REG - Thor Explorations Ld - FIRST QUARTER 2022 FINANCIAL AND OPERATING RESULTS
31/05/2022 08:45
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RNS Number : 3673N Thor Explorations Ltd 31 May 2022
NEWS RELEASE
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR
DISTRIBUTION TO U.S. WIRE SERVICES
May 31, 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 FIRST QUARTER 2022 FINANCIAL AND OPERATING
RESULTS, FOR THE THREE MONTHS ENDING MARCH 31, 2022
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 to March 31, 2022 ("Q1 2022" or the "Period").
The Company's Condensed Consolidated Interim Financial Statements together
with the notes related thereto, as well as the Management's Discussion and
Analysis for the three months ended March 31, 2022, are available on Thor
Explorations' website https://thorexpl.com/investors/financials/
(https://thorexpl.com/investors/financials/)
Operational Highlights of the Period
· Achievement of commercial production with 21,343 oz of gold
produced at Segilola in the Period
o Mill feed grade was 3.38 grammes per tonne ("g/t") gold and recovery was
94.1%
o The Company exported the gold regularly throughout the period selling
16,658 oz of gold and 922 oz of silver in the Period
· Gold dore inventory of 6,626 oz as at the end of Q1 2022
· 7,500 metre reverse circulation ("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
· 6,000 metre RC drilling programme completed on the Douta Project,
Senegal subsequent to the period.
· One Lost Time Incident over the Period
· Commencement of the Company's 2021 Sustainability Report, which is
scheduled for completion in Q2 2022
· The Company has funded a range of livelihood restoration programmes to
aid the local community members who lost assets (crops and trees) and land
within the mine's footprint
· Community development included support for women's programmes,
school scholarships for children from vulnerable families; road upgrades and
construction of local market facilities
Financial Highlights of the Period
· First gold sales in the Period generating revenues of
US$24,865,482
· As at March 31, 2022, the Company had cash of US$6,276,376
· Shipped 16,658 oz at a cash operating cost of US$696 per oz sold
and all-in sustaining cost ("AISC") of US$799 per oz sold
· In the Period, the Company cancelled US$1.35 million 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 AFC
of US$2.53 million consisting of principal and interest in accordance with the
terms of its Senior Secured Facility
· Instalment payments on the AFC Senior Secured Facility of
US$22,904,418 are due by December 31, 2022. These will be paid from cashflows
during the year
· Following gold shipment of 16,658 oz in Q1 2022, all outstanding
Mining Contractor invoices to the end of the Period were paid. The payment of
the final EPC invoices, amounting to US$10,992,978 has been extended by the
EPC Contractor following the delay in commercial production experienced in Q4
2021 and will be paid from cash flows during H2 2022
· In Q1 2022, the Company changed its presentation currency to the
United States dollar ("$"). This being the functional currency for the
Company, and the currency of the primary economic environment in which the
Company operates.
Post Period Highlights
Senior Management Appointments
Following the transition to commercial production, the Company is pleased to
announce that James Philip has been appointed as Chief Operating Officer.
James has been the Vice President of Corporate Development at Thor since 2016
and has been instrumental in the successful development of the Segilola
project and the establishment of the Company's current operating and project
development platform. James has a long track record in the mining industry and
brings a diversified skill set having worked in project development, strategy,
corporate finance and more recently in operations. He is a graduate of the
Royal School of Mines, Imperial College London with a M.Eng. degree in Earth
Resources & Environmental Engineering.
The Company is also pleased to announce the appointment of Chris Omo-Osagie as
Acting Chief Financial Officer, succeeding Ben Hodges who has resigned as
Chief Financial Officer ("CFO"). Chris will report directly to the CEO and is
not joining the Board of the Company. Ben will remain as a consultant to the
Company over the next three months to ensure a smooth transition.
Chris moves into the position from Deputy Chief Finance Officer of Thor. Chris
has served in various senior executive roles across North America, Europe, the
Caribbean and Africa with PricewaterhouseCoopers, Deloitte, Centrica, Molson
Coors and more recently as Deputy Regional Chief Finance Officer for Dangote
Cement Plc in Nigeria. Chris has led and sponsored numerous business
transformational projects and has extensive experience in financial reporting,
finance operations, mergers and acquisitions, controls and assurance, and
treasury management and also financial advisory and corporate finance services
to organizations, with transaction values from US$30 million to US$45 billion,
including supporting new listings on the TSX.V (Toronto Stock Exchange) and
the Irish Stock Exchange.
Chris is a Chartered Accountant and Fellow of the Institute of Chartered
Accountants in England and Wales, and member of the Institute of Chartered
Accountants of Ontario, Canada.
Outlook
· 2022 production guidance of 80,000 to 100,000 oz of gold at an
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:
"Firstly, on behalf of the Company, I would like to thank Ben for his
contributions since joining the Company over the last six years, seeing the
Company grow from an exploration company to a gold producer. Ben has played an
instrumental role acting as CFO and Company Secretary since the acquisition of
the Segilola Project, supporting all financial transactions, due diligence and
regulatory activities and reporting for all the Company's subsidiaries. We
wish him well in all his future endeavours."
"The Company's performance in Q1 2022 provides a solid foundation for the rest
of the year. Segilola is now running efficiently and the Company continues to
be on track to achieve its guidance of 80,000 to 100,000 ounces of gold this
year within our AISC guidance of US$850-US$950 per ounce."
"We are also proud of our Environmental, Social and Governance efforts in and
around the local communities. We are particularly proud to share our inaugural
sustainability report, which will be published later in the year. In
particular, we are proud of our International Women's Day celebrations, where
the theme was women in STEM, we continue to address the gender chasm in male
dominated STEM careers."
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
During the period, there continued to be global supply chain issues resulting shortages and in increased prices for a number of essential consumables and supplies such as ammonium nitrate, diesel and spare parts. The Company has mitigated these risks through the bulk purchase of most supply chain items and anticipates that its production guidance and costs for the year remain in line.
Gold Production
During the three months ended March 31, 2022, the Segilola Mine produced
21,343 ounces of gold. There is no comparable information as the Segilola Mine
achieved commercial production on January 01, 2022.
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. These ounces will be sold in the
second quarter of 2022.
Mining
During the three months ended March 31, 2022, 3,759,524 tonnes of material was
mined, equivalent to mining rates of 41,772 tonnes of material per day. In
this period, 226,314 tonnes of ore was mined, equivalent to mining rates of
2,515 tonnes of ore per day, at an average grade of 2.68g/t.
The stockpile balance at the end of the period was 179,758 tonnes of ore at an
average of 1.23g/t.
Processing
During the three months ended March 31, 2022, a total of 221,920 tonnes of
ore, equivalent to a throughput rate of 2,466 tonnes per day, was processed.
The mill feed grade was 3.18g/t gold and recovery was 94.1% for a total of
21,343 ounces of gold produced. We continue to review the process plant to
optimize throughput and recoveries.
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.
All of the main operating units are performing as expected, and the plant is
consistently operating above nameplate capacity. Optimization of the gold
recovery process is ongoing, and the start-up issues encountered have been
addressed.
