CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
(Expressed in United States dollars)
(Unaudited)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Expressed in thousands of United States dollars
(Unaudited)
As at | Note | September 30, 2023 | December 31, 2022 | ||
ASSETS | |||||
Current | |||||
Cash and cash equivalents | $ | 660 | $ | 523 | |
Receivables | 4 | 516 | 1,180 | ||
Inventories | 5 | 19,795 | 9,971 | ||
Gold stream derivative asset | 6 | 223 | 346 | ||
Prepaid expenses, and other advances | 562 | 884 | |||
Total current assets | 21,756 | 12,904 | |||
Advances and other prepaid expenses | 268 | 3 | |||
Exploration and evaluation assets | 7 | 765 | 765 | ||
Mineral property, plant and equipment | 8 | 21,032 | 31,499 | ||
TOTAL ASSETS | $ | 43,821 | $ | 45,171 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | 9 | $ | 11,756 | $ | 12,678 |
Term loans | 10 | 4,142 | 2,771 | ||
Derivative liability | 10 | - | 18 | ||
Provision for reclamation and rehabilitation | 11 | 26 | 689 | ||
Total current liabilities | 15,924 | 16,156 | |||
Accrued liabilities | 9 | 959 | 1,131 | ||
Provision for reclamation and rehabilitation | 11 | 2,833 | 1,944 | ||
Term loans | 10 | 12,734 | 12,270 | ||
Total liabilities | 32,450 | 31,501 | |||
Shareholders' equity | |||||
Share capital | 12 | 88,206 | 88,021 | ||
Contributed surplus | 12 | 12,296 | 12,087 | ||
Accumulated other comprehensive income | 1,425 | 1,402 | |||
Deficit | (90,556) | (87,840) | |||
Total shareholders' equity | 11,371 | 13,670 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 43,821 | 45,171 |
Approved by the Audit Committee of the Board of Directors on November 10, 2023
"John Hick", Audit Committee Chair"Akiba Leisman", Director Events after the reporting period (Note 19)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
Expressed in thousands of United States dollars, except per share amounts (Unaudited)
For the three months ended | For the nine months ended | ||||||||
Note | September 30, | September 30, | September 30, | September 30, | |||||
2023 | 2022 | 2023 | 2022 | ||||||
Revenue | $ | 10,630 | $ | 13,532 | $ | 39,217 | $ | 46,971 | |
Production services revenue | 6 & 13(e)(ii) | 77 | 105 | 261 | 317 | ||||
10,707 | 13,637 | 39,478 | 47,288 | ||||||
Cost of sales | |||||||||
Production costs | (5,647) | (8,480) | (19,251) | (23,873) | |||||
Write-down of inventories | - | (769) | (1,169) | (769) | |||||
Depreciation, depletion and amortization | (2,410) | (5,359) | (10,013) | (17,205) | |||||
(8,057) | (14,608) | (30,433) | (41,847) | ||||||
Mine operating profit | 2,650 | (971) | 9,045 | 5,441 | |||||
Exploration and evaluation expenses | (1,178) | (3,878) | (3,369) | (8,463) | |||||
General and administrative expenses | 17 | (1,895) | (1,613) | (5,621) | (4,950) | ||||
Other income (expense) | |||||||||
Accretion and interest expense | 18 | (387) | (298) | (1,082) | (1,770) | ||||
Change in provision for reclamation and rehabilitation | 11 | (20) | (60) | (8) | (56) | ||||
Change in fair value of derivative liability | 10(b)(c) | (191) | (16) | (281) | 70 | ||||
Gain (loss) on gold stream derivative asset | 6 | (14) | 5 | 32 | 40 | ||||
Foreign exchange gain (loss) loss | (113) | 332 | (179) | 152 | |||||
Interest income | 6 | 1 | 14 | 1 | |||||
Loss before income taxes | (1,142) | (6,498) | (1,449) | (9,535) | |||||
Income tax expense | (330) | (492) | (1,267) | (1,644) | |||||
Loss for the period | $ | (1,472) | $ | (6,990) | $ | (2,716) | $ | (11,179) | |
Other comprehensive income (loss) | |||||||||
Loss for the period | (1,472) | (6,990) | (2,716) | (11,179) | |||||
Items subject to reclassification into statement of income (loss): | |||||||||
Foreign currency translation adjustment | 11 | (413) | 23 | (448) | |||||
Other comprehensive income (loss) for the period | 11 | (413) | 23 | (448) | |||||
Comprehensive loss for the period | $ | (1,461) | $ | (7,403) | $ | (2,693) | $ | (11,627) | |
