REG - Thor Explorations Ld - Final Results
03/05/2022 07:00
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RNS Number : 9830J Thor Explorations Ltd 03 May 2022
NEWS RELEASE
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR
DISTRIBUTION TO U.S. WIRE SERVICES
May 3, 2022 TSXV/AIM: THX
Vancouver, British Columbia
This Announcement contains inside information as defined in Article 7 of the
Market Abuse Regulation No. 596/2014 ("MAR"). Upon the publication of this
Announcement, this inside information is now considered to be in the public
domain.
THOR EXPLORATIONS ANNOUNCES FOURTH QUARTER 2021 FINANCIAL AND OPERATING
RESULTS, AND FULL YEAR FINANCIAL RESULTS FOR THE YEAR ENDING DECEMBER 31, 2021
Thor Explorations Ltd. (TSXV / AIM: THX) ("Thor Explorations" or the
"Company") is pleased to provide an operational and financial review for its
mineral properties located in Nigeria, Senegal and Burkina Faso for the three
months ("Q4 2021") and the audited financial results for the year ending
December 31, 2021 ("Year" or "FY 2021").
The Company's Consolidated Audited Financial Statements together with the
notes related thereto, as well as the Management's Discussion and Analysis for
the year ending December 31, 2021, are available on Thor Explorations' website
at https://thorexpl.com/investors/financials/
(https://thorexpl.com/investors/financials/) .
Operational Highlights of FY 2021
· Commencement of gold production from the flagship Segilola Gold
Project ("Segilola") in Nigeria
o During the operational months of FY 2021 the Company produced 9,921 oz of
gold
· Updated Mineral Resource and Reserve Estimates for Segilola
o Reserve of 517,800 oz at 4.02 grammes per tonne ("g/t") within an open pit
indicated Mineral Resource Estimate ("MRE") of 532,000 oz of gold grading at
4.5 g/t, and an underground indicated resource of 76,000 oz of gold grading at
6.1 g/t
· Maiden MRE and discovery at the Douta Gold Project ("Douta") in
Senegal
o Inferred resource of 730,000 ounces grading at 1.5 g/t at the Makosa
deposit
o New prospect, Mansa, discovered. Located approximately five kilometres
north of the Makosa deposit
· Continued exploration at Segilola and Douta
o Segilola
§ Regional stream sediment sampling, auger soil sampling, trenching and
geological mapping identified a large area of scattered low-level gold
anomalies. Further near mine exploration identified a structural trend,
extending north of the Segilola Pit, with gold anomalism occurring along a
three-kilometre strike length
§ Ongoing 4,000 metre reverse circulation ("RC") drilling programme with the
objective of finding truckable open pit ounces to the Segilola Plant to
supplement production and potentially extend the Segilola mine life
o Douta
§ Results from exploratory RC drilling at the Mansa Prospect confirmed
primary gold mineralisation associated with two parallel zones. The geological
setting of Mansa is similar to that of Makosa
§ Drilling remains underway at Douta to further upgrade the current resource
and to test three additional priority targets
· Company's exploration footprint expanded in Osun State in
Nigeria. It was granted the licence EL34429, which is located in Kwara State
to the north of Segilola, and agreed four separate option agreements over
prospective exploration leases located in Ogun, Osun and Oyo States
· Re-acquired 100% interest in Central Houndé Gold Project
("Central Houndé") in Burkina Faso
· One Lost Time Injury ("LTI"), reported during Segilola's
construction in FY 2021
· Community benefits with the three host communities around
Segilola implemented and Corporate Social Responsibility programmes
progressed. This included a women's training initiative programme, grading of
local roads and maintenance of community boreholes
· Compensation payments made to 234 landowners and 1,044 asset
owners surrounding Segilola
· Segilola has provided 260 local employment opportunities to date
· 26 scholarships awarded this year to high and senior school and
technical college students. These scholarships will be provided annually
· Successfully listed on AIM market of the London Stock Exchange
Financial Highlights of Q4 2021 and FY 2021
· First gold sales in Q4 2021 generating FY 2021 revenues of
C$7,815,621 (FY 2020: nil)
· Q4 2021 net profit of C$3,354,803 (Q4 2020: loss of C$2,033,901)
· FY 2021 operating loss of C$1,898,306 (FY 2020: loss of
C$3,704,785)
· FY 2021 net loss of C$2,514,238 (FY 2020: loss of C$3,870,107)
· Cash of C$1,621,927 and restricted cash of C$4,445,121 (FY 2020:
C$28,261,552 and restricted cash of C$4,460,026)
· Working capital deficit of $53.8 million which includes its
Senior Secured Facility, Deferred Payment Facility, Mining Contractor invoices
which become due three months after being invoiced, and final Engineering
Procurement and Construction ("EPC") invoices which became due post EPC
handover, which occurred on January 31, 2022
· The Company's focus during Q4 2021, was the ramp-up of production
to mine plan level which was not achieved on a consistent basis prior to
year-end. After careful consideration Management has determined that mining
operations to December 31, 2021, were not at sustainable commercial levels and
that commercial production was achieved in January 2022. As such, management
has decided to amend the accounting treatment of gold sales and deem
commercial production to have commenced in January 2022
Post FY 2021 Highlights
· Achievement of commercial production with 21,343 oz produced at
Segilola in the first quarter of 2022
· Post year end, the Company cancelled US$1.35m of its Senior
Facility with Africa Finance Corporation ("AFC") it did not draw down. The
Company also made its first scheduled debt repayment on March 31, 2022, to the
AFC of US$2.53m consisting of principal and interest in accordance with the
terms of its Senior Secured Facility
· Following gold sales of 16,658 ounces in Q1 2022, all outstanding
Mining Contractor invoices to the end of the period Q1 2022 were paid. The
payment of the final EPC invoices, which constitute a material amount of the
net working capital deficit, has been extended by the EPC Contractor following
the delay in commercial production experienced in Q4 2021 and will be paid
from cash flows during H2 2022
· Gold dore inventory of 6,626 ounces of gold as at the end of Q1
2022
· 7,500 metre RC and diamond drilling programme commenced at
Segilola to test both near mine and regional drill targets that were generated
during the Period and are within trucking distance of the Segilola Plant
· Commencement of comprehensive exploration programme at Douta. The
first phase includes 5,000 metres of RC drilling which has been designed to
extend the strike extensions of the resource which remains open-ended along
strike to the north. Further drilling in 2022 will consist of an additional
25,000 metres of RC and diamond drilling, targeting an upgrade to the existing
resource at Makosa and testing three priority targets within the licence
Outlook
· 2022 production guidance of 80,000 to 100,000 ounces ("oz") of
gold at an All in Sustaining Cost ("AISC") of US$850-950 per oz
· Continue to advance the Douta project to preliminary feasibility
study ("PFS")
· Advance exploration programmes across the portfolio, focusing on
near mine and underground exploration at Segilola, extension drilling at Douta
as well as accessing regional targets in Nigeria
Segun Lawson, President & CEO, stated:
"2021 proved to be a pivotal year in the Company's history with multiple
milestones achieved over a transformational 12 months. First to note is the
commencement of production at our Segilola gold mine, which was built through
an unprecedented global pandemic that affected global and local supply chains,
transportation of people and general working conditions. It's our belief that
Segilola will provide a solid foundation to our growth, providing the funding
for the development across the portfolio and the expertise to replicate its
success.
"Earlier in the year we also announced an updated resource and reserve at
Segilola which saw a 28% reserve increase and a 14% increase in process plant
design capacity, having a materially positive impact on the project economics.
Leading on from last year, in 2022 the Company has continued to implement its
exploration programs in Nigeria, focusing on testing near mine targets that
can be transported to the plant at Segilola.
"We see Nigeria as an untapped jurisdiction, and our growing, sizeable land
package in the country, together with our first mover advantage, leaves the
Company in good stead in terms of its growth strategy in the country. In the
year we were granted a new licence and have agreed four separate option
agreements over prospective exploration leases located in Ogun, Osun and Oyo
States. Drilling activities on these licenses recommenced post the period.
"Outside Nigeria, in 2021 we published a maiden mineral resource estimate on
the Makosa deposit and discovered the new Mansa prospect at Douta, in Senegal.
Douta is located in a significant gold endowed region in Senegal and presents
a major resource opportunity for the Company. Exploration here continues as we
target an upgrade to the existing resource at Makosa and we test the Mansa,
Maka and Samba prospects. We look forward to sharing more exciting updates
from Douta in the near future.
"Additionally, during the year we re-acquired 100% of the Central Houndé
Project in Burkina Faso and listed on the AIM market of the London Stock
Exchange. The admission to the AIM market offers wider access for investors as
Thor continues to progress its successful production from Segilola, offering a
growth platform from which to grow.
"ESG is held at the upmost importance at Thor. Over the year, we implemented a
number of Health Safety Security and Environment plans, policies, procedures
and protocols, and in 2022, we'll continue to look at more ways we can improve
the way we operate in this respect. We will continue our community benefit
schemes with the host communities surrounding Segilola. One of my highlights
from the scheme was the awarding of 26 scholarships to high and senior school
and technical college students from vulnerable households to enable them to
continue their studies.
"Looking to 2022 we have set production guidance at 80,000 to 100,000 ounces,
with 21,343 ounces produced in Q1 2022, and with the continuation of
production improvements, the Company is well on its way to achieving this. And
coupled with the ongoing exploration across the portfolio, it promises an
exciting future for the Company and all its stakeholders."
Further details can be found on the Company's website: www.thorexpl.com
(http://www.thorexpl.com)
About Thor Explorations
Thor Explorations Ltd. is a mineral exploration company engaged in the
acquisition, exploration, development and production of mineral properties
located in Nigeria, Senegal and Burkina Faso. Thor Explorations holds a 100%
interest in the Segilola Gold Project located in Osun State, Nigeria and has a
70% economic interest in the Douta Gold Project located in south-eastern
Senegal. Thor Explorations trades on AIM and the TSX Venture Exchange under
the symbol "THX".
THOR EXPLORATIONS LTD.
Segun Lawson
President & CEO
For further information please contact:
Thor Explorations Ltd
Email: info@thorexpl.com (mailto:info@thorexpl.com)
Canaccord Genuity (Nominated Adviser & Broker)
Henry Fitzgerald-O'Connor / James Asensio / Thomas Diehl
Tel: +44 (0) 20 7523 8000
Hannam & Partners (Broker)
Andrew Chubb / Matt Hasson / Nilesh Patel / Franck Nganou
Tel: +44 (0) 20 7907 8500
Fig House Communications (Investor Relations)
Tel: +1 416 822 6483
Email: investor.relations@thorexpl.com
(mailto:investor.relations@thorexpl.com)
BlytheRay (Financial
PR)
Tim Blythe / Megan Ray / Rachael Brooks
Tel: +44 207 138 3203
FY 2021 Operational Review
Segilola Project, Nigeria
Executive Summary
The Company's flagship operation is the Segilola Gold mine located in Osun
State, Nigeria, approximately 120 kilometres ("km") northeast of Lagos.
Segilola is forecast to produce between 80,000 and 100,000oz of gold in 2022
at an All in Sustaining Cost of US$850-950 per oz. Following an updated
Mineral Resource and Mineral Reserve Estimate and improved Life of Mine plan
announced in the first quarter of the year, Segilola contains a high-grade
open pit probable reserve of 517,800 oz at 4.02 grams per tonne ("g/t") within
an open pit indicated MRE of 532,000 oz of gold grading at 4.5 g/t, and an
underground indicated resource of 76,000 oz of gold grading at 6.1 g/t, with
additional significant exploration upside potential.
Production Update
The Company is now in production at its flagship Segilola mine, having
produced 9,921 oz of gold in the operational months of the Year. After a
production ramp-up phase in the fourth quarter of 2021 Thor transitioned into
commercial production in Q1 2022 and expects to produce 80,000 to 100,000 oz
gold in 2022.
The commissioning period at Segilola was extended primarily due to supply
chain issues, and delayed commissioning of the laboratory. Whilst these issues
have been mostly resolved, the mining operations completed the year behind
schedule and as a result head grade in the first half of 2022 is expected to
be lower than anticipated in the updated Mineral Reserve Estimate. These
challenges have been largely offset by the process plant outperforming the
definitive feasibility study design capacity of 650,000 tonnes per annum with
a current annualised production rate experienced in Q1 2022 of 780,000 tonnes
per annum, representing a c.20% improvement over the definitive feasibility
study design capacity. In addition to this, recoveries from the gravity
circuit were also higher than designed in the definitive feasibility study.
This increased process plant capacity, combined with the current gold price
and additional lower grade material identified during grade control drilling
has also presented the opportunity to review and optimise Segilola's cut-off
grade, which offers the opportunity to realise additional production ounces
over the life of mine.
Despite the effects that Covid-19 presented around the globe, the Company
continued to make excellent progress throughout FY 2021. The Company
introduced a number of initiatives that have enabled work to continue
normally.
Construction Activities
FY 2021 began with the installation of the processing plant, with the SAG Mill
already in place, and construction progress at both the camp and the mining
contractors' camp. Significant progress was also made on the tailings storage
facility ("TSF"). On the mining operations side, access roads and clearing
commenced, as well as the preparation for the construction of the Run of Mine
("ROM") pad.
Later on in FY 2021, significant progress was made across all of these areas,
with the addition of advanced work on the Water Storage Dam and the ROM pad
delivering ore to the stockpiles. In the third quarter of the Year, the
majority of the work was completed, including the processing plant which was
fully operational, and the mill and crusher. First gold was poured in July
2021. The camp was also fully operational with phase 1a construction at the
TSF complete.
Health & Safety
The Covid-19 restrictions which came into place at the end of the first
quarter of 2020 continue. Temperature checks, social distancing and the
wearing of masks have become a regular part of operating procedures. Health
and Safety efforts continued, with Site Health and Safety rules being further
consolidated. Systems and Safe Operating Procedures continue to be developed
to ensure compliance with safety rules. In the third quarter, the project site
experienced its first cases of Covid-19 with measures swiftly put in place to
minimize its spread. Those infected were isolated for a period before being
allowed to resume duties. Enhanced protective measures were taken across the
site which were successful with cases having dropped significantly by the end
of the quarter.
The Company regrettably recorded a serious LTI in August 2021, during its
project construction period. Thor voluntarily suspended operations for two
days whilst the relevant authorities were informed, who carried out an
independent investigation. The Company also completed an internal
investigation which resulted in the implementation of changes to its operating
and training procedure. Thor recorded over 1,565,505 LTI free hours up until
the incident.
Staffing and Project Office
Staffing of Segilola was ongoing throughout FY 2021 and completed in the third
quarter. The engineering department is fully established with benefits in
quality control being realised. The human resources department is continuously
implementing and establishing the HR policies and effective working practice
across the Company. In the Year, the finance department became fully
operational, and the supply chain team established purchasing and warehousing
standard operating procedures. The security team is in place and being further
developed. In addition, the technical team for survey, mine engineering and
grade control were put in place, and the processing plant team and maintenance
technicians were fully established. A performance management process has been
implemented and a training department established.
Community
Compensation payments to landowners and farmers were completed over the year.
Over 250 community workers have benefited from employment at site. The
communities are being favoured for most unskilled work and a number of
community projects have been initiated.
Social & Environment
The start of the Year saw the continued construction of facilities,
infrastructure, the processing plant, camp, perimeter security wall and
administration buildings at Segilola. In addition, during the first quarter,
TSF construction commenced. Compensation to project affected persons for the
loss of land and/or assets ran ahead of areas being cleared for this
construction.
The relocation of the emulsion and detonator stores and access road near the
TSF triggered further land and asset surveys and compensation payments.
Evaluating new exploration licences has involved the community development and
stakeholder team, in meetings with community leaders in new jurisdictions to
discuss the proposed exploration programme. Additionally, in the fourth
quarter of the Year, community liaison and Health Safety Security and
Environment ("HSSE") personnel were assigned to the exploration team to
proactively address environment and social exploration focused actions. This
led to the Temporary Damages Compensation Procedure being updated to better
reflect exploration compensation concerns.
Progress on a range of HSSE management plans occurred throughout the Year with
a particular emphasis on requirements for the project finance lenders set out
in their Environment and Social Action Plan.
In the first quarter of the Year, community benefits with the three host
communities around Segilola included awarding the first round of 26
scholarships to high and senior school and technical college students from
vulnerable households to enable them to continue their studies. These
scholarships will be provided annually. In the second quarter of the Year,
community benefits included a women's training initiative programme, grading
of local roads and maintenance of community boreholes. These benefits were
maintained and improved upon all year round.
With production from Segilola imminent, in the second quarter of the Year,
operational readiness was the focus of environment and social management
plans, standards operating procedures and on-site training. The operational
phase activities included community training on blasting procedures, including
siren system and the erection of blasting notices in the three host
communities. Additionally, a community health, safety and security plan was
completed to comply with Performance Standard for Environment and Social
Sustainability.
In the second quarter of the year, a Nigerian consultancy firm was appointed
to aid the Company in the selection, analysis and preparation of business
plans for livelihood restoration programmes for project affected persons.
Corporate Social Responsibility ("CSR") programmes progressed in the second
quarter, including the construction of local markets, improvements to an
important road, replacing degraded wooden pylons with steel electricity
pylons, and the training of community members in applying for jobs and
preparing a C.V. In the third quarter of the Year, CSR programmes included the
opening of local produce markets and increased work undertaken to make
improvements to the road.
By the fourth quarter of the year, Thor employed 260 local employees out of
850 total employees at the Segilola mine site. Additionally, the final
compensation for the project footprint was completed in the final quarter and
by the year end, the compensation budget for Segilola sat at $3.508 million,
in line with the overall compensation budget for the project. This provides
compensation to 234 landowners and 1,044 asset owners.
Nigerian Exploration Licences
Thor currently has a substantial prospective land package in Nigeria which
consists of tenure over eleven exploration licences and one mining licence
that cover the prospective gold bearing Ilesha Schist Belt (the major regional
shear zone that extends for several hundred kilometres) that forms part of the
crystalline basement complex of southwestern Nigeria. The licences are located
in close proximity to the Segilola Gold Project and cover sections of the
structural trends that extend from the Segilola high grade gold deposit.
Initial stream sediment and soil sampling have revealed gold occurrences in
all of the Company's exploration licences. The Company's exploration strategy
includes further expansion of its Nigerian land package as and when attractive
new licences become available.
The second quarter of FY 2021 saw a significant increase in exploration
activities, focused on generating high quality drill targets and comprised of
regional stream sediment sampling, detailed auger soil sampling, trenching and
detailed geological mapping. The sampling programmes were successful in
identifying a large area of scattered low-level gold anomalies. Additional
geochemical sampling and trenching was carried out to better define potential
drilling targets. Further near mine exploration identified a structural trend,
extending north of the Segilola Pit, with gold anomalism occurring along a
three km strike length.
