TIDMBCN
RNS Number : 7464G
Bacanora Minerals Ltd
31 May 2017
BACANORA MINERALS LTD.
Condensed Consolidated Interim Financial Statements
March 31, 2017
(Unaudited)
Management's Comments on the Unaudited Condensed Consolidated
Interim Financial Statements
The accompanying unaudited condensed consolidated interim
financial statements of Bacanora Minerals Ltd. as at and for the
three and nine months ended March 31, 2017 and 2016 have been
prepared by management and approved by the Audit Committee and the
Board of Directors of the Company. These statements have not been
reviewed by the Company's external auditors.
BACANORA MINERALS LTD.
Condensed Consolidated Statements of
Financial Position
Unaudited
Expressed in Canadian Dollars
----------------------------------------------------- -------------
As at March 31, June 30,
2017 2016
-------------------------------------- ------------- -------------
Assets
Current
Cash $ 13,741,332 $ 28,730,168
Other receivables (Note 4a) 590,004 265,342
Deferred costs 79,121 102,607
Total current assets 14,410,457 29,098,117
-------------------------------------- ------------- -------------
Non-current assets
Investment in jointly controlled
entity (Note 6) 9,858,582 -
Long-term derivative asset
(Note 6) 2,600,000 -
Property and equipment (Note
7) 2,057,258 2,364,371
Exploration and evaluation
assets (Note 8) 25,030,947 17,816,713
-------------------------------------- ------------- -------------
Total non-current assets 39,546,787 20,181,084
-------------------------------------- ------------- -------------
Total assets 53,957,244 49,279,201
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable and accrued
liabilities 378,581 1,041,117
Warrant liability (Note 9(b)) - 897,323
Joint Venture obligation (Note
6) 2,321,964 -
Total current liabilities 2,700,545 1,938,440
-------------------------------------- ------------- -------------
Non-current liabilities
Joint Venture obligation (Note
6) 1,018,991 -
Deferred tax liability 135,000 135,000
Total non-current liabilities 1,153,991 135,000
-------------------------------------- ------------- -------------
Total liabilities 3,854,536 2,073,440
Shareholders' Equity
Share capital (Note 9) 61,535,296 57,058,924
Contributed surplus (Note
9(e)) 6,526,622 3,528,990
Foreign currency translation
reserve 483,777 574,478
Deficit (17,295,498) (13,150,873)
-------------------------------------- ------------- -------------
Attributed to Shareholders
of Bacanora Minerals Ltd. 51,250,197 48,011,519
Non-controlling interest (1,147,489) (805,758)
-------------------------------------- ------------- -------------
Total shareholders' equity 50,102,708 47,205,761
-------------------------------------- ------------- -------------
Total Liabilities and Shareholders'
Equity $ 53,957,244 $ 49,279,201
-------------------------------------- ------------- -------------
Commitments and Contingencies (Note 13) Subsequent Events (Note
14)
Approved by the Board of Directors:
(signed) "Jamie Strauss" (signed) "Ray Hodgkinson"
Jamie Strauss Ray Hodgkinson
Director Director
See accompanying notes to the condensed consolidated financial
statements.
BACANORA MINERALS LTD.
Condensed Consolidated Statements of Comprehensive
Loss
Unaudited
Expressed in Canadian Dollars
---------------------------------------------------------------------------------------
Three months Nine months
ended ended
Mar. Mar. Mar. Mar.
31, 31, 31, 31,
2017 2016 2017 2016
------------------------------- ------------ ------------ ------------ ------------
Revenue
Interest income $ 22,771 $ 45,242 $ 85,009 $ 89,870
------------------------------- ------------ ------------ ------------ ------------
Expenses
General and administrative
(Note 10) 914,684 1,068,083 3,420,053 2,500,700
Depreciation (Note 7) 104,772 17,233 147,603 78,612
Stock-based compensation
(Note 9(f)) 1,658,030 1,347,749 3,039,412 2,723,081
2,677,486 2,433,065 6,607,068 5,302,393
------------------------------- ------------ ------------ ------------ ------------
Loss before other items (2,654,715) (2,387,823) (6,522,059) (5,212,523)
Foreign exchange gain
(loss) 1,804,303 819,573 500,111 (312,160)
Warrant liability valuation - - 348,964
Joint Venture investment
gain (loss) 70,235 - 70,235 -
------------------------------- ------------ ------------ ------------ ------------
Loss (780,177) (1,568,250) (5,602,749) (5,524,683)
Foreign currency translation
adjustment (1,042,288) (953,850) (91,701) (373,358)
------------------------------- ------------ ------------ ------------ ------------
Total comprehensive
loss (1,822,465) (2,522,100) (5,694,450) (5,898,041)
------------------------------- ------------ ------------ ------------ ------------
Loss attributable to
shareholders of Bacanora
Minerals Ltd. (117,642) (1,496,568) (4,144,625) (5,264,707)
Loss attributable to
non-controlling interest (662,536) (71,682) (1,458,124) (259,976)
------------------------------- ------------ ------------ ------------ ------------
(780,178) (1,568,250) (5,602,749) (5,524,683)
------------------------------- ------------ ------------ ------------ ------------
Total comprehensive
loss attributable to
shareholders of Bacanora
Minerals Ltd. (1,159,930) (2,450,418) (4,236,326) (5,638,065)
Total comprehensive
loss attributable to
non-controlling interest (662,536) (71,682) (1,458,124) (259,976)
------------------------------- ------------ ------------ ------------ ------------
(1,822,466) (2,522,100) (5,694,450) (5,898,041)
------------------------------- ------------ ------------ ------------ ------------
Net loss per share (basic
and diluted) $ (0.01) $ (0.02) $ (0.05) $ (0.06)
------------------------------- ------------ ------------ ------------ ------------
See accompanying notes to the condensed consolidated financial
statements.
