2023 Full Year Financial Results
26/03/2024 07:00
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TORONTO, ONTARIO, March 26, 2024 (GLOBE NEWSWIRE) -- (“Amaroq” or the
“Corporation” or the “Company”)
2023 Full Year Financial Results
Well-funded and on track to progress development of Nalunaq in 2024
TORONTO, ONTARIO – 26 March 2024 - Amaroq Minerals Ltd. (AIM, TSXV, NASDAQ
Iceland: AMRQ), an independent mine development company with a substantial
land package of gold and strategic mineral assets in Southern Greenland, is
presents its Q4 and FY 2023 financials and provide an update on its planned
operational activities for 2024. All dollar amounts are expressed in Canadian
dollars unless otherwise noted.
A remote presentation for sell-side analysts and investors will be held
remotely at 14:00 GMT today, followed by an opportunity to ask questions.
Analysts and investors who wish to participate in the webcast are requested to
register via the link here: https://brrmedia.news/AMRQ_FY23
Eldur Olafsson, CEO of Amaroq, commented:
“Following our successful Fundraising in February 2024, we have increased
the scope of the Nalunaq gold project development to account for accelerating
the transition of the process plant to nameplate capacity of 300 tonnes per
day.
“We experienced some operational and procurement delays towards the end of
2023 due to adverse weather conditions, which continued into the start of
2024. This situation has now significantly improved and we are making good
operational progress.
“Greenland offers significant potential for improving the security of supply
of raw materials for Europe. We are particularly encouraged by recent
developments following the recent signing of two new collaboration agreements
to strengthen the EU-Greenland Partnership and the opening of a new EU office
in Nuuk. 2024 is a crucial year for Amaroq as we focus on bringing Nalunaq
into production, whilst accelerating exploration activities across our wider
precious and strategic metals portfolio. We look forward to providing further
updates on the Nalunaq development programme at a planned Capital Markets
event in early Summer.”
FY 2023 Corporate Highlights
* Amaroq group liquidity of C$78.2 million (cash (gold and strategic minerals
businesses) loan and overrun facility) as of December 31, 2023
* Gold business working capital of C$37.6 million as of December 31, 2023
(C$59 million as at September 30, 2023)
* Strategic minerals business available liquidity of C$18.7 million as of
December 31 (C$22.5 million as at September 30, 2023)
* Successful transfer of Icelandic listing to Iceland Nasdaq Main Market in
2023 and admission to the OMX Iceland 15 Index, effective in January 2024
* Completion of most successful drilling program at Nalunaq to date and
discovery of new 75 vein, underpinning potential for faster resource growth
* Awarded two additional licences in South Greenland, increasing the
Corporation's total licence holding to 9,785.56 km(2), making it the largest
licence holder any mining company in Greenland
* Geological interpretation and advanced data science at the Nanoq target have
expanded its potential size and have indicated a 25km corridor linking it to
the Jokum's Shear project
* Promising results from 2023 Strategic Minerals exploration programme, with
significant new nickel-copper discovery at Stendalen
* Post-period, in February 2024, the Company completed a Fundraising, raising
net proceeds of approximately $75 million, to accelerate mining of the Target
Block at the Nalunaq and associated works to enable a smoother transition of
the process plant to nameplate capacity of 300 tonnes of ore processed per
day.
* Amaroq achieved score of “Good” by Icelandic ratings agency Reitun it
their first ESG assessment of the Company. Amaroq was placed it in category
B3, with a score of 68 points. The rating is based on the Company’s
performance in environmental, social and governance (ESG) matters.
Q4 2023 Operational Highlights
* Contracting and Procurement: At the end of Q4 2023, 80% of the key contracts
for the processing plant were concluded and procurement was 80% completed.
Thyssen Schachtbau GMBH is contracted on the underground development and
mining while Halyard Inc. is the engineering consultant in the staged
construction of the processing plant
* Engineering: Process plant engineering was 77% complete at the end of Q4
2023 based on the updated project scope
* Construction: Two wings were added to the camp, increasing the accommodation
capacity by 60 beds. The overall construction status of the processing plant
was 16% at the end of Q4 2023 based on the updated project scope and 23% as at
the end of February 2024
* Mining: Mine rehabilitation works were continued in Q4 2023. This work lays
the foundation for safe and efficient trial mining to commence at the end of
Q1 2024 or early Q2 2024
* Nalunaq Exploration: New underground samples beyond the historically mined
areas of Target Block, Nalunaq's largest historic mining block, confirmed
continuation of high-grade mineralisation into modelled extension area with
grades of up to 48.3g/t Au over 1m. Additional intersections of the newly
discovered 75 Vein provide further confidence in its thickness and continuity
* Strategic Minerals: Provisional results from Sava 2023 Drilling programme
further indicate the existence of a new 120km long copper district in South
Greenland. The Stendalen Drilling programme in 2023 resulted in a significant
new Ni-Cu discovery at the Stendalen Project.
Nalunaq Project KPIs
* 45,384 hours worked during Q4 2023. 107,184 total hours worked during FY
2023
* Daily average of 33 people working on site at Nalunaq in Q4 2023
* One Lost Time Injury (LTI) in 2023
* Amaroq remains committed to ensuring local representation among the
workforce, with the ratio of Greenlandic personnel at Nalunaq standing at 61%
for 2023
2024 Outlook
* Permitting: The public consultation for the Environmental Impact Assessment
(EIA) and Social Impact Assessment (SIA) for Nalunaq closed on 1(st) March
2024. The Company is following the process agreed with the Government of
Greenland to respond to the small number of comments received
* Engineering: Engineering for the processing plant is expected to be
completed in Q2 2024
* Contracting and Procurement: The remaining contracts are expected to be
concluded in Q2 2024. The only outstanding major contract is the installation
of the processing plant components. The quotes of different bidders are
currently being evaluated and the contract will then be awarded
* Construction: Placement of the process plant foundations is nearing
completion. The erection of the steel structure of the process plant building
is expected to commence in April 2024 and the installation of the mechanical
and electrical process plant components is scheduled for the second half of
2024
* Mining: The rehabilitation of the ramp from the 300 level portal to the
Mountain Block is nearing completion and will be followed by the development
of a ramp extending higher up into the Mountain Block. Rehabilitation of the
mine will progress based on the location of future planned mining activities.
The Company expects to mine first gold in 2024 and plans to provide a progress
update with timings for guidance for the project at an investor event in June
2024. First production guidance for 2025 will be provided towards the end of
2024.
* Support Infrastructure: In 2024 additional containers will be added, which
will allow Amaroq to accommodate in total up to 120 persons
* Nalunaq Exploration: Underground focused exploration will continue to target
extension of the Mountain and Target Blocks as well as further delineating the
newly discovered 75 Vein
* Strategic Minerals: Ni-Cu exploration will continue at the Stendalen
discovery with an expanded drilling programme targeting sulphide zone.
Exploration at Target West will look to further expand the identified copper
mineralisation and assess high grade potential. Regional exploration will
focus on additional copper targeting within the Copper belt, Ni-Cu sulphide
target similar to Stendalen and rare earth element (REE) targeting at
Nunarsuit
2024 Operational Workplan
Nalunaq Development Workplan
* Nalunaq * The main ramp will be developed from 720 level upwards into the
Mountain Block. Starting from the ramp, crosscuts will be driven into the main
vein at different levels and then drifts will be developed following the
strike of the vein. At a later stage the ore between these ore drifts will be
mined using the long-hole stoping method. Later in 2024, development and
exploration drilling activities will be carried out in the Target Block in
parallel to the aforementioned works. Rehabilitation of the mine will continue
depending on the locations, where future mining activities are planned.
Gold Exploration Projects
* Nalunaq * Following the underground rehabilitation, exploration will now
switch to underground drilling to target continued extensions of both the
Mountain and Target Blocks while simultaneously targeting further
intersections into the 75 vein.
* Nanoq * Following the expansion of the mineral potential at Nanoq in 2023,
the Company will construct facilities and finalise exploration plans allowing
Amaroq the option to conduct a maiden core drilling programme across the first
target at Nanoq. In addition, ground studies will be conducted to further
establish the additional targets generated by the geophysical and modelling
work completed in 2023.
* Vagar and Surrounding Areas * Amaroq intends to conduct a target generation
programme across the Vagar licence, including Vagar Ridge and other priority
areas in the local vicinity such as Eagle’s Nest, aimed at delineating
accessible high-grade material. Management believes that this material could
constitute future high-grade feed to the Nalunaq plant as it develops and
expands.
Strategic Minerals Projects (Amaroq 51%)
* Sava Copper Belt (Sava/North Sava) * Exploration at Target West will
concentrate on further defining Unit 1, which hosts observed copper
mineralisation. Mapping, sampling and a limited drilling programme will look
to expand the footprint of Unit 1 and test for higher grade material at depth.
* Target generation programmes will continue across Sava, North Sava and the
full extent of the Copper Belt assessing high priority porphyry and IOCG
targets on the ground. The aim of this programme will be to define new areas
for scout drilling.
* Stendalen
* Following the new Ni-Cu discovery made at Stendalen, Amaroq intends to
mobilise three drill rigs and a semi-permanent camp to site to facilitate an
expanded drilling programme. Drilling will focus on intersecting further
target areas at the base of the Stendalen intrusion including the interpreted
Feeder Zone targeting massive sulphide mineralisation.
* The Company plans to conduct further ground geophysics to provide further
confidence to the overall extend and geometry of the intrusion and associated
sulphide mineralisation.
* Leveraging off the data from this discovery, ground studies will also assess
the potential for further target areas with Stendalen and more regionally.
* Kobberminebugt * Amaroq will continue to review the results of the detailed
geophysical programme conducted over the Kobberminebugt licence in 2023.
Specific geophysical targets will be followed up in the field with detailed
mapping and surface sampling ahead of defining more definitive targets for
future scout drilling.
* Nunarsuit * Geophysical data collected during 2023 is currently being fully
assessed and Amaroq aim to conduct a targeted field programme on the licence
during the summer of 2024. Initial targets will include specific geophysical
anomalies as well as outcropping niobium bearing pegmatites.
Amaroq Financial Results
The following selected financial data is extracted from the Financial
Statements for the three months ended December 31, 2023.
Financial Results
Three months ended December 31 Year ended December 31
2023 $ 2022 $ 2023 $ 2022 $
Exploration and evaluation expenses 879,326 1,697,334 6,616,652 12,700,526
Site development costs 690,179 - 1,825,564 -
General and administrative 5,616,655 3,203,588 8,015,257 6,946,431
(Gain) on loss of control of subsidiary - - (31,340,880) -
Share of 3 and 12-months loss of an equity-accounted joint arrangement 2,871,156 - 5,021,231 -
Net income (loss) and comprehensive income (loss) (14,259,099) (4,426,345) 13,425,586 (17,472,618)
Basic and diluted income (loss) per common share (0.050) (0.020) 0.047 (0.100)
Financial Position
As at December 31 As at September 30
2023 $ 2023 $
Cash on hand 21,014,633 53,655,954
Total assets 106,953,183 111,193,232
Total current liabilities (before convertible notes liability) 6,354,185 2,818,672
Shareholders’ equity 64,278,637 77,982,519
Working capital (before convertible notes liability) 37,614,068 58,690,730
Gold business liquidity (excludes $18.7M and $22.5M ring-fenced for strategic mineral exploration as of Dec 31, 2023 and Sept 30, 2023 respectively) 59,514,633 92,353,824
Ends
Enquiries:
Amaroq Minerals Ltd.
Eldur Olafsson, Executive Director and CEO
eo@amaroqminerals.com
Eddie Wyvill, Corporate Development
+44 (0)7713 126727
ew@amaroqminerals.com
Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker)
Callum Stewart
Varun Talwar
Simon Mensley
Ashton Clanfield
+44 (0) 20 7710 7600
Panmure Gordon (UK) Limited (Joint Broker)
Hugh Rich
Dougie Mcleod
+44 (0) 20 7886 2500
Camarco (Financial PR)
Billy Clegg
Elfie Kent
Charlie Dingwall
+44 (0) 20 3757 4980
For Company updates:
Follow @Amaroq_minerals on Twitter
Follow Amaroq Minerals Inc. on LinkedIn
Further Information:
About Amaroq Minerals
Amaroq Minerals' principal business objectives are the identification,
acquisition, exploration, and development of gold and strategic metal
properties in Greenland. The Company's principal asset is a 100% interest in
the Nalunaq Project, a development stage property with an exploitation license
including the previously operating Nalunaq gold mine. The Corporation has a
portfolio of gold and strategic metal assets in Southern Greenland covering
the two known gold belts in the region. Amaroq Minerals is incorporated under
the Canada Business Corporations Act and wholly owns Nalunaq A/S, incorporated
under the Greenland Public Companies Act.
Certain statements in this release constitute "forward-looking statements" or
"forward-looking information" within the meaning of applicable securities
laws. Such statements and information involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the company, its projects, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements or information. Such
statements can be identified by the use of words such as "may", "would",
"could", "will", "intend", "expect", "believe", "plan", "anticipate",
"estimate", "scheduled", "forecast", "predict" and other similar terminology,
or state that certain actions, events or results "may", "could", "would",
"might" or "will" be taken, occur or be achieved. These statements reflect the
Company's current expectations regarding future events, performance and
results and speak only as of the date of this release.
Forward-looking statements and information involve significant risks and
uncertainties, should not be read as guarantees of future performance or
results and will not necessarily be accurate indicators of whether or not such
results will be achieved. A number of factors could cause actual results to
differ materially from the results discussed in the forward-looking statements
or information, including, but not limited to: material adverse changes,
unexpected changes in laws, rules or regulations, or their enforcement by
applicable authorities; the failure of parties to contracts with the company
to perform as agreed; social or labour unrest; changes in commodity prices;
and the failure of exploration, refurbishment, development or mining programs
or studies to deliver anticipated results or results that would justify and
support continued exploration, studies, development or operations.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Glossary
Ag silver
Au gold
Cu copper
EIA Environmental Impact Assessment
EU European Union
g grams
g/t grams per tonne
IOCG Iron Ore, Copper, Gold
km kilometers
Koz thousand ounces
LTI Lost Time Injury
m meters
Mo molybdenum
MRE Mineral Resource Estimate
Nb niobium
Ni nickel
oz ounces
REE Rare Earth Elements
SIA Social Impact Assessment
t tonnes
Ti Titanium
t/m (3) tonne per cubic meter
U uranium
V Vanadium
Zn zinc
Inside Information
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No. 596/2014 on Market Abuse ("UK MAR"),
as it forms part of UK domestic law by virtue of the European
Union (Withdrawal) Act 2018, and Regulation (EU) No. 596/2014 on Market Abuse
("EU MAR").
