New Found Gold Corp 6-K, filed Mar 10, 2022
New Found Gold Corp. (NFGC)
About this 6-K
New Found Gold Corp filed this 6-K on March 10, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2022
Commission File Number 001-39966
New Found Gold Corp.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name)
Suite 1430 – 800 West Pender Street
Vancouver, British
Columbia V6C 2V6
604-562-9664
(Address and telephone number of registrant’s principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ¨ Form 40-F x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
DOCUMENTS INCLUDED AS PART OF THIS REPORT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| New Found Gold Corp. | |||
| Date: March 10, 2022 | By: | /s/ Michael Kanevsky | |
| Name: | Michael Kanevsky | ||
| Title: | Chief Financial Officer | ||
Exhibit 99.1
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021 AND 2020
(Expressed in Canadian Dollars)
 |
Crowe MacKay LLP |
| 1100 – 1177 West Hastings Street Vancouver, BC V6E 4T5 Main +1 (604) 687-4511 Fax +1 (604) 687-5805 www.crowemackay.ca |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of New Found Gold Corp.
Opinion on the Financial Statements
We have audited the accompanying statements of financial position of New Found Gold Corp. (the “Company”) as of December 31, 2021 and 2020, the related statements of loss and comprehensive loss and cash flows and equity for the years then ended, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Crowe MacKay LLP
Chartered Professional Accountants
Vancouver, Canada
March 10, 2022
We have served as the Company’s auditor since 2020.
New Found Gold Corp.
Statements of Financial Position
(Expressed in Canadian Dollars)
| Note | December 31, 2021 $ | December 31, 2020 $ | ||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash | 100,484,576 | 47,731,125 | ||||||||||
| Investments, at fair value | 5 | 31,942,458 | 21,089,997 | |||||||||
| Amounts receivable | - | 2,837 | ||||||||||
| Prepaid expenses and deposits | 6 | 2,179,057 | 1,258,203 | |||||||||
| Sales taxes recoverable | 1,807,182 | 1,024,369 | ||||||||||
| Right-of-use assets | 8 | - | 54,034 | |||||||||
| Other assets | 107,376 | - | ||||||||||
| Total current assets | 136,520,649 | 71,160,565 | ||||||||||
| Non-current assets | ||||||||||||
| Exploration and evaluation assets | 3 | 8,525,481 | 999,234 | |||||||||
| Property and equipment | 4 | 2,914,459 | 1,377,129 | |||||||||
| Right-of-use assets | 8 | 97,258 | - | |||||||||
| Total non-current assets | 11,537,198 | 2,376,363 | ||||||||||
| Total Assets | 148,057,847 | 73,536,928 | ||||||||||
| LIABILITIES | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable and accrued liabilities | 10 | 2,573,200 | 396,451 | |||||||||
| Flow-through share premium | 7 | 10,129,196 | 185,431 | |||||||||
| Lease liabilities | 8 | 54,250 | 53,201 | |||||||||
| Total current liabilities | 12,756,646 | 635,083 | ||||||||||
| Flow-through share premium | 7 | 12,600,000 | - | |||||||||
| Lease liabilities | 8 | 46,600 | - | |||||||||
| Total non-current liabilities | 12,646,600 | - | ||||||||||
| Total liabilities | 25,403,246 | 635,083 | ||||||||||
| EQUITY | ||||||||||||
| Share capital | 9 | 181,795,493 | 87,668,764 | |||||||||
| Reserves | 9 | 30,474,764 | 24,208,662 | |||||||||
| Deficit | (89,615,656 | ) | (38,975,581 | ) | ||||||||
| Total equity | 122,654,601 | 72,901,845 | ||||||||||
| Total Liabilities and Equity | 148,057,847 | 73,536,928 | ||||||||||
NATURE OF OPERATIONS (Note 1)
COMMITMENTS AND CONTINGENCY (Note 15)
SUBSEQUENT EVENTS (Note 18)
These financial statements are authorized for issue by the Board of Directors on March 10, 2022. They are signed on the Company’s behalf by:
| “Collin Kettell” | , Director |
| “John Anderson” | , Director |
The accompanying notes are an integral part of these financial statements.
-1-
New Found Gold Corp.
Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars)
| Year ended December 31, | ||||||||||||
| Note | 2021 $ | 2020 $ | ||||||||||
| Expenses | ||||||||||||
| Corporate development and investor relations | 1,306,045 | 758,421 | ||||||||||
| Depreciation | 4,8 | 582,930 | 129,957 | |||||||||
| Exploration and evaluation expenditures | 3,10 | 42,271,457 | 8,107,439 | |||||||||
| Office and sundry | 469,476 | 105,067 | ||||||||||
| Professional fees | 10 | 955,337 | 677,243 | |||||||||
| Salaries and consulting | 10 | 3,100,723 | 1,948,113 | |||||||||
| Share-based compensation | 9,10 | 7,612,214 | 26,457,335 | |||||||||
| Transfer agent and regulatory fees | 260,159 | 91,487 | ||||||||||
| Travel | 103,871 | 72,226 | ||||||||||
| Loss from operating activities | (56,662,212 | ) | (38,347,288 | ) | ||||||||
| Settlement of flow-through share premium | 7 | 6,617,730 | 1,772,188 | |||||||||
| Foreign exchange (loss) | 2,453 | (12,214 | ) | |||||||||
| Gain on sale of exploration and evaluation assets | 3 | 499,415 | 4,384,953 | |||||||||
| Impairment of exploration and evaluation assets | 3 | (28,604 | ) | (166,662 | ) | |||||||
| Interest expense | (7,493 | ) | (3,544 | ) | ||||||||
| Interest income | 122,714 | 61,882 | ||||||||||
| Net realized gains on disposal of investments | 5 | 192,114 | - | |||||||||
| Net change in unrealized (losses) on investments | 5 | (1,376,192 | ) | (223,754 | ) | |||||||
| Loss and comprehensive loss for the year | (50,640,075 | ) | (32,534,439 | ) | ||||||||
| Loss per share – basic and diluted ($) | 11 | (0.33 | ) | (0.29 | ) | |||||||
| Weighted average number of common shares outstanding – basic and diluted | 154,949,075 | 112,657,850 | ||||||||||
The accompanying notes are an integral part of these financial statements.
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New Found Gold Corp.
Statements of Cash Flows
(Expressed in Canadian Dollars)
| Year ended December 31, | ||||||||
| 2021 $ | 2020 $ | |||||||
| Cash flows from operating activities | ||||||||
| Loss for the year | (50,640,075 | ) | (32,534,439 | ) | ||||
| Adjustments for: | ||||||||
| Depreciation | 582,930 | 129,957 | ||||||
| (Gain) on sale of exploration and evaluation assets | (499,415 | ) | (4,384,953 | ) | ||||
| Impairment of exploration and evaluation assets | 28,604 | 166,662 | ||||||
| Interest expense | 7,493 | 3,544 | ||||||
| Settlement of flow-through share premium | (6,617,730 | ) | (1,772,188 | ) | ||||
| Share-based compensation | 7,612,214 | 26,457,335 | ||||||
| Net realized gains on disposal of investments | (192,114 | ) | - | |||||
| Net change in unrealized losses on investments | 1,376,192 | 223,754 | ||||||
| (48,341,901 | ) | (11,710,328 | ) | |||||
| Change in non-cash working capital items: | ||||||||
| Decrease in amounts receivable | 2,837 | 43,248 | ||||||
| (Increase) in prepaid expenses and deposits | (920,854 | ) | (821,767 | ) | ||||
| (Increase) in other assets | (107,211 | ) | - | |||||
| (Increase) in sales taxes recoverable | (782,813 | ) | (733,294 | ) | ||||
| Increase in accounts payable and accrued liabilities | 1,637,860 | 3,602 | ||||||
| Net cash used in operating activities | (48,512,082 | ) | (13,218,539 | ) | ||||
| Cash flows used in investing activities | ||||||||
| Purchases of exploration and evaluation assets | (3,938,898 | ) | (100,000 | ) | ||||
| Expenditures on claims staking and mineral license renewals | (111,130 | ) | (42,930 | ) | ||||
| Proceeds on disposal of investments | 1,313,462 | - | ||||||
| Purchases of investments | (12,850,001 | ) | - | |||||
| Purchases of property and equipment | (1,484,104 | ) | (1,446,440 | ) | ||||
| Net cash used in investing activities | (17,070,671 | ) | (1,589,370 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common shares in initial public offering | - | 31,395,000 | ||||||
| Issuance of common shares in private placements | 120,501,665 | 7,118,196 | ||||||
| Share issue costs | (4,457,654 | ) | (3,032,606 | ) | ||||
| Stock options exercised | 1,236,170 | 7,036,624 | ||||||
| Warrants exercised | 1,156,523 | 12,721,057 | ||||||
| Lease payments | (93,984 | ) | (32,331 | ) | ||||
| Interest expense on lease liabilities | (6,516 | ) | (3,544 | ) | ||||
| Net cash generated from financing activities | 118,336,204 | 55,202,396 | ||||||
| Net increase in cash | 52,753,451 | 40,394,487 | ||||||
| Cash at beginning of year | 47,731,125 | 7,336,638 | ||||||
| Cash at end of year | 100,484,576 | 47,731,125 | ||||||
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 12)
The accompanying notes are an integral part of these financial statements.
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New Found Gold Corp.
Statements of Changes in Equity
(Expressed in Canadian Dollars)
| Share capital | Reserves | |||||||||||||||||||||||
Number of shares | Amount $ | Equity settled share-based payments $ | Warrants $ |
Deficit $ | Total equity $ | |||||||||||||||||||
| Balance at December 31, 2019 | 78,924,249 | 10,735,862 | 2,415,009 | 2,252,458 | (6,441,142 | ) | 8,962,187 | |||||||||||||||||
| Shares issued in initial public offering | 24,150,000 | 31,395,000 | - | - | - | 31,395,000 | ||||||||||||||||||
| Shares issued in private placements | 15,000,000 | 16,736,110 | - | - | - | 16,736,110 | ||||||||||||||||||
| Flow-through shares issued in private placements | 4,860,982 | 7,118,196 | - | - | - | 7,118,196 | ||||||||||||||||||
| Share issue costs | - | (3,032,606 | ) | - | - | - | (3,032,606 | ) | ||||||||||||||||
| Agents’ warrants issued | - | (813,952 | ) | - | 813,952 | - | - | |||||||||||||||||
| Flow-through share premium | - | (1,957,619 | ) | - | - | - | (1,957,619 | ) | ||||||||||||||||
| Share-based compensation | - | - | 26,457,335 | - | - | 26,457,335 | ||||||||||||||||||
| Stock options exercised | 9,195,000 | 12,204,631 | (5,168,007 | ) | - | - | 7,036,624 | |||||||||||||||||
| Warrants exercised | 16,554,292 | 15,283,142 | - | (2,562,085 | ) | - | 12,721,057 | |||||||||||||||||
| Total comprehensive loss for the year | - | - | - | - | (32,534,439 | ) | (32,534,439 | ) | ||||||||||||||||
| Balance at December 31, 2020 | 148,684,523 | 87,668,764 | 23,704,337 | 504,325 | (38,975,581 | ) | 72,901,845 | |||||||||||||||||
| Issued pursuant to acquisition of exploration and evaluation assets | 458,823 | 3,505,408 | - | - | - | 3,505,408 | ||||||||||||||||||
| Flow-through shares issued in private placements | 12,905,500 | 120,501,665 | - | - | - | 120,501,665 | ||||||||||||||||||
| Share issue costs | - | (4,457,654 | ) | - | - | - | (4,457,654 | ) | ||||||||||||||||
| Flow-through share premium | - | (29,161,495 | ) | - | - | - | (29,161,495 | ) | ||||||||||||||||
| Share-based compensation | - | - | 7,612,214 | - | - | 7,612,214 | ||||||||||||||||||
| Stock options exercised | 1,273,000 | 2,096,982 | (860,812 | ) | - | - | 1,236,170 | |||||||||||||||||
| Warrants exercised | 883,854 | 1,641,823 | - | (485,300 | ) | - | 1,156,523 | |||||||||||||||||
| Total comprehensive loss for the year | - | - | - | - | (50,640,075 | ) | (50,640,075 | ) | ||||||||||||||||
| Balance at December 31, 2021 | 164,205,700 | 181,795,493 | 30,455,739 | 19,025 | (89,615,656 | ) | 122,654,601 | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
-4-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 1. | NATURE OF OPERATIONS |
New Found Gold Corp. (the “Company”) was incorporated on January 6, 2016, under the Business Corporations Act in the Province of Ontario. On June 23, 2020, the Company continued as a British Columbia corporation under the Business Corporations Act in the Province of British Columbia. The Company’s registered office is located at Suite 2600 – 595 Burrard Street, Vancouver, British Columbia V7X 1L3.
The Company is a mineral exploration company engaged in the acquisition, exploration and evaluation of resource properties with a focus on gold properties located in the Provinces of Newfoundland and Labrador and Ontario, Canada. The Company’s exploration and evaluation assets presently have no proven or probable reserves, and on the basis of information to date, it has not yet determined whether these properties contain economically recoverable resources. The recoverability of amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production.
On March 11, 2020, the World Health Organization declared the global outbreak of a novel coronavirus identified as “COVID-19” a global pandemic. In order to combat the spread of COVID-19, governments worldwide have enacted emergency measures including travel bans, legally enforced or self-imposed quarantine periods, social distancing and business and organization closures. These measures have caused material disruptions to businesses, governments and other organizations resulting in an economic slowdown and increased volatility in national and global equity and commodity markets. Central banks and governments, including Canadian federal and provincial governments, have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of any interventions. Significant economic and social impacts have limited the Company’s ability to continue its exploration and evaluation activities as intended. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods.
These financial statements were approved by the Board of Directors of the Company on March 10, 2022.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The principal accounting policies applied in the preparation of these financial statements are set out below.
| a) | Statement of compliance |
The Company’s financial statements, including comparatives, have been prepared in accordance with and using accounting policies in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), effective for the Company’s reporting for the year ended December 31, 2021 and 2020.
| b) | Basis of presentation |
These financial statements have been prepared on a historical cost basis except for financial instruments classified as subsequently measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
| c) | Foreign currencies |
The presentation and functional currency of the Company is the Canadian dollar. Transactions in currencies other than the Canadian dollar are recorded at the rates of exchange prevailing on the dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
-5-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
| d) | Exploration, evaluation and development expenditures |
Costs incurred before the Company has obtained the legal right to explore are expensed as incurred. Once the legal right to explore has been acquired, the Company capitalizes the costs of acquiring rights or licenses, including those purchased from other parties or staked directly by the Company, until such time as the lease expires, it is abandoned, sold or considered impaired in value. Indirect administrative costs and costs of surveying, exploratory drilling, sampling, materials, fuel, equipment rentals or payments to contractors are expensed as incurred.
Exploration and evaluation properties are not amortized during the exploration and evaluation stage.
The Company does not have revenue from mining operations. The Company recognizes gains or losses on the sale of exploration and evaluation assets in accordance with the terms of the purchase and sale agreements. Gains or losses are recognized when a mining option is executed and the cost is derecognized in accordance with the percentage interest sold.
At each reporting date the carrying amounts of the Company’s exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.
For the purposes of impairment testing, exploration and evaluation assets are allocated to cash generating units (“CGU”) to which the exploration activity relates. Each of the Company’s properties is considered to be a separate CGU. Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
| e) | Cash and cash equivalents |
Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. The Company does not have any cash equivalents as at December 31, 2021 and 2020.
| f) | Decommissioning liabilities |
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of exploration and evaluation assets and equipment when those obligations result from the acquisition, construction, development or normal operation of assets. The net present value of future rehabilitation costs is capitalized to exploration and evaluation assets along with a corresponding increase in the rehabilitation provision in the period incurred.
Pre-tax discount rates that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is depreciated on the same basis as exploration and evaluation assets. The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to exploration and evaluation assets and the rehabilitation provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period. There are no decommissioning liabilities for the periods presented.
-6-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
| g) | Property, plant and equipment |
Property, plant and equipment is recorded at cost less accumulated depreciation calculated using the straight-line method over the estimated useful lives of 25 years for Property & Buildings, 2 years for Geological Equipment, 2 years for Computer Equipment, and 3 years for Vehicles. Depreciation of an asset begins once it is available for use.
Long-lived assets are comprised of property, plant and equipment. At the end of each reporting period the carrying amounts of the Company’s long-lived assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use.
Fair value is determined as the amount that would be obtained by the sale of the asset in any arm’s length transaction between knowledgeable and willing parties. Fair value of mineral assets is generally determined as the present value of the estimated cash flows expected to arise from the continued use of the asset, including an expansion projects. Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal.
Impairment is assessed at the CGU level, which is identified as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets.
Non-financial assets that have been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. When a reversal of a previous impairment is recorded, the reversal amount is adjusted for depreciation that would have been recorded had the impairment not taken place.
| h) | Leases |
The Company recognizes assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.
The Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments for the lease agreements entered after the transition date which are not short term or low value leases. The right-of-use asset is measured at cost, which is equal to the initial lease liability adjusted for any lease payments at or before the commencement date, less any lease incentives received. It is subsequently measured at cost less any accumulated depreciation and impairment losses and adjusted for re-measurements of the lease liability. Right-of-use assets are depreciated over the term of the lease.
A lease liability is measured at the present value of remaining lease payments, discounted at the Company’s incremental borrowing rate. It is subsequently increased by the interest cost on the lease liability, less the lease payments made. Lease liabilities are re-measured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or in the assessment of whether an extension option is reasonably certain to be exercised. The Company’s estimated weighted average incremental borrowing rate for the years ended December 31, 2021 and 2020 is 12%.
-7-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
| i) | Share-based payment transactions |
Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to equity settled share-based payments reserve.
Consideration received on the exercise of stock options is recorded as share capital and the related equity settled share-based payments reserve is transferred to share capital. Charges for options that are forfeited/cancelled before vesting are transferred from equity settled share-based payment reserve to deficit. Charges for options that are expired remain in equity settled share-based payment reserve.
Where the terms and conditions of options are modified before they vest, the changes in fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
| j) | Valuation of equity units issued in private placements |
The Company follows the pro-rata allocation method with respect to the measurement of shares and warrants issued as private placement units. This values each component at fair value and allocates total proceeds received between shares and warrants based on the pro rata relative values of the components. The fair value of the common shares is based on the closing quoted bid price on the issue date and the fair value of the common share purchase warrants is determined at the issue date using the Black- Scholes pricing model. In the event of a modification in warrants issued as private placement units, no re-measurement adjustment is recognized within equity.
| k) | Financial instruments |
Financial assets and liabilities are recognized when the entity becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are derecognized when the rights to receive cash flows have expired or substantially all risks and rewards of ownership have been transferred. Gains and losses on derecognition are generally recognized in profit and loss.
Financial assets are classified and measured either at amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL") based on the business model in which they are held and the characteristics of their contractual cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest are measured at amortized cost at the end of the subsequent accounting periods. All other financial assets including equity investments are measured at their fair values at the end of subsequent accounting periods, with any change taken through profit or loss or other comprehensive income.
All financial instruments are initially recognized at fair value on the statement of financial position. Subsequent measurement of financial instruments is based on their classification. Financial assets and liabilities classified at FVTPL are measured at fair value with changes in those fair values recognized in profit or loss for the period. Financial assets and liabilities classified at amortized cost are measured at amortized cost using the effective interest method.
-8-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
The following table sets out the classifications of the Company’s financial assets and liabilities:
| Financial assets/liabilities | Classification under IFRS 9 | |
| Cash | Amortized cost | |
| Investments | FVTPL | |
| Amounts receivable | Amortized cost | |
| Deposits | Amortized cost | |
| Accounts payables | Amortized cost |
IFRS requires an expected credit loss model for calculating the impairment of financial assets.
The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in initial recognition. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods, if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods, if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
| l) | Investments |
Purchases and sales of investments are recognized on the settlement date. Realized gains and losses on disposal of investments and unrealized gains and losses in the fair value of investments are reflected in the statement of loss and comprehensive loss. Upon disposal of an investment, previously recognized unrealized gains or losses are reversed so as to recognize the full realized gain or loss in the period of disposition. All transaction costs associated with the acquisition and disposition of investments are expensed to the statement of loss and comprehensive loss as incurred. Interest income and other income are recorded on an accrual basis.
The fair value of investments is determined as follows:
| (a) | Securities that are traded in an active market and for which no sales restrictions apply, are presented at fair value based on quoted closing trade prices at the date of statement of financial position. If there were no trades on the date of the statement of financial position, these securities are presented at the closing price on the last date the security traded. These investments are included in Level 1 of the fair value hierarchy. |
| (b) | Securities that are traded in an active market, but which are escrowed or otherwise restricted as to their sale or transfer, are recorded at amounts discounted from market value to a maximum of 10%. In determining the discount for such investments, the Company considers the nature and length of the restriction. These investments are included in Level 2 of the fair value hierarchy. |
| (c) | Securities that are not traded in an active market or are valued based on unobservable market inputs are included in the Level 3 of the fair value hierarchy. See Note 5 for details of investments held by the Company as at December 31, 2021 and 2020. |
-9-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
| m) | Flow-through shares |
The Company will from time to time issue flow-through common shares to finance a significant portion of its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenditures being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as recovery of flow-through premium liability and the related deferred tax is recognized as a tax provision.
