Industria
Q3 2024 Financial Results
(“Amaroq” or the “Corporation” or the “Company”)
Q 3 2024 Financial Results
TORONTO, ONTARIO – 14 November 2024 - Amaroq Minerals Ltd. (AIM, TSXV, NASDAQ Iceland: AMRQ), an independent mine development company with a substantial land package of gold and strategic mineral assets in Southern Greenland, presents its Q3 2024 financials.All dollar amounts are expressed in Canadian dollars unless otherwise noted.
A conference call for analysts and investors will be held tomorrow, 15 November 2024, at 08:30 GMT, details of which can be found further down in this announcement.
Eldur Olafsson, CEO of Amaroq, commented:
" We are now on the cusp of achieving first gold at Nalu naq , a major milestone which will start initial cash flow ahead of a ramp-up to commercial production .
Over the third quarter we made significant headway at Nalunaq . Many of the major components of the processing plant were installed successfully and the development within the mine in the 'Mountain Block' enabled the first ore to be stockpiled for first gold production due this quarter. Our exploration progra m m e at Nalunaq has further ed our understanding of the high-grade deposit w ith a drilling campaign on the ' Target Block ' expansion a nd the 75 Vein . R esults on this and the first ore drives in Mountain Block are expected soon. We believe t hese results , also inc orporating the last two years ' drill results , will provid e for an updated Mineral Resource Estimate (MRE4) for Nalunaq early next yea r.
The exploration season was in full swing in Q3 and I'm very proud of what our exploration team has achieved this year. In addition to our on-going work at Nalunaq, we drilled the first two holes at Nanoq in our Gold portfolio , and across our strategic minerals portfolio we drilled [two] holes in Target North at Sava, undertook a three-drill rig campaign at Stendalen and dri l l ed two scout holes at the historical Josva copper mine . We expect results from all of these campaigns o ver the next few months. This has laid a solid foundation for further Gold, C opper and N ickel exploration activities next year as we continue to unlock the full value of our portfolio in Greenland. ”
Q 3 2024 Corporate Highlights
Q 3 2024 Operational Highlights
Nalunaq Project KPIs
Outlook
Exploration activities overview
Gold projects:
Strategic Minerals:
Details of conference call
A conference call for analysts and investors will be held tomorrow, 15 November, at 08:30am GMT BST, including a management presentation and Q&A session.
To join the meeting, please register at the below link:
https://us06web.zoom.us/webinar/register/WN_dhWLE36tQGabAf9MI_zcCA
Amaroq Financial Results
The following selected financial data is extracted from the Financial Statements for the six months ended June 30, 2024.
Financial Results
Financial Position
Enquiries:
Amaroq Minerals Ltd.
Eldur Olafsson, Executive Director and CEO
eo@amaroqminerals.com
Eddie Wyvill, Corporate Development
+44 (0)7713 126727
ew@amaroqminerals.com
Panmure Liberum (UK) Limited ( Nominated Adviser and
Corporate Broker )
Scott Mathieson
Kieron Hodgson
+44 (0) 20 7886 2500
Canaccord Genuity Limited (Corporate Broker)
James Asensio
Harry Rees
Tel: +44 (0) 20 7523 8000
Camarco (Financial PR)
Billy Clegg
Elfie Kent
Fergus Young
+44 (0) 20 3757 4980
For Company updates:
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Further Information:
About Amaroq Minerals
Amaroq Minerals' principal business objectives are the identification, acquisition, exploration, and development of gold and strategic metal properties in South Greenland. The Company's principal asset is a 100% interest in the past producing Nalunaq Gold mine which is due to go into production towards the end of 2024. The Company has a portfolio of gold and strategic metal assets in Southern Greenland covering the two known gold belts in the region as well as advanced exploration projects at Stendalen and the Sava Copper Belt exploring for Strategic metals such as Copper, Nickel, Rare Earths and other minerals. Amaroq Minerals is continued under the Business Corporations Act (Ontario) and wholly owns Nalunaq A/S, incorporated under the Greenland Public Companies Act.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Glossary
Inside Information
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014 on Market Abuse ("UK MAR"), as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, and Regulation (EU) No. 596/2014 on Market Abuse ("EU MAR").