BACANORA MINERALS LTD.
Condensed Consolidated Statements of Changes in Shareholders' Equity
Unaudited
Expressed in Canadian Dollars
------------------------------------------------------------------------------------------------------------------------
Share Capital
-------------- --------------------------
Accumulated
other
Number of Contributed comprehensive Non-controlling
Shares Amount Surplus income Deficit interest Total
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
Balance, June
30,
2015 84,947,409 $24,827,911 $657,254 $1,695,333 $(2,855,397) $(680,281) $23,644,820
Brokered
placements 11,476,944 17,461,167 - - - - 17,461,167
Shares issued
on
exercise of
options 850,000 302,840 (86,840) - - - 216,000
Stock-based
compensation
expense - - 2,723,081 - - - 2,723,081
Foreign
currency
translation
adjustment - - - (373,358) - - (373,358)
Loss for the
period - - - - (5,264,704) (226,016) (5,490,723)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
Balance,
March 31,
2016 97,274,353 $42,591,918 $3,293,495 $1,321,975 $(8,120,104) $(906,297) $38,180,987
Brokered
placements 9,750,000 13,720,966 - - - - 13,720,966
Shares issued
on
exercise of
options 850,000 746,040 (319,039) - - - 427,001
Stock-based
compensation
expense - - 554,534 - - - 554,534
Foreign
currency
translation
adjustment - - - (747,497) - (747,497)
Loss for the
period - - - - (5,030,769) 100,539 (4,930,230)
Balance, June
30,
2016 107,874,353 $57,058,924 $3,528,990 $574,478 $(13,150,873) $(805,758) $47,205,761
Shares issued
on
exercise of
warrants 2,925,000 4,486,570 - - - - 4,486,570
Share issue
costs - (111,978) - - - - (111,978)
Shares issued
on
exercise of
options 200,000 101,780 (41,780) - - - 60,000
Stock-based
compensation
expense - - 3,039,412 - - - 3,039,412
Foreign
currency
translation
adjustment - - - (90,701) - - (90,701)
Loss for the
period - - - - (4,144,625) (341,731) (4,486,356)
Balance,
March 31,
2017 110,999,353 $61,535,296 $6,526,622 $483,777 $(17,295,498) $(1,147,489) $50,102,708
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
See accompanying notes to the condensed consolidated financial
statements.
BACANORA MINERALS LTD.
Condensed Consolidated Statements of Cash Flows
Unaudited
Expressed in Canadian Dollars
-----------------------------------------------------------------------------------------------------
Three months
ended September Nine months
30, ended
Mar.
Mar. 31, 31,
Mar. Mar.
31, 2017 2016 2017 31, 2016
-------------------------------------- ------------- -------------- -------------- --------------
Cash provided by (used
in)
Operating activities
Net loss $ (780,177) $ (1,568,250) $ (5,602,749) $ (5,524,683)
Depreciation 104,772 17,233 147,603 78.612
Warrant liability revaluation - - (348,964) -
Unrealized foreign exchange
adjustment - (1,722,929) - (1,204,569)
Share based compensation 1,658,030 1,347,749 3,039,412 2,723,081
982,625 (1,926,197) (2,764,698) (3,927,559)
Changes in non-cash
working capital
Other receivables (135,112) 291,900 (324,662) (78,898)
Prepaid 68,512 (58,804) 23,486 (122,380)
Accounts payable and
accrued liabilities (1,264,657) 186,070 (1,662,149) 188,466
-------------------------------------- ------------- -------------- -------------- --------------
(348,632) (1,507,031) (4,728,023) (3,940,371)
-------------------------------------- ------------- -------------- -------------- --------------
Financing activities
Issue of shares, net
of expenses 186,758 - 101,780 17,461,167
Related party (payments)/advances - 46,863 - 91,969
Options exercise proceeds - - - 216,000
Warrant exercise proceeds,
net of expenses - - 2,925,616 -
186,758 46,863 3,027,396 17,769,136
-------------------------------------- ------------- -------------- -------------- --------------
Investing activities
Investment in jointly
controlled entity (7,104,782) - (7,104,779) -
Additions to mineral
properties (Note 8) (2,430,040) (1,507,200) (6,179,438) (3,674,000)
Additions to property
and equipment (Note
7) (359,325) 112,285 (3,992) 229,128
(9,894,147) (1,394,915) (13,288,209) (3,444,872)
-------------------------------------- ------------- -------------- -------------- --------------
Increase in cash position (10,056,021) (2,855,083) (14,988,836) 10,383,893
Cash, beginning of the
period 23,797,353 23,230,013 28,730,168 9,991,037
-------------------------------------- ------------- -------------- -------------- --------------
Cash, end of the period $ 13,741,332 $ 20,374,930 $ 13,741,332 $ 20,374,930
-------------------------------------- ------------- -------------- -------------- --------------
See accompanying notes to the condensed consolidated financial
statements.
