PNRLF Premium Resources Ltd (PK)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission File Number: 000-14740

 

 

 

PREMIUM NICKEL RESOURCES LTD.

(Exact name of registrant as specified in its charter)

 

 

Ontario, Canada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Suite 3400, One First Canadian Place, P.O. Box 130, Toronto, Ontario, Canada		M5X 1A4
(Address of principal executive offices)		(Zip Code)

 

(604) 770-4334

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of November 14, 2024, there were 185,708,588 Common Shares issued and outstanding.

 

 

 

TABLE OF CONTENTS

 

Part I	Financial Information	3
	Cautionary Note Regarding Forward-Looking Statements	3
	Cautionary Statements to Investors on Reserves and Resources	3
	Item 1. Financial Statements	4
	Unaudited Condensed Interim Consolidated Balance Sheets	5
	Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss	6
	Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	7
	Unaudited Condensed Interim Consolidated Statements of Cash Flows	8
	Notes to the Unaudited Condensed Interim Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	50
	Item 4. Controls and Procedures	50
Part II	Other Information	51
	Item 1. Legal Proceedings	51
	Item 1A. Risk Factors	51
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3. Defaults Upon Senior Securities	51
	Item 4. Mine Safety Disclosures	51
	Item 5. Other Information	51
	Item 6. Exhibits	52
Exhibit Index		52
Signature		53

 

 

PART I - FINANCIAL INFORMATION

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Report”) for Premium Nickel Resources Ltd. (the “Company” or “PNRL”) (as defined herein), contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) as filed with the Securities and Exchange Commission on June 28, 2024 and elsewhere in this Report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” of the 2023 Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date hereof. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.

 

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

Unless otherwise indicated, all references to “$”,”C$” and “dollars” in this Report refer to Canadian dollars, references to “US$” in this Report refer to United States dollars and references to “BWP” in this Report refer to Botswanan Pula. On September 30, 2024, the daily exchange rate: (i) for one United States dollar expressed in Canadian dollars was US$1.00 = C$1.3499 (or C$1.00 = US$0.7408); (ii) for one Botswanan Pula expressed in Canadian dollars was BWP 1.00 = C$0.1019 (or C$1.00 = BWP 9.8135); and (iii) for one Botswanan Pula expressed in United States dollars was BWP 1.00 = US$0.0764 (or US$1.00 = BWP 13.0890). “This quarter” or “the quarter” means the third quarter (“Q3”) of 2024. “Year-to-date” or “year-to-date period” means the nine months ended September 30 (“YTD”).

 

CAUTIONARY STATEMENTS TO INVESTORS ON RESERVES AND RESOURCES

 

This Report uses the terms “mineral resources”, “indicated mineral resources” and “inferred mineral resources” as such terms are defined under Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”). NI 43-101 is a rule developed by the Canadian Securities Administrators, which establishes standards for all public disclosure a Canadian issuer makes of scientific and technical information concerning mineral projects.

 

On October 31, 2018, the SEC adopted new mining disclosure rules (“S-K 1300”) that are more closely aligned with current industry and global regulatory practices and standards, including NI 43-101, with which we comply because we are also a “reporting issuer” under Canadian securities laws. While S-K 1300 is more closely aligned with NI 43-101 than the prior mining disclosure rules of the Securities and Exchange Commission, there are some differences. Accordingly, there is no assurance any mineral resources that the Company may report as “indicated mineral resources” and “inferred mineral resources” under NI 43-101 will be the same as the reserve or resource estimates prepared under S-K 1300. Investors should not assume that any part or all of indicated mineral resources or inferred mineral resources will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralization described using these terms has a greater amount of uncertainty as to their existence and feasibility than mineralization that has been characterized as reserves. Accordingly, investors are cautioned not to assume that any “indicated mineral resources” or “inferred mineral resources” on the Company’s projects are or will be economically or legally mineable. Further, “inferred resources” have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, investors are also cautioned not to assume that all or any part of the inferred resources exist. In accordance with Canadian rules, estimates of “inferred mineral resources” cannot form the basis of feasibility or other economic studies, except in limited circumstances where permitted under NI 43-101.

 

It should be noted that the Company filed technical reports prepared in accordance with S-K 1300 as Exhibits 96.1 and 96.2 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission on June 28, 2024.

 

 

Item 1. Financial Statements

 

 

UNAUDITED CONDENSED INTERIM Consolidated Financial Statements

 

For the three and nine months ended September 30, 2024 and 2023

 

In accordance with generally accepted accounting principles in the United States and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission and stated in Canadian dollars, unless otherwise indicated.

 

INDEX

 

Unaudited Condensed Interim Consolidated Financial Statements

 

	■	Unaudited Condensed Interim Consolidated Balance Sheets
	■	Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
	■	Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
	■	Unaudited Condensed Interim Consolidated Statements of Cash Flows
	■	Notes to the Unaudited Condensed Interim Consolidated Financial Statements

 

 

 

Unaudited Condensed Interim Consolidated Balance Sheets

(Expressed in Canadian dollars)

 

				As at
		Notes		September 30, 2024 $				December 31, 2023 $
ASSETS
CURRENT ASSETS
Cash and cash equivalents					17,358,377				19,245,628
Prepaid expenses					1,285,587				900,310
Other receivables		3			826,490				532,835
Spare parts		18			1,202,055				212,135
TOTAL CURRENT ASSETS					20,672,509				20,890,908
NON-CURRENT ASSETS
Exploration and evaluation assets		4,10			8,855,512				8,594,798
Property, plant and equipment		5			7,764,047				8,488,499
TOTAL NON-CURRENT ASSETS					16,619,559				17,083,297
TOTAL ASSETS					37,292,068				37,974,205
LIABILITIES
CURRENT LIABILITIES
Trade payables and accrued liabilities		6			4,904,635				4,280,146
Lease liabilities		9			675,181				1,611,143
TOTAL CURRENT LIABILITIES					5,579,816				5,891,289
NON-CURRENT LIABILITIES
Vehicle financing					280,470				236,124
Provision for leave and severance					959,537				510,202
Term Loan		7			18,710,277				17,956,423
DSU liability		11			1,293,071				884,481
NSR option liability		10			2,750,000				2,750,000
TOTAL NON-CURRENT LIABILITIES					23,993,355				22,337,230
TOTAL LIABILITIES					29,573,171				28,228,519
SHAREHOLDERS’ EQUITY
Common shares (no par value, unlimited common shares authorized; 185,708,588 issued and outstanding) (December 31, 2023 – 149,300,920)					-				-
Preferred shares					31,516				31,516
Additional paid-in capital					144,789,145				116,069,973
Deficit					(135,712,148	)			(104,566,816	)
Accumulated other comprehensive loss					(1,389,616	)			(1,788,987	)
TOTAL SHAREHOLDERS’ EQUITY					7,718,897				9,745,686
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY					37,292,068				37,974,205

 

Nature of Operations and Going Concern (Note 1)

Subsequent Events (Note 19)

 

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

 

Approved by the Board of Directors on November 14, 2024.

