UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------

FORM 10-Q

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended: March 31, 2020


Commission File Number: 333-182072

-----------------------------

Patagonia Gold Corp.
(Exact name of registrant as specified in its charter)

British Columbia, Canada
  1041
(State or other jurisdiction of incorporation or organization)
 
(Primary Standard Industrial Classification Code Number)

Av. Libertador 498 P.26, Argentina, C.A.B.A
(+5411) 52786950
(Address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  No 

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging growth company
   

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No ☒

As of November 17, 2020, the registrant’s outstanding common stock consisted of 361,829,267 common shares.









Patagonia Gold Corp.

Table of Contents


 
Page
Part I. Financial Information
   
Item 1. Financial Statements
 
   
Condensed Interim Consolidated Balance Sheets (Unaudited)
3
   
Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
4
   
Condensed Interim Consolidated Statement of  Shareholders' Equity (Unaudited)
5
   
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
6
   
Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)
7-23
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
24-38
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
38
   
Item 4. Controls and Procedures
39
   
Part II. Other Information
 
   
Item 1. Legal Proceedings
39
   
Item 1A. Risk Factors
39
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
39
   
Item 3. Defaults Upon Senior Securities.
39
   
Item 4. Mine Safety Disclosures.
39
   
Item 5. Other Information.
39
   
Item 6. Exhibits.
40
   
Signatures
41


















- 2 -


Patagonia Gold Corp.
Condensed Interim Consolidated Balance Sheets (Unaudited)
(in thousands of U.S. dollars)

   
Note
   
March 31, 2020
 
December 31,
2019
           $’000      $’000  
Current Assets
                 
 Cash
   
22
   
$
699
   
$
685
 
 Receivables
   
12, 22
     
1,913
     
1,516
 
 Inventories
   
6
     
4,127
     
3,347
 
 Total Current Assets
           
6,739
     
5,548
 
                         
Non-Current Assets
                       
 Mineral Properties
   
7, 24
     
8,610
     
8,610
 
 Mining Rights
   
9
     
15,848
     
16,997
 
 Property, plant and equipment
   
11
     
10,338
     
10,508
 
 Goodwill
   
24
     
4,379
     
4,379
 
 Other financial assets
   
10, 22
     
240
     
334
 
 Deferred tax assets
           
3,062
     
4,599
 
 Other receivable
   
13, 22
     
3,126
     
3,814
 
 Total Non-Current Assets
           
45,603
     
49,241
 
Total Assets
         
$
52,342
   
$
54,789
 
                         
Current Liabilities
                       
 Bank indebtedness
   
14
   
$
11,578
   
$
14,989
 
 Accounts payable and accrued liabilities
   
15, 20, 22
     
5,956
     
5,992
 
 Accounts payable with related parties
   
15, 20, 22
     
6,842
     
6,717
 
 Loan payable and current portion of long-term debt
   
16, 20, 22
     
311
     
334
 
 Current portion of long-term debt with related parties
   
16, 20, 22
     
13,120
     
-
 
 Total Current Liabilities
           
37,807
     
28,032
 
                         
Non-Current Liabilities
                       
 Long-term debt
   
17, 22
     
298
     
312
 
 Long-term debt with related parties
   
17, 20, 22
     
1,470
     
11,708
 
 Asset retirement obligation
   
8
     
2,879
     
2,812
 
 Deferred tax liabilities
           
1,833
     
2,693
 
 Other long-term payables
           
52
     
56
 
 Total Non-Current Liabilities
           
6,532
     
17,581
 
Total Liabilities
           
44,339
     
45,613
 
                         
Commitments and Contingencies (note 25)
                       
                         
Stockholders’ Equity
                       
Capital stock: Authorized - Unlimited No Par Value Issued and outstanding – 317,943,990 common shares (December 31, 2019 - 317,943,990 common shares)
   
19
     
2,588
     
2,588
 
Additional paid in capital
           
181,761
     
181,676
 
Accumulated Deficit
           
(173,959
)
   
(174,270
)
Accumulated other comprehensive income (loss)
           
(2,190
)
   
(575
)
Total Stockholders' Equity attributable to the parent:
           
8,200
     
9,419
 
Non-controlling interest
           
(197
)
   
(243
)
Total Stockholders' Equity
           
8,003
     
9,176
 
Total Liabilities and Stockholders’ Equity
         
$
52,342
   
$
54,789
 
                         
Going Concern (note 3)
                       
Subsequent events (note 27)
                       



The accompanying notes form an integral part of these condensed interim consolidated financial statements. 
- 3 -


Patagonia Gold Corp.
Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
(in thousands of U.S. dollars)
 
   
Note
   
March 31, 2020
   
March 31, 2019
 
           $’000      $’000  
Revenue
       
$
5,215
   
$
4,871
 
Cost of Sales
   
6
     
(2,448
)
   
(6,823
)
Gross Profit (Loss)
         
$
2,767
   
$
(1,952
)
                         
Operating Income (Expenses):
                       
 Exploration expenses
           
(694
)
   
(842
)
 Administrative expense
   
21
     
(1,115
)
   
(2,312
)
 Share-based payments expense
   
19
     
(85
)
   
(21
)
 Interest expense
           
(717
)
   
(431
)
Total operating expense:
         
$
(2,611
)
 
$
(3,606
)
                         
Other Income/(Expenses)
                       
 Interest income
   
10
     
55
     
28
 
 Gain/(Loss) on foreign exchange
           
(5
)
   
(40
)
 Accretion expense
   
8
     
(162
)
   
(21
)
 Realized gain (loss) on investment
           
728
     
-
 
Total other income/(expenses)
           
616
     
(33
)
Income (Loss) – before income taxes
         
$
772
   
$
(5,591
)
                         
 Income tax benefit (expense)
           
(415
)
   
1,594
 
Net Income (Loss)
         
$
357
   
$
(3,997
)
                         
Attributable to non-controlling interest
           
46
     
(325
)
Attributable to equity share owners of the parent
           
311
     
(3,672
)
           
$
357
   
$
(3,997
)
Other Comprehensive Income (Loss) net of tax
                       
 Change in fair value of investment
   
10
     
(94
)
   
(1
)
 Foreign currency translation adjustment
           
(1,521
)
   
337
 
Total Other comprehensive Income (Loss)
         
$
(1,615
)
 
$
336
 
Total Comprehensive Income (Loss)
         
$
(1,258
)
 
$
(3,661
)
                         
Weighted average shares outstanding – basic and diluted
   
18
     
317,943,990
     
254,355,192
 
                         
Net Income (Loss) per share – Basic and Diluted
   
18
   
$
0.00
   
$
(0.02
)










The accompanying notes form an integral part of these condensed interim consolidated financial statements.




