TIDMBCN
RNS Number : 1502A
Bacanora Minerals Ltd
22 December 2017
The following announcement replaces the Final Results
announcement released on 25 October 2017 at 7.00 am under RNS No
5529U.
The Company had reclassified $2,000,000 from foreign currency
translation adjustment to foreign exchange loss to correct these
amounts in the consolidated statement of comprehensive loss for the
year ended June 30, 2016 which represents foreign exchange amounts
erroneously classified in prior year. This reclassification had no
effect on opening balances for the 2016 fiscal year and as such no
opening consolidated statement of financial position has been
presented. The consolidated statement of cash flows has also been
updated for this change and to correct amounts recorded as
additions to exploration and evaluation assets and exchange rate
effects. The impact of this restatement was not correctly reflected
in the original announcement of 25 October 2017. In addition, the
Net loss per share should have read $(0.15) in respect of the year
to 30 June 2017 instead of $(0.14) and $(0.13) in respect of the
year to 30 June 2016 instead of $(0.11). This replacement Final
Results announcement also incorporates remuneration details of two
directors who joined the Board shortly before the end of the
financial year.
The correct version of the Financial Statements for the year
ended 30 June 2017 was published on the Company's website and
posted to Shareholders.
The correct version of the announcement of Final Results is set
out below.
Bacanora Minerals Ltd
('Bacanora' or the 'Company')
Final Results
Bacanora, the London and Canadian listed (AIM: BCN, TSXV: BCN)
lithium exploration and development company, is pleased to announce
its audited final results for the 12 months ended 30 June 2017.
The Company's Audited Accounts and Management's Discussion and
Analysis for the year ended 30 June 2017 are being printed and will
be posted to shareholders shortly. Electronic copies of these
documents are available on the Company's website at
www.bacanoraminerals.com and on SEDAR at www.sedar.com. This
announcement of final results is presented in Canadian dollars,
unless stated otherwise.
Highlights
-- Delivering on objective to transform Bacanora into a global lithium producer
-- Strategic partnership and offtake agreement for flagship
Sonora lithium project in Mexico ('Sonora' and 'the Project')
secured with Hanwa Co., LTD. ('Hanwa'), a leading Japan-based
global trading company and one of the larger traders of battery
chemicals in Japan
o Partnership provides third party validation of quality of
resource, process and product and follows extensive due diligence
by Hanwa covering the Project, Pilot Plant and battery grade
lithium carbonate samples
-- Feasibility Study ('FS') on course to be completed in Q4 2017
and expected to confirm Sonora occupies a favourable position on
the industry cost curve
-- Battery grade lithium carbonate continuously produced at the
Company's Pilot Plant since May 2016 has enabled optimisation and
refinement of beneficiation process for Sonora FS
-- 4,000 metre infill drilling programme completed to upgrade a
portion of the current Mineral Resource from the Indicated to
Measured category, in conjunction with geotechnical and
hydrological drilling for the FS
o Sonora currently has a large Indicated Resource comprised of
259 Mt averaging 3,200 ppm Li for 4.5 Mt of lithium carbonate
equivalent ('LCE')
o An updated resource model prepared by SRK Exploration Ltd to
be included in the FS
-- Acquisition of 50% interest in, and joint operatorship of,
the Zinnwald Lithium Project ('Zinnwald') in southern Saxony,
Germany- provides potential entry into the thriving European
lithium market, which is being driven by the automotive, renewable
energy storage and chemicals industries
-- FS at Zinnwald commenced post period end:
o Bulk ore sampling work to provide samples for metallurgical
testwork for the flowsheet
o Infill drilling programme planned for late 2017 to upgrade the
existing resource model in accordance with National Instrument
43-101 - Standards of Disclosure for Mineral Projects
Chairman's Statement
We are developing one of the world's largest lithium projects
and I believe we are at a tipping point. We have already proved
that we can produce high quality battery grade lithium at our
flagship Sonora Lithium Project in Mexico, which is one of the
world's larger deposits with an Indicated Mineral Resource of 4.5
million tonnes and 2.7 million tonnes Inferred of lithium
resources. We have received backing from institutional investors
and we have secured an agreement with one of the world's largest
traders of battery chemicals.
The stand-out development was the signing of a strategic
partnership and off-take agreement with leading Japanese trading
house Hanwa for up to 100% of production. In our view, securing a
partnership with a major trader of battery chemicals in Japan with
reported net sales of more than Yen1,000 billion in 2016 provides
industry validation of the large and scalable resource we have
identified at Sonora; the work we have done to prove the
metallurgical process; and the quality of the battery grade lithium
carbonate produced by our pilot plant. Having secured Hanwa both as
a partner and as an investor in Bacanora and having demonstrated
Sonora is more than capable of meeting the stringent requirements
of battery manufacturers for lithium products of the highest
quality, we are looking forward to the completion of the
Feasibility Study in Q4 2017, at which point we will then look to
move onto the construction phase.
At Sonora we set ourselves three core targets for the year: sign
an offtake agreement for lithium carbonate produced at the Project;
commence and progress a Feasibility Study focused on an operation
capable of delivering 17,500 tonnes per year of high quality
battery-grade Li(2) CO(3) for the first two years, followed by an
expansion of the operations to 35,000 tonnes Li(2) CO(3) per year;
and finally prove up the detailed flow sheet and metallurgical
process using our large scale lithium carbonate pilot plant in
Hermosillo. We have delivered on all three counts.
From the outset, our intention was to secure an off-take partner
for Sonora's production. The outcome surpassed our expectations.
Not only did we award an off-take agreement for up to 100% of the
Company's stage 1 production at Sonora to Hanwa at the prevailing
market price, but we also signed a strategic partnership with the
leading Japanese trading house. This saw Hanwa acquire an initial
10% equity stake in the Company via the purchase of 12,333,261 new
common shares in the Company. Hanwa also has the option to increase
its interest in Bacanora to up to 19.9%. Off-take agreements
typically do not require any investment on the part of the
off-taker until production commences so for Hanwa to agree to
invest in the business represents a major vote of confidence not
just in Sonora, but also in Bacanora and the management team.
We expect the upcoming FS, which is on course to be completed in
Q4 2017, to go a long way to showing just why Hanwa elected to
invest in Bacanora. Our previous work had already established
Sonora as one of the world's larger lithium resources which
benefits from being both high grade and scalable. We believe the FS
report will confirm Sonora occupies a favourable position on the
industry cost curve. This is due to a combination of factors: the
plan to develop Sonora as an open pit mining operation; the nature
of the deposit which is in the form of free digging lithium,
thereby removing the need for the ore to be drilled, blasted,
crushed and ground prior to processing as is the case with hard
rock; the development of a conventional beneficiation process
followed by a standard SO(4) roasting process that has been
de-risked by the Project's pilot plant; and the capability to
re-cycle Na(2) SO(4) into the roaster which negates the need to
purchase expensive sulphuric acid as a sulphate SO(4) source.
In addition to the world-class qualities of the deposit, our
large-scale pilot plant in Hermosillo played a key role in securing
such a high-quality partner. The integrated lithium carbonate
facility, which includes pre-concentration, roasting, leaching and
IX circuits, has been continuously producing battery grade lithium
carbonate samples since May 2016. Integrated laboratory facilities
at the site have enabled us to process and test battery grade
samples from the plant which have then been distributed to Hanwa
and its customers. As well as proving the detailed flow sheet and
metallurgical process to be deployed at Sonora, the plant is also
enabling us to train our workforce to operate the facilities. We
intend to run the pilot plant continuously until 2019 to facilitate
operator training prior to production.
To ensure we maintain the momentum behind the Company once the
FS has been completed and move onto the construction phase as
quickly possible, during the period we submitted an Environmental
Impact Statement, the Manifestacion de Impacto Ambiental ('MIA'),
for Sonora. This was based on environmental and social baseline
studies that were carried out over the Project site over a two year
period from early 2015. I am pleased to report that post period
end, the MIA for Sonora, which was submitted to the appropriate
authorities in June 2017, was approved in October 2017.
Our overall objective is to build a multi-project lithium
company and with this in mind during the year under review we
acquired a 50% interest in and joint operatorship of the Zinnwald
Project in Germany. Zinnwald is located in a granite hosted Sn/W/Li
belt that has been mined historically for tin, tungsten and lithium
in the heart of Germany's industrial region. In terms of final
product, end markets and stage of development, Zinnwald neatly
complements Sonora. Zinnwald provides an excellent entry point into
the rapidly growing market for lithium in Germany which is being
driven by the automotive, renewable energy storage and chemicals
industries. Meanwhile initial laboratory testwork has demonstrated
that higher value lithium products can be produced from the
Zinnwald concentrates. In line with this a Feasibility Study is
underway to develop a strategy to produce higher value downstream,
lithium products for the European battery and automotive
sectors.
Corporate
During the year a number of changes were made to the Board of
the Company. In October 2016, the Company confirmed the appointment
of Mr. Jamie Strauss as a non-executive independent director. Mr.
Strauss is the founding partner of Strauss Partners Ltd and has
worked as a stockbroker in the City of London for over 25 years,
specialising in the natural resources sector for nearly 20 years.
In November 2016, I assumed the role of Chairman of the Board
replacing James Leahy, interim Non-Executive Chairman. At the same
time Mr. Ray Hodgkinson was appointed as a Canadian based
Non-Executive Director of the Company, replacing Shane Shircliff
who stepped down from this role to pursue other business interests.
Ray Hodgkinson has substantial public company and natural resource
experience. He is very familiar with Bacanora having been on its
board between 2006 and 2013, prior to its AIM listing.
In May 2017, the Company announced the appointment of Dr. Andres
Antonius, who is based in Mexico City, and Mr. Junichi Tomono, head
of the Speciality Metals and Alloys department of Hanwa, as
Non-Executive directors of the Company. The two appointments
replace Mr. James Leahy, who stepped down from the Board as
Non-Executive Director to pursue other business interests, and Mr.
Kiran Morzaria who resigned from his position as Non-executive
Director of the Company. Mr. Tomono's appointment to the board
follows the signing of the strategic partnership and offtake
agreement with Hanwa.
Financial
The Company held cash balances of approximately US$25.0 million
at the date of this report and is therefore fully funded through to
the initial project development and the start of the construction
stages at Sonora.
The current working capital is dedicated towards the completion
of exploration programs, feasibility studies on the lithium
projects along with continued work at the pilot plant. In order to
meet the Company's planned growth and development activities, the
Company budgets to spend an aggregate of approximately $19.5
million during fiscal 2018, with approximately $6.0 million on the
Feasibility Study and related expenditures, approximately $2.6
million on pilot plant related capital expenditures, approximately
$4.0 million on the Zinnwald project and approximately $6.9 million
on general and administrative corporate expenditures.