Proceeds received from the issuance of flow-through shares are required to be used only for Canadian resource property exploration expenditures within a two-year period. The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the Look-back Rule, in accordance with the Government of Canada flow-through regulations. When applicable, this tax is accrued as an expense until paid.
| n) | Earnings and loss per share |
The Company presents basic and diluted earnings and loss per share data for its common shares, calculated by dividing the earnings attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share does not adjust the earnings or loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.
| o) | Income taxes |
Income tax on the profit or loss for the years presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at year end applicable to the period of expected realization or settlement.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
| p) | Significant Accounting Estimates and Judgments |
The preparation of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates.
-10-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
These financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates may be pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant assumptions about the future and other sources of estimation uncertainty that management has made at year end that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to the following:
| (i) | Critical accounting estimates |
Valuation of Options Granted and Warrants Issued
The fair value of common share purchase options granted and warrants issued is determined at the issue date using the Black-Scholes option pricing model. The Black-Scholes model involves six key inputs to determine the fair value of an option, which are: risk-free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense. These estimates impact the values of stock-based compensation expense, share capital, and reserves.
Fair Value of Financial Derivatives
Investments in warrants that are not traded on a recognized securities exchange do not have a readily available market value. When there are sufficient and reliable market inputs, a Black-Scholes option pricing model is used. The Black-Scholes model involves six key inputs to determine the fair value of a warrant, which include: risk free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control.
Fair Value of Investments in Private Companies
The determination of fair value requires judgment and is based on market information, where available and appropriate. All privately-held investments are initially recorded at the transaction price, being the fair value at the time of acquisition. Thereafter, at each reporting period, the fair value of an investment may be adjusted using one or more of the valuation indicators described below. These are included in Level 3 in Note 16.
Company-specific information is considered when determining whether the fair value of a privately-held investment should be adjusted upward or downward at the end of each reporting period. In addition to company-specific information, the Company will take into account trends in general market conditions and the share performance of comparable publicly-traded companies when valuing privately-held investments.
The absence of the occurrence of any of these events, any significant change in trends in general market conditions, or any significant change in share performance of comparable publicly-traded companies indicates generally that the fair value of the investment has not materially changed.
-11-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Computation of Income Taxes
The determination of tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and make estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings which affect the extent to which potential future tax benefits may be used.
The Company is subject to assessments by taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. We provide for such differences where known based on our best estimate of the probable outcome of these matters.
Shares Issued to Acquire Exploration and Evaluation Assets
From time to time, the Company issues common shares in the course of acquiring exploration and evaluation assets. When shares are issued without cash consideration, the transaction is recognized at the fair value of the assets received. In the event that the fair value of the assets cannot be reliably determined, the Company will recognize the transaction at the fair value of the shares issued. These estimates impact the value of share capital and exploration and evaluation assets.
Valuation of flow-through premium
The determination of the valuation of flow-through premium and warrants in equity units is subject to significant judgment and estimates. The flow-through premium is valued as the estimated premium that investors pay for the flow-through feature, being the portion in excess of the market value of shares without the flow-through feature issued in concurrent private placement financing.
| (ii) | Critical accounting judgments |
Impairment of Exploration and Evaluation Assets
Management is required to assess impairment in respect to the Company’s intangible mineral property interests. The triggering events are defined in IFRS 6. In making the assessment, management is required to make judgments on the status of each project and the future plans towards finding commercial reserves. The carrying value of each exploration and evaluation asset is reviewed regularly for conditions that may suggest impairment.
This review requires significant judgment. Factors considered in the assessment of asset impairment include, but are not limited to, whether there has been a significant adverse change in the legal, regulatory, accessibility, title, environmental or political factors that could affect the property’s value; whether there has been an accumulation of costs significantly in excess of the amounts originally expected for the property’s acquisition, development or cost of holding; and whether exploration activities produced results that are not promising such that no more work is being planned in the foreseeable future. If impairment is determined to exist, a formal estimate of the recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount.
Management has determined that there were indicators of impairment as at December 31, 2021 and has impaired $28,604 (December 31, 2020 - $166,662) in exploration and evaluation assets. Refer to Note 3 for further information.
-12-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
| q) | Initial application of standards, interpretations and amendments to standards and interpretations in the reporting period |
There were no new accounting standards issued that were mandatory for adoption in 2021, and as a result no new standards were adopted by the Company during the year ended December 31, 2021.
| r) | New and amended IFRS standards not yet effective |
New accounting standards and interpretations have been published that are not mandatory for the current period and have not been adopted early. These standards are not expected to have a material impact on the Company.
| 3. | EXPLORATION AND EVALUATION ASSETS |
The schedules below summarize the carrying costs of acquisition costs and exploration expenditures incurred to date for each exploration and evaluation asset that the Company is continuing to explore as at December 31, 2021 and December 31, 2020:
| Newfoundland | ||||||||||||||||
| Queensway(i) | Other(ii) | Ontario(iii) | Total | |||||||||||||
| Year ended December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Exploration and evaluation assets | ||||||||||||||||
| Balance as at December 31, 2020 | 685,930 | 13,100 | 300,204 | 999,234 | ||||||||||||
| Additions | ||||||||||||||||
| Acquisition costs | 7,444,306 | - | - | 7,444,306 | ||||||||||||
| Claim staking and license renewal costs | 106,530 | 4,600 | - | 111,130 | ||||||||||||
| Disposal of exploration and evaluation assets | (585 | ) | - | - | (585 | ) | ||||||||||
| Impairment of exploration and evaluation assets | - | - | (28,604 | ) | (28,604 | ) | ||||||||||
| Balance as at December 31, 2021 | 8,236,181 | 17,700 | 271,600 | 8,525,481 | ||||||||||||
| Exploration and evaluation expenditures | ||||||||||||||||
| Cumulative exploration expense - December 31, 2020 | 10,245,545 | 45,851 | 1,286,951 | 11,578,347 | ||||||||||||
| Assays | 5,611,068 | - | 53,447 | 5,664,515 | ||||||||||||
| Drilling | 19,102,621 | - | 277,748 | 19,380,369 | ||||||||||||
| Environmental studies | 395,015 | - | - | 395,015 | ||||||||||||
| Geophysics | 3,257,813 | - | 374,660 | 3,632,473 | ||||||||||||
| Imagery and mapping | 104,665 | - | - | 104,665 | ||||||||||||
| Office and general | 512,922 | - | 1,631 | 514,553 | ||||||||||||
| Property taxes, mining leases and rent | 59,997 | - | - | 59,997 | ||||||||||||
| Petrography | - | - | 7,996 | 7,996 | ||||||||||||
| Reclamation | 335,783 | - | 732 | 336,515 | ||||||||||||
| Salaries and consulting | 6,391,133 | 12,295 | 165,863 | 6,569,291 | ||||||||||||
| Supplies and equipment | 3,893,748 | 923 | 62,338 | 3,957,009 | ||||||||||||
| Technical reports | 854,541 | - | 22,479 | 877,020 | ||||||||||||
| Travel and accommodations | 742,796 | 577 | 18,641 | 762,014 | ||||||||||||
| Trenching | 9,860 | - | 77,715 | 87,575 | ||||||||||||
| Exploration cost recovery | (77,550 | ) | - | - | (77,550 | ) | ||||||||||
| 41,194,412 | 13,795 | 1,063,250 | 42,271,457 | |||||||||||||
| Cumulative exploration expense – December 31, 2021 | 51,439,957 | 59,646 | 2,350,201 | 53,849,804 | ||||||||||||
-13-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 3. | EXPLORATION AND EVALUATION ASSETS (continued) |
| Newfoundland | ||||||||||||||||
| Queensway (i) | Other(ii) | Ontario(iii) | Total | |||||||||||||
| Year ended December 31, 2020 | $ | $ | $ | $ | ||||||||||||
| Exploration and evaluation assets | ||||||||||||||||
| Balance as at December 31, 2019 | 658,700 | 16,500 | 425,516 | 1,100,716 | ||||||||||||
| Additions | ||||||||||||||||
| Acquisition costs | 75,000 | - | 25,000 | 100,000 | ||||||||||||
| Claim staking and license renewal costs | 37,230 | 2,100 | 3,600 | 42,930 | ||||||||||||
| Disposal of exploration and evaluation assets | (75,000 | ) | (2,750 | ) | - | (77,750 | ) | |||||||||
| Impairment of exploration and evaluation assets | (10,000 | ) | (2,750 | ) | (153,912 | ) | (166,662 | ) | ||||||||
| Balance as at December 31, 2020 | 685,930 | 13,100 | 300,204 | 999,234 | ||||||||||||
| Exploration and evaluation expenditures | ||||||||||||||||
| Cumulative exploration expense - December 31, 2019 | 2,633,775 | - | 837,133 | 3,470,908 | ||||||||||||
| Assays | 848,000 | 963 | 209,159 | 1,058,122 | ||||||||||||
| Drilling | 2,560,406 | - | - | 2,560,406 | ||||||||||||
| Geochemistry | - | - | 5,330 | 5,330 | ||||||||||||
| Geophysics | 838,235 | - | - | 838,235 | ||||||||||||
| Office and general | 47,130 | 499 | 714 | 48,343 | ||||||||||||
| Property taxes, mining leases and rent | 46,217 | - | 5,812 | 52,029 | ||||||||||||
| Reclamation | 163,598 | - | - | 163,598 | ||||||||||||
| Salaries and consulting | 1,801,863 | 37,870 | 115,985 | 1,955,718 | ||||||||||||
| Supplies and equipment | 879,816 | 6,470 | 80,803 | 967,089 | ||||||||||||
| Travel and accommodations | 225,550 | 49 | 150 | 225,749 | ||||||||||||
| Trenching | 231,635 | - | 31,865 | 263,500 | ||||||||||||
| Exploration cost recovery | (30,680 | ) | - | - | (30,680 | ) | ||||||||||
| 7,611,770 | 45,851 | 449,818 | 8,107,439 | |||||||||||||
| Cumulative exploration expense – December 31, 2020 | 10,245,545 | 45,851 | 1,286,951 | 11,578,347 | ||||||||||||
| (i) | Queensway Project – Gander, Newfoundland |
As at December 31, 2021, the Company owns a 100% interest in 86 (December 31, 2020 – 86) mineral licenses including 6,041 (December 31, 2020 – 6,041) claims comprising 151,030 (December 31, 2020 – 151,030) hectares of land located in Gander, Newfoundland. The project rights were acquired by map staking mineral licenses and making staged payments in cash and common shares of the Company from 2016 through 2019 under nine separate, fully executed option agreements. The Queensway Project carries various net smelter return (“NSR”) royalties ranging from 0.6% to 2.5% which can be reduced to 0.5% to 1.6%, at the Company’s option, with payments ranging from $250,000 to $1,000,000 to the optionors. The total cost of the NSR’s that may be purchased at the Company’s discretion is $5,250,000.
During the year ended December 31, 2021, the Company entered into three royalty purchase agreements with arm’s length royalty holders (together, the “Vendors” and each, a “Vendor”), to purchase 100% of each Vendor’s royalty interests, each equal to 0.2%, for an aggregate of 0.6% of net returns from the Company’s Linear and JBP Linear properties (the “Royalty Interests”) for cash consideration of $1,300,000 (paid) and the issuance of 152,941 common shares (issued) in the capital of the Company to each Vendor, for aggregate cash consideration of $3,900,000 and aggregate share consideration of 458,823 common shares with a value of $3,505,408. The Company also incurred $38,898 in legal and filing fees in connection with the transaction. The royalty purchase was completed on November 25, 2021.The total amount of the consideration paid of $7,444,306 is included in mineral property acquisition costs at December 31, 2021.
-14-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 3. | EXPLORATION AND EVALUATION ASSETS (continued) |
Disposal of Newfoundland Properties
During the year ended December 31, 2021, the Company sold a stand-alone claim that was part of the Queensway Project (claim 023951M also known as Unknown Brooke claim) to Long Range Exploration Corporation (“Long Range”) for non-cash consideration of 5,000,000 common shares of Long Range valued at $500,000 (Note 5). The Company recognized a gain on sale of exploration and evaluation assets in the amount of $499,415 and derecognized exploration and evaluation assets at their carrying value of $585. The Company retained a 1% NSR on future production from the mineral claim, 0.5% of which can be repurchased by Long Range for $750,000.
During the year ended December 31, 2020, the Company recognized a gain on disposal of certain Newfoundland exploration and evaluation assets of $4,384,953. The Company received total non-cash consideration comprised of investments having a fair value of $4,462,703, and derecognized exploration and evaluation assets at their carrying value of $77,750. The Company retained a 2% net smelter returns royalty on future production from the mineral claims.
Impairment of Newfoundland Properties
During the year ended December 31, 2021, the Company recorded an impairment of $Nil (2020 - $10,000) in acquisition costs related to projects no longer being explored.
| (ii) | Other Projects - Newfoundland |
Impairment of Newfoundland Properties
During the year ended December 31, 2021, the Company recorded an impairment of $Nil (2020 - $2,750) in acquisition costs related to projects no longer being explored.
| (iii) | Ontario Projects |
As at December 31, 2021, the Company owns a 100% interest in the Lucky Strike project in Kirkland Lake, Ontario comprising 11,684 hectares, as well as a portfolio of mining and royalty interests throughout northeastern Ontario. The project rights were acquired by map staking mineral licenses and making staged payments in cash and common shares of the Company from 2016 through 2019 under a fully executed option agreement. The optioned lands carry an NSR ranging from 1% to 2%.
During the year ended December 31, 2021, the Company recorded an impairment of $28,604 (2020 - $153,912) in acquisition costs related to projects no longer being explored.
-15-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 4. | PROPERTY AND EQUIPMENT |
| Property and | Computer | Geological | ||||||||||||||||||
| Buildings | Equipment | Equipment | Vehicles | Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance at January 1, 2020 | — | — | — | 45,949 | 45,949 | |||||||||||||||
| Additions | 836,009 | 15,860 | 336,020 | 258,551 | 1,446,440 | |||||||||||||||
| Balance at December 31, 2020 | 836,009 | 15,860 | 336,020 | 304,500 | 1,492,389 | |||||||||||||||
| Additions | 1,291,476 | 16,532 | 487,102 | 226,740 | 2,021,850 | |||||||||||||||
| Balance at December 31, 2021 | 2,127,485 | 32,392 | 823,122 | 531,240 | 3,514,239 | |||||||||||||||
| Accumulated Depreciation | ||||||||||||||||||||
| Balance at January 1, 2020 | — | — | — | 16,800 | 16,800 | |||||||||||||||
| Depreciation | 6,998 | 4,090 | 45,474 | 41,898 | 98,460 | |||||||||||||||
| Balance at December 31, 2020 | 6,998 | 4,090 | 45,474 | 58,698 | 115,260 | |||||||||||||||
| Depreciation | 46,656 | 13,017 | 288,000 | 136,847 | 484,520 | |||||||||||||||
| Balance at December 31, 2021 | 53,654 | 17,107 | 333,474 | 195,545 | 599,780 | |||||||||||||||
| Carrying Amount | ||||||||||||||||||||
| At December 31, 2020 | 829,011 | 11,770 | 290,546 | 245,802 | 1,377,129 | |||||||||||||||
| At December 31, 2021 | 2,073,831 | 15,285 | 489,648 | 335,695 | 2,914,459 | |||||||||||||||
| 5. | INVESTMENTS |
The Company classifies its investments at FVTPL. Realized gains and losses on disposal of investments and unrealized gains and losses in the fair value of investments are reflected in the statement of loss and comprehensive loss in the period in which they occur.
Investments consisted of the following as at December 31, 2021 and 2020:
| December 31, 2021 | December 31, 2020 | |||||||
| $ | $ | |||||||
| Equities held (i) | 28,578,556 | 21,089,997 | ||||||
| Warrants held (ii) | 3,363,902 | — | ||||||
| Total Investments | 31,942,458 | 21,089,997 | ||||||
(i) Equities held
The Company held the following equities as at December 31, 2021 and 2020:
| Fair Value | ||||||||||||
| December 31, | ||||||||||||
| Cost | 2021 | |||||||||||
| Quantity | $ | $ | ||||||||||
| Exploits Discovery Corp. | 13,229,466 | 8,462,704 | 7,276,206 | |||||||||
| Labrador Gold Corp. | 12,555,556 | 8,850,000 | 11,300,000 | |||||||||
| Long Range | 5,000,000 | 500,000 | 500,000 | |||||||||
| Novo Resources Corp. | 6,645,000 | 16,014,450 | 9,502,350 | |||||||||
| Total Equities | 33,827,154 | 28,578,556 | ||||||||||
-16-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 5. | INVESTMENTS (continued) |
(i) Equities held (continued)
| Fair Value | ||||||||||||
| December 31, | ||||||||||||
| Cost | 2020 | |||||||||||
| Quantity | $ | $ | ||||||||||
| Exploits Discovery Corp. (i) | 6,562,799 | 4,462,703 | 3,957,368 | |||||||||
| MetalsTech Limited | 3,000,000 | 586,920 | 604,852 | |||||||||
| Novo Resources Corp. | 6,944,444 | 16,736,110 | 16,527,777 | |||||||||
| Total Equities | 21,785,733 | 21,089,997 | ||||||||||
| (i) | The Exploits Discovery Corp. investment is subject to certain resale restrictions expiring December 8, 2021 and trading restrictions expiring April 8, 2021 and was discounted in the amount of $439,708. |
Investments in Exploits Discovery Corp., MetalsTech Limited, Labrador Gold Corp. and Novo Resources Corp. represent investments in public companies that are quoted on an active exchange and are measured using the quoted market price of these companies. Long Range is a private company without observable market prices for its common shares and is measured at its estimated fair value based on valuation techniques that use inputs derived by management and is considered Level 3 in the fair value hierarchy (Note 16).
(ii) Warrants held
The Company held the following warrants as at December 31, 2021:
| Fair Value | ||||||||||||
| December 31, | ||||||||||||
| Cost | 2021 | |||||||||||
| Quantity | $ | $ | ||||||||||
| Exploits Discovery Corp. | 6,666,667 | — | 837,381 | |||||||||
| Labrador Gold Corp. | 6,277,778 | — | 2,526,521 | |||||||||
| Total Warrants | — | 3,363,902 | ||||||||||
The Company did not hold any investments in warrants as at December 31, 2020.
Warrants held by the Company are classified at fair value through profit or loss, with any gains or losses arising on remeasurement recognized in profit or loss. Warrants that do not have a quoted market price are valued using a Black-Scholes option pricing model using assumptions including risk free interest rate, expected dividend yield, expected volatility, and expected remaining life of the warrant, which are supported by observable market conditions.
An analysis of investments including related gains and losses for the years ended December 31, 2021 and 2020 is as follows:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Investments, beginning of year | 21,089,997 | 114,937 | ||||||
| Investments received in private placement | — | 16,736,110 | ||||||
| Investments received in sale of exploration and evaluation assets | 500,000 | 4,462,704 | ||||||
| Purchases of investments | 12,850,001 | — | ||||||
| Disposition of investments | (1,313,462 | ) | — | |||||
| Realized gain on investments | 192,114 | — | ||||||
| Unrealized (loss) on investments | (1,376,192 | ) | (223,754 | ) | ||||
| Investments, end of year | 31,942,458 | 21,089,997 | ||||||
-17-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 6. | PREPAID EXPENSES AND DEPOSITS |
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Prepaid expenses | 1,966,959 | 761,595 | ||||||
| Mineral license deposits | 212,098 | 496,608 | ||||||
| Prepaid expenses and deposits, end of year | 2,179,057 | 1,258,203 | ||||||
| 7. | FLOW-THROUGH SHARE PREMIUM |
| Issued | Issued | Issued | Issued | Issued | ||||||||||||||||||||
| June 4, 2020 | June 10, 2020 | April 8, 2021 | August 24, 2021 | November 25, 2021 | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance at December 31, 2019 | — | — | — | — | — | — | ||||||||||||||||||
| Liability incurred on flow-through shares issued | 1,697,704 | 259,915 | — | — | — | 1,957,619 | ||||||||||||||||||
| Settlement of flow-through share premium on expenditures incurred | (1,536,893 | ) | (235,295 | ) | — | — | — | (1,772,188 | ) | |||||||||||||||
| Balance at December 31, 2020 | 160,811 | 24,620 | — | — | — | 185,431 | ||||||||||||||||||
| Liability incurred on flow-through shares issued | — | — | 1,971,330 | 14,590,165 | 12,600,000 | 29,161,495 | ||||||||||||||||||
| Settlement of flow-through share premium on expenditures incurred | (160,811 | ) | (24,620 | ) | (1,971,330 | ) | (4,460,969 | ) | — | (6,617,730 | ) | |||||||||||||
| Balance at December 31, 2021 | — | — | — | 10,129,196 | 12,600,000 | 22,729,196 | ||||||||||||||||||
Flow-through share arrangements entitle the holder of the flow-through share to a 100% tax deduction in respect of qualifying Canadian exploration expenses as defined in the Income Tax Act, Canada (“Qualifying CEE”).
During the year ended December 31, 2021, the Company incurred $33,254,971 (2020 – $6,443,941) in Qualifying CEE and amortized a total of $6,617,730 (2020 - $1,772,188) of its flow-through liabilities.
