New Pacific Metals Corp 6-K, filed May 17, 2021
New Pacific Metals Corp (NEWP)
About this 6-K
New Pacific Metals Corp filed this 6-K on May 17, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of: May 2021
Commission File No. 001-40381
NEW PACIFIC METALS CORP.
Suite 1750 - 1066 West Hastings Street, Vancouver, BC V6E 3X1 CANADA
Address of Principal Executive Office
Indicate by check mark whether the registrant files or will file annual reports under cover:
Form 20-F [ ] Form 40-F [X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 14, 2021 | NEW PACIFIC METALS CORP. |
|
/s/ Jalen Yuan |
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Jalen Yuan |
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Chief Financial Officer |
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EXHIBIT INDEX
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NEWS RELEASE
Trading Symbol: TSX: NUAG
OTCQX: NUPMF
NEW PACIFIC REPORTS FINANCIAL RESULTS FOR THE THREE AND NINE MONTHS
ENDED MARCH 31, 2021
VANCOUVER, BRITISH COLUMBIA - MAY 14, 2021: New Pacific Metals Corp. ("New Pacific" or the "Company") reports its unaudited condensed consolidated interim financial results for the three and nine months ended March 31, 2021. All figures are expressed in Canadian dollars unless otherwise stated.
QUARTERLY HIGHLIGHTS
- Silver Sand Preliminary Economic Analysis ("PEA") continues to advance with approximately 65% completed as at March 31, 2021;
- Maintained working capital of $59.98 million, sufficient to advance the Silver Sand Project and regional exploration initiatives, including the Silverstrike Project and the Carangas Project;
- Acquired 98% interest in the Carangas Silver Project subsequent to quarter-end, with an initial discovery drill program planned for 2021;
- Approved and implemented Company-wide Environmental Policy and Corporate Social Responsibility Policy; and
- Progressed regional project generation.
Dr. Mark Cruise, CEO of New Pacific, said, "I am pleased with the work our team has accomplished during the quarter as we advanced the Silver Sand project PEA. Simultaneously, our project generation team continues to assess opportunities as we continue to take advantage of our first-mover status in the country. This work led to the acquisition of the Carangas Silver Project in April 2021, where we have identified the potential for near surface bulk tonnage mineralization as well as high-grade mineralization at relatively shallow depths. We look forward to commencing a drill program this year to test our prioritized targets. With the addition of a third project to our portfolio, we are well-positioned to continue to deliver shareholder value."
FINANCIAL RESULTS
Working Capital: As at March 31, 2021, the Company had working capital of $59.98 million.
Net loss attributable to equity holders of the Company for the three months ended March 31, 2021 was $2.15 million or $0.01 per share (three months ended March 31, 2020 - net loss of $1.73 million or $0.01 per share). The Company's financial results were mainly impacted by: (i) operating expenses of $2.04 million compared to $1.53 million in the comparative quarter of 2020; (ii) income from investments of $0.08 million compared to a loss of $1.59 million in the comparative quarter of 2020; and (iii) foreign exchange loss of $0.20 million compared to a gain of $1.39 million in the prior year quarter.
For the nine months ended March 31, 2021, net loss attributable to equity holders of the Company was $5.97 million or $0.04 per share compared to net loss of $2.05 million or $0.01 per share for the nine months ended March 31, 2020.
Operating expenses for the three and nine months ended March 31, 2021 were $2.04 million and $5.69 million, respectively (three and nine months ended March 31, 2020 - $1.53 million and $4.17 million, respectively).
Income (loss) from investments for the three and nine months ended March 31, 2021 was $0.08 million and $0.79 million, respectively (three and nine months ended March 31, 2020 - $(1.59) million and $0.86 million, respectively).
Foreign exchange loss for the three months ended March 31, 2021 was $0.20 million (three months ended March 31, 2020 - gain of $1.39 million). 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 will result in unrealized foreign exchange gain or loss for the relevant reporting periods. During the three months ended March 31, 2021, the US dollar depreciated by 1.2% against the Canadian dollar (from 1.2732 to 1.2575) while in the comparative quarter of 2020 the US dollar appreciated by 9.2% against the Canadian dollar (from 1.2988 to 1.4187).
For the nine months ended March 31, 2021, foreign exchange loss was $1.07 million (nine months ended March 31, 2020 - gain of $1.24 million).
PROJECT OVERVIEW
SILVER SAND PROJECT
Since acquiring the project in 2017, the Company has carried out extensive exploration and Mineral Resource definition drill programs. From 2017 to 2019, the Company completed a total of 97,619 metres of drilling in 386 diamond core drillholes, representing one of the largest greenfield discovery drill programs in South America during this period.
For the three and nine months ended March 31, 2021, total expenditures of $1.12 million and $2.90 million, respectively (three and nine months ended March 31, 2020 - $2.40 million and $10.93 million, respectively) were capitalized under the Silver Sand Project.
SILVERSTRIKE PROJECT
For the three and nine months ended March 31, 2021, total expenditures of $0.54 million and $1.82 million, respectively (three and nine months ended March 31, 2020 - $0.42 million and $0.43 million, respectively) were capitalized under the Silverstrike Project.
CARANGAS PROJECT
Subsequent to March 31, 2021, the Company signed an agreement with a private Bolivian company (the "Vendor") to acquire a 98% contractual interest in the Carangas silver project.
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 Vendor is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km2) 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. The agreement has a term of 30 years and is renewable for an additional 15 years. An initial discovery diamond drill program is planned to commence upon receipt of the required permits from AJAM.
For additional details on the Carangas Project, refer to the Company's news release dated April 12, 2021.
MANAGEMENT DISCUSSION AND ANALYSIS
This news release should be read in conjunction with the Company's Management Discussion and Analysis ("MD&A") and the Unaudited Condensed Consolidated Interim Financial results and notes thereto for the corresponding period, which have been filed with the Canadian Securities Administrators and are available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.newpacificmetals.com.
ABOUT NEW PACIFIC
New Pacific is a Canadian exploration and development company, which owns the Silver Sand Project, the Silverstrike Project and the Carangas Project, all of which are located in Bolivia. The Company is focused on progressing the development of its existing projects, while growing Mineral Resources through the exploration and acquisition of properties in the Americas.
For further information, please contact:
Stacey Pavlova, CFA
VP, Investor Relations and Corporate Communications
New Pacific Metals Corp.
Phone: (604) 633-1368
U.S. & Canada toll-free: 1 (877) 631-0593
E-mail: info@newpacificmetals.com
www.newpacificmetals.com
To receive company news by e-mail, please register using New Pacific's website at www.newpacificmetals.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain of the statements and information in this news release constitute "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. Any statements or information that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategies", "targets", "goals", "forecasts", "objectives", "budgets", "schedules", "potential" or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements or information. Such 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; and estimates of the Company's revenues and capital expenditures.
Forward-looking statements or information are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements or information, including, without limitation, risks relating to: global economic and social impact of COVID-19; fluctuating equity prices, bond prices, 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 under the heading "Risk Factors" in the Company's Annual Information Form for the year ended June 30, 2020 and its other public filings.
This list is not exhaustive 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 news release that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These estimates, assumptions, beliefs, expectations and options 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 Company's ability to obtain and maintain social license at its mineral properties; 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 Mining Production Contract with COMIBOL by the Plurinational Legislative Assembly of Bolivia; 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 news release 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 news release 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 news release.
CAUTIONARY NOTE TO US INVESTORS
The disclosure in this news release and referred to herein was prepared in accordance with NI 43-101 which differs significantly from the requirements of the U.S. Securities and Exchange Commission (the "SEC"). The terms "proven mineral reserve", "probable mineral reserve" and "mineral reserves" used in this news release are in reference to the mining terms defined in the Canadian Institute of Mining, Metallurgy and Petroleum Standards (the "CIM Definition Standards"), which definitions have been adopted by NI 43-101. Accordingly, information contained in this news release providing descriptions of our mineral deposits in accordance with NI 43-101 may not be comparable to similar information made public by other U.S. companies subject to the United States federal securities laws and the rules and regulations thereunder.
Investors are cautioned not to assume that any part or all of mineral resources will ever be converted into reserves. Pursuant to CIM Definition 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. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures.
