New Pacific Metals Corp 6-K, filed Sep 17, 2021
New Pacific Metals Corp (NEWP)
About this 6-K
New Pacific Metals Corp filed this 6-K on September 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 OF
THE SECURITIES EXCHANGE ACT OF 1934
September 16, 2021
Commission File No. 0001-34184
NEW PACIFIC METALS CORP.
(Translation of registrant's name into English)
Suite 1750 - 1066 W. Hastings Street
Vancouver BC, Canada V6E 3X1
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F]
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) [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is "submitting" the Form 6-K in paper as permitted by Regulation S-T "Rule" 101(b)(7) [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: September 16, 2021 | NEW PACIFIC METALS CORP. |
| /s/ Jalen Yuan | |
| Jalen Yuan | |
| Chief Financial Officer |
1
EXHIBIT INDEX
EXHIBITS 99.4, 99.5 and 99.6 INCLUDED WITH THIS REPORT ARE HEREBY INCORPORATED BY REFERENCE AS EXHIBITS TO THE REGISTRANT'S REGISTRATION STATEMENT ON FORM F-10 (FILE NO. 333-249939), AS AMENDED AND SUPPLEMENTED, AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS SUBMITTED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
2
NEWS RELEASE
NEW PACIFIC REPORTS FINANCIAL RESULTS FOR THE YEAR
ENDED JUNE 30, 2021
VANCOUVER, BRITISH COLUMBIA - SEPTEMBER 16, 2021: New Pacific Metals Corp. ("New Pacific" or the "Company") reports its audited consolidated financial results for the year ended June 30, 2021. All figures are expressed in US dollars unless otherwise stated.
FISCAL 2021 HIGHLIGHTS
- Maintained working capital of $46.36 million, sufficient to advance the Silver Sand Project and regional exploration initiatives, including the Carangas and Silverstrike Projects;
- Silver Sand Preliminary Economic Analysis ("PEA") continues to advance as scheduled. A 38,000-metre ("m") exploration and resource expansion drill program commenced in July 2021;
- Received an administrative mining contract for the Silver Sand Project, establishing a clear title to the project mineral rights;
- Acquired a 98% interest in the Carangas Silver Project in April 2021. A 5,000 m initial discovery drill program commenced in June 2021;
- Identified three significant new zones of gold and silver rich polymetallic mineralization on the Silverstrike Project;
- Developed and implemented a Company-wide environmental policy and corporate social responsibility policy;
- Successfully completed the spin-out transaction of Whitehorse Gold Corp. (TSX.V: WHG.V), enabling shareholders to realize the value of the Tagish Lake Gold Project in the current strong gold market;
- Listed on the Toronto Stock Exchange ("TSX") and delisted all of the Company's issued and outstanding shares from the TSX Venture Exchange ("TSX.V") in August 2020; and
- Listed on the NYSE American stock exchange in May 2021, achieving a significant milestone in the growth of the Company.
Dr. Mark Cruise, CEO of New Pacific, said, "Fiscal year 2021 has been very productive for our team and I am pleased with the work we have accomplished to advance our projects and the milestones we have achieved. We continue to advance the Silver Sand PEA and have commenced an extensive drill program with the aim to continue growing our silver resources. In parallel, we have strengthened our portfolio with a third project, the Carangas silver project, where a discovery drill program is underway. Importantly, our listing on the NYSE American and graduation to the TSX, have increased our ability to appeal to the investment community, offering greater investability and liquidity, while we continue to focus on creating value for our shareholders."
FINANCIAL RESULTS
Working Capital: As of June 30, 2021, the Company had working capital of $46.36 million.
Net loss attributable to equity holders of the Company for the year ended June 30, 2021 was $6.57 million or $0.04 per share (year ended June 30, 2020 - net income of $5.91 million or $0.04 per share). The Company's financial results were mainly impacted by the following: (i) operating investment expenses of $5.95 million compared to $4.61 million in the prior year; (ii) income from investments of $0.40 million compared to $1.31 million in the prior year; (iii) impairment recovery of $nil compared to $8.72 million in the prior year; and (iv) foreign exchange loss of $1.02 million compared to gain of $0.47 million in the prior year.
Operating expenses for the year ended June 30, 2021 were $5.95 million (year ended June 30, 2020 - $4.61 million). The increase in operating expenses was mainly due to the following reasons: (i) a $0.62 million increase in project evaluation and corporate development expense as a result of the Company's increased efforts in seeking and evaluating other exploration and investment opportunities in Bolivia; (ii) a $0.46 million increase in regulatory filing, listing, and professional fees as a result of the Whitehorse Gold spin-out transaction, the Company's graduation from the TSX.V to the TSX, and listing on the NYSE American; (iii) a $0.26 million increase in annual incentive payout; and (iv) a $0.17 million increase in office administrative expense as a result of the inclusion of the Company's La Paz office expenses as it transitioned to a regional office overseeing multiple projects. The increase in operating expenses was offset by a $0.2 million decrease in investor relation expense as a result of reduced travel expenses due to the COVID-19 pandemic.
Income from investments for the year ended June 30, 2021 was $0.40 million (year ended June 30, 2020 - $1.31 million).
Foreign exchange loss for the year ended June 30, 2021 was $1.02 million (year ended June 30, 2020 - gain of $0.47 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 resulted in unrealized foreign exchange gain or loss for the relevant reporting periods. During the year ended June 30, 2021, the US dollar depreciated by 9.1% against the Canadian dollar (from 1.3628 to 1.2394) while in the prior year the US dollar appreciated by 4.1% against the Canadian dollar (from 1.3087 to 1.3628).
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 m of drilling in 386 diamond core drillholes.
On July 27, 2021, the Company announced the commencement of a 38,000 m diamond drill program with the objectives to expand the existing resource, which remains open along strike and at depth, and to complete geotechnical drilling to support the PEA study. Highlights of the drill program include:
- 80% of the drill program is intended to focus on expanding the existing Mineral Resources and discovering new resources;
- 5,000 m of the drill program is dedicated to testing for feeder zones for the large Silver Sand deposit;
- District exploration drilling to target the North Block and Snake Hole Zone; and
- Mineral continuity and geotechnical drilling to support the Silver Sand PEA.
For additional information on the 2021 drill program, please see the Company's news release dated July 27, 2021.
In addition to the 2021 drill program, the Company continues to advance or has commenced key studies and initiatives in support of the Silver Sand Project development. These include environmental baseline, socioeconomic and hydrogeology studies.
For the year ended June 30, 2021, total expenditures of $3.36 million (year ended June 30, 2020 - $9.48 million) were capitalized under the Silver Sand Project.
CARANGAS PROJECT
In April 2021, the Company signed a mining association agreement with a private Bolivian company to acquire a 98% interest in the Carangas Project. Under the agreement, the Company will cover 100% of the future expenditures of exploration, mining, development and production activities. The agreement has a term of 30 years and renewable for another 15 years.
On June 29, 2021, the Company announced the commencement of an initial discovery drill program at the Carangas Project. Phase I of the 5,000 m drill program is expected to be comprised of approximately 20 drillholes with an initial 3,000 m to be completed over an eight-week period. Contingent on the success of initial results, follow-up drilling will complete the budgeted 5,000 m program.
For the year ended June 30, 2021, total expenditures of $0.25 million (year ended June 30, 2020 - $nil) were capitalized under the project.
The Carangas Project is comprised of two exploration licenses covering an area of 6.25 km2 and owned 100% by the Company's Bolivian joint venture partner. New Pacific has entered into a mining association agreement with the Bolivian partner (the "Carangas Joint Venture"), under which New Pacific is required to cover 100% of the future expenditures on exploration, mining, development, and production activities in return for 98% economic interest in the Project.
SILVERSTRIKE PROJECT
During the fiscal year ended June 30, 2021, the Company's exploration team completed reconnaissance and detailed mapping and sampling programs on the northern portion of the project. The results to date indicate good to excellent exploration potential for hosting narrow, high-grade, near-surface broad-zones of silver mineralization. Please refer to the Company's news release dated September 29, 2020 for details on the exploration program at the northern areas of the project and to the news release dated November 19, 2020 for details on exploration activities and field work on the central and southern areas of the project.
For the year ended June 30, 2021, total expenditures of $1.29 million (year ended June 30, 2020 - $0.48 million) were capitalized under the Silverstrike Project.
MANAGEMENT DISCUSSION AND ANALYSIS
This news release should be read in conjunction with the Company's Management Discussion and Analysis ("MD&A") and the audited consolidated financial statements 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.
QUALIFIED PERSON
The scientific and technical information contained in this news release has been reviewed and approved by Alex Zhang, P. Geo., Vice President of Exploration, who is a Qualified Person for the purposes of National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"). The Qualified Person has verified the information disclosed herein and is not aware of any significant risks and uncertainties that could be expected to affect the reliability or confidence in the information discussed herein.
ABOUT NEW PACIFIC
New Pacific is a Canadian exploration and development company with precious metal projects, including the flagship 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 the Silver Sand Project, while growing its 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 approval of the mining association agreement for the Silverstrike Project by AJAM; the ability of the Company to convert the exploration licenses at the Carangas Project to AMC; the ability to meet current and future obligations; the ability to obtain timely financing on reasonable terms when required; the current and future social, economic and political conditions; and other assumptions and factors generally associated with the mining industry.
Although the forward-looking statements contained in this 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
This news release, including the documents incorporated by reference herein, has been prepared in accordance with the requirements of the securities laws in effect in Canada which differ from the requirements of United States securities laws. All mining terms used herein but not otherwise defined have the meanings set forth in NI 43-101.
Accordingly, information contained in this news release and the documents incorporated by reference herein containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of United States federal securities laws and the rules and regulations thereunder.
Form 52-109F1
Certification of Annual Filings
Full Certificate
I, Jalen Yuan, Chief Financial Officer of New Pacific Metals Corp. certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of New Pacific Metals Corp. (the "issuer") for the financial year ended June 30, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual 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, for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual 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 annual 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 financial year end
(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 annual 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: N/A
5.3 Limitation on scope of design: N/A
6. Evaluation: The issuer's other certifying officer(s) and I have
(a) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
(b) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A
(i) our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and
(ii) N/A.
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2021 and ended on June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
8. Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.
Date: September 16, 2021
"Jalen Yuan"
Jalen Yuan
Chief Financial Officer
Form 52-109F1
Certification of Annual Filings
Full Certificate
I, Mark Cruise, Chief Executive Officer of New Pacific Metals Corp. certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of New Pacific Metals Corp. (the "issuer") for the financial year ended June 30, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual 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, for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual 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 annual 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 financial year end
(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 annual 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: N/A
5.3 Limitation on scope of design: N/A
6. Evaluation: The issuer's other certifying officer(s) and I have
(a) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
(b) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A
(i) our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and
(ii) N/A.
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2021 and ended on June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
8. Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.
Date: September 16, 2021
"Mark Cruise"
Mark Cruise
Chief Executive Officer
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021 and 2020
(Expressed in US Dollars)
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Deloitte LLP Tel: 604-669-4466 |
Report of Independent Registered
Public Accounting Firm
To the Shareholders and the Board of Directors of New Pacific Metals Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of New Pacific Metals Corp. and subsidiaries (the "Company") as of June 30, 2021 and 2020 and July 1, 2019, the related consolidated statements of (loss) income, comprehensive (loss) income, changes in equity, and cash flows, for each of the two years in the period ended June 30, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020 and July 1, 2019, and its financial performance and its cash flows for each of the two years in the period ended June 30, 2021, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, Canada
September 16, 2021
We have served as the Company's auditor since 2004.