Qualified Person Statement
The technical information presented in this press release has been approved by
James Gilbertson CGeol, VP Exploration for Amaroq Minerals and a Chartered
Geologist with the Geological Society of London, and as such a Qualified
Person as defined by NI 43-101.
Amaroq Minerals Ltd.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
As at December 31, As at December 31,
Notes 2023 2022
$ $
ASSETS
Current assets
Cash 21,014,633 50,137,569
Due from a related party 21.1 3,521,938 -
Sales tax receivable 69,756 95,890
Prepaid expenses and others 5 18,681,568 450,290
Inventory 680,358 -
Total current assets 43,968,253 50,683,749
Non-current assets
Deposit 27,944 27,944
Escrow account for environmental monitoring 6 598,939 427,120
Investment in equity-accounted joint arrangement 7 23,492,811 -
Mineral properties 8 48,821 85,579
Right of use asset 11.1 574,856 655,063
Capital assets 9 38,241,559 13,216,606
Total non-current assets 62,984,930 14,412,312
TOTAL ASSETS 106,953,183 65,096,061
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities 6,273,979 1,138,961
Convertible notes 10 35,743,127 -
Lease liabilities – current portion 11 80,206 71,797
Total current liabilities 42,097,312 1,210,758
Non-current liabilities
Lease liabilities 11 577,234 657,440
Total non-current liabilities 577,234 657,440
Total liabilities 42,674,546 1,868,198
Equity
Capital stock 12 132,117,971 131,708,387
Contributed surplus 13 6,725,568 5,250,865
Accumulated other comprehensive loss (36,772) (36,772)
Deficit (74,528,130) (73,694,617)
Total equity 64,278,637 63,227,863
TOTAL LIABILITIES AND EQUITY 106,953,183 65,096,061
Subsequent events 23
The accompanying notes are an integral part of these consolidated financial
statements.
Approved on Behalf of the Board of Directors
(s) Eldur Ólafsson (s) Line Frederiksen
Eldur Ólafsson Line Frederiksen
Director Director
Notes 2023 2022
$ $
Expenses
Exploration and evaluation expenses 16 6,616,652 12,700,526
Site development costs 2,515,743 -
General and administrative 17 13,631,912 10,150,020
Loss on disposal of capital assets 37,791 100,536
Foreign exchange loss (gain) (306,705) (849,773)
Operating loss 22,495,393 22,101,309
Other expenses (income)
Interest income (1,069,559) (239,869)
Project management income 21.1 (1,714,559) -
Gain on loss of control of subsidiary 7 (31,340,880) -
Share of net losses of joint arrangement 7 7,892,387 -
Unrealised loss on derivative liability 10 4,536,411 -
Finance costs 18 34,320 37,523
Net loss and comprehensive loss (833,513) (21,898,963)
Weighted average number of common shares outstanding - basic and diluted 272,623,548 191,575,781
Basic and diluted loss per common share 20 (0.003) (0.11)
The accompanying notes are an integral part of these consolidated financial
statements.
Notes Number of common shares outstanding Capital stock Contributed surplus Accumulated other comprehensive loss Deficit Total equity
$ $ $ $ $
Balance, January 1, 2022 177,098,737 88,500,205 3,300,723 (36,772) (51,795,654) 39,968,502
Net loss and comprehensive loss - - - - (21,898,963) (21,898,963)
Share issuance under a fundraising 85,714,285 46,313,551 - - - 46,313,551
Share issuance costs - (3,331,569) - - - (3,331,569)
Options exercised 260,000 226,200 (96,200) - - 130,000
Stock-based compensation 13.1 - - 2,046,342 - - 2,046,342
Balance, December 31, 2022 263,073,022 131,708,387 5,250,865 (36,772) (73,694,617) 63,227,863
Balance, January 1, 2023 263,073,022 131,708,387 5,250,865 (36,772) (73,694,617) 63,227,863
Net loss and comprehensive loss - - - - (833,513) (833,513)
- - - - - -
Share issuance under a fundraising - - - - - -
Share issuance costs - - - - - -
Options exercised, net 597,029 409,584 (433,600) - - (24,016)
Stock-based compensation 13.1 - - 1,908,303 - - 1,908,303
Balance, December 31, 2023 263,670,051 132,117,971 6,725,568 (36,772) (74,528,130) 64,278,637
The accompanying notes are an integral part of these consolidated financial
statements.
Notes 2023 2022
$ $
Operating activities
Net loss (833,513) (21,898,963)
Adjustments for:
Depreciation 9 698,273 770,492
Amortisation of ROU asset 11.1 80,207 80,207
Stock-based compensation 13.1 1,908,303 2,046,342
Unrealized loss on derivative liability 10 4,536,411 -
Convertible note transaction cost expensed 10.2 641,528 -
Gain on loss of control of subsidiary 7 (31,340,880) -
Share of net losses of joint arrangement 7 7,892,387 -
Other expenses - 2,785
Loss on disposal of capital assets 37,791 100,536
Foreign exchange (365,324) (882,897)
(16,744,817) (19,781,498)
Changes in non-cash working capital items:
Sales tax receivable 26,133 (44,640)
Due from a related party (3,521,938) -
Prepaid expenses and others (19,043,990) (183,673)
Escrow account for environmental monitoring 6 (168,140) -
Trade and other payables 5,093,572 (864,477)
(17,614,363) (1,092,790)
Cash flow used in operating activities (34,359,180) (20,874,288)
Investing activities
Acquisition of mineral properties 8 - (23,335)
Acquisition of capital assets 9 (24,303,517) (301,957)
Disposition of capital assets 9 - 63,325
Cash flow used in investing activities (24,303,517) (261,967)
Financing activities
Shares issuance - 46,313,551
Share issuance costs - (3,331,569)
Convertible note issue 10 30,431,180 -
Convertible note transaction costs 10.2 (1,004,030) -
Principal repayment – lease liabilities 11 (71,797) (50,722)
Exercise of stock options - 130,000
Cash flow from financing activities 29,355,353 43,061,260
Net change in cash before effects of exchange rate changes on cash (29,307,344) 21,925,005
Effects of exchange rate changes on cash 184,408 888,105
Net change in cash (29,122,936) 22,813,110
Cash, beginning 50,137,569 27,324,459
Cash, ending 21,014,633 50,137,569
Supplemental cash flow information
Borrowing costs capitalised to capital assets (note 9,10) 1,457,638 -
Interest received 1,069,559 239,869
The accompanying notes are an integral part of these consolidated financial
statements.
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Amaroq Minerals Ltd. (the “Corporation”) was incorporated on February 22,
2017 under the Canada Business Corporations Act. The Corporation’s head
office is situated at 3400, One First Canadian Place, P.O. Box 130, Toronto,
Ontario, M5X 1A4, Canada. The Corporation operates in one industry segment,
being the acquisition, exploration and development of mineral properties. It
owns interests in properties located in Greenland. The Corporation’s
financial year ends on December 31. Since July 2017, the Corporation’s
shares are listed on the TSX Venture Exchange (the “TSX-V”), since July
2020, the Corporation’s shares are also listed on the AIM market of the
London Stock Exchange (“AIM”) and from November 1, 2022, on Nasdaq First
North Growth Market Iceland which were transferred on September 21, 2023 on
Nasdaq Main Market Iceland (“Nasdaq”) under the AMRQ ticker.
These consolidated financial statements (“Financial Statements”) were
reviewed and authorized for issue by the Board of Directors on March 26, 2024.
2. ADOPTION OF NEW AND REVISED STANDARDS
2.1 New and amended accounting standards effective for the
current year
In the current year, the Corporation has applied a number of amendments to
IFRS Accounting Standards issued by the International Accounting Standards
Board (IASB) that have an effective date of 1 January 2023. The adoption of
these standards has not had any material impact on the disclosures and amounts
reported in these financial statements.
Amendments to IAS 1 Presentation of Financing Statements and IFRS Practice
Statement 2 Making Materiality Judgments – Disclosure of Accounting Policies
The amendments change the requirements in IAS 1 with regard to disclosure of
accounting policies. The amendments replace the term ‘significant accounting
policies’ with ‘material accounting policy information’. Accounting
policy information is material if, when considered together with other
information in the Corporation’s consolidated financial statements, can
reasonable be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements. IFRS Practice Statement 2 offers additional optional guidance
using a systematic four-step process to help companies make material judgments
when preparing financial statements.
The Corporation has adopted the amendments to IAS 1 by disclosing material
accounting policy information.
2. ADOPTION OF NEW AND REVISED STANDARDS (CONT’D)
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors – Definition of Accounting Estimates
This amendment to IAS 8 eliminate the definition of a change in accounting
estimate and replaces it with a definition of accounting estimates. Under the
new definition, accounting estimates are “monetary amounts in financial
statements that are subject to estimation uncertainty”.
2.2 Accounting standards issued but not yet effective
The Corporation has not yet adopted certain standards, interpretations to
existing standards and amendments which have been issued but have an effective
date of later than January 1, 2023. Many of these updates are not expected to
have any significant impact on the Corporation and are therefore not discussed
herein.
* Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
* Amendments to IAS 1 Classification of Liabilities as Current or Non-current
* Amendments to IAS 1 Non-current Liabilities with Covenants
* Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
* Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
The Corporation does not expect that the adoption of the Standards listed
above will have a material impact on the financial statements except as
indicated below.
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments
in Associates and Joint Ventures - Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
These amendments apply to situations in which there is a sale or contribution
of assets between an investor and its associate or joint venture. According to
the amendments, gains or losses arising from the loss of control of a
subsidiary that does not contain a business in a transaction with an associate
or a joint venture accounted for under the equity method, are recognised in
the parent’s profit or loss only to the extent of the unrelated investors’
interest in that associate or joint venture. Similarly, gains and losses
resulting from the remeasurements of an investment retained in a former
subsidiary are recognised in the former parent’s profit or loss only to the
extent of the unrelated investors’ interests in the new associate or joint
venture.
An effective date for these amendments has not been set yet. The Corporation
anticipates that these amendments may impact the Corporation’s consolidated
financial statements in future periods if such transactions were to occur.
Amendments to IAS 1 Presentation of Financial Statements – Classification of
Liabilities as Current or Non-current
These amendments, published in January 2020, only affect the presentation of
liabilities in the statement of financial position by clarifying that the
classification of liabilities as current or non-current should be based on
rights that are in existence at the end of the reporting period, regardless of
expectations regarding the exercise of the right to defer settlement.
Furthermore, the amendments explain that are rights are in existence if
covenants are complied with at the end of the reporting period and define
settlement as the transfer to the counter party of cash, equity instruments,
other assets or services.
The amendments are applied retrospectively for annual periods beginning on or
after 1 January 2024. Earlier application is permitted but requires that the
2022 IAS 1 amendments are applied early as well.
2. ADOPTION OF NEW AND REVISED STANDARDS (CONT’D)
The Corporations expects that the application of these amendments may have an
impact on the consolidated financial statements.
Amendments to IAS 1 Presentation of Financial Statements – Non-current
Liabilities with Covenants
These amendments, published in October 2022, indicate that only covenants that
must be complied with on or before the end of the reporting period affect the
right to defer settlement of a liability for at least twelve months after the
reporting date and must be considered in assessing the classification of the
liability as current or non-current. The right to defer settlement is not
affected if the covenants must be complied with after the reporting period,
however, if the right to defer settlement of a liability is subject to
complying with covenants within twelve months after the reporting period,
disclosures must be made to enable users to understand the risk of the
liabilities becoming repayable within twelve months after the reporting
period.
The amendments are applied retrospectively for annual periods beginning on or
after 1 January 2024. Earlier application is permitted but requires that the
2020 IAS 1 amendments are applied early as well.
The Corporations expects that the application of these amendments may have an
impact on the consolidated financial statements.
3. MATERIAL ACCOUNTING POLICIES
3.1 Basis of accounting
The Financial Statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”) and interpretations issued by the
International Financial Reporting Interpretations Committee. (“IFRIC”).
The Financial Statements have been prepared on the historical cost basis,
except for financial instruments at fair value.
3.2 Going concern
The Financial Statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.3 Basis of consolidation
The Financial Statements include the accounts of the Corporation and those of
its subsidiary Nalunaq A/S, corporation incorporated under the Greenland
Public Companies Act, owned at 100%.
Control is defined by the authority to direct the financial and operating
policies of a business in order to obtain benefits from its activities. The
amounts presented in the consolidated financial statements of subsidiary have
been adjusted, if necessary, so that they meet the accounting policies adopted
by the Corporation.
Profit or loss or other comprehensive loss of subsidiary set up, acquired or
sold during the year are recorded from the actual date of acquisition or until
the effective date of the sale, if any. All intercompany transactions,
balances, income and expenses are eliminated at consolidation.
3.4 Investments in joint venture
The financial results of the Corporation’s investments in its joint
arrangement are included in the Corporation’s results using the equity
method. Under the equity method, the investment is initially recognized at
cost, and the carrying amount is increased or decreased to recognize the
Corporation’s share of comprehensive income or loss of the joint venture
after the date of acquisition. The Corporation’s share of profits or losses
is recognized in the condensed interim statement of income (loss).
The Corporation assesses at each period-end whether there is any objective
evidence that its investments in joint ventures are impaired. If impaired, the
carrying value of the Corporation’s share of the underlying assets of the
joint venture is written down to its estimated recoverable amount (being the
higher of fair value less costs of disposal and value in use) and charged to
the statement of income (loss).
3.5 Functional and presentation currency – Foreign currency
transactions
The functional and presentation currency of the Corporation is Canadian
dollars (“CAD”). The functional currency of Nalunaq A/S and Gardaq A/S is
CAD. The functional currency of Nalunaq A/S and Gardaq A/S is determined using
the currency of the primary source of economic activity and using the currency
which is more representative of the economic effect of the underlying
financings, transactions, events and conditions.