- 4 -


Patagonia Gold Corp.
Condensed Interim Consolidated Statement of Shareholders’ Equity (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
(in thousands of U.S. dollars)


   
Capital Stock
   
Preferred
Shares
   
Accumulated
Deficit
   
Accumulated Other Comprehensive Income (Loss)
   
Additional Paid in Capital
   
Total Attributable to parent
   
Non-Controlling Interest
   
Total
 
     $’000      $’000      $’000      $’000      $’000      $’000      $’000        
Balance at January 1, 2019
   
301
     
-
     
(164,717
)
   
(519
)
   
181,549
     
16,614
     
(121
)
   
16,493
 
Share Based Payments
   
-
     
-
     
-
     
-
     
21
     
21
     
-
     
21
 
Net Income (Loss)
   
-
     
-
     
(3,672
)
   
-
     
-
     
(3,672
)
   
(325
)
   
(3,997
)
Other Comprehensive Income (Loss)
   
-
     
-
     
-
     
336
     
-
     
336
     
-
     
336
 
Balance – March 31, 2019
   
301
     
-
     
(168,389
)
   
(183
)
   
181,570
     
13,299
     
(446
)
   
12,853
 
                                                                 
Balance at January 1, 2020
   
2,588
     
-
     
(174,270
)
   
(575
)
   
181,676
     
9,419
     
(243
)
   
9,176
 
Share based payments
   
-
     
-
     
-
     
-
     
85
     
85
     
-
     
85
 
Net Income (Loss)
   
-
     
-
     
311
     
-
     
-
     
311
     
46
     
357
 
Other Comprehensive Income (Loss)
   
-
     
-
     
-
     
(1,615
)
   
-
     
(1,615
)
   
-
     
(1,615
)
Balance – March 31, 2020
   
2,588
     
-
     
(173,959
)
   
(2,190
)
   
(181,761
)
   
8,200
     
(197
)
   
8,003
 


























The accompanying notes form an integral part of these condensed interim consolidated financial statements

- 5 -


Patagonia Gold Corp.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
(in thousands of U.S. dollars)
 
 
 
Note
   
March 31, 2020
   
March 31, 2019
 
           $’000      $’000  
Cash Flow From Operating Activities
                 
Net Income/(Loss)
       
$
357
   
$
(3,997
)
Items not affecting cash
                     
Depreciation of property, plant and equipment
   
21
     
427
     
563
 
Depreciation of mining rights
   
21
     
25
     
25
 
Share based payment expense
   
19
     
85
     
21
 
Asset retirement obligation
   
8
     
(95
)
   
(27
)
Write-down of inventory
   
6
     
-
     
2,368
 
Accretion expense
   
8
     
162
     
21
 
Deferred tax benefit/(expense)
           
415
     
(1,594
)
             
1,376
     
(2,620
)
Net change in non-cash working capital items
                       
(Increase)/decrease in receivables
           
291
     
1,102
 
(Increase)/decrease in deferred tax assets
           
1,144
     
492
 
(Increase)/decrease in inventory
           
(780
)
   
(279
)
(Increase)/decrease in other financial assets
           
94
     
1
 
Increase/(decrease) in accounts payable and accrued liabilities
           
(9
)
   
(887
)
Increase/(decrease) in accounts payable and accrued liabilities with related parties
           
125
     
37
 
Increase/(decrease) in provision
           
(4
)
   
(9
)
Increase/(decrease) in transaction taxes payable
           
(28
)
   
(108
)
Increase/(decrease) in deferred tax liabilities
           
(881
)
   
-
 
             
(48
)
   
349
 
Net cash provided by/(used in) operating activities
           
1,328
     
(2,271
)
                         
Cash Flows from Investing Activities
                       
Purchase of property, plant and equipment
   
11
     
(271
)
   
(136
)
Purchase of mineral property
   
7
     
-
     
(182
)
Proceeds from disposal of property, plant and equipment
           
14
     
5
 
Net cash provided by/(used in) investing activities
           
(257
)
   
(313
)
                         
Cash Flow from Financing Activities
                       
Bank indebtedness (repayment)
           
(3,411
)
   
2,168
 
Proceeds from loans with related parties
           
2,882
     
2,006
 
Repayment of loans
           
(37
)
   
(1,895
)
Net cash provided by/(used in) financing activities
           
(566
)
   
2,279
 
                         
Net Increase/(Decrease) in Cash
           
505
     
(305
)
Effect of Foreign Exchange on Cash
           
(491
)
   
57
 
Cash, Beginning of Period
           
685
     
660
 
Cash, End of the Period
         
$
699
   
$
412
 
                         
Taxes paid
           
(28
)
   
(108
)
Interest paid
           
(7
)
   
(107
)
Supplemental Non-Cash Information
                       
Change in value of investments
           
(94
)
   
(1
)



The accompanying notes form an integral part of these condensed interim consolidated financial statements.


- 6 -


Patagonia Gold Corp.
Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)
(in thousands of U.S. dollars unless otherwise stated)

1. Nature of business

On July 24, 2019, Patagonia Gold Corp. (PGDC.TSXV – “the Company” or “Patagonia”) [formerly Hunt Mining Corp (“Hunt”, or “Hunt Mining”)] and Patagonia Gold PLC (“PGP”) completed a reverse acquisition (or reverse takeover, the “RTO”) resulting in Hunt acquiring all issued shares of common stock of PGP in exchange for common shares of Hunt on the basis of 10.76 Hunt shares for each PGP share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80%. The operating name of Hunt Mining Corp. was changed to Patagonia Gold Corp (“the Company”) (Note 24).

Comparative information for the Company is that of PGP (accounting acquirer) prior to the reverse acquisition on July 24, 2019.

Patagonia is a mineral exploration and production company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties and exploitation of reserves in Santa Cruz, Rio Negro and Chubut provinces of Argentina.

