NexMetals Mining Corp 10-Q for FY2024 Q1
NexMetals Mining Corp. (NEXM)
About this 10-Q
NexMetals Mining Corp filed this 10-Q on July 12, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- 9.35M CAD
- compared with a net loss of 6.37M CAD a year earlier
- Diluted EPS
- 0.06 CAD
- up 20.0% from 0.05 CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
Ontario, |
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(State or other jurisdiction of | | (I.R.S. Employer |
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(Address of principal executive offices) | | (Zip Code) |
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| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
þ | | Smaller reporting company | ||
| | | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of June 30, 2024, there were
TABLE OF CONTENTS
2
PART I - FINANCIAL INFORMATION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) for Premium Nickel Resources Ltd. (the “Company” or “PNRL”) (as defined herein), contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) as filed with the Securities and Exchange Commission on June 28, 2024 and elsewhere in this Report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” of the Company’s 2023 Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date hereof. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless otherwise indicated, all references to “$”,”C$” and “dollars” in this Report refer to Canadian dollars, references to “US$” in this Report refer to United States dollars and references to “BWP” in this Report refer to Botswanan Pula. On March 28, 2024, the daily exchange rate (i) for one United States dollar expressed in Canadian dollars, as quoted by the Bank of Canada, was US$1.00 = C$1.3550 (or C$1.00 = US$0.7380), (ii) for one Botswanan Pula expressed in Canadian dollars, as quoted by Bloomberg LP, was BWP 1.00 = C$0.0987 (or C$1.00 = BWP 10.1241), and (iii) for one Botswanan Pula expressed in United States dollars, as quoted by Bloomberg LP, was BWP 1.00 = US$0.0730 (or US$1.00 = BWP 13.7082).
3
Item 1. Financial Statements
UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024 and 2023
In accordance with generally accepted accounting principles in the United States and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission and stated in Canadian dollars, unless otherwise indicated.
INDEX
4
Unaudited Condensed Interim Consolidated Balance Sheets
(Expressed in Canadian dollars)
|
| |
| As at March 31, 2024 |
| As at December 31, 2023 |
| | Notes | | $ | | $ |
ASSETS | | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | | | |
| |
Prepaid expenses | | | | |
| |
Other receivables |
| 3 | | |
| |
Spare parts | | 18 | | |
| |
TOTAL CURRENT ASSETS | | | | |
| |
| | | | | | |
NON-CURRENT ASSETS | | | | | | |
Exploration and evaluation assets |
| 4,10 | | |
| |
Property, plant and equipment |
| 5 | | |
| |
TOTAL NON-CURRENT ASSETS | | | | |
| |
TOTAL ASSETS | | | | |
| |
| | | | | | |
LIABILITIES | | | | | | |
CURRENT LIABILITIES | | | | | | |
Trade payables and accrued liabilities |
| 6 | | |
| |
Lease liabilities |
| 9 | | |
| |
TOTAL CURRENT LIABILITIES |
| | | |
| |
| | | | | | |
NON‑CURRENT LIABILITIES | | | | | | |
Vehicle financing | | | | |
| |
Provision for leave and severance | | | | |
| |
Term loan |
| 7 | | |
| |
Deferred share units liability |
| 11 | | |
| |
NSR Option liability |
| 10 | | |
| |
TOTAL NON-CURRENT LIABILITIES | | | | | | |
TOTAL LIABILITIES | | | | |
| |
| | | | | | |
SHAREHOLDERS' EQUITY | | | | | | |
Common shares ( | | | | | | |
Preferred shares | | | |
| | |
Additional paid-in capital | | | | |
| |
Deficit |
| | | ( |
| ( |
Accumulated other comprehensive loss | | | | ( |
| ( |
TOTAL SHAREHOLDERS' EQUITY | | | | |
| |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| |
Nature of Operations and Going Concern (Note 1)
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
Approved by the Board of Directors on July 12, 2024.
“signed” Keith Morrison Director | “signed” Jason LeBlanc Director |
5
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian dollars)
|
|
|
| Three months ended | | Three months ended |
|
| |
| March 31, 2024 |
| March 31, 2023 |
| | Notes | | $ | | $ |
EXPENSES |
| | | |
|
|
General and administration expenses |
| 17 | | |
| |
Depreciation |
| 5 | | |
| |
General exploration expenses |
| 4 | | |
| |
Interest and bank charges |
| | | |
| |
Share-based payment |
| 11 | | |
| — |
Deferred share units granted |
| 11 | | |
| |
Fair value movement of deferred shares units |
| 11 | | ( |
| ( |
Net foreign exchange loss |
| | | |
| |
|
| | | |
| |
OTHER ITEMS | | | | |
| |
Interest expense (income) | | | | | | ( |
Interest expense on Term loan |
| 7 | | |
| — |
Interest expense on Promissory note |
| | | — |
| |
NET LOSS FOR THE PERIOD |
| | | |
| |
|
| | | |
| |
OTHER COMPREHENSIVE LOSS |
| | | |
| |
Exchange differences on translation of foreign operations |
| | | |
| |
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD | | | | | | |
|
| | | | | |
Basic and diluted loss per share |
| | | |
| |
Weighted average number of common shares outstanding – basic and diluted | | | | |
| |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
6
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian dollars)
|
| |
| |
|
| |
| |
| |
| Accumulated |
| |
| | | | | | | | | Additional | | | | Other | | Total |
| | | | | | | Preferred | | paid-in | | | | Comprehensive | | Shareholders’ |
|
| |
| Number of |
|
| shares |
| capital |
| Deficit |
| Loss |
| Equity |
| | Notes | | Shares | | | $ | | $ | | $ | | $ | | $ |
BALANCE AS AT DECEMBER 31, 2022 |
| 10 |
| | | | | | | | ( | | ( | | |
| | |
| | |
| | | | | | | | | |
Net loss for the period | | |
| — | |
| — | | — | | ( | | — | | ( |
Share capital issued through private placement | | |
| | |
| — | | | | — | | — | | |
Share issue costs | | |
| — | |
| — | | ( | | — | | — | | ( |
Fair value of lender warrants | | |
| — | |
| — | | | | — | | — | | |
Exchange differences on translation of foreign operations | | |
| — | |
| — | | — | | — | | ( | | ( |
BALANCE AS AT MARCH 31, 2023 | | 10 |
| | |
| | | | | ( | | ( | | |
| | |
| | |
| | | | | | | | | |
| | |
| | |
| | | | | | | | | |
BALANCE AS AT DECEMBER 31, 2023 | | |
| | |
| | | | | ( | | ( | | |
| | |
| | |
| | | | | | | | | |
Net loss for the period | | |
| — | |
| — | | — | | ( | | — | | ( |
Exercise of options, net | | |
| | |
| — | | — | | — | | — | | — |
Share-based payment |
| |
| — | |
| — | | | | — | | — | | |
Exchange differences on translation of foreign operations | | |
| — | |
| — | | — | | — | | ( | | ( |
BALANCE AS AT MARCH 31, 2024 | | 10 |
| | |
| | | | | ( | | ( | | |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
7
Unaudited Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
|
| Three months Ended | ||
|
| March 31, 2024 |
| March 31, 2023 |
| | $ | | $ |
OPERATING ACTIVITIES |
|
|
|
|
Net loss for the period |
| ( | | ( |
Interest payment on term loan | | ( | | — |
Items not affecting cash: | | | | |
Deferred share units granted |
| | | |
Fair value movement of deferred share units |
| ( | | ( |
Depreciation |
| | | |
Provision for leave and severance |
| | | |
Accrued interests and accretion on loans |
| | | |
Share-based payment |
| | | — |
Changes in non-cash working capital and non-current liability |
| | | |
Prepaid expenses and other receivables |
| | | |
Trade payables and accrued expenses |
| ( | | |
Spare parts |
| ( | | ( |
Net cash used in operating activities |
| ( | | ( |
| | | | |
INVESTING ACTIVITIES |
| | | |
Acquisition of property, plant and equipment |
| ( | | ( |
Net cash used in investing activities |
| ( | | ( |
|
| | | |
FINANCING ACTIVITIES |
| | | |
Proceeds from issuance of units |
| — | | |
Share issue costs |
| — | | ( |
Vehicle loan payment |
| ( | | ( |
Lease payment |
| ( | | ( |
Net cash provided by/(used in) financing activities |
| ( | | |
|
| | | |
Effect of exchange rate changes on cash and cash equivalents | | | | ( |
Change in cash and cash equivalents for the period |
| ( | | |
Cash and cash equivalents at the beginning of the period |
| | | |
Cash and cash equivalents at the end of the period |
| | | |
|
| | | |
|
| | | |
Supplemental cash flow information |
| | | |
Income taxes paid |
| — | | — |
Interest paid | | | | |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
8
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
1. | NATURE OF OPERATIONS AND GOING CONCERN |
Premium Nickel Resources Ltd. (TSXV: PNRL) (the “Company” or “PNRL”) was founded upon the closing of a reverse takeover transaction (the “RTO”) whereby Premium Nickel Resources Corporation (“PNRC”) and 1000178269 Ontario Inc. (“NAN Subco”), a wholly-owned subsidiary of North American Nickel Inc. (“NAN”), amalgamated by way of a triangular amalgamation (the “Amalgamation”) under the Business Corporations Act (Ontario) (the “OBCA”) on August 3, 2022. The common shares of PNRL are listed and posted for trading on the TSX Venture Exchange (the “TSXV”) under the symbol “PNRL”.
Prior to the RTO, PNRC was a private company existing under the OBCA. PNRC was incorporated to evaluate, acquire, improve and reopen, assuming economic feasibility, a combination of certain assets of BCL Limited (“BCL”) and Tati Nickel Mining Company (“TNMC”) that were in liquidation in Botswana.
In connection with the RTO, the Company was continued under the OBCA and changed its name from “North American Nickel Inc.” to “Premium Nickel Resources Ltd.”
Currently, the Company’s principal business activity is the exploration and evaluation of mineral properties in Botswana through its wholly-owned subsidiaries.
9
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
The following corporate structure chart sets out details of the direct and indirect ownership of the principal subsidiaries of the Company:
Notes:
| (1) | Premium Nickel Group Proprietary Limited owns the Selkirk Assets (as defined below). |
| (2) | Premium Nickel Resources Proprietary Limited owns the Selebi Assets (as defined below). |
The Company has its head and registered office at One First Canadian Place, 100 King Street West, Suite 3400, Toronto, Ontario, Canada M5X 1A4.
The principal assets of the Company are the Selebi and Selebi North nickel-copper-cobalt (“Ni-Cu-Co”) mines (the “Selebi Mines”) in Botswana and related infrastructure (together, the “Selebi Assets”), as well as the nickel, copper, cobalt, platinum-group elements (“Ni-Cu-Co-PGE”) Selkirk mine (the “Selkirk Mine”) in Botswana, together with associated infrastructure and four surrounding prospecting licenses (collectively, the “Selkirk Assets”).
Going Concern
The Company, being in the exploration stage, is subject to risks and challenges similar to companies in a comparable stage of exploration and development. These risks include the challenges of securing adequate capital for exploration, development and operational risks inherent in the mining industry, and global economic and metal price volatility, and there is no assurance management will be successful
10
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
in its endeavors. As at March 31, 2024, the Company had no source of operating cash flows, nor any credit line currently in place. The Company incurred a net loss of $
These unaudited condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The ability of the Company to continue operations as a going concern is ultimately dependent upon achieving profitable operations and its ability to obtain adequate financing. To date the Company has not generated profitable operations from its resource activities and will need to invest additional funds in carrying out its planned evaluation, development and operational activities. It is not possible to predict whether financing efforts will be successful or if the Company will attain a profitable level of operations. These material uncertainties cast substantial doubt about the Company’s ability to continue as a going concern. These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities and the reported expenses and comprehensive loss that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.
