New Pacific Metals Corp 40-F, filed Sep 28, 2021
New Pacific Metals Corp (NEWP)
About this 40-F
New Pacific Metals Corp filed this 40-F on September 28, 2021, covering the fiscal year ended June 30, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 40-F
☐ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
or
☒ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2021
Commission File Number 001-40381
New Pacific Metals Corp.
(Exact name of Registrant as specified in its charter)
| British Columbia<br>(Province or Other Jurisdiction of Incorporation or Organization) | 1040<br>(Primary Standard Industrial Classification Code) | Not Applicable<br>(I.R.S. Employer <br>Identification No.) |
|---|
1066 West Hastings Street
Suite 1750
Vancouver BC
Canada V6C 3X1 (604) 633-1368 (Address and telephone number of Registrant's principal executive offices)
| DL Services Inc.<br><br> <br>Columbia Center<br><br> <br>701 Fifth Avenue, Suite 6100<br><br> <br>Seattle, WA 98104-7043<br><br> <br>(206) 903-8800<br><br> <br>(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States) |
|---|
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol: | Name of Each Exchange On Which Registered: |
|---|---|---|
| Common shares, no par value | NEWP | NYSE American LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this form:
| ☒ Annual Information Form | ☒ Audited Annual Financial Statements |
|---|
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 154,451,263
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). ☐ Yes ☐ No
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging Growth Company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
EXPLANATORY NOTE
New Pacific Metals Corp. ("we", "us", "our", the "Company" or the "issuer") is a Canadian corporation that is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this annual report on Form 40-F ("Annual Report") pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in accordance with disclosure requirements in effect in Canada, which are different from those of the United States.
FORWARD LOOKING STATEMENTS
This Annual Report, including the Exhibits incorporated by reference into Annual Report, contains "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and U.S. securities legislation. The forward-looking statements herein are made as of the respective dates set forth in the Exhibits incorporated by reference into this Annual Report, and the Company does not assume any obligation to update or revise them to reflect new information, estimates or opinions, future events or results or otherwise, except as required by applicable law. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budgets", "scheduled", "estimates", "forecasts", "predicts", "projects", "intends", "targets", "aims", "anticipates" or "believes" or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Estimates of mineral reserves and mineral resources are also forward-looking statements because they represent estimates of mineralization that will be encountered if a property is mined, in addition to involving projection relating to future economic conditions. Forward-looking statements and information are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that, while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties, and contingencies. Forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of the Company to control or predict, that may cause the Company's actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to: risks related to epidemics, pandemics or other public health crises, including the novel coronavirus ("COVID-19") global health pandemic, and the spread of other viruses or pathogens, and the potential impact thereof on the Company's business, operations and financial condition; political instability and social unrest in Bolivia and/or other jurisdictions where the Company operates; general business, economic, competitive, political, regulatory and social uncertainties; silver and gold price volatility; uncertainty related to mineral exploration properties; risks related to the ability to finance the continued exploration of mineral properties; risks related to factors beyond the control of the Company; risks and uncertainties associated with exploration and mining operations; risks related to the ability to obtain adequate financing for planned development activities; lack of infrastructure at mineral exploration properties; risks and uncertainties relating to the interpretation of drill results and the geology, grade and continuity of mineral deposits; uncertainties related to title to mineral properties and the acquisition of surface rights; risks related to governmental regulations, including environmental laws and regulations and liability and obtaining permits and licences; the ratification and approval of the Mining Production Contract by the Plurinational Legislative Assembly of Bolivia; the approval of the mining association agreement for the Silverstrike Project by the Bolivia Ministry of Mines and Metallurgy through the Jurisdictional Mining Administrative Authority; the ability of the Company to convert the exploration licenses at the Carangas Project to AMC Mining Consultants (Canada) Ltd.; future changes to environmental laws and regulations; unknown environmental risks from past activities; commodity price fluctuations; risks related to reclamation activities on mineral properties; risks related to political instability and unexpected regulatory change; currency fluctuations; influence of third party stakeholders; conflicts of interest; risks related to dependence on key individuals; risks related to the involvement of some of the directors and officers of the Company with other natural resource companies; enforceability of claims; the ability to maintain adequate control over financial reporting; disruptions or changes in the credit or security markets; actual results of current exploration activities; mineral reserve and mineral resource estimate risk; actual results of current reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; changes in labour costs or other costs of production; labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; the ability to renew existing licenses or permits or obtain required licenses and permits; increased infrastructure and/or operating costs; risks of not meeting production and cost targets; discrepancies between actual and estimated production; metallurgical recoveries; mining operational and development risk; litigation risks; speculative nature of silver exploration; global economic climate; dilution; environmental risks; community and nongovernmental actions; regulatory risks; U.S. securities laws; and cyber-security risks. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed, and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. Some of the disclosure in this Annual Report and the Exhibits incorporated by reference to this Annual Report is based on information publicly disclosed by the owners or operators of these properties and information/data available in the public domain as at the date hereof, and none of this information has been independently verified by the Company. Readers are cautioned that forward-looking statements are not guarantees of future performance. All of the forward-looking statements made in this Annual Report and the Exhibits incorporated by reference to this Annual Report are qualified by these cautionary statements.
DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Company is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this Annual Report in accordance with Canadian disclosure requirements, which are different from those of the United States. The Company prepares its financial statements, which are filed with this Annual Report in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Therefore, they are not comparable in all respects to financial statements of United States companies that are prepared in accordance with United States generally accepted accounting principles.
MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
Unless otherwise indicated, all mineral resource and mineral reserve estimates included in the documents incorporated by reference into this Annual Report have been prepared in accordance with Canadian National Instrument 43-101 ("NI 43-101") and the Canadian Institute of Mining and Metallurgy Classification System. NI 43-101 is a rule developed by the Canadian securities administrators, which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange Commission (the "SEC"). Accordingly, mineral resource and mineral reserve estimates, and other scientific and technical information, contained in the documents incorporated by reference into this Annual Report may not be comparable to similar information disclosed by U.S. companies.
PRINCIPAL DOCUMENTS
The following documents, filed as Exhibits 99.1, 99.2, 99.3 and 99.15 to this Annual Report, are hereby incorporated by reference into this Annual Report on Form 40-F:
(a) Annual Information Form for the fiscal year ended June 30, 2021;
(b) Management's Discussion and Analysis for the fiscal year ended June 30, 2021;
(c) Audited Consolidated Financial Statements for the fiscal year ended June 30, 2021 and notes thereto, together with the report of the independent registered public accounting firm thereon; and
(d) Technical Report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020 (effective date January 16, 2020).
CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. See Exhibit 99.2, under the heading "Disclosure Controls and Procedures".
(b) Management's Annual Report on Internal Control Over Financial Reporting. See Exhibit 99.2, under the heading "Management's Report on Internal Control Over Financial Reporting".
(c) Attestation Report of the Independent Registered Public Accounting Firm. This Annual Report does not include a an attestation report of the Company's registered public accounting firm due to a transition period established by rules of the SEC for emerging growth companies.
(d) Changes in Internal Control Over Financial Reporting*.* See Exhibit 99.2, under the heading "Changes in Internal Control Over Financial Reporting".
NOTICES PURSUANT TO REGULATION BTR
The Company was not required by Rule 104 of Regulation BTR to send any notices to any of its directors or executive officers during the fiscal year ended June 30, 2021.
AUDIT COMMITTEE FINANCIAL EXPERT
See Exhibit 99.1, under the heading "11.3 Relevant Education and Experience".
CODE OF ETHICS
The Board has adopted a written code of ethics entitled, "Code of Business Conduct and Ethics" (the "Code"), by which it and all officers and employees of the Company, including the Company's principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions, are required to abide. There were no amendments to the Code, or waivers of the Code that apply to the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions during the fiscal year ended June 30, 2021, except that on March 3, 2021 the Code was amended and restated following a general review in advance of the Company becoming an SEC reporting company. The changes to the Code included, without limitation:
- Expanding the scope of persons subject to the Code to include consultants, agents and representatives;
- Expanding the description of the adverse consequences that an individual may face for violations of the Code;
- Updates to our anti-corruption policies;
- Clarifying the Company's policies on press releases relating to material non-public information;
- Expanding the description of the Company's disclosure in periodic reports and other public communications;
- Clarifying that the Code is subject to applicable whistleblower laws; and
- Other clarifications and typographical corrections.
The amended and restated Code is filed as an exhibit to this Form 40-F.
The Code is also posted on the Company's website at https://newpacificmetals.com/corporate-governance, and a copy of the Code may be obtained, without charge, by contacting the Corporate Secretary of the Company at the address or telephone number indicated on the cover page of this Annual Report. If there is an amendment to the Code, or if a waiver of the Code is granted to any of the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, the Company intends to disclose any such amendment or waiver by posting such information on the Company's website. Unless and to the extent specifically referred to herein, the information on the Company's website shall not be deemed to be incorporated by reference in this Annual Report on Form 40-F.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
See Exhibit 99.1, under the heading "11.6 External Auditor Services Fees".
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
See Exhibit 99.1, under the heading "11.5 Pre-Approval Policies and Procedures". All audit-related fees, tax fees, or all other fees were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i) of Regulation S-X. However, none of such fees were approved pursuant to the exemption provided in Rule 2-01(c)(7)(i)(C) of Regulation S-X.
OFF BALANCE ARRANGEMENTS
The Company has no off-balance sheet arrangements.
CURRENCY
Unless otherwise indicated, all dollar amounts in this Annual Report are in Canadian dollars.
CONTRACTUAL OBLIGATIONS
The following table presents information regarding the Company's known contractual obligations by maturity as of June 30, 2021:
| **** | Payments due by period | ||||||
|---|---|---|---|---|---|---|---|
| Contractual Obligations | Total | Less than1 year | 1-3 years | 3-5 years | More than5 years | ||
| Trades and other payables | $ | 1,044,189 | $ | 1,044,189 | - | - | - |
| Due to a related party | $ | 50,378 | $ | 50,378 | - | - | - |
| Payable for mineral property acquisition | - | - | - | - | - | ||
| Total | $ | 1,094,567 | $ | 1,094,567 | - | - | - |
IDENTIFICATION OF THE AUDIT COMMITTEE
The Company's Board has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Company's Audit Committee is comprised of David Kong, Jack Austin and Greg Hawkins. The Board has determined that each of the members of the Audit Committee is independent as determined under Rule 10A-3 of the Exchange Act and Section 803 of the NYSE American company guide.
MINE SAFETY DISCLOSURE
The Company does not operate any mine in the United States and has no mine safety incidents to report for the year ended June 30, 2021.
NYSE AMERICAN STATEMENT OF CORPORATE GOVERNANCE DIFFERENCES
The common shares of the Company are listed on the NYSE American. Section 110 of the NYSE American company guide permits NYSE American to consider the laws, customs and practices of foreign issuers in relaxing certain NYSE American listing criteria, and to grant exemptions from NYSE American listing criteria based on these considerations. A description of the significant ways in which the Company's governance practices differ from those followed by domestic companies pursuant to NYSE American standards is provided on the Company's website at https://newpacificmetals.com/corporate-governance.
UNDERTAKINGS
The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Company has previously filed with the SEC an Appointment of Agent for Service of Process and Undertaking on Form F-X with respect to the class of securities in relation to which the obligation to file this Form 40-F arises. Any change to the name or address of the Company's agent for service shall be communicated promptly to the SEC by amendment to the Form F-X referencing the file number of the Company.
EXHIBITS
*To be filed by amendment within the 30-day grace period provided by Rule 405(a)(2)(ii) of Regulation S-T.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Company certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEW PACIFIC METALS CORP. | |
|---|---|
| /s/ Mark Cruise | |
| Name: Mark Cruise | |
| Title: Chief Executive Officer | |
| Date: September 28, 2021 |
EXHIBIT INDEX
The following documents are being filed with the SEC as exhibits to this Registration Statement on Form 40-F. ****
*To be filed by amendment within the 30-day grace period provided by Rule 405(a)(2)(ii) of Regulation S-T.
New Pacific Metals Corp.: Exhibit 99.1 - Filed by newsfilecorp.com
ANNUAL INFORMATION FORM
For the year ended June 30, 2021
Dated as at September 28, 2021
NEW PACIFIC METALS CORP.
Suite 1750 - 1066 West Hastings Street Vancouver, BC, Canada V6E 3X1 Tel: (604) 633-1368 Fax: (604) 669-9387 Email: info@newpacificmetals.com Website: www.newpacificmetals.com
TABLE OF CONTENTS
| ITEM 1: GENERAL | 3 |
|---|---|
| 1.1 Date of Information | 3 |
| 1.2 Forward-Looking Statements | 3 |
| 1.3 Cautionary Note to U.S. Investors Concerning Preparation of Mineral Resource and Mineral Reserve Estimates | 4 |
| 1.4 Currency | 4 |
| ITEM 2: CORPORATE STRUCTURE | 5 |
| 2.1 Names, Current Address and Incorporation | 5 |
| 2.2 Intercorporate Relationships | 6 |
| ITEM 3: GENERAL DEVELOPMENT OF THE BUSINESS | 6 |
| 3.1 Business of New Pacific | 6 |
| 3.2 Three Year History | 7 |
| 3.3 Significant Acquisitions | 10 |
| ITEM 4: DESCRIPTION OF THE BUSINESS | 10 |
| 4.1 General | 10 |
| 4.2 Risk Factors | 11 |
| ITEM 5: MINERAL PROPERTY | 20 |
| 5.1 Silver Sand Project | 20 |
| ITEM 6: DIVIDENDS AND DISTRIBUTIONS | 30 |
| ITEM 7: DESCRIPTION OF CAPITAL STRUCTURE | 30 |
| ITEM 8: MARKET FOR SECURITIES | 31 |
| 8.1 Trading Price and Volume | 31 |
| 8.2 Prior Sales | 31 |
| ITEM 9: ESCROWED SECURITIES | 31 |
| ITEM 10: DIRECTORS AND OFFICERS | 31 |
| 10.1 Name, Occupation and Security Holding | 31 |
| 10.2 Cease Trade Orders, Bankruptcies, Penalties or Sanctions | 33 |
| 10.3 Conflicts of Interest | 33 |
| ITEM 11: AUDIT COMMITTEE | 34 |
| 11.1 Audit Committee Charter | 34 |
| 11.2 Composition of the Audit Committee | 34 |
| 11.3 Relevant Education and Experience | 34 |
| 11.4 Audit Committee Oversight | 34 |
| 11.5 Pre-Approval of Policies and Procedures | 35 |
| 11.6 External Auditor Service Fees | 35 |
| ITEM 12: PROMOTERS | 35 |
| ITEM 13: LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 35 |
| 13.1 Legal Proceedings | 35 |
| 13.2 Regulatory Actions | 35 |
| ITEM 14: INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 35 |
| ITEM 15: TRANSFER AGENTS AND REGISTRARS | 36 |
| ITEM 16: MATERIAL CONTRACTS | 36 |
| ITEM 17: INTERESTS OF EXPERTS | 36 |
| ITEM 18: ADDITIONAL INFORMATION | 37 |
| SCHEDULE "A" | 38 |
ITEM 1: GENERAL
1.1 Date of Information
All information in this Annual Information Form ("AIF") is as of June 30, 2021, unless otherwise indicated.
1.2 Forward-Looking Statements
This AIF contains "forward-looking statements" and "forward-looking information" collectively referred to herein as "forward-looking statements" for New Pacific Metals Corp. (the "Company" or "New Pacific") within the meaning of the applicable U.S. and Canadian securities laws that are based on expectations, estimates and projections as at the date of this AIF. These forward-looking statements include but are not limited to statements and information concerning: plans and expectations for the Silver Sand Project (as defined below), the Silverstrike Project (as defined below), and the Carangas Project (as defined below).
Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often but not always using phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events, or results "may" or "could", "would", "might", or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking statements. These forward-looking statements are based on the beliefs of the Company's management as well as on assumptions, which management believes to be reasonable based on information currently available at the time such statements were made. However, there can be no assurance that the forward-looking statements will prove to be accurate.
By their nature, forward-looking statements are based on assumptions and involve known and unknown risks, uncertainties, and other factors that 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. Forward-looking statements are subject to a variety of risks, uncertainties, and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation: social and economic impacts of COVID-19; political instability and social unrest in Bolivia and/or other jurisdictions where the Company operates; general business, economic, competitive, political, regulatory and social uncertainties; silver and gold price volatility; uncertainty related to mineral exploration properties; risks related to the ability to finance the continued exploration of mineral properties; risks related to factors beyond the control of the Company; risks and uncertainties associated with exploration and mining operations; risks related to the ability to obtain adequate financing for planned development activities; lack of infrastructure at mineral exploration properties; risks and uncertainties relating to the interpretation of drill results and the geology, grade and continuity of mineral deposits; uncertainties related to title to mineral properties and the acquisition of surface rights; risks related to governmental regulations, including environmental laws and regulations and liability and obtaining permits and licences; the ratification and approval of the MPC by the Plurinational Legislative Assembly of Bolivia; the approval of the mining association agreement for the Silverstrike Project by AJAM; the ability of the Company to convert the exploration licenses at the Carangas Project to AMC (as defined below); future changes to environmental laws and regulations; unknown environmental risks from past activities; commodity price fluctuations; risks related to reclamation activities on mineral properties; risks related to political instability and unexpected regulatory change; currency fluctuations; influence of third party stakeholders; conflicts of interest; risks related to dependence on key individuals; risks related to the involvement of some of the directors and officers of the Company with other natural resource companies; enforceability of claims; the ability to maintain adequate control over financial reporting; disruptions or changes in the credit or security markets; actual results of current exploration activities; mineral reserve and mineral resource estimate risk; actual results of current reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; changes in labour costs or other costs of production; labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; the ability to renew existing licenses or permits or obtain required licenses and permits; increased infrastructure and/or operating costs; risks of not meeting production and cost targets; discrepancies between actual and estimated production; metallurgical recoveries; mining operational and development risk; litigation risks; speculative nature of silver exploration; global economic climate; dilution; environmental risks; community and non-governmental actions; regulatory risks; U.S. securities laws; and cyber-security risks. This list is not exhaustive of the factors that may affect any of the forward-looking statements of the Company.
Forward-looking statements are statements about the future and are inherently uncertain. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters set out generally and certain economic and business factors, some of which may be beyond the control of the Company. Further, these statements are only current as of June 30, 2021, unless otherwise indicated, as the case may be. Important risk factors are identified in this AIF under the heading "Item 4.2 - Risk Factors". Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described. Investors are cautioned against attributing undue certainty to forward-looking statements. The Company does not undertake to update or supplement any of these forward-looking statements as a result of changing circumstances or otherwise, and the Company disclaims any obligation to do so, except as required by applicable laws. For all of these reasons, such forward-looking statements included in, or incorporated by reference into, this AIF should not be unduly relied upon.
1.3 Cautionary Note to U.S. Investors Concerning Preparation of Mineral Resource and Mineral Reserve Estimates
This AIF has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of the United States Securities and Exchange Commission's (the "SEC"). The terms "mineral resources", "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" used in this AIF are in reference to the mining terms defined in the Canadian Institute of Mining, Metallurgy and Petroleum Standards (the "CIM Standards"), which definitions have been adopted by National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Accordingly, information contained in this AIF providing descriptions of the Company's mineral deposits in accordance with NI 43-101 may not be comparable to similar information made public by other public companies subject to the technical disclosure requirements of the SEC.
Readers are cautioned not to assume that all or any part of mineral resources will ever be converted into reserves. Pursuant to CIM Standards, "inferred mineral resources" are that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Such geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource and must not be converted to a mineral reserve. However, it is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource is economically or legally mineable.
Canadian standards, including the CIM Standards and NI 43-101, differ significantly from standards in the SEC's Industry Guide 7 ("Guide 7") under the United States Securities Act of 1933, as amended. Effective February 25, 2019, the SEC adopted new mining disclosure rules under subpart 1300 of Regulation S-K of the United States Securities Act of 1933, as amended (the "SEC Modernization Rules"), with compliance required for the first fiscal year beginning on or after January 1, 2021. The SEC Modernization Rules replace the historical property disclosure requirements included in Guide 7. As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of "measured mineral resources", "indicated mineral resources" and "inferred mineral resources". In addition, the SEC has amended its definitions of "proven mineral reserves" and "probable mineral reserves" to be substantially similar to corresponding definitions under the CIM Standards. During the period leading up to the compliance date of the SEC Modernization Rules, information regarding mineral resources or reserves contained or referenced in this AIF may not be comparable to similar information made public by companies that report according to U.S. standards. While the SEC Modernization Rules are purported to be "substantially similar" to the CIM Standards, readers are cautioned that there are differences between the SEC Modernization Rules and the CIM Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report as "proven mineral reserves", "probable mineral reserves", "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules.
1.4 Currency
All sums of money which are referred to herein are expressed in lawful money of United States ("U.S."), unless otherwise specified. The symbol "CAD$" denotes lawful money of Canada. The following table sets forth, for each of the periods indicated, the year-end exchange rate, the average closing rate and the high and low closing exchange rates for one Canadian dollar expressed in U.S. dollar, as quoted by the Bank of Canada:
| Year Ended June 30, | |||
|---|---|---|---|
| 2021 | 2020 | 2019 | |
| High | 0.8306 | 0.7710 | 0.7811 |
| Low | 0.7344 | 0.6898 | 0.7330 |
| Average | 0.7807 | 0.7453 | 0.7556 |
| Period End | 0.8068 | 0.7338 | 0.7556 |
The exchange rate for one Canadian dollar expressed in U.S. dollar based upon the daily average exchange rate on June 30, 2021 provided by the Bank of Canada was $0.8608.
ITEM 2: CORPORATE STRUCTURE
2.1 Names, Current Address and Incorporation
The Company was formed as a special limited company under the Company Act (British Columbia) on April 19, 1972. By special resolution of its shareholders dated July 21, 1983, the Company converted itself from a special limited company to a limited company. Subsequently, on November 6, 1997, the Company continued in Bermuda by way of continuation as a foreign corporation. On November 5, 2003, the Company continued in British Columbia under the Company Act (British Columbia). In 2004, the Company adopted new Articles consistent with the transition to the Business Corporations Act (British Columbia). On July 1, 2016, the Company's name was changed to "New Pacific Holdings Corp." On July 20, 2017, the Company's name was changed back to "New Pacific Metals Corp." The head office, principal address, and registered and records office of the Company is located at Suite 1750 - 1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1.
The Company is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland. The common shares of the Company trade on the Toronto Stock Exchange ("TSX") under the symbol "NUAG" and on the NYSE American stock exchange (the "NYSE American") under the symbol "NEWP".
2.2 Intercorporate Relationships
The corporate structure of the Company and its subsidiaries, as of June 30, 2021, **** is as follows:
Note:
* Project owned by the Company's Bolivian partner.
ITEM 3: GENERAL DEVELOPMENT OF THE BUSINESS
3.1 Business of New Pacific
New Pacific is a Canadian mining issuer engaged in exploring and developing mineral properties in the Americas. The Company's precious metal projects include the flagship Silver Sand Project, the Silverstrike Project and the Carangas Project, all of which are located in Bolivia. With experienced management and sufficient technical and financial resources, the Company is well positioned to build shareholder value through exploration and resource development.
3.2 Three Year History
(a) Fiscal 2021 (year ended June 30, 2021)
On July 27, 2021, the Company announced the commencement of a planned 38,000 m diamond drill program at the Silver Sand Project with the objectives to expand the existing resource, which remains open along strike and at depth, and to complete geotechnical drilling to support the PEA study. For additional information on the 2021 drill program at the Silver Sand Project, please see the Company's news release dated July 27, 2021.
On June 29, 2021, the Company announced that it, following receipt of exploration licenses and environmental permits, commenced an initial discovery drill program at the Carangas silver project (the "Carangas Project") located in the Oruro Department, Bolivia. Please see "Carangas Project" section below for additional information.
On July 15, 2021, the Company filed a final short form base shelf prospectus (the "Prospectus") with the securities regulatory authorities in each of the provinces in Canada and a corresponding registration statement on Form F-10 with the U.S. Securities Exchange Commission (the "Registration Statement"). The Prospectus and the Registration Statement enable the Company to make offerings of up to US$200,000,000 of common shares, preferred shares, debt securities, warrants, units or subscription receipts of the Company or any combination thereof from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Prospectus is effective. The specific terms of any future offering will be established in a supplement to the Prospectus, which will be filed with the applicable Canadian securities regulatory authorities.
On May 20, 2021, the Company's common shares commenced trading on the NYSE American and ceased trading on the OTCQX Market on May 19, 2021.
On April 12, 2021, the Company signed a mining association agreement with a private Bolivian company to acquire a 98% interest in the Carangas Project.
On November 18, 2020, the Company distributed all of the spin-out shares held by it to the Company's shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). Assets and liabilities of Whitehorse Gold Corp. ("Whitehorse Gold") and the Tagish Lake Gold Project were disposed upon completion of the spin-out (the "Spin-Out"). On November 15, 2020, Whitehorse Gold's common shares were listed for trading on the TSX Venture Exchange ("TSX-V") under the symbol "WHG". As a result of the Spin-Out, the Company no longer holds an interest in the Tagish Lake Gold Project.
On August 11, 2020, the Company's common shares graduated from the TSX-V to the TSX.
(b) Fiscal 2020 (year ended June 30, 2020)
In Fiscal 2020, the Company increased the bench strength with key hires during the period including successfully transitioning Mark Cruise from COO to CEO, adding a VP Sustainability, dedicating a Project Manager to the Silver Sand project and hiring local Bolivian sustainability team members.
The Company strengthened the treasury by raising net proceeds of CAD$38.9 million through two bought deal financings to fund exploration and development studies.
On April 14, 2020, the Company released its inaugural NI 43-101 Mineral Resource estimate for the Silver Sand Project. For further details, please refer to the Company's news release dated April 14, 2020 and an amended and restated technical report entitled "Silver Sand Deposit Mineral Resource Report (Amended)" with an effective date January 16, 2020 filed under the Company's profile on SEDAR at www.sedar.com and available on the Company's website at www.newpacificmetals.com.
In response to the COVID-19 pandemic, the Company's Health & Safety Team implemented Companywide safety protocols such as 14-day self-isolation where necessary, travel restrictions, remote working and enhanced hygiene controls. The Company also continues to provide assistance to the communities neighbouring our projects by donating medical, hygiene, personal protective equipment, and food supplies as part of the Company's ongoing social responsibility program.
On December 19, 2019, the Company expanded the Silver Sand land package by acquiring 100% interest in a Special Temporary Authorization ("ATE") named "El Bronce" located approximately 4 km north of the property for $200,000 to arm's length private owners. The El Bronce ATE is six hectares but will total approximately 0.50 km^2^ once it has been consolidated to Administrative Mining Contracts ("AMC").
In December 2019, the Company acquired a 98% interest in the Silverstrike Project from private Bolivian corporation by making a one-time cash payment of $1,350,000. Under the agreement, the Company's Bolivian subsidiary will cover 100% of the future expenditures including exploration, development and mining production activities. The agreement has a term of 30 years and renewable for another 15 years and is subject to approval by AJAM.
(c) Fiscal 2019 (year ended June 30, 2019)
On May 22, 2019, Pan American Silver Corp. ("Pan American") and Silvercorp Metals Inc. ("Silvercorp") exercised their warrants and the Company received gross proceeds of CAD$19,950,000.
On January 11, 2019, New Pacific announced that Alcira entered into a Mining Production Contract (the "MPC") with COMIBOL granting Alcira the right to carry out exploration, development and mining production activities in the areas adjoining the Company's Silver Sand Project. Please see "Mining Production Contract" section below for current status of the MPC.
In July 2018, the Company entered into an agreement with third party private owners to acquire their 100% interest in the Jisas and Jardan ATEs located north of the Silver Sand Project by cash payments in the aggregate amount of $1,000,000 and issuance of 832,000 common shares.
Exploration and Development Properties
Bolivian Land Tenure
Exploration and mining rights in Bolivia are granted by the Ministry of Mines and Metallurgy through the Jurisdictional Mining Administrative Authority (Autoridad Jurisdiccional Administrativa Minera or "AJAM"). Under Bolivian mining laws, tenure is granted as either an AMC or an exploration license. Tenure held under previous legislation was converted to ATEs, formerly known as "mining concessions", which are now required to be consolidated into new 25-hectare sized cuadriculas (concessions) and converted to AMC. AMCs created by conversion recognize existing rights of exploration and/or exploitation and development, including treatment, metal refining, and/or trading. AMCs have a fixed term of 30 years and can be extended if certain conditions are met. Each contract requires ongoing work and the submission of plans to AJAM.
Exploration licenses permit exploration activities only and must be converted to AMCs to conduct exploitation and development activities. Exploration licenses are valid for a maximum of five years and provide the holder with the preferential right to request an AMC. In specific areas, mineral tenure is owned by the Bolivian state mining corporation, Corporación Minera de Bolivia ("COMIBOL"). In these areas, development and production agreements can be obtained by entering into a Mining Production Contract ("MPC") with COMIBOL.
Silver Sand Project
In accordance with the Mining Law, New Pacific (through Alcira) submitted all required documents for the consolidation and conversion of the original 17 ATEs, which comprise the core of the Silver Sand Project, to cuadriculas and AMC to AJAM. On January 6, 2020, Alcira signed an AMC with AJAM pursuant to which the 17 ATEs were consolidated into one concession with an area of 3.17 km^2^. On June 17, 2021, the AMC for the Silver Sand Project was registered and notarized before Bolivia's National Mining Registry and on July 15, 2021 published in AJAM's Mining Gazette.
In addition, New Pacific acquired a 100% interest in three ATEs called Jisas, Jardan and El Bronce originally owned by third party private entities. These three ATEs, when converted to AMCs, will total 2.25 km^2^. Consequently, the total area owned by the Company which comprises the Silver Sand Project is 5.42 km^2^.
Advanced studies commenced on the Project following a competitive tendering process, the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc (an Amec Foster Wheeler company) to lead the Preliminary Economic Assessment, Environmental baseline study, and Social baseline studies, respectively. The studies are currently in progress.
Mining Production Contract
As mentioned above, Alcira entered into the MPC with COMIBOL in 2019 granting Alcira the right to carry out exploration, development and mining production activities in the areas adjoining the Company's Silver Sand Project. The MPC is comprised of two areas. The first area is located to the south and west of the Silver Sand Project. The second area includes additional geologically prospective ground to the north, east and south of the Silver Sand Project, wherein COMIBOL is expected to apply for exploration and mining rights with AJAM. Upon granting of the exploration and mining rights, COMIBOL will contribute these additional properties to the MPC.
There are no known economic mineral deposits, nor any previous exploration drilling or mineral discoveries within the MPC areas. The MPC presents an opportunity to explore and evaluate the possible extensions and/or satellites of mineralization outside of the currently defined Silver Sand Project.
The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this AIF, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulation, community relations, taxation or otherwise. A change in the government's position on these issues could adversely affect the ratification of the MPC and the Company's business.
Carangas Project
In April 2021, the Company signed a mining association agreement with a private Bolivian company and acquired a 98% joint venture interest in the Carangas Project. Under the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development and production activities for the project. The agreement has a term of 30 years and is renewable for additional 15 years. The Carangas Project is located approximately 180 km southwest of the city of Oruro and within the 50 km from Bolivia's border with Chile. The private Bolivian corporation is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km^2^) that comprise the Carangas Project. On June 29, 2021, following receipt of exploration licenses and environmental permits, the Company commenced initial discovery drilling at the Carangas Project.
On June 29, 2021, the Company announced the commencement of an initial discovery drill program at the Carangas Project to test near-surface bulk-tonnage and high-grade vein-hosted silver-rich polymetallic targets centred on and adjacent to the historically exploited West and East Dome areas. For additional details, please refer to the Company's news releases dated April 12, 2021 and June 14, 2021. Phase I of the 5,000 m drill program is expected to be comprised of approximately 20 drillholes with an initial 3,000 m to be completed over an eight-week period. Contingent on the success of initial results, follow-up drilling will comprise the remainder of the budgeted 5,000 m program. On September 8, 2021, the Company announced assay results from the first two drill holes of the initial discovery drilling program - please see the Company's news release dated September 8, 2021 for additional information.
Silverstrike Project
The Silverstrike Project is located approximately 140 km southwest of La Paz, Bolivia. In December 2019, the Company signed a mining association agreement and acquired a 98% joint venture interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000. The private Bolivian corporation is owned 100% by Bolivian nationals and holds the title to the nine ATEs (covering an area of approximately 13 km^2^) that comprise the project. Under the mining association agreement, the Company is required to cover 100% of future expenditures including exploration, contingent on results of development and subsequent mining production activities at the Silverstrike Project. The agreement has a term of 30 years and is renewable for another 15 years. The mining association agreement is subject to approval by AJAM.
The Silverstrike Project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district - the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver-rich occurrences associated with sercitic alteration. The area is largely underexplored, with limited modern exploration to date. The Company's joint venture partner has applied for exploration rights over areas surrounding the Silverstrike Project on behalf of the joint venture.