Foreign currency transactions are translated into the functional currency of
the underlying entity using appropriate rates of exchange prevailing on the
dates of such transactions. Monetary assets and liabilities denominated in
foreign currencies are translated at the functional currency rate of exchange
in effect at the end of each reporting period. Foreign exchange gains and
losses resulting from the settlement of such transactions are recognized in
the net profit or loss.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.6 Mineral properties and exploration and evaluation expenses
Mineral properties include rights in mining properties, paid or acquired
through a business combination or an acquisition of assets, and costs related
to the initial search for mineral deposits with economic potential or to
obtain more information about existing mineral deposits.
All costs incurred prior to obtaining the legal rights to undertake
exploration and evaluation on an area of interest are expensed as incurred.
Mining rights are recorded at acquisition cost or at its recoverable amount in
the case of a devaluation caused by an impairment of value. Mining rights and
options to acquire undivided interests in mining rights are depreciated only
as these properties are put into commercial production. Proceeds from the sale
of mineral properties are applied as a reduction of the related carrying costs
and any excess or shortfall is recorded as a gain or loss in the consolidated
statement of comprehensive loss.
Exploration and evaluation expenses (“E&E expenses”) also typically
include costs associated with prospecting, sampling, trenching, drilling and
other work involved in searching for ore such as topographical, geological,
geochemical and geophysical studies. Generally, expenditures relating to
exploration and evaluation activities are expensed as incurred.
E&E expenses include costs related to establishing the technical and
commercial viability of extracting a mineral resource identified through
exploration or acquired through a business combination or asset acquisition.
E&E include the cost of:
* establishing the volume and grade of deposits through drilling of core
samples, trenching and sampling activities in an ore body that is classified
as either a mineral resource or a proven and probable reserve;
* determining the optimal methods of extraction and metallurgical and
treatment processes, including the separation process, for Corporation’
mining properties;
* studies related to surveying, transportation and infrastructure
requirements;
* permitting activities; and
* economic evaluations to determine whether development of the mineralized
material is commercially justified.
Technical feasibility and commercial viability of an exploration and
evaluation asset are demonstrated when considering the facts and circumstances
relating to the asset under assessment. These facts and circumstances include,
but are not limited to, the following:
* The life of mine plan and economic modeling support the economic extraction
of such resources and/or reserves;
* The operating and environment permits for the area to be mined exist or are
reasonably assured as obtained; and
* The Board has approved the decision to proceed to the development phase
E&E include overhead expenses directly attributable to the related activities.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.7 Capital assets
Capital assets are stated at cost less accumulated depreciation and
accumulated impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of an asset. Subsequent costs are included in
the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefit associated
with the item will flow to the Corporation and the cost can be measured
reliably. The carrying amount of a replaced asset is derecognized when
replaced.
The intangible assets include software with a definite useful life. The assets
are capitalized and amortized on a straight-line basis in the consolidated
statement of comprehensive loss. The intangible assets are assessed for
impairment whenever there is an indication that the intangible assets may be
impaired.
Depreciation is calculated to amortize the cost of the capital assets less
their residual values over their estimated useful lives using the
straight-line method and following periods by major categories:
Field equipment and infrastructure related to exploration and evaluation activities 3 to 10 years
Vehicles and rolling stock 3 to 10 years
Equipment 3 to 10 years
Software 3 to 10 years
Right-of-use assets Lease term
Depreciation of capital assets, if related to exploration activities, is
expensed consistently with the policy for exploration and evaluation expenses.
For those which are not related to exploration and evaluation activities,
depreciation expense is recognized directly in the consolidated statement of
comprehensive loss. Assets capitalized under Construction in Progress are not
depreciated as they are not available for use yet.
Residual values, methods of depreciation and useful lives of the assets are
reviewed annually and adjusted if appropriate.
Proceeds from selling items before the related item of Property, plant and
equipment is available for use are recognized in profit or loss, together with
the costs of producing those items. The Corporation therefore distinguishes
between the costs associated with producing and selling items before the item
of Property, plant and equipment (pre-production revenue) is available for use
and the costs associated with making the item of Property, plant and equipment
available for its intended use. For the sale of items that are not part of the
Corporation’s ordinary activities, the Corporation discloses separately the
sales proceeds and related production cost recognized in profit or loss and
specify the line items in which such proceeds and costs are included in the
consolidated statement of comprehensive loss.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.7.1 Nalunaq mine project
Management established that effective September 1, 2023, the Nalunaq Project
is in the development phase. Accordingly, all expenditures related to the
restart of the Nalunaq mine and the associated development of the initial
processing plant and surface infrastructure are capitalized under Construction
in Progress within Capital assets (see note 9). Capitalized expenditures will
be carried at cost until the Nalunaq Project is placed into commercial
production, sold, abandoned, or determined by management to be impaired in
value. The mine and mobile equipment, process plant building and the Nalunaq
mine are not yet available for use as intended by Management as at December
31, 2023, therefore, depreciation has not yet commenced.
3.8 Leases
At the commencement date of a lease, a liability is recognized to make lease
payments (i.e., the lease liability) and an asset representing the right to
use the underlying asset during the lease term (i.e., the right-of-use asset)
is also recognized. The interest expense on the lease liability is recognized
separately from the depreciation expense on the right-of-use asset.
The lease liability is remeasured upon the occurrence of certain events (e.g.,
a change in the lease term, a change in future lease payments resulting from a
change in an index or rate used to determine those payments). This
remeasurement is generally recognized as an adjustment to the right-of-use
asset. Leases of “low-value” assets and short-term leases (12 months or
less) are recognized on a straight-line basis as an expense in the
consolidated statement of comprehensive loss.
3.9 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets are added to the cost of those assets.
Qualifying assets are assets that take a substantial period of time until they
are ready for their intended use. Borrowing costs, less any temporary
investment income on those borrowings, that are directly attributable to the
acquisition, construction or production of a qualifying asset are included in
the cost of that asset if it is probable that they will result in future
economic benefits to the Corporation and the costs can be measured reliably.
Borrowing costs that are incurred for general purposes are allocated to
qualifying assets by applying a capitalisation rate to the expenditures on
that asset. The capitalisation rate shall be the weighted average of the
borrowing costs appliable to all borrowings of the Corporation that are
outstanding during the period. Capitalisation of borrowing costs ceases when
the all the activities necessary to prepare the qualifying asset for its
intended use or sale are substantially complete.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.10 Impairment of non-financial assets
Mineral properties and capital assets are reviewed for impairment if there is
any indication that the carrying amount may not be recoverable. Assets under
Construction in Progress are subject to an annual impairment test since it
they are not depreciated yet. Mineral properties and capital assets are
reviewed by area of interest. If any such indication is present, the
recoverable amount of the asset is estimated in order to determine whether
impairment exists. Where the asset does not generate cash flows that are
independent from other assets, the Corporations estimates the recoverable
amount of the asset group to which the asset belongs.
An asset’s recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value, using a pre-tax discount
rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which estimates of future cash flows have
not been adjusted.
If the recoverable amount of an asset or asset group is estimated to be less
than its carrying amount, the carrying amount is reduced to the recoverable
amount. Impairment is recognized immediately in the consolidated statement of
comprehensive loss. Where an impairment subsequently reverses, the carrying
amount is increased to the revised estimate of recoverable amount but only to
the extent that this does not exceed the carrying value that would have been
determined if no impairment had previously been recognized. A reversal is
recognized as a reduction in the impairment charge for the period.
3.11 Environmental monitoring provision
Provisions are recorded when a present legal or constructive obligation exists
as a result of past events where it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a
reliable estimate of the amount of the obligation can be made. The Corporation
is subject to laws and regulations relating to environmental matters,
including land reclamation and discharge of hazardous materials and
environmental monitoring. The Corporation may be found to be responsible for
damage caused by prior owners and operators of its unproven mineral interests
and in relation to interests previously held by the Corporation.
On initial recognition, the estimated net present value of a provision is
recorded as a liability and a corresponding amount is added to the capitalized
cost of the related non-financial asset or charged to consolidated statement
of comprehensive loss if the property has been written off. Discount rates
using a pre-tax rate that reflects the time value of money and the risk
associated with the liability are used to calculate the net present value. The
provision is evaluated at the end of each reporting period for changes in the
estimated amount or timing of settlement of the obligation.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.12 Taxation
Income tax expense represents the sum of tax currently payable and deferred
tax.
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount
are those that are substantively enacted by the date of the consolidated
statement of financial position.
Deferred income taxes are provided using the liability method on temporary
differences at the date of the consolidated statement of financial position
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary
differences, except:
* where the deferred income tax liability arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable earnings; and
* in respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of
the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
3.13 Equity
Capital stock represents the amount received on the issue of shares. Warrants
represent the allocation of the amount received for units issued as well as
the charge recorded for the broker warrants relating to financing. Options
represent the charges related to stock options until they are exercised.
Contributed surplus includes charges related to stock options and the warrants
that are expired and not yet exercised. Contributed surplus also includes
contributions from shareholders. Deficit includes all current and prior period
retained profits or losses and share issue expenses.
Share and warrant issue expenses are accounted for in the year in which they
are incurred and are recorded as a deduction to equity in the year in which
the shares and warrants are issued.
Costs related to shares not yet issued are recorded as deferred share issuance
costs. These costs are deferred until the issuance of the shares to which the
costs relate to, at which time the costs will be charged against the related
share capital or charged to operations if the shares are not issued.
Proceeds from unit placements are allocated between shares and warrants issued
on a pro-rata basis of their value within the unit using the Black-Scholes
pricing model.
3.14 Interest income
Interest income from financial assets is accrued, by reference to the
principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.15 Stock-based compensation
Employees and consultants of the Corporation may receive a portion of their
compensation in the form of share-based payment transactions, whereby
employees or consultants render services as consideration for equity
instruments (“equity-settled transactions”).
The costs of equity-settled transactions with employees and others providing
similar services are measured by reference to the fair value at the date on
which they are granted.
The costs of equity-settled transactions are recognized, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award (“the vesting
date”). The cumulative expense is recognized for equity-settled transactions
at each reporting date until the vesting date reflects the Corporation’ best
estimate of the number of equity instruments that will ultimately vest. The
profit or loss charge or credit for a period represents the movement in
cumulative expense recognized as at the beginning and end of that period and
the corresponding amount is represented in contributed surplus.
No expense is recognized for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied
provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense
recognized is the expense as if the terms had not been modified. An additional
amount is recognized on the same basis as the amount of the original award for
any modification which increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee as measured at
the date of modification.
3.16 Loss per share
The basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. The diluted
loss per share reflects the potential dilution of common share equivalents,
such as outstanding options, restricted share unit and warrants, in the
weighted average number of common shares outstanding during the year, if
dilutive. During 2023 and 2022, all the outstanding common share equivalents
were anti-dilutive.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.17 Financial instruments
Financial assets and financial liabilities are recognized when the Corporation
becomes a party to the contractual provisions of the financial instrument.
Financial assets and liabilities are offset and the net amount is reported in
the consolidated statement of financial position when there is an
unconditional and legally enforceable right to offset the recognized amounts
and there is an intention to settle on a net basis, or realize the asset and
settle the liability simultaneously.
All financial instruments are required to be measured at fair value on initial
recognition. The fair value is based on quoted market prices, unless the
financial instruments are not traded in an active market. In this case, the
fair value is determined by using valuation techniques like the Black-Scholes
option pricing model or other valuation techniques.
3.17.1 Financial assets
Financial assets are derecognized when the contractual rights to receive the
cash flows from the financial asset have expired, or when the financial asset
and all substantial risks and rewards have been transferred. A financial
liability is derecognized when it is extinguished, discharged, cancelled or
when it expires.
Financial assets are initially measured at fair value. If the financial asset
is not subsequently accounted for at fair value through profit or loss, then
the initial measurement includes transaction costs that are directly
attributable to the asset’s acquisition or origination. On initial
recognition, the Corporation classifies its financial instruments in the
following categories depending on the purpose for which the instruments were
acquired.
Amortized cost:
Financial assets at amortized cost are non-derivative financial assets with
fixed or determinable payments constituted solely of payments of principal and
interest that are held within a “held to collect” business model.
Financial assets at amortized cost are initially recognized at the amount
expected to be received, less, when material, a discount to reduce the
financial assets to fair value. Subsequently, financial assets at amortized
cost are measured using the effective interest method less a provision for
expected losses. The Corporation’s cash, due from a related party, and
escrow account for environmental monitoring are classified within this
category.
Any gain or loss arising on derecognition is recognized directly in profit or
loss and presented in other gains/(losses), together with foreign exchange
gains and losses. Impairment losses are presented as separate line item in the
consolidated statement comprehensive loss.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.17.2 Financial liabilities and equity
A financial liability is derecognized when extinguished, discharged,
terminated, cancelled or expired.
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the contractual arrangements and the definitions
of a financial liability and an equity instrument.
Financial liabilities measured at amortized cost
Financial liabilities are initially measured at fair value. Transaction costs
directly attributable to the issuance of the financial liability, other than
financial liabilities at fair value through profit or loss, are deducted from
the financial liability’s fair value on initial recognition. Transaction
costs directly attributable to the issuance of financial liabilities at fair
value through profit or loss are recognised immediately in profit or loss.
Financial liabilities are measured subsequently at amortised cost using the
effective interest method.
Equity instruments
An equity instrument is a contract that evidences a residual interest in the
assets of an entity net of its liabilities.
Compound instruments
The terms of a convertible note are evaluated to determine whether it contains
both a liability and an equity component. These components are classified
separately as financial liabilities, financial assets or equity instruments. A
conversion option that will be settled by the exchange of a fixed amount of
cash or another financial asset for a fixed number of the parent company’s
equity instruments is an equity instrument
The fair value of the liability component of the convertible note instrument
is estimated using market interest rates for similar non-convertible
instruments. This amount is recorded as a liability on an amortised cost basis
using the effective interest method until the instrument’s maturity date or
conversion.
The value of the conversion option classified as equity is determined by
subtracting the financial liability component’s fair value from the compound
instrument as a whole. The conversion option is then included in equity and is
not subsequently re-measured.
Transaction costs that relate to the issue of the convertible notes are
allocated to the liability and equity components in proportion to the
allocation of the gross proceeds, with the transaction costs related to the
equity component being allocated to equity, while the transaction costs
related to the liability component are included in the carrying amount of the
liability component and amortised over the life of the convertible loan note.
