(“Amaroq” or the “Corporation” or the “Company”)
Q3 2023 Financial Results
Successful commencement of mine
rehabilitation activities at Nalunaq
TORONTO, ONTARIO – 14 November 2023 - Amaroq
Minerals Ltd. (AIM, TSXV, NASDAQ Iceland: AMRQ), an independent
mine development company with a substantial land package of gold
and strategic mineral assets in Southern Greenland, is pleased to
present its Q3 2023 Financial Results.
Q3 2023 Corporate
Highlights
- Amaroq group liquidity of $115
million (cash (gold and strategic minerals businesses), convert,
loan and overrun facility).
- Gold business working capital of
$59 million as of September 30, 2023 ($41 million as at June 30,
2023).
- The Strategic minerals business has
available liquidity of $22.5 million ($29.3 million as at June 30,
2023).
- Closing of US$50.9 million senior
secured debt funding package, enabling the staged transition
production at the Nalunaq gold project.
- Amaroq successfully completed the
transfer of its Icelandic listing from Nasdaq First North Growth
Market to the Nasdaq Main Market in September 2023
- Completion of most successful
drilling program at Nalunaq to date, underpinning potential for
faster resource growth in Nalunaq.
- Significant expansion of mineral
license holding in South Greenland following the award of two
additional mineral exploration licences.
Q3 2023 Operational
Highlights
- Contracting:
At the end of Q3 2023, contracting for the processing plant,
infrastructure, and construction, as well as underground mine
rehabilitation and mining, was 75% complete.
- Engineering:
Processing plant engineering was 63% complete at the end of Q3
2023, accounting for some additional scope and optimisation
procedures within the core engineering workstreams.
- Construction:
Process Plant pad construction neared completion. The Nalunaq camp
expansion and upgrade was well underway with the assembly of an
additional 30-person, winterized accommodation block completed.
Components for the processing plant are arriving to site on
schedule.
- Mining:
Procurement of all required equipment and machinery for mine
rehabilitation was completed. Mine rehabilitation works commenced
in October 2023.
- Nalunaq
Exploration: The 1,735m resource drilling programme at the
Mountain Block extension was completed. This included the highest
ever grade of a Main Vein intercept at 182g/t Au over 0.69m.
Drilling confirmed the existence of the parallel ‘75 Vein’ in the
hanging wall, with grades of up to 256g/t Au over 0.5m.
- Strategic
Minerals: Amaroq completed the scout drilling programme
across two targets at the Sava Copper Belt and commenced the
Stendalen stratigraphic drilling.
Nalunaq Project KPIs
- 33, 684 total hours worked
during Q3 2023.
- Daily average of 32 people
working on site at Nalunaq over the period.
- Zero Lost Time Injuries in
year-to-date 2023.
- Committed to ensuring local
representation among the workforce, with the ratio of Greenlandic
personnel at Nalunaq standing at 59% in year-to-date 2023.
- A further update on progress at
Nalunaq will be provided later in 2023.
Q4 2023
Outlook
- Permitting:
The public consultation for the Environmental Impact Assessment
(EIA) and Social Impact Assessment (SIA) for Nalunaq is expected to
take place in Q4 2023.
- Contracting:
Key contracting processes are expected to be 100% completed
following signing of the EPCM contract by the end of Q4 2023.
- Engineering:
Overall engineering for the processing plant is expected to be 85%
complete by the end of Q4 2023.
- Construction:
Targeting 50% overall completion by the end of Q4 2023, with
construction of the processing plant’s main building to commence in
Q4 2023.
- Mine
Rehabilitation: Rehabilitation of the Nalunaq Mine access
portals expected to be complete at the 300 level and 450 level,
alongside rehabilitation of the access ramp for 720 level in Q4
2023.
- Support
Infrastructure: Expansion and upgrade of the 50-person
Nalunaq base camp to 88-person expected to be completed by the end
of 2023.
- Nalunaq
Exploration: Further results from two additional sampled
intersections at the 75 Vein expected in Q4 2023.
- Strategic Minerals: Results from the Sava
drilling programme and initial results from the Stendalen
stratigraphic drilling are expected in Q4 2023 or Q1 2024.
Eldur Olafsson, CEO of Amaroq,
commented:
“We continue to make solid progress with our
development workplan to bring Nalunaq into production successfully
and sustainably. Post period, and following the finalization of two
key services contracts, we commenced mine rehabilitation activities
at the project, and I look forward to providing a fuller update on
Nalunaq later this year.
We remain focused on exploration across our
strategic minerals targets, and during the quarter we completed a
scout drilling programme across two key targets across the Sava
Copper Belt and commenced a stratigraphic drilling programme at the
Stendalen nickel-copper target, with results expected in Q4.”
Update on Q3 2023 Operational
Workplan
Nalunaq Development
Workplan
- Nalunaq
- Following the successful
mobilisation of equipment and personnel, mine rehabilitation works
are set to commence at Nalunaq in Q4 2023, including the
installation of all required mining services within the Mountain
Block, ahead of initial mining commencing next year.
- Following the finalisation of key
contracts and procurement of all major long lead items for the
processing plant, the Company plans to commence the construction of
the Processing Plant main building in Q4 2023.
- The expansion and upgrade of the
Nalunaq all-weather camp is expected to be completed by the end of
2023.
- The Company intends to provide a
further update on the Nalunaq Project Development programme later
in 2023.
Gold Exploration Projects
- Nalunaq
- Results from the completed Mountain Block drilling recorded the
Company's highest grade Main Vein intercept ever reported at 182g/t
Au over 0.69m during a programme to explore the up-dip extension of
the Mountain Block.
- New discovery of several Hanging Wall Veins intersected,
including 256g/t Au over 0.5m in the 75m Vein, showing similar
thickness to Main Vein, providing potential for further minable
bodies beyond the Main Vein.
- Amaroq further expects results from two additional sampled
intersections at the 75 Vein, which are currently being processed
by the laboratory.
- Further underground exploration is scheduled for Q4 2023 aimed
at opening up a new high grade mining extension from the Target
Block, which is located next to the Mountain Block.
- Nanoq
- ALS Goldspot conducted a full
review of the 2022 geophysical survey results to further define
existing and new gold targets, with further surface exploration and
site preparation for initial drilling to take place in 2024.
- Vagar Ridge
- Amaroq continues to progress the
construction of a robust geological and mineralisation model to
inform future exploration, including additional data collection and
review and further geological mapping and sampling.
Strategic Minerals Projects (Amaroq
51%)
- Sava Copper Belt
(Sava/North Sava)
- Scout drilling across the two key
targets in Sava, one assessing a copper-molybdenum porphyry style
and the other a copper-gold epithermal style target, continued
through the period and where completed with all core transported to
Nalunaq for logging and sampling. Results expected during Q4
2023.
- The Company additionally plans to
conduct a Gravity geophysical survey over the Sava licence area to
ensure full coverage of the prospective copper belt.
- Stendalen
- Following the review and
identification of a number of geophysical targets, a stratigraphic
drilling programme commenced at Stendalen during the quarter aimed
at intersecting both potential Platinum Group Metals and
nickel-copper sulphide mineralisation at depth.
- In order to realise this hole, a
remote camp operation has been set up on the bay leading to
Stendalen. Drilling of this hole is expected to be completed during
Q4.
- Kobberminebugt
- Following the completion of a
high-resolution MT survey over the entire licence, results are
expected in Q4 2023.
- Paatasoq
- Following the reconnaissance
exploration conducted over licence area to assess REE and critical
metal potential with the assistance of the University of St
Andrews, full results and interpretations are expected in Q4
2023.
Amaroq Financial
Results
The following selected financial data is extracted from the
Financial Statements for the three months ended September 30,
2023.