 

“signed” Keith Morrison Director

“signed” Jason LeBlanc Director

 

 

 

Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss

(Expressed in Canadian dollars)

 

				Three months ended								Nine months ended
		Notes		September 30, 2024 $				September 30, 2023 $				September 30, 2024 $				September 30, 2023 $
EXPENSES
General and administrative expenses		17			2,314,273				1,936,140				6,657,082				6,250,925
Depreciation		5			354,581				151,500				1,088,483				241,260
General exploration expenses		4			7,318,600				4,330,412				18,598,362				13,252,757
Interest and bank charges					10,557				17,035				26,831				34,865
Share-based payment		11			933,619				-				1,712,843				-
DSUs granted		11			317,497				215,764				882,410				564,000
Fair value movement of DSUs		11			(153,304	)			36,355				(473,820	)			(5,476	)
Net foreign exchange loss					146,359				153,014				360,361				256,917
Operating expenses					11,242,182				6,840,220				28,852,552				20,595,248
OTHER ITEMS
Interest (income) expense					(23,945	)			126,623				(24,398	)			193,441
Interest expense and accretion on Term Loan		7			786,723				717,991				2,317,178				728,277
Interest expense on A&R Promissory Note		8			-				-				-				682,547
NET LOSS FOR THE PERIOD					12,004,960				7,684,834				31,145,332				22,199,513
OTHER COMPREHENSIVE (INCOME) LOSS
Exchange differences on translation of foreign operations					(143,911	)			183,703				(399,371	)			903,578
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD					11,861,049				7,868,537				30,745,961				23,103,091
Basic and diluted loss per share					0.06				0.06				0.19				0.18
Weighted average number of common shares outstanding – basic and diluted					185,708,588				135,730,527				163,300,132				125,150,919

 

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

 

 

 

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian dollars)

 

		Notes		Number of Shares					Preferred shares $				Additional paid-in capital $				Deficit $				Accumulated Other Comprehensive (Loss) Income $				Total Shareholders’ Equity $
BALANCE AS AT DECEMBER 31, 2023			-		149,300,920					31,516				116,069,973				(104,566,816	)			(1,788,987	)			9,745,686
Net loss for the period			-		-					-				-				(31,145,332	)			-				(31,145,332	)
Share capital issued through private placement		11			36,281,409					-				28,239,254				-				-				28,239,254
Share issue costs		11			-					-				(1,232,925	)			-				-				(1,232,925	)
Exercise of options, net		11			126,259					-				-				-				-				-
Share-based payment		11			-					-				1,712,843				-				-				1,712,843
Exchange differences on translation of foreign operations					-					-				-				-				399,371				399,371
BALANCE AS AT SEPTEMBER 30, 2024			-		185,708,588					31,516				144,789,145				(135,712,148	)			(1,389,616	)			7,718,897
BALANCE AS AT JUNE 30, 2024			-		185,708,588					31,516				143,874,771				(123,707,188	)			(1,533,527	)			18,665,572
Net loss for the period			-		-					-				-				(12,004,960	)			-				(12,004,960	)
Share issue costs					-					-				(19,245	)			-				-				(19,245	)
Share-based payment					-					-				933,619				-				-				933,619
Exchange differences on translation of foreign operations					-					-				-				-				143,911				143,911
BALANCE AS AT SEPTEMBER 30, 2024			-		185,708,588					31,516				144,789,145				(135,712,148	)			(1,389,616	)			7,718,897
BALANCE AS AT DECEMBER 31, 2022			-		116,521,343					31,516				77,302,736				(72,190,747	)			(1,200,516	)			3,942,989
Net loss for the period			-		-					-				-				(22,199,513	)			-				(22,199,513	)
Share capital issued through private placement		11			19,209,184					-				24,014,273				-				-				24,014,273
Share issue costs		11			-					-				(1,866,097	)			-				-				(1,866,097	)
Fair value of lender warrants		7			-					-				1,468,231				-				-				1,468,231
Exchange differences on translation of foreign operations					-					-				-				-				(903,578	)			(903,578	)
BALANCE AS AT SEPTMEBER 30, 2023			-		135,730,527					31,516				100,919,143				(94,390,260	)			(2,104,094	)			4,456,305
BALANCE AS AT JUNE 30, 2023			-		135,730,527					31,516				101,119,143				(86,705,426	)			(1,920,391	)			12,524,842
Balance			-		135,730,527					31,516				101,119,143				(86,705,426	)			(1,920,391	)			12,524,842
Net loss for the period			-		-					-				-				(7,684,834	)			-				(7,684,834	)
Share issue costs					-					-				(200,000	)			-				-				(200,000	)
Exchange differences on translation of foreign operations					-					-				-				-				(183,703	)			(183,703	)
BALANCE AS AT SEPTEMBER 30, 2023			-		135,730,527					31,516				100,919,143				(94,390,260	)			(2,104,094	)			4,456,305
Balance			-		135,730,527					31,516				100,919,143				(94,390,260	)			(2,104,094	)			4,456,305

 

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

 

 

 

Unaudited Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian dollars)

 

