Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
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.
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).
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.
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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of January 28, 2021, there were 33,484,945
shares outstanding of the registrant’s $0.01 par value common stock, the registrant’s only outstanding class of voting
securities. As of April 30, 2020, the aggregate market value of the registrant’s voting common stock held by non-affiliates
of the registrant was approximately $13.7 million based upon the closing sale price of the common stock as reported by the OTCQB.
For the purpose of this calculation, the registrant has assumed that its affiliates as of April 30, 2020 included all directors
and officers.
Portions of the registrant’s definitive
proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the
2021 annual meeting of shareholders are incorporated by reference in Part III of this Annual Report on Form 10-K.
This Annual Report on Form 10-K includes
certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the United States Private Securities Litigation Reform Act of 1995, and “forward-looking
information” within the meaning of applicable Canadian securities legislation. We use words such as “anticipate,”
“continue,” “likely,” “estimate,” “expect,” “may,” “will,”
“projection,” “should,” “believe,” “potential,” “could,” or similar
words suggesting future outcomes (including negative and grammatical variations) to identify forward-looking statements. These
statements include statements regarding the following, among other things:
These statements are based on certain assumptions
and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future
developments and other factors we believe are appropriate in the circumstances. Such statements are subject to a number of assumptions,
risks and uncertainties and our actual results could differ from those expressed or implied in these forward-looking statements
as a result of the factors described under “Risk Factors” in this Annual Report on Form 10-K, including:
These factors are not intended to represent
a complete list of the general or specific factors that could affect us.
We are an exploration stage company and do
not currently have any known reserves and cannot be expected to have known reserves unless and until a feasibility study is completed
for the Sierra Mojada and Beskauga concessions that shows proven and probable reserves. There can be no assurance that our concessions
contain proven and probable reserves and investors may lose their entire investment. See the “Risk Factors” section
below.
PART
I
Items 1 and
2. BUSINESS AND PROPERTIES
Overview
and Corporate Structure
Silver Bull Resources, Inc. was incorporated
in the State of Nevada on November 8, 1993 as the Cadgie Company for the purpose of acquiring and developing mineral properties.
The Cadgie Company was a spin-off from its predecessor, Precious Metal Mines, Inc. On June 28, 1996, our name was changed
to Metalline Mining Company (“Metalline”). On April 21, 2011, we changed our name to Silver Bull Resources, Inc.
We have not realized any revenues from our planned operations, and we are considered an exploration stage company. We have not
established any reserves with respect to our exploration projects and may never enter into the development stage with respect to
any of our projects.
We engage in the business of mineral exploration.
We currently own a number of property concessions in Mexico within a mining district known as the Sierra Mojada District, located
in the west–central part of the state of Coahuila, Mexico. We conduct our operations in Mexico through our wholly-owned subsidiary
corporations, Minera Metalin S.A. de C.V. (“Minera Metalin”), Contratistas de Sierra Mojada S.A. de C.V. (“Contratistas”)
and Minas de Coahuila SBR S.A. de C.V (“Minas”).
In April 2010, Metalline Mining Delaware, Inc.,
our wholly-owned subsidiary incorporated in the State of Delaware, was merged with and into Dome Ventures Corporation (“Dome”),
a Delaware corporation. As a result, Dome became a wholly-owned subsidiary of Silver Bull. Dome has a wholly-owned subsidiary,
Dome Asia Inc. (“Dome Asia”), which is incorporated in the British Virgin Islands. Dome Asia has a wholly-owned subsidiary,
Dome Minerals Nigeria Limited, incorporated in Nigeria.
On June 5, 2015, we announced our decision
to voluntarily delist our shares of common stock from the NYSE MKT due to costs associated with the continued listing and NYSE
MKT exchange rules regarding maintenance of a minimum share price. On June 29, 2015, our shares began trading on the OTCQB
marketplace operated by OTC Markets Group. Our shares of common stock continue to trade on the Toronto Stock Exchange (“TSX”).
On August 12, 2020, we entered
into an option agreement (the “Beskauga Option Agreement”) with Copperbelt AG, a corporation existing under the laws
of Switzerland (“CB Parent”), and Dostyk LLP, an entity existing under the laws of Kazakhstan and a wholly-owned subsidiary
of CB Parent (the “CB Sub,” and together with CB Parent, “CB”), pursuant to which we have the exclusive
right and option (the “Beskauga Option”) to acquire CB’s right, title and 100% interest in the Beskauga property
located in Kazakhstan (the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga
Main Project”) and the Beskauga South project (the “Beskauga South Project,” and together the Beskauga Main
Project, the “Beskauga Project”). After the completion of due diligence, the transaction contemplated by the Beskauga
Option Agreement closed on January 26, 2021.
On September 1, 2020, we entered
into a joint venture agreement (the “Stepnoe and Ekidos JV Agreement”) with CB Parent in connection with mineral license
applications for, and further exploration and evaluation of, the Stepnoe and Ekidos properties located in Kazakhstan. Pursuant
to the Stepnoe and Ekidos JV Agreement, we are obligated to contribute to the joint venture such funds as may be required to apply
for the Stepnoe and Ekidos mineral licenses and to fund such other exploration activities on the Stepnoe and Ekidos properties
as we, in our sole discretion, may deem appropriate, and CB is obligated to contribute to the joint venture the identification
of the Stepnoe and Ekidos properties. We and CB have initial participating interests in the joint venture of 80% and 20%, respectively.
Pursuant to the Stepnoe and Ekidos JV Agreement, we are entitled to acquire CB’s participating interest in one or both of
the Stepnoe and Ekidos properties for $1.5 million each in cash.
On September 18, 2020, we completed
a one-for-eight reverse stock split of our shares of common stock. All share and per share information in this annual report on
Form 10-K, including references to the number of shares of common stock, stock options and warrants, prices of issued shares, exercise
prices of stock options and warrants, and loss per share, have been adjusted to reflect the impact of the reverse stock split.
Our efforts and expenditures have been and
are expected to be concentrated in the exploration of properties, principally the Sierra Mojada property located in Coahuila, Mexico
(the “Sierra Mojada Property”) and the Beskauga Property. We have not determined whether our exploration properties
contain ore reserves that are economically recoverable. The ultimate realization of our investment in exploration properties is
dependent upon the success of future property sales, the existence of economically recoverable reserves, and our ability to obtain
financing or make other arrangements for exploration, development and future profitable production activities. The ultimate realization
of our investment in exploration properties cannot be determined at this time.
South32
Option Agreement
On June 1, 2018, we and our subsidiaries
Minera Metalin and Contratistas entered into an earn-in option agreement (the “South32 Option Agreement”) with South32
International Investment Holdings Pty Ltd (“South32”), a wholly owned subsidiary of South32 Limited (ASX/JSE/LSE: S32),
whereby South32 is able to obtain an option to purchase 70% of the shares of Minera Metalin and Contratistas (the “South32
Option”). Minera Metalin owns the Sierra Mojada Property located in Coahuila, Mexico (the “Sierra Mojada Project”)
and Contratistas supplies labor for the Sierra Mojada Project. Under the South32 Option Agreement, South32 earns into the South32
Option by funding a collaborative exploration program on the Sierra Mojada Project. Upon the terms and subject to the conditions
set forth in the South32 Option Agreement, in order for South32 to earn and maintain its four-year option, South32 must have contributed
to Minera Metalin for exploration of the Sierra Mojada Project at least $3 million by the end of Year 1, $6 million by the
end of Year 2, $8 million by the end of Year 3 and $10 million by the end of Year 4 (the “Initial Funding”).
Funding is made on a quarterly basis based on the subsequent quarter’s exploration budget. South32 may exercise the South32
Option by contributing $100 million to Minera Metalin (the “Subscription Payment”), less the amount of Initial Funding
previously contributed by South32. The issuance of shares upon notice of exercise of the South32 Option by South32 is subject to
antitrust approval by the Mexican government. If the full amount of the Subscription Payment is advanced by South32 and the South32
Option becomes exercisable and is exercised, we and South32 will be obligated to contribute funding to Minera Metalin on a 30/70
pro rata basis. If South32 elects not to continue with the South32 Option during the four-year option period, the Sierra Mojada
Project will remain 100% owned by us. The exploration program will be initially managed by us, with South32 being able to approve
the exploration program funded by it. We received funding of $3,144,163 from South32 for Year 1 of the South32 Option Agreement.
In April 2019, we received a notice from South32 to maintain the South32 Option Agreement for Year 2 by providing cumulative
funding of $6 million by the end of such period. As of October 31, 2020, we had received funding of $1,420,161 from South32
for Year 2 of the South32 Option Agreement, the time period for which has been extended by an event of force majeure described
in more detail below. In November 2020, we received an additional payment of $60,286 for the extended Year 2 time period.
If the South32 Option Agreement is terminated by South32 without cause or if South32 is unable to obtain antitrust authorization
from the Mexican government, we are under no obligation to reimburse South32 for amounts contributed under the South32 Option Agreement.
Upon exercise of the South32 Option,
Minera Metalin and Contratistas are required to issue common shares to South32. Pursuant to the South32 Option Agreement, following
exercise and until a decision has been made by the board of directors of Minera Metalin to develop and construct a mine on the
Sierra Mojada Project, each shareholder holding greater than or equal to 10% of the shares may withdraw as an owner in exchange
for a 2% net smelter royalty on products produced and sold from the Sierra Mojada Project. Any shareholder whose holdings are reduced
to less than 10% must surrender its interest in exchange for a 2% net smelter royalty.
On October 11, 2019, we and our subsidiary
Minera Metalin issued a notice of force majeure to South32 pursuant to the South32 Option Agreement. Due to a blockade by a cooperative
of local miners called Sociedad Cooperativa de Exploración Minera Mineros Norteños, S.C.L. (“Mineros Norteños”),
we have temporarily halted all work on the Sierra Mojada Property. The notice of force majeure was issued because of the blockade’s
impact on the ability of us and our subsidiary Minera Metalin to perform our obligations under the South32 Option Agreement. Pursuant
to the South32 Option Agreement, any time period provided for in the South32 Option Agreement will generally be extended by a period
equal to the period of delay caused by the event of force majeure. As of January 28, 2021, the blockade by Mineros Norteños
at, on and around the Sierra Mojada Property is ongoing.
Beskauga
Option Agreement
On August 12, 2020, we entered
into the Beskauga Option Agreement with CB pursuant to which we have the exclusive right and option to acquire CB’s right,
title and 100% interest in the Beskauga Property, which consists of the Beskauga Main Project and the Beskauga South Project.
Upon the execution of the Beskauga Option Agreement, we paid CB Parent $30,000. In addition, we paid CB Parent $40,000 upon completion
of our due diligence, and the transaction contemplated by the Beskauga Option Agreement closed on January 26, 2021.
The Beskauga Option Agreement provides
that subject to its terms and conditions, in order to maintain the effectiveness of the Beskauga Option, we must incur $2,000,000
in cumulative exploration expenditures on the Beskauga Property by the first anniversary following the closing of the transactions
contemplated by the Beskauga Option Agreement (the “Closing Date”), $5,000,000 in cumulative expenditures on the Beskauga
Property by the second anniversary following the Closing Date, $10,000,000 in cumulative expenditures on the Beskauga Property
by the third anniversary following the Closing Date, and $15,000,000 in cumulative expenditures on the Beskauga Property by the
fourth anniversary following the Closing Date (collectively, the “Exploration Expenditures”). The Beskauga Option Agreement
also provides that subject to its terms and conditions,after we have incurred the Exploration Expenditures, we may exercise the
Beskauga Option and acquire (i) the Beskauga Property by paying CB $15,000,000 in cash, (ii) the Beskauga Main Project
only by paying CB $13,500,000 in cash, or (iii) the Beskauga South Project only by paying CB $1,500,000 in cash.
In addition, the Beskauga Option Agreement
provides that subject to its terms and conditions, we may be obligated to make the following bonus payments (collectively, the
“Bonus Payments”) to CB Parent if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable
feasibility study in compliance with Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts
set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or
after the mineral resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business
days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable,
and (ii) up to 50% of the Bonus Payments payable in shares of our common stock to be valued at the 20-day volume-weighted
average trading price of the shares on the Toronto Stock Exchange calculated as of the date immediately preceding the date such
shares are issued:
|
Gold equivalent resources
|
|
Cumulative Bonus Payments
|
|
Beskauga Main Project
|
|
|
|
3,000,000 ounces
|
|
$
|
2,000,000
|
|
|
5,000,000 ounces
|
|
$
|
6,000,000
|
|
|
7,000,000 ounces
|
|
$
|
12,000,000
|
|
|
10,000,000 ounces
|
|
$
|
20,000,000
|
|
|
Beskauga South Project
|
|
|
|
|
|
2,000,000 ounces
|
|
$
|
2,000,000
|
|
|
3,000,000 ounces
|
|
$
|
5,000,000
|
|
|
4,000,000 ounces
|
|
$
|
8,000,000
|
|
|
5,000,000 ounces
|
|
$
|
12,000,000
|
|
The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement
of us and CB; (ii) upon the delivery of written notice by us, provided that at the time of delivery of such notice, unless
there has been a material breach of a representation or warranty given by CB that has not been cured, the Beskauga Property is
in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement
and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
On August 24, 2020, we loaned $360,000
to Ekidos Minerals LLP, an unrelated third-party Kazakh entity relating to the acquisition of mineral property concessions in Kazakhstan.
The loan is interest free and is to be repaid by January 31, 2021.
On December 21, 2020, we loaned
an additional $400,000 to Ekidos Minerals LLP. This loan is interest free and is to be repaid by June 30, 2021.
Sierra Mojada Project
Location, Access and Infrastructure
The Sierra Mojada Project is located within
a mining district known as the Sierra Mojada District. The Sierra Mojada District is located in the west–central part of
the state of Coahuila, Mexico, near the Coahuila-Chihuahua state border approximately 200 kilometers south of the Big Bend of the
Rio Grande River. The principal mining area extends for approximately five kilometers in an east-west direction along the base
of the precipitous, 1,000-meter high Sierra Mojada Range.
The Sierra Mojada Project site is situated
to the south of the village of Esmeralda, on the northern side of a major escarpment that forms the northern margin of the Sierra
Mojada range. In general, the site is approximately 1,500 meters above sea level. The project is accessible by paved road from
the city of Torreon, Coahuila, which lies approximately 250 kilometers to the south. Esmerelda is served by a rail spur of the
Coahuila Durango railroad. There is an airstrip east of Esmeralda, although its availability is limited, and another airstrip at
the nearby Penoles plant, which we can use occasionally. The Sierra Mojada District has high voltage electric power supplied by
the national power company, Comisión Federal de Electricidad, C.F.E., and is supplied water by the municipality of Sierra
Mojada. Although power levels are sufficient for current operations and exploration, future development of the project, if any,
may require additional power supplies to be sourced.
Our facilities in Mexico include offices, accommodation
for employees, workshops, warehouse buildings and exploration equipment located at Calle Mina #1, La Esmeralda, Coahuila, Mexico.
The map below shows the
location of the Sierra Mojada Project:
Property History
Silver and lead were first discovered by a
foraging party in 1879, and mining through 1886 consisted of native silver, silver chloride, and lead carbonate ores. After 1886,
silver-lead-zinc-copper sulphide ores within limestone and sandstone units were produced. No accurate production history has been
found for historical mining during this period.
Approximately 95 years ago, zinc silicate and
zinc carbonate minerals (“Zinc Manto Zone”) were discovered underlying the silver-lead mineralized horizon. The Zinc
Manto Zone is predominantly zinc dominated, but with subordinate lead-rich manto and is principally situated in the footwall rocks
of the Sierra Mojada Fault System. Since discovery and until 1990, zinc, silver, and lead ores were mined from various mines along
the strike of the deposit, including from the Sierra Mojada Property. Ores mined from within these areas were hand-sorted, and
the concentrate shipped mostly to smelters in the United States.
Activity during the period of 1956 to 1990
consisted of operations by the Mineros Norteños and operations by individual owners and operators of pre-existing mines.
The Mineros Norteños operated the San Salvador, Encantada, Fronteriza, Esmeralda, and Parrena mines, and shipped oxide zinc
ore to Zinc National’s smelter in Monterrey, while copper and silver ore were shipped to smelters in Mexico and the United
States.
We estimate that over 45 mines have produced
ore from underground workings throughout the approximately five kilometers by two-kilometer area that comprises the Sierra Mojada
District. We estimate that since its discovery in 1879, the Sierra Mojada District has produced approximately 10 million tons of
silver, zinc, lead and copper ore. The Sierra Mojada District does not have a mill to concentrate ore, and all mining conducted
thus far has been limited to selectively mined ore of sufficient grade to direct ship to smelters. We believe that mill-grade mineralization
that was not mined remains available for extraction. No mining operations are currently active within the area of the Sierra Mojada
District, except for a dolomite quarry by Peñoles near Esmeralda.
