REG - Thor Explorations Ld - THIRD QUARTER 2021 FINANCIAL AND OPERATING RESULTS
30/11/2021 07:00
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RNS Number : 9556T Thor Explorations Ltd 30 November 2021
NEWS RELEASE
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR
DISTRIBUTION TO U.S. WIRE SERVICES
November 30, 2021 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 THIRD QUARTER 2021 FINANCIAL AND OPERATING RESULTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
Thor Explorations Ltd. (TSXV / AIM: THX) ("Thor Explorations" or the
"Company") is pleased to provide an operational and financial review for its
mineral properties located in Nigeria, Senegal and Burkina Faso for the three
and nine months to September 30, 2021 ("Q3 2021") (altogether 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 and nine months ended September 30, 2021, are available
on Thor Explorations' website https://thorexpl.com/investors/financials/
(https://thorexpl.com/investors/financials/)
Operational Highlights of the Period
- First gold poured at the Company's Segilola Gold Mine (the
"Segilola Project" or the "Project")
- Construction work at the Segilola Project Process Plant
completed with only some earthworks, minor civil work and landscaping to be
completed
- Exploration during Q3 2021 comprised of on-going regional stream
sediment sampling, soil sampling and termite mound sampling in the exploration
lease located both north and south of the Segilola Gold Deposit
- At the Douta Gold Project, in Senegal (the "Douta Project")
reverse circulation drilling at Makosa North has extended the mineralized
strike length to a total of over 7 kilometres
Post Period Highlights
- Commerical production achieved at the Segilola Project in October
2021
- The combination of the delay in commissioning of the Segilola
Project, delayed arrival of laboratory equipment, supply chain issues
resulting in the supply of sub-standard reagents and delays in the Company's
ability to export produced gold, resulted in the Company having to restrict
the plant feed grade to an average of 2.0g/t.
- Whilst the performance of the processing plant has in most aspects
overachieved during ramp up, the design criteria and residual gold in tailings
is less than 3.0%. However the plant has not yet achieved its overall target
97% gold recovery.
- The Company continues to expand its footprint in the Osun State in
Nigeria, having made applications for a number of licences
- A maiden resource estimate of 730,000 ounces inferred grading at
1.5 grammes per tonne ("g/t") declared at the Douta Project
- New prospect, Mansa, discovered at the Douta Project, located
approximately five kilometres north of the Makosa deposit
Outlook
- Production post-Period from the Segilola Project has been
approximately 4,570oz with an additional gold pour scheduled for November 30,
2021 and regularly through December.
- Whilst the Company believes it has resolved the majority of the
issues experienced during ramp up due the issues experienced, it will not
achieve its previously announced year end guidance of 30,000 to 35,000 and
will provide the market with an updated guidance in due course
Segun Lawson, President & CEO, stated:
"Over the quarter we have delivered on a number of major milestones for the
Company, having achieved first gold pour and, thereafter, in October we
achieved commercial production at the Segilola Gold Mine. Following the
period, earlier this month we also announced a maiden resource estimate at the
Douta Gold Project in Senegal, the first major milestone at this project.
"During the mine ramp-up of at Segilola, we experienced a number of issues
which lead to a number of stoppages during and after the period, resulting in
a lower production output and therefore a negative impact on our year
guidance, however we believe we have taken the right approach in resolving
these issues early on. We are pleased that the majority of these issues have
now been resolved and are anticipating a steady production rate through the
remainder of the year. We lok forward tol updating the market with our revised
guidance in due course.
"We are also pleased to have continued to execute on our strategic objective
of acquiring further propspective gold targets in Nigeria, and also to
continue to advance near mine exploration where we have drill results pending.
"Lastly, we remain excited about the Douta Project. The maiden resource
estimate of 730,000 ounces at 1.5g/t in the inferred category, combined with
the discovery drill results at the new prospect Mansa, provides an excellent
growth platform for the next phase of exploration."
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 and development 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 of 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)
Blytheweigh (Financial
PR)
Tim Blythe / Megan Ray / Rachael Brooks
Tel: +44 207 138 3203
Segilola Project, Nigeria
Executive Summary
The Company continued to make very strong progress throughout the Period, with
most construction activities complete. The focus was on ramping up to
Commercial Production. This was achieved following the quarter.
There were a number of Covid-19 cases on site in August which resulted in
heightened restrictions at the workplace. Following a serious Lost Time Injury
("LTI") which occurred on 29 August 2020 during project construction
activities. Mr Samuel Vanahand, a contract worker for the EPC contractor,
suffered serious injuries resulting from electrocution. His life was saved by
the SROL medical team and was transferred to a hospital to receive further
treatment.The Company voluntarily suspended operations for 2 days whilst the
relevant authorities were informed, who carried out an independent
investigation and the Company also completed an internal investigation which
resulted in the Company implementing changes to its operating and training
procedure.
Construction work at the Process Plant has been completed with only some
earthworks, minor civil work and landscaping still outstanding. The majority
of Process Plant equipment is installed and is now fully operational, and both
the mill and crusher have operated at rates higher than the design capacity.
The camp is fully operational and phase 1a construction at the Tailings
Management Facility is complete.
Mining operations continued to progress with the Mining Contractor fully in
place.
Health & Safety
The project site experienced its first cases of Covid-19 with measures swiftly
put in place to minimize its spread. Those infected were isolated for a period
before being allowed to resume duties. Enhanced protective measures were taken
across the site which were successful with cases having dropped significantly
by the end of the quarter.
Staffing and Project Office
Staffing of the Project, is complete. The engineering department is fully
established with benefits in quality control being realized. The Human
Resources Department is driving the establishment of HR policies and effective
working practice across the Company. The Finance Department is fully
operational and the Supply Chain Team are establishing purchasing and
warehousing SOP's. Our security team is in place and being further developed.
Our technical team for survey, mine engineering and grade control are in
place, as is the Process Plant team is fully in place. A Performance
Management Process has been implemented and a training department established.
Community
Compensation payments to land owners and farmers are complete. Over 250
Community Workers have benefited from employment at site. The communities are
being favoured for most unskilled work and a number of community projects have
been initiated.
Engineering, Procurement and Construction
Civils work at the process plant are complete with only some earthworks and
landscaping remaining. Commissioning of the process plant commenced with dry
commissioning starting during the last week of July, with the plant
operational by the end of the Period.
Process plant equipment is installed and operational. Commissioning of the
camp is complete. Work at the tailings management facility is complete with
Phase 1a being commissioned. Phase 1b is expected to start in Q4. It is
planned that the EPC contractor will remain on site into 2022 to assist the
Company in fixing snags and providing operational guidance.
Mining & Processing Operations
Mining operations are progressing with Sinic, the Company's primary contractor
now established on site. The ROM Pad is fully operational and is now being
expanded to enable the further establishment of stockpiles. Blasting
operations continue successfully.
Processing operations started during the Period. The process plant is running
and has surpassed its design capacity and most processing positions have been
filled. However, gold recovery was lower than planned from the CIL circuit and
as a result, there were a number of stoppages during the ramp up to
investigate and resolve the issues. Work is ongoing and it is planned to
undertake final performance testing towards the latter half of Q4 2021. The
diesel power plant is running as expected and work has started on construction
of the CNG facility which will be commissioned during the Q1 2022. Cheaper
power generated by the CNG plant will replace diesel generation, with the
diesel plant being used as a backup.
A number of technical projects were undertaken to facilitate mining
operations. Dewatering holes and water monitoring holes have now been drilled.
Pumps, pipes and ancillary equipment are at site and installation is planned
for Q4 2021.
Social & Environment
The main achievements in environment and social activities for Q3 2021 were
the construction and commissioning of the process plant and finalisation of
infrastructure on the Segilola Gold Mine Project including completing Phase 1
of the tailings storage facility, installation and commissioning power
generators, laying the water pipes and installing pumps from the water storage
dam as well as completion of camp accommodation chalets, offices and
recreation/canteen blocks and installing site security gateway and gatehouses.
Further site clearance for mining activities meant that site clearance was
achieved across the entire pit area as well as for land for the waste rock
dumps and access roads. New exploration licences beyond the Segilola Project
have involved the Community Development and Stakeholder Team in meeting with
community leaders in new jurisdictions to to introduce the Company and to
discuss the proposed exploration program.
Operational readiness has continued to be the focus of environment and social
management plans, standards operating procedures and on-site training during
Q3 2021. The commissioning and operational phases included on-site training
for core SROL staff on cyanide and hazardous chemicals management, updating
the risk register to address the commissioning and operations management of
the process plant, TMF and power supply facilities as well as continued
community training on blasting procedures (siren system, erection of blasting
notices in the 3 host communities and a step-up in security posts on the
Iperindo Road passing through the site).
'Social listening' continues (monitoring SROL and Thor mentions in Nigerian
media) across electronic, TV and printed media and findings are shared with
key departments in SROL. Most media coverage has been positive.
Progress on a range of Health, Safety, Social and Environment (HSSE)
management plans occurred with emphasis on requirements for lenders (AFC)
set out in their Environment and Social Action Plan (ESAP) 2. HSSE Plans,
policies, procedures and protocols delivered to lenders' Environment and
Social advisors in Q2 2021 in line with ESAP2 included:
New:
· Crisis media procedures;
· TSF Operations Manual;
· Mine Method Statement which includes blasting procedures and
waste rock management measures; and
· Process Plant Management Procedures.
Updates to:
· Stakeholder Engagement Plan; and
· Grievance Management Procedure.
Most documents submitted in Q2 2021 have been reviewed and closed out by the
lender's (African Finance Corporation) Environment and Social Advisors
following their site visit in July 2021. No red flags were identified from
that visit. Monthly environment baseline surveys (summarised in quarterly
reports to the Federal Ministry of Environment) were in line with emissions
standards.
Upcoming focus for HSSE management (for Q4 2021) relates to HSSE inputs
required for additional operations management plans and procedures for Site
Security and updates to the and Emergency Response and Evacuation Plan.
SROLSafe will also continue to be updated with SOPs prepared for the process
plant and inputs into Mining Procedures. External audits are also proposed by
the Federal Ministry of Environment.
Community benefits via Community Development Agreements ("CDAs") signed in
2017-18 with the three host communities around the Project footprint included
SROL continuing to deliver agreed benefits on the women's training initiative
programme and ongoing funding of the school scholarship programme. Local
employment commitments outlined in the CDAs were also met with 15 to 18% of
employment on site from the 3 host communities (averaging around 100 local
employees for 650 employees at the mine site). Further emphasis has been
placed on maintaining local community employment as the project moves into the
operations phase and with a slow down on construction activities.
Corporate Social Responsibility programmes progressed in Q3 2021 included
opening of local produce markets and increased work gangs undertaking
improvements to the Iperindo Road (replacing road and fixing potholes).
Nigerian Exploration Licences
The 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.
The licences cover a strike length of 20km over the highly prospective
gold-bearing Ilesha Schist Belt and the immediate northern extensions of the
Segilola gold trend.
