The following discussion and analysis should be read in conjunction with our
condensed interim consolidated financial statements for the three months ended
August 31, 2021, and the related notes thereto, which have been prepared in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP"). This discussion and analysis contains forward-looking statements
and forward-looking information that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated in
these forward-looking statements and information as a result of many factors.
See section heading "Note Regarding Forward-Looking Statements" below. All
currency amounts are stated in Canadian dollars unless noted otherwise.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING ESTIMATES OF MEASURED, INDICATED AND
INFERRED RESOURCES AND PROVEN AND PROBABLE RESERVES
Corvus Gold Inc. ("we", "us", "our," "Corvus" or the "Company") is a mineral
exploration company engaged in the acquisition and exploration of mineral
properties. The mineral estimates in the two technical reports entitled
"Technical Report and Preliminary Economic Assessment for Gravity Milling and
Heap Leach Processing at the North Bullfrog Project, Bullfrog Mining District,
Nye County, Nevada", dated November 21, 2020 with an effective date of October
7, 2020 (the "NBP Technical Report"), and "Technical Report and Preliminary
Economic Assessment for BIOX Mill and Heap Leach Processing at the Mother Lode
Project, Bullfrog Mining District, Nye County, Nevada" dated November 21, 2020
with an effective date of October 7, 2020 (the "ML Technical Report" and
together with the NBP Technical Report, the "Technical Reports") referenced in
this Quarterly Report on Form 10-Q have been prepared in accordance with the
requirements of the securities laws in effect in Canada, which differ from the
requirements of United States securities laws. As used in the Technical Reports
referenced in this Quarterly Report on Form 10-Q, the terms "Mineral Reserve",
"Proven Mineral Reserve" and "Probable Mineral Reserve" are Canadian mining
terms as defined in accordance with Canadian National Instrument 43-101
"Standards of Disclosure for Mineral Projects" ("NI 43-101") and the Canadian
Institute of Mining, Metallurgy and Petroleum (the "CIM") Definition Standards
on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as
amended.
These definitions differ materially from the definitions in the United States
Securities and Exchange Commission ("SEC") Industry Guide 7 ("SEC Industry Guide
7"). Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility
study is required to report reserves, the three-year historical average price is
used in any reserve or cash flow analysis to designate reserves, and the primary
environmental analysis or report must be filed with the appropriate governmental
authority.
In addition, the terms "Mineral Resource", "Measured Mineral Resource",
"Indicated Mineral Resource" and "Inferred Mineral Resource" are defined in and
required to be disclosed by NI 43-101; however, these terms are not defined
terms under SEC Industry Guide 7 and are normally not permitted to be used in
reports and registration statements filed with the SEC. Investors are cautioned
not to assume that all or any part of a mineral deposit in these categories will
ever be converted into reserves. Under Canadian rules, Inferred Mineral
Resources can only be used in economic studies as provided under CIM Standards.
Under Canadian rules, estimates of Inferred Mineral Resources may not form the
basis of feasibility or pre-feasibility studies, except in rare cases. Investors
are cautioned not to assume that all or any part of an Inferred Mineral Resource
is economically or legally mineable. An "Inferred Mineral Resource" is that part
of a mineral resource for which quantity and grade or quality are estimated on
the basis of limited geological evidence and sampling. Geological evidence is
sufficient to imply but not verify geological and grade or quality continuity.
An Inferred Mineral Resource has a lower level of confidence than that applying
to an Indicated Mineral Resource and must not be converted to a Mineral Reserve.
It is reasonably expected that the majority of Inferred Mineral Resources could
be upgraded to Indicated Mineral Resources with continued exploration.
Disclosure of "contained ounces" in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report
mineralization that does not constitute "reserves" by SEC standards as in place
tonnage and grade without reference to unit measures.
Accordingly, information contained in this report and the Technical Reports
referenced in this report contain descriptions of our mineral deposits that may
not be comparable to similar information made public by U.S. companies reporting
under SEC Industry Guide 7 requirements.