In the 1990s, Kennecott Copper Corporation
(“Kennecott”) had a joint venture agreement with USMX, Inc. (“USMX”) involving its Sierra Mojada concessions.
Kennecott terminated the joint venture in approximately 1995. We entered into a Joint Exploration and Development Agreement with
USMX in July 1996 involving USMX’s Sierra Mojada concessions. In 1998, we purchased the Sierra Mojada and the USMX concessions,
and the joint exploration and development agreement was terminated. We also purchased certain other concessions during this time
and conducted exploration for copper and silver mineralization from 1997 through 1999.
Title and Ownership Rights
The Sierra Mojada Project is comprised of 20
concessions consisting of 6,496 hectares (about 16,052 acres). We periodically obtain additional concessions in the Sierra Mojada
Project area, and whether we will continue to hold these additional concessions will depend on future exploration work and exploration
results and our ability to obtain financing. As we have done in prior years, we continually assess our concession ownership, and
we may terminate our rights to certain concessions holdings.
Each mining concession enables us to explore
the underlying concession in consideration for the payment of a semi-annual fee to the Mexican government and completion of certain
annual assessment work. Annual assessment work in excess of statutory annual requirements can be carried forward and applied to
future periods.
Ownership of a concession provides the owner
with exclusive exploration and exploitation rights to all minerals located on the concessions, but does not include the surface
rights to the real property. Therefore, we will need to negotiate any necessary agreements with the appropriate surface landowners
if we determine that a mining operation is feasible for the concessions. We own surface rights to five lots in the Sierra Mojada
Property (Sierra Mojada lot #1, #3, #4, #6 and #7) but anticipate that we will be required to obtain additional surface rights
if we determine that a mining operation is feasible.
Geology and Mineralization
The Sierra Mojada concessions contain a mineral
system which can be separated into two distinct zones: a silver-rich zone (the “Silver Zone”) and a zinc-rich zone
(the “Zinc Zone”). These two zones lie along the Sierra Mojada Fault which trends east–west along the base of
the Sierra Mojada range. The majority of the mineralization identified to date is seen as oxide, which has been derived from primary
“sulphide” bodies that have been oxidized and remained in situ or remobilized into porous and fractured rock along
the Sierra Mojada Fault. The formation of the Silver Zone and the Zinc Zone is a reflection of the mobility of the metals in the
ground water conditions at Sierra Mojada.
The geology of the Sierra Mojada District is
composed of a Cretaceous limestone and dolomite sequence sitting on top of the Jurassic “San Marcos” red sediments.
This sedimentary sequence was subsequently intruded by Tertiary volcanics, which are considered to be responsible for the mineralization
seen at Sierra Mojada. Historical mines are dry, and the rocks are competent for the most part. We believe that the thickness and
attitude of the mineralized material could potentially be amenable to high volume mechanized mining methods and low-cost production.
Sierra Mojada Technical Report (October
2018)
On October 30,
2018, Archer, Cathro & Associates (1981) Limited and Timothy Barry delivered an updated technical report (the “Sierra
Mojada Report”) on the silver and zinc mineralization at the Sierra Mojada Project in accordance with Canadian National Instrument
43-101 (“NI 43-101”). The Sierra Mojada Report supersedes the prior mineralized material estimate released by the Company
in June 2015. The Sierra Mojada Report includes an update on the silver and zinc mineralization which was estimated from 1,336
diamond drill holes, 24 reverse circulation drill holes, 9,027 channel samples and 2,346
underground long holes. Using a net smelter return (“NSR”) economic cut-off, the Sierra Mojada Report indicates mineralized
material in the optimized pit of 70.4 million tonnes at an average silver grade of 38.6 grams/tonne silver, an average zinc percentage
of 3.4%, an average copper percentage of 0.04% and an average lead percentage of 0.3%. The Sierra Mojada Report used a $13.50/tonne
NSR cut-off grade and assumed a silver price of $15.00/ounce and a zinc price of $1.20/pound. Mineralized material estimates do
not include any amounts categorized as inferred resources.
“Mineralized material” as used
in this Annual Report on Form 10-K, although permissible under the Securities and Exchange Commission’s (“SEC’s”)
Industry Guide 7, does not indicate “reserves” by SEC standards. We cannot be certain that any part of the Sierra Mojada
Project will ever be confirmed or converted into SEC Industry Guide – 7 -- compliant “reserves.” Investors are
cautioned not to assume that all or any part of the mineralized material will ever be confirmed or converted into reserves or that
mineralized material can be economically or legally extracted.
Sampling, Analysis, Quality Control and
Security
Our activities conform to mining industry standard
practices and follow the Best Practices Guidelines of the Canadian Institute of Mining, Metallurgy, and Petroleum (CIM). Sampling
is directed and supervised by trained and experienced geologists. Drill core and other samples are processed and logged using industry
standard methods. Standard samples, duplicates and blanks are periodically entered into the stream of samples submitted for assays,
and campaigns of re-sampling and duplicate analyses and round-robin inter-laboratory validations are conducted periodically. We
use ALS Chemex – Vancouver (“ALS Chemex”) laboratory as our independent primary laboratory. ALS Chemex is ISO
9001:2000 certified. All analytical results that are used in resource models are exclusively from the independent primary laboratory.
Our consultants perform technical audits of
our operations, including our formal quality assurance/quality control (“QA/QC”) program, and recommend improvements
as needed. A systematic program of duplicate sampling and assaying of representative samples from previous exploration activities
was completed in 2010 under the direction and control of our consultants. Results of this study acceptably confirm the values in
the project database used for resource modeling.
We formerly operated a sample preparation and
an analytical laboratory at the project that prepared samples for shipment, performed QA/QC analyses to ensure against cross-contamination
of samples during preparation and removed most low-value samples from the flow to the primary laboratory. For cost and other reasons,
the internal laboratory has been shut down.
Prior Exploration Activities
We have focused our exploration efforts on
two primary locations: the Silver Zone and the Zinc Zone. As further described below, we have conducted various exploration activities
at the Sierra Mojada Project; however, to date, we have not established any reserves, and the project remains in the exploration
stage and may never enter the development stage.
Prior to 2008, exploration efforts largely
focused on the Zinc Zone with surface and underground drilling. In fiscal year 2009, we scaled back our exploration activities
and administrative costs to conserve capital while we tried to secure additional sources of capital resources.
After closing the transaction with Dome in
April 2010, we focused our exploration activities at Sierra Mojada primarily on the Silver Zone, which lies largely at surface.
By the end of calendar 2018, approximately 101,000 meters of diamond drilling from surface and 10,000 meters of underground drilling
had been completed.
The silver contained within the Silver Zone
is seen primarily as silver halide minerals. The zinc contained within the Zinc Zone is contained mostly in the mineral hemimorphite
and, to a lesser amount, in the mineral smithsonite.
2020 Exploration Activities
In January 2020, our board of directors
approved an exploration budget for the Sierra Mojada Property of $0.2 million for the period
from January 2020 through May 2020 and $1.1 million for general and administrative
expenses for calendar year 2020. In June 2020, our board of directors approved an
exploration budget for the Sierra Mojada Property of $0.1 million for the period from June 2020 through December 2020. Due to the
blockade by Mineros Norteños previously mentioned under the “South32 Option Agreement” section of this Form
10-K, we have temporarily halted all work at the Sierra Mojada Property.
2020
Drilling
During the year ended October 31, 2020,
we conducted no drilling as we halted the drilling program due to the blockade.
Airborne
Geophysics
Between September 2018 and November 2018, we
completed a 5,297 line kilometer helicopter-borne Versatile Time Domain Electro Magnetic (VTEM) and Magnetic Geophysical Survey
over the Sierra Mojada Property. The results of this survey aided in refining the design of the drilling program.
2021 Exploration Program
The focus of our 2021 calendar year
exploration program on the Sierra Mojada Property will be to resolve the blockade and maintain our property concessions. Upon resolution
of the blockade, we will work with South32 to approve an updated exploration program.
Metallurgical Studies
In May 2015, we selected and shipped samples
of high-grade zinc material to a lab in Denver, Colorado for “fine bubble” flotation test work and to a group in Australia
to assess their proprietary hydrometallurgy process. Previous test work completed by Silver Bull using mechanical flotation has
shown an 87% recovery of zinc from the white zinc zone to produce a rough concentrate of 43% zinc, and a 72.5% recovery of zinc
from the red zinc zone to produce a rough concentrate of 30% zinc. The “fine bubble” flotation test work that was performed
did not improve recovery, but based on analysis of the results, it was determined that the “fine bubble” flotation
test process may be able to be adjusted to improve recovery. Further testing is not planned at this time.
In addition, we previously conducted a metallurgical
program to test the recovery of (i) the silver mineralization using the agitation cyanide leach method and (ii) the zinc mineralization
using the SART process (sulfidization, acidification, recycling, and thickening). The test work on the Silver Zone focused on cyanide
leach recovery of the silver using “Bottle Roll” tests to simulate an agitation leach system and to determine the recovery
of (A) low-grade zinc that occurs in the Silver Zone and (B) high-grade zinc from the Zinc Zone that had been blended with mineralization
from the Silver-rich Zone to the leach solution. The silver was recovered from the cyanide leach solution using the Merrill Crowe
technique, and the zinc was recovered from the leach solution using the SART process. The SART process is a metallurgical process
that regenerates and recycles the cyanide used in the leaching process of the silver and zinc and allows for the recovery of zinc
that has been leached by the cyanide solution. The results showed an overall average silver recovery of 73.2%, with peak values
of 89.0% and an overall average zinc recovery of 44% in the Silver Zone.
Beskauga
Project
Location, Access and Infrastructure
The Beskauga Project is located in the
Pavlodar Region of northeastern Kazakhstan, approximately 300 kilometers from the Kazakhstan capital Nur-Sultan (formerly Astana),
approximately 70 kilometers southwest of the city of Pavlodar, and approximately 65 km east of the town of Ekibastuz. There is
an international airport at Nur-Sultan. Access to the project area is via sealed road from Pavlodar.
The property comprises three licenses, the
Beskauga mineral license (67.8 square kilometers) in the center of the property, which has been the subject of all work carried
out thus far, and the Stepnoe (425 square kilometers) and Ekidos (425 square kilometers) mineral exploration licenses.
The region has sufficient infrastructure to
host large-scale mining operations and is a sophisticated transportation and communication node with a local economy dominated
by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power-generating capacity comes from the
region, which contains six power stations, three of which are in Pavlodar. Fresh water is supplied to the area from the Irtysh
River/Karaganda Canal, and there is a large, well-trained labour force to draw upon for any future mining activities.
The map below shows the location of the Beskauga
Project:
Property History, Title and Ownership Rights
The Beskauga deposit was discovered by
a regional shallow drilling program conducted during the Soviet-era in the 1980’s. CB Sub maintains minerals rights for the
Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, and a series of subsequent contracts and addendums
as per the Republic of Kazakhstan legislation.
The Beskauga mineral exploration license was
issued under Kazakhstan’s previous mining code, which was based on a contract arrangement whereby a company agrees to meet
certain milestones and expenditure with the government. Despite a new mining code being in place since June 2018, obligations under
existing contracts and licenses are still enforced. CB Sub has a mineral exploration license providing for the right to explore
for all minerals (except uranium) on the Beskauga property. In order to maintain the exploration license in good standing, CB Sub
is required to spend the following:
Before the end of the three-year period ending
December 31, 2023, the Beskauga exploration license will need to be converted to a mining license. A mining license has a provision
to allow for another 3-year exploration period before an economic study needs to be completed on the project. Pursuant to the Beskauga
Option Agreement with CB Parent and the Beskauga mineral exploration license held by CB Sub, Silver Bull has the exclusive right
and option to acquire CB Sub’s right to explore for all minerals (except uranium) on the Beskauga property until December 31,
2023.
Geology and Mineralization
The Beskauga Project is located in northeastern
Kazakhstan, an area underlain by the rocks of the Altaid tectonic collage or Central Asian Orogenic Belt, an extensive Palaeozoic
subduction-accretion complex made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded
terranes that was progressively developed from the late Neoproterozoic Era, through the Palaeozoic Era to the early Mesozoic Era,
and which extends eastwards into Russia, Mongolia and China as the Transbaikal-Mongolian orogenic collage. These tectonic collages
contain several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician
to the Jurassic and associated with the various magmatic arcs of this complex.
Beskauga is thought to be located in
the lower Boshchekul-Chingiz volcanic arc, part of the Kipchak arc system. Island-arc volcanism was calc-alkaline in nature, evolving
from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites,
granodiorite and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry deposits in the
region.
Beskauga Main is a copper-gold porphyry
deposit with elevated grades of molybdenum and silver, related to granodiorite and plagiogranite porphyry intrusions. The project
area is predominantly underlain by volcanogenic-sedimentary rocks of upper Ordovician age that have been intruded by small stock-like
intrusive bodies of porphyry ranging in composition from gabbro-diorite to quartz diorite and granodiorite. Porphyry-style mineralization
is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes. Mineralized zones are affected by
stockwork veining and hydrothermal alteration and dip steeply. Alteration is mainly represented by albitization, sericitization
and pyritization, though potassic alteration is also described. The most intensive alteration is at a depth of 250-500 meters.
The principal sulphide minerals at Beskauga Main are pyrite and chalcopyrite, with smaller amounts of bornite, chalcocite, tennantite,
enargite, and molybdenite, with magnetite and hematite also described. Analysis indicates a close correlation between gold and
copper grades. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets.
Beskauga South is a gold only deposit
associated with sericite-pyrophyllite-quartz alteration and silicification in steeply-dipping alteration zones affecting diorite
porphyry. Mineralization may represent an epithermal stage within a porphyry-epithermal system.
Beskauga Technical Report (January 2021)
On January
27, 2021, Silver Bull announced a technical report prepared by CSA Global Consultants Canada Ltd on the mineralization at the Beskauga
Project in accordance with NI 43-101 (the “Beskauga Report”). The Beskauga Report includes an estimate of the copper,
gold and silver mineralization at Beskauga Main. Using a NSR economic cut-off, the Beskauga Report indicates mineralized material
in an open-pit constrained block resource model of 207 million tonnes at an average copper percentage of 0.23%, gold grade of 0.35
grams/tonne, and silver grade of 1.09 grams/tonne. The Beskauga Report used a $5.70/tonne NSR cut-off grade and assumed a copper
price of $2.80/pound, a gold price of $1,500/ounce and a silver price of $17.25/ounce. These mineralized material estimates do
not include any amounts categorized as inferred resources.
The full
Beskauga Report will be issued by March 12, 2021, which is 45 days from the report announcement date, as per Canadian regulatory
requirements.
“Mineralized material” as used
in this Annual Report on Form 10-K, although permissible under the SEC’s Industry Guide 7, does not indicate “reserves”
by SEC standards. We cannot be certain that any part of the Beskauga Project will ever be confirmed or converted into SEC Industry
Guide 7-compliant “reserves.” Investors are cautioned not to assume that all or any part of the mineralized material
will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.
2021 Exploration Program
We anticipate the commencement of an
exploration program in the second calendar quarter of 2021 on the Beskauga property. This will involve a geological mapping and
sampling program of key select areas, as well as a diamond drilling program targeting extensions to the known mineralization in
the second half of calendar year 2021. The exploration program’s design is being determined based historical geological information
in the area and an airborne geophysics program that has recently been completed. The exploration drilling program is subject to
obtaining adequate financing.
Information about our Executive Officers
We have three executive officers: a Chairman,
a President and Chief Executive Officer and a Chief Financial Officer. Set forth below is information regarding our executive officers.
|
Name and Residence
|
|
Age
|
|
Position
|
|
Brian Edgar
Vancouver, BC
|
|
71
|
|
Chairman
|
|
Timothy Barry
Squamish, BC
|
|
45
|
|
President, Chief Executive Officer and Director
|
|
Christopher Richards
Vancouver, BC
|
|
43
|
|
Chief Financial Officer
|
Brian Edgar. Mr. Edgar was appointed
Chairman of the Board of Directors in April 2010. Mr. Edgar has broad experience working in junior and mid-size natural resource
companies. He previously served as Dome’s President and Chief Executive Officer from February 2005 to April 2010, when Dome
was acquired by Silver Bull. Further, Mr. Edgar served on Dome’s board of directors from 1998 to 2010. Mr. Edgar
currently serves as a director of Denison Mines Corp. Mr. Edgar practiced corporate/securities law in Vancouver, British Columbia,
Canada for 16 years.