The properties in which the Company currently has an interest are in pre-revenue stage. As such, the Company is dependent on external financing to fund its activities. In order to carry out the planned development and cover administrative costs, the Company will use its existing working capital and raise additional amounts as needed. Although the Company has been successful in its past fundraising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future. The Company will continue to assess new properties and seek to acquire interests in additional properties if there is sufficient geologic or economic potential and if adequate financial resources are available to do so.
11
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
(a) | Statement of Compliance |
These unaudited condensed interim consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) for interim financial information and in accordance with the instructions in Article 10 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (“SEC”) for financial information.
Certain information or footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. The interim period results do not necessary indicate the results that may be expected for any other interim period or for the full fiscal year.
(b) | Basis of preparation |
These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis under the historical cost convention, modified by the revaluation of any financial assets and financial liabilities where applicable. The preparation of consolidated financial statements in conformity with US GAAP requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies.
The significant accounting policies used in the preparation of these unaudited condensed interim consolidated financial statements are consistent with those used in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2023.
Operating segments are reported in a manner consistent with the internal reporting used for the audited annual consolidated financial statements. The Company determined that it has
12
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
(c) | Basis of consolidation |
These unaudited condensed interim consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries as summarized in the table below. All intercompany transactions, balances, income and expenses are eliminated upon consolidation.
| | Place of | | Percentage | | Functional |
Name of Entity |
| Incorporation |
| Ownership |
| Currency |
Premium Nickel Resources Ltd. |
| Ontario, Canada | | |
| CAD |
NAN Exploration Inc. |
| Ontario, Canada |
| |
| CAD |
PNR Amalco Ltd. |
| Ontario, Canada |
| |
| CAD |
Premium Nickel Resources International Ltd. |
| Barbados |
| |
| USD |
PNR Selkirk Group (Barbados) Limited |
| Barbados |
| |
| USD |
PNR Selebi (Barbados) Limited |
| Barbados |
| |
| USD |
Premium Nickel Group Proprietary Limited |
| Botswana |
| |
| BWP |
Premium Nickel Resources Proprietary Limited |
| Botswana |
| |
| BWP |
(d) | Use of estimates and judgment |
The preparation of the unaudited condensed interim consolidated financial statements in accordance with US GAAP requires management to make judgements, estimates and assumptions that affect the implementation of the accounting policies and the recorded amount of assets and liabilities, income, expenses, and disclosure of contingent liabilities. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
Judgement
Information about judgements made in applying accounting policies that have most significant effect on the amounts recognized in these consolidated financial statements are the same as disclosed in Note 3 of the consolidated financial statements for the year ended December 31, 2023.
Estimates
Information about assumptions and estimates uncertainties as at March 31, 2024, that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities in the next financial year are the same as disclosed in Note 3 of the consolidated financial statement for the year ended December 31, 2023.
3. | OTHER RECEIVABLES |
A summary of the other receivables as at March 31, 2024 and December 31, 2023 is detailed in the table below:
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
HST paid on purchases |
| |
| |
VAT paid on purchases |
| |
| |
Other receivables |
| |
| |
|
| |
| |
13
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
4. | EXPLORATION AND EVALUATION ASSETS |
|
| Botswana |
|
| ||
| | Selebi |
| Selkirk |
| Total |
| | $ | | $ | | $ |
Balance, December 31, 2022 |
| |
| |
| |
Addition costs |
| |
| — |
| |
Foreign currency translation |
| ( |
| ( |
| ( |
Balance, December 31, 2023 |
| |
| |
| |
Foreign currency translation |
| ( |
| ( |
| ( |
Balance, March 31, 2024 |
| |
| |
| |
The following is a description of the Company’s exploration and evaluation assets and the related spending commitments.
Botswana Assets - Selebi and Selkirk
On September 28, 2021, the Company executed the Selebi Asset Purchase Agreement (“the “Selebi APA”) with the BCL liquidator to acquire the Selebi Assets formerly operated by BCL. On January 31, 2022, the Company closed the transaction and ownership of the Selebi Assets transferred to the Company.
Pursuant to the Selebi APA, the aggregate purchase price payable to the seller for the Selebi Assets shall be the sum of $
| ● | $ |
| ● | $ |
| ● | The third instalment of $ |
| ● | Payment of care and maintenance funding contribution in respect of the Selebi Assets for a total of $ |
The total acquisition cost of the Selebi Assets included the first instalment of $
In addition to the Selebi APA, the purchase of the Selebi Assets is also subject to a contingent compensation agreement as well as a royalty agreement with the liquidator.
PNRC also negotiated a separate asset purchase agreement (the “Selkirk APA”) with the liquidator of TNMC to acquire the Selkirk deposit and related infrastructure formerly operated by TNMC on January 20, 2022. The transaction closed on August 22, 2022.
14
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
The Selkirk APA does not provide for a purchase price or initial payment for the purchase of the assets. The acquisition cost of the Selkirk Mine of $
On August 16, 2023, the Company entered into a binding commitment letter with the Liquidator of BCL Limited, which is subject to customary final documentation, to acquire a
The upfront cost to the Company to acquire these additional mineral properties is USD
General Exploration Expenses
Details of the general exploration expenses by nature are presented as follows:
For the three months ended March 31, 2024:
| | Botswana | | | ||
| | Selebi | | Selkirk | | Total |
|
| $ |
| $ |
| $ |
Site operations & administration |
| | | |
| |
Care and maintenance |
| | | — |
| |
Geology |
| | | |
| |
Drilling |
| | | — |
| |
Geophysics |
| | | |
| |
Engineering |
| | | |
| |
Environmental, social and governance |
| | | — |
| |
Metallurgy and processing |
| — | | |
| |
Technical studies |
| | | — |
| |
Health and safety |
| | | — |
| |
Mine re-development |
| | | |
| |
Licensing and others |
| | | — |
| |
Total |
| | | |
| |
15
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
For the three months ended March 31, 2023:
| | Botswana | | | ||
|
| Selebi |
| Selkirk |
| Total |
| | $ | | $ | | $ |
Site operations & administration |
| |
| |
| |
Care and maintenance |
| |
| — |
| |
Geology |
| |
| |
| |
Drilling |
| |
| — |
| |
Geophysics |
| |
| |
| |
Engineering |
| |
| — |
| |
Environmental, social and governance |
| |
| — |
| |
Metallurgy and processing |
| — |
| |
| |
Technical studies |
| |
| |
| |
Health and safety |
| |
| — |
| |
Licensing and others |
| |
| — |
| |
Total |
| |
| |
| |
5.PROPERTY, PLANT AND EQUIPMENT
The tables below set out costs and accumulated amortization as at March 31, 2024 and December 31, 2023
|
| Land and |
| Exploration |
| |
| |
| |
| |
| Computer |
| |
| | Buildings (ROU | | Equipment | | Exploration | | Furniture and | | | | | | and | | |
| | Assets) | | (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles | | software | | Total |
Cost | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ |
Balance – December 31, 2023 |
| |
| |
| |
| |
| |
| |
| |
| |
Additions |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| |
Foreign currency translation |
| ( |
| — |
| ( |
| ( |
| ( |
| ( |
| |
| ( |
Balance – March 31, 2024 |
| |
| |
| |
| |
| |
| |
| |
| |
|
| Land and |
| Exploration |
| |
| |
| |
| |
| Computer |
| |
Accumulated | | Building (ROU | | Equipment | | Exploration | | Furniture and | | | | | | and | | |
Depreciation |
| Assets) |
| (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles |
| software | | Total |
Balance – December 31, 2023 |
| |
| |
| |
| |
| |
| |
| |
| |
Depreciation during the period |
| |
| — |
| |
| |
| |
| |
| |
| |
Foreign currency translation |
| ( |
| — |
| ( |
| ( |
| ( |
| ( |
| |
| |
Balance – March 31, 2024 |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
| Exploration |
| |
| |
| |
| |
| Computer |
| |
Carrying | | Land (ROU | | Equipment | | Exploration | | Furniture and | | | | | | and | | |
Value | | Assets) |
| (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles |
| Software | | Total |
Balance – December 31, 2023 |
| |
| |
| |
| |
| |
| |
| |
| |
Balance – March 31, 2024 |
| |
| |
| |
| |
| |
| |
| |
| |
16
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
|
| Land and |
| Exploration |
| |
| Furniture |
| |
| |
| Computer |
| |
| | Buildings (ROU | | Equipment | | Exploration | | and | | | | | | and | | |
| | Assets) | | (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles | | software | | Total |
Cost | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ |
Balance – December 31, 2022 | | | | — | | | | | | | | | | | | |
Additions | | — | | | | | | | | | | | | | | |
Foreign currency translation | | ( | | — | | — | | ( | | ( | | ( | | ( | | ( |
Balance – December 31, 2023 | | | | | | | | | | | | | | | | |
|
| Land and |
| Exploration |
| |
| Furniture |
| |
| |
| Computer |
| |
Accumulated | | Building (ROU | | Equipment | | Exploration | | and | | | | | | and | | |
Depreciation | | Assets) | | (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles | | software | | Total |
Balance – December 31, 2022 | | | | — | | | | | | | | | | | | |
Depreciation during the year | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | — | | — | | | | | | ( | | — | | |
Balance – December 31, 2023 | | | | | | | | | | | | | | | | |
|
| Land |
| Exploration |
| |
| Furniture |
| |
| |
| Computer |
| |
| | (ROU | | Equipment | | Exploration | | and | | | | | | and | | |
Carrying Value | | Assets) | | (ROU Assets) | | Equipment | | Fixtures | | Generator | | Vehicles | | Software | | Total |
Balance – December 31, 2022 | | | | — | | | | | | | | | | — | | |
Balance – December 31, 2023 | | | | | | | | | | | | | | | | |
Additions to property, plant and equipment during the year ended December 31, 2023 included the purchase of drilling equipment for $
6. | TRADE PAYABLES AND ACCRUED LIABILITIES |
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Amounts due to related parties (Note 12) | | | | |
Trade payables |
| |
| |
Accrued liabilities |
| |
| |
|
| |
| |
7. | TERM LOAN |
On June 28, 2023, the Company closed a financing with Cymbria Corporation (“Cymbria”), EdgePoint Investment Group Inc. and certain other entities managed by it (“EdgePoint”) for aggregate gross proceeds to PNRL of $
The Term Loan has a principal amount of $
17
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
at the parent level and debentures and hypothecations at the subsidiary level. The Term Loan is subject to certain covenants and provisions on events of default, repayments and mandatory prepayments, including:
| ● | increase in the interest rate payable on the Term Loan to |
| ● | the Company may prepay all or any portion of the principal amount outstanding with a minimum repayment amount of $ |
| ● | if prepayment occurs within |
| ● | mandatory prepayment shall be made when the Company has non-ordinary course asset sales or other dispositions of property or the Company receives cash from the issuance of indebtedness for borrowed money and all of the net cash proceeds from assets sales or new loans shall be applied to repay the principal amount of the Term Loan together with all accrued and unpaid interest on the principal amount being repaid as well as the Prepayment Fee if such mandatory prepayment occurs within one year of the closing date; and |
| ● | in the event of change of control, the Company shall repay the Term Loan in full plus a fee equal to |
In connection with the Term Loan, the Company issued an aggregate of
Further, on December 14, 2023, in accordance with the terms of a second amended and restated commitment letter dated December 3, 2023 (the “Second A&R Commitment Letter”), the Company and Cymbria closed an amendment to the terms of their existing Term Loan pursuant to which the Company increased the principal amount of the Term Loan by $
The Company evaluated the amendment of the Term Loan and determined that it qualified as a non-substantial modification under ASC 470. Therefore, a new effective interest rate was determined based on the carrying amount of the original debt instrument, adjusted for the fair value of the Additional Warrants resulting from the modification, and the revised cash flows.