At June 30, 2017, the Company did not have any bank debt. The
Company intends on meeting its financial commitments through
further equity financings, as and when required.
In May 2017, in conjunction with the strategic partnership with
Hanwa, the Company announced the issuance of 12,333,261 new common
shares to Hanwa at a price of GBP0.83 (approximately $1.46) per
share to raise approximately GBP10.2 million (approximately $18.1
million). The new common shares represented 10.0% of the issued and
outstanding share capital of the Company at the time of the issue.
Also in May 2017, the Company announced the issuance of 8,573,925
new shares at a price of GBP0.86 (approximately $1.49) to Capital
Research and Management Company, a US based investment company that
manages in excess of US$1.4 trillion, for total gross proceeds of
approximately GBP7.4 million (approximately $12.8 million). When
combined with the previous investments by BlackRock Inc. and
M&G Investment Funds, the Company is continuing to build a
strong institutional shareholder base.
During the year ended June 30, 2017, the Company issued
2,925,000 common shares as a result of warrants exercise and
200,000 common shares as a result of stock options exercised for
total proceeds of $3,998,000.
For the year ended June 30, 2017 an impairment charge of
$8,037,430 was recognized in respect of the Magdalena Borate
property. As a result of the Company's decision not to invest any
further capital in the project and the Company's focus on the
Lithium projects an impairment test was performed. The recoverable
amount is its estimated fair value less costs to sell and is
determined to be $679,125. The Company plans to maintain the mining
concessions in good standing for the next fiscal period.
The Company has previously disclosed the existence of an
agreement between the late Mr. Colin Orr-Ewing, the past Chairman
of Bacanora, and the Company subjecting the Sonora Lithium Project
to a 3% gross overriding royalty on production from certain
concessions within the Sonora Lithium Project. The Company
understands that the royalty is now held by the estate of Mr. Colin
Orr-Ewing. The circumstances of the granting of this royalty were
reviewed by the Company and as a result of that review the
legitimacy of the royalty is being disputed by the Company with the
Orr-Ewing estate.
Outlook
We have known for a long time that Sonora holds one of the
larger high grade and scalable lithium resources in the world. It
is one thing to have a world class deposit and another to be able
to extract a high value product from it. The year under review has
seen us focus on proving that Sonora can become the next major
producer of battery grade lithium carbonate. In our view, the
continuous production of battery grade lithium carbonate over an 18
month period at our pilot plant in Hermosillo, which played a major
part in securing a strategic partnership with leading Japanese
trading house Hanwa, demonstrates just that.
With a flagship project fast approaching the construction phase,
a first class partner with long-established relationships in Asia,
and end markets that benefit from structural growth drivers in the
form of the rapid roll-out of electric vehicles and energy storage,
Bacanora is in the right market with the right asset at the right
time. The next major milestone will be the completion of the
Feasibility Study at Sonora in Q4 2017. Subject to the results we
intend to swiftly move into the construction phase, as we look to
deliver on our objective to build a leading supplier of high value
lithium products for many years to come.
I would like to thank our shareholders, management, employees
and advisors for their support during over the course of the year
and I look forward to providing further updates on our progress in
the near term.
Mark Hohnen
24 October 2017
A copy of the annual report will be available on the Company's
website at www.bacanoraminerals.com.
Bacanora Minerals Peter Secker, CEO info@bacanoraminerals.com
Ltd.
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Cairn Financial
Advisers LLP, Sandy Jamieson/Liam +44 (0) 20
Nomad Murray 7213 0880
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Canaccord Genuity, Martin Davison, James +44 (0) 20
Broker Asensio 7523 8000
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St Brides Partners,
Financial PR Frank Buhagiar, Megan +44 (0) 20
Adviser Dennison 7236 1177
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ABOUT BACANORA:
Bacanora is a Canadian and London listed lithium exploration and
development company (TSX-V: BCN and AIM: BCN). The Company is
exploring for, and developing a pipeline of international lithium
projects, with a primary focus on the Sonora Lithium Project. The
Company's operations are based in Hermosillo in northern Mexico.
The Company is led by a team with lithium expertise and proven mine
development, construction and operations experience.
The Sonora Lithium Project, which consists of ten mining
concession areas covering approximately 100 thousand hectares in
the northeast of Sonora State. The Company, through drilling and
exploration work to date, has established an Indicated Mineral
Resource (in accordance with National Instrument 43-101 - Standards
of Disclosure for Mineral Projects ('NI 43-101')) of 4.5 million
tonnes (LCE(1) ) and 2.7 million tonnes Inferred(2) . A
Pre-Feasibility Study completed in Q1 2016(3) demonstrated the
economics associated with becoming a 35,000 tpa lithium carbonate
and 50,000 tpa SOP producer in Mexico.
In addition to the Sonora Lithium Project, the Company also has
a 50% interest in the Zinnwald Lithium Project in southern Saxony,
Germany. The Zinnwald Lithium Project is located in a granite
hosted Sn/W/Li belt that has been mined historically for tin,
tungsten and lithium at different times over the past 300 years.
The strategic location of the Zinnwald Lithium Project allows
immediate access to the German automotive and downstream lithium
chemical industries.
1 LCE = lithium carbonate (Li(2) CO(3) ) equivalent; determined
by multiplying Li value in percent by 5.324 to get an equivalent
Li(2) CO(3) value in per cent. Use of LCE is to provide data
comparable with industry reports and assumes complete conversion of
lithium in clays with no recovery or process losses.
2 See Amended Mineral Resource Estimate for the Sonora Lithium
Project, Mexico, April 2016. The lead author of the amended report
is Mr. Martin Pittuck (MSc., C.Eng., FGS, MIMMM) of SRK Consulting
(UK) Limited ('SRK'). A copy of this report is available under
Bacanora's corporate profile at www.sedar.com.
3 See Technical Report on the Pre-Feasibility Study for the
Sonora Lithium Project, Mexico, 15 April 2016. The authors of the
PFS are Ausenco Limited, SRK and Independent Mining Consultants
Inc. A copy of this report is available under Bacanora's corporate
profile at www.sedar.com.
Consolidated Statements of Financial
Position
Expressed in Canadian Dollars
---------------------------------------------------- -------------
As at June 30,
2016
June 30,
2017 (Note 18)
------------------------------------- ------------- -------------
Assets
Current
Cash $38,755,184 $28,730,168
Other receivables (Note 5(a)) 676,498 265,342
Deferred costs 23,330 102,607
Total current assets 39,455,012 29,098,117
------------------------------------- ------------- -------------
Non-current assets
Investment in Joint Venture
(Note 7) 10,946,471 -
Long-term derivative asset
(Note 7) 2,689,639 -
Property and equipment (Note
8) 2,769,008 2,364,371
Exploration and evaluation
assets (Note 9) 17,828,645 17,816,713
------------------------------------- ------------- -------------
Total non-current assets 34,233,763 20,181,084
------------------------------------- ------------- -------------
Total assets 73,688,775 49,279,201
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable and accrued
liabilities (Note 14) 1,092,806 1,041,117
Warrant liability (Note 10(b)) - 897,323
Joint Venture obligation (Note
7) 4,474,832 -
Total current liabilities 5,567,638 1,938,440
------------------------------------- ------------- -------------
Non-current liabilities
Joint Venture obligation (Note
7) 1,927,626 -
Deferred tax liability (Note
11) 135,000 135,000
------------------------------------- ------------- -------------
Total non-current liabilities 2,062,626 135,000
------------------------------------- ------------- -------------
Total liabilities 7,630,264 2,073,440
Shareholders' Equity
Share capital (Note 10) 91,805,916 57,058,924
Contributed surplus (Note
10(e)) 6,784,655 3,528,990
Foreign currency translation
reserve 2,273,622 2,574,478
Deficit (34,001,997) (15,150,873)
------------------------------------- ------------- -------------
Attributed to Shareholders
of Bacanora Minerals Ltd. 66,862,196 48,011,519
Non-controlling interest (803,685) (805,758)
------------------------------------- ------------- -------------
Total shareholders' equity 66,058,511 47,205,761
------------------------------------- ------------- -------------
Total Liabilities and Shareholders'
Equity $73,688,775 $49,279,201
------------------------------------- ------------- -------------
Consolidated Statements of Comprehensive Loss
Expressed in Canadian Dollars
------------------------------------------------------------------------
June 30,
2016
June 30,
For the years ended 2017 (Note 18)
Revenue
Interest income $94,895 $114,079
---------------------------------------- ------------- -------------
Expenses
General and administrative
(Note 12) 5,059,076 4,226,962
Warrant liability valuation (348,964) 444,024
Accretion of Joint Venture
obligation (Note 7) 401,915 -
Depreciation (Note 8) 184,153 88,887
Stock-based compensation (Note
10(f)) 3,297,445 3,277,615
8,593,625 8,037,488
--------------------------------------- ------------- -------------
Loss before other items (8,498,730) (7,923,409)
Other income 15,738 -
Foreign exchange gain (loss) (2,377,094) (4,497,544)
Impairment of exploration and
evaluation assets (8,037,430) -
Joint Venture investment profit
(loss) 48,465 -
Loss for the year (18,849,051) (12,420,953)
Foreign currency translation
adjustment (300,856) 879,145
---------------------------------------- ------------- -------------
Total comprehensive loss (19,149,907) (11,541,808)
---------------------------------------- ------------- -------------
Loss attributable to shareholders
of Bacanora Minerals Ltd. (18,851,124) (12,295,476)
Loss attributable to non-controlling
interest 2,073 (125,477)
---------------------------------------- ------------- -------------
(18,849,051) (12,420,953)
--------------------------------------- ------------- -------------
Total comprehensive loss attributable
to shareholders of Bacanora
Minerals Ltd. (19,151,980) (11,416,331)
Total comprehensive loss attributable
to non-controlling interest 2,073 (125,477)
---------------------------------------- ------------- -------------
(19,149,907) (11,541,808)
--------------------------------------- ------------- -------------
Net loss per share (basic and
diluted) $(0.15) $(0.13)
---------------------------------------- ------------- -------------
Consolidated Statements of Changes in Shareholders' Equity
Expressed in Canadian Dollars
Share Capital
-------------- --------------------------
Accumulated
other
Number Contributed comprehensive Non-controlling
of Shares Amount Surplus income Deficit interest Total
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2015 (Note
18) 84,947,409 $24,827,911 $657,254 $1,695,333 $(2,855,397) $(680,281) $23,644,820
Brokered
placements 21,226,944 32,099,923 - - - - 32,099,923
Shares issued
on exercise
of options 1,700,000 1,046,880 (405,879) - - - 641,001
Share issue
costs - (915,790) - - - - (915,790)
Stock-based
compensation
expense - - 3,277,615 - - - 3,277,615
Foreign
currency
translation
adjustment - - - 879,145 - - 879,145
Loss for the
period - - - - (12,295,476) (125,477) (12,420,953)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2016 107,874,353 $57,058,924 $3,528,990 $2,574,478 $(15,150,873) $(805,758) $47,205,761
Brokered
