REG - Thor Explorations Ld - Thor Explorations Announces Full Year Results
02/05/2023 07:00
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RNS Number : 9870X Thor Explorations Ltd 02 May 2023
NEWS RELEASE
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR
DISTRIBUTION TO U.S. WIRE SERVICES
May 2, 2023 TSXV/AIM: THX
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 AUDITED FINANCIAL AND OPERATING RESULTS FOR THE
FULL YEAR AND THREE MONTHS ENDING DECEMBER 31, 2022
Thor Explorations Ltd. (TSXV / AIM: THX) ("Thor Explorations", "Thor" or the
"Company") is pleased to provide an operational and financial review for its
Segilola Gold mine, located in Nigeria ("Segilola"), and for the
Company's mineral exploration properties located in Nigeria, Senegal and
Burkina Faso for the three months ending December 31, 2022 ("Q4 2022") and
the audited financial results for the year ending December 31, 2022 ("Year" or
"FY 2022").
The Company's Consolidated Audited Financial Statements together with the
notes related thereto, as well as the Management's Discussion and Analysis for
the year ending December 31, 2022, are available on Thor Explorations' website
at https://thorexpl.com/investors/financials/
(https://thorexpl.com/investors/financials/) .
All figures are in US dollars ("US$") unless otherwise stated.
Operational Highlights
Segilola Production
· Gold production for the Year totaled 98,006 ounces ("oz")
o 2022 was the Company's first full calendar year of production with
commercial production declared at Segilola on January 1, 2022
o Gold production was at the top end of the FY 2022 guidance range of 90,000
to 100,000oz of gold
· All of the main operating units of the process plant performed as
expected, and the plant consistently operated above nameplate capacity
Segilola Near-Mine Exploration
· Acquisition of additional exploration tenures, expanding the
Company's Nigeria portfolio
· Exploration activities ramped up across the Company's portfolio,
delineating drill targets for 2023
Douta
· A successful 26,000 metre reverse circulation ("RC") drilling
program was completed to upgrade certain areas of the existing resource and to
target higher grade parts of the deposit
· New discovery of the Sambara Prospect
Financial Highlights
· 92,489 oz of gold sold with an average gold price of US$1,767 per
oz
· Cash operating cost of US$821 per oz sold and all-in sustaining
cost ("AISC") of US$1,091 per oz sold
o The higher than budget AISC was a result of materially increased prices of
ammonium nitrate and diesel during 2022
· FY 2022 revenue of US$165.2m (FY 2021: US$6m)
· FY 2022 EBITDA of US$71.7m (FY 2021: loss of US$1.8m)
· FY 2022 net profit of US$25.4m (FY 2021: loss of US$2.1m)
· Cash and cash equivalents of US$6.7m (FY 2021: US$1.3m)
· Senior debt facility significantly reduced from US$54m to
US$28.4m as at December 31, 2022
· Net debt of US$31m (FY 2021: US$ 65.6m)
Environment, Social and Governance
· Transition from diesel to compressed natural gas ("CNG")
generators is progressing. Once fully operational they will reduce greenhouse
gas emissions at the Segiola Mine Project by 53%. Total emissions (Scope 1)
for 2022 at 31,781 tons
· Livelihood restoration projects initiated, including fish and
vegetable farms
· Community Development Agreements ("CDA") have funded local Youth
and Women Initiative programs focusing on practical skill-based courses. CDA's
have also funded annual school scholarships to enable children from vulnerable
backgrounds to remain in school
· In Senegal, quarterly water quality (surface and ground)
monitoring commenced in Q4 2022 and the Company has been assisting with the
economic development of local communities as well as providing funding to a
women's initiative program
Post FY 2022 Highlights
· Segilola gold production of 20,629 oz during Q1 2023
· Identification of new high grade quartz vein system within 15km
of Segilola, with multiple high grade drillhole intercepts including 1m at 310
g/t gold which equates to 10 oz of gold per tonne
· Senior debt facility with Africa Finance Corporation amended and
restated to facilitate the Company's growth opportunities
o Senior debt facility reduced to US$27.9 million as at 31 March 2023
· Mineral Resource Estimate at Douta updated to approximately 1.78
million oz of gold, an increase of 144%
o Updated Douta Resource encompasses the Makosa, Makosa Tail and the
recently discovered Sambara prospects, all of which remain open along strike
and down dip
o Drilling is ongoing at Douta with a further 40,000 metre drilling
programme to be completed in 2023, consisting of diamond drilling and reverse
circulation drilling
Outlook
· Production guidance set at 85,000 to 95,000 oz for 2023 with an
AISC guidance of US$1,150 to US$1,350 per oz
· Advance exploration programs across the portfolio, including near
mine and underground projects at Segilola, extension and infill programs at
Douta and the assessment of potential targets in Nigeria
· Completion of the Douta preliminary feasibility study ("PFS") in
Q4 2023
Segun Lawson, President & CEO, stated:
"2022 proved to be a significant year for Thor Explorations, being our first
full calendar year of commercial production at our flagship asset, the
Segilola Gold mine, producing 98,006 oz of gold and selling 92,489 oz of gold
at an average price of US$1,767 per oz. Despite the global supply chain issues
that Thor faced, which contributed to a higher than budgeted AISC, the Company
still managed to achieve an annual operating profit of US$40 million and a net
profit of US$25.4 million. This highlights the quality and operating
efficiency of Segilola and the value that it has to offer. Importantly, it
provides us with a solid platform from which to grow.
"We also continue to develop the Douta Gold Project and, during the year,
carried out a 26,000m drilling programme that led to the announcement of a
144% resource increase subsequent to the year end. We will continue to advance
the Douta project towards a PFS in 2023 as we believe that it has the
potential to provide significant value to shareholders.
"Regrettably, during the year, a tragic accident at Segilola resulted in the
death of Mr Muyideen Adegboyega, our thoughts and condolences go out to his
family and friends. Since the incident, we have put in place additional
measures to ensure that this does not happen again and that the safety of
everyone working at, or otherwise affected by, the Segilola project is
prioritised, as determined by our ESG policy.
"ESG remains an integral part of our business strategy and we have made
considerable progress with our community development projects. We have
commenced livelihood restoration programs, in the form of fish farms and
market gardens. We have provided funding, equipment, training and assisted
with the construction of these projects which presented cash-positive projects
to the communities so that they can produce goods to be sold at local markets.
We have also commissioned and supervised many youth programs and training
workshops to develop and enhance necessary and transferable skills. We will
continue to progress our projects to help the development of local
communities.
"Looking to the future, our production guidance for 2023 is set at 85,000 -
95,000 ounces and I look forward to seeing what we will be able to accomplish
in 2023."
About Thor Explorations
Thor Explorations Ltd. is a mineral exploration company engaged in the
acquisition, exploration, development and production of mineral properties
located in Nigeria, Senegal and Burkina Faso. Thor Explorations holds a 100%
interest in the Segilola Gold Project located in Osun State, Nigeria and has a
70% economic interest in the Douta Gold Project located in south-eastern
Senegal. Thor Explorations trades on AIM and the TSX Venture Exchange under
the symbol "THX".
THOR EXPLORATIONS LTD.
Segun Lawson
President & CEO
For further information please contact:
Thor Explorations Ltd
Email: info@thorexpl.com
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 / Jay Ashfield / Franck Nganou
Tel: +44 (0) 20 7907 8500
Fig House Communications (Investor Relations)
Tel: +1 416 822 6483
Email: investor.relations@thorexpl.com
Ibu Lawson (Investor Relations)
Tel: +447909825446
Email: ibu.lawson@thorexpl.com
BlytheRay (Financial
PR)
Tim Blythe / Megan Ray / Said Izagaren
Tel: +44 207 138 3203
Management Discussion & Analysis for Q4 2022 and Full Year 2022
CHAIRMAN'S STATEMENT
We are extremely pleased to have completed our first full calendar year as a
commercial gold producer, with the 98,006 ounces produced during the year
being at the top end of the Company's Full Year 2022 guidance. This progress
has seen the Company transition from an explorer, to a developer and
ultimately a gold producer, building and successfully operating Nigeria's
first large scale commercial gold mine within a five year period. This
required significant effort from a large number of people from our various
stakeholders and the Board wishes to express its thanks to everyone involved.
This year saw a highly regrettable loss of life. We were sorry to suffer a
fatal injury incident leading to the tragic death of Mr Muyideen Adegboyega.
Our condolences go out to his family and friends. Following this tragic
incident, the Company has put into place additional measures that ensure the
safety of anyone working or otherwise affected by the Segilola Project,
including the ongoing work towards achieving ISO45001. Environmental, Social
and Governance ("ESG") was at the heart of our business in 2022. Engagement
with local stakeholders happened at all levels, from national government
through to local communities. This remains a priority for the Company.
Community development projects have made significant progress throughout the
year. We have commenced livelihood restoration programmes in the form of fish
farms and market gardens. By funding and assisting with the construction of
these projects, providing necessary equipment, maintenance materials and
training, the communities are now presented with cash-positive projects that
can produce goods to sell at local markets and to the Segilola mine. We have
also commissioned and supervised various community youth programmes and skills
training workshops throughout the year that focussed on developing and
enhancing transferable skills.
2022 has been a year where the company has consolidated itself as an
operator. Production for the first full year of operations has been
commendable, with an achievement of over 98,000 ounces. We also continued to
advance exploration in Nigeria and Senegal, and look forward to accelerating
exploration in both countries in 2023.
I would like to thank all our shareholders who have been supportive through
our transition. We believe we have created a strong foundation to deliver
further value in the coming years and look forward to 2023.
Adrian Coates
Chairman
CEO'S STATEMENT
2022 proved to be a year of significant milestones for Thor. The Company
officially declared commercial production from its Segilola Gold Mine on 1
January 2022 and after this, successfully produced 98,006 ounces by the end of
the year. This was a successful year in terms of gold production; however, the
year was not without its challenges. Global supply chain shortages following
the COVID-19 pandemic persisted, resulting in materially increased prices of
essential consumables and supplies such as ammonium nitrate, diesel and spare
parts contributing to a higher than budget AISC for the Segilola Gold Mine of
US$1,091 per ounce. Despite these challenges, we were able to demonstrate
operational efficiency, resulting in positive cash flows and a maiden annual
operating profit of US$40 million and net profit of US$25.4 million.
In the full year 2022, Segilola produced 98,006 ounces and sold 92,489 ounces
of gold with an average gold price sold of US$1,767 per ounce. Significantly,
our senior debt facility was reduced from US$54 million to US$28.4 million as
at December 31, 2022.
I reiterate the comments of our Chairman and also extend my condolences to the
friends and family of Mr Muyideen Adegboyega, who was tragically killed. A
thorough incident investigation was undertaken (in line with company
procedures) with senior managers involved as well as the Ministry of Mines and
Steel Development as is standard practice. The lessons learnt from this
fatality triggered immediate and long-lasting actions to prevent the
reoccurrence of such an event, to improve protection of SROL and Project staff
and to protect and respect local community resident's health, safety and
security.
Our focus turns to achieving global best practice in health and safety with
ESG continuing to be a priority for the Company. We continue to be extremely
proud of our community engagement and throughout the period we invested
heavily in a number of long-term initiatives, specifically in the areas of
food and agriculture, health, education, water and sanitation and local
economic development.
The Company also completed a successful year of exploration at the Douta
Project in Senegal. This project continues to be of high priority for the
Company and is well positioned to deliver significant value to our
shareholders. During the year, the major activity carried out was a 26,000
metre exploration drilling program which was successful and culminated in the
announcement of a 144% resource increase post the period end. We look forward
to completing a preliminary feasibility study of the Douta Project in 2023.
I would like to finish by saying we are proud of our first calendar year as a
producer, achieving the top end of our guidance. We are now very well
positioned to grow the company and continue its evolution through exploration
whilst continuing to deliver further on gold production and generation of
strong cash flow. I would like to thank our entire team of incredible
employees for their commitment and tireless work during the year without whom
we would be unable to operate. We look forward to the years ahead and growing
Thor into a sustainable, multi- asset, mining company.
Segun Lawson
Chief Executive Officer
OVERVIEW
Thor Explorations Ltd. ("Thor" or the "Company") is a gold production,
development and exploration company focussed on West Africa and dual-listed on
the TSX Venture Exchange TSX-V (THX: TSX-V) and the AIM market of the London
Stock Exchange (THX: AIM). The Company's main assets include its flagship
producing Segilola Gold mine in Nigeria and the advanced exploration project,
Douta, in Senegal. The Company also has a growing portfolio of prospective
exploration licences on the unexplored Ilesha schist belt in near proximity to
the Segilola Gold mine and further exploration licences in Nigeria and Burkina
Faso.
Our strategy is to operate, develop and explore mineral properties where our
expertise can substantially increase shareholder value. The Company operates
with transparency and in accordance with international best practices and is
committed to delivering value to its shareholders through responsible
development, providing economic and social benefit to our host communities and
operating in a manner where health and safety and the environment are integral
to our operations and development approach.
Figure 1.1: Thor's Properties in West Africa
HIGHLIGHTS AND ACTIVITIES - FOURTH QUARTER 2022 AND YEAR ENDED DECEMBER 31, 2022
Operating results remained in line with expectations for the quarter and the
year highlighted by the selling of 92,489 ounces of gold during the Year at a
cash operating cost(( 1 (#_ftn1) )) of US$821 per oz sold. AISC(1) for the
Year was above guidance at US$1,091 per oz sold.
Commercial production was declared at Segilola on January 1, 2022, and the
Facility Taking Over Certificate from the EPC contractor was received on
January 31, 2022. The EPC Contractor confirmed that it would cooperate with
the Company by extending the payment period of the final EPC invoices by
allowing the Company to make payment of the final EPC invoices from available
cashflow. As at the date of publishing this document, all EPC invoices due had
been settled in full.
The Company's performance in Q4 2022 builds on its performance during the
previous quarters and provides good direction for 2023. The Company has set
its production guidance to 85,000 to 95,000 oz, while AISC(1) guidance for
2023 is set at US$1,150 per ounce to US$1,350 per ounce.
Table 2.1 Key Operating and Financial Statistics
Year ended December 31, 2022 Year ended December 31, 2021
Operating
Gold Sold Au 92,489 3,425
Average realised gold price(1) $/oz 1,767 1,753
Cash operating cost(1) $/oz 821 -
AISC (all-in sustaining cost)(1) $/oz 1,091 -
EBITDA $/oz 775 -
Financial
Revenue $ 165,174,531 6,049,485
EBITDA(1) $ 71,680,022 (1,799,068)
Net Income/(Loss) $ 25,398,941 (2,069,195)
Cash and cash equivalents $ 6,688,037 1,276,270
Deferred Income $ 6,581,743 -
Net Debt(1) $ 31,650,722 65,555,984
Segilola Gold Mine, Nigeria
During the year, there continued to be global supply chain issues resulting in
shortages and increased prices for a number of essential consumables and
supplies such as ammonium nitrate, diesel and spare parts contributing to a
higher than target AISC of US$1,091. The Company was able to partially
mitigate these risks through the bulk purchase of most supply chain items.