Financial Results
|
Three months ended September 30 |
Nine months ended September 30 |
|
2023$ |
2022$ |
2023$ |
2022$ |
Exploration and evaluation expenses |
2,277,540 |
5,567,361 |
5,737,256 |
11,003,192 |
Site development costs |
(1,825,441) |
- |
- |
- |
General and administrative |
2,632,041 |
1,859,725 |
8,015,257 |
6,946,432 |
(Gain) on loss of control of subsidiary |
- |
- |
(31,340,880) |
- |
Share of 3 and 9-months loss of an equity-accounted joint
arrangement |
3,381,749 |
- |
5,021,231 |
- |
Net income (loss) and comprehensive income (loss) |
(6,555,222) |
(7,012,481) |
13,425,594 |
(17,472,618) |
Basic and diluted income (loss) per common share |
(0.02) |
(0.04) |
0.04 |
(0.10) |
Financial Position
|
As at September 30 |
As at June 30 |
|
2023$ |
2023$ |
Cash on hand |
53,655,954 |
39,669,852 |
Total assets |
111,193,232 |
87,686,844 |
Total current liabilities (before convertible notes liability) |
2,818,672 |
2,980,657 |
Shareholders’ equity |
77,982,519 |
84,089,457 |
Working capital (before convertible notes liability) |
58,690,730 |
41,017,725 |
Gold business liquidity (excludes $22.5M ring-fenced for strategic
mineral exploration) |
92,353,824 |
39,669,852 |
Ends
Enquiries: Amaroq Minerals
Ltd. Eldur Olafsson, Executive Director and
CEO eo@amaroqminerals.com Eddie
Wyvill, Corporate Development+44 (0)7713
126727 ew@amaroqminerals.com Stifel
Nicolaus Europe Limited (Nominated Adviser and
Broker) Callum Stewart Varun
Talwar Simon Mensley Ashton
Clanfield +44 (0) 20 7710
7600 Panmure Gordon (UK) Limited
(Joint Broker) John Prior Hugh
Rich Dougie Mcleod +44 (0) 20 7886
2500 Landsbankinn hf. (Listing
Agent) Ellert
Arnarson Ellert.Arnarson@landsbankinn.is
Camarco (Financial PR) Billy
Clegg Elfie Kent Charlie
Dingwall +44 (0) 20 3757 4980
For Company updates: Follow
@Amaroq_minerals on Twitter Follow Amaroq Minerals Inc.
on LinkedIn
Further Information:
About Amaroq Minerals
Amaroq Minerals' principal business objectives
are the identification, acquisition, exploration, and development
of gold and strategic metal properties in Greenland. The Company's
principal asset is a 100% interest in the Nalunaq Project, a
development stage property with an exploitation license including
the previously operating Nalunaq gold mine. The Corporation has a
portfolio of gold and strategic metal assets in Southern Greenland
covering the two known gold belts in the region. Amaroq Minerals is
incorporated under the Canada Business Corporations Act and wholly
owns Nalunaq A/S, incorporated under the Greenland Public Companies
Act.
Certain statements in this release constitute
"forward-looking statements" or "forward-looking information"
within the meaning of applicable securities laws. Such statements
and information involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or
achievements of the company, its projects, or industry results, to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements or information. Such statements can be identified by the
use of words such as "may", "would", "could", "will", "intend",
"expect", "believe", "plan", "anticipate", "estimate", "scheduled",
"forecast", "predict" and other similar terminology, or state that
certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved. These statements reflect
the Company's current expectations regarding future events,
performance and results and speak only as of the date of this
release.
Forward-looking statements and information
involve significant risks and uncertainties, should not be read as
guarantees of future performance or results and will not
necessarily be accurate indicators of whether or not such results
will be achieved. A number of factors could cause actual results to
differ materially from the results discussed in the forward-looking
statements or information, including, but not limited to: material
adverse changes, unexpected changes in laws, rules or regulations,
or their enforcement by applicable authorities; the failure of
parties to contracts with the company to perform as agreed; social
or labour unrest; changes in commodity prices; and the failure of
exploration, refurbishment, development or mining programs or
studies to deliver anticipated results or results that would
justify and support continued exploration, studies, development or
operations.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Glossary
Ag |
silver |
Au |
gold |
Bt |
Billion tonnes |
Cu |
copper |
g |
grams |
g/t |
grams per tonne |
km |
kilometers |
Koz |
thousand ounces |
m |
meters |
Mo |
molybdenum |
MRE |
Mineral Resource Estimate |
Nb |
niobium |
Ni |
nickel |
oz |
ounces |
REE |
Rare Earth Elements |
t |
tonnes |
Ti |
Titanium |
t/m3 |
tonne per cubic meter |
U |
uranium |
USD/ozAu |
US Dollar per ounce of gold |
V |
Vanadium |
Zn |
zinc |
Inside Information
This announcement contains inside information
for the purposes of Article 7 of the UK version of
Regulation (EU) No. 596/2014 on Market Abuse ("UK MAR"), as it
forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018, and Regulation
(EU) No. 596/2014 on Market Abuse ("EU MAR").
Qualified Person Statement
The technical information presented in this
press release has been approved by James Gilbertson CGeol, VP
Exploration for Amaroq Minerals and a Chartered Geologist with the
Geological Society of London, and as such a Qualified Person as
defined by NI 43-101.
Amaroq Minerals Ltd.
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS For the three and nine months ended
September 30, 2023
The attached financial statements have been
prepared by Management of Amaroq Minerals Ltd. and have not been
reviewed by the auditor
|
|
As at September 30, |
As at December 31, |
|
Notes |
2023 |
2022 |
|
|
$ |
$ |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash |
|
53,655,954 |
50,137,569 |
Due from a
related party |
14.1 |
1,529,406 |
- |
Sales tax
receivable |
|
65,712 |
95,890 |
Prepaid expenses and others |
|
6,258,331 |
450,290 |
Total current
assets |
|
61,509,403 |
50,683,749 |
Non-current assets |
|
|
|
Deposit |
|
27,944 |
27,944 |
Deposit on
order |
|
- |
- |
Investment in
equity-accounted joint arrangement |
3 |
26,363,967 |
- |
Escrow account
for environmental monitoring |
|
585,545 |
427,120 |
Mineral
properties |
4 |
48,821 |
85,579 |
Capital assets |
5 |
22,657,552 |
13,871,669 |
Total non-current
assets |
|
49,683,829 |
14,412,312 |
TOTAL ASSETS |
|
111,193,232 |
65,096,061 |
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts
payable and accrued liabilities |
|
2,740,161 |
1,138,961 |
Convertible
notes |
6 |
29,794,898 |
- |
Current portion of lease liabilities |
7 |
78,509 |
71,797 |
Total current
liabilities |
|
32,613,568 |
1,210,758 |
Non-current liabilities |
|
|
|
Lease liabilities |
7 |
597,145 |
657,440 |
Total non-current
liabilities |
|
597,145 |
657,440 |
Total liabilities |
|
33,210,713 |
1,868,198 |
Equity |
|
|
|
Capital
stock |
|
132,117,971 |
131,708,387 |
Contributed
surplus |
|
6,170,307 |
5,250,865 |
Accumulated
other comprehensive loss |
|
(36,772) |
(36,772) |
Deficit |
|
(60,268,987) |
(73,694,617) |
Total equity |
|
77,982,519 |
63,227,863 |
TOTAL LIABILITIES
AND EQUITY |
|
111,193,232 |
65,096,061 |
Subsequent events |
17 |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements.