Timothy Barry. Mr. Barry has served
as a director, President and Chief Executive Officer of Silver Bull since March 2011. From August 2010 to March 2011, he served
as our Vice President – Exploration. Between 2006 and August 2010, Mr. Barry spent five years working as Chief Geologist
in West and Central Africa for Dome. During this time, he managed all aspects of Dome’s exploration programs and oversaw
corporate compliance for Dome’s various subsidiaries. Mr. Barry also served on Dome’s board of directors. In 2005,
he worked as a project geologist in Mongolia for Entree Gold, a company that has a significant stake in the Oyu Tolgoi mine in
Mongolia. Between 1998 and 2005, Mr. Barry worked as an exploration geologist for Ross River Minerals Inc. on its El Pulpo
copper/gold project in Sinaloa, Mexico, for Canabrava Diamonds Corporation on its exploration programs in the James Bay lowlands
in Ontario, Canada, and for Homestake Mining Company on its Plutonic Gold Mine in Western Australia. He has also worked as a mapping
geologist for the Geological Survey of Canada in the Coast Mountains, and as a research assistant at the University of British
Columbia, where he examined the potential of CO2 sequestration in Canada using ultramafic rocks. Mr. Barry received
a bachelor of science degree from the University of Otago in Dundein, New Zealand and is a Chartered Professional Geologist (CPAusIMM).
Christopher Richards. Mr. Richards
was appointed Chief Officer in September 2020. From June 2018 to February 2020, he served as the Vice President of Finance for
Great Panther Mining Limited, a U.S. and Canadian dual-listed gold and silver producer. From January 2017 to May 2018, he was self-employed
as a senior financial consultant at various public and private mining companies. Prior to that, Mr. Richards served as the
Vice President of Finance and Corporate Secretary (December 2013–December 2016) and Group Controller (April 2009–November
2013) of Kyzyl Gold Ltd., which owned the Kyzyl Gold Mine located in northeastern Kazakhstan. From July 2015 to October 2016, he
served as the Chief Financial Officer of TSX Venture Exchange-listed True North Gems Inc. Previously, Mr. Richards served
as the Corporate Controller of U.S. and Canadian dual-listed NovaGold Resources Inc. and as a Senior Manager of audit for KPMG
LLP. Mr. Richards is a CPA (Chartered Professional Accountant, British Columbia), CA, and received a bachelor of business
administration degree from Simon Fraser University in 2000 and a certificate in mining studies from the University of British Columbia
in 2014.
Competition and Mineral Prices
Mineral Prices
Silver and zinc are commodities, and their
prices are volatile. From January 1, 2020 to December 31, 2020 the price of silver ranged from a low of $12.00 per troy
ounce to a high of $28.89 per troy ounce, and from January 1, 2020 to December 31, 2020 the price of zinc ranged from a low
of $1,903 per tonne to a high of $2,780 per tonne. Silver and zinc prices are affected by many factors beyond our control, including
prevailing interest rates and returns on other asset classes, expectations regarding inflation, speculation, currency values, governmental
decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic
conditions and other factors. The competitive nature of the business and the risks we face are discussed further in the “Risk
Factors – Risks Related to Our Business” section below.
The following tables set forth, for the periods
indicated, high and low silver and zinc prices on the London Metal Exchange in U.S. dollars per troy ounce and per tonne, respectively.
On October 31, 2020, the closing price of silver was $23.63 per troy ounce. On October 31, 2020, the closing price of
zinc was $2,441 per tonne.
|
|
|
Silver
(per troy ounce)
|
|
Year
|
|
High
|
|
Low
|
|
2013
|
|
$32.23
|
|
$18.61
|
|
2014
|
|
$22.05
|
|
$15.28
|
|
2015
|
|
$18.23
|
|
$13.71
|
|
2016
|
|
$20.71
|
|
$13.58
|
|
2017
|
|
$18.56
|
|
$15.22
|
|
2018
|
|
$17.52
|
|
$13.97
|
|
2019
|
|
$19.31
|
|
$14.38
|
|
2020
|
|
$28.89
|
|
$12.00
|
|
|
|
|
|
|
|
|
|
Zinc
(per tonne)
|
|
Year
|
|
High
|
|
Low
|
|
2013
|
|
$2,129
|
|
$1,831
|
|
2014
|
|
$2,327
|
|
$2,008
|
|
2015
|
|
$2,281
|
|
$1,528
|
|
2016
|
|
$2,566
|
|
$1,520
|
|
2017
|
|
$3,264
|
|
$2,573
|
|
2018
|
|
$3,533
|
|
$2,434
|
|
2019
|
|
$2,932
|
|
$2,272
|
|
2020
|
|
$2,780
|
|
$1,903
|
|
|
Competition
Our industry is highly competitive. We compete
with other mining and exploration companies in the acquisition and exploration of mineral properties. There is competition for
a limited number of mineral property acquisition opportunities, some of which is with other companies having substantially greater
financial resources, staff and facilities than we do. As a result, we may have difficulty acquiring attractive exploration properties,
staking claims related to our properties and exploring properties. Our competitive position depends upon our ability to successfully
and economically acquire and explore new and existing mineral properties.
Government Regulation
Mineral exploration activities are subject
to various national, state/provincial, and local laws and regulations, which govern prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances
and other matters. Similarly, if any of our properties are developed and/or mined, those activities are also subject to significant
governmental regulation and oversight. We plan to obtain the licenses, permits and other authorizations currently required to conduct
our exploration program. We believe that we are in compliance in all material respects with applicable mining, health, safety and
environmental statutes and the regulations applicable to the mineral interests we now hold in Mexico.
Environment Regulations
Our activities are subject to various national
and local laws and regulations governing protection of the environment. These laws are continually changing and, in general, are
becoming more restrictive. We intend to conduct business in a way that safeguards public health and the environment and is in compliance
with applicable laws and regulations.
Changes to current state or federal laws and
regulations in Mexico or Kazakhstan could, in the future, require additional capital expenditures and increased operating and/or
reclamation costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional
regulatory requirements could impact the economics of our projects.
During fiscal year 2020, we had no material
environmental incidents or non-compliance with any applicable environmental regulations.
Employees
We have three employees, all of whom work full
time. Contratistas, our wholly-owned operating subsidiary in Mexico, currently has one full-time employee. Minera Metalin, our
wholly-owned mineral holding company in Mexico, does not have any employees.
Corporate Offices
Our corporate office is located at 777 Dunsmuir
Street, Suite 1610, Vancouver, British Columbia, Canada V7Y 1K4. Our telephone number is (604) 687-5800, and our fax number is
(604) 563-6004.
Available Information
We maintain an internet website at http://www.silverbullresources.com.
The information on our website is not incorporated by reference in this Annual Report on Form 10-K. We make available on or
through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with
the Exchange Act. You may also obtain this information from the SEC’s website, http://www.sec.gov.
A purchase of our securities involves a
high degree of risk. Our business or operating or financial condition could be harmed due to any of the following risks. Accordingly,
investors should carefully consider these risks in making a decision as to whether to purchase, sell or hold our securities. In
addition, investors should note that the risks described below are not the only risks facing us. Additional risks not presently
known to us, or risks that do not seem significant today, may impair our business operations in the future. You should carefully
consider the risks described below, as well as the other information contained in this Annual Report on Form 10-K and the
documents incorporated by reference herein, before making a decision to invest in our securities.
RISKS RELATED TO OUR BUSINESS:
There is substantial doubt about
whether we can continue as a going concern.
To date, we have earned no revenues
and have incurred accumulated net losses of $132,019,148. In addition, we have limited financial resources. As of October 31,
2020, we had cash and cash equivalents of $1,862,000 and working capital of $1,828,000. Therefore, our continuation as a going
concern is dependent upon our achieving a future financing or strategic transaction. However, there is no assurance that we will
be successful pursuing a financing or strategic transaction. Accordingly, there is substantial doubt as to whether our existing
cash resources and working capital are sufficient to enable us to continue our operations for the next 12 months as a going concern.
Ultimately, in the event that we cannot obtain additional financial resources, or achieve profitable operations, we may have to
liquidate our business interests and investors may lose their investment. The accompanying consolidated financial statements have
been prepared assuming that our company will continue as a going concern. Continued operations are dependent on our ability to
obtain additional financial resources or generate profitable operations. Such additional financial resources may not be available
or may not be available on reasonable terms. Our consolidated financial statements do not include any adjustments that may result
from the outcome of this uncertainty. Such adjustments could be material.
If South32 exercises
its option to purchase 70% of the equity of Minera Metalin and Contratistas, we will no longer control the development of the Sierra
Mojada Project.
On June 1, 2018,
we entered into the South32 Option Agreement with South32, a wholly owned subsidiary of South32 Limited (ASX/JSE/LSE: S32), whereby
South32 is able to obtain the South32 Option to purchase 70% of the equity of Minera Metalin and Contratistas, and oversee the
mineral exploration of the Sierra Mojada Project. If South32 exercises the South32 Option, then we will no longer control the development
of the Sierra Mojada Project. South32 would have the ability to control the timing and pace of future development, and its decisions
may not be in the best interests of the Company and its stockholders.
If South32 were
to exercise its option to purchase 70% of the equity of Minera Metalin and Contratistas, we will be required to contribute 30%
of subsequent funding toward development of the Sierra Mojada Project, and we do not currently have sufficient funds to do so.
If South32 exercises
its option to purchase 70% of the equity of Minera Metalin and Contratistas, under the terms of the South32 Option Agreement, we
will retain a 30% ownership in Minera Metalin and Contratistas, and be obligated to contribute 30% of subsequent funding toward
the development of the Sierra Mojada Project. If we fail to satisfy our funding commitment, our interest in Minera Metalin and
Contratistas will be diluted. We do not currently have sufficient funds with which to satisfy this future funding commitment, and
there is no certainty that we will be able to obtain sufficient future funds on acceptable terms or at all.
We may have difficulty meeting our current
and future capital requirements.
Our management and
our board of directors monitor our overall costs and expenses and, if necessary, adjust our programs and planned expenditures in
an attempt to ensure that we have sufficient operating capital. We continue to evaluate our costs and planned expenditures for
our ongoing exploration efforts at our Sierra Mojada Project. As of October 31, 2020, we had cash and cash equivalents of
$1,862,000. Even with the South32 funds, the continued exploration and possible development of the Sierra Mojada Project will require
significant amounts of additional capital. If we are unable to fund future operations by way of financings, including public or
private offerings of equity or debt securities, we will need to reorganize or significantly reduce our operations, which may result
in an adverse impact on our business, financial condition and exploration activities. We do not have a credit, off-take or other
commercial financing arrangement in place that would finance continued evaluation or development of the Sierra Mojada Project,
and we believe that securing credit for these projects may be difficult. Moreover, equity financing may not be available on attractive
terms and, if available, will likely result in significant dilution to existing stockholders.
We are an exploration stage mining company
with no history of operations.
We are an exploration stage enterprise engaged
in mineral exploration in Mexico and Kazakhstan. We have a very limited operating history and are subject to all the risks inherent
in a new business enterprise. As an exploration stage company, we may never enter the development and production stages. To date,
we have had no revenues and have relied upon equity financing and South32 funding to fund our operations. The likelihood of our
success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in
connection with an exploration stage business, and the competitive and regulatory environment in which we operate and will operate,
such as under-capitalization, personnel limitations, and limited financing sources.
We have no commercially mineable ore
body.
No commercially mineable ore body has been
delineated on the Sierra Mojada Project or Beskauga Project, nor have our properties been shown to contain proven or probable mineral
reserves. Investors should not assume that the projections contained in the Sierra Mojada Report or Beskauga Report will ever be
realized. We cannot assure you that any mineral deposits we identify on the Sierra Mojada Project or Beskauga Project will qualify
as an ore body that can be legally and economically exploited or that any particular level of recovery of silver, zinc or other
minerals from discovered mineralization will in fact be realized. Most exploration projects do not result in the discovery of commercially
mineable ore deposits. Even if the presence of reserves is established at a project, the legal and economic viability of the project
may not justify exploitation.
Mineral resource estimates may not be
reliable.
There are numerous uncertainties inherent in
estimating quantities of mineralized material such as silver, zinc, lead, and copper, including many factors beyond our control,
and no assurance can be given that the recovery of mineralized material will be realized. In general, estimates of mineralized
material are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:
-
geological and engineering estimates that have inherent uncertainties;
-
the assumed effects of regulation by governmental agencies;
-
the judgment of the engineers preparing the estimate;
-
estimates of future metals prices and operating costs;
-
the quality and quantity of available data;
-
the interpretation of that data; and
-
the accuracy of various mandated economic assumptions, all of which may vary considerably
from actual results.
All estimates are, to some degree, uncertain.
For these reasons, estimates of the recoverable mineral resources prepared by different engineers or by the same engineers at different
times may vary substantially. As such, there is significant uncertainty in any mineralized material estimate, and actual deposits
encountered and the economic viability of a deposit may differ materially from our estimates.
Our business plan is highly speculative,
and its success largely depends on the successful exploration of our Sierra Mojada and Beskauga concessions.
Our business plan is focused on exploring the
Sierra Mojada and Beskauga concessions to identify reserves and, if appropriate, to ultimately develop each property. Although
we have reported mineralized material on our Sierra Mojada Project and the Beskauga Project, we have not established any reserves
and remain in the exploration stage. We may never enter the development or production stage. Exploration of mineralization and
determination of whether the mineralization might be extracted profitably is highly speculative, and it may take a number of years
until production is possible, during which time the economic viability of the project may change. Substantial expenditures are
required to establish reserves, extract metals from ore and construct mining and processing facilities.
Both the Sierra Mojada Project and Beskauga
Project are subject to all of the risks inherent in mineral exploration and development. The economic feasibility of any mineral
exploration and/or development project is based upon, among other things, estimates of the size and grade of mineral reserves,
proximity to infrastructures and other resources (such as water and power), anticipated production rates, capital and operating
costs, and metals prices. To advance from an exploration project to a development project, we will need to overcome various hurdles,
including completing favorable feasibility studies, securing necessary permits, and raising significant additional capital to fund
activities. There can be no assurance that we will be successful in overcoming these hurdles. Because of our focus on the Sierra
Mojada Project and the Beskauga Project, the success of our operations and our profitability may be disproportionately exposed
to the impact of adverse conditions unique to the Torreon, Mexico and Pavlodar, Kazakhstan regions, as the Sierra Mojada Project
and Beskauga Project, respectively, due to their proximity to these locales.
Due to our history of operating losses,
we are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives.
During the fiscal years ended October 31,
2020 and October 31, 2019, we suffered net losses of $2,226,000 and $3,939,000 respectively. At October 31, 2020, we
had stockholders’ equity of $9,116,000 and cash and cash equivalents of $1,862,000. Significant amounts of capital will be
required to continue to explore and potentially develop the Sierra Mojada concessions. We are not engaged in any revenue producing
activities, and we do not expect to be in the near future. Currently, our potential sources of funding consist of the sale of additional
equity securities, entering into joint venture agreements or selling a portion of our interests in our assets. There is no assurance
that any additional capital that we will require will be obtainable on terms acceptable to us, if at all. Failure to obtain such
additional financing could result in delays or indefinite postponement of further exploration of our projects. Additional financing,
if available, will likely result in substantial dilution to existing stockholders.
Our exploration activities require significant
amounts of capital that may not be recovered.
Mineral exploration activities are subject
to many risks, including the risk that no commercially productive or extractable resources will be encountered. There can be no
assurance that our activities will ultimately lead to an economically feasible project or that we will recover all or any portion
of our investment. Mineral exploration often involves unprofitable efforts, including drilling operations that ultimately do not
further our exploration efforts. The cost of minerals exploration is often uncertain, and cost overruns are common. Our drilling
and exploration operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond our
control, including title problems, weather conditions, protests, compliance with governmental requirements, including permitting
issues, and shortages or delays in the delivery of equipment and services.
Our financial condition could be adversely
affected by changes in currency exchange rates, especially between the U.S. dollar and each of the Mexican peso (“$MXN”)
and the Kazakh tenge (“$KZT”) and the U.S dollar and the Canadian dollar (“$CDN”) given our focus on the
Sierra Mojada Project in Mexico and the Beskauga Project in Kazakhstan, and our corporate office in Vancouver, Canada.
Our financial condition is affected in part
by currency exchange rates, as portions of our exploration costs in Mexico and Kazakhstan and general and administration costs
in Canada are denominated in the local currency. A weakening U.S. dollar relative to the $MXN, $KZT and $CDN will have the effect
of increasing exploration costs and general and administration costs while a strengthening U.S. dollar will have the effect of
reducing exploration costs and general and administration costs. The exchange rates between the $CDN and the U.S. dollar and between
the $MXN, $KZT and U.S. dollar have fluctuated widely in response to international political conditions, general economic conditions
and other factors beyond our control.