Thor's exploration tenure now comprises nine explorations licences. Together
with the mining lease over the Segilola Gold Deposit Thor's total exploration
tenure amounts to 915 km².
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.
Tenement soil stream sediment termite mound trench Total
EL19066 - 72 13 - 85
EL26356 817 - 87 - 904
EL26357 901 - - - 901
EL26358 2,037 - 35 - 2,072
EL28801 348 34 - - 382
EL29977 1,075 45 48 253 1,421
EL29978 613 21 - - 634
Total 5,791 172 183 253 6,399
Table 1: Geochemical Sampling Statistics
Activity during the quarter generated a total of 6,399 surface geochemical
samples (Figure 1).
Reverse circulation (RC) drilling was undertaken in two areas located 5km
north of Segilola 1,518 metres were drilled in the period of a planned 4,000
metres with drilling results pending.
Regional Growth Opportunities
Summary
The Company has expaned its exploration footprint via licence application and
option over what the Company believes to be prospective exploration targets in
the region surrounding the Segilola Gold Mine and the existing package of
wholy owned exploration and mining leases. Thor, through one of its wholly
owned subsidiaries has been granted a new licence, EL34429, which is located
in Kwara State to the north of Segilola. This application was made further to
significant target generation work followed by encouraging ground truthing
which revealed significant historical artisanal workings.
In addition, Thor has negotiated four separate option agreements over
prospective exploration leases located in Ogun, Osun and Oyo States. The focus
has been on consolidating prospective ground within trucking distance of
Segilola and also acquiring prospective licences further away which have
demonstrated strong gold mineralisation prospectivity through target
generation, ground truthing and artisanal mining.
EL34429 (100% SROL, Kwara State)
Exploration Licence EL34429 was applied for and granted during the period. The
area is notable for the number of artisanal workings that are located within
the lease. This suggests that gold mineralisation is widespread within a north
north easterly trending schist belt.
Preliminary exploration work on the exploration lease has returned anomalous
rock chip results of up 1.41g/tAu from a number of workings dug into
lateritised saprolite.(Figure 6).
EL20776 (option agreement, Osun State)
EL20776 is located approximately 15km west from the Segilola Gold Mine. This
area covers extensive artisanal workings that signify potential for a high
grade primary gold deposit. Preliminary mapping has define a Priority 1 target
that trends in a north easterly direction which is closely parallel to the
geological trend in which the Segilola gold deposit is formed. Surface
geochemical sampling results are pending.
EL30237 (option agreement, Osun State)
EL30237 is located approximately 22km southwest from the Segilola Gold Mine.
To date a detailed auger soil geochemical program has bee completed. Anomalous
gold geochemisatry has been delineated to the west of the drainage that runs
through the lease. Exploration is ongoing to define potential drill targets.
Decisions to either exercise the options or not will be made in December 2021
and will be based on the exploration data obtained during the option period.
Douta Project, Senegal
The Douta Gold Project is a gold exploration permit that covers an area of 103
km2 and is located within the Kéniéba inlier, eastern Senegal. The permit is
an elongate polygon with dimensions of approximately 32km by 3.3km, trending
northeast with an area of 103 km2.
The Douta licence is strategically positioned between the world class deposits
of Massawa and Sabadola to the west and the Makabingui deposit to the east.
Within the licence five separate gold prospects have been identified using
surface geochemical sampling. These comprise the more advanced Makosa
prospect, where RC and diamond drilling has defined mineralisation over a
7.4km strike length, and the earlier exploration stage Maka, Mansa, Samba and
Makosa Tail prospects.
RC drilling during the quarter continued at Makosa North extending the
mineralised strike length to a total of over 7km (Table 2).
During the quarter further target generative work, comprising termite mound
sampling and auger-assisted geochemical sampling, continued at the Maka and
Mansa prospects
Drilling Results
The results are from the exploratory RC drilling program at Makosa North are
shown in Table 2 and Figure 11.
HOLE-ID Easting Northing Elevation Length (m) From (m) To (m) Interval (m) Grade (g/tAu) True Width (m)
DTRC281 177098 1438174 195 42 6.0 14.0 8.0 1.69 5.8
17.0 33.0 16.0 1.58 11.5
includes 19.0 22.0 3.0 5.53 2.2
DTRC283 177162 1438260 194 42 10.0 19.0 9.0 2.93 6.5
includes 11.0 18.0 7.0 3.56 5.0
DTRC289 177593 1438746 195 64 21.0 34.0 13.0 1.19 9.2
includes 27.0 32.0 5.0 1.78 3.5
DTRC293 177755 1438838 197 66 10.0 20.0 10.0 0.83 7.2
DTRC295 177692 1438889 196 46 26.0 36.0 10.0 1.21 7.3
includes 27.0 33.0 6.0 1.60 4.4
DTRC296 177651 1438910 195 80 65.0 80.0 15.0 2.42 11.3
includes 65.0 75.0 10.0 3.21 7.5
DTRC301 177837 1439050 194 45 25.0 39.0 14.0 1.20 10.4
DTRC311 178059 1439395 187 60 48.0 58.0 10.0 1.42 7.0
Table 2: Makosa North Significant Results
(0.5g/tAu lower cut off; maximum 2m internal dilution, minimum 2m interval)
Drill samples were analysed by ALS laboratories in Mali using the AA26 fire
assay method (50g charge).
The Makosa North drilling has extended the mineralisation a further 1,500m to
the north. Significantly, on the last drill section hole DTRC311 intersected
10m at 1.42g/tAu. This indicates that the mineralisation remains open-ended to
the north.
Drillholes DTRC 281 and DTRC283 were drilled at the ends of existing drill
sections to test for across-strike extensions of mineralisation with positive
results including 16m at 1.58g/tAu and 9m at 2.93g/tAu respectively. These
results further resolve a pod of mineralisation that extends over a strike
length of nearly 800m
Analyses were carried out by ALS Laboratories in Mali.
Subsequent to the quarter, the Company announced an initial NI 43-101 standard
Maiden Mineral Resource Estimate ("MRE") for the Makosa Deposit which is
located in the southern portion of the Douta Gold Project 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 grammes per
tonne ("g/t") gold ("Au") for 730,000 ounces of gold.
Burkina Faso
In Burkina Faso, in April 2021, Thor regained a 100% interest from its Joint
Venture with Barrick in the Central Houndé Project.
OVERALL PERFORMANCE
For the nine months ended September 30, 2021, the Company incurred a net loss
of $5,869,041 ($0.009 loss per share) compared to a net loss of $1,836,206
($0.003 loss per share) for the nine months ended September 30, 2020. The
increase in net loss is primarily due to foreign exchange losses of $1,222,808
on US Dollar denominated liabilities, and extra-ordinary costs incurred in
listing the Company's shares on the AIM Market of the London Stock Exchange of
$1,614,821. The loss of $1,836,206 in the comparable period is net of the
reversal of an impaired receivable of $2,081,703 where, if not for this
reversal, the loss for the nine months to September 30, 2020, would have been
$3,917,909.
For the three and nine months ended September 30, 2021, the Company incurred
the following costs excluding acquisition and impairments across its mining
tenements:
Three Months ended Nine Months ended Total
September 30, September 30, cumulative expenditure
September 30, 2021
2021 2020 2021 2020
Assets under construction $ 19,047,516 $ 14,579,556 $ 62,065,474 $ 39,516,994 $ 135,656,108
Exploration expenditures 947,570 604,182 2,557,398 883,815 12,217,668
Total $ 19,995,086 $ 15,183,738 $ 64,622,872 $ 40,400,809 $ 147,873,776
The majority of the expenditure for the nine months ended September 30, 2021,
was on the construction of the Segilola Gold Mine in Nigeria of $59,468,375,
including $10,989,534 in capitalised Project Finance costs, and exploration
works at the Douta Gold Project in Senegal of $2,281,813.
With the commencement of construction during 2020, the Company has recognised
a provision for restoration costs of $1,873,212 for future rehabilitation work
(refer to Note 14 of the Q3 Unaudited Financial Statements).
During the quarter no acquisition costs were incurred. The cumulative
acquisition costs for the Segilola Gold Project, Nigerian exploration
licenses, Douta Gold Project and Central Houndé Project expenditures at
September 30, 2021, amount to $20,065,625, $35,896, $6,199,492 and $664,145
respectively.
The value of the Central Houndé Project has been impaired fully as at
September 30, 2021, with a charge of $126,742 being recognised in the
Consolidated Statement of Comprehensive Loss.
As at September 30, 2021, the Company had cash of $3,398,251, restricted cash
of $4,459,156, and net working capital, excluding Gold Stream repayments and
borrowings, of $5,706,342 (December 31, 2020 - cash of $28,261,552, restricted
cash of $4,460,026, and net working capital, excluding Gold Stream repayments
and borrowings, of $22,307,767).
SUMMARY OF QUARTERLY RESULTS
The table below sets forth selected results of operations for the Company's
eight most recently completed quarters (in Canadian dollars, except per share
amounts).
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Description Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31
2021 2021 2021 2020 2020 2020 2020 2019
$ $ $ $ $ $ $ $
Revenues - - - - - - - -
Net profit/(loss) for period 580,532 (6,849,148) 399,575 (2,033,901) (1,371,821) 1,124,648 (1,589,033) (3,069,974)
Basic and fully diluted loss per share
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total assets 181,784,588 159,443,519 137,104,210 141,505,374 108,989,434 100,439,234 54,754,250 53,712,727
Total long-term liabilities
(64,151,891) (56,615,998) (44,018,156) (46,499,308) (18,877,481) (28,657,690) (21,568) (35,354)
RESULTS OF OPERATIONS
The review of the results of operations should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and notes thereto for
the three and nine months ended September 30, 2021.
Results of operations for the nine months ended September 30, 2021, and 2020
Loss for the period
The Company reported a net loss of $5,869,041 ($0.009 loss per share) for the
nine months September 30, 2021, as compared to a net loss of $1,836,206 ($0.00
loss per share) for the nine months ended September 30, 2020. The increase in
loss was largely the result of:
· an increase foreign exchange losses of $1,609,833 from gains of
$387,025 in 2020 to losses of $1,222,808 in 2021;
· costs of listing on the AIM Market of the London Stock Exchange
of $1,614,821;
· an increase in office and administrative expenses of $159,449
from $101,616 in 2020 to $261,065 in 2021;
· an increase in bank charges of $148,901 from 37,135 in 2020 to
$186,036 in 2021; and
· a gain realized of $2,081,703 in the comparable period to
September 30, 2020, upon the reversal of a receivables impairment which had
the effect of reducing the loss in the comparable period.
The increase in costs was offset partially by:
· a decrease in stock-based compensation costs of $1,021,271 from
$1,021,271 in 2020 to $nil in 2021; and
· a decrease in salaries of $523,472, from $1,724,720 in 2020 to
$1,201,248 in 2021.