Qualified Person Statement
The technical information presented in this press release has been approved by James Gilbertson CGeol, VP Exploration for Amaroq Minerals and a Chartered Geologist with the Geological Society of London, and as such a Qualified Person as defined by NI 43-101.
Amaroq Minerals Ltd.
UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2024
The attached financial statements have been prepared by Management of Amaroq Minerals Ltd. and have not been reviewed by the auditor
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Amaroq Minerals Ltd.
Consolidated Statements of Changes in Equity
(Unaudited, in Canadian Dollars)
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION
Amaroq Minerals Ltd. (the “Corporation”) was incorporated on February 22, 2017, under the Canada Business Corporations Act. As of June 19, 2024, the Corporation completed its continuance from the Canada Business Corporations Act into the Province of Ontario under the Business Corporations Act (Ontario). The Corporation's head office is situated at 100 King Street West, Suite 3400, First Canadian Place, Toronto, Ontario, M5X 1A4, Canada. The Corporation operates in one industry segment, being the acquisition, exploration and development of mineral properties. It owns interests in properties located in Greenland. The Corporation's financial year ends on December 31. Since July 2017, the Corporation's shares are listed on the TSX Venture Exchange (the “TSX-V”). Since July 2020, the Corporation's shares are also listed on the AIM market of the London Stock Exchange (“AIM”) and from November 1, 2022, on Nasdaq First North Growth Market Iceland which were transferred on September 21, 2023 on Nasdaq Main Market Iceland (“Nasdaq”) under the AMRQ ticker.
These unaudited condensed interim consolidated financial statements for the nine months ended September 30, 2024 (“Financial Statements”) were approved by the Board of Directors on November 14, 2024.
1.1 Basis of presentation and consolidation
The Financial Statements include the accounts of the Corporation and those of its 100% owned subsidiary Nalunaq A/S, company incorporated under the Greenland Public Companies Act. The Financial Statements also include the Corporation's 51% equity share of Gardaq A/S, a joint venture with GCAM LP (Note 3).
The Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. The Financial Statements have been prepared under the historical cost convention.
The Financial Statements should be read in conjunction with the audited annual financial statements for the year ended December 31, 2023, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies, methods of computation and presentation applied in these Financial Statements are consistent with those of the previous financial year ended December 31, 2023.
2. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS
The preparation of the Financial Statements requires Management to make judgments and form assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and reported amounts of expenses during the reporting period. On an ongoing basis, Management evaluates its judgments in relation to assets, liabilities and expenses. Management uses past experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments. Actual outcomes may differ from these estimates under different assumptions and conditions.
In preparing the Financial Statements, the significant judgements made by Management in applying the Corporation accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Corporation's audited annual financial statements for the year ended December 31, 2023.
3. INVESTMENT IN AN ASSOCIATE OR JOINT VENTURE CORPORATION
The following tables summarize the unaudited financial information of Gardaq A/S.
3. INVESTMENT IN AN ASSOCIATE OR JOINT VENTURE CORPORATION (CONT'd)
3.1 Financial Asset – Related Party
Subject to a Subscription and Shareholder Agreement dated 13 April 2023, the Corporation undertakes to subscribe to two ordinary shares in Gardaq (the “Amaroq shares”) at a subscription price of GBP 5,000,000 no later than 10 business days after the third anniversary of the completion of the subscription agreement.
Amaroq's subscription will be completed by the conversion of Gardaq's related party balance into equity shares. Gardaq's related party payable balance consists of overhead, management, general and administrative expenses payable to the Corporation. In the event that the related party payable balance is less than GBP 5,000,000, the Corporation shall, no later than 10 business days after the third anniversary of Completion:
(a) subscribe to one Amaroq share by conversion of the amount payable to the Corporation,
(b) subscribe to one Amaroq share at a subscription price equal to GBP 5,000,000 less the amount payable to the Corporation
In the event that the amount payable to the Corporation exceeds GBP 5,000,000, the Corporation shall subscribe to the Amaroq shares at a subscription price equal to GBP 5,000,000 by conversion of GBP 5,000,000 of the amount due from Gardaq. Gardaq shall not be liable to repay any of the balance payable to the Corporation that exceeds GBP 5,000,000 (equivalent to CAD 9,048,791 as at 30 September 2024). See note 13.1.