The condensed interim consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:
 
Corporation
 
Incorporation
Percentage
ownership
Functional currency
Business purpose
 
Patagonia Gold S.A. (PGSA)
 
Argentina
 
95.3
 
US$
Production and Exploration Stage
Minera Minamalu S.A.
Argentina
100
US$
Exploration Stage
Huemules S.A.
Argentina
100
US$
Exploration Stage
Leleque Exploración S.A.
Argentina
100
US$
Exploration Stage
Patagonia Gold Limited (formerly Patagonia Gold PLC)
UK
100
GBP$
Holding
Minera Aquiline S.A.U.
Argentina
100
US$
Exploration Stage
Patagonia Gold Canada Inc.
Canada
100
CAD$
Holding
Patagonia Gold Chile S.C.M.
Chile
100
CH$
Exploration Stage
Ganadera Patagonia S.R.L.
Argentina
100
US$
Land Holding
1494716 Alberta Ltd.
Canada
100
CAD$
Nominee Shareholder
Hunt Gold USA LLC
USA
100
US$
Management Company

The Company’s activities include the exploration for and production of minerals from properties in Argentina and Chile. On the basis of information to date, properties where it has not yet been determined if economically recoverable ore reserves exist are classified as exploration-stage. Properties where economically recoverable ore reserves exist and are being exploited are classified as production-stage. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties.

On some properties, ongoing production and sales of gold and silver are being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations. As a result, there is increased uncertainty and economic risks of failure associated with these production activities. Despite the sale of gold and silver, these projects remain in the exploration stage because management has not established proven or probable ore reserves required to be classified in either the development or production stage.

The Company has initiated a corporate reorganization (the “Reorganization”), which resulted in Patagonia Gold SA (“PGSA”) and Cerro Cazador SA (“CCSA”) (former wholly owned subsidiary) merging and continuing as one legal entity. The Reorganization will facilitate the development of the Cap-Oeste gold / silver underground project (“Cap-Oeste”), with Cap-Oeste and the Martha processing plant being held by the same legal entity, PGSA. It is also expected to facilitate the development of an exploration program for the La Josefina and La Valenciana gold / silver projects. The Reorganization is expected to be completed by the end of the second quarter 2020 and be effective as of January 1, 2020.

In connection with this Reorganization, the Company also renegotiated the agreement between PGSA and the Provincial State owned Mining Company, Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”), pursuant to which Fomicruz held a 10% interest in PGSA, and the farm-in agreement between CCSA and Fomicruz regarding the La Josefina and the La Valenciana properties. Accordingly, Fomicruz agreed to reduce its interest in PGSA to 4.7% and to hold a 2% royalty on the properties it contributed to PGSA, with the exception of the La Josefina and La Valenciana properties, where Fomicruz will retain a 5% royalty.


- 7 -



2. Basis of presentation

The condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP).

These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

The Company’s presentation currency is the US Dollar.

The preparation of the condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Judgments made by management in the application of US GAAP that have a significant effect on the condensed interim consolidated financial statements and estimates with significant risk of material adjustment in the current and following periods are discussed in Note 4.
2. Going Concern
3. Going Concern

The accompanying condensed interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three months ended March 31, 2020, the Company had net income of $357. As at March 31, 2020, the Company has negative working capital of $31,068 and had an accumulated deficit of $173,959. The Company’s ability to continue as a going concern is dependent upon the ability to generate cashflows from operations and obtain financing. The Company intends to continue funding operations through operation of Cap-Oeste, Lomada, Martha, La Josefina project and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the three months ending March 31, 2020. There can be no assurance that the steps management is taking will be successful.

These factors, among others, indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material.
 
4. Significant Accounting Policies and Critical Accounting Judgments and Estimates

The accounting polices used in the preparation of these interim financial statements are consistent with those of the Company’s audited financial statements for the year ended December 31, 2019. Please see note 4 - Significant Accounting Policies and note 6 - Critical Accounting Judgement and Estimates contained in the 2019 10-K.

5. Recent Accounting Pronouncements

Recently issued and adopted accounting pronouncements

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)”. The new standard is effective for reporting periods beginning after December 15, 2019. The standard replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We adopted the new credit loss standard effective January 1, 2020. The adoption of the new credit loss standard did not have a material effect on our financial position, results of operations or cash flows.





- 8 -


Recently issued but not yet adopted accounting pronouncements

Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020 (January 1, 2021 for the Company). Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on its consolidated financial statements.

6. Inventories

 
March 31, 2020
 
December 31, 2019
   $’000    $’000  
 
       
Gold held on carbon
 
$
1,595
   
$
1,422
 
Silver and gold concentrate
   
642
     
157
 
Materials and supplies
   
1,890
     
1,768
 
 
 
$
4,127
   
$
3,347
 

In 2019, the Company closed the Lomada project and put the Cap-Oeste project into care and maintenance. As a result, the carrying value of inventory for these projects has been reviewed for impairment. The net realizable value of the inventory is less than the costs incurred in establishing the ore stockpile and therefore a write down of $2.37 million was required and is recorded in cost of sales for the three months ended March 31, 2019.

7. Mineral properties

   
Mining assets
   
Surface rights acquired
   
Total
 
     $’000      $’000      $’000  
Cost
   
     
       
Balance at January 1, 2019
 
$
1,780
   
$
745
   
$
2,525
 
Reverse acquisition (Note 24)
   
6,830
     
1,035
     
7,865
 
Additions
   
216
     
-
     
216
 
Impairment
   
(1,996
)
   
-
     
(1,996
)
Balance December 31, 2019
 
$
6,830
   
$
1,780
   
$
8,610
 
Additions
   
-
     
-
     
-
 
Impairment
   
-
     
-
     
-
 
Balance March 31, 2020
 
$
6,830
   
$
1,780
   
$
8,610
 

Trilogy Mining Corporation

In January 2016, Patagonia Gold PLC (PGP) entered into an earn–in agreement with Trilogy Mining Corporation (“Trilogy”) in relation to the San José Project in Uruguay. This was recognized within mining assets at a cost of $1,996. In December 2019, the Company announced the termination of its option agreement with Trilogy and in exchange received common shares of Trilogy, that will result in PGP owning 42.5% of the then issued and outstanding shares of Trilogy. In connection with the termination of the option agreement, the Company impaired $1,996 of the mining asset related to San José Project in Uruguay during the year ended December 31, 2019.