Revenue
The Company did not have any operating revenue during the nine months ended
September 30, 2021, and 2020. The Company's sole source of income has been
its interest income on cash balances. No interest was earned during the nine
months ended September 30, 2021, and 2020.
Results of operations for the three months ended September 30, 2021, and 2020
Loss for the period
The Company reported a net profit of $580,532 ($0.001 profit per share) for
the three months September 30, 2021, as compared to a net (loss) of
($1,371,821) ($0.001 loss per share) for the three months ended September 30,
2020. The decrease in loss was largely the result of:
· a decrease in salaries of $880,292, from $1,285,967 in 2020 to
$405,675 in 2021; and
· an increase foreign exchange gains of of $1,587,535 from gains of
$187,140 in 2020 to gains of $1,774,675 in 2021.
These were offset partially by:
· costs of listing on the AIM Market of the London Stock Exchange
of $172,211;
· a gain realized of $312,040 in the comparable period to September
30, 2020, upon the reversal of a receivables impairment which had the effect
of reducing the loss in the comparable period.
Revenue
The Company did not have any operating revenue during the Period. The
Company's sole source of income is interest income on cash balances. No
interest was earned during the three months ended September 30, 2021, and
2020.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of $3,398,251, restricted cash allocated to the Segilola
Gold Project of $4,459,156, and net working capital, excluding Gold Stream
repayments and borrowings, of $5,706,342 as at September 30, 2021 (December
31, 2020: cash of $28,261,552, restricted cash allocated to the Segilola Gold
Project of $4,460,026, and net working capital, excluding Gold Stream
repayments and borrowings, of $22,307,767). The decrease in cash and cash
balance of $24,863,301 is due mainly to expenditure on assets under
construction of $53,136,024, intangible exploration assets expenditures of
$2,419,246, the purchase of property plant and equipment of $2,442,050, and
operational overheads. This cash expenditure was financed by existing cash
balances and drawdowns from a senior secured loan facility of $32,901,926 and
$1,880,364 from short term loans.
As at September 30, 2021, in addition to cash and restricted cash balances,
the Company has produced 4,570 ounces subsequent to period end as at November
29, 2021. Continued production from Segilola combined with existing cash
balances and undrawn debt facilities of $7 million (US$5.5 million) should
provide sufficient funding to support the Company's operational activities and
corporate overhead costs. The Board has reviewed the Group's cash flow
forecasts up until December 2022, having regard to its current financial
position and operational objectives. The Board is satisfied that the Group has
sufficient financial resources to meet its commitments for at least the next
twelve months. Refer to note 2c of the Q3 2021 Unaudited Financial Statements
for further detail on going concern.
Unaudited Financial Statements
THOR EXPLORATIONS LTD.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In Canadian dollars
(unaudited) (audited)
September 30, December 31,
Note 2021 2020
$
$
ASSETS
Current
Cash 3,398,251 28,261,552
Restricted cash 6 4,459,156 4,460,026
Inventory 7 1,744,513 -
Amounts receivable 8 2,430,290 56,705
Prepaid expenses, advances and deposits 9 1,066,953 552,696
Total current assets 13,099,163 33,330,979
Deferred income tax assets 43,991 46,668
Prepaid expenses, advances and deposits 9 146,920 195,284
Right of use assets 10 36,906 87,817
Property, plant and equipment 15 150,126,784 91,576,876
Intangible assets 16 18,330,824 16,267,750
Total non-current assets 168,685,425 108,174,395
TOTAL ASSETS 181,784,588 141,505,374
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 17 10,019,646 10,915,964
Lease liabilities 10 - 38,969
Gold stream liability 11 15,032,512 6,068,017
Loans and other borrowings 12 20,482,102 68,279
Total current liabilities 45,534,260 17,091,229
Non-current liabilities
Gold stream liability 11 22,211,540 25,348,934
Loans and other borrowings 12 40,067,139 20,531,788
Provision for restoration costs 14 1,873,212 618,586
Total non-current liabilities 64,151,891 46,499,308
SHAREHOLDERS' EQUITY
Common shares 18 99,802,700 97,122,584
Share purchase warrants 18 - 475,000
Option Reserve 18 5,773,190 5,846,190
Currency translation reserve (3,397,164) (769,689)
Deficit (30,080,289) (24,759,248)
Total shareholders' equity 72,098,437 77,914,837
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 181,784,588 141,505,374
These consolidated financial statements were approved for issue by the
Board of Directors on November 29, 2021, 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 STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
In Canadian dollars (unaudited)
Three Months Ended Nine Months Ended
September 30,
September 30,
Note 2021 2020 2021 2020
Continuing operations
Amortisation and depreciation - owned assets 6,982 14,218 17,722 42,303
Amortisation and depreciation - right of use assets 10 14,268 14,141 42,721 42,394
Other administrative expenses 5 997,529 1,841,928 2,843,514 3,196,371
Impairment of receivables / (reversal) - (312,040) - (2,081,703)
Impairment of Exploration & Evaluation assets 16 3,098 - 126,742 -
Share-based payments 18 - - - 1,021,271
(Loss) / profit from operations (1,021,877) (1,558,247) (3,030,699) (2,220,636)
Interest expense 10 (55) (714) (713) (2,595)
Foreign exchange gain (loss) 1,774,675 187,140 (1,222,808) 387,025
Extra-ordinary expenses 5 (172,211) - (1,614,821) -
Net profit / (loss) before taxes $580,532 $(1,371,821) $(5,869,041) $(1,836,206)
Deferred income taxes - - - -
Net profit / (loss) for the period $580,532 $(1,371,821) $(5,869,041) $(1,836,206)
Other comprehensive income
Foreign currency translation gain (loss) attributed to 789,655 183,308 (2,627,475) 66,949
equity shareholders of the company*
Total comprehensive (loss) for the period $1,370,187 $(1,188,513) $(8,496,516) $(1,769,257)
Net loss per share - basic and diluted 19 $(0.001) $(0.002) $(0.009) $(0.003)
Weighted average number of common shares 626,280,674 610,520,639 622,722,592 525,256,592
outstanding - basic and diluted
* Items that may be reclassified to profit or loss.
The accompanying notes are an integral part of these unaudited condensed
consolidated interim financial statements.
THOR EXPLORATIONS LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
In Canadian dollars (unaudited)
Three Months Ended NIne Months Ended
September 30,
September 30,
Note 2021 2020 2021 2020
Cash flows from (used in):
Operating activities
Net profit (loss) for the period $580,532 $(1,371,821) $(5,869,041) $(1,836,206)
Adjustments for:
Foreign exchange loss (gain) (534,406) (184,870) 1,836,995 (422,962)
Impairment of exploration and evaluation assets 16 3,098 - 126,742 -
Depreciation 21,250 28,359 60,443 84,697
Write-off of receivable - (312,040) - (2,081,703)
Stock based compensation 18 - - - 1,021,271
Interest expense 10 55 714 713 2,595
Changes in non-cash working capital items 21 (2,010,547) 113,457 (3,157,298) 331,429
Cash utilized in operations (1,940,018) (1,726,201) (7,001,446) (2,900,879)
Adjustments to net loss for cash items
Realized foreign exchange (gain) loss (29,821) 1,318 145,133 (1,617)
Net operating cash flows (1,969,839) (1,724,883) (6,856,313) (2,902,496)
Investing activities
Purchases of property, plant and equipment 15 (453,771) (1,678,507) (2,442,050) (1,811,954)
Assets under construction expenditures 15 (11,316,903) (16,686,604) (51,776,161) (29,837,365)
Exploration & Evaluation assets expenditures 16 (1,574,151) (756,538) (2,419,246) (1,006,003)
Other intangible assets 16 (51,902) - (223,834) -
Net investing cash flows (13,396,727) (19,121,649) (56,861,291) (32,655,322)
Financing
Proceeds from issuance of equity securities 18 1,331,345 15,239,905 1,690,961 22,125,157
Proceeds from loan drawdowns 12 8,185,890 - 34,782,290 -
Proceeds from gold stream liability 11 - - - 28,197,757
Borrowing costs paid 12 (32,501) - (564,581) -
Payment of lease liabilities 10 (8,227) (30,221) (39,051) (45,625)
Share issue costs 18 - (1,325,653) - (1,360,866)
Net financing cash flows 9,476,507 13,884,031 35,869,619 48,916,423
Effect of exchange rates on cash (114,439) (414,787) 2,984,684 687,297
Net change in cash (6,004,498) (7,377,288) (24,863,301) 14,045,902
Cash, beginning of the period 9,402,749 26,826,110 28,261,552 5,402,920
Cash, end of the period $3,398,251 $19,448,822 $3,398,251 $19,448,822
Supplemental cash flow information (Note 21)
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 Canadian dollars (unaudited)
Note Common Shares Share purchase warrants Option Reserve Currency translation reserve Deficit Total shareholders' equity
Balance on December 31, 2019 $67,550,111 $533,000 $4,902,308 $559,126 $(20,961,259) $52,583,286
Private placements 18 26,151,403 - - - - 26,151,403
Share issuance costs 18 (1,244,876) - - - - (1,244,876)
Writeback of warrants expired 18 - (58,000) - - 58,000
Share based payments 18 - - 1,078,000 - - 1,078,000
Net loss for the period - - - - (1,836,206) (1,836,206)
Comprehensive income - - - 66,949 - 66,949
Balance on September 30, 2020 $92,456,638 $475,000 $5,980,308 $626,075 $(22,739,465) $76,798,556
Private placements 18 4,623,512 - 4,623,512
Share issuance costs 18 434 - - - - 434
Share based payments 18 - - (120,000) - (120,000)
Options exercised 18 42,000 - (14,118) - 14,118 42,000
Net loss for the period - - - - (2,033,901) (2,033,901)
Comprehensive income (loss) - - - (1,395,764) - (1,395,764)
Balance on December 31, 2020 $97,122,584 $475,000 $5,846,190 $(769,689) $(24,759,248) $77,914,837
Exercise of options 18 60,000 (73,000) - 73,000 60,000
Reinstatement of warrants 18 - 58,000 - - (58,000) -
Exercise of warrants 18 2,620,116 (533,000) - - 533,000 2,620,116
Net loss for the period - - - - (5,869,041) (5,869,041)
Comprehensive income (loss) - - - (2,627,475) - (2,627,475)
Balance on September 30, 2021 $99,802,700 $- $5,773,190 $(3,397,164) $(30,080,289) $72,098,437
The accompanying notes are an integral part of these unaudited condensed
consolidated interim financial statements.