Despite these challenges, we were able to demonstrate operational efficiency,
resulting in positive cash flows and annual operating profit of US$40 million
and net profit of US$25.4 million.
Gold Production
During the year ended December 31, 2022 the Segilola Mine produced 98,006
ounces of gold doré (2021: 9,888 ounces).
The Company exported gold regularly throughout the year selling 92,489 ounces
of gold and 5,329 ounces of silver in the year and had a further gold dore
inventory of 1,884 ounces and gold in circuit of 1,031 ounces on hand. These
ounces have all been sold in the first quarter of 2023.
Mining
During the year ended December 31, 2022, 16,106,033 tonnes of material were
mined, equivalent to mining rates of 43,956 tonnes of material per day. In
this period, 1,057,996 tonnes of ore were mined, equivalent to mining rates of
2,890 tonnes of ore per day, at an average grade of 3.56g/t.
Processing
During the year ended December 31, 2022, a total of 929,760 tonnes of ore,
equivalent to a throughput rate of 2,719 tonnes per day, were processed.
The mill feed grade was 3.45g/t gold and recovery was 95.12% for a total of
98,006 ounces of gold doré produced. We continue to review the process plant
to optimize throughput and recoveries.
All of the main operating units of the process plant are performing as
expected, and the plant is consistently operating above nameplate capacity. We
continue to carry out further optimization activities for the gold recovery
process.
Table 2.2: Production Metrics
Units FY 2022 FY 2021
Mining
Total Ore Mined Tonnes 1,057,996 309,641
Ore Processed Tonnes 929,760 145,999
Waste Mined Tonnes 15,048,436 6,179,443
Total Mined Tonnes 16,106,033 6,489,014
Total Ore Mined Gold Grade g/t Au 3.56 2.47
Ore Processed g/t Au 3.45 2.65
Processing
Ore Milled Tonnes 929,760 145,999
Daily Throughput Rate (average) Tpd 2,719 86
Daily Throughput/ Nameplate % 136.34 96.64
Capacity
Ore Processed Gold Grade
Recovery % 95.12 83.90
Gold doré Recovered Oz 98,006 9,888
NON-IFRS MEASURES
This MD&A refers to certain financial measures, such as average realized
gold price, cash operating costs, all-in sustaining costs ("AISC"), net debt
and earnings before interest, taxes, depreciation and amortisation ("EBITDA")
which are not recognized under IFRS and do not have a standardized meaning
prescribed by IFRS. These measures may differ from those made by other
companies and accordingly may not be comparable to such measures as reported
by other companies. These measures have been derived from the Company's
financial statements because the Company believes that, with the achievement
of gold production, they are of assistance in the understanding of the results
of operations and its financial position.
Average realised gold price per ounce sold
The Company believes that, in addition to conventional measures prepared in
accordance with GAAP, the average realised gold price, which takes into
account the impact of gain/losses on forward sale of commodity contracts, is a
metric used to better understand the gold price realised during a period.
Management believes that reflecting the impact of these contracts on the
Group's realised gold price is a relevant measure and increases the
consistency of this calculation with our peer companies.
In addition to the above, in calculating the realised gold price, management
has adjusted the revenues as disclosed in the consolidated financial statement
to exclude by product revenue, relating to silver revenue, and has reflected
the by product revenue as a credit to cash operating costs. The revenues as
disclosed in the consolidated financial statements have been reconciled to the
gold revenue for all periods presented.
Table 3.1: Average annual realised price per ounce sold
Units Year Ended December 31, 2022 Year Ended December 31, 2021
Revenues $ 165,174,531 6,049,485
By product revenue $ (114,211) (3,727)
Gold Revenue $ 165,060,320 6,045,758
Gain/(Loss) on forward sale of commodity contracts $ (1,587,524)
(43,295)
Gold Revenue $ 163,472,796 6,002,463
Gold ounces sold oz Au 92,489 3,425
Average realised price per ounce sold $ 1,767 1,753
Cash operating cost per ounce
Cash operating cost per oz sold, combined with revenues, can be used to
evaluate the Company's performance and ability to generate operating income
and cash flow from operating activities. The Company believes that, in
addition to conventional measures prepared in accordance with GAAP, certain
investors may find this information useful to evaluate the costs of production
per ounce.
By product revenues are included as a credit to cash operating costs.
Table 3.2: Average annual cash operating cost per ounce of gold
Year Ended December 31, 2022
Production costs $ 68,907,249
Transportation and refining $ 3,419,333
Royalties $ 3,696,527
By product revenue $ (114,211)
Cash Operating costs $ 75,908,898
Gold ounces sold recognised in income statement Oz Au 92,489
Cash operating cost per ounce sold $/oz 821
All-in sustaining cost per ounce
AISC provides information on the total cost associated with producing gold.
The Company calculates AISC as the sum of total cash operating costs (as
described above), other administration expenses and sustaining capital, all
divided by the gold ounces sold to arrive at a per oz amount.
Other administration expenses includes administration expenses directly
attributable to the Segilola Gold Mine plus a percentage of corporate
administration costs allocated to supporting the operations of the Segilola
Gold Mine. For the year ended December 31, 2022, this was deemed to be 50%.
Other companies may calculate this measure differently as a result of
differences in underlying principles and policies applied.
Table 3.3: Average annual all-in sustaining cost per ounce of gold
Year Ended December 31, 2022
Cash operating costs(1) $ 75,908,898
Adjusted other administration expenses(2) $ 14,042,505
Sustaining capital(3) $ 10,917,636
Total all-in sustaining cost $ 100,869,039
Gold ounces sold Oz Au 92,489
All-in sustaining cost per ounce sold $/oz 1,091
1 Refer to Table - 3.2 Cash operating costs.
2 Exclude expenses not related to the Segilola mine
3 Refer to Table - 3.3a Sustaining and Non-Sustaining Capital
The Company's all-in sustaining costs include sustaining capital expenditures
which management has defined as those capital expenditures related to
producing and selling gold from its on-going mine operations. Non-sustaining
capital is capital expenditure related to major projects or expansions at
existing operations where management believes that these projects will
materially benefit the operations. The distinction between sustaining and
non-sustaining capital is based on the Company's policies and refers to the
definitions set out by the World Gold Council.
This non-GAAP measure provides investors with transparency regarding the
capital costs required to support the on-going operations at its operating
mine, relative to its total capital expenditures. Readers should be aware that
these measures do not have a standardised meaning. It is intended to provide
additional information and should not be considered in isolation, or as a
substitute for measures of performance prepared in accordance with IFRS.
Table 3.3a: Sustaining and Non-Sustaining Capital
Year Ended December 31, 2022
Property, plant and equipment additions during the year $ 24,757,723
Non-sustaining capital expenditures(1) $ (18,722,873)
Payment for sustaining leases $ 4,882,786
Sustaining capital $ 10,917,636
(( 1 )) Includes EPC and other construction costs for the Segilola Mine.
Net Debt
Net debt is calculated as total debt adjusted for unamortized deferred
financing charges less cash and cash equivalents and short-term investments at
the end of the reporting period. This measure is used by management to measure
the Company's debt leverage. The Company considers that in addition to
conventional measures prepared in accordance with IFRS, net debt is useful to
evaluate the Company's performance.
Table 3.4: Net Debt
Year Ended December 31, 2022 Year Ended December 31, 2021
Loans from the Africa Finance Corporation $ 24,459,939 46,859,966
Due to EPC contractor $ 10,196,105 13,762,221
Deferred element of EPC contract $ 3,682,715 6,210,067
Less:
Cash (6,688,037) (1,276,270)
Net Debt $ 31,650,722 65,555,564
Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA)
EBITDA is calculated as the total earnings before interest, taxes,
depreciation and amortisation. This measure helps management assess the
operating performance of each operating unit.
Table 3.5: Earnings Before Interest, Tax, Depreciation and Amortization
(EBITDA)
Year Ended December 31, 2022
Net profit/(loss) for the period $ 25,398,941
Amortisation and depreciation - owned assets $ 26,928,156
Amortisation and depreciation - right of use assets $ 4,724,101
Impairment of Exploration & Evaluation assets $ 12,014
Interest expense $ 14,616,810
EBITDA $ 71,680,022
Gold ounces sold Oz Au 92,489
EBITDA per ounce sold $/oz 775
OUTLOOK AND UPCOMING MILESTONES
This Section 5 of the MD&A contains forward looking information as defined
by National Instrument 51-102. Refer to Section 16 of this MD&A for
further information on forward looking statements.
We are focussed on advancing the Company's strategic objectives and near-term
milestones which include:
2023 Operational Guidance and Outlook
Gold Production Oz 85,000-95,000
All-in Sustaining Cost ("AISC") US$/oz Au sold 1,150 - 1,250
Capital Expenditure US$ 8,000,000 - 10,000,000
Exploration Expenditure:
Nigeria(1) US$ 4,200,000
Senegal US$ 3,000,000
1 This includes purchase of licenses
· The critical factors that influence whether Segilola can achieve
these targets include:
o Segilola's ability to maintain an adequate supply of consumables (in
particular ammonium nitrate, flux and cyanide) and equipment.
o Fluctuations in the price of key consumables, in particular ammonium
nitrate, and diesel
o Segilola's workforce remaining healthy
o Continuing to receive full and on-time payment for gold sales
o Continuing to be able to make local and international payments in the
ordinary course of business
· Continue to advance the Douta project towards preliminary
feasibility study ("PFS")
· Continue to advance exploration programmes across the portfolio:
o Segilola near mine exploration
o Segilola underground project
o Segilola regional exploration programme
o Douta extension programme
o Douta infill programme
o Assess regional potential targets in Nigeria
SUMMARY OF QUARTERLY RESULTS
The table below sets forth selected results of operations for the Company's
eight most recently completed quarters.
Table 6.1: Summary of quarterly results
$ 2022 Q4 2022 Q3 2022 Q2 2022 Q1
Dec 31 Sep 30 Jun 30 Mar 31
Revenues 43,251,204 55,703,098 41,354,747 24,865,482
Net profit for period 14,908,460 4,126,066 6,163,942 200,473
Basic profit per share (cents) 2.21 0.65 0.01 0.00
$ 2021 Q4 2021 Q3 2021 Q2 2021 Q1
Dec 31 Sep 30 Jun 30 Mar 31
Revenues 6,049,485 - - -
Net profit/(loss) for period 3,116,416 463,844 (5,582,090) (67,365)
Basic profit/(loss) per share (cents) 0.47 0.07 (0.87) (0.01)
The Company reported a net profit of $14,908,460 (2.21 cents per share) for
the three month period ended December 31, 2022, as compared to a net profit of
$3,116,416 (0.47 cents per share) for the year ended December 31, 2021. The
increase in profit for the period was largely due to:
sales during the period of $43,251,204 (Q4 2021: $6,049,485)
These were offset partially by:
Amortisation and depreciation of $12,250,612 (Q4 2021: $15,720); and
Interest of $3,265,120 (Q4 2021: $16,713)
No interest was earned during the three months period ended December 31, 2022,
and 2021.
SELECTED ANNUAL FINANCIAL INFORMATION
The review of the results of operations should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto.
For the year ended December 31 2022 December 31 2021 December 31 2020
Total revenues $ 165,174,531 6,049,485 -
Net profit/(loss) $ 25,398,941 (2,069,195) (2,886,145)
Profit/(loss) per share (cents)
Basic 3.81 (0.33) (0.52)
Diluted 3.86 (0.33) (0.52)
Total assets $ 223,251,813 212,238,762 111,596,899
Total non-current liabilities $ 57,663,580 63,406,824 36,530,000
Table 7.1: Selected annual information
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2022 and 2021
The Company reported a net profit of $25,398,941 (3.86 cents per share) for
the year ended December 31, 2022, as compared to a net loss of $2,069,195
(0.33 cents per share) for the year ended December 31, 2021. The move to
profit for the year was largely due to:
· Sales during the year of $165,174,531 (2021: $6,049,485)
These were offset partially by:
· Amortisation and depreciation of $31,652,257 (2021: $106,191);
and
· Interest of $14,616,810 (2021: $64,877)
No interest was earned during the year ended December 31, 2022, and 2021.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2022, the Company had cash of $6,688,037 (2021: $1,276,270)
and 1,884 ounces of gold dore in inventory to be sold (2021: 6,626 ounces),
and a working capital deficit of $29,116,915 (2021: deficit of $45,542,373).
The increase in cash from December 31, 2021 is due mainly to gold sales
revenue of $165,174,531, offset by instalment payments on the loan facility of
$28,865,778, the purchase of property plant and equipment of $26,754,964 and
operational costs and corporate overheads of $91,906,985. This cash
expenditure was financed by operational cashflow and existing cash balances.
The total EPC amount has been finalized with our EPC contractor, and we have
paid all outstanding EPC payments at the date of this report.
Working Capital Calculation
The Working Capital Calculation excludes $10,187,630 (2021: $12,837,633) of
gold stream liabilities, and $2,215,585 (2021: $7,115,207) in third party
royalties included in current accounts payable, that are contingent upon the
achievement of the revised gold sales forecast of 85,000 to 95,000 ounces for
the year ending December 31, 2023.
Included in working capital, in accounts payable and accrued liabilities, is a
balance of $10,196,105 (2021: $13,762,221) due to our EPC contractors. As of
the date of this report, the Company has made all outstanding due payments in
relation to the EPC contract.
Table 8.1: Working Capital
December 31, 2022 December 31, 2021
Current Assets
Cash and Restricted Cash $ 6,688,037 4,772,262
Inventory $ 19,901,262 18,146,558
Amounts receivable, prepaid expenses, advances and deposits $ 10,697,365 824,516
Total Current Assets for Working Capital $ 37,286,664 23,743,336
Current Liabilities
Accounts Payable and accrued liabilities $ 56,337,289 43,567,750
Deferred Income 6,581,743 -
Lease Liabilities $ 4,811,991 4,849,088
Gold Stream Liability $ 10,187,630 12,837,633
Loan and other borrowings $ 888,141 27,984,078
$ 78,806,794 89,238,549
less: Current Liabilities contingent upon future gold sales $ (12,403,215) (19,952,840)
Working Capital Deficit $ (29,116,915) (45,542,373)
Inventory
Gold inventory is recognised in the ore stockpiles and in production
inventory, comprised principally of ore stockpile and doré at site or in
transit to the refinery, with a component of gold-in-circuit.
Table 8.2: Inventory
December 31 2022 December 31 2021
Plant spares and consumables $ 4,751,922 1,337,792
Gold ore in stockpile $ 11,869,168 8,663,728
Gold in circuit $ 1,160,237 1,614,267
Gold dore (1) $ 2,119,935 6,530,771
$ 19,901,262 18,146,558
1:Gold dore is valued at cost ($1,125/oz), which comprises production cost,
depreciation and amortisation.