Our success depends on developing and
maintaining relationships with local communities and other stakeholders.
Our ongoing and future success depends on developing
and maintaining productive relationships with the communities surrounding our operations and other stakeholders in our operating
locations. We believe that our operations can provide valuable benefits to surrounding communities, in terms of direct employment,
training and skills development. In addition, we seek to maintain our partnerships and relationships with local communities and
stakeholders in a variety of ways, including in-kind contributions, sponsorships and donations. Notwithstanding our ongoing efforts,
local communities and stakeholders can become dissatisfied with our activities or the level of benefits provided, which may result
in legal or administrative proceedings, civil unrest, protests, direct action or campaigns against us, such as the recent blockade
by Mineros Norteños that caused us to halt all work on the Sierra Mojada Property. Any such occurrences, including the blockade,
could materially and adversely affect our financial condition, results of operations and cash flows.
Our operations may be disrupted, and
our financial results may be adversely affected, by global outbreaks of contagious diseases, including the novel coronavirus (COVID-19)
pandemic.
Global outbreaks of contagious diseases, including
the December 2019 outbreak of a novel strain of coronavirus (COVID-19), have the potential to significantly and adversely impact
our operations and business. On March 11, 2020, the World Health Organization recognized COVID-19 as a global pandemic. Pandemics
or disease outbreaks such as the currently ongoing COVID-19 outbreak may have a variety of adverse effects on our business, including
by depressing commodity prices and the market value of our securities and limiting the ability of our management to meet with potential
financing sources. The spread of COVID-19 has had, and continues to have, a negative impact on the financial markets, which may
impact our ability to obtain additional financing in the near term. A prolonged downturn in the financial markets could have an
adverse effect on our business, results of operations and ability to raise capital.
RISKS RELATING TO THE MINERAL EXPLORATION
INDUSTRY:
There are inherent risks in the mineral
exploration industry.
We are subject to all of the risks inherent
in the minerals exploration industry, including, without limitation, the following:
-
we are subject to competition from a large number of companies, many of which are significantly
larger than we are, in the acquisition, exploration, and development of mining properties;
-
we might not be able raise enough money to pay the fees and taxes and perform the labor
necessary to maintain our concessions in good status;
-
exploration for minerals is highly speculative, involves substantial risks and is frequently
unproductive, even when conducted on properties known to contain significant quantities of mineralization, and our exploration
projects may not result in the discovery of commercially mineable deposits of ore;
-
the probability of an individual prospect ever having reserves that meet the requirements
for reporting under SEC Industry Guide 7 is remote, and any funds spent on exploration may be lost;
-
our operations are subject to a variety of existing laws and regulations relating to exploration
and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards,
pollution and other environmental protection controls, and we may not be able to comply with these regulations and controls; and
-
a large number of factors beyond our control, including fluctuations in metal prices, inflation,
and other economic conditions, will affect the economic feasibility of mining.
Metals prices are subject to extreme
fluctuation.
Our activities are influenced by the prices
of commodities, including silver, zinc, lead, copper and other metals. These prices fluctuate widely and are affected by numerous
factors beyond our control, including interest rates, expectations for inflation, speculation, currency values (in particular,
the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal-producing
regions of the world.
Our ability to establish reserves through our
exploration activities, our future profitability and our long-term viability depend, in large part, on the market prices of silver,
zinc, lead, copper and other metals. The market prices for these metals are volatile and are affected by numerous factors beyond
our control, including:
-
global or regional consumption patterns;
-
supply of, and demand for, silver, zinc, lead, copper and other metals;
-
speculative activities and producer hedging activities;
-
expectations for inflation;
-
political and economic conditions; and
-
supply of, and demand for, consumables required for production.
Future weakness in the global economy could
increase volatility in metals prices or depress metals prices, which could in turn reduce the value of our properties, make it
more difficult to raise additional capital, and make it uneconomical for us to continue our exploration activities.
There are inherent risks with foreign
operations.
Our business activities are primarily conducted
in Mexico and are expected to expand into Kazakhstan, and as such, our activities are exposed to various levels of foreign political,
economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to, terrorism, hostage taking,
military repression, extreme fluctuations in currency exchange rates, high rates of inflation, labor unrest, war or civil unrest,
expropriation and nationalization, renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts,
illegal mining, changes in taxation policies, restrictions on foreign exchange and repatriation, changing political conditions
(including, potential instability if the United States withdraws from the United States-Mexico-Canada Agreement), currency controls
and governmental regulations that favor or require the rewarding of contracts to local contractors or require foreign contractors
to employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes, if any, in mining or investment policies
or shifts in political attitude in Mexico or Kazakhstan may adversely affect our exploration and possible future development activities.
We may also be affected to varying degrees by government regulations with respect to, but not limited to, foreign investment, maintenance
of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly
with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction
or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried
or other interests.
The occurrence of these various factors and
uncertainties cannot be accurately predicted and could have an adverse effect on our operations. In addition, legislation in the
United States, Canada, Kazakhstan or Mexico regulating foreign trade, investment and taxation could have a material adverse effect
on our financial condition.
Our Sierra Mojada Project is located
in Mexico and is subject to varying levels of political, economic, legal and other risks.
The Sierra Mojada Project is in Mexico. In
the past, Mexico has been subject to political instability, changes and uncertainties that have resulted in changes to existing
governmental regulations affecting mineral exploration and mining activities. Mexico’s status as a developing country may
make it more difficult for us to obtain any required financing for the Sierra Mojada Project or other projects in Mexico in the
future. Our Sierra Mojada Project is also subject to a variety of governmental regulations governing health and worker safety,
employment standards, waste disposal, protection of historic and archaeological sites, mine development, protection of endangered
and protected species and other matters. Mexican regulators have broad authority to shut down and/or levy fines against facilities
that do not comply with regulations or standards.
Our exploration activities in Mexico may be
adversely affected to varying degrees by changing government regulations relating to the mining industry or shifts in political
conditions that increase the costs related to the Sierra Mojada Project. Changes, if any, in mining or investment policies or shifts
in political attitude may adversely affect our financial condition. Expansion of our activities will be subject to the need to
obtain sufficient access to adequate supplies of water and assure the availability of sufficient power and surface rights that
could be affected by government policy and competing operations in the area.
We also have litigation risk with respect to
our operations. See Part I, Item 3 – Legal Proceedings of this Annual Report on Form 10-K for an explanation of material
legal proceedings to which Silver Bull or its subsidiaries have been a party.
The occurrence of these various factors and
uncertainties cannot be accurately predicted and could have an adverse effect on our financial condition. Future changes in applicable
laws and regulations or changes in their enforcement or regulatory interpretation could negatively impact current or planned exploration
activities with the Sierra Mojada Project or in respect to any other projects in which we become involved in Mexico. Any failure
to comply with applicable laws and regulations, even if inadvertent, could result in the interruption of exploration operations
or material fines, penalties or other liabilities.
Our Beskauga Project is located in Kazakhstan
and is subject to varying levels of political, economic, legal and other risks.
The Beskauga Project is in Kazakhstan. As is
typical of an emerging market, Kazakhstan’s business, legal and regulatory infrastructure has been subject to substantial
political, economic and social change. Our business in Kazakhstan is subject to Kazakhstan-specific laws and regulations, including
with respect to tax, anti-corruption, and foreign exchange controls. Such laws are often rapidly changing and are unpredictable.
Our failure to manage the risks associated with doing business in Kazakhstan could have a material adverse effect upon our results
of operations.
Title to our properties may be challenged
or defective.
Our future operations, including our activities
at the Sierra Mojada Project and other exploration activities, will require additional permits from various governmental authorities.
Our operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports,
taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety,
mining royalties and other matters. There can be no assurance that we will be able to acquire all required licenses, permits or
property rights on reasonable terms or in a timely manner, or at all, that such terms will not be adversely changed, that required
extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.
We attempt to confirm the validity of our rights
of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot
guarantee that title to our properties will not be challenged. The Sierra Mojada Property may be subject to prior unregistered
agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to
the title of any of the claims comprising the Sierra Mojada Property that, if successful, could impair possible development and/or
operations with respect to such properties in the future. Challenges to permits or property rights (whether successful or unsuccessful),
changes to the terms of permits or property rights, or a failure to comply with the terms of any permits or property rights that
have been obtained could have a material adverse effect on our business by delaying or preventing or making continued operations
economically unfeasible.
A title defect could result in Silver Bull
losing all or a portion of its right, title, and interest to and in the properties to which the title defect relates. Title insurance
generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining
concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our
rights with respect to our properties. We annually monitor the official mining records in Mexico City to determine if there are
annotations indicating the existence of a legal challenge against the validity of any of our concessions. As of January 2021, and
to the best of our knowledge, there are no such annotations, nor are we aware of any challenges from the government or from third
parties, except for the Mineros Norteños matter described in Part I, Item 3 – Legal Proceedings.
In addition, in connection with the purchase
of certain mining concessions, Silver Bull agreed to pay a net royalty interest on revenue from future mineral sales on certain
concessions at the Sierra Mojada Project, including concessions on which a significant portion of our mineralized material is located.
The aggregate amount payable under this royalty is capped at $6.875 million (the “Royalty”), an amount that will only
be reached if there is significant future production from the concessions. As noted in Part I, Item 3 (Legal Proceedings), this
Royalty is currently the subject of a dispute with a local cooperative. In addition, records from prior management indicate that
additional royalty interests may have been created, although the continued applicability and scope of these interests are uncertain.
The existence of these royalty interests may have a material effect on the economic feasibility of potential future development
of the Sierra Mojada Project.
We are subject to complex environmental
and other regulatory risks, which could expose us to significant liability and delay and potentially the suspension or termination
of our exploration efforts.
Our mineral exploration activities are subject
to federal, state and local environmental regulations in the jurisdictions where our mineral properties are located. These regulations
mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations
on the generation, transportation, storage and disposal of solid and hazardous waste. No assurance can be given that environmental
standards imposed by these governments will not be changed, thereby possibly materially adversely affecting our proposed activities.
Compliance with these environmental requirements may also necessitate significant capital outlays or may materially affect our
earning power.
Environmental legislation is evolving in a
manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.
As a result of recent changes in environmental laws in Mexico, for example, more legal actions supported or sponsored by non-governmental
groups interested in halting projects may be filed against companies operating in all industrial sectors, including the mining
sector. Mexican projects are also subject to the environmental agreements entered into by Mexico, the United States and Canada
in connection with the United States-Mexico-Canada Agreement.
Future changes in environmental regulations
in the jurisdictions where our projects are located may adversely affect our exploration activities, make them prohibitively expensive,
or prohibit them altogether. Environmental hazards may exist on the properties in which we currently hold interests, such as the
Sierra Mojada Project, or may hold interests in the future, that are unknown to us at present and that have been caused by us or
previous owners or operators, or that may have occurred naturally. We may be liable for remediating any damage that we may have
caused. The liability could include costs for removing or remediating the release and damage to natural resources, including ground
water, as well as the payment of fines and penalties.
Our industry is highly competitive,
attractive mineral properties and property concessions are scarce, and we may not be able to obtain quality properties or concessions.
We compete with other mining and exploration
companies in the acquisition of mineral properties and property concessions. There is competition for a limited number of attractive
mineral property acquisition opportunities, some of which is with other companies having substantially greater financial resources,
staff and facilities than we do. As a result, we may have difficulty acquiring quality mineral properties or property concessions.
We may face a shortage of water.
Water is essential in all phases of the exploration
and development of mineral properties. It is used in such processes as exploration, drilling, leaching, placer mining, dredging,
testing, and hydraulic mining. Both the lack of available water and the cost of acquisition may make an otherwise viable project
economically impossible to complete. In November 2013, Silver Bull was granted the right to exploit up to 3.5 million cubic meters
of water per year from six different well sites by the water regulatory body in Mexico, La Comisión Nacional del Agua, but
it has yet to be determined if the six well sites can produce this much water over a sustained period of time.
Our non-operating properties are subject
to various hazards.
We are subject to risks and hazards, including
environmental hazards, possible encounters with unusual or unexpected geological formations, cave-ins, flooding and earthquakes,
and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or the
destruction of, mineral properties or future production facilities, personal injury or death, environmental damage, delays in our
exploration activities, asset write-downs, monetary losses and possible legal liability. We may not be insured against all losses
or liabilities, either because such insurance is unavailable or because we have elected not to purchase such insurance due to high
premium costs or other reasons. Although we maintain insurance in an amount that we consider to be adequate, liabilities might
exceed policy limits, in which event we could incur significant costs that could adversely affect our activities. The realization
of any significant liabilities in connection with our activities as described above could negatively affect our activities and
the price of our common stock.
We need and rely upon key personnel.
Presently, we employ a limited number of full-time
employees, utilize outside consultants, and in large part rely on the efforts of our officers and directors. Our success will depend,
in part, upon the ability to attract and retain qualified employees. In particular, we have only three executive officers, Brian
Edgar, Timothy Barry and Christopher Richards, and the loss of the services of any of these three would adversely affect our business.
RISKS RELATING TO OUR COMMON STOCK:
We will have virtually no shares
available for issuance to raise capital to fund our general corporate overhead or cover the costs associated with maintaining our
mineral interests unless the number of authorized shares of common stock is increased.
Currently, we have 37,500,000 authorized
shares of common stock. As of January 28, 2021, we had 33,484,945 shares of common stock outstanding. After taking into account
the 4,015,039 shares reserved for issuance upon the exercise of outstanding options and warrants, we have virtually no shares available
for issuance. For all practical purposes, the 37,500,000 authorized shares of our common stock have been fully utilized, restricting
our ability to issue any more shares. In December 2020, we solicited the approval of our shareholders to amend our articles of
incorporation to increase the number of authorized shares of common stock to 300,000,000; however, we did not receive the requisite
shareholder approval. If the number of authorized shares of common stock is not increased, we will have virtually no shares available
for issuance to raise capital to fund our general corporate overhead or cover the costs associated with maintaining our interests
in the Sierra Mojada Project in Mexico or our interests in the Beskauga Project in Kazakhstan. Further delays in securing, or the
failure to secure, shareholder approval to amend our articles of incorporation to increase the number of authorized shares of common
may prevent us from executing a capital raising transaction, which may have a material adverse effect on our business and financial
condition.
Further equity financings may lead to
the dilution of our common stock.
In order to finance future operations, we may
raise funds through the issuance of common stock or the issuance of debt instruments or other securities convertible into common
stock. We cannot predict the size of future issuances of common stock or the size and terms of future issuances of debt instruments
or other securities convertible into common stock or the effect, if any, that future issuances and sales of our securities will
have on the market price of our common stock. Any transaction involving the issuance of previously authorized but unissued shares,
or securities convertible into common stock, would result in dilution, possibly substantial, to present and prospective security
holders. Demand for equity securities in the mining industry has been weak; therefore, equity financing may not be available on
attractive terms and, if available, will likely result in significant dilution to existing shareholders.
No dividends are anticipated.
At the present time, we do not anticipate paying
dividends, cash or otherwise, on our common stock in the foreseeable future. Future dividends will depend on our earnings, if any,
our financial requirements and other factors. There can be no assurance that we will pay dividends.
Our stock price can be very volatile.
Our common stock is listed on the TSX and trades
on the OTCQB. The trading price of our common stock has been, and could continue to be, subject to wide fluctuations in response
to announcements of our business developments, results and progress of our exploration activities at the Sierra Mojada Project,
progress reports on our exploration activities, and other events or factors. In addition, stock markets have experienced significant
price volatility in recent months and years. This volatility has had a substantial effect on the share prices of companies, at
times for reasons unrelated to their operating performance. These fluctuations could be in response to:
-
volatility in metal prices;
-
political developments in the foreign countries in which our properties are located; and
-
news reports relating to trends in our industry or general economic conditions.
These broad market and industry fluctuations
may adversely affect the price of our common stock, regardless of our operating performance.
