EUROMAX RESOURCES LTD. MANAGEMENT'S DISCUSSION & ANALYSIS
For the year ended December 31, 2023
EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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INTRODUCTION
The following Management's Discussion and Analysis ("MD&A") of Euromax Resources Ltd. ("Euromax" or the "Company") and its subsidiary companies (collectively, the "Group") is prepared as of May 3, 2024 and should be read in conjunction with the Group's audited consolidated financial statements and related notes for the years ended December 31, 2023 and 2022 ("FY23" and "FY22", respectively) ("consolidated financial statements"), which are prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board (the "IASB"). The accounting policies applied are consistent with those adopted and disclosed in the previous reporting periods. The Group's functional and reporting currency is the Canadian dollar and all figures in this MD&A are in Canadian dollars unless otherwise indicated.
Some of the statements in this MD&A are forward-looking statements that are subject to risk factors set out in the cautionary note contained herein.
During the years ended December 31, 2023 and 2022, Euromax's common shares were listed on the Toronto Stock Exchange (the "TSX") under the trading symbol "EOX". However, following a voluntary application to delist from the TSX, from January 9, 2024 Euromax's common shares have been re-listed on TSX Venture Exchange (the "TSXV"). Euromax's common shares are also listed on the OTC Pink Market under the trading symbol "EOXFF". Euromax's share options and warrants are not listed.
CORPORATE STRATEGY
The Group's ambition is to become a leading gold and base metal mining company in Europe.
In addition, we will strive to set the standard for developing mines in Europe by using best industry practices at our operations and implementing the highest standard for environmental management and managing health and safety in the workplace.
The Group mission is to bring an Ilovica-Shtuka copper project (the "Ilovica-Shtuka Project") in the Republic of North Macedonia ("Macedonia") into production within two years (once permitting and construction funding have been arranged) and grow the value of our business by maximising the potential of the Ilovica-Shtuka Project as our flagship asset. Delivery of value for our shareholders is key and we intend to pursue a suite of financing alternatives such that we may grow our business without diminishing value for shareholders.
As part of all our activities we will engage with and empower communities to be part of our projects and we will look to create mutually beneficial opportunities for all our stakeholders including local businesses, communities and employees.
Our Business during FY23
During FY23 the Group operates in only one sector, exploration and development of mineral right interests. The Group's wholly owned Macedonian subsidiary, Euromax Resources DOO Skopje, is developing the Ilovica-Shtuka Project in Macedonia, which consists of two 30-years exploitation concessions ("Exploitation Concession Ilovica 6" and "Exploitation Concession Ilovica 11"), and the Group has plans to bring it into construction and ultimately commercial production.
FY23 HIGHLIGHTS
Non-Brokered Private Placements
On January 24, 2023 the Company announced the closing of a non-brokered private placement ("2023 Private Placement") for gross proceeds of US$3 million. As part of the 2023 Private Placement the Company issued 101,250,000 common shares and 101,250,000 share purchase warrants which were divided into two tranches under the following vesting conditions: 50,625,000 share purchase warrants vest on approval of the request for the merger of the Group's two exploitation concessions, Exploitation Concession Ilovica 6 and Exploitation Concession Ilovica 11, (the "Merger") (defined as "A Warrants"), while the other 50,625,000 share purchase warrants vest on approval of the Exploitation Permit on the merged concession and approval of the Environmental Impact Assessment on the merged concession (defined as "B Warrants"). All these 101,250,000 share purchase warrants are exercisable for a period of two years from the date of issuance, whereby A Warrants are exercisable at a price of $0.075, and B Warrants at price of $0.125.
Subsequent to December 31, 2023, the Company announced the closing of a non-brokered private placement ("2024 Private Placement") for gross proceeds of US$0.791 million.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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FY23 HIGHLIGHTS - CONTINUED
Financing
Following closing of the 2023 Private Placement, on January 26, 2023 both convertible notes of $1.638 million or US$1.25 million, issued to Galena Resource Equities Limited ("Galena") in the year ended December 31, 2022, were converted into 35,342,120 Company's common shares.
Extension of convertible loans
During FY23 both convertible loans with the European Bank for Reconstruction and Development ("EBRD") (or the "EBRD convertible loan") and with CC Ilovitza ("CCI", a member of CCC Group) (or the "CCI convertible loan") were extended to February 28, 2024.