Basic and diluted loss per common share | $ | (0.02) | $ | (0.11) | $ | (0.04) | $ | (0.17) | |
Weighted average common shares outstanding - basic (thousands) | 65,819 | 65,744 | 65,798 | 65,823 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Expressed in thousands of United States dollars
(Unaudited)
Number of | Accumulated | Deficit | |||||||||
Share capital | Contributed | other | |||||||||
shares | Total | ||||||||||
(000s) | surplus | comprehensive | |||||||||
income (loss) | |||||||||||
Balance at December 31, 2021 | 65,931 | $ | 88,259 | $ | 11,603 | $ | 1,763 | $ | (75,657) | $ | 25,968 |
Shares cancelled (NCIB) | (200) | (278) | - | - | (207) | (485) | |||||
Share-based compensation | - | - | 390 | - | - | 390 | |||||
Net loss | - | - | - | - | (11,179) | (11,179) | |||||
Other comprehensive loss | - | - | - | (448) | - | (448) | |||||
Balance at September 30, 2022 | 65,731 | $ | 87,981 | $ | 11,993 | $ | 1,315 | $ | (87,043) | $ | 14,246 |
Shares cancelled (NCIB) | (8) | (11) | - | - | - | (11) | |||||
Common shares issued on DSU vesting | 20 | 51 | (51) | - | - | - | |||||
Share-based compensation | - | - | 145 | - | - | 145 | |||||
Net loss | - | - | - | - | (797) | (797) | |||||
Other comprehensive loss | - | - | - | 87 | - | 87 | |||||
Balance at December 31, 2022 | 65,743 | $ | 88,021 | $ | 12,087 | $ | 1,402 | $ | (87,840) | $ | 13,670 |
Common shares issued on RSU vesting | 76 | 185 | (185) | - | - | - | |||||
Share-based compensation | - | - | 394 | - | - | 394 | |||||
Net loss | - | - | - | - | (2,716) | (2,716) | |||||
Other comprehensive income | - | - | - | 23 | - | 23 | |||||
Balance at September 30, 2023 | 65,819 | $ | 88,206 | $ | 12,296 | $ | 1,425 | $ | (90,556) | $ | 11,371 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of United States dollars
(Unaudited)
For the nine months ended | Note | September 30, 2023 | September 30, 2022 | |
Operating activities | ||||
Loss for the period | $ | (2,716) | $ | (11,179) |
Interest received | ||||
Non-cash items: | ||||
Accretion and interest expense | 1,068 | 1,768 | ||
Depreciation, depletion and amortization | 10,136 | 17,262 | ||
Change in provision for reclamation and rehabilitation | 8 | 19 | ||
Writedown of inventory | 1,169 | 769 | ||
Lease interest | 14 | 2 | ||
Change in fair value of derivative liability | 281 | (70) | ||
Gain on gold stream derivative asset | 122 | 122 | ||
Share-based payments | 395 | 390 | ||
Unrealized foreign exchange loss | 38 | (546) | ||
$ | 10,515 | $ | 8,537 | |
Changes in non-cash working capital | 16 | (7,680) | 4,824 | |
Net cash provided by operating activities | 2,835 | 13,361 | ||
Investing activities | ||||
Expenditures on mineral property, plant and equipment | (3,250) | (6,654) | ||
Net cash used in investing activities | $ | (3,250) | $ | (6,654) |
Financing activities | ||||
Purchase of common shares - NCIB | - | (485) | ||
Sailfish Silver Loan | 6,000 | - | ||
Repayment of Sailfish Silver Loan | (372) | - | ||
Repayment of Sailfish Loan and derivative liability | (3,025) | (3,391) | ||
Wexford Loan Drawdown | 2,000 | - | ||
Repayment of Wexford Loan | (4,000) | (4,000) | ||
Payments on lease liability | (73) | - | ||
Net cash from (used in) financing activities | $ | 530 | $ | (7,876) |
Effect of foreign exchange on cash and cash equivalents | 22 | (71) | ||
Change in cash and cash equivalents | 137 | (1,240) | ||
Cash and cash equivalents, beginning of period | 523 | 1,944 | ||
Cash and cash equivalents, end of period | $ | 660 | $ | 704 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
1. NATURE OF OPERATIONS
Mako Mining Corp. ("Mako" or the "Company") was incorporated on April 1, 2004, under the laws of the Yukon Territory and continued into British Columbia under the British Columbia Corporations Act. The Company is listed on the TSX Venture Exchange ("TSX-V") under the symbol MKO. The address of the Company's corporate office and principal place of business is Suite 700 - 838 West Hastings Street, Vancouver, BC, V6C 0A6, Canada.