In the third quarter of the Year, Thor commenced an initial 4,000 metre
reverse circulation drilling programme with the objective of finding truckable
open pit ounces to the Segilola Plant to supplement production and potentially
extend the Segilola mine life. This commenced following successful initial
soil geochemistry, mapping of the Segilola package sequence and the appearance
of visible gold in a number of the trenches. This program was paused whilst
awaiting commissioning of the on-site lab and resumed in Q1 2022.
Activity during the quarter generated a total of 4,065 surface geochemical
samples. Initial rock chip sampling and geological mapping commenced on a new
exploration lease (EL34429). Reconnaissance geochemical sampling also
commenced on three exploration leases that are held under option agreements.
Regional Growth Opportunities
Thor expanded its exploration footprint via licence applications and options
over what the Company believes to be prospective exploration targets in the
region surrounding the Segilola Gold Mine and the existing package of wholly
owned exploration and mining leases. Thor was granted licence EL34429, which
is located in Kwara State to the north of Segilola. In addition, Thor agreed
four separate option agreements over prospective exploration leases located in
Ogun, Osun and Oyo States.
The focus has been on consolidating prospective ground within trucking
distance of Segilola and also acquiring prospective licences further away
which have demonstrated strong gold mineralisation prospectively through
target generation, ground truthing and artisanal mining.
EL34429 (100% SROL, Kwara State) is notable for the number of artisanal
workings that are located within the lease. This suggests that gold
mineralisation is widespread within a north easterly trending schist belt.
Preliminary exploration work on the exploration lease has returned anomalous
rock chip results of up to 1.41 g/t of gold from a number of workings dug into
lateritised saprolite.
On Site Laboratory
The Company has invested in a fully accredited onsite lab which is being
managed by MS Analytical. The lab was commissioned during the 4th quarter of
FY 2021. The lab which is currently being used to support mining operations is
being expanded to include exploration sampling capability. This will enable
the Company to significantly reduce its sample turnaround time in Nigeria,
thereby improving its exploration efficiency. It is expected that this
expansion will be completed in the 3rd quarter of 2022.
Exploration Team
The Company is also significantly building up its in-country exploration
expertise. Three on the ground senior exploration geologists joined the team
in late January 2021 and are leading in-country exploration, focussing on
working up exploration targets across all the Company's exploration portfolio.
Next Steps
Subsequent to FY 2021, the Company commenced an initial 7,500 metre Reverse
Circulation ("RC") and diamond drilling program. The program has been designed
to test both near mine and regional drill targets that have been generated
during the period and are within trucking distance of the Segilola Plant. The
Company expects to receive its first drilling results in Q2 2022.
Douta Project, Senegal
The Douta Gold Project is a gold exploration permit that covers an area of 58
km² and is located within the Kéniéba Inlier which hosts over 40 million oz
of gold deposits and has attracted major international mining companies. Douta
is within 5 km of the Massawa Gold Deposit which was acquired by Teranga Gold
Corporation (subsequently acquired by Endeavour Mining) from Barrick Gold
Corporation ("Barrick") for US$430 million.
The Douta licence is strategically positioned between the Massawa and Sabadola
deposits to the west and the Makabingui deposit to the east. Within the
licence five separate gold prospects were initially identified using surface
geochemical sampling and shallow auger drilling. These comprise the more
advanced Makosa prospect, and the earlier exploration stage Maka, Mansa, Samba
and Makosa Tail prospects.
Thor holds a 70% economic interest in the Douta Gold Project in south-eastern
Senegal that is located approximately 700 km east of the capital city Dakar
and currently consisting of an advanced stage gold exploration license which
hosts two discoveries at Makosa and Mansa.
In November 2021, the Company announced a maiden MRE for the highly
prospective Makosa Deposit, which is located in the southern portion of the
Douta Gold Project in Senegal. The resource comprises 730,000 oz of gold
grading at 1.5 g/t, supported by a total of 35,728 metres of drilling.
Mineralisation at the Makosa Deposit remains open along strike with further
growth potential. In addition, exploration has uncovered a new mineralised
discovery at the Mansa Prospect located 5km along strike from Makosa. Drilling
remains underway at Douta to further upgrade the current resource and to test
three additional priority targets.
Operations Update
The first quarter of FY 2021 saw Thor announce drilling results from the
Makosa North and Makosa Tail prospects at Douta which included highlight holes
of 5 metres at 3.4 g/t gold from 37 metres and 12 metres at 1.3 g/t gold from
46 metres. In addition, geological and structural mapping was undertaken at
Makosa Tail and Makosa in order to improve the understanding of the
mineralised zone defined for a further RC drilling programme. Further
exploration in the form of detailed structural mapping to the west of the
Makosa prospect was completed in order to identify other zones that may
contain other lodes of gold mineralisation parallel to the Makosa main trend.
In the second quarter of the year, Thor announced drilling results from the
Makosa Tail prospect. The exploratory programme was designed to infill the
initial wide-spaced drilling that was completed in late 2020 which led to the
Makosa Tail discovery. The results confirm the continuation of the Makosa
mineralised system along strike to the south. Highlight holes included 5
metres at 11.0 g/t gold from 17 metres and 5 metres at 10.1 g/t gold from 7
metres.
RC drilling continued in the second quarter, at Makosa Tail and Makosa North,
extending the mineralised strike length to a total of over 7.4 km. Further
target generative work, comprising termite mound sampling and auger-assisted
geochemical sampling, resumed at the Maka and Mansa prospects. Exploration
activity generated a total of 16,894 samples with analyses carried out by ALS
Laboratories in Mali.
In the third quarter of the year, we announced further drilling results from
the exploratory RC drilling programme at Makosa North, which extended the
mineralisation a further 1,500 metres to the north. Significantly, a highlight
hole intersected 10 metres at 1.42 g/t gold, which indicates that the
mineralisation remains open-ended to the north. Additional highlights from
this set of drilling results include 16 metres at 1.58 g/t gold and 9 metres
at 2.93 g/t gold.
The Company received all outstanding drill results from its drilling programme
in the third quarter. These exciting results went on to form the maiden MRE
and discovery at Douta which was announced in the fourth quarter of the Year.
The initial resource is of 15 million tonnes ("Mt") grading 1.53 g/t gold for
730,000 oz in the Inferred category and encompasses the Makosa, Makosa North
and Makosa Tail zones, which are collectively named the Makosa Resource.
The MRE has been estimated by an independent consultant and is reported at a
cut-off grade of 0.3 g/t gold within optimised shells using a gold price of
US$2,200.
Douta Gold Project Mineral Resource Estimate, November 2021 (reported at
cut-off grade of 0.3g/t Au)
Deposit Classification Tonnage Grade Contained Metal Thor Interest
Mt Au g/t koz Au
Makosa Inferred 11.7 1.5 550 70%
Makosa Tail Inferred 3.6 1.6 180 70%
Total Makosa Inferred 15.3 1.5 730 70%
· Open Pit Mineral Resources are reported in situ at a cut-off
grade of 0.30 g/t Au. A Whittle shell ($2,200) was used to constrain the
resources.
· The Mineral Resource is considered to have reasonable prospects
for economic extraction by open pit mining methods above a 0.30 g/t Au and
within an optimized pit shell.
· Metallurgical and mining recovery factors not applied.
· Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability.
· Totals may not add exactly due to rounding.
· The statement used the terminology, definitions and guidelines
given in the CIM Standards on Mineral resources and Mineral Reserves (May
2014) as required by NI 43-101.
· Bulk density is assigned according to weathering profile with a
weighted average of 2.78.
· Mr. B. Diouf (CP), Principal Geologist of Azimuth Consulting
Senegal, is responsible for this Mineral Resource statement and is an
"Independent Qualified Person" as defined in NI 43-101.
· Mr. Diouf has undertaken several site visits during the course of
the resource drilling and is satisfied that industry-standard sampling and
QAQC procedures have been followed.
In the fourth quarter of the Year, exploratory RC drilling results from the
Mansa Prospect comprised 31 holes totalling 2,405 metres and tested anomalous
zones as defined by the regional auger geochemical survey completed in 2020.
Significant intersections are listed in the table below. The results have
confirmed primary gold mineralisation associated with two parallel zones
suggested by the geochemical data. The geological setting of Mansa is similar
to that of Makosa with mineralisation hosted by deformed sedimentary rocks
near the contact with gabbro or volcaniclastics.
Mansa Significant Results
HOLE-ID Easting Northing Elevation Length From To Interval Grade True Width
(m)
(m)
(m)
(m)
(g/tAu)
(m)
DTRC339 181675 1442731 200 90 56 58 2 10.65 1.8
DTRC341 181929 1442998 200 78 5 7 2 1.35 1.6
DTRC345 181247 1443265 200 90 46 49 3 1.08 2.7
DTRC346 181415 1443389 200 70 20 28 8 0.72 7.0
DTRC346 and 29 31 2 0.53 1.8
DTRC347 181393 1443404 200 90 48 53 5 1.75 4.5
DTRC349 181563 1443527 200 84 44 51 7 0.88 6.4
DTRC354 181798 1443855 200 81 39 41 2 1.58 1.8
DTRC363 182618 1443983 200 70 55 59 4 3.11 3.6
(0.5g/t Au lower cut off; maximum 2m internal dilution)
The initial exploration results from Mansa indicate the occurrence of gold
mineralisation over a wide area measuring approximately 800 metres wide and
2,000 metres along strike.
Next Steps
Thor intends to progress the Makosa Resource expansion drilling together with
parallel workstreams including detailed metallurgical sampling and testing,
environmental and social baseline monitoring as part of an Environmental and
Social Impact Assessment, geotechnical and hydrological studies.
The main resource expansion priorities are:
· Extensional drilling northwards from the Makosa Resource that
will bridge the gap between the Makosa and the Mansa prospect.
· Infill and resource definition drilling at the Mansa Prospect.
· Continue exploration northwards from Mansa.
The broad project level objectives are:
· To upgrade the Inferred Resource to a sufficient inventory of
material in the Indicated Resource category so that preliminary mining studies
can be undertaken.
· To identify higher grade mineralisation in the oxide zone that
can be upgraded to Indicated Resources as a priority.
Continued drilling to increase the overall resource base through extensional
drilling along the prospective corridor.
In the period post FY 2021, Thor announced the commencement of drilling at
Douta in the form of a comprehensive exploration programme, that commences
with a first phase of 5,000 metres of RC drilling, and which has been designed
to extend the strike extensions of the resource which remains open-ended along
strike to the north. During 2022, the work programme, which includes an
additional 25,000 metres of RC and diamond drilling, is also targeting an
upgrade to the existing resource at Makosa and testing three priority targets
within the licence.
Burkina Faso
In Burkina Faso, Thor was in an earn-in agreement with Barrick Gold
Corporation ("Barrick") comprising two contiguous gold permits, Bongui and
Legue, covering an area of 233km², and the Ouere gold permit, covering an
area of approximately 241km². These three Burkina Faso permits comprise the
Central Houndé Project, located within the Houndé belt, 260km southwest of
the capital Ouagadougou, in western Burkina Faso. The Central Houndé Project
was being advanced through a Farm-out Agreement with Barrick who could earn up
to an 80% interest in the project. Barrick has previously met the minimum
spending requirement for the Phase 1 Earn-in, and as a result, had a 51%
interest in the Central Houndé Project.
In April 2021, Thor regained a 100% interest in its Central Houndé Project,
acquiring Barrick's 51% ownership of the Project in exchange for a 1% Net
Smelter Royalty.
As at December 31, 2021, a permit extension for Ouere has been received, and
all documentation for permit extensions for Bongui and Legue has been
submitted and is currently pending with the Mining Cadastre.
SUMMARY OF QUARTERLY RESULTS
The table below sets forth selected results of operations for the Company's
eight most recently completed quarters (in Canadian dollars, except per share
amounts).
Summary of quarterly results
$ 2021 Q4 2021 Q3 2021 Q2 2021 Q1
Dec 31 Sep 30 Jun 30 Mar 31
Revenues 7,815,621 - - -
Net profit/(loss) for period 3,354,803 580,532 (6,849,148) 399,575
Basic and fully diluted loss per share (cents) 0.50 0.10 (1.10) (0.06)
$ 2020 Q4 2020 Q3 2020 Q2 2020 Q1
Dec 31 Sep 30 Jun 30 Mar 31
Revenues - - - -
Net profit/(loss) for period (2,033,901) (1,371,821) 1,124,648 (1,589,033)
Basic and fully diluted loss per share (cents) (0.33) (0.22) 0.22 (0.35)
SUMMARY FINANCIAL RESULTS OF OPERATIONS
The review of the results of operations should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto for the three
months and year ending December 31, 2021.
Results of operations for the year ended December 31, 2021, and 2020
The Company reported a net loss of $2,511,656 (0.40 cents loss per share) for
the year ended December 31, 2021, as compared to a net loss of $3,870,107
(0.70 cents loss per share) for the Year ended December 31, 2020. The decrease
in loss was largely the result of:
· pre-commercial production sales in Q4 2021 of $7,815,621 in 2021
(2020: nil);
· foreign exchange gains of $1,141,982 from losses of ($192,026) in
2020 primarily on fluctuations between the US Dollar and Nigerian Naira; and
· a decrease in salaries and benefits of $467,562 from $2,099,369
in 2020, which included bonuses, to $1,631,807 in 2021.
Partially offset by:
· costs of listing on the AIM Market of the London Stock Exchange
of $1,740,376;
· an increase in bank charges of $192,808, from $71,103 in 2020 to
$263,910 in 2021 due to an increase in both number and value of payments made;
· an increase in travel costs of $118,335, from $95,316 in 2020 to
$213,651 in 2021 with the easing of travel restrictions caused by the Covid-19
pandemic and the return to international travel; and
· an increase in office & miscellaneous costs of $306,434 from
$171,748 in 2020 to $478,182 in 2021 most notably an increase in the cost of
insurance, rent and utilities.
The Segilola mine was in construction throughout 2021. In December 2021, while
the mine was still in a ramp up phase, the Company recorded pre-commercial
production sales revenue of $7,815,621.
Volatility in cost of sales during the first few months of start-up is normal
and is to be expected. Costs of production indicated during this start-up
period (i.e., before commercial production) are not necessarily indicative of
costs to be expected during commercial production. Cost guidance for FY 2022
has been provided in the outlook section.
The Group achieved first gold sales from its Segilola Gold Mine ("Segilola")
in Osun state, Nigeria in December 2021, with first production from the Mill
occurring in October 2021. During Q4 2021 production from the Mill was
intermittent and below operating capacity per its mine plan, while overall
recovery was approximately 13% below capacity. The Group's focus during Q4
2021, was the ramp-up of production to mine plan level which was not achieved
on a consistent basis prior to year-end. After careful consideration
Management has determined that mining operations to December 31, 2021, were
not at sustainable commercial levels and that the correct classification of
Segilola was Assets under construction. During the test phase, the Group
earned pre-production sales revenue from gold sales. Refer to Note 3f of the
2021 Audited Financial Statements for detail on the impact of commencement of
commercial production in 2022. Refer to Note 3u for further detail on
accounting treatment for revenue and cost of production during the testing and
ramp-up phase to December 31, 2021.
For the year ended December 31, 2021, the Company incurred the following costs
excluding acquisition and impairments across its mining tenements:
Costs excluding acquisition and impairments
$ Year ended December 31, Total cumulative expenditure
2021 2020 December 31, 2021
Assets under construction 90,235,195 22,228,831 163,825,829
Exploration expenditures 3,584,433 859,076 13,115,654
Total 93,819,628 23,087,907 176,289,181
The majority of the expenditure for the year ended December 31, 2021, was on
the construction of the Segilola Gold Mine in Nigeria of $90,235,195,
including $15,109,684 in capitalised Project Finance costs, and exploration
works at the Douta Gold Project in Senegal of $2,530,224.
The Company has recognised a provision for restoration costs of $6,440,018 for
future rehabilitation work (refer to Note 14 of the 2021 Audited Consolidated
Financial Statements).
During the Year acquisition costs of $93,027 were incurred on exploration
licenses in Nigeria, and $9,268,302 of deemed acquisition costs under IAS 3 in
the form of third party royalty obligations were brought to account for the
acquisition of the Segilola Gold Project. The cumulative acquisition costs for
the Segilola Gold Project, Nigerian exploration licenses, Douta Gold Project
and Central Houndé Project expenditures at December 31, 2021, amount to
$29,333,926, $128,923, $6,199,492 and $664,145 respectively.
The value of the Central Houndé Project has been impaired fully as at
December 31, 2021, with a charge of $129,109 being recognised in the
Consolidated Statement of Comprehensive Loss.
As at December 31, 2021, the Company had cash of $1,621,927, restricted cash
of $4,445,121, and 5,725 ounces of gold to be sold (December 31, 2020: cash of
$28,261,552, restricted cash allocated to the Segilola Gold Project of
$4,460,026).
Results of operations for the three months ended December 31, 2021, and 2020
The Company reported a net profit of $3,357,385 ($0.005 profit per share) for
the three months December 31, 2021, as compared to a net (loss) of
($2,033,901) ($0.001 loss per share) for the three months ended December 31,
2020. The move to profit for the three months was largely due to:
· pre-commercial production sales in Q4 2022 of $7,815,621 in 2021
(020: nil);
· foreign exchange gains of $2,364,790 from losses of ($579,051) in
2020; and
· a decrease in the impairment of mineral interests of $1,602,197,
from $1,604,564 in 2020 to 2,367 in 2021.
These were offset partially by:
· costs of listing on the AIM Market of the London Stock Exchange
of $172,211;
· an increase in travel costs of $50,587 from $30,320 in 2020 to
$80,907 in 2021.
The Company recorded pre-commercial production sales revenue of $7,815,621 for
the three months ended December 31, 2021, and $nil for the three months to
December 31, 2020. No interest was earned during the three months ended
December 31, 2021, and 2020.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2021, the Company had cash of $1,621,927, restricted cash
of $4,445,121, and 5,725 ounces of gold to be sold and a working capital
deficit of ($53,880,473).
The decrease in cash from December 31, 2020 (cash of $26,639,625) is due
mainly to expenditure on assets under construction of $34,889,010, payment of
fleet mobilisation costs and lease liabilities of $7,088,176, intangible
exploration assets expenditures of $3,379,592, the purchase of property plant
and equipment of $2,642,214, and operational costs and corporate overheads of
$22,360,715. This cash expenditure was financed by existing cash balances and
drawdowns from a senior secured loan facility of $38,062,018 and $2,583,530
from the exercise of warrants and options.
Working Capital Calculation
The Working Capital Calculation excludes $16,322,931 of gold stream
liabilities, and $7,045,538 in third party royalties included in current
accounts payable, that are contingent upon gold sales forecast of
80,000-100,000 ounces for the year ending December 31, 2022.