placements 20,907,186 30,895,043 - - - - 30,895,043
Shares issued
on exercise
of options 200,000 101,780 (41,780) - - - 60,000
Shares issued
on exercise
of warrants 2,925,000 4,493,502 - - - - 4,493,502
Share issue
costs - (743,333) - - - - (743,333)
Stock-based
compensation
expense - - 3,297,445 - - - 3,297,445
Foreign
currency
translation
adjustment - - - (300,856) - - (300,856)
Loss for the
period - - - (18,851,124) 2,073 (18,849,051)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2017 131,906,539 $91,805,916 $6,784,655 $2,273,622 $(34,001,997) $(803,685) $66,058,511
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Consolidated Statements of
Cash Flows
Expressed in Canadian Dollars
---------------------------------------- --- ------------- --------------
June 30,
2016
June 30, (Note
For the years ended 2017 18)
---------------------------------------- --- ------------- --------------
Cash provided by (used in)
Operating activities
Net loss $ (18,849,051) $ (12,420,953)
Depreciation 184,153 88,887
Stock-based compensation expense
(Note 10(f)) 3,297,445 3,277,615
Warrant liability revaluation (348,964) 444,024
Accretion of Joint Venture
obligation 401,915 -
Joint Venture investment profit
(loss) (48,465) -
Impairment of exploration
and evaluation assets 8,037,430 -
(7,325,537) (8,610,427)
Changes in non-cash working
capital
Other receivables (411,156) (24,533)
Deferred costs 79,277 (84,101)
Accounts payable and accrued
liabilities 51,689 242,355
(7,605,727) (8,476,706)
-------------------------------------------- ------------- --------------
Financing activities
Issue of shares, net of expenses 30,151,710 31,637,432
Warrants proceeds 3,945,143 -
Option proceeds 60,000 641,001
34,156,853 32,278,433
-------------------------------------------- ------------- --------------
Investing activities
Additions to exploration and
evaluation assets (Note 9) (7,965,180) (5,499,515)
Reclamation costs - (150,000)
Investment in Joint Venture
(Note 7) (7,334,277) -
Additions to property and equipment
(Note 8) (560,011) (186,393)
(15,859,468) (5,835,908)
-------------------------------------------- ------------- --------------
Increase in cash position 10,691,658 17,965,819
Exchange rate effects (666,642) 773,312
Cash, beginning of the year 28,730,168 9,991,037
--------------------------------------------- ------------- --------------
Cash, end of the year $ 38,755,184 $ 28,730,168
--------------------------------------------- ------------- --------------
Notes to the Consolidated Financial Statements
As at and for the years ended June 30, 2017 and 2016
Expressed in Canadian dollars
1. CORPORATE INFORMATION
Bacanora Minerals Ltd. (the "Company" or "Bacanora") was
incorporated under the Business Corporations Act of Alberta on
September 29, 2008. The Company is dually listed on the TSX Venture
Exchange as a Tier 2 issuer and on the AIM Market of the London
Stock Exchange, with its common shares trading under the symbol,
"BCN" on both exchanges. The address of the Company is 2204 6
Avenue N.W. Calgary, AB T2P 3S2.
The Company is an exploration stage mining company engaged in
the identification, acquisition, exploration and development of
mineral properties located in Mexico and Germany. The Company has
not yet determined whether its mineral properties contain
economically recoverable reserves. The recoverability of amounts
capitalized is dependent upon the discovery of economically
recoverable reserves, maintaining title in the properties and
obtaining the necessary financing to complete the exploration and
development of these projects and upon attainment of future
profitable production. The amounts capitalized as exploration and
evaluation assets represent costs incurred to date, and do not
necessarily represent present or future values.
2. BASIS OF PREPARATION
a) Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB").
The annual consolidated financial statements were authorized for
issue by the Board of Directors on October 24, 2017. The Board of
Directors has the power and authority to amend these financial
statements after they have been issued.
b) Basis of measurement
These consolidated financial statements have been prepared on a
historical cost basis, except for certain financial instruments
that have been measured at fair value.
These consolidated financial statements are presented in
Canadian dollars. The functional currency of the Company is the
British pound sterling ("GBP") and US dollar for its subsidiaries.
The Company's functional currency for the consolidated financial
statements was previously the Canadian dollar up until June 30,
2016. The functional currency was changed to GBP given that the
Company's expenses and financings are primarily denominated in this
currency.
3. SIGNIFICANT ACCOUNTING POLICIES
The preparation of consolidated financial statements in
compliance with IFRS requires management to make certain critical
accounting estimates. It also requires management to exercise
judgment in applying the Company's accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 4.
a) Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company, 70% of its subsidiary, Mexilit S.A. de
C.V. ("Mexilit"), 70% of its subsidiary, Minera Megalit S.A de C.V.
("Megalit"), 100% of its subsidiary, Operador Lithium Bacanora S.A
de CV ("OLB") and through its wholly-owned subsidiary, Mineramex
Limited, 99.9% of Minera Sonora Borax, S.A. de C.V. ("MSB"), and
60% of Minerales Industriales Tubutama, S.A. de C.V. ("MIT").
Subsidiaries are consolidated from the date of acquisition, being
the date on which the Company obtains control, and continue to be
consolidated until the date when such control ceases. The financial
statements of the subsidiaries are prepared for the same reporting
period as the parent company, using consistent accounting policies.
All intercompany balances and transactions are eliminated in full.
Losses within a subsidiary are attributed to the non-controlling
interest even if that results in a deficit balance. A change in
ownership interest of a subsidiary, without a loss of control, is
accounted for as an equity transaction.
b) Joint Arrangements
Certain of the Company's activities are conducted through joint
arrangements in which two or more parties have joint control. A
joint arrangement is classified as either a joint operation or a
joint venture, depending on the rights and obligations of the
parties to the arrangement.
Joint operations arise when the Company has a direct ownership
interest in jointly controlled assets and obligations for
liabilities. The Company does not have this type of
arrangement.
Joint ventures arise when the Company has rights to the net
assets of the arrangement. For these arrangements, the Company uses
the equity method of accounting and recognizes initial and
subsequent investments at cost, adjusting for the Company's share
of the joint venture's income or loss, less dividends received
thereafter. When the Company's share of losses in a joint venture
equals or exceeds its interest in a joint venture it does not
recognize further losses. The transactions between the Company and
the joint venture are assessed for recognition in accordance with
IFRS.
Joint ventures are tested for impairment whenever objective
evidence indicates that the carrying amount of the investment may
not be recoverable under the equity method of accounting. The
impairment amount is measured as the difference between the
carrying amount of the investment and the higher of its fair value
less costs of disposal and its value in use. Impairment losses are
reversed in subsequent periods if the amount of the loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognized.
c) Foreign currency
(i) Transactions and balances:
Transactions in foreign currencies are initially recorded in the
functional currency at the rate in effect at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency spot rate of
exchange in effect at the reporting date.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of the initial transaction. All exchange differences are
recorded in net income (loss) for the year.
(ii) Translation to presentation currency:
The results and balance sheet of the subsidiary are translated
to the presentation currency as follows:
Assets and liabilities are translated at the closing rate at the
dates of the consolidated statements of financial position;
Share capital is translated using the exchange rate at the date
of the transaction; revenue and expenses for each statement of
comprehensive income (loss) are translated at average exchange
rates; and all resulting exchange differences are recognized in
other comprehensive income (loss) in the consolidated statements of
comprehensive loss.
The Company treats specific inter-company loan balances, which
are not intended to be repaid in the foreseeable future, as part of
its net investment in a foreign operation and any resulting
exchange difference on these balances is recorded in other
comprehensive loss. When a foreign entity is sold, such exchange
differences are reclassified to income (loss) in the consolidated
statements of comprehensive loss as part of the gain or loss on
sale.
d) Cash
Cash is comprised of cash held on deposit and other short-term,
highly liquid investments with original maturities of three months
or less with a Canadian chartered bank, a British bank and a
Mexican bank. These deposits and investments are readily
convertible to known amounts of cash and subject to an
insignificant risk of change in value.
e) Exploration and evaluation assets
Costs incurred prior to acquiring the right to explore an area
of interest are expensed as incurred.
Exploration and evaluation assets are intangible assets.
Exploration and evaluation assets represent the costs incurred on
the exploration and evaluation of potential mineral resources, and
include costs such as exploratory drilling, sample testing,
activities in relation to the evaluation of technical feasibility
and commercial viability of extracting a mineral resource, and
general & administrative costs directly relating to the support
of exploration and evaluation activities. The Company assesses
exploration and evaluation assets for impairment when facts and
circumstances suggest that the carrying amount may exceed its
recoverable amount. The recoverable amount is the higher of the
assets fair value less costs to sell and value in use. Assets are
allocated to cash generating units not larger than operating
segments for impairment testing.
Purchased exploration and evaluation assets are recognized as
assets at their cost of acquisition or at fair value if purchased
as part of a business combination. They are subsequently stated at
cost less accumulated impairment. Exploration and evaluation assets
are not amortized. Where the Company's exploration commitments for
a mineral property are performed under option agreements with a
third party, the proceeds of option payments under such agreements
are applied to the mineral property to the extent costs are
incurred. The excess, if any, is recorded to the statements of
comprehensive loss. Asset swaps are recognized at the carrying
amount of the asset being swapped when the fair value of the assets
cannot be determined.
Once the work completed to date on an area of interest is
sufficient such that the technical feasibility and commercial
viability of extracting the mineral resource has been determined,
the property is considered to be a mine under development.
Exploration and evaluation assets are tested for impairment before
the assets are transferred to development property, capitalized
expenditure is transferred to mine development assets or capital
work in progress.
f) Property and equipment
Property and equipment is carried at cost less accumulated
depreciation and accumulated impairment losses. The cost of an item
of property and equipment consists of the purchase price and any
costs directly attributable to bringing the asset to the location
and condition necessary for its intended use and an estimate of the
costs of dismantling and removing the item and restoring the site
on which it is located.