Embedded derivatives
Embedded derivatives are components of hybrid contracts. Hybrid contracts
contain a non-derivative host and an embedded derivative which impacts the
combined instrument in a way similar to a stand-alone derivative.
Derivatives that are embedded in hybrid contracts whose non-derivative host is
not a financial asset (for example, a financial liability) are recognised as
separate derivatives if they meet the definition of a derivative and their
risks and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at fair value through profit
or loss. Embedded derivatives that are separated from a financial liability
host contract are measured at fair value. The residual value of the hybrid
contract is then allocated to the financial liability host contract.
3. MATERIAL ACCOUNTING POLICIES (CONT’D)
3.17.3 Impairment of financial assets
Amortized cost:
At each reporting date, the Corporation assesses, on a forward‐looking
basis, the expected credit losses associated with its debt instruments carried
at amortized cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk.
The expected loss is the difference between the amortized cost of the
financial asset and the present value of the expected future cash flows,
discounted using the instrument’s original effective interest rate. The
carrying amount of the asset is reduced by this amount either directly or
indirectly through the use of an allowance account. Provisions for expected
losses are adjusted upwards or downwards in subsequent periods if the amount
of the expected loss increases or decreases.
3.18 Segment disclosures
The Corporation operates in one industry segment, being the acquisition,
exploration and evaluation of mineral properties. All of the Corporation’
activities are conducted in Greenland.
4. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS
The preparation of these Financial Statements requires Management to make
judgments and form assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
expenses during the reporting period. On an ongoing basis, Management
evaluates its judgments in relation to assets, liabilities and expenses.
Management uses historical experience and various other factors it believes to
be reasonable under the given circumstances as the basis for its judgments.
Actual outcomes may differ from these estimates under different assumptions
and conditions. Critical judgments exercised in applying accounting policies
with the most significant effect on the amounts recognized in the Financial
Statements are described below.
JUDGMENTS
4.1 Impairment of mineral properties and capital assets
Determining if there are any facts and circumstances indicating impairment
loss or reversal of impairment losses is a subjective process involving
judgment and a number of estimates and interpretations in many cases.
4.1.2 Impairment of capital assets
Determining whether to test for impairment of capital assets requires
Management’s judgement, among other factors, regarding the following:
whether capital assets have been in use and depreciated, did market value of
capital assets decline, whether net assets of the Corporation are higher than
the market capitalization, was there any obsolescence or physical damage
recorded to the capital assets, was there an increase to market interest
rates.
4. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS (CONT’D)
When an indication of impairment loss or a reversal of an impairment loss
exists, the recoverable amount of the individual asset must be estimated. If
it is not possible to estimate the recoverable amount of the individual asset,
the recoverable amount of the cash-generating unit to which the asset belongs
must be determined. Identifying the cash-generating units requires
considerable management judgment. In testing an individual asset or
cash-generating unit for impairment and identifying a reversal of impairment
losses, Management estimates the recoverable amount of the asset or the
cash-generating unit. This requires management to make several assumptions as
to future events or circumstances. These assumptions and estimates are subject
to change if new information becomes available. Actual results with respect to
impairment losses or reversals of impairment losses could differ in such a
situation and significant adjustments to the Corporation’ assets and
earnings may occur during the next period.
With regards to the annual impairment test on Construction in Progress, the
Management has assessed that the replacement cost approach is the most
appropriate for determining the recoverable value of individual assets under
CIP. The Corporation has conducted the analysis based on the enquiry of the
current market prices obtained from suppliers for each asset under the CIP
category as well as the assessment of the recoverable value based on the
general Machinery and Equipment as well as Industrial Producer Price index
changes from 2021 to 2023. As a result of this analysis, the replacement value
of the assets under CIP category has produced a recoverable value that was at
least 20% higher than the carrying value of assets under CIP as of December
31, 2023.
4.2 Determination of functional currency
In accordance with IAS 21 “The Effects of Changes in Foreign Exchange
Rates”, Management determined that the functional currency of the
Corporation and its subsidiary is the Canadian dollar.
4.3 Capitalisation of borrowing costs
The Corporation makes judgments on the amount of borrowing costs that are
directly attributable to the acquisition of a qualifying asset.
4.4 Technical Feasibility and Commercial Viability (“TFCV”)
Management uses significant judgment to determine when TFCV is demonstrable.
Technical feasibility refers to the ability to physically construct and
operate a mineral project in a technically sound manner to produce a saleable
mineral product while commercial viability refers to the ability to mine the
mineral asset to generate a reasonable return on investment. Key
considerations used to determine if TFCV has been reached included the
establishment of confidence about mineralization, results and status of
studies, probability of obtaining key permits, the existence of other barriers
that may impact mining and the ability to generate a return on investment,
confidence of project potential by the Management and the Board of Directors.
Based on the criteria described above, Management has concluded that
sufficient evidence existed on September 1, 2023, for the Corporation to
declare TFCV for the Nalunaq Project. September 1, 2023, was aligned with the
date that the Board of Directors approved and closed the Financing package
deal (note 10), thus supporting the commercial viability of the project.
4. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS (CONT’D)
ESTIMATES AND ASSUMPTIONS
4.5 Environmental monitoring costs
The provisions for environmental monitoring costs are based on estimated
future costs using information available at the financial reporting date.
Determining these obligations requires significant estimates and assumptions
due to the numerous factors that affect the amount ultimately payable. Such
factors include estimates of the scope and cost of restoration activities,
legislative amendments, known environmental impacts, the effectiveness of
reparation and restoration measures and changes in the discount rate. This
uncertainty may lead to differences between the actual expense and the
provision. At the date of the consolidated statement of financial position,
environmental monitoring costs represent Management’s best estimate of the
charge that will result when the actual obligation is terminated.
4.6 Restricted Share Units (“RSU”)
For the purpose of determining the fair market value of restricted share unit
awards and a number of assumptions are required for input in the pricing
model. Determining these assumptions requires significant level of estimates
and Management’s judgement.
For equity-settled awards, assumptions must be determined at the date of the
grant. Such assumptions include grant calculation date, projection period,
share price at grant, exercise price, risk-free rate of interest, dividends,
share price volatility and forfeitures. The uncertainty related to the choice
of assumptions may lead to differences between the actual value of restricted
share unit awards and their estimated fair value based on the Monte-Carlo
simulation run. At the date of the consolidated statement of financial
position, restricted share units award and embedded derivative value
represents Management's best estimate of awards fair value vesting at
measurement dates stipulated under the RSU award contract.
4.7 Embedded Derivative
For the purpose of determining the fair market value of the embedded
derivative a number of assumptions are required for input in the pricing
model. Determining these assumptions requires significant level of estimates
and Management’s judgement.
Assumptions must be determined at the reporting date. Such assumptions include
term, share price on the reporting date, risk-free rate of interest and
volatility.
The uncertainty related to the choice of assumptions may lead to differences
between the actual value of the embedded derivative and its estimated fair
value based on the Black-Scholes pricing model.
5. PREPAID EXPENSES AND OTHERS
2023 2022
$ $
Advance payments to suppliers and mining contractors 17,848,780 157,501
Prepaid credit facility costs 408,792 -
Prepaid insurance 169,416 160,876
Prepaid exploration work 87,968 87,968
Other prepayments 166,612 43,945
Total prepaid expenses and others 18,681,568 450,290
6. ESCROW ACCOUNT FOR ENVIRONMENTAL MONITORING
On behalf of Nalunaq’s licence holder, an escrow account has been set up
with the holder of the licence as holder of the account and the Government of
Greenland as beneficiary. The funds in the escrow account have been provided
in favour of the Government of Greenland as security for fulfilling the
environmental monitoring expenses following the closure of the Nalunaq mine.
This environmental monitoring program was completed in 2020.
2023 2022
$ $
Balance beginning 427,120 424,637
Additions 168,140
Effect of translation 3,679 2,483
Balance ending 598,939 427,120
Non-current portion – escrow account for environmental monitoring (598,939) (427,120)
Current portion – escrow account for environmental monitoring - -
7. INVESTMENT IN EQUITY-ACCOUNTED JOINT ARRANGEMENT
As at December 31, 2023 As at December 31, 2022
$ $
Balance at beginning of period - -
Original Investment in Gardaq ApS 7,422 -
Transfer of non-gold strategic minerals licences at cost 36,896 -
Investment at conversion of Gardaq ApS to Gardaq A/S 55,344 -
Gain on FV recognition of equity accounted investment in joint venture 31,285,536 -
Investment retained at fair value- 51% share 31,385,198 -
Share of joint venture’s net losses- for the year ended December 31, 2023 (7,892,387) -
Balance at end of period 23,492,811 -
On June 10, 2022, the Corporation announced that it had signed a non-binding
head of terms with ACAM to establish a special purpose vehicle (the "SPV") and
created a joint venture (the "JV") for the exploration and development of its
Strategic Mineral assets for a combined contribution of $62.0 million (GBP
36.7 million). Subject to the final terms of the JV, ACAM invested $30.1
million (GBP 18 million) in exchange for a 49% shareholding in the SPV, with
Amaroq holding 51%. Amaroq contributed its strategic non- precious mineral
(i.e., non-gold) licenses, and will be required to provide a contribution in
kind over a three-year period, valued, in aggregate, at $31.4 million (GBP
18.7 million) in the form of site support, logistics and overhead costs
associated with utilizing its existing infrastructure in Southern Greenland to
support the JV's activities. The transfer of these licenses has been approved
by the Greenland Government on April 13, 2023.
The carrying value of the strategic non-precious mineral licenses transferred
to Gardaq A/S is $36,896 (Note 7).
7. INVESTMENT IN EQUITY-ACCOUNTED JOINT ARRANGEMENT (CONT’D)
Upon execution of the Subscription and Shareholders’ Agreement (“SSHA”)
on April 13, 2023, the Corporation has ceased the control of Gardaq on that
date. As a result of the Corporation losing control over the subsidiary:
* The Corporation derecognizes the assets and liabilities of the subsidiary
from the consolidated statement of financial position,
* Recognizes the fair value of the consideration received from the transaction
that has resulted in the loss of control,
* Recognizes any investment retained in the former subsidiary at its fair
value once control is lost and subsequently accounts for it and any amounts
owed by or to the former subsidiary in accordance with the relevant IFRS. The
fair value shall be regarded as a fair value of the initial recognition of the
investment in the joint venture.
* Subsequently recognizes joint venture’s share of net profits or losses
proportionately to the retained share of investment for the reporting periods.
Given that the relevant activities of Gardaq require unanimous consent of its
shareholders in accordance with the SSHA, Management has determined that it
has joint control and as such the Corporation performed deconsolidation of
Gardaq A/S as at April 13, 2023, the date when control was lost. The fair
value of the 51% equity investment retained in Gardaq A/S was determined to be
$31,385,198 (GBP 18.7million). The fair value of Gardaq A/S was measured based
on the cash consideration received in exchange for 49% of the outstanding
shares.
The Corporation has determined that it has a joint control in Gardaq A/S as
decisions around relevant activities require unanimous shareholder approval.
Effective April 13, 2023, the Corporation’s investment was accounted for as
an investment in joint venture using the equity method. The equity method
involves recording the initial investment at cost and subsequently adjusting
the carrying value of the investment for the Corporation’s proportionate
share of the profit or loss, other comprehensive income or loss and any other
changes in the joint venture’s net assets, such as further investments or
dividends. For the year ended December 31, 2023 the Corporation recorded the
51% proportion of net loss from Gardaq of $7,892,387.
7. INVESTMENT IN EQUITY-ACCOUNTED JOINT ARRANGEMENT (CONT’D)
The following tables summarize the financial information of Gardaq A/S as of
December 31, 2023.
As at December 31, 2023
$
Cash and cash equivalent 18,377,850
Prepaid expenses and other 351,752
Total current assets 18,729,602
Mineral property 92,239
Total Assets 18,821,841
Accounts payable and accrued liabilities 4,036,532
Due to related parties 13,641
Capital stock 30,246,937
Deficit (15,475,269)
Total equity 14,771,668
Total liabilities and equity 18,821,841
For the year ended December 31, 2023
$
Exploration and Evaluation expenses 13,950,672
Interest expense (income) (2,651)
Foreign exchange loss (gain) (187,011)
Operating loss 13,761,010
Other expenses (income) 1,714,260
Net loss and comprehensive loss 15,475,270
8. MINERAL PROPERTIES
As at December 31, 2022 Transfers (Note 6) As at December 31, 2023
$ $ $
Nalunaq - Au 1 - 1
Tartoq - Au 18,431 - 18,431
Vagar - Au 11,103 - 11,103
Nuna Nutaaq - Au 6,076 - 6,076
Anoritooq - Au 6,389 - 6,389
Siku - Au 6,821 - 6,821
Naalagaaffiup Portornga - Strategic Minerals 6,334 (6,334) -
Saarloq - Strategic Minerals 7,348 (7,348) -
Sava - Strategic Minerals 6,562 (6,562) -
Kobberminebugt - Strategic Minerals 6,840 (6,840) -
Stendalen - Strategic Minerals 4,837 (4,837) -
North Sava - Strategic Minerals 4,837 (4,837) -
Total mineral properties 85,579 (36,758) 48,821
8. MINERAL PROPERTIES (CONT’D)
As at December 31, 2021 Additions As at December 31, 2022
$ $ $
Nalunaq - Au 1 - 1
Tartoq - Au 18,431 - 18,431
Vagar - Au 11,103 - 11,103
Nuna Nutaaq - Au 6,076 - 6,076
Anoritooq - Au 6,389 - 6,389
Siku - Au - 6,821 6,821
Naalagaaffiup Portornga - Strategic Minerals 6,334 - 6,334
Saarloq - Strategic Minerals 7,348 - 7,348
Sava - Strategic Minerals 6,562 - 6,562
Kobberminebugt - Strategic Minerals - 6,840 6,840
Stendalen - Strategic Minerals - 4,837 4,837
North Sava - Strategic Minerals - 4,837 4,837
Total mineral properties 62,244 23,335 85,579
8.1 Nalunaq - Au
Nalunaq A/S holds the gold exploitation licence number 2003/05 on the Nalunaq
property (the “Nalunaq Licence”) located in South West Greenland. The
licence expires in April 2033 with an extension possible up to 20 years.