Surface rights

The Company owns the surface rights of land encompassing the Estancia La Bajada, Estancia El Tranquilo, Estancia El Rincon, Estancia La Josefina and the Estancia 1° de Abril.

There is a back in right granted to the sellers under Estancia El Rincon’s title deed whereby the Company irrevocably committed to resell the estancia to its former owner in the event that two consecutive years elapse without mining activities. Current activity on this property includes the Lomada Project.


- 9 -


Mina Martha project

On May 6, 2016, the Company acquired the assets of the Mina Martha project from Coeur Mining Inc. (“Coeur”). The Mina Martha project consists of land, mineral rights, a mine camp, offices, a warehouse, maintenance shop, mining facilities including a flotation mill and a tailings retention facility.

La Josefina project

In March 2007, the Company acquired the exploration and development rights to the La Josefina project from Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”) the Santa Cruz provincial mining and petroleum company.

In July 2007, the Company entered into an agreement (subsequently amended) with Fomicruz which provides that, in the event that a positive feasibility study is completed on the La Josefina property, a Joint Venture Corporation (“JV Corporation”) would be formed by the Company and Fomicruz. The Company would own 81% of the joint venture company and Fomicruz would own the remaining 19%. Fomicruz has the option to earn up to a 49% participating interest in the JV Corporation by reimbursing the Company an equivalent amount, up to 49%, of the exploration investment made by the Company. The Company has the right to buy back any increase in Fomicruz’s ownership interest in the JV Corporation at a purchase price of $0.2 million per each percentage interest owned by Fomicruz down to its initial ownership interest of 19%; the Company can also purchase 10% of the Fomicruz’s initial 19% JV Corporation ownership interest by negotiating a purchase price with Fomicruz. Under the agreement, the Company has until the end of 2019 to complete cumulative exploration expenditures of $18 million and determine if it will enter into production on the property. As at December 31, 2018, the Company had incurred approximately $20 million and is in current discussions with Fomicruz to develop a plan for production. In October 2019, the agreement was extended until April 30, 2021 which period may be extended for an additional one-year term.

As at March 31, 2020, this project has a carrying amount of $Nil (December 31, 2019 - $Nil) on the condensed interim consolidated balance sheet.

8. Asset retirement obligation

The Company is legally required to perform reclamation on sites where environmental disturbance is caused by the development or on-going mining of a property to restore it to its original condition at the end of its useful life. In accordance with FASB ASC 410-20, Asset Retirement Obligations, the Company recognized the fair value of that liability as an asset retirement obligation. The total amount of undiscounted cash flows required to settle the estimated obligation is $5,533 (December 31, 2019 - $5,533) which has been discounted using a credit-adjusted rate of 24.94% (December 31, 2019 – 24.94%) and an inflation rate of 1.54% (December 31, 2019 – 2.29%).

The following table describes the changes to the Company's asset retirement obligation liability:



   
Three months ended
   
Year ended
 
 
 
March 31, 2020
 
December 31, 2019
     $’000      $’000  
Asset retirement obligation at beginning of period
 
$
2,812
   
$
552
 
Reverse acquisition (note 24)
   
-
     
739
 
Change in estimate
   
(95
)
   
1,342
 
Accretion expense
   
162
     
179
 
Asset retirement obligation at end of period
 
$
2,879
   
$
2,812
 













- 10 -


9. Mining Rights


   
Fomicruz Agreement
   
Minera Aquiline Argentina
   
Total
 
     $’000      $’000      $’000  
                   
Balance at January 1, 2019
 
$
3,288
   
$
13,187
   
$
16,475
 
Amortization
   
(100
)
   
-
     
(100
)
Exchange differences
   
-
     
622
     
622
 
Balance December 31, 2019
 
$
3,188
   
$
13,809
   
$
16,997
 
Amortization
   
(25
)
   
-
     
(25
)
Exchange differences
   
-
     
(1,124
)
   
(1,124
)
Balance March 31, 2020
 
$
3,163
   
$
12,685
   
$
15,848
 

Fomicruz Agreement

On October 14, 2011, Patagonia Gold, PGSA and Fomicruz entered into a definitive strategic partnership agreement in the form of a shareholders’ agreement (“Fomicruz Agreement”) to govern the affairs of PGSA and the relationship between the Company, PGSA and Fomicruz. Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine Fomicruz’s mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA. The Fomicruz Agreement establishes the terms and conditions of the strategic partnership for the future development of certain PGSA mining properties in the Santa Cruz. The Company will fund 100% of all exploration expenditures on the PGSA properties to the pre-feasibility stage, with no dilution to Fomicruz. After feasibility stage is reached, Fomicruz is obliged to pay its 10% share of the funding incurred thereafter on the PGSA properties, plus annual interest at LIBOR +1% to the Company. Such debt and interest payments will be guaranteed by an assignment by Fomicruz of 50% of the future dividends otherwise payable to Fomicruz on its shares. The Company will manage the exploration and potential future development of the PGSA properties.

The mining rights acquired have been measured by reference to the estimated fair value of the equity interest given to Fomicruz. Management has estimated the fair value of the 10% interest in PGSA acquired by Fomicruz, on or about October 14, 2011 at $4 million. In determining this fair value estimate, management considered many factors including the net assets of PGSA and the illiquidity of the 10% interest. This amount has been recorded as an increase in the equity of PGSA and as a mining right asset. In these condensed interim consolidated financial statements, the increase in equity in PGSA has been recorded as non-controlling interest. The initial share of net assets of PGSA ascribed to the non-controlling interest amounted to $4 million.

Effective January 1, 2020, the Company’s former subsidiary Cerro Cazador S.A merged with PGSA and as a result, Formicruz has a 4.7% interest in the newly merged entity.

Minera Aquiline Argentina Agreement

On January 31, 2018, Patagonia, through a wholly owned subsidiary (Patagonia Gold Canada Inc. “PGCAD”), has acquired the Calcatreu gold asset in Rio Negro, Argentina, by way of acquiring 100% of the shares of Minera Aquiline Argentina S.A. (“MASA”), a subsidiary of Pan American Silver Corporation. Total consideration for the acquisition amounted to $15 million. PGCAD has made the initial payment of $5 million on January 31, 2018 and the final payment of $10 million on legal completion on May 18, 2018.