Mako is a gold mining and exploration company. The Company's primary asset is the San Albino mine, an open pit mine located in Nicaragua, which commenced commercial production on July 1, 2021. In addition to its mining operation, Mako continues to explore its other concessions in Nicaragua.
On March 8, 2023, the Company effected the consolidation of all of its issued and outstanding common shares on the basis of one new common share for ten previously issued and outstanding common shares.
2. BASIS OF PRESENTATION
- Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), as applicable to the preparation of interim financial statements including International Accounting Standard ("IAS") 34, Interim Financial Reporting. Accordingly, they do not include all the information and notes to the consolidated financial statements required by IFRS for annual financial statements and should be read in conjunction with the Company's most recent audited consolidated financial statements for the year ended December 31, 2022.
These condensed interim consolidated financial statements were approved for issuance by the Board of Directors on November 10, 2023.
(b) Basis of presentation
The accounting policies and methods used in the preparation of these condensed interim consolidated financial statements are the same as those applied in the Company's most recent audited consolidated financial statements for the year ended December 31, 2022.
These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at fair value.
- Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances, revenues and expenses have been eliminated upon consolidation.
Subsidiaries are included in the condensed interim consolidated financial statements from the date of acquisition or control until the date of disposition or until control ceases. Control exists when the Company has exposure or rights to variable returns from its involvement with an entity, and the ability to affect those returns through its power over the entity.
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
The condensed interim consolidated financial statements of the Company include the following subsidiaries:
Referred | Place of | Ownership | ||
Subsidiary | to as | incorporation | interest | Principal activity |
Gold Belt, S.A. | "Gold Belt" | Nicaragua | 100% | Holds mineral interest in Nicaragua, exploration |
activities. | ||||
Nicoz Resources, S.A. | "Nicoz" | Nicaragua | 100% | Holds mineral interest in Nicaragua, San Albino |
mine and exploration activities. | ||||
Mako US Corp. | "Mako US" | United States | 100% | Incorporated on June 19, 2019, service company |
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of these condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Outlined below are the key areas which require management to make significant estimates and assumptions in determining carrying values.
(a) Estimated mineral resources
Mineral resources are estimates of the amount of metal that can be extracted from the Company's properties, considering both economic and legal factors. The Company estimates the quantity and/or grade of its mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires judgments to interpret the complex geological data. Calculating mineral resources is based upon factors such as estimates of metallurgical recoveries along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the mineral resources may affect the Company's financial position in a number of ways, including:
- asset carrying values may be affected due to changes in estimated future cash flows;
- depreciation charges in the Company's consolidated statement of comprehensive income (loss) may change when such charges are determined by the unit-of-production basis, or when the useful lives of assets change; and
- provision for reclamation liabilities balances may be affected as the estimated timing of reclamation activities is adjusted for changes in the estimated mine life as determined by the available mineral resources.
- Silver obligations
The carrying value of the Sailfish Silver Loan represents management's best estimate of the fair value of the arrangement. The fair value incorporates estimates of silver prices and discount rates. Judgment was made in determining that it's a derivative. (Refer to note 10(c)).