Subsequent to December 31, 2023, these convertible loans were further extended to February 28, 2025.
Ilovica-Shtuka Project permitting - update
During FY23, the Macedonian administrative courts adopted two verdicts that annulled the rejection of the exploitation permit request and the termination of the Exploitation Concession Ilovica 6. Accordingly, all administrative court proceedings started in October 2019 against these two negative decisions regarding the Exploitation Concession Ilovica 6 were resolved in favour of the Group, and there remains no other legal administrative dispute over the legality of the Group's Exploitation Concessions Ilovica 6 and Ilovica 11. The basis for both verdicts was that the merger of the concessions (the "Merger"), filed in January 2016, represents an administrative preliminary matter that needs to be resolved first before making further administrative decisions on these two individual exploitation concessions.
Following these verdicts that annulled the termination of the Exploitation Concession Ilovica 6, the Macedonian Government made a decision on June 27, 2023 to approve the Merger, as announced on July 4, 2023 in the Official Gazette. However, on July 25, 2023, the Government reversed its own decision and withdrew the Merger approval, as announced on July 26, 2023. The Group filed a lawsuit against this subsequent Government decision which was made without any legal basis. Following the year end, the Administrative Court rejected Group's lawsuit, and accordingly the case has been transferred for decision by the Higher Administrative Court. Despite this decision, the Administrative Court did not challenge the fact that all legal conditions for the Merger approval have been met. Until this is resolved, either by acceptance of the Group's lawsuit or by new approval by the Government, the Group remains in the process of waiting for the Merger approval.
The approval of the Merger is a significant step forward to the development of the Ilovica-Shtuka Project that provides legal grounds for further progressing of the Exploitation Permit approval for the Ilovica-Shtuka Project. The Minerals Law in the Republic of North Macedonia does not allow an Exploitation Permit application for multiple concessions, and so the Group must apply to merge its concessions prior to applying for its Exploitation Permit.
Board restructure and Chief Executive Officer ("CEO") appointment
On February 3, 2023, the Company announced that Mr. Ali Vezvaei has been appointed as Non-Executive Director and President of Euromax.
Mr. Tim Morgan-Wynne, in addition to his role as an Executive Chairman, was appointed as CEO of the Company on June 26, 2023.
Subsequently to the year end, on March 11, 2024 the Company announced that Mr. Nicolas Treand resigned from his position as Executive Director responsible for Macedonian affairs, but he will remain to be part of the board of directors as Non-Executive Director.
Delisting review
On June 26, 2023, the Company announced that notice from TSX was received for reviewing the eligibility of the Company's securities for continued listing pursuant to Part VII of the TSX Company Manual. Specifically, the main area of the TSX review was toward the minimum required expenditures of $350k per annum on exploitation and/or development work, and appropriate capital structure. Both items are closely related to resolving the outstanding issue in the permitting process, i.e. approval of the Merger.
Given the recent development, as presented in "Ilovica-Shtuka Project permitting - update" sub-section above, whereby the Government reversed its decision and annulled the Merger approval, as announced on October 18, 2023, the Company has made an application to transfer the listing of the Company's common shares to the TSXV, until a final positive resolution of the Merger approval has been reached.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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FY23 HIGHLIGHTS - CONTINUED
Delisting review - continued
On December 20, 2023, the Company announced that its application to list as Tier 2 Mining Issuer on the TSXV had been approved, and the Company's common shares were de-listed from the TSX commencing at the opening of the market on January 9, 2024.
Cease Trade Order
On April 8, 2024, the Company announced that was not able to meet the prescribed deadline of TSX for filing of the required year- end disclosures. Although companies listed on TSXV are required to file their year-end disclosures within 120 days following the year-end, the Company was still listed on the TSX as at December 31, 2023 and was therefore still subject to the required deadline for filing of the year-end disclosures applicable to TSX listed issuers, being 90 days following the year-end. Since the filing of the year-end disclosures was post March 31, 2024, on April 8, 2024, the Ontario Securities Commission issued a failure to file cease trade order that prohibits trading of Euromax's common shares which will be revoked once the required year-end disclosures are published, which will be revoked once the required year-end disclosures are published, providing 90 days to the Company to meet that requirement. Within 30 days of the issued cease trade order, or on May 3, 2024 the Company published the required year- end disclosures.
