NEVADA ZINC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2022
AUGUST 29, 2022
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Introduction
The following interim management's discussion and analysis ("MD&A") of Nevada Zinc Corporation ("Nevada Zinc" or the "Company") for the three and six month periods ended June 30, 2022, has been prepared to provide material updates to the business operations, liquidity and capital resources of the Company since its last annual MD&A for the fiscal year ended December 31, 2021. This interim MD&A does not provide a general update to the annual MD&A, or reflect any non-material events since the date of the annual MD&A.
This interim MD&A has been prepared in compliance with section 2.2.1 of Form 51-102F1, in accordance with National Instrument 51-102 - Continuous Disclosure Obligations. This discussion should be read in conjunction with the Company's annual MD&A, audited annual financial statements for the years ended December 31, 2021, and December 31, 2020, together with the notes thereto, and the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2022, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. The Company's unaudited condensed consolidated interim financial statements and the financial information contained in this interim MD&A are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and interpretations of the IFRS Interpretations Committee. The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Standard 34, Interim Financial Reporting. Information contained herein is presented as of August 29, 2022, unless otherwise indicated.
For the purposes of preparing this interim MD&A, management, in conjunction with the Board of Directors (the "Board"), considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Nevada Zinc's common shares; (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.
Further information about the Company and its operations can be obtained from the offices of the Company or on SEDAR at www.sedar.com.
Cautionary Note Regarding Forward-Looking Statements
This MD&A contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as "forward-looking statements"). These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates" or "believes", or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statement. The following table outlines certain significant forward-looking statements contained in this MD&A and provides the material assumptions used to develop such forward-looking
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statements and material risk factors that could cause actual results to differ materially from the forward looking statements.
Forward-looking | Assumptions | Risk factors | |||||||||||||||||||
statements | |||||||||||||||||||||
Nevada | Zinc's | Lone | Financing will be available for future | Availability | of | financing | for | ||||||||||||||
Mountain | property | may | development | and | exploration | of | Nevada Zinc's development and | ||||||||||||||
contain economic | deposits | Nevada Zinc's Lone Mountain | exploration | activities; | zinc | ||||||||||||||||
of zinc and other base | deposit; the actual results of | chemicals off-take price volatility; | |||||||||||||||||||
metals and the Company | Nevada Zinc's development studies | market | penetration; | increases in | |||||||||||||||||
may | economically | produce | will be favourable; the deposit's | costs; | environmental | compliance | |||||||||||||||
zinc | sulfate | from | the | mineralized material will be suitable | and | changes | in | environmental | |||||||||||||
deposit. | for | making | zinc | chemicals, | and other local legislation and | ||||||||||||||||
operating, | and | development | costs | regulation; | changes in economic | ||||||||||||||||
will not exceed Nevada Zinc's | conditions; the Company's | ability | |||||||||||||||||||
expectations; the Company will be | to retain and attract skilled staff. | ||||||||||||||||||||
able to retain and attract skilled | |||||||||||||||||||||
staff; all requisite regulatory and | |||||||||||||||||||||
governmental | approvals will | be | |||||||||||||||||||
received on a timely basis upon | |||||||||||||||||||||
terms acceptable to Nevada Zinc, | |||||||||||||||||||||
and | economic | conditions | are | ||||||||||||||||||
favourable to Nevada Zinc; the off- | |||||||||||||||||||||
take price for zinc based | |||||||||||||||||||||
micronutrient | products | will | be | ||||||||||||||||||
favourable to Nevada Zinc; no title | |||||||||||||||||||||
disputes exist or will exist with | |||||||||||||||||||||
respect | to | the | Company's | ||||||||||||||||||
properties. | |||||||||||||||||||||
The Company will be able | The | development | and | operating | Availability of sufficient cash and | ||||||||||||||||
to | carry | out | anticipated | activities of the Company for the | cash | equivalents | and availability | ||||||||||||||
business | plans, | including | twelve month period ending May 27, | of | external | financing | on | ||||||||||||||
the funding of development | 2023, and the funding of the costs | acceptable | terms; zinc chemical | ||||||||||||||||||