1. CORPORATE INFORMATION
Bacanora Minerals Ltd. (the "Company" or "Bacanora") was
incorporated under the Business Corporations Act of Alberta on
September 29, 2008. The Company is dual listed on the TSX Venture
Exchange as a Tier 2 issuer and on the AIM Market of the London
Stock Exchange, with its common shares trading under the symbol,
"BCN" on both exchanges. The address of the Company is 2204 6
Avenue N.W. Calgary, AB T2N 0W9.
The Company is an exploration and development stage mining
company engaged in the identification, acquisition, exploration and
development of mineral properties located in Mexico. The Company
has not yet determined whether its mineral properties contain
economically recoverable reserves. The recoverability of amounts
capitalized is dependent upon the discovery of economically
recoverable reserves, securing and maintaining title in the
properties and obtaining the necessary financing to complete the
exploration and development of these projects and upon attainment
of future profitable production. The amounts capitalized as mineral
properties represent costs incurred to date, and do not necessarily
represent present or future values.
2. BASIS OF PREPARATION
a) Statement of compliance
These condensed consolidated interim financial statements have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") applicable to the preparation of interim
financial statements, including IAS 34, Interim Financial
Reporting. The condensed consolidated interim financial statements
should be read in conjunction with the audited annual consolidated
financial statements for the year ended June 30, 2016, which have
been prepared in accordance with IFRS as issued by the IASB.
The Company uses the same accounting policies and methods of
computation as in the audited annual consolidated financial
statements for the year ended June 30, 2016.
These condensed consolidated interim financial statements were
authorized for issue by the Board of Directors on May 30, 2017. The
Board of Directors has the power and authority to amend these
financial statements after they have been issued.
b) Basis of measurement
These condensed consolidated interim financial statements have
been prepared on a historical cost basis, except for certain
financial instruments that have been measured at fair value.
These consolidated financial statements are presented in
Canadian dollars. The functional currency of the Company is the
British pound sterling ("GBP") and US dollar for its subsidiaries.
The Company's functional currency previously was the Canadian
dollar up until June 30, 2016.
c) New standards and interpretations not yet adopted
A number of new IFRS standards, and amendments to standards and
interpretations, are not yet effective for the period ended March
31, 2017, and have not been applied in preparing these condensed
consolidated interim financial statements. None of these standards
are expected to have a significant effect on the condensed
consolidated interim financial statements of the Company.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the Company's condensed consolidated interim
financial statements in accordance with IFRS requires management to
make certain judgments, estimates, and assumptions about
recognition and measurement of assets, liabilities, income and
expenses. The actual results are likely to differ from these
estimates. Information about the significant judgments, estimates,
and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, income and
expenses are discussed below.
a) Exploration and evaluation assets
The Company is in the process of exploring its mineral
properties and has not yet determined whether the properties
contain economically recoverable mineral reserves. The
recoverability of carrying values for mineral properties is
dependent upon the discovery of economically recoverable mineral
reserves, the ability of the Company to obtain the financing
necessary to complete exploration and development, and the success
of future operations.
The application of the Company's accounting policy for
exploration and evaluation assets requires judgment in determining
whether it is likely that costs incurred will be recovered through
successful exploration and development or sale of the asset under
review when assessing impairment. Furthermore, the assessment as to
whether economically recoverable reserves exist is itself an
estimation process. Estimates and assumptions made may change if
new information becomes available. If, after expenditures are
capitalized, information becomes available suggesting that the
recovery of expenditures is unlikely, the amount capitalized is
written off in the statement of comprehensive loss in the period
when the new information becomes available. The carrying value of
these assets is detailed in Note 8.
b) Joint Arrangements
Certain of the Company's activities are conducted through joint
venture in which it has joint control.
Joint ventures arise when the Company has rights to the net
assets of the arrangement. For these arrangements the Company uses
the equity method of accounting and recognizes initial and
subsequent investments at cost, adjusting for the Company's share
of the joint venture's income or loss, less dividends received
thereafter. The transactions between the Company and the joint
venture partner are assessed for recognition in accordance with
IFRS.
Under the equity method, losses from the joint venture are
applied against the carrying amount of the investment and any loans
to the associate that are considered part of the net investment.
When the Company's share of losses in a jointly controlled entity
exceeds the Company's interest, the Company discontinues
recognizing its share of future losses. The Corporation does not
recognize further losses unless a legal or constructive obligation
exists. If the joint venture subsequently reports profits, the
entity resumes recognizing its share of those profits only after
its share of the profits equals the share of losses not recognized.
Revenue is only recorded when collection is reasonably assured.