The flow-through premium liability does not represent a cash liability to the Company and is to be fully amortized to the statement of loss and comprehensive loss pro-rata with the amount of qualifying expenditures that will be incurred.
As at December 31, 2021, the Company must spend another $39,920,949 of Qualifying CEE within one year to satisfy its remaining current flow-through liability of $10,129,196. The Company must also spend another $48,000,000 of Qualifying CEE by November 24, 2023 to satisfy its remaining non-current flow-through liability of $12,600,000.
-18-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 8. | RIGHT-OF-USE ASSETS |
The Company leases certain assets under lease agreements. The lease liabilities consists of residential, office and equipment leases. The leases are non-interest bearing and expiry dates for these leases range from May 2022 to November 2041. The related lease liabilities were measured at the present value of the remaining lease payments discounted using an incremental borrowing rate of 12% upon commencement of the lease.
As at December 30, 2021 and 2020, the Company’s right-of use assets were as follows:
| Total | ||||
| $ | ||||
| Cost | ||||
| Balance at January 1, 2020 | — | |||
| Additions | 85,532 | |||
| Balance at December 31, 2020 | 85,532 | |||
| Additions | 141,633 | |||
| Balance at December 31, 2021 | 227,165 | |||
| Accumulated Depreciation | ||||
| Balance at January 1, 2020 | — | |||
| Depreciation | 31,497 | |||
| Balance at December 31, 2020 | 31,497 | |||
| Depreciation | 98,410 | |||
| Balance at December 31, 2021 | 129,907 | |||
| Carrying Amount | ||||
| At December 31, 2020 | 54,035 | |||
| At December 31, 2021 | 97,258 | |||
As at December 30, 2021 and 2020, the Company’s lease liabilities were as follows:
| Lease liability | December 31, 2021 | December 31, 2020 | ||||||
| Current portion | $ | 54,250 | $ | 53,201 | ||||
| Non-current portion | 46,600 | — | ||||||
| Total lease liabilities | $ | 100,850 | $ | 53,201 | ||||
A Reconciliation of debt arising from lease liabilities is as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Lease liabilities beginning of year | $ | 53,201 | $ | — | ||||
| Additions to lease liabilities | 141,633 | 85,532 | ||||||
| Principal payments on lease liabilities | (93,984 | ) | (32,331 | ) | ||||
| $ | 100,850 | $ | 53,201 | |||||
As at December 30, 2021 and 2020, the Company is committed to minimum lease payments as follows:
| Maturity analysis | December 31, 2021 | December 31, 2020 | ||||||
| Less than one year | $ | 62,517 | $ | 53,201 | ||||
| One to five years | 22,130 | — | ||||||
| More than five years | 106,187 | — | ||||||
| Total undiscounted lease liabilities | $ | 190,835 | $ | 53,201 | ||||
-19-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 8. | RIGHT-OF-USE ASSETS (continued) |
| Amounts recognized in profit or loss | December 31, 2021 | December 31, 2020 | ||||||
| Interest on lease liabilities | $ | 6,516 | $ | 3,544 | ||||
| Expenses related to short-term leases | $ | — | $ | — | ||||
| Amounts recognized in the statement of cash flows | December 31, 2021 | December 31, 2020 | ||||||
| Principal payments on lease liabilities | $ | 93,983 | $ | 32,331 | ||||
| Total cash outflows for leases | $ | 100,499 | $ | 35,875 | ||||
| 9. | SHARE CAPITAL AND RESERVES |
Authorized Share Capital
At December 31, 2021, the authorized share capital comprised an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.
Details of Common Shares Issued in 2021
During the year ended December 31, 2021, 1,273,000 stock options were exercised at a weighted average exercise price of $0.97 per share for gross proceeds of $1,236,170.
During the year ended December 31, 2021, 883,854 warrants were exercised at a weighted average exercise price of $1.31 per share for gross proceeds of $1,156,523.
On April 8, 2021, the Company completed a non-brokered private placement financing of 2,857,000 flow-through common shares at a price of $5.25 per common share for gross proceeds of $14,999,250. The Company paid share issuance costs of $587,641 in cash of which $524,974 were finder’s fees. The premium received on the flow-through shares issued was determined to be $1,971,330.
On August 24, 2021, the Company completed a bought-deal private placement financing of 5,048,500 flow-through common shares at a price of $11.39 per common share for gross proceeds of $57,502,415, which included the full exercise of the underwriter’s over-allotment option. The Company paid share issuance costs of $3,254,048 in cash of which $2,734,547 was paid to the underwriters. The premium received on the flow-through shares issued was determined to be $14,590,165.
On November 24, 2021, the Company completed a non-brokered private placement financing of 5,000,000 flow-through common shares at a price of $9.60 per common share for gross proceeds of $48,000,000. The Company paid share issuance costs of $615,965 in cash of which $480,000 were finder’s fees. The premium received on the flow-through shares issued was determined to be $12,600,000.
On November 25, 2021, the Company issued 458,823 common shares with an estimated value of $3,505,408 as a portion of the consideration paid to acquire royalty interests for an aggregate of 0.6% of net returns from the Company’s Linear and JBP Linear properties (Note 3).
Details of Common Shares Issued in 2020
During the year ended December 31, 2020, 9,195,000 stock options were exercised at a weighted average exercise price of $0.77 per share for gross proceeds of $7,036,624.
-20-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 9. | SHARE CAPITAL AND RESERVES (continued) |
During the year ended December 31, 2020, 16,554,292 warrants were exercised at a weighted average exercise price of $0.77 per share for gross proceeds of $12,721,057.
On March 6, 2020, the Company completed a private placement consisting of 15,000,000 common shares in exchange for non-cash consideration of 6,944,444 common shares of Novo Resources Corp. (TSXV: NVO) at a price of $2.41 per share for gross proceeds of $16,736,110.
On June 4, 2020, the Company completed a non-brokered private placement financing of 3,994,597 flow-through common shares at a price of $1.50 per common share for gross proceeds of $5,991,896. Finders’ fees paid were $69,394 in cash and the issuance of 64,282 warrants exercisable into common shares of the Company at $1.50 per share for two years from the date of issue with a fair value of $25,912. The premium received on the flow-through shares issued was determined to be $1,697,704.
On June 10, 2020, the Company completed a non-brokered private placement financing of 866,385 flow-through common shares at a price of $1.30 per common share for gross proceeds of $1,126,300. Finders’ fees paid were $56,793 in cash and the issuance of 43,582 warrants exercisable into common shares of the Company at $1.30 per share for two years from the date of issue with a fair value of $16,271. The premium received on the flow-through shares issued was determined to be $259,915.
On August 11, 2020, the Company completed an initial public offering of 21,000,000 common shares at a price of $1.30 per share for gross proceeds of $27,300,000 and on August 13, 2020, its agents exercised their overallotment option in full to offer and sell an additional 3,150,000 common shares for gross proceeds of $4,095,000. The Company paid share issuance costs of $2,906,419 in cash and issued 1,379,768 agents’ warrants with a fair value of $771,769. The agents’ warrants are exercisable into common shares of the Company at $1.30 per share for 12 months from the date of issue in connection with the initial public offering.
Share Purchase Option Compensation Plan
The Company has a share purchase option plan (the “Plan”) approved by the Company’s shareholders that allows it to grant share purchase options, subject to regulatory terms and approval, to its officers, directors, employees and service providers. The Plan is based on the maximum number of eligible shares not exceeding 10% in the aggregate and 5% with respect to any one optionee of the Company’s outstanding common shares at the time of grant. If outstanding share purchase options are exercised or expire, and/or the number of issued and outstanding common shares of the Company increases, then the share purchase options available to grant under the Plan increase proportionately. The exercise price and vesting terms of each share purchase option is set by the Board of Directors at the time of grant. Share purchase options granted are subject to a four-month hold period and exercisable for a period determined by the Board of Directors which cannot exceed five years.
-21-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 9. | SHARE CAPITAL AND RESERVES (continued) |
The continuity of share purchase options for the year ended December 31, 2021 is as follows:
| Outstanding | Cancelled/ | Outstanding | Exercisable | |||||||||||||||||||||||||
| Exercise | December | Forfeited/ | December | December | ||||||||||||||||||||||||
| Expiry date | Price | 31, 2020 | Granted | Exercised | Expired | 31, 2021 | 31, 2021 | |||||||||||||||||||||
| February 20, 2022 | $ | 0.15 | 75,000 | — | (75,000 | ) | — | — | — | |||||||||||||||||||
| September 30, 2023 | $ | 0.40 | 250,000 | — | (100,000 | ) | — | 150,000 | 150,000 | |||||||||||||||||||
| December 17, 2024 | $ | 0.50 | 2,685,000 | — | (760,000 | ) | — | 1,925,000 | 1,925,000 | |||||||||||||||||||
| April 18, 2025 | $ | 1.00 | 1,500,000 | — | (50,000 | ) | — | 1,450,000 | 1,450,000 | |||||||||||||||||||
| May 23, 2025 | $ | 1.075 | 225,000 | — | (25,000 | ) | — | 200,000 | 200,000 | |||||||||||||||||||
| August 11, 2025 | $ | 1.40 | 2,965,000 | — | (65,000 | ) | — | 2,900,000 | 2,900,000 | |||||||||||||||||||
| September 3, 2025 | $ | 2.07 | 215,000 | — | (100,000 | ) | — | 115,000 | 115,000 | |||||||||||||||||||
| October 1, 2025 | $ | 2.15 | 25,000 | — | — | — | 25,000 | 25,000 | ||||||||||||||||||||
| December 31, 2025 | $ | 4.10 | 6,242,500 | — | (87,500 | ) | — | 6,155,000 | 6,155,000 | |||||||||||||||||||
| April 29, 2026 | $ | 6.79 | — | 1,369,000 | (10,500 | ) | (64,250 | ) | 1,294,250 | 1,118,000 | ||||||||||||||||||
| May 17, 2026 | $ | 8.62 | — | 200,000 | — | — | 200,000 | 200,000 | ||||||||||||||||||||
| September 27, 2026 | $ | 8.70 | — | 125,000 | — | — | 125,000 | 12,500 | ||||||||||||||||||||
| November 26, 2026 | $ | 8.04 | — | 62,500 | — | (6,750 | ) | 55,750 | 6,250 | |||||||||||||||||||
| 14,182,500 | 1,756,500 | (1,273,000 | ) | (71,000 | ) | 14,595,000 | 14,256,750 | |||||||||||||||||||||
| Weighted average exercise price $ | 2.36 | 5.39 | 0.97 | 6.91 | 3.01 | 2.92 | ||||||||||||||||||||||
| Weighted average contractual remaining life (years) | 4.58 | — | — | — | 3.71 | 3.71 | ||||||||||||||||||||||
The continuity of share purchase options for the year ended December 31, 2020 is as follows:
| Outstanding | Cancelled/ | Outstanding | Exercisable | |||||||||||||||||||||||||
| December | Forfeited/ | December | December | |||||||||||||||||||||||||
| Expiry date | Exercise Price | 31, 2019 | Granted | Exercised | Expired | 31, 2020 | 31, 2020 | |||||||||||||||||||||
| February 20, 2022 | $ | 0.15 | 1,930,000 | — | (1,855,000 | ) | — | 75,000 | 75,000 | |||||||||||||||||||
| September 30, 2023 | $ | 0.40 | 350,000 | — | (100,000 | ) | — | 250,000 | 250,000 | |||||||||||||||||||
| December 17, 2024 | $ | 0.50 | 5,605,000 | — | (2,920,000 | ) | — | 2,685,000 | 2,685,000 | |||||||||||||||||||
| April 18, 2025 | $ | 1.00 | — | 2,300,000 | (800,000 | ) | — | 1,500,000 | 1,500,000 | |||||||||||||||||||
| May 23, 2025 | $ | 1.075 | — | 1,670,000 | (1,445,000 | ) | — | 225,000 | 225,000 | |||||||||||||||||||
| August 11, 2025 | $ | 1.40 | — | 5,040,000 | (2,075,000 | ) | — | 2,965,000 | 2,965,000 | |||||||||||||||||||
| September 3, 2025 | $ | 2.07 | — | 215,000 | — | — | 215,000 | 215,000 | ||||||||||||||||||||
| October 1, 2025 | $ | 2.15 | — | 25,000 | — | — | 25,000 | 25,000 | ||||||||||||||||||||
| December 31, 2025 | $ | 4.10 | — | 6,242,500 | — | — | 6,242,500 | 6,242,500 | ||||||||||||||||||||
| 7,885,000 | 15,492,500 | (9,195,000 | ) | — | 14,182,500 | 14,182,500 | ||||||||||||||||||||||
| Weighted average exercise price $ | 0.41 | 2.40 | 0.77 | — | 2.36 | 2.36 | ||||||||||||||||||||||
| Weighted average contractual remaining life (years) | 4.22 | 5.0 | — | — | 4.58 | 4.58 | ||||||||||||||||||||||
The weighted average fair value of share purchase options exercised during the year ended December 31, 2021 is $0.68 (2020 - $0.56). The weighted average share price of options exercised at the date of exercise during the year ended December 31, 2021 is $8.84 (2020 – $3.12).
The weighted average fair value of share purchase options granted during the year ended December 31, 2021 is $5.15 (2020 - $1.71).
-22-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 9. | SHARE CAPITAL AND RESERVES (continued) |
Options were priced based on the Black-Scholes option pricing model using the following weighted average assumptions to estimate the fair value of options granted:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Risk-free interest rate | 0.95 | % | 0.39 | % | ||||
| Expected option life in years | 5.0 | 5.0 | ||||||
| Expected share price volatility(i) | 95.13 | % | 96.82 | % | ||||
| Grant date share price | $ | 7.18 | $ | 2.39 | ||||
| Expected forfeiture rate | — | — | ||||||
| Expected dividend yield | Nil | Nil | ||||||
| (i) | The expected share price volatility is based on the average historical share price of comparable companies over the life of the option. |
Warrants
The continuity of warrants for the year ended December 31, 2021 is as follows:
| Outstanding | Outstanding | |||||||||||||||||||||||
| Exercise | December | Cancelled/ | December 31, | |||||||||||||||||||||
| Expiry date | Price | 31, 2020 | Issued | Exercised | Expired | 2021 | ||||||||||||||||||
| August 11, 2021 | $ | 1.30 | 714,462 | — | (714,462 | ) | — | — | ||||||||||||||||
| August 13, 2021 | $ | 1.30 | 113,399 | — | (113,399 | ) | — | — | ||||||||||||||||
| May 12, 2022 | $ | 1.30 | 39,475 | — | (14,321 | ) | — | 25,154 | ||||||||||||||||
| May 13, 2022 | $ | 1.50 | 36,052 | — | (27,680 | ) | — | 8,372 | ||||||||||||||||
| June 4, 2022 | $ | 1.50 | 25,845 | — | (9,885 | ) | — | 15,960 | ||||||||||||||||
| June 10, 2022 | $ | 1.30 | 4,107 | — | (4,107 | ) | — | — | ||||||||||||||||
| 933,340 | — | (883,854 | ) | — | 49,486 | |||||||||||||||||||
| Weighted average exercise price $ | 1.31 | — | 1.31 | — | 1.40 | |||||||||||||||||||
| Weighted average contractual remaining life (years) | 0.70 | — | — | — | 0.38 | |||||||||||||||||||
The continuity of warrants for the year ended December 31, 2020 is as follows:
| Outstanding | Outstanding | |||||||||||||||||||||||
| Exercise | December | Cancelled/ | December | |||||||||||||||||||||
| Expiry date | Price | 31, 2019 | Issued | Exercised | Expired | 31, 2020 | ||||||||||||||||||
| August 11, 2021 | $ | 1.30 | — | 1,190,769 | (476,307 | ) | — | 714,462 | ||||||||||||||||
| August 13, 2021 | $ | 1.30 | — | 188,999 | (75,600 | ) | — | 113,399 | ||||||||||||||||
| May 12, 2022 | $ | 1.30 | — | 39,475 | — | — | 39,475 | |||||||||||||||||
| May 13, 2022 | $ | 1.50 | — | 36,052 | — | — | 36,052 | |||||||||||||||||
| June 4, 2022 | $ | 1.50 | — | 28,230 | (2,385 | ) | — | 25,845 | ||||||||||||||||
| June 10, 2022 | $ | 1.30 | — | 4,107 | — | — | 4,107 | |||||||||||||||||
| November 29, 2022 | $ | 0.75 | 16,000,000 | — | (16,000,000 | ) | — | — | ||||||||||||||||
| 16,000,000 | 1,487,632 | (16,554,292 | ) | — | 933,340 | |||||||||||||||||||
| Weighted average exercise price | $ | 0.75 | 1.31 | 0.77 | — | 1.31 | ||||||||||||||||||
| Weighted average contractual remaining life (years) | 2.92 | 1.07 | — | — | 0.70 | |||||||||||||||||||
The weighted average fair value of warrants exercised during the year ended December 31, 2021 is $0.55 (2020 - $0.15).
The weighted average fair value of warrants issued during the year ended December 31, 2021 is $Nil (2020 - $0.55). The weighted average share price of warrants exercised at the date of exercise during the year ended December 31, 2021 is $8.18 (2020 – $1.41).
-23-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 9. | SHARE CAPITAL AND RESERVES (continued) |
Warrants were priced based on the Black-Scholes option pricing model using the following weighted average assumptions to estimate the fair value of warrants issued:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Risk-free interest rate | — | 0.26 | % | |||||
| Expected option life in years | — | 1.07 | ||||||
| Expected share price volatility(i) | — | 91.94 | % | |||||
| Grant date share price | — | $ | 1.41 | |||||
| Expected forfeiture rate | — | — | ||||||
| Expected dividend yield | Nil | Nil | ||||||
| (i) | The expected share price volatility is based on the average historical share price of comparable companies over the life of the warrant. |
| 10. | RELATED PARTY BALANCES AND TRANSACTIONS |
All transactions with related parties have occurred in the normal course of operations and on terms and conditions that are similar to those of transactions with unrelated parties and are measured at the amount of consideration paid or received. A summary of the Company’s related party transactions with corporations having similar directors and officers, being Goldspot Discoveries Inc. and Mexican Gold Mining Corp., is as follows:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Amounts paid to Goldspot Discoveries Inc. (i) for administration, exploration and evaluation | (1,356,384 | ) | (147,690 | ) | ||||
| Amounts paid to Mexican Gold Mining Corp. (ii) for legal fees | — | (127,234 | ) | |||||
| Options exercised by members of key management | 666,875 | 5,753,625 | ||||||
| (i) | Goldspot Discoveries Inc. is a related entity having the following common director and officer to the Company: Denis Laviolette, Director and President. |
| (ii) | Mexican Gold Mining Corp. is a related entity having the following common director and officer to the Company: John Anderson, Director, Michael Kanevsky, Chief Financial Officer. |
As at December 31, 2021, $225,619 is included in accounts payable and accrued liabilities for amounts owed to Goldspot Discoveries Inc. (December 31, 2020 - $Nil owed to related corporations).
There are no ongoing contractual commitments resulting from these transactions with related parties.
-24-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 10. | RELATED PARTY BALANCES AND TRANSACTIONS (continued) |
Key management personnel compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers.
| Year ended | ||||||||||||||||
| Salaries and | Share-based | December 31, | ||||||||||||||
| Consulting | compensation | Bonus | 2021 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Executive Chairman | 300,000 | 1,291,220 | 100,000 | 1,691,220 | ||||||||||||
| Chief Executive Officer | 300,000 | 1,291,220 | 100,000 | 1,691,220 | ||||||||||||
| President | 210,000 | 1,291,220 | 70,000 | 1,571,220 | ||||||||||||
| Chief Financial Officer | 72,000 | — | — | 72,000 | ||||||||||||
| Chief Operating Officer | 195,000 | 544,192 | 65,000 | 804,192 | ||||||||||||
| Non-executive directors | 80,129 | 1,546,426 | — | 1,626,555 | ||||||||||||
| Total | 1,157,129 | 5,964,278 | 335,000 | 7,456,407 | ||||||||||||
| Year ended | ||||||||||||||||
| Salaries and | Share-based | December 31, | ||||||||||||||
| Consulting | compensation | Bonus | 2020 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Executive Chairman | 269,070 | 15,233,481 | 75,000 | 15,577,551 | ||||||||||||
| Chief Executive Officer | 250,000 | 4,722,549 | 325,000 | 5,297,549 | ||||||||||||
| President | 195,000 | 1,281,825 | 75,000 | 1,551,825 | ||||||||||||
| Chief Financial Officer | 72,900 | — | — | 72,900 | ||||||||||||
| Chief Operating Officer | 157,083 | 291,310 | 33,000 | 481,393 | ||||||||||||
| Non-executive directors | 20,000 | 886,614 | — | 906,614 | ||||||||||||
| Total | 964,053 | 22,415,779 | 508,000 | 23,887,832 | ||||||||||||
As at December 31, 2021 and 2020, there were no amounts payable to key management personnel in respect of key management compensation.
Under the terms of their management agreements, certain officers of the Company are entitled to 18 months of base pay in the event of their agreements being terminated without cause.
| 11. | LOSS PER SHARE |
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Loss attributable to common shareholders ($) | 50,640,075 | 32,534,439 | ||||||
| Weighted average number of common shares outstanding | 154,949,075 | 112,657,850 | ||||||
| Loss per share attributed to common shareholders | $ | 0.33 | $ | 0.29 | ||||
Diluted loss per share did not include the effect of 14,595,000 (2020 – 14,182,500) share purchase options and 49,486 (2020 – 933,340) common share purchase warrants as they are anti-dilutive.