studies | and | exploration | associated therewith will be funded | price volatility, changes in equity | |||||||||||||||||
costs on its Lone Mountain | from the Company's cash and cash | markets; | the | uncertainties | |||||||||||||||||
property, | completion | of its | equivalents and equity raises; the | involved in interpreting geological | |||||||||||||||||
pilot | plant | study | and | Company will be able to retain and | data and confirming title to | ||||||||||||||||
subsequent studies leading | attract skilled staff; all applicable | acquired properties; | increases in | ||||||||||||||||||
to an ultimate | construction | regulatory | and | governmental | costs; | environmental | compliance | ||||||||||||||
decision. | approvals | for | exploration | and | and | changes | in | environmental | |||||||||||||
development | projects | and | other | and other local legislation and | |||||||||||||||||
operations will be received on a | regulation; | changes | in economic | ||||||||||||||||||
timely basis upon terms acceptable | conditions; the Company may be | ||||||||||||||||||||
to Nevada Zinc; the Company | will | unable to retain and attract skilled | |||||||||||||||||||
not be adversely affected by market | staff; receipt of applicable permits. | ||||||||||||||||||||
competition; the price of zinc | |||||||||||||||||||||
chemicals will be favourable to | |||||||||||||||||||||
Nevada Zinc; no title disputes exist | |||||||||||||||||||||
with respect to Nevada Zinc's Lone | |||||||||||||||||||||
Mountain property. |
Inherent in forward-looking statements are risks, uncertainties and other factors beyond Nevada Zinc's ability to predict or control. Please also make reference to those risk factors referenced in the "Risks and
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Uncertainties" section below. Readers are cautioned that the above chart does not contain an exhaustive list of the factors or assumptions that may affect the forward-looking statements, and that the assumptions underlying such statements may prove to be incorrect. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Nevada Zinc's actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking statements. All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law.
Description of Business
Nevada Zinc is a Canadian-based resource company focused on the exploration and development of its high-grade zinc carbonate-oxide deposit located near Eureka, Nevada. The Company has a 100% ownership interest in the Lone Mountain zinc property comprised of a lease agreement (the "Lease Agreement") assigned to the Company on June 16, 2014. The Lease Agreement applies to 176 claims in Eureka County, Nevada. Under the terms of the Lease Agreement, Nevada Zinc has the right to continually lease the property for an initial 20 year term, subject to lease extensions at the end of the initial lease term and the end of subsequent lease extensions at the option of the Company. On September 30, 2015, the Company announced the purchase of the historic Mountain View Mine property that was, to that point, completely surrounded by other claims held by the Company. The Mountain View Mine property is comprised of a single patented mineral claim where historic mining operations took place more than 50 years ago. As a result of the transactions described above, plus additional staking of 26 unpatented mining claims, the Company now controls 202 claims with the Lone Mountain property now aggregating to more than 4,000 acres in one of the world's top ranked mining jurisdictions. Nevada Zinc released its initial inferred resource in July 2018, and in June 2019, the Company announced positive preliminary economic assessment results for the production of zinc concentrate from its Lone Mountain zinc deposit.
Nevada Zinc is now actively assessing the potential to economically produce zinc chemicals for the US agricultural industry from its Lone Mountain zinc carbonate-oxide deposit. This potentially represents to the Company a superior economic alternative to producing and selling zinc concentrate for the production of zinc metal. In March 2021, Nevada Zinc announced the engagement of Hazen Research, Inc. ("Hazen"), Golden, Colorado, to conduct a multiphase pilot program to determine if the Company can economically produce zinc sulfate monohydrate, a micronutrient zinc-based fertilizer and animal feed from its Lone Mountain zinc carbonate-oxide deposit. The pilot program's scope is to develop a process flowsheet using representative bulk sample material from the Lone Mountain zinc project site to produce commercial grade zinc sulfate monohydrate product samples, and to provide process plant capital and operating cost estimates. In September 2021, the Company announced that Hazen had successfully produced bench scale high-grade zinc sulfate monohydrate from the Company's Lone Mountain zinc carbonate-oxide deposit. This was one of the key objectives of the Hazen pilot program. In April of 2022 Hazen began the final phase pf the pilot plant process with the objective to economically produce approximately 100 pounds of zinc sulfate monohydrate. The pilot plant work is projected to be completed by the end of October 2022.