8.1.1 Collaboration agreement and project schedule
Cyrus Capital Partners LP was the main creditor of Angel Mining PLC, the
parent company of Angel Mining (Gold) A/S. Angel Mining PLC went into
administration in February 2013 and as part of the Administrator’s
restructuring process, FBC Mining (Holdings) Ltd. (“FBC Mining”) and
Arctic Resources Capital S.à r.l. (“ARC”) agreed to enter into a
collaboration agreement (“Collaboration Agreement”) (signed July 15, 2015)
to progress the Nalunaq exploration project. FBC Mining is a 100% subsidiary
of FBC Holdings S.à r.l which is managed by Cyrus Capital Partners LP.
In addition, ARC, FBC Mining and AEX Gold Limited (previously known as FBC
Mining (Nalunaq) Limited) (a 100% subsidiary of FBC Mining) signed on
July 17, 2015 the Nalunaq project schedule (“2015 Project Schedule”)
which was continued following the signature with Nalunaq A/S on March 31, 2017
of the 2016-2017 Nalunaq Project Schedule (“2016-2017 Project Schedule”),
(collectively “Project Schedules”).
8. MINERAL PROPERTIES (CONT’D)
Finally, the conditions relating to a processing plant located on the Nalunaq
Licence (“Processing Plant”) and a royalty payment were outlined in the
2015 Project Schedule and formalized in the processing plant and royalty
agreement (“Processing Plant and Royalty Agreement”) signed on March 31,
2017 and the conditions are as follows:
a) AEX Gold Limited transfers the Processing Plant to Nalunaq A/S under
the following conditions:
i) An initial purchase price of US$1;
ii) A deferred consideration of US$1,999,999 (“Deferred
Consideration”) on a pay as you go basis until the Deferred Consideration is
paid in full. If only part of the Processing Plant is used, then the Deferred
Consideration payable shall be reduced by an amount to be agreed by the
parties to reflect the value of the part of the Processing Plant used.
iii) The Deferred Consideration may be reduced to the extent that the
Processing Plant or any part which is being used requires repairs, is not in
good working condition or will not be capable of doing the work for which it
was designed.
iv) Nalunaq A/S may dispose or otherwise deal with the Processing Plant
or any part of it at its own cost. If any disposal proceeds (defined as
proceeds received minus costs of dealing with the disposal) are received, that
disposal proceeds shall be paid to AEX Gold Limited and such amount shall be
deemed to be Deferred Consideration. If there are any disposal proceeds
remaining after the Deferred Consideration has been paid in full, the disposal
proceeds remaining may be retained by Nalunaq A/S.
b) Nalunaq A/S shall pay to AEX Gold Limited a 1% royalty on Nalunaq
A/S’ net revenue generated on the Nalunaq Licence (total revenue minus
production, transportation and refining costs), provided that in respect to
the last completed calendar year, the operating profit per ounce of gold
exceeded US$500. The cumulative royalty payments over the life of mine are
capped at a maximum of US$1,000,000.
8.1.2 Government of Greenland royalty
The Nalunaq Licence and subsequent Addendums does not have a royalty clause.
However, according to the Addendum 3 of the Mineral Resources Act enacted on
July 1, 2014, the Greenland Government may set terms on the licensee’s
payment of royalty or consideration, if the Greenland Government and the
licensee agree, since the Nalunaq Licence was granted before July 1, 2014.
Nalunaq A/S may have to pay to the Government of Greenland a sales royalty of
up to 2.5% of the value of the minerals. Nalunaq A/S may on certain terms
offset an amount equal to paid corporate income tax and corporate dividend tax
against the sales royalty to be paid.
8.1.3 Exploration commitments and exploitation milestones
After Nalunaq A/S has submitted its statements of expenses for the Nalunaq
Licence for the 2017 and 2018 years, the MLSA has approved Nalunaq A/S’
transition to the subsequent period (sub period 4) without a rollover of the
unspent amount.
The Government of Greenland has been confirmed with Addendum No. 5 dated March
2020 which was signed by the Government of Greenland and therefore became
effective on March 13, 2020, to extend the requirement dates to perform the
following tasks. No later than December 31, 2022, the licensee shall prepare
an environmental impact assessment, make a social impact assessment and
perform an impact benefit agreement. The time limit for commencement of
exploitation is January 1, 2023. As these deadlines have passed, the
Government of Greenland has completed Addendum No. 6.
8. MINERAL PROPERTIES (CONT’D)
On the 14th and 15th December 2022 the Corporation signed Addendum 6 to the
Nalunaq licence which amended certain of the milestone dates pertaining to the
licence including commencing exploitation by 1 January 2026; preparing an
Environmental Impact Assessment (EIA) and Social Impact Assessment (SIA) by
December 2023; negotiating, concluding and performing an Impact Benefit
Agreement (“IBA”) by 31 December 2024. Prior to commencement of
exploitation and no later than December 31, 2025 the licence will be amended
to include terms on royalty.
On September 21, 2023 and October 13, 2023 the Corporation signed Addendum 7
to the Nalunaq Licence which amended certain of the Milestones pertaining to
the licence including preparing an Environmental Impact Assessment (EIA) and
Social Impact Assessment (SIA) by 30 June 2024. . The addendum became
effective on November 6, 2023, when it was signed by the Government of
Greenland. Failure to satisfy any of the conditions set forth in the addendums
to the Nalunaq Licence may result in the MLSA revoking the Nalunaq Licence
without further notice.
8.2 Tartoq - Au
8.2.1 Purchase of the Tartoq Licence
Nalunaq A/S signed on July 6, 2016 a sale and purchase agreement, to purchase
from Nanoq Resources Ltd. the Tartoq exploration licence number 2015/17
located in Southwest Greenland, for a total consideration of $7,221. The
licence originally expired December 31, 2024 with an entitlement to a 5-year
extension. The renewal for a period of five years has been confirmed with
Addendum No. 3 dated February 2020 which was signed by Nalunaq A/S on
February 13, 2020 and became effective on March 13, 2020 when it was signed
by the Government of Greenland. In response to the COVID 19 pandemic, the
Government of Greenland gave an extension of the licence period for all
exploration licences by two years, therefore the licence expires
December 31, 2026.
8.2.2 Exploration commitments
For the exploration licence, Nalunaq A/S 2023 obligation is DKK 2.031.600 of
exploration activities in 2023, which together with the carried forward 2022
licence obligation of DKK 742,143 will result in DKK 2,773,743 ($543,942 using
the exchange rate as at December 31, 2023) exploration obligation in 2023
before an approval of 2023 incurred expenses by MLSA. For the purpose of
crediting expenditures against the amounts set forth in the Tartoq Licence,
actual expenditures are multiplied by a factor of between 1.5 and 3, depending
upon the type of expenditures made. If these obligations are not met, certain
measures may be taken by the licence holder to rectify the situation,
including reducing the area of the licence proportionately to the spending
shortfall or rolling over the exploration commitment to the next period
subject to approval from the MLSA. Nalunaq A/S will submit statements of
expenses for the Tartoq exploration licence for the 2023 year to the MLSA by
April 1, 2024.
8.3 Vagar - Au
8.3.1 Purchase of the Vagar Licence
Nalunaq A/S entered into a sale and purchase agreement with NunaMinerals A/S,
acting through its bankruptcy receiver, on February 6, 2017 to acquire the
Vagar exploration licence number 2006/10 (“Vagar Licence") located in
Western Greenland, along with all mineral exploration and mining-related data,
maps and reports pertaining to the Vagar Licence, studies and reports, for a
purchase price of $9,465 (DKK 50,000). Upon the approval of the Greenland
authorities received on October 30, 2017, Nalunaq A/S signed the paperwork to
complete the licence transfer, which became effective upon the Greenland
authorities executing the document on January 18, 2018. The licence
originally expired December 31, 2021 with a possible 6-year extension. In
response to the COVID 19 pandemic, the Government of Greenland gave an
extension of the licence period for all exploration licences by two years,
therefore the licence expired December 31, 2023.
8. MINERAL PROPERTIES (CONT’D)
The Corporation has applied for an additional 3 years extension and a licence
reduction to a total area of 197 km(2) and are awaiting final documentation
from the Government.
8.3.2 Exploration commitments
For the exploration licence, Nalunaq A/S shall complete DKK 16,353,000 of
exploration activities in 2023. 2022 carried forward balance was DKK5,716,001,
resulting in DKK 22,069,001 ($4,327,819 using the exchange rate as at
December 31, 2023) exploration obligation in 2023 before an approval of 2023
incurred expenditures by MLSA. For the purpose of crediting expenditures
against the amounts set forth in the Vagar Licence, actual expenditures are
multiplied by a factor of between 1.5 and 3,
depending upon the type of expenditures made. If these obligations are not
met, certain measures may be taken by the licence holder to rectify the
situation, including reducing the area of the licence proportionately to the
spending shortfall or rolling over the exploration commitment to the next
period subject to approval from the MLSA. Nalunaq A/S will submit its
statements of expenses for the Vagar exploration licence for the 2023 year to
the MLSA by April 1, 2024.
8.4 Nuna Nutaaq - Au
8.4.1 Purchase of the Nuna Nutaaq Licence
The Corporation has acquired the right to conduct exploration activities on
approximately 244km(2) of land in an area of Itillersuaq near Narsaq in South
Greenland. The exploration rights have been granted to the Corporation under a
new separate Exploration Licence 2019/113 Nuna Nutaaq. The licence application
has been approved and all required documentation was signed by the Corporation
on September 13, 2019 and the licence became effective on September 26, 2019
when it was signed by the Government of Greenland. The licence originally
expired December 31, 2023 with an entitlement to a 5-year extension. In
response to the COVID 19 pandemic, the Government of Greenland gave an
extension of the licence period for all exploration licences by two years,
therefore the licence expires December 31, 2025.
8.4.2 Exploration commitments
In 2023 Nalunaq A/S shall complete DKK 2,637,920 of exploration activities,
received an approval of 2022 exploration expenses of 3,832,527 and 2022
carried forward credits of 2,344,489 which results in a total credit of
DKK 3,229,826 for 2023 (credit of $633,382 using the exchange rate as at
December 31, 2023) so there is no exploration obligation in 2023 which was
confirmed by MLSA. For the purpose of crediting expenditures against the
amounts set forth in the Nuna Nutaaq Licence, actual expenditures are
multiplied by a factor of between 1.5 and 3, depending upon the type of
expenditures made. If these obligations are not met, certain measures may be
taken by the licence holder to rectify the situation, including reducing the
area of the licence proportionately to the spending shortfall or rolling over
the exploration commitment to the next period subject to approval from the
MLSA. Nalunaq A/S will submit statements of expenses for the Nuna Nutaaq
exploration licence for the 2023 year to the MLSA by April 1, 2024.
8. MINERAL PROPERTIES (CONT’D)
8.5 Anoritooq - Au
8.5.1 Purchase of the Anoritooq Licence
The Corporation acquired the right to conduct exploration activities on
approximately 1,185km(2) of land in the areas of Anoritooq and Kangerluluk in
South Greenland. The exploration rights have been granted to the Corporation
under a new separate Exploration Licence 2020/36, referred to as Anoritooq.
The licence application has been approved and all required documentation was
signed by the Corporation on June 11, 2020 and the licence became effective
on June 24, 2020 when it was signed by the Government of Greenland. In October
2020, the Corporation was granted an addendum to the Anoritooq Licence,
increasing the size of the licence to 1,889km(2) and became effective
November 6, 2020 when it was signed by the Government of Greenland. The
licence originally expired December 31, 2024 with a possible 5-year
extension. In response to the COVID 19 pandemic, the Government of Greenland
gave an extension of the licence period for all exploration licences by two
years, therefore the licence expires December 31, 2026.
8.5.2 Exploration commitments
In 2023 Nalunaq A/S shall complete DKK 3,421,080 of exploration activities,
received an approval of 2022 exploration expenses of DKK 969,834 and carry
forward of 2022 credits of DKK 738,610 which results in total of
DKK 2,682,470 ($526,043 using the exchange rate as at December 31, 2023)
exploration obligation in 2023 before an approval of 2023 expenses by MLSA.
For the purpose of crediting expenditures against the amounts set forth in the
Anoritooq Licence, actual expenditures are multiplied by a factor of between
1.5 and 3, depending upon the type of expenditures made. If these obligations
are not met, certain measures may be taken by the licence holder to rectify
the situation, including reducing the area of the licence proportionately to
the spending shortfall or rolling over the exploration commitment to the next
period subject to approval from the MLSA. Nalunaq A/S will submit its
statements of expenses for the Anoritooq exploration licence for the 2023 year
to the MLSA by April 1, 2024.
8.6 Siku - Au
8.6.1 Purchase of the Siku Licence
The Corporation acquired the right to conduct exploration activities on
approximately 251km(2) of land in an areas between the Nanoq and Jokum’s
Shear project on the east coast of South Greenland. The exploration rights
have been granted to the Corporation under a new separate Exploration Licence
2022/08, referred to as Siku. The licence application has been approved and
all required documentation was signed by the Corporation on May 10, 2022 and
the licence became effective on June 3, 2022 when it was signed by the
Government of Greenland. The licence expires December 31, 2026 with a possible
5-year extension.
8.6.2 Exploration commitments
For the exploration licence, Nalunaq A/S shall complete DKK 603,720 of
exploration activities in 2023 and carried forward DKK 296,595 from 2022
resulting in total obligation balance of DKK 900,315 ($176,555 using the
exchange rate as at December 31, 2023). For the purpose of crediting
expenditures against the amounts set forth in the Siku Licence, actual
expenditures are multiplied by a factor of between 1.5 and 3, depending upon
the type of expenditures made. If these obligations are not met, certain
measures may be taken by the licence holder to rectify the situation,
including reducing the area of the licence proportionately to the spending
shortfall or rolling over the exploration commitment to the next period
subject to approval from the MLSA. Nalunaq A/S will submit its statements of
expenses for the Siku exploration licence for the 2023 year to the MLSA by
April 1, 2024.
8. MINERAL PROPERTIES (CONT’D)
8.7 Genex
On September 26, 2019, Nalunaq A/S was granted a prospecting licence number
2019/146 covering East Greenland, in this context defined as areas south of
75ºN and east of 44ºW. It is valid for a term of five years until
December 31, 2023. Nalunaq A/S intends to reapply for the prospecting
license over East Greenland. Nalunaq A/S is not obligated to spend exploration
expenses regarding this licence area during this period.
