Silver Elephant Mining Corp 6-K, filed Nov 18, 2020
Silver Elephant Mining Corp. (SILEF)
6-K
2020-11-18
For: 2020-11-18
View Original
Added on
July 04, 2026
About this 6-K
Silver Elephant Mining Corp filed this 6-K on November 18, 2020.
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 November
2020
Commission
File Number 000-55985
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SILVER ELEPHANT MINING CORP.
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(Translation
of registrant’s name into English)
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Suite 1610 – 409 Granville Street
Vancouver, British Columbia, Canada V6C 1T2
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(Address
of principal executive offices)
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Indicate
by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F
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Form
20-F
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☒
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Form
40-F
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☐
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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):
☐
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Note: Regulation S-T Rule 101(b)(1) only permits
the submission in paper of a Form 6-K if submitted solely to
provide an attached annual report to security holders.
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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): ☐
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Note: Regulation S-T Rule 101(b)(7) only permits
the submission in paper of a Form 6-K if submitted to furnish
a report or other document that the registrant foreign private
issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or
legally organized (the registrant’s “home
country”), or under the rules of the home country exchange on
which the registrant’s securities are traded, as long as the
report or other document is not a press release, is not required to
be and has not been distributed to the registrant’s security
holders, and, if discussing a material event, has already been the
subject of a Form 6-K submission or other Commission filing on
EDGAR.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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SILVER ELEPHANT MINING CORP.
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Date:
November 18, 2020
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/s/ Brigitte
McArthur
Brigitte McArthur
Corporate Secretary
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-2-
INDEX TO EXHIBITS
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Short
Form Prospectus dated November 17, 2020
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-3-
Exhibit
99.1
No securities
regulatory authority has expressed an opinion about these
securities and it is an offence to claim otherwise. This prospectus
constitutes a public offering of these securities only in those
jurisdictions where they may be lawfully offered for sale and
therein only by persons permitted to sell such
securities.
The offering of
these securities has not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any applicable
state securities laws. Accordingly, except as permitted under the
Underwriting Agreement (as defined herein) and pursuant to
exemptions from the registration requirements of the U.S.
Securities Act and applicable state securities laws, these
securities may not be offered, sold or otherwise disposed of,
directly or indirectly, in the United States of America, its
territories or possessions, any State of the United States or the
District of Columbia (collectively, the "United States"). This prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any of these securities within the United States. See "Plan of
Distribution".
Information has been incorporated by reference
in this prospectus from documents filed with securities commissions
or similar authorities in Canada. Copies of the documents
incorporated herein by reference may be obtained on request without
charge from the Corporate Secretary of Silver Elephant Mining
Corp., at the Company's head and registered office located at Suite
1610, 409 Granville Street, Vancouver, British Columbia, Canada V6C
1T2, telephone: (604) 569-3661 and are also available
electronically at www.sedar.com.
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New
Issue
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November 17,
2020
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SHORT FORM PROSPECTUS
Silver Elephant Mining Corp.
$8,000,000
20,000,000 Common Shares
$0.40 per Common Share
This
prospectus (this "Prospectus") qualifies the distribution
(the "Offering") of an
aggregate of 20 million common shares ("Common Shares", and the Common Shares
offered in this Prospectus being the "Offered Shares") of Silver Elephant
Mining Corp. (the "Company")
at a price of $0.40 per
share (the "Offering Price")
for aggregate gross proceeds of $8 million. The Offered Shares will
be sold pursuant to an underwriting agreement dated October 26,
2020, as amended November 17, 2020 (the "Underwriting Agreement") between the
Company and Mackie Research Capital Corporation (the "Lead Underwriter"), Canaccord Genuity Corp.
and Sprott Capital Partners LP (together with the Lead Underwriter,
the "Underwriters"). The
Offering Price was determined by arm's length negotiation between
the Lead Underwriter and the Company with reference to the
prevailing market price of the Common Shares. See "Plan of
Distribution".
Price:
$0.40 per Offered Share
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Price
to
the
Public
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Underwriters'
Commission(1)(2)
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Net
Proceeds
to the
Company
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Per Offered
Share
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$0.40
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$0.024
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$0.376
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Total Offering(3)
..
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$8,000,000
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$480,000
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$7,520,000
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Notes:
(1)
Pursuant to the terms and
conditions of the Underwriting Agreement, the Company has agreed to
pay a cash commission to the Underwriters equal to 6% of the gross
proceeds of the Offering (the "Underwriters' Commission"). In addition
to the Underwriters' Commission, the Company will issue to the
Underwriters such number of compensation options ("Compensation Options") as is equal to 6%
of the aggregate number of Offered Shares issued under the
Offering, including any Offered Shares sold pursuant to the
Over-Allotment Option (as defined below). Each Compensation Option
is exercisable for the purchase of one Common Share (a
"Compensation Option Share")
at any time prior to 4:30 p.m. (Vancouver time) on the date that is
12 months after the closing date of the Offering (the "Closing Date") at a price of $0.40 per
share. This Prospectus also qualifies the distribution of the
Compensation Options. See "Plan of
Distribution".
(2)
After
deducting the Underwriters' Commission, but before deducting the
expenses of the Offering, estimated at $300,000, which will be paid
by the Company from the proceeds of the Offering. See "Use of Proceeds".
(3)
The Company has
granted to the Underwriters an option (the "Over-Allotment Option"), exercisable in
whole or in part, in the sole discretion of the Underwriters, at
any time for a period of 30 days after the Closing Date, to
purchase up to an additional 3 million Common Shares (the
"Over-Allotment Shares") at
the Offering Price to cover over allotments, if any, and for market
stabilization purposes. If the Over Allotment Option is exercised
in full, the total "Price to the Public", "Underwriters'
Commission" and "Net Proceeds to the Company" (before deducting
expenses of the Offering) will be $9,200,000, $552,000 and $8,648,000, respectively. This
Prospectus also qualifies the grant of the Over-Allotment Option
and the distribution of the Over-Allotment Shares. See
"Plan of Distribution". A
purchaser who acquires Common Shares forming part of the
Underwriters' over-allocation position acquires those securities
under this Prospectus, regardless of whether the over-allocation
position is ultimately filled through the exercise of the
Over-Allotment Option or secondary market
purchases.
1
Unless
the context otherwise requires, when used in this Prospectus, all
references to "Offered Shares" includes the Over-Allotment Shares
and all references to "Compensation Options" includes the
additional Compensation Options issuable as a result of the
exercise of the Over-Allotment Option.
The
following table sets forth the number of securities that may be
issued by the Company to the Underwriters pursuant to the
Over-Allotment Option and the Compensation Options:
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Underwriters' Position
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Maximum Number of Securities
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Exercise Period
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Exercise Price
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Compensation
Options
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1,200,000
Common Shares(1)
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12
months following the Closing Date
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$0.40
per share
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Over-Allotment
Option
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3,000,000
Common Shares
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30 days
following the Closing Date
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$0.40
per share
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Note:
(1)
Assumes no exercise
of the Over-Allotment Option. In the event the Over-Allotment
Option is exercised in full, a maximum of 1,380,000 Common Shares
will be issuable.
The
Common Shares are listed on the Toronto Stock Exchange (the
"TSX") under the trading
symbol "ELEF" and on the Frankfurt Stock Exchange under the symbol
"1P2N" and are quoted on the OTCQX Market (the "OTCQX") under the symbol "SILEF". On
October 19, 2020, the last full trading day prior to the public
announcement of the Offering, the closing price of the Common
Shares was $0.465 per
share on the TSX. On November 16, 2020, the last full trading day
prior to the filing of this Prospectus, the closing price of the
Common Shares was $0.485 per share on the TSX. The Offered Shares
and the Compensation Option Shares have been conditionally approved
for listing on the TSX. Listing of the Offered Shares and the
Compensation Option Shares will be subject to the Company
fulfilling all the listing requirements of the TSX on or before
January 22, 2021.
The
Underwriters, as principals, conditionally offer the Offered
Shares, subject to prior sale, if, as and when issued by the
Company and accepted by the Underwriters in accordance with the
conditions contained in the Underwriting Agreement and subject to
approval of certain legal matters relating to the Offering by MLT
Aikins LLP, on behalf of the Company, and by McCarthy Tétrault
LLP, Toronto, on behalf of the Underwriters. See "Plan of Distribution".
Subject
to applicable laws, the Underwriters may, in connection with the
Offering, effect transactions which stabilize or maintain the
market price of the Common Shares at levels other than those which
might otherwise prevail on the open market. Such transactions, if
commenced, may be discontinued at any time. In certain circumstances, the Underwriters may
offer the Offered Shares at a price lower than that stated
above. See "Plan of
Distribution".
Mr.
John Lee, a director and the chief executive officer of the
Company, Mr. Masateru Igata, a director of the Company, Mr. Mark
Leduc, a director of the Company, and Mr. David Smith, a director
of the Company, each resides outside of Canada and each has
appointed MLT Aikins LLP at 2600-1066 West Hastings St., Vancouver,
British Columbia V6E 3X1, as agent for service of process. Osvaldo
Arce, P. Geo, who is an author responsible for the preparation of
the Restated Pulacayo Technical Report (as defined below), resides
outside of Canada and has appointed MLT Aikins LLP at 2600-1066
West Hastings St., Vancouver, British Columbia V6E 3X1 as agent for
service of process. Purchasers are advised that it may not be
possible for investors to enforce judgments obtained in Canada
against any person or company that is incorporated, continued or
otherwise organized under the laws of a foreign jurisdiction or
resides outside of Canada, even if the party has appointed an agent
for service of process.
An investment in Offered Shares is highly speculative and involves
significant risks that should be carefully considered by
prospective investors. The risks outlined in this Prospectus and in
the documents incorporated herein by reference should be carefully
reviewed and considered by prospective investors. See "Risk Factors" and "Cautionary Statement Regarding Forward-Looking
Statements".
Prospective investors are advised to consult their own tax advisors
regarding the application of Canadian federal income tax laws to
their particular circumstances, as well as any other provincial,
territorial, local, foreign and other tax consequences of
acquiring, holding or disposing of Offered Shares, including the
Canadian federal income tax consequences applicable to a foreign
controlled Canadian corporation that acquires Offered
Shares.
Subscriptions
for the Offered Shares will be received subject to rejection or
allotment, in whole or in part, and the right is reserved to close
the subscription books at any time without notice. The Closing Date
is expected to occur on November 24, 2020, or such earlier or later
date, not later than December 1, 2020; however, the Offered Shares
are to be taken up by the Underwriters, if at all, on or before a
date that is not later than 42 days after the date of the final
receipt for this Prospectus. Except in certain limited
circumstances, it is expected that one or more global certificates
(in physical or electronic form) evidencing the Offered Shares
distributed under this Prospectus in Canada will be issued in
registered form to CDS Clearing and Depository Services Inc.
("CDS") and will be
deposited with CDS on the Closing Date. No certificates evidencing
Offered Shares will be issued to Canadian resident purchasers,
except in certain limited circumstances (including, without
limitation, as described herein), and registration of such
securities will be made in the depository service of CDS. Canadian
resident purchasers of Offered Shares will receive only a customer
confirmation from the Underwriter or other registered dealer who is
a CDS participant and from or through whom a beneficial interest in
the Offered Shares is purchased. Notwithstanding the foregoing, all
Offered Shares issued in the United States pursuant to available
exemptions from the registration requirements of the U.S.
Securities Act and applicable state securities laws to purchasers
who do not qualify as "qualified institutional buyers" within the
meaning of Rule 144A under the U.S. Securities Act ("Qualified Institutional Buyers") will be
represented by definitive physical certificates. See "Plan of Distribution".
2
TABLE OF CONTENTS
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3
ABOUT THIS
PROSPECTUS
Prospective
investors should rely only on the information contained in or
incorporated by reference into this Prospectus. Neither the Company
nor any of the Underwriters has authorized anyone to provide
prospective investors with different information. Information
contained on the Company's website should not be deemed to be a
part of this Prospectus or incorporated by reference herein and
should not be relied upon by prospective investors for the purpose
of determining whether to invest in Offered Shares. Neither the
Company nor the Underwriters are making an offer of the Offered
Shares in any jurisdiction where the offer or sale is not
permitted. Prospective investors should assume that the information
appearing in this Prospectus is accurate only as of the date on the
front of this Prospectus, or the date of any documents incorporated
by reference herein. The Company's business, operating results,
financial condition and prospects may have changed since the date
of this Prospectus.
Market
data and certain industry forecasts used in this Prospectus or the
documents incorporated by reference herein were obtained from
market research, publicly available information and industry
publications. The Company believes that these sources are generally
reliable, but the accuracy and completeness of this information is
not guaranteed. Neither the Company nor the Underwriters have
independently verified such information, and do not make any
representation as to the accuracy of such information.
The
Company's consolidated annual and interim financial statements are
prepared in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards
Board. The financial information contained in certain documents
incorporated by reference in this Prospectus are presented in
United States dollars.
In this
Prospectus, references to the "Company" refers to Silver Elephant
Mining Corp. and/or, as applicable, one or more of its
subsidiaries. Unless the context otherwise requires, references to
"Common Shares" include all of the Common Shares. The Company's
head and registered office is located at Suite 1610, 409 Granville
Street, Vancouver, British Columbia, Canada, V6C 1T2.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Certain
statements contained in this Prospectus, including the documents
incorporated by reference herein, constitute "forward-looking
statements" within the meaning of United States securities laws and
"forward-looking information" within the meaning of Canadian
securities laws and are intended to be covered by the safe harbors
provided by such regulations (such forward-looking statements and
forward-looking information are collectively referred to herein as
"forward-looking statements"). Forward-looking statements in this
Prospectus, including the documents incorporated by reference
herein, are frequently, but not always, identified by words such as
"expects", "anticipates", "intends", "believes", "estimates",
"potentially" or similar expressions, or statements that events,
conditions or results "will", "may", "would", "could" or "should"
occur or are "to be" achieved, and statements related to matters
which are not historical facts. Information concerning management's
expectations regarding the Company's future growth, results of
operations, performance, business prospects and opportunities may
also be deemed to be forward-looking statements, as such
information constitutes predictions based on certain factors,
estimates and assumptions subject to significant business,
economic, competitive and other uncertainties and contingencies,
and involve known and unknown risks which may cause the actual
results, performance, or achievements to be different from future
results, performance, or achievements contained in the forward-
looking statements.
Such
forward-looking statements include, but are not limited to,
statements regarding the following:
●
the Company's
planned and future exploration and/or development of the Pulacayo
Paca silver-lead-zinc property located in the Potosí
Department, Antonnio Quijarro province, Bolivia and the Gibellini
vanadium project located in the State of Nevada, USA;
●
the volatility of
the novel coronavirus ("COVID-19") outbreak as a global
pandemic;
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political
instability and social unrest in Bolivia and other jurisdictions
where the Company operates;
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the use of proceeds
from the Offering;
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the Company's goals
regarding exploration, and development of, and production from its
projects, and regarding raising capital and conducting further
exploration and developments of its properties;
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the Company's
future business plans;
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the Company's
future financial and operating performance;
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the future price of
silver, lead, zinc, vanadium and other metals;
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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
obtain or maintain any required permits, licenses or other
necessary approvals for the exploration or development of the
Company's projects;
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government
regulation of mineral exploration and development operations in
Bolivia and other relevant jurisdictions;
●
the Company's
reliance on key management personnel, advisors and
consultants;
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the volatility of
global financial markets;
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the timing and
amount of estimated future operating and exploration
expenditures;
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the costs and
timing of the development of new deposits;
4
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the continuation of
the Company as a going concern;
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the likelihood of
securing project financing;
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the impacts of
changes in the legal and regulatory environment in which the
Company operates;
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the timing and
possible outcome of any pending litigation and regulatory matters;
and
●
other information
concerning possible or assumed future results of the Company's
operations.