|
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
Notes |
2023 |
2022 |
2023 |
2022 |
|
|
$ |
$ |
$ |
$ |
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Exploration and
evaluation expenses |
10 |
2,277,540 |
5,567,361 |
5,737,257 |
11,003,192 |
Site
development costs |
11 |
(1,825,564) |
- |
- |
- |
General and
administrative |
12 |
2,632,041 |
1,859,725 |
8,015,379 |
6,946,432 |
Loss on disposal
of capital assets |
|
- |
- |
37,791 |
- |
Foreign
exchange loss (gain) |
|
83,882 |
(391,133) |
58,707 |
(417,826) |
Operating loss |
|
3,167,899 |
7,035,953 |
13,849,134 |
17,531,798 |
Other
expenses (income) |
|
|
|
|
|
Interest
income |
|
(141,443) |
(32,837) |
(613,031) |
(87,554) |
Project
management income |
14 |
(601,461) |
- |
(1,108,101) |
- |
Gain on loss of
control of subsidiary |
3 |
- |
- |
(31,340,880) |
- |
Share of loss
of an equity-accounted joint arrangement |
3 |
3,381,749 |
- |
5,021,231 |
- |
Finance costs |
13 |
748,478 |
9,365 |
766,053 |
28,374 |
|
|
|
|
|
|
Net income (loss) and comprehensive income
(loss) |
|
(6,555,222) |
(7,012,481) |
13,425,594 |
(17,472,618) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic |
|
263,579,331 |
177,341,889 |
263,356,034 |
177,184,305 |
Weighted
average number of common shares outstanding – diluted |
|
306,335,274 |
186,779,284 |
306,111,977 |
186,621,700 |
Basic earnings
(loss) per share |
15 |
(0.02) |
(0.04) |
0.05 |
(0.10) |
Diluted earnings (loss) per common share |
15 |
(0.02) |
(0.04) |
0.04 |
(0.10) |
Effect of dilution |
|
- |
- |
- |
- |
Share
options |
|
9,126,875 |
9,437,395 |
9,126,875 |
9,437,395 |
Convertible notes |
|
33,629,068 |
- |
33,629,068 |
- |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements.
|
Notes |
Number of common
sharesoutstanding |
CapitalStock |
Contributed surplus |
Accumulated other comprehensive loss |
Deficit |
TotalEquity |
|
|
|
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
Balance at January 1, 2022 |
|
177,098,737 |
88,500,205 |
3,300,723 |
(36,772) |
(51,795,654) |
39,968,502 |
Net loss and
comprehensive loss |
|
- |
- |
- |
- |
(17,472,618) |
(17,472,618) |
|
|
|
|
|
|
|
|
Options
exercised |
|
260,000 |
226,200 |
(96,200) |
- |
- |
130,000 |
Stock-based compensation |
|
- |
- |
1,499,028 |
- |
- |
1,499,028 |
Balance at September 30, 2022 |
|
177,358,737 |
88,726,405 |
4,703,551 |
(36,772) |
(69,268,272) |
24,124,912 |
|
|
|
|
|
|
|
|
Balance at January 1, 2023 |
|
263,073,022 |
131,708,387 |
5,250,865 |
(36,772) |
(73,694,581) |
63,227,899 |
Net income and
comprehensive income |
|
- |
- |
- |
- |
13,425,594 |
13,425,594 |
|
|
|
|
|
|
|
|
Options
exercised, net |
9 |
597,029 |
409,584 |
(433,600) |
- |
- |
(24,016) |
Stock-based compensation |
9 |
- |
- |
1,353,042 |
- |
- |
1,353,042 |
Balance at September 30, 2023 |
|
263,670,051 |
132,117,971 |
6,170,307 |
(36,772) |
(60,268,987) |
77,982,519 |
The accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements.
|
Notes |
Nine monthsended September
30, |
|
|
2023 |
2022 |
|
|
$ |
$ |
Operating activities |
|
|
|
Net income
(loss) for the period |
|
13,425,594 |
(17,472,618) |
Adjustments
for: |
|
|
|
Depreciation |
5 |
585,509 |
638,039 |
Stock-based compensation |
9 |
1,353,042 |
1,499,028 |
Gain on loss of control of subsidiary |
3 |
(31,340,880) |
- |
Share of loss of an associate |
3 |
5,021,231 |
- |
Loss on change
in FVTPL of Embedded derivative |
|
(273,780) |
- |
Embedded
derivate related transaction costs |
|
641,526 |
- |
Loss on disposal of capital assets |
|
37,791 |
- |
Other expenses |
|
- |
9,048 |
Escrow account for environmental monitoring |
|
(165,946) |
- |
Foreign exchange |
|
(1,114,277) |
(413,443) |
|
|
(11,830,190) |
(15,739,946) |
Changes in
non-cash working capital items: |
|
|
|
Sales tax receivable |
|
30,178 |
(14,181) |
Due from related party |
|
(1,160,405) |
- |
Prepaid expenses and others |
|
(5,808,291) |
71,561 |
Accounts payable and accrued liabilities |
|
1,179,419 |
(843,483) |
|
|
(5,759,099) |
(786,103) |
Net Cash used in
operating activities |
|
(17,589,289) |
(16,526,049) |
Investing activities |
|
|
|
Addition of
capital assets |
5 |
(9,409,183) |
(301,958) |
Net Cash used in
investing activities |
|
(9,409,183) |
(301,958) |
Financing activities |
|
|
|
Proceeds from
convertible notes, net of issue costs |
6 |
29,427,152 |
- |
Principal
repayment – lease liabilities |
7 |
(53,583) |
(39,659) |
Exercise of stock options |
|
- |
130,000 |
Net Cash provided by
financing activities |
|
29,373,569 |
90,341 |
Net change in cash before effects of exchange rate changes on cash
during the period |
|
2,375,097 |
(16,737,666) |
Effects of exchange rate changes on cash |
|
1,143,288 |
445,694 |
Net change in cash during the period |
|
3,518,385 |
(16,291,972) |
Cash, beginning of period |
|
50,137,569 |
27,324,459 |
Cash, end of
period |
|
53,655,954 |
11,032,487 |
Supplemental cash
flow information |
|
|
|
Interest
received |
|
613,031 |
87,554 |
|
|
|
|
The accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements.
1. NATURE
OF OPERATIONS, BASIS OF PRESENTATION
Amaroq Minerals Ltd. (the “Corporation”) was
incorporated on February 22, 2017 under the Canada Business
Corporations Act. The Corporation’s head office is situated at
3400, One First Canadian Place, P.O. Box 130, Toronto, Ontario, M5X
1A4, Canada. The Corporation operates in one industry segment,
being the acquisition, exploration and development of mineral
properties. It owns interests in properties located in Greenland.
The Corporation’s financial year ends on December 31. Since July
2017, the Corporation’s shares are listed on the TSX Venture
Exchange (the “TSX-V”), since July 2020, the Corporation’s shares
are also listed on the AIM market of the London Stock Exchange
(“AIM”) and from November 1, 2022, on Nasdaq First North Growth
Market Iceland which were transferred on
September 21, 2023 on Nasdaq Main Market Iceland
(“Nasdaq”) under the AMRQ ticker.
These unaudited condensed interim consolidated
financial statements for the nine months ended
September 30, 2023 (“Financial Statements”) were approved
by the Board of Directors on November 14, 2023.
1.1 Basis of
presentation and consolidationThe Financial Statements
include the accounts of the Corporation and those of its 100% owned
subsidiary Nalunaq A/S, company incorporated under the
Greenland Public Companies Act. The Financial Statements also
include the Corporation’s 51% equity pick-up of Gardaq A/S, a joint
venture with GCAM LP. (Note 3).
The Financial Statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board
(“IASB”) including International Accounting Standard (“IAS”) 34,
Interim Financial Reporting. The Financial Statements have been
prepared under the historical cost convention.
The Financial Statements should be read in
conjunction with the annual financial statements for the year ended
December 31, 2022 which have been prepared in accordance with IFRS
as issued by the IASB. The accounting policies, methods of
computation and presentation applied in these Financial Statements
are consistent with those of the previous financial year ended
December 31, 2022, except for the policies described below.
a) Investments in
joint venture
The financial results of the Corporation’s
investments in its joint arrangement are included in the
Corporation’s results using the equity method. Under the equity
method, the investment is initially recognized at cost, and the
carrying amount is increased or decreased to recognize the
Corporation’s share of comprehensive income or loss of the joint
venture after the date of acquisition. The Corporation’s share of
profits or losses is recognized in the condensed interim statement
of income (loss).