		Nine months Ended
		September 30, 2024 $				September 30, 2023 $
OPERATING ACTIVITIES
Net loss for the period			(31,145,332	)			(22,199,513	)
Interest payment on Term Loan			(1,563,324	)			(390,411	)
Interest payment on A&R Promissory Note			-				(412,329	)
Items not affecting cash:
DSUs granted			882,410				564,000
Fair value movement of DSUs			(473,820	)			(5,476	)
Depreciation			1,088,483				241,260
Provision for leave and severance			449,335				257,104
Accrued interest and accretion on loans			2,237,268				337,866
Share-based payment			1,712,843				-
Accrued interest on lease liability			107,238				233,327
Changes in non-cash working capital and non-current liability
Prepaid expenses and other receivables			(678,932	)			(1,208,558	)
Trade payables and accrued expenses			624,489				(1,499,776	)
Spare parts			(989,920	)			(212,135	)
Net cash used in operating activities			(27,749,262	)			(24,294,641	)
INVESTING ACTIVITIES
Acquisition of property, plant and equipment			(25,835	)			(2,852,916	)
Additions to expenditures on exploration and evaluation assets			-				(483,883	)
Interest received			91,703				39,622
Net cash from (used in) investing activities			65,868				(3,297,177	)
FINANCING ACTIVITIES
Proceeds from issuance of units			27,499,999				23,814,272
Share issue costs			(295,578	)			(1,818,956	)
Loan proceeds, net of fees			-				14,625,000
NSR option			-				2,750,000
A&R Promissory Note repayment			-				(7,000,000	)
Vehicle financing payment, net			44,345				375
Lease payment			(1,112,496	)			(946,427	)
Net cash provided by financing activities			26,136,270				31,424,264
Effect of exchange rate changes on cash and cash equivalents			(340,127	)			(142,141	)
Change in cash and cash equivalents for the period			(1,887,251	)			3,690,305
Cash and cash equivalents at the beginning of the period			19,245,628				5,162,991
Cash and cash equivalents at the end of the period			17,358,377				8,853,296
Supplemental cash flow information
Income taxes paid			-				-
Interest paid			1,682,379				809,238

 

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

1. NATURE OF OPERATIONS AND GOING CONCERN

 

Premium Nickel Resources Ltd. (the “Company” or “PNRL”) was founded upon the closing of a reverse takeover transaction (the “RTO”) whereby Premium Nickel Resources Corporation (“PNRC”) and 1000178269 Ontario Inc. a wholly-owned subsidiary of North American Nickel Inc. (“NAN”), amalgamated by way of a triangular amalgamation under the Business Corporations Act (Ontario) (the “OBCA”) on August 3, 2022. The common shares of PNRL (“Common Shares”) are listed and posted for trading on the TSX Venture Exchange (the “TSXV”) under the symbol “PNRL”.

 

Prior to the RTO, PNRC was a private company existing under the OBCA. PNRC was incorporated to evaluate, acquire, improve and reopen, assuming economic feasibility, a combination of certain assets of BCL Limited (“BCL”) and Tati Nickel Mining Company (“TNMC”) that were in liquidation in Botswana.

 

In connection with the RTO, the Company was continued under the OBCA and changed its name from “North American Nickel Inc.” to “Premium Nickel Resources Ltd.”

 

Currently, the Company’s principal business activity is the exploration and evaluation of mineral properties in Botswana through its wholly-owned subsidiaries.

 

The following corporate structure chart sets out details of the direct and indirect ownership of the principal subsidiaries of the Company:

 

 

Notes:

 

	(1)	Premium Nickel Group Proprietary Limited owns the Selkirk Mine (as defined below).
	(2)	Premium Nickel Resources Proprietary Limited owns the Selebi Mines (as defined below).

 

9

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

The Company’s head and registered office is located at One First Canadian Place, 100 King Street West, Suite 3400, Toronto, Ontario, Canada M5X 1A4.

 

The principal assets of the Company are the Selebi and Selebi North nickel-copper-cobalt (“Ni-Cu-Co”) mines in Botswana and related infrastructure (together, the “Selebi Mines”), as well as the nickel, copper, cobalt, platinum-group elements (“Ni-Cu-Co-PGE”) Selkirk mine in Botswana, together with associated infrastructure and four surrounding prospecting licenses (collectively, the “Selkirk Mine” and together with the Selebi Mines, the “Mines”).

 

Going Concern

 

The Company, being in the exploration stage, is subject to risks and challenges similar to companies in a comparable stage of exploration and development. These risks include the challenges of securing adequate capital for exploration and advancement of the Company’s material projects, operational risks inherent in the mining industry, and global economic and metal price volatility, and there is no assurance management will be successful in its endeavors. As at September 30, 2024, the Company had no source of operating cash flows, nor any credit line currently in place. The Company incurred a net loss of $31,145,332 for the nine months ended September 30, 2024. The Company’s committed cash obligations and expected level of expenses will vary depending on its operations.

 

These unaudited condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The ability of the Company to continue operations as a going concern is ultimately dependent upon achieving profitable operations and its ability to obtain adequate financing. To date, the Company has not generated profitable operations from its resource activities and will need to invest additional funds in carrying out its planned evaluation, development and operational activities. It is not possible to predict whether financing efforts will be successful or if the Company will attain a profitable level of operations. These material uncertainties cast substantial doubt about the Company’s ability to continue as a going concern. These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities and the reported expenses and comprehensive loss that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

 

The properties in which the Company currently has an interest are in pre-revenue stage. As such, the Company is dependent on external financing to fund its activities. In order to carry out the planned development and cover administrative costs, the Company will use its existing working capital and raise additional amounts as needed. Although the Company has been successful in its past fundraising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future. The Company will continue to assess new properties and seek to acquire interests in additional properties if there is sufficient geologic or economic potential and if adequate financial resources are available to do so.

 

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

(a) Statement of Compliance

 

These unaudited condensed interim consolidated financial statements were prepared in accordance with US GAAP for interim financial information and in accordance with the instructions in Article 10 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (“SEC”) for financial information.

 

Certain information or footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

10

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

The accompanying unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. The interim period results do not necessary indicate the results that may be expected for any other interim period or for the full fiscal year.

 

(b) Basis of preparation

 

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis under the historical cost convention, modified by the revaluation of any financial assets and financial liabilities where applicable. The preparation of consolidated financial statements in conformity with US GAAP requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies.

 

The significant accounting policies used in the preparation of these unaudited condensed interim consolidated financial statements are consistent with those used in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2023.