THOR EXPLORATIONS LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER, 2021 AND 2020
In Canadian dollars, except where noted (unaudited)
1. CORPORATE INFORMATION
Thor Explorations Ltd. N.P.L. was incorporated on September 11, 1968, under
certificate number 81705 as a specially limited company pursuant to the
Company Act (British Columbia, Canada). On December 4, 2001, Thor Explorations
Ltd. N.P.L. changed its name to Thor Explorations Ltd. ("Old Thor"). On March
28, 2006, Old Thor transitioned to the British Columbia Business Corporations
Act and on August 24, 2007, Old Thor resolved to remove the pre-existing
company provisions applicable to Old Thor. Effective on September 1, 2009, Old
Thor amalgamated with Magnate Ventures Inc. The amalgamated entity continued
as Thor Explorations Ltd. ("Thor" or the "Company"). Thor trades on the TSX
Venture exchange under the symbol "THX-V".
The Company is a natural resources company with no revenue, engaged in the
acquisition, exploration and development of mineral properties, and is
currently focused on gold projects located in West Africa.
The Company's registered office is located at 550 Burrard Street, Suite 2900,
Vancouver, BC, Canada, V6C 0A3.
2. BASIS OF PREPARATION
a) Statement of compliance
These 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 Canadian dollars,
unless otherwise indicated.
The preparation of financial statements in compliance with IFRS requires
management to make certain critical accounting estimates. It also requires
management to exercise judgment in applying the Company's accounting policies.
A precise determination of many assets and liabilities is dependent upon
future events, the preparation of consolidated financial statements for a
period involves the use of estimates, which have been made using careful
judgment. Actual results may differ from these estimates. The areas
involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the unaudited condensed financial
statements are discussed in Note 4.
c) Nature of operations and going concern
As at September 30, 2021, the Company had cash of $3,398,251, restricted cash
of $4,459,156 and net working capital, excluding Gold Stream repayments and
borrowings of $3,079,517. The Company had undrawn debt facilities of $7
million (US$5.5 million) which will provide sufficient funding for the
completion of the construction of its Segilola Gold Mine ("Segilola") in Osun
state, Nigeria.
The predominant focus of operational activities will be the completion of the
Segilola Segilola Gold Mine and scale up of commercial production, with
production of 4,570 ounces post period end and to the date of this Report. The
Board has reviewed the Group's cash flow forecasts up until December 2022, and
with continued production from Segilola, having regard to its current
financial position and operational objectives. The Board is satisfied that the
Group has sufficient financial resources to meet its commitments for at least
the next twelve months.
The ongoing Covid-19 coronavirus pandemic has caused a severe adverse effect
on the business environment on a global scale. The Group may be affected by
disruptions to its operations in one or more locations, particularly for the
foreseeable future in light of government responses to the spread of Covid-19
or other potential pandemics.
The Board is aware of the various risks that the pandemic presents that
include but are not limited to financial, operational, staff and community
health and safety, logistical challenges and government regulation. At present
the Board believes that there should be no significant material disruption to
its operations in Nigeria and continues to monitor these risks and the Group's
business continuity plans. Management maintains constant dialogue with local
the Nigerian government and monitors the situation among the local communities
as well as the broader environment.
The Group's operations in Senegal have not been impacted by Covid-19 and
exploration activities are continuing.
The Board has considered the operational disruption that could be caused by
factors such as delays to commercial production, illness amongst workforce
caused by Covid-19, and potential disruptions to supply chains. The Board has
conducted sensitivity testing of its cash flow forecasts factoring in these
potential impacts and it has considered reasonable mitigating actions to its
forecasts and sensitivity scenarios. The major focus on sensitivity testing
was on the anticipated production from its Segilola Gold Mine. Scenarios
considered included a delay by four months in commissioning of the mine and a
fall in the gold price were considered. The forecast cashflows are based on a
gold price of US$1,600/oz and the period end gold price of US$1,750/oz. The
life of mine all in sustaining cost at Segilola is US$685/oz providing the
Group with a significant margin of safety from any material fall in the gold
price. In the event of a material delay in commissioning at Segilola, the
Group has mitigating actions available to minimize the impact of the delay
including liquidated damages that are payable under the EPC contract (US$1.6m
per month), DSU insurance which covers the full interest chargeable under the
Secured Senior Debt Facility (US$0.5m per month), and triggering a suspension
of mining under the terms of the Mining Contract.
The Board is satisfied that the mitigating actions available should there be a
significant delay to commissioning of the Segilola Gold Mine will not
jeopardize the Group's ability to continue as a going concern.
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 ("SRI BVI") British Virgin Islands March 10, 2020 100%
African Star Resources SARL ("African Star SARL") Senegal July 14, 2011 100%
Argento Exploration BF SARL Burkina Faso September 15, 2010 100%
("Argento BF SARL")
AFC Constelor Panafrican Resources SARL ("AFC Constelor SARL") Burkina Faso December 9, 2011 100%
Segilola Resources Operating Limited Nigeria August 18, 2016 100%
("SROL")
Segilola Gold Limited ("SGL") Nigeria August 18, 2016 100%
There have been no changes in ownership interest from the previous year.
c) Foreign currency translation
Functional and presentation currency
The Company's presentation currency is the Canadian dollar ("$"). The
functional currency for the Company, being the currency of the primary
economic environment in which the Company operates, is the Canadian dollar.
The individual financial statements of each of the Company's wholly owned
subsidiaries are prepared in the currency of the primary economic environment
in which it operates (its functional currency).
Exchange rates published by the Bank of Canada and Oanda were used to
translate the Thor BVI, African Star, SR BVI, African Star SARL, Argento BF
SARL, AFC Constelor SARL, SROL and SGL's financial statements into the
Canadian dollar in accordance with IAS 21 The Effects of Changes in Foreign
Exchange Rates. This standard requires, on consolidation, that assets and
liabilities be translated using the exchange rate at period end, and income,
expenses and cash flow items are translated using the rate that approximates
the exchange rates at the dates of the transactions (i.e., the average rate
for the period). The foreign exchange differences on translation of
subsidiaries Thor BVI, African Star, SRI BVI, African Star SARL, Argento BF
SARL, AFC Constelor SARL, SROL and SGL are 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 recognized in profit and
loss. There is a legal requirement in Nigeria for Nigerian incorporated
companies to maintain a functional currency of Nigerian Naira ("the Naira").
Fluctuations in the value of the Naira, with most notably the US Dollar and
Canadian Dollar will result in foreign exchange gains and losses as assets and
liabilities denominated in US Dollar and Canadian Dollar are revalued in Naira
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 represent 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 September 30, 2021, the Company had $4.4 million (US$3.5 million) that
is accounted for separately from cash and cash equivalents. It is classified
as restricted cash as the funds are not freely available for the Company's
use. Refer to Note 6.
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, accounts payable, accrued liabilities and deferred
payment. Loans and borrowings are initially recognized 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 recognized 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 recognized in profit or loss.
Gold Stream arrangement
On April 29, 2020, the Company announced the completion of financing
requirements for the development of the Segilola Gold Project in Nigeria. The
financing included a US$21 million gold stream prepayment pursuant to a Gold
Stream Arrangement ("GSA") entered in to with the African Finance Corporation
("AFC").
Under the terms of the GSA an advance payment of US$21 million was received.
Upon the commencement of production at Segilola the AFC will have the right to
receive 10.27% of gold produced from the Group's ML41 mining license. Once the
initial liability has been repaid in full any further gold production will be
delivered under the terms of the GSA up to the money multiple limit of 2.25
times the initial advance. The total maximum amount payable to the AFC under
this agreement is US$47.25m including the repayment of the initial US$21
million advance. The advanced payment has been recorded as a contract
liability based on the facts and terms of the arrangement and own use
exemptions considerations.
The maximum US$26.25 million payable after the initial US$21 million has been
settled has been identified as a significant financing component. The deemed
interest rate is calculated at inception, using the production plan and gold
price estimates and released over the term of the arrangement as interest
expense in the income statement upon commencement of production. The deemed
interest rate will be recalculated at each reporting period and restated based
on changes to the expected production profile and gold price estimates.
Revenue from the streaming arrangement will be recognized under IFRS 15 when
the customer obtains control of the gold and the Group has satisfied its
performance obligations. The revenue recognized reduces the contract liability
balance.
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 recognized 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 recognized in profit or loss
except where depreciation is directly attributable to mineral properties owned
by the Group that are classified as either Exploration & Evaluation of
Assets Under Construction. Depreciation in this instance is capitalized to the
value of the mineral property asset (refer to Note 14). Depreciation is
provided on a straight-line basis over the estimated useful life of the assets
as follows:
Description within Mining and Other Equipment Rate
Motor vehicles 20-33%
Plant and machinery 20-25%
Office furniture 20-33%
Depreciation methods, useful lives and residual values are reviewed at each
financial year-end and adjusted if appropriate.
f) Assets under construction
Assets under construction comprise development projects and assets in the
course of construction at both the mine development and production phases.
Development projects comprise interests in mining projects where the ore body
is considered commercially recoverable and the development activities are
ongoing. Expenditure incurred on a development project is recorded at cost,
less applicable accumulated impairment losses. Interest on borrowings,
incurred for the purpose of the establishment of mining assets, is capitalised
during the construction phase.
The cost of an asset in the course of construction comprises its purchase
price and any costs directly attributable to bringing it into working
condition for its intended use, at which point it is transferred from assets
under construction to other relevant categories and depreciation commences.
Assets under construction are not depreciated.
Upon commercial production being achieved assets under construction will be
re-categorised as Mining Property, and any costs will be depleted using a
units of production method.
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) Inventory
Stores and consumables are stated at the lower of cost and net realisable
value. The cost of stores and consumables includes expenditure incurred in
acquiring the inventories and bringing them to their existing location and
condition.
Gold ore stockpiles are valued at the lower of weighted average cost,
including related overheads and depreciation of relevant mining assets, and
net realisable value, using assay data to determine the amount of gold
contained in the stockpiles, adjusted for expected gold recovery rates.
Gold bullion and gold in process are stated at the lower of weighted average
cost and net realisable value. Cost includes direct materials, direct labour
costs and production overheads, including depreciation of relevant mining
properties.
k) 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.
l) 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).
m) 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.
n) 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.
o) 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.
p) Interest income
Interest income is recognized as earned, provided that collection is assessed
as being reasonably assured.
q) 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.
r) 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.
s) 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, 2021, that had a significant
effect on the Group's financial statements.
t) 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.
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 will
be recalculated 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 September 30, 2021.
A 1% change in gold production estimates would result in an impact of less
than US$0.047 million on the Gold Stream liability.
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 $126,742 has been charged in the nine months to September 30, 2021,
in the Condensed 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) 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 $0.1 million (2020: $nil) on the provision for
environmental and site restoration. The value of the year- end restoration
provision is disclosed within note 14.