Amortization is provided at rates calculated to expense the cost
of property and equipment, less their estimated residual value,
using the straight-line method over a five year period.
The assets' residual values, useful lives and methods of
depreciation are reviewed at each financial year-end, and adjusted
prospectively if appropriate.
g) Rehabilitation provision
The Company recognizes provisions for contractual, constructive
or legal obligations, including those associated with the
reclamation of mineral interests (exploration and evaluation
assets) and plant and equipment, when those obligations result from
the acquisition, construction, development or normal operation of
the assets. Initially, a provision for the rehabilitation is
recognized at its present value in the period in which it is
incurred. Upon initial recognition of the liability, the
corresponding provision is added to the carrying amount of the
related asset and the cost is amortized as an expense over the
economic life of the asset. Following the initial recognition of
the rehabilitation provision, the carrying amount of the liability
is increased for the passage of time and adjusted for changes to
the current market-based discount rate, and amount or timing of the
underlying cash flows needed to settle the obligation.
h) Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) that has arisen as a result of a
past event and it is probable that a future outflow of resources
will be required to settle the obligation, provided that a reliable
estimate can be made of the amount of the obligation.
Provisions are measured at management's best estimate of the
present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risk specific to the
obligation. The increase in any provision due to passage of time is
recognized as accretion expense.
i) Interest income
Interest income is recorded on an accrual basis using the
effective interest method.
j) Financial instruments
Financial assets and financial liabilities are recognized when
the Company becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognized when the
contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognized when
it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are measured
initially at fair value plus transactions costs, except for
financial assets and liabilities carried at fair value through
profit or loss, which are measured initially at fair value.
Financial assets and financial liabilities are subsequently
measured as described below.
(i) Financial assets
For the purpose of subsequent measurement, financial assets are
classified into the following categories upon initial recognition:
loans and receivables; financial assets at fair value through
profit of loss; held-to-maturity investments; and
available-for-sale financial assets.
The category determines how the asset is subsequently measured
and whether any resulting income or expense is recognized in profit
or loss or in other comprehensive income.
All financial assets except for those at fair value through
profit or loss are subject to review for impairment at least at
each reporting date. Financial assets are considered impaired when
there is objective evidence that the net realizable value of a
financial asset or a group of financial assets is lower than its
carrying value.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial recognition these are measured at amortized
cost using the effective interest method, less provision for
impairment, if any.
Loans and receivables comprise cash and other receivables.
(iii) Fair value through profit or loss
Financial assets measured at fair value through profit loss are
subsequently measured at fair value with changes in those fair
values recognized in net income (loss).
Assets held at fair value through profit or loss comprise
long-term derivative asset.
(iv) Financial liabilities
Financial liabilities are measured subsequently at amortized
cost using the effective interest method, except for financial
liabilities held for trading or designated at fair value through
profit or loss, that are carried subsequently at fair value with
gains and losses recognized in profit or loss. The effective
interest method is a method of calculating the amortized cost of a
financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a
shorter period.
The Company's financial liabilities measured at amortized cost
include accounts payables and accrued liabilities and Joint Venture
obligation. The Company accounts for the warrant liability at fair
value through profit and loss. The Company currently does not have
any financial liabilities classified as held for trading.
k) Impairment of assets
(i) Financial assets
A financial asset that is not carried at fair value through
profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates that a
loss event has occurred after the initial recognition of the asset,
and that the loss event had a negative effect on the estimated
future cash flows of that asset that can be estimated reliably. An
impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset's original effective interest rate. The
amount of the impairment loss is recognized in profit or loss. If,
in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss, unless the
impairment relates to an equity investment.
(ii) Non-financial assets
At the end of each reporting period, the Company reviews the
carrying amounts of its tangible and intangible assets to determine
whether there is an indication that the assets are impaired. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment, if
any. Where the asset does not generate largely independent cash
inflows, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. A cash-generating
unit is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
Recoverable amount is the higher of fair value less costs to
sell, and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessment of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognized in net income
(loss).
With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognized may no longer exist. Where an impairment loss
subsequently reverses, the carrying amount of the asset (or
cash-generating unit) is increased to the revised estimate of its
recoverable amount, but to an amount that does not exceed the
carrying amount that would have been determined had no impairment
loss been recognized for the asset (or cash-generating unit) in
prior periods. A reversal of an impairment loss is recognized in
net income (loss).
l) Income taxes
Income tax expense comprises current and deferred tax. Current
tax and deferred tax are recognized in profit or loss except to the
extent that it relates to a business combination, or items
recognized directly in equity or in comprehensive loss.
Current income tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred income taxes are calculated based on temporary
differences between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not recognized on the
initial recognition of goodwill, on the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit
or loss at the time of the transaction, and on temporary
differences relating to investments in subsidiaries and jointly
controlled entities where the reversal of these temporary
differences can be controlled by the Company and it is probable
that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are measured, without
discounting, at the tax rates that are expected to apply when the
assets are recovered and the liabilities settled, based on tax
rates that have been enacted or substantively enacted by the
reporting date.
A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against
which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow the related tax benefit
to be utilized.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to set off current tax assets against
current tax liabilities, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different
taxable entities which intend either to settle current tax
liabilities and assets on a net basis, or to realize the assets and
settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities and assets
are expected to be settled or recovered.
m) Earnings (loss) per share
Basic loss per share is calculated by dividing the loss
attributable to the common shareholders of the Company by the
weighted average number of common shares outstanding during the
reporting period. Diluted earnings per share is calculated by
adjusting the loss attributable to common shareholders and the
weighted average number of common shares outstanding for the
effects of all dilutive potential common shares, which comprise
share options and warrants granted.
n) Stock-based payments
(i) Stock-based payment transactions
The Company grants stock options to acquire common shares to
directors, officers and employees ("equity-settled transactions").
The board of directors determines the specific grant terms within
the limits set by the Company's stock option plan. The Company's
stock-based payment plan does not feature any option for a cash
settlement.
(ii) Equity-settled transactions
The costs of equity-settled transactions are measured by
reference to the fair value at the grant date and are recognized,
together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled,
ending on the date on which the relevant persons become fully
entitled to the award (the "vesting date"). The cumulative expense
recognized for equity-settled transactions at each reporting date
until the vesting date reflects the Company's best estimate of the
number of equity instruments that will ultimately vest. The profit
or loss charge or credit for a period represents the movement in
cumulative expense recognized as at the beginning and end of that
period and the corresponding amount is represented in share option
reserve. No expense is recognized for awards that do not ultimately
vest.
Where the terms of an equity-settled award are modified, the
minimum expense recognized is the expense as if the terms had not
been modified. An additional expense is recognized for any
modification which increases the total fair value of the
stock-based payment arrangement, or is otherwise beneficial to the
employee as measured at the date of modification.
Where equity-settled transactions are awarded to employees, the
fair value of the options at the date of grant is charged to profit
(loss) over the vesting period. Performance vesting conditions are
taken into account by adjusting the number of equity instruments
expected to vest at each reporting date so that, ultimately, the
cumulative amount recognized over the vesting period is based on
the number of the options that will eventually vest.
Where equity-settled transactions are entered into with
non-employees and some or all of the goods or services received by
the entity as consideration cannot be specifically identified, they
are measured at the fair value of the equity instruments issued.
Otherwise, stock-based payments to non-employees are measured at
the fair value of the goods or services received.
Upon exercise of stock options, the proceeds received are
allocated to share capital along with any value previously recorded
in share option reserve relating to those options. The dilutive
effect of outstanding options is reflected as additional dilution
in the computation of diluted earnings per share.
o) Segment reporting
The reportable segments identified make up all of the Company's
activities. The reportable segments are an aggregation of the
operating segments within the Company as prescribed by IFRS 8. The
reportable segments are based on the Company's management
structures and the consequent reporting to the Chief Operating
Decision Maker, the Board of Directors. The sector results are
attributable to unallocated head office corporate costs and
exploration costs. These reportable segments also correspond to
geographical locations such that each reportable segment is in a
separate geographic location. Income and expenses included in
profit or loss for the year are allocated directly or indirectly to
the reportable segments.
Non-current segment assets comprise the non-current assets used
directly for segment operations, including intangible assets,
property and plant and equipment. Current segment assets comprise
the current assets used directly for segment operations, including
other receivables and deferred costs. Inter-company balances
comprise transactions between operating segments making up the
reportable segments. These balances are eliminated to arrive at the
figures in the consolidated accounts.
p) Standards, amendments and interpretations not yet effective
At the date of authorization of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have
not been adopted early by the Company.
Management anticipates that all of the pronouncements will be
adopted in the Company's accounting policy for the first period
beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that
are expected to be relevant to the Company's financial statements
are provided below.
-- IFRS 9, "Financial Instruments ("IFRS 9"). IFRS 9 provides a
comprehensive new standard for accounting for all aspects of
financial instruments. IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair
value, and replaces the multiple category and measurement models in
IAS 39. The approach in IFRS 9 focuses on how an entity manages its
financial instruments in the context of its business model, as well
as the contractual cash flow characteristics of the financial
assets. The new standard also requires a single impairment method
to be used, replacing the multiple impairment methods currently
provided in IAS 39.
Although the classification criteria for financial liabilities
did not change under IFRS 9, the fair value option requires
different accounting for changes to the fair value of a financial
liability resulting from changes to an entity's own credit
risk.
New hedge accounting requirements were incorporated into IFRS 9
that increase the scope of items that can qualify as a hedged item
and change the requirements of hedge effectiveness testing that
must be met to use hedge accounting.
Amendments to IFRS 9 introduce a single, forward-looking
'expected loss' impairment model for financial assets which will
require more timely recognition of expected credit losses, and a
fair value through other comprehensive income category for
financial assets that are debt instruments.
The amendments to IFRS 9 are effective for annual periods
beginning on or after January 1, 2018 and are available for earlier
adoption. The Company is in the process of evaluating the impact
that IFRS 9 may have on the Company's consolidated financial
statements.
-- IFRS 15, "Revenue from Contracts with Customers" ("IFRS 15").
IFRS 15 provides a single model to determine how and when an entity
should recognize revenue, as well as requiring entities to provide
more informative, relevant disclosures in respect to its revenue
recognition criteria. IFRS 15 is to be applied prospectively and is
effective for annual periods beginning on or after January 1, 2018,
with earlier application permitted. The Company is in the process
of evaluating the impact that IFRS 15 may have on the Company's
consolidated financial statements.