| New Pacific Metals Corp. Consolidated Statements of Financial Position |
| (Expressed in US dollars) |
| Notes | June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| ASSETS | (restated)* | (restated)* | ||||||||
| Current Assets | ||||||||||
| Cash | $ | 46,441,482 | $ | 29,824,146 | $ | 21,280,631 | ||||
| Short-term investments | 4 | 143,914 | 15,140,719 | 8,361,655 | ||||||
| Receivables | 343,608 | 303,488 | 198,364 | |||||||
| Deposits and prepayments | 523,141 | 163,500 | 108,787 | |||||||
| Assets held for distribution | 3 | - | 8,695,312 | - | ||||||
| 47,452,145 | 54,127,165 | 29,949,437 | ||||||||
| Non-current Assets | ||||||||||
| Reclamation deposits | - | - | 11,519 | |||||||
| Other tax receivable | 5 | 2,216,392 | 2,100,430 | 1,375,956 | ||||||
| Equity investments | 6 | 496,526 | 4,111,822 | 3,905,320 | ||||||
| Plant and equipment | 8 | 1,118,639 | 1,127,034 | 1,001,606 | ||||||
| Mineral property interests | 9 | 75,535,422 | 69,745,800 | 58,696,480 | ||||||
| TOTAL ASSETS | $ | 126,819,124 | $ | 131,212,251 | $ | 94,940,318 | ||||
| LIABILITIES AND EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable and accrued liabilities | 10 | $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 | |||
| Payable for mineral property acquisition | - | 193,073 | 301,582 | |||||||
| Due to a related party | 11 | 50,378 | 62,182 | 68,151 | ||||||
| Liabilities held for distribution | 3 | - | 89,653 | - | ||||||
| 1,094,567 | 1,499,501 | 1,608,677 | ||||||||
| Non-current liabilities | ||||||||||
| Payable for mineral property acquisition | - | - | 201,054 | |||||||
| Total Liabilities | 1,094,567 | 1,499,501 | 1,809,731 | |||||||
| Equity | ||||||||||
| Share capital | 12 | 149,629,543 | 145,904,310 | 114,621,944 | ||||||
| Share-based payment reserve | 16,564,197 | 16,813,906 | 15,265,578 | |||||||
| Accumulated other comprehensive income | 13,641,379 | 7,669,888 | 9,797,021 | |||||||
| Deficit | (54,106,972 | ) | (40,633,984 | ) | (46,541,710 | ) | ||||
| Total equity attributable to the equity holders of the Company | 125,728,147 | 129,754,120 | 93,142,833 | |||||||
| Non-controlling interests | 13 | (3,590 | ) | (41,370 | ) | (12,246 | ) | |||
| Total Equity | 125,724,557 | 129,712,750 | 93,130,587 | |||||||
| TOTAL LIABILITIES AND EQUITY | $ | 126,819,124 | $ | 131,212,251 | $ | 94,940,318 |
*Restated for change in presentation currency (note 2(c))
Approved on behalf of the Board:
(Signed) David Kong
Director
(Signed) Mark Cruise
Director
See accompanying notes to the consolidated financial statements
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New Pacific Metals Corp. |
| (Expressed in US dollars) |
| Year Ended June 30, | |||||||
| Notes | 2021 | 2020 | |||||
| (restated)* | |||||||
| Operating expense | |||||||
| Project evaluation and corporate development | $ | (822,864 | ) | $ | (206,060 | ) | |
| Depreciation | (44,000 | ) | (11,995 | ) | |||
| Filing and listing | (393,814 | ) | (128,142 | ) | |||
| Investor relations | (337,714 | ) | (536,902 | ) | |||
| Professional fees | (498,207 | ) | (303,031 | ) | |||
| Salaries and benefits | (1,688,687 | ) | (1,324,699 | ) | |||
| Office and administration | (678,529 | ) | (513,030 | ) | |||
| Share-based compensation | 12(b) | (1,482,170 | ) | (1,584,730 | ) | ||
| (5,945,985 | ) | (4,608,589 | ) | ||||
| Other (expense) income | |||||||
| Income from investments | 7 | $ | 395,543 | $ | 1,311,921 | ||
| Loss on disposal of plant and equipment | 8 | (1,944 | ) | - | |||
| Impairment recovery of mineral property interests | 9 | - | 8,724,915 | ||||
| Foreign exchange (loss) gain | (1,021,628 | ) | 465,021 | ||||
| Other expense | (360 | ) | - | ||||
| (628,389 | ) | 10,501,857 | |||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| Attributable to: | |||||||
| Equity holders of the Company | $ | (6,566,440 | ) | $ | 5,907,726 | ||
| Non-controlling interests | 13 | (7,934 | ) | (14,458 | ) | ||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| (Loss) earnings per share attributable to the equity holders of the Company | |||||||
| Basic (loss) earnings per share | 12(d) | $ | (0.04 | ) | $ | 0.04 | |
| Diluted (loss) earnings per share | 12(d) | $ | (0.04 | ) | $ | 0.04 | |
| Weighted average number of common shares - basic | 12(d) | 153,294,454 | 146,254,726 | ||||
| Weighted average number of common shares - diluted | 12(d) | 153,294,454 | 150,688,553 | ||||
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
| New Pacific Metals Corp. Consolidated Statements of Comprehensive (Loss) Income |
| (Expressed in US dollars) |
| Year Ended June 30, | |||||||
| Notes | 2021 | 2020 | |||||
| (restated)* | |||||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| Other comprehensive income (loss), net of taxes: | |||||||
| Items that may subsequently be reclassified to net income or loss: | |||||||
| Currency translation adjustment, net of tax of $nil | 6,017,205 | (2,141,799 | ) | ||||
| Other comprehensive income (loss), net of taxes | $ | 6,017,205 | $ | (2,141,799 | ) | ||
| Attributable to: | |||||||
| Equity holders of the Company | $ | 5,971,491 | $ | (2,127,133 | ) | ||
| Non-controlling interests | 13 | 45,714 | (14,666 | ) | |||
| $ | 6,017,205 | $ | (2,141,799 | ) | |||
| Total comprehensive (loss) income, net of taxes | $ | (557,169 | ) | $ | 3,751,469 | ||
| Attributable to: | |||||||
| Equity holders of the Company | $ | (594,949 | ) | $ | 3,780,593 | ||
| Non-controlling interests | 37,780 | (29,124 | ) | ||||
| Total comprehensive (loss) income, net of taxes | $ | (557,169 | ) | $ | 3,751,469 | ||
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
| New Pacific Metals Corp. Consolidated Statements of Cash Flows |
| (Expressed in US dollars) |
| Year Ended June 30, | |||||||
| Notes | 2021 | 2020 | |||||
| (restated)* | |||||||
| Operating activities | |||||||
| Net (loss) income | $ | (6,574,374 | ) | $ | 5,893,268 | ||
| Add (deduct) items not affecting cash: | (395,543 | ) | |||||
| Income from investments | 7 | (1,311,921 | ) | ||||
| Depreciation | 44,000 | 11,995 | |||||
| Impairment recovery on mineral property interest | 9 | - | (8,724,915 | ) | |||
| Loss on disposal of plant and equipment | 8 | 1,944 | - | ||||
| Share-based compensation | 12(b) | 1,596,526 | 1,641,029 | ||||
| Unrealized foreign exchange loss (gain) | 1,021,628 | (465,021 | ) | ||||
| Changes in non-cash operating working capital | 18 | (558,356 | ) | (94,231 | ) | ||
| Dividends and interests received | 261,223 | 423,079 | |||||
| Net cash used in operating activities | (4,602,952 | ) | (2,626,717 | ) | |||
| Investing activities | |||||||
| Mineral property interest | |||||||
| Capital expenditures | (4,314,465 | ) | (8,623,458 | ) | |||
| Acquisition of mineral concession | - | (1,850,000 | ) | ||||
| Plant and equipment | (113,166 | ) | |||||
| Additions | (229,605 | ) | |||||
| Proceeds on disposals | 8 | 1,418 | - | ||||
| Short-term investments | - | ||||||
| Acquisition | 4 | (14,895,360 | ) | ||||
| Proceeds on disposals | 4 | 15,596,974 | 7,589,328 | ||||
| Equity investments | - | ||||||
| Acquisition | 6 | (3,737,498 | ) | ||||
| Proceeds on disposals | 6 | 4,345,636 | 4,566,635 | ||||
| Consideration received for transfer of TLG | 3 | 2,201,350 | - | ||||
| Changes in other tax receivable | (115,960 | ) | (724,476 | ) | |||
| Net cash provided by (used in) investing activities | 17,601,787 | (17,904,434 | ) | ||||
| Financing activities | |||||||
| Proceeds from issuance of common shares | 1,076,157 | 30,070,791 | |||||
| Net cash provided by financing activities | 1,076,157 | 30,070,791 | |||||
| Effect of exchange rate changes on cash | 2,542,344 | (996,125 | ) | ||||
| Increase in cash | 16,617,336 | 8,543,515 | |||||
| Cash, beginning of the year | 29,824,146 | 21,280,631 | |||||
| Cash, end of the year | $ | 46,441,482 | $ | 29,824,146 | |||
| Supplementary cash flow information | 18 | ||||||
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
| New Pacific Metals Corp. Consolidated Statements of Changes in Equity |
| (Expressed in US dollars) |
| Share capital | Total equity | ||||||||||||||||||||||||
| Share- | Accumulated | attributable | |||||||||||||||||||||||
| Number of | based | other | to the equity | Non- | |||||||||||||||||||||
| common | payment | comprehensive | holders of | controlling | |||||||||||||||||||||
| Notes | shares issued | Amount | reserve | income | Deficit | the Company | interests | Total equity | |||||||||||||||||
| Balance, July 1, 2019 (restated)* | 142,432,812 | $ | 114,621,944 | $ | 15,265,578 | 49,797,021 | $ | (46,541,710 | ) | $ | 93,142,833 | $ | (12,246 | ) | $ | 93,130,587 | |||||||||
| Options exercised | 888,066 | 1,158,470 | (390,886 | ) | - | - | 767,584 | - | 767,584 | ||||||||||||||||
| Restricted share units vested | 136,400 | 470,929 | (470,929 | ) | - | - | - | ||||||||||||||||||
| Common shares issued through bought deal financing | 8,550,500 | 29,303,208 | - | - | - | 29,303,208 | - | 29,303,208 | |||||||||||||||||
| Share-based compensation | - | - | 2,759,903 | - | - | 2,759,903 | - | 2,759,903 | |||||||||||||||||
| Common shares issued to acquire mineral property interest | 291,000 | 349,759 | (349,759 | ) | - | - | - | - | - | ||||||||||||||||
| Net income | - | - | - | - | 5,907,726 | 5,907,726 | (14,458 | ) | 5,893,268 | ||||||||||||||||
| Currency translation adjustment | - | - | - | (2,127,133 | ) | - | (2,127,133 | ) | (14,666 | ) | (2,141,799 | ) | |||||||||||||
| Balance, June 30, 2020 (restated)* | 152,298,778 | $ | 145,904,310 | $ | 16,813,907 | $ | 7,669,888 | $ | (40,633,984 | ) | $ | 129,754,121 | $ | (41,370 | ) | $ | 129,712,751 | ||||||||
| Options exercised | 12(b) | 1,396,935 | 1,623,221 | (547,064 | ) | - | - | 1,076,157 | - | 1,076,157 | |||||||||||||||
| Restricted share units vested | 464,550 | 1,751,533 | (1,751,533 | ) | - | - | - | - | - | ||||||||||||||||
| Share-based compensation | 12(b) | - | - | 2,399,366 | - | - | 2,399,366 | - | 2,399,366 | ||||||||||||||||
| Common shares issued to acquire mineral property interest | 12(c) | 291,000 | 350,479 | (350,479 | ) | - | - | - | - | - | |||||||||||||||
| Spin-out distribution | 3 | - | - | - | - | (6,906,548 | ) | (6,906,548 | ) | - | (6,906,548 | ) | |||||||||||||
| Net loss | - | - | - | - | (6,566,440 | ) | (6,566,440 | ) | (7,934 | ) | (6,574,374 | ) | |||||||||||||
| Currency translation adjustment | - | - | - | 5,971,491 | - | 5,971,491 | 45,714 | 6,017,205 | |||||||||||||||||
| Balance, June 30, 2021 | 154,451,263 | $ | 149,629,543 | $ | 16,564,197 | $ | $13,641,379 | $ | (54,106,972 | ) | $ | 125,728,147 | $ | (3,590 | ) | $ | 125,724,557 | ||||||||
*Restated for change in presentation currency (note 2(c))
See accompanying notes to the consolidated financial statements
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
1. CORPORATE INFORMATION
New Pacific Metals Corp. along with its subsidiaries (collectively, the "Company" or "New Pacific") is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company is in the stage of exploring and advancing the development of its mineral properties and has not yet determined if they contain economically recoverable Mineral Reserves. The underlying value and the recoverability of the amounts shown for mineral properties are entirely dependent upon the existence of recoverable Mineral Reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral properties, and future profitable production or proceeds from the disposition of the mineral property interests.
The Company is publicly listed on the Toronto Stock Exchange ("TSX") under the symbol "NUAG" and on the NYSE American stock exchange ("NYSE-A") under the symbol "NEWP". The head office, registered address and records office of the Company are located at 1066 Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). The policies applied in these consolidated financial statements are based on IFRS in effect as of June 30, 2021.
These consolidated financial statements have been prepared on a going concern basis.
The consolidated financial statements of the Company as at and for the year ended June 30, 2021 were authorized for issue in accordance with a resolution of the Board of Directors (the "Board") dated on September 15, 2021.
(b) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary; and has the ability to use its power to affect its returns. For non-wholly-owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as "non-controlling interests" in the equity section of the consolidated statements of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
Balances, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Details of the Company's significant subsidiaries which are consolidated are as follows:
|
|
|
|
Proportion of ownership interest held |
|
|
|
|
|
Country of |
June 30, |
June 30, |
Mineral |
|
Name of subsidiaries |
Principal activity |
incorporation |
2021 |
2020 |
properties |
|
New Pacific Offshore Inc. |
Holding company |
BVI (i) |
100% |
100% |
|
|
SKN Nickel & Platinum Ltd. |
Holding company |
BVI |
100% |
100% |
|
|
Glory Metals Investment Corp. Limited |
Holding company |
Hong Kong |
100% |
100% |
|
|
New Pacific Investment Corp. Limited |
Holding company |
Hong Kong |
100% |
100% |
|
|
New Pacific Andes Corp. Limited |
Holding company |
Hong Kong |
100% |
100% |
|
|
Fortress Mining Inc. |
Holding company |
BVI |
100% |
100% |
|
|
Minera Alcira S.A. |
Mining company |
Bolivia |
100% |
100% |
Silver Sand |
|
NPM Minerales S.A. |
Mining company |
Bolivia |
100% |
100% |
|
|
Colquehuasi S.R.L. |
Mining company |
Bolivia |
100% |
100% |
Silverstrike |
|
Granville S.R.L. |
Mining company |
Bolivia |
100% |
N/A |
Carangas |
|
Qinghai Found Mining Co., Ltd. |
Mining company |
China |
82% |
82% |
RZY |
|
Whitehorse Gold Corp. |
Mining company |
Canada |
0% |
100% |
|
|
Tagish Lake Gold Corp. |
Mining company |
Canada |
0% |
100% |
TLG |
|
(i) British Virgin Islands ("BVI") |
|
|
|
|
|
(c) Foreign Currency Translation
The functional currency for each subsidiary of the Company is the currency of the primary economic environment in which the entity operates. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is the Canadian dollar ("CAD"). The functional currency of all Bolivian subsidiaries is the US dollar ("USD"). The functional currency of the Chinese subsidiary is the Chinese Renminbi ("RMB").
Foreign currency monetary assets and liabilities are translated into the functional currency using exchange rates prevailing at the balance sheet date. Foreign currency non-monetary assets are translated using exchange rates prevailing at the transaction date. Foreign exchange gains and losses are included in the determination of net income.
The Company decided to change the presentation currency of its consolidated financial statements from CAD to USD effective July 1, 2020. This change in presentation currency was made to better reflect the Company's main business activities, which are mineral exploration operations in Bolivia with budgets and major payments denominated in USD. Such change in presentation currency also made the Company's consolidated financial statements more consistent with industry peers listed on TSX and NYSE-A. In order to satisfy the requirements of IAS 21 - The effects of changes in foreign exchange rates with respect to the change in presentation currency, the consolidated financial statements for the year ended June 30, 2020 have been restated from CAD to USD using the procedures outlined below:
- assets and liabilities of subsidiaries where functional currency is other than USD were translated to USD using exchange rates at June 30, 2020;
- income and expenses of subsidiaries where functional currency is other than USD were translated using average exchange rates during the year ended June 30, 2020;
- share capital and deficit were translated at the historical rates prevailing at the dates of transactions; and
- differences arising from the retranslation of the opening net assets at July 1, 2019 and the results for the year have been taken to the accumulated other comprehensive income.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Effective July 1, 2020, the consolidated financial statements are presented in USD. The financial position and results of the Company's entities are translated from functional currencies to USD as follows:
- assets and liabilities are translated using exchange rates prevailing at the balance sheet date;
- income and expenses are translated using average exchange rates prevailing during the period; and
- all resulting exchange gains and losses are included in other comprehensive income.
Consolidated Statements of Financial Position
| June 30, 2020 | July 1, 2019 | |||||||||||
| As reported, | Restated, | As reported, | Restated, | |||||||||
| CAD$ | USD$ | CAD$ | USD$ | |||||||||
| Cash | $ | 40,644,346 | $ | 29,824,146 | $ | 27,849,961 | $ | 21,280,631 | ||||
| Other Current assets | 33,120,154 | 24,303,019 | 11,344,868 | 8,668,806 | ||||||||
| Non-Current assets | 105,051,558 | 77,085,086 | 85,053,566 | 64,990,881 | ||||||||
| Total assets | $ | 178,816,058 | $ | 131,212,251 | $ | 124,248,395 | $ | 94,940,318 | ||||
| Current liabilities | $ | 2,043,514 | $ | 1,499,501 | $ | 2,105,272 | $ | 1,608,677 | ||||
| Non-current liabilities | - | - | 263,120 | 201,054 | ||||||||
| Total liabilities | $ | 2,043,514 | $ | 1,499,501 | $ | 2,368,392 | $ | 1,809,731 | ||||
| Share Capital | $ | 191,563,628 | $ | 145,904,310 | $ | 150,005,738 | $ | 114,621,944 | ||||
| Share-based payment reserve | 22,057,385 | 16,813,906 | 19,978,062 | 15,265,578 | ||||||||
| Accumulated other comprehensive income | 6,599,738 | 7,669,888 | 3,264,901 | 9,797,021 | ||||||||
| Retained earnings | (43,398,714 | ) | (40,633,984 | ) | (51,331,013 | ) | (46,541,710 | ) | ||||
| Non-controlling interests | (49,493 | ) | (41,370 | ) | (37,685 | ) | (12,246 | ) | ||||
| Total shareholder's equity | $ | 176,772,544 | $ | 129,712,750 | $ | 121,880,003 | $ | 93,130,587 | ||||
| Total liabilities and shareholder's equity | $ | 178,816,058 | $ | 131,212,251 | $ | 124,248,395 | $ | 94,940,318 | ||||
| Consolidated Statement of Income and Comprehensive Income | ||||||
| Year ended June 30, 2020 | ||||||
| As reported, | Restated, | |||||
| CAD$ | USD$ | |||||
| Operating expense | $ | (6,187,954 | ) | $ | (4,608,589 | ) |
| Other income | 14,100,841 | 10,501,857 | ||||
| Net income | $ | 7,912,887 | $ | 5,893,268 | ||
| Other comprehensive income (loss), net of taxes | 3,342,441 | (2,141,799 | ) | |||
| Total comprehensive income, net of taxes | $ | 11,255,328 | $ | 3,751,469 | ||
| Earnings per share - Basic and diluted | $ | 0.05 | $ | 0.04 | ||
The Company treats inter-company loan balances, which are not intended to be repaid in the foreseeable future, as part of its net investment. When a foreign entity is sold, the historical exchange differences plus the foreign exchange impact that arises on the transaction are recognized in the consolidated statement of (loss) income as part of the gain or loss on sale.