Statements
relating to mineral resources are deemed to be forward-looking
statements, as they involve the implied assessment, based on
certain estimates and assumptions, that the mineral resources
described exist in the quantities predicted or estimated and may be
profitably produced in the future. Estimated values of future net
revenue do not represent fair market value. There is no certainty
that it will be commercially viable to produce any portion of the
mineral resources.
Forward-looking
statements are not guarantees of future performance and are based
upon a number of estimates and assumptions of management at the
date the statements are made including, among other things, the
following:
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timely receipt of
regulatory and governmental approvals (including licenses and
permits) for the development, construction and production of the
Company's properties and projects;
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there being no
significant disruptions affecting operations, whether due to labour
disruptions, COVID 19 or other causes;
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currency exchange
rates being approximately consistent with current
levels;
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certain price
assumptions for silver, lead, zinc, vanadium and other
metals;
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prices for and
availability of fuel and electricity;
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parts and equipment
and other key supplies remaining consistent with current levels and
prices;
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production
forecasts meeting expectations;
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the accuracy of the
Company's current mineral resource estimates and of any
metallurgical testing completed to date;
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labour and
materials costs increasing on a basis consistent with the Company's
current expectations;
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any additional
required financing being available on reasonable
terms;
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market developments
and trends in global supply and demand for silver, lead, zinc,
vanadium and other metals meeting expectations;
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favourable
operating conditions;
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political
stability;
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access to necessary
financing;
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stability of labour
markets and in market conditions in general; and
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estimates of costs
and expenditures to complete the Company's programs.
Many of
these assumptions are inherently subject to significant business,
social, economic, political, regulatory, competitive and other
risks and uncertainties, contingencies, and other factors that are
not within the control of the Company and could thus cause actual
performance, achievements, actions, events, results or conditions
to be materially different from those projected in the
forward-looking statements. Furthermore, such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from those
reflected in the forward-looking statements, whether expressed or
implied. Such factors include, among others, the
following:
●
the Company is an
exploration stage company;
●
the cost, timing
and amount of estimated future capital, operating exploration,
acquisition, development and reclamation activities;
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the volatility of
the market price of the Common Shares;
●
judgment of
management when exercising discretion in the use of proceeds from
offerings of securities;
●
sales of a
significant number of Common Shares in the public markets, or the
perception of such sales, could depress the market price of the
Common Shares;
●
potential dilution
with the issuance of additional Common Shares;
●
none of the
properties in which the Company has a material interest have
mineral reserves;
●
estimates of
mineral resources are based on interpretation and assumptions and
are inherently imprecise;
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the Company has not
received any material revenue or net profit to date;
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exploration,
development and production risks;
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no history of
profitable mineral production;
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actual capital
costs, operating costs, production and economic returns may differ
significantly from those the Company has anticipated;
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foreign operations
and political condition risks and uncertainties;
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legal and political
risk;
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amendments to local
laws;
●
the ability to
obtain, maintain or renew underlying licenses and
permits;
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title to mineral
properties;
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environmental
risks;
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competitive
conditions in the mineral exploration and mining
business;
●
availability of
adequate infrastructure;
●
the ability of the
Company to retain its key management and employees and the impact
of shortages of skilled personnel and contractors;
●
limits of insurance
coverage and uninsurable risk;
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reliance on third
party contractors;
●
the availability of
additional financing on reasonable terms or at all;
●
foreign exchange
risk;
●
impact of
anti-corruption legislation;
●
recent global
financial conditions;
●
changes to the
Company's dividend policy;
●
conflicts of
interest;
●
cyber security
risks;
●
litigation and
regulatory proceedings;
●
the obligations
which the Company must satisfy in order to maintain its interests
in its properties;
●
the influence of
third-party stakeholders;
●
the Company's
relationships with the communities in which it
operates;
●
human
error;
●
the speculative
nature of mineral exploration and development in general, including
the risk of diminishing quantities or grades of mineralization;
and
●
other risks and the
factors discussed under the heading "Risk Factors" in this Prospectus and in
analogous disclosure in the documents incorporated by reference
herein.
The
foregoing list is not exhaustive and additional factors may affect
any of the Company's forward looking statements. Although the
Company has attempted to identify important factors that could
cause actual performance, achievements, actions, events, results or
conditions to differ materially from those described in
forward-looking statements, there may be other factors that cause
performance, achievements, actions, events, results or conditions
to differ from those anticipated, estimated or
intended.
The
forward-looking statements contained herein are made as of the date
of this Prospectus 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 required by applicable law. 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 statements. Accordingly, readers should not
place undue reliance on forward-looking statements. All
forward-looking statements attributable to the Company are
expressly qualified by these cautionary statements.
NATIONAL INSTRUMENT 43-101
Unless
stated otherwise, information of a scientific or technical nature
regarding the Company's Pulacayo Paca silver-lead-zinc project in
Bolivia (the "Pulacayo
Project") is summarized, derived or extracted from the
technical report titled "Mineral
Resource Estimate Technical Report for the Pulacayo Project,
Potosí Department, Antonnio Quijarro Province,
Bolivia", prepared by Matthew Harrington, P. Geo, Michael
Cullen, P. Geo, and Osvaldo Arce, P. Geo, of Mercator Geological
Services Limited ("Mercator"), with an original report date
of October 23, 2020, an amended report date of November 12, 2020,
and an effective date of October 13, 2020 (the "Restated Pulacayo Technical
Report").
Each of
the authors of the Restated Pulacayo Technical Report (each of whom
is listed under the heading "Interests of Experts" in this
Prospectus) is a "qualified person" and "independent" for the
purposes of National Instrument 43-101 – Standards of Disclosure for Mineral
Projects ("NI
43-101"). The Restated Pulacayo Technical Report has been
filed with the Canadian securities regulatory authorities and is
available for review at www.sedar.com under the Company's profile.
For a complete description of assumptions, qualifications and
procedures associated with the information in the Restated Pulacayo
Technical Report, reference should be made to the full text of such
report.
The
Restated Pulacayo Technical Report includes inferred mineral
resources that are too speculative geologically to have economic
considerations applied to them that would enable them to be
categorized as mineral reserves. There is no certainty that the
Restated Pulacayo Technical Report results will be realized.
Mineral resources are not mineral reserves and do not have
demonstrated economic viability.
6
CAUTIONARY NOTE TO U.S. INVESTORS
CONCERNING RESOURCE ESTIMATES
The
terms "mineral resource", "measured mineral resource", "indicated
mineral resource" and "inferred mineral resource" are defined in
and required to be disclosed in accordance with NI 43-101 and the
Canadian Institute of Mining, Metallurgy and Petroleum (the
"CIM") - Definition
Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended; however, these terms are not defined terms
under the United States Securities and Exchange Commission (the
"SEC") Industry Guide 7
("SEC Industry Guide 7")
under the United States Securities
Exchange Act of 1934, as amended, and have historically not
been permitted to be used in reports and annual reports filed with
the SEC. Investors are cautioned not to assume that any part or all
of mineral deposits in these categories will ever be converted into
reserves. An inferred mineral resource has a lower level of
confidence than an indicated mineral resource and must not be
converted to a mineral reserve. The quantity and grade of reported
inferred resources in this estimation are uncertain in nature and
there has been insufficient exploration to define these inferred
resources as an indicated or measured mineral resource and it is
uncertain if further exploration will result in upgrading them to
an indicated or measured mineral resource category. Under Canadian
rules, estimates of inferred mineral resources may not form the
basis of feasibility or pre-feasibility studies, except in rare
cases.
Disclosure
of "contained ounces" in a resource is permitted disclosure under
Canadian regulations; however, under SEC Industry Guide 7 the SEC
historically only permitted issuers to report mineralization that
does not constitute reserves by SEC Industry Guide 7 standards as
in place tonnage and grade without reference to unit
measures.
The
term "mineralized material", although permissible under SEC
Industry Guide 7, does not indicate reserves by SEC Industry Guide
7 standards. The Company cannot be certain that any part of the
mineralized material will ever be confirmed or converted into SEC
Industry Guide 7 compliant reserves. Investors are cautioned not to
assume that all or any part of the mineralized material will ever
be confirmed or converted into reserves or that mineralized
material can be economically or legally extracted.
Accordingly,
information contained in this Prospectus, including in documents
incorporated by reference herein, may contain descriptions of the
Company's mineral deposits that may not be comparable to similar
information made public by U.S. companies pursuant to SEC Industry
Guide 7.
The SEC
has adopted amendments to its disclosure rules to modernize the
mineral property disclosure requirements for issuers whose
securities are registered with the SEC. These amendments became
effective February 25, 2019 (the "SEC Modernization Rules") and, following
a two-year transition period, the SEC Modernization Rules will
replace the historical property disclosure requirements for mining
registrants that are included in SEC Industry Guide 7. Following
the transition period, the Company may be subject to the SEC
Modernization Rules which differ from the requirements of NI 43-101
and the CIM. Under the SEC Modernization Rules, the definitions of
"Proven Mineral Reserves" and "Probable Mineral Reserves" have been
amended to be substantially similar to the corresponding CIM
Definition Standards and the SEC has added definitions to recognize
"Measured Mineral Resources", "Indicated Mineral Resources" and
"Inferred Mineral Resources" which are also substantially similar
to the corresponding CIM Definition Standards; however, there are
differences in the definitions under the SEC Modernization Rules
and the CIM Definition Standards and therefore once the Company
begins reporting under the SEC Modernization Rules there is no
assurance that the Company's Mineral Reserve and Mineral Resource
estimates will be the same as those reported under CIM Definition
Standards as contained in this Prospectus, including in documents
incorporated by reference herein.
CURRENCY AND EXCHANGE RATE
INFORMATION
Unless
otherwise indicated, all references to "$" or "dollars" in this
Prospectus refer to Canadian dollars. References to "US$" in this
Prospectus refer to United States dollars.
The
table below sets forth the following: (a) the rate of exchange for
the Canadian dollar, expressed in U.S. dollars, in effect at the
end of the periods indicated; (b) the average exchange rates for
the Canadian dollar, expressed in U.S. dollars, on the last day of
each month on which exchange rates are published during such
periods; and (c) the high and low exchange rates for the Canadian
dollar, expressed in U.S. dollars, during such periods, each based
on the rate of exchange as reported by the Bank of Canada for
conversion of Canadian dollars into U.S. dollars.
|
|
Year
Ended December 31,
|
Quarter Ended
September 30,
|
||
|
|
2019
|
2018
|
2020
|
2019
|
|
Rate at end of
period
|
$1.2988
|
$1.3642
|
$1.3339
|
$1.3243
|
|
Average rate of
period
|
$1.3269
|
$1.2957
|
$1.3321
|
$1.3243
|
|
High for
period
|
$1.3600
|
$1.3642
|
$1.3616
|
$1.3343
|
|
Low for
period
|
$1.2988
|
$1.2288
|
$1.3042
|
$1.3038
|
The
daily exchange rate on November 16, 2020, as reported by the Bank
of Canada for the conversion of U.S. dollars into Canadian dollars
was US$1.00 equals $1.3085 (the "Current Exchange Rate").
MARKETING MATERIALS
Any
"template version" of any "marketing materials" (as defined in
National Instrument 41-101 – General Prospectus Requirements) that
are utilized by the Underwriters in connection with the Offering
are not part of this Prospectus to the extent that the contents of
the template version of the marketing materials have been modified
or superseded by a statement contained in this Prospectus. Any
template version of any other marketing materials filed on SEDAR at
www.sedar.com after
the date of this Prospectus but before the termination of the
distribution under the Offering (including any amendments to, or an
amended version of, the marketing materials) is deemed to be
incorporated by reference in this Prospectus.
7
DOCUMENTS INCORPORATED BY
REFERENCE
Information has been incorporated by reference into this Prospectus
from documents filed with the securities commissions or similar
authorities in Canada. Copies of the documents incorporated
herein by reference may be obtained on request without charge from
Brigitte McArthur, Corporate Secretary of the Company at Suite
1610, 409 Granville Street, Vancouver, British Columbia, Canada V6C
1T2 (Telephone: (604) 569-3661) and are also available
electronically at www.sedar.com.
The
following documents of the Company filed with the securities
commissions or similar authorities in Canada are incorporated by
reference in this Prospectus:
1.
the Restated
Pulacayo Technical Report;
2.
the annual report
on Form 20-F, dated March 30, 2020, for the fiscal year ended December
31, 2019, excluding exhibits 1.1 and 4.1 through 4.7 (inclusive)
and excluding the articles of the Company incorporate by reference
in exhibit 2.1 of such report (subject to such exclusions, the
"Annual Report"), as
supplemented by the charter of the audit committee of the Company
attached as Appendix "A" to the Company's annual information form
dated March 29, 2018, for the financial year ended December 31,
2017 (the "2017 AIF") (for
greater clarity, only Appendix "A" to the 2017 AIF is incorporated
by reference in this Prospectus), except that the statement "lease
liability of $52,818" on page 45 of the Annual Report should be
removed from the "2018" subsection and added to the "2019"
subsection on the same page;
3.
the audited
consolidated annual financial statements of the Company (including
notes thereto), which comprise the consolidated statements of
financial position as at December 31, 2019, December 31, 2018 and
December 31, 2017 and the consolidated statements of operations and
comprehensive loss, changes in equity and cash flows for the years
ended December 31, 2019, December 31, 2018 and December 31, 2017,
and the auditor's report thereon dated March 30, 2020 (the
"Annual Financial
Statements");
4.
the management's
discussion and analysis for the fiscal year ended December 31,
2019;
5.
the unaudited
condensed interim consolidated financial statements of the Company,
which comprise the condensed interim consolidated statement of
financial position as at September 30, 2020 and the condensed
interim consolidated statements of operations and comprehensive
loss for the three and nine month periods ended September 30, 2020
and September 30, 2019 and the condensed interim consolidated
statements of changes in equity and cash flows for the nine months
ended September 30, 2020 and September 30, 2019;
6.
the management's
discussion and analysis for the three and nine months ended
September 30, 2020;
7.
the management
information circular of the Company dated January 31, 2020
regarding the special meeting of shareholders of the Company that
was held on March 16, 2020 (the "2020 SGM"), except that the reference to
794,000 stock options in footnote 5 on page 30 thereof should be a
reference to 1,275,000 stock options;
8.
the management
information circular of the Company dated May 25, 2020 regarding
the annual general and special meeting of shareholders of the
Company that was held on July 7, 2020 (the "2020 AGSM"); and
9.
the template
version of the marketing materials related to the Offering, which
were filed on October 20, 2020;
10.
the following
material change reports of the Company filed since December 31,
2019, the Company's most recently completed financial
year:
a.
dated January 8,
2020, announcing the 2020 SGM held on March 16, 2020 to approve the
name change of the Company from "Prophecy Development Corp." to
"Silver Elephant Mining Corp." and a consolidation of the Common
Shares;
b.
dated January 21,
2020, announcing first step-out diamond drilling results from the
Pulacayo Project;
c.
dated March 17,
2020, announcing shareholder approval of all resolutions presented
at the 2020 SGM;
d.
dated March 23,
2020, announcing the change of the Company's trading symbol on the
OTCQX to "SILEF";
e.
dated April 15,
2020, announcing the Company's non-brokered private placement (the
"2020 Unit Offering") of up
to 14,000,000 units of the Company at a price per unit of $0.13 for
total gross proceeds of up to $1,820,000, with each unit consisting
of one Common Share and one Common Share purchase warrant entitling
the holder thereof to acquire one additional Common Share for a
period of three years from the date of issuance at an exercise
price of $0.16;
f.
dated May 1, 2020,
announcing the closing of the first tranche of the Company's 2020
Unit Offering of 10,238,000 units for gross proceeds of
$1,330,940;
g.
dated May 20, 2020,
announcing the oversubscribed closing of the final tranche of the
Company's 2020 Unit Offering of 4,962,000 units for gross proceeds
of $645,060;
h.
dated July 7, 2020,
announcing shareholder approval of all resolutions presented at the
Company's 2020 AGSM;
i.
dated July 21,
2020, announcing the departure of the Company's interim chief
executive officer and chief operating officer;
j.
dated August 3,
2020, announcing the appointment of David Smith as a director of
the Company and the departure of Ronald Clayton as a director of
the Company;
k.
dated October 20,
2020, announcing an agreement with the Lead Underwriter in relation
to the Offering; and
l.
dated October 21,
2020, announcing an agreement with the Lead Underwriter in relation
to increasing the size of the Offering.