Table 1: Production Metrics
Units Q1 2022
Mining
Total Ore Mined tonnes 226,314
Ore Processed tonnes 221,900
Low Grade Ore Stockpiled tonnes 179,758
Waste Mined tonnes 3,533,610
Total Mined tonnes 3,759,524
Total Ore Mined Gold Grade g/t Au 2.68
Ore Processed g/t Au 3.18
Low Grade Ore Stockpiled g/t Au 1.23
Processing
Ore Milled tonnes 221,920
Daily Throughput Rate (average) tpd 2,760
Daily Throughput / Nameplate Capacity % 128%
Ore Processed Gold Grade g/t Au
Recovery % 94.1
Gold Recovered oz 21,343
Health and Safety
The health and safety of personnel at site is of paramount importance. During
the quarter there was one Lost Time Incident, four Medical Treatment Cases and
eight Near Miss events.
Environmental
Environment and social activities for Q1 2022 focused on the Company's
corporate sustainability aspects including upgrading the Company's corporate
governance policies and the commencement of the Company's 2021 Sustainability
Report, which is scheduled for completion in Q2 2022.
During Q1 2022 significant progress has been made on the Segilola Gold Mine
Project's Greenhouse Gas (GHG) Procedure and Tool. The Procedure sets out how
carbon equivalent (CO(2) e) calculations will be undertaken for the project
and how they will be reported. The GHG Procedure and Tool will be operational
in Q2 2022.
The annual dry season biodiversity survey was undertaken for the Segilola
Project March 2022. Generally, the overall biodiversity account of the 2022
survey showed better biodiversity parameters than that of 2021, indicating an
increase and improvement in overall biodiversity and water quality status of
the sites. This is thought to be linked to the fact that human interference
around these sites have drastically reduced, allowing these sites to
self-purify and re-grow.
Monthly environment baseline monitoring continued in Q1 2022 as per the
Segilola EIA certificate requirements. The monitoring results are in
compliance with permits and applicable regulations.
Community
Social and community development parameters for the Segilola Project were also
progressed in Q1 2022. Of significance was signoff for start-up funding for a
range for livelihood restoration programmes to aid those local community
members who lost assets (crops and trees) and land within the mine's
footprint. Fish farms, chicken broiler farms and vegetable plots are being
designed in land surrounding the water storage dam. Land clearing has
occurred, and construction is planned to commence in Q2 through to Q4 2022.
Commitments to livelihood programmes were outlined in SROL's Livelihood
Restoration Plan. The programmes are expected to be self-sustaining within a
two-year period and operate beyond the lifetime of the mine. An agricultural
expert has been seconded into the SROL team to assist in the development of
the agricultural programs.
Through funding agreed via Community Development Agreements, signed with the
three communities surrounding the Segilola Mine, community programmes were
progressed in Q1 2022. These included support for women's programs, school
scholarships for children from vulnerable families (19 scholarships awarded);
road upgrades (grading of local roads) and construction of local market
facilities.
To mark International Women's Day (IWD) on the 8th of March, SROL celebrated
with the female children and teachers of host communities. The theme - Women
in STEM -aimed at addressing the gender chasm in male dominated Science,
Technology, Engineering and Maths "STEM" careers. The program was organized by
SROL's Cooperate Affairs Department. In attendance were speakers and guests
from the Ministry of Mines and Steel Development and the Chairperson from
Atakunmosa East LGA.
Compensation for the Segilola project footprint continued in Q1 2022. The
compensation budget for the Project sits at $3.5 million in line with the
overall compensation budget for the Project. This provides compensation for
234 landowners and 1044 asset owners (March 2022). Additionally, compensation
for temporary loss of assets and lands impacted by exploration activities (at
10 explorations sites across 3 states in Nigeria) stands at ~$288,000 for 415
asset and landowners (as of March 2022).
Exploration
Douta Project, Senegal
In November 2021 Thor issued a Maiden mineral resource estimate ("MRE") for
the Makosa deposit at the Douta Gold Project ("Douta") in Senegal. The MRE is
classified as Inferred Resources and is constrained within optimised pit
shells and comprises 15.3 million tonnes grading 1.5 g/t gold for 730,000
ounces of gold.
Reverse circulation (RC) drilling commenced during the quarter. The main
objectives of this program are:
· Extensional drilling northwards from the Makosa Resource that
will bridge the gap between Makosa and Mansa prospect.
· Initial exploration drilling at Sambara Prospect.
Table 2: Douta RC Drilling Statistics
Prospect No. of Holes Metres Drilled No. of Samples
Makosa North 54 3,572 4,199
Sambara 46 3,036 3,573
100 6,608 7,772
Regional Exploration, 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
now comprises nine explorations licences and five joint venture partnership
exploration licences. Together with the mining lease over the Segilola Gold
Deposit Thor's total exploration tenure amounts to over 1,252 square
kilometres.
Exploration during the quarter comprised on-going regional steam sediment
sampling, soil sampling and termite mound sampling in the exploration lease
located both north and south of the Segilola Gold Deposit. Activity during the
quarter generated a total of 4,330 surface geochemical samples (Figure 2.1).
Sample turnaround in Nigeria is currently being affected by the delayed
commissioning of the exploration laboratory which the Company anticipates will
be commissioned in July 2022. Until the exploration lab is commissioned, the
Company continues to send its samples to third party laboratories in Ghana and
Canada.
An extensive soil geochemical survey commenced at the new exploration lease
(EL34429) that is owned 100% by Thor. A total of 647 surface soil samples
were collected together with 26 rock chip samples. Detailed geological mapping
has been completed withing the exploration permit. This lease is located 160km
north from Segilola in a newly identified gold-bearing schist belt. Follow up
geochemical surveys, including 801 auger-assisted soil samples, were completed
in the north-western sector of EL29978 where several anomalous stream sediment
samples were previously collected.
Subsequent to the period, the Company commenced a 7,500 metre combined reverse
circulation and diamond drilling program on a number of drill targets within
trucking distance of the Segilola Processing Plant.
COVID-19 Pandemic
The COVID-19 pandemic continued in 2021 and has had a significant impact on
businesses through restrictions put in place by governments around the world
including the jurisdictions in which we conduct our business. Over the last
two years, aspects of the Company's operations have been impacted by COVID-19
for a variety of reasons, such as government and other restrictions on
transportation and the mobility of personnel and mandatory quarantine periods
and border closures.
As of the date of this MD&A, it is not possible to determine the extent of
the impact that this pandemic will have on our activities as the impacts will
depend on future developments which themselves are uncertain and cannot be
predicted with confidence. These uncertainties arise from the inability to
predict the ultimate geographic spread of the disease, its extent and
intensity, the duration of the outbreak, and possible government, societal,
and individual responses to the situation.
Possible impacts of the continuing or worsening spread of COVID-19, including
new variants of the virus, may include mandated or voluntary closures of
operations, illness among the Company's workforce, restricted mobility of
personnel, interruptions in the Company's logistics and supply chain, delay at
or closure of the Company's refining and smelting service providers and global
travel restrictions, all of which could disrupt the Company's operations and
negatively impact its financial performance.
SUBSEQUENT EVENTS
Appointments
Following the period end, the Company appointed James Philip as Chief
Operating Officer, and Chris Omo-Osagie as Acting Chief Finance Officer.
We believe that both James and Chris' operational experience will be valuable
in taking us through the next phase of our evolution into a multi asset
development, management, and operating group.
Resignation
Ben Hodges has resigned from his position as Chief Finance Officer and will be
transitioning from the Company over the next three months.