Canadian standards, including the CIM Definition Standards and NI 43-101, differ significantly from standards in the SEC Industry Guide 7. 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 SEC Industry 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 Definition 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 news release 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 Definition Standards, readers are cautioned that there are differences between the SEC Modernization Rules and the CIM Definitions 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.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2021 and 2020
(Expressed in Canadian Dollars)
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New Pacific Metals Corp. |
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(Expressed in Canadian dollars) |
| Notes | March 31, 2021 | June 30, 2020 | |||||
| ASSETS | |||||||
| Current Assets | |||||||
| Cash and cash equivalents | $ | 60,040,843 | $ | 40,644,346 | |||
| Short-term investments | 4 | 155,194 | 20,633,772 | ||||
| Receivables | 364,180 | 413,594 | |||||
| Deposits and prepayments | 442,407 | 222,817 | |||||
| Assets held for distribution | 3 | - | 11,849,971 | ||||
| 61,002,624 | 73,764,500 | ||||||
| Non-current Assets | |||||||
| Other tax receivable | 5 | 2,750,611 | 2,862,468 | ||||
| Equity investments | 6 | 966,080 | 5,603,591 | ||||
| Plant and equipment | 8 | 1,358,653 | 1,535,923 | ||||
| Mineral property interests | 9 | 93,216,183 | 95,049,576 | ||||
| TOTAL ASSETS | $ | 159,294,151 | $ | 178,816,058 | |||
| LIABILITIES AND EQUITY | |||||||
| Current Liabilities | |||||||
| Accounts payable and accrued liabilities | $ | 941,775 | $ | 1,573,474 | |||
| Payable for mineral property acquisition | - | 263,120 | |||||
| Due to a related party | 10 | 78,111 | 84,742 | ||||
| Liabilities held for distribution | 3 | - | 122,178 | ||||
| 1,019,886 | 2,043,514 | ||||||
| Equity | |||||||
| Share capital | 11 | 194,700,309 | 191,563,628 | ||||
| Share-based payment reserve | 22,231,557 | 22,057,385 | |||||
| Accumulated other comprehensive (loss) income | (367,745 | ) | 6,599,738 | ||||
| Deficit | (58,229,568 | ) | (43,398,714 | ) | |||
| Total equity attributable to the equity holders of the Company | 158,334,553 | 176,822,037 | |||||
| Non-controlling interests | 12 | (60,288 | ) | (49,493 | ) | ||
| Total Equity | 158,274,265 | 176,772,544 | |||||
| TOTAL LIABILITIES AND EQUITY | $ | 159,294,151 | $ | 178,816,058 |
| Approved on behalf of the Board: | |
| (Signed) David Kong | |
| Director | |
| (Signed) Mark Cruise | |
| Director |
See accompanying notes to the unaudited condensed consolidated interim financial statements
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New Pacific Metals Corp. |
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(Expressed in Canadian dollars) |
| Three Months March 31, | Nine Months Ended March 31, | ||||||||||||
| Notes | 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating expense | |||||||||||||
| Project evaluation and corporate development | 387,362 | $ | - | $ | 869,530 | $ | - | ||||||
| Depreciation | 13,982 | 3,412 | 42,547 | 9,126 | |||||||||
| Filing and listing | 93,621 | 30,352 | 353,178 | 238,218 | |||||||||
| Investor relations | 121,320 | 152,995 | 335,146 | 593,568 | |||||||||
| Professional fees | 67,881 | 69,360 | 514,285 | 282,156 | |||||||||
| Salaries and benefits | 663,383 | 396,764 | 1,527,029 | 1,225,321 | |||||||||
| Office and administration | 196,917 | 174,312 | 642,987 | 523,798 | |||||||||
| Share-based compensation | 11(b) | 494,521 | 705,653 | 1,408,927 | 1,294,734 | ||||||||
| 2,038,987 | 1,532,848 | 5,693,629 | 4,166,921 | ||||||||||
| Other income (expense) | |||||||||||||
| Income (loss) from investments | 7 | 84,164 | (1,594,956 | ) | 788,628 | 860,146 | |||||||
| Loss on disposal of plant and equipment | 8 | - | - | (2,479 | ) | - | |||||||
| Foreign exchange (loss) gain | (195,675 | ) | 1,390,100 | (1,074,454 | ) | 1,243,563 | |||||||
| Other expense | - | - | (465 | ) | - | ||||||||
| (111,511 | ) | (204,856 | ) | (288,770 | ) | 2,103,709 | |||||||
| Net loss | $ | (2,150,498 | ) | $ | (1,737,704 | ) | $ | (5,982,399 | ) | $ | (2,063,212 | ) | |
| Attributable to: | |||||||||||||
| Equity holders of the Company | $ | (2,147,396 | ) | $ | (1,733,133 | ) | $ | (5,974,587 | ) | $ | (2,047,019 | ) | |
| Non-controlling interests | 12 | (3,102 | ) | (4,571 | ) | (7,812 | ) | (16,193 | ) | ||||
| Net loss | $ | (2,150,498 | ) | $ | (1,737,704 | ) | $ | (5,982,399 | ) | $ | (2,063,212 | ) | |
| Loss per share attributable to the equity holders of the Company | |||||||||||||
| Basic and diluted loss per share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.01 | ) | |
| Weighted average number of common shares - basic and diluted | 153,620,966 | 147,522,980 | 153,036,665 | 145,399,888 | |||||||||
See accompanying notes to the unaudited condensed consolidated interim financial statements
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New Pacific Metals Corp. |
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(Expressed in Canadian dollars) |
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||
| Notes | 2021 | 2020 | 2021 | 2020 | |||||||||
| Net loss | $ | (2,150,498 | ) | 4(1,737,704 | ) | $ | (5,982,399 | ) | 4(2,063,212 | ) | |||
| Other comprehensive (loss) income, net of taxes: | |||||||||||||
| Items that may subsequently be reclassified to net income or loss: | |||||||||||||
| Currency translation adjustment, net of tax of $nil | (1,163,709 | ) | 7,901,155 | (6,970,466 | ) | 7,080,197 | |||||||
| Other comprehensive (loss) income, net of taxes | $ | (1,163,709 | ) | $ | 7,901,155 | $ | (6,970,466 | ) | 47,080,197 | ||||
| Attributable to: | |||||||||||||
| Equity holders of the Company | $ | (1,153,507 | ) | $ | 7,853,606 | $ | (6,967,483 | ) | $ | 7,047,098 | |||
| Non-controlling interests | 12 | (10,202 | ) | 47,549 | (2,983 | ) | 33,099 | ||||||
| $ | (1,163,709 | ) | $ | 7,901,155 | $ | (6,970,466 | ) | $ | 7,080,197 | ||||
| Other comprehensive (loss) income, net of taxes | $ | (3,314,207 | ) | $ | 6,163,451 | $ | (12,952,865 | ) | $ | 5,016,985 | |||
| Attributable to: | |||||||||||||
| Equity holders of the Company | $ | (3,300,903 | ) | $ | 6,120,473 | $ | (12,942,070 | ) | $ | 5,000,079 | |||
| Non-controlling interests | (13,304 | ) | 42,978 | (10,795 | ) | 16,906 | |||||||
| Total comprehensive (loss) income, net of taxes | $ | (3,314,207 | ) | $ | 6,163,451 | $ | (12,952,865 | ) | $ | 5,016,985 | |||
See accompanying notes to the unaudited condensed consolidated interim financial statements
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New Pacific Metals Corp. |
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(Expressed in Canadian dollars) |
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||
| Notes | 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating activities | |||||||||||||
| Net loss | $ | (2,150,498 | ) | (1,737,704 | ) | (5,982,399 | ) | (2,063,212 | ) | ||||
| Add (deduct) items not affecting cash: | |||||||||||||
| (Income) loss from investments | (84,164 | ) | 1,594,956 | (788,628 | ) | (860,146 | ) | ||||||
| Dividends and interests received | 80,621 | 73,049 | 296,334 | 424,034 | |||||||||
| Depreciation | 13,982 | 3,412 | 42,547 | 9,126 | |||||||||
| Loss on disposal of plant and equipment | - | - | 2,479 | - | |||||||||
| Share-based compensation | 11(b) | 570,097 | 705,653 | 1,529,789 | 1,294,734 | ||||||||
| Unrealized foreign exchange loss (gain) | 195,675 | (1,390,100 | ) | 1,074,454 | (1,243,563 | ) | |||||||
| Changes in non-cash operating working capital | 16 | (167,622 | ) | (6,854 | ) | (1,051,485 | ) | (302,762 | ) | ||||
| Net cash used in operating activities | (1,541,909 | ) | (757,588 | ) | (4,876,909 | ) | (2,741,789 | ) | |||||
| Investing activities | |||||||||||||
| Mineral property interest | |||||||||||||
| Capital expenditures | (1,400,427 | ) | (1,999,153 | ) | (4,276,654 | ) | (10,097,546 | ) | |||||
| Acquisition of mineral concession | - | - | - | (2,436,160 | ) | ||||||||
| Plant and equipment | |||||||||||||
| Additions | (12,883 | ) | (101,261 | ) | (56,061 | ) | (165,637 | ) | |||||
| Proceeds on disposals | - | - | 1,808 | - | |||||||||
| Short-term investments | |||||||||||||
| Proceeds on disposals | 6,000,000 | 6,838,198 | 20,000,000 | 8,816,648 | |||||||||
| Equity investments | |||||||||||||
| Acquisition | 6 | - | (247,000 | ) | - | (5,018,338 | ) | ||||||
| Proceeds on disposals | 6 | - | 110,708 | 5,572,409 | 6,131,622 | ||||||||
| Changes in other tax receivable | (27,043 | ) | (114,625 | ) | (113,052 | ) | (930,782 | ) | |||||
| Net cash provided by (used in) investing activities | 4,559,647 | 4,486,867 | 21,128,450 | (3,700,193 | ) | ||||||||
| Financing activities | |||||||||||||
| Proceeds from issuance of common shares | 302,954 | 517,052 | 1,005,108 | 16,588,486 | |||||||||
| Net cash provided by financing activities | 302,954 | 517,052 | 1,005,108 | 16,588,486 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (565,357 | ) | 1,196,274 | 2,139,848 | 1,066,402 | ||||||||
| Increase in cash and cash equivalents | 2,755,335 | 5,442,605 | 19,396,497 | 11,212,906 | |||||||||
| Cash and cash equivalents, beginning of the period | 57,285,508 | 33,620,262 | 40,644,346 | 27,849,961 | |||||||||
| Cash and cash equivalents, end of the period | $ | 60,040,843 | $ | 39,062,867 | $ | 60,040,843 | $ | 39,062,867 | |||||
| Supplementary cash flow information | 16 | ||||||||||||
See accompanying notes to the unaudited condensed consolidated interim financial statements
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New Pacific Metals Corp. |
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(Expressed in Canadian dollars, except for share figures) |
| Share capital | Total equity | ||||||||||||||||||||||||
| Accumulated | attributable | ||||||||||||||||||||||||
| Number of | Share-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 | 142,432,812 | $ | 150,005,738 | $ | 19,978,062 | $ | 3,264,901 | $ | (51,331,013 | ) | $ | 121,917,688 | $ | (37,685 | ) | $ | 121,880,003 | ||||||||
| Options exercised | 724,539 | 1,153,517 | (398,564 | ) | - | - | 754,953 | - | 754,953 | ||||||||||||||||
| Common shares issued through bought deal financing | 4,312,500 | 15,833,533 | - | - | - | 15,833,533 | - | 15,833,533 | |||||||||||||||||
| Share-based compensation | - | - | 2,479,503 | - | - | 2,479,503 | - | 2,479,503 | |||||||||||||||||