During the nine-month period ended 30 September 2024, the Corporation determined that the financial asset should be reclassified to the non-current asset category since the amount will be settled during April 2026. As a result, an amount of $5,762,187 has been reclassified to non-current assets as at 30 September 2024 ($3,521,938 reclassified as at 31 December 2023).
4. MINERAL PROPERTIES
4. MINERAL PROPERTIES (CONT'd)
5. CAPITAL ASSETS
5. CAPITAL ASSETS ( CONT'd )
Depreciation of capital assets related to exploration and evaluation properties is being recorded in exploration and evaluation expenses in the consolidated statement of comprehensive loss, under depreciation. Depreciation of $556,632 ($478,519 for the nine months ended September 30, 2023) was expensed as exploration and evaluation expenses during the nine months ended September 30, 2024.
As at September 30, 2024, the Corporation had capital commitments, of $25,532,115. These commitments relate to the development of Nalunaq Project, rehabilitation of the Nalunaq mine, construction of processing plant, purchases of mobile equipment and establishment of surface infrastructure.
During the first nine months of 2024 the Corporation capitalised borrowing costs of $4,263,933 to construction in progress, which are included in additions.
6. CONVERTIBLE NOTES AND LOAN PAYABLE
6. CONVERTIBLE NOTES AND LOAN PAYABLE (CONT'd)
6.1 Revolving Credit Facility
A $25 million (US$18.5 million) Revolving Credit Facility (“RCF”) was entered into with Landsbankinn hf. and Fossar Investment Bank on September 1, 2023, with a two-year term expiring on September 1, 2025 and priced at the Secured Overnight Financing Rate (“SOFR”) plus 950bps. Interest is capitalized and payable at the end of the term.
The RCF is denominated in US Dollars and the SOFR interest rate is determined with reference to the CME Term SOFR Rates published by CME Group Inc. The RCF carries (i) a commitment fee of 0.40% per annum calculated on the undrawn facility amount and (ii) an arrangement fee of 2.00% on the facility amount where 1.5% has been paid on the closing date of the facility and 0.50% was paid at the first draw down. The facility is not convertible into any securities of the Corporation.
The facility is secured by (i) a bank account pledge from the Corporation and Nalunaq A/S, (ii) share pledges over all current and future acquired shares in Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to the terms of share pledge agreements, (iii) a proceeds loan assignment agreement, (iv) a pledge agreement in respect of owner's mortgage deeds and (v) a licence transfer agreement. During September 2024, the Corporation has drawn on this facility and the loan payable amount as of September 30, 2024, is $25,069,002.
This facility will be replaced by the new revolving credit facilities that are expected to be finalized subsequent to the interim financial reporting date (see note 6.4).
6. CONVERTIBLE NOTES AND LOAN PAYABLE (CONT'd)
6.2 Convertible notes
Convertible notes represent $30.4 million (US$22.4 million) notes issued to ECAM LP (US$16 million), JLE Property Ltd. (US$4 million) and Livermore Partners LLC (US$2.4 million) on September 1, 2023 with a four-year term and a fixed interest rate of 5%. The conversion price of $0.90 per common share is the closing Canadian market price of the Amaroq shares on the day, prior to the closing day of the Debt Financing.