PROJECTS
This section outlines the exploration activities carried out in the year ended December 31, 2023. Patrick Forward, Director, is the Qualified Person responsible for the review of the technical information contained in this section of the Group's MD&A.
Ilovica-Shtuka Project - Macedonia
The Group's activities have been focused on resolving the administrative process toward reaching the Merger approval, that represents a material trigger for further development of the Ilovica-Shtuka Project (for more details please see note 7 of the consolidated financial statements).
SELECTED ANNUAL FINANCIAL INFORMATION
(Expressed in thousands of Canadian dollars except per share amounts)
Years Ended December 31, | 2023 | 2022 | 2021 |
$000s | $000s | $000s | |
Loss for the period | (3,564) | (7,924) | (6,354) |
Loss per common share: | |||
Basi c and diluted loss per share (in $) | (0.01) | (0.02) | (0.02) |
As at December 31, | 2023 | 2022 | 2021 |
$000s | $000s | $000s | |
Net working capital deficiency | (43,474) | (46,524) | (39,654) |
Mineral right interests | 38,102 | 37,483 | 37,499 |
Total assets | 39,016 | 37,864 | 38,163 |
Total non-current financial lia bil ities | 90 | 89 | 90 |
All figures presented above are prepared in accordance with IFRS, and the accounting policies were applied on a consistent basis for all presented periods.
The net working capital deficiencies1 largely results from following items classified as current liabilities at December 31, 2023,
2022 and 2021:
- Gold purchase advance payments received under the Gold Purchase and Sale Agreement ("GPSA") with Royal Gold, AG ("Royal Gold") (2023: $14.903 million; 2022: $15.236 million; 2021: $14.376 million);
- Convertible loans (EBRD convertible loan and CCI convertible loan) (2023: $27.667 million; 2022: $26.172 million; 2021: $23.622 million); and
- Share-basedpayment liabilities (2023: $1.290 million; 2022: $2.749 million; 2021: $1.633 million).
The non-current financial liabilities at December 31, 2023 represented a lease liability of $0.090 million (2022: $0.089 million;
2021: $0.090 million).
1Non-GAAP Measure. Please refer to page 9 for further details.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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SUMMARY OF QUARTERLY RESULTS
(Expressed in thousands of Canadian dollars except per share amounts)
Quarter ended (unaudited) | December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, |
2023 | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 | |
Profit/(Loss) for the period | 340 | (2,414) | (189) | (1,301) | (1,225) | (3,039) | (1,655) | (2,005) |
Basic profit/(loss) per share | 0.00 | (0.01) | (0.00) | (0.00) | (0.00) | (0.01) | (0.00) | (0.01) |
Diluted profit/(loss) per share | 0.00 | (0.01) | (0.00) | (0.00) | (0.00) | (0.01) | (0.00) | (0.01) |
All figures presented above are prepared in accordance with IFRS, as well as the accounting policies were applied on a consistent basis for all presented periods.
The Group's primary focus is the exploration and development of mineral right interests and its principal project is the Ilovica- Shtuka Project. The Ilovica-Shtuka Project is not in production and therefore the Group has incurred losses and will continue to incur losses until the Ilovica-Shtuka Project is brought into commercial production.
Apart from the Group's regular operational activities that are relatively constant on a period by period basis, net profit/(loss) has been influenced by fluctuations in:
- the Company's common share price, which is a key assumption in establishing fair value of (1) share-based payment liabilities and (2) the EBRD convertible loan; and
- foreign currency exchange rates.