During 2020, the Company's exploration team completed reconnaissance and detailed mapping and sampling programs on the northern portion of the project. The results to date indicate good to excellent exploration potential for hosting narrow, high-grade, near-surface broad-zones of silver mineralization. Please refer to the Company's news release dated September 29, 2020 for details on the exploration program at the northern areas of the project and to the news release dated November 19, 2020 for details on exploration activities and field work on the central and southern areas of the project.
Frontier Area - Carangas and Silverstrike Projects
The Carangas and the Silverstrike projects are located within 50 km of the Bolivian border with Chile. In line with many South American countries, Bolivia does not permit foreign entities to own property within 50 km of international borders (the "Frontier Area"). Property owners in the Frontier Area are, however, permitted to enter into mining association agreements, or joint ventures, with third parties, including foreign entities, for the development of mining activities under Bolivian Law No. 535 on Mining and Metallurgy. While the Company believes the joint ventures for the Carangas and the Silverstrike projects are legally compliant with the Frontier Area requirements and Bolivian mining laws, there is no assurance that the Company's Bolivian joint venture partners will be successful in obtaining the approval of AJAM to convert the exploration licenses to AMC in the case of Carangas Project and the mining association agreement in the case of the Silverstrike Project, or that even if approved, that such relationships and structures will not be challenged by other Bolivian organizations or communities.
RZY Silver-Lead-Zinc Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu Tibetan Autonomous Prefecture. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company's subsidiary, Qinghai Found, reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title of the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of June 30, 2021, the process was under review and subject to approval by the Qinghai Government.
3.3 Significant Acquisitions
The Company made no significant acquisitions in its most recently completed financial year.
ITEM 4: DESCRIPTION OF THE BUSINESS
4.1 General
Specialized Skill and Knowledge
All aspects of the Company's business activities require specialized skills and knowledge. Such skills and knowledge include the fields of geology, mining, metallurgy, engineering, environment issues, permitting, social issues, and accounting. While competition in the resource mining industry has made it more difficult to locate and retain competent employees in such fields, the Company has been successful in finding and retaining experts for its key activities.
Competitive Conditions
Competition in the mineral exploration industry is intense. The Company competes with other mining companies, many of which have greater financial resources and technical facilities for the acquisition and development of mineral concessions, claims, leases and other interests, as well as for the recruitment and retention of qualified employees and consultants.
Business Cycles
The mining business is subject to mineral price and investment climate cycles. The marketability of minerals is also affected by worldwide economic and demand cycles. It is difficult to assess if the current commodity prices are long-term trends, and there is uncertainty as to the recovery, or otherwise, of the world economy. If global economic conditions weaken and commodity prices decline as a consequence, a continuing period of lower prices could significantly affect the economic potential of the Company's projects.
Economic Dependence
The Company's business is not substantially dependent on any contract such as a contract to see the major part of its products or services or to purchase the major part of its requirements for goods, services or raw materials, or on any franchise, license or other agreement to use a patent, formula, trade secret, process or trade name upon which its business depends.
Bankruptcy and Similar Procedures
There is no bankruptcy, receivership or similar proceedings against the Company, nor is the Company aware of any such pending or threatened proceedings. There have not been any voluntary bankruptcy, receivership or similar proceedings by the Company within the three most recently completed financial years or currently proposed for the current financial year.
Foreign Operations
Our principal operations and assets are located in Bolivia. Our operations are exposed to various levels of political, economic, social and other risks and uncertainties. These risks and uncertainties include, but are not limited to government regulations (or changes to such regulations) with respect to restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, local ownership requirements and land claims of local people, regional and national instability and mine safety. The effect of these factors cannot be accurately predicted. See "Risk Factors".
Reorganizations
Other than the Spin-out, there have been no material reorganizations of the Company or its subsidiaries within the three most recently completed financial years nor any material reorganizations proposed for the current financial year.
Social Policies
The board of directors of the Company (the "Board") has adopted a written code of business conduct and ethics (the "Code"). A copy of the Code may be obtained by contacting the Company at the address on the cover of this AIF. Alternatively, a copy of the Code can be found on the Company's website at www.newpacificmetals.com. When proposed transactions or agreements in which directors or officers may have an interest, material or not, are presented to the Board, the directors are required to disclose any such interest and the persons who have such an interest are excluded from all discussion on the matter and are not permitted to vote on the proposal. All such interests in transactions or agreements involving senior Management are dealt with by the Board, regardless of apparent immateriality.
Employees
As at June 30, 2021, the Company had 61 employees.
4.2 Risk Factors
Mining Business
An investment in the common shares of the Company involves a significant degree of risk and ought to be considered a highly speculative investment. Shareholders of the Company may lose their entire investment. The market price of the Company's common shares may be affected by many variables not directly related to the corporate performance of the Company, including the market in which it is traded, the strength of the economy generally, the availability and attractiveness of alternative investments and the breadth of the public market for its shares. The effect of these and other factors on the market price of the common shares in the future cannot be predicted. The lack of an active public market could also have a material adverse effect on the price of the common shares.
In addition, risk factors identified in this AIF, as well as risks not currently known to the Company, could materially adversely affect the Company's future business, operations and financial condition and could cause actual results to differ materially from the estimates described in the forward-looking statements and information relating to the Company.
The Company is currently in the business of acquiring and exploring mineral properties, and is exposed to a number of risks and uncertainties that are common to other mineral exploration companies in the same business. The following is a brief discussion of those factors which may have a material impact on, or constitute risk factors in respect of, the Company's future financial performance.
COVID-19
The Company's business, operations and financial condition could be materially adversely affected by the outbreak of pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility, and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company's operations, and the operations of suppliers, contractors and service providers.
The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company's control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.
As at the date of this AIF, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time.
The Company's exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company's workforce at risk.
No Revenues or Ongoing Mining Operations
The Company is a development stage mineral company and has no revenue from operations and no ongoing mining operations of any kind. The Company has not developed or operated any mines, and has no operating history upon which an evaluation of the Company's future success or failure can be made. The Company's ability to achieve and maintain profitable mining operations is dependent upon a number of factors, including the Company's ability to successfully build and operate mines, processing plants, and related infrastructure. The Company may not successfully establish mining operations or profitably produce metals at its properties. As such, the Company does not know if it will ever generate revenues.
Mineral Deposits Not Economic
The determination of whether any mineral deposits on the Company's mineral projects are economical is affected by numerous factors beyond the control of the Company. These factors include: (a) the metallurgy of the mineralization forming the mineral deposit; (b) market fluctuations for metal prices; (c) the proximity and capacity of natural resource markets and processing equipment; and (d) government regulations governing prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection.
Political and Economic Risks in Bolivia
The Silver Sand Project is located in Bolivia. Regardless of recent progress in restructuring its political institutions and revitalizing its economy, Bolivia's history since the mid-1960s has been one of political and economic instability under a variety of governments. Since 2006, the government has intervened in the national economy and social structure, including periodically imposing various controls, the effects of which have been to restrict the ability of both domestic and foreign companies to freely operate. Although the Company believes that the current conditions in Bolivia are relatively stable and conducive to conducting business, the Company's current and future mineral exploration and mining activities in Bolivia are exposed to various levels of political, social, economic, and other risks and uncertainties. These risks and uncertainties include, but are not limited to, hostage taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, political and labour unrest, civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions, licences and social licenses, permits and contracts, illegal mining, changes in taxation policies, restrictions on foreign exchange and repatriation, changing political conditions, changing social conditions, currency controls, and governmental regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ citizens or purchase supplies from a particular jurisdiction.
There has been a significant level of social unrest in Bolivia in recent years resulting from a number of factors, including a high rate of unemployment. Protestors have previously targeted foreign firms in the mining sector, and as a result there is no assurance that future social unrest will not have an adverse impact on the Company's operations. The Company's exploration and development activities may be affected by changes in government, political instability, and the nature of various government regulations relating to the mining industry. Bolivia's fiscal regime has historically been favourable to the mining industry, but there is a risk that this could change. In addition, labour in Bolivia is customarily unionized and there are risks that labour unrest or wage agreements may impact operations. The Company cannot predict the government's positions on foreign investment, mining concessions, land tenure, environmental regulation, or taxation. A change in government positions on these issues could adversely affect the Company's business and/or its holdings, assets, and operations in Bolivia. Any changes in regulations or shifts in political conditions are beyond the control of the Company. The Company's operations in Bolivia entail significant governmental, economic, social, medical, and other risk factors common to all developing countries. The status of Bolivia as a developing country may also make it more difficult for the Company to obtain any required financing because of the investment risks associated with it. The level of social unrest in Bolivia has increased significantly following the failed general elections held on October 20, 2019.
The Company's operations in Bolivia may be adversely affected by economic uncertainty characteristic of developing countries. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use, and safety factors.
On January 11, 2019, New Pacific announced that Alcira entered into the MPC with COMIBOL granting Alcira the right to carry out exploration, development and mining production activities in the areas adjoining the Company's Silver Sand Project.
The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this AIF, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulation, community relations, taxation or otherwise. A change in the government's position on these issues could adversely affect the ratification of the MPC and the Company's business.
Any such changes could have a material adverse effect on the Company's operations.
Community Relations and Social Licence to Operate
Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities and there are risks associated with the Company failing to acquire and subsequently maintain a "social licence" to operate on its mineral properties. "Social licence" does not refer to a specific permit or licence, but rather is a broad term used to describe community acceptance of a company's plans and activities related to exploration, development or operations on its mineral projects.
The Company places a high priority on, and dedicates considerable efforts and resources toward, its community relationships and responsibilities. Despite its best efforts, there are factors that may affect the Company's efforts to establish and maintain social licence at any of its projects, including national or local changes in sentiment toward mining, evolving social concerns, changing economic conditions and challenges, and the influence of third-party opposition toward mining on local support. There can be no guarantee that social licence can be earned by the Company or if established, that social licence can be maintained in the long term, and without strong community support the ability to secure necessary permits, obtain project financing, and/or move a project into development or operation may be compromised or precluded. Delays in projects attributable to a lack of community support or other community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations may result in additional operating costs, higher capital expenditures, reputational damage, active community opposition (possibly resulting in delays, disruptions and stoppages), legal suits, regulatory intervention and investor withdrawal.
Obstacles Implementing Capital Expenditure Projects
The Company's mineral projects are subject to a number of risks that may make it less successful than anticipated, including: (a) delays or higher than expected costs in implementing recommendations contained in the Silver Sand Technical Report (as defined below) or other technical reports that may be prepared for the Company's mineral projects; (b) negative technical results and/or technical results that fail to deliver the required returns to render the ongoing development of the Silver Sand Project or the Company's other mineral projects; (c) delays in receiving environmental permits and/or social licenses; (d) delays in receiving construction and operating permits; (e) delays or higher than expected costs in obtaining the necessary equipment or services to build and operate the Silver Sand Project and the Company's other mineral projects; and (f) adverse mining conditions may delay and hamper the ability of the Company to produce the expected quantities of minerals.
General Market Events and Conditions
The unprecedented events in global financial markets in the past several years which have been heightened due to emerging risks relating to the spread of COVID-19 have had a profound impact on the global economy. Many industries, including the mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company's business and industry. A number of issues related to economic conditions could have a material adverse effect on financial condition and results of operations of the Company, specifically: (a) the global credit/liquidity crisis could impact the cost and availability of financing and the Company's overall liquidity; (b) the volatility of metal prices would impact the revenues, profits, losses and cash flow of the Company; (c) continued recessionary pressures could adversely impact demand for the production from the Company's mineral projects, if any; and (d) volatile energy, commodity and consumables prices and currency exchange rates would impact the Company's production costs, if any.
No Known Commercial Mineral Deposits
Neither the Silver Sand Project nor any of the Company's other mineral projects currently contain known amounts of commercial mineral deposits. The Company's program is exploratory only and there is no certainty that the expenditures to be made by the Company will result in the development of any commercial mineral deposits.
Changes in Market Price of Metals
The potential of the Company's mineral projects to be economically mined is significantly affected by changes in the market price of metals. The market price of metals is volatile and is impacted by numerous factors beyond the control of the Company, including: (a) expectations with respect to the rate of inflation; (b) the relative strength of the U.S. dollar and certain other currencies; (c) interest rates; (d) global or regional political or economic conditions; (e) supply and demand for jewellery and industrial products containing metals; and (f) sales by central banks, other holders, speculators, and producers of gold and other metals in response to any of the above factors. A decrease in the market price of metals could make it difficult or impossible to finance the exploration or development of the Company's mineral projects or cause the Company to determine that it is impractical to continue development of such projects, which would have a material adverse effect on the financial condition and results of operations of the Company. There can be no assurance that the market price of metals will not decrease.
Mining Operations May Not be Established or Profitable
The Company has no history of production and the Company's mineral projects are currently in the exploration stage. The future development of the Company's mineral projects will require additional financing, permits, design, construction, processing plant, and related infrastructure. As a result, the Company will be subject to all of the risks associated with establishing new mining operations and business enterprises, including: (a) the timing and cost, which will be considerable, of obtaining all necessary permits including environmental, construction, and operating permits; (b) the timing and cost, which will be considerable, of the construction of mining and processing facilities; (c) the availability and costs of skilled labour, power, water, transportation, and mining equipment; (d) the availability and cost of appropriate smelting and/or refining arrangements; (e) the need to obtain necessary environmental and other governmental approvals and permits, and the timing of those approvals and permits; and (f) the availability of funds to finance construction and development activities.
It is common in new mining operations to experience unexpected problems and delays during permitting, construction, development, and mine start-up. In addition, delays in the commencement of mineral production often occur, and once commenced, the production of a mine may not meet expectations or the estimates set forth in feasibility or other studies. Accordingly, there are no assurances that the Company will successfully establish mining operations or become profitable.
Estimates of Mineralization Figures
The mineralization figures presented in the Silver Sand Technical Report are based upon estimates made by qualified persons. These estimates are imprecise and depend upon interpretation of geologic formations, grade, and metallurgical characteristics and upon statistical inferences drawn from drilling and sampling analysis, any or all of which may prove to be unreliable. Material changes in mineral resources or mineral reserves, grades, stripping ratios, or recovery rates may affect the economic viability of any project. Estimates can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations, and work interruptions. There can be no assurance that: (a) the estimates made by qualified persons upon which the mineralization figures presented in the Silver Sand Technical Report are based will be accurate; (b) mineral resource or other mineralization figures will be accurate; or (c) this mineralization could be mined or processed profitably.
Mineralization estimates for the Silver Sand Project may require adjustments or downward revisions based upon further exploration or development work. It is possible that the following may be encountered: unusual or unexpected geologic formations or other geological or grade problems, unanticipated changes in metallurgical characteristics and silver recovery, and unanticipated ground or earth conditions. If mining operations are commenced, the grade of mineralization ultimately mined, if any, may differ from that indicated by drilling results. Estimates of mineral recovery rates used in mineral reserve and mineral resource estimates are uncertain and there can be no assurance that mineral recovery rates in small scale tests will be duplicated in large scale tests under on-site conditions or in production scale.
Acquisition and Maintenance of Permits and Government Approvals
Exploration and development of, and production from, any deposit at the Company's mineral projects require permits from various governmental authorities. There can be no assurance that any required permits will be obtained in a timely manner or at all, or that they will be obtained on reasonable terms. Delays or failure to obtain, expiry of, or a failure to comply with the terms of such permits could prohibit development of the Company's mineral projects and have a material adverse impact on the Company.
The Company's current and future operations, including development activities and commencement of production, if warranted, require permits from governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, and other matters. Companies engaged in property exploration and the development or operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations, and permits. The Company cannot predict if all permits which it may require for continued exploration, development, or construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms, if at all. Time delays and associated costs related to applying for and obtaining permits and licenses may be prohibitive and could delay planned exploration and development activities. Failure to comply with or any violations of the applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.
Parties engaged in mining operations may be required to compensate those impacted by mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations, and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company's operations and cause increases in capital expenditures or production costs, or reduction in levels of production at producing properties, or require abandonment or delays in development of new mining properties.
Operations and Exploration Subject to Governmental Regulations
The Company's operations and exploration and development activities are subject to extensive laws and regulations governing various matters, including: (a) environmental protection; (b) management and use of toxic substances and explosives; (c) management of natural resources; (d) management of tailings and other wastes; (e) mine construction; (f) exploration, development of mines, production and post-closure reclamation; exports; (g) price controls; (h) taxation and mining royalties; (i) regulations concerning business dealings with indigenous groups; (j) labour standards and occupational health and safety, including mine safety; and (k) historic and cultural preservation. Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities, enjoining or curtailing operations, or requiring corrective measures, installation of additional equipment, or remedial actions, any of which could result in the Company incurring significant expenditures. The Company may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations, or permitting requirements. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expenses, capital expenditures, restrictions on or suspensions of the Company's exploration activities, if any, and delays in the development of the Silver Sand Project.
The Company conducts operations in Bolivia. The laws of Bolivia differ significantly from those of Canada and all such laws are subject to change. Mining is subject to potential risks and liabilities associated with environment and disposal of waste products occurring as a result of mineral exploration and production.
Failure to comply with applicable laws and regulations may result in enforcement actions and may also include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws and regulations.
New laws and regulations, amendments to existing laws and regulations, administrative interpretation of existing laws and regulations, or more stringent enforcement of existing laws and regulations could have a material adverse impact on future cash flow, results of operations and the financial condition of the Company.
While the Company believes the contractual relationships and the structures it has in place with private Bolivian companies owned 100% by Bolivian nationals for the Silverstrike Project and the Carangas Project are legally compliant with Bolivian laws related to the Frontier Area, there is no assurance that the Bolivian companies will be successful in obtaining approval of (i) the mining association agreement from AJAM in the case of Silverstrike Project or (ii) the conversion of the exploration licenses to AMCs in the case of Carangas Project, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian organizations or communities.
Impact of Environmental Laws and Regulations
The Company's mineral projects are subject to regulation by governmental agencies under various environmental laws. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. Compliance with environmental laws and regulations may require significant capital outlays on behalf of the Company and may cause material changes or delays in the Company's intended activities. There can be no assurance that future changes in environmental regulations will not adversely affect the Company's business, and it is possible that future changes in these laws or regulations could have a significant adverse impact on some portion of the Company's business, causing the Company to re-evaluate those activities at that time.
Mining is Inherently Dangerous
The business of mining is subject to a number of risks and hazards including environmental hazards, industrial accidents, labour disputes, cave-ins, pit wall failures, flooding, fires, rock bursts, explosions, power outages, periodic interruptions due to inclement or hazardous weather conditions, and other acts of God or unfavourable operating conditions. Such risks could result in damage to, or destruction of, mineral properties or processing facilities, personal injury or death, loss of key employees, environmental damage, delays in mining, increased production costs, monetary losses, and possible legal liability.
Where considered practical to do so, the Company will maintain insurance against risks in the operation of its business in amounts which it believes to be reasonable. Such insurance, however, contains exclusions and limitations on coverage. There can be no assurance that such insurance will continue to be available, will be available at economically acceptable premiums, or will be adequate to cover any resulting liability. In some cases, coverage is not available or is considered too expensive relative to the perceived risk. The Company may suffer a material adverse effect on its business if it incurs losses related to any significant events that are not covered sufficiently or at all by its insurance policies.
Financing
The continuing development of the Company's mineral projects will depend upon the Company's ability to obtain financing on reasonable terms. There is no assurance the Company will be successful in obtaining the required financing. The failure to obtain such financing could have a material adverse effect on the Company's results of operations and financial condition.
Competition
The mining industry is intensely competitive. The Company will compete with other mining companies, many of which have greater financial resources for the acquisition of mineral claims and concessions, as well as for the recruitment and retention of qualified employees. Increased competition could adversely affect the Company's ability to attract necessary capital funding.
Specialized Skill and Knowledge
All aspects of the Company's business activities require specialized skills and knowledge. Such skills and knowledge include the fields of geology, mining, metallurgy, engineering, environment issues, permitting, social issues, and accounting. While competition in the resource mining industry has made it more difficult to locate and retain competent employees in such fields, the Company has been successful in finding and retaining experts for the majority of its key activities in the past.
Environmental Protection
The Company is currently in compliance with all material environmental regulations applicable to its exploration, development, construction and operating activities. The financial and operational effects of environmental protection requirements on capital expenditures, earnings and non-capital expenditures during the fiscal year ended June 30, 2021 were not material.
Title to Mineral Properties
Establishing title to mineral properties is a very detailed and time-consuming process. Title to the area of mineral properties may be disputed. While the Company has investigated title to all of its mineral claims and, to the best of its knowledge, title to all of its properties are in good standing, the Company's mineral properties may be subject to prior unregistered agreements or transfers and title may be affected by such undetected defects. There may be valid challenges to the title of the Company's properties which, if successful, could impair exploration, development and/or operations. The Company's mineral properties may be subject to indigenous land claims, prior unregistered agreements or transfers and title may be affected by undetected defects. **** The Company cannot give any assurance that title to its properties will not be challenged. None of the Company's mineral properties have been surveyed, and the precise location and extent thereof may be in doubt.
Conflicts of Interest
Certain officers and directors of the Company are also directors, officers, employees, consultants or shareholders of other companies that are engaged in the business of acquiring, developing, and exploiting natural resource properties. Such associations may give rise to conflicts of interest from time to time. Such a conflict poses the risk that the Company may enter into a transaction on terms which place the Company in a worse position than if no conflict existed. The directors are required by law to act honestly and in good faith with a view to the best interest of the Company, and to disclose any interest which they may have in any project or opportunity of the Company. However, each director has a similar obligation to other companies for which such director serves as an officer or director. If a conflict of interest arises at a meeting of the Board, any director in a conflict will disclose his/her interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the Board will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time.
Internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act
Management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting, and used the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate, with the participation of the CEO and CFO, the effectiveness of internal controls. The Company's internal control over financial reporting includes:
- maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
- providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements in accordance with generally accepted accounting principles;
- providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
- providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on the Company's consolidated financial statements would be prevented or detected on a timely basis.
Based on this evaluation, management concluded that the Company's internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by COSO was effective as of June 30, 2021 and provided a reasonable assurance of the reliability of the Company's financial reporting and preparation of the financial statements.
No matter how well a system of internal control over financial reporting is designed, any system has inherent limitations. Even systems determined to be effective can provide only reasonable assurance of the reliability of financial statement preparation and presentation. Also, controls may become inadequate in the future because of changes in conditions or deterioration in the degree of compliance with the Company's policies and procedures.
The failure to achieve and maintain the adequacy of our internal control over financial reporting on a timely basis could result in the loss of investor confidence in the reliability of the financial statements, which in turn could harm the business and negatively impact the trading price of shares or market value of other securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the operating results or cause to fail to meet the reporting obligations. There can be no assurance that the Company will be able to remediate material weaknesses, if any, identified in future periods, or maintain all of the controls necessary for continued compliance, and there can be no assurance that the Company will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies. Future acquisitions of companies may provide the Company with challenges in implementing the required processes, procedures and controls in the acquired operations. Acquired companies may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company.
Outcome of Future Litigation or Regulatory Actions
Due to the nature of its business, the Company may be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the discovery of evidence process, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on the Company's business.
No assurance can be given with respect to the ultimate outcome of future litigation or regulatory proceedings, and the amount of any damages awarded or penalties assessed in such a proceeding could be substantial. In addition to monetary damages and penalties, the allegations made in connection with the proceedings may have a material adverse effect on the reputation of the Company and may impact its ability to conduct operations in the normal course.
Litigation and regulatory proceedings also require significant resources to be expended by the directors, officers and employees of the Company and as a result, the diversion of such resources could materially affect the ability of the Company to conduct its operations in the normal course of business. Significant fees and expenses may be incurred by the Company in connection with the investigation and defense of litigation and regulatory proceedings. The Company may also be obligated to indemnify certain directors, officers, employees and experts for additional legal and other expenses pursuant to such proceedings, which additional costs may be substantial and could have a negative effect on the Company's future operating results. The Company may be able to recover certain costs and expenses incurred in connection with such matters from its insurer. However, there can be no assurance regarding when or if the insurer will reimburse the Company for such costs and expenses.
Bringing actions and enforcing judgments under U.S. securities laws
Investors in the U.S. or in other jurisdictions outside of Canada may have difficulty bringing actions and enforcing judgments against the Company, its directors, its executive officers and some of the experts named in this AIF based on civil liabilities provisions of the federal securities laws, other laws in the U.S. state(s) in or the equivalent laws of other jurisdictions of residence.
Foreign Currency Exchange Fluctuations
Operations in Bolivia are subject to foreign currency exchange fluctuations. The Company raises its funds through equity issuances which are priced in Canadian dollars, and the majority of the exploration costs of the Company are denominated in U.S. dollars and/or the Bolivian boliviano. The Company may suffer losses due to adverse foreign currency fluctuations. The Company does not actively hedge against foreign currency fluctuations.
Dependence on Certain Key Personnel
The Company is highly dependent upon its senior management and other key personnel, and the loss of any such individuals could have a materially adverse effect on the business of the Company. In addition, there can be no assurance that the Company will be able to maintain the services of its officers or other key personnel required in the operation of the business. Failure to retain these individuals could adversely impact the Company's business and prospects.
Recent and Current Market Conditions
Over recent years worldwide securities markets, including those in the U.S. and Canada, have experienced a high level of price and volume volatility. Accordingly, the market price of securities of many mining companies, particularly those considered exploration or development-stage companies, have experienced unprecedented shifts and/or declines in price which have not necessarily been related to the underlying asset values or prospects of such companies. As a consequence, despite the Company's past success in securing equity financing, market forces may render it difficult or impossible for the Company to secure investors to participate in new share issues at an attractive price for the Company, or at all. Therefore, there can be no assurance that significant fluctuations in the trading price of the Company's common shares will not occur, or that such fluctuations will not have a material adverse impact on the Company's ability to raise equity funding.
Dividends
To date, the Company has not paid dividends on any of its common shares and the Company is not required to pay any dividends on its common shares in the foreseeable future. Any decision to pay dividends will be made on the basis of the Company's earnings, financial requirements and other conditions.
Company Risk
Economic factors affecting the Company
Many industries, including the mining industry, are impacted by market conditions. Some of the key impacts of the recent financial market turmoil include emerging risks relating to the spread of COVID-19, contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metals markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company's growth and profitability. Specifically: the volatility of silver, lead and zinc prices may impact the Company's revenues, profits, losses and cash flow; volatile energy prices, commodity and consumable prices and currency exchange rates would impact the Company's production costs; and the devaluation and volatility of global stock markets may impact the valuation of the Company's equity and other securities. These factors could have a material adverse effect on the Company's financial condition and results of operations.
Loss of Investment Risk
An investment in the Company is speculative and may result in the loss of a substantial portion of an investor's investment. Only potential investors who are experienced in high risk investments and who can afford to lose a substantial portion of their investment should consider an investment in the Company.
No Guaranteed Return
There is no guarantee that an investment in the Company will earn any positive return in the short term or long term.
Cybersecurity Risks
The Company is subject to cybersecurity risks including unauthorized access to privileged information, destroy data or disable, degrade or sabotage our systems, including through the introduction of computer viruses. Although we take steps to secure our configurations and manage our information system, including our computer systems, internet sites, emails and other telecommunications, and financial/geological data, there can be no assurance that measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently or are not recognized until successful. The Company has not experienced any material cybersecurity incident in the past, but there can be no assurance that the Company would not experience in the future. If our systems are compromised, do not operate properly or are disable, we could suffer financial loss, disruption of business, loss of geology data which could affect our ability to conduct effective mine planning and accurate mineral resources estimates, loss of financial data which could affect our ability to provide accurate and timely financial reporting.
ITEM 5: MINERAL PROPERTY
As at June 30, 2021, the Company considers the Silver Sand Project to be a material property for the purposes of NI 43-101.
5.1 Silver Sand Project
(1) Current Technical Report
The current technical report for Silver Sand Project is entitled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020, with an effective date of January 16, 2020 (the "Silver Sand Technical Report") prepared for the Company by A. Ross, P.Geo., B.Sc., Ph.D., D. Nussipakynova, P.Geo., B.Sc., M.Sc., and S. Robinson, P.Geo., B.Sc. of AMC Mining Consultants (Canada) Ltd. ("AMC Consultants"), and A. Holloway, P.Eng. B.Eng.(Hons).
Interpretation
Except as otherwise stated, the information in this AIF is based on the Silver Sand Technical Report and the results of resource drilling program of the Company which commenced in late October 2017.
The Silver Sand Technical Report contains more detailed information and qualifications than as set out below and readers are encouraged to review the Silver Sand Technical Report in its entirety. The following summary is subject to all of the assumptions, information and qualifications set forth in the Silver Sand Technical Report and the detailed disclosure contained in the Silver Sand Technical Report is hereby incorporated by reference. The Silver Sand Technical Report is available for review under the Company's SEDAR profile at www.sedar.com.
Within the excerpted information below, the Silver Sand Project is also referred to as the "Property". Further, any references cited within this excerpted information (including tables and figures which are not reproduced and renumbered herein) are provided in the Silver Sand Technical Report and all other defined terms that are not otherwise defined herein will have the definitions ascribed to them in the Silver Sand Technical Report.
The remaining information provided below in respect of the Company's projects is based on information prepared by or information which has been reviewed and approved by Alex Zhang, P. Geo., Vice President of Exploration, who is a Qualified Person for the purposes of NI 43-101.
(2) Project Description, Location and Access
(a) Location and Access
The Silver Sand Property is situated in the Colavi District of Potosí Department in southwestern Bolivia, 25 kilometres (km) north east of Potosí city, the department capital. The approximate geographic center of the Property is 19°22' 4.97" S latitude and 65°31' 22.93" W longitude at an elevation of 4,072 metres (m) above sea level.
The Silver Sand Property is located approximately 30 km north-east of the Cerro Rico de Potosí silver and base metal mine, 46 km south-west of the city of Sucre, and 25 km north-west of city of Potosí. The Silver Sand Property is accessed from Sucre and Potosí by travelling along a paved highway to the community of Don Diego, and then north from Don Diego along a 27 km, maintained, all weather gravel road. Don Diego is accessed by driving 129 km to south-west from Sucre, or 29 km to the north east from Potosí along paved Highway 5.
Sucre has a population of 250,000 and is the constitutional capital of Bolivia and the capital city of Chuquisaca department (a department is the largest administrative division in Bolivia). Potosí has a population of 141,000 and is the capital city of Potosí department. Sucre is connected to major Bolivian cities and beyond by highways and commercial air flights. From Potosí, the Pan American highway provides access to La Paz, the capital city of Bolivia. Chilean port cities of Arica and Iquique can be accessed from Potosí via all-weather roads.
Exploration and mining rights in Bolivia are granted by the Ministry of Mines and Metallurgy through the Jurisdictional Mining Administrative Authority (Autoridad Jurisdiccional Administrativa Minera or "AJAM"). Under Mining and Metallurgy Law No. 535 (the "2014 Mining Law"), as modified by the Law No. 845 (the "2016 Mining Law", together with the 2014 Mining Law, the "New Mining Laws"), tenure is granted as either an Administrative Mining Contract ("AMC") or an exploration license. Tenure held under previous legislation was converted to Temporary Special Authorizations ("ATEs"), formerly known as "mining concessions", under the new Mining Laws. These ATEs are required to be consolidated to new 25-hectare sized cuadriculas (concessions) and converted to AMCs. AMCs created by conversion recognize existing rights of exploration and / or exploitation and development, including treatment, foundry refining, and / or trading.
AMCs have a fixed term of 30 years and can be extended for a further 30 years if certain conditions are met. Each contract requires ongoing work and the submission of plans to AJAM.
Exploration licenses are valid for a maximum of five years and provide the holder with the first right of refusal for an AMC.
In specific areas, mineral tenure is owned by the Bolivian state mining corporation, Corporación Minera de Bolivia ("COMIBOL"). In these areas development and production agreements can be obtained by entering into a Mining Production Contract ("MPC") with COMIBOL.
Depending on the nature and scope of the activities to be conducted, the operator may need specific licenses or dispensations from the environmental authorities under the Ministry of Environment and Water or the Departmental Governorships. This applies to projects that may require consultation with a population that could be affected by the project.
(b) Mineral Concessions
The Company, through its three wholly-owned subsidiaries, Alcira, Empresa Jisas-Jardan SRL, and Empresa El Cateador SRL, collectively holds exploration and mining agreements over an approximate 60 km^2^ contiguous area. The total area under 100% control of the Company is 5.42 km^2^ after the claim consolidation and conversion procedures are complete. This process is completed for the Silver Sand south block, which hosts the Mineral Resource area. Table 1 summarizes the Silver Sand Property mineral tenure. The remaining area incorporates MPC claims consisting of 29 ATEs and 201 cuadriculas for a total area of about 57 km^2^ surrounding the Silver Sand Project core area. The AMC-covered and MPC-covered areas comprise the Silver Sand Property.