-25-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 12. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS |
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Non-cash investing and financing activities: | ||||||||
| Investments received for exploration and evaluation assets | 500,000 | 4,462,703 | ||||||
| Investments received for private placement | — | 16,736,110 | ||||||
| Issued pursuant to acquisition of exploration and evaluation assets | 3,505,408 | — | ||||||
| Agents warrants issued in private placements | — | 42,183 | ||||||
| Agents warrants issued in initial public offering | — | 771,769 | ||||||
| Right-of-use assets | 97,423 | 54,034 | ||||||
| Property and equipment included in accounts payable and accrued liabilities | 537,746 | — | ||||||
| Cash paid for income taxes | — | — | ||||||
| Cash paid for interest | — | — | ||||||
| 13. | SEGMENTED INFORMATION |
The Company’s operations are limited to a single reportable segment, being mineral exploration and evaluation. All of the Company’s evaluation and exploration assets are located in Canada.
| 14. | INCOME TAXES |
The recovery of income taxes shown in the statements of loss and comprehensive loss differs from the amounts obtained by applying statutory rates to the loss before provision for income taxes due to the following:
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| (Loss) income before income taxes | (50,640,075 | ) | (32,534,439 | ) | ||||
| Income tax (recovery) expense at statutory rate | (13,673,000 | ) | (8,784,000 | ) | ||||
| Permanent and other differences | 8,136,000 | 6,697,000 | ||||||
| Change in unrecognized deductible temporary differences | 5,537,000 | 2,087,000 | ||||||
| Income tax recovery | — | — | ||||||
| Statutory tax rate | 27.00 | % | 27.00 | % | ||||
Deferred income taxes reflect the net tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Deferred income tax assets | ||||||||
| Investments | 254,000 | 94,000 | ||||||
| Exploration and evaluation assets | 3,422,000 | 840,000 | ||||||
| Non-capital tax losses carryforward | 2,305,000 | 410,000 | ||||||
| Net capital losses carryforward | 45,000 | 46,000 | ||||||
| Other | 1,436,000 | 655,000 | ||||||
| Capital assets | 150,000 | 30,000 | ||||||
| 7,612,000 | 2,075,000 | |||||||
| Unrecognized deferred tax assets | (7,612,000 | ) | (2,075,000 | ) | ||||
| — | — | |||||||
-26-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 14. | INCOME TAXES (continued) |
As at December 31, 2021, the Company has Canadian non-capital loss carry forwards of $8,535,283 that may be available for tax purposes. The Company’s non-capital losses expire as follows:
| Expiry Date | $ | |||
| 2040 | 791,376 | |||
| 2041 | 7,743,907 | |||
| 8,535,283 | ||||
| 15. | COMMITMENTS AND CONTINGENCY |
Exploration
As at December 31, 2021, the Company is required to spend approximately $829,628 (December 31, 2020 - $1,844,956) over the next 12 months to keep all mineral property claims owned in good standing.
Subsequent to December 31, 2021, the Company entered into an agreement for drilling services to complete up to a minimum of 100,000m of drilling at its Queensway project. Pursuant to the terms of the agreement, the Company is subject to a one-time termination fee of $20 per undrilled meter as of the termination date up to a maximum termination fee of $2,000,000.
Legal Proceeding
In July 2021, the Company responded to a claim by ThreeD Capital Inc. and 131366 Ontario Inc. with respect to a common share purchase by Palisades Goldcorp Ltd. of 17,500,000 common shares of the Company. The outcome of this lawsuit cannot be determined at this time and therefore no amount has been accrued for.
| 16. | 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 credit risk, liquidity risk, currency risk, and interest rate risk. Where material, these risks are reviewed and monitored by the Board of Directors.
| (a) | Fair Values |
Financial assets and liabilities measured at fair value are recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| (a) | Fair Values (continued) |
| Level 1 | – | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
| Level 2 | – | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. | |
| Level 3 | – | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The Company’s only financial instrument measured at fair value are its investments, for which the fair value is determined using closing prices at the statement of financial position date with any unrealized gain or loss recognized in profit or loss.
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New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 16. | FINANCIAL INSTRUMENTS (continued) |
The carrying values of other financial instruments, including cash, deposits and amounts receivable, and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Recurring measurements | Carrying amount | Fair value | ||||||||||||||||||
| Investments, at fair value | ||||||||||||||||||||
| December 31, 2021 | 31,942,458 | 28,078,556 | 3,363,902 | 500,000 | 31,942,458 | |||||||||||||||
| December 31, 2020 | 21,089,997 | 17,132,629 | 3,957,368 | — | 21,089,997 | |||||||||||||||
There was no movement between levels during the year ended December 31, 2021.
The following table represents the changes in fair value measurements of financial instruments classified as Level 3. Within Level 3, the Company includes private company investments which are not quoted on an active exchange. These financial instruments are measured at fair value utilizing non-observable market inputs.
| Balance at | Net Unrealized | Balance at | ||||||||||||||
| January 1 | Additions | Gains/Losses | December 31 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 2021 | — | 500,000 | — | 500,000 | ||||||||||||
| 2020 | — | — | — | — | ||||||||||||
The addition in 2021 relates to the investment in common shares of Long Range (Note 5(i)). Long Range is a private company without observable market prices for its common shares and is measured at its estimated fair value based on valuation techniques that use inputs derived by management. The key assumptions used in the valuation of this investment include, but are not limited to, the value at which a recent financing was completed by the investee, company-specific information, review of adjusted net book values, liquidation analysis, trends in general market conditions, share performance of comparable publicly-traded companies and a strategic review. There has been no change in the estimated fair value of this investment and it has been estimated at $500,000 at December 31, 2021.
(b) Financial Instrument Risk Exposure
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company does not have financial instruments that potentially subject the Company to credit risk. Overall, the Company’s credit risk has not changed significantly from the prior year. Sales taxes recoverable are due from the Canada Revenue Agency and the Company places its cash with financial institutions with high credit ratings, therefore in management’s judgment, credit risk is low.
There have been no changes in management’s methods for managing credit risk during the years ended December 31, 2021 and 2020.
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New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 16. | FINANCIAL INSTRUMENTS (continued) |
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company has historically relied on issuance of shares to fund exploration programs and may require doing so again in the future. As at December 31, 2021, the Company has total liabilities of $25,403,246 and cash of $100,484,576 which is available to discharge these liabilities (December 31, 2020 – total liabilities of $635,083 and cash of $47,731,125). Accordingly, in management’s judgment, liquidity risk is low.
There have been no changes in management’s methods for managing liquidity risk during the years ended December 31, 2021 and 2020.
Market risk
| (i) | Currency risk |
Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuation include cash accounts denominated in US dollars and investments denominated in Australian dollars. Fluctuations in the exchange rate between the US dollar and the Canadian dollar, and the Australian dollar and the Canadian dollar at December 31, 2021 would not have a material impact on the Company’s net earnings and other comprehensive income.
| (ii) | Interest rate risk |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. As the Company deposits its short-term investments into fixed rate guaranteed investment certificates with one-year maturities or less, the Company is not exposed to interest rate risk.
| (iii) | Commodity price risk |
Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company’s property has exposure to predominantly gold. Commodity prices, especially gold, greatly affect the value of the Company and the potential value of its property and investments.
| (b) | Financial Instrument Risk Exposure (continued) |
| (iv) | Equity price risk |
Equity price risk is the risk that the fair value of or future cash flows from the Company’s financial instruments will significantly fluctuate because of changes in market prices. The Company is exposed to market risk in trading its investments in unfavorable market conditions which could result in dispositions of investments at less than favorable prices. Additionally, the Company adjusts its investments to fair value at the end of each reporting period. This process could result in write-downs of the Company’s investments over one or more reporting periods, particularly during periods of overall market instability. The sensitivity of the Company’s net loss to changes in market prices at December 31, 2021 would change the Company’s net loss by $3,194,245 as a result of a 10% change in the market price of its investments.
There have been no changes in management’s methods for managing market risks during the years ended December 31, 2021 and 2020.
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New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars Unless Otherwise Noted)
| 17. | CAPITAL MANAGEMENT |
The Company’s objectives when managing capital are:
| • | To safeguard our ability to continue as a going concern in order to develop and operate our current projects; |
| • | Pursue strategic growth initiatives; and |
| • | To maintain a flexible capital structure which lowers the cost of capital. |
In assessing our capital structure, we include in our assessment the components of equity consisting of common shares, stock options and warrants, and deficit that as at December 31, 2021 totalled $122,654,601 (December 31, 2020 - $72,901,845). In order to facilitate the management of capital requirements, the Company prepares annual expenditure budgets and continuously monitors and reviews actual and forecasted cash flows. The annual and updated budgets are monitored and approved by the Board of Directors. To maintain or adjust the capital structure, the Company may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. The Company’s current capital resources are sufficient to carry out our exploration plans and support operations through the current operating period.
The Company is not subject to any capital requirements imposed by a regulator.
There were no changes in the Company’s approach to capital management during the years ended December 31, 2021 and 2020.
| 18. | SUBSEQUENT EVENTS |
Stock Options Granted
Subsequent to December 31, 2021, 30,000 stock options were granted at an exercise price of $8.98 per share and an expiry date of January 4, 2027.
Stock Options Exercised
Subsequent to December 31, 2021, 26,875 stock options were exercised at a weighted average exercise price of $1.78 per share for gross proceeds of $47,731.
Warrants Exercised
Subsequent to December 31, 2021, 12,270 warrants were exercised at a weighted average exercise price of $1.50 per share for gross proceeds of $18,405.
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Exhibit 99.2
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The following discussion is management’s assessment and analysis of the results and financial condition of New Found Gold Corp. (the “Company” or “NFG”) and should be read in conjunction with the accompanying audited financial statements and related notes. The financial data was prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) and all figures are reported in Canadian dollars unless otherwise indicated. Please refer to the cautionary note regarding forward-looking statements and information within this Management’s Discussion & Analysis (“MD&A”) and the Risks Factors discussed in the Company’s most recent Annual Information Form on file with the Canadian provincial securities regulatory authorities and Form 40-F on file with the U.S. Securities and Exchange Commission (the “SEC”).
This MD&A contains forward-looking information and forward-looking statements, within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of applicable Canadian securities legislation, (collectively, “forward-looking statements”), that involve numerous risks and uncertainties. The Company continually seeks to minimize its exposure to business risks, but by the nature of its business and exploration activities and size, will always have some risk. These risks are not always quantifiable due to their uncertain nature. Should one or more of these risks and uncertainties, including those described under the headings “Risks and Uncertainties” and “Cautionary Notes Regarding Forward-Looking Statements” materialize, or should underlying assumptions prove incorrect, then actual results may vary materially from those expressed or implied in forward-looking statements. The effective date of this report is March 10, 2022.
The technical content disclosed in this MD&A was reviewed and approved by Greg Matheson, P. Geo., Chief Operating Officer, and a Qualified Person as defined under National Instrument 43-101. Mr. Matheson consents to the publication of this MD&A, by NFG. The scientific and technical information in this MD&A relating to the Queensway Project is derived from, and in some instances is a direct extract from, and is based on the assumptions, qualifications and procedures set out in, the report entitled “43-101 Technical Report for the Queensway Project, Newfoundland, Canada” with an effective date of May 27, 2021, prepared in accordance with NI 43-101 (the “Queensway Technical Report”). Reference should be made to the full text of the Queensway Technical Report, which is available for review under the Company’s profile on SEDAR at www.sedar.com.
Description of Business
The Company was incorporated on January 6, 2016, under the Business Corporations Act (Ontario). On June 23, 2020, the Company continued as a British Columbia corporation under the Business Corporation Act in the province of British Columbia. The Company’s head office is located at 1430 – 800 West Pender Street, Vancouver, British Columbia V6C 2V6, and its registered office is located at Suite 2600 – 595 Burrard Street, Vancouver, British Columbia V7X 1L3. On August 11, 2020, the Company completed an initial public offering and listed on the TSX Venture Exchange under the symbol “NFG”. On September 29, 2021, the Company also listed its shares on the NYSE American stock exchange under the symbol “NFGC”.
The Company is a mineral exploration company engaged in the acquisition, exploration and evaluation of resource properties with a focus on gold properties located in the Provinces of Newfoundland and Labrador and Ontario, Canada. The Company’s principal objective is to explore and develop the Queensway Project, which is located near Gander, Newfoundland and to identify other properties worthy of investment and exploration. For the purpose of NI 43-101, the Queensway Project is the Company’s only material property.
The Queensway Project is comprised of 86 mineral licenses, including 6,041 claims comprising 151,030 hectares of land located near Gander, Newfoundland. The Queensway Project is accessible by main access roads including the Trans-Canada Highway (“TCH”) that passes through the southern portion of the project and has high voltage electric transmission lines running through the project area. In addition, the Company owns a 100% interest in the Lucky Strike project in Kirkland Lake, Ontario comprising 11,684 hectares, as well as a portfolio of mining and royalty interests throughout northeastern Ontario. The Lucky Strike Property is located 10km north of Larder Lake, Ontario and is comprised of 639 single cell un-patented mining claims. The Company is well financed to advance its planned exploration activities on the projects as intended.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
As of the date of this MD&A, the Company’s Board of Directors consisted of the following: Collin Kettell (Executive Chairman), Craig Roberts, Denis Laviolette, Douglas Hurst and Quinton Hennigh.
Additional information relating to the Company is available on the Company’s website at www.newfoundgold.ca.
Project Summary
Queensway Project, Newfoundland
Ownership
The Queensway Project contains nine optioned claim packages along with mineral licenses map staked by NFG. The Company acquired the rights to the Queensway Project by map staking mineral licenses and making a series of staged payments in cash and common shares of the Company from 2016 through 2019 under nine separate option agreements. All of the option agreements have been fully exercised resulting in 100% ownership by NFG of the mineral licenses related to such option agreements. In addition to the nine option agreements, NFG also conducted map staking resulting in 49 map staked mineral licenses, which are held 100% by NFG. The optioned lands also carry various net smelter royalties, the option agreements locations can be seen in the figure below.
Queensway Project – Option Agreement Claim Groups
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Overall Project Showing Gold Occurrences
- 3 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Locations of Prospects along the AFZ and JBPFZ.
- 4 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Environmental and Exploration Permitting
All exploration activities, including reclamation, must comply with all pertinent federal and provincial laws and regulations, the fundamental requirement of which, is that exploration on crown land must prevent unnecessary or undue degradation or impact on fish and wildlife and requires reclamation if any degradation or impacts that occur. All exploration activities in Newfoundland and Labrador require an Exploration Approval from the Department of Natural Resources prior to the start of work. In this, approval requirements for the exploration are listed with contacts for the various entities given. Four Exploration Approvals are in place at the Queensway Project as of the date of this MD&A along with other associated provincial permits.
The first Exploration Approval is for diamond drilling (1500 Holes) on the Queensway North (“QWN”) area shown on the map above; this approval expires on November 4, 2022. The second Exploration Approval is for trenching within the Queensway South (“QWS”) area shown on the map above and expires on June 17, 2022. A third Exploration Approval covers geochemical sampling and prospecting over the entire Queensway Project and expires on June 10, 2022. The fourth Exploration Approval covers passive seismic geophysics within the GGN area and expires on October 14, 2022. Any changes to the planned work have to be submitted to the Department of Natural Resources and either an amended approval is given or a new application has to be made.
A number of secondary permits and authorizations are held by the Company to conduct its exploration activities related to camp development, the cutting of wood, construction of access trails and modifications to water bodies.
In October 2020, the Company submitted an environmental registration document with the Newfoundland Ministry of Environment for review related to its diamond drilling activities on the QWN claim group. The Company was released from the environmental review on December 12, 2020 subject to several operating/reporting conditions including:
| • | Limitations on the percentage of land disturbance within protected public supply areas (“PPWSAs”) | |
| • | Requirements for the capping or sealing of drill holes in and outside of PPWSAs | |
| • | The establishment of a water-sampling program | |
| • | The development of a waste management plan | |
| • | The maintenance of buffers at certain shoreline, outflow, waterbodies and wetland sites and restrictions on vegetation clearing near bird habitats; and | |
| • | The development of a women’s employment plan |
To date, all of our operating conditions have been met, and the Company is in compliance with all reporting conditions.
Generally, the mineral licenses are available for exploration activities year-round and only subject to the conditions of the exploration approvals; other activities such as construction, road building, camps and water crossings may require additional permits from outside of the mines department. Mineral licenses within the southernmost portion of Gander Gold South (“GGS”), specifically licenses 024557M, 024558M, 024561M, 024563M, 024568M, and 024570M are restricted from exploration activities from mid-May to early-July due to spring habitat for Newfoundland caribou.
Project Infrastructure
The main access roads include the TCH that passes through the southern portion of the Appleton Fault Zone (“AFZ”) / Joe Batts Pond Deformation Zone (“JBPDZ”) claim areas on the QWN, and the Northwest Gander (“NWG”) road that extends along the western portion of the property from the TCH just west of Glenwood, to the south and west of Gander Lake on the GGS. Gravel woods access roads originally built for the forestry industry, such as the AFZ access, the JBPDZ access, the JBP road and the roads to the east of the steel bridge across the NWG River and across the bridge to the east of the Southwest Gander River extend through most of the property, with areas in the extreme SE and SW the most difficult to access. The SW area is best accessed by woods roads from Route 360, the Baie D’Espoir highway, that leaves the TCH at Bishop’s Falls, approximately 70 km to the west of Glenwood.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Transportation availability includes the international airport at Gander which has bush plane and helicopter bases, a helicopter base in Appleton and shipping through the ports of Lewisporte and Botwood, 25 km and 70 km to the west respectively, and north of the TCH, both with good harbours although problems with winter shipping due to sea and pack ice.
Electricity is available from the NL provincial grid, which has three transmission lines through the Queensway Project as follows:
| 1) | A 350 kV HVdc direct current line which passes through the approximate centre of the GGS licences; | |
| 2) | Two 138 kV HVac transmission lines to the north of the TCH crossing the AFZ and JBPDZ trends on the QWN licences; | |
| 3) | A 69 kV HVac transmission line that approximately parallels the TCH to the north across the AFZ and JBPDZ trends on the QWN licences and follows the TCH and secondary routes. |
In addition, electrical power is supplied, through the provincial grid, to the towns of Glenwood and Appleton which are surrounded by the NFG Queensway licences.
Historical Work
There has been over 29,200 metres of core in 238 holes drilled historically on the Queensway Project by Noranda, Rubicon and various operators from the mid 1980’s through to 2012. Historical core drilling has primarily occurred north of Gander Lake along the two principal fault structures the AFZ and JBPDZ; the exploration drilling has been spread out amongst individual zones with drilling along 5 km of the AFZ targeting the Lotto, Powerline, Cokes, Keats, Dome, Trench 26, Road, Knob, Letha and Grouse Zones. Drilling at the JBPDZ has focussed along 3 km targeting the Pocket Pond and H-Pond zones and one drill hole targeting the 798 Zone. Significantly lesser number of drill holes have also targeted zones south of Gander Lake including the Paul’s Pond showing, Aztec and A-Zone extension and the Goose zone.
Throughout the 1980’s through mid-2000’s various operators and prospectors have completed surface geochemical sampling including tills, soils and rock samples. This amounts to roughly 2,500 till samples, over 14,000 soil samples and 6,000 rock samples spread across the large district scale project with concentrations of work around the many showings in the Queensway license group. This work has identified a number of gold in soil or gold in till anomalies that have led to surface gold discoveries or have yet to be explained with follow up exploration. Several locations throughout the project have defined surface float samples containing high grade gold mineralization some of which have led to surface gold occurrences while other locations have not been adequately explored to trace them to source.
Various historical ground geophysical surveys have been conducted throughout the Queensway Project with most of this work concentrated either along the AFZ, JBPDZ or in the region of the Paul’s Pond and Greenwood Pond showings in the QWS claim group. Over 50 different geophysical surveys including VLF, EM, MAG and IP have covered ground-based grids throughout the Queensway Project. Various anomalies have been identified and often limited follow up exploration has occurred.
A significant number of surface trenches have been conducted at the project with over 330 trenches. Many of the historical trenches have targeted soil and till anomalies with only some of these reaching bedrock; often the trenches not reaching bedrock have left both soil and till anomalies unexplained and open for further interpretation and exploration.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Project Geology
The Queensway Project is located within the Exploits subzone of the Dunnage zone and lies just to the west of the Gander River Ultramafic Complex (“GRUC”) fault, which is the Dunnage-Gander zones boundary. See figure below:
Queensway Project – Geological context of the Queensway Project Geological map from Colman-Sadd et al., 1990. A) Location
of the major terranes of Newfoundland. B) Regional geological context.