The SEC has adopted amendments to its disclosure rules to modernize the mineral
property disclosure requirements for issuers whose securities are registered
with the SEC. These amendments became effective February 25, 2019 (the "SEC
Modernization Rules") and, following a two-year transition period, the SEC
Modernization Rules will replace the historical property disclosure requirements
for mining registrants that are included in SEC Industry Guide 7. The Company is
not required to provide disclosure on its mineral properties under the SEC
Modernization Rules until its annual report for the fiscal year ending May 31,
2022. Under the SEC Modernization Rules, the definitions of "Proven Mineral
Reserves" and "Probable Mineral Reserves" have been amended to be substantially
similar to the corresponding CIM Definition Standards and the SEC has added
definitions to recognize "Measured Mineral Resources", "Indicated Mineral
Resources" and "Inferred Mineral Resources" which are also substantially similar
to the corresponding CIM Definition Standards; however there are differences in
the definitions under the SEC Modernization Rules and the CIM Definition
Standards and therefore once the Company begins reporting under the SEC
Modernization Rules there is no assurance that the Company's Mineral Reserve and
Mineral Resource estimates will be the same as those reported under CIM
Definition Standards as contained in this report.
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CAUTIONARY NOTE TO ALL INVESTORS CONCERNING ECONOMIC ASSESSMENTS THAT INCLUDE
INFERRED RESOURCES
The Company currently holds or has the right to acquire interests in advanced
stage exploration projects in Nye County, Nevada referred to as the North
Bullfrog Project (the "NBP") and the Mother Lode Project ("MLP" or "Mother
Lode"). Mineral resources that are not mineral reserves have no demonstrated
economic viability. The preliminary economic assessments included in the
Technical Reports on the NBP and on the MLP are preliminary in nature and
include Inferred Mineral Resources that have a great amount of uncertainty as to
their existence, and are considered too speculative geologically to have
economic considerations applied to them that would enable them to be categorized
as Mineral Reserves. It cannot be assumed that all, or any part, of an Inferred
Mineral Resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of Inferred Mineral Resources may not form the basis of
feasibility or pre-feasibility studies. There is no certainty that such Inferred
Mineral Resources at the NBP or at the MLP will ever be realized. Mineral
Resources that are not Mineral Reserves do not have demonstrated economic
viability. Investors are cautioned not to assume that all or any part of an
Inferred Mineral Resource exists or is economically or legally mineable. Readers
should refer to the Technical Reports for additional information.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and the exhibits attached hereto contain
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995, as amended, and "forward-looking
information" within the meaning of applicable Canadian securities legislation,
collectively "forward-looking statements". Such forward-looking statements
concern our anticipated results and developments in the operations of the
Company in future periods, planned exploration activities, the adequacy of the
Company's financial resources and other events or conditions that may occur in
the future. Forward-looking statements are frequently, but not always,
identified by words such as "expects," "anticipates," "believes," "intends,"
"estimates," "potential," "possible" and similar expressions, or statements that
events, conditions or results "will," "may," "could" or "should" (or the
negative and grammatical variations of any of these terms) occur or be achieved.
These forward-looking statements may include, but are not limited to, statements
concerning:
? the Company's strategies and objectives, both generally and in respect of its
specific mineral properties;
? the results of the preliminary economic assessment ("PEA") on each of NBP and
MLP;
? the timing of decisions regarding the timing and costs of exploration programs
with respect to, and the issuance of the necessary permits and authorizations
required for, the Company's exploration programs, including for the NBP and
the MLP;
? the Company's estimates of the quality and quantity of the Mineral Resources
at its mineral properties;
? the timing and cost of planned exploration programs of the Company, and the
timing of the receipt of results therefrom;
? the Company's future cash requirements and use of proceeds of sales;
? general business and economic conditions;
? the Company's ability to meet its financial obligations as they come due, and
the ability to raise the necessary funds to continue operations;
? the Company's expectation that it will be able to add additional mineral
projects of merit to its assets;
? the potential for the existence or location of additional high-grade veins at
the NBP, or high-grade mineralization at the MLP;
? the potential to expand Company's existing deposits and discover new deposits;
? the potential for any delineation of higher grade mineralization at the NBP or
MLP;
? the potential for there to be one or more additional vein zone(s);
? the potential discovery and delineation of mineral deposits/resources/reserves
and any expansion thereof beyond the current estimate;
? the potential for the NBP or the MLP mineralization systems to continue to
grow and/or to develop into a major new higher-grade, bulk tonnage, Nevada
gold discovery;
? the Company's expectation that it will be able to build itself into a
non-operator gold producer with significant carried interests and royalty
exposure;
? that the Company will operate at a loss;
? that the Company will need to scale back anticipated costs and activities or
raise additional funds;
? that the Company will have to raise substantial additional capital to
accomplish its business plan over the next couple of years;
19
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? the estimated reclamation and asset retirement costs;
? the plans related to the potential development of the MLP and the NBP; and
? the NBP and MLP work plans and mine development plans/programs.