(d) Plant and Equipment
Plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Plant and equipment are subsequently measured at cost less accumulated depreciation and applicable impairment losses. Depreciation is computed using the straight-line method based on the nature and estimated useful lives as follows:
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
| Land | Not depreciated |
| Buildings | 20 Years |
| Machinery | 5 Years |
| Motor vehicles | 5 Years |
| Office equipment and furniture | 5 Years |
| Computer software | 5 Years |
Subsequent costs that meet the asset recognition criteria are capitalized while costs incurred that do not extend the economic useful life of an asset are considered repair and maintenance, which are accounted for as an expense recognized during the period. The Company conducts an annual assessment of the residual balances, useful lives, and depreciation methods being used for plant and equipment and any changes are applied prospectively.
Assets under construction are capitalized as construction-in-progress. The cost of construction-in-progress comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Construction-in-progress assets are not depreciated until they are completed and available for use.
(e) Mineral Property Interests
The cost of acquiring mineral rights and properties either as an individual asset purchase or as part of a business combination is capitalized and represents the property's fair value at the date of acquisition. Fair value is determined by estimating the value of the property's reserves, resources and exploration potential.
Exploration and evaluation costs, incurred associated with specific mineral rights and properties prior to demonstrable technical feasibility and commercial viability of extracting a mineral resource, are capitalized.
The Company determines that a property is in the development stage when it has completed a positive economic analysis of the mineral deposit. Costs incurred in the development stage prior to commercial production are capitalized and included in the carrying amount of the related property in the period incurred. Proceeds from sales during this period, if any, are offset against costs capitalized.
(f) Impairment of Long-lived Assets
Long-lived assets, including mineral property interests, plant and equipment are reviewed and tested for impairment when indicators of impairment are considered to exist. Impairment assessments are conducted at the level of cash-generating units ("CGU") or at the individual asset level, whichever is the lowest level for which identifiable cash inflows are largely independent of the cash flows of other assets. An impairment loss is recognized for any excess of carrying amount of a CGU over its recoverable amount, which is the greater of its fair value less costs to sell and value in use. For mineral properties and processing facilities, the recoverable amount is estimated as the discounted future net cash inflows expected to be derived from expected future production, metal prices, and net proceeds from the disposition of assets on retirement, less operating and capital costs. Impairment losses are recognized in the period they are incurred.
For exploration and evaluation assets, indication of impairment includes but is not limited to expiration of the right to explore, substantive expenditures in the specific area are neither budgeted nor planned, and exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Impairment losses are reversed if there is evidence the loss no longer exists or has decreased. This reversal is recognized in net income in the period the reversal occurs limited by the carrying value that would have been determined, net of any depreciation, had no impairment charge been recognized in prior years.
(g) Share-based Payments
The Company grants share-based awards, including restricted share units ("RSUs") and stock options to directors, officers, employees, and consultants.
For share-based awards, the fair value is charged to the consolidated statements of income and credited to equity, on a straight-line basis over the vesting period, after adjusting for the estimated number of awards that are expected to vest. The fair value of share units is determined based on quoted market price of the Company's common shares at the date of grant. The fair value of the stock options granted to employees, officers, and directors is determined at the date of grant using the Black-Scholes option pricing model with market related input. The fair value of stock options granted to consultants is measured at the fair value of the services delivered unless that fair value cannot be estimated reliably, which then is determined using the Black-Scholes option pricing model. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.
At each statement of financial position date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is computed (after adjusting for non-market performance conditions). The movement in cumulative expense is recognized in the consolidated statements of income with a corresponding entry within equity. The amount recognized as expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met.
(h) Income Taxes
Current tax for each taxable entity is based on the local taxable income at the local substantively enacted statutory tax rate at the balance sheet date and includes adjustments to taxes payable or recoverable in respect to previous periods.
Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred tax is recognized using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses, can be utilized, except:
- where the deferred tax asset or liability relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been substantively enacted by the end of the reporting period.
Deferred tax relating to items recognized outside profit or loss is recognized in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(i) Earnings (loss) per Share
Earnings (loss) per share is computed by dividing net income (loss) attributable to equity holders of the Company by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to be issued under securities that entitle their holders to obtain common shares in the future. For RSUs, the full outstanding numbers as at the end of the period are included in the calculation of diluted earnings per share. For stock options, the number of additional shares for inclusion in diluted earnings per share calculations is determined when the exercise price is less than the average market price of the Company's common shares; the stock options are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the period. The incremental number of common shares issued under stock options and repurchased from proceeds is included in the calculation of diluted earnings per share. When loss per share is presented in the period, the Company's calculation of diluted loss per share excludes any incremental shares from the assumed calculation of RSUs and stock options as they would be anti-dilutive.
(j) Financial Instruments
Initial recognition:
On initial recognition, all financial assets and financial liabilities are recorded at fair value adjusted for directly attributable transaction costs except for financial assets and liabilities classified as fair value through profit or loss ("FVTPL"), in which case transaction costs are expensed as incurred.
Subsequent measurement of financial assets:
Subsequent measurement of financial assets depends on the classification of such assets.
I. Non-equity instruments:
IFRS 9 includes a single model that has only two classification categories for financial instruments other than equity instruments: amortized cost and fair value. To qualify for amortized cost accounting, the instrument must meet two criteria:
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
i. The objective of the business model is to hold the financial asset for the collection of the cash flows; and
ii. All contractual cash flows represent only principal and interest on that principal.
All other instruments are mandatorily measured at fair value.
II. Equity instruments:
At initial recognition, for equity instruments other than held for trading, the Company may make an irrevocable election to designate it as either FVTPL or fair value through other comprehensive income ("FVTOCI").
Financial assets classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization from the effective interest method is included in finance income.
Financial assets classified as FVTPL are measured at fair value with changes in fair values recognized in profit or loss. Equity investments designated as FVTOCI are measured at fair value with changes in fair values recognized in other comprehensive income ("OCI"). Dividends from that investment are recorded in profit or loss when the Company's right to receive payment of the dividend is established unless they represent a recovery of part of the cost of the investment.
Impairment of financial assets carried at amortized cost:
The Company assesses at the end of each reporting period whether there is objective evidence that financial assets or group of financial assets measured at amortized cost are impaired. Impairment losses and reversal of impairment losses, if any, are recognized in profit or loss in the period they are incurred.
Subsequent measurement of financial liabilities:
Financial liabilities classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization using the effective interest method is included in finance costs.
The Company classifies its financial instruments as follows:
- Financial assets classified as FVTPL: cash, short-term investments - bonds, and equity investments;
- Financial assets classified as amortized cost: receivables and short-term investments - guaranteed investment certificates; and
- Financial liabilities classified as amortized cost: trade and other payables, provisions and due to related parties.
Bonds:
The Company acquired bonds issued by other companies from various industries through the open market. These bonds are held to receive coupon interest payments and to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for other operational or investment needs. Bonds are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement.
Equity investments:
Equity investments represent equity interests of other publicly-traded or privately-held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares and warrants. Equity investments are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Derecognition of financial assets and financial liabilities:
A financial asset is derecognized when:
- The rights to receive cash flows from the asset have expired; or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Gains and losses on derecognition of financial assets and liabilities classified as amortized cost are recognized in profit or loss when the instrument is derecognized or impaired, as well as through the amortization process.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. In this case, a new liability is recognized, and the difference in the respective carrying amounts is recognized in the consolidated statement of income.
Offsetting of financial instruments:
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position if and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle liabilities simultaneously.
Fair value of financial instruments:
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without deduction for transaction costs. For financial instruments that are not traded in active markets, the fair value is determined using appropriate valuation techniques, such as using a recent arm's length market transaction between knowledgeable and willing parties, discounted cash flow analysis, reference to the current fair value of another instrument that is substantially the same, or other valuation models.
(k) Significant Judgments and Estimation Uncertainties
Many amounts included in the consolidated financial statements require management to make judgments and/or estimates. These judgments and estimates are continuously evaluated and are based on management's experience and knowledge of relevant facts and circumstances. Actual results may differ from the amounts included in the consolidated statement of financial position.
Areas of significant judgment include:
- Capitalization of expenditures with respect to exploration, evaluation and development costs to be included in mineral rights and properties.
- Determination of functional currency.
- Recognition, measurement and impairment or impairment reversal assessment for mineral rights and properties.
- Accounting assessment and classification for equity investments and short-term investments.
- Determination of asset acquisition or business combination.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Areas of significant estimates include:
- The estimated fair values of CGUs for impairment or impairment reversal tests, including estimates of future costs to produce proven and probable reserves, future commodity prices, discount rates, probabilities of expected cash flows from disposal and salvage value of plant and equipment.
- Valuation input and forfeiture rates used in calculation of share-based compensation.
- Valuation of securities that do not have a quoted market price.
The Company estimates its ore reserves and mineral resources based on information compiled by qualified persons as defined in accordance with National Instrument 43-101.
(l) Accounting Standards Issued But Not Yet Effective
Amendment to IAS 16 - Property, Plant and Equipment. The amendments to IAS 16 prohibit deducting from the cost of property, plant and equipment the proceeds from selling items produced while bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by management. Instead, a company will recognize such sales proceeds and related cost in profit or loss.
This amendment is effective January 1, 2022 with early adoption permitted. The Company is in the process of assessing the impact of the application of this amendment on the consolidated financial statements.
3. WHITEHORSE GOLD CORP. SPIN-OUT TRANSACTION
During Fiscal 2020, the Company established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the Tagish Lake Gold Project ("TLG Project") located in Yukon Territory, Canada from the Company for consideration of $2,201,350 (CAD$3,000,000) via a promissory note plus 20,000,000 Whitehorse Gold common shares ("spin-out shares") as a result of a strategic review on the TLG Project (see note 9).
On November 18, 2020, the Company received the consideration of $2,201,350 and distributed all of the spin-out shares held by it to the Company's shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). The spin-out shares were valued at $6,906,548 upon distribution. Assets and liabilities of Whitehorse Gold and the TLG Project were classified as held for distribution as at June 30, 2020 in the amount of $8,695,312 and $89,653, respectively.
4. SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| Guaranteed Investment Certificates | $ | - | $ | 14,677,890 | $ | - | |||
| Bonds | 143,914 | 462,829 | 8,361,655 | ||||||
| $ | 143,914 | $ | 15,140,719 | $ | 8,361,655 |
The Company acquired guaranteed investment certificates ("GICs") through major Canadian financial institutions. These GICs were held to receive interest payments until maturity. The Company accounts for the GICs at amortized cost at each reporting date.
The Company acquired bonds issued by other companies from various industries through the open market. These bonds were held to receive coupon interest payments and to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for operational or investment needs. The Company accounts for the bonds at fair value at each reporting date.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
The continuity of GICs is summarized as follows:
| Amount | |||
| Balance, July 1, 2019 | $ | - | |
| Acquisition | 14,895,360 | ||
| Interest earned | 2,255 | ||
| Foreign currency translation impact | (219,725 | ) | |
| Balance, June 30, 2020 | $ | 14,677,890 | |
| Interest earned | 69,206 | ||
| Interest received | (70,964 | ) | |
| Disposition | (15,596,974 | ) | |
| Foreign currency translation impact | 920,842 | ||
| Balance, June 30, 2021 | $ | - |
The continuity of bonds is summarized as follows:
| Amount | |||
| Balance, July 1, 2019 | $ | 8,361,655 | |
| Interest earned | 269,275 | ||
| Loss on fair value change | (279,768 | ) | |
| Coupon payment | (299,005 | ) | |
| Disposition | (7,589,328 | ) | |
| Balance, June 30, 2020 | $ | 462,829 | |
| Loss on fair value change | (318,915 | ) | |
| Balance, June 30, 2021 | $ | 143,914 |
5. OTHER TAX RECEIVABLE
Other tax receivable is composed of value-added tax ("VAT") imposed by the Bolivian government. The Company had VAT outputs through its exploration costs and general expenses incurred in Bolivia. These VAT outputs are deductible against future VAT inputs that will be generated through sales.
6. EQUITY INVESTMENTS
Equity investments represent equity interests of other publicly-traded or privately-held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares, preferred shares and warrants. Equity investments are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
The equity investments are summarized as follows:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| Common or preferred shares | |||||||||
| Public companies | $ | 461,635 | $ | 3,519,196 | $ | 3,395,708 | |||
| Private companies | - | - | 250,000 | ||||||
| Warrants | |||||||||
| Public companies | 34,891 | 592,626 | 259,612 | ||||||
| $ | 496,526 | $ | 4,111,822 | $ | 3,905,320 |
The fair values of the warrants were estimated using the Black Scholes options pricing model with the following assumptions:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| Risk free interest rate | 0.97% | 0.36% | 1.39% | ||||||
| Expected volatility | 114% | 122% | 130% | ||||||
| Expected life of warrants in years | 0.19 | 1.20 | 2.19 |
The continuity of equity investments is summarized as follows:
| Accumulated mark-to- | ||||||
| market gain included | ||||||
| Fair value | in net income | |||||
| Balance, July 1, 2019 | $ | 3,905,320 | $ | 2,319,464 | ||
| Acquisition | 3,737,498 | - | ||||
| Proceeds on disposal | (4,566,635 | ) | - | |||
| Change in fair value | 1,196,084 | 1,196,084 | ||||
| Foreign exchange impact | (160,445 | ) | - | |||
| Balance, June 30, 2020 | $ | 4,111,822 | $ | 3,515,548 | ||
| Proceeds on disposal | (4,345,636 | ) | - | |||
| Change in fair value | 455,597 | 455,597 | ||||
| Foreign exchange impact | 274,743 | - | ||||
| Balance, June 30, 2021 | $ | 496,526 | $ | 3,971,145 |
7. INCOME FROM INVESTMENTS
Income from investments consist of:
| Year Ended June 30, | ||||||
| 2021 | 2020 | |||||
| Fair value change on equity investments | $ | 455,597 | $ | 1,196,085 | ||
| Fair value change on bonds | (318,915 | ) | (10,493 | ) | ||
| Dividend income | 110,293 | 103,968 | ||||
| Interest income | 148,568 | 22,361 | ||||
| Income from investments | $ | 395,543 | $ | 1,311,921 | ||
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
8. PLANT AND EQUIPMENT
| Office | ||||||||||||||||||
| Land and | equipment and | Computer | ||||||||||||||||
| Cost | building | Machinery | Motor vehicles | furniture | software | Total | ||||||||||||
| Balance, July 1, 2019 | $ | 1,310,639 | $ | 1,055,450 | $ | 268,155 | $ | 175,262 | $ | 96,475 | $ | 2,905,981 | ||||||
| Additions | - | 39,275 | 30,011 | 57,769 | 102,552 | 229,607 | ||||||||||||
| Reclassified to assets held for distribution | - | - | - | - | (10,187 | ) | (10,187 | ) | ||||||||||
| Foreign currency translation impact | (27,019 | ) | (35,688 | ) | (2,601 | ) | (4,657 | ) | (5,340 | ) | (75,305 | ) | ||||||
| Balance, June 30, 2020 | $ | 1,283,620 | $ | 1,059,037 | $ | 295,565 | $ | 228,374 | $ | 183,500 | $ | 3,050,096 | ||||||
| Additions | - | 2,232 | - | 110,935 | - | 113,167 | ||||||||||||
| Disposals | (653,620 | ) | (859,519 | ) | (54,146 | ) | (37,327 | ) | (31 | ) | (1,604,643 | ) | ||||||
| Foreign currency translation impact | - | 497 | 1,163 | 13,259 | 18,266 | 33,185 | ||||||||||||
| Balance, June 30, 2021 | $ | 630,000 | $ | 202,247 | $ | 242,582 | $ | 315,241 | $ | 201,735 | $ | 1,591,805 | ||||||
| Accumulated depreciation and amortization | ||||||||||||||||||
| Balance, July 1, 2019 | $ | (680,640 | ) | $ | (878,165 | ) | $ | (107,922 | ) | $ | (141,209 | ) | $ | (96,439 | ) | $ | (1,904,375 | ) |
| Depreciation and amortization | - | (22,795 | ) | (40,305 | ) | (26,136 | ) | (1,446 | ) | (90,682 | ) | |||||||
| Reclassified to assets held for distribution | - | - | - | - | 34 | 34 | ||||||||||||
| Foreign currency translation impact | 27,020 | 33,953 | 2,413 | 4,728 | 3,847 | 71,961 | ||||||||||||
| Balance, June 30, 2020 | $ | (653,620 | ) | $ | (867,007 | ) | $ | (145,814 | ) | $ | (162,617 | ) | $ | (94,004 | ) | $ | (1,923,062 | ) |
| Depreciation and amortization | - | (24,538 | ) | (45,820 | ) | (38,080 | ) | (23,769 | ) | (132,207 | ) | |||||||
| Disposals | 653,620 | 819,698 | 54,556 | 73,376 | 31 | 1,601,281 | ||||||||||||
| Foreign currency translation impact | - | (224 | ) | (506 | ) | (8,270 | ) | (10,178 | ) | (19,178 | ) | |||||||
| Balance, June 30, 2021 | $ | - | $ | (72,071 | ) | $ | (137,584 | ) | $ | (135,591 | ) | $ | (127,920 | ) | $ | (473,166 | ) | |
| Carrying amount | ||||||||||||||||||
| Balance, June 30, 2020 | $ | 630,000 | $ | 192,030 | $ | 149,751 | $ | 65,757 | $ | 89,496 | $ | 1,127,034 | ||||||
| Balance, June 30, 2021 | $ | 630,000 | $ | 130,176 | $ | 104,998 | $ | 179,650 | $ | 73,815 | $ | 1,118,639 |
During the year ended June 30, 2021, certain plant and equipment were disposed for proceeds of $1,418 (year ended June 30, 2020, $nil) and loss of $1,944 (year ended June 30, 2020, $nil).