RESULTS OF OPERATIONS
KEY POINTS
- FY23 operating loss of $0.433 million (FY22: $4.873 million)
- FY23 operating cash costs2 (operating (loss)/profit excluding depreciation, share-based payments and unrealised foreign exchange (loss)/gain) increased to $2.616 million (FY22: $2.109 million)
- FY23 loss for the period of $3.564 million (FY22: $7.924 million)
- The profit for the period for the quarter ended December 31, 2023 ("Q4-2023") of $0.340 million (the quarter ended December 31, 2022 ("Q4-2022"): loss of $1.225 million)
Quarter ended December 31 | Year ended December 31 | |||
in thousands $ | 2023 | 2022 | 2023 | 2022 |
Continuing operations | ||||
Accounti ng, legal and professional | (351) | (326) | (951) | (886) |
Depreciation | (11) | (11) | (45) | (45) |
Office and general | (69) | (45) | (218) | (202) |
Salaries, director and consultant fees | (233) | (226) | (905) | (931) |
Share-based payments recovery/(expense) | 901 | (1,566) | 1,247 | (1,140) |
Social responsibility and other project related costs | (163) | (24) | (549) | (92) |
Gain/(Loss) on forei gn exchange | 976 | 2,000 | 988 | (1,577) |
Operating profit/(loss) | 1,050 | (198) | (433) | (4,873) |
Finance expense | (828) | (773) | (3,255) | (3,051) |
Fair value (loss)/gain on financial liabilities | 2 | (254) | 8 | - |
Net finance loss | (826) | (1,027) | (3,247) | (3,051) |
Other items | ||||
Other income | 116 | - | 116 | - |
Profit/(Loss) before tax | 340 | (1,225) | (3,564) | (7,924) |
Income tax expense | - | - | - | - |
Profit/(Loss) for the period | 340 | (1,225) | (3,564) | (7,924) |
- Non-GAAPMeasure. Please refer to page 9 for further details.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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RESULTS OF OPERATIONS - CONTINUED
DETAILED ANALYSIS OF THE YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022
The Group recorded a loss for the period of $3.564 million or $0.01 loss per share in FY23, compared to a loss of $7.924 million or $0.02 per share in FY22.
The decreased loss in FY23 was mainly due to the following:
-
The recognised gain on foreign exchange of $0.988 million in FY23, compared to loss of $1.577 million in FY22, that is related to unrecognised foreign exchange differences mainly driven by the favourable movement of:
o Euro against the US dollar during FY23 compared to FY22, which was reflected within the foreign exchange movements on the gold purchase advance payments liability, being denominated in US dollars and held within a subsidiary that has Euro as functional currency (as disclosed in note 12 of the consolidated financial statements); and
o Canadian dollar against US dollar during FY23 compared to FY22, which was reflected within the foreign exchange movements on the EBRD convertible loan (as disclosed in note 11(b) of the consolidated financial statements). - The recognised share-based payments recovery of $1.247 million in FY23, compared to expense of $1.140 million in FY22, was due to unfavourable movement of the Company's common share price during FY23 compared to FY22. As disclosed in Note 10(b)(iii) of the consolidated financial statements, the Company's Deferred Phantom Units ("DPUs") are revalued at the Company's period-end common share price.
- The recognised other income of $0.116 million in FY23 (FY22: Nil) was related to write off of payables at December 31, 2023 that were outstanding for more than 5 years.
partly compensated by:
- Social responsibility and other project related costs increased by $0.457 million in FY23, compared to FY22, mainly resulting from the increased levels of activity undertaken in FY23, compared to FY22.
- An increase in the finance expense by $0.204 million in FY23, compared to FY22, being the result of the increased convertible loans' outstanding balances at December 31, 2023, compared to its balance at December 31, 2022.
DETAILED ANALYSIS OF THE QUARTER ENDED DECEMBER 31, 2023 COMPARED TO QUARTER ENDED DECEMBER 31, 2022
The Group recorded a profit for the period of $0.340 million or $0.00 profit per share in Q4-2023, compared to loss of $1.225 million or $0.00 loss per share in Q4-2022.
The recorded profit in Q4-2023 compared to the loss in Q4-2022 was mainly due to the following:
- The recognised share-based payments recovery of $0.901 million in Q4-2023, compared to expense of $1.566 million in Q4-2022, was due to unfavourable movement of the Company's common share price during FY23 compared to FY22.
- The recognised fair value gain on financial instruments of $0.002 million in Q4-2023 was related to the EBRD convertible loan, compared to loss of $0.254 million in Q4-2022 recognised on the EBRD convertible loan and convertible notes, calculated via an internally prepared model that separately values the loan amount on a discounted cash flow basis and the conversion option using a Black-Scholes option pricing model.