Liquidity and Capital Resources
The Company has generated strong operating cash flow during Q4 2022 and the
year ended December 31, 2022 and expects to continue to do so based on its
production and AISC guidance. This strong operating cash flow will support
debt repayments, regional exploration and underground expansion drilling at
Segilola, planned capital expenditures and corporate overhead costs.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Group's financial instruments consist of cash, restricted cash, amounts
receivable, accounts payable, accrued liabilities, gold stream liability,
loans and other borrowings and lease liabilities.
Fair value of financial assets and liabilities
Fair values have been determined for measurement and/or disclosure purposes.
When applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.
The carrying amount for cash, restricted cash, amounts receivable, and
accounts payable, accrued liabilities, loans and borrowings and lease
liabilities on the statement of financial position approximate their fair
value because of the limited term of these instruments.
Financial risk management objectives and policies
The Group has exposure to the following risks from its use of financial
instruments
· Interest rate risk
· Credit risk
· Liquidity and funding risk
· Market risk
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these consolidated financial statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous years unless otherwise
stated in these notes.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Company'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:
Table 9.3: Financial instruments by category
December 31, 2022 December 31, 2021
Measured at amortised cost Measured at fair value through profit and loss Total Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 6,688,037 - 6,688,037 1,276,270 - 1,276,270
Restricted cash $ - - - 3,495,992 3,495,992
Amounts receivable $ 220,442 - 220,442 237,651 - 237,651
Total assets $ 6,908,479 - 6,908,479 5,009,913 - 5,009,913
Liabilities
Accounts payable and accrued liabilities $ 54,121,704 2,215,585 56,337,289 38,024,962 7,106,979 45,131,941
Loans and borrowings $ 28,142,654 - 28,142,654 53,738,603 - 53,738,603
Gold stream liability $ - 25,039,765 25,039,765 - 30,262,279 30,262,279
Lease liabilities $ 15,409,285 - 15,409,285 18,274,374 - 18,274,374
Total liabilities $ 97,673,643 27,255,350 124,928,993 110,037,939 37,369,258 147,407,197
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company ensures that there is
sufficient capital in order to meet short-term business requirements, after
taking into account the Company's holdings of cash. The Company's cash is
held in business accounts and are available on demand with the exception of
restricted cash which was only available to be applied against the cost of the
construction of the Segilola Gold Mine until construction is completed, at
which point it then became available on demand.
In the normal course of business, the Company enters into contracts and
performs business activities that give rise to commitments for future minimum
payments.
The following tables summarize the Company's significant remaining contractual
maturities for financial liabilities at December 31, 2022, and December 31,
2021. The tables show projected cashflows including interest payments.
Table 9.4: Contractual maturity analysis
Contractual maturity analysis as at December 31, 2022
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable and accrued liabilities 55,368,069 1,001,983 - - 56,370,052
Lease liabilities 1,255,581 3,766,744 12,681,521 - 17,703,846
Gold Stream Liability 2,986,708 8,475,973 23,420,334 - 34,883,015
Loans and borrowings 1,642,151 4,810,033 33,337,237 - 39,789,421
61,252,509 18,054,733 69,439,092 - 148,746,334
Contractual maturity analysis as at December 31, 2021
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable and accrued liabilities 38,699,814 4,862,676 1,952,408 - 45,514,898
Lease liabilities 1,213,678 3,641,035 16,991,498 - 21,846,211
Gold Stream Liability 2,237,631 10,614,896 33,955,921 46,808,448
Loans and borrowings 1,984,714 26,031,054 32,400,920 - 60,416,688
44,135,837 45,149,661 85,300,747 - 174,586,245
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's income and
operating cash flows will be impacted by changes in market interest rates as
the Group's secured loans from the AFC incurs Interest at SOFR plus 9% (Refer
to Note 12 of the 2022 Audited Financial Statements). The Group's management
monitors the interest rate fluctuations on a continuous basis and assesses the
impact of interest rate fluctuations on the Group's cash position, and acts to
ensure that sufficient cash reserves are maintained in order to meet interest
payment obligations.
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 Group manages the credit risk associated with cash by investing these
funds with highly rated financial institutions, and by monitoring its
concentration of cash held in any one institution. As such, the Group deems
the credit risk on its cash to be low. At 31 December 2022, 93% of the Group's
cash balances were invested in AA rated financial institutions (2021: 93%), 2%
in AA- rated financial institutions (2021: 1%), 1% in A+ rated financial
institutions (2021: 1%) and 4% in B rated institutions (2021: 5%).
The Group sells its gold to large international organisations with strong
credit ratings, and the historical level of customer defaults is minimal. As a
result, the credit risk associated with gold trade receivables at 31 December
2022 is considered to be negligible.
Market risk
The Group is subject to normal market risks including fluctuations in foreign
exchange rates and interest rates. While the Group manages its operations in
order to minimize exposure to these risks, the Group has not entered into any
derivatives or contracts to hedge or otherwise mitigate this exposure.
Foreign currency risk
The Company's primary operations are in Nigeria and Senegal. Revenues
generated and expenditures incurred are primarily denominated in United States
Dollars, as are its loan facilities.
Although the Company does not enter into currency derivative financial
instruments to manage its exposure, the Company tries to manage this risk by
maintaining most of its cash in United States dollars.
DISCLOSURE OF OUTSTANDING SHARE DATA
As at the date of this MD&A, there were 644,696,185 common shares issued
and outstanding stock options to purchase a total of 26,901,000 common shares.
Authorized Common Shares
Table 14.1: Common shares issued
December 31, 2022 December 31, 2021
Common shares issued 644,696,185 632,358,009
Warrants
There were no warrants that were outstanding at December 31, 2022, and as at
the date of this report.
During the quarter ended December 31, 2022, no warrants were issued.
During the year ended December 31, 2018, 44,453,335 warrants were issued to
subscribers as a part of the private placement ("closing options") that closed
on August 31, 2018. These warrants were issued with an exercise price of $0.28
per share with an exercise period of three years from the date of closing. In
addition, the Company issued a total of 1,497,867 broker warrants plus 166,667
broker warrants as an advisory fee, each broker warrant being exercisable for
a common share at C$0.18 for a period of three years from the date the closing
options were issued.
During the three months ended June 30, 2021, 1,664,534 broker warrants were
exercised and converted into common shares at C$0.18 each.
During the three months ended December 31, 2021, 8,287,500 placement warrants
were exercised and converted into common shares at C$0.28 each, and 36,165,835
placement warrants expired during the period ended December 31, 2021.
Stock Options
The number of stock options that were outstanding and the remaining
contractual lives of the options at December 31, 2022, were as follows.
Table 14.2: Options outstanding
Exercise Price Number Weighted Average Remaining Contractual Life Expiry Date
Outstanding
C$0.145 12,111,000 0.19 March 12, 2023
C$0.140 750,000 0.76 October 5, 2023
C$0.200 14,040,000 2.05 January 16, 2025
Total 26,901,000
The Company has granted employees, consultants, directors and officers share
purchase options. These options were granted pursuant to the Company's stock
option plan.
No options were issued during the year ended December 31, 2022, and a total of
9,250,000 options were exercised at a price of C$0.12 each and 689,000 at a
price of C$0.145.
Under the Company's Omnibus Incentive Plan approved by shareholder on December
17, 2021, 44,900,000 common shares of the Company are reserved for issuance
upon exercise of options or other securities.
During the year ended December 31, 2022, 2,399,176 Restricted Share Units
("RSUs") were granted to members of Executive Management under the Company's
Long Term Incentive Plan ("LTIP").
In April 2023, the Board resolved to extend the expiry date of 12,111,111
shares with exercise price of C$0.145 past its original expiry date of March
12, 2023 up until June 15, 2023.
Audited Financial Results for the Year Ended 31 December 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In United States dollars
December 31, December 31, January 1,
Note 2022 2021 2021
$ $ $
(restated) (restated)
ASSETS
Current assets
Cash 6,688,037 1,276,270 22,181,737
Restricted cash 6 - 3,495,992 3,500,555
Inventory 7 19,901,262 18,146,558 -
Amounts receivable 8 220,442 237,651 44,506
Prepaid expenses, advances and deposits 9 10,476,923 586,865 433,796
Total current assets 37,286,664 23,743,336 26,160,594
Non-current assets
Deferred income tax assets 87,797 86,795 36,628
Prepaid expenses, advances and deposits 9 282,825 105,683 153,273
Right-of-use assets 10 16,849,402 20,843,612 69,066
Property, plant and equipment 15 149,513,917 152,113,917 72,079,922
Intangible assets 16 19,231,208 15,345,419 13,097,416
Total non-current assets 185,965,149 188,495,426 85,436,305
TOTAL ASSETS 223,251,813 212,238,762 111,596,899
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 17 56,337,289 43,567,750 8,555,799
Deferred income 18 6,581,743 - -
Lease liabilities 10 4,811,991 4,849,088 30,648
Gold stream liability 11 10,187,630 12,837,633 4,812,872
Loans and other borrowings 12 888,141 27,984,078 53,590
Total current liabilities 78,806,794 89,238,549 13,452,909
Non-current liabilities
Accounts payable and accrued liabilities 17 - 1,564,191 -
Lease liabilities 10 10,597,294 13,425,286 -
Gold stream liability 11 14,852,135 17,424,646 19,895,701
Loans and other borrowings 12 27,254,513 25,754,525 16,147,799
Provisions 14 4,959,638 5,238,176 486,500
Total non-current liabilities 57,663,580 63,406,824 36,530,000
SHAREHOLDERS' EQUITY
Common shares 19 80,439,693 79,027,183 76,858,769
Share purchase warrants - - 375,895
Option reserve 19 3,351,133 4,513,900 4,626,427
Currency translation reserve (2,512,911) (2,889,510) (769,690)
Retained earnings 5,503,524 (21,058,184) (19,477,411)
Total shareholders' equity 86,781,439 59,593,389 61,613,990
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 223,251,813 212,238,762 111,596,899
These consolidated financial statements were approved for issue by the
Board of Directors on May 1, 2023, 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.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
In United States dollars
2022 2021
Note $ $
Continuing operations (restated)
Revenue 165,174,531 6,049,485
Production costs 5 (68,907,249) (3,907,825)
Transportation and refining 5 (3,419,333) (50,985)
Royalties 5 (3,696,527) (108,258)
Amortisation and depreciation of operational assets - owned assets 5 (25,673,590) -
Amortisation and depreciation of operational assets - right of use assets 5 (4,638,775) -
Cost of sales (106,335,474) (4,067,068)
Loss on forward sale of commodity contracts (1,587,524) (43,295)
Gross profit (loss) from operations 57,251,533 1,939,122
Amortisation and depreciation - owned assets 5 (1,254,566) (65,018)
Amortisation and depreciation - right of use assets 5 (85,326) (41,173)
Other administration expenses 5 (15,883,876) (3,294,820)
Impairment of Exploration & Evaluation assets 16 (12,014) (99,059)
Profit (loss) from operations 40,015,751 (1,560,948)
Interest expense 5 (14,616,810) (64,877)
Foreign exchange - gain/(loss) - 881,069
AIM listing costs - (1,377,261)
Net profit (loss) before income taxes 25,398,941 (2,122,017)
Income Tax 5 - 52,822
Net profit (loss) for the year 25,398,941 (2,069,195)
Attributable to:
Equity shareholders of the Company 25,398,941 (2,069,195)
Net profit (loss) for the period 25,398,941 (2,069,195)
Other comprehensive profit (loss)
Foreign currency translation profit (loss) attributed to 376,599 (2,119,820)
equity shareholders of the company
Total comprehensive income profit (loss) for the period 25,775,540 (4,189,015)
Net profit (loss) per share
Basic 20 $ 0.040 $ (0.003)
Diluted 20 $ 0.039 $ (0.003)
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
In United States dollars
Note 2022 2021
(restated)
Cash flows from/(used in):
Operating activities
Net profit / (loss) $ 25,398,941 $ (2,069,195)
Adjustments for: -
Impairment of unproven mineral interest 16 12,014 99,059
Share-based compensation 451,964 -
Amortisation and depreciation 5 31,652,256 106,191
Loss on forward sale commodity contracts 1,587,524 43,295
Unrealized Foreign exchange (gains)/losses 5 1,633,496 1,282,492
Interest expense 5 14,616,810 64,877
Income tax - (52,822)
75,353,005 (526,103)
Changes in non-cash working capital accounts
Inventory 7 (1,754,704) (18,510,206)
Receivables 8 17,209 (42,131)
Current prepaid expenses, advances and deposits (10,095,887) (346,917)
Non-current prepaid expenses, advances and deposits (177,142) (17,139)
Accounts payable and accrued liabilities 17 14,464,283 1,274,316
Deferred income 18 6,581,743 -
Net cash flows from/(used in) operating activities 84,388,507 (18,168,180)
Investing
Restricted cash 6 3,495,992 812
Purchase of intangible assets 16 (43,599) (175,423)
Assets under construction expenditures 15 (1,884,352) (27,546,130)
Mobilisation of mining fleet 10 - (2,785,055)
Property, Plant & Equipment 15 (26,754,964) (2,086,123)
Exploration & Evaluation assets expenditures 16 (5,366,778) (2,741,758)
Net cash flows used in investing activities (30,553,701) (35,333,677)
Financing
Proceeds from issuance of equity securities - 2,039,790
Borrowing costs paid - (510,838)
Share subscriptions received 19 960,546 -
(Repayment of) / Proceeds from loans and borrowings 13 (39,864,224) 31,178,558
Interest paid 13 (4,645,014) (65,602)
Payment of lease liabilities 10 (4,882,786) (2,811,315)
Net cash flows (used in)/from financing activities (48,431,478) 29,830,593
Effect of exchange rates on cash 8,439 2,765,797
Net change in cash $ 5,411,767 $ (20,905,467)
Cash, beginning of the period $ 1,276,270 $ 22,181,737
Cash, end of the period $ 6,688,037 $ 1,276,270
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
In United States dollars
Note Common shares Share purchase warrants Option reserve Currency translation reserve (Deficit)/ Retained earnings Total shareholders' equity
Balance on December 31, 2020 (restated) $ 76,858,769 $ 375,895 $ 4,626,427 $ (769,690) $ (19,477,411) $ 61,613,990
Net loss for the year - - - - (2,069,195) (2,069,195)
Other comprehensive loss - - - (2,119,820) - (2,119,820)
Total comprehensive loss for the year - - - (2,119,820) (2,069,195) (4,189,015)
Reinstatement of warrants 19 - 45,899 - - (45,899) -
Exercise of warrants 19 2,073,451 (421,794) - - 421,794 2,073,451
Options exercised 19 94,963 - (112,527) - 112,527 94,963
Balance on December 31, 2021 (restated) $ 79,027,183 $ - $ 4,513,900 $ (2,889,510) $ (21,058,184) $ 59,593,389
Net profit for the period - - - - 25,398,941 25,398,941
Other comprehensive income - - - 376,599 - 376,599
Total comprehensive loss for the year - - - 376,599 25,398,941 25,775,540
Options exercised 19 1,412,510 - (1,162,767) - 1,162,767 1,412,510
Balance on December 31, 2022 $ 80,439,693 $ - $ 3,351,133 $ (2,512,911) $ 5,503,524 $ 86,781,439
Notes to the Audited Financial Statements
1. CORPORATE INFORMATION
Thor Explorations Ltd. (the "Company"), together with its subsidiaries
(collectively, "Thor" or the "Group") is a West African focused gold producer
and explorer, dually listed on the TSX-Venture Exchange (THX.V) and AIM Market
of the London Stock Exchange (THX.L).