Table 1 Mineral Tenure controlled by New Pacific
| Concessionnumber | National registry | Name | Concessiontype | Size oforiginalATE<br><br> <br>(hectares) | Titleholder | Duration |
|---|---|---|---|---|---|---|
| 4694<br><br> <br>4695<br><br> <br>4696<br><br> <br>4697<br><br> <br>4698<br><br> <br>4699<br><br> <br>4700<br><br> <br>4701<br><br> <br>4702<br><br> <br>4703<br><br> <br>4704<br><br> <br>4705<br><br> <br>4706<br><br> <br>4707<br><br> <br>4708<br><br> <br>4709<br><br> <br>4710 | 503‐01271<br><br> <br>503‐01275<br><br> <br>503‐02424<br><br> <br>503‐01276<br><br> <br>503‐02423<br><br> <br>503‐01270<br><br> <br>503‐01269<br><br> <br>502‐01266<br><br> <br>503‐02425<br><br> <br>503‐01267<br><br> <br>503‐01268<br><br> <br>503‐01272<br><br> <br>503‐02426<br><br> <br>503‐02427<br><br> <br>503‐02428<br><br> <br>503‐01273<br><br> <br>503‐01274 | La Sombra<br><br> <br>San Marcos Evangelista<br><br> <br>El Carmen<br><br> <br>Escuadra<br><br> <br>Perfecta<br><br> <br>Reintegrante<br><br> <br>Félix<br><br> <br>Seis de Agosto<br><br> <br>Olvidada<br><br> <br>Moria<br><br> <br>El Rodero<br><br> <br>Kirigin<br><br> <br>San Antonio<br><br> <br>Nieves<br><br> <br>Londres<br><br> <br>Santa Micaela<br><br> <br>Bertha | ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE<br><br> <br>ATE | 66<br><br> <br>16<br><br> <br>6<br><br> <br>35<br><br> <br>16<br><br> <br>3<br><br> <br>10<br><br> <br>6<br><br> <br>15<br><br> <br>20<br><br> <br>37<br><br> <br>10<br><br> <br>8<br><br> <br>8<br><br> <br>8<br><br> <br>31<br><br> <br>20 | Empresa Minera Alcira S.A. | 30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years<br><br> <br>30 years |
| 13235<br><br> <br>13257 | 503-02753<br><br> <br>503-02734 | Jisas<br><br> <br>Jardan | ATE<br><br> <br>ATE | 125<br><br> <br>50 | Emrespa Jisas - Jardan SRL | 30 years from signing AMC<br><br> <br>30 years from signing AMC |
| 11313 | 503-03740 | El Bronce | ATE | 6 | Empresa El Cateador SRL | 30 years from signing AMC |
| 20 | Totals | 496 | **** | **** |
Notes:
• There is no expiry date for the previously issued mineral permits in Bolivia.
• Once the ATEs are fully converted to AMCs, they will be valid for 30 years and can be extended for an additional 30 years.
• The size of claims listed in the table are the original ATE size. The size of claims can change during the conversion process to AMCs. The Amended and Restated Technical Report text refers to the AMC size.
• As of the date of the Amended and Restated Technical Report, the Quota Purchase agreement with the former shareholders of Cateador still needed to be registered with Registry of Commerce.
In accordance with the new Mining Laws, the Company (through Alcira) submitted all required documents for the consolidation and conversion of the original 17 concessions, which comprise the core of the Silver Sand Project, to cuadriculas and AMC to AJAM. Conversion was initially approved by AJAM in February 2018. On 6 January 2020, Alcira signed an AMC with AJAM pursuant to which the 17 ATEs were consolidated into one concession with an area of 3.1656 km2. As of the date of the Amended and Restated Technical Report, this AMC was yet to be registered with the mining register, notary process and published in the mining gazette.
Mining production contract
The Company, through Alcira, entered into an MPC with COMIBOL on 11 January 2019. The MPC covers 29 ATEs and 201 cuadriculas for a total area of about 57 km^2^ surrounding the Silver Sand Project core area. For COMIBOL to obtain mining rights over such areas, AJAM will have to grant them by way of AMCs in accordance with Bolivian mining laws. In addition, the MPC must be ratified by the Congress of Bolivia ("Congress") to be valid and enforceable.
Once the MPC has been ratified by Congress, the MPC with COMIBOL will be valid for 15 years which may be automatically renewed for an additional 15 year term and potentially, subject to submission of an acceptable work plan, for an additional 15 year term for a total of 45 years. According to the terms of the MPC, the Company has an investment commitment of US$6 million during the first five years of exploration. The Company will pay COMIBOL a 4% gross sales value if the mineral concessions covered by the MPC are commercially exploited at a future date.
Environmental permits
The Company has successfully obtained environment permits from local authorities to conduct mineral exploration and drilling activities in the mineral concessions fully owned by the Company and the MPC areas owned by COMIBOL. There are no known significant factors or risks that might affect access or title, or the right or ability to perform work on the Property, including permitting and environmental liabilities to which the project is subject.
Land holding costs
AJAM employs a special tax unit ("STU"), that is indexed to the "Unidad de Fomento a la Vivienda", to calculate the annual fee which mineral concession holders have to pay to the government. Depending on the type and size of mineral concessions, the number of STUs varies between 375 and 692 STUs per cuadricula. In 2019, each STU was equivalent to two Bolivianos. Note that the STU may change slightly year by year.
For the year 2019, the Company paid to the government the annual fees of 11,644 Bolivianos (US$1,687) for the 17 ATEs of the original Silver Sand concession, 6,468 Bolivianos (US$937) for the 7 cuadriculas of Jisas Jardan concessions, and 3,215 Bolivianos, (US$466) for 7 ATEs of the 29 ATEs covered by the MPC with COMIBOL. The Company does not have to pay any fees to the government for the remaining 22 ATEs owned by COMIBOL and covered by the MPC as the 22 ATEs are nationalized concessions. However, according to the terms of MPC, the Company will have to pay the annual fees to the government when COMIBOL is granted the 201 cuadriculas by AJAM. In addition, the Company will pay COMIBOL a management fee of US$10,000 per month for all the concessions covered by the MPC upon ratification.
Surface rights
As per the 2014 Mining Law, holders of mining rights may obtain surface rights through administrative agreements entered into with AJAM. In addition, surface rights may be obtained on third-party contract areas and by neighbouring properties by the following means: (i) agreement between parties; (ii) payment of compensation; and (iii) compliance with the regulations and procedures for authorization. Once surface rights are obtained, holders of mining rights may build treatment plants, dams and tailings, infrastructure and other infrastructure necessary to carry out mining activities. The Company has not yet obtained surface land rights.
Royalties and encumbrances
For the MPC, if commercial production commences, the Company will pay COMIBOL a 4% gross sales value of all minerals produced from the MPC areas.
AMCs are subject to the following royalties and duties:
(i) Mining royalty: The royalty is applicable to all mining actors and applies to the exploitation of mineral resources and non-renewable metals pursuant to the New Mining Laws. The royalty is established according to the status of the mineral (raw, refined, etc.), on whether the mineral will be exported, and international mineral prices. The royalty applicable to silver pre-concentrates, concentrates, complexes, precipitates, bullion or molten bar and refined ingot is as shown in Table 2.
Table 2 Royalty applicable to silver in MPC
| Official silver price per troy ounce(US$) | Aliquot (%) |
|---|---|
| Greater than $8.00 | 6 |
| From $4.00 to $8.00 | 0.75 * official silver price |
| Less than $4.00 | 3 |
(ii) Mining Patent: Is a requirement for the mining operator to continue holding mining rights over the mining area. Patents are calculated according to the size of the area under the exploration license or contract, as set out in the 2014 Mining Law. Failure to pay for the patents will trigger the loss of the underlying exploration or mining rights.
With the exception of political risk discussed in Section 14 of the Amended and Restated Technical Report and the need for final execution of some land agreements, AMC Consultants is not aware of other significant factors and risks which may affect access, title or right to perform work on the Silver Sand Property.
(3) History
In 2009, Ningde Jungie Mining Industry Co. Ltd. ("NJ Mining") purchased Alcira, owner of the Silver Sand Project, from Empresa Minera Tirex Ltda, a private Bolivia mining company. The Company entered into an agreement to acquire Alcira from NJ Mining, pursuant to the terms announced on 10 April 2017. The acquisition was finalized on the 20 July 2017.
The Company subsequently acquired 100% interests of a local private company who owns the mineral rights of two additional concessions (Jisas and Jardan) in July 2018. No exploration work was completed on the two concessions.
In January 2019, an MPC was signed between Alcira and COMIBOL securing access to an additional 57 km^2^ of prospective property surrounding the original Silver Sand Project concessions.
In December 2019, the Company acquired 100% interests of Empresa El Cateador SRL, a local company which owns the mineral rights to a single ATE (El Bronce) located to the north of the Silver Sand Property. No exploration work was ever completed on this concession.
Mining activity has been carried out on the Silver Sand Property and adjacent areas by various operators intermittently since the early 16^th^ century. There are widespread small mine workings and numerous abandoned miners' villages on the Silver Sand Property. Machacamarca, a historic silver mine on the Silver Sand Property, was mined from colonial times until the price declined in about 1890. Since then, local mining activities have focused on tin mineralization at the adjacent Colavi and Canutillos mines.
Historical mining activities on the Silver Sand Property mainly targeted high-grade vein structures.
Records of historical mine production are not available.
Despite the long history of mining on the Silver Sand Property and its adjacent areas, there has been little modern systematic exploration work recorded prior to 2009. The only documented exploration campaign was completed by NJ Mining between 2009 and 2015.
NJ Mining carried out a comprehensive exploration program across the Silver Sand Property. Exploration work comprised geological mapping, surface and underground sampling, trenching and drilling as shown in Table 3. All exploration samples were analyzed at NJ Mining's lab facilities near Potosí, Bolivia for silver and, in some cases, tin.
Table 3 Exploration work completed by NJ Mining from 2009 to 2015
| Type of exploration | Work completed |
|---|---|
| 1:5,000 geological mapping | 3.15 km2 |
| 1:1,000 geological traverse surveying | 7,272 m in 15 NE-SW exploration lines |
| Topographic survey | 8 survey points |
| Mapping historic workings | 208 m |
| Diamond core drilling and logging | 2,334 m in 8 holes |
| Trenching | 40 m |
| Reconnaissance mapping | 292 points |
| Reconnaissance sampling | 1,202 samples |
| Mineralogy and lithology identification | 19 thin sections |
| Petrography study | 9 thin sections |
| Channel sampling | 1,628 m with 546 samples |
| Core sampling | 504 samples |
| Specific gravity measurement | 31 samples |
| QA/QC | 215 samples |
Six silicified mineralization zones (Zone I, II, III, IV, IX, and X) were defined from results of the previous exploration program. Zone I mineralization was defined over an area 1,500 m in length and up to 125 m in width.
There are no known historical estimates of Mineral Resources or Mineral Reserves at the Silver Sand Property.
(4) Geological Setting, Mineralization and Deposit Types
The regional geological and tectonic framework of Bolivia can be divided into six geotectonic belts. From east to west these comprise: the Precambrian Shield, the Chaco-Beni Plains, the Subandean Zone, the Eastern Cordillera, the Altiplano, and the Western Cordillera.
The Bolivian Central Andes is characterized by a diverse series of deposits and metallogenic belts. These include the Miocene to Pliocene red-bed copper deposits, epithermal Ag-Au-Pb-Zn-Cu deposits in the Altiplano and Western Cordillera, the Mesozoic and Cenozoic tin belt, the Paleozoic gold antimony belt and the lead-zinc belt in the Eastern Cordillera.
The Bolivian Tin Belt is a 900 km long, north-west to north-south trending belt containing significant deposits of tin, silver and tungsten related to orogenic and magmatic processes which occurred between the late Paleozoic and late Tertiary. Pluton related Sb-W mineralization occurs within Triassic-Jurassic and Miocene aged rocks in the northern portion of the belt. Pluton related Sn-W and volcanic rock associated Sn-Ag-Pb-Zn mineralization occur within Miocene to Pliocene aged rocks in the central and southern portion of the belt.
The Silver Sand Property is located in the south section of the polymetallic tin belt in the Eastern Cordillera of the Central Andes, Bolivia. Evidence of historical mining activities such as abandoned mining adits and mining villages can be seen across the Property. Four of these geotectonic belts form part of the Central Andes and are discussed in more detail in the Amended and Restated Technical Report.
Bedrock in the Silver Sand Property area mainly consists of weakly deformed Cretaceous continental sandstone, siltstone, and mudstone and strongly deformed Paleozoic marine sedimentary rocks. The Cretaceous sedimentary sequence forms an open syncline which plunges gently north-northwest and is bound to the southwest and northeast by northwest trending faults.
The dominant Cretaceous sedimentary sequence within the Silver Sand Property is divided into the lower La Puerta Formation and the upper Tarapaya Formation. The La Puerta Formation consists of sandstones and unconformably overlies the highly folded Paleozoic marine sedimentary rocks. The Tarapaya Formation conformably overlies the La Puerta sandstones in the central part of the Property and comprises siltstones and mudstones intercalated with minor sandstone.
Both the Cretaceous and Paleozoic sedimentary sequences are intruded by numerous small Miocene subvolcanic dacitic porphyry intrusions.
Silver mineralization is hosted by faults, fractures, fissures, and crackle breccia zones in the Cretaceous La Puerta brittle sandstone and porphyritic dacitic dikes, laccolith, and stocks. In the mineralized sandstone, open spaces are filled with silver-containing sulphosalts and sulphides in forms of sheeted veins, stockworks, and veinlets, as well as breccia fillings and minor disseminations. Most silver mineralization in the Silver Sand Property is structurally controlled with secondary rheological controls. The intensity of mineralization is dependent on the density of various mineralized vein structures developed in the brittle host rocks.
The most common silver-bearing minerals include freibergite, miargyrite, polybasite, bournonite, andorite and boulangerite. The mineralized zones have been irregularly oxidized which in areas can result in significant mixed oxide and sulphide zones due to the strong local influence of sub-vertical fractures. Oxide minerals are dominated by jarosite, goethite and minor hematite resulting pervasive staining within sandstones, and pseudomorphing of sulphide minerals within veins.
A total of ten mineralized prospects have been identified across the Silver Sand Property to date. These include the Silver Sand deposit and the El Fuerte, Snake Hole, North Plain, San Antonio, Esperanza, Jisas, El Bronce, Mascota, and Aullagas occurrences. Silver Sand and Snake Hole have been defined or tested by drilling. The other eight prospects have been defined by rock chip and grab sampling of ancient and more recent artisanal mine workings and dumps.
Four mineralization types have been recognized in the Silver Sand Property, including (1) sandstone-hosted silver mineralization, (2) dacitic porphyry-hosted silver mineralization, (3) hydrothermal breccia-hosted silver mineralization, and (4) manto-type tin and base metal mineralization. The first three mineralization types are considered to have been developed in an epithermal environment during the late stage of the Cenozoic orogenic movement in the Eastern Cordillera. They are typical of the Bolivian polymetallic vein-type deposits represented by the giant Cerro Rico de Potosí silver mine in Potosí. The manto-type tin and base metal mineralization was formed by metosomatic replacement associated with a mesothermal environment during the early stage of the Cenozoic orogenic event.
(5) Exploration
Before the acquisition of the Silver Sand Property by the Company in 2017, the previous owner drilled eight diamond drillholes for a total of 2,334 m of HQ size core between 2012 and 2015 at the Silver Sand deposit, within the core area of the Silver Sand Property. Limited surface and underground sampling were also conducted by the previous owner. Since October 2017, the Company has carried out an extensive property-scale reconnaissance investigation program by surface and underground sampling of the mineralization outcrops and the accessible ancient underground mine works across the Silver Sand Property. A total of 904 rock chip samples were collected from 19 separate outcrops by the Company since 2017. Continuous chip samples were collected at 1.5 m intervals along lines roughly perpendicular to the strike direction of the mineralization zones. Sample lines covered a total length of 1,340 m. Most of the sampled outcrops are located above or near old mine works.
The Company has also mapped and sampled 42 historical mine workings comprising 4,912 m of mine tunnel. A total of 964 continuous chip samples have been collected at 1 m intervals along walls of available tunnels that cut across the mineralized zones. Mine dumps from historical mining activities are scattered across a significant portion of the Property. The Company has collected a total of 1,339 grab samples from historical mine dumps. The majority of samples collected were remnants of high-grade narrow veins extracted from underground mining activity. Of the 1,339 samples collected from historical mine dumps to date, 572 samples (43%) returned assay results between 32 and 3,290 grams per ton ("g/t") silver ("Ag") with an average grade of 190 g/t Ag. Assay results of underground chip samples and surface mine dump grab samples show that silver mineralization widely occurs in the wall rocks of the previously mined-out high-grade veins in the abandoned ancient underground mining works.
Exploration results collected to date show comparable average grades between the underground chip samples and the grab samples from historical waste dumps. Surface rock chip sample grades are consistently lower. The significant difference of silver grades between underground and surface chip samples may be the result of oxidation and leaching of silver sulphides and sulphosalts from the host rocks.
(6) Drilling
From October 2017 to December 2019, the Company conducted intensive diamond drilling programs over the Silver Sand Project core area to define the spatial extension of the mineralization. It drilled 386 HQ diamond holes for a total metreage of 97,610 m in the core area of the Silver Sand Property. Holes were first drilled at 50 m-by-50 m grid to delineate the spatial extensions of the major mineralized zones defined by surface and underground sampling. Later drilling, on a nominal 25 m-by-25 m grid, infilled defined areas of mineralization.
All holes were drilled from the surface. Drillholes were drilled up to 545 m deep at inclinations between -45° and -80° towards azimuths of 060° (~NE) and 220° (~SW) to intercept the principal trend of mineralized vein structures.
The drilling programs have covered an area of approximately 1,600 m long in the north south direction and 800 m wide in the east-west direction and have defined silver mineralization at the Silver Sand deposit over an oblique strike length of 2 km, a collective width of 650 m and to a depth of 250 m below surface.
Drill coring was completed using conventional HQ (64 mm diameter) equipment and 3 m drill rods. Core recovery from the Company's drill programs varies between 0% (voids and overburden) and 100%, averaging 97%. More than 92% of core intervals have a core recovery of greater than 95%. Drill core containing visible mineralization is wrapped in paper to minimize damage during transport.
Drill programs completed between October 2017 and December 2019 have defined silver mineralization at the Silver Sand deposit over an oblique strike length of 2 km, a collective width of 650 m and to a depth of 250 m below surface. Silver mineralization occurs predominantly associated with sheeted veins, stockworks and veinlets within altered La Puerta sandstone. Within the core of the system, where vein intensity is greatest, mineralized zones are relatively continuous along strike and to depth, reaching thicknesses of up to 300 m. The core portion of the system shows strong continuity. Mineralization outside of the core occurs as discontinuous pods and lenses often only multiple metres thick.
As of 16 January 2020, assay results for 19 of 24 drillholes were received by the Company. Fifteen of 19 drillholes contain significant, structurally controlled, sandstone hosted silver mineralization. Silver mineralization occurs as coarse silver sulphosalts (freibergite) which is hosted in fractures of bleached sandstones associated with disseminated pyrite. The grade and thickness of mineralization appears to increase towards the north.
At this time there are no known drilling, sampling or recovery factors that could impact the accuracy and reliability of the results. Due to fine-grained mineralization occurring on fractures, there is the possibility of loss of mineralization during the drilling, transportation and core handling processes, which may lead underestimation of the grade. This is further supported in Sections 11 and 13 of the Amended and Restated Technical Report.
AMC recommends that the Company consider drilling twin holes using triple tube diamond core or RC drilling to evaluate whether loss of vein material is also occurring during drilling and sampling processes.
(7) Sampling, Analysis and Data Verification
The Company has developed and implemented good standard procedures for sample preparation, analytical, and security protocols. The Company manages all aspects of sampling from the collection of samples to sample delivery to the laboratory. All samples are stored and processed at the Company's Betanzos facility located approximately 1.5 hours drive from the Silver Sand deposit. This facility is surrounded by a brick wall, has a locked gate and is monitored by video surveillance and security guard 24 hours a day, seven days a week. Within the facility, there are separate and locked areas for core logging, sampling, and storage.
Core, chip, and grab samples are shipped in securely sealed bags to ALS Global ("ALS") - an independent commercial laboratory specializing in analytical geochemistry services - in Oruro, Bolivia for preparation. At the preparation lab, samples are processed using the following procedures: (1) crush to 70% less than 2 mm; (2) riffle split off 250 grams; and (3) pulverize split to better than 85% passing a 75-micron sieve. The pulverized pulps are shipped to ALS Global in Lima, Peru for geochemical analysis. Sample analysis in 2017 and 2018 comprised an aqua regia digest followed by Inductively Coupled Plasma ("ICP") Atomic Emission Spectroscopy analysis of silver, lead, and zinc (ALS code OG46). Assay results greater than 1,500g/t Ag were sent for fire assay and gravimetric finish analysis. The Company changed its analysis protocol in 2019 to include systematic multielement analysis. All samples were sent for an initial 51 element ICP mass spectroscopy analysis (ALS code ME-MS41) with over limit procedures in place.
Drill programs completed on the Silver Sand Property between 2017 and 2019 have included Quality Assurance / Quality Control ("QA/QC") monitoring programs which have incorporated the insertion of certified reference materials ("CRMs"), blanks, and duplicates into the sample streams, and umpire (check) assays at a separate laboratory. AMC Consultants has compiled and reviewed the available QA/QC data for 345 drillholes where assays have been received. The Company has included CRMs, blank, and coarse reject umpire (check) assays as part of routine analysis at slightly less than the preferred rates of 5%. Field duplicate samples consisting of quarter core have also been included but comprise less than 1% of all samples.
The Company has used four different CRMs throughout the project history. Three CRMs were used in the 2019 program, which monitored the approximate cut-off grade and grades below and above the average grade. In previous years, CRMs did not monitor the cut-off grade. CRMs generally show reasonable analytical accuracy; however, two of the four CRMs do not perform within certified control limits, with an excessive number of failures. AMC Consultants postulates that poor CRM performance may be due to the CRMs being certified using a four-acid digest but analyzed using aqua-regia. AMC Consultants recommends that follow up work be completed prior to further use of these CRMs. Blank sample results are considered acceptable and show that no significant contamination has occurred during sample preparation and analysis. Quarter core field duplicate samples show sub-optimal performance which suggest that mineralization is heterogeneous, that sample errors are occurring during the sampling process, or a combination of both factors. Duplicate samples are biased on average 11% lower than the original sample. AMC Consultants speculates that the friable nature of silver sulphosalts may result in sample loss during the core cutting and sampling process, resulting in progressive decrease in sample grade with each successive stage of processing, and an overall net underestimation of metal. AMC Consultants recommends that this be investigated. Umpire (check) coarse reject samples have been sent to a third-party laboratory to confirm the accuracy of the primary laboratory. Umpire assay results show sub-optimal precision however this may be in part due to additional sub-sampling variance incurred during sampling of the coarse rejects. AMC Consultants recommends future umpire samples be sent as pulp samples.
The Qualified Person ("QP") who prepared this portion of the Amended and Restated Technical Report considers sample preparation, analytical and security protocols employed by the Company to be acceptable. The QP has reviewed the QA/QC procedures used by the Company including CRMs, blank, duplicate and umpire data and has made some recommendations. The QP does not consider these to have a material impact on the Mineral Resource estimate and considers the assay database to be adequate for Mineral Resource estimation.
The QP completed a site visit to the Project between 8 - 11 August 2019, and during the inspection the following activities were carried out:
• Review of field site of Silver Sand Project.
• Review of drilling and core processing procedures.
• Review of New Pacific QA/QC procedures.
• Review of randomly selected core from two drillholes (DSS422501 and DSS522506).
• Inspected the core processing facility and core storage in Betanzos.
• Held discussions with several staff on site.
• Held discussions on database management procedures.
• Observed two operating drill rigs.
• Reviewed the drill management process adopted by New Pacific.
After the site visit, the QP undertook random cross-checks of assay results in the database with original assay results on the assay certificates returned from ALS (Bolivia) and Actlabs Skyline (Peru) - an independent geochemical laboratory certified according to ISO 9001:215. This verification consisted of comparing 3,616 of the 58,420 assay results in the database to those in the certificates. This is approximately 6.2% of the total samples. One typing error was detected. The QP also undertook a random cross check of the original collar and survey measurements for 18 drillholes and compared them to the database. This represented 5.5% of the total drillholes. No errors were detected.
The QP considers the database fit-for-purpose and in the QP's opinion, the geological data provided by the Company for the purposes of Mineral Resource estimation were collected in line with industry best practice as defined in the CIM Exploration Best Practice Guidelines and the CIM Mineral Resource, Mineral Reserve Best Practice Guidelines. As such, the data are adequate for use in the estimation of Mineral Resources.
(8) Mineral Processing and Metallurgical Testing
A metallurgical testwork program started in 2018 examined several metallurgical composites of Oxide, Transition, and Sulphide mineralization from two areas of the Silver Sand deposit. The composites were prepared from samples of available half-core. A geometallurgical sampling approach was used and was designed to highlight the effect of differences in silver grade, degree of oxidation, and lithology.
Four independent geometallurgical testwork programs (mineral characterization, comminution, froth flotation, and cyanide leaching) were carried out on the different metallurgical composites. Six metallurgical domains were identified for the flotation and leaching testwork and six geological domains were branded for the comminution work. Comminution, flotation, and leaching programs were completed by SGS Mineral Services in Lima, Peru, while the mineral characterization work was completed by the Research Center for Mining and Metallurgy and Oruro Technical University both in Bolivia.
The results of the testwork suggest that the mineralized materials from the Silver Sand Project would be amenable to processing using conventional flotation or large-scale whole ore cyanidation at atmospheric pressure. This preliminary metallurgical testing program has demonstrated that good silver extraction rates are possible using these simple extraction methods and that further improvements and refinements should be possible in future programs after fine-tuning the various test parameters. Highlights of the completed test program are as follows:
• Composite samples of Sulphide, Transition, and Oxide mineralization were submitted for laboratory-scale rougher-scavenger flotation testing and this achieved up to 96.0%, 86.8%, and 92.0% silver recovery respectively.
• Composite samples of Sulphide, Transition, and Oxide mineralization were submitted for bottle roll cyanidation testing and this achieved up to 96.7%, 97.0%, and 96.3% silver extraction respectively.
• Samples of oxide mineralization were submitted for coarse column leach cyanidation testing and this achieved up to 88.3% silver extraction.
• High recoveries achieved during cyanidation tests indicate that silver-bearing minerals within the sulphide and transition composite samples tested can be considered non-refractory in nature.
• Composite samples were found to be mostly in the soft to medium grindability range with low to medium values of Abrasion Index.
(9) Mineral Resources and Mineral Reserves Estimates
(a) Mineral Resources
The Mineral Resource estimate was completed using 330 drillholes on the Silver Sand Property comprising 85,391 m of diamond core and 58,420 assays. Grade interpolation was completed using ordinary kriging. Silver, lead, zinc, gallium, and indium were estimated but only silver is reported below as metallurgical work has yet to be done on the other metals.
The mineralization domain was built by the Company using Leapfrog Geo 4.0 software. The mineralization domain was reviewed and accepted by the QP who prepared this portion of the Amended and Restated Technical Report with some changes, including separating the domain into two areas based on vein orientation. The QP estimated into these domains and also estimated a background block model that was combined with the domain mineralization to form the final block model. The Company performed 4,033 density measurements on the core drilled on the Property. As the mineralization is hosted in one rock type, after reviewing the density data, the QP assigned two density measurements to the block model based on the mean density inside and outside of the mineralized domains. The mineralized sandstone was assigned a bulk density of 2.54 tonnes per cubic metre (t/m3) and the unmineralized sandstone was assigned a bulk density of 2.50 t/m3.
The pit-constrained Mineral Resources are reported for blocks above a conceptual pit shell based on a US$18.70/ounce silver price and within the AMC claim boundary. Pit optimization allowed minor waste to extend outside the Company's 100% owned claim boundary to the NE and SW. The cut-off applied for reporting the pit-constrained Mineral Resources is 45 g/t Ag. Assumptions made to derive a cut-off grade included mining costs, processing costs and recoveries, and were obtained from comparable industry situations. The model is depleted for historical mining activities.
The Mineral Resource for the Silver Sand deposit has been estimated by Ms Dinara Nussipakynova, P.Geo., Principal Geologist of AMC Consultants, who takes responsibility for the estimate. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Table 5 Conceptual pit-constrained Mineral Resource as of 31 December 2019
| Resource category | Tonnes (Mt) | Ag (g/t) | Ag (Moz) |
|---|---|---|---|
| Measured | 8.40 | 159 | 43.05 |
| Indicated | 26.99 | 130 | 112.81 |
| Measured & Indicated | 35.39 | 137 | 155.86 |
| Inferred | 9.84 | 112 | 35.55 |
Notes:
• CIM Definition Standards (2014) were used for reporting the Mineral Resources.
• The QP is Dinara Nussipakynova, P.Geo. of AMC Consultants.
• Mineral Resources are constrained by an optimized pit shell developed at a metal price of US$18.70/oz Ag and recovery of 90% Ag (costs and other assumptions shown in Table 1.2 below).
• Cut-off grade is 45 g/t Ag.
• Mineral Resources are reported inside the AMC claim boundary.
• Pit optimization allows waste to extend outside the claim to the NE and SW.
• Mineral resources that are not mineral reserves do not have demonstrated economic viability.
• Drilling results up to 31 December 2019.
• The numbers may not compute exactly due to rounding.
• See "Cautionary Note to U.S. Investors Concerning Preparation of Mineral Resource and Mineral Reserve Estimates".
• Source: AMC Mining Consultants (Canada) Ltd.
Table 6 Cut-off grade and conceptual pit parameters
| Input | Units | Value |
|---|---|---|
| Silver price | US$/oz Ag | 18.70 |
| Silver process recovery | % | 90 |
| Payable silver | % | 97 |
| Dilution factor | % | 10 |
| Mining recovery factor | % | 100 |
| Mining cost | US$/t mined | 2.00 |
| Process cost | US$/t minable material > COG | 10.00 |
| G&A cost | US$/t minable material > COG | 2.00 |
| Slope angle | degrees | 45 |
Notes:
• Sustaining capital cost has not been included.
• Measured, Indicated and Inferred Mineral Resources included.
• Source: AMC Mining Consultants (Canada) Ltd.
The QP is not aware of any known environmental, permitting, legal, taxation, socioeconomic, marketing, or other similar factors that could materially affect the stated Mineral Resource estimates. Regarding title, the QP is aware that the ATEs, where the Mineral Resource is located, were, as of the date of the Amended and Restated Technical Report in the process of being consolidated and converted into one concession. An AMC with AJAM has been signed but is yet to be registered with the mining register, notarized, and published in the mining gazette. AMC Consultants sees no reason for these final conversion steps not to occur. Regarding political risk, during previous elections in Bolivia, civil unrest across the country resulted in road blockages, including blockages of the roads leading to the Silver Sand Property, and strikes by local groups. In the past, former political leaders have caused Bolivia to nationalize privately owned mines. Globally mining laws are subject to change from time to time.
(b) Mineral Reserves
There are neither historical nor current Mineral Reserves on the Property.
(10) Exploration, Development, and Production
There are no mining or metal recovery operations underway by the Company or the prior owner at the Silver Sand Property. There are a few local contract miners conducting underground, small scale, artisanal mining intermittently on the Silver Sand Property. Evidence of historic mining, commencing in Spanish Colonial times, is demonstrated by numerous adits, declines, pits and drifts, rail tracks, and small scale dumps scattered around the Silver Sand Property. There are no known records of past production from these activities.
(11) Conclusions
Silver mineralization at the Silver Sand Property occurs in ten areas: Silver Sand, El Fuerte, Snake Hole, North Plain, San Antonio, Esperanza, Jisas, El Bronce, Mascota, and Aullagas. The mineralization identified in the Silver Sand Property belongs to the Bolivian polymetallic vein-type deposits represented by the giant Cerro Rico de Potosí silver mine in Potosí.
The Silver Sand deposit is defined by exploration drilling and has a conceptual pit-constrained Mineral Resource using a 45 g/t Ag cut-off of Measured and Indicated Resources of 35.39 million tonnes grading 137 g/t silver; and Inferred Mineral Resource of 9.84 million tonnes grading 112 g/t silver. Ms Dinara Nussipakynova, P.Geo. of AMC Consultants takes responsibility for these estimates.
Logging, mapping, sampling, and analyzing procedures of the Company's on-going exploration programs follow common industry practice. Results of QA/QC programs are deemed acceptable by the QP. The results of a preliminary metallurgical test program suggest that the mineralized materials from the Silver Sand Property would be amenable to processing using conventional flotation or whole ore cyanidation at atmospheric pressure at a large scale.
Risks and opportunities relating to this project are discussed below.