- The recognised other income of $0.116 million in Q4-2023(Q4-2022: Nil) was related to write off of payables at December 31, 2023 that were outstanding for more than 5 years.
partly compensated by:
-
A decrease of the recognised gain on foreign exchange by $1.024 million in Q4-2023, compared to Q4-2022, related to unrecognised foreign exchange differences mainly driven by the less favourable movement of:
o Euro against the US dollar during Q4-2023 compared to Q4-2022, which was reflected within the foreign exchange movements on the gold purchase advance payments liability, being denominated in US dollars and held within a subsidiary that has Euro as functional currency; and
o Canadian dollar against US dollar during Q4-2023 compared to Q4-2022, which was reflected within the foreign exchange movements on the EBRD convertible loan.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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RESULTS OF OPERATIONS - CONTINUED
DETAILED ANALYSIS OF THE QUARTER ENDED DECEMBER 31, 2023 COMPARED TO QUARTER ENDED DECEMBER 31, 2022 - CONTINUED
- Social responsibility and other project related costs increased by $0.139 million in Q4-2023, compared to Q4-2022, mainly resulting from the increased levels of activity undertaken in Q4-2023, compared to Q4-2022.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2023 the Group has following contractual obligations:
Contractual obligations | Payments due by Period | ||||
Total | Less than 1 year | 1 - 3 years | 4 - years | After 5 years | |
$000s | $000s | $000s | $000s | $000s | |
Debt | |||||
Trade and other payables | 272 | 272 | - | - | - |
Gold purchase advance payments | 14,903 | 14,903 | - | - | - |
Lease liability | 143 | 53 | 90 | - | - |
Loans and borrowings | 28,203 | 28,203 | - | - | - |
Total Contractual Obligations | 43,521 | 43,431 | 90 | - | - |
At December 31, 2023 the Group had cash and cash equivalents of $0.617 million and $0.094 million in total for other receivables and other current assets. However, as presented above, the Group had trade and other payables of $0.272 million, gold purchase advance payments of $14.903 million (see note 12 of the consolidated financial statements), financial liabilities regarding two convertible loans (see note 11 of the consolidated financial statements) totalling $27.667 million (or contractual obligations $28.203 million for both loans at December 31, 2023), current lease liabilities of $0.053 million, and current liabilities of $1.290 million for share-based payments, with the result that the Group had a net working capital deficiency3 of $43.474 million at December 31, 2023.
The two key contributors to the Group's working capital deficiency position at December 31, 2023 are financial liabilities regarding two convertible loans and the gold purchase advance payments received from Royal Gold, AG ("Royal Gold").
Firstly, the current financial liabilities, composed of the EBRD convertible loan of $15.532 million and the CCI convertible loan of $12.135 million, are classified as current liabilities since both mature on February 28, 2024, however, subsequent to December 31, 2023 both convertible loans have been extended to February 28, 2025. Both convertible loans are convertible into the Company's common shares at the election of EBRD and CCI on or before their maturity (refer to note 11 of the consolidated financial statements). The total contractual obligations at February 28, 2024 for these two convertible loans are $28.203 million, out of which $15.705 million (or US$11.856 million) related to the EBRD convertible loan and $12.498 million to the CCI convertible loan. However, subsequent to the year ended December 31, 2023, both EBRD and the CCI convertible loans were extended further until February 28, 2025, whereby contractual cash payments at February 28, 2025 are in total of $30.187 million or $16.802 million (US$12.686 million) and $13.385 million, respectively.
Secondly, the gold purchase advance payments are classified as current liabilities since Royal Gold has the contractual capacity to issue a termination notice that may require the Group to repay the outstanding advance payments within 60 days of receiving such notice (refer to note 12 of the consolidated financial statements). As at the date of approval of this MD&A by the Company's board of directors, no termination or repayment notice has been received from Royal Gold.
As the Group is in the exploration and evaluation stage of the mining life cycle, the Group does not generate cash inflow from its operating activities. The Group's ability to continue operations is contingent on its ability to obtain additional financing and progress the Ilovica-Shtuka Project into commercial production. Refer to note 3 of the consolidated financial statements.
- Non-GAAPMeasure. Please refer to page 9 for further details.