We cannot make any predictions or projections
as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will
achieve or remain at levels at or near its offering price, or as to what effect the sale of shares or the availability of common
stock for sale at any time will have on the prevailing market price.
|
|
Item 1B.
|
UNRESOLVED STAFF COMMENTS
|
None.
|
|
Item 3.
|
LEGAL PROCEEDINGS
|
On May 20, 2014, Mineros Norteños
filed an action in the Local First Civil Court in the District of Morelos, State of Chihuahua, Mexico, against our subsidiary,
Minera Metalin, claiming that Minera Metalin breached an agreement regarding the development of the Sierra Mojada Project. Mineros
Norteños sought payment of the Royalty, including interest at a rate of 6% per annum since August 30, 2004, even though
no revenue has been produced from the applicable mining concessions. It also sought payment of wages to the cooperative’s
members since August 30, 2004, even though none of the individuals were ever hired or performed work for Minera Metalin under
this agreement and Minera Metalin never committed to hiring them. On January 19, 2015, the case was moved to the Third District
Court (of federal jurisdiction). On October 4, 2017, the court ruled that Mineros Norteños was time barred from bringing
the case. On October 19, 2017, Mineros Norteños appealed this ruling. On July 31, 2019, the Federal Appeals Court
upheld the original ruling. This ruling was subsequently challenged by Mineros Norteños and on January 24, 2020, the
Federal Circuit Court ruled that the Federal Appeals Court must consider additional factors in its ruling. In
March 2020, the Federal Appeals Court upheld the original ruling after considering these additional factors. In August 2020, Mineros
Norteños appealed this ruling, which appeal we timely responded and objected to on October 5, 2020. We and our
Mexican legal counsel believe that it is unlikely that the court’s ruling will be overturned. We have not accrued any amounts
in our consolidated financial statements with respect to this claim. See Note 15 – Commitments and Contingencies to
our consolidated financial statements.
|
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Not applicable.
SILVER
BULL RESOURCES, INC.
(AN EXPLORATION
STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
|
|
|
October 31,
2020
|
|
October 31,
2019
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,861,518
|
|
|
$
|
1,431,634
|
|
|
Value-added tax receivable, net of allowance for uncollectible taxes of $345,059 and $327,624, respectively (Note 4)
|
|
|
219,804
|
|
|
|
255,847
|
|
|
Income tax receivables
|
|
|
580
|
|
|
|
784
|
|
|
Other receivables
|
|
|
14,387
|
|
|
|
8,543
|
|
|
Prepaid expenses and deposits
|
|
|
229,647
|
|
|
|
204,713
|
|
|
Loan receivable (Note 5)
|
|
|
360,050
|
|
|
|
—
|
|
|
Total Current Assets
|
|
|
2,685,986
|
|
|
|
1,901,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office and mining equipment, net (Note 6)
|
|
|
239,769
|
|
|
|
226,413
|
|
|
Property concessions (Note 7)
|
|
|
5,019,927
|
|
|
|
5,019,927
|
|
|
Goodwill (Note 8)
|
|
|
2,058,031
|
|
|
|
2,058,031
|
|
|
TOTAL ASSETS
|
|
$
|
10,003,713
|
|
|
$
|
9,205,892
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
499,057
|
|
|
$
|
328,943
|
|
|
Accrued liabilities and expenses
|
|
|
383,718
|
|
|
|
305,446
|
|
|
Income tax payable
|
|
|
5,000
|
|
|
|
1,825
|
|
|
Stock option liability (Note 11)
|
|
|
—
|
|
|
|
4,803
|
|
|
Total Current Liabilities
|
|
|
887,775
|
|
|
|
641,017
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable (Note 9)
|
|
|
30,034
|
|
|
|
—
|
|
|
TOTAL LIABILITIES
|
|
|
917,809
|
|
|
|
641,017
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY (Notes 3, 10, 11 and 12)
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 37,500,000 shares authorized,
33,165,945 and 29,541,027 shares issued and outstanding, respectively*
|
|
|
2,399,518
|
|
|
|
2,363,282
|
|
|
Additional paid-in capital
|
|
|
138,613,286
|
|
|
|
135,902,944
|
|
|
Accumulated deficit
|
|
|
(132,019,148
|
)
|
|
|
(129,793,599
|
)
|
|
Other comprehensive income
|
|
|
92,248
|
|
|
|
92,248
|
|
|
Total Stockholders’ Equity
|
|
|
9,085,904
|
|
|
|
8,564,875
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
10,003,713
|
|
|
$
|
9,205,892
|
|
|
|
|
|
|
|
|
|
|
|
*Shares outstanding for prior period have been
restated for the one-for-eight reverse stock split.
The accompanying notes are an integral part
of these consolidated financial statements.
SILVER
BULL RESOURCES, INC.
(AN EXPLORATION
STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
|
|
Years
Ended October 31,
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPLORATION AND PROPERTY HOLDING COSTS
|
|
|
|
|
|
|
|
|
|
Exploration and property holding costs
|
|
|
645,701
|
|
|
|
2,508,602
|
|
|
Depreciation, asset and property concessions’ impairment (Notes 6 and 7)
|
|
|
34,694
|
|
|
|
44,119
|
|
|
TOTAL EXPLORATION AND PROPERTY HOLDING COSTS
|
|
|
680,395
|
|
|
|
2,552,721
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
613,517
|
|
|
|
692,242
|
|
|
Office and administrative
|
|
|
316,930
|
|
|
|
446,853
|
|
|
Professional services
|
|
|
398,154
|
|
|
|
245,949
|
|
|
Directors’ fees
|
|
|
144,310
|
|
|
|
201,073
|
|
|
Provision for uncollectible value-added taxes (Note 4)
|
|
|
49,619
|
|
|
|
222,130
|
|
|
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
1,522,530
|
|
|
|
1,808,247
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(2,202,925
|
)
|
|
|
(4,360,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
7,689
|
|
|
|
28,443
|
|
|
Foreign currency transaction loss
|
|
|
(22,371
|
)
|
|
|
(15,214
|
)
|
|
Change in fair value of stock option liability (Note 11)
|
|
|
—
|
|
|
|
21,105
|
|
|
Change in fair value of warrant derivative liability
|
|
|
—
|
|
|
|
393,374
|
|
|
TOTAL OTHER (EXPENSES) INCOME
|
|
|
(14,682
|
)
|
|
|
427,708
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(2,217,607
|
)
|
|
|
(3,933,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (Note 13)
|
|
|
7,942
|
|
|
|
5,309
|
|
|
NET AND COMPREHENSIVE LOSS
|
|
$
|
(2,225,549
|
)
|
|
$
|
(3,938,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS PER COMMON SHARE*
|
|
$
|
(0.08
|
)
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING*
|
|
|
29,580,786
|
|
|
|
29,485,841
|
|
|
|
|
|
|
|
|
|
|
|
*Shares outstanding for prior period have been
restated for the one-for-eight reverse stock split.
The accompanying notes are an integral part
of these consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Years Ended October 31,
|
|
|
|
2020
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,225,549
|
)
|
|
$
|
(3,938,569
|
)
|
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation, asset and property concessions’ impairment
|
|
|
34,694
|
|
|
|
44,119
|
|
|
Provision for uncollectible value-added taxes
|
|
|
49,619
|
|
|
|
222,130
|
|
|
Foreign currency transaction loss
|
|
|
15,191
|
|
|
|
145
|
|
|
Change in fair value of warrant derivative liability
|
|
|
—
|
|
|
|
(393,374
|
)
|
|
Change in fair value of stock option liability (Note 11)
|
|
|
—
|
|
|
|
(21,105
|
)
|
|
Stock options issued for compensation (Note 11)
|
|
|
62,417
|
|
|
|
206,756
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Value-added tax receivable
|
|
|
(39,820
|
)
|
|
|
(288,673
|
)
|
|
Income tax receivables
|
|
|
123
|
|
|
|
(604
|
)
|
|
Other receivables
|
|
|
(6,338
|
)
|
|
|
3,641
|
|
|
Prepaid expenses and deposits
|
|
|
(25,419
|
)
|
|
|
31,090
|
|
|
Accounts payable
|
|
|
120,273
|
|
|
|
71,476
|
|
|
Accrued liabilities and expenses
|
|
|
53,511
|
|
|
|
(143,286
|
)
|
|
Income tax payable
|
|
|
3,175
|
|
|
|
(2,875
|
)
|
|
Net cash used in operating activities
|
|
|
(1,958,123
|
)
|
|
|
(4,209,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Acquisition of property concessions
|
|
|
—
|
|
|
|
(11,821
|
)
|
|
Purchase of equipment
|
|
|
(48,050
|
)
|
|
|
(57,224
|
)
|
|
Loan receivable (Note 5)
|
|
|
(360,050
|
)
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
|
(408,100
|
)
|
|
|
(69,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Property concessions funding (Note 3)
|
|
|
1,100,731
|
|
|
|
2,540,810
|
|
|
Proceeds from loan financing (Note 9)
|
|
|
29,531
|
|
|
|
—
|
|
|
Proceeds from issuance of common stock, net of offering costs (Note 10)
|
|
|
1,668,669
|
|
|
|
—
|
|
|
Proceeds from exercise of warrants, net of costs (Note 10)
|
|
|
—
|
|
|
|
142,876
|
|
|
Net cash provided by financing activities
|
|
|
2,798,931
|
|
|
|
2,683,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
(2,824
|
)
|
|
|
283
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
429,884
|
|
|
|
(1,594,205
|
)
|
|
Cash and cash equivalents beginning of year
|
|
|
1,431,634
|
|
|
|
3,025,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of year
|
|
$
|
1,861,518
|
|
|
$
|
1,431,634
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
|
Years Ended October 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
4,825
|
|
|
$
|
8,080
|
|
|
Interest paid
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCIING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs included in accounts payable and accrued liabilities
|
|
$
|
90,042
|
|
|
$
|
—
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SILVER
BULL RESOURCES, INC.
(AN EXPLORATION
STAGE COMPANY)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares *
|
|
|
|
Amount
|
|
|
|
Additional Paid-in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Other
Comprehensive Income
|
|
|
|
Total
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2018
|
|
|
29,358,527
|
|
|
$
|
2,348,682
|
|
|
$
|
133,015,768
|
|
|
$
|
(125,855,030
|
)
|
|
$
|
92,248
|
|
|
$
|
9,601,668
|
|
|
Issuance of common stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Exercise of warrants at a price of $0.13 per share less costs of $210 (Note 10)
|
|
|
182,500
|
|
|
|
14,600
|
|
|
|
128,276
|
|
|
|
—
|
|
|
|
—
|
|
|
|
142,876
|
|
|
South32 option agreement (Note 3)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,540,810
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,540,810
|
|
|
Reclassification to additional paid-in capital of stock option liability (Notes 3 and 11)
|
|
|
—
|
|
|
|
—
|
|
|
|
12,126
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,126
|
|
|
Reclassification of consultants’ stock options to liability (Note 11)
|
|
|
—
|
|
|
|
—
|
|
|
|
(792
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(792
|
)
|
|
Stock option activity as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Stock-based compensation for options issued to directors, officers, employees and consultants (Note 11)
|
|
|
—
|
|
|
|
—
|
|
|
|
206,756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
206,756
|
|
|
Net loss for the year ended October 31, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,938,569
|
)
|
|
|
—
|
|
|
|
(3,938,569
|
)
|
|
Balance, October 31, 2019
|
|
|
29,541,027
|
|
|
$
|
2,363,282
|
|
|
$
|
135,902,944
|
|
|
$
|
(129,793,599
|
)
|
|
$
|
92,248
|
|
|
$
|
8,564,875
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares *
|
|
|
|
Amount
|
|
|
|
Additional Paid-in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Other
Comprehensive Income
|
|
|
|
Total
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2019
|
|
|
29,541,027
|
|
|
$
|
2,363,282
|
|
|
$
|
135,902,944
|
|
|
$
|
(129,793,599
|
)
|
|
$
|
92,248
|
|
|
$
|
8,564,875
|
|
|
Issuance of common stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Fractional share adjustment (Note 10)
|
|
|
1,338
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
- for cash at a price of $0.47 per share with attached warrants, less offering costs of $124,456 (Note 10)
|
|
|
3,623,580
|
|
|
|
36,236
|
|
|
|
1,542,391
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,578,627
|
|
|
South32 option agreement (Note 3)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,100,731
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,100,731
|
|
|
Reclassification to additional paid-in capital of stock option liability (Notes 3 and 11)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,803
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,803
|
|
|
Stock option activity as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Stock-based compensation for options issued to directors, officers, employees and consultants (Note 11)
|
|
|
—
|
|
|
|
—
|
|
|
|
62,417
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62,417
|
|
|
Net loss for the year ended October 31, 2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,225,549
|
)
|
|
|
—
|
|
|
|
(2,225,549
|
)
|
|
Balance, October 31, 2020
|
|
|
33,165,945
|
|
|
$
|
2,399,518
|
|
|
$
|
138,613,286
|
|
|
$
|
(132,019,148
|
)
|
|
$
|
92,248
|
|
|
$
|
9,085,904
|
|
*Shares outstanding for prior periods have
been restated for the one-for-eight reverse stock split.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
Silver Bull Resources, Inc. (the “Company”)
was incorporated in the State of Nevada on November 8, 1993 as the Cadgie Company for the purpose of acquiring and developing
mineral properties. The Cadgie Company was a spin-off from its predecessor, Precious Metal Mines, Inc. On June 28, 1996, the
Company’s name was changed to Metalline Mining Company. On April 21, 2011, the Company’s name was changed to Silver
Bull Resources, Inc. The Company’s fiscal year-end is October 31. The Company has not realized any revenues from its
planned operations and is considered an exploration stage company. The Company has not established any reserves with respect to
its exploration projects and may never enter into the development stage with respect to any of its projects.
The Company engages in the business of mineral
exploration. The Company currently owns a number of property concessions in Mexico (collectively known as the “Sierra Mojada
Property”). The Company conducts its operations in Mexico through its wholly-owned subsidiary corporations, Minera Metalin
S.A. de C.V. (“Minera Metalin”), Contratistas de Sierra Mojada S.A. de C.V. (“Contratistas”) and Minas
de Coahuila SBR S.A. de C.V. (“Minas”). In addition, the Company has the option to acquire certain property concessions
in Kazakhstan.
On April 16, 2010, Metalline Mining Delaware,
Inc., a wholly-owned subsidiary of the Company incorporated in the State of Delaware, was merged with and into Dome Ventures Corporation
(“Dome”), a Delaware corporation. As a result, Dome became a wholly-owned subsidiary of the Company. Dome has a wholly-owned
subsidiary Dome Asia Inc. (“Dome Asia”), which is incorporated in the British Virgin Islands. Dome Asia has a wholly-owned
subsidiary, Dome Minerals Nigeria Limited, incorporated in Nigeria.
On September 18, 2020, the Company completed
a one-for-eight reverse stock split of its shares of common stock. All share and per share information in the consolidated financial
statements, including references to the number of shares of common stock, stock options and warrants, prices of issued shares,
exercise prices of stock options and warrants, and loss per share, have been adjusted to reflect the impact of the reverse stock
split.
The Company’s efforts and expenditures
have been concentrated on the exploration of properties, principally in the Sierra Mojada Property located in Coahuila, Mexico.
The Company has not determined whether its exploration properties contain ore reserves that are economically recoverable. The ultimate
realization of the Company’s investment in exploration properties is dependent upon the success of future property sales,
the existence of economically recoverable reserves, and the ability of the Company to obtain financing or make other arrangements
for exploration, development, and future profitable production activities. The ultimate realization of the Company’s investment
in exploration properties cannot be determined at this time.
Going Concern
Since its inception in November 1993, the Company
has not generated revenue and has incurred an accumulated deficit of $132,019,148. Accordingly, the Company has not generated cash
flows from operations, and since inception the Company has relied primarily upon proceeds from private placements and registered
direct offerings of the Company’s equity securities and warrant exercises as the primary sources of financing to fund the
Company’s operations. As of October 31, 2020, the Company had cash and cash equivalents of $1,861,518. Based on the
Company’s limited cash and cash equivalents, and history of losses, there is substantial doubt as to whether the Company’s
existing cash resources are sufficient to enable the Company to continue its operations for the next 12 months as a going concern.
Management plans to pursue possible financing and strategic options including, but not limited to, obtaining additional equity
financing. Management has successfully pursued these options previously and believes that they alleviate the substantial doubt
that the Company can continue its operations for the next 12 months as a going concern. However, there is no assurance that the
Company will be successful in pursuing these plans. The Company’s limited ability to
issue shares to raise capital without an increase in the number of authorized shares of common stock is discussed further in the
“Risk Factors – Risks Related to our Business” section above.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This summary of significant accounting policies
is presented to assist in understanding the consolidated financial statements. The consolidated financial statements and notes
are representations of the Company’s management, which is responsible for their integrity and objectivity.
Basis of Presentation
The Company’s consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
using the accrual method of accounting, except for cash flow amounts.
All figures are in United States dollars
unless otherwise noted.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The
wholly owned subsidiaries of the Company are listed in Note 1 to the consolidated financial statements.
The Company consolidates entities in which
it has a controlling financial interest based on either the variable interest entity (VIE) or voting interest model.