The convertible notes are denominated in US Dollars and will mature on September 30, 2027, being the date that is four years from the convertible note offering closing date. The principal amount of the convertible notes will be convertible, in whole or in part, at any time from one month after issuance into common shares of the Corporation ("Common Shares") at a conversion price of $0.90 (£0.525) per Common Share for a total of up to 33,629,068 Common Shares. The Corporation may repay the convertible notes and accrued interest at any time, in cash, subject to providing 30 days' notice to the relevant noteholders, with such noteholders having the option to convert such convertible notes into Common Shares at the conversion price up to 5 days prior to the redemption date. If the Corporation chooses to redeem some but not all of the outstanding convertible notes, the Corporation shall redeem a pro rata share of each noteholder's holding of convertible notes. The Corporation shall pay a commitment fee to the holders of the convertible notes of, in aggregate, $5,511,293 (US$4,484,032), which shall be paid pro rata to each noteholder's holding of convertible notes. The commitment fee is payable on the earlier of (a) the date falling 20 business days after all amounts outstanding under the Bank Revolving Credit Facility have been repaid in full, but no earlier than the date that is 24 months after the date of issuance of the notes; and (b) the date falling 30 (thirty) months after the date of the subscription agreement in respect of the notes, irrespective of whether or not notes have converted at that date or been repaid.
The convertible notes will be secured by (i) bank account pledge agreements from the Corporation and Nalunaq A/S, (ii) share pledges over all current and future acquired shares in Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to the terms of share pledge agreements, (iii) a proceeds loan assignment agreement, (iv) a pledge agreement in respect of owner's mortgage deeds and (v) a licence transfer agreement.
The convertible notes represent hybrid financial instruments with embedded derivatives requiring separation. The debt host portion (the “Host”) of the instrument is initially recognised at fair value and subsequently measured at amortized cost, whereas the aggregate conversion and repayment options (the “Embedded Derivatives”) are classified at fair value through profit and loss (FVTPL).
The fair value of the convertible notes at inception was recognized at $30.4 million (US$22.4 million) and $19.4 million (US$14.3 million) embedded derivative component was isolated and determined using a Black Scholes valuation model which required the use of significant unobservable inputs. As of September 30, 2024, the Corporation identified the fair value of embedded derivative associated with the early conversion option to be $22.3 million ($24.0 million as of December 31, 2023). The change in fair value of embedded derivative in the period from January 1, 2024 to September 30, 2024 has been recognized in the consolidated statement of comprehensive loss. The Host liability component at inception, before deducting transaction costs, was recognized to be the residual amount of $10.9 million (US$8.1 million) which is subsequently measured at amortized cost. Transaction costs incurred on the issuance of the convertible note amounted to $1,004,030, of which $362,502 was allocated to, and deducted from, the host liability component, and $641,528 was allocated to the embedded derivative component and charged to profit and loss.
Amendments and conversion of these convertible notes were concluded subsequently to the interim financial reporting date (see note 6.4).
6. CONVERTIBLE NOTES AND LOAN PAYABLE (CONT'D)
6.3 Cost Overrun Facility
$13.5 million (US$10 million) Revolving Cost Overrun Facility was entered into with JLE Property Ltd. on September 1, 2023, on the same terms as the Bank Revolving Credit Facility.
The Overrun Facility is denominated in US Dollars with a two-year term, expiring on September 1, 2025, and will bear interest at the CME Term SOFR Rates by CME Group Inc. and have a margin of 9.5% per annum. The Overrun Facility carries a stand-by fee of 2.5% on the amount of committed funds. The Overrun Facility is not convertible into any securities of the Corporation.
The Overrun Facility will be secured by (i) bank account pledge agreements from the Corporation and Nalunaq A/S, (ii) share pledges over all current and future acquired shares in Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to the terms of share pledge agreements, (iii) a proceeds loan assignment agreement, (iv) a pledge agreement in respect of owner's mortgage deeds and (v) a licence transfer agreement. The Corporation has not yet drawn on this facility.
This facility will be replaced by the new revolving credit facilities that are expected to be finalized subsequent to the interim financial reporting date (see note 6.4).
6.4 US$35 million Revolving Credit Facility Heads of Terms
On July 2, 2024, the Corporation announced that it agreed a Head of Terms, subject to final approval and documentation, with Landsbankinn for US$35 million in three Revolving Credit Facilities, securing a substantial increase and extension to its existing debt facilities.