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Operating Activities
Year ended December 31, | ||
in thousands $ | 2023 | 2022 |
OPERATING ACTIVITIES | ||
Loss before tax | (3,564) | (7,924) |
Add back: | ||
Depreciation | 45 | 45 |
Finance expense | 3,255 | 3,051 |
Other i ncome - write off of trade payables | (116) | - |
Share-based payments (recovery)/expenses | (1,247) | 1,140 |
Unreal ised foreign exchange (gain)/loss | (981) | 1,579 |
Expensed transacti on costs associated wi th convertible loans | 76 | 77 |
Expensed transacti on costs associated wi th convertible notes | - | 81 |
Fai r value gain on financi al liabilities | (8) | - |
Sub-total | (2,540) | (1,951) |
Changes in working capital items: | ||
Decrease/(Increase) in other receivabl es and prepayments and deposits | 8 | (27) |
(Decrease)/Increase in trade and other payables | (425) | 398 |
Cash used in operating activities | (2,957) | (1,580) |
Cash used in operating activities during FY23 was $2.957 million compared to $1.580 million in FY22. This increase of $1.377 million in FY23 was due to:
- increased payments incurred in FY23, following the closing of the 2023 Private Placement, which resulted in cash outflow of working capital of $0.417 million in FY23, compared to a positive working capital movement of $0.371 million in FY22; and
- increased cash payments of $0.587 million from operating activities (from $1.951 million in FY22 to $2.538 million in FY23), mainly due to the increased level of social responsibility and other project related costs that were incurred in FY23, compared to FY22, as explained in "Result of Continuing Operations" section above.
Financing Activities
Year ended December 31, | ||
in thousands $ | 2023 | 2022 |
FINANCING ACTIVITIES | ||
Proceeds from shares issued | 4,015 | - |
Proceeds from convertible notes | - | 1,627 |
Share issue costs | (143) | (7) |
Transaction costs associated with converti ble loans | (143) | (141) |
Transaction costs associated with converti ble notes | (19) | (62) |
Payment of l ea se liabilities | (53) | (50) |
Interest pai d | (6) | (5) |
Cash provided by financing activities | 3,651 | 1,362 |
In FY23 the Group closed the 2023 Private Placement (as explained in "FY23 Highlights" section above) for gross proceeds of $4.015 million or US$3 million, which was partly offset by (i) paid share issue costs of $0.143 million related to the 2023 Private Placement, (ii) the payment of fees and legal costs of $0.143 million for extension of both convertible loans, as disclosed in "FY23 Highlights" section above, (iii) $0.053 million paid for leases, (iv) legal fees of $0.019 million paid regarding the convertible notes issued to Galena and (v) interest of $0.006 million paid during FY23.
In FY22 the Group received US$1.25 million or $1.627 million under the convertible notes issued to Galena, and that was partly offset by (i) payment of extension fees and legal costs of $0.141 million for extension of both convertible loans in FY22, (ii) payment of legal fees of $0.062 million for closing of the convertible notes issued to Galena in FY22, (iii) $0.050 million paid for leases, (iv) paid share issue costs of $0.007 million related to the 2023 Private Placement and (v) interest of $0.005 million paid during FY22.
Investing Activities
Year ended December 31, | ||
in thousands $ | 2023 | 2022 |
INVESTING ACTIVITIES | ||
Expenditures on mineral right interests | (85) | (79) |
Purchases of property, plant and equipment | (1) | - |
Cash provided by investing activities | (86) | (79) |
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Investing Activities - continued
During FY23, the Group paid concession fee of $0.085 million for maintaining the legal right over the Ilovica-Shtuka Project (FY22: $0.079 million), while further payment of $0.001 million was related to purchases of equipment in FY23 (FY22: Nil).
NON-GAAP MEASURES
The Company has included a non-GAAP performance measure, namely total operating cash costs, in this document. Mineral exploration companies are reliant on continuously sourcing funding until commercial production is reached and hence minimising cash outflows from administrative costs is a key objective. In addition to conventional measures prepared in accordance with GAAP, the Company and certain investors use this information to evaluate the Company's cash-burn rate. This non-GAAP measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The following table provides a reconciliation of the operating cash costs for the quarters and years ended December 31, 2023 and 2022.
Quarter ended December 31 | Year ended December 31 | |||
in thousands $ | 2023 | 2022 | 2023 | 2022 |
Operating loss - per consolidated financial statements | 1,050 | (198) | (433) | (4,873) |
Add/(Less): | ||||
Share-based payments (recovery)/expenses | (901) | 1,566 | (1,247) | 1,140 |
Depreciation | 11 | 11 | 45 | 45 |
Unrealised forei gn exchange l oss/(gain) | (985) | (1,985) | (981) | 1,579 |
Total Operating cash costs | (825) | (606) | (2,616) | (2,109) |
The other non-GAAP measure used is net working capital deficiencies which represents the difference between current liabilities and current assets.