We are extremely grateful to Ben for his commitment and service during a very
important period of the Company's development and we wish Ben the very best in
his future pursuits.
OUTLOOK AND UPCOMING MILESTONES
This Section 5 of the MD&A contains forward looking information as defined
by National Instrument 51-102. Refer to Section 16 of this MD&A for
further information on forward looking statements.
We are focussed on advancing the Company's strategic objectives and near-term
milestones which include:
Maintain our rigorous health and safety protocols
2022 Operational Guidance and Outlook
Gold Production oz 80,000-100,000
All-in Sustaining Cost ("AISC") US$/oz Au sold $850 - $950
Capital Expenditure US$ 9,243,000
Exploration:
Nigeria US$ 4,200,000
Senegal US$ 2,000,000
· The critical factors that influence whether Segilola can achieve
these targets include:
o Segilola's ability to maintain an adequate supply of consumables (in
particular Ammonium Nitrate, Flux and Cyanide) and equipment, particularly if
there is any resurgence in the COVID-19 pandemic
o Fluctuations in the price of key consumables, in particular Ammonium
Nitrate, and Diesel
o Commissioning of the CNG generators in May 2022, thereby reducing the cost
of power generation to the process plant
o Segilola's workforce remaining healthy
o Continuing to receive full and on-time payment for gold sales
o Continuing to be able to make local and international payments in the
ordinary course of business
· Continue to advance the Douta project to preliminary feasibility
study ("PFS")
· Continue to advance exploration programs across the portfolio:
o Segilola near mine exploration
o Segilola underground project
o Segilola regional exploration program
o Douta extension program
o Douta infill program
o Assess regional potential targets in Nigeria
SUMMARY OF QUARTERLY RESULTS
The table below sets forth selected results of operations for the Company's
eight most recently completed quarters.
Table 2: Summary of quarterly results
$ 2022 Q1 2021 Q4 2021 Q3 2021 Q2
Mar 31 Dec 31 Sep 30 Jun 30
Revenues 24,865,482 6,205,345 - -
Net profit/(loss) for period 200,473 2,665,653 460,745 (5,582,090)
Basic and fully diluted profit/(loss) per share (cents) 0.00 0.40 0.08 (0.90)
$ 2021 Q1 2020 Q4 2020 Q3 2020 Q2
Mar 31 Dec 31 Sep 30 Jun 30
Revenues - - - -
Net profit/(loss) for period (67,365) (1,560,694) (1,030,715) 812,003
Basic and fully diluted profit/(loss) per share (cents) (0.05) (0.25) (0.17) 0.16
RESULTS FOR THREE MONTHS ENDED March 31, 2022
The review of the results of operations should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto.
The Company reported a net profit of $200,473 ($0.00 profit per share) for the
three months March 31, 2022, as compared to a net (loss) of ($67,365) ($0.05
loss per share) for the three months ended March 31, 2021. The move to profit
for the three months was largely due to:
· sales in Q1 2022 of $24,865,482 in Q1 2021 (nil);
· foreign exchange gains of $2,183,811 from gains of $1,153,721 in
Q1 2021
These were offset partially by:
· Amortisation and depreciation of $7,679,808; and
· Interest of $3,758,131
The Company recorded sales revenue of $24,865,482 for the three months ended
March 31, 2022, and $nil for the three months to March 31,2021. No interest
was earned during the three months ended March 31, 2022, and 2021.
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2022, the Company had cash of $6,276,376 and 6,626 ounces of
gold to be sold and a working capital deficit of ($38,511,529).
The increase in cash from December 31, 2021 (cash of $1,276,270) is due mainly
to gold sales revenue of $24,865,482, offset by payment of lease liabilities
of $1,213,678, intangible exploration assets expenditures of $715,626, the
purchase of property plant and equipment of $7,573,148 and operational costs
and corporate overheads of $13,708.578. This cash expenditure was financed by
operational cashflow and existing cash balances.
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.
Unaudited Financial Statements
THOR EXPLORATIONS LTD.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In United States dollars (unaudited)
March 31, December 31,
Note 2022 2021
$
$
ASSETS
Current assets
Cash 6,276,376 1,276,270
Restricted cash 6 3,495,992
-
Inventory 7 16,534,943 18,146,558
Amounts receivable 8 191,876 237,651
Prepaid expenses, advances and deposits 9 918,219 586,865
Total current assets 23,921,414 23,743,336
Non-current assets
Deferred income tax assets 84,794 86,795
Prepaid expenses, advances and deposits 9 103,790 105,683
Right-of-use assets 10 19,707,915 20,843,612
Property, plant and equipment 15 146,438,336 147,373,656
Intangible assets 16 15,466,490 15,345,419
Total non-current assets 181,801,325 183,755,165
TOTAL ASSETS 205,722,739 207,498,501
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 17 31,834,095 38,827,489
Deferred income 18 6,233,347 -
Lease liabilities 10 4,854,714 4,849,088
Gold stream liability 11 12,889,957 12,837,633
Loans and other borrowings 12 28,441,348 27,984,078
Total current liabilities 84,253,461 84,498,288
Non-current liabilities
Accounts payable and accrued liabilities 17 1,031,309 1,564,191
Lease liabilities 10 12,587,430 13,425,286
Gold stream liability 11 16,860,524 17,424,646
Loans and other borrowings 12 25,733,198 25,754,525
Provision for restoration costs 14 5,341,369 5,238,176
Total non-current liabilities 61,553,830 63,406,824
SHAREHOLDERS' EQUITY
Common shares 19 79,949,297 79,027,183
Option Reserve 19 3,455,454 4,513,900
Currency translation reserve (3,690,038) (2,889,510)
Deficit (19,799,265) (21,058,184)
Total shareholders' equity 59,915,448 59,593,389
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 205,722,739 207,498,501
These consolidated financial statements were approved for issue by the
Board of Directors on May 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.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31,
In United States dollars (unaudited)
Three Months Ended
March 31,
Note 2022 2021
Continuing operations
Revenue $ 24,865,482 $ -
Production costs (13,386,659) -
Transportation and refining (502,222)
Royalties (550,765)
Loss on forward sale of commodity contracts (294,922) -
Gross profit from operations 10,130,914 -
Administrative expenses 5 (1,516,936) (1,106,943)
Amortisation and depreciation 5 (6,162,872) (17,501)
Other expenses 5 (673,612) -
Impairment of Exploration & Evaluation assets 16 (2,701) (96,317)
Profit (loss) from operations 1,774,793 (1,220,761)
Interest expense (3,758,131) (325)
Foreign exchange gains 2,183,811 1,153,721
Net profit (loss) before taxes $ 200,473 $ (67,365)
Tax expense - -
Net profit (loss) for the period $ 200,473 $ (67,365)
Other comprehensive loss
Foreign currency translation loss attributed to (800,528) (822,207)
equity shareholders of the Company*
Total comprehensive loss for the period $ (600,055) $ (889,572)
Net loss per share - basic and diluted 20 $ (0.000) $ (0.000)
Weighted average number of common shares 635,508,743 621,405,975
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.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
In United States dollars (unaudited)
Three Months Ended
March 31,
Note 2022 2021
Cash flows from (used in):
Operating activities
Net loss for the period $ 200,473 $ (67,365)
Adjustments for:
Foreign exchange gains 714,995 (893,620)
Impairment of receivables - (56,042)
Impairment of Exploration & Evaluation Assets 16 2,701 96,316
Depreciation 5,004,617 17,502
Loss on forward sale commodity contracts 294,923 -
Interest expense 3,752,766 325
Changes in non-cash working capital items 22 3,738,103 (2,463,755)
Cash utilized in operations 13,708,578 (3,366,640)
Adjustments to net loss for cash items
Realized foreign exchange loss 150,080 191,002
Net operating cash flows 13,858,658 (3,175,638)
Investing activities
Purchases of property, plant and equipment 15 (7,573,148) (991,891)
Assets under construction expenditures 15 - (9,100,531)
Exploration and evaluation expenditures 16 (715,626) (585,184)
Purchase of other intangible assets 16 (169) -
Net investing cash flows (8,288,943) (10,677,606)
Financing
Proceeds from issuance of equity securities 919,162 -
Borrowing costs paid 12 - (72,454)
Proceeds from loans and borrowings 12 1,753,388 -
Repayments of loans and borrowings 12 (1,983,834) -
Payment of lease liabilities 10 (1,213,678) (12,243)