| Common shares issued to acquire mineral property interest | 291,000 | 460,144 | (460,144 | ) | - | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | - | (2,047,019 | ) | (2,047,019 | ) | (16,193 | ) | (2,063,212 | ) | |||||||||||||
| Currency translation adjustment | - | - | - | 7,047,095 | - | 7,047,095 | 33,099 | 7,080,194 | |||||||||||||||||
| Balance, March 31, 2020 | 147,760,851 | $ | 167,452,932 | $ | 21,598,857 | $ | 10,311,996 | $ | (53,378,032 | ) | $ | 145,985,753 | $ | (20,779 | ) | $ | 145,964,974 | ||||||||
| Options exercised | 163,527 | 404,560 | (126,611 | ) | - | - | 277,949 | - | 277,949 | ||||||||||||||||
| Restricted share units vested | 136,400 | 641,080 | (641,080 | ) | - | - | - | - | - | ||||||||||||||||
| Common shares issued through bought deal financing | 4,238,000 | 23,065,056 | - | - | - | 23,065,056 | - | 23,065,056 | |||||||||||||||||
| Share-based compensation | - | - | 1,226,219 | - | - | 1,226,219 | - | 1,226,219 | |||||||||||||||||
| Net income (loss) | - | - | - | - | 9,979,318 | 9,979,318 | (3,219 | ) | 9,976,099 | ||||||||||||||||
| Currency translation adjustment | - | - | - | (3,712,258 | ) | - | (3,712,258 | ) | (25,495 | ) | (3,737,753 | ) | |||||||||||||
| Balance, June 30, 2020 | 152,298,778 | $ | 191,563,628 | $ | 22,057,385 | $ | 6,599,738 | $ | (43,398,714 | ) | $ | 176,822,037 | $ | (49,493 | ) | $ | 176,772,544 | ||||||||
| Options exercised | 11(b) | 999,768 | 1,505,257 | (500,149 | ) | - | - | 1,005,108 | - | 1,005,108 | |||||||||||||||
| Restricted share units vested | 246,900 | 1,171,280 | (1,171,280 | ) | - | - | - | - | - | ||||||||||||||||
| Share-based compensation | 11(b) | - | - | 2,305,745 | - | - | 2,305,745 | - | 2,305,745 | ||||||||||||||||
| Common shares issued to acquire mineral property interest | 11(c) | 291,000 | 460,144 | (460,144 | ) | - | - | - | - | - | |||||||||||||||
| Spin-out distribution | 3 | - | - | - | - | (8,856,267 | ) | (8,856,267 | ) | - | (8,856,267 | ) | |||||||||||||
| Net loss | - | - | - | - | (5,974,587 | ) | (5,974,587 | ) | (7,812 | ) | (5,982,399 | ) | |||||||||||||
| Currency translation adjustment | - | - | - | (6,967,483 | ) | - | (6,967,483 | ) | (2,983 | ) | (6,970,466 | ) | |||||||||||||
| Balance, March 31, 2021 | 153,836,446 | $ | 194,700,309 | $ | 22,231,557 | $ | (367,745 | ) | $ | (58,229,568 | ) | $ | 158,334,553 | $ | (60,288 | ) | $ | 158,274,265 | |||||||
See accompanying notes to the unaudited condensed consolidated interim financial statements
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
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 currently exploring and advancing the development of its mineral properties and has not yet determined if they contain potentially 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 OTCQX Best Market in the United States under the symbol "NUPMF". The head office and the registered and records offices of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance and Basis of Preparation
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting ("IAS 34") of the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended June 30, 2020. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies set out in Note 2 to the audited consolidated financial statements for the year ended June 30, 2020.
These unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
The unaudited condensed consolidated interim financial statements of the Company as at and for the three and nine months ended March 31, 2021 was authorized for issue in accordance with a resolution of the Company's board of directors (the "Board") dated on May 13, 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 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.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
Balances, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
Details of the Company's significant subsidiaries which are consolidated are as follows:
|
|
|
Proportion of ownership interest held |
|||
|
|
|
Country of |
March 31, |
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 |
|
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")
3. WHITEHORSE GOLD CORP. SPIN-OUT TRANSACTION
During Fiscal 2020, the Company performed a strategic review on the Tagish Lake Gold Project ("TLG Project") located in the Yukon Territory, Canada and established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the TLG Project from the Company for a cash consideration of $3,000,000 plus 20,000,000 Whitehorse Gold common shares ("spin-out shares").
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). The spin-out shares were valued at $8,856,267 upon distribution. Assets and liabilities of Whitehorse Gold and TLG Project which were classified as held for distribution as at June 30, 2020 in the amount of $11,849,971 and $122,178, respectively, were disposed upon completion of the spin-out.
4. SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
| March 31, 2021 | June 30, 2020 | |||||
| Guaranteed Investment Certificates | $ | - | $ | 20,003,028 | ||
| Bonds | 155,194 | 630,744 | ||||
| $ | 155,194 | $ | 20,633,772 |
5. OTHER TAX RECEIVABLE
Other tax receivable is comprised of value-added tax ("VAT") imposed by the Bolivian government. The Company had VAT inputs through its exploration costs and general expenses incurred in Bolivia. These VAT inputs are deductible against potential future VAT outputs that will be generated through mining production sales.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
6. EQUITY INVESTMENTS
Equity investments represent equity interests of other publicly traded or privately-held companies that the Company has acquired on the open market or through private placements. These equity interests consist of common shares, preferred shares, and warrants. Equity investments are classified as fair value through profit or loss ("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.
The equity investments are summarized as follows:
| March 31, 2021 | June 30, 2020 | |||||
| Common or preferred shares | ||||||
| Public companies | $ | 745,100 | $ | 4,795,960 | ||
| Warrants | ||||||
| Public companies | 220,980 | 807,631 | ||||
| $ | 966,080 | $ | 5,603,591 |
The fair value of the warrants was estimated using the Black Scholes options pricing model with the following assumptions:
| March 31, 2021 | June 30, 2020 | |||||
| Risk free interest rate | 0.99% | 0.36% | ||||
| Expected volatility | 117% | 122% | ||||
| Expected life of warrants in years | 0.44 | 1.20 |
The continuity of equity investments is summarized as follows:
| Accumulated mark-to- | ||||||
| market gain included | ||||||
| Fair value | in net income | |||||
| Balance, July 1, 2019 | $ | 5,110,893 | $ | 3,035,483 | ||
| Acquisition | 5,018,338 | - | ||||
| Proceeds on disposal | (6,131,622 | ) | - | |||
| Change in fair value | 1,605,982 | 1,605,982 | ||||
| Balance, June 30, 2020 | $ | 5,603,591 | $ | 4,641,465 | ||
| Proceeds on disposal | (5,572,409 | ) | ||||
| Change in fair value | 934,898 | 934,898 | ||||
| Balance, March 31, 2021 | $ | 966,080 | $ | 5,576,363 |
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
7. INCOME (LOSS) FROM INVESTMENTS
Income (loss) from investments consist of:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Fair value change on equity investments | $ | 36,753 | $ | (1,424,696 | ) | $ | 934,898 | $ | 901,109 | |||
| Fair value change on bonds | (2,161 | ) | (243,309 | ) | (440,779 | ) | (131,789 | ) | ||||
| Dividend income | - | 68,255 | 141,429 | 68,255 | ||||||||
| Interest income | 49,572 | 4,794 | 153,080 | 22,571 | ||||||||
| Income (loss) from investments | $ | 84,164 | $ | (1,594,956 | ) | $ | 788,628 | $ | 860,146 | |||
8. PLANT AND EQUIPMENT
| Office | ||||||||||||||||||
| Land and | Motor | equipment and | Computer | |||||||||||||||
| Cost | building | Machinery | vehicles | furniture | software | Total | ||||||||||||
| Balance, July 1, 2019 | $ | 1,715,235 | $ | 1,381,268 | $ | 350,934 | $ | 229,366 | $ | 126,257 | $ | 3,803,060 | ||||||
| Additions | - | 52,734 | 40,296 | 77,566 | 137,696 | 308,292 | ||||||||||||
| Reclassified to assets held for distribution | - | - | - | - | (13,883 | ) | (13,883 | ) | ||||||||||
| Foreign currency translation impact | 34,083 | 9,253 | 11,566 | 4,296 | 4 | 59,202 | ||||||||||||
| Balance, June 30, 2020 | $ | 1,749,318 | $ | 1,443,255 | $ | 402,796 | $ | 311,228 | $ | 250,074 | $ | 4,156,671 | ||||||
| Additions | - | 2,903 | - | 53,158 | - | 56,061 | ||||||||||||
| Disposals | - | - | - | (38,646 | ) | - | (38,646 | ) | ||||||||||
| Foreign currency translation impact | (66,339 | ) | (20,584 | ) | (24,203 | ) | (10,103 | ) | (2 | ) | (121,231 | ) | ||||||
| Balance, March 31, 2021 | $ | 1,682,979 | $ | 1,425,574 | $ | 378,593 | $ | 315,637 | $ | 250,072 | $ | 4,052,855 | ||||||
| Accumulated depreciation and amortization | ||||||||||||||||||
| Balance, July 1, 2019 | $ | (890,754 | ) | $ | (1,149,255 | ) | $ | (141,238 | ) | $ | (184,800 | ) | $ | (126,210 | ) | $ | (2,492,257 | ) |
| Depreciation and amortization | - | $ | (30,607 | ) | $ | (54,118 | ) | $ | (35,093 | ) | $ | (1,941 | ) | $ | (121,759 | ) | ||
| Reclassified to assets held for distribution | - | $ | - | $ | - | $ | - | $ | 46 | $ | 46 | |||||||
| Foreign currency translation impact | - | $ | (1,693 | ) | $ | (3,360 | ) | $ | (1,722 | ) | $ | (3 | ) | $ | (6,778 | ) | ||
| Balance, June 30, 2020 | $ | (890,754 | ) | $ | (1,181,555 | ) | $ | (198,716 | ) | $ | (221,615 | ) | $ | (128,108 | ) | $ | (2,620,748 | ) |
| Depreciation and amortization | - | (24,872 | ) | (44,733 | ) | (35,425 | ) | (22,859 | ) | (127,889 | ) | |||||||
| Disposals | - | - | - | 34,359 | - | 34,359 | ||||||||||||
| Foreign currency translation impact | - | 5,569 | 10,558 | 3,948 | 1 | 20,076 | ||||||||||||
| Balance, March 31, 2021 | $ | (890,754 | ) | $ | (1,200,858 | ) | $ | (232,891 | ) | $ | (218,733 | ) | $ | (150,966 | ) | $ | (2,694,202 | ) |
| Carrying amount | ||||||||||||||||||
| Balance, June 30, 2020 | $ | 858,564 | $ | 261,700 | $ | 204,080 | $ | 89,613 | $ | 121,966 | $ | 1,535,923 | ||||||
| Balance, March 31, 2021 | $ | 792,225 | $ | 224,716 | $ | 145,702 | $ | 96,904 | $ | 99,106 | $ | 1,358,653 |
During the three and nine months ended March 31, 2021, certain plant and equipment were disposed for proceeds of $nil and $1,808, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively) and loss of $nil and $2,479, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively).