The fair value of the Non-Transferable Warrants was estimated at $
18
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
The fair value of the Non-Transferable Warrants was calculated using the following assumptions:
|
| June 28, 2023 |
| December 14, 2023 |
| ||
Expected dividend yield |
| | | % | | | % |
Stock price | | $ | | | $ | | |
Expected share price volatility | |
| | % |
| | % |
Risk free interest rate | |
| | % |
| | % |
Expected life of warrant | |
| | years |
| | years |
The Company used $
For the three months ended March 31, 2024, the Company paid $
The following is a continuity of the Term Loan:
|
| $ |
Principal amount of the Term Loan | | |
Fair value of the attached warrants | | ( |
Term Loan at fair value on issuance, June 28, 2023 | | |
Transaction costs | | ( |
Accretion of warrant value and transaction costs | | |
Fair value of loan as of December 14, 2023 | | |
Additional principal amount of loan on Dec 14, 2023 | | |
Loan issue discount | | ( |
Fair value of the attached warrants | | ( |
Transaction fee for modification | | ( |
Fair value of modified loan as of December 14, 2023 | | |
Accretion of warrant value and transaction costs | | |
Term Loan balance, December 31, 2023 | | |
Accrued interest | | |
Accretion of warrant value and transaction costs | | |
Interest paid | | ( |
Term Loan balance, March 31, 2024 | | |
Fort Capital Partners acted as financial advisor to PNRL on the debt portion of the Financing Transactions and was paid cash fees of $
19
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
8. | PROMISSORY NOTE |
On November 21, 2022, the Company announced a $
On March 17, 2023, the Company entered into an amended and restated Promissory Note (the “A&R Promissory Note”) extending the maturity of the Promissory Note from March 22, 2023 to November 24, 2023 (the “Extension”). All other terms of the Promissory Note remained the same. In connection with the Extension and entry into of the A&R Promissory Note, the Company agreed to pay an amendment and restatement fee of $
In connection with the A&R Promissory Note, accretion expense of $
The fair value of the liability of the Lender Warrants was estimated at $
The fair value of the Lender warrants was calculated using the following assumptions:
|
| March 31, 2023 |
| |
Expected dividend yield |
| | | % |
Stock price | | $ | | |
Expected share price volatility | |
| | % |
Risk free interest rate | |
| | % |
Expected life of warrant | |
| | year |
The volatility was determined by calculating the historical volatility of stock prices of the Company over one year using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns.
On June 28, 2023, the Company repaid the Promissory Note in full.
20
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
9. | LEASE LIABILITIES |
Syringa Lodge
On July 9, 2022, the Company executed a sales agreement (the “Lodge Agreement”) with Tuli Tourism Pty Ltd. (the “Seller”) for the Syringa Lodge (the “Lodge”) in Botswana.
As per the Lodge Agreement, the aggregate purchase price payable to the Seller shall be the sum of $
In addition to the above purchase price, the Company is required to pay to the Seller an agreed interest amount in
Drilling Equipment
On March 14, 2023, the Company entered into a drilling equipment supply agreement (the “Equipment Agreement”) with Forage Fusion Drilling Ltd. (“Forage”) to purchase specific drilling equipment on a “rent to own” basis with the purchase price to be paid in monthly payments.
As per the Equipment Agreement, the aggregate purchase price payable to Forage is $
The following table presents lease cost and other supplemental lease information:
|
| March 31, 2024 |
| March 31, 2023 |
| | $ | | $ |
Finance lease cost: |
|
|
|
|
Amortization of right-of-use assets |
| |
| |
Interest expense on lease liabilities |
| |
| |
Cash paid for finance lease liabilities |
| ( |
| ( |
10. | NSR OPTION |
Concurrently with the closings of the Equity Financing and the Term Loan on June 28, 2023, Cymbria paid an aggregate of $
As the NSR options are exercisable entirely at the discretion of Cymbria and the underlying projects are in the exploration stage, the fair value of the call and put on the option as at March 31, 2024 and December 31, 2023 is
21
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
PNRL’s indirect wholly-owned subsidiary Premium Nickel Resources Proprietary Limited (“PNRP”) acquired the Selebi Mines in January 2022 out of liquidation. Pursuant to the acquisition agreement, the liquidator retained a
PNRL’s indirect wholly-owned subsidiary Premium Nickel Group Proprietary Limited (“PNGP”) acquired the Selkirk Mine in August 2022 out of liquidation. Pursuant to the acquisition agreement, the liquidator retained a
Each of PNRP and PNGP has agreed to grant Cymbria, in exchange for the Option Payment, an option to participate in any such repurchase of the applicable portion of its NSR from the relevant liquidator. Cymbria will, following the exercise of its option to participate in any such repurchase, acquire a
Under the NSR option purchase agreements, Cymbria could acquire a
11. | SHARE CAPITAL, WARRANTS AND OPTIONS |
The authorized capital of the Company comprises an number of common shares without par value and
a) | Common Shares Issued and Outstanding |
During the three months ended March 31, 2024,
During the year ended December 31, 2023, the Company completed the following financing transactions:
On February 24, 2023, the Company issued
On June 28, 2023, the Company issued
22
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
component (shares and warrants). The fair value of the warrants is calculated using the Black-Scholes Option Pricing Model while the fair value of the shares is determined by the stock price on the closing date of the Equity Financing times the total number of shares issued.
Fort Capital Partners acted as financial advisor to PNRL on the equity portion of the Financing Transactions and was paid cash fees of $
The fair value of the warrants in connection with the above two financing transactions were calculated using the following assumptions:
|
| February 24, 2023 |
| June 28, 2023 |
| ||
Expected dividend yield |
| | | % | | | % |
Expected forfeiture rate |
| | | % | | | % |
Stock price | | $ | | | $ | | |
Expected share price volatility | |
| | % |
| | % |
Risk free interest rate | |
| | % |
| | % |
Expected life of warrant | |
| years |
| years | ||
The volatility was determined by calculating the historical volatility of stock prices of the Company over a period as the expected life of warrants using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns.
On December 14, 2023, the company closed an equity and debt financing package of approximately $
b) | Warrants |
The following summarizes common share purchase warrant activity for the three months ended March 31, 2024:
|
| March 31, 2024 |
| December 31, 2023 | ||||
| | | | Weighted | | | | Weighted |
| | | | Average | | | | Average |
| | Number | | Exercise Price | | Number | | Exercise Price |
| | Outstanding | | ($) | | Outstanding | | ($) |
Outstanding, beginning of the period |
| |
| |
| |
| |
Issued |
| — |
| — |
| |
| |
Exercised |
| — |
| — |
| ( |
| |
Cancelled/expired |
| ( |
| |
| ( |
| |
Outstanding, end of the period |
| |
| |
| |
| |
23
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
At March 31, 2024, the Company had outstanding common share purchase warrants exercisable to acquire common shares of the Company as follows:
|
| |
| Exercise Price |
| Weighted Average remaining |
Warrants Outstanding |
| Expiry Date |
| ($) |
| contractual life (years) |
| August 3, 2024 |
| |
| ||
| February 24, 2025 |
| |
| ||
| June 28, 2026 |
| |
| ||
| June 28, 2026 |
| |
| ||
| |
|
|
|
c) | Stock Options |
The Company adopted a Stock Option Plan (the “Plan”) providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire up to
A summary of option activity under the Plan during the three months ended March 31, 2024 and the year ended December 31, 2023 is as follows:
|
| March 31, 2024 |
| December 31, 2023 | ||||
| | |
| Weighted | | |
| Weighted |
| | | | Average | | | | Average |
| | Number | | Exercise Price | | Number | | Exercise Price |
| | Outstanding | | ($) | | Outstanding | | ($) |
Outstanding, beginning of the period |
| |
| |
| |
| |
Issued |
| — |
| — |
| |
| |
Exercised |
| ( |
| |
| ( |
| |
Cancelled |
| ( |
| |
| ( |
| |
Outstanding, end of the period |
| |
| |
| |
| |
During the year ended December 31, 2023, the Company granted an aggregate total of
24
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
The fair value of stock options granted during the year ended December 31, 2023:
|
| December 31, 2023 |
|
Expected dividend yield |
| | % |
Expected forfeiture rate |
| | % |
Expected share price volatility |
| | % |
Risk free interest rate |
| % | |
Expected life of options |
| years |
Details of options outstanding as at March 31, 2024 are as follows:
|
| |
| |
| |
| Weighted average |
Options | | Options | | Expiry | | Exercise | | remaining contractual life |
Outstanding | | Exercisable | | Date | | Price ($) |
| (years) |
| | | February 24, 2025 |
| |
| ||
| | | August 19, 2025 |
| |
| ||
| | | January 26, 2026 |
| |
| ||
| | | February 25, 2026 |
| |
| ||
| | | September 29, 2026 |
| |
| ||
| | | October 25, 2026 |
| |
| ||
| | | January 20, 2027 |
| |
| ||
| — | | August 8, 2028 |
| |
| ||
| | | |
|
|
|
d) | DSU Plan |
Effective December 2022, the Company approved a Deferred Share Unit Plan (“DSU Plan”) that enables the Company upon approval by the Directors to grant DSUs to eligible non-management directors. The DSUs credited to the account of a director may only be redeemed following the date upon which the holder ceases to be a director. Depending upon the country of residence of a director, the DSUs may be redeemed at any time prior to December 15 in the calendar year following the year in which the holder ceases to be a director and may be redeemed in as many as
During the three months ended March 31, 2024, DSUs have been granted as follows:
|
| Number |
| Market Price 1 |
| Fair Value |
| | Outstanding | | ($) | | ($) |
DSUs outstanding at December 31, 2023 |
| |
| |
| |
DSUs granted during the period |
| |
| |
| |
Fair value adjustment |
| — |
| |
| ( |
DSUs outstanding at March 31, 2024 |
| |
| |
| |
1. | According to the DSU plan, Market Price is the volume weighted average price on the TSXV for the last five trading days immediately preceding the grant date. |
25
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
During the three months ended March 31, 2024, the DSU compensation totaled $
The DSUs were classified as a derivative financial liability that should be measured at fair value, with changes in value recorded in profit or loss. The fair value of the DSUs was determined by the volume weighted average price on the TSXV for the last
12. | RELATED PARTY TRANSACTIONS |
The following amounts due to related parties are included in trade payables and accrued liabilities (Note 6).
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Directors and officers of the Company |
| |
| |
|
| |
| |
These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
(a) | Related party transactions |
As a result of the Financing Transactions on June 28, 2023 and December 14, 2023, Cymbria and certain other funds managed by EdgePoint (the “Financing Parties”) have acquired a total of
(b) | Key management personnel is defined as members of the Board of Directors and senior officers. |
Key management compensation was related to the following:
|
| March 31, 2024 |
| March 31, 2023 |
| | $ | | $ |
Management fees | | | | |
Corporate and administration expenses |
| |
| |
|
| |
| |
13. | FINANCIAL INSTRUMENTS |
The Company thoroughly examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include interest rate risk, credit risk, liquidity risk, market risk and currency risk. The carrying value of cash and cash equivalents and trade payables and accrued liabilities approximate their fair value due to their short-term nature. The fair value of the Term Loan, vehicle financing, DSU liability and provision for severance are based upon discounted future cash flows using discounted rates, adjusted for the Company’s own credit risk that reflect current market conditions. Such fair value estimates are not necessarily indicative of the amounts the Company might pay or receive in actual market transactions. The fair value of the DSUs is the closing price of the Company’s common shares at the end of each reporting period. Fair value measurements of financial instruments
26
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
are required to be classified using a fair value hierarchy that reflects the significance of inputs in making the measurements. The levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs for the asset or liability that are not based on observable market data.
On March 31, 2024 and December 31, 2023, the fair value of cash and cash equivalents and DSUs is based on Level 1 measurements.
14. | RISK MANAGEMENT |
The Company’s exposure to market risk includes, but is not limited to, the following risks:
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not subject to significant changes in interest rates.
Foreign Currency Exchange Rate Risk
Currency risk is risk that the fair value of future cash flows will fluctuate because of changes in foreign currency exchange rates. In addition, the value of cash and other financial assets and liabilities denominated in foreign currencies can fluctuate with changes in currency exchange rates.