December 31, 2021
Current Assets
Cash and Restricted Cash $ 6,067,048
Inventory $ 23,073,178
Amounts receivable, prepaid expenses, advances and deposits $ 1,039,175
Total Current Assets for Working Capital $ 30,179,401
Current Liabilities
Accounts payable and accrued liabilities $ 42,859,971
Lease liabilities $ 6,651,570
Gold stream liability $ 16,322,931
Loan and other borrowings $ 42,079,871
$ 107,428,343
less: Current Liabilities contingent upon future gold sales $ (23,368,469)
Total Current Liabilities for Working Capital $ 84,059,874
Following the commencement of the test phase of mining and processing
operations, gold inventory is recognised in the ore stockpiles and in
production inventory, comprised principally of ore stockpile and doré at site
or in transit to the refinery, with a component of gold-in-circuit.
Table 9.1: Inventory
December 31, 2021
Plant spares and consumables $ 1,700,832
Gold ore in stockpile $ 11,015,930
Gold in circuit $ 2,052,541
Gold dore (1) $ 8,303,875
Total assets measured at amortised cost $ 23,073,178
Note 1: Gold dore is valued at cost ($1,142/oz)
At the end of Q1 2022, the Company has produced a further 21,343 oz of gold
dore and sold 16,658 ounces of gold dore for a realised revenue of
$31,650,000. Further detail is found in subsequent events.
Liquidity and Capital Resources
The Company has generated strong operating cash flow during Q1 2022 and
expects to continue to do so based on its production and AISC guidance. This
strong operating cash flow will support debt repayments, regional exploration
and underground expansion drilling at Segilola, planned capital expenditures
and corporate overhead costs.
The Board has reviewed the Group's cash flow forecasts up until April 2023,
having regard to its current financial position and operational objectives.
The Board is satisfied that the Group has sufficient financial resources to
meet its commitments for at least the next twelve months. Refer to note 2c of
the 2021 Audited Consolidated Financial Statements for further detail on going
concern.
FY 2021 Audited Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In Canadian dollars
December 31, December 31,
Note 2021 2020
$
$
ASSETS
Current
Cash 1,621,927 28,261,552
Restricted cash 6 4,445,121 4,460,026
Inventory 7 23,073,178 -
Amounts receivable 8 294,522 56,705
Prepaid expenses, advances and deposits 9 744,653 552,696
Total current assets 30,179,401 33,330,979
Deferred income tax assets 109,903 46,668
Prepaid expenses, advances and deposits 9 134,184 195,284
Right-of-use assets 10 26,502,457 87,817
Property, plant and equipment 15 187,236,870 91,576,876
Intangible assets 16 19,059,901 16,267,750
Total non-current assets 233,043,315 108,174,395
TOTAL ASSETS 263,222,716 141,505,374
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 17 49,358,349 10,915,964
Lease liabilities 10 6,165,570 38,969
Gold stream liability 11 16,322,931 6,068,017
Loans and other borrowings 12 35,581,493 68,279
Total current liabilities 107,428,343 17,091,229
Non-current liabilities
Accounts payable and accrued liabilities 17 1,988,854 -
Lease liabilities 10 17,070,126 -
Gold stream liability 11 22,155,274 25,348,934
Loans and other borrowings 12 32,746,826 20,531,788
Provisions 14 6,660,292 618,586
Total non-current liabilities 80,621,372 46,499,308
SHAREHOLDERS' EQUITY
Common shares 18 99,862,700 97,122,584
Share purchase warrants 18 - 475,000
Option reserve 18 5,703,990 5,846,190
Currency translation reserve (3,739,985) (769,689)
Deficit (2,6653,704) (24,759,248)
Total shareholders' equity 75,173,001 77,914,837
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 263,222,716 141,505,374
These consolidated financial statements were approved for issue by the
Board of Directors on April 30, 2022, and are signed on its behalf by:
(Signed) "Adrian Coates" (Signed) "Olusegun Lawson"
Director Director
The accompanying notes are an integral part of these consolidated financial
statements.
THOR EXPLORATIONS LTD.
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31,
In Canadian dollars
2021 2020
Note $ $
Continuing operations
Revenue $ 7,815,621 $ -
Production costs and other cost of sales (5,254,441) -
Loss on forward sale of commodity contracts (55,935) -
Gross profit from operations 2,505,245 -
Other administrative expenses 5 (4,274,442) (4,316,831)
Reversal of impairment of receivables 8 - 2,081,704
Impairment of Exploration & Evaluation assets 16 (129,109) (1,604,564)
Gain on settlement of liabilities 18(b) - 1,042,500
Share-based payments - (907,594)
Profit (Loss) from operations (1,898,306) (3,704,785)
Interest expense 10 (83,802) (3,159)
Foreign exchange gain (loss) 1,141,982 (192,025)
AIM listing costs 5 (1,740,376) -
Net loss before taxes $ (2,580,502) $ (3,899,969)
Tax expense 22 68,846 29,862
Net loss for the year $ (2,511,656) $ (3,870,107)
Other comprehensive loss
Foreign currency translation loss attributed to (2,970,296) (1,328,815)
equity shareholders of the company*
Total comprehensive loss for the year $ (5,481,952) $ (5,198,922)
Net loss per share (cents) - basic and diluted 19 (0.40) (0.70)
Weighted average number of common shares 625,373,103 549,384,552
outstanding - basic and diluted
* Items that may be reclassified to profit or loss.
The accompanying notes are an integral part of these consolidated financial
statements.
THOR EXPLORATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
In Canadian dollars
Note 2021 2020
Cash flows from (used in):
Operating activities
Net loss for the period $ (2,514,238) $ (3,870,107)
Adjustments for:
Foreign exchange loss 1,472,498 192,025
Proceeds from commodity arrangement 11 - 28,197,777
Gain on debt settlement 18(b) - (1,042,500)
Impairment of Exploration & Evaluation Assets 129,109 1,604,564
Depreciation 78,825 112,337
Share-based payments - 907,594
Loss on forward sale commodity contracts 83,089 -
Deferred income tax recovery 22 (68,846) (29,862)
Interest expense 10 83,802 3,159
Changes in non-cash working capital items 21 (21,779,400) 1,700,089
Cash utilized in operations (22,512,579) 27,775,076
Adjustments to net loss for cash items
Realized foreign exchange loss / (gain) 151,864 9,015
Net operating cash flows (22,360,715) 27,784,091
Investing activities
Acquisition of exploration and evaluation assets 16 (93,027) (267,611)
Purchase of other intangible assets 16 (222,185) -
Mobilisation of mining fleet 10 (3,527,458) -
Purchases of property, plant and equipment 15 (2,642,214) (2,397,530)
Assets under construction expenditures 15 (34,889,010) (37,592,724)
Exploration and evaluation expenditures 16 (3,379,593) (2,027,359)
Transfer to restricted cash 6 - (4,460,026)
Net investing cash flows (44,753,486) (46,745,250)
Financing
Proceeds from issuance of equity securities 18 2,583,530 19,243,403
Borrowing costs paid 11 (647,010) (4,339,276)
Share issue costs 18 - (1,376,118)
Proceeds from borrowings 12 38,925,285 27,927,401
Payment of lease liabilities 10 (3,560,718) (103,009)
Interest paid 10 (83,089) -
Net financing cash flows 37,217,998 41,352,401
Effect of exchange rates on cash 3,256,578 467,390
Net change in cash (26,639,625) 22,858,632
Cash, beginning of the year 28,261,552 5,402,920
Cash, end of the year $ 1,621,927 $ 28,261,552
The accompanying notes are an integral part of these consolidated financial
statements.
THOR EXPLORATIONS LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
In Canadian dollars
Note Common shares Share purchase warrants Option reserve Currency translation reserve Deficit Total shareholders' equity
Balance on December 31, 2019 $ 67,550,111 $ 533,000 $4,902,308 $ 559,126 $(20,961,259) $ 52,583,286
Net loss for the year - - - - (3,870,107) (3,870,107)
Comprehensive loss - - - (1,328,815) - (1,328,815)
Total comprehensive loss - - - (1,328,815) (3,870,107) (5,198,922)
Private placements 18 30,774,915 - - - - 30,774,915
Share issuance costs 18 (1,244,442) - - - - (1,244,442)
Writeback of warrants expired 18 - (58,000) - - 58,000 -
Share based payments 18 - - 958,000 - - 958,000
Options exercised 18 42,000 - (14,118) - 14,118 42,000
Balance on December 31, 2020 $ 97,122,584 $ 475,000 $5,846,190 $ (769,689) $(24,759,248) $ 77,914,837
Net loss for the year - - - - (2,511,656) (2,511,656)
Comprehensive loss - - - (2,970,296) - (2,970,296)
Total comprehensive loss - - - (2,970,296) (2,514,238) (5,481,952)
Writeback of warrants expired 18 - 58,000 - - (58,000) -
Exercise of warrants 18 2,620,116 (533,000) 533,000 2,620,116
Options exercised 18 120,000 - (142,200) - 142,200 120,000
Balance on December 31, 2021 99,862,700 - 5,703,990 (3,739,985) (26,653,704) 75,173,001
The accompanying notes are an integral part of these consolidated financial
statements.
THOR EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
In Canadian dollars, except where noted (audited)
1. CORPORATE INFORMATION
Thor Explorations Ltd. N.P.L. was incorporated on September 11, 1968, under
certificate number 81705 as a specially limited company pursuant to the
Company Act (British Columbia, Canada). On December 4, 2001, Thor Explorations
Ltd. N.P.L. changed its name to Thor Explorations Ltd. ("Old Thor"). On March
28, 2006, Old Thor transitioned to the British Columbia Business Corporations
Act and on August 24, 2007, Old Thor resolved to remove the pre-existing
company provisions applicable to Old Thor. Effective on September 1, 2009, Old
Thor amalgamated with Magnate Ventures Inc. The amalgamated entity continued
as Thor Explorations Ltd. ("Thor" or the "Company"). Thor trades on the TSX
Venture exchange under the symbol "THX" and was admitted to trading on the AIM
market in the United Kingdom under the symbol "THX" on June 22, 2021.
The Company is a natural resources company engaged in the acquisition,
exploration, development and production of mineral properties and is currently
focused on gold projects located in West Africa.
The Company's registered office is located at 550 Burrard Street, Suite 2900,
Vancouver, BC, Canada, V6C 0A3.
2. BASIS OF PREPARATION
a) Statement of compliance
These audited consolidated financial statements, including comparatives,
have been prepared using accounting policies consistent with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board.
b) Basis of measurement
These audited consolidated financial statements have been prepared on a
historical cost basis, and are presented in Canadian dollars, unless otherwise
indicated.
The preparation of financial statements in compliance with IFRS requires
management to make certain critical accounting estimates. It also requires
management to exercise judgment in applying the Company's accounting policies.
A precise determination of many assets and liabilities is dependent upon
future events, the preparation of consolidated financial statements for a
period involves the use of estimates, which have been made using careful
judgment. Actual results may differ from these estimates. The areas
involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the audited financial statements
are discussed in Note 4.
c) Nature of operations and going concern
As at December 31, 2021, the Company had cash of $1,621,927, restricted cash
of $4,445,121 and inventory of 5,725 ounces of gold to be sold. Post year end
the Company has continued production from its Segilola Gold Mine with 21,343
ounces of gold produced, and 16,658 ounces of gold sold to the end of Q1 2022.
The Board has reviewed the Group's cash flow forecasts for the twelve-month
period from the date of signing this report including forecast production of
80,000 - 100,000 ounces of gold for 2022. The Board is satisfied that the
Group will generate sufficient financial resources from its operational cash
flow to meet commitments for at least the next twelve months.
The Board has considered the operational disruption that could be caused by
factors such as interruptions to production at commercial levels, illness
amongst workforce caused by global and regional pandemics, and potential
disruptions to supply chains. The Board has conducted sensitivity testing of
its cash flow forecasts factoring in these potential impacts and it has
considered reasonable mitigating actions to its forecasts and sensitivity
scenarios. The major focus on sensitivity testing was on the production levels
at its Segilola Gold Mine, where the impact of production levels falling 5%
below expected capacity, were assessed, as well as the impact of a fall in the
gold price of up to 5% from forecast levels. The forecast cashflows are based
on a gold price of US$1,836/oz and the all-in sustaining cost at Segilola of
US$850 - 950/oz during the period under review (Refer to section 6 of the Q4
2021, MD&A).
The final EPC invoices are recorded as due and payable and constitute a
material amount of the net working capital deficit. The EPC Contractor has
confirmed that it will support the Company by extending the payment period of
the final EPC invoices and has acknowledged that the Company will make payment
of the final EPC invoices from available cashflow.
As at December 31, 2021, the Group had a net working capital deficit of $53.8
million which includes its Senior Secured Facility, Deferred Payment Facility
(refer to note 12), Mining Contractor invoices which become due three months
after being invoiced, and final EPC invoices which became due post EPC
handover, which occurred on January 31, 2022. The working capital calculation
excludes $16,322,931 of gold stream liabilities, and $7,045,538 in third party
royalties included in current accounts payable, that are contingent upon gold
sales forecast of 80,000-100,000 ounces for the year ending December 31, 2022.
Post year end, the Company cancelled US$1.35m of its Senior Facility it did
not draw down. The Company also made its first scheduled debt repayment on
March 31, 2022, to the Africa Finance Corporation of US$2.53m consisting of
principal and interest in accordance with the terms of its Senior Secured
Facility.
In addition to this, the Company's gold sales of 16,658 ounces made to the end
of Q1 2022 enabled the Company to pay all outstanding due Mining Contractor
invoices.
Having reviewed the cash flow forecast, the Board has a reasonable expectation
that continued production at expected levels from its Segilola Gold Mine will
provide sufficient cash generation to enable the Group service future debt
repayment obligations.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies described below have been applied consistently to all
periods presented in these audited consolidated financial statements unless
otherwise stated.
a) Consolidation principles
Assets, liabilities, revenues and expenses of the subsidiaries are recognised
in accordance with the Company's accounting policies. Intercompany
transactions and balances are eliminated upon consolidation.
b) Details of the group
In addition to the Company, these audited consolidated financial
statements include all subsidiaries of the Company. Subsidiaries are all
corporations over which the Company has power over the Subsidiary and it is
exposed to variable returns from the Subsidiary and it has the ability to use
its power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of these
elements of control. The audited consolidated financial statements present the
results of the Company and its subsidiaries ("the Group") as if they formed a
single entity, with Subsidiaries being fully consolidated from the date on
which control is acquired by the Company. They are de-consolidated from the
date that control by the Company ceases.
The subsidiaries of the Company are as follows:
Company Location Incorporated Interest
Thor Investments (BVI) Ltd. ("Thor BVI") British Virgin Islands June 30, 2011 100%
African Star Resources Incorporated ("African Star") British Virgin Islands March 31, 2011 100%
Segilola Resources Incorporated ("SRI BVI") British Virgin Islands March 10, 2020 100%
African Star Resources SARL ("African Star SARL") Senegal July 14, 2011 100%
Argento Exploration BF SARL Burkina Faso September 15, 2010 100%
("Argento BF SARL")
AFC Constelor Panafrican Resources SARL ("AFC Constelor SARL") Burkina Faso December 9, 2011 100%
Segilola Resources Operating Limited Nigeria August 18, 2016 100%
("SROL")
Segilola Gold Limited ("SGL") Nigeria August 18, 2016 100%
There have been no changes in ownership interest from the previous year.
c) Foreign currency translation
Functional and presentation currency
The Company's presentation currency is the Canadian dollar ("$"). The
functional currency for the Company, being the currency of the primary
economic environment in which the Company operates, is the Canadian dollar.
The individual financial statements of each of the Company's wholly owned
subsidiaries are prepared in the currency of the primary economic environment
in which it operates (its functional currency).
Exchange rates published by the Bank of Canada and Oanda were used to
translate the Thor BVI, African Star, SR BVI, African Star SARL, Argento BF
SARL, AFC Constelor SARL, SROL and SGL's financial statements into the
Canadian dollar in accordance with IAS 21 The Effects of Changes in Foreign
Exchange Rates. This standard requires, on consolidation, that assets and
liabilities be translated using the exchange rate at period end, and income,
expenses and cash flow items are translated using the rate that approximates
the exchange rates at the dates of the transactions (i.e., the average rate
for the period). The foreign exchange differences on translation of
subsidiaries Thor BVI, African Star, SRI BVI, African Star SARL, Argento BF
SARL, AFC Constelor SARL, SROL and SGL are recognised in other comprehensive
income (loss).
Foreign currency transactions
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing on the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit and
loss. Fluctuations in the value of the local currencies of our subsidiaries,
with most notably the US Dollar and Canadian Dollar will result in foreign
exchange gains and losses as assets and liabilities denominated in US Dollar
and Canadian Dollar are revalued in the Subsidiary's local currency at
reporting dates.
d) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities are added to or deducted
from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
The effective interest method is a method of calculating the amortised cost of
a financial asset/liability and of allocating interest income/expense over the
relevant period. The effective interest rate is the rate that discounts
estimated future cash receipts/payments through the expected life of the
financial asset/liability or, where appropriate, a shorter period. Costs
directly relating to financing facilities are initially recognised against the
loan balance, and subsequently released to the income statement over the term
of the facility.
Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of
a group of similar financial assets) is derecognised when:
- the rights to receive cash flows from the asset have expired;
- the Group retains the right to receive cash flows from the asset,
but has assumed an obligation to pay them in full without material delay to a
third party under a 'pass through' arrangement; or
- the Group has transferred its rights to receive cash flows from the
asset and either (a) has transferred substantially all the risks and rewards
of the asset, or (b) has neither transferred nor retained substantially all
the risks and rewards of the asset but has transferred control of the asset.
Financial liabilities
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognised
in profit or loss.
Financial Assets
Under IFRS 9, the Group classifies its financial assets into the following
categories: those to be held at amortised cost, and those to be measured
subsequently at fair value through profit and loss.
Classification depends on the business model for managing the financial assets
and the contractual terms of the cash flows. Management determines the
classification of financial assets at initial recognition. The Group's
business model is primarily that of "hold to collect" (where assets are held
in order to collect contractual cash flows).
Amortised cost: these assets arise principally from the provision of goods
and services to customers, but also incorporate other types of financial
assets where the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely payments of
principal and interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue
and are subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Amounts receivables are measured at amortised cost using the effective
interest rate method, less impairment.
Cash and cash equivalents
Cash and cash equivalents represent cash balances held at bank and on demand
deposits. Cash and cash equivalents are measured at amortised cost.
Restricted cash represents cash balances held in bank accounts that are ring
fenced to be applied to the construction costs at the Company's Segilola Gold
Mine in Nigeria.
The Group does not hold any financial assets that meet conditions for
subsequent recognition at fair value through other comprehensive income.