On October 28, 2022, Nalunaq A/S was awarded a prospecting licence number
2022/77 covering West Greenland, in this context defined as areas south of
78ºN and west of 44ºW. It is valid for a term of five years until
December 31, 2027. Nalunaq A/S is not obligated to spend exploration
expenses regarding this licence area during this period.
9. CAPITAL ASSETS
Field equipment and infrastructure Vehicles and rolling stock Equipment (including software) Construction In Progress Total
$ $ $ $ $
2022
Opening net book value 1,989,114 4,304,709 156,011 7,452,668 13,902,502
Additions - - 179,040 69,417 248,457
Disposals - (123,360) (40,501) - (163,861)
Adjustment - - - - -
Depreciation (253,362) (438,965) (78,165) - (770,492)
Closing net book value 1,735,752 3,742,384 216,385 7,522,085 13,216,606
As at December 31, 2022
Cost 2,351,041 4,466,971 313,214 7,522,085 $14,653,311
Accumulated depreciation (615,289) (724,587) (96,829) - (1,436,705)
Closing net book value 1,735,752 3,742,384 216,385 7,522,085 13,216,606
2023
Opening net book value 1,735,752 3,742,384 216,385 7,522,085 13,216,606
Additions - - - 25,761,155 25,761,155
Disposals - - (80,983) - (80,983)
Adjustment - - 43,054 - 43,192
Depreciation (198,373) (430,266) (69,634) - (698,273)
Closing net book value 1,537,379 3,312,118 108,822 33,283,240 38,241,559
As at December 31, 2023
Cost 2,351,041 4,466,971 232,231 33,283,240 $40,333,483
Accumulated depreciation (813,662) (1,154,853) (123,409) - (2,091,786)
Closing net book value 1,537,379 3,312,118 108,822 33,283,240 38,241,559
9. CAPITAL ASSETS (CONT’D)
Depreciation of capital assets related to exploration and evaluation
properties is being recorded in exploration and evaluation expenses in the
consolidated statement of comprehensive loss, under depreciation. Depreciation
of $635,773 ($721,072 – 2022) was expensed as exploration and evaluation
expenses in 2023.
As of December 31, 2023, the amount of $33,283,240 ($7,522,085 as at
December 31, 2022) of construction in progress is related to equipment and
infrastructure received or in storage and which will be installed at the
appropriate time. Equipment and infrastructure include process plant
components that are not yet available for use.
As at December 31, 2023, the Corporation had capital commitments, of
$56,681,735. These commitments relate to the development of Nalunaq Project,
rehabilitation of the Nalunaq mine, construction of processing plant,
purchases of mobile equipment and establishment of surface infrastructure.
During 2023 the Company capitalised borrowing costs of $1,457,638 to
construction in progress, which are included in additions.
10. CONVERTIBLE NOTES
Convertible notes loan Embedded Derivatives at FVTPL Total
$ $ $
Balance as at December 31, 2022 - - -
Gross proceeds from issue 30,431,180 - 30,431,180
Embedded derivative component (19,443,663) 19,443,663 -
Transaction costs (note 10.2) (362,502) - (362,502)
Accretion of discount 949,062 - 949,062
Accrued interest 508,576 - 508,576
Fair value change - 4,536,411 4,536,411
Foreign exchange loss (gain) (319,600) - (319,600)
Balance as at December 31, 2023 11,763,053 23,980,074 35,743,127
Non-current portion - - -
Current portion 11,763,053 23,980,074 35,743,127
10.1 Revolving Credit Facility
A $25 million (US$18.5 million) Revolving Credit Facility (“RCF”) provided
by Landsbankinn hf. and Fossar Investment Bank, with a two-year term and
priced at SOFR plus 950bps. Interest is capitalized and payable at the end of
the term.
The credit facility is denominated in US Dollars and the SOFR interest rate is
determined with reference to the CME Term SOFR Rates published by CME Group
Inc. The Landsbankinn hf. and Fossar revolving credit facility carries (i) a
commitment fee of 0.40% per annum calculated on the undrawn facility amount
and (ii) an arrangement fee of 2.00% on the facility amount where 1.5% is to
be paid on or before the closing date of the facility and 0.50% is to be paid
on or before the first draw down. The facility is not convertible into any
securities of the Corporation.
The facility will be secured by (i) a bank account pledge from the Corporation
and Nalunaq A/S, (ii) share pledges over all current and future acquired
shares in Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to the
terms of share pledge agreements, (iii) a proceeds loan assignment agreement,
(iv) a pledge agreement in respect of owner’s mortgage deeds and (v) a
licence transfer agreement. The Corporation has not yet drawn on this
facility.
10. CONVERTIBLE NOTES (CONT’D)
10.2 Convertible notes
Convertible notes represent $30.4 million (US$22.4 million) notes issued to
ECAM LP (US$16 million), JLE Property Ltd. (US$4 million) and Livermore
Partners LLC (US$2.4 million) with a four-year term and a fixed interest rate
of 5%. The conversion price of $0.90 per common share is the closing Canadian
market price of the Amaroq shares on the day, prior to the closing day of the
Debt Financing.
The convertible notes are denominated in US Dollars and will mature on
September 30, 2027, being the date that is four years from the convertible
note offering closing date. The principal amount of the convertible notes will
be convertible, in whole or in part, at any time from one month after issuance
into common shares of the Corporation ("Common Shares") at a conversion price
of $0.90 (£0.525) per Common Share for a total of up to 33,812,401 Common
Shares. The Corporation may repay the convertible notes and accrued interest
at any time, in cash, subject to providing 30 days’ notice to the relevant
noteholders, with such noteholders having the option to convert such
convertible notes into Common Shares at the conversion price up to 5 days
prior to the redemption date. If the Corporation chooses to redeem some but
not all of the outstanding convertible notes, the Corporation shall redeem a
pro rata share of each noteholder's holding of convertible notes. The
Corporation shall pay a commitment fee to the holders of the convertible notes
of, in aggregate, $5,511,293 (US$4,484,032), which shall be paid pro rata to
each noteholder's holding of convertible notes. The commitment fee is payable
on the earlier of (a) the date falling 20 business days after all amounts
outstanding under the Bank Revolving Credit Facility have been repaid in full,
but no earlier than the date that is 24 months after the date of issuance of
the notes; and (b) the date falling 30 (thirty) months after the date of the
subscription agreement in respect of the notes, irrespective of whether or not
notes have converted at that date or been repaid.
The convertible notes will be secured by (i) bank account pledge agreements
from the Corporation and Nalunaq A/S, (ii) share pledges over all current and
future acquired shares in Nalunaq A/S and Gardaq A/S held by the Corporation
pursuant to the terms of share pledge agreements, (iii) a proceeds loan
assignment agreement, (iv) a pledge agreement in respect of owner’s mortgage
deeds and (v) a licence transfer agreement.
The convertible notes represent hybrid financial instruments with embedded
derivatives requiring separation. The debt host portion (the “Host”) of
the instrument is classified at amortized cost, whereas the aggregate
conversion and repayment options (the “Embedded Derivatives”) are
classified at fair value through profit and loss (FVTPL).
The fair value of the convertible notes at inception was recognized at $30.4
million (US$22.4 million) and $19.4 million (US$14.3 million) embedded
derivative component was isolated and determined using a Black Scholes
valuation model which required the use of significant unobservable inputs
(note 22.4). As of December 31, 2023 the Corporation identified the fair value
of embedded derivative associated with the early conversion option to be $24.0
million. The change in fair value of embedded derivative in the period from
September 1, 2023 to December 31, 2023 has been recognized in the statement of
Income (loss) and comprehensive income (loss). The Host liability component at
inception, before deducting transaction costs, was recognized to be the
residual amount of $10.9 million (US$8.1 million) which is subsequently
measured at amortized cost. Transaction costs incurred on the issuance of the
convertible note amounted to $1,004,030, of which $362,502 was allocated to,
and deducted from, the host liability component, and $641,528 was allocated to
the embedded derivative component and charged to profit and loss.
10. CONVERTIBLE NOTES (CONT’D)
10.3 Cost Overrun Facility
$13.5 million (US$10 million) Revolving Cost Overrun Facility from JLE
Property Ltd. on the same terms as the Bank Revolving Credit Facility.
The Overrun Facility is denominated in US Dollars with a two-year term and
will bear interest at the CME Term SOFR Rates by CME Group Inc. and have a
margin of 9.5% per annum. The Overrun Facility carries a stand-by fee of 2.5%
on the amount of committed funds. The Overrun Facility is not convertible into
any securities of the Corporation.
The Overrun Facility will be secured by (i) bank account pledge agreements
from the Corporation and Nalunaq A/S, (ii) share pledges over all current and
future acquired shares in Nalunaq A/S and Gardaq A/S held by the Corporation
pursuant to the terms of share pledge agreements, (iii) a proceeds loan
assignment agreement, (iv) a pledge agreement in respect of owner’s mortgage
deeds and (v) a licence transfer agreement. The Corporation has not yet
drawn on this facility.
11. LEASE LIABILITIES
As at December 31, 2023 As at December 31, 2022
$ $
Balance beginning 729,237 763,913
Lease payment (105,894) (88,245)
Interest 34,097 37,523
Adjustment - 16,046
Balance ending 657,440 729,237
Non-current portion – lease liabilities (577,234) (657,440)
Current portion – lease liabilities 80,206 71,797
Maturity analysis:
2024 108,345
2025 108,836
2026 108,836
2027 108,836
2028 108,836
Onwards 235,809
Undiscounted lease payments 779,498
Less: unearned interest (122,058)
657,440
11. LEASE LIABILITIES (CONT’D)
11.1 Right of use asset
As at As at
December 31, December 31,
2023 2022
$ $
Opening net book value 655,063 740,150
Additions - -
Disposals - -
Adjustment - (4,880)
Amortisation (80,207) (80,207)
Closing net book value 574,856 655,063
Cost 836,200 836,200
Accumulated amortisation (261,344) (181,137)
Closing net book value 574,856 655,063
The Corporation has one lease for its office. In October 2020, the Corporation
started the lease for five years and five months including five free rent
months during this period. The monthly rent is $8,825 until March 2024 and
$9,070 for the balance of the lease. The Corporation has the option to renew
the lease for an additional five-year period at $9,070 monthly rent indexed
annually to the increase of the consumer price index of the previous year for
the Montreal area.
A right-of-use asset of $841,080 and an equivalent long term lease liability
was recorded as of October 1, 2020, with a 5% incremental borrowing rate and
considering that the renewal option would be exercised. Amortisation of
right-of-use assets is being recorded in general and administrative expenses
in the consolidated statement of comprehensive loss, under depreciation.
Amortisation of $80,207 ($80,207 in 2022) was expensed as general and
administration expenses in 2023.
12. SHARE CAPITAL
12.1 Share Capital
The Corporation is authorized to issue an unlimited number of common voting
shares and an unlimited number of preferred shares issuable in series, all
without par value.
12.2 Nasdaq Main Market Listing in Iceland
Subsequent to the approval by the Central Bank of Iceland (the “FSA”) and
satisfaction of all Nasdaq Main Market requirements the Corporation
transferred all depository receipts from the Nasdaq First North Growth Market
to the Nasdaq Main Market with the first day of trading on
September 21, 2023. The mainboard listing in Iceland do not affect any
shares traded on AIM or the TSX-V.
13. STOCK-BASED COMPENSATION
13.1 Stock options
An incentive stock option plan (the “Plan”) was approved initially in 2017
and renewed by shareholders on June 15, 2023. The Plan is a “rolling”
plan whereby a maximum of 10% of the issued shares at the time of the grant
are reserved for issue under the Plan to executive officers, directors,
employees and consultants. The Board of directors grants the stock options and
the exercise price of the options shall not be less than the closing price on
the last trading day, preceding the grant date. The options have a maximum
term of ten years. Options granted pursuant to the Plan shall vest and become
exercisable at such time or times as may be determined by the Board, except
options granted to consultants providing investor relations activities shall
vest in stages over a 12-month period with a maximum of one-quarter of the
options vesting in any three-month period. The Corporation has no legal or
constructive obligation to repurchase or settle the options in cash.
On January 17, 2022, the Corporation granted its officers, employees and
consultant 4,100,000 stock options with an exercise price of $0.60 and expiry
date of January 17, 2027. The stock options vested 100% at the grant date.
The options were granted at an exercise price equal to the closing market
price of the shares the day prior to the grant. Total stock-based compensation
costs amount to $1,435,000 for an estimated fair value of $0.35 per option.
On April 20, 2022, the Corporation granted a senior employee 73,333 stock
options with an exercise price of $0.75 and expiry date of April 20, 2027.
The stock options vested 100% at the grant date. The options were granted with
an exercise price equal to the closing market price of the shares the day
prior to the grant. Total stock-based compensation costs amount to $32,267 for
an estimated fair value of $0.44 per option. The fair value of the options
granted was estimated using the Black-Scholes model with no expected dividend
yield, 68.9% expected volatility, 2.7% risk-free interest rate and a 5-year
term. The expected life and expected volatility were estimated by benchmarking
comparable companies to the Corporation.
On July 14, 2022, the Corporation granted an employee 39,062 stock options
with an exercise price of $0.64 and expiry date of July 14, 2027. The stock
options vested 100% at the grant date. The options were granted with an
exercise price equal to the closing market price of the shares the day prior
to the grant. Total stock-based compensation costs amount to $14,844 for an
estimated fair value of $0.38 per option. The fair value of the options
granted was estimated using the Black-Scholes model with no expected dividend
yield, 69% expected volatility, 3.1% risk-free interest rate and a 5-year
term. The expected life and expected volatility were estimated by benchmarking
comparable companies to the Corporation.
On December 30, 2022, the Corporation granted its employees and consultant
1,330,000 stock options with an exercise price of $0.70 and expiry date of
December 30, 2027. The stock options vested 100% at the grant date. The
options were granted at an exercise price equal to the closing market price of
the shares the day prior to the grant. Total stock-based compensation costs
amount to $545,300 for an estimated fair value of $0.41 per option.
On July 24, 2023, the Corporation granted an on-hire incentive stock option
award to a new senior employee of Amaroq. The option award gives the employee
the right to acquire up to 19,480 common shares under the Corporation's stock
option Plan. The option has an exercise price of $0.77 per share which vested
on October 24, 2023. The option will expire if it remains unexercised five
years from the date of the award.