(a) Risks
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is a degree of uncertainty attributable to the estimation of Mineral Resources. Until Mineral Resources are actually mined and processed, the quantity of mineralization and grades must be considered as estimates only. The QP notes that the current Mineral Resource is constrained within a conceptual open pit that allows minor waste, but not mineralization, to extend onto the MPC area. Constraining both the waste and mineralization to the AMC ground reduces the contained silver ounces in the Measured and Indicated category from 155.9 Moz to 142.2 Moz and in the Inferred category from 35.6 Moz to 27.4 Moz. Engineering, geotechnical and hydrogeological studies, at a sufficient level to convert Mineral Resources to Mineral Reserves, are necessary before the impact of these risks and uncertainties to the project's potential economic viability can be reasonably quantified. Operating in South America can be associated with political risk. In the past, former political leaders have caused Bolivia to nationalize privately owned mines. Global mining laws are subject to change from time to time.
(b) Opportunities
Potential opportunities for the Silver Sand Project include:
• The current Mineral Resource is constrained within an open pit that allows waste, but not mineralization, to extend onto the MPC area. Extending the pit to allow for the extraction of both waste and mineralization in the MPC area increases the contained silver ounces in the Measured and Inferred category from 155.9 Moz to 170.3 Moz and in the Inferred category from 35.6 Moz to 49.7 Moz.
• Expansion and upgrading of the Silver Sand deposit through additional drilling.
• Significant exploration potential within an emerging silver district, which contains numerous showings and evidence of silver-rich, polymetallic mineralization including historic workings.
ITEM 6: DIVIDENDS AND DISTRIBUTIONS
The Company has not paid dividends on its common shares since incorporation. The Company has no present intention of paying dividends on its common shares. Payment of dividends of distributions in the future will be dependent on the earnings and financial condition of the Company and other factors which the directors may deem appropriate at that time.
ITEM 7: DESCRIPTION OF CAPITAL STRUCTURE
The Company has an authorized capital of an unlimited number of common shares without par value, of which 154,451,263 common shares were issued and outstanding as fully paid and non-assessable as of June 30, 2021. A further 3,115,832 common shares have been reserved and allotted for issuance upon the due and proper exercise of certain incentive options outstanding as of June 30, 2021. All of the common shares of the Company rank equally as to dividends, voting powers and participation in assets and in all other respects. Each common share carries one vote per share at meetings of the shareholders of the Company. There are no indentures or agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights attached to the common shares. The common shares presently issued are not subject to any calls or assessments.
The Company's amended and restated share based compensation plan (the "Omnibus Plan") was prepared by the Company in accordance with the applicable stock exchange rules and is in the form of a "rolling 10% plan" reserving for issuance upon the exercise of options granted pursuant to the Omnibus Plan a maximum of 10% of the issued and outstanding common shares. Furthermore, no more than 3,500,000 shares may be granted in the form of RSUs and no more than 780,000 shares may be granted in the form of PSUs. As of June 30, 2021, the Company has (a) stock options outstanding to purchase 3,115,832 common shares at exercise prices from CAD$0.55 to CAD$2.15 per share with original terms of 5 years, with the last options expiring on February 21, 2024; (b) 794,900 RSUs issued outstanding; and (c) nil PSUs issued and outstanding.
As at June 30, 2020, the Company has no outstanding warrants.
ITEM 8: MARKET FOR SECURITIES
8.1 Trading Price and Volume
Until August 10, 2020, the Company's shares traded on the TSX-V. On August 11, 2020, the Company's common shares graduated from the TSX-V to the TSX. The following table provides the high and low prices, and average daily volume for the Company's shares traded on the TSX-V and the TSX for the period indicated (stated in Canadian dollars):
| Period | High | Low | Volume |
|---|---|---|---|
| Jul 2020 | 6.00 | 5.28 | 139,727 |
| Aug 2020 | 6.57 | 5.30 | 128,145 |
| Sep 2020 | 7.23 | 5.70 | 497,895 |
| Oct 2020 | 6.69 | 5.18 | 106,419 |
| Nov 2020 | 7.16 | 5.50 | 191,543 |
| Dec 2020 | 8.09 | 5.49 | 138,590 |
| Jan 2021 | 8.76 | 6.90 | 142,150 |
| Feb 2021 | 9.02 | 5.62 | 174,911 |
| Mar 2021 | 6.58 | 4.92 | 135,852 |
| Apr 2021 | 6.74 | 4.78 | 84,105 |
| May 2021 | 7.64 | 5.92 | 88,630 |
| Jun 2021 | 6.95 | 5.52 | 67,590 |
8.2 Prior Sales
RSUs
The following table sets forth the date and number of RSUs that were granted by the Company during the financial year ended June 30, 2021:
| Date of Grant | Number |
|---|---|
| Aug 12, 2020 | 35,000 |
| Feb 11, 2021 | 325,500 |
Options and PSUs
The Company did not grant any options or PSUs during the financial year ended June 30, 2021.
ITEM 9: ESCROWED SECURITIES
The Company has no securities currently held in escrow.
ITEM 10: DIRECTORS AND OFFICERS
10.1 Name, Occupation and Security Holding
The Company's directors are elected by shareholders at each annual general meeting and typically hold office until the end of the next annual meeting at which time they will be re-elected or replaced. The following table sets out the names of the directors and officers, all offices in the Company each now holds, each person's principal occupation, business or employment, the period of time during which each has been a director of the Company and the number of shares of the Company beneficially owned by each, directly and indirectly, or over which each exercised control or direction as at the date of this AIF.
| Name, Position,Province & Country ofResidence^(1)^ | Principal Occupations During Last FiveYears^(1)^ | Date ofAppointment As aDirector and/orOfficer | SharesBeneficiallyOwned orControlled^(1)^ |
|---|---|---|---|
| Dr. Rui Feng<br>Director^(5)^<br>British Columbia, Canada | Chairman, CEO, and Director of Silvercorp Metals Inc. since September 2003; CEO of New Pacific from May 2010 to April 2020. | May 12, 2004 | 10,242,400 |
| Dr. Mark Cruise<br>Director and Chief Executive Officer<br>British Columbia, Canada | CEO and Director of Trevali Mining Corp.; COO of the Company from November 2019 to April 2020; Director of Velocity Minerals Ltd. | May 28, 2020 | 95,667 |
| The Honourable Jack Austin<br>Chairman and Director^(^^2^^)(^^3^^)(^^4^^)^<br>British Columbia, Canada | Chairman and Director of the Company; Advisor to Stern Partners Inc.; Honorary Professor and Senior Fellow at the Institute of Asian Research at the University of British Columbia. | May 13, 2008 | 612,758^(6)^ |
| David Kong<br>Director^(^^2^^)(^^3^^)^ <br>British Columbia, Canada | Partner at Ernst & Young LLP from 2005 to 2010. Director of Silvercorp Metals Inc., Uranium Energy Corp., and Gold Mining Inc. | November 29, 2010 | 507,058^(7)^ |
| Greg Hawkins<br>Director^(^^2^^)(^^3^^)(^^4^^)^^(5)^<br>British Columbia, Canada | Founding director and/or consultant of public and private exploration development ventures (Brohm Mining Inc., Dayton Mining Inc., Nevsun Resources Ltd., Banro Resource Corp., Tagish Lake Gold Corp., and African Gold Group Inc.). Chairman of Yellowhead Mining Inc. Director of Discovery-Corp Enterprises Inc. Managing Director of CME and Co. from 1993 to 2014. | November 29, 2010 | 1,081,675 |
| Martin G. Wafforn<br>Director^(4)^^(5)^<br>British Columbia, Canada | Senior Vice President of Pan American Silver Corp. | November 27, 2017 | 27,758 |
| Jalen Yuan<br>Chief Financial Officer <br>British Columbia, Canada | Chief Financial Officer of the Company | February 7, 2015 | 133,083 |
| Alex Zhang<br>Vice President, Exploration<br>British Columbia, Canada | Vice President, Exploration of the Company | June 16, 2016 | 266,200 |
| David Tingey<br>Vice President, Sustainability<br>British Columbia,<br>Canada | Senior Sustainability Manager (HSEC) for Entre Mares (Guatemala); Senior Manager and Director of Goldrea Peru SA; Sustainability Consultant, LuceVerde Inc.; Director of Sustainability, Zangezur Copper Molybdenum (Armenia); VP of Health, Safety & Sustainability, Endeavour Silver | March 9, 2020 | 5,000 |
| Yong-Jae Kim<br>General Counsel and Corporate Secretary<br>British Columbia,<br>Canada | Lawyer at Gowling WLG (Canada) LLP from 2010 to 2018. General Counsel and Corporate Secretary of Silvercorp Metals Inc. from 2018. | October 1, 2018 | 16,699 |
| Name, Position, Province & Country of Residence^(1)^ | Principal Occupations During Last Five Years^(1)^ | Date of Appointment As a Director and/or Officer | Shares Beneficially Owned or Controlled^(1)^ |
| --- | --- | --- | --- |
| Stacey Pavlova<br>Vice President, Investor Relations and Corporate Communications<br>British Columbia,<br>Canada | Manager, Metals Sales and Treasury, at SSR Mining Inc., and Manager, Investor Relations at SSR Mining Inc. | February 4, 2021 | 5,833 |
Notes:
(1) The information as to residence, principal occupation or employment and shares beneficially owned, directly or indirectly, or controlled is not within the knowledge of the management of the Company and has been furnished by the respective director or officer.
(2) Denotes member of the Audit Committee.
(3) Denotes member of the Compensation Committee.
(4) Denotes member of the Corporate Governance Committee.
(5) Denotes member of the Technical Committee. (6) Of these shares, 10,000 are held in the name of Mr. Austin's spouse.
(7) Of these shares, 174,000 are held in the name of Mr. Kong's spouse.
As of the date of this AIF, all of the directors, officers and control persons of the Company, as a group, beneficially own, directly or indirectly, or exercise control or direction over 12,994,131 common shares representing 8.38% of the Company's 155,094,761 common shares issued and outstanding.
10.2 Cease Trade Orders, Bankruptcies, Penalties or Sanctions
No director or executive officer of the Company, within the 10 years prior to the date of this AIF, is or has been, a director, chief executive officer or chief financial officer of any company (including the Company) that: (a) while that person was acting in that capacity was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or (b) was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days that was issued after that person ceased to be a director, chief executive officer or chief financial officer, and which resulted from an event that occurred while that person was acting in that capacity.
No director or executive officer of the Company or a shareholder holding a sufficient number of securities to affect materially the control of the Company, within the 10 years prior to the date of this AIF, is or has been, a director or executive officer of any company (including the Company) that while that person was acting in that capacity or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No director or executive officer of the Company or a shareholder holding a sufficient number of securities to affect materially the control of the Company has, within the 10 years prior to this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.
No director or executive officer of the Company or a shareholder holding a sufficient number of securities to affect materially the control of the Company has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable making an investment decision.
10.3 Conflicts of Interest
Certain directors and officers of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the business of acquiring and exploiting natural resource properties. These associations to other public companies in the resource sector may give rise to conflicts of interest from time to time. Under the laws of the Province of British Columbia, the directors and senior officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company. In the event that such a conflict of interest arises at a meeting of the Company's directors, a director who has such a conflict will disclose such interest in a contract or transaction and will abstain from voting on any resolution in respect of such contract or transaction. See also "Item 4.2: Risk Factors".
ITEM 11: AUDIT COMMITTEE
11.1 Audit Committee Charter
A copy of the Charter of the Audit Committee is attached hereto as Schedule "A". A description of the responsibilities, powers and operation of the committee can be found therein.
11.2 Composition of the Audit Committee
The Company has an audit committee (the "Audit Committee") which consists of David Kong (Chair), Jack Austin, and Greg Hawkins. All of the members are considered independent and financially literate pursuant to National Instrument 52-110 Audit Committees ("NI 52-110"). The Audit Committee will be re-constituted after the 2019 annual general meeting.
11.3 Relevant Education and Experience
The Audit Committee currently consists of David Kong, (Chair), Jack Austin, and Greg Hawkins. The directors of the Company have determined that all members of the Audit Committee are "independent" and "financially literate" for the purposes of applicable laws and the rules of the TSX and NYSE American. The directors of the Company have also determined that David Kong, Jack Austin, and Greg Hawkins is each an "Audit Committee Financial Expert" for the purposes of applicable laws and the rules of the TSX and NYSE American. The designation of a member of the Audit Committee as an "Audit Committee Financial Expert" does not make him an "expert" for any purpose, impose any duties, obligations or liability on the member that are greater than those imposed on members of the board of directors (the "Board") who do not carry this designation or affect the duties, obligations or liability of any other member of the Audit Committee.
The Audit Committee operates under the guidelines of the Audit Committee Charter which is reproduced later in this AIF. The Audit Committee, among other things, reviews the annual financial statements of the Company for recommendation to the Board, reviews and approves the quarterly financial statements, oversees the annual audit process, the Company's internal accounting controls and the resolution of issues identified by the Company's auditors, and recommends to the Board the firm of independent auditors to be nominated for appointment by the shareholders at the next annual general meeting. In addition, the Audit Committee meets annually with the Company's auditors both with and without the presence of any members of the Company's management.
David Kong, Director
Mr. Kong holds a Bachelor in Business Administration and earned his Chartered Accountant designation in British Columbia in 1978. From 1981 to 2004, he was partner at Ellis Foster Chartered Accountants and from 2005 to 2010, a partner at Ernst & Young LLP. Currently, Mr. Kong is a director of Silvercorp Metals Inc., Uranium Energy Corp., and Gold Mining Inc. Mr. Kong is a certified director (ICD.C) of the Institute of Corporate Directors.
Jack Austin, Director
The Honourable Jack Austin, P.C., C.M., O.B.C, Q.C., B.A., LL.B., LL.M., Doc.Soc.Sci. (Hon) (Macau), LL.D. (Hon), has over 40 years' experience in law, business, and finance. After serving as legal counsel to several senior mining companies, including International Mineral Corporation, and to BC Hydro in the development of its Peace River and Columbia River power projects, Mr. Austin was President and CEO of two operating mining companies based in B.C. As a member of the Senate of Canada, he served on the Senate Banking Committee for a number of years.
Greg Hawkins, Director
Mr. Hawkins has been involved in the mining exploration and investment industry since 1969. He has been variously responsible for the identification and/or delineation of 10 mineral deposits in Canada, USA, Chile, Ghana, Mali, and Zaire (DRC). Mr. Hawkins has extensive experience directing and managing companies since he has been a founding project consultant or a founding director of seven public and private exploration and development ventures.
11.4 Audit Committee Oversight
During the last year, recommendations of the Audit Committee to nominate or compensate an external auditor were adopted by the Board.
11.5 Pre-Approval Policies and Procedures
The Audit Committee has adopted a specific policy and procedure for the engagement of non-audit services as described in Section 4 of the Audit Committee Charter. The Audit Committee must pre-approve all non-audit services to be provided to the Company or its subsidiary entities by the Company's external auditor.
11.6 External Auditor Service Fees
The Audit Committee has reviewed the nature and amount of the services provided by Deloitte LLP, auditors to the Company, to ensure independence. Fees billed by external auditors for audit services in the last two fiscal years are outlined below:
| Nature of Services | Year Ended <br>June 30, 2021 <br>(CAD) | Year Ended <br>June 30, 2020 <br>(CAD) |
|---|---|---|
| Audit Fees^(1)^ | $139,000 | $205,000 |
| Audit-Related Fees^(2)^ | - | - |
| Tax- Fees^(3)^ | - | - |
| All Other Fees^(4)^ | $90,000 | $80,000 |
| Total | $229,000 | $285,000 |
Notes:
(1) "Audit Fees" include fees necessary to perform the annual audit and quarterly reviews of the Company's consolidated financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits.
(2) "Audit-Related Fees" include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.
(3) "Tax Fees" include fees for all tax services other than those included in "Audit Fees" and "Audit-Related Fees". This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities.
(4) "All Other Fees" include the aggregate fees billed for services provided by the principal accountant, other than the services reported in the above items..
ITEM 12: PROMOTERS
The Company did not retain the services of any promoters within the two most recently completed financial years.
ITEM 13: LEGAL PROCEEDINGS AND REGULATORY ACTIONS
13.1 Legal Proceedings
The Company is not aware of any actual or pending material legal proceedings to which the Company is or is likely to be party or of which any of its business or property is or is likely to be subject.
13.2 Regulatory Actions
There are no (a) penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during its most recently completed financial year; (b) other penalties or sanctions imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decision in the Company; or (c) settlement agreements the Company entered into before a court relating to securities legislation or with a securities regulatory authority during its most recently completed financial year.
ITEM 14: INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except as disclosed in this AIF, during the three most recently completed financial years, no director or executive officer, insider, or any associate or affiliate of such insider, or director, or executive officer has had any material interest, direct or indirect, in any transaction or any proposed transaction which has materially affected or would materially affect the Company or any of its subsidiaries.
The following summarizes the Company's relationship with related parties since July 1, 2020:
| Transactions with related parties | Year ended June 30, 2021 |
|---|---|
| Silvercorp Metals Inc.^(1)^ | $616,030 |
Related Party Transactions are entered into based on normal market conditions at the amounts agreed on by the parties. As at June 30, 2021, the balances with related parties, which are unsecured, non-interest bearing, and due on demand, are as follows:
| Due to related parties | Year ended June 30, 2020 |
|---|---|
| Silvercorp Metals Inc.^(1)^ | $50,378 |
Note:
(1) Silvercorp has two directors and one officer in common with the Company and shares office space with and provides various general and administrative services to the Company. During the year ended June 30, 2021, the Company recorded total expenses of $616,030 (year ended June 30, 2020 - $586,030) for services rendered and expenses incurred by Silvercorp on behalf of the Company.
ITEM 15: TRANSFER AGENTS AND REGISTRARS
The Company's transfer agent and registrar for the Company's common shares is Computershare Investor Services Inc. of 510 Burrard Street, 3rd Floor, Vancouver, British Columbia V6C 3B9.
ITEM 16: MATERIAL CONTRACTS
There are no other contracts, other than those herein disclosed in this AIF and other than those entered into in the ordinary course of the Company's business, that are material to the Company and which were entered into in the most recently completed financial year ended June 30, 2021, or before the most recently completed financial year but are still in effect as of the date of this AIF.
ITEM 17: INTERESTS OF EXPERTS
Names of Experts
Silver Sand Technical Report
AMC was commissioned by the Company to prepare the technical report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020, with an effective date of January 16, 2020 (the "Silver Sand Technical Report").
Qualified Persons who prepared, or contributed to , the Silver Sand Technical Report are identified in that report as follows: A. Ross, P.Geo., B.Sc., Ph.D.; D. Nussipakynova, P.Geo., B.Sc., M.Sc.; and S. Robinson, P.Geo., B.Sc.; and A. Holloway, P.Eng. B.Eng.(Hons).
Interests of Experts
None of the independent consulting geologists and independent "Qualified Persons" named in "Item 17 Names of Experts", when or after they prepared the statement, report or valuation, has received any registered or beneficial interests, direct or indirect, in any securities or other property of the Company or of one of the Company's associates or affiliates or is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of any associate or affiliate of the Company except as disclosed below. This information has been provided to the Company by the individual experts.
The Qualified Persons who were responsible for the preparation of the Silver Sand Technical Report beneficially own, directly or indirectly, less than 1% of the Company common shares.
Auditor
Deloitte LLP is the independent registered public accounting firm of the Company and is independent within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of British Columbia and the applicable rules and regulations of the Securities and Exchange Commission and the Public Company Accounting Oversight Board (United States).
ITEM 18: ADDITIONAL INFORMATION
Additional information on the Company may be found on the Company's website at www.newpacificmetals.com or under the Company's profile on SEDAR at www.sedar.com. Additional financial information, including directors' and officers' remuneration and indebtedness, principal holders of the Company's securities and securities authorized for issuance under equity compensation plans, if applicable, is contained in the Company's information circular for its most recent annual meeting of security holders that involved the election of directors.
Additional financial information is provided in the Company's most recent financial statements and the management discussion and analysis for its most recently completed financial year.
SCHEDULE "A"
CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF NEW PACIFIC METALS CORP.
1.0 Purpose of the Committee
1.1 The Audit Committee represents the Board in discharging its responsibility relating to the accounting, reporting and financial practices of the Company and its subsidiaries, and has general responsibility for oversight of internal controls, accounting and auditing activities and legal compliance of the Company and its subsidiaries.
2.0 Members of the Committee
2.1 The Audit Committee shall consist of no less than three Directors, each of whom shall be "independent" as defined in accordance with Canadian National Instrument 52-110 and all applicable securities laws and regulations and all applicable stock exchange rules; provided, however, that one or more members of the Committee may be non-independent if permitted by all applicable regulations and stock exchange rules.
2.2 The members of the Committee shall be selected annually by the Board and serve at the pleasure of the Board. Each member of the Audit Committee shall be "financially literate" as defined under Canadian National Instrument 52-110, be able to read and understand fundamental financial statements and satisfy all applicable financial literacy requirements of all applicable regulations. Additionally, if the Company is subject to applicable requirements, at least one member of the Committee shall: be financially sophisticated, in that he or she shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, which may include being or having been a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibilities; and be an "audit committee financial expert" within the meaning of U.S. federal securities laws.
2.3 None of the members of the Committee may have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years.
3.0 Meeting Requirements
3.1 The Committee will meet on a regular basis at least once every quarter, and will hold special meetings as it deems necessary or appropriate in its judgment. Meetings may be held in person or telephonically, and shall be at such times and places as the Committee determines. The Committee may also act by unanimous written consent of all members of the Committee.
3.2 A majority of the members of the Committee shall constitute a quorum.
4.0 Duties and Responsibilities
The Audit Committee's function is one of oversight and shall not relieve the Company's management of its responsibilities for preparing financial statements which accurately and fairly present the Company's financial results and conditions or the responsibilities of the external auditors relating to the audit or review of financial statements. Specifically, the Audit Committee will:
(a) be directly responsible, subject to any authority reserved by law to the Company's shareholders, for the appointment, compensation, retention, oversight (including resolution of any disagreements between management and the auditors regarding financial reporting) and discharge of the independent public accountants as auditors of the Company (the "auditors") who perform the annual audit and any other audit, review or other services for the Company in accordance with applicable securities laws;
(b) review with the auditors the scope of the audit and the results of the annual audit examination by the auditors, including any reports of the auditors prepared in connection with the annual audit;
(c) review information, including written statements from the auditors, concerning any relationships between the auditors and the Company or any other relationships that may adversely affect the independence of the auditors and assess the independence of the auditors;
(d) obtain from the external auditors a formal written statement delineating all relationships between the external auditors and the Company in a manner consistent with the requirements of applicable securities laws and regulations and applicable stock exchange rules; actively engage in a dialogue with the external auditors with respect to any disclosed relationships or services that impact the objectivity and independence of the external auditor;
(e) review and discuss with management and the auditors the Company's audited financial statements and accompanying Management's Discussion and Analysis of Financial Conditions ("MD&A"), including a discussion with the auditors of their judgments as to the quality of the Company's accounting principles and report on them to the Board;
(f) review and discuss with management the Company's interim financial statements and interim MD&A and report on them to the Board;
(g) pre-approve all auditing services and non-audit services provided to the Company by the auditors to the extent and in the manner required by applicable law or regulation. In no circumstances shall the auditors provide any non-audit services to the Company that are prohibited by applicable law or regulation;
(h) evaluate the external auditor's performance for the preceding fiscal year, reviewing their fees and making recommendations to the Board;
(i) periodically review the adequacy of the Company's internal controls and ensure that such internal controls are effective;
(j) review changes in the accounting policies of the Company and accounting and financial reporting proposals that are provided by the auditors that may have a significant impact on the Company's financial reports, and report on them to the Board;
(k) oversee and annually review the Company's Code of Business Conduct and Ethics;
(l) approve material contracts where the Board of Directors determines that it has a conflict;
(m) establish procedures for the receipt, retention and treatment of complaints received by the Company regarding the auditing matters, internal accounting controls or other accounting matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
(n) engage independent counsel and/or other advisors as it determines necessary to carry out its duties;
(o) satisfy itself that management has put into place procedures that facilitate compliance with the provisions of applicable securities laws and regulation relating to insider trading, continuous disclosure and financial reporting;
(p) review and monitor all related party transactions which may be entered into by the Company; and
(q) annually review the adequacy of its charter and recommending any changes thereto to the Board.
5.0 Miscellaneous
5.1 Nothing contained in this Charter is intended to extend applicable standards of liability under statutory or regulatory requirements for the directors of the Company or members of the Committee. The purposes and responsibilities outlined in this Charter are meant to serve as guidelines rather than as inflexible rules and the Committee is encouraged to adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.
5.2 The Company shall provide for appropriate funding, as determined by the Committee, for payment of (a) compensation to any registered public accounting firm engaged for the purposes of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (b) compensation to any advisers employed by the Committee; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
New Pacific Metals Corp.: Exhibit 99.2 - Filed by newsfilecorp.com
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the year ended June 30, 2021
(Expressed in US Dollars)*
| *The Company changed its presentation currency from Canadian Dollars to US Dollars effective on July 1, 2020. Certain comparative financial information in this MD&A have been restated to reflect this change. Please refer to Note 2(c) of the audited consolidated financial statements for the year ended June 30, 2021. |
|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) |
| --- |
DATE OF REPORT: September 15, 2021
This MD&A for New Pacific Metals Corp. and its subsidiaries (collectively, "New Pacific" or the "Company") should be read in conjunction with the Company's audited consolidated financial statements for the year ended June 30, 2021 and the related notes contained therein. The Company reports its financial position, financial performance, and cash flow in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Company's significant accounting policies are set out in Note 2 of the audited consolidated financial statements for the year ended June 30, 2021.
BUSINESS STRATEGY
The Company is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company's flagship project is the Silver Sand Project. With experienced management and sufficient technical and financial resources, the Company is well positioned to create shareholder value through exploration and Mineral Resource development.
The Company is publicly listed on the Toronto Stock Exchange ("TSX") under the symbol "NUAG" and on the NYSE American stock exchange ("NYSE-A") under the symbol "NEWP". The head office, registered address and records office of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
FISCAL 2021 HIGHLIGHTS
Maintained working capital of $46.36 million, sufficient to advance the Silver Sand Project and regional exploration initiatives, including the Carangas and Silverstrike Projects;
Silver Sand Preliminary Economic Analysis ("PEA") continues to advance as scheduled. A 38,000-metre ("m") exploration and resource expansion drill program commenced in July 2021;
Received an administrative mining contract for the Silver Sand Project, establishing a clear title to the project mineral rights;
Acquired a 98% interest in the Carangas Silver Project in April 2021. A 5,000 m initial discovery drill program commenced in June 2021;
Identified three significant new zones of gold and silver rich polymetallic mineralization on the Silverstrike Project;
Developed and implemented a Company-wide environmental policy and corporate social responsibility policy;
Successfully completed the spin-out transaction of Whitehorse Gold Corp. (TSX.V: WHG.V), enabling shareholders to realize the value of the Tagish Lake Gold Project in the current strong gold market;
Listed on the Toronto Stock Exchange ("TSX") and delisted all of the Company's issued and outstanding shares from the TSX Venture Exchange ("TSX.V") in August 2020; and
| Management’s Discussion and Analysis | Page 2 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
- Listed on the NYSE-A in May 2021, achieving a significant milestone in the growth of the Company.
PROJECTS OVERVIEW
COVID-19 Pandemic Response
In response to the COVID-19 pandemic, the Company's Health & Safety Team has implemented Company-wide safety protocols such as a 14-day self-isolation where necessary, travel restrictions, remote working and enhanced hygiene controls. The Company also continues to provide assistance to the communities neighbouring our projects by donating medical and hygiene supplies, personal protective equipment, and food supplies as part of the Company's ongoing social responsibility program.
Silver Sand Project
The Silver Sand Project is located in the Colavi District of Potosí Department in southwestern Bolivia at an elevation of 4,072 m above sea level, 25 kilometres ("km") northwest of Potosí City, the department capital.
The project is comprised of two claim blocks, the Silver Sand South and North Blocks, which encompass a total area of 5.42 km^2^. The Silver Sand South Block, covering an area of 3.17 km^2^, hosts the Silver Sand deposit and was originally comprised of 17 Autorización Transitoria Especiales ("ATEs"), formerly known as mining concessions. Under the existing Bolivian mining laws, ATEs are required to be consolidated into an Administrative Mining Contract ("AMC"). New Pacific, through its wholly owned subsidiary, Minera Alcira S.A. ("Alcira"), submitted all required documents to the Bolivian Jurisdictional Mining Administrative Authority (Autoridad Jurisdiccional Administrativa Minera or "AJAM") for the consolidation and conversion of these 17 ATEs to cuadriculas and an AMC. On August 12, 2021, AJAM granted the AMC to Alcira. As of the date of this MD&A, all required registration, notarization and publication steps to perfect the title of the AMC in favour of Alcira have been completed. The AMC establishes a clear title to the Company's Silver Sand South Block. The Silver Sand North Block covers an area of 2.25 km^2^ and is comprised of three ATEs (Jisas, Jardan and El Bronce). The Company is in the process of converting these ATEs to an AMC.
A summary of Bolivian mining laws with respect to AMCs and exploration licenses is presented below.
Exploration and mining rights in Bolivia are granted by the Ministry of Mines and Metallurgy through AJAM. Under Bolivian mining laws, tenure is granted as either an AMC or an exploration license. Tenure held under the previous legislation was converted to ATEs, which are now required to be consolidated into new 25-hectare sized cuadriculas (concessions) and converted to AMCs. AMCs created by conversion recognize existing rights of exploration and/or exploitation and development, including treatment, metal refining, and/or trading. AMCs have a fixed term of 30 years and can be extended for a further 30 years if certain conditions are met. Each contract requires ongoing work and the submission of plans to AJAM.
Exploration licenses permit exploration activities only and must be converted to AMCs to conduct exploitation and development activities. Exploration licenses are valid for a maximum of five years and provide the holder with the preferential right to request an AMC. In specific areas, mineral tenure is owned by the Bolivian state mining corporation, Corporación Minera de Bolivia ("COMIBOL"). In these areas, development and production agreements can be obtained by entering into a Mining Production Contract ("MPC") with COMIBOL.
Since acquiring the project in 2017, the Company has carried out extensive exploration and resource definition drill programs. From 2017 to 2019, the Company completed a total of 97,619 m of drilling in 386 diamond core drillholes.
| Management’s Discussion and Analysis | Page 3 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
On April 14, 2020, the Company released its inaugural National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") Mineral Resource estimate for the Silver Sand Project. For further details, please refer to the Company's news release dated April 14, 2020 and an amended and restated technical report entitled "Silver Sand Deposit Mineral Resource Report (Amended)" prepared by Adrienne Ross, Dinara Nussipakvnova, Simeon Robinson and Andrew Holloway of AMC Consultants (Canada) Ltd. with an effective date of January 16, 2020 and filed under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.newpacificmetals.com.
Advanced studies have commenced on the project and the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc to lead the PEA, environmental baseline study, and social baseline study, respectively.
On July 27, 2021, the Company announced the commencement of a planned 38,000 m diamond drill program with the objectives to expand the existing resource, which remains open along strike and at depth, and to complete geotechnical drilling to support the PEA study. Highlights of the drill program include:
- 80% of the drill program is intended to focus on expanding the existing Mineral Resources and discovering new resources;
- 5,000 m of the drill program is dedicated to testing for feeder zones for the large Silver Sand deposit;
- District exploration drilling to target the North Block and Snake Hole Zone; and
- Mineral continuity and geotechnical drilling to support the Silver Sand PEA.
For additional information on the 2021 drill program at the Silver Sand Project, please see the Company's news release dated July 27, 2021.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $1,125,702 and $3,357,104, respectively (three months and year ended June 30, 2020 - $1,253,126 and $9,482,197, respectively) were capitalized under the project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in the ATEs located to the north of the Silver Sand Project by cash payments of $1,000,000 and the issuance of 832,000 common shares to the vendors. During Fiscal 2019 and Fiscal 2020, cash payments of $800,000 were paid and 541,000 common shares were issued to the vendors. During the year ended June 30, 2021, the final payment of $200,000 cash and 291,000 common shares were paid and issued to the vendors, respectively.
Mining Production Contract
On January 11, 2019, **** New Pacific announced that Alcira entered into an MPC with COMIBOL granting Alcira the right to carry out exploration, development and mining production activities in ATEs and cuadriculas owned by COMIBOL adjoining the Company's Silver Sand Project. The MPC is comprised of two areas. The first area is located to the south and west of the Silver Sand Project. The second area includes additional geologically prospective ground to the north, east and south of the Silver Sand Project, wherein COMIBOL is expected to apply for exploration and mining rights with AJAM. Upon granting of the exploration and mining rights, COMIBOL will contribute these additional properties to the MPC.
| Management’s Discussion and Analysis | Page 4 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
There are no known economic mineral deposits, nor any previous drilling or exploration discoveries within the MPC area. The MPC presents an opportunity to explore and evaluate the possible extensions and/or satellites of mineralization outside of the currently defined Silver Sand Project.
The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulation, community relations, taxation or otherwise. A change in the government's position on these issues could adversely affect the ratification of the MPC and the Company's business.