The Company primarily operates in Canada, Barbados and Botswana and undertakes transactions denominated in foreign currencies such as United States dollar and Botswana Pula, and consequently is exposed to exchange rate risks. Exchange risks are managed by matching levels of foreign currency balances and related obligations and by maintaining operating cash accounts in non-Canadian dollar currencies.
Foreign currency denominated financial assets and liabilities which expose the Company to currency risk are disclosed below. The amount shown are those reported and translated into CAD at the closing rate.
|
| Short-term exposure |
| Long-term exposure | ||
| | USD |
| BWP | | BWP |
| | $ | | $ | | $ |
March 31, 2024 | | | | | | |
Financial assets |
| |
| |
| |
Financial liabilities |
| ( |
| ( |
| ( |
Total exposure |
| ( |
| ( |
| |
|
| Short-term exposure |
| Long-term exposure | ||
| | USD |
| BWP | | BWP |
| | $ | | $ | | $ |
December 31, 2023 |
|
|
|
|
|
|
Financial assets |
| |
| |
| |
Financial liabilities |
| ( |
| ( |
| ( |
Total exposure |
| |
| ( |
| |
27
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
The following table illustrates the sensitivity of net loss in relation to the Company’s financial assets and financial liabilities and the USD/CAD exchange rate and BWP/CAD exchange rate, all other things being equal. It assumes a +/- 5% change of the USD/CAD and BWP/CAD exchange rates for the three months ended March 31, 2024 and the year ended December 31, 2023, respectively.
If the CAD strengthened against the and by
|
| Short-term exposure |
| Long-term exposure | ||||
| | USD |
| BWP |
| Total |
| BWP |
| | $ | | $ | | $ | | $ |
March 31, 2024 | | ( | | ( | | ( | | |
December 31, 2023 |
| |
| ( |
| ( |
| |
If the CAD weakened against the and by
|
| Short-term exposure |
| Long-term exposure | ||||
| | USD |
| BWP |
| Total |
| BWP |
| | $ | | $ | | $ | | $ |
March 31, 2024 | | | | | | | | ( |
December 31, 2023 |
| ( |
| |
| |
| ( |
The higher foreign currency exchange rate sensitivity in profit at March 31, 2024 compared with December 31, 2023 is attributable to increased balances in financial assets and liabilities and fluctuations in foreign exchange rates, BWP and USD in relation to CAD.
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The credit risk is primarily associated with liquid financial assets. The Company limits exposure to credit risk on liquid financial assets by holding cash at highly-rated financial institutions.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company manages the liquidity risk inherent in these financial obligations by regularly monitoring actual cash flows to annual budget which forecast cash and expected cash availability to meet future obligations.
The Company will defer discretionary expenditures, as required, in order to manage and conserve cash required for current liabilities.
The following table shows the Company’s contractual obligations as at March 31, 2024:
|
| Less than |
| |
| |
| |
| | 1 year | | 1 - 2 years | | 2 - 5 years | | Total |
| | $ | | $ | | $ | | $ |
Trade payables and accrued liabilities | | |
| — |
| — |
| |
Vehicle financing | | |
| |
| |
| |
Term Loan | | |
| |
| |
| |
Lease liabilities | | |
| — |
| — |
| |
| | |
| |
| |
| |
28
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
Deferred share units liability and provision for leave and severance are not presented in the above liquidity analysis as management considers it is not practical to allocate the amounts into maturity groupings.
Capital Risk Management
The Company manages its capital to ensure that it will be able to continue as a going concern, so that adequate funds are available or are scheduled to be raised to meet its ongoing administrative and operating costs and obligations. This is achieved by the Board of Directors’ review and ultimate approval of budgets that are achievable within existing resources, and the timely matching and release of the next stage of expenditures with the resources made available from capital raises and debt funding from related or other parties. In doing so, the Company may issue new shares, restructure or issue new debt.
The Company is not subject to any externally imposed capital requirements imposed by a regulator or a lending institution.
In the management of capital, the Company includes the components of equity and debt (vehicle financing, lease liabilities and Term Loan), net of cash.
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Shareholder's equity (deficit) | | |
| |
Vehicle financing | | |
| |
Lease liabilities | | |
| |
Term Loan | | |
| |
| | |
| |
Cash | | ( |
| ( |
| | |
| |
15. | SEGMENTED INFORMATION |
The Company operates in
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Current assets | |
|
|
|
Canada | | |
| |
Barbados | | |
| |
Botswana | | |
| |
Total | | |
| |
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Property, plant and equipment | |
|
|
|
Canada | | |
| |
Botswana | | |
| |
Total | | |
| |
29
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Exploration and evaluation assets | |
|
|
|
Botswana | | |
| |
16. | CONTINGENT LIABILITIES |
There are no environmental liabilities associated with the Selebi Assets and the Selkirk Assets as at the acquisition dates as all liabilities prior to the acquisitions are the responsibility of the sellers, BCL and TNMC, respectively. The Company has an obligation for the rehabilitation costs arising subsequent to the acquisitions. As of March 31, 2024, management is not aware of or anticipating any contingent liabilities that could impact the financial position or performance of the Company related to its exploration and evaluation assets.
The Company’s exploration and evaluation assets are affected by the laws and environmental regulations that exist in the various jurisdictions in which the Company operates. It is not possible to estimate the future contingent liabilities and the impact on the Company’s operating results due to future changes in Company’s exploration and development of its projects or future changes in such laws and environmental regulations.
17. | GENERAL AND ADMINISTRATIVE EXPENSES |
Details of the general and administrative expenses are presented in the following table:
|
| March 31, 2024 |
| March 31, 2023 |
| | $ | | $ |
Management fee | | |
| |
Advisory and consultancy | | |
| |
Consulting fees | | |
| |
General office expenses | | |
| |
Filing fees | | |
| |
Investor relationships | | |
| |
Professional fees | | |
| |
Salaries and benefits | | |
| |
Insurance | | |
| |
Total | | |
| |
18. | SPARE PARTS |
Details of the movements in relation to spare parts are presented in the following table:
|
| March 31, 2024 |
| December 31, 2023 |
| | $ | | $ |
Spare parts, beginning of the period | | |
| — |
Additions | | |
| |
Utilization | | ( |
| — |
Spare parts, end of the period | | |
| |
30
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in Canadian dollars)
Spare parts relate to spares to drilling equipment and underground equipment located at the mines in Botswana which are critical for the continued operations of the mines in the event that certain components become worn or inoperable. Spare parts are held in reserve at the mine site and consumed when placed into service.
19. | SUBSEQUENT EVENTS |
On June 14 and June 21, 2024, the Company closed
Each Unit is comprised of one common share of the Company and one common share purchase warrant of the Company (each, a “Warrant”). Each Warrant entitles the holder thereof to acquire one common share at an exercise price of $
In connection with the private placement, The Company issued an aggregate
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report. This discussion and analysis below includes forward-looking statements that are subject to risks, uncertainties and other factors described in the “Risk Factors” section set forth in the 2023 Form 10-K that could cause actual results to differ materially from those anticipated in these forward-looking statements as a result of various factors. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We caution you to read the “Cautionary Note Regarding Forward-Looking Statements” section of this Report.
The following management’s discussion and analysis (this “MD&A”) should be read in conjunction with the unaudited condensed interim consolidated financial statements of the Company and accompanying notes thereto for the quarters ended March 31, 2024 and 2023 (the “Quarterly Financial Statements”). This MD&A is intended to assist the reader to assess material changes in the financial condition of the Company during the quarter ended March 31, 2024, and the results of operations of the Company for the three-month periods ended March 31, 2024 and March 31, 2023. The Quarterly Financial Statements and the financial information contained in this MD&A were prepared in accordance with US GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission.
In this MD&A, unless the context otherwise requires, references to the Company or PNRL refer to Premium Nickel Resources Ltd. and its consolidated subsidiaries. All monetary amounts in the discussion are expressed in Canadian dollars unless otherwise indicated.
This MD&A contains forward-looking information within the meaning of applicable securities laws. All forward-looking information, including information not specifically identified herein, is made subject to cautionary language in this MD&A. Readers are cautioned to refer to the disclosure in this Report under the heading “Cautionary Note Regarding Forward-Looking Statements” when reading any forward-looking information.
Company Overview
PNRL is a mineral exploration company focused on the discovery and advancement of high-quality nickel-copper-cobalt-platinum group metals (“Ni-Cu-Co-PGM”) resources. The principal assets of the Company are the Selebi and Selebi North nickel-copper-cobalt (“Ni-Cu-Co”) mines (together, the “Selebi Mines”) in Botswana and related infrastructure (together, the “Selebi Assets”), as well as the nickel, copper, cobalt, platinum-group elements (“Ni-Cu-Co-PGE”) Selkirk mine (the “Selkirk Mine”) in Botswana, together with associated infrastructure and four surrounding prospecting licenses (collectively, the “Selkirk Assets”).
PNRL’s global strategy is to identify the best Ni-Cu-Co-PGM projects and to acquire or invest in opportunities that have high prospectivity in mining friendly jurisdictions located in low-risk countries with rule-of-law, supportive foreign investment and resource acts. PNRL sources projects that fit a strict standard that comply with the Company’s values and principles which stand up against the highest acceptable industry standards. PNRL is committed to governance through transparency, accountability, and open communication within PNRL’s team and stakeholders.
The Company’s principal business activity is the exploration and evaluation of PNRL’s flagship asset, the Selebi Mines and, separately, the Company’s Selkirk Mine, each located Botswana.
The Selebi Mines and the Selkirk Mine are permitted with 10-year mining licences and benefit from significant local infrastructure. The Company’s flagship Selebi Mines includes two operational shafts, the Selebi and Selebi North shafts, and related infrastructure such as rail, power and roads.
PNRL is headquartered in Toronto, Ontario, Canada and is publicly traded on the TSX Venture Exchange under the symbol “PNRL” and on the OTCQX Best Market under the symbol “PNRLF”.
Summary of Activities
In 2023, PNRL commenced its Phase 2 drill program undertaking a combination of resource and continued exploration drilling at the Selebi Mines to demonstrate the size potential of the Selebi Mines mineral system, with the aim of establishing a current mineral resource
32
estimate (“MRE”) on the Selebi Mines that will serve as the basis for future engineering studies. The resource drilling at the Selebi Mines commenced underground from the Selebi North infrastructure in August 2023 and is currently ongoing with three drills turning. Assay results for completed holes are released as they are received and confirmed by the Company. The Company sees significant potential for expanding the 2016 historic estimate.
Currently the Company’s primary objective is to prepare current mineral resource estimates in respect of the Selebi Mines expected in late Q2 or early Q3, 2024. Concurrently, PNRL plans to continue its work at the Selkirk Mine and its surrounding prospecting licences, which is the Company’s second asset in Botswana, located approximately 75 kilometres north of the Selebi Mines. The focus of this work will be to understand the legacy work done by previous owners, which had advanced the Selkirk Mine to a bankable feasibility study for re-development as an open pit mine.
The Company plans to include drilling, geoscience and metallurgical work to support a mineral resource estimate in respect of the Selkirk Mine. In 2023, the Company completed test work to evaluate an alternative ore processing and tailings management strategy to those used in previous economic studies, the results of which are set forth in the Selkirk TRS (as defined herein).
For more information relating to the exploration and evaluation activities conducted on the Selebi Mines and Selkirk Mine, please see “Exploration and Evaluation Activities” below.