This transaction was accounted for as an asset acquisition and the purchase consideration was allocated to Mining Rights at $14.6 million and other net assets at $0.4 million. These mining rights will be amortized on a unit-of-production method over the estimated period of economically recoverable resources once the project reaches the commercial production phase.

10. Other Financial Assets

The Company has short-term investments in equity securities which are recorded at fair value through other comprehensive income/(loss). As of the three months ended March 31, 2020, the value of the short-term investments in equity decreased to $6 (December 31, 2019 - $8). The change in the fair value of $2 (December 31, 2019 - $3) for the three months ended March 31, 2020 is recorded as other comprehensive loss in the Company’s condensed interim consolidated statement of operations and comprehensive income/(loss).



- 11 -


The Company has a performance bond that was originally required to secure the Company’s rights to explore the La Josefina property. It is a step-up US dollar denominated 2.5% coupon bond, paying quarterly, issued by the Government of Argentina with a face value of $600 and a maturity date of 2035. The bond trades in the secondary market in Argentina. The bond was originally purchased for $247. As of the three months ended March 31, 2020, the value of the bond increased to $234 (December 31, 2019 - $326). The change in the face value of the performance bond of $92 (December 31, 2019 - $25) for the three months ended March 31, 2020 ended is recorded as other comprehensive income/(loss) in the Company’s condensed interim consolidated statement of operations and comprehensive income/(loss).

Since Cerro Cazador S.A. (“CCSA”) fulfilled its exploration expenditure requirement mandated by the agreement with Fomicruz, the performance bond was no longer required to secure the La Josefina project. Therefore, in September 2010 the Company used the bond to secure the La Valenciana project, an additional Fomicruz exploration project. As of March 31, 2020, there are no restrictions on the performance bond.

11. Property, Plant and Equipment
 
 
 
Plant
   
Buildings
   
Vehicles and Equipment
   
Improvements and advances
   
Total
 
     $’000      $’000      $’000      $’000      $’000  
 Cost
                             
 Balance at December 31, 2018
 
$
5,901
   
$
230
   
$
13,458
   
$
566
   
$
20,155
 
Reverse acquisition (Note 24)
   
1,732
     
69
     
409
     
-
     
2,210
 
Additions
   
203
     
-
     
244
     
330
     
777
 
Disposals
   
-
     
-
     
(326
)
   
(51
)
   
(377
)
Transfers
   
-
     
-
     
106
     
(106
)
   
-
 
 Balance at December 31, 2019
 
$
7,836
   
$
299
   
$
13,891
   
$
739
   
$
22,765
 
Additions
   
24
     
-
     
59
     
188
     
271
 
Disposals
   
-
     
-
     
(177
)
   
-
     
(177
)
Balance at March 31, 2020
 
$
7,860
   
$
299
   
$
13,773
   
$
927
   
$
22,859
 
                                         
 Accumulated depreciation
                                       
Balance at December 31, 2018
 
$
5,761
   
$
33
   
$
4,883
   
$
-
   
$
10,677
 
Disposals
   
-
     
-
     
(264
)
   
-
     
(264
)
Depreciation for the year
   
144
     
9
     
1,691
     
-
     
1,844
 
Balance at December 31, 2019
 
$
5,905
   
$
42
   
$
6,310
   
$
-
   
$
12,257
 
Disposals
   
-
     
-
     
(163
)
   
-
     
(163
)
Depreciation for the period
   
54
     
3
     
370
     
-
     
427
 
Balance at March 31, 2020
 
$
5,959
   
$
45
   
$
6,517
   
$
-
   
$
12,521
 
 
                                       
 Net book value
                                       
 At December 31, 2019
 
$
1,931
   
$
257
   
$
7,581
   
$
739
   
$
10,508
 
 At March 31, 2020
 
$
1,901
   
$
254
   
$
7,256
   
$
927
   
$
10,338
 


12. Receivables
 
 
 
March 31,
   
December 31,
 
 
2020
   
2019
 
     $’000      $’000  
 Receivable from sale
 
$
152
   
$
150
 
 Value added tax ("VAT") recoverable
   
1,382
     
880
 
 Other receivables
   
379
     
486
 
 Total receivables
 
$
1,913
   
$
1,516
 


- 12 -



13. Other Receivables
 
 
 
March 31,
 
December 31,
 
 
2020
   
2019
 
     $’000      $’000  
 Value added tax ("VAT") recoverable
 
$
665
   
$
1,226
 
 Other receivables
   
2,461
     
2,588
 
 Total Other Receivables
 
$
3,126
   
$
3,814
 

14. Bank indebtedness

As at March 31, 2020, the Company has bank indebtedness of $11,578 (December 31, 2019 – $14,989) in the form of operating lines of credit which have an interest rate of 1.5% plus refinancing rate and mature on the June 30, 2020. As at March 31, 2020, the interest rate on the lines of credit is 2.75%. The lines of credit have no specific terms of repayment and the Company renews them every year.

Subsequent to March 31, 2020, the Company renewed the operating lines of credit at an interest rate of 1.8% and mature on January 31, 2021.

15. Accounts payable and accrued liabilities

 
March 31,
December 31,
 
2020
 
2019
 
   $’000    $’000  
Trade accounts payable and accrued liabilities
 
$
4,763
   
$
5,102
 
Other accruals
   
1,193
     
890
 
Accounts payable to related parties (note 20)
   
6,842
     
6,717
 
Total
 
$
12,798
   
$
12,709
 

16. Loan payable and current portion of long-term debt

 
March 31,
December 31,
 
2020
 
2019
 
   $’000    $’000  
Current portion of long-term debt (note 17)
 
$
202
   
$
200
 
Current portion of long-term debt with related parties (note 17)
   
13,120
     
-
 
Leases payable
   
109
     
134
 
Total
 
$
13,431
   
$
334
 



















- 13 -


17. Long-term debt

 
 
March 31,
 
December 31,
 
 
2020
   
2019
 
     $’000      $’000  
Loan to related party secured by a letter of guarantee from the Company, at 5% interest per annum, due 2021 (note 20)
 