Carangas Project
In April 2021, the Company signed a mining association agreement with a private Bolivian company and acquired a 98% joint venture interest in the Carangas Project. Under the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development and production activities for the project. The agreement has a term of 30 years and is renewable for additional 15 years.
On June 29, 2021, the Company announced the commencement of an initial discovery drill program at the Carangas Project to test near-surface bulk-tonnage and high-grade vein-hosted silver-rich polymetallic targets centred on and adjacent to the historically exploited West and East Dome areas. For additional details, please refer to the Company's news releases dated April 12, 2021 and June 14, 2021. Phase I of the 5,000 m drill program is expected to be comprised of approximately 20 drillholes with an initial 3,000 m to be completed over an eight-week period. Contingent on the success of initial results, follow-up drilling will comprise the remainder of the budgeted 5,000 m program.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $nil and $250,427, respectively (three months and year ended June 30, 2020 - $nil and $nil, respectively) were capitalized under the project.
Silverstrike Project
The Silverstrike Project is located approximately 140 km southwest of La Paz, Bolivia. In December 2019, the Company signed a mining association agreement and acquired a 98% joint venture interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000. The private Bolivian corporation is owned 100% by Bolivian nationals and holds the title to the nine ATEs (covering an area of approximately 13 km^2^) that comprise the project. Under the mining association agreement, the Company is required to cover 100% of future expenditures including exploration, contingent on results of development and subsequent mining production activities at the Silverstrike Project. The agreement has a term of 30 years and is renewable for another 15 years. The mining association agreement is subject to approval by AJAM.
| Management’s Discussion and Analysis | Page 5 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
The Silverstrike Project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district - the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver-rich occurrences associated with sercitic alteration. The area is largely underexplored, with limited modern exploration to date. The Company's joint venture partner has applied for exploration rights over areas surrounding the Silverstrike Project on behalf of the joint venture.
During 2020, the Company's exploration team completed reconnaissance and detailed mapping and sampling programs on the northern portion of the project. The results to date indicate good to excellent exploration potential for hosting narrow, high-grade, near-surface broad-zones of silver mineralization. Please refer to the Company's news release dated September 29, 2020 for details on the exploration program at the northern areas of the project and to the news release dated November 19, 2020 for details on exploration activities and field work on the central and southern areas of the project.
Frontier Area - Carangas and Silverstrike Projects
The Carangas and the Silverstrike projects are located within 50 km of the Bolivian border with Chile. In line with many South American countries, Bolivia does not permit foreign entities to own property within 50 km of international borders (the "Frontier Area"). Property owners in the Frontier Area are, however, permitted to enter into mining association agreements, or joint ventures, with third parties, including foreign entities, for the development of mining activities under Bolivian Law No. 535 on Mining and Metallurgy. While the Company believes the joint ventures for the Carangas and the Silverstrike projects are legally compliant with the Frontier Area requirements and Bolivian mining laws, there is no assurance that the Company's Bolivian joint venture partners will be successful in obtaining the approval of AJAM to convert the exploration licenses to AMC in the case of Carangas Project and the mining association agreement in the case of the Silverstrike Project, or that even if approved, that such relationships and structures will not be challenged by other Bolivian governmental authorities.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $15,026 and $1,293,907, respectively (three months and year ended June 30, 2020 - $155,217 and $476,728, respectively) were capitalized under the project.
Tagish Lake Gold Project
The Tagish Lake Gold Project ("TLG Project"), covering an area of approximately 170 km^2^, is located in Yukon Territory, Canada, and consists of 1,051 mining claims hosting three identified gold and gold-silver mineral deposits: Skukum Creek, Goddell Gully and Mount Skukum. In Q4, fiscal 2020, given the significant changes with favourable effects on the TLG Project, the Company recognized an impairment recovery of $8,724,915 on the TLG Project, being its fair value less costs of disposal ("FVLCD") for the year ended June 30, 2020. The fair value was determined using a market approach based on the pricing parameters implied by the market value of selected comparable transactions involving the sale of similar companies or mineral properties. Specifically, the comparable in-situ resource multiples (Enterprise Value ("EV") per ounce of contained gold ("EV/R&R")) observed in comparable transactions has been used to estimate the fair value.
| Management’s Discussion and Analysis | Page 6 |
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| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
For the year ended June 30, 2021, total expenditures of $312,593 (year ended June 30, 2020 - $78,242) were capitalized to assets held for distribution under the TLG Project prior to its disposal.
The project's carrying value of $8,985,913 was disposed upon the completion of the Whitehorse Gold spin-out transaction, resulting in no gain or loss.
During Fiscal 2020, the Company established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the TLG Project from the Company for consideration of $2,201,350 (CAD$3,000,000) via a promissory note plus 20,000,000 Whitehorse Gold common shares ("spin-out shares") as a result of a strategic review on the TLG Project.
On November 18, 2020, the Company received the consideration of $2,201,350 and distributed all of the spin-out shares held by it to the Company's shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). The spin-out shares were valued at $6,906,548 upon distribution. Assets and liabilities of Whitehorse Gold and the TLG Project were classified as held for distribution as at June 30, 2020 in the amount of $8,695,312 and $89,653, respectively. On November 15, 2020, Whitehorse Gold's common shares were listed for trading on the TSX.V under the symbol "WHG". As a result of the spin-out, the Company no longer holds an interest in Whitehorse Gold or the TLG Project.
RZY Silver-Lead-Zinc Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu, Tibetan Autonomous Prefecture, or 820 km from Qinghai Province's capital city of Xining. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company's subsidiary, Qinghai Found Mining Co., Ltd. ("Qinghai Found"), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of June 30, 2021, the process was under review and subject to approval by the Qinghai Government.
| Management’s Discussion and Analysis | Page 7 |
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| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
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Overall Expenditure Summary
The continuity schedule of mineral property acquisition costs, deferred exploration and development costs are summarized as follows:
| Cost | Silver Sand | Silverstrike | Carangas | Tagish Lake | RZY Project | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, July 1, 2019 | $ | 55,995,583 | $ | - | $ | - | $ | - | $ | 2,700,897 | $ | 58,696,480 | |||||
| Capitalized exploration expenditures | |||||||||||||||||
| Reporting and assessment | 447,953 | 727 | - | - | - | 448,680 | |||||||||||
| Drilling and assaying | 4,856,789 | 1,666 | - | - | - | 4,858,455 | |||||||||||
| Project management and support | 3,386,249 | 436,473 | - | - | - | 3,822,722 | |||||||||||
| Camp service | 492,674 | 37,862 | - | - | - | 530,536 | |||||||||||
| Camp construction | 24,135 | - | - | - | - | 24,135 | |||||||||||
| Permitting | 38,250 | - | - | 78,242 | - | 116,492 | |||||||||||
| Acquisition of Silverstrike Project | - | 1,350,000 | - | - | - | 1,350,000 | |||||||||||
| Acquisition of mineral concessions | 216,147 | - | - | - | - | 216,147 | |||||||||||
| Other | 20,000 | - | - | - | - | 20,000 | |||||||||||
| Impairment recovery | - | - | - | 8,724,915 | - | 8,724,915 | |||||||||||
| Reclassified to assets held for distribution | - | - | - | (8,673,320 | ) | - | (8,673,320 | ) | |||||||||
| Foreign currency impact | (176,786 | ) | (5,538 | ) | - | (129,837 | ) | (77,281 | ) | (389,442 | ) | ||||||
| Balance, June 30, 2020 | $ | 65,300,994 | $ | 1,821,190 | $ | - | $ | - | $ | 2,623,616 | $ | 69,745,800 | |||||
| Capitalized exploration expenditures | |||||||||||||||||
| Reporting and assessment | 482,355 | 4,119 | - | 47,538 | - | 534,012 | |||||||||||
| Drilling and assaying | 78,201 | 169,102 | 21,952 | - | - | 269,255 | |||||||||||
| Project management and support | 2,505,338 | 996,005 | 178,753 | - | - | 3,680,096 | |||||||||||
| Camp service | 225,016 | 113,666 | 49,569 | - | - | 388,251 | |||||||||||
| Camp construction | 53,199 | - | - | 215,238 | - | 268,437 | |||||||||||
| Permitting | 12,995 | 11,015 | 153 | 49,817 | - | 73,980 | |||||||||||
| Disposal upon spin-out distribution | - | - | - | (312,593 | ) | (312,593 | ) | ||||||||||
| Foreign currency impact | 587,402 | 48,207 | 4,823 | - | 247,752 | 888,184 | |||||||||||
| Balance, June 30, 2021 | $ | 69,245,500 | $ | 3,163,304 | $ | 255,250 | $ | - | $ | 2,871,368 | $ | 75,535,422 |
INVESTMENTS OVERVIEW
Short-Term Investments
Short-term investments consist of the following:
| June 30, 2021 | June 30, 2020 | |||
|---|---|---|---|---|
| Guaranteed Investment Certificates | $ | - | $ | 14,677,890 |
| Bonds | 143,914 | 462,829 | ||
| $ | 143,914 | $ | 15,140,719 |
Equity Investments
Equity investments represent equity interests of other publicly traded or privately held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares, preferred shares, and warrants.
| Management’s Discussion and Analysis | Page 8 |
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| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
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The Company's equity investments are summarized as follows:
| June 30, 2021 | June 30, 2020 | |||
|---|---|---|---|---|
| Common or preferred shares | ||||
| Public companies | $ | 461,635 | $ | 3,519,196 |
| Warrants | ||||
| Public companies | 34,891 | 592,626 | ||
| $ | 496,526 | $ | 4,111,822 |
FINANCIAL RESULTS
Selected Annual Information
| Fiscal 2021 | Fiscal 2020 | Fiscal 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Operating expense | $ | (5,945,985 | ) | $ | (4,608,589 | ) | $ | (2,468,617 | ) |
| Income from Investments | 395,543 | 1,311,921 | 1,157,659 | ||||||
| Impairment recovery (loss) of mineral property interests | - | 8,724,915 | (589,123 | ) | |||||
| Other (loss) income | (1,023,932 | ) | 465,021 | (43,527 | ) | ||||
| Net (loss) income | (6,574,374 | ) | 5,893,268 | (1,943,608 | ) | ||||
| Net (loss) income attributable to equity holders | (6,566,440 | ) | 5,907,726 | (1,828,891 | ) | ||||
| Basic and diluted (loss) earnings per share | (0.04 | ) | 0.04 | (0.01 | ) | ||||
| Total current assets | 47,452,145 | 54,127,165 | 29,949,437 | ||||||
| Total non-current assets | 79,366,979 | 77,085,086 | 64,990,881 | ||||||
| Total current liabilities | 1,094,567 | 1,499,501 | 1,608,677 | ||||||
| Total non-current liabilities | - | - | 201,054 |
Net loss attributable to equity holders of the Company for the year ended June 30, 2021 was $6,566,440 or $0.04 per share (year ended June 30, 2020 - net income of $5,907,726 or $0.04 per share). The Company's financial results were mainly impacted by the following: (i) operating expenses of $5,945,985 compared to $4,608,589 in the prior year; (ii) income from investments of $395,543 compared to $1,311,921 in the prior year; (iii) impairment recovery of $nil compared to $8,724,915 in the prior year; and (iv) foreign exchange loss of $1,021,628 compared to gain of $465,021 in the prior year.
Net loss attributable to equity holders of the Company for the three months ended June 30, 2021 was $1,972,372 or $0.01 per share (three months ended June 30, 2020 - net income of $7,448,576 or $0.05 per share).
Operating expenses for the three months and year ended June 30, 2021 were $1,567,955 and $5,945,985, respectively (three months and year ended June 30, 2020 - $1,472,028 and $4,608,589, respectively). Items included in operating expenses were as follows:
(i) Project evaluation and corporate development expenses for the three months and year ended June 30, 2021 of $154,252 and $822,864, respectively (three months and year ended June 30, 2020 - $206,060 and $206,060, respectively). The Company is actively seeking and evaluating other exploration and investment opportunities in Bolivia after its initial success on the Silver Sand Project.
(ii) Filing and listing fees for the three months and year ended June 30, 2021 of $122,243 and $393,814, respectively (three months and year ended June 30, 2020 - $51,172 and $128,142, respectively). The increase in filing and listing fees in the current periods was a result of the Company's graduation from TSX.V to TSX and listing on NYSE-A.
| Management’s Discussion and Analysis | Page 9 |
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| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
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(iii) Investor relations expenses for the three months and year ended June 30, 2021 of $80,009 and $337,714, respectively (three months and year ended June 30, 2020 - $90,106 and $536,902, respectively). Decrease in investor relations expenses was a result of reduced travel expenses due to the COVID-19 pandemic.
(iv) Professional fees for the three months and year ended June 30, 2021 of $102,755 and $498,207, respectively (three months and year ended June 30, 2020 - $90,644 and $303,031, respectively). The increase in professional fees in the current periods was related to the Whitehorse Gold spin-out transaction, the Company's graduation to the TSX and listing on NYSE-A.
(v) Salaries and benefits expense for the three months and year ended June 30, 2021 of $514,501 and $1,688,687, respectively (three months and year ended June 30, 2020 - $402,365 and $1,324,699, respectively). Salaries and benefits increased in the current periods as a result of the increased annual incentive payout and estimates on future payouts.
(vi) Office and administration expenses ****** for the three months and year ended June 30, 2021 of $184,114 and $678,529, respectively (three months and year ended June 30, 2020 - $118,752 and $513,030, respectively). Office and administrative expenses increased in the current periods as a result of the inclusion of the Company's La Paz office expenses as it transitioned to a regional office overseeing multiple projects. Previously, the La Paz office expenses were capitalized under the Silver Sand Project as its sole function was to serve that project.
(vii) Share-based compensation for the three months and year ended June 30, 2021 of $398,797 and $1,482,170, respectively (three months and year ended June 30, 2020 - $610,147 and $1,584,730, respectively).
Income from investments for the year ended June 30, 2021 was $395,543 (year ended June 30, 2020 - income of $1,311,921) and is comprised of a $455,597 gain on the Company's equity investments, a $318,915 loss on bonds, $110,293 income from dividends, and $148,568 interest earned from GICs and other cash accounts.
Loss from investments for the three months ended June 30, 2021 was $210,861 (three months ended June 30, 2020 - income from investments of $664,464) and is comprised of a $263,278 loss on the Company's equity investments, a $20,015 gain on bonds, $1,543 income from dividends, and $30,859 interest earned from cash accounts.
Foreign exchange loss for the year ended June 30, 2021 was $1,021,628 (year ended June 30, 2020 - gain of $465,021). The Company holds a large portion of cash and short-term investments in US dollars to support its operations in Bolivia. Revaluation of these US-dollar-denominated financial assets to their Canadian dollar functional currency equivalents resulted in unrealized foreign exchange gain or loss for the relevant reporting periods. During the year ended June 30, 2021, the US dollar depreciated by 9.1% against the Canadian dollar (from 1.3628 to 1.2394) while in the prior year the US dollar appreciated by 4.1% against the Canadian dollar (from 1.3087 to 1.3628).
Foreign exchange loss for the three months ended June 30, 2021 was $195,443 (three months ended June 30, 2020 - $471,044).
| Management’s Discussion and Analysis | Page 10 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | ||||||||||||
| --- | ||||||||||||
| Selected Quarterly Information | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| For the Quarters Ended | ||||||||||||
| Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | |||||||||
| Operating expense | $ | (1,567,955 | ) | $ | (1,604,319 | ) | $ | (1,251,752 | ) | $ | (1,521,959 | ) |
| (Loss) income from Investments | (210,861 | ) | 71,747 | (98,800 | ) | 633,457 | ||||||
| Other loss | (195,483 | ) | (159,261 | ) | (425,463 | ) | (243,725 | ) | ||||
| Net loss | (1,974,299 | ) | (1,691,833 | ) | (1,776,015 | ) | (1,132,227 | ) | ||||
| Net loss attributable to equity holders | (1,972,372 | ) | (1,689,401 | ) | (1,774,420 | ) | (1,130,247 | ) | ||||
| Basic and diluted loss per share | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||
| Total current assets | 47,452,145 | 48,511,033 | 50,497,592 | 53,157,010 | ||||||||
| Total non-current assets | 79,366,979 | 78,164,236 | 76,719,133 | 79,236,381 | ||||||||
| Total current liabilities | 1,094,567 | 811,042 | 1,180,315 | 1,518,961 | ||||||||
| Total non-current liabilities | - | - | - | - | ||||||||
| For the Quarters Ended | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | |||||||||
| Operating expense | $ | (1,472,028 | ) | $ | (1,141,354 | ) | $ | (1,231,089 | ) | $ | (764,118 | ) |
| Income (loss) from Investments | 664,464 | (1,212,187 | ) | 257,517 | 1,602,127 | |||||||
| Impairment of mineral property interests | 8,724,915 | - | - | - | ||||||||
| Other (loss) income | (471,044 | ) | 1,047,061 | (244,548 | ) | 133,552 | ||||||
| Net income (loss) | 7,446,307 | (1,306,480 | ) | (1,218,120 | ) | 971,561 | ||||||
| Net income (loss) attributable to equity holders | 7,448,576 | (1,303,094 | ) | (1,211,656 | ) | 973,900 | ||||||
| Basic and diluted earnings (loss) per share | 0.05 | (0.01 | ) | (0.01 | ) | 0.01 | ||||||
| Total current assets | 54,127,165 | 29,369,814 | 33,025,625 | 29,383,139 | ||||||||
| Total non-current assets | 77,085,086 | 74,936,839 | 74,495,178 | 66,575,909 | ||||||||
| Total current liabilities | 1,499,501 | 1,420,226 | 1,432,489 | 2,011,187 | ||||||||
| Total non-current liabilities | - | - | - | - |
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash used in operating activities for the three months and year ended June 30, 2021 was $886,287 and $4,602,952, respectively (three months and year ended June 30, 2020 - $666,789 and $2,626,717, respectively). The increase during the current periods was mainly due to the increase in operating expense and negative impact from the change in non-cash operating working capital.
Cash provided by investing activities for the year ended June 30, 2021 was $17,601,787 (year ended June 30, 2020 - cash used in investing activities of $17,904,434). Cash flows from investing activities were mainly impacted by: (i) capital expenditures for mineral properties and equipment of $4,427,631 on the exploration projects in Bolivia compared to $10,703,063 in the prior year; (ii) proceeds of $15,596,974 from maturity of GIC compared to net purchase of $7,306,032 in the prior year; (iii) $4,345,636 net proceeds from disposal of equity investments compared to net proceeds of $829,137 in the prior year; and (iv) $2,201,350 consideration received upon the completion of the Whitehorse Gold spin-out in the current year.
Cash provided by investing activities for the three months ended June 30, 2021 was $1,076,265 (three months ended June 30, 2020 - cash used in investing activities of $15,094,096).
Cash provided by financing activities for the year ended June 30, 2021 was $1,076,157 (year ended June 30, 2020 -$30,070,791). Cash flows from financing activities during the current year were proceeds arising from stock option exercises. In the prior year, cash flows from financing activities were net proceeds of $29,303,208 raised from two bought deal financings plus $767,583 from stock option exercises.
| Management’s Discussion and Analysis | Page 11 |
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| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
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Cash provided by financing activities for the three months ended June 30, 2021 was $303,294 (three months ended June 30, 2020 - $17,584,162).
Liquidity and Access to Capital
As of June 30, 2021, the Company had working capital of $46,357,578 (June 30, 2020 - $52,627,664), comprised of cash of $46,441,482 (June 30, 2020 - $29,824,146), short term investments of $143,914 (June 30, 2020 - $15,140,719), assets held for distribution of $nil (June 30, 2020 - $8,695,312), and other current assets of $866,749 (June 30, 2020 - $466,988) offset by current liabilities of $1,094,567 (June 30, 2020 - $1,499,501). Management believes that the Company has sufficient funds to support its normal exploration and operating requirements on an ongoing basis.
The Company does not have unlimited resources and its future capital requirements will depend on many factors, including, among others, cash flow from interest, dividends, and realized gains on investments. To the extent that its existing resources and the funds generated by future income are insufficient to fund the Company's operations, the Company may need to raise additional funds through public or private debt or equity financing. If additional funds are raised through the issuance of equity securities, the percentage ownership of current shareholders will be reduced and such equity securities may have rights, preferences or privileges senior to those of the holders of the Company's common shares. No assurance can be given that additional financing will be available or that, if available, it can be obtained on terms favourable to the Company and its shareholders. If adequate funds are not available, the Company may be required to delay, limit or eliminate some or all of its proposed operations. The Company believes it has sufficient capital to meet its cash needs for the next 12 months, including the costs of compliance with continuing reporting requirements.
In addition, the current COVID-19 pandemic has caused significant disruption to global economic conditions, which may adversely impact the Company's results.
Use of Proceeds of Prior Financings
On October 25, 2019 and June 9, 2020, the Company successfully closed two bought deal financings underwritten by BMO Capital Markets that raised net proceeds of $11,927,767 and $17,375,441, respectively. The following table sets out a comparison between the Company's planned and actual use of these net proceeds as of June 30, 2021.
| Management’s Discussion and Analysis | Page 12 | ||
|---|---|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |||
| --- | |||
| OCTOBER 25, 2019 BMO BOUGHT DEAL<br>FINANCING | PLANNED USE OF<br>PROCEEDS | ACTUAL USE OF<br>PROCEEDS FROM<br>OCTOBER 25, 2019 to<br>JUNE 30, 2021 | VARIANCE |
| --- | --- | --- | --- |
| PROCEEDS | |||
| Offering | $ 11,299,435 | $ 12,994,785 | 1,695,350 |
| Underwriter's fee and offering related expense | (964,218) | (1,067,018) | (102,800) |
| Net proceeds | $ 10,335,217 | $ 11,927,767 | 1,592,550 |
| USE OF PROCEEDS | |||
| 2019 Drill Program for the Silver Sand Project | |||
| Drilling of 55,000 meters | $ 6,152,000 | $ 5,266,437 | (885,563) |
| Assaying and sampling of 53,854 samples | 2,000,000 | 1,881,369 | (118,631) |
| Equipment | 525,000 | 263,360 | (261,640) |
| Site expenses | 312,000 | 1,784,525 | 1,472,525 |
| Community relations | 111,000 | 28,818 | (82,182) |
| Concession renewal | 1,500 | 1,926 | 426 |
| Metallurgical testing | 203,000 | 207,610 | 4,610 |
| Technical report | 255,000 | 187,390 | (67,610) |
| Overhead office costs | 2,301,000 | 2,315,634 | 14,634 |
| TOTAL | $ 11,860,500 | $ 11,937,069 | 76,569 |
All values are in US Dollars.
| JUNE 9, 2020 BMO BOUGHT DEAL FINANCING | PLANNED USE OF<br>PROCEEDS | ACTUAL USE OF<br>PROCEEDS FROM JUNE 9, 2020 <br>to JUNE 30, 2021 | VARIANCE |
|---|---|---|---|
| PROCEEDS | |||
| Offering | $ 18,835,556 | $ 18,836,190 | 634 |
| Underwriter's fee and offering related expense | (1,416,386) | (1,460,749) | (44,363) |
| Net proceeds | $ 17,419,170 | $ 17,375,441 | (43,729) |
| USE OF PROCEEDS | |||
| 2020-2021 Exploration Program for Silver Sand Project | |||
| Drilling of 26,000 meters | $ 3,200,000 | $ - | (3,200,000) |
| Assaying and sampling of 21,000 samples | 1,100,000 | 46,475 | (1,053,525) |
| Other field operation expenditures | 1,600,000 | 64,424 | (1,535,576) |
| Advanced studies | 1,100,000 | 431,851 | (668,149) |
| Community relations and social studies | 500,000 | 123,963 | (376,037) |
| Exploration camp construction | 3,800,000 | 54,933 | (3,745,067) |
| Subtotal for Silver Sand Project | $ 11,300,000 | $ 721,646 | (10,578,354) |
| 2020-2021 Exploration Program for Other Regions and Projects in Bolivia | |||
| Drilling of 34,000 meters | $ 4,300,000 | $ - | (4,300,000) |
| Assaying and sampling of 34,000 samples | 1,700,000 | 218,031 | (1,481,969) |
| Other field operating expenditures | 119,170 | 1,259,803 | 1,140,633 |
| Subtotal for other exploration programs | $ 6,119,170 | $ 1,477,834 | (4,641,336) |
| TOTAL | $ 17,419,170 | $ 2,199,480 | (15,219,690) |
All values are in US Dollars.
| Management’s Discussion and Analysis | Page 13 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
Although the Company intends to use the proceeds from the June 9, 2020 financing as set forth above, the actual allocation of the net proceeds may vary depending on future developments or unforeseen events.
FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. The Board 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.
(a) Fair Value
The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 - Fair Value Measurement ("IFRS 13").
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The following table sets forth the Company's financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at June 30, 2021 and June 30, 2020 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Fair value as at June 30, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||
| Financial Assets | ||||||||
| Cash | $ | 46,441,482 | $ | - | $ | - | $ | 46,441,482 |
| Short-term investments - bonds | 143,914 | - | - | 143,914 | ||||
| Common or preferred shares | 461,635 | - | - | 461,635 | ||||
| Warrants | - | 34,891 | - | 34,891 | ||||
| Fair value as at June 30, 2020 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||
| Financial Assets | ||||||||
| Cash | $ | 29,824,146 | $ | - | $ | - | $ | 29,824,146 |
| Short-term investments - bonds | 462,829 | - | - | 462,829 | ||||
| Common or preferred shares | 3,519,196 | - | - | 3,519,196 | ||||
| Warrants | - | 592,626 | - | 592,626 |
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of June 30, 2021 and June 30, 2020, respectively.
| Management’s Discussion and Analysis | Page 14 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
There were no transfers into or out of Level 3 during the year ended June 30, 2021.
(b) Liquidity Risk
The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at June 30, 2021, the Company had a working capital position of $46,357,578 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the next 12 months.
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company's financial liabilities:
| June 30, 2021 | June 30, 2020 | |||||
|---|---|---|---|---|---|---|
| Due within a year | Total | Total | ||||
| Trade and other payables | $ | 1,044,189 | $ | 1,044,189 | $ | 1,154,593 |
| Due to a related party | 50,378 | 50,378 | 62,182 | |||
| Payable for mineral property acquisition | - | - | 193,073 | |||
| $ | 1,094,567 | $ | 1,094,567 | $ | 1,409,848 |
(c) Foreign Exchange Risk
The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is Chinese Renminbi ("RMB"). The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk that could affect net income is summarized as follows:
| Financial assets denominated in foreign currencies other than relevant functional currency | June 30, 2021 | June 30, 2020 | ||
|---|---|---|---|---|
| United States dollars | $ | 11,079,194 | $ | 11,158,435 |
| Bolivianos | 285,267 | 297,147 | ||
| Chinese RMB | - | 160,123 | ||
| Total | $ | 11,364,461 | $ | 11,615,705 |
| Financial liabilities denominated in foreign currencies other than relevant functional currency | ||||
| United States dollars | $ | - | $ | 432,922 |
| Bolivianos | 333,405 | - | ||
| Chinese RMB | - | 101,060 | ||
| Total | $ | 333,405 | $ | 533,982 |
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $111,000.
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately $500.
| Management’s Discussion and Analysis | Page 15 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
(d) 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 holds a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of June 30, 2021. The Company, from time to time, also owns GICs and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond's fair value. An increase in market interest rates will generally reduce bond's fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
(e) Credit Risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's exposure to credit risk is primarily associated with cash, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as the majority of its cash are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at June 30, 2021, the Company had a receivables balance of $343,608 (June 30, 2020 - $303,488). There were no material amounts in receivables which were past due on June 30, 2021 (June 30, 2020 - $nil).
(f) Equity Price Risk
The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company's portfolio at June 30, 2021, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $50,000.
RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in this MD&A are as follows:
| Due to a related party | June 30, 2021 | June 30, 2020 | ||
|---|---|---|---|---|
| Silvercorp Metals Inc. | $ | 50,378 | $ | 62,182 |
(a) Silvercorp Metals Inc. ("Silvercorp") has two directors (Dr. Rui Feng and David Kong) and one officer (Yong-Jae Kim as corporate secretary for both companies) in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Expenses in general and administrative services rendered and incurred by Silvercorp on behalf of the Company for the year ended June 30, 2021 were $616,030 (year ended June 30, 2020 - $586,138).
| Management’s Discussion and Analysis | Page 16 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel for the years ended June 30, 2021 and 2020 are as follows:
| Year ended June 30, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Director's cash compensation | $ | 290,463 | $ | 55,858 |
| Director's share-based compensation | 604,970 | 446,652 | ||
| Key management's cash compensation | 859,394 | 940,323 | ||
| Key management's share-based compensation | 1,709,004 | 2,205,258 | ||
| $ | 3,463,831 | $ | 3,648,091 |
Other than as disclosed above, the Company does not have any ongoing contractual or other commitments resulting from transactions with related parties.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet financial arrangements.
PROPOSED TRANSACTIONS
There are no proposed acquisitions or disposals of assets or business, other than those in the ordinary course of business, approved by the Board as at the date of this MD&A.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the consolidated financial statements in accordance with IFRS as issued by IASB requires management to make estimates and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent management's estimates that are uncertain and any changes in these estimates could materially impact the Company's consolidated financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The Company's critical accounting policies and estimates are described in Note 2 of the audited consolidated financial statements for the year ended June 30, 2021.
| Management’s Discussion and Analysis | Page 17 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
OUTSTANDING SHARE DATA
As at the date of this MD&A, the following securities were outstanding:
(a) Share Capital
- Authorized - unlimited number of common shares without par value.
- Issued and outstanding - 155,064,244 common shares with a recorded value of $151.0 million.
- Shares subject to escrow or pooling agreements - nil.
(b) Options
The outstanding options as at the date of this MD&A are summarized as follows:
| Options Outstanding | Exercise Price CAD |
|---|---|
| 495,000 | 0.55 |
| 615,000 | 1.15 |
| 200,000 | 1.57 |
| 1,210,834 | 2.15 |
| 2,520,834 | 1.55 |
All values are in US Dollars.
(c) RSUs
The outstanding RSUs as at the date of this MD&A are summarized as follows:
| Weighted average | ||
|---|---|---|
| grant date closing | ||
| RSUs Outstanding | price per share (CAD$) | |
| 710,250 | $ | 5.43 |
RISK FACTORS
The Company is subject to many risks which are outlined in this MD&A and in the Company's Annual Information Form, NI 43-101 technical report and other public filings which are available on SEDAR at www.sedar.com. In addition, please refer to the "Financial Instruments" section of this MD&A for an analysis of financial risk factors.
COVID-19
The current outbreak of the COVID-19 pandemic could have a material adverse effect on the Company's business and operations, as well as impacting global economic conditions. COVID-19 has spread to regions where the Company has operations and offices. Government efforts to control the spread of the virus have resulted in temporary suspensions of our operations in Bolivia, delays and/or deferrals of field work including consultant site work and laboratory results and reduced corporate activities in Canada. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock and financial market volatilities, labour shortage and delay in logistics, and a general reduction in consumer activities. All of these could affect commodity prices, interest rates, credit risk, social security and inflation. Such public health crisis at the moment or in the future may negatively affect the Company's operations along with the operations of its suppliers, contractors, service providers and local communities.
| Management’s Discussion and Analysis | Page 18 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
While the COVID-19 pandemic has already had significant, direct impacts on the Company's operations and business, the extent to which the pandemic will continue to impact our operations is highly uncertain and cannot be predicted with confidence as at the date of this MD&A. These uncertainties include, but are not limited to, the duration of the outbreak, Bolivian and Canadian governments' mandates to curtail the spreading of the virus, community and social stabilities and the Company's ability to resume operations efficiently or economically. It is also uncertain whether the Company will be able to maintain an adequate financial condition and have sufficient capital or have the ability to raise capital. Any of these uncertainties, and others, could have further material adverse effects on the Company's business and operations.
The Company may experience additional business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events could have a material adverse impact on the Company's business, operations and operating results, financial condition and liquidity.
Political and Economic Risks in Bolivia
The Company's projects are located in Bolivia and, therefore, the Company's current and future mineral exploration and mining activities are exposed to various levels of political, economic, and other risks and uncertainties. There has been a significant level of political and social unrest in Bolivia in recent years resulting from a number of factors, including Bolivia's history of political and economic instability under a variety of governments and high rate of unemployment.
The Company's exploration and development activities may be affected by changes in government, political instability, and the nature of various government regulations relating to the mining industry. Bolivia's fiscal regime has historically been favourable to the mining industry, but there is a risk that this could change. The Company cannot predict the government's positions on foreign investment, mining concessions, land tenure, environmental regulation, or taxation. A change in government positions on these issues could adversely affect the Company's business and/or its holdings, assets, and operations in Bolivia. Any changes in regulations or shifts in political conditions are beyond the control of the Company. Moreover, protestors and cooperatives have previously targeted foreign firms in the mining sector, and as a result there is no assurance that future social unrest will not have an adverse impact on the Company's operations. Labour in Bolivia is customarily unionized and there are risks that labour unrest or wage agreements may impact operations.