Any
document of the type referred to in Section 11.1 of Form 44-101F1
– Short Form
Prospectus (excluding confidential material change reports)
filed by the Company with a securities commission or similar
regulatory authority in Canada after the date of this Prospectus
and prior to the termination of the distribution shall be deemed to
be incorporated by reference in this Prospectus.
Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for the
purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference in this Prospectus
modifies or supersedes that statement. Any statement so modified or
superseded shall not constitute a part of this Prospectus except as
so modified or superseded. The modifying or superseding statement
need not state that it has modified or superseded a prior statement
or include any information set forth in the document that it
modifies or supersedes. The making of a modifying or superseding
statement shall not be deemed an admission for any purposes that
the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of
the circumstances in which it was made.
8
DESCRIPTION OF THE
BUSINESS
Silver
Elephant Mining Corp. is a mineral exploration and development
stage company. The Company's principal projects are the Pulacayo
Project located in Bolivia and the Gibellini vanadium project,
which is comprised of the Gibellini and Louie Hill vanadium
deposits and associated claims located in the State of Nevada, USA
(the "Gibellini
Project").
The
Pulacayo Project comprises seven mining areas covering an area of
approximately 3,560 hectares of contiguous areas centered on the
historical Pulacayo mine and town site. The Pulacayo Project is
located 18 km east of the town of Uyuni in the Department of
Potosí, in southwestern Bolivia. It is located 460 km
south-southeast of the national capital of La Paz and 150 km
southwest of the City of Potosí, which is the administrative
capital of the department. The Pulacayo Project is fully permitted
with secured social licenses for mining.
The
Pulacayo Project mining rights are recognized by two legally
independent contractual arrangements, one covering all, except
Apuradita (which is identified in Table 1.1 under the heading
"Pulacayo Project – Restated
Pulacayo Technical Report Summary – 1.2 Property
Description", below), from a mining production contract (the
"Pulacayo MPC") between the
Company and the Corporación Minera de Bolivia ("COMIBOL"), a Bolivian state mining
company, and the original holder of the rights, executed on October
3, 2019. The Pulacayo MPC grants the Company the 100% exclusive
right to develop and mine at the Pulacayo and Paca concessions for
up to 30 years against certain royalty payments. It is comparable
to a mining license in Canada or the United States. In connection
with Apuradita, its rights are covered by a second contractual
arrangement, with the Bolivian Jurisdictional Mining Authority,
acting for the State, which is in process of formalization, as a
mean of recognition of the acquired rights to what was originally
the mining concession. Until such time as the contract is
formalized, all mining rights, as recognized in the Bolivian Mining
Law 535, can be exercised by the holder of the
ex-concession.
The
Company also currently holds, through leasehold assignments, a 100%
interest in the claims comprising the Gibellini Project, which the
Company aims to make the first operating primary vanadium mine in
North America, as well as a 100% interest in the Titan
vanadium-titanium-iron property located in Ontario, Canada; a 100%
interest in the Ulaan Ovoo coal property located in Selenge
province, Mongolia; and a 100% interest in each of the Chandgana
Tal coal property and the Khavtgai Uul coal property located in
Khentii province, Mongolia. The Company also holds the land use
right and construction license for the Chandgana 600MW Coal-Fired
Mine Mouth Power Plant project located in Khenti province,
Mongolia.
Further
information regarding the business of the Company and its
operations and mineral properties can be found in the Annual Report
and the other documents incorporated by reference into this
Prospectus. See "Documents
Incorporated by Reference".
RECENT DEVELOPMENTS
Pulacayo Project
On
October 13, 2020, the Company announced the results of a new NI
43-101 compliant mineral resource estimate for the Pulacayo and
Paca deposits comprising the Pulacayo Project in Bolivia. On
November 17, 2020, the Company filed the Restated Pulacayo
Technical Report.
Private Placement Financing
On
April 15, 2020, the Company announced the 2020 Unit Offering
involving the issuance of up to 14,000,000 units ("2020 Units") at a price of $0.13 per
unit. Each 2020 Unit consists of one Common Share and one Common
Share purchase warrant (each a "2020 Unit Warrant"). Each 2020 Unit
Warrant entitles the holder to purchase one additional Common Share
at an exercise price of $0.16 per share, for a period of three
years from the date of issuance thereof.
On May
1, 2020, the Company announced the closing of the first tranche of
the 2020 Unit Offering of 10,238,000 units for gross proceeds of
$1,330,940.
On May
20, 2020, the Company announced the oversubscribed closing of the
final tranche of the 2020 Unit Offering of 4,962,000 units for
gross proceeds of $645,060.
Appointment of New Director and Chief Executive
Officer
On July
21, 2020, the Company announced the departure of its interim chief
executive officer and chief operating officer. The Company
subsequently appointed John Lee to act as chief executive
officer.
On
August 3, 2020, the Company announced the appointment of David
Smith as a director of the Company and the departure of Ronald
Clayton as a director of the Company.
9
PULACAYO PROJECT
On
November 17, 2020, the Company filed the Restated Pulacayo
Technical Report with the with Canadian securities regulatory
authorities. The Restated Pulacayo Technical Report is available
under the Company's profile on SEDAR at www.sedar.com, and is
incorporated by reference in this Prospectus.
Reproduced
below, under the heading "Restated
Pulacayo Technical Report Summary" is the summary that is
set out in the Restated Pulacayo Technical Report (the
"Restated Pulacayo Technical Report
Summary"). The Restated Pulacayo Technical Report Summary is
extracted from the Restated Pulacayo Technical Report, is subject
to those assumptions, qualifications and procedures described in
the Restated Pulacayo Technical Report, and is qualified in its
entirety by the full text of the Restated Pulacayo Technical
Report. Terms, including scientific and technical terms, that are
used but not defined in the Restated Pulacayo Technical Report
Summary are defined in the Restated Pulacayo Technical Report.
Reference should be made to the full text of the Restated Pulacayo
Technical Report.
Restated Pulacayo Technical
Report Summary
1.1
Introduction and Terms of Reference
This
report on mineral resource estimates for the Pulacayo and Paca
silver-zinc-lead deposits located in Bolivia was prepared by
Mercator Geological Services Limited ("Mercator") on behalf of Silver Elephant
Mining Corp. ("Silver
Elephant"). It documents new mineral resource estimates for
these two deposits that differ from the directly preceding
estimates by the inclusion of open pit optimization methods for
reporting of resources. The current mineral resource estimates and
this supporting technical report were prepared in accordance with
National Instrument 43-101 ("NI
43-101") and the Canadian Institute of Mining, Metallurgy
and Petroleum Standards for Mineral Resources and Reserves:
Definitions and Guidelines as amended in 2014 ("CIM Standards, 2014").
The
original version of this technical report with a report date of
October 23, 2020 was filed on SEDAR by Silver Elephant. The report
date has been amended to November 12, 2020 due to the authors'
subsequent revisions to a number of sections of the technical
report. There have not been any changes to the mineral resource
estimates, interpretation and conclusions or
recommendations.
1.2
Property Description
The
Pulacayo and Paca silver-zinc-lead deposits are located
approximately 18 km northeast of the city of Uyuni, in the
Department of Potosi in southwestern Bolivia and form part of
Silver Elephant's Pulacayo Project. The site is 460 km south
southeast of the national capital, La Paz, and 130 km southwest of
the city of Potosi. Silver Elephant acquired a 100% interest in the
Pulacayo Project in early 2015 through purchase of Apogee Minerals
Bolivia S.A. ("Apogee"), ASC
Holdings Limited and ASC Bolivia LDC ("ASC"). These firms were wholly-owned
subsidiaries of the previous owner, Apogee Silver Ltd., a publicly
listed mineral exploration firm with corporate offices located in
Toronto, Ontario, Canada.
The
current holdings that comprise the Pulacayo Project cover 3560 ha
of surface area and are listed below in Table 1.1. Silver Elephant
has advised that all mineral titles and associated agreement and
permits were in good standing at the effective date of this
technical report.
Table 1.1: Silver Elephant's Pulacayo Project Exploration Holdings
at Report Effective Date.
|
*STA
|
Titleholder
|
Size (ha)
|
Patentes Payment
|
Registration Number
|
Location
|
|
Pulacayo
|
COMIBOL
|
1031
|
Payment is not required*
|
512-01015
|
Pulacayo
|
|
Porvenir
|
COMIBOL
|
1199
|
Payment is not required*
|
512-01165
|
Pulacayo
|
|
Huanchaca
|
COMIBOL
|
470
|
Payment is not required*
|
512-03903
|
Pulacayo
|
|
Galería General
|
COMIBOL
|
76
|
Payment is not required*
|
512-01160
|
Pulacayo
|
|
Subtotal
|
|
2776
|
|
|
|
|
Temeridad
|
COMIBOL
|
10
|
Payment is not required*
|
512-00992
|
Paca
|
|
Real del Monte
|
COMIBOL
|
24
|
Payment is not required*
|
512-00994
|
Paca
|
|
Apuradita
|
ASC Bolivia LDC
|
750
|
2017
|
512-03652
|
Paca
|
|
Subtotal
|
|
784
|
|
|
|
|
Grand Total
|
|
3560
|
|
|
|
*
Special Transitory Authorization
– formerly mining concession
10
1.3
Geological Setting
1.3.1
Geology
The
Pulacayo Project that includes both the Pulacayo and Paca deposits
is located on the western flank of a regional anticline that
affects sedimentary and igneous rocks of Silurian, Tertiary and
Quaternary ages on the western side of the Cordillera Oriental,
near the Cordillera-Altiplano boundary. The Uyuni-Khenayani Fault
is a reverse fault that crosses the project area and is believed to
have controlled localization of volcanic center complexes at Cuzco,
Cosuño, Pulacayo and San Cristóbal and related
mineralized areas at Pulacayo, Cosuño, El Asiento,
Carguaycollu and San Cristóbal. This fault brings Tertiary
sediments in contact with Paleozoic formations at surface and is
located about 4 km west of Pulacayo. The Pulacayo Project
mineralized zones at Pulacayo, Pacamayo and Paca all occur on the
west flank of a north-south striking anticline and local
topographic highs define Lower Miocene dacitic-andesitic domes and
stocks associated with caldera resurgence that intrude the folded
section. A younger Miocene-Pliocene phase of volcanism is also
superimposed on the anticlinal trend and is marked by pyroclastic
deposits and flows of andesitic and rhyolitic composition.
Ignimbrites associated with the Cosuño Caldera are the
youngest volcanic deposits in the area. A dacitic to andesitic dome
complex at the Pulacayo property intruded the folded sedimentary
section and forms the main topographic highs that occur on the
property.
1.3.2
Mineralization
Mineralization
comprising the current Pulacayo deposit mineral resource estimate
is defined by the extent of modern-era diamond core drilling along
the Tajo Vein System ("TVS")
in the vicinity of historic underground workings. The workings
extend over a strike length of approximately 2.7 km and to a
vertical depth from surface of about 1 km. Modern drilling coverage
is present for approximately 1.5 km of the known deposit strike
length and extends to a vertical depth of approximately 550 m below
surface.
The
extent of mineralization comprising the current Paca deposit
mineral resource estimate is defined by the extent of modern era
diamond core drilling along a strike length of approximately 750 m
and north-south extent of approximately 700 m. Limited underground
exploratory workings accessible from the Esmeralda adit are present
along approximately 100 m of the deposit's strike length in its
central area.
Mineralization
of economic interest at the Pulacayo deposit occurs within the
Tertiary age Pulacayo volcanic dome complex that consists of older
sedimentary rocks of the Silurian Quenhua Formation plus intruding
andesitic volcanic rocks of the Rotchild and Megacristal units.
Mineralization hosted by volcanic rocks can occur over tens of
metres in thickness and typically consists of discrete veins plus
stockworks of narrow veins and veinlets that occur within argillic
alteration host rock envelopes. At deeper levels, high grade veins
that are typically less than a few metres in width are hosted by
sedimentary lithologies. Veins are commonly banded in texture and
can contain semi-massive to massive sulphides. Primary minerals of
economic importance at Pulacayo are tetrahedrite, galena and
sphalerite, with additional silver sulfosalts and native silver
also contributing to deposit silver grades. Mineralization is
controlled by an east-west oriented normal fault system that links
two northeast trending, steeply dipping, regional strike slip
faults.
Mineralization
of economic interest at the Paca deposit occurs in association with
the same Tertiary age volcanic dome complex that produced the
Pulacayo deposit and takes the form of thin veinlets, fracture
fillings and disseminations hosted by altered volcaniclastic
sedimentary lithologies and altered intermediate to felsic igneous
lithologies. These occur in direct association with mineralized
igneous or hydrothermal breccia zones. The intensity of argillic
alteration is greatest in areas of highest concentrations of
metallic mineral phases such as sphalerite, galena, argentite and
tetrahedrite. Stratabound disseminated mineralization and breccia
hosted mineralization predominate within the deposit, but discrete
mineralized veins are also present locally. The deposit occurs at
the contact between an andesitic intrusive complex and
volcaniclastic sedimentary host lithologies. Bedded and
cross-cutting breccia deposits that are important hosts to
higher-grade mineralization commonly show close spatial association
with the contact zone of the andesitic intrusion.
1.4
Deposit Type
The
Pulacayo and Paca deposits are interpreted to be low to
transitional sulphidation epithermal deposits that contain both
precious and base metal mineralization.
1.5
History
The
Pulacayo area has a very long history of exploration and mining,
with this dominated by the Pulacayo deposit itself, where most work
has been concentrated on mineralized systems that comprise the TVS
and related systems. In contrast, the history of Paca deposit
exploration forms a relatively small part of the long-term
exploration and mining history of the area. Exploration and related
studies carried out since 2001 by Apogee and related firms form the
bulk of modern era work completed in the Pulacayo Project area and
include over 91,900 m of core drilling, completion of a feasibility
study in 2012 and several mineral resource estimates prepared in
accordance with NI 43-101.