Under the VIE model, a VIE is a reporting entity
that has (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) the
obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
Currently, the Company manages the mineral exploration program in the property concessions in Mexico through its wholly-owned subsidiary
corporations Minera Metalin and Contratistas.
The Company has determined Minera Metalin and
Contratistas are variable interest entities and the Company is the primary beneficiary.
Use of Estimates
The preparation of these consolidated financial
statements in conformity with GAAP requires management to make estimates based on assumptions about future events that affect the
amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results
could differ from those estimates. Estimates and assumptions are reviewed on an ongoing basis based on historical experience and
other factors that are considered to be relevant under the circumstances. Revisions to estimates and assumptions are accounted
for prospectively.
Significant areas involving the use of estimates
include determining the allowance for uncollectible taxes, evaluating recoverability of property concessions, evaluating impairment
of long-lived assets, evaluating impairment of goodwill, establishing a valuation allowance on future use of deferred tax assets,
calculating a valuation for stock option liability, calculating a valuation for warrant derivative liability and calculating stock-based
compensation.
Cash and Cash Equivalents
Cash and cash equivalents include all highly-liquid
investments with an original maturity of three months or less at the date of purchase.
Property Concessions
Property concession acquisition costs are capitalized
when incurred and will be amortized using the units of production method following the commencement of production. If a property
concession is subsequently abandoned or impaired, any capitalized costs will be expensed in the period of abandonment or impairment.
To date, no property concessions have reached the production stage.
Acquisition costs include cash consideration
and the fair market value of shares issued on the acquisition of property concessions.
Exploration Costs
Exploration costs incurred are expensed to
the date of establishing that costs incurred are economically recoverable. Exploration expenditures incurred subsequent to the
establishment of economic recoverability are capitalized and included in the carrying amount of the related property. To date,
the Company has not established the economic recoverability of its exploration prospects; therefore, all exploration costs are
being expensed.
Property and Equipment
Property and equipment are recorded at cost
less accumulated depreciation and impairment losses. Assets under construction are depreciated when they are substantially complete
and available for their intended use, over their estimated useful lives. Repairs and maintenance of property and equipment are
expensed as incurred. Costs incurred to enhance the service potential of property and equipment are capitalized and depreciated
over the remaining useful life of the improved asset. Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the related assets as follows:
|
|
·
|
Mining equipment – five to 10 years
|
|
|
·
|
Building and structures – 40 years
|
|
|
·
|
Computer equipment and software – three years
|
|
|
·
|
Well equipment – 10 to 40 years
|
|
|
·
|
Office equipment – three to 10 years
|
Impairment of Long-Lived Assets
Management reviews and evaluates its long-lived
assets for impairment when events and changes in circumstances indicate that the related carrying amounts of its assets may not
be recoverable. Impairment is considered to exist if the future cash flows on an undiscounted basis are less than the carrying
amount of the long-lived asset. An impairment loss is measured and recorded based on the difference between book value and fair
value of the asset group. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable
cash flows that are largely independent of cash flows from other asset groups. In estimating future cash flows, the Company estimates
the price that would be received to sell an asset group in an orderly transaction between market participants at the measurement
date. Significant factors that impact this price include the price of silver and zinc, and general market conditions for exploration
companies, among other factors.
Goodwill
Goodwill is the purchase
premium after adjusting for the fair value of net assets acquired. The Company tests goodwill for impairment at the reporting unit
level at least annually, or more frequently if events or changes in circumstances indicate that the assets may be impaired. Goodwill
impairment tests require judgment, including the identification of reporting units, assignment of assets and liabilities to reporting
units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The Company performs
its annual goodwill impairment tests on April 30th of each fiscal year. During the year ended October 31, 2020,
the Company determined that no impairment was required.
Income Taxes
The Tax Cuts and Jobs Act of 2017 (the
“Tax Act”) was signed into law on December 22, 2017. The law includes significant changes to the U.S. corporate
income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense
and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax
system. The law did not have a material impact on the Company’s financial position, results of operations or cash flows and
disclosures.
The Company follows the asset and liability
method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on temporary
differences between the tax basis and accounting basis of the assets and liabilities measured using tax rates enacted at the balance
sheet date. The Company recognizes the tax benefit from uncertain tax positions only if it is at least “more likely than
not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon settlement with the taxing authorities. This accounting standard
also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure.
A valuation allowance is recorded against deferred
tax assets if management does not believe that the Company has met the “more likely than not” standard imposed by this
guidance to allow recognition of such an asset. Management recorded a full valuation allowance at October 31, 2020 and 2019
against the deferred tax assets as it determined that future realization would not meet the “more likely than not”
criteria.
Warrant Derivative Liability
The Company classifies warrants with a Canadian
Dollar (“$CDN”) exercise price on its consolidated balance sheets as a derivative liability that is fair valued at
each reporting period subsequent to the initial issuance as the functional currency of Silver Bull is the U.S. dollar and the exercise
price of the warrants is the $CDN. The Company has used the Black-Scholes pricing model to fair value the warrants that do not
have an acceleration feature and has used the Monte Carlo valuation model to fair value the warrants that do have an acceleration
feature. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment.
Any change in the estimates used may cause the value to be higher or lower than that reported. The estimated volatility of the
Company’s common stock at the date of issuance, and at each subsequent reporting period, is based on the historical volatility
adjusted to reflect the implicit discount to historical volatilities observed in the prices of traded warrants. The risk-free interest
rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the warrants
at the valuation date. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend
yield is expected to be none as the Company has not paid dividend nor does the Company anticipate paying any dividend in the foreseeable
future.
The derivatives warrants are not traded in
an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from
those recorded in the consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating
the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the
consolidated statement of operations and comprehensive loss each reporting period.
Stock-Based Compensation
The Company uses the Black-Scholes pricing
model as a method for determining the estimated fair value for all stock options awarded to employees, officers, directors and
consultants. The expected term of the options is based upon an evaluation of historical and expected future exercise behavior.
The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining
life of the options at the valuation date. Volatility is determined based upon historical volatility of the Company’s stock
and adjusted if future volatility is expected to vary from historical experience. The dividend yield is assumed to be none as the
Company has not paid dividends nor does the Company anticipate paying any dividends in the foreseeable future. The Company uses
the graded vesting attribution method to recognize compensation costs over the requisite service period. Stock options granted
to consultants when the exercise price is in $CDN are classified as stock option liability on the Company’s consolidated
balance sheets upon vesting.
The Company classifies cumulative compensation
cost associated with options on subsidiary equity as additional paid-in capital until exercise.
Loss per Share
Basic loss per share includes no dilution and
is computed by dividing net loss available to common shareholders by the weighted average common shares outstanding for the period.
Diluted loss per share reflects the potential dilution of securities that could share in the earnings of an entity similar to fully
diluted loss per share. Although there were stock options and warrants in the aggregate of 3,855,539 shares and 4,019,039 shares
outstanding at October 31, 2020 and 2019, respectively, they were not included in the calculation of loss per share because
they would have been considered anti-dilutive.
Foreign Currency Translation
During the years ended October 31, 2020
and 2019, the functional currency of Silver Bull Resources, Inc. and its subsidiaries was the U.S. dollar.
During the years ended October 31, 2020
and 2019, the Company’s Mexican operations’ monetary assets and liabilities with foreign source currencies were translated
into U.S. dollars at the period-end exchange rate and non-monetary assets and liabilities with foreign source currencies were translated
using the historical exchange rate. The Company’s Mexican operations’ revenue and expenses were translated at the average
exchange rate during the period except for depreciation of office and mining equipment, costs of office and mining equipment sold
and impairment of property concessions, all of which are translated using the historical exchange rate. Foreign currency translation
gains and losses of the Company’s Mexican operations are included in the consolidated statement of operations.
Accounting for Loss Contingencies and Legal
Costs
From time to time, the Company is named as
a defendant in legal actions arising from its normal business activities. The Company records an accrual for the estimated loss
from a loss contingency when information available prior to issuance of its financial statements indicates that it is probable
that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
Disclosure of a loss contingency is made by the Company if there is at least a reasonable possibility that a loss has been incurred,
and either an accrual has not been made or an exposure to loss exists in excess of the amount accrued. In cases where only disclosure
of the loss contingency is required, either the estimated loss or a range of estimated loss is disclosed or it is stated that an
estimate cannot be made. Legal costs incurred in connection with loss contingencies are considered period costs and accordingly
are expensed in the period services are provided.
Recent Accounting Pronouncements Adopted
in the Year
On November 1, 2019, the Company adopted
the Financial Accounting Standards Board’s (the “FASB’s”) Accounting Standards Update (“ASU”)
2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”,
which became effective for fiscal years beginning after December 15, 2018. ASU 2018-07 simplifies the accounting for nonemployee
share-based payments, aligning it more closely with the accounting for employee awards. Under the adoption provisions, equity-classified
awards for which a measurement date had already been established as of the adoption date, including the Company’s South32
Option Agreement (Note 3), are unaffected by ASU 2018-07. As a result of this adoption, during the year ended October 31,
2020, the Company reclassified $4,803 from stock option liability to additional paid-in capital (Note 11).
On November 1, 2019, the Company adopted
the FASB’s ASU 2016-02, “Leases (Topic 842),” together with subsequent amendments, which became effective for
fiscal years beginning after December 15, 2018. The new standard requires a lessee to recognize on its balance sheet, a liability
to make lease payments (the lease liability) and the right-of-use (“ROU”) asset representing the right to the underlying
asset for the lease term and allows companies to elect to apply the standard at the effective date. The Company elected the package
of practical expedients permitted under the transition guidance, which applies to expired or existing leases and allows the Company
not to reassess whether a contract contains a lease, the lease classification, and any initial direct costs incurred.
The Company also elected a number of optional
practical expedients including the following:
-
the short-term lease recognition exemption whereby ROU assets and lease liabilities will
not be recognized for leasing arrangements with terms less than one year;
-
the land easements practical expedient whereby existing land easements are not reassessed
under the new standard;
-
the hindsight practical expedient when determining lease term at transition; and
-
the practical expedient not to apply lease accounting to the intangible right to explore
for those natural resources, and rights to use the land in which those natural resources are contained.
The adoption of this update did not have an
impact on the Company’s financial position, results of operations or cash flows and disclosures.
Recent Accounting Pronouncements Not Yet
Adopted
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 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. Early adoption is permitted. At this time, the Company does not expect this standard to affect the
Company’s financial position, results of operations or cash flows and disclosures.
Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force) and the SEC did not or are not expected to have a material impact
on the Company’s present or future consolidated financial statements.
NOTE
3 – SOUTH32 OPTION AGREEMENT
On June 1, 2018, the Company and
its subsidiaries Minera Metalin and Contratistas entered into an earn-in option agreement (the “South32 Option Agreement”)
with South32 International Investment Holdings Pty Ltd (“South32”), a wholly-owned subsidiary of South32 Limited (ASX/JSE/LSE:
S32), whereby South32 is able to obtain an option to purchase 70% of the shares of Minera Metalin and Contratistas (the “South32
Option”). Minera Metalin owns the Sierra Mojada Property located in Coahuila, Mexico (the “Sierra Mojada Project”),
and Contratistas supplies labor for the Sierra Mojada Project. Under the South32 Option Agreement, South32 earns into the South32
Option by funding a collaborative exploration program on the Sierra Mojada Project. Upon the terms and subject to the conditions
set forth in the South32 Option Agreement, in order for South32 to earn and maintain its four-year option, South32 must have contributed
to Minera Metalin for exploration of the Sierra Mojada Project at least $3 million by the end of Year 1, $6 million by the
end of Year 2, $8 million by the end of Year 3 and $10 million by the end of Year 4 (the “Initial Funding”).
Funding is made on a quarterly basis based on the subsequent quarter’s exploration budget. South32 may exercise the South32
Option by contributing $100 million to Minera Metalin (the “Subscription Payment”), less the amount of Initial Funding
previously contributed by South32. The issuance of shares upon notice of exercise of the South32 Option by South32 is subject to
antitrust approval by the Mexican government. If the full amount of the Subscription Payment is advanced by South32 and the South32
Option becomes exercisable and is exercised, the Company and South32 will be obligated to contribute funding to Minera Metalin
on a 30/70 pro rata basis. If South32 elects not to continue with the South32 Option during the four-year option period, the Sierra
Mojada Project will remain 100% owned by the Company. The exploration program will be initially managed by the Company, with South32
being able to approve the exploration program funded by it. The Company received funding of $3,144,163 from South32 for Year 1
of the South32 Option Agreement. In April 2019, the Company received a notice from South32 to maintain the South32 Option Agreement
for Year 2 by providing cumulative funding of $6 million by the end of such period. As of October 31, 2020, the Company
had received funding of $1,420,161, which included a $319,430 received during the year ended October 31, 2019, from South32 for
Year 2 of the South32 Option Agreement, the time period for which has been extended by an event of force majeure described
in more detail below. In November 2020, the Company received a payment of $60,286 for the extended Year 2 time period. If
the South32 Option Agreement is terminated by South32 without cause or if South32 is unable to obtain antitrust authorization from
the Mexican government, the Company is under no obligation to reimburse South32 for amounts contributed under the South32 Option
Agreement.
Upon exercise of the South32 Option,
Minera Metalin and Contratistas are required to issue common shares to South32. Pursuant to the South32 Option Agreement, following
exercise and until a decision has been made by the board of directors of Minera Metalin to develop and construct a mine on the
Sierra Mojada Project, each shareholder holding greater than or equal to 10% of the shares may withdraw as an owner in exchange
for a 2% net smelter royalty on products produced and sold from the Sierra Mojada Project. Any shareholder whose holdings are reduced
to less than 10% must surrender its interest in exchange for a 2% net smelter royalty.
The Company has determined that Minera
Metalin and Contratistas are variable interest entities and that the South32 Option Agreement has not resulted in the transfer
of control of the Sierra Mojada Project to South32. The Company has also determined that the South32 Option Agreement represents
non-employee share-based compensation associated with the collaborative exploration program undertaken by the parties. The compensation
cost is expensed when the associated exploration activity occurs. The share-based payments have been classified as equity instruments
and valued based on the fair value of the cash consideration received, as it is more reliably measurable than the fair value of
the equity interest. If the South32 Option is exercised and shares are issued prior to a decision to develop a mine, such shares
would be classified as temporary equity as they would be contingently redeemable in exchange for a net smelter royalty under circumstances
that are not wholly in control of the Company or South32 and are not currently probable.
No portion of the equity value has been classified
as temporary equity as the South32 Option has no intrinsic value.
On October 11, 2019, the Company and its
subsidiary Minera Metalin issued a notice of force majeure to South32 pursuant to the South32 Option Agreement. Due to a blockade
by a cooperative of local miners called Sociedad Cooperativa de Exploración Minera Mineros Norteños, S.C.L. (“Mineros
Norteños”), the Company has temporarily halted all work on the Sierra Mojada Property. The notice of force majeure
was issued because of the blockade’s impact on the ability of the Company and its subsidiary Minera Metalin to perform their
obligations under the South32 Option Agreement. Pursuant to the South32 Option Agreement, any time period provided for in the South32
Option Agreement will generally be extended by a period equal to the period of delay caused by the event of force majeure. As of
January 28, 2021, the blockade by Mineros Norteños at, on and around the Sierra Mojada Property is ongoing.
The combined carrying amount of the assets
and liabilities of Minera Metalin and Contratistas (consolidated with their wholly-owned subsidiary) are as follows at October 31,
2020:
|
Assets:
|
|
Mexico
|
|
Cash and cash equivalents
|
|
$
|
9,000
|
|
|
Value-added tax receivable, net
|
|
|
220,000
|
|
|
Other receivables
|
|
|
4,000
|
|
|
Income tax receivable
|
|
|
1,000
|
|
|
Prepaid expenses and deposits
|
|
|
100,000
|
|
|
Office and mining equipment, net
|
|
|
192,000
|
|
|
Property concessions
|
|
|
5,020,000
|
|
|
Total assets
|
|
$
|
5,546,000
|
|
|
Liabilities:
|
|
|
|
Accounts payable
|
|
|
51,000
|
|
|
Accrued liabilities and expenses
|
|
|
187,000
|
|
|
Payable to Silver Bull Resources, Inc. to be converted to
equity upon exercise of the South 32 Option
|
|
|
3,621,000
|
|
|
Total liabilities
|
|
$
|
3,859,000
|
|
|
|
|
|
|
|
|
Net advances and investment in the Company’s Mexican subsidiaries
|
|
$
|
1,687,000
|
|
In addition, at October 31, 2020, Silver
Bull Resources, Inc. held $nil of cash received from South32, which is to be contributed to the capital of the Mexican subsidiaries
as required for exploration. Cash received from South32 is required to be used to further exploration at the Sierra Mojada Property.