 

Operating segments are reported in a manner consistent with the internal reporting used for the audited annual consolidated financial statements. The Company determined that it has one reportable operating segment being that of the acquisition, exploration and evaluation of mineral properties in three geographic segments, which are Canada, Barbados and Botswana (Note 15).

 

The Company’s presentation currency is Canadian (“CA”) dollars. Reference herein of $ or CAD is to CA dollars, US$ or USD is to United States dollars, and BWP is to Botswana pula.

 

(c) Basis of consolidation

 

These unaudited condensed interim consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries as summarized in the table below. All intercompany transactions, balances, income and expenses are eliminated upon consolidation.

 SCHEDULE OF ITS WHOLLY-OWNED SUBSIDIARIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS

Name of Entity		Place of Incorporation		Percentage Ownership		Functional Currency
Premium Nickel Resources Ltd.		Ontario, Canada				CAD
NAN Exploration Inc.		Ontario, Canada		100		CAD
PNR Amalco Ltd.		Ontario, Canada		100		CAD
Premium Nickel Resources International Ltd.		Barbados		100		USD
PNR Selkirk Group (Barbados) Limited		Barbados		100		USD
PNR Selebi (Barbados) Limited		Barbados		100		USD
Premium Nickel Group Proprietary Limited		Botswana		100		BWP
Premium Nickel Resources Proprietary Limited		Botswana		100		BWP

 

(d) Use of estimates and judgment

 

The preparation of the unaudited condensed interim consolidated financial statements in accordance with US GAAP requires management to make judgements, estimates and assumptions that affect the implementation of the accounting policies and the recorded amount of assets and liabilities, income, expenses, and disclosure of contingent liabilities. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

11

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

Judgement

 

Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognized in these consolidated financial statements is the same as disclosed in Note 3 of the consolidated financial statements for the year ended December 31, 2023.

 

Estimates

 

Information about assumptions and estimates uncertainties as at September 30, 2024, that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities in the next financial year is the same as disclosed in Note 3 of the consolidated financial statement for the year ended December 31, 2023.

 

3. OTHER RECEIVABLES

 

A summary of the Company’s other receivables is detailed in the table below:

 

SCHEDULE OF OTHER RECEIVABLES

		September 30, 2024 $				December 31, 2023 $
HST paid on purchases			337,715				301,618
VAT paid on purchases			488,775				223,776
Other receivables			-				7,441
Other receivables, net			826,490				532,835

 

 

4. EXPLORATION AND EVALUATION ASSETS

 

SCHEDULE OF EXPLORATION AND EVALUATION ASSETS

		Botswana
		Selebi $				Selkirk $				Total $
Balance, December 31, 2022			8,251,518				327,109				8,578,627
Additions			483,883				-				483,883
Foreign currency translation			(449,878	)			(17,834	)			(467,712	)
Balance, December 31, 2023			8,285,523				309,275				8,594,798
Foreign currency translation			251,333				9,381				260,714
Balance, September 30, 2024			8,536,856				318,656				8,855,512

 

The following is a description of the Company’s exploration and evaluation assets and the related spending commitments.

 

Botswana Assets - Selebi and Selkirk

 

In September 2021, the Company executed the Selebi Asset Purchase Agreement (“the “Selebi APA”) with the BCL liquidator to acquire the Selebi Mines formerly operated by BCL. In January 2022, the Company closed the transaction and ownership of the Selebi Mines transferred to the Company.

 

Pursuant to the Selebi APA, the aggregate purchase price payable to the seller for the Selebi Mines shall be the sum of $76,862,200 (USD 56,750,000), which amount shall be paid in three instalments:

 

●	$2,086,830 (USD 1,750,000) payable on the closing date, and payment of care and maintenance funding contributions in respect of the Selebi Mines from March 22, 2021 to the closing date of $6,164,688 (USD 5,178,747). These payments have been made.

 

●

$33,747,500 (USD 25,000,000) payable upon the earlier of: (a) approval by the Botswana Ministry of Mineral Resources, Green Technology and Energy Security (“MMRGTES”) of the Company’s Section 42 and Section 43 applications (for the further extension of the mining license and conversion of the mining license into an operating license, respectively), and (b) on the expiry date of the study phase, January 31, 2026, which pursuant to the Selebi APA has been extended for one year from the original expiry date of January 31, 2025. This extension follows successful completion by the Company of the work and investment milestones required by the Selebi APA.

 

●	$40,497,000 (USD 30,000,000) payable on the completion of mine construction and production start-up (commissioning) by the Company on or before January 31, 2030, but not later than four years after the approval by the Minister of MMRGTES of the Company’s Section 42 and Section 43 applications.

 

12

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

The total acquisition cost of the Selebi Mines included the first instalment of $2,086,830 (USD 1,750,000) and the payment of the care and maintenance funding contribution of $6,164,688 (USD 5,178,747). As per the terms and conditions of the Selebi APA, the Company has the option to cancel the second and third payments and return the Selebi Mines to the liquidator if the Company determines that the Selebi Mines are not economical. The Company also has an option to pay in advance the second and third payments if the Company determines that the Selebi Mines are economical.

 

In addition to the Selebi APA, the purchase of the Selebi Mines is also subject to a contingent consideration agreement as well as a royalty agreement with the liquidator.

 

The Company also negotiated a separate asset purchase agreement (the “Selkirk APA”) with the liquidator of TNMC in January 22 to acquire the Selkirk deposit and related infrastructure formerly operated by TNMC. The transaction closed in August 2022.

 

The Selkirk APA does not provide for a purchase price or initial payment for the purchase of the assets. The acquisition cost of the Selkirk Mine of $327,109 (USD 244,954) was the care and maintenance funding contribution from April 1, 2021 to the closing date of the Selkirk APA. The Selkirk APA provides that if the Company elects to develop the Selkirk Mine first, the payment of the second Selebi instalment of $33,747,500 (USD 25,000,000) would be upon the approval by the Minister of MMRGTES of the Company’s Section 42 and Section 43 applications (for the further extension of the Selkirk mining license and conversion of the Selkirk mining license into an operating license, respectively). For the third Selebi instalment of $40,497,000 (USD 30,000,000), if the Selkirk Mine were to be commissioned earlier than the Selebi Mines, the payment would trigger on the Selkirk Mine’s commission date.