Highlights and Key Developments During Q1 2024 and Subsequent Events to Date:
| ● | On January 1, 2024, James Gowans was appointed as the Chair of the Board of Directors. |
| ● | The Company continued its Phase 2 Selebi North drilling program, which commenced August 9, 2023. In aggregate, the Company has drilled a total of 35,246 metres in 92 drill holes, at the time of the May 16, 2024 press release. |
| ● | Since January 1, 2024, the Company reported assay results from a total of 37 drill holes, pursuant to press releases issued from January 30 to May 16, 2024, see the table under “Selebi Mines, Botswana - Exploration Activities”, all of which are available on the Company’s website www.premiumnickel.com. The Company’s website is not incorporated in this Report. |
Assay results included:
| ● | 30.45m of 2.88% NiEq and 9.55m of 3.94% NiEq reported on January 30, 2024; |
| ● | 102.80 Metres of 2.23% NiEq reported on February 13, 2024; |
| ● | 110.75 Metres of 2.56% NiEq reported on February 26, 2024; and |
| ● | 17.55 meters of 3.28% NiEq reported on May 16, 2024. |
| ● | On June 14 and June 21, 2024, the Company closed two tranches of a non-brokered private placement offering of units of the Company, pursuant to which the Company issued a total of 35,256,409 Units at a price of C$0.78 per Unit for gross proceeds of approximately C$27.5 million. |
| ● | On June 24, 2024, Norman MacDonald was appointed to the Board of Directors. |
33
Exploration and Evaluation Activities
The following table outlines the key milestones, estimated timing and costs of each of the Company’s material projects, the Selebi Mines and the Selkirk Mine, based on the Company’s reasonable expectations and intended courses of action and current assumptions and judgement, with information based as of March 31, 2024.
Key Milestones for Project |
| Expected Timing of Completion |
| Anticipated Remaining Costs(1) | | |
Selebi Mines(2) | | | | | | |
Ongoing drilling and assays(3) |
| Ongoing, costs to June 2024 | | $ | 1,140,000 | |
Care and maintenance costs |
| Ongoing costs to June 2024 | | $ | 600,000 | |
Engineering and development |
| Ongoing costs to June 2024 | | $ | 910,000 | |
Mineral resource estimate for Selebi Mines |
| June 2024 | | $ | 120,000 | (4) |
Selkirk Mine(5) |
|
| |
|
| |
Geology & Geophysics |
| Ongoing costs to June 2024 | | $ | 125,000 | |
Notes:
| (1) | As at March 31, 2024. |
| (2) | The key milestones are to take the Selebi Mines to an updated mineral resource estimate, which would mark the completion of the Phase I work program as envisioned in the Selebi TRS (defined below) and to commence Phase 2 which will gear towards a preliminary economic assessment for the project. Please refer to the Selebi TRS, including the recommendations provided therein, for more details. |
| (3) | The Company has completed the exploration and infill drilling (15,074 metres) as contemplated in Phase 1 of the work program in the Selebi TRS. This constitutes a Phase 2 drilling program, with the additional drilling and assays required to advance the Selebi Mines toward a current MRE. For more details, see “Selebi Mines, Botswana – Exploration Activities”. |
| (4) | Total costs relating to an MRE for the Selebi Mines are approximately $150,000. Approximately $31,625 has been spent as at March 31, 2024. This represents the additional expected costs to complete an MRE for the project. |
| (5) | The Company will be focusing its exploration and evaluation activities on the Selebi Mines until an updated mineral resource estimate is completed for the Selebi project. Expenditures contemplated for the Selkirk Mine are minimal and contingent on additional financing. The contemplated geology and geophysics work represented here is a portion of the geology and geophysics work program outlined in the Selkirk TRS which is required to advance the project towards an MRE, and meet exploration commitments on the prospecting licences. |
Readers are cautioned that the above represents the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those described above.
Mineral Properties
The information relating to the Selebi Mines is derived from, and in some instances is an extract from, the technical report summary entitled “Technical Report Summary on the Selebi Mines, Central District, Republic of Botswana” dated June 27, 2024 (with an effective date of May 31, 2024) prepared for the Company by SLR (as defined herein) (the “Selebi TRS”), prepared in compliance with the SEC’s Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K (the “SEC Mining Rules”).
The information relating to the Selkirk Mine is derived from, and in some instances is an extract from, the technical report summary entitled “Technical Report Summary on the Selkirk Nickel Project, North East District, Republic of Botswana” dated June 27, 2024 (with an effective date of May 31, 2024) prepared for the Company by SLR (the “Selkirk TRS”), prepared in compliance with the SEC Mining Rules.
Selebi Mines, Botswana
The Selebi Mines are located in Botswana approximately 150 km southeast of the city of Francistown, and 410 km northeast of the national capital Gaborone. The Selebi Mines are readily accessed via paved and gravel roads from the town of Selebi-Phikwe, located just north of the mining licence. With a population of approximately 52,000, the town is accessed via a well-maintained paved road that branches due east from the major A1 highway at the town of Serule, 57 km from the Selebi Mines.
34
The Selebi Mines infrastructure includes two mines, currently on care and maintenance, Selebi (#2 Shaft) and Selebi North (#4 Shaft), and associated surface infrastructure.
The Selebi Mines consists of a single mining licence covering an area of 11,504 ha. The mining licence is centred approximately at 22°03’00”S and 27°47’00”E.
Mining licence 2022/1L was granted to Premium Nickel Resources Proprietary Limited, a wholly-owned subsidiary of PNRL in Botswana, on January 31, 2022 over the Selebi Mines deposits discovered under mining licence 4/72. The original licence which had been granted to BCL Limited (“BCL”) on March 7, 1972, covered both Selebi and Phikwe project areas, was amended several times and renewed once, and was set to expire on March 6, 2022. The new mining licence is limited to the Selebi and Selebi North deposits and their surrounding areas and expires May 26, 2032.
Exploration
Exploration work completed at the Selebi Mines from 2021 to May 2024 consisted of the sourcing and digitization of existing historical information, confirming collar and down hole location information of selected historical holes, and drilling. PNRL also completed gyro, electromagnetic surveys (“BHEM”), televiewer, and downhole physical property surveys on selected high priority historical and recent exploration holes. A focused structural model over a portion of the Selebi deposit was developed by SRK Consulting Ltd. (“SRK”), and a 3D model of mineralization for use in targeting was created at Selebi North by SLR.
Early due diligence work in 2019 highlighted an off-hole BHEM anomaly in a 2010 drill hole located down-plunge of the Selebi deposit. The collection of new gyro data confirmed that the off-hole anomaly lies at the downdip edge of the modelled Selebi mineralization which was intersected by a drill hole which reported an estimated true thickness interval of 38.5 m averaging 1.58% Ni and 2.44% Cu, including 21.4 m of 2.34% Ni and 3.39% Cu. This drill hole intersection is located approximately 300 m down plunge of the existing mine workings and approximately 1,200 m below surface and provides support to the potential establishment of mineral resources at depth at the Selebi deposit.
Selebi North mineralization is also open at depth, and additional potential to establish mineral resources occurs there. Given the basin structure, it is possible that the Selebi North mineralization extends at depth and flattens to the south, while also potentially extending southward.
Mineral Processing and Metallurgical Testing
The historical BCL operations consisted of an integrated mining, concentrating, and smelting complex which operated for over 40 years over the Selebi Phikwe project area. The smelter processed Selebi and Phikwe concentrates and toll treated nickel concentrates received from the Nkomati Nickel Mine and the Phoenix Mine. The concentrator plant and smelter were placed on care and maintenance in 2016 and are located adjacent to the Selebi Mines at the historical Phikwe Mine.
PNRL intends to use pre-concentration methods to separate the minerals from waste materials to produce a mill feed and flotation to produce a concentrate for commercial sale, or for further refining, and does not plan to restart the existing concentrator or smelter. Concentrate options will be investigated in the next phase of work and include a bulk concentrate and separate nickel and copper concentrates. In 2021, PNRL carried out due diligence work that included metallurgical sampling and testing. Metallurgical study programs were carried out by SGS Canada Inc. (“SGS”) in Lakefield, Ontario in 2021 and 2023 for separate copper and nickel concentrate production at a conceptual level. The conceptual process flowsheet developed by SGS includes the key unit operations of crushing, grinding, and flotation.
PNRL and DRA collaborated in the analyses of historical data collected on key flotation parameters observed in the production of separate nickel and copper concentrates, such as metal upgrade ratios and mass pull, to simulate estimated metal grades and recoveries for bulk concentrate.
Selkirk Mine, Botswana
The Selkirk Mine is located in the northeast of Botswana approximately 28 km southeast of the city of Francistown, and 450 km northeast of the national capital Gaborone.
35
The Selkirk Mine is accessed year-round via paved and gravel roads from Gaborone and Francistown. The Selkirk Mine infrastructure includes relict surface infrastructure supporting the historical underground mine, and the original decline. The Selkirk Mine is quite flat, and beyond the mine footprint is covered in grassland with dispersed and clusters of trees typical of a tree savanna biome.
The Selkirk Mine consists of a single mining licence covering an area of 1,458 ha (14.58 km2) and four prospecting licences covering a total of 12,670 ha (126.7 km2). The mining licence, 2022/7L, is centred approximately at 21°19’13” S and 27°44’17” E and is held by PNGPL, a subsidiary of PNRL. The mining licence was renewed for ten years commencing on May 27, 2022, ending on May 26, 2032. The four prospecting licences (PL050/2010, PL051/2010, PL210/2010, and PL071/2011) are valid for a period of two years effective from October 1, 2022.
Exploration
Exploration work completed by PNRL to date has consisted of the sourcing and digitization of existing historical information, confirming collar location information on selected historical holes, re-logging selected drill core, sampling mineralized drill core found untouched on surface, and submitting a number of samples for proof-of-concept metallurgical testing. PNRL has also initiated an internal study into the feasibility of the open pit concept and is exploring conceptually with limiting test information several different processing options. Work to validate the existing drill core information through field duplicate and pulp duplicate re-analysis in ongoing with the intention of reporting an updated Mineral Resource estimate at the Selkirk Mine in the future.
Mineral Processing and Metallurgical Testing
PNRL intends to use flotation to produce a concentrate for commercial sale or for further refining. Concentrate options will be investigated in the next phase of work and include a bulk concentrate and separate nickel and copper concentrates. Metallurgical study programs were carried out by SGS in Lakefield, Ontario in 2021 and 2023 for separate copper and nickel concentrate production at a conceptual level. The conceptual process flowsheet developed by SGS includes the key unit operations of crushing, grinding, and flotation.
PNRL analyzed select SGS test results on key flotation parameters observed in the production of separate nickel and copper concentrates to simulate estimated metal grades and recoveries for bulk concentrate. Infrastructure The area is in a rural district and the available infrastructure is minimal. Strategic services (e.g., electricity and water supplies) could be provided by the Botswana Power Corporation and from existing governmental water pipelines within the Francistown Road Reserve, and potable water could be sourced on site from boreholes. A railway line crosses the western margin of the Selkirk area.
Maniitsoq Nickel-Copper-PGM Project, Southwest Greenland
The Maniitsoq project is centred on the 75 kilometre by 15 kilometre Greenland Norite Belt which hosts numerous high-grade nickel-copper sulphide occurrences associated with mafic and ultramafic intrusions. The property is located 100 kilometres north of Nuuk, the capital of Greenland, and is accessible year-round either by helicopter or by boat from Nuuk or Maniitsoq, the latter located on the coast approximately 15 kilometres to the west. The Company acquired the Maniitsoq project in 2011 due to its potential for the discovery of significant magmatic sulfide deposits in a camp-scale belt. The Maniitsoq property consists of three exploration licences, Sulussagut No. 2011/54 and Ininngui No. 2012/28 comprising 2,689 and 296 square kilometres, respectively, and the Carbonatite property No. 2018/21 (63 square kilometres), and a prospecting licence, No. 2020/05, for West Greenland. The Greenland properties have no mineral resources or reserves.
The three mineral exploration licences (“MEL”), 2011/54, 2012/28 and 2018/21, had sufficient accrued work credits to keep the property in good standing until December 2023, at which time a reduction in the size of 2011/54 and 2012/28 was required. An application for the renewal and reduction of MEL 2012/28 was approved and the licence area has been reduced and renewed to December 31, 2026. The reduction of MEL 2012/54 from 265 km2 to 110.9 km2 has no material impact on potential for discovery of an economic deposit as all known mineral prospects are retained. The application for the reduction of 2011/54 was submitted and the Company is waiting for approval from the Greenland authority. The MEL 2018/21 and prospecting licence 2020/05 are in effect until December 31, 2024.