7. LEASE LIABILITIES
The Corporation has two leases for its offices. In October 2020, the Corporation started a lease for five years and five months including five free rent months during this period. The monthly rent is $8,825 until March 2024 and $9,070 for the balance of the lease. The Corporation has the option to renew the lease for an additional five-year period at $9,070 monthly rent indexed annually to the increase of the consumer price index of the previous year for the Montreal area. In March 2024, the Corporation started a new lease for a two-year term with the option to extend for two more years. The monthly rent is $5,825 until March 2025 after which the monthly rent may increase as per the lease terms.
7.1 Right of use asset
8. SHARE CAPITAL
On February 23, 2024, the Corporation successfully completed its oversubscribed fundraising which resulted in a total of 62,724,758 new common shares being placed with new and existing institutional investors at a placing price of 74 pence (CAD $1.25 at the closing exchange rate on 9 February 2024). The placing price represents a 5.7% premium to the closing share price on 9 February 2024 on the AIM exchange. The fundraising consisted of:
As a result of the subscription, net proceeds of approximately GBP 44 million (CAD 75.6 million) have been raised, exceeding the initial targeted amount of GBP 30 million. The shares subscribed to were credited as fully paid and rank pari passu in all respects with the existing common shares of the Corporation.
9. STOCK-BASED COMPENSATION
9.1 Stock options
An incentive stock option plan (the “Plan”) was approved initially in 2017 and renewed by shareholders on June 14, 2024. The Plan is a “rolling” plan whereby a maximum of 10% of the issued shares at the time of the grant are reserved for issue under the Plan to executive officers, directors, employees and consultants. The Board of directors attributes that the stock options and the exercise price of the options shall not be less than the closing price on the last trading day, preceding the grant date. The options have a maximum term of ten years. Options granted pursuant to the Plan shall vest and become exercisable at such time or times as may be determined by the Board, except options granted to consultants providing investor relations activities shall vest in stages over a 12-month period with a maximum of one-quarter of the options vesting in any three-month period. The Corporation has no legal or constructive obligation to repurchase or settle the options in cash.
On May 14, 2024, and June 3, 2024, the Corporation granted its employees 22,988 stock options with an exercise price ranging from $1.30 to $1.31 per share. The stock options vested 100% at the grant date. The options were granted at an exercise price equal to the closing market price of the shares the day prior to the grant. Total stock-based compensation costs amounted to $18,163 for an estimated fair value of $0.72 per share.
On January 5, 2024, a former director of the Corporation exercised his options. As a result, 150,000 options were exercised which resulted in the former director receiving 60,637 shares net of applicable withholdings. On May 23, 2024, the former Chief Financial Officer (“CFO”) of the Corporation exercised his options. As a result, 1,800,000 options were exercised which resulted in the former CFO receiving 963,281 shares net of applicable withholdings.On October 9, 2024, an employee of the Corporation exercised his options. As a result, 31,278 options were exercised which resulted in the employee receiving 11,090 shares net of applicable withholdings
9. STOCK-BASED COMPENSATION (CONT'd)
Changes in stock options are as follows:
Stock options outstanding and exercisable as at September 30, 2024 are as follows:
9.2 Restricted Share Unit
9.2.1 Description
Conditional awards were made in 2022 that give participants the opportunity to earn restricted share unit awards under the Corporation's Restricted Share Unit Plan (“RSU Plan”) subject to the generation of shareholder value over a four-year performance period.
The awards are designed to align the interests of the Corporation's employees and shareholders, by incentivising the delivery of exceptional shareholder returns over the long-term. Participants receive a 10% share of a pool which is defined by the total shareholder value created above a 10% per annum compound hurdle.
The awards comprise three tranches, based on performance measured from January 1, 2022, to the following three measurement dates:
9. STOCK-BASED COMPENSATION (CONT'd)
Restricted share unit awards granted under the RSU Plan as a result of achievement of the total shareholder return performance conditions are subject to continued service, with vesting as follows:
The maximum term of the awards is therefore four years from grant.
The Corporation's starting market capitalization is based on a fixed share price of $0.552. Value created by share price growth and dividends paid at each measurement date will be calculated with reference to the average closing share price over the three months ending on that date.