$
10,458
   
$
7,908
 
                 
Loan to related party secured by assets of the Company payable 5.75% interest per annum, due 2022
   
501
     
512
 
                 
Acquired in reverse acquisition. Unsecured loan payable to related party at 8% interest per annum, due 2022 (note 20 and 24)
   
1,034
     
990
 
                 
Acquired in reverse acquisition. Unsecured loan payable to related party at 8% interest per annum, due 2021 (note 20 and 24)
   
861
     
826
 
                 
Acquired in reverse acquisition. Unsecured loan payable to related party at 7% interest per annum, due 2021 (note 20 and 24)
   
1,084
     
1,038
 
                 
Accrued interest on debt
   
1,152
     
946
 
   
$
15,090
   
$
12,220
 
Less current portion
   
(13,322
)
   
(200
)
   
$
1,768
   
$
12,020
 

Principal payments on long-term debts are due as followed:

Year ending December 31,
2020
195
2021
13,327
2022
1,568

18. Net income (loss) per share

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For the three months ended March 31, 2020, there were 7,650,000 stock options that were not included in the diluted weighted average number of common shares outstanding as the average market price of the Company’s common shares during the three month period ended March 31, 2020 was below the exercise price of the stock options.

 
March 31,
 
March 31,
 
 
2020
 
2019
 
Net income (loss) ($’000)
 
$
357
   
$
(3,997
)
Weighted average number of common shares outstanding – basic and diluted
   
317,943,990
     
254,355,192
 
Net income (loss) per share
 
$
0.00
   
$
(0.02
)










- 14 -


19. Capital stock

Authorized:
Unlimited number of common shares without par value
Unlimited number of preferred shares without par value

Issued:

Common Shares
 
Three months ended
 
 
Year ended
 
 
 
March 31, 2020
 
 
December 31, 2019
 
   
Number
   
Amount
   
Number
   
Amount
 
 
 
 
 
 
$’000
 
 
 
 
 
$’000
 
Balance, beginning of year
 
 
317,943,990
 
 
$
2,588
 
 
 
254,355,192
 
 
 $
301
 
Share issued in reverse acquisition (note 24)
   
-
     
-
     
63,588,798
     
2,287
 
Balance, at end of period
 
 
317,943,990
 
 
$
2,588
 
 
 
317,943,990
   
$
2,588
 

Preferred shares are non-redeemable and non-transferrable with discretionary dividends and hence are classified as equity. Preferred shares shall be issued at a price of $0.30 per share and will not have voting rights. As at March 31, 2020, there were no preferred shares issued by the Company (December 31, 2019 - nil).

Shares issued in reverse acquisition

On July 24, 2019, Hunt concluded an agreement with PGP on the terms of a recommended share for share exchange offer to be made by Hunt for all the issued shares of common stock of PGP in exchange for the common shares of Hunt Mining on the basis of 10.76 Hunt Shares for each PGP Share. Hunt issued 254,355,192 common shares to the shareholders of PGP representing an ownership interest of approximately 80% in Hunt in exchange for all of the issued and outstanding shares of PGP (Note 24).

Normal Course Issuer Bid

On February 19, 2020, the Company announces that it has received approval from the TSX Venture Exchange (“TSXV”) of its Notice of Intention to Make a Normal Course Issuer Bid (the “NCIB”). Under the NCIB, the Company may purchase for cancellation up to 15,897,199 common shares (the “Shares”) (representing approximately 5% of its 317,943,990 issued and outstanding common shares as of February 17, 2020) over a twelve month period commencing on February 21, 2020. The NCIB will expire no later than February 20, 2021. During the three months ended March 31, 2020, the Company did not repurchase any common shares under the NCIB.

Stock options

Under the Company’s share option plan, and in accordance with TSX Venture Exchange requirements, the number of common shares reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 5 years and vest at the discretion of the Board of Directors. In connection with the foregoing, the number of common shares reserved for issuance to: (a) any individual director or officer will not exceed 5% of the issued and outstanding common shares; and (b) all consultants will not exceed 2% of the issued and outstanding common shares.

All equity-settled share-based payments are ultimately recognized as an expense in the statement of operations and comprehensive income/(loss) with a corresponding credit to “Additional Paid in Capital”. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different to that estimated on vesting.








- 15 -


 
 
Three months ended March 31, 2020
 
 
Year ended December 31, 2019
 
 
 
 
Number of options
 
 
Weighted Average Price (CAD)
 
 
Number of options
 
 
Weighted Average Price (CAD)
 
 
 Balance, beginning of period
 
 
7,650,000
   
$
0.065
 
 
 
1,706,830
 
 
$
13,896
   
 Granted
 
 
-
 
 
$
-
 
 
 
7,650,000
 
 
$
0.065
   
 Expiration of stock options
 
 
-
 
 
$
-
 
 
 
(1,706,830
)
 
$
(13.896
)
 
 Balance, end of period
 
 
7,650,000
 
 
$
0.065
 
 
 
7,650,000
 
 
$
0.065
   
 
 
 
Range of Exercise prices (CAD)
 
 
Number outstanding
 
 
Weighted average life (years)
 
 
Weighted average exercise price (CAD)
 
 
Number exercisable on March 31, 2020
 
Stock options
 
$
0.065
     
7,650,000
 
 
 
4.74
 
 
$
0.065
     
7,650,000
 

On May 29, 2019, all outstanding stock option holders consented to the cancellation of their outstanding stock options.

On September 25, 2019, the Company granted 7,650,000 options to directors, officers, and employees with an exercise price of CAD $0.065 and an expiry date of September 25, 2024. The stock options vest one year after the date of grant. The fair value of the options on grant date was estimated to be $456 and the Company recognized an expense of $85 during the three months ended March 31, 2020. The fair value of the options was calculated using the Black-Scholes option pricing model and using the following assumptions:

 Discount rate
1.46%
 
 Expected volatility
253.14%
 
 Expected life (years)
5
 
 Expected dividend yield
0%
 
 Forfeiture rate
0%
 
 Stock price
CAD$ 0.06

Warrants
_____________
There are no warrants outstanding as at March 31, 2020 and December 31, 2019 as they expired without being exercised during the previous year at the end of their four-year term.