Such forward-looking statements reflect the Company's current views with respect
to future events and are subject to certain known and unknown risks,
uncertainties and assumptions. Many factors could cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements that may be expressed or implied by such
forward-looking statements, including, among others, risks related to:
? risks related to the evolving novel coronavirus ("COVID-19") pandemic and
health crisis and the governmental and regulatory actions taken in response
thereto;
? our requirement of significant additional capital and our ability to raise
such additional capital on favourable terms;
? our limited operating history;
? our history of losses;
? cost increases for our exploration and, if warranted, development projects;
? our properties being in the exploration stage;
? mineral exploration and production activities;
? our lack of mineral production from our properties;
? estimates of Mineral Resources;
? changes in Mineral Resource estimates;
? differences in United States and Canadian Mineral Reserve and Mineral Resource
reporting;
? our exploration activities being unsuccessful;
? fluctuations in gold, silver and other metal prices;
? our ability to obtain permits and licenses for production;
? government and environmental regulations that may increase our costs of doing
business or restrict our operations;
? proposed legislation that may significantly affect the mining industry;
? land reclamation requirements;
? competition in the mining industry;
? equipment and supply shortages;
? tax issues;
? current and future joint ventures and partnerships;
? our ability to attract qualified management;
? the ability to enforce judgment against certain of our directors;
? currency fluctuations;
? claims on the title to our properties;
? surface access on our properties;
? potential future litigation;
? our lack of insurance covering all our operations;
? our status as a "passive foreign investment company" under US federal tax
code;
? the common shares of the Company (the "Common Shares");
? the arrangement transaction with AngloGold Ashanti Limited; and
? events such as war, terrorism, natural disaster or outbreaks of disease
(including COVID-19).
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein. This list is not exhaustive of the factors that may
affect any of the Company's forward-looking statements. Forward-looking
statements are statements about the future and are inherently uncertain, and
actual achievements of the Company or other future events or conditions may
differ materially from those reflected in the forward-looking statements due to
a variety of risks, uncertainties and other factors, including without
limitation those discussed in Part I, Item 1A, Risk Factors, of our Annual
Report on Form 10-K, as filed with the SEC on August 9, 2021, which are
incorporated herein by reference, as well as other factors described elsewhere
in this report and the Company's other reports filed with the SEC.
The Company's forward-looking statements contained in this Quarterly Report on
Form 10-Q are based on the beliefs, expectations and opinions of management as
of the date of this report. The Company does not assume any obligation to update
forward-looking statements if circumstances or management's beliefs,
expectations or opinions should change, except as required by law. For the
reasons set forth above, investors should not attribute undue certainty to or
place undue reliance on forward-looking statements.
20
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Current Business Activities
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General
The Company's material mineral properties are the NBP and the MLP, advanced
exploration stage projects in Nevada which have a number of high-priority, bulk
tonnage and high-grade vein targets (held through Corvus Nevada, a Nevada
subsidiary). While exploring the NBP, the Company acquired the MLP in June 2017,
which is located approximately 19 km to the south east of the NBP. The MLP was
mined in the late 1980s and has substantial gold mineralization remaining
unexploited extending to the north of the existing open pit mine. Exploration
drilling and surface mapping have revealed that other exploration targets on the
Corvus property in the Mother Lode area contain gold mineralization and are
therefore being actively explored.
The primary focus of the Company will be to leverage its exploration expertise
to expand its existing deposits and discover major new gold deposits. Other than
with respect to the ongoing exploration of the MLP and NBP, the Company's
strategy is to leverage its other non-core assets by maintaining a retained
royalty.
Highlights of activities during the period and to the date of this MD&A include:
AngloGold Ashanti Transaction
On September 13, 2021, the Company announced that the Company and AngloGold
Ashanti Limited ("AngloGold Ashanti") entered into a definitive arrangement
agreement pursuant to which AngloGold Ashanti has agreed to acquire the
remaining 80.5% of Common Shares not already owned by AngloGold Ashanti at a
price of $4.10 per Common Share in cash (the "Transaction").