Unrealized gains on transactions between the
Corporation and a joint venture are eliminated to the extent of the
Corporation’s interest in the associate. Unrealized losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Dilution gains and losses
arising from changes in interests in investments in joint venture
are recognized in the condensed interim statement of income
(loss).
The Corporation assesses at each period-end
whether there is any objective evidence that its investments in
joint ventures are impaired. If impaired, the carrying value of the
Corporation’s share of the underlying assets of the joint venture
is written down to its estimated recoverable amount (being the
higher of fair value less costs of disposal and value in use) and
charged to the statement of income (loss).
There are two main instances when the
Corporation recognizes an investment in associate or joint venture.
In the first case the entity recognizes an acquisition of new
investment, has a significant influence over the investee but does
not control it. In the second case, the Corporation loses control
over the subsidiary because of the sale of a share in subsidiary
that results in losing control over that subsidiary. If the
Corporation loses control over the subsidiary, then
- The Corporation derecognizes the
assets and liabilities of the subsidiary from the consolidated
statement of financial position,
- Recognizes the fair value of the
consideration received from the transaction that has resulted in
the loss of control,
- Recognizes any investment retained
in the former subsidiary at its fair value once control is lost and
subsequently accounts for it and any amounts owed by or to the
former subsidiary in accordance with the relevant IFRS. The fair
value shall be regarded as a fair value of the initial recognition
of the investment in the joint venture.
- Subsequently recognizes joint
venture’s share of net profits or losses proportionately to the
retained share of investment for the reporting periods.
b) Nalunaq mine
project
Management established that effective September
1, 2023, the Nalunaq Project is in the development phase.
Accordingly, all expenditures related to the restart of the Nalunaq
mine and the associated development of the initial processing plant
and surface infrastructure are capitalized under Construction in
Progress within Capital assets (see note 5). Capitalized
expenditures will be carried at cost until the Nalunaq Project is
placed into commercial production, sold, abandoned, or determined
by management to be impaired in value. The mine and mobile
equipment, process plant building and the Nalunaq mine are not yet
available for use as intended by Management as at September 30,
2023, therefore, depreciation has not yet commenced.
1.2 Functional and
presentation currencyThe functional and presentation
currency of the Corporation is Canadian dollars (“CAD”). The
functional currency of Nalunaq A/S and Gardaq A/S is CAD. The
functional currency of Nalunaq A/S and Gardaq A/S is determined
using the currency of the primary source of economic activity and
using the currency which is more representative of the economic
effect of the underlying financings, transactions, events and
conditions.
Foreign currency transactions are translated
into the functional currency of the underlying entity using
appropriate rates of exchange prevailing on the dates of such
transactions. Monetary assets and liabilities denominated in
foreign currencies are translated at the functional currency rate
of exchange in effect at the end of each reporting period. Foreign
exchange gains and losses resulting from the settlement of such
transactions are recognized in the net profit or loss.
2. CRITICAL
ACCOUNTING JUDGMENTS AND ASSUMPTIONS
The preparation of the Financial Statements
requires Management to make judgments and form assumptions that
affect the reported amounts of assets and liabilities at the date
of the Financial Statements and reported amounts of expenses during
the reporting period. On an ongoing basis, Management evaluates its
judgments in relation to assets, liabilities and expenses.
Management uses past experience and various other factors it
believes to be reasonable under the given circumstances as the
basis for its judgments. Actual outcomes may differ from these
estimates under different assumptions and conditions.
In preparing the Financial Statements, the
significant judgements made by Management in applying the
Corporation accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the
Corporation’s audited annual financial statements for the year
ended December 31, 2022 except for these described below and in
note 1.1 b).
Management exercised significant judgement in
assessing whether the Corporation still has control over its
subsidiary Gardaq A/S or whether it lost control over the
subsidiary but maintained significant influence or joint control
over Gardaq A/S. The result of this assessment is described under
Note 3 below. Estimates and assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
3. INVESTMENT
IN AN ASSOCIATE OR JOINT VENTURE CORPORATION
|
As at September 30,
2023 |
As at December 31,
2022 |
|
$ |
$ |
Balance at
beginning of period |
- |
- |
Original Investment
in Gardaq ApS |
7,422 |
- |
Transfer of
non-gold strategic minerals licences at cost |
36,896 |
- |
Investment at
conversion of Gardaq ApS to Gardaq A/S |
55,344 |
- |
Gain on FV
recognition of equity accounted investment in joint venture |
31,285,536 |
- |
Investment retained
at fair value- 51% share |
31,385,198 |
- |
Share of joint venture’s net losses- for 9 months ended September
30, 2023 |
(5,021,231) |
- |
Balance at end of period |
26,363,967 |
- |
On June 10, 2022, the Corporation announced that
it had signed a non-binding head of terms with ACAM to establish a
special purpose vehicle (the "SPV") and created a joint venture
(the "JV") for the exploration and development of its Strategic
Mineral assets for a combined contribution of $62.0 million (GBP
36.7 million). Subject to the final terms of the JV, ACAM invested
$30.1 million (GBP 18 million) in exchange for a 49% shareholding
in the SPV, with Amaroq holding 51%. Amaroq contributed its
strategic non- precious mineral (i.e., non-gold) licenses, and will
be required to provide a contribution in kind over a three-year
period, valued, in aggregate, at $31.4 million (GBP 18.7 million)
in the form of site support, logistics and overhead costs
associated with utilizing its existing infrastructure in Southern
Greenland to support the JV's activities. The transfer of these
licenses has been approved by the Greenland Government on April 13,
2023.
The carrying value of the strategic non-precious
mineral licenses transferred to Gardaq A/S is $36,758 (Note 4).
Upon execution of the Subscription and
Shareholders’ Agreement (“SSHA”) on April 13, 2023, the Corporation
has ceased the control of Gardaq on that date. Given that the
relevant activities of Gardaq require unanimous consent of its
shareholders in accordance with the SSHA, Management has determined
that it has joint control and as such the Corporation performed
deconsolidation of Gardaq A/S as at April 13, 2023, the date when
control was lost. The fair value of the 51% equity investment
retained in Gardaq A/S was determined to be $31,385,198 (GBP
18.7million). The fair value of Gardaq A/S was measured based on
the cash consideration received in exchange for 49% of the
outstanding shares.
The Corporation has determined that it has a
joint control in Gardaq A/S as decisions around relevant activities
require unanimous shareholder approval. Effective April 13, 2023,
the Corporation’s investment was accounted for as an investment in
joint venture using the equity method. The equity method involves
recording the initial investment at cost and subsequently adjusting
the carrying value of the investment for the Corporation’s
proportionate share of the profit or loss, other comprehensive
income or loss and any other changes in the joint venture’s net
assets, such as further investments or dividends. For the period
ended September 30, 2023 the Corporation recorded the 51%
proportion of net loss from Gardaq of $4,866,894.