 

In August 2023, the Company entered into a binding commitment letter with the liquidator of BCL, which is subject to customary final documentation, to acquire a 100% interest in two additional deposits (“Phikwe South” and the “Southeast Extension”) located adjacent to and immediately north of the Selebi North shaft. The impact is to increase the Selebi mining license area. While the remaining historic resources at Phikwe South and the Southeast Extension occur within the expanded Selebi mining license, the amended license intentionally does not include the historic mine workings and infrastructure at these previously-producing properties, and the Company has no liability for historic environmental issues at those sites.

 

The upfront cost to the Company to acquire these additional mineral properties is $1,349,900 (USD 1,000,000). In addition, the Company agreed to additional work commitments of $6,749,500 (USD 5,000,000) in the aggregate over the next four years. As a result of the extension of the Selebi mining license, the remaining asset purchase obligations of the Company outlined in the original Selebi APA with the liquidator will each increase by 10%, or $7,424,450 (USD 5,500,000) in total, while the trigger events remain unchanged. The existing 2% net smelter royalty (“NSR”) held by the Liquidator with respect to production from the Selebi mining license will also apply to production from these additional deposits, subject to the Company’s existing buy-back right for 50% of the NSR (Note 10). The acquisition of the Phikwe South and the Southeast Extension deposits has not yet closed as at September 30, 2024.

 

13

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

General Exploration Expenses

 

Details of the general exploration expenses by nature are presented as follows:

 

SCHEDULE OF GENERAL EXPLORATION EXPENSES

For the nine months ended September 30, 2024:

 

		Selebi $				Selkirk $				Other $				Total $
Site operations and administration			706,303				38,761				128,600				873,664
Care and maintenance			2,218,200				-				-				2,218,200
Geology			2,391,154				335,756				-				2,726,910
Drilling			5,209,401				163,232				-				5,372,633
Geophysics			868,261				31,537				-				899,798
Engineering			6,105,977				30,978				-				6,136,955
Environmental, social and governance			125,096				-				-				125,096
Metallurgy and processing			40,709				26,855				-				67,564
Technical studies			8,322				4,600				-				12,922
Health and safety			119,756				44				-				119,800
Mine re-development			19,195				25,625				-				44,820
Total			17,812,374				657,388				128,600				18,598,362

 

For the nine months ended September 30, 2023:

 

		Selebi $				Selkirk $				Other $				Total $
Site operations and administration			468,322				41,752				139,782				649,856
Care and maintenance			2,289,013				-				-				2,289,013
Geology			2,392,480				321,270				-				2,713,750
Drilling			1,301,463				6,683				-				1,308,146
Geophysics			1,460,507				17,792				-				1,478,299
Engineering			3,860,973				33,284				-				3,894,257
Environmental, social and governance			187,221				-				-				187,221
Metallurgy and processing			58,632				103,050				-				161,682
Technical studies			21,072				7,650				-				28,722
Health and safety			319,203				-				-				319,203
Water treatment project			46,102				-				-				46,102
Mine re-development			176,506				-				-				176,506
Total			12,581,494				531,481				139,782				13,252,757

 

14

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

5. PROPERTY, PLANT AND EQUIPMENT

 

The tables below set out costs and accumulated depreciation and amortization as at September 30, 2024 and December 31, 2023:

 

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

Cost		Land and Buildings (ROU Assets(1)) $				Exploration Equipment (ROU Assets(1)) $				Exploration Equipment $				Furniture and Fixtures $				Generator $				Vehicles $				Computer and software $				Total $
Balance – December 31, 2022			3,077,420				-				11,973				126,605				31,381				241,884				1,950				3,491,213
Additions			-				1,023,615				4,190,484				65,998				8,557				187,310				585,561				6,061,525
Foreign currency translation			(167,783	)			-				-				(704	)			(1,711	)			(31,162	)			(20,104	)			(221,464	)
Balance – December 31, 2023			2,909,637				1,023,615				4,202,457				191,899				38,227				398,032				567,407				9,331,274
Balance , Cost			2,909,637				1,023,615				4,202,457				191,899				38,227				398,032				567,407				9,331,274
Additions			-				-				4,181				15,111				-				111,629				6,543				137,464
Additions, Cost			-				-				4,181				15,111				-				111,629				6,543				137,464
Foreign currency translation			88,261				-				123,337				3,609				1,160				12,074				35,916				264,357
Foreign currency translation, Cost			88,261				-				123,337				3,609				1,160				12,074				35,916				264,357
Balance – September 30, 2024			2,997,898				1,023,615				4,329,975				210,619				39,387				521,735				609,866				9,733,095
Balance , Cost			2,997,898				1,023,615				4,329,975				210,619				39,387				521,735				609,866				9,733,095

 

Accumulated Depreciation		Land and Building (ROU1 Assets)				Exploration Equipment (ROU1 Assets)				Exploration Equipment				Furniture and Fixtures				Generator				Vehicles				Computer and software				Total
Balance – December 31, 2022			51,123				-				1,447				1,872				562				39,589				1,950				96,543
Depreciation during the year			119,133				85,301				306,112				14,030				6,212				69,997				143,998				744,783
Foreign currency translation			-				-				-				3,177				1,775				(3,503	)			-				1,449
Balance – December 31, 2023			170,256				85,301				307,559				19,079				8,549				106,083				145,948				842,775
Balance Accumulated Depreciation			170,256				85,301				307,559				19,079				8,549				106,083				145,948				842,775
Depreciation during the period			81,979				155,318				635,096				10,661				5,801				80,025				119,603				1,088,483
Depreciation Accumulated Depreciation			81,979				155,318				635,096				10,661				5,801				80,025				119,603				1,088,483
Foreign currency translation			(1,776	)			953				3,811				776				364				4,739				28,923				37,790
Foreign currency translation Accumulated Depreciation			(1,776	)			953				3,811				776				364				4,739				28,923				37,790
Balance – September 30, 2024			250,459				241,572				946,466				30,516				14,714				190,847				294,474				1,969,048
Balance Accumulated Depreciation			250,459				241,572				946,466				30,516				14,714				190,847				294,474				1,969,048

 

Carrying Value		Land and Buildings (ROU1 Assets)				Exploration Equipment (ROU1 Assets)				Exploration Equipment				Furniture and Fixtures				Generator				Vehicles				Computer and Software				Total
Balance – December 31, 2023			2,739,381				938,314				3,894,898				172,820				29,678				291,949				421,459				8,488,499
Balance, Carrying Value			2,739,381				938,314				3,894,898				172,820				29,678				291,949				421,459				8,488,499
Balance – September 30, 2024			2,747,439				782,043				3,383,509				180,103				24,673				330,888				315,392				7,764,047
Balance, Carrying Value			2,747,439				782,043				3,383,509				180,103				24,673				330,888				315,392				7,764,047

 

Note:

 

(1)	Land and Buildings (ROU Assets) contains the Syringa Lodge right-of-use (“ROU”) asset and Exploration Equipment (ROU Assets) contains the drilling equipment supply agreement ROU asset (Note 9).