The Company's operations in Bolivia may also be adversely affected by economic uncertainty characteristic of developing countries. In addition, operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use, and safety factors.
On January 11, 2019, New Pacific announced the execution of the MPC with COMIBOL (see Project Overviews section). The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Moreover, the Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulations, community relations, taxation or otherwise.
| Management’s Discussion and Analysis | Page 19 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
Community Relations and Social Licence to Operate
Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities and there are risks associated with the Company failing to acquire and subsequently maintain a "social licence" to operate on its mineral properties. "Social licence" does not refer to a specific permit or licence, but rather is a broad term used to describe community acceptance of a company's plans and activities related to exploration, development or operations on its mineral projects.
The Company places a high priority on, and dedicates considerable efforts and resources toward, its community relationships and responsibilities. Despite its best efforts, there are factors that may affect the Company's efforts to establish and maintain social licence at any of its projects, including national or local changes in sentiment toward mining, evolving social concerns, changing economic conditions and challenges, and the influence of third-party opposition toward mining on local support. There can be no guarantee that social licence can be earned by the Company or if established, that social licence can be maintained in the long term, and without strong community support the ability to secure necessary permits, obtain project financing, and/or move a project into development or operation may be compromised or precluded. Delays in projects attributable to a lack of community support or other community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations may result in additional operating costs, higher capital expenditures, reputational damage, active community opposition (possibly resulting in delays, disruptions and stoppages), legal suits, regulatory intervention and investor withdrawal.
Acquisition and Maintenance of Permits and Governmental Approvals
Exploration and development of, and production from, any deposit at the Company's mineral projects require permits from various governmental authorities. There can be no assurance that any required permits will be obtained in a timely manner or at all, or that they will be obtained on reasonable terms. Delays or failure to obtain, expiry of, or a failure to comply with the terms of such permits could prohibit development of the Company's mineral projects and have a material adverse impact on the Company.
While the Company believes the contractual relationships and the structures it has in place with private Bolivian companies owned 100% by Bolivian nationals for the Silverstrike Project and the Carangas Project are legally compliant with Bolivian laws related to the Restricted Areas, there is no assurance that the Bolivian companies will be successful in obtaining approval of (i) the mining association agreement from AJAM in the case of Silverstrike Project or (ii) the conversion of the exploration licenses to AMCs in the case of Carangas Project, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian organizations or communities.
The Company's current and future operations, including development activities and commencement of production, if warranted, require permits from governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, and other matters. Companies engaged in property exploration and the development or operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations, and permits. The Company cannot predict if all permits which it may require for continued exploration, development, or construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms, if at all. Time delays and associated costs related to applying for and obtaining permits and licenses may be prohibitive and could delay planned exploration and development activities. Failure to comply with or any violations of the applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.
| Management’s Discussion and Analysis | Page 20 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
Parties engaged in mining operations may be required to compensate those impacted by mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations, and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company's operations and cause increases in capital expenditures or production costs, or reduction in levels of production at producing properties, or require abandonment or delays in development of new mining properties.
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that material information related to the Company is gathered and reported to senior management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), as appropriate, to allow for timely decisions about the Company's public disclosure.
Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in the rules of the U.S. Securities and Exchange Commission and the national instruments of the Canadian Securities Administrators. The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate in the circumstances. Based on this evaluation, management concluded that as of June 30, 2021, the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 and National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings) are effective.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
(a) Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting, and used the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate, with the participation of the CEO and CFO, the effectiveness of the Company's internal controls. The Company's internal control over financial reporting includes:
| Management’s Discussion and Analysis | Page 21 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
providing reasonable assurance that transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with generally accepted accounting principles;
providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on the Company's consolidated financial statements would be prevented or detected on a timely basis.
Based on this evaluation, management concluded that as of June 30, 2021, the Company's internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by COSO was effective and provided a reasonable assurance of the reliability of the Company's financial reporting and preparation of the financial statements.
No matter how well a system of internal control over financial reporting is designed, any system has inherent limitations. Even systems determined to be effective can provide only reasonable assurance of the reliability of financial statement preparation and presentation. Also, controls may become inadequate in the future because of changes in conditions or deterioration in the degree of compliance with the Company's policies and procedures.
Emerging growth companies are exempt from Section 404(b) of the Sarbanes-Oxley Act, which generally requires public companies to provide an independent auditor attestation of management's assessment of the effectiveness of their internal control over financial reporting. The Company qualifies as an emerging growth company and therefore has not included an independent auditor attestation of management's assessment of the effectiveness of its internal control over financial reporting in this MD&A or in its audited annual consolidated financial statements for the year ended June 30, 2021.
(b) Changes in Internal Control over Financial Reporting
There has been no change in the Company's internal control over financial reporting during the three months and year ended June 30, 2021 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.
TECHNICAL INFORMATION
The scientific and technical information contained in this MD&A has been reviewed and approved by Alex Zhang, P. Geo., Vice President of Exploration of the Company, who is a Qualified Person for the purposes of NI 43-101.
FORWARD LOOKING STATEMENTS
Except for statements of historical fact relating to the Company, certain information contained herein constitutes "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 provincial securities laws (collectively, "forward-looking statements"). Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "goals", "forecast", "budget", "potential" or variations thereof and other similar words, or statements that certain events or conditions "may", "could", "would", "might", "will" or "can" occur. Forward-looking statements include, but are not limited to: statements regarding anticipated exploration, drilling, development, construction, and other activities or achievements of the Company; timing of receipt of permits and regulatory approvals, including the ratification and approval of the MPC by the Plurinational Legislative Assembly of Bolivia; and estimates of the Company's revenues and capital expenditures.
| Management’s Discussion and Analysis | Page 22 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
Forward-looking statements are based on the opinions and estimates of management on the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include global economic and social impact of COVID-19; fluctuating equity prices, bond prices and commodity prices; calculation of resources, reserves and mineralization; general economic conditions; foreign exchange risks; interest rate risk; foreign investment risk; loss of key personnel; conflicts of interest; dependence on management; uncertainties relating to the availability and costs of financing needed in the future; environmental risks; operations and political conditions; the regulatory environment in Bolivia and Canada; risks associated with community relations and corporate social responsibility; and other factors described in this MD&A, under the heading "Risk Factors" in the Company's Annual Information Form for the year ended June 30, 2021 and its other public filings. The foregoing is not an exhaustive list of the factors that may affect any of the Company's forward-looking statements or information.
The forward-looking statements are necessarily based on a number of estimates, assumptions, beliefs, expectations and opinions of management as of the date of this MD&A that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These estimates, assumptions, beliefs, expectations and opinions include, but are not limited to, those related to the Company's ability to carry on current and future operations, including: the duration and effects of COVID-19 on our operations and workforce; development and exploration activities; the timing, extent, duration and economic viability of such operations; the accuracy and reliability of estimates, projections, forecasts, studies and assessments; the Company's ability to meet or achieve estimates, projections and forecasts; the stabilization of the political climate in Bolivia; the availability and cost of inputs; the price and market for outputs; foreign exchange rates; taxation levels; the timely receipt of necessary approvals or permits; including the ratification and approval of the MPC by the Plurinational Legislative Assembly of Bolivia; the approval of the mining association agreement for the Silverstrike Project by AJAM; the ability of the Company to convert the exploration licenses at the Carangas Project to AMC; the ability to meet current and future obligations; the ability to obtain timely financing on reasonable terms when required; the current and future social, economic and political conditions; and other assumptions and factors generally associated with the mining industry.
Although the forward-looking statements contained in this MD&A are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. All forward-looking statements in this MD&A are qualified by these cautionary statements. Accordingly, readers should not place undue reliance on such statements. Other than specifically required by applicable laws, the Company is under no obligation and expressly disclaims any such obligation to update or alter the forward-looking statements whether as a result of new information, future events or otherwise except as may be required by law. These forward-looking statements are made as of the date of this MD&A.
| Management’s Discussion and Analysis | Page 23 |
|---|---|
| NEW PACIFIC METALS CORP. **** **Management’s Discussion and AnalysisFor the year ended June 30, 2021(Expressed in US dollars, unless otherwise stated) | |
| --- |
CAUTIONARY NOTE TO U.S. INVESTORS
This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada which differ from the requirements of United States securities laws. All mining terms used herein but not otherwise defined have the meanings set forth in NI 43-101.
Accordingly, information contained in this MD&A and the documents incorporated by reference herein containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of United States federal securities laws and the rules and regulations thereunder.
Additional information relating to the Company, including the Company's Annual Information form, can be obtained under the Company's profile on SEDAR at www.sedar.com, and on the Company's website at www.newpacificmetals.com.
| Management’s Discussion and Analysis | Page 24 |
|---|
New Pacific Metals Corp.: Exhibit 99.3 - Filed by newsfilecorp.com
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021 and 2020
(Expressed in US Dollars)
| Deloitte LLP<br>939 Granville Street<br>Vancouver, BC V6Z1L3<br>Canada<br><br> <br>Tel: 604-669-4466<br>Fax: 604-685-0395<br>www.deloitte.ca |
|---|
Report of Independent Registered
Public Accounting Firm
To the Shareholders and the Board of Directors of New Pacific Metals Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of New Pacific Metals Corp. and subsidiaries (the "Company") as of June 30, 2021 and 2020 and July 1, 2019, the related consolidated statements of (loss) income, comprehensive (loss) income, changes in equity, and cash flows, for each of the two years in the period ended June 30, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020 and July 1, 2019, and its financial performance and its cash flows for each of the two years in the period ended June 30, 2021, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, Canada
September 16, 2021
We have served as the Company's auditor since 2004.
| New Pacific Metals Corp. Consolidated Statements of Financial Position | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Expressed in US dollars) | ||||||||||
| Notes | June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ASSETS | (restated)* | (restated)* | ||||||||
| Current Assets | ||||||||||
| Cash | $ | 46,441,482 | $ | 29,824,146 | $ | 21,280,631 | ||||
| Short-term investments | 4 | 143,914 | 15,140,719 | 8,361,655 | ||||||
| Receivables | 343,608 | 303,488 | 198,364 | |||||||
| Deposits and prepayments | 523,141 | 163,500 | 108,787 | |||||||
| Assets held for distribution | 3 | - | 8,695,312 | - | ||||||
| 47,452,145 | 54,127,165 | 29,949,437 | ||||||||
| Non-current Assets | ||||||||||
| Reclamation deposits | - | - | 11,519 | |||||||
| Other tax receivable | 5 | 2,216,392 | 2,100,430 | 1,375,956 | ||||||
| Equity investments | 6 | 496,526 | 4,111,822 | 3,905,320 | ||||||
| Plant and equipment | 8 | 1,118,639 | 1,127,034 | 1,001,606 | ||||||
| Mineral property interests | 9 | 75,535,422 | 69,745,800 | 58,696,480 | ||||||
| TOTAL ASSETS | $ | 126,819,124 | $ | 131,212,251 | $ | 94,940,318 | ||||
| LIABILITIES AND EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable and accrued liabilities | 10 | $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 | |||
| Payable for mineral property acquisition | - | 193,073 | 301,582 | |||||||
| Due to a related party | 11 | 50,378 | 62,182 | 68,151 | ||||||
| Liabilities held for distribution | 3 | - | 89,653 | - | ||||||
| 1,094,567 | 1,499,501 | 1,608,677 | ||||||||
| Non-current liabilities | ||||||||||
| Payable for mineral property acquisition | - | - | 201,054 | |||||||
| Total Liabilities | 1,094,567 | 1,499,501 | 1,809,731 | |||||||
| Equity | ||||||||||
| Share capital | 12 | 149,629,543 | 145,904,310 | 114,621,944 | ||||||
| Share-based payment reserve | 16,564,197 | 16,813,906 | 15,265,578 | |||||||
| Accumulated other comprehensive income | 13,641,379 | 7,669,888 | 9,797,021 | |||||||
| Deficit | (54,106,972 | ) | (40,633,984 | ) | (46,541,710 | ) | ||||
| Total equity attributable to the equity holders of the Company | 125,728,147 | 129,754,120 | 93,142,833 | |||||||
| Non-controlling interests | 13 | (3,590 | ) | (41,370 | ) | (12,246 | ) | |||
| Total Equity | 125,724,557 | 129,712,750 | 93,130,587 | |||||||
| TOTAL LIABILITIES AND EQUITY | $ | 126,819,124 | $ | 131,212,251 | $ | 94,940,318 |
*Restated for change in presentation currency (note 2(c))
Approved on behalf of the Board:
(Signed) David KongDirector
(Signed) Mark CruiseDirector
See accompanying notes to the consolidated financial statements
Page | 1
| New Pacific Metals Corp. Consolidated Statements of (Loss) Income | |||||||
|---|---|---|---|---|---|---|---|
| ***** (Expressed in US dollars)* | |||||||
| Year Ended June 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Notes | 2021 | 2020 | |||||
| (restated)* | |||||||
| Operating expense | |||||||
| Project evaluation and corporate development | $ | (822,864 | ) | $ | (206,060 | ) | |
| Depreciation | (44,000 | ) | (11,995 | ) | |||
| Filing and listing | (393,814 | ) | (128,142 | ) | |||
| Investor relations | (337,714 | ) | (536,902 | ) | |||
| Professional fees | (498,207 | ) | (303,031 | ) | |||
| Salaries and benefits | (1,688,687 | ) | (1,324,699 | ) | |||
| Office and administration | (678,529 | ) | (513,030 | ) | |||
| Share-based compensation | 12(b) | (1,482,170 | ) | (1,584,730 | ) | ||
| (5,945,985 | ) | (4,608,589 | ) | ||||
| Other (expense) income | |||||||
| Income from investments | 7 | $ | 395,543 | $ | 1,311,921 | ||
| Loss on disposal of plant and equipment | 8 | (1,944 | ) | - | |||
| Impairment recovery of mineral property interests | 9 | - | 8,724,915 | ||||
| Foreign exchange (loss) gain | (1,021,628 | ) | 465,021 | ||||
| Other expense | (360 | ) | - | ||||
| (628,389 | ) | 10,501,857 | |||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| Attributable to: | |||||||
| Equity holders of the Company | $ | (6,566,440 | ) | $ | 5,907,726 | ||
| Non-controlling interests | 13 | (7,934 | ) | (14,458 | ) | ||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| (Loss) earnings per share attributable to the equity holders of the Company | |||||||
| Basic (loss) earnings per share | 12(d) | $ | (0.04 | ) | $ | 0.04 | |
| Diluted (loss) earnings per share | 12(d) | $ | (0.04 | ) | $ | 0.04 | |
| Weighted average number of common shares - basic | 12(d) | 153,294,454 | 146,254,726 | ||||
| Weighted average number of common shares - diluted | 12(d) | 153,294,454 | 150,688,553 |
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
Page | 2
| New Pacific Metals Corp. Consolidated Statements of Comprehensive (Loss) Income | ||||||
|---|---|---|---|---|---|---|
| (Expressed in US dollars) | ||||||
| Year Ended June 30, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2021 | 2020 | |||||
| (restated)* | ||||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | |
| Other comprehensive income (loss), net of taxes: | ||||||
| Items that may subsequently be reclassified to net income or loss: | ||||||
| Currency translation adjustment, net of tax of nil | 6,017,205 | (2,141,799 | ) | |||
| Other comprehensive income (loss), net of taxes | $ | 6,017,205 | $ | (2,141,799 | ) | |
| Attributable to: | ||||||
| Equity holders of the Company | $ | 5,971,491 | $ | (2,127,133 | ) | |
| Non-controlling interests | 45,714 | (14,666 | ) | |||
| $ | 6,017,205 | $ | (2,141,799 | ) | ||
| Total comprehensive (loss) income, net of taxes | $ | (557,169 | ) | $ | 3,751,469 | |
| Attributable to: | ||||||
| Equity holders of the Company | $ | (594,949 | ) | $ | 3,780,593 | |
| Non-controlling interests | 37,780 | (29,124 | ) | |||
| Total comprehensive (loss) income, net of taxes | $ | (557,169 | ) | $ | 3,751,469 |
All values are in US Dollars.
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
Page | 3
| **New Pacific Metals Corp.**Consolidated Statements of Cash Flows | |||||||
|---|---|---|---|---|---|---|---|
| ***** (Expressed in US dollars)* | |||||||
| Year Ended June 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Notes | 2021 | 2020 | |||||
| (restated)* | |||||||
| Operating activities | |||||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| Add (deduct) items not affecting cash: | (395,543 | ) | |||||
| Income from investments | 7 | (1,311,921 | ) | ||||
| Depreciation | 44,000 | 11,995 | |||||
| Impairment recovery on mineral property interest | 9 | - | (8,724,915 | ) | |||
| Loss on disposal of plant and equipment | 8 | 1,944 | - | ||||
| Share-based compensation | 12(b) | 1,596,526 | 1,641,029 | ||||
| Unrealized foreign exchange loss (gain) | 1,021,628 | (465,021 | ) | ||||
| Changes in non-cash operating working capital | 18 | (558,356 | ) | (94,231 | ) | ||
| Dividends and interests received | 261,223 | 423,079 | |||||
| Net cash used in operating activities | (4,602,952 | ) | (2,626,717 | ) | |||
| Investing activities | |||||||
| Mineral property interest | |||||||
| Capital expenditures | (4,314,465 | ) | (8,623,458 | ) | |||
| Acquisition of mineral concession | - | (1,850,000 | ) | ||||
| Plant and equipment | (113,166 | ) | |||||
| Additions | (229,605 | ) | |||||
| Proceeds on disposals | 8 | 1,418 | - | ||||
| Short-term investments | - | ||||||
| Acquisition | 4 | (14,895,360 | ) | ||||
| Proceeds on disposals | 4 | 15,596,974 | 7,589,328 | ||||
| Equity investments | - | ||||||
| Acquisition | 6 | (3,737,498 | ) | ||||
| Proceeds on disposals | 6 | 4,345,636 | 4,566,635 | ||||
| Consideration received for transfer of TLG | 3 | 2,201,350 | - | ||||
| Changes in other tax receivable | (115,960 | ) | (724,476 | ) | |||
| Net cash provided by (used in) investing activities | 17,601,787 | (17,904,434 | ) | ||||
| Financing activities | |||||||
| Proceeds from issuance of common shares | 1,076,157 | 30,070,791 | |||||
| Net cash provided by financing activities | 1,076,157 | 30,070,791 | |||||
| Effect of exchange rate changes on cash | 2,542,344 | (996,125 | ) | ||||
| Increase in cash | 16,617,336 | 8,543,515 | |||||
| Cash, beginning of the year | 29,824,146 | 21,280,631 | |||||
| Cash, end of the year | $ | 46,441,482 | $ | 29,824,146 | |||
| Supplementary cash flow information | 18 |
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
Page | 4
| New Pacific Metals Corp. Consolidated Statements of Changes in Equity | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Expressed in US dollars) | |||||||||||||||||||||
| Share capital | Total equity | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Share- | Accumulated | attributable | |||||||||||||||||||
| Number of | based | other | to the equity | Non- | |||||||||||||||||
| common | payment | comprehensive | holders of | controlling | |||||||||||||||||
| Notes | shares issued | Amount | reserve | income | Deficit | the Company | interests | Total equity | |||||||||||||
| Balance, July 1, 2019 (restated)* | 142,432,812 | $ | 114,621,944 | $ | 15,265,578 | 49,797,021 | $ | (46,541,710 | ) | $ | 93,142,833 | $ | (12,246 | ) | $ | 93,130,587 | |||||
| Options exercised | 888,066 | 1,158,470 | (390,886 | ) | - | - | 767,584 | - | 767,584 | ||||||||||||
| Restricted share units vested | 136,400 | 470,929 | (470,929 | ) | - | - | - | ||||||||||||||
| Common shares issued through bought deal financing | 8,550,500 | 29,303,208 | - | - | - | 29,303,208 | - | 29,303,208 | |||||||||||||
| Share-based compensation | - | - | 2,759,903 | - | - | 2,759,903 | - | 2,759,903 | |||||||||||||
| Common shares issued to acquire mineral property interest | 291,000 | 349,759 | (349,759 | ) | - | - | - | - | - | ||||||||||||
| Net income | - | - | - | - | 5,907,726 | 5,907,726 | (14,458 | ) | 5,893,268 | ||||||||||||
| Currency translation adjustment | - | - | - | (2,127,133 | - | (2,127,133 | ) | (14,666 | ) | (2,141,799 | ) | ||||||||||
| Balance, June 30, 2020 (restated)* | 152,298,778 | $ | 145,904,310 | $ | 16,813,907 | $ | 7,669,888 | $ | (40,633,984 | ) | $ | 129,754,121 | $ | (41,370 | ) | $ | 129,712,751 | ||||
| Options exercised | 12(b) | 1,396,935 | 1,623,221 | (547,064 | ) | - | - | 1,076,157 | - | 1,076,157 | |||||||||||
| Restricted share units vested | 464,550 | 1,751,533 | (1,751,533 | ) | - | - | - | - | - | ||||||||||||
| Share-based compensation | 12(b) | - | - | 2,399,366 | - | - | 2,399,366 | - | 2,399,366 | ||||||||||||
| Common shares issued to acquire mineral property interest | 12(c) | 291,000 | 350,479 | (350,479 | ) | - | - | - | - | - | |||||||||||
| Spin-out distribution | 3 | - | - | - | - | (6,906,548 | ) | (6,906,548 | ) | - | (6,906,548 | ) | |||||||||
| Net loss | - | - | - | - | (6,566,440 | ) | (6,566,440 | ) | (7,934 | ) | (6,574,374 | ) | |||||||||
| Currency translation adjustment | - | - | - | 5,971,491 | - | 5,971,491 | 45,714 | 6,017,205 | |||||||||||||
| Balance, June 30, 2021 | 154,451,263 | $ | 149,629,543 | $ | 16,564,197 | $ | 13,641,379 | $ | (54,106,972 | ) | $ | 125,728,147 | $ | (3,590 | ) | $ | 125,724,557 |
All values are in US Dollars.
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
Page | 5
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
1. CORPORATE INFORMATION
New Pacific Metals Corp. along with its subsidiaries (collectively, the "Company" or "New Pacific") is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company is in the stage of exploring and advancing the development of its mineral properties and has not yet determined if they contain economically recoverable Mineral Reserves. The underlying value and the recoverability of the amounts shown for mineral properties are entirely dependent upon the existence of recoverable Mineral Reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral properties, and future profitable production or proceeds from the disposition of the mineral property interests.
The Company is publicly listed on the Toronto Stock Exchange ("TSX") under the symbol "NUAG" and on the NYSE American stock exchange ("NYSE-A") under the symbol "NEWP". The head office, registered address and records office of the Company are located at 1066 Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). The policies applied in these consolidated financial statements are based on IFRS in effect as of June 30, 2021.
These consolidated financial statements have been prepared on a going concern basis.
The consolidated financial statements of the Company as at and for the year ended June 30, 2021 were authorized for issue in accordance with a resolution of the Board of Directors (the "Board") dated on September 15, 2021.
(b) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary; and has the ability to use its power to affect its returns. For non-wholly-owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as "non-controlling interests" in the equity section of the consolidated statements of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
Balances, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
Page | 6
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Details of the Company's significant subsidiaries which are consolidated are as follows:
| Proportion of ownership interest held | |||||
|---|---|---|---|---|---|
| Country of | June 30, | June 30, | Mineral | ||
| Name of subsidiaries | Principal activity | incorporation | 2021 | 2020 | properties |
| New Pacific Offshore Inc. | Holding company | BVI (i) | 100% | 100% | |
| SKN Nickel & Platinum Ltd. | Holding company | BVI | 100% | 100% | |
| Glory Metals Investment Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
| New Pacific Investment Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
| New Pacific Andes Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
| Fortress Mining Inc. | Holding company | BVI | 100% | 100% | |
| Minera Alcira S.A. | Mining company | Bolivia | 100% | 100% | Silver Sand |
| NPM Minerales S.A. | Mining company | Bolivia | 100% | 100% | |
| Colquehuasi S.R.L. | Mining company | Bolivia | 100% | 100% | Silverstrike |
| Granville S.R.L. | Mining company | Bolivia | 100% | N/A | Carangas |
| Qinghai Found Mining Co., Ltd. | Mining company | China | 82% | 82% | RZY |
| Whitehorse Gold Corp. | Mining company | Canada | 0% | 100% | |
| Tagish Lake Gold Corp. | Mining company | Canada | 0% | 100% | TLG |
| (i) British Virgin Islands ("BVI") |
(c) Foreign Currency Translation
The functional currency for each subsidiary of the Company is the currency of the primary economic environment in which the entity operates. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is the Canadian dollar ("CAD"). The functional currency of all Bolivian subsidiaries is the US dollar ("USD"). The functional currency of the Chinese subsidiary is the Chinese Renminbi ("RMB").
Foreign currency monetary assets and liabilities are translated into the functional currency using exchange rates prevailing at the balance sheet date. Foreign currency non-monetary assets are translated using exchange rates prevailing at the transaction date. Foreign exchange gains and losses are included in the determination of net income.
The Company decided to change the presentation currency of its consolidated financial statements from CAD to USD effective July 1, 2020. This change in presentation currency was made to better reflect the Company's main business activities, which are mineral exploration operations in Bolivia with budgets and major payments denominated in USD. Such change in presentation currency also made the Company's consolidated financial statements more consistent with industry peers listed on TSX and NYSE-A. In order to satisfy the requirements of IAS 21 - The effects of changes in foreign exchange rates with respect to the change in presentation currency, the consolidated financial statements for the year ended June 30, 2020 have been restated from CAD to USD using the procedures outlined below:
assets and liabilities of subsidiaries where functional currency is other than USD were translated to USD using exchange rates at June 30, 2020;
income and expenses of subsidiaries where functional currency is other than USD were translated using average exchange rates during the year ended June 30, 2020;
share capital and deficit were translated at the historical rates prevailing at the dates of transactions; and
differences arising from the retranslation of the opening net assets at July 1, 2019 and the results for the year have been taken to the accumulated other comprehensive income.
Page | 7
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Effective July 1, 2020, the consolidated financial statements are presented in USD. The financial position and results of the Company's entities are translated from functional currencies to USD as follows:
assets and liabilities are translated using exchange rates prevailing at the balance sheet date;
income and expenses are translated using average exchange rates prevailing during the period; and
all resulting exchange gains and losses are included in other comprehensive income.
Consolidated Statements of Financial Position
| June 30, 2020 | July 1, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| As reported, | Restated, | As reported, | Restated, | |||||
| CAD | CAD | |||||||
| Cash | $ | 40,644,346 | $ | 29,824,146 | $ | 27,849,961 | $ | 21,280,631 |
| Other Current assets | 33,120,154 | 24,303,019 | 11,344,868 | 8,668,806 | ||||
| Non-Current assets | 105,051,558 | 77,085,086 | 85,053,566 | 64,990,881 | ||||
| Total assets | $ | 178,816,058 | $ | 131,212,251 | $ | 124,248,395 | $ | 94,940,318 |
| Current liabilities | $ | 2,043,514 | $ | 1,499,501 | $ | 2,105,272 | $ | 1,608,677 |
| Non-current liabilities | - | - | 263,120 | 201,054 | ||||
| Total liabilities | $ | 2,043,514 | $ | 1,499,501 | $ | 2,368,392 | $ | 1,809,731 |
| Share Capital | $ | 191,563,628 | $ | 145,904,310 | $ | 150,005,738 | $ | 114,621,944 |
| Share-based payment reserve | 22,057,385 | 16,813,906 | 19,978,062 | 15,265,578 | ||||
| Accumulated other comprehensive income | 6,599,738 | 7,669,888 | 3,264,901 | 9,797,021 | ||||
| Retained earnings | (43,398,714 | (40,633,984 | (51,331,013 | (46,541,710 | ||||
| Non-controlling interests | (49,493 | (41,370 | (37,685 | (12,246 | ||||
| Total shareholder's equity | $ | 176,772,544 | $ | 129,712,750 | $ | 121,880,003 | $ | 93,130,587 |
| Total liabilities and shareholder's equity | $ | 178,816,058 | $ | 131,212,251 | $ | 124,248,395 | $ | 94,940,318 |
All values are in US Dollars.
| Consolidated Statement of Income and Comprehensive Income | ||||
|---|---|---|---|---|
| Year ended June 30, 2020 | ||||
| As reported, | Restated, | |||
| CAD | ||||
| Operating expense | $ | (6,187,954 | $ | (4,608,589 |
| Other income | 14,100,841 | 10,501,857 | ||
| Net income | $ | 7,912,887 | $ | 5,893,268 |
| Other comprehensive income (loss), net of taxes | 3,342,441 | (2,141,799 | ||
| Total comprehensive income, net of taxes | $ | 11,255,328 | $ | 3,751,469 |
| Earnings per share - Basic and diluted | $ | 0.05 | $ | 0.04 |
All values are in US Dollars.
The Company treats inter-company loan balances, which are not intended to be repaid in the foreseeable future, as part of its net investment. When a foreign entity is sold, the historical exchange differences plus the foreign exchange impact that arises on the transaction are recognized in the consolidated statement of (loss) income as part of the gain or loss on sale.
(d) Plant and Equipment
Plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Plant and equipment are subsequently measured at cost less accumulated depreciation and applicable impairment losses. Depreciation is computed using the straight-line method based on the nature and estimated useful lives as follows:
Page | 8
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements | |
|---|---|
| (Expressed in US dollars) | |
| Land | Not depreciated |
| --- | --- |
| Buildings | 20 Years |
| Machinery | 5 Years |
| Motor vehicles | 5 Years |
| Office equipment and furniture | 5 Years |
| Computer software | 5 Years |
Subsequent costs that meet the asset recognition criteria are capitalized while costs incurred that do not extend the economic useful life of an asset are considered repair and maintenance, which are accounted for as an expense recognized during the period. The Company conducts an annual assessment of the residual balances, useful lives, and depreciation methods being used for plant and equipment and any changes are applied prospectively.
Assets under construction are capitalized as construction-in-progress. The cost of construction-in-progress comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Construction-in-progress assets are not depreciated until they are completed and available for use.
(e) Mineral Property Interests
The cost of acquiring mineral rights and properties either as an individual asset purchase or as part of a business combination is capitalized and represents the property's fair value at the date of acquisition. Fair value is determined by estimating the value of the property's reserves, resources and exploration potential.
Exploration and evaluation costs, incurred associated with specific mineral rights and properties prior to demonstrable technical feasibility and commercial viability of extracting a mineral resource, are capitalized.
The Company determines that a property is in the development stage when it has completed a positive economic analysis of the mineral deposit. Costs incurred in the development stage prior to commercial production are capitalized and included in the carrying amount of the related property in the period incurred. Proceeds from sales during this period, if any, are offset against costs capitalized.
(f) Impairment of Long-lived Assets
Long-lived assets, including mineral property interests, plant and equipment are reviewed and tested for impairment when indicators of impairment are considered to exist. Impairment assessments are conducted at the level of cash-generating units ("CGU") or at the individual asset level, whichever is the lowest level for which identifiable cash inflows are largely independent of the cash flows of other assets. An impairment loss is recognized for any excess of carrying amount of a CGU over its recoverable amount, which is the greater of its fair value less costs to sell and value in use. For mineral properties and processing facilities, the recoverable amount is estimated as the discounted future net cash inflows expected to be derived from expected future production, metal prices, and net proceeds from the disposition of assets on retirement, less operating and capital costs. Impairment losses are recognized in the period they are incurred.
For exploration and evaluation assets, indication of impairment includes but is not limited to expiration of the right to explore, substantive expenditures in the specific area are neither budgeted nor planned, and exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources.
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| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Impairment losses are reversed if there is evidence the loss no longer exists or has decreased. This reversal is recognized in net income in the period the reversal occurs limited by the carrying value that would have been determined, net of any depreciation, had no impairment charge been recognized in prior years.
(g) Share-based Payments
The Company grants share-based awards, including restricted share units ("RSUs") and stock options to directors, officers, employees, and consultants.
For share-based awards, the fair value is charged to the consolidated statements of income and credited to equity, on a straight-line basis over the vesting period, after adjusting for the estimated number of awards that are expected to vest. The fair value of share units is determined based on quoted market price of the Company's common shares at the date of grant. The fair value of the stock options granted to employees, officers, and directors is determined at the date of grant using the Black-Scholes option pricing model with market related input. The fair value of stock options granted to consultants is measured at the fair value of the services delivered unless that fair value cannot be estimated reliably, which then is determined using the Black-Scholes option pricing model. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.
At each statement of financial position date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is computed (after adjusting for non-market performance conditions). The movement in cumulative expense is recognized in the consolidated statements of income with a corresponding entry within equity. The amount recognized as expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met.
(h) Income Taxes
Current tax for each taxable entity is based on the local taxable income at the local substantively enacted statutory tax rate at the balance sheet date and includes adjustments to taxes payable or recoverable in respect to previous periods.
Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred tax is recognized using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses, can be utilized, except:
where the deferred tax asset or liability relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
Page | 10
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been substantively enacted by the end of the reporting period.