Interest paid 11 (1,214,587) -
Net financing cash flows (1,739,549) (84,697)
Effect of exchange rates on cash 1,169,940 373,237
Net change in cash 5,000,106 (13,564,705)
Cash, beginning of the period 1,276,270 22,239,182
Cash, end of the period $ 6,276,376 $ 8,674,477
Supplemental cash flow information (Note 22)
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
THOR EXPLORATIONS LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
In United States dollars (unaudited)
Note Common Shares Option Reserve Currency translation reserve Deficit Total shareholders' equity
Balance on December 31, 2020 $ 76,858,769 $ 4,626,426 $ (594,661) $(19,562,232) $ 61,704,198
Reinstatement of warrants 19 - - - (45,899) -
Net loss for the period - - - (67,364) (67,364)
loss - - (804,019) - (804,019)
Balance on March 31, 2021 $ 76,858,769 $ 4,626,426 $ (1,398,680) $(19,675,495) $ 60,832,815
Exercise of warrants 19 2,073,451 - - 421,794 2,073,451
Options exercised 19 94,963 (112,527) - 112,527 94,963
Net loss for the period - - - (1,917,010) (1,917,010)
Comprehensive loss - - (1,490,830) - (1,490,830)
Balance on December 31, 2021 $ 79,027,183 $ 4,513,900 $ (2,889,510) $(21,058,184) $ 59,593,389
Share issuance costs 19 - - - - -
Issue of share options 19 - - - - -
Options exercised 19 922,114 (1,058,446) - 1,058,446 922,114
Net profit for the period - - - 200,473 200,473
Comprehensive loss - - (800,528) - (800,528)
Balance on March 31, 2022 $ 79,949,297 $ 3,455,454 $ (3,690,038) $(19,799,265) $ 59,915,448
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
THOR EXPLORATIONS LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
In United States dollars, except where noted (unaudited)
1. CORPORATE INFORMATION
Thor Explorations Ltd. Is a West African focused gold producer and explorer,
dually listed on the TSX-V (THX.V) and AIM Market of the London Stock Exchange
(THX.L).
The Company was formed in 1968 and is organised under the BCBCA with its
registered office at 550 Burrard St, Suite 2900 Vancouver, BC, CA, V6C 0A3.
The Company evolved into its current form in August 2011 following a reverse
takeover and completed the transformational acquisition of its flagship
Segilola Gold Project in Nigeria in August 2016.
2. BASIS OF PREPARATION
a) Statement of compliance
These unaudited condensed consolidated interim 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 unaudited condensed consolidated interim financial statements have been
prepared on a historical cost basis and are presented in United States
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 unaudited condensed financial
statements are discussed in Note 4.
c) Nature of operations and going concern
As at March 31, 2022, the Company had cash of $6,276,376, restricted cash of
$nil and inventory of 6,626 ounces of gold to be sold. During Q1 2022 and post
period 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 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 forecast cashflows are based on a gold price
of US$1,836/oz and the all-in sustaining cost at Segilola of US$850 -
$US950/oz during the period under review (Refer to section 3 of the Q1 2022,
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 March 31, 2022, the Group had a net working capital deficit of
$38,511,529 which includes its Senior Secured Facility, Deferred Payment
Facility (refer to note 12), Mining Contractor invoices which become due three
months after being invoiced, final EPC invoices which became due post EPC
handover, which occurred on January 31, 2022 and a Deferred Income component,
less related inventory, which was earned in April 2022 (See note 18 for
details). The working capital calculation excludes $12,889,957 of gold stream
liabilities, and $5,379,033 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.
In Q1, 2022, the Company cancelled $1.35m of its Senior Facility it did not
draw down. The Company made its first scheduled debt repayment on March 31,
2022, to the Africa Finance Corporation of $2.53m consisting of principal and
interest in accordance with the terms of its Senior Secured Facility.
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 to service future debt
repayment obligations.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies described below have been applied consistently to all
periods presented in these unaudited condensed consolidated interim financial
statements unless otherwise stated.
a) Consolidation principles
Assets, liabilities, revenues and expenses of the subsidiaries are recognized
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 unaudited condensed consolidated interim
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 ("SR BVI") British Virgin Islands March 10, 2020 100%
Thor Gold Ventures Ltd ("THX GV") United Kingdom February 11, 2022 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%
The change to ownership interest from the previous year was the incorporation
of Thor Gold Ventures Ltd in February 2022.
c) Foreign currency translation
Functional and presentation currency
The Company's presentation currency is the United States dollar ("$"). The
functional currency for the Company, being the currency of the primary
economic environment in which the Company operates. 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 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 United States 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, SR BVI,
African Star SARL, Argento BF SARL, AFC Constelor SARL, SROL and SGL are
recognized in other comprehensive income (loss). Exchange differences arising
on the net investment in subsidiaries are recognised in other comprehensive
income.
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 will result in foreign exchange gains and
losses as assets and liabilities denominated in US 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 represented 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 March 31, 2022, the Company had $nil that is accounted for separately
from cash and cash equivalents (December 31, 2021 $3.5 million). It is
classified as restricted cash as the funds are not freely available for the
Company's use. Refer to Note 6.
Impairment of Financial Assets
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.
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 categorized 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 $21 million gold stream prepayment pursuant to a Gold
Stream Arrangement ("GSA") entered in to with the Africa Finance Corporation
("AFC").
Under the terms of the GSA an advance payment of $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 $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 $26.25 million payable after the initial $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 obtained control of the gold and the Group satisfied its performance
obligations. The revenue recognised reduced 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
recognized 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
derecognized. The costs of the day-to-day servicing of property, plant and
equipment are recognized 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 recognized 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 on January 1, 2022, assets under
construction were re-categorized as Mining Property.
g) Exploration and evaluation expenditures
Acquisition costs
The fair value of all consideration paid to acquire an unproven mineral
interest is capitalized, 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 recognized and
capitalized, 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 capitalized costs of the optioned unproven
mineral interest to nil and are then recognized 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 recognized in profit and loss, except for income
taxes relating to items recognized 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 recognized 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 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 Group recognises the sale upon delivery at which point control of the
product has been transferred to the Customer Transfer of control generally
takes place when refined gold is credited to the metals account at the
refinery of the Customer 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 $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.