RELATED PARTY TRANSACTIONS
At December 31, 2023, 46% (2022: 54%) of all issued common shares were owned by Galena, an entity that is controlled by Galena Asset Management S.A., which is an affiliate of Trafigura Group Pte Ltd. ("Trafigura"). Galena has executed its right to appoint four out of eight members of the board of directors, and therefore Trafigura as ultimate controlling entity of Galena represents a controlling entity of the Company.
During the year ended December 31, 2022, the Group received US$1.25 million ($1.627 million) under two non-interest bearing, unsecured, convertible notes issued to Galena, that were converted into 35,342,120 Company's common shares on January 26, 2023.
Since 2019, the Group has signed an off-take agreement with Trafigura whereby the whole future production of the copper concentrate from the Ilovica-Shtuka Project will be sold to Trafigura.
Details of the transactions between the Group and other related parties are disclosed below.
- Key management personnel transactions
The Group's related party is as follows:
- ARQX Capital DWC Ltd - a private company owned by one of the Group's directors, as additional support for the Group's Macedonian affairs, particularly engaged in the permitting process and for the development of the Ilovica-Shtuka Project.
For these services an annual fee has been agreed, paid in monthly instalments, and that annual fee was set based on advice from third party human resource consultants as being a fair market price for such services.
The Group incurred the following fees and expenses in the normal course of operations in connection with related parties. Expenses incurred by related parties are reimbursed by the Group at their original cost.
Years ended December 31, | ||
2023 | 2022 | |
$000s | $000s | |
Fees for the executive oversight of Macedonian | 209 | 198 |
operations | ||
209 | 198 |
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EUROMAX RESOURCES LTD. Management's Discussion and Analysis Year ended December 31, 2023
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RELATED PARTY TRANSACTIONS - CONTINUED
- Key management personnel transactions - continued
At December 31, 2023, the Group owed ARQX Capital DWC Ltd $0.018 million (December 31, 2022: $0.035 million) for services provided in December 2023.
- Key management personnel compensation
The remuneration of directors and other members of key management personnel during the years ended December 31, 2023 and 2022 was as follows:
Years ended December 31, | |||
Note | 2023 | 2022 | |
$000s | $000s | ||
Short-term employee benefits | 332 | 324 | |
Share-based payments (recoveries)/expenses | (i) | (1,456) | 1,116 |
(1,124) | 1,440 |
- Share-basedpayments expense/(recovery) is the expense/income from share options, restricted share units ("RSUs") and DPUs granted to directors and key management personnel.
COMMITMENTS
The Group had no future contractual obligations as at December 31, 2023, except to those already disclosed in the consolidated financial statements and in this MD&A.
CRITICAL ACCOUNTING ESTIMATES
The Group's material accounting policies are summarised in note 3 of the consolidated financial statements. The preparation of the consolidated financial statements is in accordance with IFRS, as issued by the IASB, requires management to select accounting policies and make estimates that may have a significant impact on the consolidated financial statements.
The Group regularly reviews its estimates; however, actual amounts could differ from the estimates and judgements used and, accordingly, materially affect the results of operations.
The Group's significant estimates include:
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Equity-settledshare-based payments arrangements and Share purchase warrants
The Group measures the cost of share-based payment arrangements with employees and consultants by reference to the fair value of the equity instruments at the date on which they are granted. Estimating fair values for share-based payment arrangements requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the valuation model, including the expected life of the share option, volatility and dividend yield, and making assumptions about them.
The Black-Scholes option pricing model was developed for use in estimating the fair value of share options and share purchase warrants that have no vesting provisions and are fully transferable. Also, option-pricing models require the use of estimates and assumptions including the expected volatility. The Group uses expected volatility rates which are based upon their historical volatility. Changes in the underlying assumptions can materially affect the fair value estimates.
For those share-based payment arrangements that have non-market performance conditions, the Group is assessing the number of equity instruments that are expected to be vested by applying the best available estimation of the related services and non-market performance conditions, associated to these arrangements, that are expected to be met. This estimation of how much equity instruments are expected to be vested is revised at each reporting period. - Recognition and measurement of convertible loans and notes
The EBRD convertible loan is accounted for as a financial liability at fair value through profit or loss ("FVTPL") and its fair value is calculated via an internally prepared model that separately values the loan amount (on a discounted cash flow basis, by using the interest rate of the CCI convertible loan, see note 11 of the consolidated financial statements, as only available relevant observable input) and the conversion option using a Black-Scholes option pricing model.
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Euromax Resources Ltd. published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 May 2024 20:08:59 UTC.