It mostly comprises Cambrian to Silurian meta-sedimentary rocks of the Davidsville group (Williams et al., 1988; Colman-Sadd et al., 1990; Valverde-Vaquero et al., 2006; van Staal, 2007; O’Reilly et al., 2010). The Davidsville group is divided into the Outflow Formation and the Hunt’s Cove Formation. The property south of Gander Lake also includes the boundary between the Davidsville and Indian Island groups. The latter mainly comprises Silurian siliciclastic rocks, intruded by the Mount Peyton Intrusive suite.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
There are over 100 gold showings/occurrences on and around the Queensway Project however the most notable mineralized zones in the Queensway Project are the JBPDZ which includes the H-Pond, Pocket Pond, Glass, Logan and Lachlan showings and the AFZ which includes the Dome, Little, Knob, Letha, Lotto, Grouse, Road, Bullet, Trench 26, Cokes, Powerline, Keats and Bowater showings. A number of gold mineralized occurrences also occur within the QWS claim group including the Greenwood Pond, Hornet, North Pauls Pond, Aztec, Goose, Road Gabbro and LBNL showings.
Recent Exploration
Queensway Drill Program
On August 17, 2020, the Company announced it had initiated a 100,000m HQ size diamond drilling program at the Queensway Project. The Company announced on January 6, 2021, that it has now increased the drilling program started in 2020 to a total of 200,000m; this program was further expanded on October 15, 2021 to 400,000m and is expected to reach 14 drill rigs by the end of the first quarter of 2022. In 2020 the Company completed 66 drill holes targeting the Little-Powerline, Lotto, Dome and Keats zones for a total of 13,400m. In 2021 the Company has completed an additional 391 drill holes totalling 117,043m. The drilling program is ongoing with ten rigs active and approximately 34% complete as of January 31, 2022, and is expected to continue into Q2 2023.
The drilling program is designed to test multiple exploration targets and zones along the 7.8 km of the Appleton Fault Zone and 12 km of the JBP Fault Zone at Queensway North. The primary focus is on the expansion of known zones of mineralization and testing targets to generate new mineralized zones.
In 2022 the Company also expects to complete an inaugural drilling program at the Queensway South part of the project testing early-stage exploration targets as part of the 400,000m program.
The majority of drilling to date has occurred along the Appleton Fault with nine drill rigs active. To date 276 drill holes have been completed at the Keats Zone totalling 75,400m, 70 drill holes at the Lotto Zone totalling 19,726m, 61 drill holes at the Golden Joint zone totalling 20,373m with the balance of 60 drill holes totalling 12,741m completed at other zones/targets along the Appleton Fault including the Little-Powerline, Cokes, Road, Zone 36, Knob, TCH and Dome.
The Company is also actively exploring along the JBP Fault zone with 84 holes totalling 22,337m completed to date at the 798, 1744 and Pocket Pond prospects .
Keats Zone Drilling
To date the Company has focussed its drilling efforts at the Keats zone where a discovery hole in late 2019 (NFGC-19-01) was drilled. A number of significant gold assay intercepts have been encountered within multiple individual zones at Keats.
Initial assay results from five drill holes at the Keats zones were reported in press release dated October 27, 2020, with further assay results reported on November 16, 2020; December 15, 2020; January 11, 2021; February 9, 2021; March 1, 2021; March 9, 2021; March 16, 2021; March 30, 2021; April 5, 2021; April 20, 2021; April 27, 2021; May 4, 2021; May 21,2021; June 15, 2021; July 5, 2021; September 15, 2021; October 13, 2021; October 14, 2021; January 13, 2022; January 26, 2022; February 24, 2022 and March 2, 2022 found through SEDAR.
Logging of the core drilled to date along with assay results received so far indicate that the veining and high-grade gold mineralization demonstrates good continuity along strike and down dip.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The Keats zone continues to see a steady increase in both strike length and depth with latest step-out results reported on February 24, 2022, indicating the down plunge of the Keats Main high-grade zone has now increased to 845m starting at the bedrock surface. Additional assay results from October 13, 2021, January 13, 2022, and January 26, 2022, have shown a new area of significant high-grade gold which was originally reported to be located within the Keats Footwall. Reinterpretation of these intercepts and an update to the geological model, indicate that these intercepts are instead a part of the Keats Main Zone hosted within the Keats-Baseline Fault that is offset by an east-west trending fault. These zones originally referenced as Keats FW include an intercept of 88.53g/t Au over 3.35m in NFGC-21-238, 56.69g/t Au over 2.45m in NFGC-21-407 and 28.2g/t over 4.5m in NFGC-21-413A; the Keats Main Zone long-section has been updated to reflect this change in interpretation. Exploration drilling continued to successfully expand the high-grade gold mineralization above the south-plunging high-grade dilatant zone. This is demonstrated by intercept 55.61 g/t Au over 3.20m in NFGC-21-385, located at surface and 200m up-dip of the dilatant zone and intercept 10.66 g/t Au over 3.15m in NFGC-21-306 located 75m up-dip of the dilatant zone, both reported on March 2, 2022.
Highlighted assay values and drill hole locations from Keats Main drilling are shown in the tables below:
| Hole No. | From (m) | To (m) | Interval (m)1 | Au (g/t) | Zone |
| NFGC-21-238 | 384.35 | 387.7 | 3.35 | 88.53 | Keats Main |
| NFGC-21-256A | 127.15 | 129.4 | 2.25 | 15.07 | Keats Main |
| And | 157 | 166.75 | 9.75 | 47.82 | |
| Including | 158 | 161.65 | 3.65 | 125.49 | |
| NFGC-21-263 | 189.7 | 195.25 | 5.55 | 28.16 | Keats Main |
| Including | 193.1 | 195.25 | 2.15 | 71.86 | |
| NFGC-21-272 | 152 | 155.1 | 3.1 | 43.78 | Keats Main |
| NFGC-21-297 | 219.5 | 227.75 | 8.25 | 8.79 | Keats Main |
| Including | 219.5 | 224.35 | 4.85 | 14.29 | |
| NFGC-21-306 | 113.85 | 117 | 3.15 | 10.66 | Keats Main |
| NFGC-21-376 | 191 | 193.05 | 2.05 | 13.65 | Keats Main |
| NFGC-21-385 | 69.6 | 72.8 | 3.2 | 55.61 | Keats Main |
| NFGC-21-387 | 444.4 | 446.4 | 2 | 62.3 | Keats Main |
| NFGC-21-407 | 393.55 | 396 | 2.45 | 56.69 | Keats Main |
| And | 410 | 412.9 | 2.9 | 4.89 | |
| And | 413.85 | 416.3 | 2.45 | 1.94 | |
| And | 417.3 | 419.9 | 2.6 | 1.1 | |
| NFGC-21-413A | 463.05 | 467.55 | 4.5 | 28.2 | Keats Main |
| Including | 463.05 | 466 | 2.95 | 41.02 |
1Note that the host structures are interpreted to be steeply dipping and true widths are generally estimated to be 60% to 95% of reported intervals. Infill veining in secondary structures with multiple orientations crosscutting the primary host structures are commonly observed in drill core which could result in additional uncertainty in true width. Intervals are calculated at a 1 g/t Au cut-off grade; grades have not been capped in the averaging.
| Hole No. | Azimuth (°) | Dip (°) | Length (m) | UTM E | UTM N |
| NFGC-21-238 | 297 | -55.5 | 413 | 658120 | 5427133 |
| NFGC-21-256A | 299 | -46 | 257 | 658197 | 5427374 |
| NFGC-21-263 | 118 | -72 | 334 | 657952 | 5427310 |
| NFGC-21-272 | 298.5 | -45.5 | 227 | 658187 | 5427380 |
| NFGC-21-297 | 300 | -45 | 377 | 658126 | 5427228 |
| NFGC-21-306 | 299 | -45.5 | 179 | 658100 | 5427358 |
| NFGC-21-376 | 120 | -72 | 351 | 657972 | 5427337 |
| NFGC-21-385 | 299 | -45.5 | 290 | 657961 | 5427265 |
| NFGC-21-387 | 299 | -45.5 | 635 | 657936 | 5426877 |
| NFGC-21-407 | 296 | -57 | 467 | 658109 | 5427123 |
| NFGC-21-413A | 296 | -57 | 515 | 658086 | 5427134 |
- 9 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The latest drilling results are shown on the long section, plan map and 3-D composite cross section below:
Queensway Project – Long Section of Keats Main (March 2, 2022)
- 10 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Plan Map of Keats Zone (March 2, 2022)
- 11 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – 3-D Composite Cross Section of Keats Zone (February 24, 2022)
Lotto Zone Drilling
The Company has reported several significant gold assay intervals from the Lotto Zone starting with its first drill hole NFGC-20-17 reporting 16.3 g/t Au over 2.20m, 41.2 g/t Au over 4.75m and a third interval of 25.4 g/t Au over 5.15 m. On January 14, 2021 the Company announced the discovery of a new zone named the “Sunday Zone” proximal to the Lotto Zone along the hanging wall of the Appleton Fault Zone. The new discovery represents the first known occurrence of gold mineralization proximal to the primary Appleton Fault structure with an intercept in drill hole NFGC-20-44 grading 18.1g/t Au over 6.5m at a down hole depth of 239m. Additional gold mineralized intercepts were reported on February 23, 2021, March 23, 2021, June 23, 2021 highlighted by drill holes NFGC-21-100 reporting 224.7 g/t Au over 2.45m, NFGC-21-109 reporting 51.3 g/t Au over 3.20m, NFGC-21-115 reporting 53.3 g/t Au over 3.10m NFGC-21-201 reporting 150.3g/t over 11.5m. The most recent drilling highlights from the Lotto Zone showed an increase to 200m vertical depth from NFGC-21-311 reporting 76.81g/t Au over 2.80m on September 8, 2021.
- 12 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Highlighted assay values and drill hole locations from Lotto drilling are shown in the tables below:
| Hole No. | From (m) | To (m) | Interval (m)1 | Au (g/t) | Zone | |||||||||||||
| NFGC-20-17 | 29.80 | 32.00 | 2.20 | 16.30 | Lotto | |||||||||||||
| And | 35.25 | 40.00 | 4.75 | 41.20 | Lotto | |||||||||||||
| Including | 35.25 | 36.90 | 1.65 | 108.70 | ||||||||||||||
| And | 56.95 | 70.75 | 13.80 | 10.10 | Lotto | |||||||||||||
| Including | 56.95 | 62.10 | 5.15 | 25.40 | ||||||||||||||
| Including | 61.00 | 61.80 | 0.80 | 138.30 | ||||||||||||||
| NFGC-20-44 | 70.15 | 72.15 | 2.00 | 2.09 | Lotto | |||||||||||||
| And | 238.55 | 245.05 | 6.50 | 18.10 | Sunday | |||||||||||||
| Including | 242.10 | 245.05 | 2.95 | 38.70 | ||||||||||||||
| NFGC-21-100 | 118.00 | 120.45 | 2.45 | 224.70 | Lotto | |||||||||||||
| NFGC-21-109 | 146.55 | 148.60 | 2.05 | 6.17 | Lotto | |||||||||||||
| And | 152.70 | 161.50 | 8.80 | 19.30 | ||||||||||||||
| Including | 154.20 | 157.40 | 3.20 | 51.30 | ||||||||||||||
| And | 179.00 | 181.00 | 2.00 | 1.03 | ||||||||||||||
| NFGC-21-115 | 180.70 | 189.10 | 8.40 | 20.30 | Lotto | |||||||||||||
| Including | 186.00 | 189.10 | 3.10 | 53.30 | ||||||||||||||
| NFGC-21-201 | 196.65 | 208.15 | 11.50 | 150.30 | Lotto | |||||||||||||
| And | 205.00 | 207.45 | 2.45 | 683.10 | ||||||||||||||
| Including | 210.00 | 214.00 | 4.00 | 1.83 | ||||||||||||||
| NFGC-21-311 | 294.65 | 297.45 | 2.80 | 76.81 | Lotto | |||||||||||||
| Including | 294.65 | 296.55 | 1.90 | 112.51 | ||||||||||||||
| Hole No. | Azimuth (°) | Dip (°) | Length (m) | UTM E | UTM N | |||||||||||
| NFGC-20-17 | 300 | -45 | 354 | 658931 | 5428990 | |||||||||||
| NFGC-20-44 | 300 | -45 | 291 | 658956 | 5429030 | |||||||||||
| NFGC-21-100 | 299 | -45 | 258 | 658979 | 5428930 | |||||||||||
| NFGC-21-109 | 300 | -45 | 252 | 659012 | 5428912 | |||||||||||
| NFGC-21-115 | 300 | -45 | 225 | 659034 | 5428895 | |||||||||||
| NFGC-21-201 | 300 | -45 | 241 | 659058 | 5428890 | |||||||||||
| NFGC-21-311 | 298.5 | -45.5 | 321 | 659107 | 5428914 | |||||||||||
1Note that the host structures along the Appleton Fault Zone are generally interpreted to be steeply dipping and true widths are estimated to be in the 80% to 90% range at Lotto. Intervals are calculated at a 1 g/t Au cut-off grade; grades have not been capped in the averaging.
- 13 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The latest results from the Lotto Zone are shown in the long section, plan map and cross section below:
Queensway Project – Lotto Zone Long Section (September 8, 2021)
- 14 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Lotto Zone Plan Map (September 8, 2021)
- 15 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Cross Section of Current Drilling Program (Lotto Zone – September 8, 2021)
Golden Joint Drilling
On June 29, 2021, the Company announced the discovery of a new high grade zone along the hanging wall of the Appleton Fault Zone named the Golden Joint. Comprised of two sub-parallel vein systems (Main Zone and HW Zone) and located between the Keats and Lotto zones this new discovery has yielded several notable high-grade intervals including NFGC-21-171 (10.36g/t Au over 4.85m), NFGC-21-241 (430.2g/t Au over 5.25m) within the GJ Main Zone. Further assay results were published on September 28, 2021 with a notable intersection in NFGC-21-386 yielding 70.65g/t Au over 5.25m. The most recent release on January 19, 2022, which showed the expansion of the Golden Joint Main Zone to a vertical depth of 305m with drill hole NFGC-21-401 intersecting 98.13g/t Au over 3.85m.
- 16 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Highlighted assay values and drill hole locations from Golden Joint drilling are shown in the tables below:
| Hole No. | From (m) | To (m) | Interval (m)1 | Au (g/t) | Zone | |||||||||||||
| NFGC-21-171 | 223.45 | 228.30 | 4.85 | 10.36 | Golden Joint | |||||||||||||
| NFGC-21-241 | 207.85 | 213.10 | 5.25 | 430.17 | Golden Joint | |||||||||||||
| And | 123.65 | 126.20 | 2.55 | 1.12 | Golden Joint HW | |||||||||||||
| NFGC-21-386 | 424.75 | 430.00 | 5.25 | 70.65 | Golden Joint | |||||||||||||
| NFGC-21-401 | 425.95 | 428.00 | 2.05 | 2.34 | Golden Joint | |||||||||||||
| And | 432.60 | 435.15 | 2.55 | 1.05 | ||||||||||||||
| And | 438.95 | 445.00 | 6.05 | 3.05 | ||||||||||||||
| And | 450.15 | 454.00 | 3.85 | 98.13 | ||||||||||||||
| Hole No. | Azimuth (°) | Dip (°) | Length (m) | UTM E | UTM N | ||||||
| NFGC-21-171 | 300 | -45 | 312 | 658547 | 5428356 | ||||||
| NFGC-21-241 | 299 | -45.5 | 303 | 658523 | 5428341 | ||||||
| NFGC-21-386 | 298.5 | -46.5 | 582 | 658634 | 5428306 | ||||||
| NFGC-21-401 | 298.5 | -46.5 | 492 | 658613 | 5428319 |
1Note that the host structures at Golden Joint are interpreted to be steeply dipping and true widths are generally estimated to be 70% to 90% of reported intervals. Infill veining in secondary structures with multiple orientations crosscutting the primary host structures are commonly observed in drill core which could result in additional variability in true width. Intervals are calculated at a 1 g/t Au cut-off grade; grades have not been capped in the averaging.
- 17 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The latest results from the Golden Joint Zone are shown in the long section and plan map below:
Queensway Project – Golden Joint Long Section (January 19, 2022)
- 18 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Golden Joint Plan Map (January 19, 2022)
- 19 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
JBP Drilling
On March 9, 2022, the Company announced results from reconnaissance diamond drilling designed to test for epizonal style high-grade gold mineralization along the JBPDZ. This initial phase of drilling focused on a +3.5km segment of the JBPDZ encompassing 1744 and Pocket Pond target areas following up on historic drill results, high-grade float samples and Au-in-till anomalies as well as testing new conceptual targets. This program to date has produced a number of salient results including 31.88 g/t Au over 2.05m in NFGC-21-180 at 1744 and 25.40 g/t Au over 2.25m in NFGC-21-304 at Pocket Pond.
Highlighted assay values and drill hole locations from the JBP drilling are shown in the tables below:
| Hole No. | From (m) | To (m) | Interval (m)1 | Au (g/t) | Zone |
| NFGC-21-180 | 32.00 | 34.05 | 2.05 | 31.88 | 1744 |
| NFGC-21-195 | 283.70 | 286.50 | 2.80 | 16.66 | 1744 |
| NFGC-21-202 | 145.85 | 147.90 | 2.05 | 17.10 | 1744 |
| NFGC-21-207 | 60.00 | 66.00 | 6.00 | 8.66 | 1744 |
| Including | 63.55 | 66.00 | 2.45 | 19.66 | |
| NFGC-21-230 | 87.00 | 89.00 | 2.00 | 8.92 | Pocket Pond |
| NFGC-21-245 | 152.60 | 154.80 | 2.20 | 7.26 | Pocket Pond |
| NFGC-21-304 | 81.60 | 83.85 | 2.25 | 25.40 | Pocket Pond |
| And | 90.50 | 96.35 | 5.85 | 5.46 | |
| Including | 90.50 | 93.85 | 3.35 | 8.94 |
1Note that the host structures are interpreted to be steeply dipping and true widths are generally estimated to be 75% to 90% of reported intervals for Pocket Pond and 55% to 65% of reported intervals for 1744. Infill veining in secondary structures with multiple orientations crosscutting the primary host structures are commonly observed in drill core which could result in additional uncertainty in true width. Intervals are calculated at a 1 g/t Au cut-off grade; grades have not been capped in the averaging.
| Hole No. | Azimuth (°) | Dip (°) | Length (m) | UTM E | UTM N |
| NFGC-21-180 | 300 | -45 | 245 | 665204 | 5430850 |
| NFGC-21-195 | 300 | -45 | 304 | 665267 | 5430870 |
| NFGC-21-202 | 300 | -45 | 245 | 665190 | 5430887 |
| NFGC-21-207 | 299 | -45.5 | 341 | 665232 | 5430862 |
| NFGC-21-230 | 119 | -45.5 | 182 | 663403 | 5428873 |
| NFGC-21-245 | 120 | -45 | 251 | 663365 | 5428880 |
| NFGC-21-304 | 121 | -45.5 | 182 | 663432 | 5428898 |
- 20 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The latest results from the JBPFZ covering both 1744 and Pocket Pond target areas are shown in the long sections and plan maps below:
Queensway Project – 1744 Long Section (March 9, 2022)
- 21 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – 1744 Plan Map (March 9, 2022)
Queensway Project – Pocket Pond Long Section (March 9, 2022)
- 22 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway Project – Pocket Pond Plan Map (March 9, 2022)
2020-2021 Field Program
Starting in June 2020, the Company initiated a field reconnaissance program within the QWS mineral licenses. The objective of this program is to conduct geological mapping, structural analysis, prospecting and the collection of C horizon till samples to be processed for gold grain analysis.
Initial results from the 2020 field program detailed till survey were reported on August 27, 2020, where the Company had announced it had found a new fertile gold region 45 km south of the current Queensway North drill targets. The Eastern Pond target is comprised of two areas where recent till results have shown highly anomalous total gold grain counts including a high percentage of pristine gold grains and yielded several sub-crop samples up to 15.0 g/t Au.
One till sample yielded 216 gold grains, 163 (75%) of them classified as pristine. A second cluster of samples yielded up to 155 gold grains with 127 (82%) of these classified as pristine. The pristine morphology of these grains indicates that they have not travelled far from their bedrock source.
To date the Eastern Pond target is defined by sub-crop and till sample results over an approximately 4 km of strike length (see Figures below). Five other gold in till anomalies have been discovered to date within QWS and warrant follow up exploration.
- 23 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway South Project: Location of the Eastern Pond Anomaly at Queensway South
- 24 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Queensway South Project: Eastern Pond anomaly and preliminary till results
Queensway South Project: Eastern Pond target till samples
Field crews were remobilized to the Eastern Pond area in late 2020 to conduct follow up work including prospecting, geological mapping and the collection of additional till samples to further vector the Company’s exploration towards bedrock sources. Follow up work at Eastern Pond in late 2020 resulted in the collection of rock samples, additional tills samples and two trenches were excavated.
- 25 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
In June 2021 field crews were mobilized to conduct early-stage exploration work throughout the Queensway Project including till sampling, geological mapping, rock sampling and trenching. The goal of this program has been to aid in the development of drilling targets for a planned diamond drilling program in 2022.
Sampling, Sub-sampling and Laboratory
Host structures along the Appleton Fault Zone are generally interpreted to be steeply dipping and true widths are estimated to be 85% to 95% of reported widths at Keats, unknown at Keats FW, 80% to 90% at Lotto, 70% to 90% at Golden Joint, in some areas infill veining in secondary structures with multiple orientations crosscutting the primary host structures are commonly observed in drill core which could result in additional variability in true width. Assays are uncut, and calculated intervals are reported over a minimum length of 2 meters using a lower cut-off of 1.0 g/t Au. Samples comprise either whole or split HQ size core and the assays reported were obtained by either complete sample metallic screen/fire assay or standard 30-gram fire-assaying with ICP finish at ALS Minerals in Vancouver, British Columbia, or by entire sample screened metallic screen fire assay at Eastern Analytical in Springdale, Newfoundland or through Chrysos PhotonAssayTM method with Intertek based in Perth, Australia.