13. STOCK-BASED COMPENSATION (CONT’D)
On December 20, 2023, the Corporation granted its employees 61,490 stock
options with an exercise price of $1.09 and expiry date of December 20, 2028.
The stock options vested 100% at the grant date. The options were granted at
an exercise price equal to the closing market price of the shares the day
prior to the grant. Total stock-based compensation costs amount to $36,894 for
an estimated fair value of $0.60 per option.
The fair value of each option granted was estimated at the time of grant using
the Black-Scholes option pricing model. Black-Scholes is a pricing model used
to determine the fair price or theoretical value for a call or a put option
based on the following assumptions at the measurement date:
December 31, 2023 December 31, 2022
Risk free rate 3.1% - 3.7% 1.5% - 3.3%
Expected life (years) 5 years 5 years
Volatility 68.0% - 61.6% 68.9% - 69.4%
Share price at date of grant $0.77 - $1.09 $0.60 - $0.75
Fair value per option $0.46 - $0.60 $0.35 - $0.44
The total share-based payment expenses related to the options and the amount
credited to contributed surplus were $52,303 ($2,046,342 for the year ended
December 31, 2022). The following table outlines the activity for stock
options for the years ended December 31, 2023, and 2022:
Changes in stock options are as follow:
2023 2022
Number of options Weighted average exercise price Number of options Weighted average exercise price
$ $
Balance, beginning 10,717,395 0.57 6,935,000 0.51
Granted 80,970 1.01 5,542,395 0.63
Expired - - (1,500,000) 0.53
Exercised (1,610,000) 0.46 (260,000) 0.50
Balance, end 9,188,365 0.59 10,717,395 0.57
Balance, end exercisable 9,188,365 0.59 10,684,062 0.57
From the options exercised during the period ended December 31, 2023,
1,012,971 shares were withheld to cover the stock option grant price and
related taxes.
13. STOCK-BASED COMPENSATION (CONT’D)
Stock options outstanding and exercisable as at December 31, 2023 are as
follows:
Number of options outstanding Number of options exercisable Exercise price Expiry date
$
1,670,000 1,670,000 0.38 December 31, 2025
1,395,000 1,395,000 0.70 December 31, 2026
100,000 100,000 0.50 September 13, 2026
3,600,000 3,600,000 0.60 January 17, 2027
73,333 73,333 0.75 April 20, 2027
39,062 39,062 0.64 July 14, 2027
1,330,000 1,330,000 0.70 December 30, 2027
900,000 900,000 0.59 December 31, 2027
19,480 19,480 0.77 July 24, 2028
61,490 61,490 1.09 December 20, 2028
9,188,365 9,188,365
13.2 Restricted Share Unit
Conditional awards under the RSU
13.2.1 Description
Conditional awards were made in 2022 that give participants the opportunity to
earn restricted share unit awards under the Corporation’s Restricted Share
Unit Plan (“RSU Plan”) subject to the generation of shareholder value over
a four-year performance period.
The awards are designed to align the interests of the Corporation’s
employees and shareholders, by incentivising the delivery of exceptional
shareholder returns over the long-term. Participants receive a 10% share of a
pool which is defined by the total shareholder value created above a 10% per
annum compound hurdle.
The awards comprise three tranches, based on performance measured from
January 1, 2022, to the following three measurement dates:
* First Measurement Date: December 31, 2023;
* Second Measurement Date: December 31, 2024; and
* Third Measurement Date: December 31, 2025.
Restricted share unit awards granted under the RSU Plan as a result of
achievement of the total shareholder return performance conditions are subject
to continued service, with vesting as follows:
* Awards granted after the First Measurement Date - 50% vest after one year,
50% vest after three years.
* Awards granted after the Second Measurement Date - 50% vest after one year,
50% vest after two years.
* RSUs granted after the Third Measurement Date - 100% vest after one year.
The maximum term of the awards is therefore four years from grant.
13. STOCK-BASED COMPENSATION (CONT’D)
The Corporation’s starting market capitalization is based on a fixed share
price of $0.552. Value created by share price growth and dividends paid at
each measurement date will be calculated with reference to the average closing
share price over the three months ending on that date.
* After December 31, 2023, 100% of the pool value at the First Measurement
Date is delivered as restricted share units under the RSU Plan, subject to the
maximum number of shares that can be allotted not being exceeded.
* After December 31, 2024, the pool value at the Second Measurement Date is
reduced by the pool value from the First Measurement Date (increased in line
with share price movements between the First and Second Measurement Dates).
100% of the remaining pool value, if any, is delivered as restricted share
units under the RSU Plan.
* After December 31, 2025, the pool value at the Third Measurement Date is
reduced by the pool value from the Second Measurement Date (increased in line
with share price movements between the Second and Third Measurement Dates),
and then further reduced by the pool value from the First Measurement Date
(increased in line with share price movements between the First Measurement
Date and the Third Measurement Date). 100% of the remaining pool value, if
any, is delivered as restricted share units under the RSU Plan.
13.2.2 RSU Plan Amendment
The RSU Plan was amended by a shareholders General Meeting on June 15, 2023.
As a result of the amendment the number of shares that could be issued under
the RSU Plan to satisfy the conditional awards and other share awards was
increased from 10% of a fixed share capital amount of 177,098,740 shares to
10% of share capital at the time of award, amounting to 10% of 263,073,022
shares, reduced by the number of outstanding options at each calculation date.
As a result, an additional expense based on the difference between the fair
value of the conditional awards before and after the modification will be
recognised over the service period. The incremental fair value was determined
and incorporated info the valuation in 12.2.2.
13.2.3 New Conditional Award under RSU Plan
On 13 October 2023, Amaroq made an award (the “Award”) under the RSU Plan
as detailed below. The Award consists of a conditional right to receive value
if the future performance targets, applicable to the Award, are met. Any value
to which the participants are eligible in respect of the Award will be granted
as Restricted Share Units (each an “RSU”), with each RSU entitling a
participant to receive common shares in the Corporation. Each RSU will be
granted under, and governed in accordance with, the rules of the Corporation's
Restricted Share Unit Plan.
Award Date October 13, 2023
Initial Price CAD 0.552
Hurdle Rate 10% p.a. above the Initial Price
Total Pool 10% of the growth in value above the Hurdle rate, not exceeding 10% of the Corporation’s share capital. The number of shares will be determined at the Measurement Dates.
Participant proportion Edward Wyvill, Corporate Development 10%
Performance Period January 1, 2022 to December 31, 2025 (inclusive)
Normal Measurement Dates First Measurement Date: December 31, 2023, 50% vesting on the first anniversary of grant, with the remaining 50% vesting on the third anniversary of grant. Second Measurement Date: December 31, 2024, 50% vesting on the first anniversary of grant, with the remaining 50% vesting on the second anniversary of grant. Third Measurement Date: December 31, 2025, vesting on the first anniversary of grant.
13. STOCK-BASED COMPENSATION (CONT’D)
13.2.4 Valuation
The fair value of the award granted in December 2022 and modified June 2023,
in addition to the award granted October 13, 2023, increased to $7,378,000
based on 90% of the available pool being awarded. A charge of $1,856,000 was
recorded during the year ended December 31, 2023 (nil in the year ended
December 31, 2022).
The fair value was obtained through the use of a Monte Carlo simulation model
which calculates a fair value based on a large number of randomly generated
projections of the Corporation’s share price.
Assumption Value
Grant date December 30, 2022
Amendment date June 15, 2023
Additional award date October 13, 2023
Expected life (years) 2.22 – 3.00
Share price at grant date $0.70 - $0.97
Exercise price N/A
Dividend yield 0%
Risk-free rate 3.60% - 4.71%
Volatility 55% - 72%
Fair value of awards - First Measurement Date $4,420,000
Fair value of awards - Second Measurement Date $1,946,000
Fair value of awards - Third Measurement Date $1,012,000
Total fair value of awards (90% of pool) $7,378,000
Expected volatility was determined from the daily share price volatility over
a historical period prior to the date of grant with length commensurate with
the expected life. A zero dividend yield has been used based on the dividend
yield as at the date of grant.
14. CAPITAL MANAGEMENT
The capital of the Corporation consists of the items included in equity and
balances thereof and changes therein are depicted in the consolidated
statement of changes in equity.
The Corporation’ objectives are to safeguard the Corporation’ ability to
continue as a going concern in order to pursue its acquisition, exploration
and evaluation activities and to maintain a flexible capital structure which
optimizes the costs of capital at an acceptable risk. The Corporation manages
the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. As
the Corporation does not have cash flow from operations, to maintain or adjust
the capital structure, the Corporation may attempt to issue new shares, issue
debt, acquire or dispose of assets or adjust the amount of cash. In order to
maximize ongoing development efforts and to continue operations, the
Corporation does not pay out dividends. The Corporation is not subject to
externally imposed restrictions on capital.
15. EMPLOYEE REMUNERATION
Salaries
2023 2022
$ $
Salaries 4,635,391 3,502,513
Director’s fees 631,667 628,000
Benefits 380,839 590,407
5,647,897 4,720,920
Less: salaries and benefits presented in E&E expenses (704,620) (904,888)
Salaries and directors’ fees disclosed in general and administrative expenses 4,943,277 3,816,032
16. EXPLORATION AND EVALUATION EXPENSES
2023 Nalunaq Vagar Nuna Nutaaq Anoritooq Saarloq Sava Kobberminebugt Stendalen North Sava Total
$ $ $ $ $ $ $ $ $ $
Geology 385,796 - 30,056 - (1,921) (59,660) (16,914) (20,202) (34,913) 282,242
Lodging and on-site support 305,808 - - - (854) (29,413) (5,737) (5,676) (8,791) 255,337
Drilling 1,354,447 - - - - (144,019) - - - 1,210,428
Analysis 32,177 156 - - (87) (25,060) (1,035) (173) - 5,978
Geophysics survey - - - - - - - - (416,177) (416,177)
Transport 800,247 3,922 - - (442) (37,154) (2,450) (2,290) (3,256) 758,577
Supplies and equipment 1,498,097 - - - (661) (18,736) (7,148) (7,779) (13,575) 1,450,198
Helicopter Charter 1,210,601 14,007 - - - (241,390) (13,072) - - 970,146
Logistic support - - - - (3,316) (16,275) (12,479) (9,796) (9,643) (51,509)
Maintenance infrastructure 1,641,203 1,569 - - (1,544) (83,364) (23,521) (26,700) (48,770) 1,458,873
Project Engineering costs 55,792 - - - - - - - - 55,792
Government fees - 994 - - - - - - - 994
Exploration and evaluation expenses before depreciation 7,284,168 20,648 30,056 - (8,825) (655,071) (82,356) (72,616) (535,125) 5,980,879
Depreciation 635,773 - - - - - - - - 635,773
Exploration and evaluation expenses 7,919,941 20,648 30,056 - (8,825) (655,071) (82,356) (72,616) (535,125) 6,616,652
2022 Nalunaq Vagar Nuna Nutaaq Anoritooq Saarloq Sava Kobberminebugt Stendalen North Sava Total
$ $ $ $ $ $ $ $ $ $
Geology 1,001,263 54,524 30,992 17,966 1,919 75,596 16,914 20,202 34,912 1,254,288
Lodging and on-site support 170,024 20,900 4,546 6,652 854 29,413 5,737 5,676 8,791 252,593
Drilling 2,962,491 611,610 - - - 144,019 - - - 3,718,120
Analysis 205,304 86,765 - 1,208 87 25,060 1,035 173 - 319,632
Geophysics survey - - 364,827 - - - - - 416,177 781,004
Transport 222,546 84,644 2,028 3,052 442 37,154 2,450 2,290 3,256 357,862
Supplies and equipment 484,461 21,247 5,211 7,178 661 20,959 7,148 7,779 13,575 568,219
Helicopter Charter 221,039 424,586 - 19,850 - 267,957 13,072 - - 946,504
Logistic support 904,310 62,777 11,530 18,478 3,316 16,275 12,479 9,796 9,643 1,048,604
Maintenance infrastructure 2,401,358 62,431 16,437 21,886 1,544 83,558 23,521 26,700 48,770 2,686,205
Project Engineering costs 35,946 - - - - - - - - 35,946
Government fees 2,584 7,893 - - - - - - - 10,477
Exploration and evaluation expenses before depreciation 8,611,326 1,437,377 435,571 96,270 8,823 699,991 82,356 72,616 535,124 11,979,454
Depreciation 721,072 - - - - - - - - 721,072
Exploration and evaluation expenses 9,332,398 1,437,377 435,571 96,270 8,823 699,991 82,356 72,616 535,124 12,700,526
16. EXPLORATION AND EVALUATION EXPENSES (CONT’D)
Exploration and Evaluation expenses for the period of twelve months ended
December 31, 2023 are net of $1,353,993 of Exploration and Evaluation expenses
incurred by Nalunaq A/S during the period from June 9 2022 to April 13, 2023
for the six non-gold strategic mineral licenses that have been transferred
from Nalunaq A/S to Gardaq A/S (Note 21.1).
17. GENERAL AND ADMINISTRATIVE
2023 2022
$ $
Salaries and benefits 4,311,610 3,188,032
Director’s fees 631,667 628,000
Professional fees 3,298,134 2,258,660
Marketing and industry involvement 713,161 598,447
Insurance 289,042 341,793
Travel and other expenses 1,383,767 746,180
Regulatory fees 953,521 212,939
General and administration before following elements 11,580,902 7,974,051
Stock-based compensation (note 13.1) 1,908,303 2,046,342
Depreciation 142,707 129,627
General and administrative 13,631,912 10,150,020
18. FINANCE COSTS
2023 2022
$ $
Lease interest (note 11) 34,097 37,523
Other finance costs 223 -
Finance costs 34,320 37,523
19. INCOME TAXES
Tax expense differs from the amount computed by applying the combined Canadian
Statutory and Greenlandic income tax rates, applicable to the Corporation, to
the loss before income taxes due to the following:
2023 2022
$ $
Net loss before income taxes (833,513) (21,898,963)
Income tax rates 26.5% 26.5%
Income tax recovery (220,881) (5,803,225)
Increase (decrease) attributable to:
Non deductible expenses 1,971,160 547,829
Difference in statutory tax rate (234,138) 213,652
Changes in unrecognized deferred tax assets (1,516,141) 5,041,744
Tax recovery - -
19. INCOME TAXES (CONT’D)
The analysis of the Corporation’s deferred tax assets and liabilities as at
December 31, 2023 and 2022 is as follows:
2023 2022
$ $
Deferred tax assets (liabilities):
Capital assets (718,851) (636,131)
Non-capital losses 718,851 636,131
- -
The Corporation records deferred income tax assets to the extent that it is
probable that sufficient taxable income will be realized during the
carry-forward period to utilize these net future tax assets.