Joint ventures are tested for impairment whenever objective
evidence indicates that the carrying amount of the investment many
not be recoverable under the equity method of accounting. The
impairment amount is measured as the difference between the
carrying amount of the investment and the higher of its fair value
less costs of disposal and its value in use. Impairment losses are
reversed in subsequent periods if the amount of the loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognized.
c) Title to mineral property interests
Although the Company has taken steps to verify the title to the
exploration and evaluation assets in which it has an interest, in
accordance with industry practices for the current stage of
exploration of such properties, these procedures do not guarantee
the Company's title. Title may be subject to unregistered prior
agreements or transfers and title may be affected by undetected
defects.
d) Rehabilitation provision
Rehabilitation or similar liabilities are estimated based on the
Company's interpretation of current regulatory requirements,
constructive obligations and are measured at fair value. Fair value
is determined based on the net present value of estimated future
cash expenditures for the settlement of decommissioning,
restoration or similar liabilities that may occur upon
decommissioning of the mine. Such estimates are subject to change
based on changes in laws and regulations.
e) Functional currency
The Company transacts in multiple currencies. The assessment of
the functional currency of each entity within the consolidated
group involves the use of judgment in determining the primary
economic environment each entity operates in. The Company first
considers the currency that mainly influences sales prices for
goods and services, and the currency that mainly influences labour,
material and other costs of providing goods or services. In
determining functional currency the Company also considers the
currency from which funds from financing activities are generated,
and the currency in which receipts from operating activities are
usually retained. When there is a change in functional currency,
the Company exercises judgment in determining the date of
change.
f) Share-based payments
The Company utilizes the Black-Scholes Option Pricing Model to
estimate the fair value of stock options granted to directors,
officers and employees. The use of the Black-Scholes Option Pricing
Model requires management to make various estimates and assumptions
that impact the value assigned to the stock options, including the
forecast future volatility of the stock price, the risk-free
interest rate, dividend yield and the expected life of the stock
options. Any changes in these assumptions could have a material
impact on the share-based payment calculation value.
The same estimates are required for transactions with
non-employees where the fair value of the goods or services
received cannot be reliably determined and for the warrant
derivative liability.
g) Income taxes
Income tax expense is recognised in each interim period based on
the best estimate of the weighted average annual income tax rate
expected for the full financial year. Amounts accrued for income
tax expense in one interim period may have to be adjusted in a
subsequent interim period of that financial year if the estimate of
the annual income tax rate changes.
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
This note presents information about the Company's exposure to
credit, liquidity and market risks arising from its use of
financial instruments and the Company's objectives, policies and
processes for measuring and managing such risks.
a) Credit risk
Credit risk arises from the potential that a counter party will
fail to perform its obligations. The Company's credit risk relates
solely to Input Tax Credits ("ITC") receivables in Canada and Value
Added Tax ("VAT") receivables in Mexico. Any changes in
management's estimate of the recoverability of the amount due will
be recognized in the period of determination and any adjustment may
be significant. The carrying amount of other receivables represent
the maximum credit exposure.
All of the other receivables represent amounts due from the
Canadian and Mexican governments and accordingly the Company
believes them to have minimal credit risk. The Company considers
all of its other receivables fully collectible, and therefore has
not provided an allowance against this balance nor reclassified the
balance as a non-current asset.
The Company's cash is held in major Canadian, UK and Mexican
banks, and as such the Company is exposed to the risks of those
financial institutions. The Board of Directors monitors the
exposure to credit risk on an ongoing basis and does not consider
such risk significant at this time. The Company considers all of
its accounts receivables fully collectible.
b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they become due. The Company's
approach to managing liquidity risk is to ensure, as far as
possible, that it will have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses. Liquidity risk arises
primarily from accounts payable and accrued liabilities and
commitments, all with maturities of one year or less.
c) Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, commodity prices, and interest rates will
affect the value of the Company's financial instruments. The
objective of market risk management is to manage and control market
risk exposures within acceptable limits, while maximizing long-term
returns.
The Company conducts exploration projects in Mexico. As a
result, a portion of the Company's expenditures, accounts
receivables, accounts payables and accrued liabilities are
denominated in US dollars and Mexican pesos and are therefore
subject to fluctuation in exchange rates. As at June 30, 2016, a 5%
change in the exchange rate between GBP and US dollar would have an
approximate $2,353,000 (2015 - $545,000) change to the Company's
total comprehensive loss.
d) Fair values
The carrying value approximates the fair value of the financial
instruments due to the short term nature of the instruments.
5. CAPITAL MANAGEMENT
The Company's objectives in managing capital are to safeguard
its ability to operate as a going concern while pursuing
exploration and development and opportunities for growth through
identifying and evaluating potential acquisitions or businesses.
The Company defines capital as the Company's shareholders' equity
excluding contributed surplus, of $44,723,575 at March 31, 2017
(June 30, 2016 - $44,482,529). The Company sets the amount of
capital in proportion to risk and corporate growth objectives. The
Company manages its capital structure and makes adjustments to it
in light of changes in economic conditions and the risk
characteristics of the underlying assets. The Company is not
subject to any externally imposed capital requirements.