The Company was formed in 1968 and is organised under the Business
Corporations Act (https://www.lawinsider.com/clause/business-corporations-act)
(British Columbia (https://www.lawinsider.com/clause/british-columbia) )
(BCBCA) with its registered office at 550 Burrard St, Suite 2900 Vancouver,
BC, CA, V6C 0A3. The Company evolved into its current form in August 2011
following a reverse takeover and completed the transformational acquisition of
its flagship Segilola Gold Project in Nigeria in August 2016.
2. BASIS OF PREPARATION
a) Statement of compliance
These consolidated financial statements, including comparatives, have been
prepared using accounting policies consistent with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board.
b) Basis of measurement
The consolidated financial statements are presented in United States dollars
("US$"). Prior years consolidated financials have been previously presented in
Canadian dollars ("C$") refer to note 3 (c) for further details on the change
of presentational currency.
These consolidated financial statements have been prepared on a historical
cost basis and are presented in United States dollars, except for the
valuation of certain financial instruments that are measured at fair value at
the end of each reporting period as explained in the accounting policies
below.
The preparation of financial statements in compliance with IFRS requires
management to make certain critical accounting estimates. It also requires
management to exercise judgement in applying the Group'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
judgement. Actual results may differ from these estimates. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements are discussed in Note 4.
c) Nature of operations and going concern
As at December 31, 2022, the Group had cash of $6,688,037 and inventory of
1,884 ounces of gold dore. During the year ended December 31, 2022, the Group
sold 92,489 ounces of gold, in line with Management's production targets of
90,000 to 100,000 ounces for the year which yielded net cash flow to the Group
of $84,388,507.
The Board has reviewed the detailed cash flow forecast prepared by management,
for the twelve-month period from the date of this report. The Directors have a
reasonable expectation that the Group will have adequate resources to continue
in operational existence for at least the next twelve months and that, as at
the date of this report, there are no material uncertainties regarding going
concern.
Key assumptions underpinning this forecast in addition to estimated production
of 85,000 - 95,000 ounces of gold for 2023 include consensus analyst gold
prices (between $1,800 per ounce and $2,050 per ounce), reduced debt servicing
requirements following the amendments noted below, effective cost control of
key production elements, production volumes in line with annual guidance and
continuing support from our EPC contractor allowing the group to settle
balances by Q2 2023. This is considered to be the Group's base case scenario
which demonstrates the Group has sufficient cash and working capital to
continue operations for a period of no less than twelve months from the date
of approval of these financial statements.
In January 2023, post year end, the Group entered into an agreement with the
AFC amending the terms of its senior debt facility. Certain covenants and
restrictions were released, and the payment timetable re-scheduled to
reallocate a higher percentage of the repayments to a later period in the
Facility's term. The updated agreement provides the Group with increased
cashflow in the shorter term and less covenant and default provisions
requiring assessment. For the purpose of the going concern review period the
updated covenants and default provisions were reviewed with no cases of
potential breach noted.
The Directors have also considered various scenarios that may impact cashflow
including adverse changes in gold price (down to $1,600 per ounce),
inflationary pressures on key cost elements (up to 5%), and adverse positions
regarding the Facility covenants. The Directors are satisfied that these
stress test scenarios have appropriate planned mitigating actions, which will
be sufficient to maintain the Groups going concern status if in the unlikely
event any of these eventualities occurred.
The Directors are therefore satisfied that the going concern basis of
accounting is an appropriate assumption to adopt in the preparation of the
consolidated financial statements as at December 31, 2022.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies described below have been applied consistently to all
periods presented in these consolidated financial statements unless otherwise
stated.
a) Consolidation principles
Assets, liabilities, revenues and expenses of the subsidiaries are recognized
in accordance with the Group's accounting policies. Intercompany transactions
and balances are eliminated upon consolidation.
b) Details of the group
In addition to the Company, these consolidated financial statements include
all subsidiaries of the Company. Subsidiaries are all corporations over which
the Company has power over the Subsidiary and it is exposed to variable
returns from the Subsidiary and it has the ability to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control. The
consolidated financial statements present the results of the Company and its
subsidiaries 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 September 30, 2011 100%
African Star Resources Incorporated ("African Star") British Virgin Islands September 30, 2011 100%
Segilola Resources Incorporated ("SR BVI") British Virgin Islands March 10, 2020 100%
Thor Gold Ventures Ltd ("Thor GV") United Kingdom February 11, 2022 100%
African Star Resources SARL ("African Star SARL") Senegal July 14, 2011 100%
Argento Exploration BF SARL Burkina Faso September 15, 2010 100%
("Argento BF SARL")
AFC Constelor Panafrican Resources SARL ("AFC Constelor SARL") Burkina Faso December 9, 2011 100%
Segilola Resources Operating Limited Nigeria August 18, 2016 100%
("SROL")
Segilola Gold Limited ("SGL") Nigeria August 18, 2016 100%
Newstar Minerals Limited ("Newstar") Nigeria July 5, 2022 100%
The only changes to ownership interest from the previous year was the
incorporation of Thor Gold Ventures Ltd in February 2022 and Newstar Minerals
Limited in July 2022.
c) Foreign currency translation
Functional and presentation currency
The Company's functional and presentation currency is the United States dollar
("$"). The functional currency for the Company is the currency of the primary
economic environment in which the Company operates. The individual financial
statements of each of the Company's wholly owned subsidiaries are prepared in
the currency of the primary economic environment in which it operates (its
functional currency). The Company has changed its presentation currency from
Canadian Dollars to US Dollars as detailed in note 26.
During the year management has assessed the functional currency of the Company
and its subsidiary SROL and concluded that from January 1, 2022 the functional
currency of both entities changed to the US dollar from the Canadian dollar
and Nigerian Naira, respectively. The assessment for the change in functional
currency is detailed in note 4.b.iii.
Exchange rates published by Oanda were used to translate the Thor GV, Thor
BVI, African Star, SR BVI, African Star SARL, Argento BF SARL, AFC Constelor
SARL and SGL's financial statements into the United States dollar in
accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This
standard requires, on consolidation, that assets and liabilities be translated
using the exchange rate at period end, and income, expenses and cash flow
items are translated using the rate that approximates the exchange rates at
the dates of the transactions (i.e., the average rate for the period). The
foreign exchange differences on translation of subsidiaries Thor GV, Thor BVI,
African Star, SR BVI, African Star SARL, Argento BF SARL, AFC Constelor SARL,
SGL and Newstar are recognized in other comprehensive income (loss). Exchange
differences arising on the net investment in subsidiaries are recognised in
other comprehensive income.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing on the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit and
loss. Fluctuations in the value of the local currencies of our subsidiaries,
with most notably the US dollar will result in foreign exchange gains and
losses as assets and liabilities denominated in US dollar are revalued in the
Subsidiary's local currency at reporting dates.
d) Financial instruments
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and out-of-money derivatives
where the time value offsets the negative intrinsic value (see "Financial
liabilities" section for out-of-money derivatives classified as liabilities).
They are carried in the statement of financial position at fair value with
changes in fair value recognised in the consolidated statement of
comprehensive income in the finance income or expense line. Other than
derivative financial instruments which are not designated as hedging
instruments, the Group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value through
profit or loss.
Amortised cost
These assets arise principally from the provision of goods and services to
customers (e.g., trade receivables), 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.
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised in profit or loss. On confirmation that the trade receivable will
not be collectable, the gross carrying value of the asset is written off
against the associated provision.
The Group's financial assets measured at amortised cost comprise cash,
restricted cash, amounts receivable as well as prepaid expenses, advances and
deposits in the consolidated statement of financial position. Cash includes
cash in hand, deposits held at call with banks, other short term highly liquid
investments with original maturities of three months or less, and - for the
purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are
shown within loans and borrowings in current liabilities on the consolidated
statement of financial position.
Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises out-of-the-money derivatives where the time value does
not offset the negative intrinsic value (see "Financial assets" for
in-the-money derivatives and out-of-money derivatives where the time value
offsets the negative intrinsic value). They are carried in the consolidated
statement of financial position at fair value with changes in fair value
recognised in the consolidated statement of comprehensive income. The Group
does not hold or issue derivative instruments for speculative purposes, but
for hedging purposes. Other than these derivative financial instruments, the
Group does not have any liabilities held for trading nor has it designated any
financial liabilities as being at fair value through profit or loss.
Other financial liabilities
Other financial liabilities include the following items:
Borrowings are initially recognised at fair value net of any transaction costs
directly attributable to the issue of the instrument. Such interest bearing
liabilities are subsequently measured at amortised cost using the effective
interest rate method, which ensures that any interest expense over the period
to repayment is at a constant rate on the balance of the liability carried in
the consolidated statement of financial position. For the purposes of each
financial liability, interest expense includes initial transaction costs and
any premium payable on redemption, as well as any interest or coupon payable
while the liability is outstanding.
Accounts payable and other short-term monetary liabilities are initially
recognised at fair value and are subsequently carried at amortised cost using
the effective interest method.
Fair Value measurement hierarchy
IFRS 13 "Fair Value Measurement" requires certain disclosures which require
the classification of financial assets and financial liabilities measured at
fair value using a fair value hierarchy that reflects the significance of the
input used in making the fair value measurement.
The fair value hierarchy has the following levels:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1);
· Input other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived prices (level 2); and,
· Inputs for the asset or liability that are not based on observable
market data (unobservable input) (level 3).
The level in the fair value hierarchy within which the financial asset or
financial liability is categorized is determined on the basis of the lowest
level input that is significant to the fair value measurement. Financial
assets and financial liabilities are classified in their entirety into only
one of the three levels.
Gold Stream arrangement
On April 29, 2020, the Group announced the completion of financing
requirements for the development of the Segilola Gold Project in Nigeria. The
financing included a $21 million gold stream prepayment pursuant to a Gold
Stream Arrangement ("GSA") entered into with the Africa Finance Corporation
("AFC").
Under the terms of the GSA an advance payment of $21 million was received.
Upon the commencement of production at Segilola the AFC had the right to
receive 10.27% of gold produced from the Group's ML41 mining license. Once the
initial liability has been repaid in full any further gold production will be
delivered under the terms of the GSA up to the money multiple limit of 2.25
times the initial advance. The total maximum amount payable to the AFC under
this agreement is $47.25m including the repayment of the initial US$21 million
advance. The advanced payment has been recorded as a contract liability based
on the facts and terms of the arrangement and own use exemptions
considerations.
The maximum $26.25 million payable after the initial $21 million has been
settled has been identified as a significant financing component. The deemed
interest rate is calculated at inception, using the production plan and gold
price estimates and released over the term of the arrangement as interest
expense in the income statement upon commencement of production. The deemed
interest rate is recalculated at each reporting period and restated based on
changes to the expected production profile and gold price estimates.
Revenue from the streaming arrangement was recognised under IFRS 15 when the
customer obtained control of the gold and the Group satisfied its performance
obligations. The revenue recognised reduced the contract liability balance.
In December 2021, the Group entered into a cash settlement agreement with the
AFC where the gold sold to the AFC is settled in a net-cash sum payable to the
AFC instead of delivery of bullion for repayment of the gold stream
arrangement. This agreement triggered a modification to the contract
liability, resulting in the liability to be accounted for in accordance with
IFRS 9 whereby the liability is classified as a financial liability measured
at fair value through profit or loss.
Capitalisation of borrowing costs
Interest on borrowings directly relating to the financing of qualifying
capital projects under construction is
added to the capitalised cost of those projects during the construction phase,
until such time as the assets
are substantially ready for their intended use or sale which, in the case of
mining properties, is when they
are capable of commercial production. Where funds have been borrowed
specifically to finance a project, the amount capitalised represents the
actual borrowing costs incurred. Where the funds used to finance a project
form part of general borrowings, the amount capitalised is calculated using a
weighted average of rates applicable to relevant general borrowings of the
Group during the period. All other borrowing costs are recognised in the
income statement in the period in which they are incurred.
e) Property, plant and equipment
Recognition and Measurement
On initial recognition, property, plant and equipment is valued at cost, being
the purchase price and directly attributable cost of acquisition or
construction required to bring the asset to the location and condition
necessary to be capable of operating in the manner intended by the Group,
including appropriate borrowing costs and the estimated present value of any
future unavoidable costs of dismantling and removing items. The corresponding
liability is recognised within provisions. Property, plant and equipment is
subsequently measured at cost less accumulated depreciation, less any
accumulated impairment losses, with the exception of land which is not
depreciated. When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Subsequent Costs
The cost of replacing part of an item of property, plant and equipment is
recognized in the carrying amount of the item if it is probable that the
future economic benefits embodied within the part will flow to the Group 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.
Stripping costs
Capitalisation of waste stripping requires the Group to make judgements and
estimates in determining the amounts to be capitalised. In open pit mining
operations, it is necessary to incur costs to remove overburden and other mine
waste materials in order to access the ore body ("stripping costs"). During
the development of a mine, stripping costs are capitalised and included in the
carrying amount of the related mining property. During the production phase of
a mine, stripping costs will be recognised as an asset only if the following
conditions are met:
· It is probable that the future economic benefit (improved access
to the ore body) associated with the stripping activity will flow to the
entity.
· The entity can identify the component of the ore body (mining
phases) for which access has been improved.
· The costs relating to the stripping activity associated with that
component can be measured reliably.
Stripping costs incurred and capitalised during the development and production
phase are depleted using the unit-of production method over the reserves and,
in some cases, a portion of resources of the area that directly benefit from
the specific stripping activity. Costs incurred for regular waste removal that
do not give rise to future economic benefits are considered as costs of sales
and included in operating expenses.
Depreciation
Depreciation on property plant & equipment is recognised in profit or loss
except where depreciation is directly attributable to mineral properties owned
by the Group that are classified as either Exploration & Evaluation or
Assets Under Construction ("AUC"). Depreciation in this instance is
capitalised to the value of the mineral property asset (refer to Note 15).
Upon commencement of commercial production, the value of AUC is reclassified
as Mining and Plant assets (together "Mining Property") within Property, Plant
& Equipment. Mining Property is depreciated using the unit of production
method based on proven and probable reserves. Units of production are
significantly affected by resources, exploration potential and production
estimates together with economic factors, commodity prices, foreign currency,
exchange rates, estimates of costs to produce reserves and future capital
expenditure.