The significant components of deductible temporary differences and unused tax
losses for which the benefits have not been recorded on the consolidated
statement of financial position as at December 31, 2023 are as follows:
Greenland As at December 31, 2023
$
Non-capital losses carry forwards 58,120,333
As the Corporation is a mineral licence holder, the non-capital losses in
Greenland have no expiration date.
Canada As at December 31, 2023
$
Non-capital losses carry forwards expiring in 2038 965,032
Non-capital losses carry forwards expiring in 2039 1,272,338
Non-capital losses carry forwards expiring in 2040 1,210,348
Non-capital losses carry forwards expiring in 2041 5,622,490
Non-capital losses carry forwards expiring in 2042 8,261,231
Non-capital losses carry forwards expiring in 2043 7,680,772
Non-capital losses carry forwards expiring in 2044 10,153,386
20. NET LOSS PER SHARE
The calculation of basic and diluted net loss per share for the year ended
December 31, 2023, was based on the net loss attributable to shareholders of
$833,513 ($21,898,963 for the year ended December 31, 2022) and the weighted
average number of common shares outstanding for the year ended
December 31, 2023 of 272,623,548 (191,575,781 for the year ended
December 31, 2022). As a result of the net loss for the years ended
December 31, 2023 and 2022, all potentially dilutive common shares are
deemed to be antidilutive and thus diluted net loss per share is equal to the
basic net loss per share for these periods.
2023 2022
$ $
Net income (loss) and comprehensive income (loss) (833,513) (21,898,963)
Weighted average number of common shares outstanding - basic 272,623,548 191,575,781
Weighted average number of common shares outstanding – diluted 272,623,548 191,575,781
Basic earnings (loss) per share (0.003) (0.11)
Diluted earnings (loss) per common share (0.003) (0.11)
21. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
21.1 Gardaq Joint Venture
2023 2022
$ $
Project management income 1,714,559 -
E&E expenses (Note 16) 4,352,897 -
6,067,456 -
As at December 31, 2023, the balance receivable from Gardaq amounted to
$3,521,938 ($nil as at December 31, 2022). This receivable balance
represents the current balance of project management costs and exploration and
evaluation costs incurred by the Corporation for six strategic minerals
licenses transferred from Nalunaq A/S to Gardaq A/S. The exploration and
evaluation costs incurred by the Corporation are transferred to Gardaq A/S
from Nalunaq A/S in accordance with the respective clauses of the SSHA. (Note
16).
21.2 Key Management Compensation
The Corporation’s key management are the members of the board of directors,
the President and Chief Executive Officer, the Chief Financial Officer, the
Vice President Exploration and the Corporate Secretary. Key management
compensation is as follows:
2023 2022
$ $
Short-term benefits
Professional fees - -
Salaries and benefits 3,209,409 2,104,440
Salaries and benefits included in the E&E expenses - -
Director’s fees 631,667 628,000
Long-term benefits
Stock-based compensation (note 13.1) 1,716,000 1,117,000
Total compensation 5,557,076 3,849,440
21. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
(CONT’D)
Key management are subject to employment agreements which provide for payments
on termination, without cause or following a change of control, providing for
payments up to one base salary.
The compensation of directors is as follows:
2023 2022
Short-term benefits ((a)) Stock-based compensation Total compensation Short-term benefits ((a)) Stock-based compensation Total compensation
$ $ $ $ $ $
Eldur Olafsson 1,553,155 - 1,553,155 801,935 385,000 1,186,935
Jaco Crouse 841,207 - 841,207 496,699 315,000 811,699
Graham Stewart 181,000 - 181,000 181,000 - 181,000
Sigurbjorn Thorkelsson 86,000 - 86,000 86,000 - 86,000
Liane Kelly 89,667 - 89,667 86,000 - 86,000
Line Frederiksen 86,000 - 86,000 86,000 - 86,000
David Neuhauser 86,000 - 86,000 86,000 - 86,000
Warwick Morley-Jepson 103,000 - 103,000 103,000 - 103,000
Total compensation 3,026,029 - 3,026,029 1,926,634 700,000 2,626,634
(a) Short-term benefits comprise salary, director fees as
applicable, annual bonus and pension.
During 2023 certain directors acquired additional shares (net of shares
withheld) by exercising their options. During 2022, the directors participated
in the November 3, 2022 fundraising for $2,700,132. The director
participation is as follows:
2023 2022
Number of new shares Number of new shares
Eldur Olafsson 228,571 814,162
Jaco Crouse - 285,714
Graham Stewart 57,534 142,857
Sigurbjorn Thorkelsson - 1,444,424
David Neuhauser - 2,285,714
Total 286,105 4,972,871
During 2024, a director of the Company participating in the 13 February 2024
fundraiser and acquired an additional 2,700,000 new common shares in the
Company as a result (Note 23).
22. FINANCIAL INSTRUMENTS
The Corporation is exposed to various financial risks resulting from both its
operations and its investment activities. The Management manages financial
risks. The Corporation does not enter into financial instruments agreements,
including derivative financial instruments, for speculative purposes. The
Corporation’s main financial risks exposure and its financial policies are
described below.
22.1 Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation. The
Corporation’s cash and escrow account for environmental monitoring are
exposed to credit risk. Management believes the credit risk on cash and escrow
account for environmental monitoring is small because the counterparties are
chartered Canadian and Greenlandic banks.
22.2 Liquidity risk
Liquidity risk is the risk that the Corporation will encounter difficulty in
meeting obligations associated with financial liabilities. The Corporation
seeks to ensure that it has sufficient capital to meet short-term financial
obligations after taking into account its exploration and operating
obligations and cash on hand. The Corporation anticipates seeking additional
financing in order to fund general and administrative costs and exploration
and evaluation costs. The Corporation’ options to enhance liquidity include
the issuance of new equity instruments or debt.
The following table summarizes the carrying amounts and contractual maturities
of financial liabilities:
As at December 31, 2023 As at December 31, 2022
Trade and other payables Convertible Notes Lease liabilities Trade and other payables Lease liabilities
$ $ $ $ $
Within 1 year 6,273,978 - 108,345 1,138,961 105,894
1 to 5 years - 35,743,127 544,178 - 434,852
5 to 10 years - - 126,975 - 344,646
Total 6,273,978 35,743,127 779,498 1,138,961 885,392
22. FINANCIAL INSTRUMENTS (CONT’D)
22.3 Currency risk
As at December 31, 2023 and 2022, a portion of the Corporation’s
transactions are denominated in DKK, Euros, US$ and British Pounds (GBP) to
the extent such currencies are different from the relevant group entities’
functional currency.
The Corporation had the following balances in currencies:
As at December 31, 2023 In DKK In Euros In US$ In GBP
Cash 3,307,004 511,458 9,913,039 3,106,964
Escrow account for environmental monitoring 3,054,191 - - -
Prepaid expenses and others 7,868,890 7,637,896 680,855 3,092
Trade and other payables (8,242,210) (107,103) (282,634) (20,476)
Convertible notes loan (note 10) - - (8,879,786) -
5,987,875 8,042,251 1,431,474 3,089,580
Exchange rate 0.1961 1.4620 1.3247 1.6863
Equivalent to CAD 1,174,222 11,757,771 1,896,274 5,209,959
Based on the above net exposures as at December 31, 2023, and assuming that
all other variables remain constant, a 10% appreciation or depreciation of the
Canadian dollar against the DKK, Euro, US$ and GBP by 10% would
decrease/increase profit or loss by $2,003,823.
As at December 31, 2022 In DKK In Euros In US$ In GBP
Cash 1,493,645 72,577 6,372,862 5,580,141
Escrow account for environmental monitoring 2,193,001 - - -
Prepaid expenses and others 207,465 - - -
Trade and other payables (1,440,197) (81,970) (112,718) (57,639)
2,453,914 (9,393) 6,260,144 5,522,502
Exchange rate 0.1948 1.4487 1.3541 1.6370
Equivalent to CAD 478,022 (13,608) 8,476,861 9,040,336
Based on the above net exposures as at December 31, 2022, and assuming that
all other variables remain constant, a 10% appreciation or depreciation of the
Canadian dollar against the DKK, Euro, US$ and GBP by 10% would
decrease/increase profit or loss by $1,798,162.
22.4 Fair value
Financial assets and liabilities recognized or disclosed at fair value are
classified in the fair value hierarchy based upon the nature of the inputs
used in the determination of fair value. The levels of the fair value
hierarchy are:
• Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
• Level 2 - Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either directly (i.e.,
as prices) or indirectly (i.e., derived from prices)
• Level 3 - Inputs for the asset or liability that are not
based on observable market data (i.e., unobservable inputs)
22. FINANCIAL INSTRUMENTS (CONT’D)
The following table summarizes the carrying value of the Corporation’s
financial instruments:
December 31, 2023 December 31, 2022
$ $
Cash 21,014,633 50,137,569
Trade and other receivables 3,521,938 -
Sales tax receivable 69,756 95,890
Deposit 27,944 27,944
Investment in equity-accounted joint arrangement 23,492,811 -
Escrow account for environmental monitoring 598,939 427,120
Accounts payable and accrued liabilities (6,273,979) (1,138,961)
Convertible notes (35,743,127) -
Lease liabilities (657,440) (729,237)
Due to the short-term maturities of cash, trade and other receivables, and
accounts payable and accrued liabilities, the carrying amounts of these
financial instruments approximate fair value at the respective balance sheet
date.
The carrying value of the convertible note instrument approximates its fair
value at maturity and includes the embedded derivative associated with the
early conversion option and the host liability at amortized cost. The embedded
derivative’s valuation model uses historical volatility as an estimate of
current market expectations of volatility. Volatility is an unobservable input
and changes in the estimate of volatility impacts the fair value of the
embedded derivative and profit and loss. The follow table displays the
sensitivity of the embedded derivative’s fair value to changes in the
volatility estimate as of December 31, 2023:
Change in volatility Volatility Fair Value of Embedded Derivative Change in Fair Value Impact on Profit and Loss
% % $ $ $
0 63.73% 23,980,074 - -
+5% 66.92% 24,575,411 595,336 (595,336)
+15% 73.29% 25,741,602 1,761,527 (1,761,527)
+25% 79.67% 26,869,400 2,889,325 (2,889,325)
-5% 60.55% 23,378,006 (602,068) 602,068
-15% 54.17% 22,159,072 (1,821,003) 1,821,003
-25% 47.80% 20,931,967 (3,048,107) 3,048,107
The carrying value of lease liabilities approximate their fair value based
upon a discounted cash flows method using a discount rate that reflects the
Corporation’s borrowing rate at the end of the period.
23. SUBSEQUENT EVENTS
23.1 Fundraising
On February 13, 2024, the Company announced the successful completion of its
oversubscribed fundraising which resulted in a total of 62,724,758 new common
shares being conditionally placed with new and existing institutional
investors at a placing price of 74 pence (CAD $1.25 at the closing exchange
rate on 9 February 2024). The placing price represents a 5.7% premium to the
closing share price on 9 February 2024 on the AIM exchange. The fundraising
will consist of:
* A placing of new common shares with new and existing institutional investors
at the placing price (the “UK Placing”). Stifel Nicolaus Europe Limited is
acting as the sole bookrunner and broker on the UK Placing.
* A placing of new depository receipts representing new common shares with new
and existing investors at the placing price (the “Icelandic Placing”).
Landsbankinn hf. And Fossar fjarfestingarbanki hf. Are acting as joint
bookrunners on the Icelandic Placing and Landsbankinn hf. Is acting as
underwriter.
* A private placement of new common shares by certain existing institutional
investors and a director of the Company at the placing price (the “Canadian
Subscription”). The Director has committed to subscribe to approximately CAD
$3.4 million (equivalent to GBP 2.0 million) in the fundraising.
As a result of the subscription, net proceeds of approximately GBP 44 million
(CAD 75 million) have been raised, exceeding the initial targeted amount of
GBP 30 million. The shares subscribed to, when issued, will be credited as
fully paid and will rank pari passu in all respects with the existing common
shares of the Company. Following the admission of the subscribed shares,
Amaroq’s total issued share capital will consist of 326,455,446 common
shares.
The proceeds of the fund will be used to further advance exploration at the
Company’s Vagar and Nanoq licenses and to fund an additional capital
injection into its Gardaq joint venture, as well as to accelerate mining and
development of the Company’s Nalunaq gold project.
The Fundraising closed on February 23, 2024.
23.1.1 Related party transaction
Amaroq director, Sigurbjorn Throkelsson, has participated in the Canadian
Subscription acquiring a total of 2,700,000 new common shares representing
gross proceeds of CAD 3.4 million (GBP 2.0 million) via Klettar LP (in which
he is a sole beneficiary).
23. SUBSEQUENT EVENTS (CONT’D)
23.2 Awards under Restricted Share Units Plan (“RSU”)
On 23 February 2024, in alignment with the Company’s RSU plan
dated 15 June 2023, the Company granted an award (the “Award”) to
directors and employees of the Company as listed in the table below.
Conditional awards were granted to participants on 30 December 2022
and 13 October 2023. The performance period runs from 1 January 2022 to 31
December 2025 with measurement dates at 31 December 2023, 31 December 2024 and
31 December 2025.
The details of the Award are as follows:
Award Date 23 February 2024
Initial Price CAD 0.552
Hurdle Rate 10% p.a. above the Initial Price
Total Pool 10% of the growth in value above the Hurdle rate, not exceeding 10% of the Company’s share capital The number of shares is determined at the Measurement Dates
Participants, proportions and number of shares subject to RSU Participant Proportion (%) Number of shares subject to RSU
Eldur Olafsson, CEO 40% 3,805,377 shares
Jaco Crouse, CFO 20% 1,902,688 shares
Joan Plant, Executive VP 10% 951,344 shares
James Gilbertson, VP Exploration 10% 951,344 shares
Edward Wyvill, Corporate Development 10% 951,344 shares
First Measurement Date: 31 December 2023 50% of the Shares will vest on the first anniversary of grant, with the remaining 50% vesting on the third anniversary of grant
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