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
9. MINERAL PROPERTY INTERESTS
(a) Silver Sand Project
On July 20, 2017, the Company acquired the Silver Sand Project. The Silver Sand 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 Silver Sand Project covers an area of approximately 5.42 km2 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.
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 three and nine months ended March 31, 2021, total expenditures of $1,120,001 and $2,901,939, respectively (three and nine months ended March 31, 2020 - $2,395,286 and $10,932,321, 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 Autorización Transitoria Especial ("ATE") located to the north of the Silver Sand Project by cash payments of $1,315,600 (US$1,000,000) and issuance of 832,000 common shares to the vendors (see note 11(c)). During Fiscal 2019 and Fiscal 2020, cash payments of $1,052,480 (US$800,000) were paid and 541,000 common shares were issued to the vendors. During the nine months ended March 31, 2021, the final payment of $263,120 (US$200,000) cash and 291,000 common shares were paid and issued to the vendors.
(b) Silverstrike Project
In December 2019, the Company acquired a 98% interest in the Silverstrike Project from an arm's length private Bolivian corporation by making a one-time cash payment of $1,782,270 (US$1,350,000).
The Silverstrike Project covers an area of approximately 13 km2 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 three and nine months ended March 31, 2021, total expenditures of $539,911 and $1,821,588, respectively (three and nine months ended March 31, 2020 - $421,925 and $427,127, respectively) were capitalized under the project.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(c) Carangas Project
Subsequent to March 31, 2021, the Company signed an agreement with a private Bolivian company (the "Vendor") to acquire a 98% contractual interest in the Carangas silver project.
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 Vendor is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km2) 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. The agreement has a term of 30 years and is renewable for an additional 15 years. An initial discovery diamond drill program is planned to commence upon receipt of the required permits from AJAM.
(d) Tagish Lake Gold Project
The TLG Project, covering an area of approximately 170 km2, 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. 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 three and nine months ended March 31, 2021, total expenditures of $nil and $400,838, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively) were capitalized under the TLG Project.
The project's carrying value of $12,220,838 (including $11,820,000 classified as part of the assets held for distribution balance as at June 30, 2020) was disposed upon the completion of the Whitehorse Gold spin-out transaction.
(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 $3.8 million (RMB ¥20 million). As of March 31, 2021, the process was under review and subject to approval by the Qinghai Government.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
The continuity schedule of mineral property acquisition costs and deferred exploration and development costs are summarized as follows:
| Cost | Silver Sand | Silverstrike | Tagish Lake | RZY Project | Total | ||||||||||
| Balance, July 1, 2019 | $ | 73,281,418 | $ | - | $ | - | $ | 3,534,664 | $ | 76,816,082 | |||||
| Capitalized exploration expenditures | |||||||||||||||
| Reporting and assessment | 601,466 | 976 | - | - | 602,442 | ||||||||||
| Drilling and assaying | 6,521,210 | 2,237 | - | - | 6,523,447 | ||||||||||
| Project management and support | 4,546,717 | 586,052 | - | - | 5,132,769 | ||||||||||
| Camp service | 661,514 | 50,837 | - | - | 712,351 | ||||||||||
| Camp construction | 32,406 | - | - | - | 32,406 | ||||||||||
| Permitting | 51,358 | - | 105,056 | - | 156,414 | ||||||||||
| Acquisition of Silverstrike Project | - | 1,782,270 | - | - | 1,782,270 | ||||||||||
| Acquisition of mineral concessions | 290,220 | - | - | - | 290,220 | ||||||||||
| Other | 26,854 | - | - | - | 26,854 | ||||||||||
| Impairment recovery | - | - | 11,714,944 | - | 11,714,944 | ||||||||||
| Reclassified to assets held for distribution | - | - | (11,820,000 | ) | - | (11,820,000 | ) | ||||||||
| Foreign currency impact | 2,979,031 | 59,546 | - | 40,800 | 3,079,377 | ||||||||||
| Balance, June 30, 2020 | $ | 88,992,194 | $ | 2,481,918 | $ | - | $ | 3,575,464 | $ | 95,049,576 | |||||
| Capitalized exploration expenditures | |||||||||||||||
| Reporting and assessment | 450,181 | 5,229 | 60,959 | - | 516,369 | ||||||||||
| Drilling and assaying | 59,595 | 219,917 | - | - | 279,512 | ||||||||||
| Project management and support | 2,110,946 | 1,449,526 | - | - | 3,560,472 | ||||||||||
| Camp service | 204,419 | 132,736 | - | - | 337,155 | ||||||||||
| Camp construction | 59,669 | - | 275,999 | - | 335,668 | ||||||||||
| Permitting | 16,729 | 14,180 | 63,880 | - | 94,789 | ||||||||||
| Disposal upon spin-out distribution | - | - | (400,838 | ) | (400,838 | ) | |||||||||
| Foreign currency impact | (6,371,060 | ) | (168,770 | ) | - | (16,690 | ) | (6,556,520 | ) | ||||||
| Balance, March 31, 2021 | $ | 85,522,673 | $ | 4,134,736 | $ | - | $ | 3,558,774 | $ | 93,216,183 |
10. RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon with 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 condensed consolidated interim financial statements are as follows:
| Due to a related party | March 31, 2021 | June 30, 2020 | ||||
| Silvercorp Metals Inc. | $ | 78,111 | $ | 84,742 |
(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. Expenses in services rendered and incurred by Silvercorp on behalf of the Company for the three and nine months ended March 31, 2021 were $203,356 and $599,771, respectively (three and nine months ended March 31, 2020 - $151,288 and $575,635, respectively).
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel for the three and nine months ended March 31, 2021 and 2020 are as follows:
| Three months ended March 31, | Nine months ended March 31, | ||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||
| Director's cash compensation | $ | 262,500 | $ | 17,500 | $ | 327,500 | $ | 57,500 | |||||
| Director's share-based compensation | 749,800 | - | 749,800 | 599,720 | |||||||||
| Key management's cash compensation | 483,845 | 624,027 | 942,206 | 985,655 | |||||||||
| Key management's share-based compensation | 1,758,820 | - | 1,818,220 | 2,961,000 | |||||||||
| $ | 3,254,965 | $ | 641,527 | $ | 3,837,726 | $ | 4,603,875 | ||||||
11. 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.
(b) Share-based compensation
The Company has a share-based compensation plan (the "Plan") which consists of 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 three and nine months ended March 31, 2021, a total of $494,521 and $1,408,927, respectively (three and nine months ended March 31, 2020 - $705,653 and $1,294,734, respectively) were recorded as share-based compensation expense.
For the three and nine months ended March 31, 2021, a total of $75,576 and $120,862, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively) were included in the project evaluation and corporate development expense.
For the three and nine months ended March 31, 2021, a total of $245,864 and $775,956, respectively (three and nine months ended March 31, 2020 - $791,318 and $1,184,768, respectively) were capitalized under mineral property interests.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(i) Stock Options
The continuity schedule of stock options, as at December 31, 2020, is as follows:
| Weighted average | ||||||
| Number of options | exercise price | |||||
| 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 | (999,768 | ) | 1.07 | |||
| Options cancelled | (150,000 | ) | 2.15 | |||
| Balance, March 31, 2021 | 3,512,999 | 1.49 |
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.
The following table summarizes information about stock options outstanding as at March 31, 2021:
| Number of options | Weighted | Number of options | Weighted | |||||||||||
| Exercise | outstanding as at | average remaining | exercisable as at | average | ||||||||||
| prices | 2021-03-31 | contractual life (years) | 2021-03-31 | exercise price | ||||||||||
| $ | 0.55 | 695,000 | 0.59 | 695,000 | $ | 0.55 | ||||||||
| 1.15 | 1,105,000 | 1.33 | 1,105,000 | $ | 1.15 | |||||||||
| 1.57 | 200,000 | 1.69 | 200,000 | $ | 1.57 | |||||||||
| 2.15 | 1,512,999 | 2.90 | 911,336 | $ | 2.15 | |||||||||
| 0.55 - 2.15 | 3,512,999 | 1.88 | 2,911,336 | $ | 1.35 |
Subsequent to March 31, 2021, a total of 32,000 stock options with an exercise price of $1.15 were exercised for proceeds of $36,800.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(ii) RSUs
The continuity schedule of RSUs, as at March 31, 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 | ) | - | |||
| Distributed | (136,400 | ) | - | |||
| Balance, June 30, 2020 | 925,200 | $ | 4.70 | |||
| Granted | 360,500 | 6.46 | ||||
| Cancelled | (26,250 | ) | 4.80 | |||
| Distributed | (246,900 | ) | 4.74 | |||
| Balance, March 31, 2021 | 1,012,550 | $ | 5.31 |
(c) Common Shares Issued for Mineral Property Interest
As partial consideration for the acquisition of ATEs located north to 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 $1,315,600 (US$1,000,000) in the year ended June 30, 2019. During the nine months ended March 31, 2021, 291,000 common shares valued at $460,144 (nine months ended March 31, 2020 - 291,000 common shares valued at $460,144) were issued and recorded under share capital.