As at December 31, 2021, the Company had $4.4 million (US$3.5 million) that is
accounted for separately from cash and cash equivalents. It is classified as
restricted cash as the funds are not freely available for the Company's use.
Refer to Note 6.
The Group recognizes a loss allowance for expected credit losses ("ECL") on
financial assets that are measured at amortised cost which comprise mainly of
receivables. The amount of expected credit losses is updated at each reporting
date to reflect changes in credit risk since initial recognition of the
respective financial instrument. Impairment provisions for other receivables
are recognised based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based on whether
there has been a significant increase in credit risk since initial recognition
of the financial asset. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those
that are determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
Impairment of Financial Assets
Financial Liabilities
The classification of financial liabilities at initial recognition depends on
the purpose for which the financial liability was issued and its
characteristics.
Financial liabilities are initially recorded on trade date, being the date on
which the Group becomes party to the contractual requirements of the financial
liability. Unless otherwise indicated the carrying amounts of the Group's
financial liabilities approximate to their fair values.
The Group's financial liabilities consist of financial liabilities measured at
amortised cost. These comprise
Loans and borrowings, short term advances pursuant to outstanding settlement
of currency exchange swaps undertaken in the normal course of operations,
accounts payable, accrued liabilities and deferred payment. Loans and
borrowings are initially recognised at fair value, net of transaction costs
incurred. They are subsequently stated at amortised cost with any difference
between the proceeds (net of transaction costs) and the redemption value
recognised in the statement of comprehensive loss over the period of the loans
and borrowings using the effective interest rate method. If estimates of
future payments are revised, the carrying amount of the financial liability is
adjusted to reflect actual and revised estimated cash flows.
Where financial liabilities are settled through the issue of shares, the
difference between the carrying amount of the financial liability and the fair
value of the equity instruments issued, is recognised in profit or loss.
Fair Value measurement hierarchy
IFRS 13 "Fair Value Measurement" requires certain disclosures which require
the classification of financial assets and financial liabilities measured at
fair value using a fair value hierarchy that reflects the significance of the
input used in making the fair value measurement.
The fair value hierarchy has the following levels:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1);
· Input 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 prices (level 2); and,
· Inputs for the asset or liability that are not based on
observable market data (unobservable input) (level 3).
The level in the fair value hierarchy within which the financial asset or
financial liability is categorised is determined on the basis of the lowest
level input that is significant to the fair value measurement. Financial
assets and financial liabilities are classified in their entirety into only
one of the three levels.
Gold Stream arrangement
On April 29, 2020, the Company announced the completion of financing
requirements for the development of the Segilola Gold Project in Nigeria. The
financing included a US$21 million gold stream prepayment pursuant to a Gold
Stream Arrangement ("GSA") entered in to with the African Finance Corporation
("AFC").
Under the terms of the GSA an advance payment of US$21 million was received.
Upon the commencement of production at Segilola the AFC will have the right to
receive 10.27% of gold produced from the Group's ML41 mining license. Once the
initial liability has been repaid in full any further gold production will be
delivered under the terms of the GSA up to the money multiple limit of 2.25
times the initial advance. The total maximum amount payable to the AFC under
this agreement is US$47.25m including the repayment of the initial US$21
million advance. The advanced payment has been recorded as a contract
liability based on the facts and terms of the arrangement and own use
exemptions considerations.
The maximum US$26.25 million payable after the initial US$21 million has been
settled has been identified as a significant financing component. The deemed
interest rate is calculated at inception, using the production plan and gold
price estimates and released over the term of the arrangement as interest
expense in the income statement upon commencement of production. The deemed
interest rate is recalculated at each reporting period and restated based on
changes to the expected production profile and gold price estimates.
Revenue from the streaming arrangement was recognised under IFRS 15 when the
customer obtains control of the gold and the Group has satisfied its
performance obligations. The revenue recognised reduces the contract liability
balance.
In December 2021, the Group entered into a cash settlement agreement with the
AFC where the gold sold to the AFC is settled in a net-cash sum payable to the
AFC instead of delivery of bullion for repayment of the gold stream
arrangement. This agreement triggered a modification to the contract
liability, resulting in the liability to be accounted for in accordance with
IFRS 9 whereby the liability is classified as a financial liability measured
at fair value through profit or loss.
Capitalisation of borrowing costs
Interest on borrowings directly relating to the financing of qualifying
capital projects under construction is
added to the capitalised cost of those projects during the construction phase,
until such time as the assets
are substantially ready for their intended use or sale which, in the case of
mining properties, is when they
are capable of commercial production. Where funds have been borrowed
specifically to finance a project, the amount capitalised represents the
actual borrowing costs incurred. Where the funds used to finance a project
form part of general borrowings, the amount capitalised is calculated using a
weighted average of rates applicable to relevant general borrowings of the
Group during the period. All other borrowing costs are recognised in the
income statement in the period in which they are incurred.
e) Property, plant and equipment
Recognition and Measurement
On initial recognition, property, plant and equipment is valued at cost, being
the purchase price and directly attributable cost of acquisition or
construction required to bring the asset to the location and condition
necessary to be capable of operating in the manner intended by the Company,
including appropriate borrowing costs and the estimated present value of any
future unavoidable costs of dismantling and removing items. The corresponding
liability is recognised within provisions. Property, plant and equipment is
subsequently measured at cost less accumulated depreciation, less any
accumulated impairment losses, with the exception of land which is not
depreciated.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components) of
property, plant and equipment.
Subsequent Costs
The cost of replacing part of an item of property, plant and equipment is
recognised in the carrying amount of the item if it is probable that the
future economic benefits embodied within the part will flow to the Company and
its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property, plant and
equipment are recognised in profit or loss as incurred.
Gains and Losses
Gains and losses on disposal of an item of property, plant and equipment are
determined by comparing the proceeds from disposal with the carrying amount
and are recognised net within other income in profit or loss.
Depreciation
Depreciation on property plant & equipment is recognised in profit or loss
except where depreciation is directly attributable to mineral properties owned
by the Group that are classified as either Exploration & Evaluation or
Assets Under Construction ("AUC") . Depreciation in this instance is
capitalised to the value of the mineral property asset (refer to Note 15).
Upon commencement of commercial production, the value of AUC will be
reclassified as Mining and Plant assets (together "Mining Property") within
Property, Plant & Equipment. Mining Property will be depreciated using the
unit of production method based on proven and probable reserves. Units of
production are significantly affected by resources, exploration potential and
production estimates together with economic factors, commodity prices, foreign
currency, exchange rates, estimates of costs to produce reserves and future
capital expenditure. Refer to Note 3f for further analysis of classification
of AUC for the year to December 31, 2021.
Depreciation of Mining and Other Equipment is provided on a straight-line
basis over the estimated useful life of the assets as follows:
Description within Mining and Other Equipment Rate
Motor vehicles 20-33%
Plant and machinery 20-25%
Office furniture 20-33%
Depreciation methods, useful lives and residual values are reviewed at each
financial year-end and adjusted if appropriate.
f) Assets under construction
Assets under construction comprise development projects and assets in the
course of construction at both the mine development and production phases.
Development projects comprise interests in mining projects where the ore body
is considered commercially recoverable and the development activities are
ongoing. Expenditure incurred on a development project is recorded at cost,
less applicable accumulated impairment losses. Interest on borrowings,
incurred for the purpose of the establishment of mining assets, is capitalised
during the construction phase.
The cost of an asset in the course of construction comprises its purchase
price and any costs directly attributable to bringing it into working
condition for its intended use, at which point it is transferred from assets
under construction to other relevant categories and depreciation commences.
Assets under construction are not depreciated.
Upon commercial production being achieved assets under construction will be
re-categorised as Mining Property, and any costs will be depleted using a
units of production method.
The Company has elected to adopt changes to IAS 16 early (refer to Note 3u)
and recognize sales from property, plant and equipment while the Group is
preparing Segilola for its intended use. The financial impacts on the
financial statements for the year to December 31, 2021, of the early adoption
of changes to IAS 16 are as follows:
· Recognising gold sales in the Consolidated Statement of
Comprehensive Loss;
· Recognising direct costs of production as cost of sales in the
Consolidated Statement of Comprehensive Loss; and
· Recording the cost value of Ore and Dore on hand as at December
31, 2021, as inventory in the Consolidated Statement of Financial Position and
not capitalizing the value in Assets under construction.
The changes to the Financial Statements of reaching commercial production will
be as follows:
· Assets under construction will be reclassified as Mining
Properties within Property, Plant & Equipment;
· Depreciation of Mining Properties will commence (refer to Note 3e
for further details);
· Management has considered the issue of functional currency and
has determined that commencement of commercial production is the event that
will have a material effect on the financial statements. Gold sales and the
mining contract are both denominated in US Dollars and given the material
impact on the financial statement of Segilola Resources Operating Limited
("SROL") the appropriate functional currency will be US Dollars. (Refer to
Note 4(v) for detail on the Group's assessment and judgement of functional
currency of its operating subsidiary SROL for the year to December 31, 2021);
and
· All costs connected with Segilola will be recognised as expenses
in the Consolidated Statement of Comprehensive Loss and not capitalised.
g) Exploration and evaluation expenditures
Acquisition costs
The fair value of all consideration paid to acquire an unproven mineral
interest is capitalised, including amounts due under option agreements.
Consideration may include cash, loans or other financial liabilities, and
equity instruments including common shares and share purchase warrants.
Exploration and evaluation expenditures
All costs incurred prior to legal title are expensed in the consolidated
statement of comprehensive loss in the year in which they are incurred. Once
the legal right to explore a property has been acquired, costs directly
related to exploration and evaluation expenditures are recognised and
capitalised, in addition to the acquisition costs. These direct expenditures
include such costs as materials used, surveying costs, drilling costs,
payments made to contractors and depreciation on plant and equipment during
the exploration phase. Costs not directly attributable to exploration and
evaluation activities, including general administrative overhead costs, are
expensed in the year in which they occur.
When a project is deemed to no longer have commercially viable prospects to
the Company, exploration and evaluation assets in respect of that project are
deemed to be impaired. As a result, those exploration and evaluation assets,
in excess of estimated realisable value, are written off to the statement of
comprehensive loss.
At such time as commercial feasibility is established, project finance has
been raised, appropriate permits are in place and a development decision is
reached, the costs associated with that property will be transferred to and
re-categorised as Assets under construction.
Farm-in agreements
As is common practice in the mineral exploration industry, the Company may
acquire or dispose of all, or a portion of, an exploration and evaluation
asset under a farm-in agreement. Farm-in agreements typically call for the
payment of cash, issue of shares and/or incurrence of exploration and
evaluation costs over a period of time, often several years, entirely at the
discretion of the party farming-in. The Company recognizes amounts payable
under a farm-in agreement when the amount is due and when the Company has no
contractual rights to avoid making the payment. The Company recognizes amounts
receivable under a farm-in agreement only when the party farming-in has
irrevocably committed to the transfer of economic resources to the Company,
which often occurs only when the amount is received. Amounts received under
farm-in agreements reduce the capitalised costs of the optioned unproven
mineral interest to nil and are then recognised as income.
h) Impairment of non-current assets
Impairment tests for non-current assets are performed when there is an
indication of impairment. At each reporting date, an assessment is made to
determine whether there are any indications of impairment. Prior to carrying
out impairment reviews, the significant cash generating units are assessed to
determine whether they should be reviewed under the requirements of IAS 36 -
Impairment of Assets for property plant and equipment, or IFRS 6 - Exploration
for and Evaluation of Mineral Resources.
Impairment reviews performed under IAS 36 are carried out on a periodic basis
to ensure that the value recognised on the Statement of Financial Position is
not greater than the recoverable amount. Recoverable amount is defined as the
higher of an asset's fair value less costs of disposal, and its value in use.
Impairment reviews performed under IFRS 6 are carried out on a
project-by-project basis, with each project representing a potential single
cash generating unit. An impairment review is undertaken when indicators of
impairment arise; typically, when one of the following circumstances applies:
(i) sufficient data exists that render the resource uneconomic and
unlikely to be developed
(ii) title to the asset is compromised
(iii) budgeted or planned expenditure is not expected in the foreseeable
future
(iv) insufficient discovery of commercially viable resources leading to the
discontinuation of activities
If any indication of impairment exists, an estimate of the non-current asset's
recoverable amount is calculated. The recoverable amount is determined as the
higher of fair value less direct costs to sell and the asset's value in use.
If the carrying value of a non-current asset exceeds its recoverable amount,
the asset is impaired and an impairment loss is charged to the statement of
comprehensive loss so as to reduce the carrying amount of the non-current
asset to its recoverable amount.
i) Income taxes
Income tax expense is comprised of current and deferred income taxes. Current
and deferred income taxes are recognised in profit and loss, except for income
taxes relating to items recognised directly in equity or other comprehensive
income.
Current income tax, if any, is the expected amount payable or receivable on
the taxable income or loss for the year, calculated in accordance with
applicable taxation laws and regulations, using income tax rates enacted or
substantively enacted at the end of the reporting period, and any adjustments
to amounts payable or receivable relating to previous years.
Deferred income taxes are provided using the liability method based on
temporary differences arising between the income tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. Deferred income tax is determined using income tax rates and
income tax laws and regulations that have been enacted or substantively
enacted at the end of the reporting period and are expected to apply when the
related deferred income tax asset is realized or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable income will be available against which the temporary
differences can be utilized. To the extent that the Company does not consider
it probable that a deferred tax asset will be recovered, the deferred tax
asset is reduced.
The following temporary differences do not result in deferred tax assets or
liabilities:
· the initial recognition of assets or liabilities, not arising in
a business combination, that do not affect accounting or taxable profit
· goodwill
· investments in subsidiaries, associates and jointly controlled
entities where the timing of reversal of the temporary differences can be
controlled and reversal in the foreseeable future is not probable.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
j) Revenue recognition
The Group enters into agreements for the sale of refined gold at LBMA Precious
Metal Prices p.m. rates ("LBMA p.m.") as per goldstream prepayment and offtake
agreements ("the Agreements") between the Group and a third party ("the
Customer"). The Customer either receives delivery of gold to a nominated
metals account or receives net proceeds pursuant to a Cash Settlement
Agreement.
The Cash Settlement Agreement is an agreement entered in to between the Group
and the Customer whereby the Customer elects to receive net cash proceeds in
lieu of delivery of gold. In executing a Cash Settlement Agreement, the Group
enters in to forward sales contracts for the sale of gold at a pre-determined
and agreed price with an agent who remits the cash proceeds to the Group. The
Cash Settlement Agreement sets prices for gold using LBMA p.m. prices that
would have been sold and delivered to the Customer at delivery. The LBMA p.m.
prices in the Cash Settlement Agreement differ from the prices achieved by the
Group in the forward sale. The Group is obligated to remit to the Customer any
difference in the prices per the Cash Settlement Agreement and the forward
sales. The difference between the two prices is recognised as a loss on
forward sales contract in the Consolidated Statement of Comprehensive Loss.
The Group recognises the sale upon delivery at which point control of the
product has been transferred to the Customer, or agent in the instance with
the Cash Settlement Agreement is used. Transfer of control generally takes
place when refined gold is credited to the metals account at the refinery of
either the Customer or agent who has sold the gold via forward sale. Revenue
is measured based on the consideration to which the Group expects to be
entitled under the terms of the Agreements with the Customer.
k) Royalties
The Group has royalty payment obligations from production from its Segilola
Gold Mine in Nigeria. A royalty is payable to the Nigerian government at a
rate of 5,400 Nigerian Naira per ounce produced. The royalty is paid before
the Dore is exported from Nigeria for refining. Royalties paid to the Nigerian
government are recognised as cost of sales in the Consolidated Statement of
Comprehensive Loss at the point that the royalty payments are made.
The Group also has royalty obligations to three former owners of the Segilola
Gold Project at rates of between 0.375% to 1.5% on the value of sales. Total
royalties to the former owners ("third party royalties") are capped at US$7.5
million. Royalties are calculated using the outturn date as reference point,
whereby the number of ounces outturned are multiplied using the London Bullion
Market Association ("LBMA") p.m. rate on the outturn date to establish a
deemed sales value. The applicable royalty rate for each former owner is
applied to the deemed sales value to determine the royalty payable. Royalty
expenses are recognised as cost of sales in the Consolidated Statement of
Comprehensive Loss and a liability in the Consolidated Statement of Financial
Position at the point that the royalty payment obligation arises. Please refer
to Note 25 for further detail on royalty obligations to former owners.
Third party royalties have been assessed to be contingent consideration in the
acquisition of the Segilola Gold Mine under IAS 3. In accordance with the
Group's accounting policy the contingent consideration has been recognised as
a financial liability at the point there was considered to be certainty over
the payment arising (commencement of production). The royalties have been
discounted using a rate of 4.7% and the discounted value of the third parties'
royalties has been included in the value of Assets Under Construction and are
recognised as a financial liability in the Consolidated Statement of Financial
Position. The discount will be unwound over the estimated time it will take to
pay the entire US$7.5 million obligation. The value of the royalties will be
depreciated over the estimated life of the mine, and royalty payments will be
applied in discharge of the financial liability. The financial liability was
initially measured at fair value with subsequent fair value re-measurement to
be recorded in the Consolidated Statement of Comprehensive Loss.
l) Inventory
Stores and consumables are stated at the lower of cost and net realisable
value. The cost of stores and consumables includes expenditure incurred in
acquiring the inventories and bringing them to their existing location and
condition.
Gold ore stockpiles are valued at the lower of weighted average cost and net
realisable value. Cost includes direct materials, direct labour costs and
production overheads.
Gold bullion and gold in process are stated at the lower of weighted average
cost and net realisable value. Cost includes direct materials, direct labour
costs and production overheads.
m) Basic and diluted income or loss per share
Basic loss per share is computed by dividing the loss for the year by the
weighted average number of commons shares outstanding during the year. Diluted
income per share reflects the potential dilution that could occur if
potentially dilutive securities were exercised or converted to common stock.