Deferred tax relating to items recognized outside profit or loss is recognized in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(i) Earnings (loss) per Share
Earnings (loss) per share is computed by dividing net income (loss) attributable to equity holders of the Company by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to be issued under securities that entitle their holders to obtain common shares in the future. For RSUs, the full outstanding numbers as at the end of the period are included in the calculation of diluted earnings per share. For stock options, the number of additional shares for inclusion in diluted earnings per share calculations is determined when the exercise price is less than the average market price of the Company's common shares; the stock options are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in the calculation of diluted earnings per share. When loss per share is presented in the period, the Company's calculation of diluted loss per share excludes any incremental shares from the assumed calculation of RSUs and stock options as they would be anti-dilutive.
(j) Financial Instruments
Initial recognition:
On initial recognition, all financial assets and financial liabilities are recorded at fair value adjusted for directly attributable transaction costs except for financial assets and liabilities classified as fair value through profit or loss ("FVTPL"), in which case transaction costs are expensed as incurred.
Subsequent measurement of financial assets:
Subsequent measurement of financial assets depends on the classification of such assets.
I. Non-equity instruments:
IFRS 9 includes a single model that has only two classification categories for financial instruments other than equity instruments: amortized cost and fair value. To qualify for amortized cost accounting, the instrument must meet two criteria:
Page | 11
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
i. The objective of the business model is to hold the financial asset for the collection of the cash flows; and
ii. All contractual cash flows represent only principal and interest on that principal.
All other instruments are mandatorily measured at fair value.
II. Equity instruments:
At initial recognition, for equity instruments other than held for trading, the Company may make an irrevocable election to designate it as either FVTPL or fair value through other comprehensive income ("FVTOCI").
Financial assets classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization from the effective interest method is included in finance income.
Financial assets classified as FVTPL are measured at fair value with changes in fair values recognized in profit or loss. Equity investments designated as FVTOCI are measured at fair value with changes in fair values recognized in other comprehensive income ("OCI"). Dividends from that investment are recorded in profit or loss when the Company's right to receive payment of the dividend is established unless they represent a recovery of part of the cost of the investment.
Impairment of financial assets carried at amortized cost:
The Company assesses at the end of each reporting period whether there is objective evidence that financial assets or group of financial assets measured at amortized cost are impaired. Impairment losses and reversal of impairment losses, if any, are recognized in profit or loss in the period they are incurred.
Subsequent measurement of financial liabilities:
Financial liabilities classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization using the effective interest method is included in finance costs.
The Company classifies its financial instruments as follows:
Financial assets classified as FVTPL: cash, short-term investments - bonds, and equity investments;
Financial assets classified as amortized cost: receivables and short-term investments - guaranteed investment certificates; and
Financial liabilities classified as amortized cost: trade and other payables, provisions and due to related parties.
Bonds:
The Company acquired bonds issued by other companies from various industries through the open market. These bonds are held to receive coupon interest payments and to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for other operational or investment needs. Bonds are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement.
Equity investments:
Equity investments represent equity interests of other publicly-traded or privately-held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares and warrants. Equity investments are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.
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| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Derecognition of financial assets and financial liabilities:
A financial asset is derecognized when:
The rights to receive cash flows from the asset have expired; or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Gains and losses on derecognition of financial assets and liabilities classified as amortized cost are recognized in profit or loss when the instrument is derecognized or impaired, as well as through the amortization process.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. In this case, a new liability is recognized, and the difference in the respective carrying amounts is recognized in the consolidated statement of income.
Offsetting of financial instruments:
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position if and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle liabilities simultaneously.
Fair value of financial instruments:
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without deduction for transaction costs. For financial instruments that are not traded in active markets, the fair value is determined using appropriate valuation techniques, such as using a recent arm's length market transaction between knowledgeable and willing parties, discounted cash flow analysis, reference to the current fair value of another instrument that is substantially the same, or other valuation models.
(k) Significant Judgments and Estimation Uncertainties
Many amounts included in the consolidated financial statements require management to make judgments and/or estimates. These judgments and estimates are continuously evaluated and are based on management's experience and knowledge of relevant facts and circumstances. Actual results may differ from the amounts included in the consolidated statement of financial position.
Areas of significant judgment include:
Capitalization of expenditures with respect to exploration, evaluation and development costs to be included in mineral rights and properties.
Determination of functional currency.
Recognition, measurement and impairment or impairment reversal assessment for mineral rights and properties.
Accounting assessment and classification for equity investments and short-term investments.
Determination of asset acquisition or business combination.
Page | 13
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Areas of significant estimates include:
The estimated fair values of CGUs for impairment or impairment reversal tests, including estimates of future costs to produce proven and probable reserves, future commodity prices, discount rates, probabilities of expected cash flows from disposal and salvage value of plant and equipment.
Valuation input and forfeiture rates used in calculation of share-based compensation.
Valuation of securities that do not have a quoted market price.
The Company estimates its ore reserves and mineral resources based on information compiled by qualified persons as defined in accordance with National Instrument 43-101.
(l) Accounting Standards Issued But Not Yet Effective
Amendment to IAS 16 - Property, Plant and Equipment. The amendments to IAS 16 prohibit deducting from the cost of property, plant and equipment the proceeds from selling items produced while bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by management. Instead, a company will recognize such sales proceeds and related cost in profit or loss.
This amendment is effective January 1, 2022 with early adoption permitted. The Company is in the process of assessing the impact of the application of this amendment on the consolidated financial statements.
3. WHITEHORSE GOLD CORP. SPIN-OUT TRANSACTION
During Fiscal 2020, the Company established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the Tagish Lake Gold Project ("TLG Project") located in Yukon Territory, Canada from the Company for consideration of $2,201,350 (CAD$3,000,000) via a promissory note plus 20,000,000 Whitehorse Gold common shares ("spin-out shares") as a result of a strategic review on the TLG Project (see note 9).
On November 18, 2020, the Company received the consideration of $2,201,350 and distributed all of the spin-out shares held by it to the Company's shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). The spin-out shares were valued at $6,906,548 upon distribution. Assets and liabilities of Whitehorse Gold and the TLG Project were classified as held for distribution as at June 30, 2020 in the amount of $8,695,312 and $89,653, respectively.
4. SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||
|---|---|---|---|---|---|---|
| Guaranteed Investment Certificates | $ | - | $ | 14,677,890 | $ | - |
| Bonds | 143,914 | 462,829 | 8,361,655 | |||
| $ | 143,914 | $ | 15,140,719 | $ | 8,361,655 |
The Company acquired guaranteed investment certificates ("GICs") through major Canadian financial institutions. These GICs were held to receive interest payments until maturity. The Company accounts for the GICs at amortized cost at each reporting date.
The Company acquired bonds issued by other companies from various industries through the open market. These bonds were held to receive coupon interest payments and to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for operational or investment needs. The Company accounts for the bonds at fair value at each reporting date.
Page | 14
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
The continuity of GICs is summarized as follows:
| Amount | |||
|---|---|---|---|
| Balance, July 1, 2019 | $ | - | |
| Acquisition | 14,895,360 | ||
| Interest earned | 2,255 | ||
| Foreign currency translation impact | (219,725 | ) | |
| Balance, June 30, 2020 | $ | 14,677,890 | |
| Interest earned | 69,206 | ||
| Interest received | (70,964 | ) | |
| Disposition | (15,596,974 | ) | |
| Foreign currency translation impact | 920,842 | ||
| Balance, June 30, 2021 | $ | - |
The continuity of bonds is summarized as follows:
| Amount | |||
|---|---|---|---|
| Balance, July 1, 2019 | $ | 8,361,655 | |
| Interest earned | 269,275 | ||
| Loss on fair value change | (279,768 | ) | |
| Coupon payment | (299,005 | ) | |
| Disposition | (7,589,328 | ) | |
| Balance, June 30, 2020 | $ | 462,829 | |
| Loss on fair value change | (318,915 | ) | |
| Balance, June 30, 2021 | $ | 143,914 |
5. OTHER TAX RECEIVABLE
Other tax receivable is composed of value-added tax ("VAT") imposed by the Bolivian government. The Company had VAT outputs through its exploration costs and general expenses incurred in Bolivia. These VAT outputs are deductible against future VAT inputs that will be generated through sales.
6. EQUITY INVESTMENTS
Equity investments represent equity interests of other publicly-traded or privately-held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares, preferred shares and warrants. Equity investments are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.
Page | 15
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
The equity investments are summarized as follows:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||
|---|---|---|---|---|---|---|
| Common or preferred shares | ||||||
| Public companies | $ | 461,635 | $ | 3,519,196 | $ | 3,395,708 |
| Private companies | - | - | 250,000 | |||
| Warrants | ||||||
| Public companies | 34,891 | 592,626 | 259,612 | |||
| $ | 496,526 | $ | 4,111,822 | $ | 3,905,320 |
The fair values of the warrants were estimated using the Black Scholes options pricing model with the following assumptions:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | |
|---|---|---|---|
| Risk free interest rate | 0.97% | 0.36% | 1.39% |
| Expected volatility | 114% | 122% | 130% |
| Expected life of warrants in years | 0.19 | 1.20 | 2.19 |
The continuity of equity investments is summarized as follows:
| Accumulated mark-to- | |||||
|---|---|---|---|---|---|
| market gain included | |||||
| Fair value | in net income | ||||
| Balance, July 1, 2019 | $ | 3,905,320 | $ | 2,319,464 | |
| Acquisition | 3,737,498 | - | |||
| Proceeds on disposal | (4,566,635 | ) | - | ||
| Change in fair value | 1,196,084 | 1,196,084 | |||
| Foreign exchange impact | (160,445 | ) | - | ||
| Balance, June 30, 2020 | $ | 4,111,822 | $ | 3,515,548 | |
| Proceeds on disposal | (4,345,636 | ) | - | ||
| Change in fair value | 455,597 | 455,597 | |||
| Foreign exchange impact | 274,743 | - | |||
| Balance, June 30, 2021 | $ | 496,526 | $ | 3,971,145 |
7. INCOME FROM INVESTMENTS
Income from investments consist of:
| Year Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Fair value change on equity investments | $ | 455,597 | $ | 1,196,085 | ||
| Fair value change on bonds | (318,915 | ) | (10,493 | ) | ||
| Dividend income | 110,293 | 103,968 | ||||
| Interest income | 148,568 | 22,361 | ||||
| Income from investments | $ | 395,543 | $ | 1,311,921 |
Page | 16
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
8. PLANT AND EQUIPMENT
| Office | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Land and | equipment and | Computer | ||||||||||||||||
| Cost | building | Machinery | Motor vehicles | furniture | software | Total | ||||||||||||
| Balance, July 1, 2019 | $ | 1,310,639 | $ | 1,055,450 | $ | 268,155 | $ | 175,262 | $ | 96,475 | $ | 2,905,981 | ||||||
| Additions | - | 39,275 | 30,011 | 57,769 | 102,552 | 229,607 | ||||||||||||
| Reclassified to assets held for distribution | - | - | - | - | (10,187 | ) | (10,187 | ) | ||||||||||
| Foreign currency translation impact | (27,019 | ) | (35,688 | ) | (2,601 | ) | (4,657 | ) | (5,340 | ) | (75,305 | ) | ||||||
| Balance, June 30, 2020 | $ | 1,283,620 | $ | 1,059,037 | $ | 295,565 | $ | 228,374 | $ | 183,500 | $ | 3,050,096 | ||||||
| Additions | - | 2,232 | - | 110,935 | - | 113,167 | ||||||||||||
| Disposals | (653,620 | ) | (859,519 | ) | (54,146 | ) | (37,327 | ) | (31 | ) | (1,604,643 | ) | ||||||
| Foreign currency translation impact | - | 497 | 1,163 | 13,259 | 18,266 | 33,185 | ||||||||||||
| Balance, June 30, 2021 | $ | 630,000 | $ | 202,247 | $ | 242,582 | $ | 315,241 | $ | 201,735 | $ | 1,591,805 | ||||||
| Accumulated depreciation and amortization | ||||||||||||||||||
| Balance, July 1, 2019 | $ | (680,640 | ) | $ | (878,165 | ) | $ | (107,922 | ) | $ | (141,209 | ) | $ | (96,439 | ) | $ | (1,904,375 | ) |
| Depreciation and amortization | - | (22,795 | ) | (40,305 | ) | (26,136 | ) | (1,446 | ) | (90,682 | ) | |||||||
| Reclassified to assets held for distribution | - | - | - | - | 34 | 34 | ||||||||||||
| Foreign currency translation impact | 27,020 | 33,953 | 2,413 | 4,728 | 3,847 | 71,961 | ||||||||||||
| Balance, June 30, 2020 | $ | (653,620 | ) | $ | (867,007 | ) | $ | (145,814 | ) | $ | (162,617 | ) | $ | (94,004 | ) | $ | (1,923,062 | ) |
| Depreciation and amortization | - | (24,538 | ) | (45,820 | ) | (38,080 | ) | (23,769 | ) | (132,207 | ) | |||||||
| Disposals | 653,620 | 819,698 | 54,556 | 73,376 | 31 | 1,601,281 | ||||||||||||
| Foreign currency translation impact | - | (224 | ) | (506 | ) | (8,270 | ) | (10,178 | ) | (19,178 | ) | |||||||
| Balance, June 30, 2021 | $ | - | $ | (72,071 | ) | $ | (137,584 | ) | $ | (135,591 | ) | $ | (127,920 | ) | $ | (473,166 | ) | |
| Carrying amount | ||||||||||||||||||
| Balance, June 30, 2020 | $ | 630,000 | $ | 192,030 | $ | 149,751 | $ | 65,757 | $ | 89,496 | $ | 1,127,034 | ||||||
| Balance, June 30, 2021 | $ | 630,000 | $ | 130,176 | $ | 104,998 | $ | 179,650 | $ | 73,815 | $ | 1,118,639 |
During the year ended June 30, 2021, certain plant and equipment were disposed for proceeds of $1,418 (year ended June 30, 2020, $nil) and loss of $1,944 (year ended June 30, 2020, $nil).
9. MINERAL PROPERTY INTERESTS
(a) Silver Sand Project
On July 20, 2017, the Company acquired the Silver Sand Project. The Project is located in the Colavi District of the Potosí Department, in Southwestern Bolivia, 25 kilometres ("km") northwest of Potosí City, the department capital. The Project covers an area of approximately 5.42 km^2^ at an elevation of 4,072 metres ("m") above sea level.
The Company has carried out extensive exploration and resource definition drill programs on the project since its acquisition in 2017. From 2017 to 2019, the Company completed a total of 97,619 m of drilling in 386 diamond core drillholes. Subsequent to June 30, 2021, the Company announced that it commenced a planned 38,000 m drill program on the project in 2021.
Advanced studies have commenced on the project, and the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc to lead the Preliminary Economic Assessment, environmental baseline study, and social baseline studies, respectively.
For the year ended June 30, 2021, total expenditures of $3,357,104 (year ended June 30, 2020 - $9,482,197) were capitalized under the project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in the Autorización Transitoria Especiales ("ATE") located to the north of the Silver Sand Project by cash payments of $1,000,000 and the issuance of 832,000 common shares to the vendors (see note 12(c)). During Fiscal 2019 and Fiscal 2020, cash payments of $800,000 were paid and 541,000 common shares were issued to the vendors. During the year ended June 30, 2021, the final payment of $200,000 cash and 291,000 common shares were paid and issued to the vendors, respectively.
Page | 17
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
(b) Carangas Project
In April 2021, the Company signed an agreement with a private Bolivian company to acquire a 98% joint venture interest in the Carangas silver project.
The Carangas Project is located approximately 180 km southwest of the city of Oruro and within 50 km from Bolivia's border with Chile. The joint venture partner is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km^2^) that comprise the Carangas Project. Under the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development, and production activities for the project. The agreement has a term of 30 years and is renewable for an additional 15 years.
On June 29, 2021, the Company announced the commencement of a 5,000 m initial discovery drill program on the project in 2021.
For the year ended June 30, 2021, total expenditures of $250,427 (year ended June 30, 2020 - $nil) were capitalized under the project.
(c) Silverstrike Project
In December 2019, the Company acquired a 98% joint venture interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000.
The Silverstrike Project covers an area of approximately 13 km^2^ and is located approximately 140 km southwest of the city of La Paz, Bolivia. The project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district - the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver rich occurrences associated with sercitic alteration. The area is largely underexplored with limited modern exploration applied.
For the year ended June 30, 2021, total expenditures of $1,293,907 (year ended June 30, 2020 - $476,728) were capitalized under the project.
(d) TLG Project
The TLG Project, covering an area of approximately 170 km^2^, is located in Yukon Territory, Canada, and consists of 1,051 mining claims hosting three identified gold and gold-silver mineral deposits: Skukum Creek, Goddell Gully and Mount Skukum. In Q4, fiscal 2020, given the significant changes with favourable effects on the TLG Project, the Company recognized an impairment recovery of $8,724,915 on the TLG project, being its fair value less costs of disposal ("FVLCD") for the year ended June 30, 2020. The fair value was determined using a market approach based on the pricing parameters implied by the market value of selected comparable transactions involving the sale of similar companies or mineral properties. Specifically, the comparable in-situ resource multiples (Enterprise Value ("EV") per ounce of contained gold ("EV/R&R")) observed in comparable transactions has been used to estimate the fair value.
Page | 18
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
On November 18, 2020, the Whitehorse Gold spin-out transaction was completed and, as a result, the Company no longer holds an interest in the TLG Project (see note 3).
For the year ended June 30, 2021, total expenditures of $312,593 (year ended June 30, 2020 - $78,242) were capitalized to assets held for distribution under the TLG Project prior to its disposal.
The project's carrying value of $8,985,913 was disposed upon the completion of the Whitehorse Gold spin-out transaction, resulting in no gain or loss.
(e) RZY Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu Tibetan Autonomous Prefecture. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY Project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company's subsidiary, Qinghai Found Mining Co., Ltd. ("Qinghai Found"), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of June 30, 2021, the process was under review and subject to approval by the Qinghai Government.
The continuity schedule of mineral property acquisition costs and deferred exploration and development costs is summarized as follows:
| Cost | Silver Sand | Silverstrike | Carangas | Tagish Lake | RZY Project | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, July 1, 2019 | $ | 55,995,583 | $ | - | $ | - | $ | - | $ | 2,700,897 | $ | 58,696,480 | |||||
| Capitalized exploration expenditures | |||||||||||||||||
| Reporting and assessment | 447,953 | 727 | - | - | - | 448,680 | |||||||||||
| Drilling and assaying | 4,856,789 | 1,666 | - | - | - | 4,858,455 | |||||||||||
| Project management and support | 3,386,249 | 436,473 | - | - | - | 3,822,722 | |||||||||||
| Camp service | 492,674 | 37,862 | - | - | - | 530,536 | |||||||||||
| Camp construction | 24,135 | - | - | - | - | 24,135 | |||||||||||
| Permitting | 38,250 | - | - | 78,242 | - | 116,492 | |||||||||||
| Acquisition of Silverstrike Project | - | 1,350,000 | - | - | - | 1,350,000 | |||||||||||
| Acquisition of mineral concessions | 216,147 | - | - | - | - | 216,147 | |||||||||||
| Other | 20,000 | - | - | - | - | 20,000 | |||||||||||
| Impairment recovery | - | - | - | 8,724,915 | - | 8,724,915 | |||||||||||
| Reclassified to assets held for distribution | - | - | - | (8,673,320 | ) | - | (8,673,320 | ) | |||||||||
| Foreign currency impact | (176,786 | ) | (5,538 | ) | - | (129,837 | ) | (77,281 | ) | (389,442 | ) | ||||||
| Balance, June 30, 2020 | $ | 65,300,994 | $ | 1,821,190 | $ | - | $ | - | $ | 2,623,616 | $ | 69,745,800 | |||||
| Capitalized exploration expenditures | |||||||||||||||||
| Reporting and assessment | 482,355 | 4,119 | - | 47,538 | - | 534,012 | |||||||||||
| Drilling and assaying | 78,201 | 169,102 | 21,952 | - | - | 269,255 | |||||||||||
| Project management and support | 2,505,338 | 996,005 | 178,753 | - | - | 3,680,096 | |||||||||||
| Camp service | 225,016 | 113,666 | 49,569 | - | - | 388,251 | |||||||||||
| Camp construction | 53,199 | - | - | 215,238 | - | 268,437 | |||||||||||
| Permitting | 12,995 | 11,015 | 153 | 49,817 | - | 73,980 | |||||||||||
| Disposal upon spin-out distribution | - | - | - | (312,593 | ) | (312,593 | ) | ||||||||||
| Foreign currency impact | 587,402 | 48,207 | 4,823 | - | 247,752 | 888,184 | |||||||||||
| Balance, June 30, 2021 | $ | 69,245,500 | $ | 3,163,304 | $ | 255,250 | $ | - | $ | 2,871,368 | $ | 75,535,422 |
Page | 19
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
10. TRADE AND OTHER PAYABLES
Trade and other payables consist of:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||
|---|---|---|---|---|---|---|
| Trade payable | $ | 626,683 | $ | 450,779 | $ | 1,078,041 |
| Accrued liabilities | 417,506 | 703,814 | 160,903 | |||
| $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 |
11. RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:
| Due to a related party | June 30, 2021 | June 30, 2020 | July 1, 2019 | |||
|---|---|---|---|---|---|---|
| Silvercorp Metals Inc. | $ | 50,378 | $ | 62,182 | $ | 68,151 |
(a) Silvercorp Metals Inc. ("Silvercorp") has two directors and one officer in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Expenses in general and administrative services rendered and incurred by Silvercorp on behalf of the Company for the year ended June 30, 2021 were $616,030 (year ended June 30, 2020 - $586,138).
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel for the years ended June 30, 2021 and 2020 are as follows:
| Year ended June 30, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Director's cash compensation | $ | 290,463 | $ | 55,858 |
| Director's share-based compensation | 604,970 | 446,652 | ||
| Key management's cash compensation | 859,394 | 940,323 | ||
| Key management's share-based compensation | 1,709,004 | 2,205,258 | ||
| $ | 3,463,831 | $ | 3,648,091 |
Other than as disclosed above, the Company does not have any ongoing contractual or other commitments resulting from transactions with related parties.
12. SHARE CAPITAL
(a) Share Capital - authorized share capital
The Company's authorized share capital consists of an unlimited number of common shares without par value.
Page | 20
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
(b) Share-based compensation
The Company has a share-based compensation plan (the "Plan") under which the Company may issue stock options and restricted share units ("RSUs"). The maximum number of common shares to be reserved for issuance on any share-based compensation under the Plan is a rolling 10% of the issued and outstanding common shares from time to time.
For the year ended June 30, 2021, a total of $1,482,170 (year ended June 30, 2020 - $1,584,730) was recorded as share-based compensation expense.
For the year ended June 30, 2021, a total of $114,356 (year ended June 30, 2020 - $56,299) was included in the project evaluation and corporate development expense.
For the year ended June 30, 2021, a total of $802,839 (year ended June 30, 2020 - $1,118,873) was capitalized under mineral property interests.
(i) Stock Options
The continuity schedule of stock options, as at June 30, 2021, is as follows:
| Weighted average | |||
|---|---|---|---|
| Number of options | exercise price (CAD$) | ||
| Balance, July 1, 2019 | 5,905,000 | 1.36 | |
| Options exercised | (888,066 | ) | 1.16 |
| Options cancelled | (354,167 | ) | 1.91 |
| Balance, June 30, 2020 | 4,662,767 | 1.36 | |
| Options exercised | (1,396,935 | ) | 0.98 |
| Options cancelled | (150,000 | ) | 0.82 |
| Balance, June 30, 2021 | 3,115,832 | 1.56 |
Option pricing model requires the input of subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate and therefore, the existing models do not necessarily provide a reliable estimate of the fair value of the Company's stock options. The Company's expected volatility is based on the historical volatility of the Company's share price on the TSX.
For the year ended June 30, 2021, a total of 1,396,935 (year ended June 30, 2020 - 888,066) stock options with weighted average share price at the date of exercise of $5.34 (year ended June 30, 2020 - $3.77) were exercised.
The following table summarizes information about stock options outstanding as at June 30, 2021:
| Number of options | Weighted | Number of options | Weighted | ||
|---|---|---|---|---|---|
| Exercise | outstanding as at | average remaining | exercisable as at | average | |
| prices (CAD$) | 2021-06-30 | contractual life (years) | 2021-06-30 | exercise price (CAD$) | |
| $ | 0.55 | 495,000 | 0.34 | 495,000 | $0.55 |
| 1.15 | 930,000 | 1.08 | 930,000 | $1.15 | |
| 1.57 | 200,000 | 1.44 | 200,000 | $1.57 | |
| 2.15 | 1,490,832 | 2.65 | 889,169 | $2.15 | |
| 0.55 - 2.15 | 3,115,832 | 1.74 | 2,514,169 | $1.42 |
Page | 21
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
Subsequent to June 30, 2021, a total of 553,331 options with exercise prices of CAD$1.15 and CAD$2.15 were exercised for proceeds of $692,770 and a total of 41,667 options with an exercise price of $2.15 were cancelled.
(ii) RSUs
The continuity schedule of RSUs, as at June 30, 2021, is as follows:
| Weighted average | ||||
|---|---|---|---|---|
| grant date closing | ||||
| Number of shares | price per share (CAD$) | |||
| Balance, July 1, 2019 | - | $ | - | |
| Granted | 1,064,600 | 4.70 | ||
| Cancelled | (3,000 | ) | 4.70 | |
| Distributed | (136,400 | ) | 4.70 | |
| Balance, June 30, 2020 | 925,200 | $ | 4.70 | |
| Granted | 360,500 | 6.46 | ||
| Cancelled | (26,250 | ) | 4.80 | |
| Distributed | (464,550 | ) | 4.72 | |
| Balance, June 30, 2021 | 794,900 | $ | 5.48 |
Subsequent to June 30, 2021, a total of 59,650 RSUs were distributed and a total of 25,000 RSUs were cancelled.
During the year ended June 30, 2021, a total of 360,500 RSUs were granted to directors, officers, employees, and consultants of the Company at grant date closing price of CAD$6.46 per share subject to a vesting schedule over a three-year term with 1/6 of the RSUs vesting every six months from the date of grant.
(c) Common Shares issued for mineral property interests
As partial consideration for the acquisition of ATEs located to the north of the Silver Sand Property (see note 9(a)), the Company agreed to issue a total of 832,000 common shares to the vendors valued at $1,000,000 in the year ended June 30, 2019. During the year ended June 30, 2021, 291,000 common shares valued at $350,479 (year ended June 30, 2020 - 291,000 common shares valued at $349,759) were issued and recorded under share capital.
(d) (Loss) earning per share
| For the years ended June 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||||||
| Loss | Shares | Per-Share | Income | Shares | Per-Share | |||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||
| Net (loss) income attributable to equity holders of the Company | $ | (6,566,440 | ) | $ | 5,907,726 | |||||||
| Basic (loss) earnings per share | (6,566,440 | ) | 153,294,454 | $ | (0.04 | ) | 5,907,726 | 146,254,726 | $ | 0.04 | ||
| Effect of dilutive securities: | ||||||||||||
| Stock options and RSUs | - | 4,433,827 | ||||||||||
| Diluted (loss) earnings per share | $ | (6,566,440 | ) | 153,294,454 | $ | (0.04 | ) | $ | 5,907,726 | 150,688,553 | $ | 0.04 |
Anti-dilutive options that are not included in the diluted (loss) earnings per share calculation were nil for the year ended June 30, 2021 (year ended June 30, 2020 - nil).
Page | 22
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
13. NON-CONTROLLING INTEREST
| Qinghai Found | |||
|---|---|---|---|
| Balance, July 1, 2019 | $ | (12,246 | ) |
| Share of net loss | (14,458 | ) | |
| Share of other comprehensive loss | (14,666 | ) | |
| Balance, June 30, 2020 | $ | (41,370 | ) |
| Share of net loss | (7,934 | ) | |
| Share of other comprehensive income | 45,714 | ||
| Balance, June 30, 2021 | $ | (3,590 | ) |
As at June 30, 2021 and June 30, 2020, the non-controlling interest in the Company's subsidiary Qinghai Found was 18%.
14. FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. 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.
(a) Fair Value
The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 - Fair Value Measurement ("IFRS 13").
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs which are supported by little or no market activity.
Page | 23
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
The following table sets forth the Company's financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at June 30, 2021 and June 30, 2020 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Fair value as at June 30, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||
| Financial Assets | ||||||||
| Cash | $ | 46,441,482 | $ | - | $ | - | $ | 46,441,482 |
| Short-term investments - bonds | 143,914 | - | - | 143,914 | ||||
| Common or preferred shares | 461,635 | - | - | 461,635 | ||||
| Warrants | - | 34,891 | - | 34,891 | ||||
| Fair value as at June 30, 2020 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||
| Financial Assets | ||||||||
| Cash | $ | 29,824,146 | $ | - | $ | - | $ | 29,824,146 |
| Short-term investments - bonds | 462,829 | - | - | 462,829 | ||||
| Common or preferred shares | 3,519,196 | - | - | 3,519,196 | ||||
| Warrants | - | 592,626 | - | 592,626 | ||||
| Fair value as at July 1, 2019 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||
| Financial Assets | ||||||||
| Cash | $ | 21,280,631 | $ | - | $ | - | $ | 21,280,631 |
| Short-term investments - bonds | 8,361,655 | - | - | 8,361,655 | ||||
| Common or preferred shares | 3,395,708 | - | 250,000 | 3,645,708 | ||||
| Warrants | - | 259,612 | - | 259,612 |
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of June 30, 2021, June 30, 2020 and July 1, 2019, respectively.
There were no transfers into or out of Level 3 during the year ended June 30, 2021.
(b) Liquidity Risk
The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at June 30, 2021, the Company had a working capital position of $46,357,578 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the next 12 months.
Page | 24
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company's financial liabilities:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Due within a year | Total | Total | Total | |||||
| Trade and other payables | $ | 1,044,189 | $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 |
| Due to a related party | 50,378 | 50,378 | 62,182 | 68,151 | ||||
| Payable for mineral property acquisition | - | - | 193,073 | 301,582 | ||||
| $ | 1,094,567 | $ | 1,094,567 | $ | 1,409,848 | $ | 1,608,677 |
(c) Foreign Exchange Risk
The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is RMB. The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk that could affect net income is summarized as follows:
| Financial assets denominated in foreign currencies other than relevant functional currency | June 30, 2021 | June 30, 2020 | July 1, 2019 | |||
|---|---|---|---|---|---|---|
| United States dollars | $ | 11,079,194 | $ | 11,158,435 | $ | 13,460,154 |
| Bolivianos | 285,267 | 297,147 | 146,102 | |||
| Chinese RMB | - | 160,123 | 146,439 | |||
| Total | $ | 11,364,461 | $ | 11,615,705 | $ | 13,752,695 |
| Financial liabilities denominated in foreign currencies other than relevant functional currency | ||||||
| United States dollars | $ | - | $ | 432,922 | $ | 1,016,643 |
| Bolivianos | 333,405 | - | - | |||
| Chinese RMB | - | 101,060 | 3,254 | |||
| Total | $ | 333,405 | $ | 533,982 | $ | 1,019,897 |
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $111,000.
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately $500.
(d) 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 holds a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of June 30, 2021. The Company, from time to time, also owns GICs and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond's fair value. An increase in market interest rates will generally reduce bond's fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
Page | 25
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
(e) Credit Risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's exposure to credit risk is primarily associated with cash, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as the majority of its cash are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at June 30, 2021, the Company had a receivables balance of $343,608 (June 30, 2020 - $303,488). There were no material amounts in receivables which were past due on June 30, 2021 (June 30, 2020 - $nil).
(f) Equity Price Risk
The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company's portfolio at June 30, 2021, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $50,000.
15. CAPITAL MANAGEMENT
The objectives of the capital management policy are to safeguard the Company's ability to support exploration and operating requirements on an ongoing basis, continue the investment in high quality assets along with safeguarding the value of its mineral properties, and support any expansionary plans.
The capital of the Company consists of the items included in equity less cash and bonds. Risk and capital management are primarily the responsibility of the Company's corporate finance function and is monitored by the Board. The Company manages the capital structure and makes adjustments depending on economic conditions. Significant risks are monitored and actions are taken, when necessary, according to the Company's approved policies.
In addition, the current COVID-19 pandemic has caused significant disruption to global economic conditions which may adversely impact the Company's results.