12. NON-CONTROLLING INTEREST
| Qinghai Found | |||
| Balance, July 1, 2019 | $ | (37,685 | ) |
| Share of net loss | (19,412 | ) | |
| Share of other comprehensive income | 7,604 | ||
| Balance, June 30, 2020 | $ | (49,493 | ) |
| Share of net loss | (7,812 | ) | |
| Share of other comprehensive loss | (2,983 | ) | |
| Balance, March 31, 2021 | $ | (60,288 | ) |
As at March 31, 2021 and June 30, 2020, the non-controlling interest in the Company's subsidiary Qinghai Found was 18%.
13. 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.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(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 March 31, 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 March 31, 2021 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash and cash equivalents | $ | 60,040,843 | $ | - | $ | - | $ | 60,040,843 | ||||
| Short-term investments - bonds | 155,194 | - | - | 155,194 | ||||||||
| Common or preferred shares | 430,653 | - | - | 430,653 | ||||||||
| Warrants | - | 535,427 | - | 535,427 | ||||||||
| Fair value as at June 30, 2020 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash and cash equivalents | $ | 40,644,346 | $ | - | $ | - | $ | 40,644,346 | ||||
| Short-term investments - bonds | 630,744 | - | - | 630,744 | ||||||||
| Common or preferred shares | 4,795,960 | - | - | 4,795,960 | ||||||||
| Warrants | - | 807,631 | - | 807,631 | ||||||||
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of March 31, 2021 and June 30, 2020, respectively.
There were no transfers into or out of Level 3 during the three and nine months ended March 31, 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 March 31, 2021, the Company had a working capital position of $59,982,738 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia, but not limited to, the next 12 months.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
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:
| March 31, 2021 | June 30, 2020 | ||||||||
| Due within a year | Total | Total | |||||||
| Trade and other payables | $ | 941,775 | $ | 941,775 | $ | 1,573,474 | |||
| Due to a related party | 78,111 | 78,111 | 84,742 | ||||||
| Payable for mineral property acquisition | - | - | 263,120 | ||||||
| $ | 1,019,886 | $ | 1,019,886 | $ | 1,921,336 | ||||
(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 Company's functional currency is the Canadian dollar. The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk is summarized as follows:
| The amounts are expressed in CAD equivalents | March 31, 2021 | June 30, 2020 | ||||
| United States dollars | $ | 14,992,712 | $ | 15,206,715 | ||
| Bolivianos | 628,713 | 404,952 | ||||
| Chinese RMB | 274,669 | 218,216 | ||||
| Financial assets in foreign currency | $ | 15,896,094 | $ | 15,829,883 | ||
| United States dollars | $ | 291,115 | $ | 589,986 | ||
| Chinese RMB | 233,005 | 137,725 | ||||
| Financial liabilities in foreign currency | $ | 524,120 | $ | 727,711 |
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the US dollar against the CAD would have increased (decreased) net income by approximately $147,000.
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the CAD would have increased (decreased) net income by approximately $6,000.
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Chinese RMB against the CAD 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's cash and cash equivalents primarily include highly liquid investments that earn interest at market rates that are fixed to maturity. The Company also holds a portion of cash and cash equivalents 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 March 31, 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.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(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 and cash equivalents, 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 equivalents that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as majority of its cash and cash equivalents 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 March 31, 2021, the Company had a receivables balance of $364,180 (June 30, 2020 - $413,594).
(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 March 31, 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 $97,000.
14. 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 cash equivalents 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.
15. SEGMENTED INFORMATION
The Company operates in four reportable operating segments, one being the corporate segment; the others being the exploration and development segments focused on safeguarding the value of its mineral properties in relevant geographical jurisdictions. 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.
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(a) Segment information for assets and liabilities are as follows:
| March 31, 2021 | ||||||||||||||||||
| Corporate | Exploration and Development | Total | ||||||||||||||||
| Canada and BVI | Bolivia | Canada | China | |||||||||||||||
| Cash and cash equivalents | $ | 59,566,482 | $ | 394,895 | $ | - | $ | 79,466 | $ | 60,040,843 | ||||||||
| Short-term investments | 155,194 | - | - | - | 155,194 | |||||||||||||
| Equity investments | 966,080 | - | - | - | 966,080 | |||||||||||||
| Plant and equipment | 156,488 | 1,183,826 | - | 18,339 | 1,358,653 | |||||||||||||
| Mineral property interests | - | 89,657,409 | - | 3,558,774 | 93,216,183 | |||||||||||||
| Other assets | 350,824 | 3,002,818 | - | 203,556 | 3,557,198 | |||||||||||||
| Total Assets | $ | 61,195,068 | $ | 94,238,948 | $ | - | $ | 3,860,135 | $ | 159,294,151 | ||||||||
| Total Liabilities | $ | (495,765 | ) | $ | (291,116 | ) | $ | - | $ | (233,005 | ) | $ | (1,019,886 | ) | ||||
| June 30, 2020 | ||||||||||||||||||
| Corporate | Exploration and Development | Total | ||||||||||||||||
| Canada and BVI | Bolivia | Canada | China | |||||||||||||||
| Cash and cash equivalents | $ | 40,007,801 | $ | 180,406 | $ | 419,860 | $ | 36,279 | $ | 40,644,346 | ||||||||
| Short-term investments | 20,633,772 | - | - | - | 20,633,772 | |||||||||||||
| Equity investments | 5,603,591 | - | - | - | 5,603,591 | |||||||||||||
| Plant and equipment | 187,979 | 1,325,228 | - | 22,716 | 1,535,923 | |||||||||||||
| Mineral property interests | - | 91,474,112 | - | 3,575,464 | 95,049,576 | |||||||||||||
| Assets held for distribution | - | - | 11,849,971 | - | 11,849,971 | |||||||||||||
| Other assets | 161,893 | 3,146,646 | - | 190,340 | 3,498,879 | |||||||||||||
| Total Assets | $ | 66,595,036 | $ | 96,126,392 | $ | 12,269,831 | $ | 3,824,799 | $ | 178,816,058 | ||||||||
| Total Liabilities | $ | (1,193,625 | ) | $ | (589,987 | ) | $ | (122,178 | ) | $ | (137,724 | ) | $ | (2,043,514 | ) | |||
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
(b) Segment information for operating results are as follows:
| Three months ended March 31, 2021 | ||||||||||||||||||
| Exploration and Development | Total | |||||||||||||||||
| Canada and BVI | Bolivia | Canada | China | |||||||||||||||
| Project evaluation and corporate development | $ | 230,328 | $ | 157,034 | $ | - | $ | - | $ | 387,362 | ||||||||
| Salaries and benefits | 651,878 | - | - | 11,505 | 663,383 | |||||||||||||
| Share-based compensation | 494,521 | - | - | - | 494,521 | |||||||||||||
| Other operating expenses | 461,207 | 26,725 | - | 5,789 | 493,721 | |||||||||||||
| Total operating expense | 1,837,934 | 183,759 | - | 17,294 | 2,038,987 | |||||||||||||
| Income from investments | 84,102 | - | - | 62 | 84,164 | |||||||||||||
| Foreign exchange loss | (195,675 | ) | - | - | - | (195,675 | ) | |||||||||||
| Net loss | $ | (1,949,507 | ) | $ | (183,759 | ) | $ | - | $ | (17,232 | ) | $ | (2,150,498 | ) | ||||
| Attributed to: | ||||||||||||||||||
| Equity holders of the Company | $ | (1,949,507 | ) | $ | (183,759 | ) | $ | - | $ | (14,130 | ) | $ | (2,147,396 | ) | ||||
| Non-controlling interests | - | - | - | (3,102 | ) | (3,102 | ) | |||||||||||
| Net loss | $ | (1,949,507 | ) | $ | (183,759 | ) | $ | - | $ | (17,232 | ) | $ | (2,150,498 | ) | ||||
| Three months ended March 31, 2020 | ||||||||||||||||||
| Corporate | Exploration and Development | Total | ||||||||||||||||
| Canada and BVI | Bolivia | Canada | China | |||||||||||||||
| Salaries and benefits | $ | 365,257 | $ | - | $ | 14,676 | $ | 16,831 | $ | 396,764 | ||||||||
| Share-based compensation | 705,653 | - | - | - | 705,653 | |||||||||||||
| Other operating expenses | 406,596 | - | 15,226 | 8,609 | 430,431 | |||||||||||||
| Total operating expense | 1,477,506 | - | 29,902 | 25,440 | 1,532,848 | |||||||||||||
| (Loss) income from investments | (1,595,002 | ) | - | - | 46 | (1,594,956 | ) | |||||||||||
| Foreign exchange gain | 1,390,043 | - | 56 | 1 | 1,390,100 | |||||||||||||
| Other income (expense) | 15,000 | - | (15,000 | ) | - | - | ||||||||||||
| Net loss | $ | (1,667,465 | ) | $ | - | $ | (44,846 | ) | $ | (25,393 | ) | $ | (1,737,704 | ) | ||||
| Attributed to: | ||||||||||||||||||
| Equity holders of the Company | $ | (1,667,465 | ) | $ | - | $ | (44,846 | ) | $ | (20,822 | ) | $ | (1,733,133 | ) | ||||
| Non-controlling interests | - | - | - | (4,571 | ) | (4,571 | ) | |||||||||||
| Net loss | $ | (1,667,465 | ) | $ | - | $ | (44,846 | ) | $ | (25,393 | ) | $ | (1,737,704 | ) | ||||
|
New Pacific Metals Corp. |
|
(Expressed in Canadian dollars, except for share figures) |
| Nine months ended March 31, 2021 | |||||||||||||||||
| Corporate | Exploration and Development | Total | |||||||||||||||
| Canada and BVI | Bolivia | Canada | China | ||||||||||||||
| Project evaluation and corporate development | $ | 294,598 | $ | 574,932 | $ | - | $ | - | $ | 869,530 | |||||||
| Salaries and benefits | 1,578,420 | - | (84,600 | ) | 33,209 | 1,527,029 | |||||||||||
| Share-based compensation | 1,408,927 | - | - | - | 1,408,927 | ||||||||||||
| Other operating expenses | 2,172,498 | 27,763 | (319,461 | ) | 7,343 | 1,888,143 | |||||||||||
| Total operating expense | 5,454,443 | 602,695 | (404,061 | ) | 40,552 | 5,693,629 | |||||||||||
| Income from investments | 788,503 | - | - | 125 | 788,628 | ||||||||||||
| Loss on disposal of plant and equipment | - | - | - | (2,479 | ) | (2,479 | ) | ||||||||||
| Foreign exchange loss | (1,074,063 | ) | - | (391 | ) | - | (1,074,454 | ) | |||||||||
| Other expense | - | - | - | (465 | ) | (465 | ) | ||||||||||
| Net loss | $ | (5,740,003 | ) | $ | (602,695 | ) | $ | 403,670 | $ | (43,371 | ) | $ | (5,982,399 | ) | |||
| Attributed to: | |||||||||||||||||
| Equity holders of the Company | $ | (5,740,003 | ) | $ | (602,695 | ) | $ | 403,670 | $ | (35,559 | ) | $ | (5,974,587 | ) | |||
| Non-controlling interests | - | - | - | (7,812 | ) | (7,812 | ) | ||||||||||
| Net loss | $ | (5,740,003 | ) | $ | (602,695 | ) | $ | 403,670 | $ | (43,371 | ) | $ | (5,982,399 | ) | |||