 

Additions to property, plant and equipment during the year ended December 31, 2023 included the acquisition of drilling equipment for $1,023,615 through a lease agreement with a drilling company (Note 9) as well as vehicles financed through a local Botswana bank.

 

15

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

6. TRADE PAYABLES AND ACCRUED LIABILITIES

 

A summary of trade payables and accrued liabilities is detailed in the table below:

SCHEDULE OF TRADE PAYABLES AND ACCRUED LIABILITIES 

		September 30, 2024 $				December 31, 2023 $
Amounts due to related parties (Note 12)			24,667				93,795
Trade payables			3,595,882				2,383,196
Accrued liabilities			1,284,086				1,803,155
Total trade payables and accrued liabilities			4,904,635				4,280,146

 

 

7. TERM LOAN

 

On June 28, 2023, the Company closed a financing with Cymbria Corporation (“Cymbria”), EdgePoint Investment Group Inc. and certain other entities managed by it (“EdgePoint”) for aggregate gross proceeds to the Company of $33,999,200. The financing included three concurrent and inter-conditional transactions (collectively the “2023 Financing Transactions”) comprised of an equity offering of units for $16,249,200 (the “Equity Financing”), a three year term loan of $15,000,000 (the “Term Loan”) and option payments of $2,750,000 (the “Option Payment”) to acquire a 0.5% net smelter returns royalty on the Mines in certain circumstances upon payment of further consideration (Note 10).

 

The Term Loan has a principal amount of $15,000,000 and bears interest at a rate of 10% per annum payable quarterly in arrears. The principal amount of the Term Loan will mature and be payable on June 28, 2026. The obligations of the Company pursuant to the Term Loan are fully and unconditionally guaranteed by each of the Company’s existing and future subsidiaries. The Term Loan is secured by a pledge of all the shares of the Company’s subsidiaries as well as by way of a general security agreement at the parent level and debentures and hypothecations at the subsidiary level. The Term Loan is subject to certain covenants and provisions on events of default, repayments and mandatory prepayments, including:

 

●

increase in the interest rate payable on the Term Loan to 15% per annum upon the occurrence of an event of default;

 

●

the Company may prepay all or any portion of the principal amount outstanding with a minimum repayment amount of $500,000 and in an integral multiple of $100,000, together with all accrued and unpaid interest on the principal amount being repaid;

 

●

if prepayment occurs within one year of the closing date, a prepayment fee in an amount equal to 10% of the principal amount of the Term Loan being prepaid less interest paid or payable on or prior to the date of prepayment attributable to the portion of the Term Loan (“Prepayment Fee”); and

 

●

mandatory prepayment shall be made when the Company has non-ordinary course asset sales or other dispositions of property or the Company receives cash from the issuance of indebtedness for borrowed money.

 

16

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

In connection with the Term Loan, the Company issued an aggregate of 2,000,000, non-transferable common share purchase warrants (the “Non-Transferable Warrants”) to Cymbria. Each Non-Transferable Warrant is exercisable by Cymbria to purchase one Common Share at a cash purchase price of $1.4375 per Common Share until June 28, 2026.

 

Further, on December 14, 2023, the Company and Cymbria closed an amendment to the terms of their existing Term Loan, increasing the principal amount of the Term Loan by $5,882,353 (the “Additional Principal Amount”) from $15,000,000 to $20,882,353. The Additional Principal Amount was subject to an original issue discount of approximately 15% and was advanced by the lender to the Company as a single advance of $5,000,000. The Additional Principal Amount forms a part of the Term Loan and is on the same terms and conditions applicable to the Term Loan. As consideration for entering into the amended Term Loan, the Company issued an additional 700,000 non-transferable common share purchase warrants (the “Additional Warrants”) to the lender, with each Additional Warrant entitling the lender to acquire one Common Share at a price of $1.4375 per Common Share until June 28, 2026. The shares issued for exercise of the Additional Warrants are subject to a hold period of four months plus a day from the date of issue and the resale rules of applicable securities legislation and policies of the TSXV.

 

The Company evaluated the amendment of the Term Loan and determined that it qualified as a non-substantial modification under ASC 470. Therefore, a new effective interest rate was determined based on the carrying amount of the original debt instrument, adjusted for the fair value of the Additional Warrants resulting from the modification, and the revised cash flows.

 

The fair value of the Non-Transferable Warrants and Additional Warrants was estimated at $1,435,350 and $275,961 respectively, using the Black-Scholes Option Pricing Model. At initial closing, the accounting was based on relative fair value under ASC 470, with proceeds and transaction costs allocated between the Term Loan and the Non-Transferrable Warrants. The Non-Transferrable Warrants were allocated $1,352,054, including $83,296 in transaction costs. The Additional Warrants were accounted for as transaction costs for obtaining the Additional Principal Amount. As such, $1,352,054 and $275,961 respectively were recorded in equity.

 

The fair value of the Non-Transferable Warrants and Additional Warrants was calculated using the following assumptions:

 

SCHEDULE OF FAIR VALUE OF NON-TRANSFERABLE AND ADDITIONAL WARRANTS

		Non-Transferable Warrants				Additional Warrants
Expected dividend yield			0	%			0	%
Share price		$	1.35			$	1.14
Expected share price volatility			92.06	%			63.54	%
Risk free interest rate			4.13	%			3.73	%
Expected life of warrant			3 years				2.54 years

 

The volatility was determined by calculating the historical volatility of stock prices of the Company over the same period as the expected life of the Transferable Warrants using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns.