The metallic screen or PhotonAssayTM method is selected by the geologist when samples contain coarse gold or any samples displaying gold initial fire assay values greater than 1.0 g/t Au. Drill program design, Quality Assurance/Quality Control and interpretation of results is performed by qualified persons employing a Quality Assurance/Quality Control program consistent with National Instrument 43-101 and industry best practices. Standards and blanks are included at a minimum with every 20 samples for Quality Assurance/Quality Control purposes by the Company as well as the lab. Approximately 3% of sample pulps are sent to secondary laboratories for check assays.
Qualified Person
The technical content disclosed in this MD&A was reviewed and approved by Greg Matheson, P. Geo., Chief Operating Officer, and a Qualified Person as defined under National Instrument 43-101. Mr. Matheson consents to the publication of this MD&A, by NFG.
Report of QA/QC Program Review
On February 23, 2022, the Company announced the results of work programs and analysis completed by independent consultants initiated to investigate possible bias indicated by a set of 30 half-core duplicate assays (see Company's November 4, 2021, news release). The work program included completion of a substantial number of additional half-core screen fire assays providing a data set of 475 half-core duplicates, and the detailed statistical assessment of these results. The work also included detailed review of sample selection, preparation, and lab analysis procedures for the screen fire assays at ALS Minerals (‘ALS’) in Vancouver, BC and Eastern Analytical (‘EA’) in Springdale, NL. New Found's independent consultants concluded that there was no evidence of systematic bias in the Company's assay results and that the project uses well conceived and documented standard operating procedures (SOPs) for marking and sawing core, and for selecting the half-core samples sent for analysis. Based on these conclusions the Company resumed normal reporting of assay results.
Lucky Strike Project, Ontario
The Lucky Strike Project is located 10 km north of Larder Lake, Ontario and covers favourable and underexplored structural corridors associated with the Larder Cadillac Deformation Zone. The project is comprised of 639 single cell un-patented mining claims.
Land History
The current mineral cells comprising the Lucky Strike Project were acquired from the completion of two option agreements, one purchase agreement and online staking. The project was consolidated from May 2016 through May 2020 and currently the project is 100% owned by the company subject to various NSR up to 2%.
- 26 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Lucky Strike Project – Project Location map, fault systems and Adjacent Projects
Environmental and Exploration Permitting
The Company has been issued four active exploration permits/plans by the Ontario MNDM which covers all areas of current exploration focus on the property. The permits allow for exploration activities on the property including mechanized stripping, mechanized diamond drilling and geophysical surveys with a generator. The four permits/plans are applicable for 3 years and will expire between the end of September 2023 and January 2024.
Project Geology
The Lucky Strike Project is covered by the Lower Blake River Group which are dominated by intermediate to mafic, massive volcanic flows. The volcanic flows have been intruded by diorite-gabbro intrusions which are up to 7 kilometres by 1.5 kilometre in size. In the Walsh-FP area a syenite-syenite porphyry intrudes the mafic-intermediate volcanics and hosts the gold-bearing quartz-ankerite veins of the Walsh Mine. The long axis of this syenite intrusion strikes approximately north-south and extends for 3.5 kilometres on the property and another 3 kilometres south of the property and is generally 0.5 kilometres wide. Two major regional faults cross the property, the Misema-Misty Lake Fault and the Mulven Fault, striking roughly in a northeast-southwest direction. These structures have been speculated as being as a continuation of the Kirkland Main Break Fault system which hosted the seven historic gold mines of the Kirkland Lake Gold camp. The Victoria Creek Deformation Zone, possibly a splay off the Misema-Misty Lake Fault and a control on the Victoria Creek and Upper Beaver Mines, lies just south of the property with splay structures extending onto the property.
- 27 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
2021 3-D IP Survey
In mid 2021 the Company initiated a 3-D distributed induced polarization geophysical survey within the central and eastern portions of the property to cover prominent target areas encountered in field reconnaissance surveys in 2018 through 2021. This survey covers projected extensions of the Misema-Misty Lake and Mulven Fault zones as well as a large mafic syenitic body associated with the Kerr North target area. This survey resulted in the delineation of several geophysical targets and anomalies predominantly related to chargeability associated with the Mulven Fault Zone. The Company plans to test several of these anomalies with diamond drilling in early 2022.
Lucky Strike Project – Angled View of IP data cloud with the IP inversion model looking north-east
- 28 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Lucky Strike Project – 3-D Chargeability Voxel with 0m MSL slice (purple voxel = > 6mV/V)
Diamond Drilling Program
Starting in November 2021 the Company has initiated a 4000m diamond drilling program at the Lucky Strike project. This program has been designed to test a variety of targets including the surface stripped outcrop located at the FP Zone where channel samples in 2018 yielded gold grades up to 72.2g/t Au over 3.9m. Other targets include geophysical chargeability anomalies associated with the Mulven Fault as well as within a large syenitic intrusion hosting the historic Kerr North showings. It is anticipated this program continues through Q1 2022.
- 29 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The schedules below summarize the carrying costs of acquisition and exploration costs incurred to date for each exploration and evaluation asset that the Company is continuing to explore as at December 31, 2021 and December 31, 2020:
| Newfoundland | ||||||||||||||||
| Year ended December 31, 2021 | Queensway $ | Other $ | Ontario $ | Total $ | ||||||||||||
| Exploration and evaluation assets | ||||||||||||||||
| Balance as at December 31, 2020 | 685,930 | 13,100 | 300,204 | 999,234 | ||||||||||||
| Additions | ||||||||||||||||
| Acquisition costs | 7,444,306 | - | - | 7,444,306 | ||||||||||||
| Claim staking and license renewal costs | 106,530 | 4,600 | - | 111,130 | ||||||||||||
| Disposal of exploration and evaluation assets | (585 | ) | - | - | (585 | ) | ||||||||||
| Impairment of exploration and evaluation assets | - | - | (28,604 | ) | (28,604 | ) | ||||||||||
| Balance as at December 31, 2021 | 8,236,181 | 17,700 | 271,600 | 8,525,481 | ||||||||||||
| Exploration and evaluation expenditures | ||||||||||||||||
| Cumulative exploration expense - December 31, 2020 | 10,245,545 | 45,851 | 1,286,951 | 11,578,347 | ||||||||||||
| Assays | 5,611,068 | - | 53,447 | 5,664,515 | ||||||||||||
| Drilling | 19,102,621 | - | 277,748 | 19,380,369 | ||||||||||||
| Environmental studies | 395,015 | - | - | 395,015 | ||||||||||||
| Geophysics | 3,257,813 | - | 374,660 | 3,632,473 | ||||||||||||
| Mapping & imaging | 104,665 | - | - | 104,665 | ||||||||||||
| Office & general | 512,922 | - | 1,631 | 514,553 | ||||||||||||
| Property taxes, mining leases and rent | 59,997 | - | - | 59,997 | ||||||||||||
| Petrography | - | - | 7,996 | 7,996 | ||||||||||||
| Reclamation | 335,783 | - | 732 | 336,515 | ||||||||||||
| Salaries & consulting | 6,391,133 | 12,295 | 165,863 | 6,569,291 | ||||||||||||
| Supplies & equipment | 3,893,748 | 923 | 62,338 | 3,957,009 | ||||||||||||
| Technical reports | 854,541 | - | 22,479 | 877,020 | ||||||||||||
| Travel & accommodations | 742,796 | 577 | 18,641 | 762,014 | ||||||||||||
| Trenching | 9,860 | - | 77,715 | 87,575 | ||||||||||||
| Exploration cost recovery | (77,550 | ) | - | - | (77,550 | ) | ||||||||||
| 41,194,412 | 13,795 | 1,063,250 | 42,271,457 | |||||||||||||
| Cumulative exploration expense – December 31, 2021 | 51,439,957 | 59,646 | 2,350,201 | 53,849,804 | ||||||||||||
- 30 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
| Newfoundland | ||||||||||||||||
| Year ended December 31, 2020 | Queensway $ | Other $ | Ontario $ | Total $ | ||||||||||||
| Exploration and evaluation assets | ||||||||||||||||
| Balance as at December 31, 2019 | 658,700 | 16,500 | 425,516 | 1,100,716 | ||||||||||||
| Additions | ||||||||||||||||
| Acquisition costs | 75,000 | - | 25,000 | 100,000 | ||||||||||||
| Staking costs | 37,230 | 2,100 | 3,600 | 42,930 | ||||||||||||
| Disposal of exploration and evaluation assets | (75,000 | ) | (2,750 | ) | - | (77,750 | ) | |||||||||
| Impairment of exploration and evaluation assets | (10,000 | ) | (2,750 | ) | (153,912 | ) | (163,912 | ) | ||||||||
| Balance as at December 31, 2020 | 685,930 | 13,100 | 300,204 | 999,234 | ||||||||||||
| Exploration and evaluation expenditures | ||||||||||||||||
| Cumulative exploration expense - December 31, 2019 | 2,633,775 | - | 837,133 | 3,470,908 | ||||||||||||
| Assays | 848,000 | 963 | 209,159 | 1,058,122 | ||||||||||||
| Drilling | 2,560,406 | - | - | 2,560,406 | ||||||||||||
| Geochemistry | - | - | 5,330 | 5,330 | ||||||||||||
| Geophysics | 838,235 | - | - | 838,235 | ||||||||||||
| Office & general | 47,130 | 499 | 714 | 48,343 | ||||||||||||
| Property taxes, mining leases and rent | 46,217 | - | 5,812 | 52,029 | ||||||||||||
| Reclamation | 163,598 | - | - | 163,598 | ||||||||||||
| Salaries & consulting | 1,801,863 | 37,870 | 115,985 | 1,955,718 | ||||||||||||
| Supplies & equipment | 879,816 | 6,470 | 80,803 | 967,089 | ||||||||||||
| Travel & accommodations | 225,550 | 49 | 150 | 225,749 | ||||||||||||
| Trenching | 231,635 | - | 31,865 | 263,500 | ||||||||||||
| Exploration cost recovery | (30,680 | ) | - | - | (30,680 | ) | ||||||||||
| 7,611,770 | 45,851 | 449,818 | 8,107,439 | |||||||||||||
| Cumulative exploration expense – December 31, 2020 | 10,245,545 | 45,851 | 1,286,951 | 11,578,347 | ||||||||||||
Overall Performance and Results of Operations
Total assets increased to $148,057,847 at December 31, 2021, from $73,536,928 at December 31, 2020, primarily as a result of an increase in cash of $52,753,451, investments of $10,852,461, sales taxes recoverable of $782,813, prepaid expenses and deposits of $920,854, exploration and evaluation assets of $7,526,247, and property and equipment of $1,537,330. The most significant assets at December 31, 2021 were cash of $100,484,576 (December 31, 2020: $47,731,125), investments of $31,942,458 (December 31, 2020: $21,089,997), exploration and evaluation assets of $8,525,481 (December 31, 2020: $999,234), and property and equipment of $2,914,459 (December 31, 2020: $1,377,129). Cash increased by $52,753,451 during the year ended December 31, 2021 as a result of cash proceeds received from private placement financings completed in April 2021, August 2021 and November 2021 for gross proceeds of $120,501,665 net of share issue costs of $4,457,654, proceeds from disposals of investments of $1,313,462, proceeds received from stock options exercised of $1,236,170, and proceeds received from warrants exercised of $1,156,523, partially offset by cash used in operating activities of $48,512,082, purchases of investments of $12,850,001, purchases of exploration & evaluation assets of $3,938,898, and purchases of property and equipment of $1,484,104.
- 31 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Year ended December 31, 2021 and 2020
During the year ended December 31, 2021, loss from operating activities increased by $18,314,924 to $56,662,212 compared to $38,347,288 for the year ended December 31, 2020. The increase in loss from operating activities is largely due to:
| - | An increase of $34,164,018 in exploration and evaluation expenditures. Exploration and evaluation expenditures were $42,271,457 for the year ended December 31, 2021 compared to $8,107,439 for the year ended December 31, 2020. The Company continued its ongoing diamond drilling program at its Queensway project and completed approximately 117,043 meters of drilling and incurred higher salaries and consulting fees, geophysics, assay and supplies and equipment costs due to an increase in exploration activity at its Queensway Project as well as completed a geophysical survey and initiated a 4,000 meter diamond drill program at its Lucky Strike Project during the year ended December 31, 2021 compared to completing approximately 13,400 meters of drilling project as well as a 1,705 km airborne gravity survey, trenching, structural analysis, prospecting, till sampling and geological mapping at its Queensway Project during the year ended December 31, 2020. |
| - | An increase of $1,152,610 in salaries and consulting fees. Salaries and consulting fees were $3,100,723 for the year ended December 31, 2020 compared to $1,948,113 for the year ended December 31, 2020. The increase is due to more consulting fees paid during the year ended December 31, 2021 compared to less consulting fees paid during the year ended December 31, 2020. |
The increase was partially offset by:
| - | A decrease of $18,845,121 in share-based compensation. Share-based compensation was $7,612,214 for the year ended December 31, 2021 compared to $26,457,335 for the year ended December 31, 2020. A total of 1,756,500 stock options were granted, of which 1,336,750 stock options vested, with a value of $7,612,214 during the year ended December 31, 2021 compared to 15,492,500 fully vested stock options granted with a value of $26,457,335 during the year ended December 31, 2020. |
Other items
For the year ended December 31, 2021, other income was $6,022,137 compared to $5,812,849 for the year ended December 31, 2020. The $209,288 change is largely due to:
| - | An increase of $4,845,542 in settlement of flow-through share premium. Settlement of flow-through share premium was $6,617,730 for the year ended December 31, 2021 compared to $1,772,188 for the year ended December 31, 2020. The Company incurred $33,254,971 of qualifying Canadian exploration expenses and derecognized $6,617,730 of its flow-through share premium liability during the year ended December 31, 2021. |
| - | An increase of $1,152,438 in net change in unrealized losses on investments. Net change in unrealized losses on investments was $1,376,192 for the year ended December 31, 2021 compared to net change in unrealized losses on investments of $223,754 for the year ended December 31, 2020. The increase is due to changes in the fair values of investments held at December 31, 2021. |
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The increase in other income was partially offset by:
| - | A decrease of $3,885,538 in gain on sale of exploration and evaluation assets. In 2021, the Company had sold a stand-alone claim that was part of the Queensway Project (claim 023951M also known as Unknown Brooke claim) to Long Range Exploration Corporation (“Long Range”) for non-cash consideration of 5,000,000 common shares of Long Range valued at $500,000. The Company recognized a gain on sale of exploration and evaluation assets in the amount of $499,415. In 2020, the Company recognized a gain on sale of exploration and evaluation assets of $4,384,953 in relation to the sale of certain Newfoundland exploration and evaluation assets for non-cash consideration comprised of investments with a fair value of $4,462,703. |
The Company recorded a loss and comprehensive loss of $50,640,075 or $0.33 basic and diluted loss per share for the year ended December 31, 2021 (December 31, 2020: $32,534,439 or $0.29 basic and diluted loss per share).
SELECT ANNUAL INFORMATION
Selected annual information from the audited financial statements for the years ended December 31, 2021, 2020, and 2019 is presented in the table below. The financial data below has been prepared in accordance with IFRS and is reported in Canadian dollars.
Selected Annual Financial Information | December 31, | December 31, 2020 $ | December 31, 2019 $ | |||||||||
| Total Assets | 148,057,847 | 73,536,928 | 9,355,036 | |||||||||
| Operating expenses(1) | (6,778,541 | ) | (3,782,514 | ) | (1,137,342 | ) | ||||||
| Share-based compensation | (7,612,214 | ) | (26,457,335 | ) | (2,130,528 | ) | ||||||
| Exploration and evaluation expenditures | (42,271,457 | ) | (8,107,439 | ) | (657,539 | ) | ||||||
| Impairment of exploration and evaluation assets | (28,604 | ) | (166,662 | ) | (91,335 | ) | ||||||
| Net realized gain (loss) on disposal of investments | 192,114 | - | (120,734 | ) | ||||||||
| Net change in unrealized (losses) gains on investments | (1,376,192 | ) | (223,754 | ) | 118,355 | |||||||
| Settlement of flow-through premium liability | 6,617,730 | 1,772,188 | - | |||||||||
| Gain on sale of exploration and evaluation assets | 499,415 | 4,384,953 | - | |||||||||
| Net loss comprehensive loss | (50,640,075 | ) | (32,534,439 | ) | (4,020,032 | ) | ||||||
| Loss per share – basic and diluted | (0.33 | ) | (0.29 | ) | (0.07 | ) | ||||||
| (1) | Operating expenses is comprised of corporate development & investor relations, depreciation, office & sundry, professional fees, salaries and consulting, transfer agent & regulatory fees, and travel. |
Three months ended December 31, 2021 and 2020
During the three months ended December 31, 2021, loss from operating activities decreased by $9,459,353 to $14,246,280 compared to $23,705,633 for the three months ended December 31, 2020. The decrease in loss from operating activities is largely due to:
| - | A decrease of $17,588,790 in share-based compensation. Share-based compensation was $350,831 for the three months ended December 31, 2021 compared to $17,939,621 for the three months ended December 31, 2020. A total of 62,500 stock options were granted, of which 6,250 vested, with a value of $350,831 during the three months ended December 31, 2021 compared to 6,267,500 fully vested stock options granted with a value of $17,939,621 during the three months ended December 30, 2020. |
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The decrease was partially offset by:
| - | An increase of $7,542,644 in exploration and evaluation expenditures. Exploration and evaluation expenditures were $12,094,840 for the three months ended December 31, 2021 compared to exploration and evaluation expenditures of $4,552,196 for the three months ended December 31, 2020. The Company continued its ongoing 400,000 meter diamond drilling program and completed approximately 31,154 meters of drilling in 90 holes during the three months ended December 31, 2021, and incurred higher salaries and consulting fees, and supplies and equipment costs due to an increase in exploration activity at its Queensway Project as well as completed a geophysical survey and initiated a 4,000 meter diamond drill program at its Lucky Strike Project during the three months ended December 31, 2020 compared to completing approximately 10,450 meters of diamond drilling in 51 holes at its Queensway project during the three months ended December 31, 2020. |
Other items
For the three months ended December 31, 2021, other income was $548,011 compared to other expenses of $1,934,089 for the three months ended December 31, 2020. The $2,482,100 change is largely due to:
| - | A decrease of $4,975,546 in net change in unrealized losses on investments. Net change in unrealized losses on investments was $2,411,303 for the three months ended December 31, 2021 compared to $7,386,849 in unrealized loss on investments for the three months ended December 31, 2020. The change is due to changes in the fair values of equity investments held at December 31, 2021. |
| - | An increase of $1,732,172 in settlement of flow-through share premium. Settlement of flow-through share premium was $2,917,262 for the three months ended December 31, 2021 compared to $1,185,090 for the three months ended December 31, 2020. The Company incurred $10,804,674 of qualifying Canadian exploration expenses and derecognized $2,917,262 of its flow-through share premium liability during the three months ended December 31, 2021. |
The increase in other income was partially offset by the following:
| - | A decrease of $4,384,953 in gain on sale of exploration and evaluation assets. Gain on sale of exploration and evaluation assets was $Nil for the three months ended December 31, 2021 compare to $4,384,953 for the three months ended December 31, 2020. There were no sales of exploration and evaluation assets during the three months ended December 31, 2021 compared to the sale of certain Newfoundland exploration and evaluation assets for non-cash consideration comprised of investments with a fair value of $4,462,703 during the three months ended December 31, 2020. |
The Company recorded a loss and comprehensive loss of $13,698,269 or $0.09 basic and diluted loss per share for the three months ended December 31, 2021 (December 31, 2020: $25,639,722 or $0.18 basic and diluted loss per share).