5. OTHER ADMINISTRATIVE EXPENSES
Three Months Ended Nine Months Ended
Note September 30, September 30,
2021 2020 2021 2020
Audit and legal $ 17,692 $ 41,549 $ 127,902 $ 83,586
Consulting fees 148,359 397,646 328,496 600,362
Directors' fees 20 113,445 106,654 335,731 304,173
Salaries and benefits 405,675 1,180,126 1,201,248 1,736,859
Listing and filing fees 4,987 3,550 31,602 17,803
Investor relations and transfer agent 105,397 64,242 238,690 249,841
Bank charges 26,743 17,397 186,036 37,135
Office and miscellaneous 105,034 18,733 261,065 101,616
Travel 70,197 12,031 132,744 64,996
$ 997,529 $ 1,841,928 $ 2,843,514 $ 3,196,371
Extra-ordinary expenses of $1,614,821 incurred in the nine months ended
September 30, 2021, are costs incurred in listing the Company's shares on the
AIM Market of the London Stock Exchange.
6. RESTRICTED CASH
September 30, December 31, 2020
2021
Restricted cash $ 4,459,156 $ 4,460,026
On December 1, 2020, announced that its subsidiary Segilola Resources
Operating Limited ("SROL") had completed the financial closing of a US$54
million project finance senior debt facility ("the Facility") from the Africa
Finance Corporation for the construction of the Segilola Gold Project in
Nigeria. The Facility can be drawn down at the Group's request in minimum
disbursements of US$5 million. As at September 30, 2021, SROL has received
total disbursements of US$48.5 million ($53.9 million), with US$27 million
($32.9 million) drawn down during the period under review. Total disbursements
received represent 90% of the facility. Under the terms of the facility, the
Company was required to place a total of US$3.5 million ($4.4 million) into a
cost overrun bank account that can only be used for expenditure on the
development of the Segilola Gold Project in the event of construction costs
exceeding budget. Accordingly, the balance of the cost overrun bank account
at the reporting date has been shown separately from Cash on the Statement of
Financial Position. Refer to Note 11 for further detail on the facility. The
restricted cash balance will be released to the Company upon satisfaction of
the following conditions:
1. Project construction being within budget; and
2. commissioning of the Segilola Gold Mine.
7. INVENTORY
September 30, 2021 December 31, 2020
Plant spares and consumables $ 1,170,008 $ -
Gold ore in stockpile 376,341 -
Gold in mill and CIL 198,164 -
$ 1,744,513 $ -
8. AMOUNTS RECEIVABLE
September 30, 2021 December 31, 2020
GST / VAT $ 19,801 $ 1,414
Other receivables 2,410,489 55,291
$ 2,430,290 $ 56,705
The majority of Other receiveables consists of:
a) $1,033,394 (US$811,078) warrant exercise funds. (Refer to note 18d) to
be received from a subscriber. As at the date of signing this report
approximately US$215,317 remains outstanding; and
b) An advance by the Company of US$1.0m ($1.27m) to the EPC contractor
made during the period under to facilitate the continuing construction of the
Segilola Gold Mine. The advance is free of interest and will be repaid before
the end of December 2021.
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
September 30, December 31, 2020
2021
Current:
Insurance $ 116,192 $ 47,973
Gold Stream liability arrangement fees 49,437 52,910
Other deposits 506,631 295,795
Other prepayments 394,693 156,018
$ 1,066,953 552,696
Non-current:
Gold Stream liability arrangement fees $ 123,593 $ 171,957
Other prepayments 23,327 23,327
$ 146,920 $ 195,284
10. LEASES
The Group accounting 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. $39,051 (2020 year: $59,778) has been expensed in the period in
relation to low value and short- term leases. In addition, the Group will no
longer recognise provisions for operating leases that it assesses to be
onerous. Instead, the Group will include the payments due under the lease in
its lease liability.
The key impacts on the Statement of Comprehensive Loss and the Statement of
Financial Position for the period ended September 30, 2021, were as follows:
Right of use asset Lease liability Income statement
Carrying value December 31, 2020 $ 87,817 $ (38,969) $ -
New leases entered in to during the period - - -
Depreciation (45,169) - (42,721)
Interest - (713) (713)
Lease payments - 39,051 -
Foreign exchange movement (5,742) 631 (5,111)
Carrying value at September 30, 2021 $ 36,906 $ - $ (48,545)
Total depreciation for the period under IFRS 16 was $45,169. Of the total
depreciation charge, $42,721 was charged to the Statement of Comprehensive
Loss, and $2,448 was capitalized to Assets Under Construction.
The key impacts on the Statement of Comprehensive Loss and the Statement of
Financial Position for the year ended December 31, 2020, were as follows:
Right of use asset Lease liability Income statement
Balance on transition $ 108,177 $ (96,665) $ -
New leases entered in to during the year 41,969 (41,969) -
Depreciation (60,559) - (56,619)
Interest - (3,159) (3,159)
Lease payments - 103,009 -
Foreign exchange movement (1770) (185) (1,955)
Carrying value at 31 December 2019 $ 87,817 $ (38,969) $ (61,733)
11. GOLD STREAM LIABILITY
Gold stream liability
September 30, 2021 December 31, 2020
Total Total
Balance at Beginning of period $ 31,416,951 $ -
Drawdown - 28,197,777
Interest at the effective interest rate 6,349,694 4,545,134
Foreign exchange movement (522,593) (1,325,960)
Balance at End of period $ 37,244,052 $ 31,416,951
Current liability 15,032,512 6,068,017
Non-current liability 22,211,540 25,348,934
On April 29, 2020, the Company announced the closing of project financing for
its flagship Segilola Gold Project ("Segilola") in Osun State, Nigeria. The
financing included a US$21 million gold stream upfront deposit ("the
Prepayment") over future gold production at Segilola under the terms of a Gold
Purchase and Sale Agreement ("GSA") entered in to between the Company's wholly
owned subsidiary SROL and the AFC. The Prepayment is secured over the shares
in SROL as well as over SROL's assets, and is not subject to interest. The
initial term of the GSA is for ten years with an automatic extension of a
further ten years. The AFC will receive 10.27% of gold production from the
Segilola ML41 mining license until the US$21 million Prepayment has been
repaid in full. Thereafter the AFC will continue to receive 10.27% of gold
production from material mined within the ML41 mining license until a further
US$26.25 million is received, representing a total money multiple of 2.25
times the value of the Prepayment, at which point the GSA will terminate. The
AFC are not entitled to receive an allocation of gold production from material
mined from any of the Group's other gold tenements under the terms of the GSA.
The US$26.25 million represents interest on the Prepayment. A calculation of
the implied interest rate was made as at drawdown date with interest being
apportioned over the expected life of the Stream Facility. The principal input
variables used in calculating the implied interest rate and repayment profile
were production profile and gold price. The future gold price estimates are
based on market forecast reports for the years 2021 to 2025 and, the
production profile is based on the latest life of mine plan model. The
liability will be re-estimated on a periodic basis to include changes to the
production profile, any extension to the life of mine plan and movement in the
gold price. Upon commencement of production, any change to the implied
interest rate will be expensed through the Consolidated Statement of Loss.
Interest expense of $6,349,694 was recognised for the nine months ended
September 30, 2021, and has been capitalized and is included in the value of
Assets Under Construction (Refer to Note 15). To the date of this report a
cumulative total of $10,894,828 has been capitalized and included in the value
of Assets Under Construction. The interest expense will be released to the
income statement upon commencement of production in line with units of gold
produced.
12. LOANS AND BORROWINGS
September 30, December 31, 2020
2021
Current liabilities:
Loans payable to the Africa Finance Corporation less than 1 year $ 16,954,214 $ -
Deferred element of EPC contract 1,636,913 68,279
Short term bridging loan 1,890,975 -
$ 20,482,102 68,279
Non-current liabilities:
Loans payable to the Africa Finance Corporation more than 1 year $ 36,909,650 $ 18,140,636
Deferred element of EPC contract 3,157,489 2,391,152
$ 40,067,139 $ 20,531,788
Loans from the Africa Finance Corporation
September 30, December 31, 2020
2021 Total
Total
Balance at Beginning of period $ 18,140,636 $ -
Drawdown 32,901,926 27,927,401
Equity component - (5,666,011)
Arrangement fees (564,581) (4,016,642)
Unwinding of interest in the year 1,625,820 186,205
Foreign exchange movement 1,760,064 (290,317)
Balance at End of period $ 53,863,865 $ 18,140,636
Current liability 16,954,214 -
Non-current liability 36,909,650 18,140,636
On December 1, 2020, the Company announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
US$54 million project finance senior debt facility ("the Facility") from the
Africa Finance Corporation ("AFC") for the construction of the Segilola Gold
Project in Nigeria. The Facility can be drawn down at the Group's request in
minimum disbursements of US$5 million. As at September 30, 2021, SROL has
received total disbursements of US$48.5 million ($61.8 million), with US$27
million ($32.9 million) drawn down during the period under review. Total
disbursements received represent 80% of the Facility. The Facility is secured
over the share capital of SROL and its assets, with repayments expected to
commence in May 2022 and conclude in May 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 $4,581,223 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 recognized at amortised cost using an effective rate of interest, with the
fair value of the shares issued in April 2020 of $5,666,011 recognized within
equity.
Interest paid during the period of $2,899,327 has been capitalized under
Assets Under Construction. (Refer to Note 15). As at September 30, 2021, $7
million (US$5.5 million) of the facility remains available for drawdown.
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 US$67.5 million
for the full delivery of design, engineering, procurement, construction and
commissioning of the proposed 715,000 ton per annum gold ore processing plant.
The EPC Contract includes a deferred element ("the Facility") of up to 10% of
the fixed price. As at September 30, 2021, a total of $4,794,401
(US$3,774,467) (December 31, 2020: $2,459,431 (US$2,009,314)) was deferred
under the facility. Interest accrues at 8% per annum from the time the
completion certificate is issued. Repayments are due to commence in March 2022
and conclude in 2025. The amount deferred was initially measured at fair value
and subsequently at amortised cost using the effective interest method.
September 30, 2021 December 31, 2020
Total Total
Deferred payment facility $ 4,794,402 $ 2,459,431
Balance at period end $ 4,794,402 $ 2,459,431
Current liability 1,636,913 68,279
Non-current liability 3,157,489 2,391,152
Short term bridging loan
Total
Balance at drawdown $ 1,880,364
Foreign exchange movement 10,611
Balance September 30, 2021 $ 1,890,975
Current liability 1,890,975
Non-current liability -
On September 23, 2021, the SROL entered into a short term loan agreement with
a Nigerian based finance provider for the provision of NGN 610,000,000
Nigerian Naira (CAD$1,880,364) (the "Loan"). The facility was fully drawn down
as at reporting date. The draw down proceeds were used for operational
purposes at the Company's Segilola Gold Mine. The Loan was for a period of 23
days and subject to a brokerage fee of 6% on the total Loan amount. The entire
Loan was repaid in full subsequent to reporting date.
13. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Short term loan AFC loan EPC deferred facility Total
January 1, 2021 $ - 18,140,636 2,459,431 20,600,067
Cash flows:
Drawdowns 1,880,364 32,901,926 - 34,782,290
Transaction costs (564,581) - (564,581)
Non-cash changes:
Unwinding of interest in the year - 1,625,820 - 1,625,820
Foreign exchange movements 10,611 1,760,064 - 1,770,675
Offset against EPC payment - - 2,334,971 2,334,971
September 30, 2021 $ 1,890,975 53,863,865 4,794,402 60,549,242
14. PROVISION FOR RESTORATION
September 30, 2021 December 31, 2020
Total Total
Balance at Beginning of period $ 618,586 $ -
Initial recognition of provision - 618,586
Increase in provision 1,341,782
(87,156)
Balance at period end $ 1,873,212 $ 618,586
Current liability - -
Non-current liability 1,873,212 618,586
The above provision relates to 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 2020 US
inflation rate of 2.28% and the interest rate of 0.25% 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 completed or commenced as at September 30, 2021. The restoration
liability will increase in future accounting periods as construction is
completed.
15. PROPERTY, PLANT AND EQUIPMENT
Mining & other equipment Land Decommissioning Asset Assets under construction Total
Costs
Balance, December 31, 2019 $ 938,180 $ - $ - $ - $ 938,180
Transfer from exploration & evaluation assets - - - 37,015,004 37,015,004
Acquisition payments - 23,012 - 318,152 341,164
Additions 1,793,111 - 618,586 55,448,668 57,860,365
Foreign exchange movement (87,927) - - (3,447,668) (3,535,595)
Balance, December 31, 2020 $ 2,643,364 $ 23,012 $ 618,586 $ 89,334,156 $ 92,619,120
Acquisition payments - - - - -
Additions 2,220,358 - 1,341,782 60,723,692 64,285,832
Foreign exchange movement (176,070) (1,573) (87,156) (5,011,246) (5,276,045)
Balance, September 30, 2021 $ 4,687,652 $ 21,439 $ 1,873,212 $ 145,046,602 $ 151,628,908
Accumulated depreciation and impairment losses
Balance, December 31, 2019 $ 801,032 $ - $ - $ - $ 801,032
Depreciation 254,046 - - - 254,046
Foreign exchange movement (12,834) - - - (12,834)
Balance, December 31, 2020 $ 1,042,244 $ - $ - $ - $ 1,042,244
Depreciation 565,971 - - - 565,971
Foreign exchange movement (106,090) - - - (106,090)
Balance, September 30, 2021 $ 1,502,125 $ - $ - $ - $ 1,502,124
Carrying amounts
Carrying value at December 31, 2019 $ 137,148 $ - $ - $ - $ 137,148
Carrying value at December 31, 2020 $ 1,601,120 $ 23,012 $ 618,586 $ 89,334,156 $ 91,576,876
Balance, September 30, 2021 $ 3,185,527 $ 21,439 $ 1,873,212 $ 145,046,602 $ 150,126,784
Included within Assets Under Construction additions is a total of $10,989,534
borrowing costs capitalized during the period, including interest on the AFC
loan of $2,899,327. The costs relate to both the Gold Stream Prepayment and
AFC Secured Loan. The associated borrowings are secured over the assets under
construction, and other property, plant & equipment of Segilola Resources
Operating Limited.
A summary of depreciation capitalized is as follows:
Three Months ended Nine Months Total depreciation
September 30, ended capitalized
September 30,
September 30, 2021 December 31, 2020
2021 2020 2021 2020
Assets under construction $ 244,983 $ 21,153 $ 599,198 $ 36,068 $ 936,939 $ 181,576
Exploration expenditures 30,248 1,854 59,888 3,704 593,143 522,075
Total $ 275,231 $ 23,007 $ 659,086 $ 39,772 $ 1,530,082 $ 703,651
a) Segilola Project, Osun Nigeria:
Classification of Expenditure on the Segilola Gold Project
On April 29, 2020, the Company announced the execution of definitive documents
with the Africa Finance Corporation to reach full funding of the Segilola Gold
Project in Nigeria ("the Project") and made the Final Investment Decision to
proceed with construction of the Project. In accordance with the provisions of
IFRS 6, this milestone achievement triggers a change in accounting treatment
for expenditure on the Project whereby the costs incurred on the Project were
transferred from Exploration and Evaluation Assets to tangible assets as
Assets under construction. This transfer in the audited financial statements
for the year ended December 31, 2020. Upon transfer of the Segilola Gold
Project from Exploration and Evaluation assets to Assets under Construction,
the Company undertook an impairment assessment in accordance with IAS 36 and
determined that no impairment was required to be recognised based on the Open
Pit DFS valuation of US$138 million, which was significantly above the value
of the project recorded on the balance sheet of $37 million (US$29 million) as
at the date of investment decision.
Decommissioning Asset
The decommissioning asset relates to estimated restoration costs at the
Group's Segilola Gold Mine as at September 30, 2021. Refer to Note 14 for
further detail.
16. EXPLORATION AND EVALUATION ASSETS
The Company's exploration and evaluation assets costs are as follows:
Douta Gold Project, Senegal Central Houndé Project, Burkina Faso Segilola Gold Project, Exploration licenses, Nigeria Software Total
Osun Nigeria
Costs
Balance, December 31, 2019 $ 13,708,142 $ 1,555,938 $ 31,336,433 $ 79,379 $ - $ 46,679,892
Additions $ - $ - $ - $ - $ 316,936 316,936
Exploration costs 1,705,210 1,121 5,678,571 36,560 - 7,421,462
Transfer to tangible assets - - (37,015,004) - - (37,015,004)
Impairment - (1,604,564) - - - (1,604,564)
Depreciation - - - - (19,710) (19,710)
Foreign exchange movement 464,356 47,505 - (4,904) (18,219) 488,738
Balance, December 31, 2020 $ 15,877,708 $ - $ - $ 111,035 $ 279,007 $ 16,267,750
Additions $ - $ - $ - $ - $ 223,834 223,834
Exploration costs 2,281,813 128,950 - 275,683 - 2,686,446
Impairment - (129,047) - - - (129,047)
Amortisation - - - - (150,693) (150,693)
Foreign exchange movement (538,514) 97 - (17,976) (11,073) (567,466)
Balance, September 30, 2021 $ 17,621,007 $ - $ - $ 368,742 $ 341,075 $ 18,330,824
a) Douta Gold Project, Senegal:
The Douta Gold Project consists of an early-stage gold exploration license
located in southeastern Senegal, approximately 700km east of the capital city
Dakar.
The Company is party to an option agreement (the "Option Agreement") with
International Mining Company ("IMC"), by which the Company has acquired a 70%
economic interest in the Douta Gold Project located in southeast Senegal held
through African Star SARL.
Effective February 24, 2012, the Company exercised its option to acquire a 70%
economic interest in the Douta Gold Project pursuant to the terms of the
Option Agreement between the Company and IMC. As consideration for the
exercise of the option, the Company issued to IMC 11,646,663 common shares,
based on a VWAP for the 20 trading days preceding the option exercise date of
$0.2014 (or US$0.2018) per share, valued at $2,678,732 based on the Company's
closing share price on February 24, 2012. The share payment includes
consideration paid to IMC for extending the time period for exercise of the
option.
Pursuant to the terms of the Option Agreement, IMC's 30% interest will be a
"free carry" interest until such time as the Company announces probable
reserves on the Douta Gold Project (the "Free Carry Period"). Following the
Free Carry Period, IMC must either elect to sell its 30% interest to African
Star at a purchase price determined by an independent valuer commissioned by
African Star or fund its 30% share of the exploration and operating expenses.
b) Central Houndé Project, Burkina Faso:
(i) Bongui and Legue gold permits, Burkina Faso:
AFC Constelor SARL held a 100% interest in the Bongui and Legue gold permits
covering an area of approximately 233 km(2) located within the Houndé belt,
260 km southwest of the capital Ouagadougou, in western Burkina Faso.
(ii) Ouere Permit, Central Houndé Project, Burkina Faso:
Argento BF SARL held a 100% interest in the Ouere gold permit, covering an
area of approximately 241 km(2) located within the Houndé belt.
The three permits together cover a total area of 474km(2) over the Houndé
Belt which form the Central Houndé Project.
(iii) Barrick Option Agreement, Central Houndé Project, Burkina Faso:
On April 8, 2015, the Company entered into the Acacia Option Agreement with
Acacia Mining plc ("Acacia"), whereby Acacia will have the exclusive option to
earn up to a 51% interest in Central Houndé Project by satisfying certain
conditions over a specified 4-year period and then the right to acquire an
additional 29%, for an aggregate 80% interest in the Central Hounde 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 Hounde 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 nine months to September 30, 2021, recognize an
impairment charge of $129,046 through the Condensed Consolidated Interim
Statement of Comprehensive Loss.
b) 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. Together with the mining lease
over the Segilola Gold Deposit, Thor's total exploration tenure amounts to 915
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
September 30, December 31,
2021 2020
Trade payables $ 3,372,574 $ 10,363,935
Accrued liabilities 6,647,072 552,029
$ 10,019,646 $ 10,915,964
Accounts payable and accrued liabilities are classified as financial
liabilities and approximate their fair values.
18. CAPITAL AND RESERVES
a) Authorized
Unlimited common shares without par value.
b) Issued
September 30, September 30, December 31, December 31,
2021 2021 2020 2020
Number Number
As at start of the year 621,405,975 $ 97,122,584 449,352,215 $ 67,550,111
Issue of new shares:
- Share warrants exercised i 9,952,034 2,620,116 - -
- Share options exercised ii 500,000 60,000 210,000 42,000
- Issue July 13, 2020 iii - - 75,548,530 13,558,254
- Issue costs July 13, 2020 - - - (1,223,457)
- Issue April 29, 2020iv - - 28,215,750 5,643,150
- Issue April 29, 2020 creditor settlementv
- - 34,750,000 5,907,500
- Issue April 29, 2020 bonus shares vi
- - 33,329,480 5,666,011
- Issue December 4, 2019vii - - - (20,985)
631,858,009 $ 99,802,700 621,405,975 $ 97,122,584
i Value of 1,664,534 warrants exercised on June 8, 2021, at a price of $0.18
per share, and 8,287,500 warrants exercised on August 31, 2021, at a price of
$0,28 per share.
ii Value of 500,000 options exercised on July 6, 2021, at a price of $0.12 per
share.
Value of 210,000 options exercised on December 10, 2020, at a price of
$0.20 per share.
iii Private placement of 75,548,530 common shares at a price of $0.18 per
share.
iv Private placement of 28,215,750 common shares at a price of $0.20 per
share.
v Issue of 34,750,000 common shares in settlement of US$5 million owed to
creditors. The fair value of the shares issued was determined at the share
price at the date of issue of $0.17 per share. The difference between the fair
value of the shares issued of $5,907,500 and the carrying amount of creditors
settled of $6,950,000 is recognised in the statement of comprehensive loss as
gain of settlement of liabilities of $1,042,000.
vi Issue of 33,329,480 bonus common shares in connection with secured
borrowing facility shares at a price of $0.17 per share (Refer to Note 11).
vii Additional costs associated with the private placement of 78,669,250
common shares in December 2019.