 

The Company used $7,637,329 of the proceeds from the Term Loan to prepay all principal, interest and fees owing by the Company pursuant to the A&R Promissory Note (defined in Note 8) in favour of Pinnacle Island LP.

 

For the nine months ended September 30, 2024, the Company paid $1,563,324 of interest costs to Cymbria (September 30, 2023 – $390,411).

 

17

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

The following is a continuity of the Term Loan:

 

SCHEDULE OF CONTINUITY OF TERM LOAN

		$
Principal amount of the Term Loan			15,000,000
Fair value of the Non-Transferrable Warrants			(1,435,350	)
Term Loan at fair value on issuance, June 28, 2023			13,564,650
Transaction costs			(787,175	)
Accrued interest			390,411
Accretion of warrant value and transaction costs			631,540
Interest paid			(390,411	)
Fair value of Term Loan as of December 14, 2023			13,409,015
Additional principal amount of Term Loan on December 14, 2023			5,882,353
Term Loan issue discount			(882,353	)
Fair value of the Additional Warrants			(275,961	)
Transaction fee for modification			(219,212	)
Fair value of modified Term Loan as of December 14, 2023			17,913,842
Accrued interest			402,981
Accretion of warrant value and transaction costs			42,581
Interest paid			(402,981	)
Term Loan balance, December 31, 2023			17,956,423
Accrued interest			1,563,324
Accretion of warrant value and transaction costs			753,854
Interest paid			(1,563,324	)
Term Loan balance, September 30, 2024			18,710,277

 

Fort Capital Partners acted as financial advisor to the Company on the debt portion of the 2023 Financing Transactions and was paid cash fees of $375,000 and $147,059, equal to 2.5% of the original principal amount and the Additional Principal Amount, respectively. Legal fees related to the 2023 Financing Transactions totaled $736,067, of which $495,471 was allocated to the original Term Loan. Legal fees of $72,153 associated with the Second A&R Commitment Letter were recorded and amortized over the remaining terms of the Term Loan. As noted above, certain transaction costs in relation to the original principal amounts were allocated to the Non-Transferrable Warrants based on the relative fair value method under ASC 470.

 

8. PROMISSORY NOTE

 

On November 21, 2022, the Company announced a $7,000,000 bridge loan (the “Bridge Loan”) financing from Pinnacle Island LP (the “Lender”). The Bridge Loan financing closed on November 25, 2022 and net proceeds of $6,740,000 were received by the Company (after deducting the commitment fee of $260,000). The Bridge Loan was evidenced by the issuance of a promissory note by the Company to the Lender (the “Promissory Note”). The Promissory Note had a principal amount of $7 million and bore interest at a rate of 10% per annum, calculated monthly and initially payable on February 22, 2023, being the maturity date of the Promissory Note, with a right of the Company to extend the maturity. The Company extended the maturity of the Promissory Note to March 22, 2023.

 

On March 17, 2023, the Company entered into an amended and restated Promissory Note (the “A&R Promissory Note”) extending the maturity of the Promissory Note from March 22, 2023 to November 24, 2023 (the “Extension”). All other terms of the Promissory Note remained the same. In connection with the Extension and entering into of the A&R Promissory Note, the Company agreed to pay an amendment and restatement fee of $225,000 and issued 350,000 non-transferable common share purchase warrants to the Lender (the “Lender Warrants”). Each Lender Warrant is exercisable to acquire one Common Share of the Company at a price of $1.75 per Common Share for a period of one year from the date of the A&R Promissory Note. In connection with the Extension and issuance of the Lender Warrants, the 119,229 common share purchase warrants previously issued to the Lender in connection with the initial issuance of the Promissory Note were cancelled concurrently with the Extension.

 

18

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

In connection with the A&R Promissory Note, interest and accretion expense of nil and $682,547 was recorded for the three and nine months ended September 30, 2023, respectively.

 

The fair value of the liability of the Lender Warrants was estimated at $116,177 using the Black-Scholes Option Pricing Model. The fair value of the Lender Warrants and the amendment and restatement fee of $225,000 was added to the liability of the A&R Promissory Note and amortized over the remaining life of the A&R Promissory Note.

 

The fair value of the Lender warrants was calculated using the following assumptions:

 

SCHEDULE OF LENDER WARRANTS

		March 17, 2023
Expected dividend yield			0	%
Share price		$	1.40
Expected share price volatility			77.2	%
Risk free interest rate			3.49	%
Expected life of warrant			1 year

 

The volatility was determined by calculating the historical volatility of share prices of the Company over one year using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns.

 

On June 28, 2023, the Company repaid the A&R Promissory Note in full, and on March 17, 2024, the Lender Warrants expired unexercised.

 

9. LEASE LIABILITIES

 

Syringa Lodge

 

In July 2022, the Company executed a sales agreement (the “Lodge Agreement”) with Tuli Tourism Pty Ltd. (the “Seller”) for the Syringa Lodge in Botswana.

 

Pursuant to the Lodge Agreement, the aggregate purchase price payable to the Seller shall be the sum of $3,213,404 (BWP 30,720,000), payable in three installments. A deposit of $482,011 (BWP 4,608,000) was paid in August 2022, and a second installment of $1,306,906 (BWP 13,056,000) was paid in July 2023. On September 12, 2024, the Company paid 50% of the final installment of $653,061 (BWP 6,528,000) with the remaining balance of $665,203 (BWP 6,528,000) due on November 30, 2024. Title of the asset transfers to the Company upon payment of the remaining balance.

 

In addition to the above purchase price, the Company is required to pay to the Seller an agreed interest amount of 6% per annum on the outstanding balance, accrued and payable monthly. The Company recognized a finance lease for this lease.

 

Drilling Equipment

 

In March 2023, the Company entered into a drilling equipment supply agreement (the “Equipment Agreement”) with Forage Fusion Drilling Ltd. (“Forage”) to purchase specific drilling equipment on a “rent to own” basis with the purchase price to be paid in monthly payments.