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
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 $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 realizable
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
realizable 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 realizable 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 recognized 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
capitalized to assets under construction where the underlying personnel cost
is also capitalized, 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 recognized 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.
r) Interest income
Interest income is recognized 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
There were no new standards or interpretations effective for the first time
for periods beginning on or after January 1, 2022, that had a significant
effect on the Group's financial statements.
v) Future accounting pronouncements
There are no 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 recognized 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.
a) 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 it constitutes a
commodity arrangement as it is an arrangement to deliver an amount of the
commodity from the Group's own Segilola Gold Project operation and does not
constitute a contract liability under IFRS 15.
In 2021 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 March 31, 2022. A 1%
change in gold production estimates would result in an impact of less than
$0.05 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 $0.385 million (2020: $0.04 million) 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 amortisation 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 number 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.
b) 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 recognized 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 $121,909 has been charged to 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 for 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. 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 best reflect the underlying
transactions, events and conditions that are most relevant to the Company's
operations.
(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.
5. ADMINISTRATIVE EXPENSES
Three Months Ended
Note March 31,
2022 2021
Audit and legal $ 47,173 $ 96,359
Bank charges 29,974 12,969
Consulting fees 324,354 68,525
Directors' fees 21 90,328 87,822
Equipment hire 51,582 388,148
Investor relations and transfer agent 111,226 49,549
Listing and filing fees 5,556 3,194
Office and miscellaneous 364,203 59,592
Salaries and benefits 325,986 317,729
Travel 166,554 23,056
$ 1,516,936 $ 1,106,943
5a. AMORTISATION AND DEPRECIATION
Amortisation and depreciation - owned assets 15 5,004,617 6,167
Amortisation and depreciation - right-of-use assets 10 1,158,255 11,334
$ 6,162,872 $ 17,501
5b. OTHER EXPENSES
Mining property costs 366,465 -
Near mine exploration 307,147 -
$ 673,612 $ -
6. RESTRICTED CASH
March 31, December 31, 2021
2022
Restricted cash $ - $ 3,495,992
On December 1, 2020, the Company announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
$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 $5 million. As at March 31, 2022, SROL has received total
disbursements of $52.6 million, with $nil drawn down during the period under
review, and the remaining $1.35m of the facility was cancelled by the Company.
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 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. Upon receipt of the Certificate of Completion on January
31, 2022, the cash ceased to be treated as restricted.
7. INVENTORY
March 31, 2022 December 31, 2021
Plant spares and consumables $ 1,513,438 $ 1,337,792
Gold ore in stockpile 4,203,827 8,663,728
Gold in CIL 2,581,292 1,614,267
Gold Dore 8,236,386 6,530,771
$ 16,534,943 $ 18,146,558
There were no write downs to reduce the carrying value of inventories to net
realizable value during the period ended March 31, 2022.
8. AMOUNTS RECEIVABLE
March 31, 2022 December 31, 2021
Accounts receivable $ 1,426 $ 20,495
GST 5,089 3,715
Other receivables 185,361 213,441
$ 191,876 $ 237,651
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
March 31, December 31, 2021
2022
Current:
Insurance $ 69,570 $ 53,985
Gold Stream liability arrangement fees 30,252 38,829
Other deposits 550,010 235,408
Other prepayments 268,387 258,643
$ 918,219 586,865
Non-current:
Gold Stream liability arrangement fees $ 85,136 $ 87,310
Other prepayments 18,654 18,373
$ 103,790 $ 105,683
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. $357,463 (2021 year: $2,349,509) has been expensed in the
period. 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 period ended March 31, 2022, were as follows:
Right of use asset Lease liability Income statement
Carrying value December 31, 2021 $ 20,843,612 $ (18,274,374) $ -
Depreciation (1,159,682) - (1,159,682)
Interest - (360,247) (360,247)
Lease payments - 1,213,678 -
Foreign exchange movement 23,985 (21,201) 2,784
Carrying value at March 31, 2022 $ 19,707,915 $ (17,442,144) $ (1,519,929)
Total depreciation charged to the Statement of Comprehensive Loss for the
period under IFRS 16 was $1,159,682.
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 $ 69,066 $ (30,648) $ -
New leases entered in to during the year 22,612,362 (19,668,810) -
Depreciation (2,355,674) - (41,106)
Interest - (782,088) (563)
Lease payments - 2,800,407 -
Foreign exchange movement 517,858 (593,235) (75,743)
Carrying value at December 31, 2021 $ 20,843,612 $ (18,274,374) $ (117,412)
11. GOLD STREAM LIABILITY
Gold stream liability
March 31, 2022 December 31, 2021
Total Total
Balance at Beginning of period $ 30,262,279 $ 24,708,573
Interest at the effective interest rate 1,733,984 6,562,830
Repayments (1,806,690) (443,915)
Foreign exchange movement (439,092) (565,209)
Balance at End of period $ 29,750,481 $ 30,262,279
Current liability 12,889,957 12,837,633
Non-current liability 16,860,524 17,424,646
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 $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 $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 $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 $26.25 million represented 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 were
based on market forecast reports for the years 2021 to 2025 and, the
production profile was based on the latest life of mine plan model. The
liability was to 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 would be expensed through the Consolidated Statement of Loss.
Interest expense of $1,733,984 was recognised for the three months ended March
31, 2022 and has been expensed to the Consolidated Statement of Loss. Prior to
the commencement of commercial production on January 1, 2022, interest was
capitalized and included in the value of the Segilola Gold Mine (Refer to Note
15). A cumulative total of $5,255,181 has been capitalized and included in the
value of the Segilola Gold Mine.
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 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 $ - 29,750,481 - 29,750,481
The liabilities included in the above table are carried at fair value through
profit and loss.
12. LOANS AND BORROWINGS
March 31, December 31, 2021
2022
Current liabilities:
Loans payable to the Africa Finance Corporation less than 1 year $ 23,430,955 $ 24,192,518
Deferred element of EPC contract 3,256,913 3,122,990
Short term advances 1,753,480 668,570
$ 28,441,348 27,984,078
Non-current liabilities:
Loans payable to the Africa Finance Corporation more than 1 year $ 22,661,907 $ 22,667,448
Deferred element of EPC contract 3,071,291 3,087,077
$ 25,733,198 $ 25,754,525
Loans from the Africa Finance Corporation
March 31, December 31, 2021
2022 Total
Total
Balance at Beginning of period $ 46,859,966 $ 14,267,114
Drawdown - 31,153,833
Repayments (1,316,346) -
Arrangement fees - (508,856)
Unwinding of interest in the year 436,065 1,714,041
Foreign exchange movement 113,178 233,834
Balance at End of period $ 46,092,862 $ 46,859,966
Current liability 23,430,955 24,192,518
Non-current liability 22,661,907 22,667,448
On December 1, 2020, the Company announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
$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 $5 million. As at March 31, 2022, SROL has received
total disbursements of $52.6 million, with $nil drawn down and the remaining
$1.35m undrawn facility cancelled by the Company during the period 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 commenced 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 $3,667,835 has been capitalised to the cost
of the Segilola Gold Mine. (Refer to Note 15).