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Summary of Quarterly Results
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Dec. 31 $ | Sep. 30 $ | Jun. 30 $ | Mar. 31 $ | Dec. 31 $ | Sep. 30 $ | Jun. 30 $ | Mar. 31 $ | |||||||||||||||||||||||||
| Revenues | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Income (loss) and comprehensive income (loss) for the period | (13,698,269 | )(2) | (35,289,366 | )(3) | 3,738,904 | (4) | (5,391,344 | )(5) | (25,639,722 | )(6) | (10,986,378 | )(7) | 10,700,940 | (8) | (6,609,279 | )(9) | ||||||||||||||||
| Earnings (loss) per Common Share Basic(1) | (0.09 | ) | (0.23 | ) | 0.02 | (0.04 | ) | (0.18 | ) | (0.09 | ) | 0.11 | (0.08 | ) | ||||||||||||||||||
| Earnings (loss) per Common Share Diluted(1) | (0.09 | ) | (0.23 | ) | 0.02 | (0.04 | ) | (0.18 | ) | (0.09 | ) | 0.09 | (0.08 | ) | ||||||||||||||||||
| (1) | Per share amounts are rounded to the nearest cent, therefore aggregating quarterly amounts may not reconcile to year-to-date per share amounts. |
| (2) | Decrease of loss and comprehensive loss from prior quarter primarily driven by a decrease of $21,123,862 in net change in unrealized losses on investments, an increase of $794,521 in settlement of flow-through share premium, offset by a decrease of $499,415 in gain on sale of exploration and evaluation assets. |
| (3) | Increase in loss and comprehensive loss from prior quarter primarily driven by increase in net change in unrealized losses on investments of $45,665,743, exploration and evaluation expenditures of $657,261, salaries and consulting of $363,512, offset by a decrease in stock-based compensation of $6,617,299, an increase in amortization of flow-through premium liability of $730,445 and gain on sale of exploration & exploration assets of $499,415. |
| (4) | Increase of income and comprehensive income from prior quarter primarily driven by increase in net change in unrealized gains on investments of $19,690,880, and amortization of flow-through premium liability of $1,206,865, partially offset by an increase in share-based compensation of $6,939,341, exploration and evaluation expenditures of $4,266,113, salaries and consulting fees of $259,797, and a decrease in net realized gains on disposals of investments of $216,346. |
| (5) | Decrease of loss and comprehensive loss from prior quarter primarily driven by a decrease in share-based compensation of $17,939,621, gain on sale of exploration and evaluation assets of $4,384,953, amortization of flow-through premium liability of $999,659, an increase in net change in unrealized gains on investments of $9,826,547 and net realized gains on disposals of investments of $204,230, partially offset by an increase in exploration and evaluation expenditures of $2,443,514. |
| (6) | Increase of loss and comprehensive loss from prior quarter primarily driven by an increase in share-based compensation of $12,454,708, net change in unrealized losses on investments of $4,854,539, and exploration and evaluation expenditures of $2,298,723, partially offset by an increase in gain on sale of exploration and evaluation assets of $4,384,953, amortization of flow-through premium liability of $699,109, and a decrease of salaries and consulting fees of $217,685. |
| (7) | Increase of loss and comprehensive loss from prior quarter primarily driven by an increase in net change in unrealized losses on investments of $17,431,256, share-based compensation of $2,452,112, exploration and evaluation expenditures of $1,666,095, salaries and consulting fees of $371,083, and corporate development and investor relations of $289,109, partially offset by amortization of flow-through premium liability of $384,864. |
| (8) | Decrease from prior quarter primarily driven by an increase in net change in unrealized gains on investments of $20,102,487, amortization of flow-through premium liability of $101,117, and a decrease in exploration and evaluation expenditures of $145,268, partially offset by an increase in share-based compensation of $3,032,801. |
| (9) | Increase from prior quarter primarily driven by increases in professional fees of $104,545, exploration and evaluation expenditures of $350,891 and net change in unrealized losses on investments of $5,279,853, partially offset by a decrease in share-based compensation of $2,130,528. |
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Liquidity and Capital Resources
As at December 31, 2021, the Company had cash of $100,484,576 to settle current liabilities of $12,756,646.
The Company does not currently have a recurring source of revenue and has historically incurred negative cash flows from operating activities. As at December 31, 2021, the Company has working capital of $123,764,003 consisting primarily of cash, investments, prepaid expenses and deposits and sales taxes recoverable. The Company’s exploration and evaluation assets presently have no proven or probable reserves, and on the basis of information to date, it has not yet determined whether these properties contain economically recoverable resources.
The recoverability of amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production.
The sources of funds currently available to the Company for its acquisition and exploration projects are solely due from equity financing.
The Company does not have bank debt or banking credit facilities in place as at the date of this report.
November 2021 Financing – Net Proceeds of $47,384,035
On November 24, 2021, the Company completed a non-brokered private placement financing of 5,000,000 flow-through common shares of the Company at a price of $9.60 per common share for gross proceeds of $48,000,000. The Company paid share issuance costs of $615,965 in cash of which $480,000 were finder’s fees. The premium received on the flow-through shares issued was determined to be $12,600,000.
| Uses of Funds: | Intended
Use of | Actual
Use of | Over/(Under)- | |||||||||
| Queensway Project work program | 48,000,000 | - | (48,000,000 | ) | ||||||||
| Total Uses | 48,000,000 | - | (48,000,000 | ) | ||||||||
As at December 31, 2021, the Company has not yet used proceeds of this financings for qualifying Canadian exploration expenses at its projects. The Company will start using them in late 2022.
August 2021 Financing – Net Proceeds of $54,248,367
On August 24, 2021, the Company completed a bought-deal private placement financing of 5,048,500 flow-through common shares at a price of $11.39 per common share for gross proceeds of $57,502,415, which included the full exercise of the underwriter’s over-allotment options. The Company paid share issuance costs of $3,254,048 in cash of which $2,734,547 were paid to the underwriters. The premium received on the flow-through shares issued was determined to be $14,590,165.
| Uses of Funds: | Intended Use of Proceeds (Estimated) $ | Actual Use of Proceeds $ | Over/(Under)-Expenditure at December 31, 2021 $ | |||||||||
| Queensway and Lucky Strike Project work programs | 57,502,415 | 17,581,466 | (39,920,949 | ) | ||||||||
| Total Uses | 57,502,415 | 17,581,466 | (39,920,949 | ) | ||||||||
As at December 31, 2021, the Company has used $17,581,466 of the proceeds for qualifying Canadian exploration expenses at its Queensway and Lucky Strike projects.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
April 2021 Financing – Net Proceeds of $14,411,609
On April 8, 2021, the Company completed a non-brokered private placement financing of 2,857,000 flow-through common shares at a price of $5.25 per common share for gross proceeds of $14,999,250. The Company paid share issuance costs of $587,641 in cash of which $524,974 were finder’s fees. The premium received on the flow-through shares issued was determined to be $1,971,330.
| Uses of Funds: | Intended
Use of | Actual
Use of | Over/(Under)- | |||||||||
| Queensway Project work program | 14,999,250 | 14,999,250 | - | |||||||||
| Total Uses | 14,999,250 | 14,999,250 | - | |||||||||
The Company used $14,999,250 of the proceeds for qualifying Canadian exploration expenses at its Queensway project during the year ended December 31, 2021.
Prior Financings
August 2020 Initial Public Offering – Net Proceeds of $28,488,581
On August 11, 2020, the Company completed an initial public offering of 21,000,000 common shares at a price of $1.30 per share for gross proceeds of $27,300,000 and on August 14, 2020, its agents exercised their overallotment option in full to offer and sell an additional 3,150,000 common shares for gross proceeds of $4,095,000. The Company paid share issuance costs of $2,906,419 in cash and issued 1,379,768 agents’ warrants with a fair value of $771,769. The agents’ warrants are exercisable into common shares of the Company at $1.30 for 12 months from the date of issue in connection with the initial public offering.
| Uses of Funds: | Intended
Use of | Actual
Use of | Over/(Under)- | |||||||||
| Queensway Project work program | 21,735,000 | 7,392,711 | (14,342,289 | ) | ||||||||
| General and administrative expenses | 4,505,000 | 3,784,270 | (720,530 | ) | ||||||||
| Working Capital to fund ongoing operations | 5,155,000 | 3,039,950 | (2,115,050 | ) | ||||||||
| Total Uses | 31,395,000 | 14,217,131 | (17,177,869 | ) | ||||||||
June 2020 Financings – Net Proceeds of $6,992,009
On June 4, 2020, the Company completed a non-brokered private placement financing of 3,994,597 flow-through common shares at a price of $1.50 per common share for gross proceeds of $5,991,896. Finders’ fees paid were $69,394 in cash and the issuance of 64,282 warrants exercisable into common shares of the Company at $1.50 per share for two years from date of issue with a fair value of $25,912. The premium received on the flow-through shares issued was determined to be $1,690,704.
On June 10, 2020, the Company completed a non-brokered private placement financing of 866,385 flow-through common shares at a price of $1.30 per common share for gross proceeds of $1,126,300. Finders’ fees paid were $56,793 in cash and the issuance of 43,582 warrants exercisable into common shares of the Company at $1.30 per share for two years from the date of issue with a fair value of $16,271. The premium received on the flow-through shares issued was determined to be $259,915.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
| Uses of Funds: | Intended
Use of | Actual
Use of |
Over/(Under)- | |||||||||
| Queensway Project work program | 7,118,196 | 7,118,196 | - | |||||||||
| Total Uses | 7,118,196 | 7,118,196 | - | |||||||||
The Company used $674,255 of the proceeds for qualifying Canadian exploration expenses at its Queensway project during the year ended December 31, 2021. The remaining portion of the proceeds of $6,443,941 was used in the fiscal year ended December 31, 2020.
Outstanding Share Data
During the year ended December 31, 2021, 1,273,000 stock options were exercised at a weighted average exercise price of $0.97 per share for gross proceeds of $1,236,170.
During the year ended December 31, 2021, 883,854 warrants were exercised at a weighted average exercise price of $1.31 per share for gross proceeds of $1,156,523.
On April 8, 2021, the Company completed a non-brokered private placement financing of 2,857,000 flow-through common shares at a price of $5.25 per common share for gross proceeds of $14,999,250. The Company paid share issuance costs of $587,641 in cash of which $524,974 were finder’s fees. The premium received on the flow-through shares issued was determined to be $1,971,330.
On August 24, 2021, the Company completed a bought-deal private placement financing of 5,048,500 flow-through common shares at a price of $11.39 per common share for gross proceeds of $57,502,415, which included the full exercise of the underwriter’s over-allotment option. The Company paid share issuance costs of $3,254,048 in cash of which $2,734,547 was paid to the underwriters. The premium received on the flow-through shares issued was determined to be $14,590,165.
On November 24, 2021, the Company completed a non-brokered private placement financing of 5,000,000 flow-through common shares of the Company at a price of $9.60 per common share for gross proceeds of $48,000,000. The Company paid share issuance costs of $615,965 in cash of which $480,000 were finder’s fees. The premium received on the flow-through shares issued was determined to be $12,600,000.
On November 25, 2021, the Company issued 458,823 common shares with an estimated fair value of $3,505,408 as part of the consideration to acquire royalty interests for an aggregate of 0.6% of net returns from the Company’s Linear and JBP Linear properties which form part of the Queensway project.
Subsequent to December 31, 2021, 26,875 stock options were exercised at a weighted average exercise price of $1.78 per share for gross proceeds of $47,731.
Subsequent to December 31, 2021, 30,000 stock options were granted at an exercise price of $8.98 and an expiry date of January 4, 2027.
Subsequent to December 31, 2021, 12,270 warrants were exercised at a weighted average exercise price of $1.50 per share for gross proceeds of $18,405.
As at December 31, 2021, there were 164,205,700 common shares issued and outstanding. As at the date of this report, there were 164,244,845 shares issued and outstanding.
As at December 31, 2021, there were 14,595,000 stock options and 49,486 warrants outstanding. As at the date of this report, there were 14,598,125 stock options and 37,216 warrants outstanding.
- 38 -
Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Related Party Transactions
All transactions with related parties have occurred in the normal course of operations and on terms and conditions that are similar to those of transactions with unrelated parties and are measured at the amount of consideration paid or received. A summary of the Company’s related party transactions with corporations having similar directors and officers, being Goldspot Discoveries Inc. and Mexican Gold Mining Corp., is as follows:
| Year ended December 31, | ||||||||
| 2021 $ | 2020 $ | |||||||
| Amounts paid to Goldspot Discoveries Inc. (i) for administration, exploration and evaluation | (1,356,384 | ) | (147,690 | ) | ||||
| Amounts paid to Mexican Gold Mining Corp. (ii) for legal fees | - | (127,234 | ) | |||||
| Options exercised by members of key management | 666,875 | 5,753,625 | ||||||
| (i) | Goldspot Discoveries Inc. is a related entity having the following common director and officer to the Company: Denis Laviolette, Director and President. |
| (ii) | Mexican Gold Mining Corp. is a related entity having the following common director and officer to the Company: John Anderson, Director, Michael Kanevsky, Chief Financial Officer. |
As at December 31, 2021, $225,619 is included in accounts payable and accrued liabilities for amounts owed to Goldspot Discoveries Inc. (December 31, 2020 - $Nil owed to related corporations).
There are no ongoing contractual commitments resulting from these transactions with related parties.
Key Management Personnel Compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers.
| Salaries and Consulting $ | Share-based compensation $ | Bonus $ | Year ended December 31, 2021 $ | |||||||||||||
| Executive Chairman | 300,000 | 1,291,220 | 100,000 | 1,691,220 | ||||||||||||
| Chief Executive Officer | 300,000 | 1,291,220 | 100,000 | 1,691,220 | ||||||||||||
| President | 210,000 | 1,291,220 | 70,000 | 1,571,220 | ||||||||||||
| Chief Financial Officer | 72,000 | - | - | 72,000 | ||||||||||||
| Chief Operating Officer | 195,000 | 544,192 | 65,000 | 804,192 | ||||||||||||
| Non-executive directors | 80,129 | 1,546,426 | - | 1,626,555 | ||||||||||||
| Total | 1,157,129 | 5,964,278 | 335,000 | 7,456,407 | ||||||||||||
| Salaries and Consulting $ | Share-based compensation $ | Bonus $ | Year ended December 31, 2020 $ | |||||||||||||
| Executive Chairman | 269,070 | 15,233,481 | 75,000 | 15,577,551 | ||||||||||||
| Chief Executive Officer | 250,000 | 4,722,549 | 325,000 | 5,297,549 | ||||||||||||
| President | 195,000 | 1,281,825 | 75,000 | 1,551,825 | ||||||||||||
| Chief Financial Officer | 72,900 | - | - | 72,900 | ||||||||||||
| Chief Operating Officer | 157,083 | 291,310 | 33,000 | 481,393 | ||||||||||||
| Non-executive directors | 20,000 | 886,614 | - | 906,614 | ||||||||||||
| Total | 964,053 | 22,415,779 | 508,000 | 23,887,832 | ||||||||||||
As at December 31, 2021 and 2020, there were no amounts payable to key management personnel in respect of key management compensation.
Under the terms of their management agreements, certain officers of the Company are entitled to 18 months of base pay in the event of their agreements being terminated without cause.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Risks and Uncertainties
The risks and uncertainties described in this section are considered by management to be the most important in the context of the Company's business. The risks and uncertainties below are not inclusive of all the risks and uncertainties the Company may be subject to and other risks may exist. The Company is in the business of acquiring, exploring and evaluating gold properties. It is exposed to a number of risks and uncertainties that are common to other gold mining companies. The industry is capital intensive at all stages and is subject to variations in commodity prices, market sentiment, inflation and other risks.
Exploration Stage Company
The Company is an exploration stage company and cannot give any assurance that a commercially viable deposit, or “reserve,” exists on any properties for which the Company currently has or may have (through potential future joint venture agreements or acquisitions) an interest. Determination of the existence of a reserve depends on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If the Company fails to find a commercially viable deposit on any of its properties, its financial condition and results of operations will be materially adversely affected.
No Mineral Resources
Currently, there are no mineral resources (within the meaning of NI 43-101) on any of the properties in which the Company has an interest and the Company cannot give any assurance that any mineral resources will be identified. If the Company fails to identify any mineral resources on any of its properties, its financial condition and results of operations will be materially adversely affected.
No Mineral Reserves
Currently, there are no mineral reserves (within the meaning of NI 43-101) on any of the properties in which the Company has an interest and the Company cannot give assurance that any mineral reserves will be identified. If the Company fails to identify any mineral reserves on any of its properties, its financial condition and results of operations will be materially adversely affected.
Reliability of Historical Information
The Company has relied on, and the disclosure in the Queensway Technical Report is based, in part, upon, historical data compiled by previous parties involved with the Queensway Project. To the extent that any of such historical data is inaccurate or incomplete, the Company’s exploration plans may be adversely affected.
Mineral Exploration and Development
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.
There is no assurance that the Company’s mineral exploration and any development activities will result in any discoveries of commercial bodies of ore. The long-term profitability of the Company’s operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining.
Substantial expenditures are required to establish ore reserves through exploration and drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.
Competition and Mineral Exploration
The mineral exploration industry is intensely competitive in all of its phases and the Company must compete in all aspects of its operations with a substantial number of large established mining companies with greater liquidity, greater access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or greater ability than the Company to withstand losses. The Company's competitors may be able to respond more quickly to new laws or regulations or emerging technologies or devote greater resources to the expansion of their operations, than the Company can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Competition could adversely affect the Company's ability to acquire suitable new mineral properties or prospects for exploration in the future. Competition could also affect the Company's ability to raise financing to fund the exploration and development of its properties or to hire qualified personnel. The Company may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on the Company's business, financial condition or results of operations.
Additional Funding
The exploration and development of the Company’s mineral properties will require substantial additional capital. When such additional capital is required, the Company will need to pursue various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. Additional financing may not be available when needed or, if available, the terms of such financing might not be favorable to the Company and might involve substantial dilution to existing shareholders. The Company may not be successful in locating suitable financing transactions in the time period required or at all. A failure to raise capital when needed would have a material adverse effect on the Company’s business, financial condition and results of operations. Any future issuance of securities to raise required capital will likely be dilutive to existing shareholders. In addition, debt and other debt financing may involve a pledge of assets and may be senior to interests of equity holders. The Company may incur substantial costs in pursuing future capital requirements, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. The ability to obtain needed financing may be impaired by such factors as the capital markets (both generally and in the gold and copper industries in particular), the Company’s status as a new enterprise with a limited history, the location of the Company’s mineral properties, the price of commodities and/or the loss of key management personnel.
Permits and Government Regulation
The future operations of the Company may require permits from various federal, state, provincial and local governmental authorities and will be governed by laws and regulations governing prospecting, development, mining, production, export, taxes, labour standards, occupational health, waste disposal, land use, environmental protections, mine safety and other matters.
Although Canada has a favorable legal and fiscal regime for exploration and mining, including a relatively simple system for the acquisition of mineral titles and relatively low tax burden, possible future government legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labour standards could cause additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted.
Before development and production can commence on any properties, the Company must obtain regulatory and environmental approvals. There is no assurance that such approvals can be obtained on a timely basis or at all. The cost of compliance, with changes in governmental regulations, has the potential to reduce the profitability of operations. The Company is currently in compliance with all material regulations applicable to its exploration activities.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Limited Operating History
The Company has a limited operating history and its mineral properties are exploration stage properties. As such, the Company will be subject to all of the business risks and uncertainties associated with any new business enterprise, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. The current state of the Company’s mineral properties require significant additional expenditures before any cash flow may be generated. Although the Company possesses an experienced management team, there is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success of the Company must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any business. There is no assurance that the Company can generate revenues, operate profitably, or provide a return on investment, or that it will successfully implement its plans.
An investment in the Company’s securities carries a high degree of risk and should be considered speculative by purchasers. There is no assurance that we will be successful in achieving a return on shareholders’ investment and the likelihood of our success must be considered in light of our early stage of operations. You should consider any purchase of the Company’s securities in light of the risks, expenses and problems frequently encountered by all companies in the early stages of their corporate development.
Title Risks
Although the Company has or will receive title opinions for any properties in which it has a material interest, there is no guarantee that title to such properties will not be challenged or impugned. The Company has not conducted surveys on all of the claims in which it holds direct or indirect interests. The Company’s properties may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by unidentified or unknown defects. Title insurance is generally not available for mineral properties and the Company's ability to ensure that it has obtained secure claims to individual mineral properties or mining concessions may be constrained. A successful challenge to the Company’s title to a property or to the precise area and location of a property could cause delays or stoppages to the Company’s exploration, development or operating activities without reimbursement to the Company. Any such delays or stoppages could have a material adverse effect on the Company’s business, financial condition and results of operations.
Laws and Regulation
The Company’s exploration activities are subject to extensive federal, provincial and local laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters in all the jurisdictions in which it operates. These laws and regulations are subject to change, can become more stringent and compliance can therefore become more costly. The Company applies the expertise of its management, advisors, employees and contractors to ensure compliance with current laws.
Uninsured and Underinsured Risks
The Company faces and will face various risks associated with mining exploration and the management and administration thereof Some of these risks are not insurable; some may be the subject of insurance which is not commercially feasible for the Company. Those insurances which are purchased will have exclusions and deductibles which may eliminate or restrict recovery in the event of loss. In some cases, the amount of insurance purchased may not be adequate in amount or in limit.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The Company will undertake intermittent assessments of insurable risk to help ensure that the impact of uninsured/underinsured loss is minimized within reason. Risks may vary from time to time within this intermittent period due to changes in such things as operations operating conditions, laws or the climate which may leave the Company exposed to periods of additional uninsured risk. In the event risk is uninsurable, at its reasonable and sole discretion, the Company may endeavor to implement policies and procedures, as may be applicable and/or feasible, to reduce the risk of related loss.
Public Health Crises such as the COVID-19 Pandemic
In December 2019, a novel strain of coronavirus known as COVID-19 surfaced in Wuhan, China and has spread around the world causing significant business and social disruption. COVID-19 was declared a worldwide pandemic by the World Health Organization on March 11, 2020. The speed and extent of the spread of COVID-19 and the duration and intensity of resulting business disruption and related financial and social impact, are uncertain. Such adverse effects related to COVID-19 and other public health crises may be material to the Company. The impact of COVID-19 and efforts to slow the spread of COVID-19 could severely impact the exploration and any development of the Queensway Project and the Company’s other mineral projects. To date, a number of governments have declared states of emergency and have implemented restrictive measures such as travel bans, quarantine and self-isolation. If the exploration and any development of the Queensway Project and other mineral projects is disrupted or suspended as a result of these or other measures, it may have a material adverse impact on the Company’s financial position and results of operations.