11
Mining
of silver deposits at the Pulacayo Project area began in the
Spanish Colonial Period (c.1545) but early production details do
not exist. The first work formally recorded on the property was
carried out in 1833 when Mariano Ramírez rediscovered the
Pulacayo deposit. In 1857 Aniceto Arce founded the Huanchaca Mining
Company of Bolivia and subsequently pursued development and
production at Pulacayo. Revenue from the mine funded the first
railway line in Bolivia, which in 1888 connected Pulacayo to the
port of Antofagasta, Chile. In 1891, reported annual silver
production reached 5.7 million ounces and mining operations at
Pulacayo at that time were the second largest in Bolivia. Pulacayo
production was predominantly from the Veta Tajo (Tajo Vein System)
which had been defined along a strike length of 2.5 km and to a
depth of more than 1000 m. In 1923, mining operation ceased due to
flooding of the main working levels.
In
1927, Mauricio Hochschild bought the property and re-started mine
development. The Veta Cuatro vein was the focus of this work and
was intersected at a mine elevation of approximately -266 m. It was
proven to continue down-dip to the -776 m elevation where it showed
a strike length of 750 m. Several short adits were also established
during the Hochschild period at Paca to test a mineralized volcanic
conglomeratic unit that outcrops in the deposit area. Work by
Hochschild in the district continued until 1952 when the Bolivian
government nationalized the mines and administration of the
Pulacayo deposit and management was assumed by the state mining
enterprise ("COMIBOL").
Operations continued under COMIBOL until closure in 1959 due to
exhaustion of reserves and rising costs. The total production from
the Pulacayo mine is estimated by the National Geological and
Mineral Service of Bolivia ("SERGEOTECMIN") to be 678 million ounces
of silver, 200,000 tons of zinc and 200,000 tons of lead
(SERGEOTECMIN Bulletin No. 30, 2002, after Mignon
1989).
In
1956, COMIBOL established the Esmeralda adit that was driven south
into the Paca deposit to assess breccia hosted high grade
mineralization localized along the andesite-host sequence contact.
A total of approximately 250 m of drifting and cross cutting was
carried out within the main mineralized zone, distributed between
the main adit level and short sub-levels above and below the main
level. Workings were established for exploration purposes only and
commercial production was not undertaken by COMIBOL.
In
1962, the Cooperativa Minera Pulacayo (the "Cooperative") was founded and this local group
leased access to the Pulacayo mine from COMIBOL. The Cooperative
has carried out small scale mining in the district since that time
and continues to do so at present. Efforts are directed toward
exploitation of narrow, very high-grade silver mineralization in
upper levels of the old mining workings, typically above the San
Leon tunnel level.
Modern
exploration of the Pulacayo and Paca areas began to a limited
degree in the 1980's when various mining and exploration companies
targeted epithermal silver and gold mineralization within the
volcanic-intrusive system present in the area. In 2001, ASC
initiated an exploration program in the district, signed agreements
with the Cooperative and COMIBOL and completed programs of regional
and detailed geological mapping, topographic surveying and sampling
of historical workings. In part, these work programs included the
Paca deposit, where 3,130 m of core drilling and 896 m of reverse
circulation (RC) drilling were completed and a mineral resource
estimate was prepared. ASC also completed core drilling campaigns
at Pulacayo.
In 2005
Apogee signed a joint venture agreement with ASC and subsequently
commenced exploration in the region in early 2006. Extensive
exploration, economic evaluation, metallurgical studies, mine and
mill permitting environmental studies and underground test mining
programs were subsequently carried out by Apogee between 2006 and
2015 when the Pulcayo Project was purchased by Silver
Elephant’s precursor, Prophecy Development Corp. (Prophecy).
Work was carried out on both the Pulacayo and Paca deposits during
this period, with emphasis placed on Pulacayo. Combined results of
the ASC and Apogee diamond drilling programs carried out between
2002 and 2012 contributed to the several mineral resource estimates
prepared in accordance with NI 43-101 and the CIM Standards in
place at the time, and also supported a 2013 Feasibility Study
focused on underground mining. All
of the noted mineral resource estimates are now historical in
nature and should not be relied upon, a Qualified Person within the meaning of NI
43-101 has not carried out sufficient work to make any of them
current and Silver Elephant is not considering any of these to be
current. Since 2001, ASC and Apogee completed 88,596 m
of drilling from surface and underground on the Pulacayo Project,
with Apogee programs accounting for 79,129 m of this
total.
1.6
Exploration
Silver
Elephant has completed various geological mapping and surface
sampling programs over several areas of mineralization on the
Pulacayo Project during the 2015 through 2017 period. Recent
exploration activities completed by Silver Elephant include a
geological mapping and chip sample program completed in February
2020 for the Paca area and a San Leon Tunnel geological mapping and
chip sample program completed in February-March of 2020. The
company also carried out a 3,277.4 m core drilling program in late
2019 and early 2020.
12
1.7
Drilling
Silver
Elephant initiated a 7 hole surface diamond drill program at the
Paca deposit in September of 2019 and completed the program in
October of 2019. Seven holes were completed for a total of 860 m.
Silver Elephant also initiated surface drilling at the Pulacayo
deposit in December of 2019 and concluded in February of 2020. A
total of 3,277.4 meters of drilling was completed in 18 drillholes.
Results of the 2019-2020 were included in the current mineral
resource estimation program and contribute to 91,873 m of drilling
combined for both deposits, the balance of which was completed by
ASC and Apogee during the 2002 to 2012 period.
1.8
Sample Preparation, Analysis and Security
Mercator
is of the opinion that ASC, Apogee, and Silver Elephant sample
preparation, analysis and security methodologies for their
respective Pulacayo and Paca deposit drilling programs were
sufficient for a project of this size and that suitable documented
precautions were taken by both Apogee and Silver Elephant to
identify irregularities in sample analytical results. Comparable
verification for the Pulacayo and Paca ASC program was not
available to Mercator but no indications of problematic data were
detected during mineral resource estimation work carried out by
Mercator. Industry standard QA/QC procedures have been implemented
for Apogee and Silver Elephant drilling programs.
1.9
Data Verification
Mercator
staff have visited the Pulacayo Project site on three occasions to
support preparation of previous mineral resource estimates and
author Arce visited the site in September of 2020 in support of the
current mineral resource estimates and associated technical
reporting. Results of data verification activities carried out by
Mercator and the site visits show that Pulacayo Project datasets
are of industry standard quality and suitable to support mineral
resource estimation programs.
1.10
Mineral Processing and Metallurgical Testing
No new
mineral processing or metallurgical testing programs have been
completed for the Pulacayo or Paca deposits by Silver Elephant
since acquisition of the Pulacayo Project in January of 2015.
Several programs were carried out by Apogee with respect to the
Pulacayo deposit during the 2003 through 2013 period and one
program was carried out in 2002 with respect to the Paca deposit by
ASC.
1.11
Mineral Resource Estimates
This
report documents new mineral resource estimates for the Pulacayo
and Paca deposits that differ from the directly preceding estimates
by their inclusion of open pit optimization methods for reporting
of mineral resources. The current mineral resource estimates and
this supporting technical report were prepared in accordance with
NI 43-101 and the CIM Standards, 2014.
Geovia
Surpac ® Version 2020 was used to create the Pulacayo Project
block models, associated geological and grade solids, and to
interpolate silver-zinc-lead grade. The current mineral resource
estimate is based on combined results of 92,900 m of drilling,
44,469 core or chip analytical results, 355 trench samples, and 71
underground chip or channel samples for the two deposits. Geovia
Whittle pit optimization software and the PseudoFlow algorithm were
applied for pit shell optimization purposes.
A
tabulation of the mineral resources for the Pulacayo Project is
presented in Table 1.2. Pit Constrained mineral resources were
defined for each deposit within optimized pit shells. Sulphide zone
pit optimization parameters include mining at US$2.00 per tonne,
combined processing and G&A at US$12.50 per tonne processed,
and haulage at US$0.50 per tonne processed for Pulacayo and US$2.00
per tonne for Paca. Oxide zone pit optimization parameters include
mining at US$2.00 per tonne, combined processing and G&A at
US$23.50 per tonne processed, and haulage at US$0.50 per tonne
processed for Pulacayo and US$2.00 per tonne for Paca. Metal prices
of US$17/oz Ag, US$0.95/lb Pb, and US$1.16/lb Zn were used and
metal recoveries of 89.2% Ag, 91.9% Pb, and 82.9% Zn were used for
sulphide zone mineral resources and 80% Ag for oxide zone mineral
resources.
Pit
Constrained sulphide mineral resources are reported at a cut-off
value of 30 g/t silver equivalent (Ag Eq.) within optimized pit
shells and Pit Constrained oxide mineral resources are reported at
a cut-off value of 50 g/t Ag within optimized pits shells. Cut-off
grades reflect total operating costs and are considered to reflect
reasonable prospects for eventual economic extraction using
conventional open pit mining methods. Out of Pit mineral resources
are reported external to the optimized pit shells and are reported
at a cut-off grade of 100 g/t Ag Eg.. They are considered to have
reasonable prospects for eventual economic extraction using
conventional underground mining methods such as long hole stoping
based on a mining cost of US$35 per tonne and processing and
G&A cost of $20.00 per tonne processed.
13
Table 1.2: Pulacayo Project
Mineral Resource Estimate – Effective Date: October 13,
2020*
|
Pit Constrained Mineral Resources
|
||||||||
|
Deposit(s)
|
Cut -off
|
Zone
|
Category
|
Rounded Tonnes
|
Ag g/t
|
Pb %
|
Zn %
|
Ag Eq. g/t
|
|
Pulacayo
|
50 Ag
g/t
|
Oxide
|
Indicated
|
1,090,000
|
125
|
|
|
|
|
Inferred
|
25,000
|
60
|
|
|
|
|||
|
30 Ag
Eq. g/t
|
Sulfide
|
Indicated
|
24,600,000
|
76
|
0.70
|
1.63
|
156
|
|
|
Inferred
|
745,000
|
82
|
0.61
|
1.79
|
164
|
|||
|
Paca
|
50 Ag
g/t
|
Oxide
|
Indicated
|
1,095,000
|
185
|
|
|
|
|
Inferred
|
345,000
|
131
|
|
|
|
|||
|
30 Ag
Eq. g/t
|
Sulfide
|
Indicated
|
20,595,000
|
46
|
0.67
|
1.07
|
106
|
|
|
Inferred
|
3,050,000
|
46
|
0.65
|
0.76
|
94
|
|||
|
Out of Pit Mineral Resources
|
||||||||
|
Pulacayo
|
100 Ag
Eq. g/t
|
Sulfide
|
Indicated
|
660,000
|
268
|
0.44
|
1.35
|
307
|
|
Inferred
|
900,000
|
179
|
0.42
|
2.14
|
257
|
|||
|
Combined Pit Constrained and Out of Pit Mineral
Resources**
|
||||||||
|
Pulacayo and Paca
|
50 Ag
g/t
|
Oxide
|
Indicated
|
2,185,000
|
155
|
|
|
|
|
Inferred
|
370,000
|
126
|
|
|
|
|||
|
30/100
Ag Eq. g/t
|
Sulfide
|
Indicated
|
45,855,000
|
65
|
0.69
|
1.37
|
136
|
|
|
Inferred
|
4,695,000
|
77
|
0.60
|
1.19
|
136
|
|||
* See
detailed notes on mineral resources in Sections 14.2.12 and
14.3.12
**
"Combined Pit Constrained and Out of Pit Mineral Resources" for the
Pulacayo Project is the tonnage-weighted average summation of the
Pulacayo deposit Pit Constrained and Out of Pit mineral resources
and the Paca deposit Pit Constrained mineral resource.
1.12
Interpretations and Conclusions
Based
on results of the current mineral resource estimation program
documented in this report, Mercator has concluded that detailed
economic assessment studies are warranted to assess the economic
viability of a combined open pit mining scenario for the Pulacayo
and Paca deposits with the possibility of related underground
mining opportunities. Good potential exists for mineral resource
extensions at both the Pulacayo and Paca deposits and new prospect
evaluations are also warranted within the exploration holding. The
current mineral resource estimate represents a 226% increase in
total sulphide contained silver equivalent from the previous
mineral resource estimate reported by Cullen and Webster (2017) and
includes definition of new oxide mineral resources. This
substantial increase in total contained metal reflects the
transition from a low tonnage high grade assessment approach or
concept used in 2017 to the low grade open pit mining concept of
the current mineral resource estimate. The current mineral resource
estimate supersedes all previous mineral resource estimates
completed on the Pulacayo and Paca deposits.
1.13
Recommendations
Mercator
is of the opinion that further technical and financial assessment
of the large open pit development scenario for the Pulacayo Project
is warranted and that both mineral resource extension and new
mineral resource definition opportunities exist on the property and
warrant future exploration. Recommendations arising from the
current mineral resource estimation program and associated project
review include, in part, recommendations provided in the 2017
technical report and are as follows:
1.
Open pit planning,
geological and engineering studies of sufficient detail to support
a Preliminary Economic Assessment ("PEA") of future development
possibilities for the Pulacayo and Paca deposits should be carried
out.
2.
The Paca deposit
currently lacks up to date, comprehensive metal recovery
information and completion of definitive metallurgical studies for
the deposit are recommended for the next phase of project
assessment. Additional metallurgical studies focused on low grade
oxide and sulphide mineralization should be completed for the
Pulacayo deposit. Results of such studies would provide necessary
inputs for future definition of mineral reserves.
14
3.
Historical mine
workings are present to a substantial depth below the base of the
current detailed digital workings model for the Pulacayo deposit
prepared by Mercator. These additional workings are defined in hard
copy historical mine records and should be digitally compiled and
merged with the current digital workings model to support future
work on the deposit. Historic assay results for underground
sampling of mine workings have also not been digitized to date and
it is recommended that this be carried, beginning within current
mineral resource areas and progressing systematically through
deeper mine levels. Continued evaluation and validation of the
current workings model is also warranted.
4.
The Pulacayo
deposit remains open along strike to both east and west and also
down dip. Further core drilling to define resource extensions is
warranted and should be focused on extensions of both low and high
grade metal trends that are defined by the current block model.
Target opportunities within approximately 200 vertical m of surface
should have highest priority. A core drilling allocation of 5000 m
is recommended.
5.
Additional drilling
is recommended to upgrade mineral resource categorization and
better define metal grade trends within the Paca deposit. It is
recommended that infill drilling of the currently defined deposit
be carried out at 50 m spaced sections along the length of the
deposit. This program should include initial testing of potential
deposit extension areas both down dip and along strike to both east
and west. A core drilling allocation of 5000 m is
recommended.
6.
Initial drilling
assessments of the main tailings/waste rock deposits sampled by
Silver Elephant in 2014 and 2015 should be completed to support
future definition of mineral resources in accordance with NI 43-101
and the CIM Standards, 2014. A study to determine the most
effective method of drilling to apply in such an assessment is
recommended.
7.
A new mineral
resource estimate for the Pulacayo Project should be prepared in
accordance NI 43-101 and the CIM Standards (2014) after completion
of deposit extension and infill drilling programs noted in
Recommendations 4 and 5 above.
8.
If warranted, based
on results of Recommendation 6 above, drilling definition of
mineral resources in the waste rock and tailings areas should be
carried out.
9.