The Transaction will be subject to the approval of: (a) 66 2/3% of the votes
cast by (i) the holders of Common Shares, including votes attached to Common
Shares held by AngloGold Ashanti, present in person or represented by proxy at
the special meeting relating to the Transaction; and (ii) the Shareholders and
the holders of options, voting together as a single class, present in person or
represented by proxy at the special meeting relating to the Transaction; and (b)
a simple majority of the votes cast by the Shareholders present in person or
represented by proxy at the special meeting relating to the Transaction,
excluding votes attached to Common Shares held by AngloGold Ashanti and its
affiliates and any other person as required to be excluded under section 8.1(2)
of Multilateral Instrument 61-101 - Protection of Minority Security Holders in
Special Transactions. In addition to securityholder approval, the Transaction
is subject to the receipt of court approval and other customary closing
conditions for transactions of this nature.
NBP and MLP Project Exploration
? Drilling during the period was performed at Mother Lode and at the Lynnda
Strip. A total of eight RC drill holes were completed during the period
totaling 2,800 metres.
? Corvus NBP project continued to conduct baseline studies and prepare permit
applications.
? Water quality sampling continues at the North Bullfrog project in support of
ongoing mine permitting work.
? NBP hydrogeologic testing continues in support of ongoing mine permitting.
Nevada Properties
NBP and MLP
Our principal mineral properties are the NBP and the MLP, which form two
separate gold exploration projects (the "NBP" and the "MLP") located in
northwestern Nye County, Nevada, in the Northern Bullfrog Hills and Bare
Mountains to the east, north and west of the town of Beatty. Neither, the NBP
nor the MLP have any known proven or probable reserves under SEC Industry Guide
7 or NI 43-101, and the projects are exploratory in nature. The Technical
Reports are available under Corvus' SEDAR profile at www.sedar.com and EDGAR
profile at www.sec.gov, and describe the two properties as separate mining
operations. The Technical Reports are referred to herein for informational
purposes only and are not incorporated herein by reference. The Technical
Reports contain disclosure regarding Mineral Resources at both projects that are
not SEC Industry Guide 7 compliant proven or probable reserves. See "Cautionary
Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred
Resources and Proven and Probable Reserves" above.
The following disclosure is derived, in part, and supported by the Technical
Reports and includes updates on the properties subsequent to the date of the
Technical Reports.
The NBP and the MLP are located in the Bullfrog Hills and Bare Mountains of
northwestern Nye County, Nevada (Figure 1). Together, the NBP and the MLP cover
approximately 129 square kilometers (12,895 hectares) of patented and unpatented
mining claims in sections 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31,
32, 33, 34, 35, and 36 of T10S, R46E; sections 1, 2, 3, 4, 5, 6, 10, 11, 12, 13,
14, 15, 23, 24, 25, 26, 34 and 35 of T11S, R46E; sections 2, 3, 4, 5, 6, 7, 8,
9, 10, and 18 of T12S R46E; sections 19, 30, 31, and 32 of T10S, R47E; sections
4, 5, 6, 7, 8, 9, 10, 11, 14, 15, 16, 17, 18, 22, 23, 26, 27, 34, 35 and 36 of
T11S, R47E; sections 1, 2, 3, 4, 8, 9, 10, 11, 12 and 13 of T12S R47E; sections
4, 9, 10, 15, 22, 27, 31, 32, 33 and 34 of T11S R48E; and sections 4, 5, 6, 7,
8, 9, 16, 17 and 18 of T12S R48E of MDBM. The total number of federal lode
claims is 1601. Corvus has total of nine option/lease agreements in place that
give us control of private land based on an aggregate of 51 historical patented
lode claims (see Private Lands in Figure 1). Corvus Nevada owns an additional
private land based on five historical patented claims (the Millman claims) and a
430 acre property with 1600 acre-feet of water rights located north of NBP in
the Sarcobatus hydrographic basin (Basin 146).
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[[Image Removed: figure1.jpg]]
Figure 1 - Property Map showing the Location of the NBP and the MLP with respect
to the town of Beatty, NV.
Studies at the NBP and MLP have been focused on the potential to develop
separate mining and processing operations at each site. Technical Reports
describing the conceptual mining and processing operations at each location were
completed on November 21, 2020 and are available on SEDAR and EDGAR.
NBP Drilling Activities
No exploration drilling was performed at NBP during the period.
Lynnda Strip Drilling Activities
Drilling at the Lynnda Strip project during the quarter has focused on
completing the resource expansion program targeting the east-west extension of
the mineralized zone. (Figure 2). Results from this area continue to outline a
large, relatively high-grade, oxide deposit that now extends over 800 metres in
width and remains open.