-- IFRS 16 "Leases", which supersedes IAS 17 "Leases" sets out
principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, i.e. the
customer ('lessee') and the supplier ('lessor'). Lessee accounting
will change substantially under this new standard while there is
little change for the lessor. IFRS 16 eliminates the classification
of leases as either operating leases or financing leases and,
instead, introduces a single lessee accounting model. A lessee will
be required to recognize assets and liabilities for all leases with
a term of more than 12 months (unless the underlying asset is of
low value) and will be required to present depreciation of leased
assets separately from interest on lease liabilities in the
consolidated statement of income (loss). A lessor will continue to
classify its leases as operating leases or financing leases, and to
account for those two types of leases separately.
IFRS 16 is effective for fiscal periods beginning on or after
January 1, 2019. The Company is in the process of evaluating the
impact that IFRS 16 may have on the Company's financial
statements.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the Company's financial statements in
accordance with IFRS requires management to make certain judgments,
estimates, and assumptions about recognition and measurement of
assets, liabilities, income and expenses. The actual results are
likely to differ from these estimates. Information about the
significant judgments, estimates, and assumptions that have the
most significant effect on the recognition and measurement of
assets, liabilities, income and expenses are discussed below.
a) Exploration and evaluation assets
The Company is in the process of exploring its mineral
properties and has not yet determined whether the properties
contain economically recoverable mineral reserves. The
recoverability of carrying values for mineral properties is
dependent upon the discovery of economically recoverable mineral
reserves, the ability of the Company to obtain the financing
necessary to complete exploration and development, and the success
of future operations.
The application of the Company's accounting policy for
exploration and evaluation assets requires judgment in determining
whether it is likely that costs incurred will be recovered through
successful exploration and development or sale of the asset under
review when assessing impairment. Furthermore, the assessment as to
whether economically recoverable reserves exist is itself an
estimation process. Estimates and assumptions made may change if
new information becomes available. If, after expenditures are
capitalized, information becomes available suggesting that the
recovery of expenditures is unlikely, the amount capitalized is
written off in the net income (loss) in the period when the new
information becomes available. In situations where indicators of
impairment are present for the Company's exploration and evaluation
assets, estimates of recoverable amount must be determined as the
higher of the estimated value in use or the estimated fair value
less costs to sell.
The carrying value of these assets is detailed in Note 9.
b) Title to mineral property interests
Although the Company has taken steps to verify the title to the
exploration and evaluation assets in which it has an interest, in
accordance with industry practices for the current stage of
exploration of such properties, these procedures do not guarantee
the Company's title. Title may be subject to unregistered prior
agreements or transfers and title may be affected by undetected
defects.
c) Rehabilitation provision
Rehabilitation or similar liabilities are estimated based on the
Company's interpretation of current regulatory requirements,
constructive obligations and are measured at fair value. Fair value
is determined based on the net present value of estimated future
cash expenditures for the settlement of decommissioning,
restoration or similar liabilities that may occur upon
decommissioning of the mine. Such estimates are subject to change
based on changes in laws and regulations.
d) Functional currency
The Company transacts in multiple currencies. The assessment of
the functional currency of each entity within the consolidated
group involves the use of judgment in determining the primary
economic environment each entity operates in. The Company first
considers the currency that mainly influences sales prices for
goods and services, and the currency that mainly influences labour,
material and other costs of providing goods or services. In
determining functional currency the Company also considers the
currency from which funds from financing activities are generated,
and the currency in which receipts from operating activities are
usually retained. When there is a change in functional currency,
the Company exercises judgment in determining the date of
change.
e) Share-based payments
The Company utilizes the Black-Scholes Option Pricing Model to
estimate the fair value of stock options granted to directors,
officers and employees. The use of the Black-Scholes Option Pricing
Model requires management to make various estimates and assumptions
that impact the value assigned to the stock options including the
forecast future volatility of the stock price, the risk-free
interest rate, dividend yield, and the expected life of the stock
options. Any changes in these assumptions could have a material
impact on the share-based payment calculation value.
The same estimates are required for transactions with
non-employees where the fair value of the goods or services
received cannot be reliably determined.
f) Income taxes
The Company is subject to income tax in several jurisdictions
and significant judgment is required in determining the provision
for income taxes. There are many transactions and calculations
undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. In the prior year these
transactions included the transfer of properties between Mexican
subsidiaries. Transactions between the Company's Mexican
subsidiaries are required by Mexican tax rules to be recorded on an
arms' length basis and the Company made estimates as to the
measurement of these transactions. The Company recognizes
liabilities and contingencies for anticipated tax audit issues
based on the Company's current understanding of the tax law.
Despite the Company's belief that its tax return positions are
supportable, the Company acknowledges that certain positions may
potentially be challenged and may not be fully sustained upon
review by tax authorities. The Company believes that its accruals
for tax liabilities are adequate for all open audit years based on
its assessment of many factors including past experience and
interpretation of tax law. This assessment relies on estimates and
assumptions and may involve a series of complex judgments about
future events. For matters where it is probable that an adjustment
will be made, the Company records its best estimate of the tax
liability including the related interest and penalties in the
current tax
provision. Management believes they have adequately provided for
the probable outcome of these matters; however, the final outcome
may result in a materially different outcome than the amount
included in the tax liabilities, and such differences will impact
income tax expense in the period in which such determination is
made.
In addition, the Company recognizes deferred tax assets relating
to tax losses carried forward to the extent there are sufficient
taxable temporary differences (deferred tax liabilities) relating
to the same taxation authority and the same taxable entity against
which the unused tax losses can be utilized.
g) Joint Venture investment
The Company applies IFRS 11 to all joint arrangements and
classifies them as either joint operations or joint ventures,
depending on the contractual rights and obligations of each
investor. The Company holds 50% of the voting rights of its joint
arrangement with SolarWorld AG. The Company has determined to have
joint control over this arrangement as under the contractual
agreements, unanimous consent is required from all parties to the
agreements for certain key strategic, operating, investing and
financing policies. The Company's joint arrangement is structured
through a limited liability entity - Deutsche Lithium GmbH ("DL")
and provides the Company and SolarWorld AG (parties to the
agreement) with rights to the net assets of DL under the
arrangements. Therefore, this arrangement has been classified as a
joint venture. The Joint Venture obligation includes assumptions
regarding the expected timing of the expenditures and on the
discount rate used. Any changes in the timing of the expectations
could impact the recorded amount. Refer to Note 7 regarding inputs
used.
h) Long-term derivative asset
The Company's Joint Venture arrangement with SolarWorld AG
stated above gives it the right, either alone or together with
another party, to purchase the remaining 50% of the voting rights
of DL for 30 million Euros (herein referred to as the "Option").
This Option is available to the Company within 6 months of the
earlier of the completion of the Feasibility Study or the second
anniversary of the agreement. The Company used significant judgment
to determine the fair value of this Option and considered the
enterprise value per measured and indicated resources of comparable
mining entities within the last quarter of fiscal 2017 to determine
an appropriate range. The Company re-assesses its inputs to
determine change in the valuation of the Option at each reporting
period. Any changes in the assumptions could have a material impact
on the Option value.
5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
This note presents information about the Company's exposure to
credit, liquidity and market risks arising from its use of
financial instruments and the Company's objectives, policies and
processes for measuring and managing such risks.
a) Credit risk
Credit risk arises from the potential that a counter party will
fail to perform its obligations. Financial instruments that
potentially subject the Company to concentrations of credit risk
consist of other receivables which relate solely to input tax
receivables in Canada and value added tax receivables in Mexico.
Any changes in management's estimate of the recoverability of the
amount due will be recognized in the period of determination and
any adjustment may be significant. The carrying amount of accounts
and related party receivables represents the maximum credit
exposure.
The Company's cash is held in major Canadian, UK and Mexican
banks, and as such the Company is exposed to the risks of those
financial institutions. Substantially all of the accounts
receivables represent amounts due from the Canadian and Mexican
governments and accordingly the Company believes them to have
minimal credit risk.
The Board of Directors monitors the exposure to credit risk on
an ongoing basis and does not consider such risk significant at
this time. The Company considers all of its accounts receivables
fully collectible.
b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they became due. The Company's
approach to managing liquidity risk is to ensure, as far as
possible, that it will have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses. Liquidity risk arises
primarily from accounts payable and accrued liabilities, current
portion of the Joint Venture obligation and commitments, all with
maturities of one year or less.
c) Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, commodity prices, and interest rates will
affect the value of the Company's financial instruments. The
objective of market risk management is to manage and control market
risk exposures within acceptable limits, while maximizing long-term
returns.
The Company conducts exploration projects in Mexico. As a
result, a portion of the Company's expenditures, other receivables,
accounts payables and accrued liabilities are denominated in US
dollars and Mexican pesos and are therefore subject to fluctuation
in exchange rates. As at June 30, 2017, a 5% change in the exchange
rate between the Canadian dollar and the GBP would have an
approximate $5,595,000 (2016 - $2,353,000) change to the Company's
total comprehensive loss.
d) Fair values
The fair value of cash, other receivables, accounts payable and
accrued liabilities and current portion of the Joint Venture
obligation approximate their carrying values due to the short-term
nature of the instruments.
Fair value measurements recognized in the statement of financial
position subsequent to initial fair value recognition can be
classified into Levels 1 to 3 based on the degree to which fair
value is observable.
Level 1 - Fair value measurements are those derived from quoted
prices in active markets for identical assets and liabilities.
Level 2 - fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly, or
indirectly.
Level 3 - Fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data.
The fair value disclosed for the long-term derivative asset
(Note 7), Joint Venture obligation (Note 7) and recoverable amount
of certain exploration and evaluation assets (Note 9) are
classified under Level 3.
Each of these items was recognised during the year and there
were no transfers between any levels of the fair value
hierarchy.
6. CAPITAL MANAGEMENT
The Company's objectives in managing capital are to safeguard
its ability to operate as a going concern while pursuing
exploration and development and opportunities for growth through
identifying and evaluating potential acquisitions or businesses.
The Company defines capital as the Company's shareholders equity
excluding contributed surplus, of $60,077,541 at June 30, 2017
(2016 - $44,482,529). The Company sets the amount of capital in
proportion to risk and corporate growth objectives. The Company
manages its capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of
the underlying assets.
7. INVESTMENT IN JOINTLY CONTROLLED ENTITY
Effective February 17, 2017, the Company acquired a 50% interest
in a jointly controlled entity, Deutsche Lithium GmbH located in
southern Saxony, Germany that is involved in the exploration of a
lithium deposit in the Alterberg-Zinnwald region of the Eastern Ore
Mountains in Germany. The determination of DL as a joint venture
was based on DL's structure through a separate legal entity whereby
neither the legal form nor the contractual arrangement give the
owners the rights to the assets and obligations for the liabilities
within the normal course of business, nor does it give the rights
to the economic benefits of the assets or responsibility for
settling liabilities associated with the arrangement. Accordingly,
the investment is accounted for using the equity method.