A PEA for the
Pulacayo Project, based upon a new mineral resource estimate as
described in Recommendation 7 above, is recommended. Results should
provide guidance regarding subsequent initiation of Pre-Feasibility
or Feasibility level studies required to define mineral reserves in
accordance with NI 43-101 and the CIM Standards
(2014).
10.
Programs of
community contact and involvement plus baseline environmental work
to support potential future development of the Pulacayo Project
should be continued throughout the project progression and on a
timely basis.
A two
phase program of recommended future work with an estimated budget
of US$ 3.61 million is proposed to support further evaluation of
the deposits comprising the Pulacayo Project. Estimated
expenditures are ordered within a two phase framework, with
Recommendations 1 through 7 assigned to Phase 1 and Recommendations
8 through 10 assigned to Phase 2. Commitment to Phase 2 would
require satisfactory results being returned from Phase I, and
estimated budget details are presented below in section
1.14.
1.14
Proposed Budget for Pulacayo Project
The US$
3.61 million estimated budget presented in Table 1.3 below is
proposed to support the recommendations presented above. Two phases
of work are proposed, with re-evaluation and possible revision of
Phase 2 initiatives to be carried out after completion of Phase
1.
15
Table 1.3: Proposed Pulacayo Project Budget – Phases 1 and
2
|
Program Phase
|
Program Component
|
Estimated Cost (US$)
|
|
1
|
Open pit planning, geological and geotechnical engineering
studies
|
200,000
|
|
1
|
Metallurgical studies
|
200,000
|
|
1
|
Expansion of digital mine model and addition of historic assay
data
|
50,000
|
|
1
|
Resource extension, infill and exploratory surface and underground
diamond drilling programs analyses, support and reporting –
10,000 m
|
1,800,000
|
|
1
|
Waste rock study
|
75,000
|
|
1
|
Continuation of community relations, support and environmental
monitoring programs
|
75,000
|
|
1
|
Completion of an updated Pulacayo deposit NI 43-101 mineral
resource estimate and technical report after completion of
drilling
|
75,000
|
|
|
Subtotal Phase 1
|
2,475,000
|
|
2
|
Drilling assessment of tailings/waste rock areas and, if results
warrant, completion of a NI 43-101 mineral resource estimate and
technical report for tailings/waste rock deposits (2000 m of
shallow drilling plus analyses and support)
|
435,000
|
|
2
|
Completion of a PEA that includes all Pulacayo and Paca deposit
mineral resources based on the updated mineral resource estimate
noted in Phase 1 above and the Phase 2 Waste Rock mineral resource
estimate, if applicable, to determine future Pre-feasibility or
Feasibility study requirements
|
250,000
|
|
2
|
Continuation of community relations, support and environmental
monitoring programs
|
150,000
|
|
|
Subtotal Phase II
|
835,000
|
|
|
Total Phase I and II
|
3,310,000
|
|
|
Contingency
|
300,000
|
|
|
Grand Total
|
3,610,000
|
Additional Information Regarding the Company's Operations in
Bolivia, an Emerging Market
The
Pulacayo Project is located in Bolivia, an emerging market, and the
Company's interest in the Pulacayo Project is held indirectly
through a Bolivian subsidiary of the Company. Operating in an
emerging market exposes the Company to risks and uncertainties that
do not exist, or are significantly less likely to occur, in
jurisdictions such as the United States or Canada. In order to
manage and mitigate these risks, the Company has designed a system
of corporate governance for itself and its subsidiaries that
include internal controls over financial reporting and disclosure
controls. These systems are coordinated by the Company's senior
management and overseen in order to monitor the Company's operating
subsidiaries. See "Risk
Factors".
Members
of the Company's management team have experience running business
operations in emerging markets, including Bolivia. The Company's VP
South American Operations is fluently bilingual in Spanish and
English and spends approximately 70% of his time in Bolivia. The
Company's Bolivian Country Manager is Bolivian and also fluently
bilingual in Spanish and English, and lives in La Paz, Bolivia
where the Company's Bolivian headquarters are located. The
Company's Chief Geologist is Bolivian, speaks Spanish, English and
Portuguese, lives in Santa Cruz, Bolivia and spends 90% of his time
working on the Company's projects in the field, and 100% of his
time in-country. In addition, one of the Company's director's
speaks conversational Spanish.
The
Company's board of directors, through its corporate governance
practices, regularly receives management and technical updates,
risk assessments and progress reports in connection with the
Company's operations in Bolivia. Through these updates, assessments
and reports, the Company's board of directors gains familiarity
with the operations, laws and risks associated with operations in
Bolivia.
The
Company maintains open communication with its operations in Bolivia
through management team members who are fluent in Spanish and are
fluent or proficient in English, removing language barriers between
management and the Company's board of directors. The primary
language used in board of directors meetings is English and
material documents relating to the Company's operations that are
provided to the Company's board of directors are in English.
Material documents relating to the Company's material operations in
Bolivia are either in English or, where in Spanish, are translated
into or summarized in English.
The
Company operates with the legal framework of Bolivian law as guided
by our Country Manager. The Company has established amicable
relationships with COMIBOL. The Company has also entered into
agreements with the local community at Pulacayo to help create
employment and foster goodwill locally. The Company has negotiated
the acquisition of two additional projects from private interests,
being the El Triunfo project and the Sunawayo project. Prior to the
current COVID-19 global pandemic, the Company's Executive Chairman
spend 80% of his time in Bolivia overseeing the business of the
Company, while the VP Exploration spent 50% of his time in Bolivia
overseeing the field operations onsite.
16
The
Company reviews its subsidiaries' financial reporting as part of
preparing its consolidated financial reporting. The Company's
independent auditors review the results of the audit of the
subsidiaries' financial statements as part of the audit of the
Company's consolidated financial statements and the results are
reported to the Company's audit committee.
The
Company's board of directors is responsible for the overall
stewardship of the Company and, as such, supervises the management
of the business and affairs of the Company. More specifically, the
Company's board of directors is responsible for reviewing the
strategic business plans and corporate objectives, and approving
acquisitions, dispositions, investments, capital expenditures and
other transactions and matters that are material to the Company,
including those of its subsidiaries.
The
Company prepares its consolidated financial statements, on a
quarterly and annual basis, using International Financial Reporting
Standards. The Company implements internal controls over the
preparation of its financial statements and other financial
disclosures (including its management's discussion and analysis) to
provide reasonable assurance that its financial reporting is
reliable, that the quarterly and annual financial statements are
being prepared in accordance with International Financial Reporting
Standards and that other financial disclosures (including its
management's discussion and analysis) are being prepared in
accordance with relevant securities legislation. These systems of
internal control over financial reporting and disclosure controls
and procedures are designed to ensure that, among other things, the
Company has access to material information about its
subsidiaries.
Differences
in banking systems and controls between Canada and Bolivia are
addressed by having controls over cash kept in the jurisdiction,
especially with respect to access to cash, cash disbursements,
appropriate authorization levels, performing and reviewing bank
reconciliations on at least a monthly basis and the segregation of
duties. In executing certain normal course monetary transactions,
funds are transferred between the Company and its subsidiaries by
way of wire transfer. These transactions would typically include
the payment of applicable fees for services; reimbursement of costs
incurred by the Company on behalf of the subsidiaries; advances in
the form of intercompany loans or equity contributions to
subsidiaries; repayment of interest and/or principal on
intercompany loans; and the return of capital or payment of
dividends from subsidiaries. Capital structure and funding
arrangements are established between the Company and the
subsidiaries, and intercompany loan agreements are established with
defined. terms and conditions. Where regulatory conditions exist in
the form of exchange controls, all necessary approvals are obtained
in advance of the proposed transactions.
Differences
in cultures and practices between Canada and Bolivia are addressed
by employing competent staff in Canada and Bolivia who are familiar
with the local laws, business culture and standard practices, have
local language proficiency, are experienced in working in that
jurisdiction and in dealing with the relevant government
authorities, and have experience and knowledge of the local banking
systems and treasury requirements.
USE OF PROCEEDS
The
estimated net proceeds to the Company from the Offering, after
deducting the Underwriters' Commission and the expenses of the
Offering (estimated to be $300,000), will be $7,220,000, assuming
no exercise of the Over-Allotment Option. If the Over-Allotment
Option is exercised in full, the estimated net proceeds received by
the Company from the Offering, after deducting the Underwriters'
Commission and the expenses of the Offering, will be
$8,348,000.
The
Company currently intends to use the net proceeds of the Offering,
assuming no exercise of the Over-Allotment Option, as set out in
the table below.
|
Activity or Nature of Expenditure
|
|
Approximate Use of Net Proceeds
|
|
Exploration
– Phase 1 of Pulacayo Project recommendations from the
Restated Pulacayo Technical Report(1)
|
|
$3.24
million(2)
|
|
Exploration
– El Triunfo project, Bolivia(3)
|
|
$0.98
million(4)
|
|
Exploration
– Sunawayo project, Bolivia(3)
|
|
$1.70
million(5)
|
|
Working
capital and general corporate purposes
|
|
$1.30
million
|
|
Total
|
|
$7.22
million
|
Notes:
(1)
The budget for
Phase 1 of the recommended exploration of the Pulacayo Project, as
set out in the Restated Pulacayo Technical Report, is reproduced
above under the heading "Pulacayo
Project - Restated Pulacayo Technical Report Summary - 1.14
Proposed Budget for Pulacayo Project ".
(2)
The budget for
Phase 1 of the recommended exploration of the Pulacayo Project, is
US$2,475,000 ($3,238,538, based on the Current Exchange
Rate).
(3)
Exploration for the
El Triunfo and Sunawayo projects includes geological mapping,
geophysical surveys and anticipated drilling programs from the
results of this work. For each project, drilling accounts for
approximately 60% of the amount of the proceeds allocated to the
project.
(4)
The proposed budget
for exploration on the El Triunfo project is US$750,000 ($981,375,
based on the Current Exchange Rate).
(5)
The proposed budget
for exploration on the Sunawayo project is US$1,300,000
($1,701,050, based on the Current Exchange Rate).
17
The
Company intends to spend the available funds as set forth above
based on annual budgets approved by the Company's board of
directors, consistent with established internal control guidelines,
and programs recommended in the Restated Pulacayo Technical Report.
However, there may be circumstances where, for sound business
reasons, a reallocation of the net proceeds may be necessary.
Potential investors are cautioned that, notwithstanding the
Company's current intentions regarding the use of the net proceeds
of the Offering, there may be circumstances where a reallocation of
the net proceeds may be advisable for reasons that management
believes, in its discretion, are in the Company's best interests.
In response to the COVID-19 pandemic, exploration in Bolivia may be
impacted by government restrictions on the Company's operations.
Potential stoppages on exploration activities could result in
additional costs, project delays, cost overruns, and operational
restart costs. The total amount of funds that the Company needs to
carry out its proposed operations may increase from these and other
consequences of the COVID-19 pandemic. The actual amount that the
Company spends in connection with each of the intended uses of
proceeds may vary significantly from the amounts specified above
and will depend on a number of factors, including those referred to
under "Risk
Factors".
The
Company generates no operating revenue from the exploration
activities on its property interests and has negative cash flow
from operating activities. The Company anticipates that it will
continue to have negative cash flow until such time as commercial
production is achieved at a particular project. To the extent that
the Company has negative operating cash flows in future periods in
excess of amounts disclosed above in the Use of Proceeds table, it
may need to deploy a portion of its existing working capital to
fund such negative cash flow. See "Risk Factors".
Danniel
Oosterman, P. Geo, is
the qualified person, within the meaning of NI 43-101, who has
reviewed and confirmed the above-noted use of net proceeds
allocations as reasonable.
Business Objectives and Milestones
Using
the net proceeds from the Offering, the Company intends to continue
exploring the Pulacayo Project in Bolivia, and to explore the El
Triunfo project and the Sunawayo project, both located in
Bolivia.
In the
next 18 months, the Company intends to identify exploration targets
at the Pulacayo Project and the El Triunfo and Sunawayo projects,
and to test those targets that meet the criteria for drilling with
an aim to make new discoveries. At the Pulacayo Project, the
Company anticipates six to eight months to achieve this goal; at
the El Triunfo project, the Company anticipates eight to nine
months to achieve this goal; and at the Sunawayo project, the
Company anticipates three to four months to achieve this goal. In
addition to the Company's exploration efforts, the Company has
submitted an application for the exploration and development rights
to the Malku Khota property which is contiguous to the Sunawayo
project and shares the same geological formations. This application
process is anticipated to last six to twelve months.
While a
portion of the funds required to meet the Company's objectives may
be funded from existing working capital of the Company, additional
sources of funds will be needed to fully fund such projects,
including to fund the acquisition by the Company of the El Triunfo
project, at a cost of US$1 million, and the Sunawayo project, at a
cost of US$6.5 million, in the event the Company's planned
exploration of these projects yields positive results. If
additional funds are raised by offering equity securities, existing
shareholders could suffer significant dilution. The Company will
continue to require additional financing to fund its operations
until positive cash flow is achieved.
Update on Use of Proceeds from the 2020 Unit Offering
On May
1, 2020 and on May 20, 2020, the Company closed two tranches of the
2020 Unit Offering for aggregate gross proceeds of $1,930,500 and
share compensation for services of $45,500, through the issuance of
15,200,000 units of the Company (each, a "Unit") at a price of $0.13 per Unit.
Each Unit was comprised of one Common Share and one Common Share
purchase warrant (each, a "2020
Unit Warrant"). Each
2020 Unit Warrant entitles the holder to purchase one Common Share
at an exercise price of $0.16 for a period of three years from the
date of issuance. The Company paid $3,250 in cash and issued
156,900 Units as finder's fees in connection with the 2020 Unit
Offering.
The net
proceeds of the 2020 Unit Offering were expected to be used for the
Company's mineral project development and for general working
capital purposes. The table below compares the estimated use of net
proceeds from the 2020 Unit Offering and the actual use of proceeds
as of October 31, 2020.
|
Description of expenditure
|
Originally proposed
use of proceeds
|
Actual use of proceeds
as of October 31, 2020
|
|
Development of mineral properties
|
$1,676,838
|
$1,675,046
|
|
General and administrative expenses
|
$250,412
|
$252,204
|
|
Total:
|
$1,927,250
|
$1,927,250
|
As of
October 31, 2020, the net proceeds from the 2020 Unit Offering were
fully applied.
18
PLAN OF DISTRIBUTION
Pursuant
to the Underwriting Agreement, the Company has agreed to sell and
the Underwriters have agreed to purchase, as principals, on the
Closing Date, 20,000,000 Offered Shares at the Offering Price,
payable in cash to the Company against delivery of the Offered
Shares. The obligations of the Underwriters under the Underwriting
Agreement are subject to compliance with all legal requirements and
the conditions contained in the Underwriting Agreement. The
Underwriters, or any one or more of them, may terminate their
obligations under the Underwriting Agreement at their discretion on
the basis of a "disaster out", "regulatory out, "material change
out" and upon the occurrence of certain other stated events. The
Underwriters are, however, obligated to take up and pay for all of
the Offered Shares (other than the Over-Allotment Shares) if any of
the Offered Shares are purchased under the Underwriting Agreement.
The terms of the Offering, including the Offering Price, were
determined by arm's length negotiation between the Company and the
Lead Underwriter, with reference to the prevailing market price of
the Common Shares.