9. MINERAL PROPERTY INTERESTS
(a) Silver Sand Project
On July 20, 2017, the Company acquired the Silver Sand Project. The Project is located in the Colavi District of the Potosí Department, in Southwestern Bolivia, 25 kilometres ("km") northwest of Potosí City, the department capital. The Project covers an area of approximately 5.42 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. Subsequent to June 30, 2021, the Company announced that it commenced a planned 38,000 m drill program on the project in 2021.
Advanced studies have commenced on the project, and the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc to lead the Preliminary Economic Assessment, environmental baseline study, and social baseline studies, respectively.
For the year ended June 30, 2021, total expenditures of $3,357,104 (year ended June 30, 2020 - $9,482,197) were capitalized under the project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in the Autorización Transitoria Especiales ("ATE") located to the north of the Silver Sand Project by cash payments of $1,000,000 and the issuance of 832,000 common shares to the vendors (see note 12(c)). During Fiscal 2019 and Fiscal 2020, cash payments of $800,000 were paid and 541,000 common shares were issued to the vendors. During the year ended June 30, 2021, the final payment of $200,000 cash and 291,000 common shares were paid and issued to the vendors, respectively.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
(b) Carangas Project
In April 2021, the Company signed an agreement with a private Bolivian company to acquire a 98% joint venture interest in the Carangas silver project.
The Carangas Project is located approximately 180 km southwest of the city of Oruro and within 50 km from Bolivia's border with Chile. The joint venture partner is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 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 for the project. The agreement has a term of 30 years and is renewable for an additional 15 years.
On June 29, 2021, the Company announced the commencement of a 5,000 m initial discovery drill program on the project in 2021.
For the year ended June 30, 2021, total expenditures of $250,427 (year ended June 30, 2020 - $nil) were capitalized under the project.
(c) Silverstrike Project
In December 2019, the Company acquired a 98% joint venture interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000.
The Silverstrike Project covers an area of approximately 13 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 year ended June 30, 2021, total expenditures of $1,293,907 (year ended June 30, 2020 - $476,728) were capitalized under the project.
(d) TLG Project
The TLG Project, covering an area of approximately 170 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. In Q4, fiscal 2020, given the significant changes with favourable effects on the TLG Project, the Company recognized an impairment recovery of $8,724,915 on the TLG project, being its fair value less costs of disposal ("FVLCD") for the year ended June 30, 2020. The fair value was determined using a market approach based on the pricing parameters implied by the market value of selected comparable transactions involving the sale of similar companies or mineral properties. Specifically, the comparable in-situ resource multiples (Enterprise Value ("EV") per ounce of contained gold ("EV/R&R")) observed in comparable transactions has been used to estimate the fair value.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
On November 18, 2020, the Whitehorse Gold spin-out transaction was completed and, as a result, the Company no longer holds an interest in the TLG Project (see note 3).
For the year ended June 30, 2021, total expenditures of $312,593 (year ended June 30, 2020 - $78,242) were capitalized to assets held for distribution under the TLG Project prior to its disposal.
The project's carrying value of $8,985,913 was disposed upon the completion of the Whitehorse Gold spin-out transaction, resulting in no gain or loss.
(e) RZY Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu Tibetan Autonomous Prefecture. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY Project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company's subsidiary, Qinghai Found Mining Co., Ltd. ("Qinghai Found"), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of June 30, 2021, the process was under review and subject to approval by the Qinghai Government.
The continuity schedule of mineral property acquisition costs and deferred exploration and development costs is summarized as follows:
| Cost | Silver Sand | Silverstrike | Carangas | Tagish Lake | RZY Project | Total | ||||||||||||
| Balance, July 1, 2019 | $ | 55,995,583 | $ | - | $ | - | $ | - | $ | 2,700,897 | $ | 58,696,480 | ||||||
| Capitalized exploration expenditures | ||||||||||||||||||
| Reporting and assessment | 447,953 | 727 | - | - | - | 448,680 | ||||||||||||
| Drilling and assaying | 4,856,789 | 1,666 | - | - | - | 4,858,455 | ||||||||||||
| Project management and support | 3,386,249 | 436,473 | - | - | - | 3,822,722 | ||||||||||||
| Camp service | 492,674 | 37,862 | - | - | - | 530,536 | ||||||||||||
| Camp construction | 24,135 | - | - | - | - | 24,135 | ||||||||||||
| Permitting | 38,250 | - | - | 78,242 | - | 116,492 | ||||||||||||
| Acquisition of Silverstrike Project | - | 1,350,000 | - | - | - | 1,350,000 | ||||||||||||
| Acquisition of mineral concessions | 216,147 | - | - | - | - | 216,147 | ||||||||||||
| Other | 20,000 | - | - | - | - | 20,000 | ||||||||||||
| Impairment recovery | - | - | - | 8,724,915 | - | 8,724,915 | ||||||||||||
| Reclassified to assets held for distribution | - | - | - | (8,673,320 | ) | - | (8,673,320 | ) | ||||||||||
| Foreign currency impact | (176,786 | ) | (5,538 | ) | - | (129,837 | ) | (77,281 | ) | (389,442 | ) | |||||||
| Balance, June 30, 2020 | $ | 65,300,994 | $ | 1,821,190 | $ | - | $ | - | $ | 2,623,616 | $ | 69,745,800 | ||||||
| Capitalized exploration expenditures | ||||||||||||||||||
| Reporting and assessment | 482,355 | 4,119 | - | 47,538 | - | 534,012 | ||||||||||||
| Drilling and assaying | 78,201 | 169,102 | 21,952 | - | - | 269,255 | ||||||||||||
| Project management and support | 2,505,338 | 996,005 | 178,753 | - | - | 3,680,096 | ||||||||||||
| Camp service | 225,016 | 113,666 | 49,569 | - | - | 388,251 | ||||||||||||
| Camp construction | 53,199 | - | - | 215,238 | - | 268,437 | ||||||||||||
| Permitting | 12,995 | 11,015 | 153 | 49,817 | - | 73,980 | ||||||||||||
| Disposal upon spin-out distribution | - | - | - | (312,593 | ) | (312,593 | ) | |||||||||||
| Foreign currency impact | 587,402 | 48,207 | 4,823 | - | 247,752 | 888,184 | ||||||||||||
| Balance, June 30, 2021 | $ | 69,245,500 | $ | 3,163,304 | $ | 255,250 | $ | - | $ | 2,871,368 | $ | 75,535,422 |
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
10. TRADE AND OTHER PAYABLES
Trade and other payables consist of:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | |||||||
| Trade payable | $ | 626,683 | $ | 450,779 | $ | 1,078,041 | |||
| Accrued liabilities | 417,506 | 703,814 | 160,903 | ||||||
| $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 |
11. RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:
| Due to a related party | June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||||
| Silvercorp Metals Inc. | $ | 50,378 | $ | 62,182 | $ | 68,151 |
(a) Silvercorp Metals Inc. ("Silvercorp") has two directors and one officer in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Expenses in general and administrative services rendered and incurred by Silvercorp on behalf of the Company for the year ended June 30, 2021 were $616,030 (year ended June 30, 2020 - $586,138).
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel for the years ended June 30, 2021 and 2020 are as follows:
| Year ended June 30, | ||||||
| 2021 | 2020 | |||||
| Director's cash compensation | $ | 290,463 | $ | 55,858 | ||
| Director's share-based compensation | 604,970 | 446,652 | ||||
| Key management's cash compensation | 859,394 | 940,323 | ||||
| Key management's share-based compensation | 1,709,004 | 2,205,258 | ||||
| $ | 3,463,831 | $ | 3,648,091 | |||
Other than as disclosed above, the Company does not have any ongoing contractual or other commitments resulting from transactions with related parties.
12. SHARE CAPITAL
(a) Share Capital - authorized share capital
The Company's authorized share capital consists of an unlimited number of common shares without par value.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
(b) Share-based compensation
The Company has a share-based compensation plan (the "Plan") under which the Company may issue stock options and restricted share units ("RSUs"). The maximum number of common shares to be reserved for issuance on any share-based compensation under the Plan is a rolling 10% of the issued and outstanding common shares from time to time.
For the year ended June 30, 2021, a total of $1,482,170 (year ended June 30, 2020 - $1,584,730) was recorded as share-based compensation expense.
For the year ended June 30, 2021, a total of $114,356 (year ended June 30, 2020 - $56,299) was included in the project evaluation and corporate development expense.
For the year ended June 30, 2021, a total of $802,839 (year ended June 30, 2020 - $1,118,873) was capitalized under mineral property interests.
(i) Stock Options
The continuity schedule of stock options, as at June 30, 2021, is as follows:
| Weighted average | ||||||
| Number of options | exercise price (CAD$) | |||||
| Balance, July 1, 2019 | 5,905,000 | 1.36 | ||||
| Options exercised | (888,066 | ) | 1.16 | |||
| Options cancelled | (354,167 | ) | 1.91 | |||
| Balance, June 30, 2020 | 4,662,767 | 1.36 | ||||
| Options exercised | (1,396,935 | ) | 0.98 | |||
| Options cancelled | (150,000 | ) | 0.82 | |||
| Balance, June 30, 2021 | 3,115,832 | 1.56 |
Option pricing model requires the input of subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate and therefore, the existing models do not necessarily provide a reliable estimate of the fair value of the Company's stock options. The Company's expected volatility is based on the historical volatility of the Company's share price on the TSX.
For the year ended June 30, 2021, a total of 1,396,935 (year ended June 30, 2020 - 888,066) stock options with weighted average share price at the date of exercise of $5.34 (year ended June 30, 2020 - $3.77) were exercised.
The following table summarizes information about stock options outstanding as at June 30, 2021:
|
|
|
Number of options |
Weighted |
Number of options |
Weighted |
|
|
Exercise |
outstanding as at |
average remaining |
exercisable as at |
average |
|
|
prices (CAD$) |
2021-06-30 |
contractual life (years) |
2021-06-30 |
exercise price (CAD$) |
|
$ |
0.55 |
495,000 |
0.34 |
495,000 |
$0.55 |
|
|
1.15 |
930,000 |
1.08 |
930,000 |
$1.15 |
|
|
1.57 |
200,000 |
1.44 |
200,000 |
$1.57 |
|
|
2.15 |
1,490,832 |
2.65 |
889,169 |
$2.15 |
|
|
0.55 - 2.15 |
3,115,832 |
1.74 |
2,514,169 |
$1.42 |
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
Subsequent to June 30, 2021, a total of 553,331 options with exercise prices of CAD$1.15 and CAD$2.15 were exercised for proceeds of $692,770 and a total of 41,667 options with an exercise price of $2.15 were cancelled.
(ii) RSUs
The continuity schedule of RSUs, as at June 30, 2021, is as follows:
| Weighted average | ||||||
| grant date closing | ||||||
| Number of shares | price per share (CAD$) | |||||
| Balance, July 1, 2019 | - | $ | - | |||
| Granted | 1,064,600 | 4.70 | ||||
| Cancelled | (3,000 | ) | 4.70 | |||
| Distributed | (136,400 | ) | 4.70 | |||
| Balance, June 30, 2020 | 925,200 | $ | 4.70 | |||
| Granted | 360,500 | 6.46 | ||||
| Cancelled | (26,250 | ) | 4.80 | |||
| Distributed | (464,550 | ) | 4.72 | |||
| Balance, June 30, 2021 | 794,900 | $ | 5.48 |
Subsequent to June 30, 2021, a total of 59,650 RSUs were distributed and a total of 25,000 RSUs were cancelled.
During the year ended June 30, 2021, a total of 360,500 RSUs were granted to directors, officers, employees, and consultants of the Company at grant date closing price of CAD$6.46 per share subject to a vesting schedule over a three-year term with 1/6 of the RSUs vesting every six months from the date of grant.
(c) Common Shares issued for mineral property interests
As partial consideration for the acquisition of ATEs located to the north of the Silver Sand Property (see note 9(a)), the Company agreed to issue a total of 832,000 common shares to the vendors valued at $1,000,000 in the year ended June 30, 2019. During the year ended June 30, 2021, 291,000 common shares valued at $350,479 (year ended June 30, 2020 - 291,000 common shares valued at $349,759) were issued and recorded under share capital.
(d) (Loss) earning per share
| For the years ended June 30, | ||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||
| Loss | Shares | Per-Share | Income | Shares | Per-Share | |||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||
| Net (loss) income attributable to equity holders of the Company | $ | (6,566,440 | ) | $ | 5,907,726 | |||||||||||||
| Basic (loss) earnings per share | (6,566,440 | ) | 153,294,454 | $ | (0.04 | ) | 5,907,726 | 146,254,726 | $ | 0.04 | ||||||||
| Effect of dilutive securities: | ||||||||||||||||||
| Stock options and RSUs | - | 4,433,827 | ||||||||||||||||
| Diluted (loss) earnings per share | $ | (6,566,440 | ) | 153,294,454 | $ | (0.04 | ) | $ | 5,907,726 | 150,688,553 | $ | 0.04 | ||||||
Anti-dilutive options that are not included in the diluted (loss) earnings per share calculation were nil for the year ended June 30, 2021 (year ended June 30, 2020 - nil).
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
13. NON-CONTROLLING INTEREST
| Qinghai Found | |||
| Balance, July 1, 2019 | $ | (12,246 | ) |
| Share of net loss | (14,458 | ) | |
| Share of other comprehensive loss | (14,666 | ) | |
| Balance, June 30, 2020 | $ | (41,370 | ) |
| Share of net loss | (7,934 | ) | |
| Share of other comprehensive income | 45,714 | ||
| Balance, June 30, 2021 | $ | (3,590 | ) |
As at June 30, 2021 and June 30, 2020, the non-controlling interest in the Company's subsidiary Qinghai Found was 18%.
14. FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.
(a) Fair Value
The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 - Fair Value Measurement ("IFRS 13").
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs which are supported by little or no market activity.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
The following table sets forth the Company's financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at June 30, 2021 and June 30, 2020 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Fair value as at June 30, 2021 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash | $ | 46,441,482 | $ | - | $ | - | $ | 46,441,482 | ||||
| Short-term investments - bonds | 143,914 | - | - | 143,914 | ||||||||
| Common or preferred shares | 461,635 | - | - | 461,635 | ||||||||
| Warrants | - | 34,891 | - | 34,891 | ||||||||
| Fair value as at June 30, 2020 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash | $ | 29,824,146 | $ | - | $ | - | $ | 29,824,146 | ||||
| Short-term investments - bonds | 462,829 | - | - | 462,829 | ||||||||
| Common or preferred shares | 3,519,196 | - | - | 3,519,196 | ||||||||
| Warrants | - | 592,626 | - | 592,626 | ||||||||
| Fair value as at July 1, 2019 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash | $ | 21,280,631 | $ | - | $ | - | $ | 21,280,631 | ||||
| Short-term investments - bonds | 8,361,655 | - | - | 8,361,655 | ||||||||
| Common or preferred shares | 3,395,708 | - | 250,000 | 3,645,708 | ||||||||
| Warrants | - | 259,612 | - | 259,612 | ||||||||
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of June 30, 2021, June 30, 2020 and July 1, 2019, respectively.