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 $0.20 per share for a period of five years. The options
vested immediately.
· On October 5, 2018, 750,000 stock options were granted at an
exercise price of $0.14 per share for a period of five years.
· On March 12, 2018, 12,800,000 stock options were granted at an
exercise price of $0.145 per share for a period of five years.
· On May 7, 2017, 500,000 stock options were granted at an exercise
price of $0.12 per share for a period of three years. On July 5, 2019, the
Company announced an extension of the expiry date from May 7, 2020, to May 7,
2022. All other conditions of the options remain the same.
· On January 16, 2017, 9,750,000 stock options were granted at an
exercise price of $0.12 per share for a period of three years. On July 5,
2019, the Company announced an extension of the expiry date from January 16,
2020, to January 16, 2022. In addition the vesting conditions attached to 1.75
million options were removed with the options vesting immediately and the
resulting charge recorded in the Consolidated Statement of Comprehensive Loss.
All of the stock options were vested as at the balance sheet date. These
options did not contain any market conditions and the fair value of the
options were charged to the statement of comprehensive loss or 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 for options outstanding as at reporting date are as follows:
Vesting period (years) First vesting date Expected remaining life (years) Risk free rate Exercise price Volatility of share price Fair value Options vested Options granted Expiry
5 01/16/2017 0.31 1.05% $0.12 197.32% $0.14 9,750,000 9,750,000 01/16/2022
5 03/12/2018 1.45 2.00% $0.145 105.09% $0.14 12,800,000 12,800,000 03/12/2023
5 10/05/2018 2.01 2.43% $0.14 100.69% $0.14 750,000 750,000 10/05/2023
5 01/16/2020 3.30 1.49% $0.20 66.84% $0.07 14,250,000 14,250,000 01/16/2025
The share price volatility measure for options granted in 2017 was the
historical volatility in Thor's share price measured over the same number of
years as the life of the options granted. In 2018 the Company elected to
measure volatility by calculating the average volatility of a collection of
three peer companies historical share prices for the exercising period of each
parcel of options. Management believes that given the transformational change
that the Company has undergone since the acquisition of the Segilola Gold
Project in August 2016, the Company's historical share price is not reflective
of the current stage of development of the Company, and that adopting the
volatility of peer companies who have advanced from exploration to development
is a more accurate measure of share price volatility for the purpose of
options valuation.
The following is a summary of changes in options from January 1, 2021, to
September 30, 2021, and the outstanding and exercisable options at September
30, 2021:
Contractual Lives January 1, During the period September 30, September 30, 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 0.31 9,750,000 - - - 9,750,000 9,750,000 -
7-May-2017 7-May-2022 ii $0.12 - 500,000 - (500,000) - - - -
12-Mar-2018 12-Mar-2023 $0.145 1.45 12,800,000 - - - 12,800,000 12,800,000 -
5-Oct-2018 5-Oct-2023 $0.14 2.01 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 3.30 14,040,000 - - - 14,040,000 14,040,000 -
Totals 1.86 37,840,000 - (500,000) - 37,340,000 37,340,000 -
Weighted Average Exercise Price $0.159 $0.200 $0.200 - $0.159 $0.159 -
(i )On July 5, 2019, the Company announced an extension of the expiry date
from January 16, 2020, to January 16, 2022. All other conditions of the
options remain the same.
(ii )On July 5, 2019, the Company announced an extension of the expiry date
from May 7, 2020, to May 7, 2022. All other conditions of the options remain
the same.
CAPITAL AND RESERVES (continued)
The following is a summary of changes in options from January 1, 2020, to
December 31, 2020, and the outstanding and exercisable options at December 31,
2020:
Contractual Lives January 1, During the period December 31, December 31, 2020
2020
2020
Number of Options
Grant Expiry Exercise Remaining (Years) Opening Granted Exercised Expired / Forfeited Closing Vested and Exercisable Unvested
Date
Date
Price
Balance
Balance
16-Jan-2017 16-Jan-2022 i $0.12 1.05 9,750,000 - - - 9,750,000 9,750,000 -
7-May-2017 7-May-2022 ii $0.12 1.35 500,000 - - - 500,000 500,000 -
12-Mar-2018 12-Mar-2023 $0.145 2.19 12,800,000 - - - 12,800,000 12,800,000 -
5-Oct-2018 5-Oct-2023 $0.14 2.76 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 4.05 - 14,250,000 (210,000) - 14,040,000 14,040,000 -
Totals 2.59 23,800,000 14,250,000 (210,000) - 37,840,000 37,840,000 -
Weighted Average Exercise Price $0.134 $0.200 $0.200 - $0.159 $0.159 -
( )
(i )On July 5, 2019, the Company announced an extension of the expiry date
from January 16, 2020, to January 16, 2022. All other conditions of the
options remain the same.
(ii )On July 5, 2019, the Company announced an extension of the expiry date
from May 7, 2020, to May 7, 2022. All other conditions of the options remain
the same.
.
d) Share purchase warrants
On August 31, 2018, the Company issued 44,453,335 warrants pursuant to the
private share placement closed on the same date, whereby one warrant was
issued for every common share subscribed for ("Placement Warrants"). The
warrants were issued with an exercise price of $0.28 for a period of
thirty-six (36) months.
During the nine months ended September 30, 2021, 8,287,500 placement warrants
were exercised and converted in to common shares at C$0.28 each. The remainder
of the unexercised warrants expired.
On August 31, 2018, the Company issued a total of 1,664,534 warrants to a
broker for advisory services pursuant to the private share placement closed on
the same date ("Broker Warrants"). The warrants were issued with an exercise
price of $0.18 for a period of thirty-six (36) months.
During the nine months ended September 30, 2021, 1,664,534 broker warrants
were exercised and converted in to common shares at C$0.18 each.
Right to accelerate exercise of warrants
If at any time after four months and one day after August 31, 2018, the Common
Shares trade on the TSX Venture Exchange (the "TSX-V") at a closing price
equal to or greater than $0.36 for a period of twenty (20) consecutive trading
days, the Company may exercise a right to accelerate the expiry date of the
Placement Warrants by giving notice to the holders of the Placing Warrants
within five trading days after such event that the Placing Warrants shall
expire (30) days from the date of such notice.
Weighted Average Exercise Price
Number of Warrants
Carrying Value
Balance, December 31, 2017 $ -
Private placement 44,453,335 $0.28 475,000
Broker 1,664,534 $0.18 58,000
Balance, December 31, 2018 46,117,869 533,000
Balance, December 31, 2019 46,117,869 533,000
Broker warrants expiry August 31, 2020 (1,664,534) $0.18 (58,000)
Balance, December 31, 2020 44,453,335 475,000
Reinstatement of broker warrants 1,664,534 $0.18 58,000
Balance, March 31, 2021 46,117,869 553,000
Exercise of broker warrants (1,664,534) $0.18 (58,000)
Balance, June 30, 2021 44,453,335 475,000
Exercise of placement warrants (8,287,500) $0.28
Expiry of placement warrants (36,165,835) $0.28
Balance, September 30, 2021 - -
The value of the private placement warrants was net of the value of the
Company's right to accelerate exercise of the warrants, which was determined
using the Black Scholes model. The inputs to the model are listed in the table
below:
Vesting period (years) First vesting date Expected life (years) Risk free rate Exercise price Volatility of share price Fair value Warrants vested Warrants granted Expired
3 31/08/2018 - 2.08% $0.28 82.43% $0.08 44,453,335 44,453,335 31/08/2021
Nature and purpose of equity and reserves
The reserves recorded in equity on the Company's statement of financial
position include 'Reserves', 'Currency translation reserve', and 'Deficit'.
'Share purchase warrants' is used to recognize the value of share purchase
warrants prior to exercise or forfeiture.
'Option reserve' is used to recognize the value of stock option grants prior
to exercise or forfeiture.
'Currency translation reserve' is used to recognize the exchange differences
arising on translation of the assets and liabilities of foreign branches and
subsidiaries with functional currencies other than Canadian dollars.
'Deficit' is used to record the Company's accumulated deficit.
19. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the loss attributed
to shareholders for the nine months to September 30, 2021, of $5,869,041
(September 30, 2020: $1,371,821) by the weighted average number of shares of
622,722,592 (September 30, 2020: 610,520,639) in issue during the period.
Due to the losses incurred during the period a diluted loss per share has not
been calculated as this would serve to reduce the basic loss per share. Out of
37,340,000 (2020: 37,840,000) share incentives outstanding at the end of the
period 37,340,000 (2020: 37,840,000) had already vested, which if exercised
could potentially dilute basic earnings per share in the future.
20. RELATED PARTY DISCLOSURES
A number of key management personnel, or their related parties, hold or held
positions in other entities that result in them having control or significant
influence over the financial or operating policies of the entities outlined
below.
a) Trading transactions
The Africa Finance Corporation ("AFC") is deemed to be a related party given
the size of its shareholding in the Company. There have been no other
transactions with the AFC other than the Gold Stream liability as disclosed in
Note 10, and the secured loan as disclosed in Note 11.
b) Compensation of key management personnel
The remuneration of directors and other members of key management during the
three and nine months ended September 30, 2021, and 2020, were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Consulting fees & salaries
Current directors & officers $ 170,559 $ 850,154 $ 500,617 $ 1,200,809
Directors' fees
Current directors 113,445 106,654 335,731 304,173
Share-based payments
Current directors and officers - - - 813,115
$ 284,004 $ 956,808 $ 836,348 $ 2,318,097
(i) Key management personnel were not paid post-employment benefits,
termination benefits, or other long-term benefits during the three and nine
months ended September 30, 2021, and 2020.
(ii) The Company paid consulting and director fees to both individuals and
private companies controlled by directors and officers of the Company for
services. Accounts payable and accrued liabilities at September 30, 2021,
include $259,306 (December 31, 2020 - $44,288) due to directors or private
companies controlled by an officer and director of the Company. Amounts due to
or from related parties are unsecured, non-interest bearing and due on demand.
21. SUPPLEMENTAL CASH FLOW INFORMATION
a) Changes in non-cash working capital are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Amounts receivable $ (121,055) $ 370 $ (1,330,226) $ (53,321)
Inventory (1,777,625) - (1,777,625) -
Prepaid expenses and deposits 624,871 2,959 (693,874) 11,204
Accounts payable and accrued liabilities
4,536,800 (4,316,887) (833,732) 875,500
Change in non-cash working capital accounts
$ 3,262,992 $ (4,313,557) $ (4,635,457) $ 833,384
Relating to:
Operating activities $ (2,010,547) $ 113,457 $ (3,157,298) $ 331,429
Financing activities - (86,212) - 15,685
Investing activities 5,273,539 (4,340,803) (1,478,159) 486,270
$ 3,262,992 $ (4,313,557) $ (4,635,457) $ 833,384
Accounts payable and accrued liabilities includes $8,283,770 (December 31,
2020 - $9,862,060) related to Assets under Construction and Exploration.
b) During the three and nine months ended September 30, 2021, the Company
had $1,253,155 and $2,899,327 outlays respectively (2020: $nil) in respect of
interest, and $nil (2020: $nil) outlays in respect of income taxes.