Fully diluted amounts are not presented when the effect of the computations
are anti-dilutive due to the losses incurred. Accordingly, there is no
difference in the amounts for the basic and diluted loss per share.
n) Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity from
transactions and other events from non-owner sources. Other comprehensive
income refers to items recognised in comprehensive income (loss) that are
excluded from net earnings (loss). The main element of comprehensive income
(loss) is the foreign exchange effect of translating the financial statements
of the subsidiaries from local functional currencies into Canadian dollars
upon consolidation. Movements in the exchange rates of the US Dollar, Pound
Sterling, Nigerian Naira and West African Franc to the Canadian dollar will
affect the size of the comprehensive income (loss).
o) Share-based payments
Where options are awarded for services the fair value, at the grant date, of
equity-settled share awards is either charged to income or loss, or
capitalised to assets under construction where the underlying personnel cost
is also capitalised, over the period for which the benefits of employees and
others providing similar services are expected to be received. The
corresponding accrued entitlement is recorded in the Options reserve. The
amount recognised as an expense is adjusted to reflect the number of share
options expected to vest. Where warrants are awarded in connection with the
issue of common shares the fair value, at the grant date, is transferred from
common shares with the corresponding accrued entitlement recorded in the share
purchase warrants reserve. The fair value of options and warrants awards is
calculated using the Black-Scholes option pricing model which considers the
following factors:
· Exercise price · Current market price of the underlying shares
· Expected life of the award · Risk-free interest rate
· Expected volatility
When equity instruments are modified, if the modification increases the fair
value of the award, the additional cost must be recognised over the period
from the modification date until the vesting date of the modified award.
p) Decommissioning, site rehabilitation and environmental costs
The Group is required to restore mine and processing sites at the end of their
producing lives to a condition acceptable to the relevant authorities and
consistent with the Group's environmental policies. The net present value of
estimated future rehabilitation costs is provided for in the financial
statements and capitalised within property, plant and equipment on initial
recognition. The capitalised cost is amortised on a unit of production basis.
Unwinding of the discount is recognised as finance cost in the statement of
comprehensive income as it occurs. Changes in estimates are dealt with on a
prospective basis as they arise. The costs of on-going programmes to prevent
and control pollution and to rehabilitate the environment are charged to
profit or loss as incurred.
q) Leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following criteria:
· There is an identified asset;
· The Group obtains substantially all the economic benefits from
use of the asset; and,
· The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease. In determining whether the Group obtains substantially
all the economic benefits from use of the asset, the Group considers only the
economic benefits that arise from use of the asset. In determining whether the
Group has the right to direct use of the asset, the Group considers whether it
directs how and for what purpose the asset is used throughout the period of
use. If the contract or portion of a contract does not satisfy these criteria,
the Group applies other applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognizing a right-of-use asset and a lease
liability except for:
· Leases of low value assets; and
· Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless this is not
readily determinable, in which case the Group's incremental borrowing rate on
commencement of the lease is used. Variable lease payments are only included
in the measurement of the lease liability if they depend on an index or rate.
In such cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term. Other
variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· Amounts expected to be payable under any residual value
guarantee;
· The exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to assess that option; and,
· Any penalties payable for terminating the lease, if the term of
the lease has been estimated based on termination option being exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· Lease payments made at or before commencement of the lease;
· Initial direct costs incurred; and,
· The amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted
using a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease payments dependent
on a rate or index is revised, except the discount rate remains unchanged. In
both cases an equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being amortised over the
remaining (revised) lease term. If the carrying amount of the right-of-use
asset is adjusted to zero, any further reduction is recognised in profit or
loss.
During the year under review there was one new lease entered in to in
accordance with IFRS 16. The Company's wholly owned Nigerian subsidiary,
Segilola Resources Operating Limited ("SROL") entered into a mining contract
with an external service provider ("the Contractor") for mining services at
its Segilola Gold Mine. The Contractor commenced full mining services on July
1, 2021. Included in the mining contract is the provision of a mining fleet.
The Group analyzed the mining contract in the context of IFRS 16 and has made
the determination that the value of the mining fleet is a lease agreement as
the fleet is representing an identifiable asset which the entity has control
over the remaining obligations of the Contractor under the mining contract
constitute service arrangements. The value of the mining fleet has been
recognised as a Right-of-
Use Asset and Lease Liability and measured at the present value of the
contractual payments due to the lessor over the lease term.
An 8% interest rate implicit in the lease and the mining contract length of
five years were key variables used in calculating the value of Right-of-Use
Asset and Lease Liabilities for the mining fleet. The mining contract length
of five years and management has determined the lease to have the same length
given the current forecast mine life. This judgement will be reviewed by
Management in future reporting periods.
r) Interest income
Interest income is recognised as earned, provided that collection is assessed
as being reasonably assured.
s) Provisions
Provisions are recognised when the Group has a present obligation, legal or
constructive, resulting from past events and it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the obligation.
t) Contingent liabilities
Contingent liabilities are possible obligations whose existence will be
confirmed by uncertain future events that are not wholly within the control of
the Group.
Contingent liabilities also include obligations that are not recognised
because their amount cannot be measured reliably or because settlement is not
probable. Contingent liabilities do not include provisions for which it is
certain that the Group has a present obligation that is more likely than not
to lead to an outflow of cash or other economic resources, even though the
amount or timing is uncertain.
Unless the possibility of an outflow of economic resources is remote, a
contingent liability is disclosed in the notes to the financial statements.
u) Application of new and revised International Financial Reporting
Standards
New standards impacting the Group that are adopted in the annual financial
statements for the year ended December 31, 2021, are:
Standard Detail Effective date
IAS 16 Amendments prohibiting a company from deducting from the cost of property, January 1, 2022
plant and equipment amounts received from selling items produced while the
company is preparing the asset for its intended use.
The Group has elected to adopt IAS 16 early as first gold sales from its
Segilola Gold Mine in Osun State, Nigeria took place in December 2021, in
advance of commercial production being achieved. Refer to Note 4vi) for
further detail on the judgement applied by the Group on assessing the timing
of achieving commercial production.
The two key variables considered by the Group in adopting IAS 16 early were:
· Accounting for sales revenue; and
· Accounting for production costs
Accounting treatment of sales revenue
The Group has one Customer for sales of gold as
per gold stream prepayment and offtake agreements ("the Agreements") (Refer
to Notes 11 and 12 for further detail on these arrangements). Sales made in
December 2021 were under the terms of the Agreements and as such Management
has determined that the correct accounting treatment for sales made to year
end was in accordance with its Revenue Recognition policy as set out in Note
3j.
Accounting for production costs
In accordance with IAS 16, where revenue is
recognised while an entity is preparing assets for their intended use, costs
of production must be measured and recorded in the statement of comprehensive
income. The production sold was gold bullion and Management has determined
that the most appropriate measure of cost of production is to recognise the
cost of bullion sold on a number of units sold basis, using the average cost
basis of direct production costs during the period September to December 2021
during which time the ore mined on a monthly basis was at a reasonably
consistent level. The cost of mining and milling was divided by the number of
units (ounces) produced (Refer to Note 3l for detail on the Group's policy on
accounting for inventory). The resulting value of the number of ounces sold
was transferred from inventory in the Consolidated Statement of Financial
Position and recorded as Production Costs in the Consolidated Statement of
Comprehensive Loss.
There were no other new standards or interpretations effective for the first
time for periods beginning on or after January 1, 2021, that had a significant
effect on the Group's financial statements.
v) Future accounting pronouncements
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods and which the Group has decided not to adopt early. None of these are
expected to have a significant effect on the Group, in particular:
IFRS 17 - Insurance contracts January 1, 2023
Amendments to IAS 1 - Classification of Liabilities as Current or Non-current January 1, 2023
Amendments to IFRS 3 Reference to the Conceptual Framework January 1, 2022
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract January 1, 2022
Annual Improvements to IFRS Standards 2018-2020 Cycle - Amendments to IFRS 1 January 1, 2022
First-time Adoption of International Financial Reporting Standards, IFRS 9
Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
There are no other standards issued by IASB, but not yet effective, that are
expected to have a material impact of the Group.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Company makes estimates and assumptions about the future that affect the
reported amounts of assets and liabilities. Estimates and judgments are
continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may differ from
these estimates and assumptions.
The effect of a change in an accounting estimate is recognised prospectively
by including it in net and/or comprehensive loss in the year of the change, if
the change affects that year only, or in the year of the change and future
years, if the change affects both.
Critical accounting estimates
Significant assumptions about the future and other sources of estimation
uncertainty that management has made at the financial position reporting date,
that could result in a material adjustment to the carrying amounts of assets
and liabilities, relate to, but are not limited to, the following:
(i) Accounting treatment of Gold Stream Liability
Determining the appropriate accounting treatment for the Gold Stream Liability
is not an accounting policy choice, rather it is an assessment of the specific
facts and circumstances and requires judgement. The Company has reviewed the
terms of the Gold Sale Agreement and determined that in the prior year it
constituted a commodity arrangement as it was an arrangement to deliver an
amount of the commodity from the Group's own Segilola Gold Project operation
and constituted a contract liability under IFRS 15. During the year the
arrangement was modified to allow the Group to settle the Gold Stream
Liability in cash which led to the arrangement being reclassified as a
financial liability.
The principal accounting estimates in calculating the value of the Gold Stream
Liability are production plan, gold price, the implied interest rate and
future repayment profile. The buy-out option contained in the Gold Sale
Agreement has been estimated at nil.
In calculating the deemed interest rate for interest expense that will be
released over the term of the Agreement, estimates of both the production plan
and gold price will be the key variables. The deemed interest rate is
calculated at each reporting period and restated based on changes to the
expected production profile and gold price estimates, which will result in a
revision to estimated future payments. Any change in future payments will
result in a revision of the deemed interest rate.
The period-end Gold Stream obligation uses forward curve information based on
the period-end gold spot price, which was US$1,875 /oz at December 31, 2021. A
1% change in gold production estimates would result in an impact of less than
US$0.056 million on the Gold Stream liability.
(ii) Restoration, site rehabilitation and environmental costs
The Group's mining and exploration activities are subject to various laws and
regulations governing the protection of the environment. The Group recognises
management's best estimate of the rehabilitation costs in the period in which
they are incurred. This estimate includes judgements from management in
respect of which costs are expected to be incurred in the future, the timing
of these costs and their present value. Actual costs incurred in future
periods could differ materially from the estimates. Additionally, future
changes to environmental laws and regulations, life of mine estimates and
discount rates could affect the carrying amount of this provision. Such
changes could similarly impact the useful lives of assets depreciated on a
straight-line-basis, where those lives are limited to the life of mine. A 1%
change in the discount rate on the Group's rehabilitation estimates would
result in an impact of $0.32 million (2020: $nil) on the provision for
environmental and site restoration. The value of the year- end restoration
provision is disclosed within note 14.
(iii) Inventories
Expenditures incurred, and depreciation and amortization of assets used in
mining and processing activities are deferred and accumulated as the cost of
ore in stockpiles, ore in mill , and finished gold dore inventories. These
deferred amounts are carried at the lower of average cost or net realizable
value.
Their measurement involves the use of estimation to determine the tonnage, the
attainable gold recovery, and the remaining costs of completion to bring
inventory to its saleable form. Changes in these estimates can result in a
change in mine operating costs of future periods and carrying amounts of
inventories.
In determining the net realizable value of ore in stockpiles, ore in mill, and
gold dore the Company estimates future metal selling prices, production
forecasts, realized grades and recoveries, and timing of processing to convert
the inventories into saleable form. Reductions in metal price forecasts,
increases in estimated future production costs, reductions in the amount of
recoverable ounces, and a delay in timing of processing can result in a write
down of the carrying amounts of the Company's ore in stockpiles, ore in mill
and gold dore inventories.
a) Critical accounting judgments
Information about critical judgments in applying accounting policies that have
the most significant risk of causing material adjustment to the carrying
amounts of assets and liabilities recognised in the financial statements
within the next financial year are discussed below:
(i) Impairment of exploration and evaluation assets
In accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources,
management is required to assess impairment in respect of the intangible
exploration and evaluation assets. In making the assessment, management is
required to make judgments on the status of each project and the future plans
towards finding commercial reserves. The nature of exploration and evaluation
activity is such that only a proportion of projects are ultimately successful
and some assets are likely to become impaired in future periods.
Management has determined that it is appropriate to impair fully the value of
the Central Houndé Project in Burkina Faso following the unsuccessful attempt
by Barrick Gold to dispose of its 51% interest in the license. An impairment
charge of $129,109 has been charged in the year to December 31, 2021, in the
Consolidated Statement of Comprehensive Loss. There were no impairment
indicators present in respect of any of the other exploration and evaluation
assets and as such, no additional impairment test was performed.
(ii) Impairment of property, plant and equipment
The Company has determined that there were no impairment indicators present in
respect of the Segilola Gold Mine in accordance with IAS 36 and determined
that no impairment was required to be recognised.
(iii) Functional currency
An analysis of functional currency under IAS 21 was undertaken on Segilola
Resources Operations Limited ("SROL") in order to determine if significant
changes to operational activities provide indicators that the functional
currency for IFRS purposes should be reviewed and changed. Under IAS 21 an
entity's functional currency reflects the underlying transactions, events and
conditions that are relevant to it. Accordingly, once determined, the
functional currency is not changed unless there is a change in those
underlying transactions, events and conditions.
The principal focus of the analysis was on the continuing applicability of the
Nigerian Naira ("NGN") as the functional and reporting currency SROL.
Potential indicators of a change in functional currency for SROL were the
commencement of the Mining Contract at Segilola and commencement of gold sales
from Segilola, both denominated in US Dollars at points during the year. SROL
continued to incur significant operating costs denominated in NGN throughout
the year under review. The financial impact of a change in functional
currency of SROL to US Dollars was assessed at each of the dates where
potential indicators of a change in functional currency could be considered to
have been determined and it was concluded that a change in functional currency
to US Dollars would not have a material impact on the financial statements of
SROL or the Group. The Group determined that in the absence of a material
change impact on the financial statements, and the continued material costs
denominated in NGN, the appropriate functional currency for SROL continued to
be NGN, for the year to December 31, 2021. Refer to Note 3f for detail on
the impact of commencement of commercial production in 2022.
(iv) Commercial production
The Group achieved first gold sales from its Segilola Gold Mine ("Segilola")
in Osun state, Nigeria in December 2021, with first production from the Mill
occurring in October 2021. During Q4 2021 production from the Mill was
intermittent and below operating capacity per its mine plan, while overall
recovery was approximately 13% below capacity. The Group's focus during Q4
2021, was the ramp-up of production to mine plan level which was not achieved
on a consistent basis prior to year-end. After careful consideration
Management has determined that mining operations to December 31, 2021, were
not at sustainable commercial levels and that the correct classification of
Segilola was Assets under construction. Production and recovery rates reached
levels closer to mine plan in January 2022, and as such Management has
determined that commercial production was achieved from January 2022. During
the test phase, the Group earned pre-production sales revenue from gold sales.
Refer to Note 3f for detail on the impact of commencement of commercial
production in 2022. Refer to Note 3u for further detail on accounting
treatment for revenue and cost of production during the testing and ramp-up
phase to December 31, 2021.
5. OTHER ADMINISTRATIVE EXPENSES
Years Ended
Note December 31,
2021 2020
Audit $ 207,988 $ 134,194
Legal and professional fees 146,787 137,398
Consulting fees 449,632 763,801
Amortisation and depreciation - owned assets 15 26,797 55,719
Amortisation and depreciation - right-of-use assets 10 52,028 56,619
Directors' fees 20 452,965 413,228
Salaries and benefits 1,631,807 2,099,369
Listing and filing fees 38,149 21,403
Investor relations and transfer agent 311,849 296,933
Bank charges 263,910 71,103
Office and miscellaneous 478,879 171,747
Travel 213,651 95,316
$ 4,274,442 $ 4,316,831
Expenses of $1,740,376 incurred in the year ended December 31, 2021, are costs
incurred in listing the Company's shares on the AIM Market of the London Stock
Exchange. These costs have been identified separately in the Consolidated
Statement of Comprehensive Loss.
Foreign exchange gains (losses) recognised through the Consolidated Statement
of Comprehensive Loss arose primarily from movements in the exchange rate
between the Nigerian Naira and US Dollar.
6. RESTRICTED CASH
December 31, December 31, 2020
2021
Restricted cash $ 4,445,121 $ 4,460,026
On December 1, 2020, the Company announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
US$54 million project finance senior debt facility ("the Facility") from the
Africa Finance Corporation for the construction of the Segilola Gold Project
in Nigeria. The Facility can be drawn down at the Group's request in minimum
disbursements of US$5 million. As at December 31, 2021, SROL has received
total disbursements of US$52.6 million ($66.7 million), with US$31.1 million
($39.4 million) drawn down during the period under review. Total disbursements
received represent 97% of the facility. Under the terms of the facility, the
Company was required to place a total of US$3.5 million ($4.4 million) into a
cost overrun bank account that can only be used for expenditure on the
development of the Segilola Gold Project in the event of construction costs
exceeding budget. Accordingly, the balance of the cost overrun bank account
at the reporting date has been shown separately from Cash on the Statement of
Financial Position. Refer to Note 13 for further detail on the facility. The
restricted cash balance will be released to the Company upon satisfaction of
the following conditions:
1. Project construction being within budget; and
2. Commissioning of the Segilola Gold Mine.
7. INVENTORY
December 31, 2021 December 31, 2020
Plant spares and consumables $ 1,700,832 $ -
Gold ore in stockpile 11,015,930 -
Gold in CIL 2,052,541 -
Gold Dore 8,303,875 -
$ 23,073,178 $ -
There were no write downs to reduce the carrying value of inventories to net
realizable value during the year ended December 31, 2021.
8. AMOUNTS RECEIVABLE
December 31, 2021 December 31, 2020
$ 25,400 $ -
GST / VAT 4,605 1,414
Other receivables 264,517 55,291
$ 294,522 $ 56,705
The value of receivables recorded on the balance sheet is approximate to their
recoverable value and there are no expected material credit losses.
9. PREPAID EXPENSES, ADVANCES AND DEPOSITS
December 31, December 31, 2020
2021
Current:
Insurance $ 68,502 $ 47,973
Gold Stream liability arrangement fees 49,270 52,910
Other deposits 298,709 295,795
Other prepayments 328,172 156,018
$ 744,653 552,696
Non-current:
Gold Stream liability arrangement fees $ 110,857 $ 171,957
Other prepayments 23,327 23,327
$ 134,184 $ 195,284
10. LEASES
The Group accounts for leases in accordance with IFRS 16. The definition of a
lease under IFRS 16 was applied only to contracts entered into or changed on
or after January 1, 2019.The Group has elected not to recognise right-of-use
assets and lease liabilities for leases which have low value, or short-term
leases with a duration of 12 months or less. The payments associated with such
leases are charged directly to the income statement on a straight-line basis
over the lease term. $2,973,774 (2020 year: $103,009) has been expensed in the
year in relation to low value and short- term leases. In addition, the Group
will no longer recognise provisions for operating leases that it assesses to
be onerous. Instead, the Group will include the payments due under the lease
in its lease liability.