| Nine months ended March 31, 2020 | |||||||||||||||||
| Corporate | Exploration and Development | Total | |||||||||||||||
| Canada | Bolivia | Canada | China | ||||||||||||||
| Salaries and benefits | $ | 1,160,595 | $ | - | $ | 14,676 | $ | 50,050 | $ | 1,225,321 | |||||||
| Share-based compensation | 1,294,734 | - | - | - | 1,294,734 | ||||||||||||
| Other operating expenses | 1,479,191 | - | 127,456 | 40,219 | 1,646,866 | ||||||||||||
| Total operating expense | 3,934,520 | - | 142,132 | 90,269 | 4,166,921 | ||||||||||||
| Income from investments | 859,968 | - | - | 178 | 860,146 | ||||||||||||
| Foreign exchange gain | 1,243,374 | - | 56 | 133 | 1,243,563 | ||||||||||||
| Other income (expense) | 45,000 | - | (45,000 | ) | - | - | |||||||||||
| Net loss | $ | (1,786,178 | ) | $ | - | $ | (187,076 | ) | $ | (89,958 | ) | $ | (2,063,212 | ) | |||
| Attributed to: | |||||||||||||||||
| Equity holders of the Company | $ | (1,786,178 | ) | $ | - | $ | (187,076 | ) | $ | (73,765 | ) | $ | (2,047,019 | ) | |||
| Non-controlling interests | - | - | - | (16,193 | ) | $ | (16,193 | ) | |||||||||
| Net loss | $ | (1,786,178 | ) | $ | - | $ | (187,076 | ) | $ | (89,958 | ) | $ | (2,063,212 | ) | |||
16. SUPPLEMENTARY CASH FLOW INFORMATION
| Changes in non-cash operating working capital: | Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||
| Receivables | $ | (48,761 | ) | $ | 7,695 | $ | 39,002 | $ | (117,160 | ) | |||
| Deposits and prepayments | 49,142 | 20,668 | (228,874 | ) | (36,691 | ) | |||||||
| Accounts payable and accrued liabilities | (132,805 | ) | (43,924 | ) | (854,982 | ) | (192,461 | ) | |||||
| Due to a related party | (35,198 | ) | 8,707 | (6,631 | ) | 43,550 | |||||||
| $ | (167,622 | ) | $ | (6,854 | ) | $ | (1,051,485 | ) | $ | (302,762 | ) | ||
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three and nine months ended March 31, 2021
(Expressed in Canadian Dollars)
|
NEW PACIFIC METALS CORP. |
DATE OF REPORT: May 13, 2021
This MD&A for New Pacific Metals Corp. and its subsidiaries' ("New Pacific" or the "Company") should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements for the three and nine months ended March 31, 2021 and the related notes contained therein. In addition, the following should be read in conjunction with the audited consolidated financial statements of the Company for the year ended June 30, 2020, the related MD&A, and the Annual Information Form dated September 25, 2020 (available on SEDAR at www.sedar.com). 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. The Company's significant accounting policies are set out in Note 2 of the audited consolidated financial statements for the year ended June 30, 2020.
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 OTCQX Best Market in the United States under the symbol "NUPMF". The corporate office and the registered and records offices of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
QUARTERLY HIGHLIGHTS
- Silver Sand Preliminary Economic Analysis ("PEA") continues to advance with approximately 65% completed as at March 31, 2021;
- Maintained working capital of $59.98 million, sufficient to advance the Silver Sand Project and regional exploration initiatives, including the Silverstrike Project and the Carangas Project;
- Acquired 98% interest in the Carangas Silver Project subsequent to quarter-end, with an initial discovery drill program planned for 2021;
- Approved and implemented Company-wide Environmental Policy and Corporate Social Responsibility Policy; and
- Progressed regional project generation.
|
NEW PACIFIC METALS CORP. |
PROJECT OVERVIEWS
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 metres ("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 km2. The Silver Sand South Block hosts the Silver Sand deposit and is comprised of 17 Autorización Transitoria Especial ("ATE"), formerly known as "mining concessions". As per the Bolivian Mining and Metallurgy Law, ATEs have been consolidated into a single claim block, termed an Administrative Mining Contract ("AMC"). Detailed explanation of AMCs is presented below:
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 and Metallurgy Law, tenure is granted as either an AMC or an exploration license. Tenure held under 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 permits 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 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.
New Pacific, through its wholly owned subsidiary, Minera Alcira S.A. ("Alcira"), submitted all required documents to AJAM for the consolidation and conversion of the original 17 ATEs, which comprise the core of the Silver Sand Project, to cuadriculas and an AMC. 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 km2. At this time, this AMC has not been registered by AJAM with the mining register, notary process, or published in the mining gazette.
In addition, New Pacific acquired a 100% interest in three continuous mineral concessions called Jisas, Jardan and El Bronce originally owned by third party private entities. These three concessions, when converted to AMCs, will total 2.25 km2. Consequently, the total area owned by the Company which comprises the Silver Sand Project is 5.42 km2.
Exploration Progress
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, representing one of the largest greenfield discovery drill programs in South America during this period.
|
NEW PACIFIC METALS CORP. |
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. Using a 45 g/t silver cut-off-grade, the independent estimate by AMC Mining Consultants (Canada) Ltd. reported a Measured & Indicated Mineral Resource of 35.39 million tonnes at a grade of 137 g/t silver, containing 155.86 million ounces of silver and Inferred Mineral Resource of 9.84 million tonnes at a grade of 112 g/t silver containing 35.55 million ounces of silver. 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.
Advanced studies have commenced on the project, and 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 to lead the Preliminary Economic Assessment, Environmental baseline study, and Social baseline study, respectively.
In response to the COVID-19 pandemic, the Company's Health & Safety Team has implemented Company-wide 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.
For the three and nine months ended March 31, 2021, total expenditures of $1,120,001 and $2,901,939, respectively (three and nine months ended March 31, 2020 - $2,395,286 and $10,932,321, respectively) were capitalized under the project.
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 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, whereby COMIBOL will 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.
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.
|
NEW PACIFIC METALS CORP. |
There are no known economic mineral deposits, nor any previous drilling or exploration discoveries within the MPC area. Alcira maintains that the MPC with COMIBOL continues to present an opportunity to explore and evaluate the possible extensions and/or satellites of mineralization outside of the currently defined Silver Sand Project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in the ATEs located north to the Silver Sand Project by cash payments of $1,315,600 (US$1,000,000) and issuance of 832,000 common shares to the vendors. During Fiscal 2019 and Fiscal 2020, cash payments of $1,052,480 (US$800,000) were paid and 541,000 common shares were issued to the vendors. During the nine months ended March 31, 2021, the final payment of $263,120 (US$200,000) in cash were paid and 291,000 common shares were issued to the vendors.
Silverstrike Project
The Silverstrike Project is located approximately 140 km southwest of La Paz, Bolivia and within 50 km from Bolivia's border with Chile. A foreign entity cannot own title to property within the 50 km border zone, but may act as a principal joint venture partner over such properties in mining association agreements under Bolivian mining laws.
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 $1,782,270 (US$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 km2) 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. While the Company believes the contractual relationship and the structure it has in place with the Bolivian corporation for the Silverstrike Project is legally compliant with the 50 km border restrictions, there is no assurance that the Bolivian corporation will be successful in obtaining approval of the agreement from AJAM, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian governmental authorities.
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 and the area is largely underexplored with limited modern exploration applied. The vendor has also applied for exploration rights over areas surrounding the Silverstrike Project as part of the transaction.
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 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.
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NEW PACIFIC METALS CORP. |
For the three and nine months ended March 31, 2021, total expenditures of $539,911 and $1,821,588, respectively (three and nine months ended March 31, 2020 - $421,925 and $427,127, respectively) were capitalized under the project.
Carangas Project
Subsequent to March 31, 2021, the Company signed a mining association agreement with a private Bolivian company (the "Vendor") and acquired 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 the 50 km from Bolivia's border with Chile. The Vendor is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km2) that comprise the Carangas Project. Under the mining association agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development, and production activities. The agreement has a term of 30 years and is renewable for an additional 15 years. An initial discovery diamond drill program is planned to commence upon receipt of the required permits from AJAM. While the Company believes the contractual relationship and the structure it has in place with the Vendor for the Carangas Project is legally compliant with the 50 km border restrictions, there is no assurance that the Vendor will be successful in obtaining the approval of AJAM when converting exploration licenses to AMCs, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian governmental authorities.
Tagish Lake Gold Project
The Tagish Lake Gold Project ("TLG Project"), covering an area of approximately 170 km2, 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.
During Fiscal 2020, the Company performed a strategic review on the TLG Project and established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the TLG Project from the Company for a cash consideration of $3,000,000 plus 20,000,000 Whitehorse Gold common shares ("spin-out shares").