The
Company has granted to the Underwriters the Over-Allotment Option,
exercisable in whole or in part, at the sole discretion of the
Underwriters, for a period of 30 days after the Closing Date, to
purchase up to an additional 3,000,000 Offered Shares at the
Offering Price, to cover over allotments, if any, and for market
stabilization purposes. This Prospectus also qualifies the grant of
the Over-Allotment Option and the distribution of the
Over-Allotment Shares.
Subscriptions
for Offered Shares will be received subject to rejection or
allotment in whole or in part and the Underwriters reserve the
right to close the subscription books at any time without notice.
During the distribution of the Offered Shares, the Underwriters may
effect transactions in the Common Shares in accordance with
applicable market stabilization rules.
Pursuant
to the Underwriting Agreement, the Company appointed the
Underwriters to offer the Offered Shares to the public in each of
the provinces of Canada, except Québec. Subject to applicable
law and the terms of the Underwriting Agreement, the Underwriters
may offer the Offered Shares in the United States and other
jurisdictions where the offer and sale of the Offered Shares will
not require the qualification or registration of the Offered
Shares. In consideration for such services, the Company has agreed
to pay to the Underwriters the Underwriters' Commission equal to 6%
of the gross proceeds realized on the proceeds of the Offering,
including pursuant to any exercise of the Over-Allotment Option,
being $0.024 per Offered Share. In addition to the Underwriters'
Commission, the Company will issue to the Underwriters such number
of Compensation Options as is equal to 6% of the aggregate number
of Offered Shares issued under the Offering, including any Offered
Shares sold pursuant to the Over-Allotment Option. Each
Compensation Option is exercisable for the purchase of one Common
Share at any time prior to 4:30 p.m. (Vancouver time) on the date
that is 12 months after the Closing Date at a price of $0.40 per
share. This Prospectus also qualifies the distribution of the
Compensation Options. The Company will also pay certain expenses
incurred by the Underwriters in connection with the Offering, as
set forth in the Underwriting Agreement.
The
Offered Shares and the Compensation Option Shares have been
conditionally approved for listing on the TSX. Listing on the TSX
will be subject to the Company fulfilling all the listing
requirements of the TSX on or before January 22, 2021.
The
Company has agreed with the Underwriters that, until the date which
is 120 days after the date of the Closing Date, it will not,
without the written consent of the Lead Underwriter, such consent
not to be unreasonably withheld or delayed, offer, announce the
offering of, or make any agreement to issue any equity or debt
securities or securities convertible or exercisable into equity or
debt securities of the Company.
The
Underwriters proposes to offer the Offered Shares initially at the
Offering Price. After the Underwriters has made reasonable efforts
to sell all of the Offered Shares at the Offering Price, the
Offering Price may be decreased and may be further changed from
time to time to an amount not greater than the Offering Price, and
the compensation realized by the Underwriters will be decreased by
the amount that the aggregate price paid by the purchasers of the
Offered Shares is less than the gross proceeds paid by the
Underwriters to the Company.
Pursuant
to policy statements of certain securities regulators, the
Underwriters may not, throughout the period of distribution, bid
for or purchase Common Shares. The foregoing restriction is subject
to certain exceptions including: (i) a bid or purchase permitted
under the Universal Market Integrity Rules for Canadian
Marketplaces of the Investment Industry Regulatory Organization of
Canada relating to market stabilization and passive market making
activities; and (ii) a bid or purchase made for and on behalf of a
customer where the order was not solicited during the period of the
distribution, provided that the bid or purchase was for the purpose
of maintaining a fair and orderly market and not engaged in for the
purpose of creating actual or apparent active trading in, or
raising the price of, such securities. Consistent with these
requirements, and in connection with this distribution, the
Underwriters may over-allot Offered Shares and may affect
transactions that stabilize or maintain the market price of the
Common Shares at levels other than those which otherwise might
prevail on the open market including stabilizing transactions,
short sales and purchases to cover positions created by short
sales.
As a
result of these activities, the price of the Common Shares may be
higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued
by the Underwriters at any time. The Underwriters may carry out
these transactions on the TSX, in the over-the-counter market or
otherwise.
19
The
Offered Shares are expected to be delivered on the Closing Date to
the Underwriters in "book-entry only" form and must be purchased or
transferred through a CDS participant so long as they are held
through CDS. The Company will cause a global certificate or
certificates (in physical or electronic form) representing any
Offered Shares to be delivered to, and registered in the name of,
CDS or its nominee. So long as the Offered Shares are held through
CDS, rights of shareholders must be exercised through, and all
payments or other property to which such holder is entitled will be
made or delivered by, CDS or the CDS participant through which the
shareholder holds such securities. Each person who acquires Offered
Shares under the Offering will receive only a customer confirmation
of purchase from the Underwriter or registered dealer from or
through which the Offered Shares are acquired in accordance with
the practices and procedures of that Underwriter or registered
dealer. The practices of registered dealers may vary, but generally
customer confirmations are issued promptly after execution of a
customer order. CDS is responsible for establishing and maintaining
book-entry accounts for its CDS participants having interests in
the Offered Shares. Notwithstanding the foregoing, all Offered
Shares issued in the United States pursuant to available exemptions
from the registration requirements of the U.S. Securities Act and
applicable state securities laws to purchasers who do not qualify
as Qualified Institutional Buyers will be represented by definitive
physical certificates
The
Offered Shares have not been and will not be registered under the
U.S. Securities Act or any United States state securities laws, and
accordingly may not be offered, sold or delivered, directly or
indirectly, in the United States except in transactions exempt from
the registration requirements of the U.S. Securities Act and
applicable state securities laws. The Underwriters may offer and
resell the Offered Shares that they have acquired pursuant to the
Underwriting Agreement in the United States to purchasers who are
Qualified Institutional Buyers. In addition, pursuant to the
Underwriting Agreement, the Underwriters may offer and the Company
may sell the Offered Shares on a "substituted purchaser" basis in
the United States to purchasers who are "accredited investors", as
such term is defined in Rule 501(a) of Regulation D under the U.S.
Securities Act, pursuant to the exemption from registration
provided by Rule 506(b) of Regulation D under the U.S. Securities
Act and/or Section 4(a)(2) of the U.S. Securities Act and similar
exemptions under applicable United States state securities laws.
The Underwriters will offer and sell the Offered Shares outside the
United States only in accordance with Rule 903 of Regulation S
under the U.S. Securities Act. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
Offered Shares in the United States. In addition, until 40 days
after the commencement of the Offering, an offer or sale of the
Offered Shares in the United States by any dealer (whether or not
participating in the Offering) may violate the registration
requirements of the U.S. Securities Act if such offer or sale is
made other than in accordance with an exemption from such
registration requirements. Any Offered Shares offered or sold in
the United States will be "restricted securities" within the
meaning of Rule 144(a)(3) under the U.S. Securities Act and any
certificates representing the Offered Shares issued to such
purchasers will contain a restriction or legend to the effect that
such securities have not been registered under the U.S. Securities
Act and may only be offered, sold, pledged or otherwise transferred
pursuant to certain exemptions from the registration requirements
of the U.S. Securities Act and applicable United States state
securities laws.
ELIGIBILITY FOR
INVESTMENT
In the
opinion of MLT Aikins LLP, counsel to the Company, and McCarthy
Tétrault LLP, counsel to the Underwriters, based on the
provisions of the Income Tax
Act (Canada) (the "Tax
Act") and the regulations thereunder, as of the date hereof,
the Offered Shares, if issued on the date hereof, would be
"qualified investments" under the Tax Act for trusts governed by
registered retirement savings plans ("RRSPs"), registered retirement income
funds ("RRIFs"), deferred
profit sharing plans, registered education savings plans
("RESPs"), registered
disability savings plans ("RDSPs") and tax-free savings accounts
("TFSAs") (each, a
"Registered
Plan").
Provided
that for purposes of the Tax Act the annuitant of an RRSP or RRIF,
the holder of a TFSA or RDSP or subscriber of a RESP, as the case
may be, deals at arm's length with the Company and does not have a
"significant interest" (as defined in the Tax Act for purposes of
the prohibited investment rules) in the Company, the Offered Shares
would not be a "prohibited investment" for RRSPs, RRIFs, RDSPs,
TFSAs and RESPs, as the case may be, under the Tax Act on the date
hereof. In addition, the Offered Shares will not be a prohibited
investment if such securities are "excluded property" as defined in
the Tax Act, for an RRSP, RRIF, RDSP, TFSA or RESP. Annuitants of
an RRSP or RRIF, holders of a TFSA or RDSP or subscribers of a RESP
should consult their own tax advisors to ensure the Offered Shares
would not be a prohibited investment in their particular
circumstances.
Prospective purchasers of Offered Shares should consult their own
tax advisers with respect to whether Offered Shares would be
prohibited investments having regard to their particular
circumstances.
DESCRIPTION OF THE SECURITIES BEING
DISTRIBUTED
Common Shares
The
authorized capital of the Company consists of an unlimited number
of Common Shares without par value. As at the close of business on
November 16, 2020, there were 155,295,228 Common Shares issued and
outstanding, which number excludes 195,000 Common Shares that are
in the process of being issued pursuant to the exercise of an
equivalent number of Common Share purchase warrants of the Company
as at the close of business on November 16, 2020, and which Common
Shares are expected to be issued on November 18, 2020. The holders
of the Common Shares are entitled to vote at all meetings of
shareholders of the Company, to receive dividends if, as and when
declared by the Company's board of directors and to participate
rateably in any distribution of property or assets upon the
liquidation, winding-up or other dissolution of the Company. The
Common Shares carry no pre-emptive rights, conversion or exchange
rights, redemption, retraction, repurchase, sinking fund or
purchase fund provisions. There are no provisions requiring the
holders of the Common Shares to contribute additional capital and
there are no restrictions on the issuance of additional securities
by the Company. There are no restrictions on the repurchase or
redemption of the Common Shares by the Company except to the extent
that any such repurchase or redemption would render the Company
insolvent pursuant to the Business
Corporations Act (British Columbia).
20
PRIOR SALES
The
table below summarizes the issuances by the Company of securities
within the 12 months prior to the date of this
Prospectus.
|
Date
|
|
Security
|
|
Price
per
Security
|
|
Number
of Securities
|
|
November 15,
2019
|
|
Options(1)
|
|
$0.33
|
|
100,000
|
|
January
6, 2020
|
|
Common
Shares(2)
|
|
$0.41
|
|
1,601,000
|
|
January
6, 2020
|
|
Options(3)
|
|
$0.41
|
|
100,000
|
|
February 12,
2020
|
|
Common
Shares(4)
|
|
$0.20
|
|
15,000
|
|
May 1,
2020
|
|
Units(5)
|
|
$0.13
|
|
10,394,900
|
|
May 4,
2020
|
|
Options(6)
|
|
$0.22
|
|
3,000,000
|
|
May 20,
2020
|
|
Units(7)
|
|
$0.13
|
|
4,962,000
|
|
July
17, 2020
|
|
Common
Shares(4)
|
|
$0.28
|
|
250,000
|
|
July
17, 2020
|
|
Common
Shares(4)
|
|
$0.22
|
|
262,500
|
|
July
24, 2020
|
|
Common
Shares(4)
|
|
$0.22
|
|
100,000
|
|
July
27, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
93,850
|
|
July
29, 2020
|
|
Common
Shares(4)
|
|
$0.33
|
|
43,750
|
|
July
29, 2020
|
|
Common
Shares(4)
|
|
$0.22
|
|
37,500
|
|
August
5, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
12,000
|
|
August
6, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
1,000,000
|
|
August
7, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
1,457,140
|
|
August
11, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
765,000
|
|
August
13, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
650,000
|
|
August
14, 2020
|
|
Common
Shares(4)
|
|
$0.20
|
|
50,000
|
|
August
17, 2020
|
|
Options(9)
|
|
$0.50
|
|
720,000
|
|
August
18, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
160,000
|
|
August
19, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
40,000
|
|
August
20, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
50,000
|
|
August
25, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
80,000
|
|
August
26, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
90,000
|
|
September 1,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
143,000
|
|
September 2,
2020
|
|
Common
Shares(8)
|
|
$0.16
|
|
2,250,000
|
|
September 3,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
413,053
|
|
September 8,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
15,000
|
|
September 9,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
43,000
|
|
September 14,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
206,947
|
|
September 15,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
104,250
|
|
September 15,
2020
|
|
Common
Shares(8)
|
|
$0.16
|
|
1,000,000
|
|
September 16,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
15,000
|
|
September 17,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
535,000
|
|
September 18,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
98,750
|
|
September 18,
2020
|
|
Common
Shares
|
|
$0.50(10)
|
|
4,000,000(11)
|
|
September 21
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
50,000
|
|
September 29,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
25,000
|
|
September 30,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
300,000
|
|
October
1, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
71,500
|
|
October
13, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
14,280
|
|
October
14, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
1,127,500
|
|
October
14, 2020
|
|
Common
Shares(8)
|
|
$0.16
|
|
500,000
|
|
October
15, 2020
|
|
Common
Shares(4)
|
|
$0.21
|
|
312,500
|
|
October
15, 2020
|
|
Common
Shares(4)
|
|
$0.22
|
|
62,500
|
|
October
15, 2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
68,800
|
|
October
19, 2020
|
|
Common
Shares(4)
|
|
$0.35
|
|
100,000
|
|
October
23, 2020
|
|
Common
Shares(8)
|
|
$0.16
|
|
50,000
|
|
November 10,
2020
|
|
Common
Shares(8)
|
|
$0.26
|
|
375,000
|
Notes:
(1)
Each incentive
stock options of the Company is exercisable at $0.33 to acquire one
Common Share expiring five years following the date of grant and
vesting at a rate of 12.5% every three months over with first two
years following the date of grant.
(2)
Bonus Common Shares
issued to certain directors, officers, employees and consultants of
the Company pursuant to the Company's Share-Based Compensation Plan
as approved at the Company's annual general meeting of shareholders
held on June 2, 2016, as amended on each of June 13, 2017 and
September 12, 2019.
(3)
Each incentive
stock options of the Company is exercisable at $0.41 to acquire one
Common Share expiring five years following the date of grant and
vesting at a rate of 12.5% every three months over with first two
years following the date of grant.
(4)
Exercise of
incentive stock options.
21
(5)
Private placement
offering of units of the Company, with each unit comprised of one
Common Share and one Common Share purchase warrant, with each such
warrant exercisable for the purchase of one additional Common
Share, at a price of $0.16 per share until May 1, 2023. 10,238,000
units were issued on a private placement basis and 156,900 units
were issued as remuneration to certain finders in connection with
the private placement.
(6)
Each incentive
stock options of the Company is exercisable at $0.22 to acquire one
Common Share expiring five years following the date of grant and
vesting at a rate of 12.5% every three months over with first two
years following the date of grant.
(7)
Private placement
offering of units of the Company, with each unit comprised of one
Common Share and one Common Share purchase warrant, with each such
warrant exercisable for the purchase of one additional Common
Share, at a price of $0.16 per share until May 20,
2023.
(8)
Exercise of Common
Share purchase warrants.
(9)
Each incentive
stock options of the Company is exercisable at $0.50 to acquire one
Common Share expiring five years following the date of grant and
vesting at a rate of 12.5% every three months over with first two
years following the date of grant.
(10)
Deemed issue price
per Common Share based on closing price of the Common Shares on the
TSX on September 17, 2020, being the date immediately prior to the
date of issue of the Common Shares.