36
Exploration Activities
No exploration work was carried out in Greenland in 2023 or in Q1 2024. Remaining targets were reviewed and prioritized in preparation for a potential field program in 2023, which was deferred. A quote was received in Q2 2023 for computer assisted target generation.
During the three months ended March 31, 2024, the Company incurred $31,354 in exploration expenditures on the Maniitsoq property, which is comprised of the Sulussugut, Ininngui, Carbonatite and 2020/05 licences. These expenditures were recorded as general exploration expense in the consolidated statements of comprehensive loss. No material expenditures or activities are contemplated on the Maniitsoq property at this time.
Canadian Nickel Projects - Sudbury, Ontario
Post Creek Property
The Post Creek property is located 35 kilometres east of Sudbury in Norman, Parkin, Alymer and Rathburn townships and consists of 73 unpatented mining claim cells in two separate blocks, covering a total area of 912 hectares held by the Company. The Company acquired the property through an option agreement in April 2010, which was subsequently amended in March 2013. As at the date of this MD&A, the Company holds a 100% interest in the Post Creek property and is obligated to pay advances on a net smelter return of $10,000 per annum, which will be deducted from any payments to be made under the net smelter return.
The Post Creek property lies adjacent to the Whistle Offset Dyke Structure which hosts the past–producing Whistle Offset and Podolsky Cu-Ni-PGM mines. Post Creek lies along an interpreted northeast extension of the corridor containing the Whistle Offset Dyke and Footwall deposits and accounts for a significant portion of all ore mined in the Sudbury nickel district and, as such, represents favourable exploration targets. Key lithologies are Quartz Diorite and metabreccia related to offset dykes and Sudbury Breccia associated with Footwall rocks of the Sudbury Igneous Complex which both represent potential controls on mineralization.
No exploration work was completed in Q1 2024 on the Post Creek Property. The claims have sufficient work credits to keep them in good standing until 2025. No material expenditures or activities are contemplated on the Post Creek property at this time.
Halcyon Property
The Halcyon property is located 35 kilometres northeast of Sudbury in the Parkin and Aylmer townships and consists of 63 unpatented mining cells for a total of 864 hectares. Halcyon is adjacent to the Post Creek property and is approximately 2 kilometres north of the producing Podolsky Mine of FNX Mining. The property was acquired through an option agreement and as at the date of this MD&A, the Company holds a 100% interest in the Halcyon property and is obligated to pay advances on a net smelter return of $8,000 per annum, which will be deducted from any payments to be made under the net smelter return.
No exploration work was completed on the Halcyon Property in Q1 2024. The claims are in good standing through 2025. No material expenditures or activities are contemplated on the Halcyon property at this time.
Quetico Property
The Quetico property is located within the Thunder Bay Mining District of Ontario and consists of 99 claim cells in two blocks. Cells were acquired to assess: (a) the Quetico Sub-province corridor, which hosts intrusions with Ni-Cu-Co-PGM mineralization related to a late 2690 Ma Archean magmatic event; and (b) the Neoproterozoic (1100 Ma MCR) magmatic event and related intrusions.
No work was carried out on the Property in Q1 2024. Of the 99 claims, 46 claims expired in April 2023, with the remaining in good standing until April 2024. These claims expired on April 26, 2024.
During the three months ended March 31, 2024, the Company incurred $16,679 in acquisition and exploration related costs related to the Post Creek, Halcyon and Quetico properties. The costs were recorded as general exploration expense in the consolidated statements of comprehensive loss. No material expenditures or activities are contemplated on the Quetico property at this time.
37
Financial Capability
The Company is an exploration stage entity and has not yet achieved commercial production on any of its properties or profitable operations. The business of the Company entails significant risks. The recoverability of amounts shown for mineral property costs is dependent upon several factors including environmental risk, legal and political risk, the establishment of economically recoverable mineral reserves, confirmation of the Company’s interests in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete exploration and advancement of its mineral assets and the ability of the Company to attain sufficient net cash flow from future profitable production or disposition proceeds.
As at March 31, 2024, the Company had working capital of $6,759,860 (FY 2023 – $14,999,619) and reported an accumulated deficit of $113,913,996 (FY 2023 – $104,566,816).
As at March 31, 2024, the Company had $9,366,821 in available cash (FY 2023 – $19,245,628). There are no sources of operating cash flows. Given the Company’s current financial position and the ongoing exploration and evaluation expenditures, the Company will need to raise additional capital through the issuance of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and re-development of the mineral properties. Although the Company has been successful in its past fund-raising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future.
Selected Financial Information
The following amounts are derived from the Company’s unaudited condensed interim consolidated financial statements prepared under US GAAP.
|
| Three months ended March 31, | ||
In Canadian dollars, except number of shares issued and shares outstanding |
| 2024 |
| 2023 |
Net (loss) |
| (9,347,180) |
| (6,367,772) |
Basic (loss) per share |
| (0.06) |
| (0.05) |
Dividend declared |
| — |
| — |
Additional paid-in capital |
| 116,459,585 |
| 84,577,438 |
Common shares issued |
| 149,427,179 |
| 120,958,527 |
Weighted average shares outstanding |
| 149,373,068 |
| 118,246,915 |
Total assets |
| 28,458,479 |
| 19,367,799 |
Investment in exploration and evaluation assets |
| 54,536,402 |
| 36,332,411 |
Current liabilities |
| 5,076,555 |
| 12,584,564 |
Non-current financial liabilities |
| 22,731,043 |
| 2,205,653 |
Net loss of $9,347,180 in Q1 2024 was higher by $2,979,408 compared to a loss of $6,367,772 for Q1 2023. The greater loss for Q1 2024 was largely due to increased exploration activities relating to the Botswana assets, the interest expense of the Term Loan (as defined below) and an increase in share-based payment.
Total Assets
Total assets as at March 31, 2024 increased by a net amount of $9,090,680 from the end of Q1 2023. The change is mainly attributable to an increase in cash and spare parts of $4,052,574 and $966,806, respectively, as well as an increase in property, plant and equipment of $3,841,306.
Investment in Exploration and Evaluation Assets
Investment in exploration and evaluation assets in Q1 2024 and Q1 2023 is related to the exploration and evaluation of the Selebi Mines and the Selkirk Mine, the costs of which are expensed. As at March 31, 2024, the recorded amount of investment in the Company’s exploration and evaluation assets, including capitalized and expensed, totaled $54,536,402 compared to $36,332,411 as at March 31, 2023. Principal factors contributing to this change were increased exploration and evaluation activities on the Botswana assets in Q1 2024 relative to Q1 2023.
38
Current and Non-Current Liabilities
Current liabilities as at March 31, 2024 decreased by $7,508,009 from Q1 2023 due to the repayment of a promissory note to Pinnacle Island. Non-current liabilities as at March 31, 2024 increased by $20,525,390 from Q1 2023 as a result of the Term Loan as well as the NSR option payment liability.
Overall Performance and Results of Operations
As at the date of this Report, the Company has not earned revenue nor proved the economic viability of its projects. The Company’s expenses are not subject to seasonal fluctuations or general trends other than factors affecting costs such as inflation and input prices. The Company’s expenses and cash requirements will fluctuate from period to period depending on the level of activity at the projects based on factors related to raising capital to fund expenditures. Comparisons of activity made between periods should be viewed with this in mind. The Company’s quarterly results may be affected by many factors such as timing of exploration activity, share-based payment costs, capital raised, marketing activities and other factors that affect the Company’s exploration, evaluation and re-development activities.
The following table summarizes the Company’s Statement of Comprehensive Loss for the three-month periods ended March 31, 2024 and March 31, 2023.
|
| Three months ended | ||
|
| March 31, 2024 |
| March 31, 2023 |
EXPENSES | | | | |
General and administration expenses |
| 1,865,253 |
| 1,857,412 |
Depreciation |
| 364,228 |
| 45,762 |
General exploration expenses |
| 5,731,998 |
| 4,015,841 |
Interest and bank charges |
| 94,617 |
| 49,939 |
Share-based payment |
| 389,612 |
| — |
Deferred share units granted |
| 281,249 |
| 173,292 |
Fair value movement of deferred shares units |
| (226,602) |
| (16,000) |
Net foreign exchange loss |
| 66,013 |
| 30,416 |
Operating loss |
| 8,566,368 |
| 6,156,662 |
| | | | |
Interest expenses (income) |
| 20,702 |
| (9,677) |
Interest expense on Term Loan |
| 519,206 |
| 220,787 |
Accretion and transaction fee of Term Loan |
| 240,904 |
| — |
LOSS BEFORE TAX |
| 9,347,180 |
| 6,367,772 |
| | | | |
OTHER COMPREHENSIVE LOSS |
|
|
|
|
Exchange differences on translation of foreign operations |
| 137,237 |
| 272,337 |
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD |
| 9,484,417 |
| 6,640,109 |
Three Months Ended March 31, 2024 and March 31, 2023
The Company incurred a net loss of $9,347,180 in Q1 2024, higher by $2,979,408 compared to a net loss of $6,367,772 for Q1 2023.
The following higher expenditures in Q1 2024 compared to Q1 2023 contributed to the higher net loss in Q1 2024:
| ● | Depreciation expense was $364,228 in Q1 2024 and was higher by $318,466 compared to $45,762 in Q1 2023 due to an increase in property, plant and equipment towards the end of 2023 which started to depreciate in Q1 2024. |
| ● | General exploration expenses were $5,731,998 during Q1 2024 and were higher by $1,716,157 compared to $4,015,841 in Q1 2023. The exploration and evaluation expenditures on the Botswana assets were increased in Q1 2024 with increased activities at the operating sites during the quarter. |
39
| ● | Bank charges net of interest earned on bank deposits was $94,617 in Q1 2024 and was higher by $44,678 compared to $49,939 in Q1 2023. |
| ● | Share-based payment in Q1 2024 was $389,612 compared to nil in Q1 2023. |
| ● | Foreign exchange loss totaled $66,013 in Q1 2024 and was higher by $35,598 compared to $30,416 in Q1 2023. The loss in Q1 2024 was due to an overall weakening of the Botswana Pula against the Canadian dollar and the Canadian dollar weakening against United States dollar. |
| ● | Interest and financing costs were $780,812 in Q1 2024 and were higher by $560,025 compared to $211,110 in Q1 2023. The higher interest costs related to the Term Loan as well as the interest charged on the lease liabilities associated with the acquisition of the Syringa Lodge and the purchase of drilling equipment. |
Deferred share unit (“DSU”) compensation (net of fair value movement) was $54,647 during Q1 2024 and was lower by $102,645 compared to $157,292 in Q1 2023. The total value of DSUs granted in Q1 2024 was higher than in Q1 2023, due to an increase in the number of directors on the Board of Directors, with the increase offset by the drop in the fair value of outstanding DSUs due to a decrease in the Company’s share price.
Cash Flows
The following table summarizes the cash flows:
|
| Three months ended March 31, | ||
|
| 2024 |
| 2023 |
Cash flows | | | | |
Operations |
| (8,174,687) |
| (5,867,112) |
Working capital items |
| (1,374,768) |
| (94,036) |
Operating activities |
| (9,522,455) |
| (5,961,148) |
Investing activities |
| (85,096) |
| (1,000,000) |
Financing activities |
| (316,120) |
| 7,238,615 |
Increase (decrease) in cash before effects of currency translation for foreign operations |
| (9,923,671) |
| 277,467 |
Effects of currency translation on cash |
| 44,864 |
| (126,211) |
Increase (decrease) in cash |
| (9,878,807) |
| 151,256 |
Cash – beginning of period |
| 19,245,628 |
| 5,162,991 |
Cash – end of period |
| 9,366,821 |
| 5,314,247 |
Operating Activities
Net cash used in operating activities was $9,522,455 in Q1 2024 compared to $5,961,148 in Q1 2023. The cash used in operations increased by $3,561,307, mainly driven by an increase in cash operating costs as a result of increasing operational activities in Botswana and a higher change in working capital compared to Q1 2023.