The following tables summarize the unaudited
financial information of Gardaq A/S as of
September 30, 2023.
|
As at September 30,
2023 |
|
$ |
Cash and cash
equivalent |
22,147,921 |
Prepaid expenses and other |
339,133 |
Total current assets |
22,487,054 |
Mineral property |
92,240 |
Total Assets |
22,579,294 |
Accounts payable and accrued liabilities |
2,177,908 |
Capital stock |
30,246,937 |
Deficit |
(9,845,551) |
Total equity |
20,401,386 |
Total liabilities and equity |
22,579,294 |
|
As at September 30,
2023 |
|
$ |
Exploration and
Evaluation expenses |
8,565,658 |
Foreign
exchange loss (gain) |
171,792 |
Operating loss |
8,737,450 |
Other expenses (income) |
1,108,101 |
Net loss and comprehensive loss |
9,845,551 |
4. MINERAL
PROPERTIES
|
As at December
31,2022 |
Transfers (note 3) |
As at September
30,2023 |
|
$ |
$ |
$ |
Nalunaq - Au |
1 |
- |
1 |
Tartoq - Au |
18,431 |
- |
18,431 |
Vagar - Au |
11,103 |
- |
11,103 |
Nuna Nutaaq -
Au |
6,076 |
- |
6,076 |
Anoritooq -
Au |
6,389 |
- |
6,389 |
Siku - Au |
6,821 |
- |
6,821 |
Naalagaaffiup
Portornga - Strategic Minerals |
6,334 |
(6,334) |
- |
Saarloq -
Strategic Minerals |
7,348 |
(7,348) |
- |
Sava - Strategic
Minerals |
6,562 |
(6,562) |
- |
Kobberminebugt -
Strategic Minerals |
6,840 |
(6,840) |
- |
Stendalen -
Strategic Minerals |
4,837 |
(4,837) |
- |
North Sava - Strategic Minerals |
4,837 |
(4,837) |
- |
Total mineral
properties |
85,579 |
(36,758) |
48,821 |
|
As at December 31, 2021 |
Additions |
As atDecember
31,2022 |
|
$ |
$ |
$ |
Nalunaq - Au |
1 |
- |
1 |
Tartoq - Au |
18,431 |
- |
18,431 |
Vagar - Au |
11,103 |
- |
11,103 |
Nuna Nutaaq -
Au |
6,076 |
- |
6,076 |
Anoritooq -
Au |
6,389 |
- |
6,389 |
Siku - Au |
- |
6,821 |
6,821 |
Naalagaaffiup
Portornga - Strategic Minerals |
6,334 |
- |
6,334 |
Saarloq -
Strategic Minerals |
7,348 |
- |
7,348 |
Sava - Strategic
Minerals |
6,562 |
- |
6,562 |
Kobberminebugt -
Strategic Minerals |
- |
6,840 |
6,840 |
Stendalen -
Strategic Minerals |
- |
4,837 |
4,837 |
North Sava -
Strategic Minerals |
- |
4,837 |
4,837 |
Total mineral
properties |
62,244 |
23,335 |
85,579 |
5. CAPITAL
ASSETS
|
Field equipment
andinfrastruc-
ture |
Vehicles and
rolling stock |
Equipment (including software) |
Construc- tion In
Progress |
Right-of- use
assets |
Total |
|
$ |
$ |
$ |
$ |
$ |
$ |
Nine months endedSeptember 30,
2023 |
|
|
|
|
|
|
Opening net book value |
1,735,752 |
3,742,384 |
216,385 |
7,522,085 |
655,063 |
13,871,669 |
Additions |
- |
- |
- |
9,409,183 |
- |
9,409,183 |
Disposals |
- |
- |
(37,791) |
- |
- |
(37,791) |
Depreciation |
(148,780) |
(322,701) |
(54,037) |
- |
(59,991) |
(585,509) |
Closing net book
value |
1,586,972 |
3,419,683 |
124,557 |
16,931,268 |
595,072 |
22,657,552 |
|
|
|
|
|
|
|
As at Sept. 30, 2023 |
|
|
|
|
|
|
Cost |
2,351,041 |
4,466,971 |
232,231 |
16,931,268 |
735,270 |
24,716,781 |
Accumulated depreciation |
(764,069) |
(1,047,288) |
(107,674) |
- |
(140,198) |
(2,059,229) |
Closing net book value |
1,586,972 |
3,419,683 |
124,557 |
16,931,268 |
595,072 |
22,657,552 |
Depreciation of capital assets related to
exploration and evaluation properties is being recorded in
exploration and evaluation expenses in the consolidated statement
of income (loss) and comprehensive income (loss), under
depreciation. Depreciation of $478,519 ($545,919 for the nine
months ended September 30, 2022) was expensed as exploration and
evaluation expenses during the nine months ended September 30,
2023.
As of September 30, 2023, the amount of
$22,657,552 ($7,522,085 as of December 31, 2022) of construction in
progress is related to the Nalunaq Project and includes costs
incurred on the site camp upgrade, surface infrastructure,
construction of the process plant foundation, mobile equipment and
critical spare parts. Equipment and infrastructure include
components of the process plant such as the manufactured mill,
grinding and gravity concentration circuit that will be shipped and
assembled at site but are not yet available for use.
As at September 30, 2023, the Corporation had
capital commitments, of $46,753,582. These commitments relate to
the development of Nalunaq Project, rehabilitation of the Nalunaq
mine, construction of processing plant, purchases of mobile
equipment and establishment of surface infrastructure.
6. LOANS
AND CONVERTIBLE NOTES
|
|
Convertible notes loan |
Embedded Derivatives at FVTPL |
Total |
|
|
$ |
$ |
$ |
Balance as at
December 31, 2022 |
|
- |
- |
- |
Additions |
|
10,987,517 |
19,443,663 |
30,431,180 |
Financing
costs |
|
(362,502) |
- |
(362,502) |
Fair value
adjustment |
|
- |
(273,780) |
(273,780) |
Balance as at September 30, 2023 |
|
10,625,015 |
19,169,883 |
29,794,898 |
Non-current portion |
|
- |
- |
- |
Current portion |
|
10,625,015 |
19,169,883 |
29,794,898 |
The Corporation closed the Debt Financing on
September 1, 2023 and consisting of:
6.1 Revolving Credit
Facility
A $25 million (US$18.5 million) Revolving Credit
Facility (“RCF”) provided by Landsbankinn hf. and Fossar Investment
Bank, with a two-year term and priced at SOFR plus 950bps. Interest
is capitalized and payable at the end of the term.
The credit facility is denominated in US Dollars
and the SOFR interest rate is determined with reference to the CME
Term SOFR Rates published by CME Group Inc. The Landsbankinn hf.
and Fossar revolving credit facility carries (i) a commitment fee
of 0.40% per annum calculated on the undrawn facility amount and
(ii) an arrangement fee of 2.00% on the facility amount where 1.5%
is to be paid on or before the closing date of the facility and
0.50% is to be paid on or before the first draw down. The facility
is not convertible into any securities of the Corporation.
The facility will be secured by (i) a bank
account pledge from the Corporation and Nalunaq A/S, (ii) share
pledges over all current and future acquired shares in Nalunaq A/S
and Gardaq A/S held by the Corporation pursuant to the terms of
share pledge agreements, (iii) a proceeds loan assignment
agreement, (iv) a pledge agreement in respect of owner’s mortgage
deeds and (v) a licence transfer agreement.
6.2 Convertible notes
Convertible notes represent $30.4 million
(US$22.4 million) notes issued to ECAM LP (US$16 million), JLE
Property Ltd. (US$4 million) and Livermore Partners LLC
(US$2.4 million) with a four-year term and a fixed interest rate of
5%. The conversion price od $0.90 per common share is the closing
Canadian market price of the Amaroq shares on the day, prior to the
closing day of the Debt Financing.
The convertible notes are denominated in US
Dollars and will mature on September 30, 2027, being the date that
is four years from the convertible note offering closing date. The
principal amount of the convertible notes will be convertible, in
whole or in part, at any time from one month after issuance into
common shares of the Corporation ("Common Shares") at a conversion
price of $0.90 (£0.525) per Common Share for a total of up to
33,629,068 Common Shares. The Corporation may repay the convertible
notes and accrued interest at any time, in cash, subject to
providing 30 days’ notice to the relevant noteholders, with such
noteholders having the option to convert such convertible notes
into Common Shares at the conversion price up to 5 days prior to
the redemption date. If the Corporation chooses to redeem some but
not all of the outstanding convertible notes, the Corporation shall
redeem a pro rata share of each noteholder's holding of convertible
notes. The Corporation shall pay a commitment fee to the holders of
the convertible notes of, in aggregate, US$4,484,032, which shall
be paid pro rata to each noteholder's holding of convertible notes.