The loan from the AFC has financial and non-financial covenants. These
covenants were triggered upon the first repayment obligation which took place
in March 2022.
Deferred payment facility on EPC contract for the construction of the Segilola
Gold Mine
The Company is constructing 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 $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 March 31, 2022, a total of $6,328,204
(December 31, 2021: $6,217,294) 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.
March 31, 2022 December 31, 2021
Total Total
Deferred payment facility $ 6,328,204 $ 6,210,090
Balance period end $ 6,328,204 $ 6,210,090
Short term advances
March 31, 2022 December 31, 2021
Total Total
Balance at beginning of period $ 668,570 $ -
Drawdowns 1,753,388 678,935
Repayments (667,488) -
Foreign exchange movement (990) (10,365)
Balance period end $ 1,753,480 $ 668,570
The Company entered into a currency swap agreement with a third party on March
30, 2022. The currency being purchased was received before reporting date. The
currency being sold was paid to the third party
'and settled in full after reporting date, on April 1, 2022. The advance did
not incur any interest.
The following table represents the Group's loans and borrowings measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Short term advances $ - - 1,753,480 1,753,480
The liabilities included in the above table are carried at amortised cost.
Their carrying value are a reasonable approximation of fair value.
13. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
March 31, 2022 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2022 $ 30,262,279 668,570 46,859,966 6,210,090 84,000,905
Cash flows:
Drawdowns - 1,753,388 - - 1,753,388
Repayments (1,806,690) (667,488) (1,316,346) - (3,790,524)
Non-cash changes:
Unwinding of interest in the year 1,733,984 - 436,065 110,911 2,280,959
Foreign exchange movements (439,092) (990) 113,179 7,203 (319,700)
Offset against EPC payment - - - - -
March 31, 2022 $ 29,750,481 1,753,480 46,092,863 6,328,204 83,925,028
December 31, 2021 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2021 $ 24,708,573 - 14,267,114 1,934,275 40,909,962
Cash flows:
Drawdowns - 678,935 31,153,833 - 31,832,768
Repayments (443,915) - - - (443,915)
Transaction costs - (508,856) - (508,856)
Non-cash changes:
Unwinding of interest in the year 6,562,830 - 1,714,041 250,402 8,527,273
Foreign exchange movements (565,209) (10,365) 233,834 25,598 (316,142)
Offset against EPC payment - - - 3,999,815 3,999,815
December 31, 2021 $ 30,262,279 668,570 46,859,966 6,210,090 84,000,905
14. PROVISIONS
March 31, 2022 Fleet demobilisation costs
Restoration costs
Total
Balance at Beginning of period $ - $ 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 period end $ - $ 6,440,018 $ 6,660,292
Current liability - - -
Non-current liability 220,274 6,440,018 6,660,292
December 31, 2021 Fleet demobilisation costs
Restoration costs
Total
Balance at Beginning of year $ - $ 486,500 $ 486,500
Initial recognition of provision 173,241 - 173,241
Increase in provision - 4,628,124 4,628,124
Foreign exchange movements - (49,689) (49,689)
Balance at year end $ 173,241 $ 5,064,935 $ 5,238,176
Current liability - - -
Non-current liability 173,241 5,064,935 5,238,176
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
Motor vehicles Plant and machinery Office furniture Land Decommissioning Asset Processing Plant Segilola Mine Assets under construction Total
Costs
Balance, December 31, 2020 $ 1,397,109 $ 411,527 $ 271,949 $ 18,113 $ 486,887 $ - $ - $ 70,314,684 $ 72,900,269
Acquisition payments - - - - - - - 7,295,056 7,295,056
Additions 777,710 187,805 939,282 - 4,634,103 - - 66,389,785 72,928,685
Foreign exchange movement (114,673) (29,208) (6,114) (1,291) (52,070) - - (4,167,554) (4,370,910)
Balance, December 31, 2021 $ 2,060,146 $ 570,125 $ 1,205,117 $ 16,822 $ 5,068,920 $ - $ - $ 139,831,971 $ 148,753,102
Transfers - - - - - 56,782,964 83,049,007 (139,831,971) -
Additions - 37,431 221,524 - - - 5,242,641 - 5,501,596
Foreign exchange movement (22,683) (42,308) (129,678) (167) (50,332) (519,590) (558,262) - (1,323,020)
Balance, March 31, 2022 $ 2,037,463 $ 565,248 $ 1,296,963 $ 16,655 $ 5,018,588 $ 56,263,374 $ 87,733,386 $ - $ 152,931,679
Accumulated depreciation and impairment losses
Balance, December 31, 2020 $ 391,082 $ 313,571 $ 115,694 $ - $ - $ - $ - $ - 820,347
Depreciation 431,020 54,475 179,509 - - - - - 665,004
Foreign exchange movement (67,684) (23,795) (14,425) - - - - - (105,905)
Balance, December 31, 2021 $ 754,418 $ 344,250 $ 280,778 $ - $ - $ - $ - $ - $ 1,379,446
Depreciation 46,048 10,062 57,703 - 414,899 1,834,208 2,735,145 - 5,098,065
Foreign exchange movement 57,830 (32,407) (5,300) - (377) (1,667) (2,246) - 15,833
Balance, March 31, 2022 $ 858,296 $ 321,905 $ 333,181 $ - $ 414,522 $ 1,832,541 $ 2,732,899 $ - $ 6,493,343
Carrying amounts
Carrying value at December 31, 2020 $ 1,006,027 $ 97,956 $ 156,255 $ 18,113 $ 486,887 $ - $ - $ 70,314,684 $ 72,079,922
Carrying value at December 31, 2021 $ 1,305,728 $ 225,875 $ 924,339 $ 16,822 $ 5,068,920 $ - $ - $ 139,831,971 $ 147,373,656
Balance, March 31, 2022 $ 1,179,167 $ 243,343 $ 963,782 $ 16,655 $ 4,604,066 $ 54,430,833 $ 85,000,487 $ - $ 146,438,336
A summary of depreciation capitalized is as follows:
Three months ended March 31, Total depreciation
capitalized
March 31, 2022 December 31, 2021
2022 2022
Exploration expenditures 23,418 7,331 620,534 515,461
Total $ 23,418 $ 131,049 $ 620,534 $ 1,454,499
a) Segilola Project, Osun Nigeria:
Classification of Expenditure on the Segilola Gold Project
On January 1, 2022, the Company achieved commercial production at the Segilola
Gold Project in Nigeria ("the Project") Upon achieving commercial production
the Assets under Construction was reclassified within Property, Plant and
Equipment, and transferred to Mining Asset, Processing Plant and
Decommissioning Asset.
Decommissioning Asset
The decommissioning asset relates to estimated restoration costs at the
Group's Segilola Gold Mine as at March 31, 2022. 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 Exploration licenses, Nigeria Software Total
Costs
Balance, December 31, 2020 $ 12,783,386 $ - $ 89,395 $ 224,634 $ 13,097,415
Acquisition costs $ - $ - $ 74,897 $ - 74,897
Exploration costs 2,037,122 106,614 742,145 - 2,885,881
Additions - - - 178,885 178,885
Depreciation - - - (167,648) (167,648)
Impairment - (106,692) - - (106,692)
Foreign exchange movement (600,526) 78 (11,136) (5,735) (617,319)
Balance, December 31, 2021 $ 14,219,982 $ - $ 895,301 $ 230,136 $ 15,345,419
Acquisition costs - - - - -
Exploration costs 664,839 2,701 58,424 - 725,964
Depreciation - - - (33,804) (33,804)
Impairment - (2,701) - - (2,701)
Foreign exchange movement (525,941) - (34,319) (8,130) (568,390)
Balance, March 31, 2022 $ 14,358,880 $ - $ 919,406 $ 188,202 $ 15,466,488
Classification of Expenditure on the Segilola Gold Project
Refer to note 14 for details on classification.