Investing Activities
Key investing activities relate to the acquisition of property, plant and equipment. During Q1 2024, investing activities totaled $85,096 compared to $1,000,000 in Q1 2023. The higher spending in Q1 2023 was related to the purchase of tooling and diamond tips for the three leased drills.
40
Financing Activities
Cash flows used in financing activities amounted to $316,120 in Q1 2024 compared to a positive cash flow of $7,238,615 generated from financing activities in Q1 2023. The decrease in cash flows in Q1 2024 compared to Q1 2023 was due to an equity private placement completed in February 2023 for a total of $7.7 million while no financing transactions were completed in Q1 2024. See “Financing” for more details. Cash flows used for financing activities in Q1 2024 were mainly due to the interest payment on the Term Loan.
Financial Position
The following information regarding the financial position of the Company as at March 31, 2024 and December 31, 2023 is derived from the Company’s unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024 and the audited consolidated financial statements for the year ended December 31, 2023.
|
| As at |
| As at |
|
| March 31, 2024 |
| December 31, 2023 |
ASSETS | | | | |
Cash |
| 9,366,821 |
| 19,245,628 |
Other current assets |
| 2,469,594 |
| 1,645,280 |
Exploration and evaluation assets |
| 8,495,730 |
| 8,594,798 |
Property, plant and equipment |
| 8,126,334 |
| 8,488,499 |
TOTAL ASSETS |
| 28,458,479 |
| 37,974,205 |
| | | | |
LIABILITIES |
|
|
|
|
Trade payables and accrued liabilities |
| 3,756,692 |
| 4,280,146 |
Lease liabilities |
| 1,319,863 |
| 1,611,143 |
Vehicle financing |
| 211,284 |
| 236,124 |
Provision for leave and severance |
| 633,304 |
| 510,202 |
Term Loan |
| 18,197,327 |
| 17,956,423 |
Deferred share units liability |
| 939,128 |
| 884,481 |
NSR option liability |
| 2,750,000 |
| 2,750,000 |
TOTAL LIABILITIES |
| 27,807,598 |
| 28,228,519 |
| | | | |
SHAREHOLDERS’ EQUITY |
|
|
|
|
Preferred shares |
| 31,516 |
| 31,516 |
Additional paid-in capital |
| 116,459,585 |
| 116,069,973 |
Deficit |
| (113,913,996) |
| (104,566,816) |
Foreign currency translation reserve |
| (1,926,224) |
| (1,788,987) |
TOTAL SHAREHOLDERS’ EQUITY |
| 650,881 |
| 9,745,686 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| 28,458,479 |
| 37,974,205 |
The Company’s cash balance on March 31, 2024 decreased from the amount on December 31, 2023, primarily due to the increased exploration activities on the Company’s properties as well as increased corporate activities as described in the “Cash Flows” section and the “Liquidity” section under “Financing”.
Other current assets increased by $824,314 and trade payables and accrued liabilities decreased by $523,454 as at March 31, 2024 compared to the amounts as at December 31, 2023.
The slight decrease in exploration and evaluation assets was primarily due to foreign currency exchange fluctuation. Property, plant and equipment decreased by $362,165 as of March 31, 2024 compared to the amount of $8,488,499 as at December 31, 2023 as a result of deprecation.
The Company’s lease liabilities were $1,319,863 as at March 31, 2024, lower by $291,280 compared to $1,611,143 as at December 31, 2023 due to a lease payment made in Q1 2024.
41
The increase in the Term Loan by $240,904 was attributed to the accretion of the value of the warrants granted associated with the Term Loan. The increase in paid-in capital by $389,612 is mainly due to options exercised during Q1 2024.
Liquidity
Capital Resources
For the three months ended March 31, 2024, the Company incurred a loss of $9,347,180 and reported an accumulated deficit of $113,913,996 as at March 31, 2024 (FY 2023 – $104,566,816). At the end of Q1 2024, the Company required additional funds to continue its planned operations and meet its future obligations, commitments and forecasted expenditures through March 31, 2025. Management is aware, in making its assessment, of material uncertainties related to events and conditions that may cast a substantial doubt upon the Company’s ability to continue as a going concern, and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The accompanying Financial Statements do not reflect the adjustments to the carrying values of assets and liabilities, expenses and financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be material. In assessing whether a going concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period.
Going Concern
As at March 31, 2024, the Company had $9,366,821 in available cash (FY 2023 – $19,245,628). There are no sources of operating cash flows. Given the Company’s current financial position and the ongoing exploration and evaluation expenditures, the Company will need to raise additional capital through the issuance of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and re-development of the mineral properties. Although the Company has been successful in its past fund-raising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future.
Financings
There were no financing transactions during the three months ended March 31, 2024.
On December 14, 2023, the Company closed a financing (the December Financing, comprised of a brokered private placement of units (the “Private Placement”) and an amended Term Loan. The Private Placement was completed in accordance with the terms of an agency agreement dated December 14, 2023 and entered into by the Company with Cormark Securities Inc. and BMO Capital Markets, as co-lead agents, and Canaccord Genuity Corp., Fort Capital Securities Ltd. and Paradigm Capital Inc. Pursuant to the Private Placement, the Company issued an aggregate of 13,133,367 common shares of the Company (“Common Shares”) at a price of $1.20 per Common Share for aggregate gross proceeds of $15,760,040. The principal amount of the Term Loan has been increased by $5,882,353 (the “Additional Principal Amount”) from $15,000,000 to $20,882,353. The Additional Principal Amount was subject to an original issue discount of approximately 15% and was advanced by Cymbria Corporation (“Cymbria”) to the Company as a single advance of $5,000,000. The net proceeds from the December Financing were $19,743,845 after fees and expenses, which are being used to advance the exploration and evaluation of the Selebi Mines and the Selkirk Mine and for general corporate and working capital purposes. A more detailed breakdown of the proposed use of proceeds of the Private Placement conducted under the Listed Issuer Financing Exemption is as outlined in the offering document dated December 3, 2023. As at March 31, 2024, approximately $10.6 million of the net proceeds of the December Financing had been expended.
42
Use of Proceeds
The following table provides a summary of the principal use of proceeds of the December Financing.
| | | | Amounts Expended |
| | Estimated Amount | | as at March 31, 2024 |
Principal Purpose |
| $’000 |
| $’000 |
December Financing | | | |
|
Activities relating to the Selebi Mines | | 11,520 | (1) | 6,380 |
Activities relating to the Selkirk Mine | | 400 | (2) | 37 |
General corporate and working capital | | 7,839 | (3) | 4,153 |
| | 19,759 | | 10,570 |
Notes:
| (1) | Represents approximately (i) $8,325,000 for the advancement of the Selebi Mines towards a mineral resource estimate; (ii) $1,400,000 for mining licence extension payment; and (iii) $1,795,000 in local management, consulting, accounting, finance, human resources and health/safety/environmental/security. |
| (2) | Represents certain geophysics and geology costs, care and maintenance and prospecting licences. |
| (3) | Represents approximately (i) $2,080,000 allocated to the payment of interest on the Term Loan; and (ii) $5,759,000 allocated to general corporate expenses. |
Working Capital
As at March 31, 2024, the Company had a positive working capital of $6,759,860 (December 31, 2023 – $14,999,619), calculated as total current assets less total current liabilities. The decrease in working capital is mainly due to a decrease in cash, an increase in accounts payable and accrued liabilities, offset by an increase in other current assets and a decrease in lease liabilities. See “Liquidity” for more details.
Contractual Obligations and Contingencies
Selebi Assets
As per the Selebi asset purchase agreement (the “Selebi APA”), the aggregate purchase price payable to the seller for the Selebi Assets is the sum of US$56,750,000 which amount shall be paid in three instalments:
| ● | US$1,750,000 payable on the closing date. This payment has been made. |
| ● | US$25,000,000 upon the earlier of: (a) approval by the Ministry of Mineral Resources, Green Technology and Energy Security (“MMRGTES”) of the Company’s Section 42 and Section 43 applications (further extension of the mining licence and conversion of the mining licence into an operating licence, respectively); and (b) on the expiry date of the study phase, January 31, 2025, which can be extended for one year. |
| ● | The third instalment of US$30,000,000 is payable on the completion of mine construction and production start-up by the Company on or before January 31, 2030, but not later than four years after the approval by the Minister of MMRGTES of the Company’s Section 42 and Section 43 applications. |
| ● | Payment of care and maintenance funding contribution in respect of the Selebi Assets for a total of US$5,178,747 from March 22, 2021 to the closing date. This payment has been made. |
43
As per the terms and conditions of the Selebi APA, the Company has the option to cancel the second and third payments and give back the Selebi Assets to the liquidator in the event the Company determines that the Selebi Assets are not economical. The Company also has an option to pay in advance the second and third payments in the event the Company determines that the Selebi Assets are economical. The Company’s accounting policy, as permitted by ASC 450 - Contingencies, is to measure and record contingent consideration when the conditions associated with the contingency are met. As of March 31, 2024, none of the conditions of the second and third instalment are met. Hence, these amounts are not accrued in the Financial Statements.
In addition to the Selebi APA, the purchase of the Selebi Assets is also subject to a contingent compensation agreement as well as a royalty agreement with the liquidator.
Phikwe South and the Southeast Extension
On August 16, 2023, the Company announced that it had entered into a binding commitment letter with the Liquidator of BCL to acquire a 100% interest in two additional deposits, Phikwe South the Southeast Extension, located adjacent to and immediately north of the Selebi North historical workings. The acquisition of the Phikwe South and the Southeast Extension deposits has not closed as at the date of this MD&A.
The upfront cost to the Company to acquire these additional mineral properties is US$1,000,000. In addition, the Company has agreed to additional work commitments of US$5,000,000 in the aggregate over the next four years. As a result of the extension of the Selebi mining licence, the remaining asset purchase obligations of the Company outlined in the Selebi APA will each increase by 10%, US$5,500,000 in total, while the trigger events remain unchanged.
Selkirk Mine
In regard to the Selkirk Assets, the purchase agreement does not provide for a purchase price or initial payment for the purchase of the assets. The Selkirk purchase agreement provides that if the Company elects to develop Selkirk first, the payment of the second Selebi instalment of US$25 million would be upon the approval by the Minister of MMRGTES of the Company’s Section 42 and Section 43 applications (further extension of the Selkirk mining licence and conversion of the Selkirk mining licence into an operating licence, respectively). For the third Selebi instalment of US$30 million, if Selkirk were commissioned earlier than Selebi, the payment would trigger on Selkirk’s commission date.
Right-of-Use Assets
On July 9, 2022, the Company executed a sales agreement with Tuli Tourism Pty Ltd. (“Tuli”) for the Syringa Lodge in Botswana and obtained possession of the property in August 2022. Pursuant to the sales agreement, the aggregate purchase price payable to the seller is $3,213,404. A deposit of $482,011 was paid on August 17, 2022. The balance is payable in two instalments of $1,365,697 on each of August 1, 2023 and August 1, 2024. The first instalment has been made. In addition to the above purchase price, the Company will pay to Tuli agreed interest in twelve equal monthly instalments of $13,657 each, followed by twelve equal monthly instalments of $6,828.
On March 14, 2023, the Company entered into a drilling equipment supply agreement with Forage Fusion Drilling Ltd. (“Forage”) of Hawkesbury, Ontario to purchase specific drilling equipment on a “rent to own” basis with the purchase price to be paid in monthly payments. Pursuant to the agreement, the aggregate purchase price payable to Forage is $2,942,000. A deposit of $1,700,000 was paid in March 2023. The balance is payable in twelve equal monthly instalments of $103,500. The equipment arrived at the site in July 2023.
Post Creek
Commencing August 1, 2015, the Company is obligated to pay advances on a net smelter return of $10,000 per annum. During each of FY 2022 and YTD 2023, the Company paid $10,000, which will be deducted from any payments to be made under the net smelter return.