The commitment fee is payable on the earlier of (a) the date
falling 20 business days after all amounts outstanding under the
Bank Revolving Credit Facility have been repaid in full, but no
earlier than the date that is 24 months after the date of issuance
of the notes; and (b) the date falling 30 (thirty) months after the
date of the subscription agreement in respect of the notes,
irrespective of whether or not notes have converted at that date or
been repaid.
The convertible notes will be secured by (i)
bank account pledge agreements from the Corporation and Nalunaq
A/S, (ii) share pledges over all current and future acquired shares
in Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to
the terms of share pledge agreements, (iii) a proceeds loan
assignment agreement, (iv) a pledge agreement in respect of owner’s
mortgage deeds and (v) a licence transfer agreement.
The convertible notes represent hybrid financial
instruments with multiple embedded derivatives requiring
separation. The debt host portion (the “Host”) of the instrument is
classified at amortized cost, whereas the aggregate conversion and
repayment options (the “Embedded Derivatives”) are classified at
fair value through profit and loss (FVTPL).
The fair value of the convertible notes at
inception was recognized at $30.4 million (US$22.4 million) and
$19.4 million (US$14.3 million) embedded derivative component was
isolated and determined using a Black Scholes valuation model which
required the use of significant unobservable inputs. As of
September 30, 2023 the Corporation identified the fair value of
embedded derivative associated with the early conversion option to
be $19.2 million (US$14.1 million). The change in fair value of
embedded derivative in the period from September 1, 2023 to
September 30, 2023 has been recognized in the statement of Income
(loss) and comprehensive income (loss). The Host liability
component at inception was recognized to be the residual amount of
$10.9 million (US$8.1 million) which is subsequently measured at
amortized cost.
6.3 Cost Overrun Facility
$13.5 million (US$10 million) Revolving Cost
Overrun Facility from JLE Property Ltd. on the same terms as the
Bank Revolving Credit Facility.
The Overrun Facility is denominated in US
Dollars with a two-year term and will bear interest at the CME Term
SOFR Rates by CME Group Inc. and have a margin of 9.5% per annum.
The Overrun Facility carries a stand-by fee of 2.5% on the amount
of committed funds. The Overrun Facility is not convertible into
any securities of the Corporation.
The Overrun Facility will be secured by (i) bank
account pledge agreements from the Corporation and Nalunaq A/S,
(ii) share pledges over all current and future acquired shares in
Nalunaq A/S and Gardaq A/S held by the Corporation pursuant to the
terms of share pledge agreements, (iii) a proceeds loan assignment
agreement, (iv) a pledge agreement in respect of owner’s mortgage
deeds and (v) a licence transfer agreement.
7. LEASE
LIABILITIES
|
As at September
302023 |
As at December
312022 |
|
$ |
$ |
Balance
beginning |
729,237 |
763,913 |
Principal
repayment |
(53,583) |
(50,722) |
Balance ending |
675,654 |
729,237 |
Non-current
portion – lease liabilities |
(597,145) |
(657,440) |
Current portion – lease liabilities |
78,509 |
71,797 |
The Corporation entered into an office lease
with a five year term on October 2020. The monthly rent is $8,825
until March 2024 and $9,070 for the balance of the lease. The
Corporation has the option to renew the lease for an additional
five-year period at $9,070 monthly rent indexed annually to the
increase of the consumer price index of the previous year for the
Montreal area.
8. SHARE
CAPITAL
8.1 Nasdaq
Main Market Listing in Iceland
Subsequent to the approval by the Central Bank
of Iceland (the “FSA”) and satisfaction of all Nasdaq Main Market
requirements the Corporation transferred all depository receipts
from the Nasdaq First North Growth Market to the Nasdaq Main Market
with the first day of trading on September 21, 2023. The
mainboard listing in Iceland do not affect any shares traded on AIM
or the TSX-V.
9. STOCK-BASED
COMPENSATION
9.1 Stock
options
An incentive stock option plan (the “Plan”) was
approved initially in 2017 and renewed by shareholders on June 15,
2023. The Plan is a “rolling” plan whereby a maximum of 10% of the
issued shares at the time of the grant are reserved for issue under
the Plan to executive officers, directors, employees and
consultants. The Board of directors grants the stock options, and
the exercise price of the options shall not be less than the
closing price on the last trading day, preceding the grant date.
The options have a maximum term of ten years. Options granted
pursuant to the Plan shall vest and become exercisable at such time
or times as may be determined by the Board, except options granted
to consultants providing investor relations activities shall vest
in stages over a 12-month period with a maximum of one-quarter of
the options vesting in any three-month period. The Corporation has
no legal or constructive obligation to repurchase or settle the
options in cash.
On July 24, 2023, the Corporation granted an
on-hire incentive stock option award to a new senior employee of
Amaroq. The option award gives the employee the right to acquire up
to 19,480 common shares under the Corporation's stock option Plan.
The option has an exercise price of $0.77 per share and will vest
on October 24, 2023. The option will expire if it remains
unexercised five years from the date of the award.
The fair value of each option granted was
estimated at the time of grant using the Black-Scholes option
pricing model. Black-Scholes is a pricing model used to determine
the fair price or theoretical value for a call or a put option
based on the following average assumptions at the measurement date:
|
September 30, 2023 |
September 30,2022 |
Risk free rate |
3.9% |
2.4% |
Expected life
(years) |
5 years |
5 years |
Volatility |
68.1% |
69.1% |
Share price at
date of grant |
$0.77 |
$0.66 |
Fair value per option |
$0.46 |
$0.39 |
The total share-based payment expenses related
to the options and the amount credited to contributed surplus were
$6,042 ($1,499,028 for the nine months ended
September 30, 2022). The following table outlines the
activity for stock options for the nine months ended September 30,
2023, and 2022:
|
Nine months ended September 30,
2023 |
Nine months ended September 30,
2022 |
|
Number of
options |
Weighted average exercise
price |
Number of
options |
Weighted average exercise
price |
|
|
$ |
|
|
Balance,
beginning |
10,717,395 |
0.57 |
6,935,000 |
0.51 |
Granted |
19,480 |
0.77 |
4,212,395 |
0.60 |
Exercised |
(1,610,000) |
0.46 |
(260,000) |
0.50 |
Expired |
- |
- |
(1,450,000) |
0.53 |
Balance, end |
9,126,875 |
0.59 |
9,437,395 |
0.55 |
Balance, end exercisable |
9,107,395 |
0.59 |
9,404,062 |
0.55 |
From the options exercised during the period
ended September 30, 2023, 1,012,971 shares were withheld to cover
the stock option grant price and related taxes.
Stock options outstanding and exercisable as at
September 30, 2023 are as follows:
Number of
options outstanding |
Number of
options exercisable |
Exercise price |
Expiry date |
|
|
$ |
|
1,670,000 |
1,670,000 |
0.38 |
December 31, 2025 |
100,000 |
100,00 |
0.50 |
September 13, 2026 |
1,395,000 |
1,395,000 |
0.70 |
December 31, 2026 |
3,600,000 |
3,600,000 |
0.60 |
January 17, 2027 |
73,333 |
73,333 |
0.75 |
April 20, 2027 |
39,062 |
39,062 |
0.64 |
July 14, 2027 |
1,330,000 |
1,330,000 |
0.70 |
December 30, 2027 |
900,000 |
900,000 |
0.59 |
December 31, 2027 |
19,480 |
- |
0.77 |
July 24, 2028 |
9,126,875 |
9,107,395 |
|
|
9.2 Restricted
Share Unit
Conditional awards under
the RSU
9.2.1 Description
Conditional awards were made in 2022 that gave
participants the opportunity to earn restricted share unit awards
under the Corporation’s Restricted Share Unit Plan (“RSU Plan”)
subject to the generation of shareholder value over a four-year
performance period.
The awards are designed to align the interests
of the Corporation’s employees and shareholders, by incentivizing
the delivery of exceptional shareholder returns over the long-term.
Participants receive a 10% share of a pool which is defined by the
total shareholder value created above a 10% per annum compound
hurdle.