6. INVESTMENT IN JOINT VENTURE
The Company holds 50% interest in a jointly controlled entity,
Deutsche Lithium GmbH, located in southern Saxony, Germany. The
Company acquired its interest in February of 2017 for a cash
consideration of EUR5 million (approximately $7,105,000) from
SolarWorld AG ("SolarWorld") and an undertaking to contribute up to
EUR5 million toward the costs of completion of a Feasibility Study,
which is anticipated to take approximately 18-24 months. The
Company, alone or together with any reasonably acceptable third
party, has an option to acquire the remaining 50% of the jointly
controlled entity within a 24 month period for EUR30 million. In
the event that the Company is unable to complete the purchase of
the remaining 50%, alone or together with any reasonably acceptable
third party, by the end of the 24 month period, then SolarWorld has
the right but not the obligation to purchase the Company's 50%
interest for EUR1.
The Company's undertaking to contribute up to EUR5 million
toward the costs of completion of a Feasibility Study is being
recorded as a liability, reported accordingly with its due dates,
between current and non-current portions. At March 31, 2017, the
current portion of the obligation was $2,321,964 and the
non-current portion was $1,018,991. The Company used a discount
rate of 20% in its calculations of future values.
The option to purchase the remaining 50% interest is a
derivative asset and is recorded at its fair value of $2,600,000.
The fair value of the investment in joint venture was determined
based on the fair value of the resources acquired with the residual
consideration allocated to the derivative asset. The derivative
asset has been classified as long-term due to its realization being
in line with the completion of the Feasibility Study.
The statement of financial position of SolarWorld includes
accounts receivables and accounts payables which are not
significant in value. Current value of SolarWorld is substantially
attributed to the exploration and evaluation assets.
7. PROPERTY AND EQUIPMENT
Office
Building furniture Computer Transportation
Cost and equipment and equipment equipment equipment Total
------------------ --------------- --------------- ----------- --------------- ------------
Balance, June
30, 2015 $ 2,932,054 $ 3,147 $ 11,464 $ 146,396 $ 3,093,061
Additions 108,777 - 17,840 59,776 186,393
Foreign exchange (267,264) - (18,765) (17,909) (303,938)
------------------ --------------- --------------- ----------- --------------- ------------
Balance, June
30, 2016 $ 2,773,567 $ 3,147 $ 10,539 $ 188,263 $ 2,975,516
Additions 3,562 - 430 - 3,992
Foreign exchange (298,961) - - - (298,961)
------------------ --------------- --------------- ----------- --------------- ------------
Balance, March
31, 2017 $ 2,478,168 $ 3,147 $ 10,969 $ 188,263 $ 2,680,547
------------------ --------------- --------------- ----------- --------------- ------------
Office
Accumulated Building furniture Computer Transportation
depreciation and equipment and equipment equipment equipment Total
---------------- --------------- --------------- ----------- --------------- ----------
Balance, June
30, 2015 $ 412,036 $ 3,147 $ 7,843 $ 99,232 $ 522,258
Additions 80,591 - 2,696 5,600 88,887
---------------- --------------- --------------- ----------- --------------- ----------
Balance, June
30, 2016 $ 492,627 $ 3,147 $ 10,539 $ 104,832 $ 611,145
Additions 11,139 - - 1,005 12,144
Balance, March
31, 2017 $ 503,766 $ 3,147 $ 10,539 $ 105,837 $ 623,289
---------------- --------------- --------------- ----------- --------------- ----------
Office
Carrying Building furniture Computer Transportation
amounts and equipment and equipment equipment equipment Total
------------- --------------- --------------- ----------- --------------- ------------
At June 30,
2016 $ 2,280,940 $ - $ - $ 83,431 $ 2,364,371
At Mar. 31,
2017 $ 1,974,402 $ - $ 430 $ 82,426 $ 2,057,258
------------- --------------- --------------- ----------- --------------- ------------
8. EXPLORATION AND EVALUATION ASSETS
The Company's mining claims consist of mining concessions
located in Mexico and Germany. The specific descriptions of such
properties are as follows:
a) Magdalena Borate property
Originally referred to as San Francisco and El Represo projects,
Magdalena Borate project consists of eight concessions located in
the State of Sonora, Mexico, with a total area of 7,105 hectares.
The concessions are 100% owned by MSB. The Magdalena property is
subject to a 3% gross overriding royalty payable to Minera Santa
Margarita S.A. de C.V., a subsidiary of Rio Tinto PLC, and a 3%
gross overriding royalty payable to the estate of the late Chairman
of the Company on sales of borate produced from this property.
b) Sonora Lithium property
The Sonora Lithium Project located in the state of Sonora,
Mexico consists of ten contiguous mineral concessions. The Company
through its wholly-owned Mexican subsidiary, MSB, has a 100%
interest in two of these concessions: La Ventana and La Ventana 1,
covering 1,820 hectares. Of the remaining concessions, five are
owned 100% by Mexilit, El Sauz, El Sauz 1, El Sauz 2, Fleur and
Fleur 1 covering 6,334 hectares. Mexilit is owned 70% by Bacanora
and 30% by Cadence Minerals PLC ("Cadence"), formally known as Rare
Earth Minerals.