The Company’s maximum exposure to loss
at October 31, 2020 is $5,308,000, which includes the carrying value of the VIEs’ net assets, excluding the payable
to Silver Bull Resources, Inc.
NOTE 4 – VALUE-ADDED TAX RECEIVABLE
Value-added tax (“VAT”) receivable
relates to VAT paid in Mexico. The Company estimates net VAT of $219,804 will be received within 12 months of the balance sheet
date. The allowance for uncollectible VAT was estimated by management based upon a number of factors, including the length of time
the returns have been outstanding, responses received from tax authorities, general economic conditions in Mexico and estimated
net recovery after commissions.
A summary of the changes
in the allowance for uncollectible VAT for the fiscal years ended October 31, 2020 and 2019 is as follows:
|
|
|
|
|
Allowance for uncollectible
VAT – October 31, 2018
|
|
$
|
98,414
|
|
|
Provision for uncollectible VAT
|
|
|
222,130
|
|
|
Foreign currency translation
adjustment
|
|
|
7,080
|
|
|
Allowance for uncollectible VAT –
October 31, 2019
|
|
|
327,624
|
|
Provision for uncollectible VAT
|
|
|
49,619
|
|
|
Foreign
currency translation adjustment
|
|
|
(32,184
|
)
|
|
Allowance for uncollectible
VAT – October 31, 2020
|
|
$
|
345,059
|
|
NOTE 5 – LOAN RECEIVABLE
On August 24, 2020, the Company
loaned $360,000 to Ekidos Minerals LLP, an unrelated third-party Kazakh entity, relating to the acquisition of mineral property
concessions in Kazakhstan. The loan is interest free and is to be repaid on January 31, 2021.
NOTE 6 – OFFICE AND MINING EQUIPMENT
The following is a summary of the Company’s
office and mining equipment at October 31, 2020 and October 31, 2019:
|
|
|
October 31,
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Mining equipment
|
|
$
|
444,202
|
|
|
$
|
396,152
|
|
|
Vehicles
|
|
|
92,873
|
|
|
|
92,873
|
|
|
Buildings and structures
|
|
|
185,724
|
|
|
|
185,724
|
|
|
Computer equipment and software
|
|
|
74,236
|
|
|
|
74,236
|
|
|
Well equipment
|
|
|
39,637
|
|
|
|
39,637
|
|
|
Office equipment
|
|
|
47,597
|
|
|
|
47,597
|
|
|
|
|
|
884,269
|
|
|
|
836,219
|
|
|
Less: Accumulated depreciation
|
|
|
(644,500
|
)
|
|
|
(609,806
|
)
|
|
Office and mining equipment, net
|
|
$
|
239,769
|
|
|
$
|
226,413
|
|
NOTE 7 – PROPERTY CONCESSIONS
The following is a summary of the Company’s
property concessions in Sierra Mojada, Mexico as at October 31, 2020 and 2019:
|
Property Concessions – October 31, 2018
|
|
|
$
|
5,019,927
|
|
|
Acquisitions
|
|
|
|
11,821
|
|
|
Impairment
|
|
|
|
(11,821
|
)
|
|
Property Concessions – October 31, 2020 and 2019
|
|
|
$
|
5,019,927
|
|
NOTE 8 – GOODWILL
Goodwill
represents the excess, at the date of acquisition, of the purchase price of the business acquired over the fair value of the net
tangible and intangible assets acquired. On April 30, 2020, the Company elected to perform a qualitative assessment
to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Based
on this assessment, management determined it is not more likely than not that the fair value of the reporting unit is less than
its carrying amount.
The following is a
summary of the Company’s goodwill balance as at October 31, 2020 and 2019:
|
|
Goodwill – October 31, 2020 and 2019
|
|
|
$
|
2,058,031
|
|
NOTE 9 – LOAN PAYABLE
In June 2020, the Company received $29,531
($CDN 40,000) in the form of a Canada Emergency Business Account (“CEBA”) loan. CEBA is part of the economic assistance
program launched by the Government of Canada to ensure that businesses have access to capital during the COVID-19 pandemic that
can only be used to pay non-deferrable operating expenses. During the period from receipt of the CEBA loan to December 31,
2022 (the “Initial Term”), no interest will be charged on the principal amount outstanding. If at least $CDN 30,000
is repaid on or before the end of the Initial Term, the remaining $CDN 10,000 of principal will be forgiven pursuant to the terms
of the CEBA loan. During the period from January 1, 2023 to December 31, 2025 (the “Extended Term”), if any
portion of the loan remains outstanding, interest will be payable monthly at a rate of 5% per annum on the outstanding principal
balance. The balance of the CEBA loan is fully repayable on or before the end of the Extended Term, if not repaid on or before
the end of the Initial Term.
|
Loan payable – October 31, 2019
|
|
$
|
—
|
|
Loan payable received – June 2020
|
|
|
29,531
|
|
|
Foreign currency translation adjustment
|
|
|
503
|
|
|
Loan payable – October 31, 2020
|
|
$
|
30,034
|
|
NOTE 10 – COMMON STOCK
On September 18, 2020, the Company completed
a one-for-eight reverse stock split of its shares of common stock. As a result of the reverse stock split, every eight pre-split
shares of issued and outstanding common stock of the Company were combined and reclassified into one post-split share of common
stock of the Company. No fractional shares were issued in connection with the reverse stock split. Any fractional share that otherwise
would have been issued as a result of the reverse stock split was rounded up to the nearest whole share. In connection with the
reverse stock split, the 300,000,000 pre-split authorized shares of common stock were proportionately reduced to 37,500,000 post-split
authorized shares of Company common stock. The $0.01 par value per share of common stock and other terms of the common stock were
not affected by the reverse stock split.
The Company’s outstanding shares
of common stock and shares underlying the Company’s options and warrants entitling the holders to purchase shares of common
stock have been adjusted as a result of the reverse stock split, as required by the terms of these securities. In addition, the
number of shares reserved for issuance under the Company existing 2019 Stock Option and Stock Bonus Plan were reduced proportionately
based on the split ratio.
The current financial statements as well as
prior period financial statements have been retroactively adjusted to reflect the impact of the reverse stock split.
On October 27, 2020, the Company
completed the initial tranche of a two-tranche private placement (the “Private Placement”) for 3,623,580 units (each,
a “Unit”) at a purchase price of $0.47 per Unit for gross proceeds of $1,703,083. Each Unit consists of one share of
the Company’s common stock and one half of one transferable common stock purchase warrant (each whole warrant, a “Warrant”).
Each Warrant entitles the holder thereof to acquire one share of common stock at a price of $0.59 until October 27, 2025.
The Company paid a 4% finder’s fee totaling $26,000 to an agent with respect to certain purchasers who were introduced by
the agent. The Company incurred other offering costs associated with the initial tranche of the Private Placement of $98,456. Subscribers
of the initial tranche of the Private Placement included management and directors for a total 840,000 units and gross proceeds
of $394,800.
No options to acquire shares of common
stock were exercised during the year ended October 31, 2020.
On March 6, 2019, 57,500 warrants
to acquire 57,500 shares of common stock were exercised at an exercise price of $CDN 1.04 per share of common stock for aggregate
gross proceeds of $44,560 ($CDN 59,800).
On February 21, 2019, 75,000 warrants
to acquire 75,000 shares of common stock were exercised at an exercise price of $CDN 1.04 per share of common stock for aggregate
gross proceeds of $59,109 ($CDN 78,000).
On January 30, 2019, 50,000 warrants
to acquire 50,000 shares of common stock were exercised at an exercise price of $CDN 1.04 per share of common stock for aggregate
gross proceeds of $39,418 ($CDN 52,000).
The Company incurred costs of $210 related
to warrant exercises in the year ended October 31, 2019.
NOTE 11 – STOCK OPTIONS
The Company has one stock option plan under
which equity securities are authorized for issuance to officers, directors, employees and consultants: the 2019 Stock Option and
Stock Bonus Plan (the “2019 Plan”). Under the 2019 Plan, the lesser of (i) 3,750,000 shares or (ii) 10% of the total
shares outstanding are reserved for issuance upon the exercise of options or the grant of stock bonuses.
The term of the Company’s 2010 Stock
Option and Stock Bonus Plan, as amended, expired on or around December 22, 2019.
Options are typically granted with an exercise
price equal to the closing market price of the Company’s stock at the date of grant, have a graded vesting schedule over
approximately one to two years and have a contractual term of five years.
No options were granted or exercised during
the year ended October 31, 2020 and October 31, 2019.
The following is a summary of stock option
activity for the fiscal years ended October 31, 2020 and 2019:
|
Options
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Aggregate Intrinsic Value
|
|
|
Outstanding at October 31, 2018
|
|
|
|
2,368,750
|
|
|
$
|
0.88
|
|
|
|
3.48
|
|
|
$
|
429,158
|
|
|
|
Expired
|
|
|
|
(325,000
|
)
|
|
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2019
|
|
|
|
2,043,750
|
|
|
|
0.72
|
|
|
|
2.83
|
|
|
|
46,448
|
|
|
|
Outstanding at October 31, 2020
|
|
|
|
2,043,750
|
|
|
|
0.72
|
|
|
|
1.83
|
|
|
|
53,546
|
|
|
|
Exercisable at October 31, 2020
|
|
|
|
2,043,750
|
|
|
$
|
0.72
|
|
|
|
1.83
|
|
|
$
|
53,546
|
|
The Company recognized stock-based compensation
costs for stock options of $62,417 and $206,756 for the fiscal years ended October 31, 2020 and 2019, respectively. As of
October 31, 2020, there remains $nil of total unrecognized compensation expense, which is expected to be recognized over a
weighted average period of nil years.
Summarized information about stock options
outstanding and exercisable at October 31, 2020 is as follows:
|
|
Options Outstanding
|
|
|
|
Options Exercisable
|
|
|
|
Exercise Price
|
|
|
|
Number Outstanding
|
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
Number Exercisable
|
|
|
|
Weighted Average Exercise Price
|
|
|
$
|
0.45
|
|
|
|
509,375
|
|
|
|
0.31
|
|
|
$
|
0.45
|
|
|
|
509,375
|
|
|
$
|
0.45
|
|
|
|
0.75
|
|
|
|
509,375
|
|
|
|
1.43
|
|
|
|
0.75
|
|
|
|
509,375
|
|
|
|
0.75
|
|
|
|
0.78
|
|
|
|
943,750
|
|
|
|
2.88
|
|
|
|
0.78
|
|
|
|
943,750
|
|
|
|
0.78
|
|
|
|
1.29
|
|
|
|
43,750
|
|
|
|
2.30
|
|
|
|
1.29
|
|
|
|
43,750
|
|
|
|
1.29
|
|
|
|
1.53
|
|
|
|
37,500
|
|
|
|
0.76
|
|
|
|
1.53
|
|
|
|
37,500
|
|
|
|
1.53
|
|
|
$
|
0.45 – 1.53
|
|
|
|
2,043,750
|
|
|
|
1.83
|
|
|
$
|
0.72
|
|
|
|
2,043,750
|
|
|
$
|
0.72
|
|
Stock options granted to consultants with a
$CDN exercise price were previously classified as a stock option liability on the Company’s consolidated balance sheets upon
vesting. During the year ended October 31, 2020, the stock option liability was reclassified to additional paid-in capital upon
adoption of ASU 2018-07, “Compensation - Stock Compensation (Topic 718).” The following is a summary of the
Company’s stock option liability at October 31, 2020 and October 31, 2019:
|
Stock option liability at October 31, 2018
|
|
$
|
25,116
|
|
|
Reclassification from additional paid-in capital
|
|
|
792
|
|
|
Change in fair value of stock option liability
|
|
|
(21,105
|
)
|
|
Stock option liability at October 31, 2019
|
|
$
|
4,803
|
|
|
Reclassification from additional paid-in capital
|
|
|
(4,803
|
)
|
|
Stock option liability at October 31, 2020
|
|
$
|
—
|
|
NOTE 12 – WARRANTS
A summary of warrant activity for the fiscal
years ended October 31, 2020 and 2019 is as follows:
|
Warrants
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Aggregate Intrinsic Value
|
|
Outstanding at October 31, 2018
|
|
|
4,537,530
|
|
|
$
|
1.04
|
|
|
|
1.16
|
|
|
$
|
254,068
|
|
|
Exercised
|
|
|
(182,500
|
)
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(2,379,741
|
)
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at October 31, 2019
|
|
|
1,975,289
|
|
|
$
|
1.28
|
|
|
|
0.75
|
|
|
$
|
—
|
|
|
Issued in the initial tranche of the Private Placement (Note 10)
|
|
|
1,811,789
|
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,975,289
|
)
|
|
|
1.28
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at October 31, 2020
|
|
|
1,811,789
|
|
|
$
|
0.59
|
|
|
|
4.99
|
|
|
$
|
18,118
|
|
During the year ended October 31,
2020, the Company issued 1,811,789 warrants with an exercise price of $0.59 in connection with the Private Placement.
No warrants were exercised during the
year ended October 31, 2020.
Warrants
exercised during the years ended October 31, 2019 are discussed in Note 10.
The warrants exercised during the years
end October 31, 2019 had an intrinsic value of $12,126.
Summarized information about warrants outstanding
and exercisable at October 31, 2020 is as follows:
|
|
Warrants Outstanding and Exercisable
|
|
|
|
Exercise Price
|
|
|
|
Number
Outstanding
|
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
|
Weighted Average Exercise Price
|
|
|
$
|
0.59
|
|
|
|
1,811,789
|
|
|
|
4.99
|
|
|
$
|
0.59
|
|
NOTE 13 – TAX REFORM AND INCOME TAXES
Provision for Taxes
The Tax Act was signed into law on December 22,
2017. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction
from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international
taxation from a worldwide tax system to a territorial tax system. The Tax Act required the Company to use a statutory tax rate
of 21% for the year ended October 31, 2020 and 2019.
The Company files a United States federal income
tax return and a Canadian branch return on a fiscal year-end basis and files Mexican income tax returns for its three Mexican subsidiaries
on a calendar year-end basis. The Company and two of its wholly-owned subsidiaries, Minera Metalin and Minas, have not generated
taxable income since inception. Contratistas, another wholly-owned Mexican subsidiary, has historically generated taxable income
based upon intercompany fees billed to Minera Metalin on the services it provides.
On April 16, 2010, a wholly-owned subsidiary
of the Company was merged with and into Dome, resulting in Dome becoming a wholly-owned subsidiary of the Company. Dome, a Delaware
corporation, files a tax return in the United States as part of the Company’s consolidated tax return.
The components of loss before income taxes
were as follows:
|
|
|
For the year ended
|
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
United States
|
|
$
|
(1,695,000
|
)
|
|
$
|
(1,155,000
|
)
|
|
Foreign
|
|
|
(523,000
|
)
|
|
|
(2,778,000
|
)
|
|
Loss before income taxes
|
|
$
|
(2,218,000
|
)
|
|
$
|
(3,933,000
|
)
|
The components of the provision for income
taxes are as follows:
|
|
|
For the year ended
|
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
Current tax expense
|
|
$
|
7,942
|
|
|
$
|
5,309
|
|
|
Deferred tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
7,942
|
|
|
$
|
5,309
|
|
The Company’s provision for income taxes
for the fiscal year ended October 31, 2020 consisted of a tax expense of $7,942 related to a provision for income taxes for
the Silver Bull and Dome Canadian branch return for the fiscal year ended October 31, 2020.