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
(c) Deferred income taxes
The determination of income tax expense and deferred income tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretation of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred income taxes or the timing of tax payments.
(d) Impairment of non-current assets
Management applies significant judgment in its assessment and evaluation of asset or cash generating units at each reporting date to determine whether there are any indications of impairment. The Company considers both internal and external sources of information when making the assessment of whether there are indications of impairment for the Company's mineral properties, plant and equipment. External sources of information considered are changes in the Company's economic, legal and regulatory environment, which it does not control, but affect the recoverability of its mining assets. Internal sources of information the Company considers include the manner in which mining properties and plant and equipment are being used or are expected to be used and indications of economic performance of the assets. Calculating the fair value less costs of disposal of cash generating units for impairment tests requires management to make estimates and assumptions with respect to future production levels, operating, capital and closure costs, future metal prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis.
(e) Reclamation and remediation provisions
Reclamation and remediation provisions represent the present value of estimated future costs for the reclamation of the Company's mines and properties. These estimates include assumptions as to the cost of services, timing of the reclamation work to be performed, inflation rates, foreign exchange rates and interest rates. The reclamation and closure estimates are more uncertain the further into the future the activities are to be performed.
The actual cost to reclaim a mine may vary from the estimated amounts because there are uncertainties in factors used to estimate the cost and potential changes in regulations or laws governing the reclamation of a mine. Management periodically reviews the reclamation requirements as new information becomes available and will assess the impact of new regulations and laws as they are enacted. Any changes to assumptions will result in an adjustment to the provision which affects the Company's liabilities and either its mineral property, plant and equipment or statement of income.
(f) Depreciation, depletion and amortization
The Company uses the units of production method to deplete mineral properties and the straight-line method to amortize plant and equipment. The calculation of the unit of production rate and the useful life and residual values of plant and equipment, and therefore the annual depletion and depreciation expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of changes in the Company's mine plans, changes in the estimation of mineral resources and changes in the estimated remaining life or residual value of plant and equipment.
(g) Stockpiled ore and ore in-circuit net realizable value
Management applies significant judgment in developing the net realizable value ("NRV") of stockpiled ore and ore in-circuit inventory, including assumptions related to estimated recoverable ounces of gold within stockpiled ore
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
and ore in-circuit inventory, the estimated forecasted gold price per ounce, estimated costs of completion and selling expenses.
4. RECEIVABLES
As at | September 30, 2023 | December 31, 2022 | |||
Trade receivable | $ | 311 | $ | 1,098 | |
Other | 205 | 82 | |||
$ | 516 | $ | 1,180 | ||
5. INVENTORIES | |||||
As at | September 30, 2023 | December 31, 2022 | |||
Stockpiled ore | $ | 13,252 | $ | 5,737 | |
Ore in-circuit | 1,267 | 1,566 | |||
Finished metal | 2,365 | 261 | |||
Supplies and spare parts | 2,911 | 2,407 | |||
$ | 19,795 | $ | 9,971 |
As at September 30, 2023, ore in-circuit, finished metal and stockpiled ore was recorded at cost. As at December 31, 2022, ore in-circuit and finished metal were recorded at cost, and stockpiled ore was recorded at NRV. During the three and nine months ended September 30, 2023, stockpiled ore was written down by $nil and $1,168,593 (2022
- $769,124 and $769,124), respectively.
6. GOLD STREAM DERIVATIVE ASSET
Gold stream derivative asset arises from the amended gold stream agreement the Company entered into with Sailfish Royalty Corp ("Sailfish") (also refer to note 13(d)) in November 2018 whereby the Company received $1,096,051 (the "Gold Stream Advance") which was recorded as a credit to the mineral property. At that time, it was determined to be a disposition of mineral interest. In return for the Gold Stream Advance, the Company is required to deliver 4% of gold production to Sailfish and is to receive a payment at 25% of the market price of the gold delivered. Effectively the Company sold 4% of the property and is being paid for services relating to the processes required to obtain the finished metal. As the price of gold is not closely related to the price of the services being provided, the contract to provide these services contains an embedded derivative that requires separation from the host contract.