There were no transfers into or out of Level 3 during the year ended June 30, 2021.
(b) Liquidity Risk
The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at June 30, 2021, the Company had a working capital position of $46,357,578 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the next 12 months.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company's financial liabilities:
| June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||||||||
| Due within a year | Total | Total | Total | |||||||||
| Trade and other payables | $ | 1,044,189 | $ | 1,044,189 | $ | 1,154,593 | $ | 1,238,944 | ||||
| Due to a related party | 50,378 | 50,378 | 62,182 | 68,151 | ||||||||
| Payable for mineral property acquisition | - | - | 193,073 | 301,582 | ||||||||
| $ | 1,094,567 | $ | 1,094,567 | $ | 1,409,848 | $ | 1,608,677 | |||||
(c) Foreign Exchange Risk
The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is RMB. The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk that could affect net income is summarized as follows:
| Financial assets denominated in foreign currencies other than relevant functional currency | June 30, 2021 | June 30, 2020 | July 1, 2019 | ||||||
| United States dollars | $ | 11,079,194 | $ | 11,158,435 | $ | 13,460,154 | |||
| Bolivianos | 285,267 | 297,147 | 146,102 | ||||||
| Chinese RMB | - | 160,123 | 146,439 | ||||||
| Total | $ | 11,364,461 | $ | 11,615,705 | $ | 13,752,695 | |||
| Financial liabilities denominated in foreign currencies other than relevant functional currency | |||||||||
| United States dollars | $ | - | $ | 432,922 | $ | 1,016,643 | |||
| Bolivianos | 333,405 | - | - | ||||||
| Chinese RMB | - | 101,060 | 3,254 | ||||||
| Total | $ | 333,405 | $ | 533,982 | $ | 1,019,897 |
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $111,000.
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately $500.
(d) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of June 30, 2021. The Company, from time to time, also owns GICs and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond's fair value. An increase in market interest rates will generally reduce bond's fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
(e) Credit Risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's exposure to credit risk is primarily associated with cash, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as the majority of its cash are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at June 30, 2021, the Company had a receivables balance of $343,608 (June 30, 2020 - $303,488). There were no material amounts in receivables which were past due on June 30, 2021 (June 30, 2020 - $nil).
(f) Equity Price Risk
The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company's portfolio at June 30, 2021, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $50,000.
15. CAPITAL MANAGEMENT
The objectives of the capital management policy are to safeguard the Company's ability to support exploration and operating requirements on an ongoing basis, continue the investment in high quality assets along with safeguarding the value of its mineral properties, and support any expansionary plans.
The capital of the Company consists of the items included in equity less cash and bonds. Risk and capital management are primarily the responsibility of the Company's corporate finance function and is monitored by the Board. The Company manages the capital structure and makes adjustments depending on economic conditions. Significant risks are monitored and actions are taken, when necessary, according to the Company's approved policies.
In addition, the current COVID-19 pandemic has caused significant disruption to global economic conditions which may adversely impact the Company's results.
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
16. INCOME TAXES
The provision for income taxes differs from the amount computed by applying the cumulative Canadian federal and provincial income tax rates to the loss before income tax provision due to the following:
| Years ended June 30, | ||||||
| 2021 | 2020 | |||||
| Canadian statutory tax rate | 27.00% | 27.00% | ||||
| (Loss) income before income taxes | $ | (6,574,374 | ) | $ | 5,893,268 | |
| Income tax (recovery) expense computed at Canadian statutory rates | (1,775,081 | ) | 1,591,182 | |||
| Foreign tax rates different from statutory rate | 218,388 | (324,652 | ) | |||
| Permanent items and other | 3,633,845 | 614,589 | ||||
| Change in unrecognized deferred tax assets | (2,078,112 | ) | (1,881,119 | ) | ||
| Adjustments in respect of prior years | 960 | - | ||||
| $ | - | $ | - | |||
Deferred tax assets are recognized to the extent that the realization of the related tax benefit through future taxable profit is probable. The ability to realize the tax benefits is dependent upon numerous factors, including the future profitability of operations in the jurisdiction in which the tax benefit arise. Deductible temporary differences and unused tax losses for which no deferred tax assets have been recognized are attributable to the following:
| June 30, 2021 | June 30, 2020 | July 31, 2019 | |||||||
| Non-capital loss carry forward | $ | 9,184,009 | $ | 11,844,993 | $ | 11,096,051 | |||
| Capital loss carry forward | 23,435,600 | - | - | ||||||
| Plant and equipment | 155,152 | 2,289,041 | 2,371,361 | ||||||
| Mineral property interests | 3,519,176 | 16,767,840 | 26,374,381 | ||||||
| Equity investments | 572,253 | 535,456 | - | ||||||
| Share issuance cost | 1,624,469 | - | - | ||||||
| Investment tax credit | - | 1,191,951 | 1,241,225 | ||||||
| $ | 38,490,659 | $ | 32,629,281 | $ | 41,083,018 |
As of June 30, 2021, the Company has the following net operating losses, expiring various years to 2041 and available to offset future taxable income in Canada, Bolivia and China, respectively:
| Canada | Bolivia | China | |||||||
| 2025 | - | - | 38,535 | ||||||
| 2027 | - | - | 48,331 | ||||||
| 2028 | - | - | 87,248 | ||||||
| 2029 | - | - | 85,919 | ||||||
| 2037 | - | 44,849 | - | ||||||
| 2038 | - | 22,571 | - | ||||||
| 2039 | - | 115,876 | - | ||||||
| 2040 | - | - | - | ||||||
| 2041 | 7,976,944 | 763,736 | - | ||||||
| $ | 7,976,944 | $ | 947,032 | $ | 260,033 |
As at June 30, 2021, the Company had capital loss carry forward of $23,435,600 that can be carried indefinitely in Canada (June 30, 2020 - $nil).
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
17. SEGMENTED INFORMATION
As at and for the year ended June 30, 2021, the Company operates in three (as at and for the year ended June 30, 2020 - four) reportable operating segments, one being the corporate segment; the other two being the exploration and development segments focused on safeguarding the value of its mineral properties in Bolivia and China (as at and for the year ended June 30, 2020 - one being the corporate segment; the other three being the exploration and development segments in Bolivia, Canada, and China). These reporting segments are components of the Company where separate financial information is available that is evaluated regularly by the Company's Chief Executive Officer, the chief operating decision maker ("CODM"). The CODM no longer reviews the Canada reportable segment as a result of the Whitehorse Gold spin-out transaction (see note 3 and 9(d)).
(a) Segment information for assets and liabilities are as follows:
| June 30, 2021 | |||||||||||||
| Corporate | Exploration and Development | Total | |||||||||||
| Canada and BVI | Bolivia | China | |||||||||||
| Cash | $ | 46,259,720 | $ | 158,539 | $ | 23,223 | $ | 46,441,482 | |||||
| Short-term investments | 143,914 | - | - | 143,914 | |||||||||
| Equity investments | 496,526 | - | - | 496,526 | |||||||||
| Plant and equipment | 115,340 | 988,503 | 14,796 | 1,118,639 | |||||||||
| Mineral property interests | - | 72,664,054 | 2,871,368 | 75,535,422 | |||||||||
| Other assets | 461,135 | 2,427,576 | 194,430 | 3,083,141 | |||||||||
| Total Assets | $ | 47,476,635 | $ | 76,238,672 | $ | 3,103,817 | $ | 126,819,124 | |||||
| Total Liabilities | $ | (573,163 | ) | $ | (333,405 | ) | $ | (187,999 | ) | $ | (1,094,567 | ) | |
| June 30, 2020 | ||||||||||||||||
| Corporate | Exploration and Development | Total | ||||||||||||||
| Canada and BVI | Bolivia | Canada | China | |||||||||||||
| Cash | $ | 29,357,060 | $ | 132,379 | $ | 308,086 | $ | 26,621 | $ | 29,824,146 | ||||||
| Short-term investments | 15,140,719 | - | - | - | 15,140,719 | |||||||||||
| Equity investments | 4,111,822 | - | - | - | 4,111,822 | |||||||||||
| Plant and equipment | 137,935 | 972,430 | - | 16,669 | 1,127,034 | |||||||||||
| Mineral property interests | - | 67,122,184 | - | 2,623,616 | 69,745,800 | |||||||||||
| Assets held for distribution | - | - | 8,695,312 | - | 8,695,312 | |||||||||||
| Other assets | 118,793 | 2,308,957 | - | 139,668 | 2,567,418 | |||||||||||
| Total Assets | $ | 48,866,329 | $ | 70,535,950 | $ | 9,003,398 | $ | 2,806,574 | $ | 131,212,251 | ||||||
| Total Liabilities | $ | (875,866 | ) | $ | (432,923 | ) | $ | (89,652 | ) | $ | (101,060 | ) | $ | (1,499,501 | ) | |
| July 1, 2019 | ||||||||||||||||
| Corporate | Exploration and Development | |||||||||||||||
| Canada and BVI | Bolivia | Canada | China | Total | ||||||||||||
| Cash | $ | 20,915,897 | $ | 293,675 | $ | 22,837 | $ | 48,222 | $ | 21,280,631 | ||||||
| Short-term investments | 8,361,655 | - | - | 8,361,655 | ||||||||||||
| Equity investments | 3,905,320 | - | - | 3,905,320 | ||||||||||||
| Plant and equipment | 24,997 | 959,449 | 17,160 | 1,001,606 | ||||||||||||
| Mineral property interests | - | 55,995,582 | 2,700,898 | 58,696,480 | ||||||||||||
| Other assets | 50,537 | 1,528,016 | 11,614 | 104,459 | 1,694,626 | |||||||||||
| Total Assets | $ | 33,258,406 | $ | 58,776,722 | $ | 34,451 | $ | 2,870,739 | $ | 94,940,318 | ||||||
| Total Liabilities | $ | (704,371 | ) | $ | (1,016,642) $ | $ | (85,464 | ) | $ | (3,254 | ) | $ | (1,809,731 | ) | ||
|
New Pacific Metals Corp. |
| (Expressed in US dollars) |
(b) Segment information for operating results are as follows:
| Year ended June 30, 2021 | ||||||||||||
| Corporate | Exploration and Development | Total | ||||||||||
| Canada and BVI | Bolivia | China | ||||||||||
| Project evaluation and corporate development | $ | (295,315 | ) | $ | (527,549 | ) | $ | - | $ | (822,864 | ) | |
| Salaries and benefits | (1,465,709 | ) | (188,340 | ) | (34,638 | ) | (1,688,687 | ) | ||||
| Share-based compensation | (1,482,170 | ) | - | - | (1,482,170 | ) | ||||||
| Other operating expenses | (1,897,162 | ) | (47,846 | ) | (7,256 | ) | (1,952,264 | ) | ||||
| Total operating expense | (5,140,356 | ) | (763,735 | ) | (41,894 | ) | (5,945,985 | ) | ||||
| Income from investments | 395,421 | - | 122 | 395,543 | ||||||||
| Loss on disposal of plant and equipment | - | - | (1,944 | ) | (1,944 | ) | ||||||
| Foreign exchange loss | (1,021,628 | ) | - | - | (1,021,628 | ) | ||||||
| Other expense | - | - | (360 | ) | (360 | ) | ||||||
| Net loss | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (44,076 | ) | $ | (6,574,374 | ) |
| Attributed to: | ||||||||||||
| Equity holders of the Company | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (36,142 | ) | $ | (6,566,440 | ) |
| Non-controlling interests | - | - | (7,934 | ) | (7,934 | ) | ||||||
| Net loss | $ | (5,766,563 | ) | $ | (763,735 | ) | $ | (44,076 | ) | $ | (6,574,374 | ) |
| Year ended June 30, 2020 | |||||||||||||||
| Corporate | Exploration and Development | Total | |||||||||||||
| Canada | Bolivia | Canada | China | ||||||||||||
| Project evaluation and corporate development | $ | (90,184 | ) | $ | (115,876 | ) | $ | - | $ | - | $ | (206,060 | ) | ||
| Salaries and benefits | (1,200,781 | ) | - | (73,539 | ) | (50,379 | ) | (1,324,699 | ) | ||||||
| Share-based compensation | (1,584,730 | ) | - | - | - | (1,584,730 | ) | ||||||||
| Other operating expenses | (1,429,865 | ) | - | (33,037 | ) | (30,198 | ) | (1,493,100 | ) | ||||||
| Total operating expense | (4,305,560 | ) | (115,876 | ) | (106,576 | ) | (80,577 | ) | (4,608,589 | ) | |||||
| Income from investments | 1,311,764 | - | - | 157 | 1,311,921 | ||||||||||
| Impairment recovery of mineral property interests | - | - | 8,724,915 | - | 8,724,915 | ||||||||||
| Foreign exchange gain | 464,896 | - | 22 | 103 | 465,021 | ||||||||||
| Other income (expense) | 22,343 | - | (22,343 | ) | - | - | |||||||||
| Net (loss) income | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (80,317 | ) | $ | 5,893,268 | ||
| Attributed to: | |||||||||||||||
| Equity holders of the Company | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (65,859 | ) | $ | 5,907,726 | ||
| Non-controlling interests | - | - | - | (14,458 | ) | $ | (14,458 | ) | |||||||
| Net (loss) income | $ | (2,506,557 | ) | $ | (115,876 | ) | $ | 8,596,018 | $ | (80,317 | ) | $ | 5,893,268 | ||
18. SUPPLEMENTARY CASH FLOW INFORMATION
| Changes in non-cash operating working capital: | Year Ended June 30, | |||||
| 2021 | 2020 | |||||
| Receivables | $ | (22,615 | ) | $ | (110,087 | ) |
| Deposits and prepayments | (340,059 | ) | (56,776 | ) | ||
| Accounts payable and accrued liabilities | (178,289 | ) | 75,944 | |||
| Due to a related party | (17,393 | ) | (3,312 | ) | ||
| $ | (558,356 | ) | $ | (94,231 | ) | |
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the year ended June 30, 2021
(Expressed in US Dollars)*
|
*The Company changed its presentation currency from Canadian Dollars to US Dollars effective on July 1, 2020. Certain comparative financial information in this MD&A have been restated to reflect this change. Please refer to Note 2(c) of the audited consolidated financial statements for the year ended June 30, 2021. |
|
NEW PACIFIC METALS CORP. |
DATE OF REPORT: September 15, 2021
This MD&A for New Pacific Metals Corp. and its subsidiaries (collectively, "New Pacific" or the "Company") should be read in conjunction with the Company's audited consolidated financial statements for the year ended June 30, 2021 and the related notes contained therein. The Company reports its financial position, financial performance, and cash flow in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Company's significant accounting policies are set out in Note 2 of the audited consolidated financial statements for the year ended June 30, 2021.
BUSINESS STRATEGY
The Company is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company's flagship project is the Silver Sand Project. With experienced management and sufficient technical and financial resources, the Company is well positioned to create shareholder value through exploration and Mineral Resource development.