Depreciation of Mining and Other Equipment is provided on a straight-line
basis over the estimated useful life of the assets as follows:
Description within Mining and Other Equipment Rate
Motor vehicles 20-33%
Plant and machinery 20-25%
Office furniture 20-33%
Depreciation methods, useful lives and residual values are reviewed at each
financial year-end and adjusted if appropriate.
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.
f) 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 Group, 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 realizable value, are written off to the statement of
comprehensive income (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 Group 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 Group recognizes amounts payable under
a farm-in agreement when the amount is due and when the Group has no
contractual rights to avoid making the payment. The Group 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 Group,
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.
g) 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.
h) 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 Group 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, which 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 Group intends to settle its current tax assets and
liabilities on a net basis. The Group has tax losses for which no deferred tax
asset has been recognised.
i) Revenue recognition
The Group enters into forward sales contracts for the sale of gold at a
pre-determined and agreed price with an agent who remits the cash proceeds to
the Group.
The Group recognises the sale upon delivery at which point control of the
product has been transferred to the Customer. Transfer of control generally
takes place when refined gold is credited to the metals account at the
refinery of the Customer who has sold the gold via forward sale. Revenue is
measured based on the consideration to which the Group expects to be entitled
under the terms of the Agreement with the Customer.
j) Royalties
The Group has royalty payment obligations from production from its Segilola
Gold Mine in Nigeria. A royalty is payable to the Nigerian government at a
rate of 16,218 Nigerian Naira (prior to May 1, 2022: 5,400 Nigerian Naira) per
ounce produced. The royalty is paid before the Dore is exported from Nigeria
for refining. Royalties paid to the Nigerian government are recognised as cost
of sales in the Consolidated Statement of Comprehensive Income/(Loss) at the
point that the gold is exported.
The Group also has royalty obligations to three former owners of the Segilola
Gold Project at rates of between 0.375% to 1.5% on the value of sales. Total
royalties to the former owners ("third party royalties") are capped at $7.5
million. Royalties are calculated using the outturn date as reference point,
whereby the number of ounces outturned are multiplied using the London Bullion
Market Association ("LBMA") p.m. rate on the outturn date to establish a
deemed sales value. The applicable royalty rate for each former owner is
applied to the deemed sales value to determine the royalty payable.
Third party royalties have been assessed to be contingent consideration in the
acquisition of the Segilola Gold Mine and accounted as an asset acquisition.
In accordance with the Group's accounting policy the contingent consideration
has been recognised as a financial liability at the point there was considered
to be certainty over the payment arising (commencement of production). The
discount will be unwound over the estimated time it will take to pay the
entire $7.5 million obligation. The value of the royalties will be depreciated
over the estimated life of the mine, and royalty payments will be applied in
discharge of the financial liability. The financial liability was initially
measured at fair value with subsequent fair value re-measurement to be
recorded in the Consolidated Statement of Comprehensive Income/(Loss).
k) Inventory
Stores and consumables are stated at the lower of cost and net realizable
value. The cost of stores and consumables includes expenditure incurred in
acquiring the inventories and bringing them to their existing location and
condition.
Gold ore stockpiles are valued at the lower of weighted average cost and net
realizable value. Cost includes direct materials, direct labour costs and
production overheads.
Gold bullion and gold in process are stated at the lower of weighted average
cost and net realizable value. Cost includes direct materials, direct labour
costs and production overheads.
l) Basic and diluted income or loss per share
Earnings per share calculations are based on the weighted average number of
common shares issued and outstanding during the period. Diluted earnings per
share is calculated using the treasury stock method, whereby the proceeds from
the exercise of potentially dilutive common shares with exercise prices that
are below the average market price of the underlying shares are assumed to be
used in purchasing the Company's common shares at their average market price
for the period.
m) 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 US dollars upon
consolidation. Movements in the exchange rates of the Canadian Dollar, Pound
Sterling, Nigerian Naira and West African Franc to the US dollar will affect
the size of the comprehensive income (loss).
n) 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.
o) 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 a 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.
p) 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.
q) Interest income
Interest income is recognized as earned, provided that collection is assessed
as being reasonably assured.
r) 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.
s) 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.
t) Application of new and revised International Financial Reporting
Standards
In the current year, the Group has applied a number of amendments to IFRS
Accounting Standards issued by the International Accounting Standards Board
(IASB) that are mandatorily effective for an accounting period that begins on
or after January 1, 2022. Their adoption has not had any material impact on
the disclosures or on the amounts reported in these financial statements.
· Amendments to IFRS 3 Reference to the Conceptual Framework
· Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract
· Annual Improvements to IFRS Accounting Standards 2018-2020 Cycle
The Group elected to early adopt the Amendments to IAS 16 Property, Plant and
Equipment-Proceeds before Intended Use on the consolidated financial
statements for the year ended December 31, 2021.
u) Future accounting pronouncements
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRS Accounting Standards that have been
issued but are not yet effective.
IFRS 17 (including the June 2020 and December 2021 Amendments to IFRS 17) Insurance Contracts
Amendments to IFRS 10 and IAS28 Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies
Amendments to IAS 8 Definition of Accounting Estimates
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
The Directors do not expect that the adoption of the Standards listed above
will have a material impact on the financial statements of the Group in future
periods.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions about the future that affect the
reported amounts of assets and liabilities. Estimates and judgements 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 Group reviewed the terms
of the Gold Sale Agreement and determined that it constituted a commodity
arrangement as it is an arrangement to deliver an amount of the commodity from
the Group's own Segilola Gold Project operation and does not constitute a
contract liability under IFRS 15.
In 2021, the arrangement was modified to allow the Group to settle the Gold
Stream Liability in cash which led to the arrangement being reclassified as a
financial liability.
The principal accounting estimates in calculating the value of the Gold Stream
Liability are production plan, gold price, the implied interest rate and
future repayment profile. The buy-out option contained in the Gold Sale
Agreement has been estimated at nil.
In calculating the deemed interest rate for interest expense that will be
released over the term of the Agreement, estimates of both the production plan
and gold price will be the key variables. The deemed interest rate is
calculated at each reporting period and restated based on changes to the
expected production profile and gold price estimates, which will result in a
revision to estimated future payments. Any change in future payments will
result in a revision of the deemed interest rate.
The period-end Gold Stream obligation uses forward curve information based on
the period-end gold spot price, which was US$1,812 /oz at December 31, 2022. A
5% change in gold production estimates would result in an impact of less than
$0.7 million on the Gold Stream liability.
(ii) Estimated recoverable ounces
The carrying amounts of the Group's mining interests are depleted based on the
estimated recoverable ounces. Changes to estimates of recoverable ounces due
to revisions to the Group's mine plans and changes in gold price forecasts can
result in a change to future depletion rates.
(iii) Mineral reserves
Mineral reserves and mineral resources are determined in accordance with
Canadian Securities Administrator's National Instrument 43-101 Standards of
Disclosure for Mineral Projects. Mineral reserve and resource estimates
include numerous estimates. Such estimation is a subjective process, and the
accuracy of any mineral reserve or resource estimate is dependent on the
quantity and quality of available data and on the assumptions made and
judgements used in engineering and geological interpretation. Changes to
management's assumptions including economic assumptions such as gold prices
and market conditions could have a material effect in the future on the
Group's financial position and results of operations.
(iv) 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 $0.25 million (2021: $0.25 million) on the provision
for environmental and site restoration. The value of the period-end
restoration provision is disclosed within Note 14.
(v) Inventories
Expenditures incurred, and depreciation and amortisation of assets used in
mining and processing activities are deferred and accumulated as the cost of
ore in stockpiles, ore in mill, and finished gold dore inventories. These
deferred amounts are carried at the lower of average cost or net realizable
value.
Their measurement involves the use of estimation to determine the tonnage, the
attainable gold recovery, and the remaining costs of completion to bring
inventory to its saleable form. Changes in these estimates can result in a
change in mine operating costs of future periods and carrying amounts of
inventories.
In determining the net realizable value of ore in stockpiles, ore in mill, and
gold dore the Group estimates future metal selling prices, production
forecasts, realized grades and recoveries, and timing of processing to convert
the inventories into saleable form. Reductions in metal price forecasts,
increases in estimated future production costs, reductions in the number of
recoverable ounces, and a delay in timing of processing can result in a write
down of the carrying amounts of the Group's ore in stockpiles, ore in mill and
gold dore inventories.
b) Critical accounting judgements
Information about critical judgements 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 judgements 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 $12,014 has been charged to the Consolidated Statement of
Comprehensive Loss. There were no impairment indicators present in respect of
any of the other exploration and evaluation assets and, as such, no additional
impairment test was performed.
(ii) Indicators of impairment of property, plant and equipment
The Group considers both internal and external information in its process of
determining whether there are any indicators for impairment of the Segilola
Gold mine. Management considers the following external factors to be relevant:
changes in the market capitalisation of the entity, changes in the long-term
gold price expectations, or changes in the technological, market, economic or
legal environment in which the entity operates, or in the market to which the
asset is dedicated. Management considers the following internal factors to be
relevant: changes in the estimates of recoverable ounces, significant
movements in production costs and variances of actual production costs when
compared to budgeted production costs, production patterns and whether
production is meeting planned budget targets, changes in the level of capital
expenditures required at the mine site, changes in the expected cost of
dismantling assets and restoring the site, particularly towards the end of a
mine's life. Refer to note 15 for details of impairment assessments performed
during the year.
(iii) Functional currency
An analysis of functional currency under IAS 21 was undertaken on the Company
and Segilola Resources Operations Limited ("SROL") in order to determine if
significant changes to operational activities provide indicators that the
functional currency for IFRS purposes should be reviewed and changed. Under
IAS 21 an entity's functional currency reflects the underlying transactions,
events and conditions that are relevant to it. Accordingly, once determined,
the functional currency is not changed unless there is a change in those
underlying transactions, events and conditions.
The principal focus of the analysis was on the continuing applicability of the
Nigerian Naira ("NGN") as the functional and reporting currency for SROL.
Potential indicators of a change in functional currency for SROL were the
commencement of the Mining Contract at Segilola and commencement of gold sales
from Segilola, both denominated in US Dollars. The financial impact of a
change in functional currency of SROL to US dollars was assessed at each of
the dates where potential indicators of a change in functional currency could
be considered to have been determined and it was concluded that a change in
functional currency to US Dollars would best reflect the underlying
transactions, events and conditions that are most relevant to the Company's
operations.
(iv) Commercial production
The Segilola Gold Mine in Nigeria achieved its first gold sales in December
2021, with production starting in October 2021. However, production during Q4
2021 was below operating capacity and not consistent with the mine plan. After
careful consideration Management has determined that mining operations to
December 31, 2021, were not at sustainable commercial levels and that the
correct classification of Segilola was Assets under construction.
Production and recovery rates improved in January 2022 and have remained
consistent with the mine plan during 2022, therefore, Management considered
that commercial production was achieved from January 1, 2022 and has
transferred Segilola`s Assets under construction to Segilola Mine assets and
Processing plant.
5. COST OF SALES
Year Ended
December 31,
2022 2021
Mining contract 37,133,315 1,717,573
Contractors and consultants 1,223,074 56,572
Professional fees 709,376 32,812
Drilling and assays 6,206,210 287,064
Salaries 6,834,866 316,142
Materials and consumables 22,376,335 1,035,000
Drilling operations 382,082 17,673
Maintenance 5,681,735 262,804
Security 1,771,671 81,947
Foreign exchange (gains)/losses on production costs* (15,578,520) -
Other 2,167,105 100,238
Production costs $ 68,907,249 $ 3,907,825
Transportation and refining 3,419,333 50,985
Royalties 3,696,527 108,258
Amortisation and depreciation of operational assets - owned assets 25,673,590 -
Amortisation and depreciation of operational assets - right of use assets 4,638,775 -
Cost of sales 106,335,474 4,067,068
( )
( )
( )
( )
(* The total foreign exchange gain for the current year was $15,578,520, which
comprises of realized foreign exchange gains of $17,212,016 and unrealized
foreign exchange losses of $1,633,496. During the year, SROL purchased its
local currency on a spot basis. The foreign exchange gains and losses from
these trades are generated from the differences between the local currency
values achieved on the trades versus the currency translation rate at the time
of the trade..)
5a. AMORTISATION AND DEPRECIATION
Year Ended
December 31,
2022 2021
Amortisation and depreciation of operational assets - owned assets 25,673,590 -
Amortisation and depreciation of operational assets - right of use assets 4,638,774 -
Amortisation and depreciation - owned assets 1,254,566 65,018
Amortisation and depreciation - right-of-use assets 85,326 41,173
$ 31,652,256 $ 106,191
5b. OTHER ADMINISTRATION EXPENSES
Year Ended
Dece
mber
31,
Note 2022 2021
Audit and legal 463,694 279,944
Bank charges 266,924 204,385
Consulting fees 1,262,943 350,963
Directors fees 21 404,097 358,465
Equipment hire 0 -
Investor relations and transfer agent fees 473,284 246,218
Listing and filing fees 32,362 30,189
Camp costs 4,093,086 -
Near mine exploration 0 -
Office and miscellaneous 3,834,177 372,436
Salaries and benefits 4,261,912 1,285,606
Travel 791,397 166,614
$ 15,883,876 $ 3,294,820
5c. INTEREST EXPENSE
Year Ended
Dece
mber
31,
Note 2022 2021
Interest on loan from the Africa Finance Corporation 12 6,465,751 1,714,041
Interest on deferred element of EPC contract 12 472,811 250,402
Interest on goldstream liability 11 6,311,927 6,562,830
Interest on leases 10 1,052,329 782,088
Interest on provisions 14 108,164 -
Other 205,828
Total Interest 14,616,810 9,309,361
(-) Interest capitalised -9,244,484
Interest expense $ 14,616,810 $ 64,877
5d. INCOME TAX
The difference between tax expense for the year and the expected income taxes
based on the Canadian statutory income tax rate is as follows:
Year Ended
December 31,
2022 2021
Profit/(Loss) before income taxes 25,398,941 (2,122,017)
Applicable Canada tax rate 27% 27%
Tax at applicable tax rate (6,857,714) 572,945
Adjustments for different tax rates in the Group 5,980,026 (60,391)
Losses carried forward not recognized 877,688 (459,731)
Income tax credit/(charge) $ - 52,822
During the years ended December 31, 2022, and 2021 the Canadian federal
corporate income tax rate remained unchanged at 15%. The British Columbia
provincial corporate income tax also remained unchanged at 12%.
The Senegalese and Burkina Faso income tax rates remained unchanged at 30% and
28% respectively.
The Nigerian corporate income tax rate remained unchanged at 30% however the
Group companies in Nigeria are exempt from income tax during the first three
years of operations under Section 36 of the Companies Income Tax Act of
Nigeria.