Page | 26
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
16. INCOME TAXES
The provision for income taxes differs from the amount computed by applying the cumulative Canadian federal and provincial income tax rates to the loss before income tax provision due to the following:
| Years ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Canadian statutory tax rate | 27.00% | 27.00% | ||||
| (Loss) income before income taxes | $ | (6,574,374 | ) | $ | 5,893,268 | |
| Income tax (recovery) expense computed at Canadian statutory rates | (1,775,081 | ) | 1,591,182 | |||
| Foreign tax rates different from statutory rate | 218,388 | (324,652 | ) | |||
| Permanent items and other | 3,633,845 | 614,589 | ||||
| Change in unrecognized deferred tax assets | (2,078,112 | ) | (1,881,119 | ) | ||
| Adjustments in respect of prior years | 960 | - | ||||
| $ | - | $ | - |
Deferred tax assets are recognized to the extent that the realization of the related tax benefit through future taxable profit is probable. The ability to realize the tax benefits is dependent upon numerous factors, including the future profitability of operations in the jurisdiction in which the tax benefit arise. Deductible temporary differences and unused tax losses for which no deferred tax assets have been recognized are attributable to the following:
| June 30, 2021 | June 30, 2020 | July 31, 2019 | ||||
|---|---|---|---|---|---|---|
| Non-capital loss carry forward | $ | 9,184,009 | $ | 11,844,993 | $ | 11,096,051 |
| Capital loss carry forward | 23,435,600 | - | - | |||
| Plant and equipment | 155,152 | 2,289,041 | 2,371,361 | |||
| Mineral property interests | 3,519,176 | 16,767,840 | 26,374,381 | |||
| Equity investments | 572,253 | 535,456 | - | |||
| Share issuance cost | 1,624,469 | - | - | |||
| Investment tax credit | - | 1,191,951 | 1,241,225 | |||
| $ | 38,490,659 | $ | 32,629,281 | $ | 41,083,018 |
As of June 30, 2021, the Company has the following net operating losses, expiring various years to 2041 and available to offset future taxable income in Canada, Bolivia and China, respectively:
| Canada | Bolivia | China | ||||
|---|---|---|---|---|---|---|
| 2025 | - | - | 38,535 | |||
| 2027 | - | - | 48,331 | |||
| 2028 | - | - | 87,248 | |||
| 2029 | - | - | 85,919 | |||
| 2037 | - | 44,849 | - | |||
| 2038 | - | 22,571 | - | |||
| 2039 | - | 115,876 | - | |||
| 2040 | - | - | - | |||
| 2041 | 7,976,944 | 763,736 | - | |||
| $ | 7,976,944 | $ | 947,032 | $ | 260,033 |
As at June 30, 2021, the Company had capital loss carry forward of $23,435,600 that can be carried indefinitely in Canada (June 30, 2020 - $nil).
Page | 27
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
17. SEGMENTED INFORMATION
As at and for the year ended June 30, 2021, the Company operates in three (as at and for the year ended June 30, 2020 - four) reportable operating segments, one being the corporate segment; the other two being the exploration and development segments focused on safeguarding the value of its mineral properties in Bolivia and China (as at and for the year ended June 30, 2020 - one being the corporate segment; the other three being the exploration and development segments in Bolivia, Canada, and China). These reporting segments are components of the Company where separate financial information is available that is evaluated regularly by the Company's Chief Executive Officer, the chief operating decision maker ("CODM"). The CODM no longer reviews the Canada reportable segment as a result of the Whitehorse Gold spin-out transaction (see note 3 and 9(d)).
(a) Segment information for assets and liabilities are as follows:
| June 30, 2021 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate | Exploration and Development | Total | |||||||||||||
| Canada and BVI | Bolivia | China | |||||||||||||
| Cash | $ | 46,259,720 | $ | 158,539 | $ | 23,223 | $ | 46,441,482 | |||||||
| Short-term investments | 143,914 | - | - | 143,914 | |||||||||||
| Equity investments | 496,526 | - | - | 496,526 | |||||||||||
| Plant and equipment | 115,340 | 988,503 | 14,796 | 1,118,639 | |||||||||||
| Mineral property interests | - | 72,664,054 | 2,871,368 | 75,535,422 | |||||||||||
| Other assets | 461,135 | 2,427,576 | 194,430 | 3,083,141 | |||||||||||
| Total Assets | $ | 47,476,635 | $ | 76,238,672 | $ | 3,103,817 | $ | 126,819,124 | |||||||
| Total Liabilities | $ | (573,163 | ) | $ | (333,405 | ) | $ | (187,999 | ) | $ | (1,094,567 | ) | |||
| June 30, 2020 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Corporate | Exploration and Development | Total | |||||||||||||
| Canada and BVI | Bolivia | Canada | China | ||||||||||||
| Cash | $ | 29,357,060 | $ | 132,379 | $ | 308,086 | $ | 26,621 | $ | 29,824,146 | |||||
| Short-term investments | 15,140,719 | - | - | - | 15,140,719 | ||||||||||
| Equity investments | 4,111,822 | - | - | - | 4,111,822 | ||||||||||
| Plant and equipment | 137,935 | 972,430 | - | 16,669 | 1,127,034 | ||||||||||
| Mineral property interests | - | 67,122,184 | - | 2,623,616 | 69,745,800 | ||||||||||
| Assets held for distribution | - | - | 8,695,312 | - | 8,695,312 | ||||||||||
| Other assets | 118,793 | 2,308,957 | - | 139,668 | 2,567,418 | ||||||||||
| Total Assets | $ | 48,866,329 | $ | 70,535,950 | $ | 9,003,398 | $ | 2,806,574 | $ | 131,212,251 | |||||
| Total Liabilities | $ | (875,866 | ) | $ | (432,923 | ) | $ | (89,652 | ) | $ | (101,060 | ) | $ | (1,499,501 | ) |
| July 1, 2019 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| Corporate | Exploration and Development | ||||||||||||||
| Canada and BVI | Bolivia | Canada | China | Total | |||||||||||
| Cash | $ | 20,915,897 | $ | 293,675 | $ | 22,837 | $ | 48,222 | $ | 21,280,631 | |||||
| Short-term investments | 8,361,655 | - | - | 8,361,655 | |||||||||||
| Equity investments | 3,905,320 | - | - | 3,905,320 | |||||||||||
| Plant and equipment | 24,997 | 959,449 | 17,160 | 1,001,606 | |||||||||||
| Mineral property interests | - | 55,995,582 | 2,700,898 | 58,696,480 | |||||||||||
| Other assets | 50,537 | 1,528,016 | 11,614 | 104,459 | 1,694,626 | ||||||||||
| Total Assets | $ | 33,258,406 | $ | 58,776,722 | $ | 34,451 | $ | 2,870,739 | $ | 94,940,318 | |||||
| Total Liabilities | $ | (704,371 | ) | $ | (1,016,642) $ | $ | (85,464 | ) | $ | (3,254 | ) | $ | (1,809,731 | ) |
Page | 28
| New Pacific Metals Corp. Notes to the Consolidated Financial Statements |
|---|
| (Expressed in US dollars) |
(b) Segment information for operating results are as follows:
| Year ended June 30, 2021 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate | Exploration and Development | Total | |||||||||||||
| Canada and BVI | Bolivia | China | |||||||||||||
| Project evaluation and corporate development | $ | (295,315 | ) | $ | (527,549 | ) | $ | - | $ | (822,864 | ) | ||||
| Salaries and benefits | (1,465,709 | ) | (188,340 | ) | (34,638 | ) | (1,688,687 | ) | |||||||
| Share-based compensation | (1,482,170 | ) | - | - | (1,482,170 | ) | |||||||||
| Other operating expenses | (1,897,162 | ) | (47,846 | ) | (7,256 | ) | (1,952,264 | ) | |||||||
| Total operating expense | (5,140,356 | ) | (763,735 | ) | (41,894 | ) | (5,945,985 | ) | |||||||
| Income from investments | 395,421 | - | 122 | 395,543 | |||||||||||
| Loss on disposal of plant and equipment | - | - | (1,944 | ) | (1,944 | ) | |||||||||
| Foreign exchange loss | (1,021,628 | ) | - | - | (1,021,628 | ) | |||||||||
| Other expense | - | - | (360 | ) | (360 | ) | |||||||||
| Net loss | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (44,076 | ) | $ | (6,574,374 | ) | |||
| Attributed to: | |||||||||||||||
| Equity holders of the Company | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (36,142 | ) | $ | (6,566,440 | ) | |||
| Non-controlling interests | - | - | (7,934 | ) | (7,934 | ) | |||||||||
| Net loss | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (44,076 | ) | $ | (6,574,374 | ) | |||
| Year ended June 30, 2020 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Corporate | Exploration and Development | Total | |||||||||||||
| Canada | Bolivia | Canada | China | ||||||||||||
| Project evaluation and corporate development | $ | (90,184 | ) | $ | (115,876 | ) | $ | - | $ | - | $ | (206,060 | ) | ||
| Salaries and benefits | (1,200,781 | ) | - | (73,539 | ) | (50,379 | ) | (1,324,699 | ) | ||||||
| Share-based compensation | (1,584,730 | ) | - | - | - | (1,584,730 | ) | ||||||||
| Other operating expenses | (1,429,865 | ) | - | (33,037 | ) | (30,198 | ) | (1,493,100 | ) | ||||||
| Total operating expense | (4,305,560 | ) | (115,876 | ) | (106,576 | ) | (80,577 | ) | (4,608,589 | ) | |||||
| Income from investments | 1,311,764 | - | - | 157 | 1,311,921 | ||||||||||
| Impairment recovery of mineral property interests | - | - | 8,724,915 | - | 8,724,915 | ||||||||||
| Foreign exchange gain | 464,896 | - | 22 | 103 | 465,021 | ||||||||||
| Other income (expense) | 22,343 | - | (22,343 | ) | - | - | |||||||||
| Net (loss) income | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (80,317 | ) | $ | 5,893,268 | ||
| Attributed to: | |||||||||||||||
| Equity holders of the Company | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (65,859 | ) | $ | 5,907,726 | ||
| Non-controlling interests | - | - | - | (14,458 | ) | $ | (14,458 | ) | |||||||
| Net (loss) income | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (80,317 | ) | $ | 5,893,268 |
18. SUPPLEMENTARY CASH FLOW INFORMATION
| Changes in non-cash operating working capital: | Year Ended June 30, | |||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Receivables | $ | (22,615 | ) | $ | (110,087 | ) |
| Deposits and prepayments | (340,059 | ) | (56,776 | ) | ||
| Accounts payable and accrued liabilities | (178,289 | ) | 75,944 | |||
| Due to a related party | (17,393 | ) | (3,312 | ) | ||
| $ | (558,356 | ) | $ | (94,231 | ) |
Page | 29
New Pacific Metals Corp.: Exhibit 99.4 - Filed by newsfilecorp.com
EXHIBIT 99.4
CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Cruise, certify that:
I have reviewed this Annual Report on Form 40-F of New Pacific Metals Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
- The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
| Date: September 28, 2021 | /s/ Mark Cruise | |
|---|---|---|
| Name: | Mark Cruise | |
| Title: | Chief Executive Officer |
New Pacific Metals Corp.: Exhibit 99.5 - Filed by newsfilecorp.com
EXHIBIT 99.5
CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jalen Yuan, certify that:
I have reviewed this Annual Report on Form 40-F of New Pacific Metals Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
- The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
| Date: September 28, 2021 | /s/ Jalen Yuan | |
|---|---|---|
| Name: | Jalen Yuan | |
| Title: | Chief Financial Officer |
New Pacific Metals Corp.: Exhibit 99.6 - Filed by newsfilecorp.com
EXHIBIT 99.6
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
New Pacific Metals Corp. (the "Company") is filing with the U.S. Securities and Exchange Commission on the date hereof, its Annual Report on Form 40-F for the fiscal year ended June 30, 2021 (the "Report").
I, Mark Cruise, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
i. the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 28, 2021
/s/ Mark Cruise
Name: Mark Cruise
Title: Chief Executive Officer
New Pacific Metals Corp.: Exhibit 99.7 - Filed by newsfilecorp.com
EXHIBIT 99.7
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
New Pacific Metals Corp. (the "Company") is filing with the U.S. Securities and Exchange Commission on the date hereof, its Annual Report on Form 40-F for the fiscal year ended June 30, 2021 (the "Report").
I, Jalen Yuan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
i. the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 28, 2021
/s/ Jalen Yuan
Name: Jalen Yuan
Title: Chief Financial Officer
New Pacific Metals Corp.: Exhibit 99.8 - Filed by newsfilecorp.com
EXHIBIT 99.8
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-257344 on Form F-10 and to the use of our report dated September 16, 2021 relating to the financial statements of New Pacific Metals Corp. ("New Pacific") appearing in this Annual Report on Form 40-F of New Pacific for the year ended June 30, 2021.
| /s/ Deloitte LLP |
|---|
| Chartered Professional Accountants |
| Vancouver, Canada |
| September 28, 2021 |
New Pacific Metals Corp.: Exhibit 99.9 - Filed by newsfilecorp.com
CONSENT OF ADRIENNE ROSS
I hereby consent to the use of my name and information derived from the Technical Report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020 (effective date January 16, 2020), and other technical and scientific information, which is included in, or incorporated by reference into, the:
- Annual Report on Form 40-F of New Pacific Metals Corp. for the year ended June 30, 2021 being filed with the United States Securities and Exchange Commission; and
- Registration Statement on Form F-10 (Registration No. 333-257344) of New Pacific Metals Corp.
Dated: September 28, 2021
| /s/ Adrienne Ross |
|---|
| Adrienne Ross, P.Geo., B.Sc., Ph.D. |
New Pacific Metals Corp.: Exhibit 99.10 - Filed by newsfilecorp.com
CONSENT OF DINARA NUSSIPAKYNOVA
I hereby consent to the use of my name and information derived from the Technical Report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020 (effective date January 16, 2020), and other technical and scientific information, which is included in, or incorporated by reference into, the:
- Annual Report on Form 40-F of New Pacific Metals Corp. for the year ended June 30, 2021 being filed with the United States Securities and Exchange Commission; and
- Registration Statement on Form F-10 (Registration No. 333-257344) of New Pacific Metals Corp.
Dated: September 28, 2021
| /s/ Dinara Nussipakynova |
|---|
| Dinara Nussipakynova, P.Geo., B.Sc., M.Sc. |
New Pacific Metals Corp.: Exhibit 99.11 - Filed by newsfilecorp.com
CONSENT OF ANDY HOLLOWAY
I hereby consent to the use of my name and information derived from the Technical Report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020 (effective date January 16, 2020), and other technical and scientific information, which is included in, or incorporated by reference into, the:
- Annual Report on Form 40-F of New Pacific Metals Corp. for the year ended June 30, 2021 being filed with the United States Securities and Exchange Commission; and
- Registration Statement on Form F-10 (Registration No. 333-257344) of New Pacific Metals Corp.
Dated: September 28, 2021
| /s/ Andy Holloway |
|---|
| Andy Holloway, P.Eng. B.Eng.(Hons) |
New Pacific Metals Corp.: Exhibit 99.12 - Filed by newsfilecorp.com
CONSENT OF SIMEON ROBINSON
I hereby consent to the use of my name and information derived from the Technical Report titled "Silver Sand Deposit Mineral Resource Report (Amended)" dated June 3, 2020 (effective date January 16, 2020), and other technical and scientific information, which is included in, or incorporated by reference into, the:
- Annual Report on Form 40-F of New Pacific Metals Corp. for the year ended June 30, 2021 being filed with the United States Securities and Exchange Commission; and
- Registration Statement on Form F-10 (Registration No. 333-257344) of New Pacific Metals Corp.
Dated: September 28, 2021
| /s/ Simeon Robinson |
|---|
| Simeon Robinson, P.Geo., B.Sc. |
New Pacific Metals Corp.: Exhibit 99.13 - Filed by newsfilecorp.com
CONSENT OF YONGMING (ALEX) ZHANG
I hereby consent to the use of my name and information attributed to me included or incorporated by reference in the Annual Report on Form 40-F for the year ended June 30, 2021 of New Pacific Metals Corp. being filed with the United States Securities and Exchange Commission.
Dated: September 28, 2021
| /s/ Yongming (Alex) Zhang |
|---|
| Yongming (Alex) Zhang, P. Geo. |
New Pacific Metals Corp.: Exhibit 99.14 - Filed by newsfilecorp.com
NEW PACIFIC METALS CORP.
Code of Business Conduct and Ethics
(Adopted by the Board on March 3, 2021)
1. Introduction
New Pacific Metals Corp. (the "Corporation") requires high standards of professional and ethical conduct from our employees. Our reputation with our shareholders, business partners, prospective investors and other stakeholders for honesty and integrity is key to the success of our business. No employee will be permitted to achieve results through violations of laws or regulations, or through unscrupulous dealings. We intend that the Corporation's business practices will be compatible with the economic and social priorities of each location in which we operate. Although customs vary by country and standards of ethics may vary in different business environments, honesty and integrity must always characterize our business activity. If a law conflicts with a policy in this Code, you must comply with the law; however, if a local custom or policy conflicts with this Code, you must comply with the Code. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation. This Code reflects our commitment to a culture of honesty, integrity and accountability and outlines the basic principles and policies with which all employees are expected to comply. Please read this Code carefully and sign at the bottom to acknowledge it has been read and that you will undertake to comply with the Code at all times.
In addition to following this Code in all aspects of your business activities, you are expected to seek guidance in any case where there is a question about compliance with both the letter and the spirit of our policies and applicable laws. This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees of the Corporation. This Code does not supersede the specific policies and procedures that are covered in the Corporation's operating manuals or in separate specific policy statements. References in this Code to the "Corporation" means New Pacific Metals Corp. or any of its subsidiaries. Reference to "employees" also includes officers and directors. This Code should also be provided to and followed by consultants, agents and representatives, including advisors, engaged by the Corporation.
Those who violate the standards set forth in this Code will be subject to disciplinary action up to and including dismissal. In addition, violation of any laws, governmental regulations or this Code could result in notification of appropriate governmental authorities and public disclosure of such violation including, without limitation, the names of parties involved. If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 17 below.
Your cooperation is necessary to the continued success of our business and the cultivation and maintenance of our reputation as a good corporate citizen.
2. Compliance with Laws, Rules and Regulations
Compliance with the letter and spirit of all laws, rules and regulations (including stock exchange rules) applicable to our business is critical to our reputation and continued success. All employees must respect and obey such laws, rules and regulations in which we operate and avoid even the appearance of impropriety.
Not all employees are expected to know the details of these laws, rules and regulations in which we operate, but it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel. The Corporation may hold information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.
3. Inside Information and Securities Trading
In the course of business activities, you may become aware of non-public information regarding the business, operations or securities of the Corporation. It is the policy of the Corporation to prohibit the unauthorized disclosure of any non-public information and the misuse of material non-public information in securities trading. It is not possible to define all categories of material information. However, information should be regarded as material if there is a reasonable likelihood that it would be considered important to an investor in making an investment decision regarding the purchase or sale of the Corporation's securities. Non-public information is information that has not been previously disclosed to the general public and is otherwise not available to the general public. While it may be difficult to determine whether particular information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. In addition, material information may be positive or negative. Examples of such information may include:
- Project exploration results, whether positive or negative
- Joint ventures with third parties
- News of a pending or proposed merger or acquisition
- Financial results
- Major contract awards, cancellations or write-offs
- Exploration or development milestones
- News of the disposition of material assets
- Impending bankruptcy or financial liquidity problems
- Gain or loss of a substantial property
- Stock splits
- New equity or debt offerings
- Significant litigation exposure due to actual or threatened litigation
- Changes in senior management
- Projections of future earnings or losses
- Dividend issuance decisions
Trading on Material Non-public Information: With certain limited exceptions, no officer or director of the Corporation, no employee of the Corporation or its subsidiaries and no consultant or contractor to the Corporation or any of its subsidiaries and no members of the immediate family or household of any such person, shall engage in any transaction involving a purchase or sale of the Corporation's securities, including any offer to purchase or offer to sell, during any period commencing with the date that he or she possesses material non-public information concerning the Corporation, and ending at the close of business on the date of public disclosure of that information (usually by Press Release), or at such time as such non-public information is no longer material. Where a press release containing material non-public information is issued immediately after market, no such trading shall be undertaken until after the close of the market on the following day on which the Corporation's shares trade.
Tipping: No insider shall disclose ("tip") material non-public information to any other person (including family members) where such information may be used by such person to his or her profit by trading in the securities of companies to which such information relates, nor shall such insider or related person make recommendations or express opinions on the basis of material non-public information as to trading in the Corporation's securities.
Applicability of Insider Trading Regulations to Securities of Other Companies: The insider trading guidelines described herein also apply to material non-public information relating to other companies, including the Corporation's joint venture partners ("business partners"), when that information is obtained in the course of employment with, or other services performed on behalf of the Corporation. All employees and consultants should treat material non-public information about the Corporation's business partners with the same care as is required with respect to information relating directly to the Corporation.
4. Conflicts of Interest
A conflict of interest occurs when an individual's private interest interferes, or appears to interfere, in any way with the interests of the Corporation. A conflict situation can arise when an employee takes actions or has interests that may make it difficult to perform his or her work for the Corporation objectively and effectively. Conflicts of interest also arise when an employee, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Corporation. Loans to, or guarantees of obligations of, such persons may not be legally permissible and are likely to pose conflicts of interest, as are transactions of any kind between the Corporation and any other organization in which you or any member of your family have an interest. Activities that could give rise to conflicts of interest are prohibited unless specifically approved by the Board of Directors or the Audit Committee. It is not always easy to determine whether a conflict of interest exists, so any potential conflicts of interests should be reported immediately to your supervisor or the Corporation's general legal counsel.
5. Corporate Opportunities
Employees are prohibited from taking for themselves personally opportunities that arise through the use of corporate property, information or position and from using corporate property, information or position for personal gain. Employees are also prohibited from competing with the Corporation directly or indirectly. Employees owe a duty to the Corporation to advance the legitimate interests of the Corporation when the opportunity to do so arises.
6. Confidentiality
Employees must maintain the confidentiality of information entrusted to them by the Corporation or that otherwise comes into their possession in the course of their employment, except when disclosure is authorized or legally mandated. Employees may be required to execute a standard form confidentiality agreement upon starting employment or from time to time during the course of employment. The obligation to preserve confidential information continues even after you leave the Corporation.
Confidential information includes all non-public information that may be of use to competitors, or harmful to the Corporation or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us.
7. Protection and Proper Use of Corporation Assets
All employees should endeavor to protect the Corporation's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Corporation's profitability. Any suspected incidents of fraud or theft should be immediately reported for investigation.
Corporation assets, such as funds, products or computers, may only be used for legitimate business purposes or other purposes approved by management. Corporation assets may never be used for illegal purposes.
The obligation to protect Corporation assets includes proprietary information. Proprietary information includes any information that is not generally known to the public or would be helpful to our competitors. Examples of proprietary information include intellectual property, such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data or reports. Unauthorized use or distribution of this information is a violation of Corporation policy. It may also be illegal and may result in civil and criminal penalties. The obligation to preserve proprietary information continues even after you leave the Corporation.
8. Fair Dealing
We seek to outperform our competition fairly and honestly. We seek competitive advantages through superior performance, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information obtained without the owner's consent or inducing the disclosures of proprietary information or trade secrets by past or present employees of other companies is prohibited. Each employee should endeavor to deal fairly with the Corporation's customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through illegal conduct, manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice.
9. Discrimination And Harassment
We value the diversity of our employees and are committed to providing equal opportunity in all aspects of employment. Abusive, harassing or offensive conduct is unacceptable, whether verbal, physical or visual. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. Employees are encouraged to speak out when a co-worker's conduct makes them uncomfortable, and to report harassment when it occurs.
10. Safety and Health
We are all responsible for maintaining a safe and healthy workplace by following safety and health rules and practices. The Corporation is committed to keeping its workplaces free from hazards. Please report any accidents, injuries, or unsafe equipment, practices or conditions immediately to a supervisor or other designated person. Threats or acts of violence or physical intimidation are prohibited.
In order to protect the safety of all employees, employees must report to work in condition to perform their duties and free from the influence of any substance that could prevent them from conducting work activities safely and effectively. The use of illegal drugs in the workplace is prohibited.
11. Financial Statements and Recordkeeping
Honest and accurate recording and reporting of information is critical to our financial reporting and our ability to make responsible business decisions. The Corporation's accounting records are relied upon to produce reports for the Corporation's management, shareholders, creditors, governmental agencies and others. Our financial statements and the books and records on which they are based must truthfully and accurately reflect all corporate transactions and conform to all legal and accounting requirements and our system of internal controls. A separate Code of Ethical Conduct for Financial Managers forms part of this Code as Schedule "A".
All employees have a responsibility to ensure that the Corporation's records, including accounting records, do not contain any false or intentionally misleading entries. We do not permit intentional misclassification of transactions as to accounts, departments or accounting periods. All transactions must be supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period.
All Corporation books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect Corporation transactions and must conform to both applicable legal requirements and the system of internal controls of the Corporation. Unrecorded or "off the books" funds or assets should not be maintained.
Business records and communications may become public through legal or regulatory investigations or the media. We should avoid exaggeration, derogatory remarks, legal conclusions or inappropriate characterizations of people and companies. This applies to communications of all kinds, including email and informal notes or interoffice memos. Records should be retained and destroyed in accordance with the Corporation's records storage and retention policy.
The Corporation will make full, fair, accurate, timely and understandable disclosure in periodic reports and documents required to be filed by the Corporation under applicable securities laws and in other public communications made by the Corporation, in accordance with the Corporation's Corporate Disclosure Policy.
12. Use of E-Mail and Internet Services
E-Mail systems and Internet services are provided to help us do work. Incidental and occasional personal use is permitted, but never for personal gain or any improper purpose. You may not access, send or download any information that could be insulting or offensive to another person, such as sexually explicit material or jokes, unwelcome propositions, ethnic or racial slurs, or any other message that could be viewed as harassment. Also remember that "flooding" our systems with junk mail and trivia hampers the ability of our systems to handle legitimate Corporation business and is prohibited.
Employees should not download copyrighted materials, should not copy material that is not licensed to the Corporation and should follow the terms of a license when using material that is licensed to the Corporation. No changes should be made to licensed materials without the prior consent of the Corporation. In addition, employees are discouraged from downloading games and screensavers, as these are common sources of viruses.
Your messages (including voice mail) and computer information are considered the Corporation's property and you should not have any expectation of privacy. Unless prohibited by law, the Corporation reserves the right to access and disclose this information as necessary for business purposes. Use good judgment, and do not access, send messages or store any information that you would not want to be seen or heard by other individuals.
13. Political Activities and Contributions
We respect and support the right of our employees to participate in political activities. However, these activities should not be conducted on Corporation time or involve the use of any Corporation resources such as telephones, computers or supplies. Employees will not be reimbursed for personal political contributions.
We may occasionally express our views on local and national issues that affect our operations. In such cases, Corporation funds and resources may be used, but only when permitted by law and by our strict guidelines. The Corporation may also make limited contributions to political parties or candidates in jurisdictions where it is legal and customary to do so. No employee may make or commit to political contributions on behalf of the Corporation without the approval of senior management.
14. Gifts and Entertainment
Business gifts and entertainment are customary courtesies designed to build goodwill among business partners. These courtesies include such things as meals and beverages, tickets to sporting or cultural events, discounts not available to the general public, travel, accommodation and other merchandise or services. In some cultures they play an important role in business relationships. However, a problem may arise when such courtesies compromise - or appear to compromise - our ability to make objective and fair business decisions.
Offering or receiving any gift, gratuity or entertainment that might be perceived to unfairly influence a business relationship should be avoided. These guidelines apply at all times, and do not change during traditional gift-giving seasons. No gift or entertainment should ever be offered, given, provided or accepted by any director or employee of the Corporation, or by any family member of a director or employee, unless it (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff and (5) does not violate any applicable laws or regulations. Please discuss with your supervisor any gifts or proposed gifts if you are uncertain whether they are appropriate.
Entertaining and providing hospital to a public official can present unique challenges and can amount to bribery if the amount involved is excessive or gratuitous or done with for the purpose of gaining business or an advantage over a competitor. Any payment or inducement that is made to influence or that may naturally tend to influence official acts is prohibited even if otherwise valid under the foregoing rules. All hospitality and gifts given received, or declined that are from a public official must be notified to the General Counsel.
For further details on gifts and entertainment, please see the Corporation's Anti-Corruption Policy.
Entertainment and hospitality of a Public Official can present unique challenges and can amount to bribery if the amount involved is excessive or gratuitous or done with for the purpose of gaining business or an advantage over a competitor. ("Public Official" includes anyone acting in an official capacity for or on behalf of a national, state, regional or local government, including collective groups or partnerships of governments (e.g., the European Union); any agency, department, or instrumentality of a national, state, regional or local government, including collective bargaining groups or partnerships of governments; a government-owned or government controlled enterprise, such as a state-owned factory or utility; a public international organization, such as the World Bank or International Monetary Fund; and any political party, party official, or candidate for a political party or political party office.) Employees are strictly prohibited from offering, paying, promising or authorizing any improper payment to a Public Official, directly or indirectly through or to a third party, on the Corporation's behalf. An "Improper Payment" includes anything of value that is provided to: (i) cause the person to act or fail to act in violation of a legal duty; (ii) cause the person to abuse or misuse their position; or (iii) secure an improper advantage, contract, or concession.
It may be permissible to offer nominal entertainment and hospitality to a Public Official provided that such payments: (1) are permissible under all applicable law; and (2) the payment is for expenses that relate directly to the promotion, demonstration or explanation of the Corporation's products or services, or to the execution or performance of a government contract. Likewise, it may be permissible to offer small gifts to a Public Official provided that it: (1) is lawful under written laws or regulations within the Public Official's jurisdiction; (2) is offered under circumstances in which gift-giving is widely accepted; (3) the total value of the gift is reasonable; and (4) the public disclosure of the gift would not draw unwelcome attention to or embarrass the Corporation. Any payment or inducement that is made to influence or that may naturally tend to influence official acts is prohibited even if otherwise valid under the foregoing rules. All hospitality and gifts given received, or declined that are from a Public Official must be notified to a supervisor.
15. Waivers of this Code of Business Conduct and Ethics
Any waiver of this Code with respect to a director or officer of the Corporation may be made only by the Board of Directors or the Audit Committee. Any such waiver will be promptly disclosed to the extent required by applicable laws or stock exchange regulations.
16. Reporting of any Illegal or Unethical Behaviour, Violations of this Code and Questionable Accounting or Auditing Matters
We have a strong commitment to conduct our business in a lawful and ethical manner. Employees are encouraged to talk to supervisors, managers or the Corporation's general counsel when in doubt about the best course of action in a particular situation and are required to promptly report violations of laws, rules, regulations or this Code to your manager, the Corporation's general counsel or the Audit Committee Chairman. The Audit Committee Chairman may be reached at 1-604-790-9718.
In addition, complaints and concerns regarding questionable accounting, internal control or auditing matters should be submitted to the Audit Committee Chairman. Such submissions may be made confidentially and anonymously if desired.
We prohibit retaliatory action against any employee who, in good faith, reports a possible violation. It is unacceptable to file a report knowing it to be false.
17. Compliance Procedures
This Code cannot, and is not intended to, address all of the situations you may encounter. There will be occasions where you are confronted by circumstances not covered by policy or procedure and where you must make a judgment as to the appropriate course of action. Since we cannot anticipate every situation that may arise, it is important for the Corporation to set forth a general way to approach a new question or problem. These are the steps to keep in mind:
• Make sure you have all of the facts. In order to reach the right solutions, you must be as fully informed as possible.
• Ask yourself what you are specifically being asked to do. This analysis will enable you to focus on the specific issues that are raised and the available alternatives. Use your judgment and common sense. If something seems unethical or improper, it probably is.
• Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and to discuss the problem.
• Discuss the problem with your supervisor. This approach is best in most if not all situations. Your supervisor may be more knowledgeable about the issue and will appreciate being brought into the process. It is a supervisor's responsibility to help you to solve problems.
• Seek help from Corporation resources. In the rare instance in which it may not be appropriate to discuss an issue with your supervisor, or in which you feel uncomfortable approaching your supervisor, discuss the problem with the Corporation's general legal counsel. If you prefer to write, address your concerns to the Corporation's general legal counsel or the Chief Executive Officer.
• You may report ethical violations in confidence and without fear of retaliation. If your situation requires, and you request, that your identity be kept secret, the Corporation will protect your anonymity. The Corporation does not permit retaliation of any kind against employees for good faith reports of ethical violations. An officer or employee who retaliates against someone who has reported an ethical violation in good faith is subject to discipline up to and including termination of employment. These procedures are intended to encourage and enable employees and others to raise serious concerns within the Corporation rather than seeking resolution outside the Corporation.
• Ask first. If you are unsure of the proper course of action, seek guidance before you act. If you do not feel comfortable discussing the matter with your supervisor, please call the Corporation's general legal counsel. If you require an interpreter, every reasonable effort will be made to provide you with one. We strive to ensure that all questions or concerns are handled fairly, discreetly and thoroughly.
18. Whistleblower Laws
The obligations of confidentiality set forth in this Code and the Code of Ethical Conduct for Financial Managers are subject to applicable whistleblower laws, which protect your right to provide information to governmental and regulatory authorities. You are not required to seek the Corporation's permission or notify the Corporation of any communications made in compliance with applicable whistleblower laws, and the Corporation will not consider such communications to violate this or any other Corporation policy or any agreement between you and the Corporation.
| I, , acknowledge having read and understood this Code of Conduct and agree to comply with it at all times. | |
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