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[[Image Removed: figure2.jpg]]
Figure 2 - Map showing location of Lynnda Strip drilling completed this quarter
Mother Lode Project Development
Corvus is progressing with its exploration permit expansion for the greater
Mother Lode and Lynnda Strip projects.
Qualified Person and Quality Control/Quality Assurance
Jeffrey A. Pontius (CPG 11044), a qualified person as defined by NI 43-101, has
supervised the preparation of the scientific and technical information that
forms the basis for the disclosure in this Report on Form 10-Q (other than the
Mother Lode Mineral Resource estimate) and has reviewed and approved the
disclosure herein. Mr. Pontius is not independent of the Company, as he is the
Chief Executive Officer and President and holds common shares and incentive
stock options in Corvus.
Carl E. Brechtel (Colorado PE 23212, Nevada PE 008744 and Registered Member
353000 of SME), a qualified person as defined by NI 43-101, has coordinated
execution of the technical work and has reviewed and approved the disclosure in
this Report on Form 10-Q related thereto. Mr. Brechtel is not independent of the
Company, as he is the Chief Administrative Officer and holds Common Shares and
incentive stock options in Corvus.
The work program at the NBP and the MLP was designed and supervised by Mark
Reischman, Corvus' US Exploration Manager, who is responsible for all aspects of
the work, including the quality control/quality assurance program. On-site
personnel at the project log and track all samples prior to sealing and
shipping. Quality control is monitored by the insertion of blind certified
standard reference materials and blanks into each sample shipment. All resource
sample shipments are sealed and shipped to American Assay Laboratories in Reno,
Nevada, for preparation and assaying.
Assaying for the NBP and the MLP holes has been performed by American Assay
Laboratories ("AAL") in Sparks, Nevada. Corvus has no business relationship with
AAL beyond being a customer for analytical services. The Sparks laboratory is
Standards Council of Canada, Ottawa, Ontario Accredited Laboratory No. 536 and
conforms with requirements of CAN-P-1579, CAN-P-4E (ISO/IEC 17025:2005).
Check assaying has been performed by Bureau Veritas North America ("BV",
formerly Inspectorate America Corporation), in Sparks Nevada and Vancouver,
Canada, and ALS Minerals Laboratories ("ALS Minerals"), in Sparks, Nevada.
Corvus has no business relationship with BV or ALS Minerals beyond being a
customer for analytical services. The BV laboratory is Accredited Laboratory No.
720 and conforms to requirements of CAN-P-1579, CAN-P-4E (ISO 9001:2008) and ALS
is Accredited Laboratory No. 660 and conforms to requirements of CAN-P-1579,
CAN-P-4E (ISO/IEC 17025:2005).
23
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Mr. Scott E. Wilson, CPG (10965), Registered Member of SME (4025107) and
President of Resource Development Associates Inc., is an independent consulting
geologist specializing in Mineral Reserve and Mineral Resource calculation
reporting, mining project analysis and due diligence evaluations. He has acted
as the Qualified Person, as defined in NI 43-101, for the Mineral Resource
estimate and the Technical Reports. Mr. Wilson has over 29 years of experience
in surface mining, resource estimation and strategic mine planning. Mr. Wilson
and Resource Development Associates Inc. are independent of the Company under NI
43-101. Mr. Wilson, a Qualified Person, has verified the data underlying the
information disclosed herein by reviewing the reports of AAL and all procedures
undertaken for QA/QC. All matters were consistent and accurate accordingly to
his professional judgment. There were no limitations on the verification
process.
For additional information on the NBP and MLP, including information relating to
exploration, data verification and the Mineral Resource estimates, see the
Technical Reports, which are available under Corvus' SEDAR profile at
www.sedar.com and EDGAR profile at www.sec.gov. The Technical Reports are
referred to herein for informational purposes only and is not incorporated
herein by reference. The Technical Reports contains disclosure regarding Mineral
Resources that are not Guide 7 compliant proven or probable reserves, see
"Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated
and Inferred Resources and Proven and Probable Reserves" above.
Results of Operations
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Three months ended August 31, 2021 Compared to Three months ended August 31,
2020
For the three months ended August 31, 2021, the Company had a net loss of
$8,119,297 compared to a net loss of $6,510,604 in the comparative period of the
prior year. Included in net loss was $1,171,147 (2020 - $917,040) in stock-based
compensation charges which is a result of stock options granted during the
period and previously granted stock options which vested during the period.