The awards comprise three tranches, based on
performance measured from January 1, 2022, to the following three
measurement dates:
- First Measurement Date: December 31, 2023;
- Second Measurement Date: December 31, 2024; and
- Third Measurement Date: December 31, 2025.
Restricted share unit awards granted under the
RSU Plan as a result of achievement of the total shareholder return
performance conditions are subject to continued service, with
vesting as follows:
- Awards granted
after the First Measurement Date - 50% vest after one year, 50%
vest after three years.
- Awards granted
after the Second Measurement Date - 50% vest after one year, 50%
vest after two years.
- RSUs granted
after the Third Measurement Date - 100% vest after one year.
The maximum term of the awards is therefore four
years from grant.
The Corporation’s starting market capitalization
is based on a fixed share price of $0.552. Value created by share
price growth and dividends paid at each measurement date will be
calculated with reference to the average closing share price over
the three months ending on that date.
- After December 31, 2023, 100% of
the pool value at the First Measurement Date is delivered as
restricted share units under the RSU Plan, subject to the maximum
number of shares that can be allotted not being exceeded.
- After December 31, 2024, the pool
value at the Second Measurement Date is reduced by the pool value
from the First Measurement Date (increased in line with share price
movements between the First and Second Measurement Dates). 100% of
the remaining pool value, if any, is delivered as restricted share
units under the RSU Plan.
- After December 31, 2025, the pool
value at the Third Measurement Date is reduced by the pool value
from the Second Measurement Date (increased in line with share
price movements between the Second and Third Measurement Dates),
and then further reduced by the pool value from the First
Measurement Date (increased in line with share price movements
between the First Measurement Date and the Third Measurement Date).
100% of the remaining pool value, if any, is delivered as
restricted share units under the RSU Plan.
9.2.1 Valuation
The fair value of the award granted in December
2022 is $5,408,800 based on 80% of the available pool being
awarded. A charge of $1,347,000 was recorded during the nine months
ended September 30, 2023.
10. EXPLORATION
AND EVALUATION EXPENSES (RECOVERY)
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Geology |
201,738 |
148,959 |
176,116 |
954,591 |
Lodging and
on-site support |
151,495 |
177,655 |
203,208 |
212,910 |
Drilling |
173,776 |
2,427,592 |
1,210,428 |
3,718,119 |
Analysis |
27,416 |
23,246 |
1,061 |
164,628 |
Geophysical
survey |
- |
412,624 |
(416,177) |
412,624 |
Transport |
25,510 |
168,180 |
650,263 |
311,395 |
Helicopter
charter |
205,073 |
484,135 |
886,755 |
926,959 |
Logistic
support |
- |
689,739 |
(51,509) |
791,847 |
Insurance |
- |
- |
- |
- |
Maintenance
infrastructure |
628,733 |
706,700 |
1,207,624 |
2,450,075 |
Supplies and
equipment |
706,545 |
143,489 |
1,309,562 |
503,647 |
Project
Engineering |
- |
- |
55,792 |
- |
Government fees |
- |
2,584 |
25,615 |
10,478 |
Exploration and
evaluation
expensesbefore
depreciation |
2,120,286 |
5,384,903 |
5,258,738 |
10,457,273 |
Depreciation |
157,254 |
182,458 |
478.519 |
545,919 |
Exploration and evaluation expenses |
2,277,540 |
5,567,361 |
5,737,257 |
11,003,192 |
Exploration and evaluation expenses for the
period of nine months ended September 30, 2023 are net of
$1,398,912 of exploration and evaluation expenses incurred by
Nalunaq A/S during the period from June 9 to December 31, 2022
for the six non-gold strategic mineral licenses that have been
transferred from Nalunaq A/S to Gardaq A/S.
11. SITE
DEVELOPMENT COSTS
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Project
Engineering and management |
(1,017,206) |
- |
- |
- |
Infrastructure |
(658,507) |
- |
- |
- |
Other costs
(travel, logistics) |
(149,851) |
- |
- |
- |
Site development costs |
(1,825,564) |
- |
- |
- |
12. GENERAL
AND ADMINISTRATION
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Salaries and
benefits |
626,384 |
557,721 |
1,864,046 |
1,799,488 |
Director’s
fees |
158,667 |
157,000 |
472,667 |
471,000 |
Professional
fees |
296,024 |
783,765 |
1,818,781 |
1,808,377 |
Marketing and
investor relations |
173,572 |
112,174 |
480,258 |
414,852 |
Insurance |
76,002 |
68,784 |
211,206 |
274,455 |
Travel and
other expenses |
471,992 |
97,019 |
993,167 |
481,589 |
Regulatory fees |
342,668 |
27,288 |
715,222 |
105,523 |
General and
administration before
following elements |
2,145,309 |
1,803,751 |
6,555,347 |
5,355,284 |
Stock-based
compensation |
451,014 |
18,468 |
1,353,042 |
1,499,028 |
Depreciation |
35,718 |
37,506 |
106,990 |
92,120 |
General and administration |
2,632,041 |
1,859,725 |
8,015,379 |
6,946,432 |
13. FINANCE
COSTS
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Change in fair
value – embedded derivative |
(273,780) |
- |
(273,780) |
- |
Transaction
costs and service fees |
1,013,771 |
|
1,013,771 |
|
Interest
expenses on lease liabilities |
8,487 |
9,365 |
26,062 |
28,374 |
|
748,478 |
9,365 |
766,053 |
28,374 |
14. RELATED
PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
14.1 Gardaq Joint Venture
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Project
management fees |
601,461 |
- |
1,108,101 |
- |
E&E
expenses (Note 10) |
821,047 |
- |
2,533,011 |
- |
|
1,422,508 |
- |
3,641,112 |
- |
As at September 30, 2023, the balance receivable
from Gardaq amounted to $1,529,406 ($nil as at
December 31, 2022). This receivable balance represents
the current balance of project management costs and exploration and
evaluation costs incurred by the Corporation for six strategic
minerals licenses transferred from Nalunaq A/S to Gardaq A/S. The
exploration and evaluation costs incurred by the Corporation are
transferred to Gardaq A/S from Nalunaq A/S in accordance with the
respective clauses of the SSHA. (Note 3).
14.2 Marketing Activities in Iceland related to the
Nasdaq Main Market Listing
In addition to Landsbankinn hf. acting as
project manager and advisor on the admission to Nasdaq Main Market,
the Corporation has engaged Fossar Investment Bank hf. (“Fossar”)
to assist in introducing Amaroq to investors, organizing investor
meetings, and advising and analyzing potential effect the Admission
has on the liquidity and formation of the share price of the
Corporation.
Fossar is a related party of Amaroq as it is a
company in which Sigurbjorn Thorkelsson, Non-Executive Director, is
Chairman of the Board and indirectly controls over 30% of the
capital. Amaroq has agreed to pay Fossar for their services $25,000
(GBP15,000) and Amaroq will be responsible for any ancillary
expenses on the planned engagement. The Engagement will end upon
the completion of Admission.
The engagement with Fossar constitutes a related
party transaction in accordance with AIM Rule 13. The Independent
Directors, being the Amaroq Directors other than Sigurbjorn
Thorkelsson, having consulted with the Corporation's Nominated
Adviser, are confident that the terms of the engagement with the
related party are fair and reasonable insofar as the Corporation's
shareholders are concerned.
$25,000 cost of engagement is included under
Marketing and Industry involvement cost category under the General
and Administrative expenses (Note 12) and as of September 30, 2023
the balance is fully settled.
14.3 Debt financing
Livermore Partners LLC ("Livermore") subscribed
for US$2.4 million in principal amount of convertible notes under
the convertible note offering (the "Insider Participation"). The
subscription by Livermore is considered to be a "related party
transaction" for purposes of Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special Transactions
("MI 61-101"). The Insider Participation is exempt from the formal
valuation and minority shareholder requirements under MI 61-101 in
reliance upon the exemptions contained in section 5.5(a) and
5.7(1)(a), respectively, of MI 61-101. The Corporation did not file
a material change report more than 21 days before the expected
closing date of the convertible note offering as the details of the
convertible note offering and the Insider Participation was not
settled until shortly prior to the closing of the convertible note
offering, and the Corporation wished to close the convertible note
offering on an expedited basis for sound business reasons.