Halcyon
Commencing August 1, 2015, the Company is obligated to pay advances on a net smelter return of $8,000 per annum. During each of FY 2022 and FY 2023, the Company paid $8,000, which will be deducted from any payments to be made under the net smelter return.
44
Related Party Transactions
Related party transactions are summarized below and include transactions with the following individuals or entities:
Key management (defined as members of the Board and senior officers) compensation was related to the following:
|
| March 31, 2024 |
| March 31, 2023 |
Management fees |
| 777,809 |
| 802,074 |
Corporate and administration expenses |
| 110,400 |
| 59,182 |
|
| 888,209 |
| 861,256 |
As a result of the financing closed on June 28, 2023 with Cymbria and EdgePoint Investment Group Inc., as portfolio manager on behalf of certain mutual funds managed by it (“EdgePoint”), and the increase of the Term Loan by the Additional Principal Amount on December 14, 2023 (the “EdgePoint Transactions”), Cymbria and certain other funds managed by EdgePoint (the “Financing Parties”) have acquired a total of 16,037,800 Common Shares, representing approximately 10.7% of the Company’s issued and outstanding shares. The Financing Parties also acquired on closing an aggregate of 6,024,000 warrants with a three-year term and an exercise price of $1.4375 which, if exercised, together with the shares acquired at closing would result in the Financing Parties holding approximately 14.2% of the shares in the aggregate (calculated on a partially diluted basis). As the result of the EdgePoint Transactions, the Financing Parties are related parties of PNRL. During the three months ended March 31, 2024, the Company paid interest of $519,206 to the Financing Parties (March 31, 2023 – nil).
Contingent Liabilities
There are no environmental liabilities associated with the Selebi Assets and the Selkirk Mine as at the acquisition dates as all liabilities prior to the acquisitions are the responsibility of the sellers. The Company has an obligation for the rehabilitation costs arising subsequent to the acquisitions. As of March 31, 2024, management is not aware of or anticipating any contingent liabilities that could impact the financial position or performance of the Company related to its exploration and evaluation assets.
The Company’s exploration and evaluation assets are affected by the laws and environmental regulations that exist in the various jurisdictions in which the Company operates. It is not possible to estimate the future contingent liabilities and the impact on the Company’s operating results due to future changes in the Company’s re-development of its projects or future changes in such laws and environmental regulations.
Segmented Disclosure
The Company operates in one reportable operating segment being that of the acquisition, exploration and evaluation of mineral properties in three geographic segments being Botswana, Barbados and Canada. The Company’s geographic segments are as follows:
|
| March 31, 2024 |
| December 31, 2023 |
Current assets |
|
|
|
|
Canada |
| 7,706,418 |
| 15,894,177 |
Barbados |
| 2,090,445 |
| 104,024 |
Botswana |
| 2,039,552 |
| 4,892,707 |
Total |
| 11,836,415 |
| 20,890,908 |
|
| March 31, 2024 |
| December 31, 2023 |
Property, plant and equipment |
|
|
|
|
Canada |
| 8,291 |
| 8,726 |
Botswana |
| 8,118,043 |
| 8,479,773 |
Total |
| 8,126,334 |
| 8,488,499 |
|
| March 31, 2024 |
| December 31, 2023 |
Exploration and evaluation assets |
|
|
|
|
Botswana |
| 8,495,730 |
| 8,594,798 |
45
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements as at March 31, 2024.
Share Capital Information
As of the date of this MD&A, the fully diluted share capital of the Company, including Common Shares issuable upon exercise of securities of the Company exercisable for Common Shares, is as follows:
Securities |
| Common shares |
Common shares |
| 185,708,588 |
Preferred shares (1) |
| 13,131 |
Deferred shares |
| 1,393,676 |
Warrants |
| 42,822,508 |
Stock options |
| 13,059,821 |
Fully diluted share capital |
| 242,997,724 |
(1): | The 118,186 outstanding preferred shares are convertible into Common Shares at a 9:1 ratio. |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based on the evaluation of these disclosure controls and procedures, management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2024 due to the material weaknesses in internal control over financial reporting that were disclosed in our 2023 Form 10-K, namely: lack of controls and process over significant estimates and judgements applied in assessing complex accounting transactions; lack of segregation of duties over posting and reviewing complex accounting transactions; and lack of communication between legal consultants and management related to SEC filing requirements.
Remediation of Previously Identified Material Weaknesses
The Company’s management, under the oversight of the Audit Committee, is in the process of designing and implementing corrective actions to remediate the control deficiencies that contributed to the material weaknesses, including obtaining specific resources to address the identified weaknesses. As we continue to evaluate and enhance our internal control over financial reporting, we may determine that additional measures to address the material weaknesses or adjustments to the remediation plan may be required. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
46
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We have no knowledge of any material, active, pending or threatened legal, administrative or judicial proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.
Item 1A. Risk Factors
Risks and other factors include those listed under “Risk Factors” in the 2023 Form 10-K and elsewhere in this Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following tables outline the number of Common Shares and securities that are convertible into Common Shares issued by the Company pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), during the first quarter ended March 31, 2024.
| | |
| Exercise Price per |
| |
Date of Issuance |
| Security |
| Security ($) |
| Number of Securities |
March 31, 2024 | | Deferred Share Units | | N/A | | 312,499 |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Item 1.01 Entry into a Material Definitive Agreement.
On each of June 14 and June 21, 2024, the Company closed two tranches of a non-brokered private placement offering of units of the Company (“Units”), pursuant to which the Company issued a total of 35,256,409 Units at a price of C$0.78 per Unit for gross proceeds of approximately C$27.5 million.
Each Unit is comprised of one Common Share and one Common Share purchase warrant of the Company (each, a “Warrant”). Each Warrant entitles the holder thereof to acquire one Common Share at an exercise price of C$1.10 per Common Share for a period of 5 years, subject to acceleration as described herein. If, at any time prior to the expiry date of the Warrant, the volume-weighted average trading price of the Common Shares on the TSX Venture Exchange (the “Exchange”) (or such other principal exchange or market where the Common Shares are then listed or quoted for trading) is at least C$2.00 per Common Share for a period of 20 trading days, the Company may, at its option, elect to accelerate the expiry date to a date (the “Accelerated Expiry Date”) that is not less than 30 days following the date that the Company provides written notice to the holders of the Warrants of the Accelerated Expiry Date. The form of Warrant was filed as Exhibit 10.18 to the Company’s 2023 Form 10-K and is hereby incorporated herein by reference.
47
In connection with the private placement, on June 4, 2024, the Company entered into a binding term sheet (the “Binding Term Sheet”), among the Company, EdgePoint and another investor, providing for the subscription of 7,692,307 units of the Company in the private placement by the investors for aggregate gross proceeds of approximately C$12,000,000. After giving effect to the private placement, EdgePoint beneficially owns approximately 18.83% of the Company’s outstanding Common Shares on a partially-diluted basis. The Binding Term Sheet was filed as Exhibit 10.13 to the Company’s 2023 Form 10-K and hereby is incorporated herein by reference.
The private placement with EdgePoint closed on June 14, 2024. As part of the closing, the Company and EdgePoint entered into an investor rights agreement dated the closing date, pursuant to which, among other things, EdgePoint was granted certain rights, including participation rights on future equity raises of the Company and the right to nominate a director to the board of directors of the Company, provided that EdgePoint meets certain equity ownership thresholds and satisfies certain other conditions. The form of investor rights agreement was filed as Exhibit 10.16 to the Company’s 2023 Form 10-K and is hereby incorporated herein by reference.
In connection with the private placement, the Company issued an aggregate 1,025,000 Units at a deemed issue price equal to C$0.78 per unit (comprised of 1,025,000 Common Shares and 1,025,000 non-transferable Warrants) to SCP Resource Finance LP and paid Fort Capital an advisory fee of C$250,000, in each case in consideration for providing certain advisory services to the Company. The form of Compensation Warrant was filed as Exhibit 10.19 to the Company’s 2023 Form 10-K and is hereby incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in response to Item 1.01 above is incorporated by reference herein. The Units were sold in reliance upon the exemptions from registration provided by Regulation S and Regulation D promulgated under the Securities Act.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 1, 2024, James Gowans was appointed as the Chair of the Board of Directors of the Company. Mr. Gowans was not appointed pursuant to any arrangement or understanding between him and any other persons pursuant to which he was selected as a director. Mr. Gowans has not been appointed to serve on any committees of the Company’s Board of Directors but as Chair of the Board of Directors is invited to every meeting of each such committee. There have been no transactions since January 1, 2023 in which the Company was or is to be a participant and the amount involved exceeds US$120,000 and in which either Mr. Gowans or any member of his immediate family had or will have a direct or indirect material interest. Mr. Gowans is eligible to participate in the Company’s Amended Option Plan and Deferred Share Unit Plan.
On June 24, 2024, Norman MacDonald was appointed as a member of the Board of Directors of the Company. Also on June 24, 2024, the Company, Mr. MacDonald and NAM Management Limited (a company controlled by Mr. MacDonald) entered into a consulting agreement for the provision of services by NAM Management Limited in connection with the capital markets strategy of PNRL and the execution thereof, in connection with other financing strategies and opportunities, in connection with capital budgeting, and otherwise as PNRL may reasonably request. The Company and EdgePoint mutually agreed upon the appointment of Mr. MacDonald. Mr. MacDonald recently served as Senior Advisor, Natural Resources at Fort Capital from February 2021 until June 24, 2024. Fort Capital, principally through Mr. MacDonald, has served as a financial advisor to the Company, most notably in connection with the private placement of Units completed on June 21, 2024 and in connection with a significant equity and debt financing transaction on June 28, 2023. Having regard to his recent history as an external advisor, Mr. MacDonald will not be regarded as an independent director of the Company. Mr. MacDonald has not been appointed to serve on any committees of the Company’s Board of Directors. Mr. MacDonald is eligible to participate in the Company’s Amended Option Plan and Deferred Share Unit Plan.
Insider Trading Arrangements
During the three months ended March 31, 2024,
48
Item 6. Exhibits
Exhibit |
| Description of Exhibit |
| ||
31.1 | | Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer |
| ||
31.2 | | Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer |
| | |
32.1 | | |
| ||
32.2 | | |
| | |
101 | | Includes the following financial and related information from Premium Nickel Limited Resource’s Quarterly Report on Form 10-Q as of and for the quarter ended March 31, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) Unaudited Condensed Interim Consolidated Balance Sheets, (2) Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss, (3) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ (Deficit) Equity, (4) Unaudited Condensed Interim Consolidated Statements of Cash Flows, and (5) Notes to the Unaudited Condensed Interim Consolidated Financial Statements. |
| | |
104 | | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL. |
49
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 12, 2024. | PREMIUM NICKEL RESOURCES LTD. | ||
| (Registrant) | ||
| | | |
| By: | /s/ Keith Morrison | |
| | Name: | Keith Morrison |
| | Title: | Chief Executive Officer |
| | | (principal executive officer) |
| | | |
| By: | /s/ Peter Rawlins | |
| | Name: | Peter Rawlins |
| | Title: | Chief Financial Officer |
| | | (principal financial officer) |
50
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Keith Morrison, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Premium Nickel Resources Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| | |
| | |
Date: | July 12, 2024 | |
| | |
By: | /s/ Keith Morrison | |
| Keith Morrison | |
| Chief Executive Officer | |
| (principal executive officer) | |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Rawlins, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Premium Nickel Resources Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 12, 2024 | | |
| | |
By: | /s/ Peter Rawlins | |
| Peter Rawlins | |
| Chief Financial Officer | |
| (principal financial officer) | |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Premium Nickel Resources Ltd. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 12, 2024 | /s/ Keith Morrison |
| Keith Morrison |
| Chief Executive Officer |
| (principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Premium Nickel Resources Ltd. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 12, 2024 | /s/ Peter Rawlins |
| Peter Rawlins |
| Chief Financial Officer |
| (principal financial officer) |