(11)
Issued in
connection with the Company's previously announced acquisition of
the Bisoni vanadium project from CellCube Energy Storage Systems
Inc. ("CellCube") pursuant
to an asset purchase agreement dated August 18, 2020 among
CellCube, the Company and certain wholly owned subsidiaries of each
of CellCube and the Company. See the Company's news release dated
September 18, 2020, a copy of which is available under the
Company's profile on SEDAR at www.sedar.com.
In
addition to the issuances listed in the table above, as at the date
hereof, the Company is in the process of issuing 195,000 Common
Shares pursuant to the exercise of an equivalent number of Common
Share purchase warrants of the Company. The issuance of these
Common Shares is expected to be completed on November 18,
2020.
TRADING PRICE AND VOLUME
The
Common Shares are listed for trading on the TSX under the symbol
"ELEF". The table below sets forth the high and low trading price
and trading volumes of the Common Shares as reported by the TSX for
the periods indicated.
|
|
High
|
Low
|
|
|
Month
|
($)
|
($)
|
Volume
|
|
November
2019
|
0.43
|
0.27
|
4,745,191
|
|
December
2019
|
0.42
|
0.28
|
4,381,885
|
|
January
2020
|
0.50
|
0.27
|
9,386,097
|
|
February
2020
|
0.31
|
0.18
|
9,509,512
|
|
March
2020
|
0.22
|
0.10
|
17,447,962
|
|
April
2020
|
0.20
|
0.13
|
9,329,839
|
|
May
2020
|
0.33
|
0.17
|
12,741,931
|
|
June
2020
|
0.32
|
0.23
|
9,240,120
|
|
July
2020
|
0.49
|
0.30
|
24,556,448
|
|
August
2020
|
0.59
|
0.45
|
21,891,211
|
|
September
2020
|
0.55
|
0.23
|
17,222,500
|
|
October
2020
|
0.52
|
0.38
|
13,806,137
|
|
November 1 - 16,
2020
|
0.50
|
0.38
|
8,897,599
|
RISK FACTORS
An investment in the Offered Shares involves a high degree of risk
and must be considered speculative due to the nature of the
Company's business and present stage of exploration and development
of its mineral properties. Before making an investment decision,
prospective purchasers should carefully consider the risks and
uncertainties described below, as well as the other information
contained in or incorporated by reference in this Prospectus. These
risks and uncertainties are not the only ones facing the Company.
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 also from finding mineral
deposits, which, though present, are insufficient in quantity or
quality to return a profit from production.
Additional risks and uncertainties not presently known to the
Company or that the Company currently deems immaterial may also
impair the business operations of the Company. If any such risks
actually occur, the Company's business, financial condition and
operating results could be materially harmed, the value of the
Company's securities could decline and you may lose all or part of
your investment. This Prospectus also contains forward-looking
statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in
the forward-looking statements as a result of a number of factors,
including the risks described below. See "Cautionary Note Regarding
Forward-Looking Information."
Prospective purchasers of the Offered Shares should carefully
consider the risk factors set out below, as well as the information
included or incorporated by reference in this Prospectus before
making an investment decision to purchase the Offered Shares. See
"Documents Incorporated by Reference".
22
Risks Associated with the Offering and the Company
Need for Future Financing
The
future development of the Company's business will require
additional financing or refinancings. There are no assurances that
such financing or refinancings will be available or, if available,
available upon terms acceptable to the Company. If sufficient
capital is not available, the Company may be required to delay the
expansion of its business and operations, which could have a
material adverse effect on the Company's business, financial
condition, prospects or results of operations.
Market Price Volatility
The
market price of the Common Shares may be adversely affected by a
variety of factors relating to the Company's business, including
fluctuations in the Company's operating and financial results, the
results of any public announcements made by the Company and the
failure to meet analysts' expectations.
The
market price of the Common Shares has experienced wide fluctuations
which may not necessarily be related to the financial condition,
operating performance, underlying asset values or prospects of the
Company. Securities of micro-cap and small-cap companies have
experienced substantial volatility in the past, often based on
factors unrelated to the financial performance or prospects of the
companies involved. These factors include macroeconomic
developments in North America and globally and market perceptions
of the attractiveness of particular industries.
The
price of the Common Shares is also likely to be significantly
affected by short-term changes in silver, lead, zinc, vanadium and
other metal prices. Other factors unrelated to the Company's
performance that may have an effect on the price of the Common
Shares include (among others) the following: (i) the extent of
analytical coverage available to investors concerning the Company's
business may be limited if investment banks with research
capabilities do not follow the Common Shares; (ii) lessening in
trading volume and general market interest in the Common Shares may
affect an investor's ability to trade significant numbers of Common
Shares; (iii) the size of the Company's public float may limit the
ability of some institutions to invest in the Common Shares; and
(iv) a substantial decline in the price of the Common Shares that
persists for a significant period of time could cause the Common
Shares to be delisted from the TSX or from any other exchange upon
which the Common Shares may trade from time to time, further
reducing market liquidity.
As a
result of any of these factors, the market price of the Common
Shares at any given point in time may not accurately reflect the
Company's long-term value. Securities class action litigation often
has been brought against companies following periods of volatility
in the market price of their securities. The Company may in the
future be the target of similar litigation. Securities litigation
could result in substantial costs and damages and divert
management's attention and resources.
Completion of the Offering
The
completion of the Offering remains subject to a number of
conditions. There can be no certainty that the Offering will be
completed. Failure by the Company to satisfy all of the conditions
precedent to the Offering would result in the Offering not being
completed. If the Offering is not completed, the Company may not be
able to raise the funds required for the purposes contemplated
under "Use of Proceeds"
from other sources on commercially reasonable terms or at
all.
Forward-looking statements may prove to be inaccurate
Investors
should not place undue reliance on forward-looking statements. By
their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties, of both
general and specific nature, that could cause actual results to
differ materially from those suggested by the forward-looking
statements or contribute to the possibility that predictions,
forecasts or projections will prove to materially inaccurate.
Additional information on the risks, assumptions and uncertainties
can be found under the heading "Cautionary Statement Regarding Forward-Looking
Statements" in this Prospectus.
Discretion in the Use of Proceeds
The
Company currently intends to apply the net proceeds received from
the Offering as described under the heading "Use of Proceeds" in this Prospectus.
However, management of the Company will have discretion concerning
the use of the net proceeds of the Offering as well as the timing
of their expenditures. As a result, an investor will be relying on
the judgment of management for the application of the net proceeds
of the Offering. Management may use the net proceeds of the
Offering in ways that an investor may not consider desirable. The
results and the effectiveness of the application of proceeds are
uncertain. If the proceeds are not applied effectively, the
Company's results may suffer.
23
Market Price of the Common Shares
Sales
of a substantial number of Common Shares or other equity-related
securities in the public markets by the Company or its significant
shareholders could depress the market price of the Common Shares
and impair the Company's ability to raise capital through the sale
of additional equity securities. The Company cannot predict the
effect that future sales of Common Shares or other equity-related
securities would have on the market price of the Common Shares. The
price of the Common Shares could be affected by possible sales of
Common Shares by hedging or arbitrage trading activity which the
Company expects to occur involving the Common Shares. If the
Company raises additional funding by issuing additional equity
securities, such financing may substantially dilute the interests
of shareholders of the Company and reduce the value of their
investment.
Potential Dilution
The
Company's articles of incorporation allow the Company to issue an
unlimited number of Common Shares for such consideration and on
such terms and conditions as shall be established by the Company's
board of directors, in many cases, without the approval of the
shareholders.
Except
as described under the heading "Plan of Distribution" in this
Prospectus, the Company may issue additional Common Shares in
subsequent offerings (including through the sale of securities
convertible into or exchangeable for Common Shares) and on the
exercise of stock options or warrants.
The
Company may also issue Common Shares to finance future acquisitions
and other projects. The Company cannot predict the size of future
issuances of Common Shares or the effect that future issuances and
sales of Common Shares will have on the market price of the Common
Shares. Issuances of a substantial number of additional Common
Shares, or the perception that such issuances could occur, may
adversely affect prevailing market prices for the Common Shares.
With any additional issuance of Common Shares, investors will
suffer dilution to their voting power and the Company may
experience dilution in the Company's earnings per
share.
Risks and Other Considerations Relating to the Company
COVID-19
An
emerging risk is a risk not well understood at the current time and
for which the impacts on strategy and financial results are
difficult to assess or are in the process of being assessed. Since
December 31, 2019, the outbreak of the novel strain of coronavirus,
specifically identified as "COVID-19", has resulted in governments
worldwide enacting emergency measures to combat the spread of the
virus. These measures, which include the implementation of travel
bans, self-imposed quarantine periods and social distancing, have
caused material disruption to businesses globally, resulting in an
economic slowdown. Global equity markets have experienced
significant volatility and weakness. Governments and central banks
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 the government and central bank interventions. 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 operating subsidiaries in future
periods.
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. Only
those mineral deposits that the Company can economically and
legally extract or produce, based on a comprehensive evaluation of
cost, grade, recovery and other factors, are considered mineral
reserves. The resource estimates contained in the Restated Pulacayo
Technical Report are indicated and inferred resource estimates only
and no assurance can be given that any particular level of recovery
of silver, lead, zinc, vanadium or other metals from mineralized
material will in fact be realized or that an identified mineralized
deposit will ever qualify as a commercially mineable mineral
deposit. In particular, inferred mineral resources have a great
amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. Substantial additional
work, including mine design and mining schedules, metallurgical
flow sheets and process plant designs, would be required in order
to determine if any economic deposits exist on the Company's
properties. Additional expenditures will be required to establish
mineral reserves through drilling and metallurgical and other
testing techniques. The costs, timing and complexities of upgrading
the mineral resources to proven or probable reserves may be greater
than the value of the Company's reserves on a mineral property and
may require the Company to write-off the costs capitalized for that
property in its financial statements. The Company cannot provide
any assurance that future feasibility studies will establish
mineral reserves at its properties. The failure to establish
mineral reserves could restrict the Company's ability to
successfully implement its strategies for long-term
growth.
24
Negative Operating Cash Flow and Going Concern
The
Company is an exploration stage company and has not yet commenced
commercial production on any property and, accordingly, has not
generated cash flow from operations. The Company is devoting
significant resources to the exploration of its projects in Bolivia
and the United States, however there can be no assurance that it
will generate positive cash flow from operations in the future. The
Company expects to continue to incur negative consolidated
operating cash flow and losses until such time as it enters into
commercial production and will not generate consolidated revenues
sufficient to fund the continuing operation of the Company's
projects. The Company has had negative operating cash flows from
operations to date, and reported a comprehensive loss of
approximately $2,367,226 for the nine months ended September 30,
2020. Although the Company reported a comprehensive gain of
$17,513,854 for year ended December 31, 2019, such comprehensive
gain primarily resulted from an impairment recovery of
approximately $13.7 million on the Pulacayo Project and a debt
settlement gain in the amount of approximately $7.95 million in
connection the resolution of a tax assessment in Bolivia that was
resolved in the Company's favour, and the Company had an operating
loss in 2019 of approximately $3.5 million. See the Annual
Financial Statements. To the extent that the Company has negative
cash flow in future periods, the Company may need to deploy a
portion of its cash reserves to fund such negative cash
flow.
The
Company's auditor has indicated in the financial statements that
there is substantial doubt about the Company's ability to continue
as a going concern. Importantly, the inclusion in the Company's
financial statements of a going concern opinion may negatively
impact the Company's ability to raise future financing and achieve
future revenue. The threat of the Company's ability to continue as
a going concern will be removed only when, in the opinion of the
Company's auditor, the Company's revenues have reached a level that
is able to sustain its business operations. If the Company is
unable to obtain additional financing from outside sources and
eventually generate enough revenues, the Company may be forced to
sell a portion or all of the Company's assets, or curtail or
discontinue the Company's operations. If any of these events
happen, you could lose all or part of your investment. The
Company's financial statements do not include any adjustments to
the Company's recorded assets or liabilities that might be
necessary if the Company becomes unable to continue as a going
concern.
Foreign Operations, Including Emerging and Developing Market
Risk
Changes
in mining, investment or other applicable policies or shifts in
political attitude in Bolivia may adversely affect the Company's
operations or profitability and may affect the Company's ability to
fund its ongoing expenditures. Regardless of the economic viability
of the Company's properties, such political changes, which are
beyond the Company's control, could have a substantive impact and
prevent or restrict (or adversely impact the financial results of)
mining of some or all of any deposits on the Pulacayo
Project.
Bolivia
is a mining-friendly jurisdiction with a long history of mining and
an experienced labour force. The majority of the Company's
operating costs in relation to Pulacayo Project are denominated in
Bolivian boliviano. The Company has not hedged its exposure to any
exchange rate fluctuations applicable to its business, and is
therefore exposed to currency fluctuation risks. The Company's
operations are also subject to Bolivian regulations pertaining to
environmental protection, the use and development of mineral
properties and the acquisition or use of rural properties by
foreign investors or Bolivian companies under foreign control and
various other Bolivian regulatory frameworks, as described
below.
The
market for securities issued by companies with significant
operations in Bolivia is influenced by economic and market
conditions in Bolivia and, to varying degrees, market conditions in
Canada, the United States and developing countries, especially
other Latin American countries. Although economic conditions vary
by country, the reaction of investors to developments in one
country may cause fluctuations in the capital markets in other
countries. Developments or adverse economic conditions in other
countries, including developing countries, have at times
significantly affected the availability of credit in the Bolivian
economy and resulted in considerable outflows of funds and reduced
foreign investment in Bolivia, as well as limited access to
international capital markets, all of which may materially
adversely affect The Company's ability to borrow at acceptable
interest rates or to raise equity capital when it needs to do so.
In addition, a significant decline in the economic growth or demand
for imports of any of Bolivia's major trading partners could have a
material adverse impact on Bolivia's exports and balance of trade
and adversely affect Bolivia's economic growth.
In
addition, because international investors' reactions to the events
occurring in one emerging market country sometimes produce a
"contagion" effect, in which an entire region or class of
investment is disfavored by international investors, Bolivia could
be adversely affected by negative economic or financial
developments in other countries.
The
Company's financial condition and results of any future operations
may also be materially adversely affected by any of the following
factors, as well as by the Bolivian government's actions in
response to them:
●
currency
depreciations and other exchange rate movements;
●
monetary
policies;
●
inflation rate
fluctuations;
●
economic and social
instability;
●
energy shortages or
other changes in energy prices;
●
interest
rates;
●
disasters at third
party mineral projects;
25
●
exchange rate
controls and restrictions on remittances abroad;
●
liquidity of the
domestic capital and lending markets;
●
tax policy,
including international tax treaties; and
●
other political,
diplomatic, social and economic policies or developments in or
affecting Bolivia.
Uncertainty
over whether the Bolivian federal government will implement changes
in policy or regulation affecting these or other factors in the
future may contribute to economic uncertainty in Bolivia and to
heightened volatility in the market value of securities issued by
Bolivian companies or companies with Bolivian assets.
These
and other future developments in the Bolivian economy and
governmental policies may adversely affect the
Company.