Overall Performance
The Company had a net and comprehensive loss of $304,148 and $501,908 for the three and six months ended June 30, 2022 compared to a net and comprehesive loss of $319,449 and $624,954 for the three
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and six months ended June 30, 2021. The reduction in the year over year loss for the six months ended June 30, 2022 of approximately $123,000 is primarily attributable to an absence of share based payments in 2022 compared to $175,000 in 2021 offset by an increase in professional fees and G&A expense for the six month period ended June 30, 2022.
The Company had consolidated exploration, acquisition and development costs of $173,702 and $238,725 and an operating loss of $304,088 and $501,776 for the three and six months ended June 30, 2022, respectively, compared to exploration, acquisition and development costs of $208,810 and $249,863 and an operating loss of $319,383 and $636,517 for the three and six months ended June 30, 2021, respectively. On a consolidated basis, the Company had total assets of $312,169 (the Company expenses all of its exploration and acquisition costs), total liabilities of $472,647 and a shareholders' deficiency of $160,478 as at June 30, 2022, compared to total assets of $58,232, total liabilities of $842,754 and a shareholders' deficiency of $784,522 as at December 31, 2021.
As at June 30, 2022, the Company had current assets of $290,796 compared to current assets of $36,859 as at December 31, 2021, and current liabilities of $472,647 as at June 30, 2022, compared to current liabilities of $842,754 as at December 31, 2021, resulting in a working capital deficit of $181,851 as at June 30, 2022, compared to a working capital deficit of $805,895 as at December 31, 2021.
The increase in total assets and the reduction in shareholders' deficiency and working capital deficiency, and decrease in total liabilities as at June 30, 2022 versus December 31, 2021 were primarily due to the February 14, 2022 equity financing for gross proceeds of $750,000 and the March 22, 2022 issue of 5,197,813 common shares at a price of $0.075 per share in consideration for the settlement of $389,836 of accrued liabilities.
Significant Developments
On September 20, 2021, the Company announced that Hazen had successfully produced bench scale high-grade zinc sulfate monohydrate from the Company's Lone Mountain zinc carbonate-oxide deposit. This was one of the key objectives of the Hazen pilot program.
On February 14, 2022, the Company announced the closing of a private placement unit financing for gross proceeds of $750,000 to fund the completion of the Hazen pilot program, payment of the annual lease payment on the Llone Mountain property, federal and county claim renewal payments and for general working capital purposes. The unit financing, priced at $0.075 per unit, consisted of one common share and one half of one common share purchase warrant. The holder of a full warrant is entitled to purchase a common share of the Company at an exercise price of $0.14 per common share. The 18 month warrants have an expiry date of August 12, 2023. The Company may elect to accelerate the expiry date of the warrants in the event the closing price of Nevada Zinc's common shares equals or exceeds $0.28 for ten consecutive trading days in which case the warrants wil expire 60 days after the date on which the Company provides written notice of acceleration.
On March 22, 2022, Nevada Zinc announced that it had issued an aggregate of 5,197,813 common shares at a deemed price of $0.075 per common share, in consideration for the settlement of an aggregate of $389,836 in accrued liabilities owing to certain of its creditors in respect of intercorporate debts and management fees. A majority of the debt settlement, namely $332,236, was accrued as an intercorporate loan advanced by Olive Resource Capital Inc. ("Olive" formerly Norvista Capital Corporation) and affiliated entities to the Company, in connection with the Company's mineral lease payments and mining claims maintenance fees paid over the course of 2019, and 2020. Following the debt settlement Olive holds, directly or indirectly, 17,927,406 common shares, representing approximately 18.02% of the Company's common shares issued and outstanding on a non-diluted basis as of the date of this MD&A. Olive increased its position in the Company for investment purposes, and in accordance with applicable securities laws, and depending on market and other conditions, Olive may from time to
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Nevada Zinc Corp. published this content on 31 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 August 2022 20:20:05 UTC.