The key impacts on the Statement of Comprehensive Loss and the Statement of
Financial Position for the year ended December 31, 2021, were as follows:
Right-of- use asset Lease liability Income statement
Carrying value December 31, 2020 $ 87,817 $ (38,969) $ -
New leases entered in to during the year 28,751,619 (25,008,892) -
Depreciation (2,995,240) - (52,028)
Interest - (994,425) (713)
Lease payments - 3,560,718 -
Foreign exchange movement 658,261 (754,128) (95,868)
Carrying value at December 31, 2021 $ 26,502,457 $ (23,235,696) $ (148,609)
Total depreciation for the year under IFRS 16 was $2,995,240. Of the total
depreciation charge, $52,028 was charged to the Statement of Comprehensive
Loss, and $2,943,212 was capitalised to Assets Under Construction. Total
interest expense for the year under IFRS 16 was $1994,425. Of the total
interest charge, $713 was charged to the Statement of Comprehensive Loss, and
$993,7119 was capitalised to Assets Under Construction. The capitalisation of
lease interest charges will cease when commercial production commences. Refer
to Note 3f for further detail on the Group's accounting policy for Assets
Under Construction and Note 4(vi) for the Group's judgement on commercial
production.
The key impacts on the Statement of Comprehensive Loss and the Statement of
Financial Position for the year ended December 31, 2020, were as follows:
Right-of -use asset Lease liability Income statement
Balance on transition $ 108,177 $ (96,665) $ -
New leases entered in to during the year 41,969 (41,969) -
Depreciation (60,559) - (56,619)
Interest - (3,159) (3,159)
Lease payments - 103,009 -
Foreign exchange movement (1770) (185) (1,955)
Carrying value at 31 December 2020 $ 87,817 $ (38,969) $ (61,733)
11. GOLD STREAM LIABILITY
Gold stream liability
December 31, 2021 December 31, 2020
Total Total
Balance at Beginning of period $ 31,416,951 $ -
Drawdown - 28,197,777
Interest at the effective interest rate 8,344,639 4,545,134
Repayments (564,438) -
Foreign exchange movement (718,947) (1,325,960)
Balance at End of period $ 38,478,205 $ 31,416,951
Current liability 16,322,931 6,068,017
Non-current liability 22,155,274 25,348,934
On April 29, 2020, the Company announced the closing of project financing for
its flagship Segilola Gold Project ("Segilola") in Osun State, Nigeria. The
financing included a US$21 million gold stream upfront deposit ("the
Prepayment") over future gold production at Segilola under the terms of a Gold
Purchase and Sale Agreement ("GSA") entered in to between the Company's wholly
owned subsidiary SROL and the AFC. The Prepayment is secured over the shares
in SROL as well as over SROL's assets and is not subject to interest. The
initial term of the GSA is for ten years with an automatic extension of a
further ten years. The AFC will receive 10.27% of gold production from the
Segilola ML41 mining license until the US$21 million Prepayment has been
repaid in full. Thereafter the AFC will continue to receive 10.27% of gold
production from material mined within the ML41 mining license until a further
US$26.25 million is received, representing a total money multiple of 2.25
times the value of the Prepayment, at which point the GSA will terminate. The
AFC are not entitled to receive an allocation of gold production from material
mined from any of the Group's other gold tenements under the terms of the GSA.
The US$26.25 million represents interest on the Prepayment. A calculation of
the implied interest rate was made as at drawdown date with interest being
apportioned over the expected life of the Stream Facility. The principal input
variables used in calculating the implied interest rate and repayment profile
were production profile and gold price. The future gold price estimates are
based on market forecast reports for the years 2021 to 2025 and, the
production profile is based on the latest life of mine plan model. The
liability will be re-estimated on a periodic basis to include changes to the
production profile, any extension to the life of mine plan and movement in the
gold price. Upon commencement of production, any change to the implied
interest rate will be expensed through the Consolidated Statement of Loss.
Interest expense of $8,344,639 was recognised for the year ended December 31,
2021 and has been capitalised and is included in the value of Assets Under
Construction (Refer to Note 15). To the date of this report a cumulative total
of $12,889,773 has been capitalised and included in the value of Assets Under
Construction. The interest expense will be released to the income statement
upon commencement of commercial production in line with units of gold
produced.
In December 2021, the Group entered into a cash settlement agreement with the
AFC where the gold sold to the AFC is settled in a net-cash sum payable to the
AFC instead of delivery of bullion in repayment of the gold stream
arrangement. Refer to note 3d for further information on the accounting
treatment of the gold stream liability.
The effect of the accounting change is set out in the table below.
December 31, December 31, 2020
2021
Contract liability $ - $ 31,416,951
Financial liability $ 38,478,205 $ -
The following table represents the Group's loans and borrowings measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Financial liability at fair value through profit or loss $ - 38,478,205 - 38,478,205
The liabilities included in the above table are caried fair value through
profit and loss.
12. LOANS AND BORROWINGS
December 31, December 31, 2020
2021
Current liabilities:
Loans payable to the Africa Finance Corporation less than 1 year $ 30,760,787 $ -
Deferred element of EPC contract 3,970,882 68,279
Short term advances 849,824 -
$ 35,581,493 68,279
Non-current liabilities:
Loans payable to the Africa Finance Corporation more than 1 year $ 28,821,637 $ 18,140,636
Deferred element of EPC contract 3,925,189 2,391,152
$ 32,746,826 $ 20,531,788
Loans from the Africa Finance Corporation
December 31, December 31, 2020
2021 Total
Total
Balance at Beginning of year $ 18,140,636 $ -
Drawdown 38,062,018 27,927,401
Equity component - (5,666,011)
Arrangement fees (647,010) (4,016,642)
Unwinding of interest in the year 2,179,403 186,205
Foreign exchange movement 1,847,378 (290,317)
Balance at End of period $ 59,582,425 $ 18,140,636
Current liability 30,760,787 -
Non-current liability 28,821,637 18,140,636
On December 1, 2020, the Company announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
US$54 million project finance senior debt facility ("the Facility") from the
Africa Finance Corporation ("AFC") for the construction of the Segilola Gold
Project in Nigeria. The Facility can be drawn down at the Group's request in
minimum disbursements of US$5 million. As at December 31, 2021, SROL has
received total disbursements of US$52.6 million ($66.7 million), with US$31.1
million ($38.1 million) drawn down during the year under review. Total
disbursements received represent 97% of the Facility. The Facility is secured
over the share capital of SROL and its assets, with repayments expected to
commence in March 2022 and conclude in March 2025.
Repayment of the aggregate Facility will be made in instalments over a
36-month period by repaying an amount on a series of repayment dates, as set
out in the Facility Agreement, which reduces the amount of the outstanding
aggregate Facility by the amount equal to the relevant percentage of Loans
borrowed as at the close of business in London on the date of Financial Close.
Interest accrues at LIBOR plus 9% and is payable on a quarterly basis in
arrears. The Facility also is subject to a Commitment Fee of 2.5% per annum on
the Facility with the Commitment Fee being payable on a quarterly basis in
arrears.
In conjunction with the granting of the Facility, Thor issued 33,329,480 bonus
shares to the AFC. Thor also incurred transaction costs of $4,663,652 in
relation to the loan facility. The fair value of the liability was determined
at $45,822,943 taking into account the transaction costs and equity component
and recognised at amortised cost using an effective rate of interest, with the
fair value of the shares issued in April 2020 of $5,666,011 recognised within
equity.
Interest paid during the year of $4,452,063 has been capitalised under
Assets Under Construction. (Refer to Note 15). As at December 31, 2021, $1.3
million (US$1.6 million) of the facility remains available for drawdown. Post
year end, the Company cancelled US$1.35m of its Senior Facility it did not
draw down.
The loan from the AFC has financial and non-financial covenants. These
covenants are triggered upon the first repayment obligation which took place
in March 2022. Refer to note 27 for further information.
Deferred payment facility on EPC contract for the construction of the Segilola
Gold Mine
The Company constructed its Segilola Gold Mine through an engineering,
procurement and construction contract ("EPC Contract") signed with Norinco
International Cooperation Limited. The EPC Contract has been agreed on a lump
sum turnkey basis which provides Thor with a fixed price of US$67.5 million
for the full delivery of design, engineering, procurement, construction and
commissioning of the proposed 715,000 ton per annum gold ore processing plant.
The EPC Contract includes a deferred element ("the Deferred Payment Facility")
of 10% of the fixed price. As at December 31, 2021, a total of $7,896,071
(US$6,217,294) (December 31, 2020: $2,459,431 (US$2,009,314)) was deferred
under the facility. The 10% deferred element is repayable in instalments over
a 36-month period by repaying an amount on a series of repayment dates, as set
out in the Deferred Payment Facility. Repayments are due to commence in March
2022 and conclude in 2025. Interest on this element of the EPC deferred
facility accrues at 8% per annum from the time the Facility taking-over
Certificate is issued.
December 31, 2021 December 31, 2020
Total Total
Deferred payment facility $ 7,896,071 $ 2,459,431
Balance at year end $ 7,896,071 $ 2,459,431
Short term advances
Total
Balance at drawdown $ 863,267
Foreign exchange movement (13,443)
Balance December 31, 2021 $ 849,824
Current liability 849,824
Non-current liability -
The Company entered into a currency swap agreement with a third party on
December 30, 2021. The currency being purchased was received before reporting
date. The currency being sold was paid to the third party after reporting date
on January 2, 2022. The advance was settled in full on January 2, 2022, and
did not incur any interest.
The following table analyses within the fair value hierarchy the Group's
assets and liabilities (by class) measured at fair value at December 31, 2021.
The following table represents the Group's loans and borrowings measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Assets $ - - - -
Liabilities
Short term advances - - 849,824 849,824
Total $ - - 849,824 849,824
The liabilities included in the above table are caried at amortised cost.
Their carrying value are a reasonable approximation of fair value.
13. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
December 31, 2021 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2021 $ 31,416,951 - 18,140,636 2,459,431 52,017,018
Cash flows:
Drawdowns - 863,267 38,062,018 - 38,925,285
Repayments (564,438) - - - (564,438)
Transaction costs - (647,010) - (647,010)
Non-cash changes:
Unwinding of interest in the year 8,344,639 - 2,179,403 318,386 10,842,428
Foreign exchange movements (718,947) (13,443) 1,847,378 32,489 1,147,477
Offset against EPC payment - - - 5,085,765 5,085,765
December 31, 2021 $ 38,478,205 849,824 59,582,425 7,896,071 106,806,525
December 31, 2021 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2021 $ 31,416,951 - 18,140,636 2,459,431 52,017,018
Cash flows:
Drawdowns - 863,267 38,062,018 - 38,925,285
Repayments (564,438) - - - (564,438)
Transaction costs - (647,010) - (647,010)
Non-cash changes:
Unwinding of interest in the year 8,344,639 - 2,179,403 318,386 10,842,428
Foreign exchange movements (718,947) (13,443) 1,847,378 32,489 1,147,477
Offset against EPC payment - - - 5,085,765 5,085,765
December 31, 2021 $ 38,478,205 849,824 59,582,425 7,896,071 106,806,525
December 31, 2020 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2020 $ - - - -
Cash flows:
Drawdowns 28,197,777 - 27,927,401 - 56,125,178
Transaction costs - (4,016,642) - (4,016,642)
Non-cash changes:
Equity component - - (5,666,011) - (5,666,011)
Unwinding of interest in the year 4,545,134 - 186,205 - 4,731,339
Foreign exchange movements (1,325,960) - (290,317) - (1,616,277)
Offset against EPC payment - - 2,459,431 2,459,431
December 31, 2020 $ 31,416,951 - 18,140,636 2,459,431 52,017,018
14. PROVISIONS
2021 Fleet demobilisation costs December 31, 2020
Restoration costs Total
Balance at Beginning of year $ - $ 618,586 $ 618,586
Initial recognition of provision 220,274 - 220,274
Increase in provision - 5,884,660 5,884,660
Foreign exchange movements - (63,228) (63,228)
Balance at year end $ - $ 6,440,018 $ 6,660,292
Current liability - - -
Non-current liability 220,274 6,440,018 6,660,292
2020 Fleet demobilisation costs December 31, 2020
Restoration costs Total
Balance at Beginning of year $ - $ - $ -
Initial recognition of provision - 618,586 618,586
Increase in provision - - -
Foreign exchange movements - - -
Balance at year end $ - $ 618,586 $ 618,586
Current liability - - -
Non-current liability - 618,586 618,586
The restoration costs provision is for the site restoration at Segilola Gold
Project in Osun State Nigeria. The fair value of the above provision is
measured by unwinding the discount on expected future cash flows using a
discount factor that reflects the credit-adjusted risk-free rate of interest.
It is expected that the restoration costs will be paid in US dollars, and as
such the 2021 US inflation rate of 4.7% and the interest rate of 1.263% on
5-year US bonds were used to calculate the expected future cash flows. The
provision represents the net present value of the best estimate of the
expenditure required to settle the obligation to rehabilitate environmental
disturbances caused by mining operations at mine closure.
The fleet demobilization costs provision is the value of the cost to
demobilize the mining fleet upon closure of the mine.
15. PROPERTY, PLANT AND EQUIPMENT
Mining & other equipment Land Decommiss Assets under construction Total
ioning Asset
Costs
Balance, December 31, 2019 $ 938,180 $ - $ - $ - $ 938,180
Transfer from exploration & evaluation assets - - - 37,015,004 37,015,004
Acquisition payments - 23,012 - 318,152 341,164
Additions 1,793,111 - 618,586 55,448,668 57,860,365
Foreign exchange movement (87,927) - - (3,447,668) (3,535,595)
Balance, December 31, 2020 $ 2,643,364 $ 23,012 $ 618,586 $ 89,334,156 $ 92,619,120
Acquisition payments - - - 9,268,302 9,268,302
Additions 2,420,029 - 5,887,586 84,347,609 92,655,224
Foreign exchange movement (190,569) (1,640) (66,154) (5,294,839) (5,553,202)
Balance, December 31, 2021 $ 4,872,824 $ 21,372 $ 6,440,018 $ 177,655,228 $ 188,989,445
Accumulated depreciation and impairment losses
Balance, December 31, 2019 $ 801,032 $ - $ - $ - $ 801,032
Depreciation 254,046 - - - 254,046
Foreign exchange movement (12,834) - - - (12,834)
Balance, December 31, 2020 $ 1,042,244 $ - $ - $ - $ 1,042,244
Depreciation 844,882 - - - 844,882
Foreign exchange movement (134,550) - - - (134,550)
Balance, December 31, 2021 $ 1,752,576 $ - $ - $ - $ 1,752,575
Carrying amounts
Carrying value at December 31, 2019 $ 137,148 $ - $ - $ - $ 137,148
Carrying value at December 31, 2020 $ 1,601,120 $ 23,012 $ 618,586 $ 89,334,156 $ 91,576,876
Balance, December 31, 2021 $ 3,120,248 $ 21,372 $ 6,440,018 $ 177,655,228 $ 187,236,870
Assets Under Construction ("AUC") acquisitions is the recognition of the
discounted value of US$7.5 million payable to third party vendors on
production from the Segilola Gold Mine. These royalty obligations have been
capitalised into the value of AUC in accordance with IAS 3 (Refer to Note 3k
for further detail on the accounting treatment for royalties).
Included within AUC additions are a total of $15,109,684 borrowing costs
capitalised during the year, including interest on the AFC loan of $4,452,063.
The costs relate to both the Gold Stream Prepayment and AFC Secured Loan. The
associated borrowings are secured over the assets under construction, and
other property, plant & equipment of Segilola Resources Operating Limited.
Material non-cash additions to Assets Under Construction for the year to
December 31, 2021, include $17,654,452 restoration costs and Deferred EPC
payments, $22,452,134 movement in trade payables and accrued expenses,
$10,431,022 in the unwinding of interest and borrowing costs, and $855,308
depreciation.
a) Segilola Project, Osun Nigeria:
A summary of depreciation capitalised is as follows:
Years ended Total depreciation
December 31, capitalised
December 31, 2021 December 31, 2020
2021 2020
$ $ $ $
Assets under construction 855,308 192,232 1,193,048 337,740
Exploration expenditures 106,999 14,885 640,254 533,256
Total $ 962,307 $ 207,117 $ 1,833,303 $ 870,996
Classification of Expenditure on the Segilola Gold Project
On April 29, 2020, the Company announced the execution of definitive documents
with the Africa Finance Corporation to reach full funding of the Segilola Gold
Project in Nigeria ("the Project") and made the Final Investment Decision to
proceed with construction of the Project. In accordance with the provisions of
IFRS 6, this milestone achievement triggers a change in accounting treatment
for expenditure on the Project whereby the costs incurred on the Project were
transferred from Exploration and Evaluation Assets to tangible assets as
Assets under construction. This transfer occurred in the audited financial
statements for the year ended December 31, 2020. Upon transfer of the Segilola
Gold Project from Exploration and Evaluation assets to Assets under
Construction, the Company undertook an impairment assessment in accordance
with IAS 36 and determined that no impairment was required to be recognised
based on the Open Pit DFS valuation of US$138 million, which was significantly
above the value of the project recorded on the balance sheet of $37 million
(US$29 million) as at the date of investment decision.
Decommissioning Asset
The decommissioning asset relates to estimated restoration costs at the
Group's Segilola Gold Mine as at December 31, 2021. Refer to Note 14 for
further detail.
16. INTANGIBLE ASSETS
The Company's exploration and evaluation assets costs are as follows:
Douta Gold Project, Senegal Central Houndé Project, Burkina Faso Segilola Gold Project, Exploration licenses, Nigeria Software Total
Osun Nigeria
Costs
Balance, December 31, 2019 $ 13,708,142 $ 1,555,938 $ 31,336,433 $ 79,379 $ - $ 46,679,892
Additions $ - $ - $ - $ - $ 316,936 316,936
Exploration costs 1,705,210 1,121 5,678,571 36,560 - 7,421,462
Transfer to tangible assets - - (37,015,004) - - (37,015,004)
Impairment - (1,604,564) - - - (1,604,564)
Depreciation - - - - (19,710) (19,710)
Foreign exchange movement 464,356 47,505 - (4,904) (18,219) 488,738
Balance, December 31, 2020 $ 15,877,708 $ - $ - $ 111,035 $ 279,007 $ 16,267,750
Acquisition costs - - - 93,027 - 93,027
Additions - - - - 222,185 222,185
Exploration costs 2,530,224 132,421 - 921,787 - 3,584,432
Impairment - (132,518) - - - (132,518)
Amortisation - - - - (208,229) (208,229)
Foreign exchange movement (745,889) 97 - (13,831) (7,123) (766,746)
Balance, December 31, 2021 $ 17,662,043 $ - $ - $ 1,112,018 $ 285,840 $ 19,059,901
a) Douta Gold Project, Senegal:
The Douta Gold Project consists of an early-stage gold exploration license
located in southeastern Senegal, approximately 700km east of the capital city
Dakar.
The Company is party to an option agreement (the "Option Agreement") with
International Mining Company ("IMC"), by which the Company has acquired a 70%
economic interest in the Douta Gold Project located in southeast Senegal held
through African Star SARL.