The Company has available non-capital losses in Canada of approximately
$14,575,000 (2021: $13,808,000). The Canadian non-capital losses may be
utilized to offset future taxable income and have carry forward periods of up
to 20 years. The losses, if not utilized, expire through 2040.
The only potential benefits of carry-forward non-capital losses and deductible
temporary differences have been recognized in these financial statements
relate to the Company's Senegalese subsidiary African Star Resources S.A.R.L.
No other potential benefits have been recognized as it is not considered
probable that sufficient future taxable profit will allow the deferred tax
asset to be recovered.
6. RESTRICTED CASH
December 31, December 31, 2021
2022
Restricted cash $ - $ 3,495,992
Under the terms of the $54 million project finance senior debt facility ("the
Facility") from the Africa Finance Corporation (refer to note 12 for details
on the Facility), the Group was required to place a total of US$3.5 million
into a cost overrun bank account that could only be used for expenditure on
the development of the Segilola Gold Project in the event of construction
costs exceeding budget. Upon receipt of the Certificate of Completion on
January 31, 2022, the cash ceased to be treated as restricted.
7. INVENTORY
December 31, 2022 December 31, 2021
Plant spares and consumables $ 4,751,922 $ 1,337,792
Gold ore in stockpile 11,869,168 8,663,728
Gold in CIL 1,160,237 1,614,267
Gold Dore 2,119,935 6,530,771
$ 19,901,262 $ 18,146,558
There were no write downs to reduce the carrying value of inventories to net
realizable value during the years ended December 31, 2022 and 2021.
The cost of inventories recognised as expense in the year ended December 31,
2022 was $89,382 thousand and was included in cost of sales (2021 - $nil).
8. AMOUNTS RECEIVABLE
December 31, 2022 December 31, 2021
Accounts receivable $ 67,084 $ 20,495
GST 993 3,715
Other receivables 152,365 213,441
$ 220,442 $ 237,651
The value of receivables recorded on the balance sheet is approximate to their
recoverable value and there are no expected material credit losses.
9. PREPAID EXPENSES, ADVANCES AND DEPOSITS
September 30, December 31, 2021
2022
Current:
Gold Stream liability arrangement fees 33,186 38,829
Advance deposits to vendors 9,625,204 235,408
Other prepayments 818,533 312,628
$ 10,476,923 586,865
Non-current:
Gold Stream liability arrangement fees $ 74,667 87,310
Other prepayments 208,158 18,373
$ 282,825 105,683
Included in Advance deposits to vendors, are payment deposits towards key
equipment, materials and spare parts, with longer lead times to delivery,
which are of critical importance to maintain efficient operations of the mine
and process plant. These were made to mitigate against price volatility and
inflation currently affecting the sector.
10. LEASES
The Group accounts for leases in accordance with IFRS 16. The definition of a
lease under IFRS 16 was applied only to contracts entered into or changed on
or after January 1, 2019. The Group has elected not to recognise right-of-use
assets and lease liabilities for leases which have low value, or short-term
leases with a duration of 12 months or less. The payments associated with such
leases are charged directly to the income statement on a straight-line basis
over the lease term. There were no such leases for the year ended December 31,
2022 and 2021.
Leases relate principally to corporate offices and the mining fleet at the
Segilola mine. Corporate offices are depreciated over 5 years and mining fleet
over the life of mine of Segilola.
The key impacts on the Statement of Comprehensive Income and the Statement of
Financial Position for the year ended December 31, 2022, were as follows:
Right of use asset Lease liability Income statement
Carrying value December 31, 2021 $ 20,843,612 $ (18,274,374) $ -
New leases entered in to during the period 660,064 (660,064) -
Depreciation (4,724,100) - (4,724,100)
Interest - (1,052,329) (1,052,329)
Lease payments - 4,882,786 -
Foreign exchange movement 69,826 (305,304) (305,304)
Carrying value at December 31, 2022 $ 16,849,402 $ (15,409,285) $ (6,081,733)
Current liability (4,811,991)
Non-current liability (10,597,294)
The key impacts on the Statement of Comprehensive Loss and the Statement of
Financial Position for the year ended December 31, 2021, were as follows:
Right-of- use asset Lease liability Income statement
Carrying value December 31, 2020 $ 69,066 $ (30,648) $ -
New leases entered in to during the year 22,612,362 (19,668,810) -
Depreciation (2,355,674) - (41,173)
Interest - (782,088) (563)
Lease payments - 2,811,315 -
Foreign exchange movement 517,858 (604,143) (86,285)
Carrying value at December 31, 2021 $ 20,843,612 $ (18,274,374) $ (128,021)
Current liability (4,849,088)
Non-current liability (13,425,286)
The total depreciation for the year ended December 31, 2021 under IFRS 16 was
$2,355,674, of that total $41,173 was charged to the Consolidated Statements
of Comprehensive Income and $2,314,501 was capitalized into the Segilola Mine
Asset.
11. GOLD STREAM LIABILITY
Gold stream liability
December 31, 2022 December 31, 2021
Total Total
Balance at Beginning of period $ 30,262,279 $ 24,708,573
Interest at the effective interest rate 6,311,927 6,562,830
Repayments (11,534,441) (443,915)
Foreign exchange movement - (565,209)
Balance at End of period $ 25,039,765 $ 30,262,279
Current liability 10,187,630 12,837,633
Non-current liability 14,852,135 17,424,646
On April 29, 2020, the Group announced the closing of project financing for
its flagship Segilola Gold Project ("Segilola") in Osun State, Nigeria. The
financing included a $21 million gold stream upfront deposit ("the
Prepayment") over future gold production at Segilola under the terms of a Gold
Purchase and Sale Agreement ("GSA") entered into between the Group's wholly
owned subsidiary SROL and the AFC. The Prepayment is secured over the shares
in SROL as well as over SROL's assets and is not subject to interest. The
initial term of the GSA is for ten years with an automatic extension of a
further ten years. The AFC will receive 10.27% of gold production from the
Segilola ML41 mining license until the $21 million Prepayment has been repaid
in full. Thereafter, the AFC will continue to receive 10.27% of gold
production from material mined within the ML41 mining license until a further
$26.25 million is received, representing a total money multiple of 2.25 times
the value of the Prepayment, at which point the GSA will terminate. The AFC
are not entitled to receive an allocation of gold production from material
mined from any of the Group's other gold tenements under the terms of the GSA.
The $26.25 million represented interest on the Prepayment. A calculation of
the implied interest rate was made as at drawdown date with interest being
apportioned over the expected life of the Stream Facility. The principal input
variables used in calculating the implied interest rate and repayment profile
were the production profile and gold price. The future gold price estimates
were based on market forecast reports for the years 2021 to 2025 and, the
production profile was based on the latest life of mine plan model. The
liability was to be re-estimated on a periodic basis to include changes to the
production profile, any extension to the life of mine plan and movement in the
gold price. Upon commencement of production, any change to the implied
interest rate will be expensed through the Consolidated Statement of Income
(Loss).
Interest expense of $6,311,927 was recognised for the Year Ended December 31,
2022 and has been expensed to the Consolidated Statement of Income. Prior to
the commencement of commercial production on January 1, 2022, interest was
capitalized and included in the value of the Segilola Gold Mine (Refer to Note
15). A cumulative total of $10,200,430 has been capitalized prior to
commercial production and included in the value of the Segilola Gold Mine.
In December 2021, the Group entered into a cash settlement agreement with the
AFC where the gold sold to the AFC is settled in a net-cash sum payable to the
AFC instead of delivery of bullion in repayment of the gold stream
arrangement. Refer to Note 3d for further information on the accounting
treatment of the gold stream liability.
The following table represents the Group's loans and borrowings measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Financial liability at fair value through profit or loss $ - - 25,039 ,765 25,039 ,765
The liabilities included in the above table are carried at fair value through
profit and loss.
The valuation is based on a cash flow model with the following key inputs:
· Production profiles based on Segilola life-of-mine forecasts
· Gold price ranging from $1,600/oz to 1,735/oz
· Interest rate of 22.61%
The sensitivities performed are described in Note 4.a.i
12. LOANS AND BORROWINGS
December 31, December 31, 2021
2022
Current liabilities:
Loans payable to the Africa Finance Corporation less than 1 year $ 356,155 $ 24,192,518
Deferred element of EPC contract 531,986 3,122,990
Short term advances - 668,570
$ 888,141 27,984,078
Non-current liabilities:
Loans payable to the Africa Finance Corporation more than 1 year $ 24,103,784 $ 22,667,448
Deferred element of EPC contract 3,150,729 3,087,077
$ 27,254,513 $ 25,754,525
Loans from the Africa Finance Corporation
December 31, December 31, 2021
2022 Total
Total
Balance at Beginning of period $ 46,859,966 $ 14,267,114
Drawdown - 31,153,833
Repayments (28,865,778) -
Arrangement fees - (508,856)
Unwinding of interest in the period 6,465,751 1,714,041
Foreign exchange movement - 233,834
Balance at End of period $ 24,459,939 $ 46,859,966
Current liability 356,155 24,192,518
Non-current liability 24,103,784 22,667,448
On December 1, 2020, the Group announced that its subsidiary Segilola
Resources Operating Limited ("SROL") had completed the financial closing of a
$54 million project finance senior debt facility ("the Facility") from the
Africa Finance Corporation ("AFC") for the construction of the Segilola Gold
Project in Nigeria. The Facility could be drawn down at the Group's request in
minimum disbursements of $5 million. As at December 31, 2022, SROL has
received total disbursements of $52.6 million (2021: $52.6 million), with $nil
drawn down in 2022 (2021: $31.2 million) and the remaining $1.35m undrawn
facility cancelled by the Group during the period under review (2021: $nil).
Total disbursements received represent 97% of the Facility. The Facility is
secured over the share capital of SROL and its assets, with repayments
commencing in March 2022 and to conclude in March 2025.
Repayment of the aggregate Facility will be made in instalments over a
36-month period by repaying an amount on a series of repayment dates, as set
out in the Facility Agreement, which reduces the amount of the outstanding
aggregate Facility by the amount equal to the relevant percentage of Loans
borrowed as at the close of business in London on the date of Financial Close.
Interest accrues at SOFR plus 9% and is payable on a quarterly basis in
arrears.
In conjunction with the granting of the Facility, Thor issued 33,329,480 bonus
shares to the AFC. Thor also incurred transaction costs of $4,663,652 in
relation to the loan facility. The fair value of the liability was determined
at $45,822,943 taking into account the transaction costs and equity component
and recognised at amortised cost using an effective rate of interest, with the
fair value of the shares issued in April 2020 of $5,666,011 recognised within
equity.
Interest paid during the year ended December 31, 2021, of $3,667,835 has been
capitalised to the cost of the Segilola Gold Mine. (Refer to Note 15).
On 31 January 2023, the Group entered into an agreement with the AFC amending
the terms of its senior debt facility. (See Note 27)
Certain covenants and restrictions were released, and the payment timetable
re-scheduled to reallocate a higher percentage of the repayments to a later
period in the Facility's term.
Deferred payment facility on EPC contract for the construction of the Segilola
Gold Mine
The Group has constructed its Segilola Gold Mine through an engineering,
procurement, and construction contract ("EPC Contract") signed with Norinco
International Cooperation Limited. The EPC Contract has been agreed on a lump
sum turnkey basis which provides Thor with a fixed price of $67.5 million for
the full delivery of design, engineering, procurement, construction, and
commissioning of the proposed 715,000 ton per annum gold ore processing plant.
The EPC Contract includes a deferred element ("the Deferred Payment Facility")
of 10% of the fixed price. As at December 31, 2022, a total of $3,682,715
(December 31, 2021: $6,210,067) was deferred under the facility. The 10%
deferred element is repayable in instalments over a 36-month period by
repaying an amount on a series of repayment dates, as set out in the Deferred
Payment Facility. Repayments commenced in March 2022 and will conclude in
2025. Interest on this element of the EPC deferred facility accrues at 8% per
annum from the time the Facility taking-over Certificate was issued.
December 31, December 31, 2021
2022 Total
Total
Balance at beginning of period $ 6,210,090 $ 1,934,275
Offset against EPC payment 440,263 3,999,815
Repayments (3,440,449) -
Unwinding of interest in the period 472,811 250,402
Foreign exchange movement - 25,575
Balance period end $ 3,682,715 $ 6,210,067
Current liability 531,986 3,122,990
Non-current liability 3,150,729 3,087,077
Short term advances
December 31, December 31, 2021
2022 Total
Total
Balance at beginning of period $ 668,570 $ -
Drawdowns - 679,294
Repayments (668,570) -
Foreign exchange movement - (10,724)
Balance period end $ - $ 668,570
13. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
December 31, 2022 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2022 $ 30,262,279 668,570 46,859,966 6,210,090 84,000,905
Cash flows:
(Repayment of) / Proceeds from loans and borrowings (11,534,441) (668,570) (24,220,764) (3,440,449) (39,864,224)
Interest paid - - (4,645,014) - (4,645,014)
Non-cash changes:
Unwinding of interest in the year 6,311,927 - 6,465,751 472,811 13,250,489
Offset against EPC payment - - - 440,263 440,263
December 31, 2022 $ 25,039,765 - 24,459,939 3,682,715 53,182,419
December 31, 2021 Gold stream liability Short term advance AFC loan EPC deferred facility Total
January 1, 2021 $ 24,708,573 - 14,267,114 1,934,275 40,909,962
Cash flows:
(Repayment of) / Proceeds from loans and borrowings (443,915) 679,294 30,943,179 - 31,178 ,558
Interest paid - - - - -
Transaction costs - (510,838) - (510,838)
Non-cash changes:
Unwinding of interest in the year 6,562,830 - 1,738,601 250,402 8,551,833
Foreign exchange movements (565,209) (10,724) 421,910 25,575 (128,448)
Offset against EPC payment - - - 3,999,815 3,999,815
December 31, 2021 $ 30,262,279 668,570 46,859,966 6,210,067 84,000,882
14. PROVISIONS
December 31, 2022 Fleet demobilisation costs
Restoration costs
Other Total
Balance at Beginning of period $ - $ 173,241 $ 5,064,935 $ 5,238,176
Initial recognition of provision 18,415 - - 18,415
Changes in estimates - - (404,859) (404,859)
Unwinding of discount - 201 107,963 108,164
Foreign exchange movements (258) - - (258)
Balance at period end $ 18,157 $ 173,442 $ 4,768,039 $ 4,959,638
Current liability - - - -
Non-current liability 18,157 173,442 4,768,039 4,959,638
December 31, 2021 Fleet demobilisation costs
Restoration costs
Total
Balance at Beginning of year $ - $ 486,500 $ 486,500
Initial recognition of provision 173,241 - 173,241
Increase in provision - 4,628,124 4,628,124
Foreign exchange movements - (49,689) (49,689)
Balance at year end $ 173,241 $ 5,064,935 $ 5,238,176
Current liability - - -
Non-current liability 173,241 5,064,935 5,238,176
The restoration costs provision is for the site restoration at Segilola Gold
Project in Osun State Nigeria. The 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 US forecast
inflation rates of 2.9% and the interest rate of 4% on 5-year US bonds were
used to calculate the expected future cash flows, which are in line with the
life of mine. The provision represents the net present value of the best
estimate of the expenditure required to settle the obligation to rehabilitate
environmental disturbances caused by mining operations at mine closure.