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%
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%
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 currently
holds 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.
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.
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. 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. As a
result, the decision was taken to impair fully the value of the Central
Houndé Project, and for the three months to March 31, 2021, recognize an
impairment charge of $121,909 through the Condensed 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 nine explorations licenses and five joint venture
partnership exploration licenses. Together with the mining lease over the
Segilola Gold Deposit, Thor's total exploration tenure amounts to 1,252 km².
The Company's exploration strategy includes further expansion of its Nigerian
land package as and when attractive new licenses become available.
17. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
March 31, December 31,
2022 2021
Trade payables $ 24,767,987 $ 32,222,580
Accrued liabilities 3,033,349 3,058,121
Other payables 5,064,068 5,110,979
$ 32,865,404 $ 40,391,680
Current liability 31,834,095 38,827,489
Non-current liability 1,031,309 1,564,191
Accounts payable and accrued liabilities are classified as financial
liabilities and approximate their fair values.
Included in trade payables is a total of $6,410,342 that relates to third
party royalties that will become payable upon future gold sales. $5,379,033 of
this royalties' creditors is included in current liabilities, and $1,031,309
is included in non-current liabilities (refer to note 3k for further detail).
18. DEFFERED INCOME
Three months ended March 31,
2022 2021
Deferred income $ 6,233,347 $ -
Deferred income liability was recorded upon receipt of funds for a gold
shipment with a delivery date of April 4, 2022, post reporting date. In
accordance with the Group's Revenue Recognition accounting policy (See note 3j
for further detail), revenue is deemed to arise at the point of delivery. This
liability will be transferred and recognised as sales revenue in Q2 2022. The
value of the gold shipment of 3,196 oz Gold was recognised as Gold Dore
inventory at March 31, 2022 and measured in accordance with the Group's
inventory accounting policy (refer to note 3l for further detail).
19. CAPITAL AND RESERVES
a) Authorized
Unlimited common shares without par value.
b) Issued
March 31, March 31, December 31, December 31,
2022 2022 2021 2021
Number Number
As at start of the year 632,358,009 $ 79,027,183 621,405,975 $ 76,858,769
Issue of new shares:
- Share options exercised i 9,539,000 922,114 - -
- Share warrants exercised ii - - 9,952,034 2,073,450
- Share options exercised iii - - 1,000,000 94,964
641,897,009 $ 79,949,297 632,358,009 $ 79,027,183
i Value of 9,250,000 options exercised on January 19, 2022, at a price of
CAD$0.12 per share, and 289,000 options exercised at a price of CAD$0.145 per
share.
ii Value of 1,664,534 warrants exercised on June 8, 2021, at a price of
CAD$0.18 per share, and 8,287,500 warrants exercised on August 31, 2021, at a
price of CAD$0.28 per share.
iii Value of 1,000,000 options exercised at a price of CAD$0.12 per share.
c) 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 C$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 C$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 C$0.145 per share for a period of five years.
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 capitalized as
to assets under construction in the period where granted to personnel's whose
cost is capitalized on the same basis. The assumptions inherent in the use of
these models 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 03/12/2018 0.95 2.00% $0.145 105.09% $0.14 12,800,000 12,800,000 03/12/2023
5 10/05/2018 1.52 2.43% $0.14 100.69% $0.14 750,000 750,000 10/05/2023
5 01/16/2020 2.80 1.49% $0.20 66.84% $0.07 14,250,000 14,250,000 01/16/2025
In Canadian Dollars
The Company has 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.
19. CAPITAL AND RESERVES (continued)
c) Share-based compensation (continued)
The following is a summary of changes in options from January 1, 2022, to
March 31, 2022, and the outstanding and exercisable options at March 31, 2022:
Contractual Lives January 1, During the period March 31, March 31, 2022
2022 2022 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 $0.12 - 9,250,000 - (9,250,000) - - - -
12-Mar-2018 12-Mar-2023 $0.145 0.95 12,800,000 - (289,000) - 12,511,000 12,511,000 -
5-Oct-2018 5-Oct-2023 $0.14 1.52 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 2.80 14,040,000 - - - 14,040,000 14,040,000 -
Totals 1.92 36,840,000 - (9,539,000) - 27,301,000 27,301,000 -
Weighted Average Exercise Price $0.160 $0.000 $0.121 - $0.173 $0.173 -
In Canadian Dollars
19. CAPITAL AND RESERVES (continued)
The following is a summary of changes in options from January 1, 2020, 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 -
In Canadian Dollars
(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.
d) 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'.
'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.
20. EARNINGS PER SHARE
Basic and diluted profit (loss) per share is calculated by dividing the profit
(attributed to shareholders for the three months to March 31, 2022, of
$200,473 (March 31, 2021: loss ($67,365)) by the weighted average number of
shares of 635,508,743 (March 31, 2021: 621,405,975) in issue during the year.
21. 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
three months ended March 31, 2022, and 2021 were as follows:
Three months ended March 31,
2022 2021
Salaries
Current directors and officers (i) (ii) $ 198,305 $ 131,673
Directors' fees
Current directors and officers (i) (ii) 90,328 87,822
Share-based payments
Current directors and officers - -
$ 288,633 $ 219,495
(i) Key management personnel were not paid post-employment benefits,
termination benefits, or other long-term benefits during the three months
ended March 31, 2022, and 2021.
(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 March 31, 2022, include
$nil (December 31, 2021 - $346,275) 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.
22. SUPPLEMENTAL CASH FLOW INFORMATION
a) Changes in non-cash working capital are as follows:
Three months ended March 31,
2022 2021
Amounts receivable $ 41,150 $ (2,531,421)
Restricted cash and deferred income 9,700,500 50
Prepaid expenses and deposits (340,269) (63,744)
Accounts payable and accrued liabilities (5,663,278) 4,330,017
Change in non-cash working capital accounts
$ 3,738,103 $ 1,734,902
Relating to:
Operating activities $ 2,625,340 $ (2,463,755)
Financing activities - -
Investing activities 1,112,763 4,198,657
$ 3,738,103 $ 1,734,902
Accounts payable and accrued liabilities includes $10,992,978 (December 31,
2021 - $25,417,829) related to Assets under Construction and Exploration.