The contract to deliver to Sailfish its 4% of gold production, in return for 25% of the market value of the gold delivered, contains an embedded derivative that was previously of minimal value. This derivative consists of a "swap" of the variable payment based on the price of gold for the fixed price implied by the contract. As at September 30, 2023, this derivative was determined to be an asset of $223,320 (December 31, 2022 - $345,696) based on current spot and future gold prices, and projected deliveries under the contract, all of which is disclosed as a current asset in the statement of financial position.
For the three and nine months ended September 30, 2023, the Company delivered a total of 254 and 860 (2022 - 347 and 1,050) ounces of gold, respectively to Sailfish, pursuant to this agreement. In exchange the Company received $122,507 and $414,747 (2022 - $150,225 and $479,418), resulting in a fair value movement on the
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
derivative of a gain of $13,765 and a loss $31,746 (2022 - loss of $40,831 and $121,897) for the three and nine months ended September 30, 2023, respectively.
7. EXPLORATION AND EVALUATION ASSETS
The following exploration and evaluation assets (acquisition costs) are located in Nicaragua:
Potrerillos | El Jicaro | Total | ||||
Balance, September 30, 2023 and December 31, 2022 | $ | 645 | $ | 120 | $ | 765 |
8. MINERAL PROPERTY, PLANT AND EQUIPMENT
Mineral | Plant | Land and | Equipment | Right-of-use | Total | |||||||
property | Building | asset | ||||||||||
Cost | ||||||||||||
As at December 31, 2021 | $ | 10,309 | $ | 38,044 | $ | 3,247 | $ | 1,662 | $ | - | $ | 53,262 |
Additions | - | 780 | 2,144 | 1,916 | 353 | 5,193 | ||||||
Asset retirement obligation | 499 | - | - | - | - | 499 | ||||||
Foreign currency translation adjustment | (259) | (82) | - | - | - | (341) | ||||||
Deferred stripping | 4,259 | - | - | - | - | 4,259 | ||||||
As at December 31, 2022 | $ | 14,808 | $ | 38,742 | $ | 5,391 | $ | 3,578 | $ | 353 | $ | 62,872 |
Additions | - | 77 | 244 | 243 | - | 564 | ||||||
Asset retirement obligation | (11) | 135 | - | - | - | 124 | ||||||
Deferred stripping | 3,798 | - | - | - | - | 3,798 | ||||||
As at September 30, 2023 | $ | 18,595 | $ | 38,954 | $ | 5,635 | $ | 3,821 | $ | 353 | $ | 67,358 |
Accumulated depreciation | ||||||||||||
As at December 31, 2021 | $ | 2,643 | $ | 5,632 | $ | 124 | $ | 1,101 | $ | - | $ | 9,500 |
Depreciation | 6,695 | 14,554 | $ | 22 | 787 | 29 | 22,087 | |||||
Foreign currency translation adjustment | (179) | (35) | - | - | - | (214) | ||||||
As at December 31, 2022 | $ | 9,159 | $ | 20,151 | $ | 146 | $ | 1,888 | $ | 29 | $ | 31,373 |
Depreciation | 8,954 | 5,465 | 29 | 439 | 66 | 14,953 | ||||||
As at September 30, 2023 | $ | 18,113 | $ | 25,616 | $ | 175 | $ | 2,327 | $ | 95 | $ | 46,326 |
Net book value as at December 31, 2021 | $ | 7,666 | $ | 32,412 | $ | 3,123 | $ | 561 | $ | - | $ | 43,762 |
Net book value as at December 31, 2022 | $ | 5,649 | $ | 18,591 | $ | 5,245 | $ | 1,690 | $ | 324 | $ | 31,499 |
Net book value as at September 30, 2023 | $ | 482 | $ | 13,338 | $ | 5,460 | $ | 1,494 | $ | 258 | $ | 21,032 |
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Mako Mining Corp. published this content on 10 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 November 2023 16:01:03 UTC.