The fleet demobilization costs provision is the value of the cost to
demobilize the mining fleet upon closure of the mine.
15. PROPERTY, PLANT AND EQUIPMENT
(* Refer to note 26 for details on the prior year restatement)
A summary of depreciation capitalized is as follows:
Year Ended December 31, Total depreciation
capitalized
December 31, 2022 December 31, 2021
2022 2021
Exploration expenditures 116,108 85,358 620,352 504,244
Total $ 116,108 $ 85,358 $ 620,352 $ 504,244
a) Segilola Project, Osun Nigeria:
Classification of Expenditure on the Segilola Gold Project
On January 1, 2022, the Group achieved Commercial Production at the Segilola
Gold Project in Nigeria ("the Project") Upon achieving Commercial Production,
the Assets under Construction was reclassified within Property, Plant and
Equipment, and transferred to Mining Asset, Processing Plant and
Decommissioning Asset.
Decommissioning Asset
The decommissioning asset relates to estimated restoration costs at the
Group's Segilola Gold Mine as at December 31, 2022. Refer to Note 14 for
further detail.
Impairment assessment
During the year ended December 31, 2022, the Group performed a review for
indicators of impairment for the Segilola Gold mine and evaluated key
assumptions such as forecasts for gold prices, significant revisions to the
mine plan including current estimates of recoverable mineral reserves and
resources, recent operating results, and future expected production based on
the reserves and resources. As a result of the above, the Group concluded that
there were no indicators of impairment for the Segilola Gold mine at 31
December 2022.
16. INTANGIBLE ASSETS
The Group's exploration and evaluation assets costs are as follows:
Douta Gold Project, Senegal Central Houndé Project, Burkina Faso Exploration licenses, Nigeria Software Total
Balance, December 31, 2020 $ 12,783,387 $ - $ 89,395 $ 224,634 $ 13,097,416
Acquisition costs - - 74,897 - 74,897
Exploration costs 2,037,122 106,614 742,145 - 2,885,881
Additions - - - 178,885 178,885
Amortisation - - - (167,648) (167,648)
Impairment - (106,692) - - (106,692)
Foreign exchange movement (600,527) 78 (11,136) (5,735) (617,320)
Balance, December 31, 2021 $ 14,219,982 $ - $ 895,301 $ 230,136 $ 15,345,419
Acquisition costs - - 24,103 - 24,103
Exploration costs 3,745,803 12,014 1,693,863 - 5,451,680
Additions - - - 43,599 43,599
Amortisation - - - (122,988) (122,988)
Impairment - (12,014) - - (12,014)
Foreign exchange movement (1,427,912) - (70,679) - (1,498,591)
Balance, December 31, 2022 $ 16,537,873 $ - $ 2,542,588 $ 150,747 $ 19,231,208
Impairment assessment
During the year ended 31 December 2022, the Group performed a review for
indicators of impairment of all exploration and evaluation assets in
accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources.
Exploration permits have been assessed as to whether the permits were in good
standing and/or any further activity was planned. No impairment indicators
were identified for the Group`s exploration and evaluation assets other than
for the Central Houndé project as detailed below.
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 Group is party to an option agreement (the "Option Agreement") with
International Mining Company ("IMC"), by which the Group has acquired a 70%
interest in the Douta Gold Project located in southeast Senegal held through
African Star SARL.
Effective February 24, 2012, the Group exercised its option to acquire a 70%
interest in the Douta Gold Project pursuant to the terms of the Option
Agreement between the Group and IMC. As consideration for the exercise of the
option, the Group 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 Group'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 Group 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 holds 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 holds 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 Group entered into the Acacia Option Agreement with
Acacia Mining plc ("Acacia"), whereby Acacia will have the exclusive option to
earn up to a 51% interest in Central Houndé Project by satisfying certain
conditions over a specified 4-year period and then the right to acquire an
additional 29%, for an aggregate 80% interest in the Central Houndé Project,
upon declaration of a Pre-Feasibility Study. Acacia met the minimum spending
requirement for the Phase 1 Earn-in in September 2018.. As a result, Acacia
earned a 51% interest in the Central Houndé Project. The Group currently
holds a 49% interest in the Central Houndé Project.
In 2019, Barrick Gold Corporation ("Barrick") completed an acquisition of
Acacia through the purchase of the ordinary share capital of Acacia that
Barrick did not already own. The acquisition did not affect work undertaken at
the Central Houndé Gold Project in Burkina Faso where Barrick continued its
exploration work as per its Joint Operation with Thor.
In April 2021, Thor re-acquired Barrick's 51% ownership of the Project in
exchange for a 1% Net Smelter Royalty. Thor now holds 100% of the Central
Houndé Project.
Following the unsuccessful attempt by Barrick Gold to dispose of its 51%
interest in the licenses, the Group carried out an impairment assessment at
December 31, 2020, and determined that the unsuccessful sale attempt was an
indication for impairment. It is the Group'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.
c) Exploration Licenses, Nigeria
The high grade Segilola gold deposit is located on the major regional shear
zone that extends for several hundred kilometres through the gold-bearing
Ilesha schist belt (structural corridor) of Nigeria. Thor's exploration tenure
currently comprises 13 exploration licenses and four joint venture partnership
exploration licenses. Together with the mining lease over the Segilola Gold
Deposit, Thor's total exploration tenure amounts to 1,400 km². The Group'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
December 31, December 31,
2022 2021
(restated*)
Trade payables $ 46,914,333 $ 36,962,841
Accrued liabilities 6,213,977 3,058,121
Other payables 3,208,979 5,110,979
$ 56,337,289 $ 45,131,941
Current liability 56,337,289 43,567,750
Non-current liability - 1,564,191
(* Refer to note 26 for details on the prior year restatement)
Accounts payable and accrued liabilities are classified as financial
liabilities and approximate their fair values.
Included in trade payables is a balance of $10,196,105 due to our EPC
contractor. The total EPC amount has been finalized with our EPC contractor,
and this balance has been paid at the date of release of these financial
statements.
Also included in trade payables is a total of $2,215,585 (2021: $7,115,207)
that relates to third party royalties that will become payable upon future
gold sales. All these royalties' creditors are included in current liabilities
(refer to Note 3j for further detail).
The following table represents the Group's trade payables measured and
recognised at fair value.
Level 1 Level 2 Level 3 Total
Trade payables $ - - 2,215,585 2,215,585
Third party royalties
The valuation is based on a cash flow model with the following key inputs:
· Production profiles based on Segilola life-of-mine forecasts
· Gold price ranging from $1,660/oz to 1,735/oz
· Discount rate of 5.25%
There are no material impacts on the valuation from a sensitivity analysis.
18. DEFERRED INCOME
December 31, December 31,
2022 2021
Deferred income $ 6,581,743 $ -
The deferred income relates to advance sales of 3,687 oz of Gold that were
delivered in January 2023.
19. CAPITAL AND RESERVES
a) Authorized
Unlimited common shares without par value.
b) Issued
December 31, December 31, December 31, December 31,
2022 2022 2021 2021
Number Number
As at start of the year 632,358,009 $ 79,027,183 621,405,975 $ 76,858,769
Issue of new shares:
- Share options exercised i 9,939,000 960,546 - -
- RSU awards vested ii 2,399,176 451,964 - -
- Share warrants exercised iii - - 9,952,034 2,073,450
- Share options exercised iv - - 1,000,000 94,964
644,696,185 $ 80,439,693 632,358,009 $ 79,027,183
i Value of 9,250,000 options exercised at a price of CAD$0.12 per share and
289,000 options exercised at a price of CAD$0.145 per share, both on January
19, 2022, and 400,000 options exercised at a price of CAD$0.145 per share on
December 13, 2022.
ii Value of 2,399,176 RSU awards that were granted and vested on October 11,
2022, at a deemed price of CAD$0.26 per share.
iii Value of 1,664,534 warrants exercised on June 8, 2021, at a price of
CAD$0.18 per share, and 8,287,500 warrants exercised on August 31, 2021, at a
price of CAD$0.28 per share.
iv Value of 500,000 options on July 5, 2021, and 500,000 options on December
41, 2021, all exercised at a price of CAD$0.12 per share.
c) Share-based compensation
Stock option plan
The Group has granted directors, officers and consultants share purchase
options. These options were granted pursuant to the Group's stock option plan.
Under the current Share Option Plan, 44,900,000 common shares of the Group are
reserved for issuance upon exercise of options.
· On January 16, 2020, 14,250,000 stock options were granted at an
exercise price of C$0.20 per share for a period of five years. The options
vested immediately.
· On October 5, 2018, 750,000 stock options were granted at an
exercise price of C$0.14 per share for a period of five years.
· On March 12, 2018, 12,800,000 stock options were granted at an
exercise price of C$0.145 per share for a period of five years.
All of the stock options were vested as at the balance sheet date. These
options did not contain any market conditions and the fair value of the
options were charged to the statement of comprehensive loss or capitalized as
to assets under construction in the period where granted to personnel's whose
cost is capitalized on the same basis. The assumptions inherent in the use of
these models are as follows:
Vesting period First vesting date Expected remaining life (years) Risk free rate Exercise price Volatility of share price Fair value Options vested Options granted Expiry
(years)
5 12/03/2018 0.19 2.00% $ 0.145 105.09% $0.14 12,800,000 12,800,000 12/03/2023
5 05/10/2018 0.76 2.43% $ 0.14 100.69% $0.14 750,000 750,000 05/10/2023
5 16/01/2020 2.05 1.49% $ 0.20 66.84% $0.07 14,250,000 14,250,000 16/01/2025
In Canadian Dollars
The Group has elected to measure volatility by calculating the average
volatility of a collection of three peer companies' historical share prices
for the exercising period of each parcel of options. Management believes that
given the transformational change that the Group has undergone since the
acquisition of the Segilola Gold Project in August 2016, the Group's
historical share price is not reflective of the current stage of development
of the Group, 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.
Grant Expiry Exercise Remaining (Years) Opening Granted Exercised Expired / Forfeited Closing Vested and Exercisable Unvested
Date
Date
Price
Balance
Balance
16-Jan-2017 16-Jan-2022 $0.12 - 9,250,000 - (9,250,000) - - - -
12-Mar-2018 12-Mar-2023 $0.145 0.19 12,800,000 - (689,000) - 12,111,000 12,111,000 -
5-Oct-2018 5-Oct-2023 $0.14 0.76 750,000 - - - 750,000 750,000 -
16-Jan-2020 16-Jan-2025 $0.20 2.05 14,040,000 - - - 14,040,000 14,040,000 -
Totals 1.18 36,840,000 - (9,939,000) - 26,901,000 26,901,000 -
Weighted Average Exercise Price $0.160 $0.000 $0.122 - $0.174 $0.174 -
The following is a summary of changes in options from January 1, 2022, to
December 31, 2022, and the outstanding and exercisable options at December 31,
2022:
In Canadian Dollars
The following is a summary of changes in options from January 1, 2020, to
December 31, 2021, and the outstanding and exercisable options at December 31,
2021:
In Canadian Dollars
(i) On July 5, 2019, the Group 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 Group announced an extension of the expiry date from
May 7, 2020, to May 7, 2022. All other conditions of the options remain the
same.
Restricted share units ("RSUs")
In October 2022, the Group granted under its Long-Term Incentive Plan ("LTIP")
RSUs through issuing and allotting 2,399,176 new common shares in the Company
at a price of CAD 26 cents per share.
The cost of $451,964 in relation to the RSU granted has been recognised in the
Consolidated Statement of Comprehensive Income for the year ended December 31,
2022.
d) Nature and purpose of equity and reserves
The reserves recorded in equity on the Group's statement of financial position
include 'Reserves,' 'Currency translation reserve,' 'Retained earnings' and
'Deficit.'
'Option reserve' is used to recognize the value of stock option grants prior
to exercise or forfeiture.
'Currency translation reserve' is used to recognize the exchange differences
arising on translation of the assets and liabilities of foreign branches and
subsidiaries with functional currencies other than US dollars.
'Deficit' is used to record the Group's accumulated deficit.
'Retained earnings' is used to record the Group's accumulated earnings.
20. EARNINGS PER SHARE
Diluted net earnings per share was calculated based on the following:
December 31, December 31, 2021
2022
Basic weighted average number of shares outstanding 641,958,083 625,373,103
Stock options 8,359,009 -
Diluted weighted average number of shares outstanding 650,317,092 625,373,103
Total common shares outstanding 644,696,185 632,358,009
Total potential diluted common shares 671,597,185 669,198,009
21. RELATED PARTY DISCLOSURES
A number of key management personnel, or their related parties, hold or held
positions in other entities that result in them having control or significant
influence over the financial or operating policies of the entities outlined
below.
a) Trading transactions
The Africa Finance Corporation ("AFC") is deemed to be a related party given
the size of its shareholding in the Company. There have been no other
transactions with the AFC other than the Gold Stream liability as disclosed in
Note 11, and the secured loan as disclosed in Note 12.
b) Compensation of key management personnel
The remuneration of directors and other members of key management during the
year ended December 31, 2022, and 2021 were as follows:
Year Ended December 31,
2022 2021
Salaries
Current directors and officers (i) (ii) $ 1,638,597 $ 306,036
Former directors and officers 71,557 -
Directors' fees
Current directors and officers (i) (ii) 404,097 211,947
Share-based payments
Current directors and officers (iii) 296,502 -
$ 2,410,753 $ 517,983
((i) Key management personnel were not paid post-employment
benefits, termination benefits, or other long-term benefits during the years
ended December 31, 2022, and 2021.)
((ii) The Group paid consulting and director fees to both
individuals and private companies controlled by directors and officers of the
Group for services. Accounts payable and accrued liabilities at December 31,
2022, include $102,092 (December 31, 2021 - $346,275) due to directors or
private companies controlled by an officer and director of the Group. Amounts
due to or from related parties are unsecured, non-interest bearing and due on
demand.)
((iii) RSU granted on October 11, 2022. Refer to note 19.c for
further information.)
22. FINANCIAL INSTRUMENTS
The Group's financial instruments consist of cash, restricted cash, amounts
receivable, accounts payable, accrued liabilities, gold stream liability,
loans and other borrowings and lease liabilities.
Fair value of financial assets and liabilities
Fair values have been determined for measurement and/or disclosure purposes.
When applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.
The carrying amount for cash, restricted cash, accounts receivable, and
accounts payable, accrued liabilities, loans and borrowings and lease
liabilities on the statement of financial position approximate their fair
value because of the limited term of these instruments.