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). The spin-out shares were valued at $8,856,267 upon distribution. Assets and liabilities of Whitehorse Gold and TLG Project which were classified as held for distribution as at June 30, 2020 in the amount of $11,849,971 and $122,178, respectively, were disposed upon completion of the spin-out. On November 15, 2020, Whitehorse Gold's common shares were listed for trading on the TSX Venture Exchange ("TSXV") under the symbol "WHG". As a result of the spin-out, the Company no longer holds an interest in the TLG Project.
For the three and nine months ended March 31, 2021, total expenditures of $nil and $400,838, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively) were capitalized under the TLG Project.
The project's carrying value of $12,220,838 (including $11,820,000 classified as assets held for distribution as at June 30, 2020) was disposed upon the completion of the Whitehorse Gold spin-out transaction.
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NEW PACIFIC METALS CORP. |
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 $3.8 million (RMB ¥20 million). As of March 31, 2021, the process was under review and subject to approval by the Qinghai Government.
The continuity schedule of mineral property acquisition costs, deferred exploration and development costs are summarized as follows:
| Cost | Silver Sand | Silverstrike | Tagish Lake | RZY Project | Total | ||||||||||
| Balance, July 1, 2019 | $ | 73,281,418 | $ | - | $ | - | $ | 3,534,664 | $ | 76,816,082 | |||||
| Capitalized exploration expenditures | |||||||||||||||
| Reporting and assessment | 601,466 | 976 | - | - | 602,442 | ||||||||||
| Drilling and assaying | 6,521,210 | 2,237 | - | - | 6,523,447 | ||||||||||
| Project management and support | 4,546,717 | 586,052 | - | - | 5,132,769 | ||||||||||
| Camp service | 661,514 | 50,837 | - | - | 712,351 | ||||||||||
| Camp construction | 32,406 | - | - | - | 32,406 | ||||||||||
| Permitting | 51,358 | - | 105,056 | - | 156,414 | ||||||||||
| Acquisition of Silverstrike Project | - | 1,782,270 | - | - | 1,782,270 | ||||||||||
| Acquisition of mineral concessions | 290,220 | - | - | - | 290,220 | ||||||||||
| Other | 26,854 | - | - | - | 26,854 | ||||||||||
| Impairment recovery | - | - | 11,714,944 | - | 11,714,944 | ||||||||||
| Reclassified to assets held for distribution | - | - | (11,820,000 | ) | - | (11,820,000 | ) | ||||||||
| Foreign currency impact | 2,979,031 | 59,546 | - | 40,800 | 3,079,377 | ||||||||||
| Balance, June 30, 2020 | $ | 88,992,194 | $ | 2,481,918 | $ | - | $ | 3,575,464 | $ | 95,049,576 | |||||
| Capitalized exploration expenditures | |||||||||||||||
| Reporting and assessment | 450,181 | 5,229 | 60,959 | - | 516,369 | ||||||||||
| Drilling and assaying | 59,595 | 219,917 | - | - | 279,512 | ||||||||||
| Project management and support | 2,111,346 | 1,449,526 | - | - | 3,560,872 | ||||||||||
| Camp service | 204,419 | 132,736 | - | - | 337,155 | ||||||||||
| Camp construction | 59,669 | - | 275,999 | - | 335,668 | ||||||||||
| Permitting | 16,729 | 14,180 | 63,880 | - | 94,789 | ||||||||||
| Disposal upon spin-out distribution | - | - | (400,838 | ) | (400,838 | ) | |||||||||
| Foreign currency impact | (6,368,040 | ) | (168,770 | ) | - | (16,690 | ) | (6,553,500 | ) | ||||||
| Balance, March 31, 2021 | $ | 85,522,673 | $ | 4,134,736 | $ | - | $ | 3,558,774 | $ | 93,216,183 |
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NEW PACIFIC METALS CORP. |
INVESTMENTS OVERVIEW
Short-Term Investments
Short-term investments consist of the following:
| March 31, 2021 | June 30, 2020 | |||||
| Guaranteed Investment Certificates | $ | - | $ | 20,003,028 | ||
| Bonds | 155,194 | 630,744 | ||||
| $ | 155,194 | $ | 20,633,772 |
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.
The Company's equity investments are summarized as follows:
| March 31, 2021 | June 30, 2020 | |||||
| Common or preferred shares | ||||||
| Public companies | $ | 745,100 | $ | 4,795,960 | ||
| Warrants | ||||||
| Public companies | 220,980 | 807,631 | ||||
| $ | 966,080 | $ | 5,603,591 |
FINANCIAL RESULTS
Net loss attributable to equity holders of the Company for the three months ended March 31, 2021 was $2,147,396 or $0.01 per share (three months ended March 31, 2020 - net loss of $1,733,133 or $0.01 per share). The Company's financial results were mainly impacted by the following: (i) operating expenses of $2,038,987 compared to $1,532,848 in the prior year quarter; (ii) income from investments of $84,164 compared to loss of $1,594,956 in the prior year quarter; and (iii) foreign exchange loss of $195,675 compared to gain of $1,390,100 in the prior year quarter.
For the nine months ended March 31, 2021, net loss attributable to equity holders of the Company was $5,974,587 or $0.04 per share compared to net loss of $2,047,019 or $0.01 per share for the nine months ended March 31, 2020.
Operating expenses for the three and nine months ended March 31, 2021 were $2,038,987 and $5,693,629, respectively (three and nine months ended March 31, 2020 - $1,532,848 and $4,166,921, respectively). Items included in operating expenses were as follows:
(i) Project evaluation and corporate development expenses for the three and nine months ended March 31, 2021 of $387,362 and $869,530, respectively (three and nine months ended March 31, 2020 - $nil and $nil, respectively). The Company is actively seeking and evaluating other exploration and investment opportunities in Bolivia.
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NEW PACIFIC METALS CORP. |
(ii) Filing and listing fees for the three and nine months ended March 31, 2021 of $93,621 and $353,178, respectively (three and nine months ended March 31, 2020 - $30,352 and $238,218). The increase in filing and listing fees in the current period was a result of the Company's graduation from TSXV to TSX.
(iii) Investor relations expenses for the three and nine months ended March 31, 2021 of $121,320 and $335,146, respectively (three and nine months ended March 31, 2020 - $152,995 and $593,568, respectively). Decrease in investor relations expenses was a result of reduced activities due to the COVID-19 pandemic.
(iv) Professional fees for the three and nine months ended March 31, 2021 of $67,881 and $514,285, respectively (three and nine months ended March 31, 2020 - $69,360 and $282,156, respectively). The increase in professional fees in the current period compared to 2020 was related to the Whitehorse Gold spin-out transaction and the Company's graduation to the TSX.
(v) Salaries and benefits expense for the three and nine months ended March 31, 2021 of $663,383 and $1,527,029, respectively (three and nine months ended March 31, 2020 - $396,764 and $1,225,321, respectively). Salaries and benefits increased in the current period as a result of the annual incentive payout.
(vi) Office and administration expenses for the three and nine months ended March 31, 2021 of $196,917 and $642,987, respectively (three and nine months ended March 31, 2020 - $174,312 and $523,798, respectively). Office and administrative expenses increased in the current period as a result of the inclusion of the Company's La Paz office expenses as it started to function as a regional office with duty of oversight of multiple projects. In the past, the La Paz office expenses were capitalized under the Silver Sand Project as its sole function was to serve that single project.
(vii) Share-based compensation for the three and nine months ended March 31, 2021 of $494,521 and $1,408,927, respectively (three and nine months ended March 31, 2020 - $705,653 and $1,294,734, respectively).
Income from investments for the three months ended March 31, 2021 was $84,164 (three months ended March 31, 2020 - loss of $1,594,956) and comprised of a $36,753 gain on the Company's equity investments, a $2,161 loss on bonds, and $49,572 in interest earned from GICs and other cash accounts.
For the nine months ended March 31, 2021, income from investments was $788,628 compared to $860,146 for the nine months ended March 31, 2020.
Foreign exchange loss for the three months ended March 31, 2021 was $195,675 (three months ended March 31, 2020 - gain of $1,390,100). 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 will result in unrealized foreign exchange gain or loss for the relevant reporting periods. During the three months ended March 31, 2021, the US dollar depreciated by 1.2% against the Canadian dollar (from 1.2732 to 1.2575) while in the comparative quarter of 2020 the US dollar appreciated by 9.2% against the Canadian dollar (from 1.2988 to 1.4187).
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NEW PACIFIC METALS CORP. |
For the nine months ended March 31, 2021, foreign exchange loss was $1,074,454 (nine months ended March 31, 2020 - gain of $1,243,563).
| Selected Quarterly Information | ||||||||||||
| For the Quarters Ended | ||||||||||||
| Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | |||||||||
| Operating expense | $ | 2,038,987 | $ | 1,627,241 | $ | 2,027,401 | $ | 2,021,033 | ||||
| Income (loss) from Investments | 84,164 | (139,364 | ) | 843,828 | 901,368 | |||||||
| Impairment recovery of mineral property interests | - | - | - | 11,714,944 | ||||||||
| Other income (loss) | (195,675 | ) | (557,056 | ) | (324,667 | ) | (619,180 | ) | ||||
| Net (loss) income | (2,150,498 | ) | (2,323,661 | ) | (1,508,240 | ) | 9,976,099 | |||||
| Net (loss) income attributable to equity holders | (2,147,396 | ) | (2,321,588 | ) | (1,505,603 | ) | 9,979,318 | |||||
| Basic and diluted earnings (loss) per share | (0.01 | ) | (0.02 | ) | (0.01 | ) | 0.06 | |||||
| Total assets | 159,294,151 | 161,972,334 | 176,599,545 | 178,816,058 | ||||||||
| Total liabilities | 1,019,886 | 1,502,777 | 2,026,143 | 2,043,514 | ||||||||
| For the Quarters Ended | ||||||||||||
| Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | |||||||||
| Operating expense | $ | 1,532,848 | $ | 1,625,133 | $ | 1,008,940 | $ | 949,529 | ||||
| Income (loss) from Investments | (1,594,956 | ) | 339,654 | 2,115,448 | (203,178 | ) | ||||||
| Impairment of mineral property interests | - | - | - | (779,823 | ) | |||||||
| Other income (loss) | 1,390,100 | (322,879 | ) | 176,342 | (353,416 | ) | ||||||
| Net income (loss) | (1,737,704 | ) | (1,608,358 | ) | 1,282,850 | (2,285,946 | ) | |||||
| Net income (loss) attributable to equity holders | (1,733,133 | ) | (1,599,824 | ) | 1,285,938 | (2,141,800 | ) | |||||
| Basic and diluted earnings (loss) per share | (0.01 | ) | (0.01 | ) | 0.01 | (0.01 | ) | |||||
| Total assets | 147,979,848 | 139,648,018 | 127,078,569 | 124,248,395 | ||||||||
| Total liabilities | 2,014,874 | 1,860,517 | 2,663,415 | 2,368,392 | ||||||||
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash used in operating activities for the three and nine months ended March 31, 2021 was $1,541,909 and $4,876,909, respectively (three and nine months ended March 31, 2020 - $757,588 and $2,741,789, respectively). The increase during the current period was mainly due to the increase in operating expense and negative impact from change in non-cash operating working capital.