The reconciliation of the provision for income
taxes computed at the U.S. statutory rate to the provision for income tax as shown in the statement of operations and comprehensive
loss is as follows:
|
|
|
For the year ended
|
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Income tax benefit calculated at U.S. federal income tax rate
|
|
$
|
(466,000
|
)
|
|
$
|
(826,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Differences arising from:
|
|
|
|
|
|
|
|
|
|
Other permanent differences
|
|
|
116,000
|
|
|
|
81,000
|
|
|
Differences due to foreign income tax rates
|
|
|
(47,000
|
)
|
|
|
(244,000
|
)
|
|
Adjustment to prior year taxes
|
|
|
(22,000
|
)
|
|
|
(28,000
|
)
|
|
Inflation adjustment foreign net operating loss
|
|
|
(174,000
|
)
|
|
|
(258,000
|
)
|
|
Foreign currency fluctuations
|
|
|
638,000
|
|
|
|
(344,000
|
)
|
|
Decrease in valuation allowance
|
|
|
(565,000
|
)
|
|
|
(403,000
|
)
|
|
Net operation loss carry forwards expiration - United States
|
|
|
159,000
|
|
|
|
154,000
|
|
|
Net capital loss carry forwards expiration - United States
|
|
|
62,000
|
|
|
|
—
|
|
|
Net operation loss carry forwards expiration - Mexico
|
|
|
307,000
|
|
|
|
1,873,000
|
|
|
Net income tax provision
|
|
$
|
8,000
|
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
The components of the deferred tax assets at
October 31, 2020 and 2019 were as follows:
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards – U.S.
|
|
$
|
7,502,000
|
|
|
$
|
7,359,000
|
|
|
Net capital loss carry forwards – U.S.
|
|
|
—
|
|
|
|
62,000
|
|
|
Net operating loss carry forwards – Mexico
|
|
|
6,080,000
|
|
|
|
6,656,000
|
|
|
Stock-based compensation – U.S.
|
|
|
8,000
|
|
|
|
8,000
|
|
|
Exploration costs
|
|
|
777,000
|
|
|
|
830,000
|
|
|
Other – United States
|
|
|
19,000
|
|
|
|
30,000
|
|
|
Other – Mexico
|
|
|
23,000
|
|
|
|
29,000
|
|
|
Total net deferred tax assets
|
|
|
14,409,000
|
|
|
|
14,974,000
|
|
|
Less: valuation allowance
|
|
|
(14,409,000
|
)
|
|
|
(14,974,000
|
)
|
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
At October 31, 2020, the Company has U.S.
net operating loss carry-forwards of approximately $31 million that expire in the years 2021 through 2037 and $4 million which
will be carried forward indefinitely. The Company has approximately $20 million of net operating loss carry-forwards in Mexico
that expire in the years 2021 through 2030.
The valuation allowance for deferred tax assets
of $14.4 and $15.0 million at October 31, 2020 and 2019, respectively, relates principally to the uncertainty of the utilization
of certain deferred tax assets, primarily net operating loss carry forwards in various tax jurisdictions. The Company continually
assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be
realized prior to their expiration. Based on the Company’s assessment, it has determined that the deferred tax assets are
not currently realizable.
Net Operating Loss Carry Forward Limitation
The Tax Reform Act of 1986 contains provisions
that limit the utilization of net operating loss and tax credit carry forwards if there has been a change in ownership as described
in Section 382 of the Internal Revenue Code. As a result of the Dome merger in April 2010, substantial changes in the Company’s
ownership have occurred that may limit or reduce the amount of net operating loss carry forwards that the Company could utilize
in the future to offset taxable income. The Company has not completed a detailed Section 382 study at this time to determine
what impact, if any, that ownership change may have had on its operating loss carry forwards. In each period since its inception,
the Company has recorded a valuation allowance for the full amount of its deferred tax assets, as the realization of the deferred
tax asset is uncertain. As a result, the Company has not recognized any federal or state income tax benefit in its consolidated
statement of operations and comprehensive loss.
Accounting for Uncertainty in Income Taxes
During the fiscal years ended October 31,
2020 and 2019, the Company has not identified any unrecognized tax benefits or had any additions or reductions in tax positions
and therefore a reconciliation of the beginning and ending amount of unrecognized tax benefits is not presented.
The Company does not have any unrecognized
tax benefits as of October 31, 2020, and accordingly the Company’s effective tax rate will not be materially affected
by unrecognized tax benefits.
The following tax years remain open to examination
by the Company’s principal tax jurisdictions:
|
|
United States:
|
2016 and all following years
|
|
|
|
Mexico:
|
2015 and all following years
|
|
|
|
Canada:
|
2016 and all following years
|
|
The Company has not identified any uncertain
tax position for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly increase
or decrease within the next 12 months.
The Company’s policy is to classify tax
related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income
taxes as a result of unrecognized tax benefits.
NOTE
14 – FINANCIAL INSTRUMENTS
Fair Value Measurements
All financial assets and financial liabilities
are recorded at fair value on initial recognition. Transaction costs are expensed when they are incurred, unless they are directly
attributable to the acquisition of financial assets or the assumption of liabilities carried at amortized cost, in which case the
transaction costs adjust the carrying amount.
The three levels of the fair value hierarchy
are as follows:
|
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
|
Level 2
|
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
|
|
Level 3
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
Under fair value accounting, assets
and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s financial instruments consist of cash and cash equivalents, accounts payable, stock option liability and warrant
derivative liability.
The carrying amounts of cash and cash
equivalents and accounts payable approximate fair value at October 31, 2020 and 2019 due to the short maturities of these
financial instruments.
Derivative liability
The Company classified warrants with a $CDN
exercise price as a derivative liability, which was fair valued at each reporting period subsequent to the initial issuance as
the functional currency of Silver Bull is the U.S. dollar. The Company used the Black-Scholes pricing model to determine the fair
value of these warrants. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable
judgment. The estimated volatility of the Company’s common stock at the date of issuance, and at each subsequent reporting
period, was based on the historical volatility adjusted to reflect the implicit discount to historical volatilities observed in
the prices of traded warrants. The risk-free interest rate was based on rates published by the government for bonds with a maturity
similar to the expected remaining life of the warrants at the valuation date. The expected life of the warrants was assumed to
be equivalent to their remaining contractual term. The dividend yield was expected to be none as the Company has not paid dividends
nor does the Company anticipate paying a dividend in the foreseeable future. All changes in fair value were recorded in the interim
Condensed Consolidated Statements of Operations and Comprehensive Loss each reporting period. As of October 31, 2020, the
warrants with a $CDN exercise price had been exercised or had expired.
The Company reclassified stock options granted
to consultants with a $CDN exercise price on its consolidated balance sheets upon vesting as a stock option liability that is fair
valued at each reporting period subsequent to reclassification as the functional currency of Silver Bull is the U.S. dollar. The
Company has used the Black-Scholes pricing model to fair value these stock options. Determining the appropriate fair-value model
and calculating the fair value of these stock options requires considerable judgment. Any change in the estimates used may cause
the value to be higher or lower than that reported. The estimated volatility of the Company’s common stock at the date of
reclassification, and at each subsequent reporting period, is based on the historical volatility of the Company’s common
stock and adjusted if future volatility is expected to vary from historical experience. The risk-free interest rate is based on
rates published by the government for bonds with a maturity similar to the expected remaining life of the options at the valuation
date. The expected life of the options is based upon historical and expected future exercise behavior. The dividend yield is expected
to be none as the Company has not paid dividends nor does the Company anticipate paying any dividend in the foreseeable future.
During the year ended October 31, 2020, the Company adopted ASU 2018-07, “Compensation - Stock Compensation (Topic 718),”
which resulted in a reclassification of the remaining carrying value from stock liability to additional paid-in capital.
Credit Risk
Credit risk is the risk that the counterparty
to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure
to credit risk on financial assets, the Company has established policies to ensure liquidity of funds and ensure that counterparties
demonstrate minimum acceptable credit worthiness.
The Company maintains its U.S. dollar and $CDN
cash and cash equivalents in bank and demand deposit accounts with major financial institutions with high credit standings. Cash
deposits held in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) for up to $CDN 100,000. Certain
Canadian bank accounts held by the Company exceed these federally insured limits or are uninsured as they related to U.S. dollar
deposits held in Canadian financial institutions. As of October 31, 2020 and 2019, the Company’s cash and cash equivalent
balances held in Canadian financial institutions included $1,793,270 and $1,296,115, respectively, which was not insured by the
CDIC. The Company has not experienced any losses on such accounts and management believes that using major financial institutions
with high credit ratings mitigates the credit risk in cash and cash equivalents.
The Company also maintains cash in bank accounts
in Mexico. These accounts are denominated in the local currency and are considered uninsured. As of October 31, 2020 and 2019,
the U.S. dollar equivalent balance for these accounts was $8,739 and $62,024, respectively.
Interest Rate Risk
The Company holds substantially all of the
Company’s cash and cash equivalents in bank and demand deposit accounts with major financial institutions. The interest rates
received on these balances may fluctuate with changes in economic conditions. Based on the average cash and cash equivalent balances
during the fiscal year ended October 31, 2020, a 1% decrease in interest rates would have resulted in a reduction in interest
income for the period of approximately $5,969.
Foreign Currency Exchange Risk
The Company is not subject to any material market
risk related to foreign currency exchange rate fluctuations.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Compliance with Environmental Regulations
The Company’s exploration activities
are subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect
of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or
affect the economics of a project, and cause changes or delays in the Company’s activities.
Property Concessions Mexico
To properly maintain property concessions in
Mexico, the Company is required to pay a semi-annual fee to the Mexican government and complete annual assessment work.
Royalty
The Company
has agreed to pay a 2% net smelter return royalty on certain property concessions within the Sierra Mojada Property based on the
revenue generated from production. Total payments under this royalty are limited to $6.875 million (the “Royalty”).
To date, no royalties have been paid.
Litigation and
Claims
On May 20,
2014, Mineros Norteños filed an action in the Local First Civil Court in the District of Morelos, State of Chihuahua, Mexico,
against the Company’s subsidiary, Minera Metalin, claiming that Minera Metalin breached an agreement regarding the development
of the Sierra Mojada Property. Mineros Norteños sought payment of the Royalty, including interest at a rate of 6% per annum
since August 30, 2004, even though no revenue has been produced from the applicable mining concessions. It also sought payment
of wages to the cooperative’s members since August 30, 2004, even though none of the individuals were hired or performed
work for Minera Metalin under this agreement and Minera Metalin did not commit to hiring them. On January 19, 2015, the case
was moved to the Third District Court (of federal jurisdiction). On October 4, 2017, the court ruled that Mineros Norteños
was time barred from bringing the case. On October 19, 2017, Mineros Norteños appealed this ruling. On July 31,
2019, the Federal Appeals Court upheld the original ruling. This ruling was subsequently challenged by Mineros Norteños
and on January 24, 2020, the Federal Circuit Court ruled that the Federal Appeals Court must consider additional factors in
its ruling. In March 2020, the Federal Appeals Court upheld the original ruling after considering these additional factors. In
August 2020, Mineros Norteños appealed this ruling, which appeal the Company timely responded and objected to on October 5,
2020. The Company and the Company’s Mexican legal counsel believe that it is unlikely that the court’s ruling will
be overturned. The Company has not accrued any amounts in its consolidated financial statements with respect to this claim.
From time to time,
the Company is involved in other disputes, claims, proceedings and legal actions arising in the ordinary course of business. The
Company intends to vigorously defend all claims against the Company, and pursue its full legal rights in cases where the Company
has been harmed. Although the ultimate outcome of these proceedings cannot be accurately predicted due to the inherent uncertainty
of litigation, in the opinion of management, based upon current information, no other currently pending or overtly threatened proceeding
is expected to have a material adverse effect on the Company’s business, financial condition or results of operations.
COVID-19
Global outbreaks of contagious diseases, including
the December 2019 outbreak of a novel strain of coronavirus (COVID-19), have the potential to significantly and adversely impact
our operations and business. On March 11, 2020, the World Health Organization recognized COVID-19 as a global pandemic. Pandemics
or disease outbreaks such as the currently ongoing COVID-19 outbreak may have a variety of adverse effects on our business, including
by depressing commodity prices and the market value of our securities and limiting the ability of our management to meet with potential
financing sources. The spread of COVID-19 has had, and continues to have, a negative impact on the financial markets, which may
impact our ability to obtain additional financing in the near term. A prolonged downturn in the financial markets could have an
adverse effect on our business, results of operations and ability to raise capital.
NOTE 16 – SEGMENT INFORMATION
The Company
operates in a single reportable segment: the exploration of mineral property interests. The Company has mineral property interests
in Sierra Mojada, Mexico.
Geographic information is approximately as
follows:
|
|
|
For the Year Ended
|
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
$
|
(552,000
|
)
|
|
$
|
(2,784,000
|
)
|
|
Canada
|
|
|
(1,465,000
|
)
|
|
|
(1,155,000
|
)
|
|
Other
|
|
|
(209,000
|
)
|
|
|
—
|
|
|
Net Loss
|
|
$
|
(2,226,000
|
)
|
|
$
|
(3,939,000
|
)
|
|
|
|
|
|
|
|
|
|
|
The following table details allocation of assets
included in the accompanying consolidated balance sheets at October 31, 2020:
|
|
|
Canada
|
|
Mexico
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
1,853,000
|
|
|
$
|
9,000
|
|
|
$
|
1,862,000
|
|
|
Value-added tax receivable, net
|
|
|
—
|
|
|
|
220,000
|
|
|
|
220,000
|
|
|
Other receivables
|
|
|
10,000
|
|
|
|
4,000
|
|
|
|
14,000
|
|
|
Prepaid expenses and deposits
|
|
|
130,000
|
|
|
|
100,000
|
|
|
|
230,000
|
|
|
Loan receivable
|
|
|
360,000
|
|
|
|
—
|
|
|
|
360,000
|
|
|
Office and mining equipment, net
|
|
|
48,000
|
|
|
|
192,000
|
|
|
|
240,000
|
|
|
Property concessions
|
|
|
—
|
|
|
|
5,020,000
|
|
|
|
5,020,000
|
|
|
Goodwill
|
|
|
—
|
|
|
|
2,058,000
|
|
|
|
2,058,000
|
|
|
|
|
$
|
2,401,000
|
|
|
$
|
7,603,000
|
|
|
$
|
10,004,000
|
|
The following table details the allocation
of assets included in the accompanying consolidated balance sheet at October 31, 2019:
|
|
|
Canada
|
|
Mexico
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
1,370,000
|
|
|
$
|
62,000
|
|
|
$
|
1,432,000
|
|
|
Value-added tax receivable, net
|
|
|
—
|
|
|
|
256,000
|
|
|
|
256,000
|
|
|
Other receivables
|
|
|
4,000
|
|
|
|
5,000
|
|
|
|
9,000
|
|
|
Prepaid expenses and deposits
|
|
|
103,000
|
|
|
|
102,000
|
|
|
|
205,000
|
|
|
Office and mining equipment, net
|
|
|
—
|
|
|
|
226,000
|
|
|
|
226,000
|
|
|
Property concessions
|
|
|
—
|
|
|
|
5,020,000
|
|
|
|
5,020,000
|
|
|
Goodwill
|
|
|
—
|
|
|
|
2,058,000
|
|
|
|
2,058,000
|
|
|
|
|
$
|
1,477,000
|
|
|
$
|
7,729,000
|
|
|
$
|
9,206,000
|
|
The Company has significant assets in Coahuila,
Mexico. Although Mexico is generally considered economically stable, it is always possible that unanticipated events in Mexico
could disrupt the Company’s operations. The Mexican government does not require foreign entities to maintain cash reserves
in Mexico.
The following table details the allocation
of exploration and property holding costs for the exploration properties:
|
|
|
For the Year Ended
|
|
|
|
October 31,
|
|
|
|
2020
|
|
2019
|
|
Exploration and property holding costs for the year
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
$
|
(477,000
|
)
|
|
$
|
(2,553,000
|
)
|
|
Other
|
|
|
(203,000
|
)
|
|
|
—
|
|
|
|
|
$
|
(680,000
|
)
|
|
$
|
(2,553,000
|
)
|
NOTE
17 – SUBSEQUENT EVENTS
On November 9,
2020, the Company completed the second and final tranche of the Private Placement for 319,000 Units for gross proceeds of $149,930.
The Company incurred other offering costs associated with the second and final tranche of the Private
Placement of $152. Subscribers of the second and final tranche of the Private Placement included management for a total 319,000
units and gross proceeds of $149,930.
On December 21, 2020, the Company
loaned an additional $400,000 to Ekidos Minerals LLP relating to the acquisition of mineral property concessions in Kazakhstan.
This loan is interest free and is to be repaid by June 30, 2021.
On August 12, 2020, the Company
entered into the Beskauga Option Agreement (the “Beskauga Option Agreement”) with Copperbelt AG (“Copperbelt”)
pursuant to which it has the exclusive right and option to acquire Copperbelt’s right, title and 100% interest in the Beskauga
property located in Kazakhstan. Upon execution of the Beskauga Option Agreement, the Company paid Copperbelt $30,000.
Upon completion of the Company’s due diligence on January 26, 2021, the Beskauga Option Agreement was finalized and the Company
paid Copperbelt $40,000.
As per the Beskauga Option Agreement,
to maintain the effectiveness of the option, the Company must incur the following exploration expenditures:
|
Date
|
|
Amount (USD $)
|
|
Within 1 year from Closing Date
|
|
$2 million
|
|
Within 2 years from Closing Date
|
|
$3 million
|
|
Within 3 years from Closing Date
|
|
$5 million
|
|
Within 4 years from Closing Date
|
|
$5 million
|
The Beskauga Option Agreement also provides
that subject to its terms and conditions, after the Company has incurred the above noted exploration expenditures, it may exercise
the option and acquire the Beskauga property by paying Copperbelt up to $15,000,000.
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