Stock-based compensation in the current period comprised of stock options
granted on November 19, 2018, April 9, 2019, June 13, 2019, February 3, 2020 and
January 15, 2021 which vested during the period. The prior period comparative
had stock-based compensation arising from stock options granted on July 31,
2017, November 19, 2018, April 9, 2019, June 13, 2019, October 11, 2019 and
February 3, 2020 which vested during the comparative period of the prior year.
The increase in loss of $1,608,693 in the three month period of the current year
was due to a combination of factors discussed below.
The primary factor for the increase in the net loss was due to the increase in
wages and benefits of $1,553,967 (2020 - $506,453) which was mainly due to an
increase in 2021 bonuses accrued of $1,029,161 compared to $nil in the
comparative period of the prior year. The 2020 bonuses were recorded in the
second quarter of the prior year. There was an increase in stock-based
compensation charges of $346,135 during the current period compared to $263,320
in the comparative period of the prior year.
Consulting fees increased to $812,162 (2020 - $502,964) mainly due to an
increase in stock-based compensation charges of $542,985 during the current
period compared to $432,741 in the comparative period of the prior year. There
was an increase of in consulting fees paid to the CFO as a result of amendment
to her consulting agreement. Consulting fees further increased due to additional
fees paid to the CFO and Corporate Secretary whereas similar fees were paid in
the second quarter of the prior year. The Board of Directors approved the
accrual of the fees to the Special Committee members effective June 1, 2021,
which amounted to $24,375 in the current period, compared to $nil in the prior
period of the prior year.
Insurance expenses increased to $168,519 (2020 - $62,559) mainly due to an
increase in D&O liability insurance premium due to the Company's listing on the
Nasdaq Capital Market in August 2020.
Investor relations expenses increased to $458,449 (2020 - $316,426) mainly due
to an increase in stock-based compensation charges of $153,211 during the
current period compared to $131,133 in the comparative period of the prior year,
and an increase in investor relations fee for consultants in the current period
whereas similar fees were paid in the second quarter of the prior year. This was
offset by a decrease in the investor relations related travel expenses mainly
due to the global pandemic which has continued to limit in-person investor
relations efforts.
Travel expenses increased to $85,530 (2020 - $15,476) mainly due to the
Company's management and Board of Directors attending the bell ringing ceremony
for the Nasdaq Capital Market in August of 2021 compared to no travel in the
comparative period of the prior year due to the Global Pandemic.
Professional fees increased to $302,344 (2020 - $158,185) mainly due to an
increase in the legal fees due to increase in activities of the Company, an
increase in stock-based compensation charges of $11,049 during the current
period compared to $7,506 in the comparative period of the prior year offset by
a decrease in audit fees as a result of under accrual of audit fees for 2020.
There was also an increase in professional fees of approximately $176,000
related to the Transaction.
Regulatory expenses decreased to $82,460 (2020 - $154,312) mainly due to the
entry fee to the Nasdaq Capital Market in the comparative period of the prior
year.
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Other expense categories that reflected only moderate change period over period
were administration expenses of $nil (2020 - $106), depreciation expenses of
$17,501 (2020 - $14,281), exploration expenditures of $4,426,263 (2020 -
$4,433,234), office expenses of $28,569 (2020 - $37,933) and rent expenses of
$1,130 (2020 - $7,403).
Other items amounted to a loss of $182,403 compared to $301,272 in the prior
period. There was a decrease in foreign exchange loss of $1,596 (2020 -
$340,176), which was the result of factors outside of the Company's control, a
decrease in interest income of $1,383 (2020 - $41,699) as a result of less
investment in cashable GIC's during the current period, and an increase interest
expenses of $182,190 (2020 - $2,795) as a result of accretion recognized on the
AngloGold North America Loan.
Liquidity and Capital Resources
The Company has no revenue generating operations from which it can internally
generate funds. To date, the Company's ongoing operations have been financed by
the sale of its equity securities by way of public offerings, private
placements, the exercise of incentive stock options and share purchase warrants,
and most recently, the AngloGold North America Loan. The Company believes that
it will be able to secure additional private placements and public financings in
the future, although it cannot predict the size or pricing of any such
financings. In addition, the Company can raise funds through the sale of
interests in its mineral properties, although current market conditions have
substantially reduced the number of potential buyers/acquirers of any such
interest(s). This situation is unlikely to change until such time as the Company
can develop a bankable feasibility study on one of its projects. When acquiring
an interest in mineral properties through purchase or option, the Company will
sometimes issue Common Shares to the vendor or optionee of the property as
partial or full consideration for the property interest in order to conserve its
cash.