 

Pursuant to the Equipment Agreement, the aggregate purchase price payable to Forage is $2,942,000. A deposit of $1,700,000 was paid in March 2023. The balance was payable in twelve equal monthly instalments of $103,500. Based on the stated equipment purchase price of $2,735,000 and monthly installments, the implied interest rate for the arrangement was 35%. The final installment was paid on April 12, 2024 and the equipment is now 100% owned by the Company. The Company recognized a finance lease for this lease.

 

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Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

The following table presents lease cost and other supplemental lease information:

 

SCHEDULE OF LEASE COST AND OTHER SUPPLEMENTAL LEASE

		September 30, 2024 $				September 30, 2023 $
Finance lease cost:
Amortization of right-of-use assets			237,297				126,380
Interest expense on lease liabilities			107,238				233,327
Cash paid for finance lease liabilities			1,043,200				3,602,167

 

10. NSR OPTION

 

Concurrently with the closings of the Equity Financing and the Term Loan on June 28, 2023, Cymbria paid an aggregate of $2,750,000 (“Option Payment”) to two subsidiaries of PNRL to acquire a right to participate with such subsidiaries in the exercise of certain contractual rights. The Option Payment was allocated to PNRP and PNGP (defined below) for $2,500,000 and $250,000, respectively.

 

As the NSR options are exercisable entirely at the discretion of Cymbria and the underlying projects are in the exploration stage, the fair value of the call and put on the option as at September 30, 2024 and December 31, 2023 is nil. The Option payment received in cash was recorded as a non-current liability.

 

PNRL’s indirect wholly-owned subsidiary Premium Nickel Resources Proprietary Limited (“PNRP”) acquired the Selebi Mines in January 2022 out of liquidation. Pursuant to the acquisition agreement, the liquidator retained a 2% net smelter returns royalty on the Selebi Mines (the “Selebi NSR”). PNRP has a contractual right to repurchase one-half of the Selebi NSR at a future time on payment by PNRP to the liquidator of $26,998,000 (USD 20,000,000).

 

PNRL’s indirect wholly-owned subsidiary Premium Nickel Group Proprietary Limited (“PNGP”) acquired the Selkirk Mine in August 2022 out of liquidation. Pursuant to the acquisition agreement, the liquidator retained a 1% net smelter returns royalty on the Selkirk Mine (the “Selkirk NSR” and together with the Selebi NSR, the “NSRs”). PNGP has a contractual right to repurchase the entirety of the Selkirk NSR at a future time on payment by PNGP to the liquidator of $2,699,800 (USD 2,000,000).

 

Each of PNRP and PNGP has agreed to grant Cymbria, in exchange for the Option Payment, an option to participate in any such repurchase of the applicable portion of its NSR from the relevant liquidator. Cymbria will, following the exercise of its option to participate in any such repurchase, acquire a 0.5% net smelter returns royalty on the applicable property by paying an amount equal to one half of the repurchase price payable by PNRP or PNGP pursuant to the applicable NSR, less the Option Payment paid at closing pursuant to the relevant option agreement among Cymbria and PNRP or PNGP, as applicable. Cymbria has the right to put its options back to PNRP and PNGP in certain circumstances in return for the reimbursement of the applicable portion of the Option Payment.

 

Under the NSR option purchase agreements, Cymbria could acquire a 0.5% net smelter returns royalty on the Selebi Mines and Selkirk Mine upon payment of $10,937,565 (USD 8,102,500) and $1,093,756 (USD 810,250), respectively.

 

11. SHARE CAPITAL, WARRANTS AND OPTIONS

 

The authorized capital of the Company comprises an unlimited number of Common Shares without par value and 100,000,000 Series 1 convertible preferred shares without par value.

 

a)	Common Shares Issued and Outstanding

 

During the nine months ended September 30, 2024, 126,259 Common Shares were issued for the net exercise of 278,100 options. No Common Shares were issued from the exercise of options for the nine months ended September 30, 2023. In addition, 36,281,409 Common Shares were issued during the nine months ended September 30, 2024 as a result of the following financing transactions:

 

20

 

 

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2024 and 2023

(Expressed in Canadian dollars)

 

On June 14, 2024, the Company closed the first tranche of a non-brokered private placement offering (the “June 2024 Financing”), pursuant to which the Company issued an aggregate 19,234,614 units of the Company (the “Units”) at a price of $0.78 per Unit (the “Issue Price”) for aggregate gross proceeds of $15,002,999. Each Unit is comprised of one Common Share and one common share purchase warrant of the Company (each, a “Warrant”).

 

On June 21, 2024, the Company closed the second tranche of the June 2024 Financing and issued an additional 16,021,795 Units at the Issue Price for gross proceeds of $12,497,000.

 

Each Warrant entitles the holder thereof to acquire one Common Share for a period expiring 60 months following the date of issuance (the “Expiry Date”) at a price of $1.10 per Common Share. If, at any time prior to the Expiry Date, the volume-weighted average trading price of the Common Shares is at least $2.00 per Common Share for a period of 20 trading days, the Company may, at its option, accelerate the Expiry Date with 30 days’ notice to the Warrant holders.

 

All securities issued under the June 2024 Financing are subject to a hold period of four months plus one day from the date of issuance. In connection with the June 2024 Financing, SCP Resource Finance LP (“SCP”), in its capacity as financial advisor to the Company, was paid an advisory fee which the Company has satisfied by issuing to SCP an aggregate of 1,025,000 Units (comprised of 1,025,000 Common Shares and 1,025,000 non-transferable Warrants), and Fort Capital was paid an advisory fee of $250,000, in each case in consideration for providing certain advisory services to the Company in connection with the June 2024 Financing.

 

The fair value of the Warrants issued under the June 2024 Financing, calculated using the Monte Carlo model, was estimated at $12,533,135. Gross proceeds raised of $27,499,999 and related issuance costs of $250,000 in cash, and the value of $1,087,755 for 1,025,000 Units granted to SCP were allocated to the Common Shares and the Warrants based on relative fair values. The key inputs used in the Monte-Carlo model were as follows:

 

SCHEDULE OF FAIR VALUE OF WARRANTS

		June 14, 2024				June 21, 2024
Expected dividend yield			0	%			0	%
Share price		$	0.81			$	0.84
Expected share price volatility			83.17	%			83.71	%
Risk free interest rate			3.23	%			3.30	%
Expected life of warrant