The remaining three concessions, Buenavista, Megalit and San
Gabriel, cover 89,235 hectares, and are subject to a separate
agreement between the Company and Cadence. Under the agreement,
Megalit is owned 70% by Bacanora and 30% by Cadence. As at March
31, 2017, Buenavista and San Gabriel concessions were transferred
from MSB to Megalit, while the Megalit concession was in the
process of being transferred to Minera Megalit S.A. de C.V..
The Sonora Lithium property is subject to a 3% gross overriding
royalty on production from certain concessions within the Sonora
Lithium property payable to the estate of the late Chairman of the
Company.
The balance of investment in mining claims as of March 31, 2017
and June 30, 2016 corresponds to concession payments to the federal
government, and costs of exploration, and consists of the
following:
Magdalena La Ventana Mexilit Megalit
Borate Lithium Lithium Lithium Total
------------------ ------------ ------------- ------------ ----------- -------------
Balance, June
30, 2015 $ 7,246,158 $ 1,931,837 $ 2,091,527 $ 637,905 $ 11,907,427
Additions 1,015,692 4,505,946 1,078,990 125,575 6,726,203
Foreign exchange (537,109) (60,295) (186,935) (32,578) (816,917)
Balance, June
30, 2016 $ 7,724,741 $ 6,377,488 $ 2,983,582 $ 730,902 $ 17,816,713
Additions 30,189 6,123,842 14,302 11,105 6,179,438
Foreign exchange 293,604 578,608 124,792 37,792 1,034,796
Balance, March
31, 2017 $ 8,048,534 $ 13,079,938 $ 3,122,676 $ 779,799 $ 25,030,947
------------------ ------------ ------------- ------------ ----------- -------------
9. SHARE CAPITAL
a) Authorized
The authorized share capital of the Company consists of an
unlimited number of voting common shares without nominal or par
value.
b) Common Shares Issued Shares Amount
--------------------------------------- ------------ -------------
Balance, June 30, 2015 84,947,409 $ 24,827,911
Shares issued on exercise of options 850,000 355,410
Shares issued in private placement
for cash(1) 11,476,944 17,871,564
Shares issued on exercise of options 850,000 691,470
Shares issued in private placement
for cash(2) 9,750,000 14,228,359
Share issue costs - (915,790)
--------------------------------------- ------------ -------------
Balance, June 30, 2016 107,874,353 $ 57,058,924
Shares issued on exercise of warrants 2,925,000 4,486,570
Share issue costs - (111,978)
Shares issued on exercise of options 200,000 101,780
--------------------------------------- ------------ -------------
Balance, March 31, 2017 110,999,353 $ 61,535,296
--------------------------------------- ------------ -------------
(1) On November 13, 2015, the Company completed a private
financing of 11,476,944 common shares at a price of $1.56 (GBP0.77)
per share for aggregate gross proceeds of $17,871,564
(GBP8,837,247). The Company paid commission of $354,280 and other
share issue expenses of $56,117. As part of the financing,
1,973,407 common shares were acquired by REM, a company that is a
significant shareholder and has a position in the Company's Board
of Directors.
(2) On May 20, 2016, the Company completed a private financing
that raised approximately $14,681,700 (GBP7,702,500) via the
placing of 9,750,000 units (the "Placing Units") at a price of
approximately $1.48 (GBP0.79) per Placing Unit (the "Placing"). The
Company paid commission of $440,500 and other share issue expenses
of $64,893. Each Placing Unit is comprised of one new common share
of the Company (a "Placing Share") and 0.3 of one common share
purchase warrant, with each whole warrant (a "Placing Warrant")
being exercisable into one common share at a price of approximately
$1.48 (GBP0.79) at any time subsequent to July 25, 2016, but on or
before September 30, 2016. Accordingly, an aggregate of 9,750,000
Placing Shares and 2,925,000 Placing Warrants were issued under
this Placing. The Placing Warrants are denominated in a currency
different than the functional currency and are recorded as warrant
liability of $453,299, which was measured using the Black-Scholes
option pricing model with the following assumptions: risk-free
interest rate: 0.39%; expected volatility: 38%; expected life: 4
months; fair value per warrant: $0.15. The fair value of the
warrant liability was re-measured as at June 30, 2016 to be
$897,323 using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate: 0.25%; expected
volatility: 44%; expected life: 3 months; fair value per warrant:
$0.31.
c) Stock options
The following tables summarize the activities and status of the
Company's stock option plan as at and during the period ended March
31, 2017.
Number of Weighted average
options exercise price
------------------------- ------------ -----------------
Balance, June 30, 2015 2,475,000 $ 0.38
Exercised (1,700,000) 0.33
Expired (50,000) 1.58
Issued 4,250,000 1.75
------------------------- ------------ -----------------
Balance, June 30, 2016 4,975,000 $ 1.52
Exercised (200,000) 0.30
Issued 2,912,400 1.39
------------------------- ------------ -----------------
Balance, March 31, 2017 7,687,400 $ 1.50
------------------------- ------------ -----------------
Weighted
Number average Number
outstanding remaining exercisable
at Mar. Exercise contractual Expiry at Mar.