COVID-19 and efforts to contain it may have broad impacts on the Company’s supply chain or the global economy, which could have a material adverse effect on the Company’s financial position. While governmental agencies and private sector participants are seeking to mitigate the adverse effects of COVID-19, and the medical community is seeking to develop vaccines and other treatment options, the efficacy and timing of such measures is uncertain.
Global Economy Risk
The volatility of global capital markets, including the general economic slowdown in the mining sector, over the past several years has generally made the raising of capital by equity or debt financing more difficult. The Company may be dependent upon capital markets to raise additional financing in the future. As such, the Company is subject to liquidity risks in meeting its operating expenditure requirements and future development cost requirements in instances where adequate cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact the ability to raise equity or obtain loans and other credit facilities in the future and on terms favourable to the Company and its management. If these levels of volatility persist or if there is a further economic slowdown, the Company's operations, the Company's ability to raise capital could be adversely impacted.
In addition, the current outbreak of COVID-19, and any future emergence and spread of similar pathogens, could have a material adverse impact on global economic conditions, which may adversely impact: the Company’s operations, its ability to raise debt or equity financing for the purposes of mineral exploration and development, and the operations of the Company’s suppliers, contractors and service providers.
Environmental Risks
The Company’s activities are subject to extensive laws and regulations governing environment protection. The Company is also subject to various reclamation related conditions. Although the Company closely follows and believes it is operating in compliance with all applicable environmental regulations, there can be no assurance that all future requirements will be obtainable on reasonable terms. Failure to comply may result in enforcement actions causing operations to cease or be curtailed and may include corrective measures requiring capital expenditures. Intense lobbying over environmental concerns by non-governmental organizations has caused some governments to cancel or restrict development of mining projects. Current publicized concern over climate change may lead to carbon taxes, requirements for carbon offset purchases or new regulation. The costs or likelihood of such potential issues to the Company cannot be estimated at this time.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
The legal framework governing this area is constantly developing, therefore the Company is unable to fully ascertain any future liability that may arise from the implementation of any new laws or regulations, although such laws and regulations are typically strict and may impose severe penalties (financial or otherwise). The proposed activities of the Company, as with any exploration, may have an environmental impact which may result in unbudgeted delays, damage, loss and other costs and obligations including, without limitation, rehabilitation and/or compensation. There is also a risk that the Company’s operations and financial position may be adversely affected by the actions of environmental groups or any other group or person opposed in general to the Company’s activities and, in particular, the proposed exploration and mining by the Company within the Provinces of Newfoundland and Ontario.
Social and Environmental Activism
There is an increasing level of public concern relating to the effects of mining on the nature landscape, in communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a social responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operations, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.
Dependence on Management and Key Personnel
The success of the Company is currently largely dependent on the performance of its directors and officers. The loss of the services of any of these persons could have a materially adverse effect on the Company’s business and prospects. There is no assurance the Company can maintain the services of its directors, officers or other qualified personnel required to operate its business. As the Company’s business activity grows, the Company will require additional key financial, administrative and mining personnel as well as additional operations staff. There can be no assurance that these efforts will be successful in attracting, training and retaining qualified personnel as competition for persons with these skill sets increase. If the Company is not successful in attracting, training and retaining qualified personnel, the efficiency of its operations could be impaired, which could have an adverse impact on the Company’s operations and financial condition. In addition, the COVID-19 pandemic may cause the Company to have inadequate access to an available skilled workforce and qualified personnel, which could have an adverse impact on the Company’s financial performance and financial condition.
First Nations Land Claims
Certain of the Company’s mineral properties may now or in the future be the subject of First Nations land claims. The legal nature of First Nations land claims is a matter of considerable complexity. The impact of any such claim on the Company’s material interest in the Company’s mineral properties and/or potential ownership interest in the Company’s mineral properties in the future, cannot be predicted with any degree of certainty and no assurance can be given that a broad recognition of First Nations rights in the areas in which the Company’s mineral properties are located, by way of negotiated settlements or judicial pronouncements, would not have an adverse effect on the Company’s activities. Even in the absence of such recognition, the Company may at some point be required to negotiate with and seek the approval of holders of First Nations interests in order to facilitate exploration and development work on the Company’s mineral properties, there is no assurance that the Company will be able to establish practical working relationships with the First Nations in the area which would allow it to ultimately develop the Company’s mineral properties.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Claims and Legal Proceedings
The Company and/or its directors and officers may be subject to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its business, the Company may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause the Company to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may have a material adverse effect on the Company’s business, operating results or financial condition.
In July 2021, the Company responded to a claim by ThreeD Capital Inc. and 131366 Ontario Inc. with respect to a common share purchase by Palisades Goldcorp Ltd. of 17,500,000 common shares of the Company. The outcome of this lawsuit cannot be determined at this time and therefore no amount has been accrued for.
Conflicts of Interest
Most of the Company’s directors and officers do not devote their full time to the affairs of the Company. All of the directors and some of the officers of the Company are also directors, officers and shareholders of other natural resource or public companies, and as a result they may find themselves in a position where their duty to another company conflicts with their duty to the Company. Although the Company has policies which address such potential conflicts and the OBCA has provisions governing directors in the event of such a conflict, none of the Company’s constating documents or any of its other agreements contain any provisions mandating a procedure for addressing such conflicts of interest. There is no assurance that any such conflicts will be resolved in favour of the Company. If any such conflicts are not resolved in favour of the Company, the Company may be adversely affected.
Gold and Metal Prices
If the Company’s mineral properties are developed from exploration properties to full production properties, the majority of our revenue will be derived from the sale of gold. Therefore, the Company’s future profitability will depend upon the world market prices of the gold for which it is exploring. The price of gold and other metals are affected by numerous factors beyond the Company’s control, including levels of supply and demand, global or regional consumptive patterns, sales by government holders, metal stock levels maintained by producers and others, increased production due to new mine developments and improved mining and production methods, speculative activities related to the sale of metals, availability and costs of metal substitutes.
Moreover, gold prices are also affected by macroeconomic factors such as expectations regarding inflation, interest rates and global and regional demand for, and supply of, gold as well as general global economic conditions. These factors may have an adverse effect on the Company’s exploration, development and production activities, as well as on its ability to fund those activities. Additionally, the current COVID-19 pandemic and efforts to contain it, including restrictions on travel and other advisories issued may have a significant effect on gold prices.
Negative Cash Flow from Operating Activities
The Company has no history of earnings and had negative cash flow from operating activities since inception. The Company’s mineral properties are in the exploration stage and there are no known mineral resources or reserves and the proposed exploration programs on the Company’s mineral properties are exploratory in nature. Significant capital investment will be required to achieve commercial production from the Company’s existing projects. There is no assurance that any of the Company’s mineral properties will generate earnings, operate profitably or provide a return on investment in the future. Accordingly, the Company will be required to obtain additional financing in order to meet its future cash commitments.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Going Concern Risk
The Company’s financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Company’s future operations are dependent upon the identification and successful completion of equity or debt financings and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Company will be successful in completing equity or debt financings or in achieving profitability. The financial statements do not give effect to any adjustments relating to the carrying values and classifications of assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
Risks Associated with Acquisitions
If appropriate opportunities present themselves, the Company may acquire mineral claims, material interests in other mineral claims, and companies that the Company believes are strategic. The Company currently has no understandings, commitments or agreements with respect to any material acquisition, other than as described in this MD&A, and no other material acquisition is currently being pursued. There can be no assurance that the Company will be able to identify, negotiate or finance future acquisitions successfully, or to integrate such acquisitions with its current business. The process of integrating an acquired Company or mineral claims into the Company may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of the Company’s business. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company’s business, results of operations and financial condition.
Force Majeure
The Company’s projects now or in the future may be adversely affected by risks outside the control of the Company, including the price of gold on world markets, labour unrest, civil disorder, war, subversive activities or sabotage, fires, floods, explosions or other catastrophes, pandemics, epidemics or quarantine restrictions.
Infrastructure
Exploration, development and processing activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important elements of infrastructure, which affect access, capital and operating costs. The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploration or development of the Company’s mineral properties. If adequate infrastructure is not available in a timely manner, there can be no assurance that the exploration or development of the Company’s mineral properties will be commenced or completed on a timely basis, if at all. Furthermore, unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of necessary infrastructure could adversely affect our operations.
Exploration operations depend on adequate infrastructure. In particular, reliable power sources, water supply, transportation and surface facilities are necessary to explore and develop mineral projects. Failure to adequately meet these infrastructure requirements or changes in the cost of such requirements could affect the Company’s ability to carry out exploration and future development operations and could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Climate Change Risks
The Company acknowledges climate change as an international and community concern and it supports and endorses various initiatives for voluntary actions consistent with international initiatives on climate change. However, in addition to voluntary actions, governments are moving to introduce climate change legislation and treaties at the international, national, state/provincial and local levels. Where legislation already exists, regulation relating to emission levels and energy efficiency is becoming more stringent. Some of the costs associated with reducing emissions can be offset by increased energy efficiency and technological innovation. However, if the current regulatory trend continues, the Company expects that this could result in increased costs at some of its operations in the future.
The Company and the mining industry are facing continued geotechnical challenges, which could adversely impact the Company’s production and profitability. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, floods, seismic activity, droughts and pit wall failures, may occur in the future and such events may not be detected in advance. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as severe weather and considerable rainfall. Geotechnical failures could result in limited or restricted access to mine sites, suspension of operations, government investigations, increased monitoring costs, remediation costs, loss of ore and other impacts, which could cause one or more of the Company’s projects to be less profitable than currently anticipated and could result in a material adverse effect on the Company’s business results of operations and financial position.
Information Systems and Cyber Security
The Company’s operations depend on information technology (“IT”) systems. These IT systems could be subject to network disruptions caused by a variety of sources, including computer viruses, security breaches and cyber-attacks, as well as disruptions resulting from incidents such as cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that the Company will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
Critical Accounting Policies and Estimates
The Company prepares its financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”).
The preparation of the financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates.
The financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Significant assumptions about the future and other sources of estimation uncertainty that management has made at year end that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to the following:
| (i) | Critical accounting estimates |
Valuation of Options Granted and Warrants Issued
The fair value of common share purchase options granted and warrants issued is determined at the issue date using the Black-Scholes option pricing model. The Black-Scholes model involves six key inputs to determine the fair value of an option, which are: risk-free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense. These estimates impact the values of stock-based compensation expense, share capital, and reserves.
Fair Value of Financial Derivatives
Investments in warrants that are not traded on a recognized securities exchange do not have a readily available market value. When there are sufficient and reliable market inputs, a Black-Scholes option pricing model is used. The Black-Scholes model involves six key inputs to determine the fair value of a warrant, which include: risk free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control.
Fair Value of Investments in Private Companies
The determination of fair value requires judgment and is based on market information, where available and appropriate. All privately-held investments are initially recorded at the transaction price, being the fair value at the time of acquisition. Thereafter, at each reporting period, the fair value of an investment may be adjusted using one or more of the valuation indicators described below.
Company-specific information is considered when determining whether the fair value of a privately-held investment should be adjusted upward or downward at the end of each reporting period. In addition to company-specific information, the Company will take into account trends in general market conditions and the share performance of comparable publicly-traded companies when valuing privately-held investments.
The absence of the occurrence of any of these events, any significant change in trends in general market conditions, or any significant change in share performance of comparable publicly-traded companies indicates generally that the fair value of the investment has not materially changed.
Computation of Income Taxes
The determination of tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and make estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings which affect the extent to which potential future tax benefits may be used.
The Company is subject to assessments by taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. We provide for such differences where known based on our best estimate of the probable outcome of these matters.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Shares Issued to Acquire Exploration and Evaluation Assets
From time to time, the Company issues common shares in the course of acquiring exploration and evaluation assets. When shares are issued without cash consideration, the transaction is recognized at the fair value of the assets received. In the event that the fair value of the assets cannot be reliably determined, the Company will recognize the transaction at the fair value of the shares issued. These estimates impact the value of share capital and exploration and evaluation assets.
Valuation of flow-through premium
The determination of the valuation of flow-through premium and warrants in equity units is subject to significant judgment and estimates. The flow-through premium is valued as the estimated premium that investors pay for the flow-through feature, being the portion in excess of the market value of shares without the flow-through feature issued in concurrent private placement financing.
| (ii) | Critical accounting judgments |
Impairment of Exploration and Evaluation Assets
Management is required to assess impairment in respect to the Company’s intangible mineral property interests. The triggering events are defined in IFRS 6. In making the assessment, management is required to make judgments on the status of each project and the future plans towards finding commercial reserves. The carrying value of each exploration and evaluation asset is reviewed regularly for conditions that may suggest impairment.
This review requires significant judgment. Factors considered in the assessment of asset impairment include, but are not limited to, whether there has been a significant adverse change in the legal, regulatory, accessibility, title, environmental or political factors that could affect the property’s value; whether there has been an accumulation of costs significantly in excess of the amounts originally expected for the property’s acquisition, development or cost of holding; and whether exploration activities produced results that are not promising such that no more work is being planned in the foreseeable future. If impairment is determined to exist, a formal estimate of the recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. Management has determined that there were indicators of impairment as at December 31, 2021 and has impaired $28,604 (December 31, 2020 - $166,662) in exploration and evaluation assets.
Financial Risk Management
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company does not have financial instruments that potentially subject the Company to credit risk. Overall the Company’s credit risk has not changed significantly from the prior year. Sales taxes recoverable are due from the Canada Revenue Agency and the Company places its cash with financial institutions with high credit ratings, therefore in management’s judgment, credit risk is low.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company has historically relied on issuance of shares to fund exploration programs and may require doing so again in the future. As at December 31, 2021, the Company has total liabilities of $25,403,246 and cash of $100,484,576 which is available to discharge these liabilities (December 31, 2020 – total liabilities of $635,083 and cash of $47,731,125). Accordingly, in management’s judgment, liquidity risk is low.
There have been no changes in management’s methods for managing liquidity risk during the years ended December 31, 2021 and 2020.
Market Risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange rates will affect the Company’s net earnings or the value of financial instruments. The objective of the Company is to manage and mitigate market risk exposures within acceptable limits, while maximizing returns.
(i) Currency Risk
Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuation include cash accounts denominated in US dollars and investments denominated in Australian dollars. Fluctuations in the exchange rate between the US dollar and the Canadian dollar, and the Australian dollar and the Canadian dollar at December 31, 2021 would not have a material impact on the Company’s net earnings and other comprehensive income.
(ii) Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. As the Company deposits its short-term investments into fixed rate guaranteed investment certificates with one year maturities or less, the Company is not exposed to interest rate risk.
(iii) Commodity Price risk
Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company’s property has exposure to predominantly gold. Commodity prices, especially gold, greatly affect the value of the Company and the potential value of its property and investments.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
(iv) Equity Price Risk
Equity price risk is the risk that the fair value of or future cash flows from the Company’s financial instruments will significantly fluctuate because of changes in market prices. The Company is exposed to market risk in trading its investments in unfavorable market conditions which could result in dispositions of investments at less than favorable prices. Additionally, the Company adjusts its investments to fair value at the end of each reporting period. This process could result in write-downs of the Company’s investments over one or more reporting periods, particularly during periods of overall market instability. The sensitivity of the Company’s net income (loss) to changes in market prices at December 31, 2021 would change the Company’s net income (loss) by $3,194,245 as a result of a 10% change in the market price of its investments.
There have been no changes in management’s methods for managing market risks during the years ended December 31, 2021 and 2020.
Capital management
The Company’s objectives when managing capital are:
| • | To safeguard our ability to continue as a going concern in order to develop and operate our current projects; |
| • | Pursue strategic growth initiatives; and |
| • | To maintain a flexible capital structure which lowers the cost of capital. |
In assessing our capital structure, we include in our assessment the components of equity consisting of common shares, stock options and warrants, and deficit that as at December 31, 2021 totalled $122,654,601 (December 31, 2020 - $72,901,845). In order to facilitate the management of capital requirements, the Company prepares annual expenditure budgets and continuously monitors and reviews actual and forecasted cash flows. The annual and updated budgets are monitored and approved by the Board of Directors. To maintain or adjust the capital structure, the Company may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. The Company’s current capital resources are sufficient to carry out our exploration plans and support operations through the current operating period.
The Company is not subject to any capital requirements imposed by a regulator.
There were no changes in the Company’s approach to capital management during the years ended December 31, 2021 and 2020.
Cautionary Notes Regarding Forward-Looking Statements
This MD&A contains forward looking statements which reflect management's expectations regarding the Company’s future growth, results from operations (including, without limitation, statements about the Company’s opportunities, strategies, competition, expected activities and expenditures as the Company pursues its business plan, the adequacy of the Company’s available cash resources and other statements about future events or results), performance (both operational and financial) and business prospects, future business plans and opportunities. Wherever possible, words such as “predicts”, “projects”, “targets”, “plans”, “expects”, “does not expect”, “budget”, “scheduled”, “estimates”, “forecasts”, “anticipate” or “does not anticipate”, “believe”, “intend” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative or grammatical variation thereof or other variations thereof, or comparable terminology have been used to identify forward-looking statements. These forward-looking statements include, among other things, statements relating to; the Queensway Project and the Company’s planned and future exploration on the Queensway Project and its other mineral properties; the Company’s goals regarding exploration and potential development of its projects; the Company’s future business plans; expectations regarding the ability to raise further capital; the market price of gold; expectations regarding any environmental issues that may affect planned or future exploration and development programs and the potential impact of complying with existing and proposed environmental laws and regulations; the ability to retain and/or maintain any require permits, licenses or other necessary approvals for the exploration or development of its mineral properties; government regulation of mineral exploration and development operations in the Provinces of Newfoundland and Labrador and Ontario; the Company’s compensation policy and practices; the Company’s expected reliance on key management personnel, advisors and consultants; effects of the novel COVID-19 outbreak as a global pandemic.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Forward-looking statements are not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances.
As of the date of this MD&A, without limitation, assumptions about: the ability to raise any necessary additional capital on reasonable terms to advance exploration and development of the Company’s mineral properties; future prices of gold and other metal prices; the timing and results of exploration and drilling programs; the demand for, and price of gold; that general business and economic conditions will not change in a material adverse manner; the Company’s ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; the geology of the Queensway Project as described in the Queensway Technical Report; the accuracy of budgeted exploration and development costs and expenditures; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; the Company’s ability to attract and retain skilled personnel; political and regulatory stability; the receipt of governmental, regulatory and third-party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; expectations regarding the level of disruption to exploration at the Queensway Project as a result of COVID 19; availability of equipment. Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking statements. Such risks include, without limitation: the Company may fail to find a commercially viable deposit at any of its mineral properties; there are no resources or mineral reserves on any of the properties in which the Company has an interest; the Company’s plans may be adversely affected by the Company’s reliance on historical data compiled by previous parties involved with its mineral properties; mineral exploration and development are inherently risky; the mineral exploration industry is intensely competitive; additional financing may not be available to the Company when required or, if available, the terms of such financing may not be favourable to the Company; fluctuations in the demand for gold; the Company may not be able to identify, negotiate or finance any future acquisitions successfully, or to integrate such acquisitions with its current business; the Company’s exploration activities are dependent upon the grant of appropriate licenses, concessions, leases, permits and regulatory consents, which may be withdrawn or not granted; the Company’s operations could be adversely affected by possible future government legislation, policies and controls or by changes in applicable laws and regulations; there is no guarantee that title to the properties in which the Company has a material interest will not be challenged or impugned; the Company faces various risks associated with mining exploration that are not insurable or may be the subject of insurance which is not commercially feasible for the Company; public health crises such as the COVID-19 pandemic may adversely impact the Company’s business; the volatility of global capital markets over the past several years has generally made the raising of capital more difficult; compliance with environmental regulations can be costly; social and environmental activism can negatively impact exploration, development and mining activities; the success of the Company is largely dependent on the performance of its directors and officers; the Company’s operations may be adversely affected by First Nations land claims; the Company and/or its directors and officers may be subject to a variety of legal proceedings, the results of which may have a material adverse effect on the Company’s business; the Company may be adversely affected if potential conflicts of interests involving its directors and officers are not resolved in favour of the Company; the Company’s future profitability may depend upon the world market prices of gold; there is no existing public market for the Company’s securities and an active and liquid one may never develop, which could impact the liquidity of the Company’s securities; dilution from future equity financing could negatively impact holders of the Company’s securities; failure to adequately meet infrastructure requirements could have a material adverse effect on the Company’s business; the Company’s projects now or in the future may be adversely affected by risks outside the control of the Company; the Company is subject to various risks associated with climate change; other factors discussed under “Risk and Uncertainties”.
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Management’s Discussion and Analysis
For the year ended December 31, 2021 and 2020
Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.
The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking statements contained herein. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking statements.
Forward-looking statements contained herein are made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.
Off-Balance Sheet Arrangements
The Company does not utilize off-balance sheet arrangements.
Proposed Transactions
There are no proposed transactions at the date of this report.
Management’s Report on Internal Control over Financial Reporting
In connection with National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings (“NI 52-109”) adopted in December 2008 by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the financial statements and respective accompanying Management’s Discussion and Analysis. The Venture Issuer Basic Certification does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109.
Additional Information
Additional information relating to the Company is available on SEDAR at www.sedar.com.
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