The Company acquired its interest for a cash consideration of
EUR5 million (approximately $7.1 million) from SolarWorld AG
("SolarWorld") and an undertaking to contribute up to EUR5 million
toward the costs of completion of a feasibility study, which is
anticipated to take approximately 18-24 months. Additionally, legal
fees of $228,679 were paid in connection to this transaction. The
Company, alone or together with any reasonably acceptable third
party, has an option to acquire the remaining 50% of the jointly
controlled entity within this 24 month period for EUR30 million. In
the event that the Company does not exercise this right within the
above stated timeframe, then SolarWorld has the right but not the
obligation to purchase the Company's 50% interest for EUR1.
The following table summarizes the purchase price allocation for
the joint venture acquisition:
Balance
----------------------------------- -------------
Working capital $ 178,337
Exploration and evaluation assets 13,692,671
Property and equipment 108,730
Less: deferred tax liability (3,244,919)
----------------------------------- -------------
Enterprise value $ 10,734,819
----------------------------------- -------------
The current value of DL is substantially attributed to the
exploration and evaluation assets, and therefore, contribution paid
in excess of the carrying value of net assets is attributed to the
exploration and evaluation assets.
Consideration for the joint venture acquisition consisted of the
following:
Amount
---------------------------------- -------------
Cash $ 7,334,277
Joint venture obligation 6,000,542
Less: Long-term derivative asset (2,600,000)
----------------------------------
Total consideration paid $ 10,734,819
---------------------------------- -------------
The Company's undertaking to contribute up to EUR5 million
toward the costs of completion of the Feasibility Study within the
next 18-24 months has been recorded as a liability in the
consolidated statement of financial position, presented in
accordance with its due date, between current and non-current
portions. As at June 30, 2017, the current portion of the
obligation was $4,474,832 and the non-current portion was
$1,927,626 which includes the accretion of $401,915. The Company
used a discount rate of 20% and final payment to conclude in March,
2019 to determine the present value of the obligation. If the
estimated rate increased/decreased by 5% it would result in an
(decrease) increase to the obligation of ($243,000) and $265,000
respectively.
The option to purchase the remaining 50% interest has been
recognized as a derivative asset in the consolidated statement of
financial position as it represents the option to acquire equity
instruments at a future point in time. This derivative asset has
been recorded at the present value of its fair value at $2,689,639.
The fair value was determined by reviewing the total enterprise
value per contained lithium quantity multiples of comparable
hard-rock mining lithium companies. If the multiple used increased
or decreased by 10% it would result in a fair value increase
(decrease) of $1.7 million and $(1.8 million) respectively. The
derivative asset has been classified as long-term due to its
realization being in line with the completion of the Feasibility
Study, which is anticipated to take approximately 18-24 months.
Reconciliation of the carrying amount of net investment in joint
venture is as follows:
June 30,
2017
------------------------ -------------
Opening Balance $ -
Investment in DL 10,734,819
Share of profit 48,465
Translation gain 163,187
Balance, June 30, 2017 $ 10,946,471
------------------------ -------------
Summarized financial information in respect of the Company's
joint venture in DL is set out below. The summarized information
represent amounts shown in DL's financial statements, as adjusted
for differences in accounting policies and fair value adjustments
required related to the Company's investment in the joint venture.
Amounts have been translated in accordance with the Company's
accounting policy on foreign currency translation.
June 30,
2017
----------------------------------- -----------
Current assets $ 509,292
Non-current assets 27,795,666
Current liabilities 6,093,169
Profit from continuing operations 271,868
Total comprehensive income 271,868
----------------------------------- -----------
8. PROPERTY AND EQUIPMENT
Office
Building furniture Computer Transportation
Cost and equipment and equipment equipment equipment Total
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2015 $ 2,932,054 $ 3,147 $ 11,464 $ 146,396 $ 3,093,061
Additions 108,777 - 17,840 59,776 186,393
Foreign exchange (267,264) - (18,765) (17,909) (303,938)
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2016 $ 2,773,567 $ 3,147 $ 10,539 $ 188,263 $ 2,975,516
Additions 410,546 - - 149,465 560,011
Foreign exchange 38,917 - - 3,908 42,825
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2017 $ 3,223,030 $ 3,147 $ 10,539 $ 341,636 $ 3,578,352
------------------ --------------- --------------- ----------- --------------- ------------
Office
Accumulated Building furniture Computer Transportation
depreciation and equipment and equipment equipment equipment Total
------------------ --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2015 $ 412,036 $ 3,147 $ 7,843 $ 99,232 $ 522,258
Additions 80,591 - 2,696 5,600 88,887
------------------ --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2016 $ 492,627 $ 3,147 $ 10,539 $ 104,832 $ 611,145
Additions 131,300 - - 52,853 184,153
Foreign exchange 11,712 - - 2,334 14,046
------------------ --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2017 $ 635,639 $ 3,147 $ 10,539 $ 160,019 $ 809,344
------------------ --------------- --------------- ----------- --------------- ----------
Office
Carrying Building furniture Computer Transportation
amounts and equipment and equipment equipment equipment Total
------------- --------------- --------------- ----------- --------------- ------------
At June 30,
2016 $ 2,280,940 $ - $ - $ 83,431 $ 2,364,371
At June 30,
2017 $ 2,587,391 $ - $ - $ 181,617 $ 2,769,008
------------- --------------- --------------- ----------- --------------- ------------
9. EXPLORATION AND EVALUATION ASSETS
The Company's mining claims consist of mining concessions
located in the State of Sonora, Mexico. The specific descriptions
of such properties are as follows:
a. Magdalena Borate property
The Magdalena Borate project consists of seven concessions, with
a total area of 7,095 hectares. The concessions are 100% owned by
MSB. The Magdalena property is subject to a 3% gross overriding
royalty payable to Minera Santa Margarita S.A. de C.V., a
subsidiary of Rio Tinto PLC, and a 3% gross overriding royalty
payable to the estate of the past Chairman of the Company on sales
of borate produced from this property.
During the year ended June 30, 2017, the Company determined
there to be indicators of impairment on the exploration and
evaluation assets located in the Magdalena Borate property based on
the Company's decision to not further explore borates. As such, the
Company recognized impairment of $8,037,430 (2016 - $Nil) on these
assets as the recoverable amount of the property was lesser than
the carrying value based on fair value less cost to sell. Fair
value for the property has been assessed by the Company on the
basis of estimated land value.
b. Sonora Lithium property
The Sonora Lithium Project consists of ten contiguous mineral
concessions. The Company through its wholly-owned Mexican
subsidiary, MSB, has a 100% interest in two of these concessions:
La Ventana and La Ventana 1, covering 1,820 hectares. Of the
remaining concessions, five are owned 100% by Mexilit - El Sauz, El
Sauz 1, El Sauz 2, Fleur and Fleur 1 covering 6,334 hectares.
Mexilit is owned 70% by Bacanora and 30% by Cadence Minerals Plc
("Cadence") formerly known as Rare Earth Minerals Plc.
The remaining three concessions, Buenavista, Megalit and San
Gabriel, cover 89,235 hectares, and are subject to a separate
agreement between the Company and Cadence. As at June 30, 2017,
Buenavista and San Gabriel concessions are owned by Megalit, while
the Megalit concession was in the process of being transferred to
Megalit. The Megalit concessions is currently owned by MSB. Megalit
is owned 70% by Bacanora and 30% by Cadence. As at June 30, 2017
USD$1,012,444 (2016 - USD$1,048,780) of the Company's cash is
restricted to be spent on Megalit.
The Sonora Lithium property is subject to a 3% gross overriding
royalty payable to the estate of the past Chairman of the Company,
on sales of mineral products produced from certain concessions
within this property.
The balance of investment in mining claims as of June 30, 2017
and June 30, 2016 corresponds to concession payments to the federal
government, costs of exploration and paid salaries, and consists of
the following:
Magdalena La Ventana Mexilit Megalit
Borate Lithium Lithium Lithium Total
------------------ ------------ ------------ ------------ ----------- ------------
Balance, June
30, 2015 $ 7,246,158 $ 1,931,837 $ 2,091,527 $ 637,905 $11,907,427
Additions 1,142,138 3,152,334 1,078,990 126,053 5,499,515
Foreign exchange 213,887 63,223 71,984 60,677 409,771
------------------ ------------ ------------ ------------ ----------- ------------
Balance, June
30, 2016 $ 8,602,183 $ 5,147,394 $ 3,242,501 $ 824,635 $17,816,713
Additions 74,608 8,118,390 24,968 48,214 8,266,180
Reimbursement
of expenses
from Cadence - - (301,000) - (301,000)
Impairment loss (8,037,430) - - - (8,037,430)
Foreign exchange 39,764 25,659 16,056 2,703 84,182
------------------ ------------ ------------ ------------ ----------- ------------
Balance, June
30, 2017 $ 679,125 $13,291,443 $ 2,982,525 $ 875,552 $17,828,645
------------------ ------------ ------------ ------------ ----------- ------------
10. SHARE CAPITAL
a) Authorised
The authorized share capital of the Company consists of an
unlimited number of voting common shares without nominal or par
value.
b) Common Shares Issued
Shares Amount
------------------------------------ ------------ -------------
Balance, June 30, 2015 84,947,409 $ 24,827,911
Shares issued on exercise of
options 850,000 355,410
Shares issued in private placement
for cash(1) 11,476,944 17,871,564
Shares issued on exercise of
options 850,000 691,470
Shares issued in private placement
for cash(2) 9,750,000 14,228,359
Share issue costs - (915,790)
------------------------------------ ------------ -------------
Balance, June 30, 2016 107,874,353 $ 57,058,924
Shares issued on exercise of
warrants(2,3) 2,925,000 4,493,502
Shares issued on exercise of
options 200,000 101,780
Shares issued in private placement
for cash(4) 12,333,261 18,057,648
Shares issued in private placement
for cash(5) 8,573,925 12,837,395
Share issue costs - (743,333)
Balance, June 30, 2017 131,906,539 $ 91,805,916
------------------------------------ ------------ -------------
(1) On November 13, 2015, the Company completed a private
financing of 11,476,944 common shares at a price of $1.56 (GBP0.77)
per share for aggregate gross proceeds of $17,871,564
(GBP8,837,247). The Company paid commission of $354,280 and other
share issue expenses of $56,117. As part of the financing,
1,973,407 common shares were acquired by Cadence, a company that is
a significant shareholder.