Financial risk management objectives and policies
The Group has exposure to the following risks from its use of financial
instruments
· Interest rate risk
· Credit risk
· Liquidity and funding risk
· Market risk
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these consolidated financial statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous years unless otherwise
stated in these notes.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group's competitiveness and flexibility. Further
details regarding these policies are set out below.
Financial instruments by category
The accounting policies for financial instruments have been applied to the
line items below:
December 31, 2022 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 6,688,037 - 6,688,037
Amounts receivable 220,442 - 220,442
Total assets $ 6,908,479 - 6,908,479
Liabilities
Accounts payable and accrued liabilities $ 54,121,704 2,215,585 56,337,289
Loans and borrowings 28,142,654 - 28,142,654
Gold stream liability - 25,039,765 25,039,765
Lease liabilities 15,409,285 - 15,409,285
Total liabilities $ 97,673,643 27,255,350 124,928,993
December 31, 2021 Measured at amortised cost Measured at fair value through profit and loss Total
Assets
Cash and cash equivalents $ 1,276,270 - 1,276,270
Restricted cash 3,495,992 - 3,495,992
Amounts receivable 237,651 - 237,651
Total assets $ 5,009,913 - 5,009,913
Liabilities
Accounts payable and accrued liabilities 38,024,962 7,106,979 45,131,941
$
Loans and borrowings 53,738,603 - 53,738,603
Gold stream liability - 30,262,279 30,262,279
Lease liabilities 18,274,374 - 18,274,374
Total liabilities $ 110,037,939 37,369,258 147,407,197
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's income and
operating cash flows will be impacted by changes in market interest rates as
the Group's secured loans from the AFC incurs Interest at SOFR plus 9% (Refer
to Note 12). The Group's management monitors the interest rate fluctuations on
a continuous basis and assesses the impact of interest rate fluctuations on
the Group's cash position and acts to ensure that sufficient cash reserves are
maintained in order to meet interest payment obligations.
The following table discusses the Group's sensitivity to a 5% increase or
decrease in interest rates:
Interest rate Interest rate
Appreciation Depreciation
By 5% By 5%
December 31, 2022
Comprehensive income (loss)
Financial assets and liabilities $ (2,086,408) $ 2,086,408
December 31, 2021
Comprehensive income (loss)
Financial assets and liabilities $ (2,162,336) $ 2,162,336
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 Group manages the credit risk associated with cash by investing these
funds with highly rated financial institutions, and by monitoring its
concentration of cash held in any one institution. As such, the Group deems
the credit risk on its cash to be low. At 31 December 2022, 93% of the Group's
cash balances were invested in AA rated financial institutions (2021: 93%), 2%
in AA- rated financial institutions (2021: 1%), 1% in A+ rated financial
institutions (2021: 1%) and 4% in B rated institutions (2021: 5%).
The Group sells its gold to large international organisations with strong
credit ratings, and the historical level of customer defaults is minimal. As a
result, the credit risk associated with gold trade receivables at December 31,
2022 is considered to be negligible.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at December 31, 2022, and
December 31, 2021, were as follows:
December 31, December 31,
2022 2021
Cash $ 6,688,037 $ 1,276,270
Restricted cash - 3,495,992
Amounts receivable 220,442 237,651
Total $ 6,908,479 $ 5,009,913
Liquidity and funding risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group ensures that there is
sufficient capital in order to meet short-term business requirements, after
taking into account the Group's holdings of cash. The Group's cash is held in
business accounts and are available on demand.
In the normal course of business, the Group enters into contracts and performs
business activities that give rise to commitments for future minimum payments.
Liquidity and funding risk (continued)
The following table summarizes the Group's significant remaining contractual
maturities for financial liabilities at December 31, 2022, and December 31,
2021.
Contractual maturity analysis as at December 31, 2022
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable and accrued liabilities 55,368,069 1,001,983 - - 56,370,052
Lease liabilities 1,255,581 3,766,744 12,681,521 - 17,703,846
Gold Stream Liability 2,986,708 8,475,973 23,420,334 - 34,883,015
Loans and borrowings 1,642,151 4,810,033 33,337,237 - 39,789,421
61,252,509 18,054,733 69,439,092 - 148,746,334
Contractual maturity analysis as at December 31, 2021
Less than 3 - 12 1 - 5 Longer than
3 months Months Year 5 years Total
$ $ $ $ $
Accounts payable and accrued liabilities 38,699,814 4,862,676 1,952,408 - 45,514,898
Lease liabilities 1,213,678 3,641,035 16,991,498 - 21,846,211
Gold Stream Liability 2,237,631 10,614,896 33,955,921 46,808,448
Loans and borrowings 1,984,714 26,031,054 32,400,920 - 60,416,688
44,135,837 45,149,661 85,300,747 - 174,586,245
Market risk
The Group is subject to normal market risks including fluctuations in foreign
exchange rates and interest rates. While the Group manages its operations in
order to minimize exposure to these risks, the Group has not entered into any
derivatives or contracts to hedge or otherwise mitigate this exposure.
a) Foreign currency risk
The Group seeks to manage its exposure to this risk by holding its cash
balances in the same denomination as that of the majority of expenditure to be
incurred. The Group also seeks to ensure
that the majority of expenditure and cash of individual subsidiaries within
the Group are denominated in the same currency as the functional currency of
that subsidiary.
The Group's loan facilities, certain exploration expenditures, certain
acquisition costs and operating expenses are denominated in United States
Dollars, Nigerian Naira, UK Pounds Sterling and West African Franc. The
Group's exposure to foreign currency risk arises primarily on fluctuations
between the United States Dollar and the Canadian Dollar, Nigerian Naira, UK
Pounds Sterling and West African Franc. The Group has not entered into any
derivative instruments to manage foreign exchange fluctuations. The Group does
enter into foreign exchange agreements during the ordinary course of
operations in order to ensure that it has sufficient funds in order to meet
payment obligations in individual currencies. These agreements are entered
into at agreed rates and are not subject to exchange rate fluctuations between
agreement and settlement dates.
The following table shows a currency of net monetary assets and liabilities by
functional currency of the underlying companies for the year ended December
31, 2022:
Functional currency
US dollar Pound Nigerian West
Sterling Naira African Total
Franc
Currency of net monetary asset/(liability) December 31, 2022 December 31, 2022 December 31, 2022 December 31, 2022 December 31, 2022
USD$ USD$ USD$ USD$ USD$
Canadian dollar 42,963 - - - 42,963
US dollar (107,637,605) - - - (107,637,605)
Pound Sterling (1,961,945) (411,079) - - (2,373,024)
Nigerian Naira (2,362,830) - 8,132 - (2,354,698)
West African Franc - - - 85,029 85,029
Euro (170,595) - - - (170,595)
Australian dollar (217,333) - - - (217,333)
Total (112,307,345) (411,079) 8,132 85,029 (112,625,263)
The following table shows the currency of net monetary assets and liabilities
by functional currency of the underlying companies for the year ended December
31, 2021:
Functional currency
Canadian US dollar Pound Nigerian West
dollar Sterling Naira African Total
Franc
Currency of net monetary asset/(liability) December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021 December 31, 2021
USD$ USD$ USD$ USD$ USD$ USD$
Canadian dollar (484,067) - - - - (484,067)
US dollar (190,391) - - (132,585,040) - (132,775,431)
Pound Sterling (361,244) - - (80,926) - (442,170)
Nigerian Naira - - - (3,910,833) - (3,910,833)
West African Franc - - - - 11,481 11,481
Australian dollar (36,626) - - (19,377) - (56,003)
Total (1,072,328) - - (136,596,176) 11,481 (137,657,023)
The following table discusses the Group's sensitivity to a 5% increase or
decrease in the United States Dollar against the Nigerian Naira:
United States United States
Dollar Dollar
Appreciation Depreciation
December 31, 2022 By 5% By 5%
Comprehensive income (loss)
Financial assets and liabilities $ 112,516 $ (112,516)
December 31, 2021
Comprehensive income (loss)
Financial assets and liabilities $ 194,000 $ (194,000)
23. CAPITAL MANAGEMENT
The Group manages, as capital, the components of shareholders' equity. The
Group'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.
The Group 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 Group may
attempt to issue common shares, borrow, acquire or dispose of assets or adjust
the amount of cash.
24. CONTRACTUAL COMMITMENTS AND CONTINGENT LIABILITIES
Contractual Commitments
The Group has no contractual obligations that are not disclosed on the
Consolidated Statement of Financial Position.
Contingent liabilities
The Group is involved in various legal proceedings arising in the ordinary
course of business. Management has assessed these contingencies and determined
that, in accordance with International Financial Reporting Standards, all
cases are considered as remote. As a result, no provision has been made in the
financial statements for any potential liabilities that may arise from these
legal proceedings.
Although the Group believes that it has valid defenses in these matters, the
outcome of these proceedings is uncertain, and there can be no assurance that
the Group will prevail in these matters. The Group will continue to assess the
likelihood of any loss, the range of potential outcomes, and whether or not a
provision is necessary in the future, as new information becomes available.
Based on the information available, the Group does not believe that the
outcome of these legal proceedings will have a material adverse effect on the
financial position or results of operations of the Group. However, there can
be no assurance that future developments will not materially affect the
Group's financial position or results of operations.
25. SEGMENTED DISCLOSURES
Segment Information
The Group's operations comprise three reportable segments, being the Segilola
Mine Project, Exploration Projects, and Corporate. These three reporting
segments have been identified based on operational focuses of the Group
following the decision to develop the Segilola Mine Project. The following
table provides the Group's results by operating segment in the way information
is provided to and used by the Group's chief operating decision maker, which
is the CEO, to make decisions about the allocation of resources to the
segments and assess their performance.
December 31, 2022 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 36,334,005 $ 120,752 $ 831,907 $ 37,286,664
Non-current assets
Deferred income tax assets - 77,797 - 77,797
Prepaid expenses, advances and deposits 74,667 - 208,158 282,825
Right-of-use assets 16,232,353 - 617,049 16,849,402
Property, plant and equipment 149,050,728 339,785 123,404 149,513,917
Intangible assets 150,747 19,080,461 - 17,954,291
Total assets $ 201,842,500 $ 19,628,795 $ 1,780,518 $ 223,251,813
Non-current asset additions $ 10,527,299 $ 2,612,033 $ 1,337,066 $ 14,476,398
Liabilities $ (133,370,335) $ (1,381,629) $ (1,718,410) $ (136,470,374)
Profit (loss) for the period $ 27,939,847 $ (273,511) $ (2,267,395) $ 25,398,941
- revenue 165,174,531 - - 165,174,531
- consulting fees (510,656) (164,563) (587,724) (1,262,943)
- salaries and benefits (1,468,610) - (2,793,302) (4,261,912)
- depreciation owned assets (26,907,422) (8,672) (12,062) (26,928,156)
- impairments - (12,013) - (12,013)
- interest expense (14,616,810) - - (14,616,810)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso United Kingdom
Senegal Nigeria Canada Total
December 31, 2022
Prepaid expenses, advances and deposits - - 7,024 74,667 201,134 - 282,825
Right-of-use assets - - - 16,232,354 617,048 - 16,849,402.00
Property, plant and equipment 176,645 - - 149,635,179 101,491 5,461 149,918,776
Intangible assets 10,704,623 - - 8,526,585 - - 17,954,291
Total non-current assets 10,881,268 - 7,024 174,468,785 919,673 5,461 186,282,211
The Group`s total revenue of $165,174,531 (2021: $6,049,485) is fully
generated in Nigeria and comprise of $165,060,320 gold sales (2021: 6,049,485)
and $114,211 silver sales (2021: $nil). All sales are done to the Group`s only
customer.
December 31, 2021 Segilola Mine Project Exploration Projects Corporate Total
Current assets $ 23,245,206 $ 76,104 $ 422,026 $ 23,743,336
Non-current assets
Deferred income tax assets - 86,795 - 86,795
Prepaid expenses, advances and deposits 87,223 - 18,460 105,683
Right-of-use assets 20,843,612 - - 20,843,612
Property, plant and equipment 151,655,614 455,339 3,964 152,114,917
Intangible assets 224,808 15,120,611 - 15,345,419
Total assets $ 196,056,463 $ 15,738,849 $ 444,450 $ 212,238,762
Non-current asset additions $ 71,990,597 $ 3,999,195 $ 3,661 $ 75,993,453
Liabilities $ (151,299,202) $ (43,436) $ (1,302,735) $ (152,645,373)
Profit (loss) for the year $ 1,975,712 $ (261,559) $ (3,783,348) $ (2,069,195)
- revenue 6,049,485 - - 6,049,485
- consulting fees (8,096) (148,781) (194,086) (350,963)
- salaries and benefits (256,228) - (1,029,378) (1,285,606)
- depreciation owned assets (59,611) (4,249) (1,158) (65,018)
- impairments - (99,059) - (99,059)
- interest expense (64,877) - - (64,877)
Non-current assets by geographical location:
British Virgin Islands
Burkina Faso
December 31, 2021 Senegal Nigeria Canada Total
Prepaid expenses, advances and deposits - - 12,623 74,686 18,374 105,683
Right-of-use assets - - - 20,843,612 - 20,843,612
Property, plant and equipment 201,264 - - 151,198,170 4,018 151,403,452
Intangible assets 14,529,771 - - 815,648 - 15,345,419
Total non-current assets 14,731,035 - 12,623 172,932,116 22,392 187,698,166
26. PRIOR YEAR RESTATEMENT
During the preparation of the current financial statements, the Group
identified invoices for contracted services provided during 2021, amounting to
$4,740,261, in relation to the construction of the Segilola Gold Mine that had
not been accounted for in the prior period financial statements.
Therefore, in accordance with "IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors", the Consolidated Statement of Financial
Position for the year ended December 31, 2021 has been adjusted by recording
an increase of $4,740,261 in the "Property, Plant and Equipment" account and
an equal increase in the "Accounts Payable and Accrued Liabilities" account.
There are no impacts on the Consolidated Statements of Comprehensive Income
nor Cash Flows, as well as on years ended prior to December 31, 2021.
The presentation currency of the Group has also been changed to United States
Dollars (US$) to align with the functional currency of the parent entity and
SROL and applied this change retrospectively resulting in the restatement of
prior periods.
27. SUBSEQUENT EVENTS
Amendment and rescheduling of senior debt facility
On 31 January 2023, the Group entered into an agreement with the AFC
amending the terms of its senior debt facility.
The amended facility removes the project finance cash sweep requirement and allows for free distributions from SROL (subject to a 20% distribution sweep to the senior debt facility), as well as releasing the Group from restrictions regarding acquisitions, distribution of dividends and certain indebtedness covenants.
In addition, the amortization schedule of the facility has been re-scheduled
per the below. No material accounting implications are expected as a result of
this amendment.
EPC Contract
As of the date of these Financial Statements, the Company has made all
outstanding due payments in relation to the EPC contract. At December 31,
2022, this amounted to US$10,196,105.
1 (#_ftnref1) Refer to "Non-IFRS Measures" section
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