The condensed interim consolidated financial statements have been prepared on a
going concern basis, which presume the realization of assets and discharge of
liabilities in the normal course of business for the foreseeable future. The
Company's ability to continue as a going concern is dependent upon achieving
profitable operations and/or obtaining additional financing.
In assessing whether the going concern assumption is appropriate, management
takes into account all available information about the future within one year
from the date the condensed interim consolidated financial statements are
issued.
The Company has sustained significant losses from operations, has negative cash
flows and has an ongoing requirement for capital investment to explore its
mineral properties. Based on its current plans, budgeted expenditures, and cash
requirements, the Company does not have sufficient cash to finance its current
plans for the 12 months from the date the condensed interim consolidated
financial statement are issued.
The Company reported cash and cash equivalents of $5,227,145 as at August 31,
2021 compared to $5,121,495 as at May 31, 2021. The change in cash position was
the net result of $6,042,392 used for operating activities, $19,228 used for
lease liabilities payments, $80,589 used for capitalized acquisition costs,
$6,589 used for share issuance costs, $99,176 used on property and equipment,
and $6,167,500 (USD 5,000,000) received from the AngloGold North America Loan.
As at August 31, 2021, the Company had working capital deficit of $8,982,447
compared to working capital deficit of $2,011,551 as at May 31, 2021.
The Company expects that it will operate at a loss for the foreseeable future
and believes the current cash and cash equivalents will be sufficient for it to
maintain its currently held properties, and fund its currently anticipated
general and administrative costs for at least the next 12 months from the date
of this report. In any event, the Company will be required to raise additional
funds, again through public or private equity financings in the future in order
to continue in business. Should such financing not be available in that
time-frame, the Company will be required to reduce its activities and will not
be able to carry out all of its presently planned exploration and, if warranted,
development activities at the NBP and the MLP on its currently anticipated
scheduling.
Despite the Company's success to date in raising significant equity financing to
fund its operations, there is significant uncertainty that the Company will be
able to secure any additional financing in the current or future equity markets.
See "Risk Factors - We will require additional financing to fund exploration
and, if warranted, development and production". Failure to obtain additional
financing could have a material adverse effect on our financial condition and
results of operation and could cast uncertainty on our ability to continue as a
going concern. The quantity of funds to be raised and the terms of any proposed
equity financing that may be undertaken will be negotiated by management as
opportunities to raise funds arise. Specific plans related to the use of
proceeds will be devised once financing has been completed and management knows
what funds will be available for these purposes. Due to this uncertainty, if the
Company is unable to secure additional financing, it may be required to reduce
all discretionary activities at the NBP and the Mother Lode Property to preserve
its working capital to fund anticipated non-discretionary expenditures in the
future.
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The Company has no exposure to any asset-backed commercial paper. Other than
cash held by its subsidiaries for their immediate operating needs in Alaska and
Nevada, all of the Company's cash reserves are on deposit with a major Canadian
chartered bank. The Company does not believe that the credit, liquidity or
market risks with respect thereto have increased as a result of the current
market conditions. However, in order to achieve greater security for the
preservation of its capital, the Company has, of necessity, been required to
accept lower rates of interest, which has also lowered its potential interest
income.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Environmental Regulations
The operations of the Company may in the future be affected from time to time in
varying degrees by changes in environmental regulations, including those for
future removal and site restoration costs. Both the likelihood of new
regulations and their overall effect upon the Company vary greatly and are not
predictable. The Company's policy is to meet or, if possible, surpass standards
set by relevant legislation by application of technically proven and
economically feasible measures.
Certain U.S. Federal Income Tax Considerations for U.S. Holders
The Company has been a "passive foreign investment company" ("PFIC") for U.S.
federal income tax purposes in recent years and expects to continue to be a PFIC
in the future. Current and prospective U.S. shareholders should consult their
tax advisors as to the tax consequences of PFIC classification and the U.S.
federal tax treatment of PFICs. Additional information on this matter is
included in the Company's Annual Report on Form 10-K as filed with the SEC on
August 9, 2021, under "Certain United States Federal Income Tax Considerations".
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