(2) On May 20, 2016, the Company completed a private financing
that raised approximately $14,681,700 (GBP7,702,500) via the
placing of 9,750,000 units (the "Placing Units") at a price of
approximately $1.48 (GBP0.79) per Placing Unit (the "Placing"). The
Company paid commission of $440,500 and other share issue expenses
of $64,893. Each Placing Unit is comprised of one new common share
of the Company (a "Placing Share") and 0.3 of one common share
purchase warrant, with each whole warrant (a "Placing Warrant")
being exercisable into one common share at a price of approximately
$1.48 (GBP0.79) at any time subsequent to July 25, 2016, but on or
before September 30, 2016. Accordingly, an aggregate of 9,750,000
Placing Shares and 2,925,000 Placing Warrants were issued under
this Placing. The Placing Warrants are denominated in a currency
different than the functional currency and were recorded originally
as warrant liability of $453,299 using the Black-Scholes option
pricing model. This warrant liability was re-measured as at June
30, 2016 to be $897,323 using the Black-Scholes option pricing
model. On the exercise date of September 30, 2016, the warrant
liability was re-measured to be $548,359 using the Black-Scholes
option pricing model.
The following assumptions were used in the Black-Scholes option
pricing model to determine the valuation of the warrant
liability:
May 20, June 30, September
Input 2016 2016 30, 2016
------------------------ -------- --------- ----------
Risk-free interest
rate 0.39% 0.25% 0.12%
Expected volatility 38% 44% 32.63%
Expected life (years) 0.33 0.25 0.01
Fair-value per warrant $0.15 $0.31 $0.19
------------------------ -------- --------- ----------
(3) On September 30, 2016, the Company issued 2,925,000 common
shares upon the exercise of its warrants at a price GBP0.79 ($1.35)
per share for aggregate gross proceeds of GBP2,310,750
(approximately $3.9 million). The Company paid commission of
GBP69,323 ($118,355) and recognized a further increase in its share
capital of $548,359 in relation to the previously recorded warrant
liability.
(4) On May 2, 2017, the Company issued 12,333,261 common shares
to Hanwa Co., LTD. The common shares represent 10.0% of the issued
and outstanding share capital of the Company and were issued at a
price of GBP0.83 ($1.46) per share for gross proceeds of
GBP10,175,000 (approximately $18.1 million) for Bacanora pursuant
to the Company's offtake agreement for battery grade lithium
carbonate at its Sonora lithium project in Mexico. The Company paid
other share issue expenses of $74,505.
(5) On May 24, 2017, the Company completed a private financing
of 8,573,925 common shares at price of GBP0.86 ($1.49) per share to
a US based investment company for aggregate gross proceeds of
approximately GBP7.4 million (approximately $12.8 million). The
Company paid commission of GBP294,943 ($513,496) and other share
issue expenses of $36,977.
c) Stock options
The following tables summarize the activities and status of the
Company's stock option plan as at and during the year ended June
30, 2017.
Number of Weighted average
options exercise price
------------------------ ------------ -----------------
Balance, June 30, 2015 2,475,000 $ 0.38
Exercised (1,700,000) 0.33
Expired (50,000) 1.58
Issued 4,250,000 1.75
------------------------ ------------ -----------------
Balance, June 30, 2016 4,975,000 $ 1.52
Exercised (200,000) 0.30
Expired/Cancelled (325,000) 0.68
Issued 2,937,400 1.41
------------------------ ------------ -----------------
Balance, June 30, 2017 7,387,400 $ 1.55
------------------------ ------------ -----------------
Weighted
Number average Number
outstanding remaining exercisable
at June Exercise contractual Expiry at June
Grant date 30, 2017 price life (Years) date 30, 2017
--------------- ------------- --------- -------------- ---------- -------------
September Sept.
28, 2012 50,000 0.25 0.3 28, 2017 50,000
September Sept.
11, 2013 500,000 0.30 1.2 11, 2018 500,000
December 2, Dec. 2,
2015 925,000 1.58 3.4 2020 975,000
January 22, Jan. 22,
2016 1,000,000 1.56(1) 0.6 2018 1,000,000
April 27, May 27,
2016 2,000,000 1.94(2) 2.0 2019 2,000,000
March
March 1, 2017 400,000 1.39(3) 4.7 1, 2022 400,000
March
March 1, 2017 2,012,400 1.39(3) 2.7 1, 2020 829,092
May 15,
May 15, 2017 500,000 1.53(4) 2.9 2020 165,000
--------------- ------------- --------- -------------- ---------- -------------
7,387,400 5,919,092
--------------- ------------- --------- -------------- ---------- -------------
(1) Exercise price of GBP0.77 per share (3) Exercise price of
GBP0.85 per share
(2) Exercise price of GBP0.96 per share (4) Exercise price of
GBP0.87 per share
d) Warrants
The following tables summarize the activities and status of the
Company's warrants as at and during the year ended June 30,
2017.
Weighted
Remaining Average
Number contractual Exercise
of warrants life (Years) Expiry date price
--------------- ------------- -------------- ------------ ----------
Balance, June March 26,
30, 2015 833,333 2.8 2018 $ 0.45
September
Issued 2,925,000 0.3 30, 2016 $ 1.51
Balance, June
30, 2016 3,758,333
Exercised (2,925,000) - - $ 1.51
Balance, June March 26,
30, 2017 833,333 0.8 2018 $ 0.45
--------------- ------------- -------------- ------------ ----------
Weighted
Average
Number Remaining
Outstanding Contractual
at June Exercise Life Financing
Grant date 30, 2015 Price (Years) Expiry date Warrants
--------------- ------------- --------- ------------- ------------ ----------
March 26, March 26,
2013 833,333 $ 0.45 2.8 2018 833,333
March 26,
June 30, 2016 833,333 $ 0.45 0.8 2018 833,333
--------------- ------------- --------- ------------- ------------ ----------
e) Contributed surplus
The following table presents changes in the Company's
contributed surplus.
June 30, June 30,
2017 2016
---------------------------------- ------------ ------------
Balance, beginning of year $ 3,528,990 $ 657,255
Exercise of stock options (41,780) (405,880)
Stock-based compensation expense
(Note 10(c)) 3,297,445 3,277,615
Balance, end of year $ 6,784,655 $ 3,528,990
---------------------------------- ------------ ------------
f) Stock-based compensation expense
During the year ended June 30, 2017, the Company recognized
$3,297,445 (2016 - $3,277,615) of stock-based compensation expense.
The fair value of the stock-based compensation as estimated on the
dates of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
June 30, June 30,
2017 2016
------------------------- -------------- --------------
Risk-free interest rate 0.77% - 1.15% 0.45% - 0.89%
101.34% - 123.09% -
Expected volatility 127.03% 138.90%
Expected life (years) 3 -5 2 - 5
Fair value per option $0.77 - $1.15 $1.02 - $1.35
------------------------- -------------- --------------
Expected volatility is based on historical volatility of the
Company's stock prices.
g) Per share amounts
Basic loss per share is calculated using the weighted average
number of shares of 112,991,355 for the year ended June 30, 2017
(2016 - 102,255,672). Options and warrants were excluded from the
dilution calculation as they were anti-dilutive.
11. INCOME TAXES
The income tax provision differs from income taxes which would
result from applying the expected tax rate to net loss before
income taxes. The differences between the "expected" income tax
expenses and the actual income tax provision are summarized as
follows:
June 30, 2017 2016
------------------------------------ --------------- --------------
Loss before tax $ (18,849,051) $(12,420,953)
-------------------------------------- --------------- --------------
Expected income tax recovery
at 27% (2016 - 27%) (5,089,244) (3,353,657)
Non-deductible expenses and
others 1,067,111 1,625,041
Foreign exchange 268,428 103,786
Difference from foreign operations (537,187) 34,735
Change in deferred tax asset
not recognized 4,290,891 1,590,096
-------------------------------------- --------------- --------------
Total income taxes - -
-------------------------------------- --------------- --------------
The components of the Company's net future income tax asset
(liability) are as follows:
June 30, 2017 2016
----------------------------------- ------------ ------------
Canada
Share issuance costs $ 299,626 $ 374,838
Unrealized foreign exchange 170,801 253,880
Non-capital losses available
for future periods 4,018,703 2,798,090
Capital losses available for
future periods 821,614 -
Unrecognized deferred tax asset (5,310,744) (3,426,808)
------------------------------------- ------------ ------------
Canada net deferred income tax
asset -
----------------------------------- ------------ ------------
Mexico
Property and equipment $ (190,773) $ (183,944)
Exploration and evaluation assets 1,054,167 (1,515,757)
Unrealized foreign exchange - (28,731)
Non-capital losses available
for future periods 1,682,501 1,767,372
Unrecognized deferred tax asset (2,680,895) (173,940)
------------------------------------- ------------ ------------
Mexico net deferred tax liability (135,000) (135,000)
------------------------------------- ------------ ------------
Total net deferred tax asset
(liability) $ (135,000) $ (135,000)
------------------------------------- ------------ ------------
As at June 30, 2017, the Company has, for tax purposes,
non-capital losses available to carry forward to future years as
follows: Canada - $14,884,084 (2016 - $10,636,297) expiring from
2027 to 2037 and Mexico - $5,608,337 (2016 - $5,891,242) expiring
from 2020 to 2027.
12. GENERAL AND ADMINISTRATIVE EXPENSES
The Company's general and administrative expenses include the
following:
June 30,
For the year ended June 30, 2017 2016
Management fees (Note
14) $ 2,192,560 $ 1,861,713
Legal and accounting
fees 1,420,460 1,248,410
Investor relations 622,320 434,753
Office expenses 158,390 317,977
Travel and other 665,346 364,109
------------------------ -------------- ------------
Total $ 5,059,076 $ 4,226,962
------------------------ -------------- ------------
13. SEGMENTED INFORMATION
The Company currently operates in two operating segments, the
exploration and development of mineral properties in Mexico and the
exploration and development of mineral properties in Germany.