20. Related party transactions

Key management personnel include the members of the Board of Directors and executive officers of the Company. Related party transactions and balances not disclosed elsewhere in the condensed interim consolidated financial statements are as follows:
 
 
 
 
Name and Principal Position
 
 Remuneration, fees or interest expense
 Loans or Advances
 Remuneration, fees, or interest payments
 Loan payments
 Included in Accounts Payable
 
Included in Loan Payable and Long-term debt
 
 
Three months ended March 31
 As at March 31, 2020 and
December 31, 2019
   
$’000
$’000
 
$’000
 
$’000
$’000
$’000
A company controlled by a director1
2020
95
-
-
-
6,469
-
 - admin, office, and interest expenses
2019
 
-
 
-
 
-
 
-
 
6,374
 
-
A company controlled by a director
2020
145
 2,550
-
-
255
10,830
 - salaries and wages
2019
346
7,908
33
-
227
8,163
 Directors
2020
65
-
63
-
118
-
 - salaries and wages
2019
337
-
317
-
116
-
 Director1
2020
-
347
-
-
-
3,760
 -loans
2019
-
347
-
-
-
3,545
1
Balances owed to related parties were acquired as part of the reverse acquisition (Note 24)
 



- 16 -


As at March 31, 2020, the Company has $6,842 (December 31, 2019 - $6,717) in accounts payable owing to related parties which relate primarily to funds advanced from companies controlled by directors in order to cover exploration costs.

21. Administrative expenses

   
Three months ended
 
   
March 31, 2020
   
March 31, 2019
 
     $’000      $’000  
General and administrative
 
$
739
   
$
1,869
 
Argentina statutory taxes
   
100
     
102
 
Professional fees
   
68
     
199
 
Operating leases
   
21
     
24
 
Directors’ remuneration
   
59
     
71
 
Gain on sale of property, plant and equipment
   
(5
)
   
(14
)
Depreciation of property, plant and equipment
   
427
     
563
 
Depreciation allocated to inventory
   
(392
)
   
(541
)
Amortization of mining rights
   
25
     
25
 
Consulting fees
   
98
     
11
 
Transaction taxes expenses (income)
   
(25
)
   
3
 
Total
 
$
1,115
   
$
2,312
 

22. Financial Instruments

The Company’s financial instruments consist of cash, receivables, performance bond, accounts payable and accrued liabilities, loan payable, interest payable, and long-term debt.

The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
 
 
Level 2: inputs, other than quoted prices, that are observable, either directly or indirectly. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the marketplace.
 
 
Level 3: inputs are less observable, unavoidable or where the observable data does not support the majority of the instruments’ fair value.












- 17 -


Fair value

As at March 31, 2020, there were no changes in the levels in comparison to December 31, 2019. The fair values of financial instruments are summarized as follows:

 
 
March 31, 2020
 
 
December 31, 2019
 
 
 
Carrying amount
   
Fair value
   
Carrying amount
   
Fair value
 
 
 
 
$‘000
     
$‘000
     
$‘000
     
$‘000
 
 Financial Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Amortized cost
 
 
         
 
 
 
 
 
 
 
 
 
 Cash (Level 1)
 
 
699
     
699
     
685
     
685
 
 
 
 
                           
 Available for sale
 
 
                           
 Other financial assets (Level 1)
 
 
240
     
240
     
334
     
334
 
 
 
 
                           
 Loans and receivables
 
 
                           
 Receivables and other receivable ¹
 
 
2,992
     
2,992
     
3,224
     
3,224
 
 
 
 
                           
 Financial Liabilities
 
 
                           
 
 
 
                           
 Amortized cost
 
 
                           
 Bank indebtedness
 
 
11,578
     
11,578
     
14,989
     
14,989
 
 Accounts payable and accrued liabilities
 
 
12,798
     
12,798
     
12,709
     
12,709
 
 Loan payable and current portion of long-term debt
 
 
13,729
     
13,431
     
334
     
334
 
 Long-term debt
 
 
2,051
     
1,768
     
13,026
     
13,026
 
¹ Amounts exclude value added tax (“VAT”) recoverable of $2,047 and $2,106 as at March 31, 2020 and December 31, 2019.

Cash and other financial assets are measured based on Level 1 inputs of the fair value hierarchy on a recurring basis.

The carrying value of receivables, other receivable, accounts payable and accrued liabilities, bank indebtedness, loan payable, interest payable, and long-term debt approximate their fair value because of the short-term nature of these instruments and because long-term debt approximates a market rate of interest. The Company assessed that there were no indicators of impairment for these financial instruments.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high quality financial institutions and limits the amount of credit exposure with any one institution. Receivables consist of trade receivables and VAT recoverable and are not considered subject to significant risk, because the amounts are due from a government and a customer who is considered credit worthy.

Concentration risk

The Company has concentrations of credit risk with respect to its trade receivables, the majority of which are concentrated internationally amongst a small number of customers. As at March 31, 2020, the Company had two customers whose trade receivables of $150 (December 31, 2019 – $150) accounted for greater than 10% of the total trade receivables. The Company controls credit risk through monitoring procedures, and by performing credit evaluations of its customers, but generally does not require collateral to secure accounts receivable.

The Company has concentrations in the volume of sales it made to customers. For the three months ended March 31, 2020, the Company made sales of $5,215 (2019 - $4,871) to two customers which accounted for greater than 10% of total revenue.

The Company currently maintains a substantial portion of its day-to-day operating cash balances at financial institutions. As at March 31, 2020, the Company had total cash balances of $699 (December 31, 2019 - $685) at financial institutions, where $Nil (December 31, 2019 - $Nil) is in excess of federally insured limits.