Cash provided by investing activities for the three months ended March 31, 2021 was $4,559,647 (three months ended March 31, 2020 - $4,486,867). Cash flows from investing activities were mainly impacted by: (i) capital expenditures for mineral properties and equipment of $1,413,310 on the exploration projects in Bolivia compared to $2,100,414 in the comparative period; and (ii) proceeds of $6,000,000 from maturity of GIC compared to $6,701,906 net proceeds from disposal of bonds and equity investments in the comparative period.
For the nine months ended March 31, 2021, cash provided by investing activities was $21,128,450 (nine months ended March 31, 2020 - cash used in investing activities of $3,700,193).
Cash provided by financing activities for the three months ended March 31, 2021 was $302,954 (three months ended March 31, 2020 - $517,052). Cash flows from financing activities during the quarter were proceeds arising from stock options exercised.
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NEW PACIFIC METALS CORP. |
For the nine months ended March 31, 2021, cash provided by financing activities was $1,005,108 (nine months ended March 31, 2020 - $16,588,486). In the comparative period, the Company received net proceeds of $15,833,533 from the BMO bought deal financing announced and discussed in the Company's news releases dated May 19, 2020, May 26, 2020 and June 9, 2020.
Liquidity and Capital Resources
As at March 31, 2021, the Company had working capital of $59,982,738 (June 30, 2020 - $71,720,986), comprised of cash and cash equivalents of $60,040,843 (June 30, 2020 - $40,644,346), short term investments of $155,194 (June 30, 2020 - $20,633,772), assets held for distribution of $nil (June 30, 2020 - $11,849,971), and other current assets of $806,587 (June 30, 2020 - $636,411) offset by current liabilities of $1,019,886 (June 30, 2020 - $2,043,514). 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, 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.
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.
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NEW PACIFIC METALS CORP. |
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 March 31, 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 March 31, 2021 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash and cash equivalents | $ | 60,040,843 | $ | - | $ | - | $ | 60,040,843 | ||||
| Short-term investments - bonds | 155,194 | - | - | 155,194 | ||||||||
| Common or preferred shares | 430,653 | - | - | 430,653 | ||||||||
| Warrants | - | 535,427 | - | 535,427 | ||||||||
| Fair value as at June 30, 2020 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash and cash equivalents | $ | 40,644,346 | $ | - | $ | - | $ | 40,644,346 | ||||
| Short-term investments - bonds | 630,744 | - | - | 630,744 | ||||||||
| Common or preferred shares | 4,795,960 | - | - | 4,795,960 | ||||||||
| Warrants | - | 807,631 | - | 807,631 | ||||||||
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of March 31, 2021 and June 30, 2020, respectively.
There were no transfers into or out of Level 3 during the three and nine months ended March 31, 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 March 31, 2021, the Company had a working capital position of $59,982,738 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia, 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:
| March 31, 2021 | June 30, 2020 | ||||||||
| Due within a year | Total | Total | |||||||
| Trade and other payables | $ | 941,775 | $ | 941,775 | $ | 1,573,474 | |||
| Due to a related party | 78,111 | 78,111 | 84,742 | ||||||
| Payable for mineral property acquisition | - | - | 263,120 | ||||||
| $ | 1,019,886 | $ | 1,019,886 | $ | 1,921,336 | ||||
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NEW PACIFIC METALS CORP. |
(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 currency. The Company's functional currency is the Canadian dollar. The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk is summarized as follows:
| The amounts are expressed in CAD equivalents | March 31, 2021 | June 30, 2020 | ||||
| United States dollars | $ | 14,992,712 | $ | 15,206,715 | ||
| Bolivianos | 628,713 | 404,952 | ||||
| Chinese RMB | 274,669 | 218,216 | ||||
| Financial assets in foreign currency | $ | 15,896,094 | $ | 15,829,883 |
| United States dollars | $ | 291,115 | $ | 589,986 | ||
| Chinese RMB | 233,005 | 137,725 | ||||
| Financial liabilities in foreign currency | $ | 524,120 | $ | 727,711 |
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the US dollar against the CAD would have increased (decreased) net income by approximately $147,000.
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the CAD would have increased (decreased) net income by approximately $6,000.
As at March 31, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Chinese RMB against the CAD 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's cash and cash equivalents primarily include highly liquid investments that earn interest at market rates that are fixed to maturity. The Company also holds a portion of cash and cash equivalents 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 March 31, 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 and cash equivalents, 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 equivalents that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as majority of its cash and cash equivalents 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 March 31, 2021, the Company had a receivables balance of $364,180 (June 30, 2020 - $413,594).
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NEW PACIFIC METALS CORP. |
(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 as at March 31, 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 $97,000.
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 | March 31, 2021 | June 30, 2020 | ||||
| Silvercorp Metals Inc. | $ | 78,111 | $ | 84,742 |
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. Expenses in services rendered and incurred by Silvercorp on behalf of the Company for the three and nine months ended March 31, 2021 were $203,356 and $599,771, respectively (three and nine months ended March 31, 2020 - $151,288 and $575,635, respectively).
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 conformity with IFRS 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, 2020.
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NEW PACIFIC METALS CORP. |
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 - 153,868,446 common shares with a recorded value of $194.8 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 $ |
Expiry Date |
|
695,000 |
0.55 |
October 31, 2021 |
|
1,073,000 |
1.15 |
July 31, 2022 |
|
200,000 |
1.57 |
December 7, 2022 |
|
1,512,999 |
2.15 |
February 21, 2024 |
|
3,480,999 |
$1.49 |
|
(c) RSUs
The outstanding RSUs as at the date of this MD&A are summarized as follows:
| RSUs Outstanding | Grant Date Price $ | ||
| 1,012,550 | $ | 5.31 |
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 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.
|
NEW PACIFIC METALS CORP. |
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 are 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 effect 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. 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 they will be obtained on reasonable terms.
|
NEW PACIFIC METALS CORP. |
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 the 50 km border restrictions, 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 governmental authorities.
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.
|
NEW PACIFIC METALS CORP. |
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.
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, including internal controls over financial reporting. Internal control over financial reporting is a process designed by and/or under the supervision of the Chief Executive Officer and the Chief Financial Officer and effected by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by IASB. It includes those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company's are being made only in accordance with authorizations of management and the Company's directors; and
(iii) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the annual financial statements or interim financial reports.
The Company's management, including its Chief Executive Officer and Chief Financial Officer, believes that due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. In addition, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company's management evaluates the effectiveness of the Company's internal control over financial reporting based upon the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on the evaluation, management concluded that the Company's internal control over financial reporting as of March 31, 2021 was effective and provides a reasonable assurance of the reliability of the Company's financial reporting and preparation of the financial statements.
|
NEW PACIFIC METALS CORP. |
(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 and nine months ended March 31, 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, 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.
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, 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, 2020 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 options 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 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.
|
NEW PACIFIC METALS CORP. |
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.
CAUTIONARY NOTE TO U.S. INVESTORS
The disclosure in this MD&A and referred to herein was prepared in accordance with NI 43-101 which differs significantly from the requirements of the U.S. Securities and Exchange Commission (the "SEC"). The terms "proven mineral reserve", "probable mineral reserve" and "mineral reserves" used in this MD&A are in reference to the mining terms defined in the Canadian Institute of Mining, Metallurgy and Petroleum Standards (the "CIM Definition Standards"), which definitions have been adopted by NI 43-101. Accordingly, information contained in this MD&A providing descriptions of our mineral deposits in accordance with NI 43-101 may not be comparable to similar information made public by other U.S. companies subject to the United States federal securities laws and the rules and regulations thereunder.
Investors are cautioned not to assume that any part or all of mineral resources will ever be converted into reserves. Pursuant to CIM Definition 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. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures.
|
NEW PACIFIC METALS CORP. |
Canadian standards, including the CIM Definition Standards and NI 43-101, differ significantly from standards in the SEC Industry Guide 7. 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 SEC Industry 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 Definition 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 MD&A 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 Definition Standards, readers are cautioned that there are differences between the SEC Modernization Rules and the CIM Definitions 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.
Additional information relating to the Company can be obtained under the Company's profile on SEDAR at www.sedar.com, and on the Company's website at www.newpacificmetals.com.
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Mark Cruise, Chief Executive Officer of New Pacific Metals Corp. certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of New Pacific Metals Corp. (the "issuer") for the interim period ended March 31, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
| Date: May 14, 2021 | |
| "Mark Cruise" |
|
| Mark Cruise | |
| Chief Executive Officer |
2
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Jalen Yuan, Chief Financial Officer of New Pacific Metals Corp. certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of New Pacific Metals Corp. (the "issuer") for the interim period ended March 31, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
| Date: May 14, 2021 | |
| "Jalen Yuan" | |
| Jalen Yuan | |
| Chief Financial Officer |
2