Effective February 24, 2012, the Company exercised its option to acquire a 70%
economic interest in the Douta Gold Project pursuant to the terms of the
Option Agreement between the Company and IMC. As consideration for the
exercise of the option, the Company issued to IMC 11,646,663 common shares,
based on a VWAP for the 20 trading days preceding the option exercise date of
$0.2014 (or US$0.2018) per share, valued at $2,678,732 based on the Company's
closing share price on February 24, 2012. The share payment includes
consideration paid to IMC for extending the time period for exercise of the
option.
Pursuant to the terms of the Option Agreement, IMC's 30% interest will be a
"free carry" interest until such time as the Company announces probable
reserves on the Douta Gold Project (the "Free Carry Period"). Following the
Free Carry Period, IMC must either elect to sell its 30% interest to African
Star at a purchase price determined by an independent valuer commissioned by
African Star or fund its 30% share of the exploration and operating expenses.
b) Central Houndé Project, Burkina Faso:
(i) Bongui and Legue gold permits, Burkina Faso:
AFC Constelor SARL held a 100% interest in the Bongui and Legue gold permits
covering an area of approximately 233 km(2) located within the Houndé belt,
260 km southwest of the capital Ouagadougou, in western Burkina Faso.
(ii) Ouere Permit, Central Houndé Project, Burkina Faso:
Argento BF SARL held a 100% interest in the Ouere gold permit, covering an
area of approximately 241 km(2) located within the Houndé belt.
The three permits together cover a total area of 474km(2) over the Houndé
Belt which form the Central Houndé Project.
(iii) Barrick Option Agreement, Central Houndé Project, Burkina Faso:
On April 8, 2015, the Company entered into the Acacia Option Agreement with
Acacia Mining plc ("Acacia"), whereby Acacia will have the exclusive option to
earn up to a 51% interest in Central Houndé Project by satisfying certain
conditions over a specified 4-year period and then the right to acquire an
additional 29%, for an aggregate 80% interest in the Central Houndé Project,
upon declaration of a Pre-Feasibility Study. Acacia met the minimum spending
requirement for the Phase 1
Earn-in in September 2018. As a result, Acacia earned a 51% interest in the
Central Houndé Project. The Group then held a 49% interest in the Central
Houndé Project.
In 2019, Barrick Gold Corporation ("Barrick") completed an acquisition of
Acacia through the purchase of the ordinary share capital of Acacia that
Barrick did not already own. The acquisition did not affect work undertaken at
the Central Houndé Gold Project in Burkina Faso where Barrick continued its
exploration work as per its Joint Operation with Thor.
Following the unsuccessful attempt by Barrick Gold to dispose of its 51%
interest in the licenses, the Company carried out an impairment assessment at
December 31, 2020, and determined that the unsuccessful sale attempt was an
indication for impairment. In 2021 there was no operational work undertaken to
assess the existence of recoverable gold reserves. The Company considered that
there is an indication for impairment for the current year given no
operational advances were made on the Project, continued political uncertainty
in Burkina Faso, and the unsuccessful sale attempt by Barrick in 2020, which
failed to provide an external value for the Project.
In April 2021, Thor re-acquired Barrick's 51% ownership of the Project in
exchange for a 1% Net Smelter Royalty. Thor now holds 100% of the Central
Houndé Project.
It is the Company's intention to focus on Segilola development and Douta
exploration in the short term, and it does not plan to undertake significant
work on the license areas in the near future. Given the absence of further
work during 2021 and the politically uncertain environment in Burkina Faso at
the present time, the decision was taken to continue the conservative approach
to valuation of the asset and impair fully the value of the Central Houndé
Project. For the year ended December 31, 2021, an impairment charge of
$129,109 was recognised through the Consolidated Statement of Comprehensive
Loss.
c) Exploration Licenses, Nigeria
The high grade Segilola gold deposit is located on the major regional shear
zone that extends for several hundred kilometres through the gold-bearing
Ilesha schist belt (structural corridor) of Nigeria. Thor's exploration tenure
currently comprises eleven explorations licenses. The focus of exploration
license acquisitions has been on consolidating prospective ground within
trucking distance of Segilola, and also acquiring prospective licences further
away which have demonstrated strong gold mineralisation prospectively through
target generation, ground truthing and artisanal mining.
On July 13, 2021, the Office of the Nigeria Mining Cadastre granted a further
two new licenses to SGL with a combined area of 84.8 km². Exploration license
EL34429 which is located in Kwara State to the north of Segilola, and EL34431
which is located in Ogun State to the west of Segilola.
During the fourth quarter of 2021, the Company exercised options with two
third parties immediately earning a 51% interest in each of two exploration
licenses in the immediate vicinity of the Segilola Gold Mine. Under the terms
of the earn-in agreements the Company can increase its interest in each
license to 75% prior to a contributions phase for which a Joint Venture
arrangement will then be established.
The total consideration paid for the licenses and Joint Venture, was comprised
of the following:
Purchase price
Acquisition of exploration licenses
Cash (NGN 1,096,323) - exploration licenses $ 4,127
Cash (US$70,000) - Joint Venture 88,900
Total consideration December 31, 2021 $ 93,027
In total, the Group currently has tenure over eleven exploration licenses and
one mining license. The focus of exploration license acquisitions has been on
consolidating prospective ground within trucking distance of Segilola, and
also acquiring prospective licences further away which have demonstrated
strong gold mineralisation prospectively through target generation, ground
truthing and artisanal mining.
17. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31, December 31,
2021 2020
Trade payables $ 40,961,341 $ 10,363,935
Accrued liabilities 3,887,484 552,029
Other payables 6,498,378 -
$ 51,347,203 $ 10,915,964
Current liability 49,358,349 10,915,964
Non-current liability 1,988,854 -
Accounts payable and accrued liabilities are classified as financial
liabilities and approximate their fair values.
Included in trade creditors is a total of $9,034,392 that relates to third
party royalties that will become payable upon future gold sales. $7,045,538 of
this royalties creditor is included in current liabilities, and $1,988,854 is
included in non-current liabilities (refer to note 3k for further detail).
The following table represents the Group's trade payables measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Trade payables
Third party royalties $ - - 9,034,392 9,034,392
The amount in Other payables is a 15% retention payment of the value of
construction of the Segilola Gold Mine, which is payable upon EPC handover.
18. CAPITAL AND RESERVES
a) Authorized
Unlimited common shares without par value.
b) Issued
December 31, December 31, December 31, December 31,
2021 2021 2020 2020
Number Number
As at start of the year 621,405,975 $ 97,122,584 449,352,215 $ 67,550,111
Issue of new shares:
- Share warrants exercised i 9,952,034 2,620,116 - -
- Share options exercised ii / iii 1,000,000 120,000 210,000 42,000
- Issue July 13, 2020 iv - - 75,548,530 13,558,254
- Issue costs July 13, 2020 - - - (1,223,457)
- Issue April 29, 2020v - - 28,215,750 5,643,150
- Issue April 29, 2020 creditor settlement vi
- - 34,750,000 5,907,500
- Issue April 29, 2020 bonus shares vii
- - 33,329,480 5,666,011
- Issue December 4, 2019viii - - - (20,985)
632,358,009 $ 99,862,700 621,405,975 $ 97,122,584
i Value of 1,664,534 warrants exercised on June 8, 2021, at a price of $0.18
per share, and 8,287,500 warrants exercised on August 31, 2021, at a price of
$0,28 per share.
ii Value of 1,000,000 options exercised at a price of $0.12 per share.
iii Value of 210,000 options exercised on December 10, 2020, at a price of
$0.20 per share.
iv Private placement of 75,548,530 common shares at a price of $0.18 per
share.
v Private placement of 28,215,750 common shares at a price of $0.20 per share.
vi Issue of 34,750,000 common shares in settlement of US$5 million owed to
creditors. The fair value of the shares issued was determined at the share
price at the date of issue of $0.17 per share. The difference between the fair
value of the shares issued of $5,907,500 and the carrying amount of creditors
settled of $6,950,000 is recognised in the statement of comprehensive loss as
gain of settlement of liabilities of $1,042,000.
vii Issue of 33,329,480 bonus common shares in connection with secured
borrowing facility shares at a price of $0.17 per share (Refer to Note 11).
viii Additional costs associated with the private placement of 78,669,250
common shares in December 2019.
Share-based compensation
The Company has granted directors, officers and consultants share purchase
options. These options were granted pursuant to the Company's stock option
plan. Under the current Share Option Plan, 44,900,000 common shares of the
Company are reserved for issuance upon exercise of options.
· On January 16, 2020, 14,250,000 stock options were granted at an
exercise price of $0.20 per share for a period of five years. The options
vested immediately.
· On October 5, 2018, 750,000 stock options were granted at an
exercise price of $0.14 per share for a period of five years.
· On March 12, 2018, 12,800,000 stock options were granted at an
exercise price of $0.145 per share for a period of five years.
· On May 7, 2017, 500,000 stock options were granted at an exercise
price of $0.12 per share for a period of three years. On July 5, 2019, the
Company announced an extension of the expiry date from May 7, 2020, to May 7,
2022. All other conditions of the options remain the same.
· On January 16, 2017, 9,750,000 stock options were granted at an
exercise price of $0.12 per share for a period of three years. On July 5,
2019, the Company announced an extension of the expiry date from January 16,
2020, to January 16, 2022. In addition, the vesting conditions attached to
1.75 million options were removed with the options vesting immediately and the
resulting charge recorded in the Consolidated Statement of Comprehensive Loss.
All of the stock options were vested as at the balance sheet date. These
options did not contain any market conditions and the fair value of the
options were charged to the statement of comprehensive loss or capitalised as
to assets under construction in the period where granted to personnel's whose
cost is capitalised on the same basis. The assumptions inherent in the use of
these models for options outstanding as at reporting date are as follows:
Vesting period (years) First vesting date Expected remaining life (years) Risk free rate Exercise price Volatility of share price Fair value Options vested Options granted Expiry
5 01/16/2017 0.05 1.05% $0.12 197.32% $0.14 9,750,000 9,750,000 01/16/2022
5 03/12/2018 1.19 2.00% $0.145 105.09% $0.14 12,800,000 12,800,000 03/12/2023
5 10/05/2018 1.76 2.43% $0.14 100.69% $0.14 750,000 750,000 10/05/2023
5 01/16/2020 3.05 1.49% $0.20 66.84% $0.07 14,250,000 14,250,000 01/16/2025
The share price volatility measure for options granted in 2017 was the
historical volatility in Thor's share price measured over the same number of
years as the life of the options granted. In 2018 the Company elected to
measure volatility by calculating the average volatility of a collection of
three peer companies historical share prices for the exercising period of each
parcel of options. Management believes that given the transformational change
that the Company has undergone since the acquisition of the Segilola Gold
Project in August 2016, the Company's historical share price is not reflective
of the current stage of development of the Company, and that adopting the
volatility of peer companies who have advanced from exploration to development
is a more accurate measure of share price volatility for the purpose of
options valuation.
The following is a summary of changes in options from January 1, 2021, to
December 31, 2021, and the outstanding and exercisable options at December 31,
2021:
Contractual Lives January 1, During the period December 31, December 31, 2021
2021
2021
Number of Options
Grant Expiry Exercise Remaining (Years) Opening Granted Exercised Expired / Forfeited Closing Vested and Exercisable Unvested
Date
Date
Price
Balance
Balance
16-Jan-2017 16-Jan-2022 i $0.12 0.05 9,750,000 - (500,000) - 9,250,000 9,250,000 -
7-May-2017 7-May-2022 ii $0.12 - 500,000 - (500,000) - - - -
12-Mar-2018 12-Mar-2023 $0.145 1.19 12,800,000 - - - 12,800,000 12,800,000 -
5-Oct-2018 5-Oct-2023 $0.14 1.76 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 3.05 14,040,000 - - - 14,040,000 14,040,000 -
Totals 1.62 37,840,000 - (1,000,000) - 36,840,000 36,840,000 -
Weighted Average Exercise Price $0.159 $0.000 $0.120 - $0.160 $0.160 -
(i )On July 5, 2019, the Company announced an extension of the expiry date
from January 16, 2020, to January 16, 2022. All other conditions of the
options remain the same.
(ii )On July 5, 2019, the Company announced an extension of the expiry date
from May 7, 2020, to May 7, 2022. All other conditions of the options remain
the same.
CAPITAL AND RESERVES (continued)
The following is a summary of changes in options from January 1, 2020, to
December 31, 2020, and the outstanding and exercisable options at December 31,
2020:
Contractual Lives January 1, During the period December 31, December 31, 2020
2020
2020
Number of Options
Grant Expiry Exercise Remaining (Years) Opening Granted Exercised Expired / Forfeited Closing Vested and Exercisable Unvested
Date
Date
Price
Balance
Balance
16-Jan-2017 16-Jan-2022 i $0.12 1.05 9,750,000 - - - 9,750,000 9,750,000 -
7-May-2017 7-May-2022 ii $0.12 1.35 500,000 - - - 500,000 500,000 -
12-Mar-2018 12-Mar-2023 $0.145 2.19 12,800,000 - - - 12,800,000 12,800,000 -
5-Oct-2018 5-Oct-2023 $0.14 2.76 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 4.05 - 14,250,000 (210,000) - 14,040,000 14,040,000 -
Totals 2.59 23,800,000 14,250,000 (210,000) - 37,840,000 37,840,000 -
Weighted Average Exercise Price $0.134 $0.200 $0.200 - $0.159 $0.159 -
(i )On July 5, 2019, the Company announced an extension of the expiry date
from January 16, 2020, to January 16, 2022. All other conditions of the
options remain the same.
(ii )On July 5, 2019, the Company announced an extension of the expiry date
from May 7, 2020, to May 7, 2022. All other conditions of the options remain
the same.
. Share purchase warrants
On August 31, 2018, the Company issued 44,453,335 warrants pursuant to the
private share placement closed on the same date, whereby one warrant was
issued for every common share subscribed for ("Placement Warrants"). The
warrants were issued with an exercise price of $0.28 for a period of
thirty-six (36) months.
During the year ended December 31, 2021, 8,287,500 placement warrants were
exercised and converted into common shares at C$0.28 each. The remainder of
the unexercised warrants expired.
On August 31, 2018, the Company issued a total of 1,664,534 warrants to a
broker for advisory services pursuant to the private share placement closed on
the same date ("Broker Warrants"). The warrants were issued with an exercise
price of $0.18 for a period of thirty-six (36) months.
During the year ended December 31, 2021, 1,664,534 broker warrants were
exercised and converted into common shares at C$0.18 each.
Right to accelerate exercise of warrants
If at any time after four months and one day after August 31, 2018, the Common
Shares trade on the TSX Venture Exchange (the "TSX-V") at a closing price
equal to or greater than $0.36 for a period of twenty (20) consecutive trading
days, the Company may exercise a right to accelerate the expiry date of the
Placement Warrants by giving notice to the holders of the Placing Warrants
within five trading days after such event that the Placing Warrants shall
expire (30) days from the date of such notice.
Weighted Average Exercise Price
Number of Warrants
Carrying Value
Balance, December 31, 2017 $ -
Private placement 44,453,335 $0.28 475,000
Broker 1,664,534 $0.18 58,000
Balance, December 31, 2018 46,117,869 533,000
Balance, December 31, 2019 46,117,869 533,000
Broker warrants expiry August 31, 2020 (1,664,534) $0.18 (58,000)
Balance, December 31, 2020 44,453,335 475,000
Reinstatement of broker warrants 1,664,534 $0.18 58,000
Balance, March 31, 2021 46,117,869 553,000
Exercise of broker warrants (1,664,534) $0.18 (58,000)
Balance, June 30, 2021 44,453,335 475,000
Exercise of placement warrants (8,287,500) $0.28 (88,555)
Expiry of placement warrants (36,165,835) $0.28 (386,445)
Balance, December 31, 2021 - -
The value of the private placement warrants was net of the value of the
Company's right to accelerate exercise of the warrants, which was determined
using the Black Scholes model. The inputs to the model are listed in the table
below:
Vesting period (years) First vesting date Expected life (years) Risk free rate Exercise price Volatility of share price Fair value Warrants vested Warrants granted Expired
3 31/08/2018 - 2.08% $0.28 82.43% $0.08 44,453,335 44,453,335 31/08/2021
The volatility was determined by calculating the average volatility of a
collection of three peer companies historical share prices for the exercise
period of each parcel of warrants.
The Company's right to accelerate the exercising of the warrants arises in the
event that the Common Shares trade on the TSX Venture Exchange (the "TSX-V")
at a closing price equal to or greater than $0.36 for a period of twenty (20)
consecutive trading days. The Company may give notice to the holders of the
warrants requiring that they exercise the warrants with a period of thirty
(30) days from the date of notice, failing which the Warrants shall expire.
The inputs to the model for the Company's right to accelerate the exercising
of the warrants are listed in the table below:
Vesting period (years) First vesting date Expected life (years) Risk free rate Exercise price Volatility of share price Fair value Warrants vested Warrants granted Expired
3 31/08/2018 - 2.08% $0.36 82.43% $0.07 44,453,335 44,453,335 31/08/2021
Nature and purpose of equity and reserves
The reserves recorded in equity on the Company's statement of financial
position include 'Reserves', 'Currency translation reserve', and 'Deficit'.
'Share purchase warrants' is used to recognize the value of share purchase
warrants prior to exercise or forfeiture.
'Option reserve' is used to recognize the value of stock option grants prior
to exercise or forfeiture.
'Currency translation reserve' is used to recognize the exchange differences
arising on translation of the assets and liabilities of foreign branches and
subsidiaries with functional currencies other than Canadian dollars.
'Deficit' is used to record the Company's accumulated deficit.
19. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the loss attributed
to shareholders for the year to December 31, 2021, of $2,511,656 (December 31,
2020: $3,870,107) by the weighted average number of shares of 625,373,103
(December 31, 2020: 549,384,552) in issue during the period.
Due to the losses incurred during the year a diluted loss per share has not
been calculated as this would serve to reduce the basic loss per share. Out of
36,840,000 (2020: 37,840,000) share incentives outstanding at the end of the
period 36,840,000 (2020: 37,840,000) had already vested, which if exercised
could potentially dilute basic earnings per share in the future.
20. RELATED PARTY DISCLOSURES
A number of key management personnel, or their related parties, hold or held
positions in other entities that result in them having control or significant
influence over the financial or operating policies of the entities outlined
below.
a) Trading transactions
The Africa Finance Corporation ("AFC") is deemed to be a related party given
the size of its shareholding in the Company. There have been no other
transactions with the AFC other than the Gold Stream liability as disclosed in
Note 11, and the secured loan as disclosed in Note 12.
b) Compensation of key management personnel
The remuneration of directors and other members of key management during the
years December 31, 2021, and 2020, were as follows:
Year ended December 31, Year ended December 31,
2021 2020
Consulting fees & salaries
Current directors and officers (i) (ii) $ 664,929 $ 1,377,230
Directors' fees
Current directors (i) (ii) 452,965 413,228
Share-based payments
Current directors and officers - 722,480
$ 1,117,894 $ 2,512,938
(i) Key management personnel were not paid post-employment benefits,
termination benefits, or other long-term benefits during the years ended
December 31, 2021, and 2020.