For the purposes of the AIM Rules for Companies,
Fossar, ECAM and Livermore are related parties of Amaroq. Fossar is
a company in which Sigurbjorn Thorkelsson, Non-Executive Director
of the Corporation, is Chairman of the board and indirectly
controls over 30% of the capital. ECAM LP is an affiliate of GCAM
LP, which owns a 49% interest in Gardaq A/S, an Amaroq subsidiary,
and has appointed two directors to the subsidiary company board.
Livermore is a company in which David Neuhauser, Non-Executive
Director of Amaroq, is Managing Director.
As such, the elements of the debt financing with
Fossar (US$1.0 million off the senior debt term loans), Livermore
Partners LLC (US$2.4 million of the convertible notes), and ECAM LP
(US$16.0 million of the convertible notes) constitute Related Party
Transactions in accordance with AIM Rule 13.
The Independent Directors, being the Amaroq
Directors other than Sigurbjorn Thorkelsson and David Neuhauser,
consider, having consulted with the Corporation's Nominated
Adviser, that the terms of the transaction are fair and reasonable
insofar as the Corporation's shareholders are concerned.
In September 2023, in accordance with Clause
11.2 of Revolving Credit Facility Agreement between Nalunaq A/S,
Amaroq Minerals Ltd and Fossar Investment Bank hf., the Corporation
paid $20,353 (US$15,000) to Fossar Investment Bank hf., which
represents 1.5% Arrangement fee.
14.4 Key Management Compensation
The Corporation’s key management are the members
of the board of directors, the President and Chief Executive
Officer, the Chief Financial Officer, the Vice President
Exploration, and the Corporate Secretary. Key management
compensation is as follows:
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
2023 |
2022 |
2023 |
2022 |
|
$ |
$ |
$ |
$ |
Short-term
benefits |
|
|
|
|
Salaries and benefits |
316,736 |
295,014 |
971,553 |
937,033 |
Director’s fees |
158,667 |
157,000 |
472,667 |
471,000 |
Long-term
benefits |
|
|
|
|
Stock-based compensation |
2,014 |
3,624 |
6,042 |
1,114,986 |
Total compensation |
477,417 |
455,638 |
1,450,262 |
2,523,019 |
15. NET EARNINGS (LOSS) PER COMMON
SHARE
The following table provides a reconciliation
between basic and diluted net earnings (loss) per share:
|
|
Three monthsended September
30, |
Nine monthsended September
30, |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
$ |
$ |
$ |
$ |
Net income (loss) and comprehensive income
(loss) |
|
(6,555,222) |
(7,012,481) |
13,425,594 |
(17,472,618) |
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic |
|
263,579,331 |
177,341,88 |
263,356,034 |
177,184,305 |
Weighted
average number of common shares outstanding – diluted |
|
306,335,274 |
186,779,284 |
306,111,977 |
186,621,700 |
Basic earnings
(loss) per share |
|
(0.02) |
(0.04) |
0.05 |
(0.10) |
Diluted earnings (loss) per common share |
|
(0.02) |
(0.04) |
0.04 |
(0.10) |
Effect of dilution |
|
- |
- |
- |
- |
Share options
outstanding |
|
9,126,875 |
9,437,395 |
9,126,875 |
9,437,395 |
Convertible
notes |
|
33,629,068 |
- |
33,629,068 |
- |
16. FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
The Corporation is exposed to various risks
through its financial instruments. The following analysis provides
a summary of the Corporation's exposure to and concentrations of
risk at September 30, 2023:
16.1 Credit Risk
Credit risk is the risk that one party to a
financial instrument will cause financial loss for the other party
by failing to discharge an obligation. The Corporation's main
credit risks relate to its amounts due from a related party. The
Corporation performed expected credit loss assessment and assessed
the amount to be fully recoverable.
16.2 Fair Value
Financial assets and liabilities recognized or
disclosed at fair value are classified in the fair value hierarchy
based upon the nature of the inputs used in the determination of
fair value. The levels of the fair value hierarchy are:
• Level 1 - Quoted
prices (unadjusted) in active markets for identical assets or
liabilities • Level 2 - Inputs other than quoted prices
included within level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices) • Level 3 - Inputs for the asset or
liability that are not based on observable market data (i.e.,
unobservable inputs)
The following table summarizes the carrying value of the
Corporation’s financial instruments:
|
September 30,2023 |
December 31, 2022 |
|
$ |
$ |
Cash |
53,655,954 |
50,137,569 |
Due from a related party |
1,529,406 |
- |
Sales tax receivable |
65,712 |
95,890 |
Deposit |
27,944 |
27,944 |
Investment in equity-accounted joint arrangement |
26,363,967 |
- |
Escrow account for environmental monitoring |
585,683 |
427,120 |
Accounts payable and accrued liabilities |
(2,740,161) |
(1,138,961) |
Convertible notes |
(29,794,898) |
- |
Lease liabilities |
(675,654) |
(729,237) |
Due to the short-term maturities of cash, due
from a related party, and accounts payable and accrued liabilities,
the carrying amounts of these financial instruments approximate
fair value at the respective balance sheet date.
The carrying value of the convertible note
instrument approximates its fair value at maturity and includes the
embedded derivative associated with the early conversion option and
the host liability at amortized cost.
The carrying value of lease liabilities
approximate its fair value based upon a discounted cash flows
method using a discount rate that reflects the Corporation’s
borrowing rate at the end of the period.
16.3 Liquidity Risk
Liquidity risk is the risk that the Corporation
will encounter difficulty in meeting obligations associated with
financial liabilities. The Corporation manages this risk by
managing its working capital and ensuring that sufficient cash is
available. The following are the contractual maturities of
financial liabilities as at September 30, 2023:
|
September 30, 2023 |
|
< 1 year |
2 – 5 years |
Over 5 years |
|
$ |
$ |
$ |
Convertible notes |
29,794,898 |
- |
- |
Lease liabilities |
78,509 |
597,145 |
- |
Accounts payable and accrued liabilities |
2,740,161 |
- |
- |
|
32,613,568 |
597,145 |
- |
The Corporation has assessed that it is not
exposed to significant liquidity risk due to its cash balance in
the amount of $53.7 million at the period end.
17. SUBSEQUENT
EVENTS
17.1 New
conditional Award under RSU Plan
On 13 October 2023, Amaroq made an award (the
“Award”) under the RSU Plan as detailed below. The Award consists
of a conditional right to receive value if the future performance
targets, applicable to the Award, are met. Any value to which the
participants are eligible in respect of the Award will be granted
as Restricted Share Units (each an “RSU”), with each RSU entitling
a participant to receive common shares in the Corporation. Each RSU
will be granted under, and governed in accordance with, the rules
of the Corporation's Restricted Share Unit Plan.
Award Date |
October 13, 2023 |
Initial Price |
CAD 0.552 |
Hurdle Rate |
10% p.a. above the Initial Price |
Total Pool |
10% of the growth in value above the Hurdle rate, not exceeding 10%
of the Corporation’s share capital.The number of shares will be
determined at the Measurement Dates. |
Participant proportion |
Edward Wyvill, Corporate Development 10% |
Performance Period |
January 1, 2022 to December 31, 2025 (inclusive) |
Normal Measurement Dates |
First Measurement Date: December 31, 2023, 50% vesting on the
first anniversary of grant, with the remaining 50% vesting on the
third anniversary of grant. Second Measurement Date:
December 31, 2024, 50% vesting on the first anniversary of
grant, with the remaining 50% vesting on the second anniversary of
grant. Third Measurement Date: December 31, 2025, vesting on
the first anniversary of grant. |
- Q3 2023 Financial Results
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