The Company is publicly listed on the Toronto Stock Exchange ("TSX") under the symbol "NUAG" and on the NYSE American stock exchange ("NYSE-A") under the symbol "NEWP". The head office, registered address and records office of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
FISCAL 2021 HIGHLIGHTS
- Maintained working capital of $46.36 million, sufficient to advance the Silver Sand Project and regional exploration initiatives, including the Carangas and Silverstrike Projects;
- Silver Sand Preliminary Economic Analysis ("PEA") continues to advance as scheduled. A 38,000-metre ("m") exploration and resource expansion drill program commenced in July 2021;
- Received an administrative mining contract for the Silver Sand Project, establishing a clear title to the project mineral rights;
- Acquired a 98% interest in the Carangas Silver Project in April 2021. A 5,000 m initial discovery drill program commenced in June 2021;
- Identified three significant new zones of gold and silver rich polymetallic mineralization on the Silverstrike Project;
- Developed and implemented a Company-wide environmental policy and corporate social responsibility policy;
- Successfully completed the spin-out transaction of Whitehorse Gold Corp. (TSX.V: WHG.V), enabling shareholders to realize the value of the Tagish Lake Gold Project in the current strong gold market;
- Listed on the Toronto Stock Exchange ("TSX") and delisted all of the Company's issued and outstanding shares from the TSX Venture Exchange ("TSX.V") in August 2020; and
|
NEW PACIFIC METALS CORP. |
- Listed on the NYSE-A in May 2021, achieving a significant milestone in the growth of the Company.
PROJECTS OVERVIEW
COVID-19 Pandemic Response
In response to the COVID-19 pandemic, the Company's Health & Safety Team has implemented Company-wide safety protocols such as a 14-day self-isolation where necessary, travel restrictions, remote working and enhanced hygiene controls. The Company also continues to provide assistance to the communities neighbouring our projects by donating medical and hygiene supplies, personal protective equipment, and food supplies as part of the Company's ongoing social responsibility program.
Silver Sand Project
The Silver Sand Project is located in the Colavi District of Potosí Department in southwestern Bolivia at an elevation of 4,072 m above sea level, 25 kilometres ("km") northwest of Potosí City, the department capital.
The project is comprised of two claim blocks, the Silver Sand South and North Blocks, which encompass a total area of 5.42 km2. The Silver Sand South Block, covering an area of 3.17 km2, hosts the Silver Sand deposit and was originally comprised of 17 Autorización Transitoria Especiales ("ATEs"), formerly known as mining concessions. Under the existing Bolivian mining laws, ATEs are required to be consolidated into an Administrative Mining Contract ("AMC"). New Pacific, through its wholly owned subsidiary, Minera Alcira S.A. ("Alcira"), submitted all required documents to the Bolivian Jurisdictional Mining Administrative Authority (Autoridad Jurisdiccional Administrativa Minera or "AJAM") for the consolidation and conversion of these 17 ATEs to cuadriculas and an AMC. On August 12, 2021, AJAM granted the AMC to Alcira. As of the date of this MD&A, all required registration, notarization and publication steps to perfect the title of the AMC in favour of Alcira have been completed. The AMC establishes a clear title to the Company's Silver Sand South Block. The Silver Sand North Block covers an area of 2.25 km2 and is comprised of three ATEs (Jisas, Jardan and El Bronce). The Company is in the process of converting these ATEs to an AMC.
A summary of Bolivian mining laws with respect to AMCs and exploration licenses is presented below.
Exploration and mining rights in Bolivia are granted by the Ministry of Mines and Metallurgy through AJAM. Under Bolivian mining laws, tenure is granted as either an AMC or an exploration license. Tenure held under the previous legislation was converted to ATEs, which are now required to be consolidated into new 25-hectare sized cuadriculas (concessions) and converted to AMCs. AMCs created by conversion recognize existing rights of exploration and/or exploitation and development, including treatment, metal refining, and/or trading. AMCs have a fixed term of 30 years and can be extended for a further 30 years if certain conditions are met. Each contract requires ongoing work and the submission of plans to AJAM.
Exploration licenses permit exploration activities only and must be converted to AMCs to conduct exploitation and development activities. Exploration licenses are valid for a maximum of five years and provide the holder with the preferential right to request an AMC. In specific areas, mineral tenure is owned by the Bolivian state mining corporation, Corporación Minera de Bolivia ("COMIBOL"). In these areas, development and production agreements can be obtained by entering into a Mining Production Contract ("MPC") with COMIBOL.
Since acquiring the project in 2017, the Company has carried out extensive exploration and resource definition drill programs. From 2017 to 2019, the Company completed a total of 97,619 m of drilling in 386 diamond core drillholes.
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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. For further details, please refer to the Company's news release dated April 14, 2020 and an amended and restated technical report entitled "Silver Sand Deposit Mineral Resource Report (Amended)" prepared by Adrienne Ross, Dinara Nussipakvnova, Simeon Robinson and Andrew Holloway of AMC Consultants (Canada) Ltd. with an effective date of January 16, 2020 and filed under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.newpacificmetals.com.
Advanced studies have commenced on the project and the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc to lead the PEA, environmental baseline study, and social baseline study, respectively.
On July 27, 2021, the Company announced the commencement of a planned 38,000 m diamond drill program with the objectives to expand the existing resource, which remains open along strike and at depth, and to complete geotechnical drilling to support the PEA study. Highlights of the drill program include:
- 80% of the drill program is intended to focus on expanding the existing Mineral Resources and discovering new resources;
- 5,000 m of the drill program is dedicated to testing for feeder zones for the large Silver Sand deposit;
- District exploration drilling to target the North Block and Snake Hole Zone; and
- Mineral continuity and geotechnical drilling to support the Silver Sand PEA.
For additional information on the 2021 drill program at the Silver Sand Project, please see the Company's news release dated July 27, 2021.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $1,125,702 and $3,357,104, respectively (three months and year ended June 30, 2020 - $1,253,126 and $9,482,197, respectively) were capitalized under the project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in the ATEs located to the north of the Silver Sand Project by cash payments of $1,000,000 and the issuance of 832,000 common shares to the vendors. During Fiscal 2019 and Fiscal 2020, cash payments of $800,000 were paid and 541,000 common shares were issued to the vendors. During the year ended June 30, 2021, the final payment of $200,000 cash and 291,000 common shares were paid and issued to the vendors, respectively.
Mining Production Contract
On January 11, 2019, New Pacific announced that Alcira entered into an MPC with COMIBOL granting Alcira the right to carry out exploration, development and mining production activities in ATEs and cuadriculas owned by COMIBOL adjoining the Company's Silver Sand Project. The MPC is comprised of two areas. The first area is located to the south and west of the Silver Sand Project. The second area includes additional geologically prospective ground to the north, east and south of the Silver Sand Project, wherein COMIBOL is expected to apply for exploration and mining rights with AJAM. Upon granting of the exploration and mining rights, COMIBOL will contribute these additional properties to the MPC.
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NEW PACIFIC METALS CORP. |
There are no known economic mineral deposits, nor any previous drilling or exploration discoveries within the MPC area. The MPC presents an opportunity to explore and evaluate the possible extensions and/or satellites of mineralization outside of the currently defined Silver Sand Project.
The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulation, community relations, taxation or otherwise. A change in the government's position on these issues could adversely affect the ratification of the MPC and the Company's business.
Carangas Project
In April 2021, the Company signed a mining association agreement with a private Bolivian company and acquired a 98% joint venture interest in the Carangas Project. Under the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development and production activities for the project. The agreement has a term of 30 years and is renewable for additional 15 years.
On June 29, 2021, the Company announced the commencement of an initial discovery drill program at the Carangas Project to test near-surface bulk-tonnage and high-grade vein-hosted silver-rich polymetallic targets centred on and adjacent to the historically exploited West and East Dome areas. For additional details, please refer to the Company's news releases dated April 12, 2021 and June 14, 2021. Phase I of the 5,000 m drill program is expected to be comprised of approximately 20 drillholes with an initial 3,000 m to be completed over an eight-week period. Contingent on the success of initial results, follow-up drilling will comprise the remainder of the budgeted 5,000 m program.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $nil and $250,427, respectively (three months and year ended June 30, 2020 - $nil and $nil, respectively) were capitalized under the project.
Silverstrike Project
The Silverstrike Project is located approximately 140 km southwest of La Paz, Bolivia. In December 2019, the Company signed a mining association agreement and acquired a 98% joint venture interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000. The private Bolivian corporation is owned 100% by Bolivian nationals and holds the title to the nine ATEs (covering an area of approximately 13 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.
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NEW PACIFIC METALS CORP. |
The Silverstrike Project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district - the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver-rich occurrences associated with sercitic alteration. The area is largely underexplored, with limited modern exploration to date. The Company's joint venture partner has applied for exploration rights over areas surrounding the Silverstrike Project on behalf of the joint venture.
During 2020, the Company's exploration team completed reconnaissance and detailed mapping and sampling programs on the northern portion of the project. The results to date indicate good to excellent exploration potential for hosting narrow, high-grade, near-surface broad-zones of silver mineralization. Please refer to the Company's news release dated September 29, 2020 for details on the exploration program at the northern areas of the project and to the news release dated November 19, 2020 for details on exploration activities and field work on the central and southern areas of the project.
Frontier Area - Carangas and Silverstrike Projects
The Carangas and the Silverstrike projects are located within 50 km of the Bolivian border with Chile. In line with many South American countries, Bolivia does not permit foreign entities to own property within 50 km of international borders (the "Frontier Area"). Property owners in the Frontier Area are, however, permitted to enter into mining association agreements, or joint ventures, with third parties, including foreign entities, for the development of mining activities under Bolivian Law No. 535 on Mining and Metallurgy. While the Company believes the joint ventures for the Carangas and the Silverstrike projects are legally compliant with the Frontier Area requirements and Bolivian mining laws, there is no assurance that the Company's Bolivian joint venture partners will be successful in obtaining the approval of AJAM to convert the exploration licenses to AMC in the case of Carangas Project and the mining association agreement in the case of the Silverstrike Project, or that even if approved, that such relationships and structures will not be challenged by other Bolivian governmental authorities.
Project Expenditures
For the three months and year ended June 30, 2021, total expenditures of $15,026 and $1,293,907, respectively (three months and year ended June 30, 2020 - $155,217 and $476,728, respectively) were capitalized under the project.
Tagish Lake Gold Project
The Tagish Lake Gold Project ("TLG Project"), covering an area of approximately 170 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. In Q4, fiscal 2020, given the significant changes with favourable effects on the TLG Project, the Company recognized an impairment recovery of $8,724,915 on the TLG Project, being its fair value less costs of disposal ("FVLCD") for the year ended June 30, 2020. The fair value was determined using a market approach based on the pricing parameters implied by the market value of selected comparable transactions involving the sale of similar companies or mineral properties. Specifically, the comparable in-situ resource multiples (Enterprise Value ("EV") per ounce of contained gold ("EV/R&R")) observed in comparable transactions has been used to estimate the fair value.
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NEW PACIFIC METALS CORP. |
For the year ended June 30, 2021, total expenditures of $312,593 (year ended June 30, 2020 - $78,242) were capitalized to assets held for distribution under the TLG Project prior to its disposal.
The project's carrying value of $8,985,913 was disposed upon the completion of the Whitehorse Gold spin-out transaction, resulting in no gain or loss.
During Fiscal 2020, the Company established Whitehorse Gold Corp. ("Whitehorse Gold") to acquire the TLG Project from the Company for consideration of $2,201,350 (CAD$3,000,000) via a promissory note plus 20,000,000 Whitehorse Gold common shares ("spin-out shares") as a result of a strategic review on the TLG Project.
On November 18, 2020, the Company received the consideration of $2,201,350 and distributed all of the spin-out shares held by it to the Company's shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). The spin-out shares were valued at $6,906,548 upon distribution. Assets and liabilities of Whitehorse Gold and the TLG Project were classified as held for distribution as at June 30, 2020 in the amount of $8,695,312 and $89,653, respectively. On November 15, 2020, Whitehorse Gold's common shares were listed for trading on the TSX.V under the symbol "WHG". As a result of the spin-out, the Company no longer holds an interest in Whitehorse Gold or the TLG Project.
RZY Silver-Lead-Zinc Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu, Tibetan Autonomous Prefecture, or 820 km from Qinghai Province's capital city of Xining. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company's subsidiary, Qinghai Found Mining Co., Ltd. ("Qinghai Found"), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of June 30, 2021, the process was under review and subject to approval by the Qinghai Government.
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NEW PACIFIC METALS CORP. |
Overall Expenditure Summary
The continuity schedule of mineral property acquisition costs, deferred exploration and development costs are summarized as follows:
| Cost | Silver Sand | Silverstrike | Carangas | Tagish Lake | RZY Project | Total | ||||||||||||
| Balance, July 1, 2019 | $ | 55,995,583 | $ | - | $ | - | $ | - | $ | 2,700,897 | $ | 58,696,480 | ||||||
| Capitalized exploration expenditures | ||||||||||||||||||
| Reporting and assessment | 447,953 | 727 | - | - | - | 448,680 | ||||||||||||
| Drilling and assaying | 4,856,789 | 1,666 | - | - | - | 4,858,455 | ||||||||||||
| Project management and support | 3,386,249 | 436,473 | - | - | - | 3,822,722 | ||||||||||||
| Camp service | 492,674 | 37,862 | - | - | - | 530,536 | ||||||||||||
| Camp construction | 24,135 | - | - | - | - | 24,135 | ||||||||||||
| Permitting | 38,250 | - | - | 78,242 | - | 116,492 | ||||||||||||
| Acquisition of Silverstrike Project | - | 1,350,000 | - | - | - | 1,350,000 | ||||||||||||
| Acquisition of mineral concessions | 216,147 | - | - | - | - | 216,147 | ||||||||||||
| Other | 20,000 | - | - | - | - | 20,000 | ||||||||||||
| Impairment recovery | - | - | - | 8,724,915 | - | 8,724,915 | ||||||||||||
| Reclassified to assets held for distribution | - | - | - | (8,673,320 | ) | - | (8,673,320 | ) | ||||||||||
| Foreign currency impact | (176,786 | ) | (5,538 | ) | - | (129,837 | ) | (77,281 | ) | (389,442 | ) | |||||||
| Balance, June 30, 2020 | $ | 65,300,994 | $ | 1,821,190 | $ | - | $ | - | $ | 2,623,616 | $ | 69,745,800 | ||||||
| Capitalized exploration expenditures | ||||||||||||||||||
| Reporting and assessment | 482,355 | 4,119 | - | 47,538 | - | 534,012 | ||||||||||||
| Drilling and assaying | 78,201 | 169,102 | 21,952 | - | - | 269,255 | ||||||||||||
| Project management and support | 2,505,338 | 996,005 | 178,753 | - | - | 3,680,096 | ||||||||||||
| Camp service | 225,016 | 113,666 | 49,569 | - | - | 388,251 | ||||||||||||
| Camp construction | 53,199 | - | - | 215,238 | - | 268,437 | ||||||||||||
| Permitting | 12,995 | 11,015 | 153 | 49,817 | - | 73,980 | ||||||||||||
| Disposal upon spin-out distribution | - | - | - | (312,593 | ) | (312,593 | ) | |||||||||||
| Foreign currency impact | 587,402 | 48,207 | 4,823 | - | 247,752 | 888,184 | ||||||||||||
| Balance, June 30, 2021 | $ | 69,245,500 | $ | 3,163,304 | $ | 255,250 | $ | - | $ | 2,871,368 | $ | 75,535,422 |
INVESTMENTS OVERVIEW
Short-Term Investments
Short-term investments consist of the following:
| June 30, 2021 | June 30, 2020 | |||||
| Guaranteed Investment Certificates | $ | - | $ | 14,677,890 | ||
| Bonds | 143,914 | 462,829 | ||||
| $ | 143,914 | $ | 15,140,719 |
Equity Investments
Equity investments represent equity interests of other publicly traded or privately held companies that the Company has acquired through the open market or through private placements. These equity interests consist of common shares, preferred shares, and warrants.