9.2.2 RSU Plan Amendment
The RSU Plan was amended by a shareholders General Meeting on June 15, 2023. As a result of the amendment the number of shares that could be issued under the RSU Plan to satisfy the conditional awards and other share awards was increased from 10% of a fixed share capital amount of 177,098,740 shares to 10% of share capital at the time of award, amounting to 10% of 263,073,022 shares, reduced by the number of outstanding options at each calculation date. As a result, an additional expense based on the difference between the fair value of the conditional awards before and after the modification will be recognised over the service period. The incremental fair value was determined and incorporated info the valuation in 9.2.4.
9. STOCK-BASED COMPENSATION (CONT'd)
9.2.3 New Conditional Award under RSU Plan
On October 13, 2023, Amaroq made an award (the “Award”) under the RSU Plan as detailed below. The Award consists of a conditional right to receive value if the future performance targets, applicable to the Award, are met. Any value to which the participants are eligible in respect of the Award will be granted as Restricted Share Units (each an “RSU”), with each RSU entitling a participant to receive common shares in the Corporation. Each RSU will be granted under, and governed in accordance with, the rules of the Corporation's Restricted Share Unit Plan.
On August 14, 2024, Amaroq made an award (the “Award”) under the RSU Plan as detailed below. The Award consists of a conditional right to receive value if the future performance targets, applicable to the Award, are met. Any value to which the participants are eligible in respect of the Award will be granted as Restricted Share Units (each an “RSU”), with each RSU entitling a participant to receive common shares in the Corporation. Each RSU will be granted under, and governed in accordance with, the rules of the Corporation's Restricted Share Unit Plan.
9. STOCK-BASED COMPENSATION (CONT'd)
9 .2.4 Valuation
The fair value of the award granted in December 2022 and modified June 2023, in addition to the award granted October 13, 2023, increased to $7,378,000 based on 90% of the available pool being awarded.
During June 2024, some of the awards were forfeited due to the departure of Jaco Crouse, CFO of the Corporation, effective June 3, 2024 (see note 9.2.5). As a result of the departure, previously recognised RSU award vesting charges of $566,875 were reversed and the percentage of the pool that was allocated was reduced to 70%.
During August 2024, new awards granted to the CFO increased the percentage of the pool that was allocated to 82%.
A charge of $610,654 and $1,328,904 was recorded during the three and nine months ended September 30, 2024 respectively, including the reduction of $566,875 of previously recognized RSU vesting charges which were reversed during the period as a result of the forfeiture of the RSU awards (a charge of $449,000 and $1,347,000 was recorded during the three and nine months ended September 30, 2023).
The fair value was obtained through the use of a Monte Carlo simulation model which calculates a fair value based on a large number of randomly generated projections of the Corporation's share price.
Expected volatility was determined from the daily share price volatility over a historical period prior to the date of grant with length commensurate with the expected life. A zero-dividend yield has been used based on the dividend yield as at the date of grant.
9. STOCK-BASED COMPENSATION (CONT'd)
9 .2.5 Awards under Restricted Share Unit Plan (the “RSU”)
On February 23, 2024, in alignment with the Company's RSU plan dated 15 June 2023, the Company granted an award (the “Award”) to directors and employees of the Company as listed below.
The shares awarded under the RSU to Jaco Crouse, CFO, have been forfeited as a result of his departure effective June 3, 2024.
10 . EXPLORATION AND EVALUATION EXPENSES (RECOVERY)
11. GENERAL AND ADMINISTRATION
12. FINANCE COSTS
13. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
13.1 Gardaq Joint Venture
As at September 30, 2024, the balance receivable from Gardaq amounted to $5,762,187 ($3,521,938 as at December 31, 2023). This receivable balance represents allocated overhead and general administration costs to manage the exploration work programmes and day-to-day activities of the joint venture. This balance will be converted to shares in Gardaq within 10 business days after the third anniversary of the completion of the Subscription and Shareholder Agreement dated April 13, 2023 (See note 3.1).
13. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION (CONT'd)
13.2 Key Management Compensation
The Corporation's key management are the members of the board of directors, the President and Chief Executive Officer, the Chief Financial Officer, the Vice President Exploration, and the Executive Vice President. Key management compensation is as follows:
14. NET EARNINGS (LOSS) PER COMMON SHARE
The calculation of net loss per share is shown in the table below.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Corporation is exposed to various risks through its financial instruments. The following analysis provides a summary of the Corporation's exposure to and concentrations of risk at September 30, 2024:
15.1 Credit Risk
Credit risk is the risk that one party to a financial instrument will cause financial loss for the other party by failing to discharge an obligation. The Corporation's main credit risk relates to its prepaid amounts to suppliers for placing orders, manufacturing and delivery of process plant equipment, as well as an advance payment to a mining contractor. The Corporation performed expected credit loss assessment and assessed the amounts to be fully recoverable.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT'd)
15.2 Fair Value
Financial assets and liabilities recognized or disclosed at fair value are classified in the fair value hierarchy based upon the nature of the inputs used in the determination of fair value. The levels of the fair value hierarchy are:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)
• Level 3 - Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs)
The following table summarizes the carrying value of the Corporation's financial instruments:
Due to the short-term maturities of cash, prepaid expenses, and accounts payable and accrued liabilities, the carrying amounts of these financial instruments approximate fair value at the respective balance sheet date.
The carrying value of the convertible note instrument approximates its fair value at maturity and includes the embedded derivative associated with the early conversion option and the host liability at amortized cost.
The carrying value of the loan payable approximate its fair value.
The carrying value of lease liabilities approximate its fair value based upon a discounted cash flows method using a discount rate that reflects the Corporation's borrowing rate at the end of the period.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT'd)
15.3 Liquidity Risk
Liquidity risk is the risk that the Corporation will encounter difficulty in meeting obligations associated with financial liabilities. The Corporation seeks to ensure that it has sufficient capital to meet short-term financial obligations after taking into account its exploration and operating obligations and cash on hand. The Corporation is currently negotiating new Head of Terms with Landsbankinn in order to fund general and administrative costs, exploration and evaluation costs and Nalunaq project development costs. The Corporation's options to enhance liquidity include the issuance of new equity instruments or debt.
The following table summarizes the carrying amounts and contractual maturities of financial liabilities:
The Corporation has assessed that it is not exposed to significant liquidity risk due to its cash balance in the amount of $25,937,983 at the period end and to the subsequent conversion of the convertible note into shares of the Corporation (see note 16).
16. SUBSEQUENT EVENTS
Amendments and c onversion of c onvertible n otes
On October 4, 2024, the Corporation entered into an agreement with the holders of its US $22.4M convertible notes, due in 2027, to convert the notes into new common shares in order to simplify the Corporation's capital structure, reduce cash interest costs and permit future financial flexibility.
The Corporation has amended the convertible notes to permit the payment of the outstanding interest and commitment fees in common shares of the Corporation at a conversion price equal to the closing price of the common shares on the TSX-V on the trading day immediately prior to such conversion. These amendments were approved by the TSX-V on October 14, 2024.
The holders of the convertible notes have elected to convert all of the outstanding principal of the convertible notes into 33,629,068 Common Shares (the “Principal Conversion Shares”) at a conversion price of CAD 0.90 (£0.525) per Principal Conversion Share and all of the outstanding interest of the convertible notes in 1,293,356 Common Shares (the “Interest Conversion Shares”) at a conversion price of CAD $1.3 (£0.73) per Interest Conversion Share. The Corporation and the holders of the convertible notes also agreed to make 70% of the total amount of the outstanding commitment fee immediately payable. The holders of the convertible notes have elected to convert such commitment fee payable into 3,307,502 Common Shares (the “Commitment Fee Conversion Shares”) in aggregate, at a conversion price of CAD $1.3 (£0.73) per Commitment Fee Conversion Share.
Following the consent of the TSX-V, and their approval of the amendments to the convertible notes, the 33,629,068 Principal Conversion Shares, 1,293,356 Interest Conversion Shares and 3,307,502 Commitment Fee Conversion Shares were admitted to trading on AIM, and TSX-V and Nasdaq Iceland's main market.
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