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:
March 31, 2022 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 6,276,376 - 6,276,376
Restricted cash - - -
Amounts receivable 191,876 - 191,876
Total assets $ 6,468,252 - 6,468,252
Liabilities
Accounts payable and accrued liabilities
$ 26,455,062 6,410,342 32,865,404
Loans and borrowings 54,174,546 - 54,174,546
Gold stream liability - 29,750,481 29,750,481
Lease liabilities 17,442,144 - 17,442,144
Total liabilities $ 98,071,752 36,160,823 134,232,575
December 31, 2021 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 1,276,270 - 1,276,270
Restricted cash 3,495,992 - 3,495,992
Amounts receivable 237,651 - 237,651
Total assets $ 5,009,913 - 5,009,913
Liabilities
Accounts payable and accrued liabilities
$ 33,284,701 7,106,979 40,391,680
Loans and borrowings 53,738,603 - 53,738,603
Gold stream liability - 30,262,279 30,262,279
Lease liabilities 18,274,374 - 18,274,374
Total liabilities $ 105,297,678 37,369,258 142,666,936
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%
March 31, 2022
Comprehensive income (loss)
Financial assets and liabilities $ 513,000 $ (513,000)
December 31, 2021
Comprehensive income (loss)
Financial assets and liabilities $ 413,600 $ (413,600)
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 March 31, 2022, and December
31, 2021, were as follows:
March 31, December 31,
2022 2021
Cash $ 6,276,376 $ 1,276,270
Restricted cash - 3,495,992
Amounts receivable 191,876 237,651
Total $ 6,468,252 $ 5,009,913
Liquidity and funding 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 March 31, 2022, and December 31, 2021.
Contractual maturity analysis as at March 31, 2022
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable 19,460,543 4,276,135 1,174,798 - 24,911,476
Accrued liabilities 3,033,349 - - - 3,033,349
Other payables 5,064,068 - - - 5,064,068
Gold stream liabilities 3,691,526 9,198,431 32,111,801 45,001,758
Loans and borrowings 13,446,845 13,245,246 31,744,105 - 58,436,196
44,696,332 26,719,812 65,030,703 - 136,446,848
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 25,766,396 4,862,676 1,952,408 - 32,581,480
Accrued liabilities 3,076,393 - - - 3,076,393
Other payables 5,116,764 - - - 5,116,764
Gold stream liabilities 2,237,631 10,614,896 33,955,921 46,808,448
Loans and borrowings 1,984,714 26,031,054 32,400,920 - 60,416,688
38,181,898 41,508,625 68,309,249 - 147,999,772
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 United
States Dollar and the Canadian Dollar, 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 period ended March 31,
2022:
Functional currency
Canadian US dollar Pound Nigerian West
dollar Sterling Naira African Total
Franc
Currency of net monetary asset/(liability) March 31, 2022 March 31, 2022 March 31, 2022 March 31, 2022 March 31, 2022 March 31, 2022
USD$ USD$ USD$ USD$ USD$ USD$
Canadian dollar (164,561) - - - - (164,561)
US dollar 174,920 - - (126,762,169) - (126,587,250)
Pound Sterling (620,350) - - (45,728) - (666,078)
Nigerian Naira - - - (293,875) - (293,875)
West African Franc - - - - 24,606 24,606
Australian dollar (57,119) - - (20,047) - (77,166)
Total (667,110) - - (127,121,819) 24,606 (127,764,323)
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, 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
USD$ USD$ USD$ USD$ USD$ USD$
Canadian dollar (484,067) - - - - (484,067)
US dollar (190,391) - - (132,585,040) - (132,775,431)
Pound Sterling (361,244) - - (80,926) - (442,170)
Nigerian Naira - - - (3,910,833) - (3,910,833)
West African Franc - - - - 11,481 11,481
Australian dollar (36,626) - - (19,377) - (56,003)
Total (1,072,328) - - (136,596,176) 11,481 (137,657,023)
The following table discusses the Company's sensitivity to a 5% increase or
decrease in the United States Dollar against the Nigerian Naira:
Canadian Canadian
Dollar Dollar
Appreciation Depreciation
March 31, 2022 By 5% By 5%
Comprehensive income (loss)
Financial assets and liabilities $ 142,000 $ (142,000)
December 31, 2021
Comprehensive income (loss)
Financial assets and liabilities $ 194,000 $ (194,000)
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 no contractual obligation that are not disclosed on the
Consolidated Statement of Financial Position.
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 period. The segment assets, liabilities and
results are as follows:
March 31, 2022 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 23,212,330 $ 72,359 $ 636,727 $ 23,921,415
Non-current assets
Deferred income tax assets - 84,794 - 84,794
Prepaid expenses and deposit 85,136 - 18,654 103,790
Right-of-use assets 19,707,915 - - 19,707,915
Property, plant and equipment 146,013,491 422,142 2,703 146,438,336
Intangible assets 188,202 15,278,288 - 15,466,490
Total assets $ 189,207,074 $ 15,857,582 $ 658,083 $ 205,722,740
Non-current asset additions $ 7,845,675 $ 720,688 $ - $ 8,566,363
Liabilities $ (144,668,999) $ (21,233) $ (1,117,061) $ (145,807,294)
Profit (loss) for the period $ 1,344,235 $ (60,571) $ (1,083,190) $ 200,473
- consulting fees (137,835) (30,174) (156,345) (324,354)
- salaries and benefits (37,913) - (288,073) (325,986)
- depreciation owned assets (5,002,094) (2,234) (1,463) (5,004,617)
- impairments - (2,701) - (2,701)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
March 31, 2022 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 11,238 73,899 18,654 103,790
Right of use assets - - - 19,707,915 - 19,707,915
Property, plant and equipment 189,128 - - 146,246,505 2,703 146,438,336
Exploration and evaluation assets 14,680,184 - - 786,306 - 15,466,490
Total non-current assets $ 14,869,312 $ - $ 11,238 $166,814,624 $ 21,357 $181,716,531
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 - 86,795 - 86,795
Prepaid expenses and deposit 87,310 - 18,373 105,683
Right-of-use assets 20,843,612 - - 20,843,612
Property, plant and equipment 146,913,777 455,861 4,018 147,373,656
Intangible assets 230,128 15,115,291 - 15,345,419
Total assets $ 191,630,714 $ 15,418,260 $ 449,527 $ 207,498,501
Non-current asset additions $ 73,406,244 $ 3,282,847 $ 2,911 $ 76,692,002
Liabilities $ (146,569,538) $ (43,262) $ (1,292,311) $ (147,905,111)
Profit (loss) for the year $ 2,609,915 $ (340,728) $ (4,780,841) $ (2,511,655)
- consulting fees (8,264) (153,207) (193,773) (355,244)
- salaries and benefits (261,541) - (1,027,711) (1,289,252)
- depreciation owned assets (15,498) (4,517) (1,156) (21,171)
- impairments - (102,006) - (102,006)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
December 31, 2021 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 12,623 74,686 18,374 105,683
Right-of-use assets - - - 20,843,612 - 20,843,612
Property, plant and equipment 201,264 - - 147,168,374 4,018 147,373,656
Intangible assets 14,529,771 - - 815,648 - 15,345,419
Total non-current assets $ 14,731,035 $ - $ 12,623 $168,902,320 $ 22,392 $183,668,370
27. SUBSEQUENT EVENTS
Appointments
Following the period end, the Company appointed James Philip as Chief
Operating Officer, and Chris Omo-Osagie as Acting Chief Finance Officer.
We believe that both James and Chris' operational experience will be valuable
in taking us through the next phase of our evolution into a multi asset
development, management, and operating group.
Resignation
Ben Hodges has resigned from his position as Chief Finance Officer and will be
transitioning from the Company over the next three months.
We are extremely grateful to Ben for his commitment and service during a very
important period of the Company's development and we wish Ben the very best in
his future pursuits.
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