(ii) The Company paid consulting and director fees to both individuals and
private companies controlled by directors and officers of the Company for
services. Accounts payable and accrued liabilities at December 31, 2021,
include $440,185 (December 31, 2020 - $44,288) due to directors or private
companies controlled by an officer and director of the Company. Amounts due to
or from related parties are unsecured, non-interest bearing and due on demand.
21. SUPPLEMENTAL CASH FLOW INFORMATION
a) Changes in non-cash working capital are as follows:
December 31, December 31,
2021 2020
Amounts receivable $ (53,362) $ 1,100,436
Inventory (23,444,410) -
Prepaid expenses and deposits (461.101) (64,811)
Accounts payable and accrued liabilities 31,383,652 10,094,147
Change in non-cash working capital accounts $ 7,424,779 $ 11,129,772
Relating to:
Operating activities $ (21,779,400) $ 1,700,089
Financing activities 156,586 -
Investing activities 29,047,593 9,429,683
$ 7,424,779 $ 11,129,772
Accounts payable and accrued liabilities includes $32,311,144 (December 31,
2020 - $9,862,060) related to Assets under Construction and Exploration.
b) During the year ended December 31, 2021, the Company had $4,535,865
cash outflows (2020: $nil) in respect of interest, of which $4,368,974 was
capitalised into the value of Assets Under Construction.
22. INCOME TAX
The difference between tax expense for the year and the expected income taxes
based on the Canadian statutory income tax rate is as follows:
Year ended Year ended
December 31, December 31,
2021 2020
Loss before income taxes $ 2,580,502 $ 3,899,969
Potential expected income tax
recovery at a statutory rate of 27% (2020 - 27%) (696,735) (1,052,992)
Higher statutory tax rate on earnings of foreign subsidiaries 75,703 30,380
Permanent and other differences 19,008 (433,536)
Changes in unrecognised deferred tax assets 533,178 1,426,268
Current income taxes - -
Deferred income tax recovery $ 68,846 $ 29,880
During the years ended December 31, 2021, and 2020, the Canadian federal
corporate income tax rate remained unchanged at 15%. The British Columbia
provincial corporate income tax also remained unchanged at 12%.
The Senegalese and Burkina Faso income tax rates remained unchanged at 30% and
28% respectively.
The Nigerian corporate income tax rate remained unchanged at 30%.
Deferred Income Tax Assets and Liabilities
Significant components of the Company's deferred income tax assets and
liabilities, after applying enacted corporate income tax rates, are as
follows:
Year ended December 31, 2010 Year ended December 31, 2020
Eligible capital $ 25,449 $ 25,449
Share issue costs 291,487 76,185
Other timing differences 412,690 329,967
Resource related deductions 460,874 386,773
Non-capital losses carried forward 4,605,520 3,872,113
5,796,019 4,690,487
Unrecognised deferred tax asset (5,686,115) (4,643,819)
Deferred income tax assets $ 109,903 $ 46,668
The Company will only recognise deferred income tax assets to the extent to
which it is probable that sufficient taxable income will be realized, or
taxable temporary differences will reverse, during the carry forward periods
to utilize the deferred tax assets.
The Company has available non-capital losses in Canada of approximately
$17,532,000 (2020 - $ 13,993,000). The Canadian non-capital losses may be
utilized to offset future taxable income and have carry forward periods of up
to 20 years. The losses, if not utilized, expire through 2040. A summary of
these tax losses is provided below.
Year of Expiry Taxable Losses
2026 267,000
2027 245,000
2028 295,000
2029 287,000
2030 105,000
2031 468,000
2032 642,000
2033 535,000
2034 391,000
2035 427,000
2036 616,000
2037 1,349,000
2038 1,883,000
2039 2,347,000
2040 2,775,000
2041 4,898,000
$ 17,532,000
The other deductible temporary differences do not expire and may be utilized
to reduce future taxable income. The only potential benefits of carry-forward
non-capital losses and deductible temporary differences have been recognised
in these financial statements relate to the Company's Senegalese subsidiary
African Star Resources S.A.R.L. No other potential benefits have been
recognised as it is not considered probable that sufficient future taxable
profit will allow the deferred tax asset to be recovered.
23. FINANCIAL INSTRUMENTS
The Group's financial instruments consist of cash, restricted cash, amounts
receivable, accounts payable, accrued liabilities, gold stream liability,
loans and other borrowings and lease liabilities.
Fair value of financial assets and liabilities
Fair values have been determined for measurement and/or disclosure purposes.
When applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.
The carrying amount for cash, restricted cash, accounts receivable, and
accounts payable, accrued liabilities, loans and borrowings and lease
liabilities on the statement of financial position approximate their fair
value because of the limited term of these instruments.
Financial risk management objectives and policies
The Group has exposure to the following risks from its use of financial
instruments
· Interest rate risk
· Credit risk
· Liquidity and funding risk
· Market risk
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these consolidated financial statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous years unless otherwise
stated in these notes.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group's competitiveness and flexibility. Further
details regarding these policies are set out below.
Financial instruments by category
The accounting policies for financial instruments have been applied to the
line items below:
December 31, 2021 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 1,621,927 - 1,621,927
Restricted cash 4,445,121 - 4,445,121
Amounts receivable 294,522 - 294,522
Total assets $ 6,361,570 - 6,361,570
Liabilities
Accounts payable and accrued liabilities
$ 42,312,811 9,034,392 51,347,203
Loans and borrowings 68,328,319 - 68,328,319
Gold stream liability - 38,478,205 38,478,205
Lease liabilities 23,235,696 - 23,235,696
Total liabilities $ 133,876,826 47,512,597 181,389,423
December 31, 2020 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 28,261,552 - 28,261,552
Restricted cash 4,460,026 - 4,460,026
Amounts receivable 56,705 - 56,705
Total assets $ 32,778,283 - 32,778,283
Liabilities
Accounts payable and accrued liabilities
$ 10,915,964 - 10,915,964
Loans and borrowings 20,600,067 - 20,600,067
Lease liabilities 38,969 - 38,969
Total liabilities $ 31,555,000 - 31,555,000
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's income and
operating cash flows will be impacted by changes in market interest rates as
the Group's secured loans from the AFC incurs Interest at LIBOR plus 9% (Refer
to Note 12). The Group's management monitors the interest rate fluctuations on
a continuous basis and assesses the impact of interest rate fluctuations on
the Group's cash position, and acts to ensure that sufficient cash reserves
are maintained in order to meet interest payment obligations.
The following table discusses the Company's sensitivity to a 1% increase or
decrease in interest rates:
Interest rate Interest rate
Appreciation Depreciation
By 1% By 1%
December 31, 2021
Comprehensive income (loss)
Financial assets and liabilities $ 526,000 $ (526,000)
December 31, 2020
Comprehensive income (loss)
Financial assets and liabilities $ 280,700 $ (280,700)
Credit risk
Credit risk is the risk of an unexpected loss if a counterparty to a financial
instrument fails to meet its contractual obligations. The credit risk
associated with cash and receivables is believed to be minimal.
Cash consists of cash on deposit in Canadian, UK, Mauritian, Nigerian, and
Senegalese Chartered banks that are believed to be creditworthy.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at December 31, 2021, and
December 31, 2020, were as follows:
December 31, December 31,
2021 2020
Cash $ 1,621,927 $ 28,261,552
Restricted cash 4,445,121 4,460,026
Amounts receivable 294,522 56,705
Total $ 6,361,570 $ 32,778,283
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company ensures that there is
sufficient capital in order to meet short-term business requirements, after
taking into account the Company's holdings of cash. The Company's cash is
held in business accounts and are available on demand with the exception of
restricted cash which is only available to be applied against the cost of the
construction of the Segilola Gold Mine until construction is completed, at
which point it will then be available on demand.
In the normal course of business, the Company enters into contracts and
performs business activities that give rise to commitments for future minimum
payments.
The following table summarizes the Company's significant remaining contractual
maturities for financial liabilities at December 31, 2021, and December 31,
2020.
Contractual maturity analysis as at December 31, 2021
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable 32,563,582 6,163,103 2,475,263 - 41,201,948
Accrued liabilities 3,887,484 - - - 3,887,948
Other payables 6,498,378 - - - 6,498,378
Gold stream liabilities 2,836,869 13,457,565 43,049,317 59,343,750
Loans and borrowings 2,518,687 33,002,170 41,077,887 - 76,598,743
48,305,000 52,622,838 86,602,466 - 187,530,304
Contractual maturity analysis as at December 31, 2020
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable 9,855,297 508,638 - - 10,363,935
Accrued liabilities 552,029 - - - 552,029
Loans and borrowings - 68,279 30,127,064 - 30,195,343
10,407,326 576,917 30,127,064 - 41,111,307
Market risk
The Company is subject to normal market risks including fluctuations in
foreign exchange rates and interest rates. While the Company manages its
operations in order to minimize exposure to these risks, the Company has not
entered into any derivatives or contracts to hedge or otherwise mitigate this
exposure.
a) Foreign currency risk
The Group seeks to manage its exposure to this risk by holding its cash
balances in the same denomination as that of the majority of expenditure to be
incurred. The Group also seeks to ensure
that the majority of expenditure and cash of individual subsidiaries within
the Group are denominated in the same currency as the functional currency of
that subsidiary.
The Group's loan facilities, certain exploration expenditures, certain
acquisition costs and operating expenses are denominated in United States
Dollars, Nigerian Naira and UK Pounds Sterling. The Group's exposure to
foreign currency risk arises primarily on fluctuations between the Canadian
Dollars and the United States Dollars, Nigerian Naira and UK Pounds Sterling.
The Group has not entered into any derivative instruments to manage foreign
exchange fluctuations. The Group does enter into foreign exchange agreements
during the ordinary course of operations in order to ensure that it has
sufficient funds in order to meet payment obligations in individual
currencies. These agreements are entered in to at agreed rates and are not
subject to exchange rate fluctuations between agreement and settlement dates.
The following table shows a currency of net monetary assets and liabilities by
functional currency of the underlying companies for the year ended December
31, 2021:
Functional currency
Canadian US dollar Pound Nigerian West
dollar Sterling Naira African Total
Franc
Currency of net monetary asset/(liability) December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021
CAD$ CAD$ CAD$ CAD$ CAD$ CAD$
Canadian dollar (615,491) - - - - (615,491)
US dollar (242,074) - - (168,578,835) - (168,820,909)
Pound Sterling (459,321) - - (102,898) - (562,219)
Nigerian Naira - - - (4,972,624) - (4,972,624)
West African Franc - - - - 14,598 14,598
Australian dollar (46,570) - - (24,638) - (71,208)
Total (1,363,465) - - (173,678,995) 14,598 (175,027,853)
The following table shows the currency of net monetary assets and liabilities
by functional currency of the underlying companies for the year ended December
31, 2020:
Functional currency
Canadian US dollar Pound Nigerian West African
dollar Sterling Naira Franc Total
Currency of net monetary asset/(liability) December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020
CAD$ CAD$ CAD$ CAD$ CAD$ CAD$
Canadian dollar (291,551) - - - - (291,551)
US dollar 7,735,527 - - (5,903,513) - 1,832,014
Pound Sterling (226,825) - (38,910) - - (265,735)
Nigerian Naira - - - (26,744) - (26,744)
West African Franc - - - - 1,656 1,656
Australian dollar (26,358) - - - - (26,358)
Total 7,190,794 - (38,910) (5,903,513) 1,656 1,223,282
The following table discusses the Company's sensitivity to a 5% increase or
decrease in the Canadian Dollar against the United States Dollar:
Canadian Canadian
Dollar Dollar
Appreciation Depreciation
December 31, 2021 By 5% By 5%
Comprehensive income (loss)
Financial assets and liabilities $ 8,200,000 $ (8,200,000)
December 31, 2020
Comprehensive income (loss)
Financial assets and liabilities $ 1,934,000 $ (1,934,000)
24. CAPITAL MANAGEMENT
The Company manages, as capital, the components of shareholders' equity. The
Company's objectives, when managing capital, are to safeguard its ability to
continue as a going concern in order to develop and its mineral interests
through the use of capital received via the issue of common shares and via
debt instruments where the Board determines that the risk is acceptable and,
in the shareholders', best interest to do so. During the year under review the
Company made additional drawdowns from secured loan facilities in order to
advance construction of the Segilola Gold Mine.
The Company manages its capital structure, and makes adjustments to it, in
light of changes in economic conditions and the risk characteristics of the
underlying assets. To maintain or adjust its capital structure, the Company
may attempt to issue common shares, borrow, acquire or dispose of assets or
adjust the amount of cash.
25. CONTRACTUAL COMMITMENTS AND CONTINGENT LIABILITIES
Contractual Commitments
The Group has a contractual obligation of approximately US$3 million in
payments under the EPC contract for the construction of the Segilola Gold
Mine. These liabilities are not reflected in the balance sheet as at reporting
date as payment is contingent upon the completion of further construction work
post reporting date.
Contingent liabilities
As part of the nature of its business the Group on occasion receives claims
from parties. A number of such claims do exist, but these are assessed
robustly by the Group and its legal advisers and will be strongly rebutted
where claims are considered to be spurious.
26. SEGMENTED DISCLOSURES
Segment Information
The Company's operations comprise three reportable segments, being the
Segilola Mine Project, Exploration Projects, and Corporate compared to one
reportable segment, being the exploration of mineral resource properties in
the prior year. These three reporting segments have been identified based on
operational focuses of the Group following the decision to develop the
Segilola Mine Project during the year. The segment assets, liabilities and
results are as follows:
December 31, 2021 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 29,549,614 $ 96,471 $ 533,315 $ 30,179,401
Non-current assets
Deferred income tax assets - 109,903 - 109,903
Prepaid expenses and deposit 110,857 - 23,327 134,184
Right-of-use assets 26,502,457 - - 26,502,457
Property, plant and equipment 186,653,954 579,171 3,745 187,236,870
Intangible assets 285,842 18,774,059 - 19,059,901
Total assets $ 243,102,724 $ 19,559,605 $ 560,387 $ 263,222,716
Non-current asset additions $ 92,329,015 $ 4,129,165 $ 3,661 $ 96,461,841
Liabilities $ (186,348,511) $ (55,004) $ (1,646,201) $ (188,049,715)
Profit (loss) for the year $ 2,609,915 $ (340,728) $ (4,780,841) $ (2,511,655)
- consulting fees (10,460) (193,914) (245,258) (449,632)
- salaries and benefits (331,033) - (1,300,774) (1,631,807)
- depreciation owned assets (19,617) (5,717) (1,463) (26,797)
- impairments - (129,109) - (129,109)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
December 31, 2021 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 16,028 94,829 23,327 134,184
Right-of-use assets - - - 26,502,457 - 26,502,457
Property, plant and equipment 255,706 - - 186,977,419 3,745 187,236,870
Intangible assets 18,047,428 - - 1,012,473 - 19,059,901
Total non-current assets $ 18,303,134 $ - $ 16,028 $214,587,178 $ 27,072 $232,933,412
December 31, 2020 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 24,967,021 $ 65,535 $ 8,298,423 $ 33,330,979
Non-current assets
Deferred income tax assets - 46,668 - 46,668
Prepaid expenses and deposit 171,957 - 23,327 195,284
Right-of-use assets 35,457 - 52,360 87,817
Property, plant and equipment 91,713,474 140,862 1,547 91,855,883
Exploration and evaluation assets - 15,988,743 - 15,988,743
Total assets $ 116,887,909 $ 16,241,808 $ 8,375,657 $ 141,505,374
Non-current asset additions $ 64,065,496 $ 1,872,290 $ 2,141 $ 65,939,927
Liabilities $ (62,523,231) $ (48,497) $ (1,018,809) $ (63,590,537)
Loss for the year $ (201,258) $ (1,634,381) $ (2,034,468) $ (3,870,107)
- consulting fees (102,218) (78,959) (582,624) (763,801)
- salaries and benefits (95,134) - (2,004,235) (2,099,369)
- share-based payments - - (907,574) (907,574)
- gain on settlement of liabilities - - 1,042,500 1,042,500
- depreciation owned assets (54,241) (225) (1,253) (55,719)
- impairments - (1,604,564) - (1,604,564)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
December 31, 2020 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 24,472 147,485 23,327 195,284
Right-of-use assets - - - 35,457 52,360 87,817
Property, plant and equipment 139,895 939 - 91,713,502 1,547 91,855,883
Exploration and evaluation assets 15,907,515 - - 81,228 - 15,988,743
Total non-current assets $ 16,047,410 $ 939 $ 24,472 $91,977,672 $ 77,234 $108,127,727
27. SUBSEQUENT EVENTS
On January 17, 2022, the Company announced the exercise of share options by
Directors and Persons Discharging Managerial Responsibilities for a total of
9,539,000 common shares at prices of 12 and 14.5 Canadian cents per common
share.
On January 31, 2022, the Company's wholly owned subsidiary Segilola Resources
Operating Limited received the Facility taking-over Certificate from the EPC
contractor for its Segilola Gold Mine.
Post year end, the Company cancelled US$1.35m of its Senior Facility it did
not draw down. The Company also made its first scheduled debt repayment on
March 31, 2022, to the Africa Finance Corporation of US$2.53m consisting of
principal and interest in accordance with the terms of its Senior Secured
Facility.
Operations performed in line with forecast in Q1 2022, with a throughput of
221,920 tonnes at an average head grade of 3.18 grammes per tonne ("g/t") and
overall recovery of 94.1% for a total of 21,343 ounces of gold produced. The
Company exported the gold regularly throughout the period selling 16,658
ounces of gold and 922 ounces of silver in the period and had a further gold
dore inventory of 6,626 ounces on hand.
For the month of March, the Segilola process plant continued to operate at a
steady state, above design mill throughput, with 69,907 tonnes of ore
processed at an average head grade of 3.38g/t and an overall gold recovery of
95.1% for a total of 7,220 ounces of gold produced.
As the mining plan moves into the fresh ore, mined ore tonnes and grade are
reconciling well to the reserve model and process recoveries are in line with
the metallurgical recovery model.
At the end of Q1 2022, the Company it started commissioning its compressed
natural gas generators at Segilola, following which the process plant will
transition from diesel to compressed natural gas generation in Q2 2022.
Post reporting date, and in order to support the Company's cashflows during
the early period of debt repayment (March-July 2022), the Company entered into
a commodity price protection program which has been implemented on a zero-cost
collar basis. The program provides price protection for 22,500 ounces of gold
representing approximately 55% of the forecast production of approximately
8,000 ounces per month.
The program provides price support for 3,000 ounces per month at US$1,820/oz
and 1,500 ounces per month at US$1,860/oz with a cap at US$1,930/oz and
US$2,000/oz respectively.
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