Political and Economic Risks in Bolivia
The
Pulacayo Project and certain other projects of the Company are
located in Bolivia. Regardless of recent progress in restructuring
its political institutions and revitalizing its economy, Bolivia's
history since the mid-1960s has been one of political and economic
instability under a variety of governments. Since 2006, the
government has intervened in the national economy and social
structure, including periodically imposing various controls, the
effects of which have been to restrict the ability of both domestic
and foreign companies to freely operate. Although the Company
believes that the current conditions in Bolivia are relatively
stable and conducive to conducting business, the Company's current
and future mineral exploration and mining activities in Bolivia are
exposed to various levels of political, economic, and other risks
and uncertainties. These risks and uncertainties include, but are
not limited to, hostage taking, military repression, extreme
fluctuations in currency exchange rates, high rates of inflation,
political and labour unrest, civil unrest, expropriation and
nationalization, renegotiation or nullification of existing
concessions, licences, permits and contracts, illegal mining,
changes in taxation policies, restrictions on foreign exchange and
repatriation, changing political conditions, currency controls, and
governmental regulations that favour or require the awarding of
contracts to local contractors or require foreign contractors to
employ citizens or purchase supplies from a particular
jurisdiction.
There
has been a significant level of social unrest in Bolivia in recent
years resulting from a number of factors, including a high rate of
unemployment. Protestors have previously targeted foreign firms in
the mining sector, and as a result there is no assurance that
future social unrest will not have an adverse impact on the
Company's operations. The Company's exploration and development
activities may be affected by changes in government, political
instability, and the nature of various government regulations
relating to the mining industry. Bolivia's fiscal regime has
historically been favourable to the mining industry, but there is a
risk that this could change. In addition, labour in Bolivia is
customarily unionized and there are risks that labour unrest or
wage agreements may impact operations. The Company cannot predict
the government's positions on foreign investment, mining
concessions, land tenure, environmental regulation, or taxation. A
change in government positions on these issues could adversely
affect the Company's business and/or its holdings, assets, and
operations in Bolivia. Any changes in regulations or shifts in
political conditions are beyond the control of the Company. The
Company's operations in Bolivia entail significant governmental,
economic, social, medical, and other risk factors common to all
developing countries. The status of Bolivia as a developing country
may also make it more difficult for the Company to obtain any
required financing because of the investment risks associated with
it. The level of social unrest in Bolivia has increased
significantly following the failed general elections held on
October 20, 2019.
The
Company's operations in Bolivia may be adversely affected by
economic uncertainty characteristic of developing countries.
Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price
controls, export controls, currency remittance, income taxes,
expropriation of property, foreign investment, maintenance of
claims, environmental legislation, land use, land claims of local
people, water use, and safety factors.
Any
such changes could have a material adverse effect on the Company's
operations.
Operations and Exploration Subject to Governmental
Regulations
The
Company's operations and exploration and development activities are
subject to extensive laws and regulations governing various
matters, including: (a) environmental protection; (b) management
and use of toxic substances and explosives; (c) management of
natural resources; (d) management of tailings and other wastes; (e)
mine construction; (f) exploration, development of mines,
production and post-closure reclamation; (g) exports; (h) price
controls; (i) taxation and mining royalties; (j) regulations
concerning business dealings with indigenous groups; (k) labour
standards and occupational health and safety, including mine
safety; and (l) historic and cultural preservation. Failure to
comply with applicable laws and regulations may result in civil or
criminal fines or penalties or enforcement actions, including
orders issued by regulatory or judicial authorities, enjoining or
curtailing operations, or requiring corrective measures,
installation of additional equipment, or remedial actions, any of
which could result in the Company incurring significant
expenditures. The Company may also be required to compensate
private parties suffering loss or damage by reason of a breach of
such laws, regulations, or permitting requirements. It is also
possible that future laws and regulations, or a more stringent
enforcement of current laws and regulations by governmental
authorities, could cause additional expenses, capital expenditures,
restrictions on or suspensions of the Company's exploration
activities, if any, and delays in the development of the Pulacayo
Project.
26
The
Company conducts operations in Bolivia. The laws of Bolivia differ
significantly from those of Canada and all such laws are subject to
change. Mining is subject to potential risks and liabilities
associated with environment and disposal of waste products
occurring as a result of mineral exploration and
production.
Failure
to comply with applicable laws and regulations may result in
enforcement actions and may also include corrective measures
requiring capital expenditures, installation of additional
equipment or remedial actions. Parties engaged in mining operations
may be required to compensate those suffering loss or damage by
reason of mining activities and may have civil or criminal fines or
penalties imposed for violations of applicable laws and
regulations.
New
laws and regulations, amendments to existing laws and regulations,
administrative interpretation of existing laws and regulations, or
more stringent enforcement of existing laws and regulations could
have a material adverse impact on future cash flow, results of
operations and the financial condition of the Company.
Mineral Resources are Inherently Imprecise
The
mineral resource figures referred to in the Restated Pulacayo
Technical Report have been determined and valued based on assumed
future prices, cut-off grades and operating costs. However, until
mineral deposits are actually mined and processed, any mineral
resources must be considered as estimates only. Any such estimates
are expressions of judgment based on knowledge, mining experience,
analysis of drilling results and industry practices. Estimates can
be imprecise and depend upon geological interpretation and
statistical inferences drawn from drilling and sampling analysis,
which may prove to be unreliable. In addition, the grade and/or
quantity of metals ultimately recovered may differ from that
indicated by drilling results. There can be no assurance that
metals recovered in small-scale tests will be duplicated in
large-scale tests under on-site conditions or in production scale.
The grade of the reported mineral resource estimates are uncertain
in nature and it is uncertain whether further technical studies
will result in an upgrade to them. Further drilling on the
mineralized zones is required to complement the current bulk sample
and add confidence in the continuity of mineralized zones in
comparison to the current block model. Any material change in the
quantity of mineralization, grade or mineralization to waste ratio
or extended declines in market prices for silver, lead, zinc,
vanadium and other metals may render portions of the Company's
mineralization uneconomic and result in reduced reported mineral
resources. Any material reductions in estimates of mineralization,
or of the Company's ability to extract this mineralization, could
have a material adverse effect on the Company's results of
operations or financial condition.
Litigation and Regulatory Proceedings
The
Company may be subject to civil claims (including class action
claims) based on allegations of negligence, breach of statutory
duty, public nuisance or private nuisance or otherwise in
connection with the Company's operations, or investigations
relating thereto. While the Company is presently unable to quantify
any potential liability under any of the above heads of damage,
such liability may be material and may materially adversely affect
the Company's ability to continue operations. In addition, the
Company may be subject to actions or related investigations by
governmental or regulatory authorities in connection with its
business activities, including, but not limited to, current and
historic activities at the Company's properties. Such actions may
include prosecution for breach of relevant legislation or failure
to comply with the terms of the Company's licenses and permits and
may result in liability for pollution, other fines or penalties,
revocations of consents, permits, approvals or licenses or similar
actions, which could be material and may impact the results of the
Company's operations. The Company's current insurance coverage may
not be adequate to cover any or all the potential losses,
liabilities and damages that could result from the civil and/or
regulatory actions referred to above.
Property Interests
The
agreements pursuant to which the Company hold rights to certain of
its properties, provide that it must make a series of cash payments
over certain time periods or make minimum exploration expenditures.
If the Company fails to make such payments or expenditures in a
timely manner, it may lose interest in those
properties.
Influence of Third Party Stakeholders
The
mineral properties in which the Company holds an interest, or the
exploration equipment and road or other means of access which the
Company intends to utilize in carrying out its work programs or
general business mandates, may be subject to interests or claims by
third party individuals, groups or companies. In the event that
such third parties assert any claims, the Company's work programs
may be delayed even if such claims are not meritorious. Such claims
may result in significant financial loss and loss of opportunity
for the Company.
27
Community Relations
The
Company's relationships with the communities in which it operates
are critical to ensure the future success of its existing
operations and the construction and development of properties.
While the Company is committed to operating in a socially
responsible manner, there is no guarantee that its efforts will be
successful, in which case interventions by third parties could have
a material adverse effect on the Company's business, financial
position and operations.
Operations Subject to Human Error
Despite
efforts to attract and retain qualified personnel, as well as the
retention of qualified consultants, to manage the Company's
interests, and even when those efforts are successful, people are
fallible and human error could result in significant uninsured
losses to the Company. These could include loss or forfeiture of
mineral claims or other assets for non-payment of fees or taxes,
significant tax liabilities in connection with any tax planning
effort the Company might undertake and legal claims for errors or
mistakes by the Company's personnel.
Prospective
purchasers should also carefully consider the risks in the
documents incorporated by reference into this Prospectus, including
in the Annual Report under "Risk
Factors". If any of such or other risks occurs, the
Company's business, prospects, financial condition, financial
performance and cash flows could be materially adversely impacted.
In that case, the applicable securities could decline in value and
purchasers could lose all or part of their investment. There is no
assurance that any risk management steps taken by the Company will
avoid future loss due to the occurrence of such risks or other
unforeseen risks.
CONSOLIDATED
CAPITALIZATION
The
table below sets out the Company's share capital both before and
after the issuance of the Offered Shares under the
Offering.
|
Designation
of Securities
|
Outstanding
as at September 30, 2020
|
Outstanding
pro forma as at September 30, 2020, after giving effect to the
Offering
|
Outstanding
pro forma as at September 30, 2020, after giving effect to the
Offering and assuming exercise of the Over-Allotment Option in
full
|
|
Common
Shares
|
152,613,148
|
172,613,148
|
175,613,148
|
|
Stock
Options
|
11,028,750
|
11,028,750
|
11,028,750
|
|
Warrants
|
29,875,737
|
29,875,737
|
29,875,737
|
|
Compensation
Options
|
Nil
|
1,200,000
|
1,380,000
|
AUDITOR, TRANSFER AGENT AND
REGISTRAR
The
auditor of the Company is Davidson & Company, LLP, Chartered
Professional Accountants, located at 1200 – 609 Granville
Street, P.O. Box 10372, Vancouver, British Columbia, Canada, V7Y
1G6.
The
Company's transfer agent and registrar is Computershare Investor
Services, (Canada), located at 510 Burrard St., 3rd Floor,
Vancouver, British Columbia.
INSIDER PARTICIPATION
It is
anticipated that John Lee, the Chief Executive Officer, Executive
Chairman and a director of the Company (including his associates
and affiliates), will purchase 750,000 Offered Shares. As a result
of the participation of Mr. Lee in the Offering, the Offering
constitutes a "related party transaction" under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI
61-101").
Pursuant
to sections 5.5(a) and 5.7(1)(a) of MI 61-101, the Company is
exempt from obtaining a formal valuation and approval of the
Company's minority shareholders as the fair market value of Mr.
Lee's participation in the Offering is below 25% of the Company's
market capitalization, as determined in accordance with MI
61-101.
28
INTERESTS OF EXPERTS
Each of
the persons listed in the table below is a "qualified person" for
the purposes of NI 43-101. Each qualified person listed in the
table below has authored the Restated Pulacayo Technical Report or
has reviewed certain scientific and technical information relating
to the Company's mineral properties contained or incorporated by
reference in this Prospectus.
|
Name
|
|
Role
|
|
Matthew
Harrington, P. Geo
|
|
Author
of the Restated Pulacayo Technical Report
|
|
Michael
Cullen, P. Geo
|
|
Author
of the Restated Pulacayo Technical Report
|
|
Osvaldo
Arce, P. Geo
|
|
Author
of the Restated Pulacayo Technical Report
|
|
Danniel
Oosterman, P. Geo
|
|
Review
of scientific and technical information relating to the Company's
mineral properties contained or incorporated by reference in this
Prospectus
|
Certain
legal matters relating to this Offering will be passed upon on
behalf of the Company by MLT Aikins LLP, and on behalf of the
Underwriters by McCarthy Tétrault LLP.
The
Company's auditors for the Annual Financial Statements incorporated
by reference in this Prospectus, Davidson & Company, LLP,
Chartered Professional Accountants, in Vancouver, British Columbia,
report that they are independent from the Company in accordance
with the Chartered Professional Accountants of British Columbia
Code of Professional Conduct.
None of
the persons listed above received or will receive a direct or
indirect interest in any property of the Company or any of its
associates or affiliates. As of the date hereof, each of such
persons (or in the case of experts who are not individuals, the
"designated professionals" of each such person, as defined under
Form 51-102F2 – Annual
Information Form) owns beneficially, directly or indirectly,
less than 1% of any outstanding class of securities of the Company
and less than 1% of the outstanding securities of any class of the
Company's associates or affiliates.
ENFORCEMENT OF JUDGMENTS AGAINST
FOREIGN PERSONS OR COMPANIES
Mr.
John Lee, a director and the chief executive officer of the
Company, Mr. Masateru Igata, a director of the Company, Mr. Mark
Leduc, a director of the Company, and Mr. David Smith, a director
of the Company, each resides outside of Canada and each has
appointed MLT Aikins LLP at 2600-1066 West Hastings St., Vancouver,
British Columbia V6E 3X1, as agent for service of process. Osvaldo
Arce, P. Geo, who is an author responsible for the preparation of
the Restated Pulacayo Technical Report, resides outside of Canada
and has appointed MLT Aikins LLP at 2600-1066 West Hastings St.,
Vancouver, British Columbia V6E 3X1 as agent for service of
process. Purchasers are advised that it may not be possible for
investors to enforce judgments obtained in Canada against any
person or company that is incorporated, continued or otherwise
organized under the laws of a foreign jurisdiction or resides
outside of Canada, even if the party has appointed an agent for
service of process.
PURCHASERS' RIGHTS OF WITHDRAWAL AND
RESCISSION
Securities
legislation in certain of the provinces and territories of Canada
provides purchasers with the right to withdraw from an agreement to
purchase securities. This right may be exercised within two
business days after receipt or deemed receipt of a prospectus and
any amendment. In several of the provinces and territories, the
securities legislation further provides a purchaser with remedies
for rescission or, in some jurisdictions, revisions of the price or
damages if the prospectus and any amendment contains a
misrepresentation or is not delivered to the purchaser, provided
that the remedies for rescission, revision of the price or damages
are exercised by the purchaser within the time limit prescribed by
the securities legislation of the purchaser's province. The
purchaser should refer to any applicable provisions of the
securities legislation of the purchaser's province for the
particulars of these rights or consult with a legal
adviser.
29
CERTIFICATE OF THE
COMPANY
November 17,
2020
This
short form prospectus, together with the documents incorporated
herein by reference, constitutes full, true and plain disclosure of
all material facts relating to the securities offered by this short
form prospectus as required by the securities legislation of each
of the provinces of Canada, excluding Québec.
(Signed) John Lee
Chief
Executive Officer
(Signed) Irina Plavutska
Chief
Financial Officer
On
behalf of the Board of Directors:
(Signed) David Smith
Director
(Signed) Greg Hall
Director
30
CERTIFICATE OF THE UNDERWRITERS
November 17,
2020
To the
best of our knowledge, information and belief, this Prospectus,
together with the documents incorporated herein by reference,
constitutes full, true and plain disclosure of all material facts
relating to the securities offered by this Prospectus as required
by the securities legislation of each of the provinces of Canada,
excluding Québec.
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MACKIE RESERARCH CAPITAL CORPORATION
(Signed) David
Greifenberger
Managing Director, Investment Banking
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CANACCORD GENUITY CORP.
(Signed) Earle McMaster
Director, Investment Banking
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SPROTT CAPITAL PARTNERS LP, by its General Partner,
SPROTT CAPITAL PARTNERS LP INC.
(Signed) David
Wargo
Managing Director and Head of Investment Banking
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31