22. FINANCIAL INSTRUMENTS
The Group's financial instruments consist of 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
based on the following methods. 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, accounts receivable, and accounts payable,
accrued liabilities 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:
September 30, 2021 Total
Assets
Cash and cash equivalents $ 3,398,251
Restricted cash 4,459,156
Amounts receivable 2,430,290
Total assets measured at amortised cost 10,287,697
Total
Liabilities
Accounts payable and accrued liabilities $ 10,019,646
Loans and Borrowings 60,549,240
Lease liabilities -
Total liabilities measured at amortised cost $ 70,568,886
December 31, 2020 Total
Assets
Cash and cash equivalents $ 28,261,552
Restricted cash 4,460,026
Amounts receivable 56,705
Total assets measured at amortised cost 32,778,283
Total
Liabilities
Accounts payable and accrued liabilities $ 10,915,964
Loans and Borrowings 20,600,067
Lease liabilities 38,969
Total liabilities measured at amortised cost $ 31,555,000
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group is exposed to
cash flow interest rate risk from the AFC secured loans with the interest at
LIBOR plus 9% (Refer to Note 11). The Group's management monitors the interest
rate fluctuations on a continuous basis and acts accordingly.
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%
September 30, 2021
Comprehensive income (loss)
Financial assets and liabilities $ 617,000 $ (617,000)
December 31, 2020
Comprehensive income (loss)
Financial assets and liabilities $ 280,700 $ (280,700)
Credit risk
Credit risk is the risk of an unexpected loss if a counterparty to a financial
instrument fails to meet its contractual obligations. The credit risk
associated with cash and receivables is believed to be minimal.
Cash consists of cash on deposit in Canadian, UK, Mauritian, Nigerian, and
Senegalese Chartered banks that are believed to be creditworthy.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at September 30, 2021, and
December 31, 2020, were as follows:
September 30, December 31,
2021 2020
Cash $ 3,398,251 $ 28,261,552
Restricted cash 4,459,156 4,460,026
Amounts receivable 2,430,290 56,705
Total $ 10,287,697 $ 32,778,283
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. Funding risk is the risk that
the Company may not be able to raise additional financing in a timely manner
and on terms acceptable to management. There are no assurances that such
financing will be available when, and if, the Company requires additional
financing.
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 September 30, 2021, and December 31,
2020.
Contractual maturity analysis as at September 30, 2021
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable 2,825,369 547,205 - - 3,372,574
Accrued liabilities 6,647,072 - - - 6,647,072
Loans and borrowings 1,923,035 18,601,935 47,968,903 - 68,493,873
11,395,474 19,149,140 47,968,903 - 78,513,517
Contractual maturity analysis as at December 31, 2020
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable 9,855,297 508,638 - - 10,363,935
Accrued liabilities 552,029 - - - 552,029
Loans and borrowings - 68,279 30,127,064 - 30,195,343
10,407,326 576,917 30,127,064 - 41,111,307
Market risk
The Company is subject to normal market risks including fluctuations in
foreign exchange rates and interest rates. While the Company manages its
operations in order to minimize exposure to these risks, the Company has not
entered into any derivatives or contracts to hedge or otherwise mitigate this
exposure.
a) Foreign currency risk
The Group seeks to manage its exposure to this risk by holding its cash
balances in the same denomination as that of the majority of expenditure to be
incurred. The Group also seeks to ensure
that the majority of expenditure and cash of individual subsidiaries within
the Group are denominated in the same currency as the functional currency of
that subsidiary.
The Company's exploration expenditures, certain acquisition costs and other
operating expenses are denominated in United States Dollars, Nigerian Naira
and UK Pounds Sterling. The Company's exposure to foreign currency risk arises
primarily on fluctuations between the Canadian Dollars and the United States
Dollars, Nigerian Naira and UK Pounds Sterling. The Company has not entered
into any derivative instruments to manage foreign exchange fluctuations.
The following table shows a currency of net monetary assets and liabilities by
functional currency of the underlying companies for the period ended September
30, 2021:
Functional currency
Canadian US dollar Pound Nigerian West
dollar Sterling Naira African Total
Franc
Currency of net monetary asset/(liability) September 30, 2021 September 30, 2021 September 30, 2021 September 30, 2021 September 30, 2021 September 30, 2021
CAD$ CAD$ CAD$ CAD$ CAD$ CAD$
Canadian dollar (635,891) - - - - (635,891)
US dollar 2,063,820 - - (59,818,083) - (57,754,263)
Pound Sterling 531,720 - - (82,395) - 449,325
Nigerian Naira - - - (2,354,482) - (2,354,482)
West African Franc - - - - 36,983 36,983
Australian dollar (19,973) - - (2,888) - (22,861)
Total 1,939,676 - - (62,257,848) 36,983 (60,281,189)
The following table shows the currency of net monetary assets and liabilities
by functional currency of the underlying companies for the year ended December
31, 2020:
Functional currency
Canadian US dollar Pound Nigerian West African
dollar Sterling Naira Franc Total
Currency of net monetary asset/(liability) December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020
CAD$ CAD$ CAD$ CAD$ CAD$ CAD$
Canadian dollar (291,551) - - - - (291,551)
US dollar 7,735,527 - - (5,903,513) - 1,832,014
Pound Sterling (226,825) - (38,910) - - (265,735)
Nigerian Naira - - - (26,744) - (26,744)
West African Franc - - - - 1,656 1,656
Australian dollar (26,358) - - - - (26,358)
Total 7,190,794 - (38,910) (5,903,513) 1,656 1,223,282
The following table discusses the Company's sensitivity to a 5% increase or
decrease in the Canadian Dollar against the United States Dollar:
Canadian Canadian
Dollar Dollar
Appreciation Depreciation
September 30, 2021 By 5% By 5%
Comprehensive income (loss)
Financial assets and liabilities $ 3,600,000 $ (3,600,000)
December 31, 2020
Comprehensive income (loss)
Financial assets and liabilities $ 1,934,000 $ (1,934,000)
23. 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 obtained funding for the construction of the Segilola Gold Mine
through a combination of senior secured debt, a gold stream prepayment against
future production and the partial deferral of payment on the EPC contraction
for Gold Mine Construction.
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.
24. CONTINGENT LIABILITIES
Under the terms of the Sale and Purchase Agreements ("SPA") dated June 27,
2016, for the acquisition of the Segilola Gold Project in Nigeria, the Group
has an obligation to pay royalties to former owners on net smelter return from
all materials mined ("Production") from the ML41 and EL19066 licenses ("the
Licenses") owned by Segilola Resources Operating Limited. Royalty expenses
will be recognised in the income statement in line with production from the
Licenses. These royalties to former owners are as follows:
· Vox Royalty Corp (acquired from Ratel Group Limited) 1.5% of
Production up to a maximum of US$3.5 million;
· Tropical Mines Limited ("TML") 1.125% of Production up to a
maximum of US$3.0 million; and
· Delano Gold Mining Industries Limited ("Delano") 0.375% of
Production up to a maximum of US$1 million.
The Group has a contractual obligation of approximately US$38 million in
payments under the EPC contract for the construction of the Segilola Gold
Mine. These liabilities are not reflected in the balance sheet as at reporting
date as payment is contingent upon the completion of further construction work
post reporting date.
25. SEGMENTED DISCLOSURES
Segment Information
The Company's operations comprise three reportable segments, being the
Segilola Mine Project, Exploration Projects, and Corporate compared to one
reportable segment, being the exploration of mineral resource properties in
the prior year. These three reporting segments have been identified based on
operational focuses of the Group following the decision to develop the
Segilola Mine Project during the year. The segment assets, liabilities and
results are as follows:
September 30, 2021 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 9,635,351 $ 138,924 $ 3,324,888 $ 13,099,163
Non-current assets
Deferred income tax assets - 43,991 - 43,991
Prepaid expenses and deposit 123,593 - 23,327 146,920
Right of use assets 27,528 - 9,379 36,906
Property, plant and equipment 149,514,539 611,812 433 150,126,784
Intangible assets 341,076 17,989,748 - 18,330,824
Total assets $ 159,642,087 $ 18,784,475 $ 3,358,026 $ 181,784,588
Non-current asset additions $ 64,030,627 $ 3,165,485 $ - $ 67,196,111
Liabilities $ (108,490,712) $ (45,778) $ (1,149,661) $ (109,686,151)
Loss for the period $ (1,796,735) $ (326,169) $ (3,746,139) $ (5,869,043)
- consulting fees (2,1431) (143,901) (182,452) (328,496)
- salaries and benefits (237,469) - (963,780) (1,201,248)
- impairments - (126,742) - (126,742)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
September 30, 2021 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 17,897 105,696 23,327 146,920
Right of use assets - - - 27,528 9,379 36,906
Property, plant and equipment 262,801 - - 149,863,550 433 150,126,784
Intangible assets 17,835,929 - - 494,895 - 18,330,824
Total non-current assets $ 18,098,729 $ - $ 17,897 $150,491,670 $ 33,138 $168,641,434
December 31, 2020 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 24,967,021 $ 65,535 $ 8,298,423 $ 33,330,979
Non-current assets
Deferred income tax assets - 46,668 - 46,668
Prepaid expenses and deposit 171,957 - 23,327 195,284
Right of use assets 35,457 - 52,360 87,817
Property, plant and equipment 91,713,474 140,862 1,547 91,855,883
Exploration and evaluation assets - 15,988,743 - 15,988,743
Total assets $ 116,887,909 $ 16,241,808 $ 8,375,657 $ 141,505,374
Non-current asset additions $ 64,065,496 $ 1,872,290 $ 2,141 $ 65,939,927
Liabilities $ (62,523,231) $ (48,497) $ (1,018,809) $ (63,590,537)
Loss for the year $ (201,258) $ (1,634,381) $ (2,034,468) $ (3,870,107)
- consulting fees (102,218) (78,959) (582,624) (763,801)
- salaries and benefits (95,134) - (2,004,235) (2,099,369)
- share-based payments - - (907,574) (907,574)
- gain on settlement of liabilities - - 1,042,500 1,042,500
- impairments - (1,604,564) - (1,604,564)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
December 31, 2020 Senegal Nigeria Canada Total
Prepaid expenses and deposit - - 24,472 147,485 23,327 195,284
Right of use assets - - - 35,457 52,360 87,817
Property, plant and equipment 139,895 939 - 91,713,502 1,547 91,855,883
Exploration and evaluation assets 15,907,515 - - 81,228 - 15,988,743
Total non-current assets $ 16,047,410 $ 939 $ 24,472 $91,977,672 $ 77,234 $108,127,727
26. SUBSEQUENT EVENTS
There have been no events subsequent to reporting date of a financial or
corporate nature.
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