Before this year, the Company operated only in one segment in
Mexico. Management of the Company makes decisions about allocating
resources based on two operating segments. Summary of the
identifiable assets, liabilities and net loss by operating segment
are as follows:
June 30, 2017 Mexico Germany Head Office Consolidated
---------------------- ------------- ------------- ----------------- -------------
Current assets $ 2,853,283 $ - $ 36,601,729 $ 39,455,012
Long-term derivative
asset - - 2,689,639 2,689,639
Property and
equipment 2,673,516 - 95,492 2,769,008
Investment in
jointly controlled
entity - 10,946,471 - 10,946,471
Exploration and
evaluation assets 17,828,645 - - 17,828,645
---------------------- ------------- ------------- ----------------- -------------
Total assets $ 23,355,444 $ 10,946,471 $ 39,386,860 $ 73,688,775
---------------------- ------------- ------------- ----------------- -------------
Current liabilities $ 672,578 $ - $4,895,060 $5,567,638
Joint Venture
obligation - - 1,927,626 1,927,626
Deferred tax
liability - - 135,000 135,000
---------------------- ------------- ------------- ----------------- -------------
Total liabilities $ 672,578 - $ 6,957,686 $ 7,630,264
---------------------- ------------- ------------- ----------------- -------------
For the year
ended June 30,
2017 Mexico Germany Head Office Consolidated
---------------------------- -------------- --------- -------------- ---------------
Interest income $ - $ - $ 94,895 $ 94,895
General and administrative (644,294) - (4,414,782) (5,059,076)
Warrant liability
valuation - - 348,964 348,964
Accretion of
Joint Venture
obligation - - (401,915) (401,915)
Depreciation (184,153) - - (184,153)
Stock-based compensation - - (3,297,445) (3,297,445)
---------------------------- -------------- --------- -------------- ---------------
Loss before other
items $ (828,447) $ - $ (7,670,283) $ (8,498,730)
---------------------------- -------------- --------- -------------- ---------------
Other income 15,738 - - 15,738
Foreign exchange
loss (245,149) - (2,131,945) (2,377,094)
Impairment on
exploration and
evaluation assets (8,037,430) - - (8,037,430)
Joint venture
investment profit - 48,465 - 48,465
---------------------------- -------------- --------- -------------- ---------------
Segment loss
for the year $ (9,095,288) $ 48,465 $(9,802,228) $ (18,849,051)
---------------------------- -------------- --------- -------------- ---------------
14. RELATED PARTY TRANSACTIONS
a. Related party expenses
The Company's related parties include directors and officers and
companies which have directors in common.
During the year ended June 30, 2017, directors and management
fees in the amount of $1,593,504 (2016 - $1,970,030) were paid to
directors and officers of the Company which was expensed as general
and administrative costs. Of the total amount incurred as directors
and management fees, $72,636 (2016 - $38,075) remains in accounts
payables and accrued liabilities on June 30, 2017.
During the year ended June 30, 2017, the Company paid $712,255
(2016 - $856,061) to Grupo Ornelas Vidal S.A. de C.V., a consulting
firm of which Martin Vidal, director of the Company and president
of MSB, is a partner. These services were incurred in the normal
course of operations for geological exploration and pilot plant
operation. As of June 30, 2017, $Nil (2016 - $77,416) remains in
accounts payable and accrued liabilities.
b. Key management personnel compensation
Key management of the Company are directors and officers of the
Company and their remuneration includes the following:
For the year ended, June 30, 2017 June 30, 2016
Director's remuneration:
Estate of Colin Orr-Ewing $ 10,056 $ 59,706
James Leahy(1) 45,263 28,011
Guy Walker - 4,396
Shane Shircliff (2) 6,462 16,671
Derek Batorowski 3,546 16,671
Kiran Morzaria 9,973 16,794
Raymond Hodgkinson 29,461 -
Jamie Strauss 32,368 -
Andres Antonius 6,317 -
Junichi Tomono - -
------------------------------- -------------- --------------
Total directors' remuneration $ 143,446 $ 142,249
-------------------------------- -------------- --------------
Management's remuneration:
Mark Hohnen $ 366,119 $ 392,577
Peter Secker 464,895 972,418
Martin Vidal 317,631 240,336
Derek Batorowski 312,732 222,450
-------------------------------- -------------- --------------
Total management's
remuneration $ 1,461,377 $ 1,827,781
-------------------------------- -------------- --------------
Total directors' and
management's remuneration $ 1,604,823 $ 1,970,030
-------------------------------- -------------- --------------
Operational consulting
fees:
Groupo Ornelas Vidal
SA CV $ 712,255 $ 856,061
-------------------------------- -------------- --------------
Stock-based compensation
expense to directors
and management $ 1,086,552 $ 2,020,881
-------------------------------- -------------- --------------
1. Resigned from his position on May 15, 2017.
2. Resigned from his position on November 23, 2016.
As at June 30, 2017, the following options were held by
directors of the Company:
Exercise Number of
Date of grant price options
-------------------- --------------- --------- ----------
September
11, 2013 $0.30 200,000
December
2, 2015 $1.58 175,000
March 1,
Martin Vidal 2017 $1.39 125,000
-------------------- --------------- --------- ----------
September
11, 2013 $0.30 200,000
December
2, 2015 $1.58 175,000
March 1,
Derek Batorowski 2017 $1.39 125,000
-------------------- --------------- --------- ----------
December
2, 2015 $1.58 1,000,000
January 22,
2016 $1.94 2,000,000
March 31,
Mark Hohnen 2017 $1.39 249,900
-------------------- --------------- --------- ----------
March 1,
Jamie Strauss 2017 $1.39 750,000
-------------------- --------------- --------- ----------
March 1,
Raymond Hodgkinson 2017 $1.39 200,000
-------------------- --------------- --------- ----------
Junichi Tomono - - -
-------------------- --------------- --------- ----------
Andres Antonius May 15, 2017 $1.53 500,000
-------------------- --------------- --------- ----------
15. COMMITMENTS AND CONTINGENCIES
The Company has commitments for lease payments for field office
and camp with no specific expiry dates. The total annual financial
commitment resulting from these agreements is $9,156. Additionally,
the Company has commitments for lease payments for its UK office in
the amount of $49,000 per year until July, 2018.
The properties in Mexico are subject to spending requirements in
order to maintain title of the concessions. The capital spending
requirement for 2017 is $744,060. The properties are also subject
to semi-annual payments to the Mexican government for concession
taxes, which will approximately $167,586 in fiscal 2018.
16. SUBSEQUENT EVENTS
On September 20, 2017, the Company announced the implementation
of a restricted share unit plan along with the grant of an
aggregate of 1,192,277 restricted share units thereunder and the
grant of an aggregate of 2,227,410 options to acquire common shares
in the capital of the Company at a price of GBP0.80 (approximately
$1.32) pursuant to the Stock Option Plan of the Company. All of the
aforementioned 2,227,410 stock options have been granted to
directors, officers and senior management members of the Company
and its subsidiaries. Such options vest 1/3(rd) on the date of
grant and an additional 1/3(rd) on each of the first and second
anniversaries of the date of grant and are exercisable for a period
of three (3) years.
On September 28, 2017, 833,333 of the Company's warrants and
50,000 of the common shares options were exercised at $0.45 and
$0.25 respectively each for gross proceeds of $387,500.
17. NON-CONTROLLING INTERESTS
The summary financial information for the Company's Mexican
subsidiaries Mexilit, Megalit and MIT is as follows.
MIT
June 30, June 30,
2017 2016
----------------------------- --------- ---------
Current assets $ 29,714 $ 43,357
Non-current assets - 700
Accumulated non-controlling
interest 779,701 746,552
Loss (income) for the year 213,356 182,996
Mexilit
June 30, June 30,
2017 2016
------------------------------ ---------- ----------
Current assets $ 226,067 $ 262,744
Non-current assets 3,776,528 3,754,053
Current liabilities 868 11,010
Non-current liabilities 2,417,493 2,391,348
Accumulated non-controlling
interest 44,970 10,288
Loss (income) for the year 33,321 (625,914)
Net cash flow from operating
activities (30,409) (772,931)
Net cash flow from financing
activities 26,145 615,147
Net cash flow from investing
activities (26,854) (598,484)
Net change in cash (31,118) (756,268)
Cash beginning of year 221,280 977,548
------------------------------ ---------- ----------
Cash end of year 190,162 221,280
------------------------------ ---------- ----------
Megalit
June 30, June 30,
2017 2016
------------------------------ ---------- ----------
Current assets $ 171,756 $ 231,931
Non-current assets 780,821 608,095
Current liabilities 1,038 197
Non-current liabilities 518,901 515,635
Accumulated non-controlling
interest 17,741 48,918
Loss (income) for the year 48,629 (95,931)
Net cash flow from operating
activities (50,172) 572,329
Net cash flow from financing
activities 181,810 (570,641)
Net cash flow from investing
activities (186,376) (45,068)
Net change in cash (54,738) (43,380)
Cash beginning of year 187,030 230,410
------------------------------ ---------- ----------
Cash end of year 132,292 187,030
------------------------------ ---------- ----------
18. COMPARATIVE INFORMATION
The Company has reclassified $2,000,000 from foreign currency
translation adjustment to foreign exchange loss to correct these
amounts in the consolidated statement of comprehensive loss for the
year ended June 30, 2016 which represents foreign exchange amounts
erroneously classified in prior year. This reclassification had no
effect on opening balances for the 2016 fiscal year and as such no
opening consolidated statement of financial position has been
presented. The consolidated statement of cash flows has also been
updated for this change and to correct amounts recorded as
additions to exploration and evaluation assets and exchange rate
effects.
Consolidated Statement of Financial Position as
at June 30, 2016
----------------------------------------------------------------------------
As Issued Adjusted
------------------------------ -------------- ------------- -------------
Foreign currency translation
reserve $ 574,478 $ 2,000,000 $ 2,574,478
Deficit (13,150,873) (2,000,000) (15,150,873)
------------------------------ -------------- ------------- -------------
Consolidated Statement of Comprehensive loss for
the year ended June 30, 2016
------------------------------------------------------------------------------
As Issued Adjusted
------------------------------ -------------- -------------- --------------
Foreign exchange gain
(loss) $ (2,497,544) $ (2,000,000) $ (4,497,544)
Foreign currency translation
adjustment (1,120,855) 2,000,000 879,145
Net loss per share (basic
and diluted) $ (0.11) $ (0.12) $ (0.13)
------------------------------ -------------- -------------- --------------
Consolidated Statement of Cash Flows for the year
ended June 30, 2016
-----------------------------------------------------------------------------
As Issued Adjusted
--------------------------- --------------- -------------- ---------------
Net loss $ (10,420,953) $ (2,000,000) $(12,420,953)
Additions to exploration
and evaluation assets (6,726,203) 1,226,688 (5,499,515)
Increase in cash position $ 18,739,131 $ (773,312) $ 17,965,819
Exchange rate effects $ - $ 773,312 $ 773,312
--------------------------- --------------- -------------- ---------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMMZZGMKGNZZ
(END) Dow Jones Newswires
December 22, 2017 02:00 ET (07:00 GMT)
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