Grant date 31, 2017 price life (Years) date 31, 2017
--------------- ------------- --------- -------------- ---------- -------------
September Sept.
28, 2012 50,000 0.25 0.8 28, 2017 50,000
September Sept.
11, 2013 525,000 0.30 1.5 11, 2018 525,000
December 2, Dec. 2,
2015 1,200,000 1.58 3.7 2020 1,200,000
January 22, Jan. 22,
2016 1,000,000 1.56(1) 0.9 2018 1,000,000
April 27, May 27,
2016 2,000,000 1.94(2) 2.2 2019 -
March
March 1, 2017 400,000 1.39(3) 4.9 1, 2022 400,000
March
March 1, 2017 2,512,400 1.39(3) 2.9 1, 2020 829,092
--------------- ------------- --------- -------------- ---------- -------------
7,687,400 4,004,092
--------------- ------------- --------- -------------- ---------- -------------
(1) Exercise price of GBP0.77 per share
(2) Exercise price of GBP0.96 per share
(3) Exercise price of GBP0.85 per share
d) Warrants
The following tables summarize the activities and status of the
Company's warrants as at and during the period ended March 31,
2017.
Weighted
Remaining Average
Number contractual Exercise
of warrants life (Years) Expiry date price
---------------- ------------- -------------- ------------ ----------
Balance, June March 26,
30, 2015 833,333 1.0 2018 $ 0.45
September
Issued 2,925,000 0.3 30, 2016 $ 1.51
---------------- ------------- -------------- ------------ ----------
Balance, June
30, 2016 3,758,333 - - $ 1.27
Exercised (2,925,000) - - 1.35
---------------- ------------- -------------- ------------ ----------
Balance, March
31, 2017 833,333 1.0 $ 0.45
---------------- ------------- -------------- ------------ ----------
Weighted
average
Number remaining
outstanding contractual
at Mar. Exercise life Financing
Grant date 31, 2017 price (Years) Expiry date warrants
------------ ------------- --------- ------------- ------------ ----------
March 26, March 26,
2013 833,333 $ 0.45 1.0 2018 833,333
March 31,
2017 833,333 - - - 833,333
------------ ------------- --------- ------------- ------------ ----------
e) Contributed surplus
The following table presents changes in the Company's
contributed surplus.
March 31, June 30,
2017 2016
---------------------------- ------------ ------------
Balance, beginning of the
period $ 3,528,990 $ 657,254
Exercise of stock options (41,780) (405,879)
Stock-based compensation
expense 3,039,412 3,277,615
Balance, end of the period $ 6,526,622 $ 3,528,990
---------------------------- ------------ ------------
f) Stock-based compensation expense
During the period ended March 31, 2017, the Company recognized
$3,039,412 (2015 - $2,723,081) of stock-based compensation expense
for options granted under the Company's stock option plan. The fair
value of stock options granted during the period ended March 31,
2017 was estimated on the dates of grant using the Black-Scholes
option pricing model with the following weighted average
assumptions, risk-free interest rate of 0.73%, expected volatility
of 138%, and expected life of 3 years. The fair value of each stock
option was $1.08. Expected volatility is based on historical
volatility of the Company's stock prices and comparable peers.
g) Per share amounts
Basic loss per share is calculated using the weighted average
number of shares of 110,923,797 for the three month period ended
March 31, 2017 and 109,858,112 for the nine month period ended
March 31, 2017 (2016 - 97,274,353 and 91,201,755 respectively).
Options and warrants were excluded from the dilution calculation as
they were anti-dilutive.
10. GENERAL AND ADMINISTRATIVE EXPENSES
Three months ended Nine months ended
---------------------- ------------------------- --------------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2017 2016 2017 2016
Management fees
(Note 14) $ 344,443 $ 435,982 $1,117,806 $1,161,623
Legal and accounting
fees 53,463 410,002 1,054,864 650,777
Investor relations 226,172 95,463 509,802 322,130
Office expenses 15,837 38,181 197,538 177,008
Travel and other
expenses 274,769 88,455 540,043 189,162
---------------------- ----------- ------------ ------------ ------------
Total $ 914,684 $ 1,068,083 $ 3,420,053 $ 2,500,700
---------------------- ----------- ------------ ------------ ------------
11. SEGMENTED INFORMATION
The Company is pursuing the exploration and development of
mineral properties in Mexico and Germany. The Company has an office
in Calgary, and London but it does not generate any revenues or
hold any non-current assets at these locations. Summary of the
identifiable assets are as follows:
Exploration and
Evaluation Activities Consolidated
------------------------ ---------------------------- -----------------------------
March 31, June 30, March
2017 2016 31, 2017 June 30, 2016
------------------------ ------------- ------------- ------------- --------------
Property and equipment
- Mexico $ 2,057,258 $ 2,364,371 $ 2,057,258 $ 2,364,371
Exploration and
evaluation assets
- Mexico $ 25,030,947 $ 17,816,713 $ 25,030,947 $ 17,816,713
Investment in jointly
controlled entity
- Germany $ 9,858,582 $ - $ 9,858,582 $ -
------------------------ ------------- ------------- ------------- --------------
12. RELATED PARTY TRANSACTIONS
a. Related party expenses
The Company's related parties include directors and officers and
companies which have directors in common. Transactions made with
related parties are made in the normal course of business and are
measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
During the three and nine months ended March 31, 2017, directors
and management fees in the amount of $347,989 and $1,013,096
respectively (2016 - $344,252 and 857,117 respectively) were paid
to directors and officers of the Company. All of these costs were
recorded as general and administrative. Of the total amount
incurred as directors and management fees, $68,069 (June 30, 2016 -
$38,075) remains in accounts payables and accrued liabilities on
March 31, 2017.