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NEW PACIFIC METALS CORP. |
The Company's equity investments are summarized as follows:
| June 30, 2021 | June 30, 2020 | |||||
| Common or preferred shares | ||||||
| Public companies | $ | 461,635 | $ | 3,519,196 | ||
| Warrants | ||||||
| Public companies | 34,891 | 592,626 | ||||
| $ | 496,526 | $ | 4,111,822 |
FINANCIAL RESULTS
Selected Annual Information
| Fiscal 2021 | Fiscal 2020 | Fiscal 2019 | |||||||
| Operating expense | $ | (5,945,985 | ) | $ | (4,608,589 | ) | $ | (2,468,617 | ) |
| Income from Investments | 395,543 | 1,311,921 | 1,157,659 | ||||||
| Impairment recovery (loss) of mineral property interests | - | 8,724,915 | (589,123 | ) | |||||
| Other (loss) income | (1,023,932 | ) | 465,021 | (43,527 | ) | ||||
| Net (loss) income | (6,574,374 | ) | 5,893,268 | (1,943,608 | ) | ||||
| Net (loss) income attributable to equity holders | (6,566,440 | ) | 5,907,726 | (1,828,891 | ) | ||||
| Basic and diluted (loss) earnings per share | (0.04 | ) | 0.04 | (0.01 | ) | ||||
| Total current assets | 47,452,145 | 54,127,165 | 29,949,437 | ||||||
| Total non-current assets | 79,366,979 | 77,085,086 | 64,990,881 | ||||||
| Total current liabilities | 1,094,567 | 1,499,501 | 1,608,677 | ||||||
| Total non-current liabilities | - | - | 201,054 |
Net loss attributable to equity holders of the Company for the year ended June 30, 2021 was $6,566,440 or $0.04 per share (year ended June 30, 2020 - net income of $5,907,726 or $0.04 per share). The Company's financial results were mainly impacted by the following: (i) operating expenses of $5,945,985 compared to $4,608,589 in the prior year; (ii) income from investments of $395,543 compared to $1,311,921 in the prior year; (iii) impairment recovery of $nil compared to $8,724,915 in the prior year; and (iv) foreign exchange loss of $1,021,628 compared to gain of $465,021 in the prior year.
Net loss attributable to equity holders of the Company for the three months ended June 30, 2021 was $1,972,372 or $0.01 per share (three months ended June 30, 2020 - net income of $7,448,576 or $0.05 per share).
Operating expenses for the three months and year ended June 30, 2021 were $1,567,955 and $5,945,985, respectively (three months and year ended June 30, 2020 - $1,472,028 and $4,608,589, respectively). Items included in operating expenses were as follows:
(i) Project evaluation and corporate development expenses for the three months and year ended June 30, 2021 of $154,252 and $822,864, respectively (three months and year ended June 30, 2020 - $206,060 and $206,060, respectively). The Company is actively seeking and evaluating other exploration and investment opportunities in Bolivia after its initial success on the Silver Sand Project.
(ii) Filing and listing fees for the three months and year ended June 30, 2021 of $122,243 and $393,814, respectively (three months and year ended June 30, 2020 - $51,172 and $128,142, respectively). The increase in filing and listing fees in the current periods was a result of the Company's graduation from TSX.V to TSX and listing on NYSE-A.
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NEW PACIFIC METALS CORP. |
(iii) Investor relations expenses for the three months and year ended June 30, 2021 of $80,009 and $337,714, respectively (three months and year ended June 30, 2020 - $90,106 and $536,902, respectively). Decrease in investor relations expenses was a result of reduced travel expenses due to the COVID-19 pandemic.
(iv) Professional fees for the three months and year ended June 30, 2021 of $102,755 and $498,207, respectively (three months and year ended June 30, 2020 - $90,644 and $303,031, respectively). The increase in professional fees in the current periods was related to the Whitehorse Gold spin-out transaction, the Company's graduation to the TSX and listing on NYSE-A.
(v) Salaries and benefits expense for the three months and year ended June 30, 2021 of $514,501 and $1,688,687, respectively (three months and year ended June 30, 2020 - $402,365 and $1,324,699, respectively). Salaries and benefits increased in the current periods as a result of the increased annual incentive payout and estimates on future payouts.
(vi) Office and administration expenses for the three months and year ended June 30, 2021 of $184,114 and $678,529, respectively (three months and year ended June 30, 2020 - $118,752 and $513,030, respectively). Office and administrative expenses increased in the current periods as a result of the inclusion of the Company's La Paz office expenses as it transitioned to a regional office overseeing multiple projects. Previously, the La Paz office expenses were capitalized under the Silver Sand Project as its sole function was to serve that project.
(vii) Share-based compensation for the three months and year ended June 30, 2021 of $398,797 and $1,482,170, respectively (three months and year ended June 30, 2020 - $610,147 and $1,584,730, respectively).
Income from investments for the year ended June 30, 2021 was $395,543 (year ended June 30, 2020 - income of $1,311,921) and is comprised of a $455,597 gain on the Company's equity investments, a $318,915 loss on bonds, $110,293 income from dividends, and $148,568 interest earned from GICs and other cash accounts.
Loss from investments for the three months ended June 30, 2021 was $210,861 (three months ended June 30, 2020 - income from investments of $664,464) and is comprised of a $263,278 loss on the Company's equity investments, a $20,015 gain on bonds, $1,543 income from dividends, and $30,859 interest earned from cash accounts.
Foreign exchange loss for the year ended June 30, 2021 was $1,021,628 (year ended June 30, 2020 - gain of $465,021). The Company holds a large portion of cash and short-term investments in US dollars to support its operations in Bolivia. Revaluation of these US-dollar-denominated financial assets to their Canadian dollar functional currency equivalents resulted in unrealized foreign exchange gain or loss for the relevant reporting periods. During the year ended June 30, 2021, the US dollar depreciated by 9.1% against the Canadian dollar (from 1.3628 to 1.2394) while in the prior year the US dollar appreciated by 4.1% against the Canadian dollar (from 1.3087 to 1.3628).
Foreign exchange loss for the three months ended June 30, 2021 was $195,443 (three months ended June 30, 2020 - $471,044).
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NEW PACIFIC METALS CORP. |
| Selected Quarterly Information | ||||||||||||
| For the Quarters Ended | ||||||||||||
| Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | |||||||||
| Operating expense | $ | (1,567,955 | ) | $ | (1,604,319 | ) | $ | (1,251,752 | ) | $ | (1,521,959 | ) |
| (Loss) income from Investments | (210,861 | ) | 71,747 | (98,800 | ) | 633,457 | ||||||
| Other loss | (195,483 | ) | (159,261 | ) | (425,463 | ) | (243,725 | ) | ||||
| Net loss | (1,974,299 | ) | (1,691,833 | ) | (1,776,015 | ) | (1,132,227 | ) | ||||
| Net loss attributable to equity holders | (1,972,372 | ) | (1,689,401 | ) | (1,774,420 | ) | (1,130,247 | ) | ||||
| Basic and diluted loss per share | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||
| Total current assets | 47,452,145 | 48,511,033 | 50,497,592 | 53,157,010 | ||||||||
| Total non-current assets | 79,366,979 | 78,164,236 | 76,719,133 | 79,236,381 | ||||||||
| Total current liabilities | 1,094,567 | 811,042 | 1,180,315 | 1,518,961 | ||||||||
| Total non-current liabilities | - | - | - | - | ||||||||
| For the Quarters Ended | ||||||||||||
| Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | |||||||||
| Operating expense | $ | (1,472,028 | ) | $ | (1,141,354 | ) | $ | (1,231,089 | ) | $ | (764,118 | ) |
| Income (loss) from Investments | 664,464 | (1,212,187 | ) | 257,517 | 1,602,127 | |||||||
| Impairment of mineral property interests | 8,724,915 | - | - | - | ||||||||
| Other (loss) income | (471,044 | ) | 1,047,061 | (244,548 | ) | 133,552 | ||||||
| Net income (loss) | 7,446,307 | (1,306,480 | ) | (1,218,120 | ) | 971,561 | ||||||
| Net income (loss) attributable to equity holders | 7,448,576 | (1,303,094 | ) | (1,211,656 | ) | 973,900 | ||||||
| Basic and diluted earnings (loss) per share | 0.05 | (0.01 | ) | (0.01 | ) | 0.01 | ||||||
| Total current assets | 54,127,165 | 29,369,814 | 33,025,625 | 29,383,139 | ||||||||
| Total non-current assets | 77,085,086 | 74,936,839 | 74,495,178 | 66,575,909 | ||||||||
| Total current liabilities | 1,499,501 | 1,420,226 | 1,432,489 | 2,011,187 | ||||||||
| Total non-current liabilities | - | - | - | - | ||||||||
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash used in operating activities for the three months and year ended June 30, 2021 was $886,287 and $4,602,952, respectively (three months and year ended June 30, 2020 - $666,789 and $2,626,717, respectively). The increase during the current periods was mainly due to the increase in operating expense and negative impact from the change in non-cash operating working capital.
Cash provided by investing activities for the year ended June 30, 2021 was $17,601,787 (year ended June 30, 2020 - cash used in investing activities of $17,904,434). Cash flows from investing activities were mainly impacted by: (i) capital expenditures for mineral properties and equipment of $4,427,631 on the exploration projects in Bolivia compared to $10,703,063 in the prior year; (ii) proceeds of $15,596,974 from maturity of GIC compared to net purchase of $7,306,032 in the prior year; (iii) $4,345,636 net proceeds from disposal of equity investments compared to net proceeds of $829,137 in the prior year; and (iv) $2,201,350 consideration received upon the completion of the Whitehorse Gold spin-out in the current year.
Cash provided by investing activities for the three months ended June 30, 2021 was $1,076,265 (three months ended June 30, 2020 - cash used in investing activities of $15,094,096).
Cash provided by financing activities for the year ended June 30, 2021 was $1,076,157 (year ended June 30, 2020 -$30,070,791). Cash flows from financing activities during the current year were proceeds arising from stock option exercises. In the prior year, cash flows from financing activities were net proceeds of $29,303,208 raised from two bought deal financings plus $767,583 from stock option exercises.
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NEW PACIFIC METALS CORP. |
Cash provided by financing activities for the three months ended June 30, 2021 was $303,294 (three months ended June 30, 2020 - $17,584,162).
Liquidity and Access to Capital
As of June 30, 2021, the Company had working capital of $46,357,578 (June 30, 2020 - $52,627,664), comprised of cash of $46,441,482 (June 30, 2020 - $29,824,146), short term investments of $143,914 (June 30, 2020 - $15,140,719), assets held for distribution of $nil (June 30, 2020 - $8,695,312), and other current assets of $866,749 (June 30, 2020 - $466,988) offset by current liabilities of $1,094,567 (June 30, 2020 - $1,499,501). Management believes that the Company has sufficient funds to support its normal exploration and operating requirements on an ongoing basis.
The Company does not have unlimited resources and its future capital requirements will depend on many factors, including, among others, cash flow from interest, dividends, and realized gains on investments. To the extent that its existing resources and the funds generated by future income are insufficient to fund the Company's operations, the Company may need to raise additional funds through public or private debt or equity financing. If additional funds are raised through the issuance of equity securities, the percentage ownership of current shareholders will be reduced and such equity securities may have rights, preferences or privileges senior to those of the holders of the Company's common shares. No assurance can be given that additional financing will be available or that, if available, it can be obtained on terms favourable to the Company and its shareholders. If adequate funds are not available, the Company may be required to delay, limit or eliminate some or all of its proposed operations. The Company believes it has sufficient capital to meet its cash needs for the next 12 months, including the costs of compliance with continuing reporting requirements.
In addition, the current COVID-19 pandemic has caused significant disruption to global economic conditions, which may adversely impact the Company's results.
Use of Proceeds of Prior Financings
On October 25, 2019 and June 9, 2020, the Company successfully closed two bought deal financings underwritten by BMO Capital Markets that raised net proceeds of $11,927,767 and $17,375,441, respectively. The following table sets out a comparison between the Company's planned and actual use of these net proceeds as of June 30, 2021.
|
NEW PACIFIC METALS CORP. |
|
OCTOBER 25, 2019 BMO BOUGHT DEAL |
PLANNED USE OF |
ACTUAL USE OF |
VARIANCE |
EXPLANATION OF VARIANCE AND IMPACT ON |
|
PROCEEDS |
|
|||
|
Offering |
$ 11,299,435 |
$ 12,994,785 |
$ 1,695,350 |
Actual funds raised was more than planned due to high market demand. |
|
Underwriter's fee and offering related expense |
(964,218) |
(1,067,018) |
(102,800) |
|
|
Net proceeds |
$ 10,335,217 |
$ 11,927,767 |
$ 1,592,550 |
|
|
USE OF PROCEEDS |
|
|||
|
2019 Drill Program for the Silver Sand Project |
||||
|
Drilling of 55,000 meters |
$ 6,152,000 |
$ 5,266,437 |
$ (885,563) |
42,604 meters of drilling completed. Less than planned work but sufficient for inaugural NI43- 101 report. |
|
Assaying and sampling of 53,854 samples |
2,000,000 |
1,881,369 |
(118,631) |
34,563 assay samples tested. Quantity was less than planned but testing procedures per sample was more extensive than planned to achieve more comprehensive results for NI43-101 purpose. |
|
Equipment |
525,000 |
263,360 |
(261,640) |
Less equipment was used than planned to achieve the results. |
|
Site expenses |
312,000 |
1,784,525 |
1,472,525 |
Unspent funds from other categories were allocated to site expenditures throughout 2020 and 2021. |
|
Community relations |
111,000 |
28,818 |
(82,182) |
Some planned programs such as building soccer fields etc. were postponed to be commenced in the second half of 2021 or 2022. |
|
Concession renewal |
1,500 |
1,926 |
426 |
|
|
Metallurgical testing |
203,000 |
207,610 |
4,610 |
|
|
Technical report |
255,000 |
187,390 |
(67,610) |
Slightly less than budgeted amount. |
|
Overhead office costs |
2,301,000 |
2,315,634 |
14,634 |
|
|
TOTAL |
$ 11,860,500 |
$ 11,937,069 |
$ 76,569 |
Net proceeds from this financing were fully used. |
|
JUNE 9, 2020 BMO BOUGHT DEAL FINANCING |
PLANNED USE OF |
ACTUAL USE OF |
VARIANCE |
EXPLANATION OF VARIANCE AND IMPACT ON |
|
PROCEEDS |
|
|||
|
Offering |
$ 18,835,556 |
$ 18,836,190 |
$ 634 |
|
|
Underwriter's fee and offering related expense |
(1,416,386) |
(1,460,749) |
(44,363) |
|
|
Net proceeds |
$ 17,419,170 |
$ 17,375,441 |
$ (43,729) |
|
|
USE OF PROCEEDS |
|
|||
|
2020-2021 Exploration Program for Silver Sand Project |
||||
|
Drilling of 26,000 meters |
$ 3,200,000 |
$ - |
$ (3,200,000) |
The planned 26,000 metre drilling program was postponed due to COVID-19 pandemic. A 38,000 meters drill program commenced on July 27, 2021. The delay of the program added marginal overhead costs and is expected to have minimal long-term impact on the Company's objective. |
|
Assaying and sampling of 21,000 samples |
1,100,000 |
46,475 |
(1,053,525) |
|
|
Other field operation expenditures |
1,600,000 |
64,424 |
(1,535,576) |
|
|
Advanced studies |
1,100,000 |
431,851 |
(668,149) |
PEA study commenced according to plan and budget. Environmental baseline study ($650,000 budgeted) was delayed due to COVID-19 pandemic. |
|
Community relations and social studies |
500,000 |
123,963 |
(376,037) |
Donations of medical and living supplies to local communities. Planned community programs and socio-economic baseline study was delayed due to COVID-19 pandemic. |
|
Exploration camp construction |
3,800,000 |
54,933 |
(3,745,067) |
Camp design completed. Construction is scheduled to commence. |
|
Subtotal for Silver Sand Project |
$ 11,300,000 |
$ 721,646 |
$ (10,578,354) |
|
|
2020-2021 Exploration Program for Other Regions and Projects in Bolivia |
||||
|
Drilling of 34,000 meters |
$ 4,300,000 |
$ - |
$ (4,300,000) |
5,000 meters drill program for Carangas Project commenced on June 29, 2021. |
|
Assaying and sampling of 34,000 samples |
1,700,000 |
218,031 |
(1,481,969) |
|
|
Other field operating expenditures |
119,170 |
1,259,803 |
1,140,633 |
Unspent funds from other categories were allocated to camp, exploration and management services related to Silverstrike Project, Carangas Project, and other regional exploration activities. |
|
Subtotal for other exploration programs |
$ 6,119,170 |
$ 1,477,834 |
$ (4,641,336) |
|
|
TOTAL |
$ 17,419,170 |
$ 2,199,480 |
$ (15,219,690) |
Unspent funds of $15.2 million was part of the Company's cash balance of approximately $46 million as of June 30, 2021. |
|
NEW PACIFIC METALS CORP. |
Although the Company intends to use the proceeds from the June 9, 2020 financing as set forth above, the actual allocation of the net proceeds may vary depending on future developments or unforeseen events.
FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. The Board has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.
(a) Fair Value
The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 - Fair Value Measurement ("IFRS 13").
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The following table sets forth the Company's financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at June 30, 2021 and June 30, 2020 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Fair value as at June 30, 2021 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash | $ | 46,441,482 | $ | - | $ | - | $ | 46,441,482 | ||||
| Short-term investments - bonds | 143,914 | - | - | 143,914 | ||||||||
| Common or preferred shares | 461,635 | - | - | 461,635 | ||||||||
| Warrants | - | 34,891 | - | 34,891 | ||||||||
| Fair value as at June 30, 2020 | ||||||||||||
| Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Financial Assets | ||||||||||||
| Cash | $ | 29,824,146 | $ | - | $ | - | $ | 29,824,146 | ||||
| Short-term investments - bonds | 462,829 | - | - | 462,829 | ||||||||
| Common or preferred shares | 3,519,196 | - | - | 3,519,196 | ||||||||
| Warrants | - | 592,626 | - | 592,626 | ||||||||
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of June 30, 2021 and June 30, 2020, respectively.
|
NEW PACIFIC METALS CORP. |
There were no transfers into or out of Level 3 during the year ended June 30, 2021.
(b) Liquidity Risk
The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at June 30, 2021, the Company had a working capital position of $46,357,578 and sufficient cash resources to meet the Company's short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the next 12 months.
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company's financial liabilities:
| June 30, 2021 | June 30, 2020 | ||||||||
| Due within a year | Total | Total | |||||||
| Trade and other payables | $ | 1,044,189 | $ | 1,044,189 | $ | 1,154,593 | |||
| Due to a related party | 50,378 | 50,378 | 62,182 | ||||||
| Payable for mineral property acquisition | - | - | 193,073 | ||||||
| $ | 1,094,567 | $ | 1,094,567 | $ | 1,409,848 | ||||
(c) Foreign Exchange Risk
The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is Chinese Renminbi ("RMB"). The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to foreign exchange risk that could affect net income is summarized as follows:
| Financial assets denominated in foreign currencies other than relevant functional currency | June 30, 2021 | June 30, 2020 | ||||
| United States dollars | $ | 11,079,194 | $ | 11,158,435 | ||
| Bolivianos | 285,267 | 297,147 | ||||
| Chinese RMB | - | 160,123 | ||||
| Total | $ | 11,364,461 | $ | 11,615,705 | ||
| Financial liabilities denominated in foreign currencies other than relevant functional currency | ||||||
| United States dollars | $ | - | $ | 432,922 | ||
| Bolivianos | 333,405 | - | ||||
| Chinese RMB | - | 101,060 | ||||
| Total | $ | 333,405 | $ | 533,982 |
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $111,000.
As at June 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately $500.
|
NEW PACIFIC METALS CORP. |
(d) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of June 30, 2021. The Company, from time to time, also owns GICs and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond's fair value. An increase in market interest rates will generally reduce bond's fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
(e) Credit Risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's exposure to credit risk is primarily associated with cash, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as the majority of its cash are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at June 30, 2021, the Company had a receivables balance of $343,608 (June 30, 2020 - $303,488). There were no material amounts in receivables which were past due on June 30, 2021 (June 30, 2020 - $nil).
(f) Equity Price Risk
The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company's portfolio at June 30, 2021, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $50,000.
RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in this MD&A are as follows:
| Due to a related party | June 30, 2021 | June 30, 2020 | ||||
| Silvercorp Metals Inc. | $ | 50,378 | $ | 62,182 |
(a) Silvercorp Metals Inc. ("Silvercorp") has two directors (Dr. Rui Feng and David Kong) and one officer (Yong-Jae Kim as corporate secretary for both companies) in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Expenses in general and administrative services rendered and incurred by Silvercorp on behalf of the Company for the year ended June 30, 2021 were $616,030 (year ended June 30, 2020 - $586,138).
|
NEW PACIFIC METALS CORP. |
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel for the years ended June 30, 2021 and 2020 are as follows:
| Year ended June 30, | ||||||
| 2021 | 2020 | |||||
| Director's cash compensation | $ | 290,463 | $ | 55,858 | ||
| Director's share-based compensation | 604,970 | 446,652 | ||||
| Key management's cash compensation | 859,394 | 940,323 | ||||
| Key management's share-based compensation | 1,709,004 | 2,205,258 | ||||
| $ | 3,463,831 | $ | 3,648,091 | |||
Other than as disclosed above, the Company does not have any ongoing contractual or other commitments resulting from transactions with related parties.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet financial arrangements.
PROPOSED TRANSACTIONS
There are no proposed acquisitions or disposals of assets or business, other than those in the ordinary course of business, approved by the Board as at the date of this MD&A.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the consolidated financial statements in accordance with IFRS as issued by IASB requires management to make estimates and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent management's estimates that are uncertain and any changes in these estimates could materially impact the Company's consolidated financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The Company's critical accounting policies and estimates are described in Note 2 of the audited consolidated financial statements for the year ended June 30, 2021.
|
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 - 155,064,244 common shares with a recorded value of $151.0 million.
- Shares subject to escrow or pooling agreements - nil.
(b) Options
The outstanding options as at the date of this MD&A are summarized as follows:
|
Options Outstanding |
Exercise Price CAD$ |
Expiry Date |
|
495,000 |
0.55 |
October 31, 2021 |
|
615,000 |
1.15 |
July 31, 2022 |
|
200,000 |
1.57 |
December 7, 2022 |
|
1,210,834 |
2.15 |
February 21, 2024 |
|
2,520,834 |
$ 1.55 |
|
(c) RSUs
The outstanding RSUs as at the date of this MD&A are summarized as follows:
| Weighted average | |||
| grant date closing | |||
| RSUs Outstanding | price per share (CAD$) | ||
| 710,250 | $ | 5.43 |
RISK FACTORS
The Company is subject to many risks which are outlined in this MD&A and in the Company's Annual Information Form, NI 43-101 technical report and other public filings which are available on SEDAR at www.sedar.com. In addition, please refer to the "Financial Instruments" section of this MD&A for an analysis of financial risk factors.
COVID-19
The current outbreak of the COVID-19 pandemic could have a material adverse effect on the Company's business and operations, as well as impacting global economic conditions. COVID-19 has spread to regions where the Company has operations and offices. Government efforts to control the spread of the virus have resulted in temporary suspensions of our operations in Bolivia, delays and/or deferrals of field work including consultant site work and laboratory results and reduced corporate activities in Canada. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock and financial market volatilities, labour shortage and delay in logistics, and a general reduction in consumer activities. All of these could affect commodity prices, interest rates, credit risk, social security and inflation. Such public health crisis at the moment or in the future may negatively affect the Company's operations along with the operations of its suppliers, contractors, service providers and local communities.
|
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 is highly uncertain and cannot be predicted with confidence as at the date of this MD&A. These uncertainties include, but are not limited to, the duration of the outbreak, Bolivian and Canadian governments' mandates to curtail the spreading of the virus, community and social stabilities and the Company's ability to resume operations efficiently or economically. It is also uncertain whether the Company will be able to maintain an adequate financial condition and have sufficient capital or have the ability to raise capital. Any of these uncertainties, and others, could have further material adverse effects on the Company's business and operations.
The Company may experience additional business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events could have a material adverse impact on the Company's business, operations and operating results, financial condition and liquidity.
Political and Economic Risks in Bolivia
The Company's projects are located in Bolivia and, therefore, the Company's current and future mineral exploration and mining activities are exposed to various levels of political, economic, and other risks and uncertainties. There has been a significant level of political and social unrest in Bolivia in recent years resulting from a number of factors, including Bolivia's history of political and economic instability under a variety of governments and high rate of unemployment.
The Company's exploration and development activities may be affected by changes in government, political instability, and the nature of various government regulations relating to the mining industry. Bolivia's fiscal regime has historically been favourable to the mining industry, but there is a risk that this could change. The Company cannot predict the government's positions on foreign investment, mining concessions, land tenure, environmental regulation, or taxation. A change in government positions on these issues could adversely affect the Company's business and/or its holdings, assets, and operations in Bolivia. Any changes in regulations or shifts in political conditions are beyond the control of the Company. Moreover, protestors and cooperatives have previously targeted foreign firms in the mining sector, and as a result there is no assurance that future social unrest will not have an adverse impact on the Company's operations. Labour in Bolivia is customarily unionized and there are risks that labour unrest or wage agreements may impact operations.
The Company's operations in Bolivia may also be adversely affected by economic uncertainty characteristic of developing countries. In addition, operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use, and safety factors.
On January 11, 2019, New Pacific announced the execution of the MPC with COMIBOL (see Project Overviews section). The MPC was approved by Bolivia's Ministry of Mining and Metallurgy but remains subject to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Moreover, the Presidential elections were held in Bolivia on October 18, 2020 and the President assumed office on November 8, 2020. The Company cautions that there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained on reasonable terms. The Company cannot predict the new government's positions on foreign investment, mining concessions, land tenure, environmental regulations, community relations, taxation or otherwise.
|
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 Bolivian laws related to the Restricted Areas, there is no assurance that the Bolivian companies will be successful in obtaining approval of (i) the mining association agreement from AJAM in the case of Silverstrike Project or (ii) the conversion of the exploration licenses to AMCs in the case of Carangas Project, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian organizations or communities.
The Company's current and future operations, including development activities and commencement of production, if warranted, require permits from governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, and other matters. Companies engaged in property exploration and the development or operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations, and permits. The Company cannot predict if all permits which it may require for continued exploration, development, or construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms, if at all. Time delays and associated costs related to applying for and obtaining permits and licenses may be prohibitive and could delay planned exploration and development activities. Failure to comply with or any violations of the applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.
|
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.
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that material information related to the Company is gathered and reported to senior management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), as appropriate, to allow for timely decisions about the Company's public disclosure.
Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in the rules of the U.S. Securities and Exchange Commission and the national instruments of the Canadian Securities Administrators. The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate in the circumstances. Based on this evaluation, management concluded that as of June 30, 2021, the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 and National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings) are effective.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
(a) Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting, and used the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate, with the participation of the CEO and CFO, the effectiveness of the Company's internal controls. The Company's internal control over financial reporting includes:
|
NEW PACIFIC METALS CORP. |
- maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
- providing reasonable assurance that transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with generally accepted accounting principles;
- providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
- providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on the Company's consolidated financial statements would be prevented or detected on a timely basis.
Based on this evaluation, management concluded that as of June 30, 2021, the Company's internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by COSO was effective and provided a reasonable assurance of the reliability of the Company's financial reporting and preparation of the financial statements.
No matter how well a system of internal control over financial reporting is designed, any system has inherent limitations. Even systems determined to be effective can provide only reasonable assurance of the reliability of financial statement preparation and presentation. Also, controls may become inadequate in the future because of changes in conditions or deterioration in the degree of compliance with the Company's policies and procedures.
Emerging growth companies are exempt from Section 404(b) of the Sarbanes-Oxley Act, which generally requires public companies to provide an independent auditor attestation of management's assessment of the effectiveness of their internal control over financial reporting. The Company qualifies as an emerging growth company and therefore has not included an independent auditor attestation of management's assessment of the effectiveness of its internal control over financial reporting in this MD&A or in its audited annual consolidated financial statements for the year ended June 30, 2021.
(b) Changes in Internal Control over Financial Reporting
There has been no change in the Company's internal control over financial reporting during the three months and year ended June 30, 2021 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.
TECHNICAL INFORMATION
The scientific and technical information contained in this MD&A has been reviewed and approved by Alex Zhang, P. Geo., Vice President of Exploration of the Company, who is a Qualified Person for the purposes of NI 43-101.
FORWARD LOOKING STATEMENTS
Except for statements of historical fact relating to the Company, certain information contained herein constitutes "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws (collectively, "forward-looking statements"). Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "goals", "forecast", "budget", "potential" or variations thereof and other similar words, or statements that certain events or conditions "may", "could", "would", "might", "will" or "can" occur. Forward-looking statements include, but are not limited to: statements regarding anticipated exploration, drilling, development, construction, and other activities or achievements of the Company; timing of receipt of permits and regulatory approvals, including the ratification and approval of the MPC by the Plurinational Legislative Assembly of Bolivia; and estimates of the Company's revenues and capital expenditures.
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NEW PACIFIC METALS CORP. |
Forward-looking statements are based on the opinions and estimates of management on the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include global economic and social impact of COVID-19; fluctuating equity prices, bond prices and commodity prices; calculation of resources, reserves and mineralization; general economic conditions; foreign exchange risks; interest rate risk; foreign investment risk; loss of key personnel; conflicts of interest; dependence on management; uncertainties relating to the availability and costs of financing needed in the future; environmental risks; operations and political conditions; the regulatory environment in Bolivia and Canada; risks associated with community relations and corporate social responsibility; and other factors described in this MD&A, under the heading "Risk Factors" in the Company's Annual Information Form for the year ended June 30, 2021 and its other public filings. The foregoing is not an exhaustive list of the factors that may affect any of the Company's forward-looking statements or information.
The forward-looking statements are necessarily based on a number of estimates, assumptions, beliefs, expectations and opinions of management as of the date of this MD&A that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These estimates, assumptions, beliefs, expectations and opinions include, but are not limited to, those related to the Company's ability to carry on current and future operations, including: the duration and effects of COVID-19 on our operations and workforce; development and exploration activities; the timing, extent, duration and economic viability of such operations; the accuracy and reliability of estimates, projections, forecasts, studies and assessments; the Company's ability to meet or achieve estimates, projections and forecasts; the stabilization of the political climate in Bolivia; the availability and cost of inputs; the price and market for outputs; foreign exchange rates; taxation levels; the timely receipt of necessary approvals or permits; including the ratification and approval of the MPC by the Plurinational Legislative Assembly of Bolivia; the approval of the mining association agreement for the Silverstrike Project by AJAM; the ability of the Company to convert the exploration licenses at the Carangas Project to AMC; the ability to meet current and future obligations; the ability to obtain timely financing on reasonable terms when required; the current and future social, economic and political conditions; and other assumptions and factors generally associated with the mining industry.
Although the forward-looking statements contained in this MD&A are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. All forward-looking statements in this MD&A are qualified by these cautionary statements. Accordingly, readers should not place undue reliance on such statements. Other than specifically required by applicable laws, the Company is under no obligation and expressly disclaims any such obligation to update or alter the forward-looking statements whether as a result of new information, future events or otherwise except as may be required by law. These forward-looking statements are made as of the date of this MD&A.
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NEW PACIFIC METALS CORP. |
CAUTIONARY NOTE TO U.S. INVESTORS
This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada which differ from the requirements of United States securities laws. All mining terms used herein but not otherwise defined have the meanings set forth in NI 43-101.
Accordingly, information contained in this MD&A and the documents incorporated by reference herein containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of United States federal securities laws and the rules and regulations thereunder.
Additional information relating to the Company, including the Company's Annual Information form, can be obtained under the Company's profile on SEDAR at www.sedar.com, and on the Company's website at www.newpacificmetals.com.
CONSENT OF EXPERT
The undersigned hereby consents to the inclusion in the Management's Discussion & Analysis of New Pacific Metals Corp. (the "Company") for the year ended June 30, 2021 of references to the undersigned as a qualified person and the undersigned's name with respect to the disclosure of technical and scientific information contained therein.
The undersigned further consents to the inclusion or incorporation by reference of all references to the undersigned in the Company's Registration Statements on Form F-10 (No. 333-257344). This consent extends to any amendments to the Form F-10, including post-effective amendments.
"Alex Zhang" ____________________ ___
Alex Zhang, P.Geo.
September 16, 2021