- 18 -



23. Segment reporting

All of the Company’s operations are in the mineral properties exploration industry with its principal business activity in mineral exploration. The Company conducts its activities primarily in Argentina. All of the Company’s long-lived assets are located in Argentina.The Company’s net income/(loss) and its geographic allocation of total assets and total liabilities may be summarized as follows:



For the three months ended March 31, 2020
 
   
Lomada Project
   
Cap- Oeste Project
   
Calcatreu Project
   
Martha and La Josefina Projects
   
Argentina Uruguay and Chile
   
UK
   
North America
   
Total
 
   

$’000
   

$’000
   

$’000
   

$’000
   

$’000
   

$’000
   
$’000
   

$’000
 
Revenue
 
$
1,337
   
$
3,447
   
$
-
   
$
431
   
$
-
   
$
-
   
$
-
   
$
5,215
 
Cost of sales
   
(500
)
   
(1,599
)
   
-
     
(349
)
   
-
     
-
     
-
     
(2,448
)
Gross profit (loss)
 
$
837
   
$
1,848
   
$
-
   
$
82
   
$
-
   
$
-
   
$
-
   
$
2,767
 
                                                                 
Operating expense
                                                               
Exploration expense
 
$
-
   
$
(141
)
 
$
(247
)
 
$
(40
)
 
$
(266
)
 
$
-
   
$
-
   
$
(694
)
Administrative expense
   
-
     
-
     
(51
)
   
-
     
(672
)
   
(154
)
   
(178
)
   
(1,055
)
Depreciation expense
   
-
     
-
     
(4
)
   
-
     
(31
)
   
(25
)
   
-
     
(60
)
Impairment of mineral properties
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Share-based payments
   
-
     
-
     
-
     
-
     
-
     
-
     
(85
)
   
(85
)
Interest expense
   
-
     
-
     
-
     
-
     
(188
)
   
(199
)
   
(330
)
   
(717
)
Total operating expense
 
$
-
   
$
(141
)
 
$
(302
)
 
$
(40
)
 
$
(1,157
)
 
$
(378
)
 
$
(593
)
 
$
(2,611
)
                                                                 
Other income/(expense)
                                                               
Interest income
 
$
-
   
$
-
   
$
1
   
$
-
   
$
54
   
$
-
   
$
-
   
$
55
 
Gain/(loss) on foreign exchange
   
-
     
-
     
237
     
-
     
(411
)
   
(660
)
   
829
     
(5
)
Accretion expense
   
(104
)    
(8
)
   
-
     
(50
)
   
-
     
-
     
-
     
(162
)
Realized gain (loss) on investment
   
-
     
-
     
-
     
-
     
728
     
-
     
-
     
728
 
Total other income/(expense)
 
$
(104
)
 
$
(8
)
 
$
238
   
$
(50
)
 
$
371
   
$
(660
)
 
$
829
   
$
616
 
                                                                 
Income/(loss) – before income tax
 
$
733
)  
$
1,699
   
$
(64
)
 
$
(8
)
 
$
(786
)
 
$
(1,038
)
 
$
236
   
$
772
 
Income tax/(benefit)
   
-
     
-
     
(17
)
   
-
     
(398
)
   
-
     
-
     
(415
)
Net income/(loss)
 
$
733
   
$
1,699
   
$
(81
)
 
$
(8
)
 
$
(1,184
)
 
$
(1,038
)
 
$
236
   
$
357
 





- 19 -


For the three months ended March 31, 2019
 
   
Lomada Project
   
Cap- Oeste Project
   
Calcatreu Project
   
Martha and La Josefina Projects
   
Argentina Uruguay and Chile
   
UK
   
North America
   
Total
 
   
$’000


$’000


$’000


$’000


$’000


$’000


$’000


$’000  
Revenue
 
$
1,265

 
$
3,606
   
$
-
   
$
-
   
$
-
   
$
-
   
$
-
   
$
4,871
 
Cost of sales
   
(1,616
)    
(5,207
)
   
-
     
-
     
-
     
-
     
-
     
(6,823
)
Gross profit (loss)
 
$
(351
)  
$
(1,601
)
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
   
$
(1,952
)
                                                                 
Operating expense
                                                               
Exploration expense
 
$
-
   
$
-
   
$
(604
)
 
$
-
   
$
(238
)
 
$
-
   
$
-
   
$
(842
)
Administrative expense
   
-
     
-
     
(31
)
   
-
     
(2,007
)
   
(209
)
   
(18
)
   
(2,265
)
Depreciation expense
   
-
     
-
     
(5
)
   
-
     
(17
)
   
(25
)
   
-
     
(47
)
Share-based payments
   
-
     
-
     
-
     
-
     
-
     
(21
)
   
-
     
(21
)
Interest expense
   
-
     
-
     
-
     
-
     
(283
)
   
(148
)
   
-
     
(431
)
Total operating expense
 
$
-
   
$
-
   
$
(640
)
 
$
-
   
$
(2,545
)
 
$
(403
)
 
$
(18
)
 
$
(3,606
)
                                                                 
Other income/(expense)
                                                               
Interest income
 
$
-
   
$
-
   
$
-
   
$
-
   
$
28
   
$
-
   
$
-
   
$
28
 
Gain/(loss) on foreign exchange
   
-
     
-
     
26
     
-
     
(35
)
   
(350
)
   
319
     
(40
)
Accretion expense
   
(12
)
   
(9
)
   
-
     
-
     
-
     
-
     
-
     
(21
)
Total other income/(expense)
 
$
(12
)  
$
(9
)
 
$
26
   
$
-
   
$
(7
)
 
$
(350
)
 
$
319
   
$
(33
)
                                                                 
Income/(loss) – before income tax
 
$
(363
)
 
$
(1,610
)
 
$
(614
)
 
$
-
   
$
(2,552
)
 
$
(753
)
 
$
301
   
$
(5,591
)
Income tax/(benefit)
   
-
     
-
     
-
     
-
     
1,594
     
-
     
-
     
1,594
 
Net income/(loss)
 
$
(363
   
$
(1,610
)
 
$
(614
)
 
$
-
   
$
(958
)
 
$
(753
)
 
$
301
   
$
(3,997
)

















- 20 -


   
Total Assets
   
Total liabilities
 
   
March 31, 2020
   
December 31, 2019
   
March 31, 2020
   
December 31, 2019
 
     $’000      $’000      $’000      $’000  
Argentina – Cap-Oeste
 
$
10,814
   
$
9,116
   
$
2,735
   
$
2,629
 
Argentina – Lomada
   
1,894
     
2,996
     
2,102
     
1,979
 
Argentina – Calcatreu
   
16,473
     
14,678
     
1,519
     
1,591
 
Argentina – Martha & La Josefina
   
10,697
     
12,106
     
2,145
     
5,475
 
Argentina and Chile
   
7,632
     
11,263
     
3,628