During the three and nine months ended March 31, 2017, the
Company paid $84,879 and $613,357 respectively (2016 - $260,533 and
$756,607 respectively) to Grupo Ornelas Vidal S.A. de C.V., a
consulting firm of which Martin Vidal, director of the Company and
president of MSB, is a partner. These services were incurred in the
normal course of geological exploration. As of March 31, 2017,
$30,211 (June 30, 2016 - $77,416) remains in accounts payable and
accrued liabilities.
b. Key management personnel compensation
Key management of the Company are directors and officers of the
Company and their remuneration includes the following:
Three months
ended Nine months ended
--------------------------- ----------------------- ------------------------
Mar. 31, Mar. 31,
Mar. 31, Mar. 31,
2017 2016 2017 2016
Directors' fees:
Colin Orr-Ewing $ - $ 14,732 $ 10,056 $ 63,977
James Leahy 12,000 5,000 37,263 15,000
Shane Shircliff - 4,375 6,462 13,125
Derek Batorowski - 4,375 - 13,125
Kiran Morzaria 1,223 4,375 9,972 12,419
Jamie Strauss 13,558 - 18,673 -
Ray Hodgkinson 13,558 - 18,095 -
--------------------------- ---------- ----------- ------------ ----------
Total directors'
fees: $ 40,339 $ 32,857 $ 100,521 $ 117,646
--------------------------- ---------- ----------- ------------ ----------
Management and consulting
fees:
Mark Hohnen $ 81,679 $ 99,416 $ 254,137 $ 133,416
Peter Secker 98,932 122,040 310,585 378,007
Martin Vidal 84,879 62,171 218,733 187,847
Derek Batorowski 82,499 60,625 229,641 157,847
Total management
and consulting fees $ 347,989 $ 344,252 $ 1,013,096 $ 857,117
--------------------------- ---------- ----------- ------------ ----------
Employee's salary:
----------------------------- ---------- ---------- ------------ ------------
Cordelia Orr-Ewing $ - $ - $ - $ 53,559
----------------------------- ---------- ---------- ------------ ------------
Total employee's
salary $ - $ - $ - $ 53,559
----------------------------- ---------- ---------- ------------ ------------
Total director's,
management's, consultant's
and employee's salaries
and fees $ 388,328 $ 377,109 $ 1,113,617 $ 1,028,322
----------------------------- ---------- ---------- ------------ ------------
Operational consulting
fees:
Grupo Ornelas Vidal
S.A. de C.V. $ 84,879 $ 260,533 $ 613,357 $ 756,607
----------------------------- ---------- ---------- ------------ ------------
Stock-based compensation $ 806,177 $ 777,536 $ 2,050,290 $ 2,152,869
----------------------------- ---------- ---------- ------------ ------------
13. COMMITMENTS AND CONTINGENCIES
The Company has commitments for lease payments for field offices
with no specific expiry dates. The total annual financial
commitments resulting from these agreements is $10,735.
The properties in Mexico are subject to spending requirements in
order to maintain title of the concessions. The capital spending
requirement for 2017 is $333,180. The properties are also subject
to semi-annual payments to the Mexican government for concession
taxes.
As per the terms of the SolarWorld purchase agreement, the
Company undertook to pay up to EUR5.0 million toward the costs of
completing of a Feasibility Study, which is anticipated to take
approximately 18 to 24 months.
14. SUBSEQUENT EVENTS
On May 2(nd) , 2017, the Company announced the issuance of
12,333,261 new common shares to Hanwa Co., LTD. The common shares
represent 10.0% of the issued and outstanding share capital of the
Company and are being issued at a price of GBP0.83 (approximately
$1.37) per share to raise approximately GBP10,175,000
(approximately $16,896,000) for Bacanora pursuant to the Company's
offtake agreement for battery grade lithium carbonate at its Sonora
lithium project in Mexico.
On May 24(th) , 2017, the Company announced the issuance of
8,573,925 new shares at price of GBP0.86 (approximately $1.51) to
Capital Research and Management Company, US based investment
company that manages in excess of $1.4 trillion, for total gross
proceeds of approximately GBP7.4 million (approximately $13
million).
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCABMATMBMJBBR
(END) Dow Jones Newswires
May 31, 2017 11:15 ET (15:15 GMT)
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