Consolidated Financial Statements of
CONSTANTINE METAL RESOURCES LTD.
(Expressed in Canadian Dollars)
For the years ended October 31, 2018 and 2017
S u i t e 3 2 0 - 8 0 0 W e s t P e n d e r S t . , V a n c o u ve r , B . C . C a n a d a V 6 C 2 V 6
P h o n e ( 6 0 4 ) 6 2 9 - 2 3 4 8 F a x ( 6 0 4 ) 6 0 8 - 3 8 7 8
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Constantine Metal Resources Ltd.,
We have audited the accompanying consolidated financial statements of Constantine Metal Resources Ltd. (“the
Company”), which comprise the consolidated statements of financial position as at October 31, 2018 and 2017 and
the consolidated statements of income (loss) and comprehensive income (loss), cash flows and changes in equity for
the years then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the
consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Constantine Metal Resources Ltd. as at October 31, 2018 and 2017 and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
February 20, 2019
Consolidated Statements of Financial Position
As at October 31, 2018 and 2017
(Expressed in Canadian dollars)
Nature of Operations (Note 1)
Commitments (Note 12)
Events Subsequent to the End of the Year (Note 13)
On Behalf of the Board of Directors:
“J. Garfield MacVeigh”
___________________________
Director
See accompanying notes to the consolidated financial statements.
“G. Ross McDonald”
___________________________
Director
3
20182017AssetsCurrent assets: Cash and cash equivalents4,307,962$ 1,780,392$ Amounts receivable (Note 7)322,442 203,232 Advances and prepaid expenses 12,230 44,193 Investments (Note 4)22,500 - 4,665,134 2,027,817 Exploration and evaluation properties (Note 5)20,577,787 14,456,587 Performance bonds137,013 32,465 25,379,934$ 16,516,869$ LiabilitiesCurrent liabilities: Trade payables and accrued liabilities 443,203$ 553,519$ Amounts due to related parties (Note 7)17,750 - 460,953 553,519 EquityShare capital (Note 6)30,055,499 20,360,239 Stock options reserve (Note 6(b))2,151,843 1,936,756 Warrants reserve432,941 432,941 Investments reserve (Note 4)(15,250) - Accumulated deficit (7,706,052) (6,766,586) 24,918,981 15,963,350 25,379,934$ 16,516,869$
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the years ended October 31, 2018 and 2017
(Expressed in Canadian dollars)
* Restated to reflect share consolidation which took effect on May 18, 2018 (Note 6).
See accompanying notes to the consolidated financial statements.
4
20182017Expenses:Consulting141,063$ 55,404$ General and administrative203,149 119,492 Insurance50,013 92,646 Legal8,823 422,846 Mineral property costs17,475 - Professional fees - audit46,822 27,675 Rent (net)3,567 12,962 Salaries, wages and benefits213,524 53,929 Shareholder communications49,922 18,303 Share-based payments (Note 6(b))215,087 214,133 Travel39,466 10,537 Loss from operations (988,911) (1,027,927)Other Items: Interest income10,451$ $ 651 Loss on foreign exchange(28,517) (46,164) Gain on sale of exploration and evaluation properties (Note 5(b)(v) and 5(b)(vi))- 3,455,719 Gain on previously written off properties75,250 - Write-off of exploration and evaluation properties (Note 5(b)(v))(7,739) (5,101) Net income (loss) for the year(939,466)$ 2,377,178 Other comprehensive income (loss): Change in investments (Note 4)(15,250)$ - Net income (loss) and comprehensive income (loss) for the year(954,716)$ 2,377,178 Basic and diluted income (loss) per share(0.03)$ $0.08 Weighted average number of common shares outstanding *35,216,728 29,335,872
Consolidated Statements of Cash Flows
For the years ended October 31, 2018 and 2017
(Expressed in Canadian dollars)
See accompanying notes to the consolidated financial statements.
5
20182017Cash provided by (used in):Operations: Net income (loss) for the year$(939,466) $2,377,178 Items not affecting cash: Share-based payments215,087 214,133 Write-off of exploration and evaluation properties (Note 5(b)(v))7,739 5,101 Gain on sale of exploration and evaluation properties (Note 5(b)(vi))- (3,455,719) Gain on previously written off exploration and evaluation properties (Note 5(b)(v))(75,250) - Changes in non-cash working capital accounts: Amounts receivable(31,166) (13,476) Trade payables and accrued liabilities(275,212) 360,803 Exploration costs recoverable from partner(88,044) (256,909) Performance bonds(104,548) 1,063 Amounts due to related parties (Note 7)17,750 (15,072) Advances and prepaid expenses31,963 3,477 (1,241,147) (779,421) Investing activities: Exploration and evalution properties (Note 5)(5,964,043) (5,444,831) Proceeds from sale of exploration and evaluation properties (Note 5(b)(v) and Note 5(b)(vi))37,500 4,500,000 Recovery of exploration and evalution property expenditures- 2,936,971 (5,926,543) 1,992,140 Financing activities: Private placement proceeds (Note 6(a))10,000,000 - Share issuance costs(304,740) - 9,695,260 - Increase in cash and cash equivalents2,527,570 1,212,719 Cash and cash equivaltents, beginning of year1,780,392 567,673 Cash and cash equivalents, end of year$4,307,962 $1,780,392 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Accounts payable related to exploration and evaluation properties$164,896 $347,828
Consolidated Statements of Changes in Equity
For the years ended October 31, 2018 and 2017
(Expressed in Canadian dollars)
* Restated to reflect share consolidation which took effect on May 18, 2018 (Note 6).
See accompanying notes to the consolidated financial statements.
6
Number of Shares*Capital StockStock OptionsWarrantsInvestmentsDeficitTotal EquityBalance, October 31, 201629,335,872 20,360,239$ 1,722,623$ 432,941$ -$ (9,143,764)$ 13,372,039$ Share-based payments - - 214,133 - - - 214,133 Net income for the year- - - - - 2,377,178 2,377,178 Balance, October 31, 201729,335,872 20,360,239$ 1,936,756$ 432,941$ -$ (6,766,586)$ 15,963,350$ Private placement (Note 6(a))14,705,881 10,000,000 - - - - 10,000,000 Share issuance costs- (304,740) - - - - (304,740) Share-based payments (Note 6(b))- - 215,087 - - - 215,087 Net loss for the year- - - - - (939,466) (939,466) Other comprehensive income (loss) (Note 4)- - - - (15,250) - (15,250) Balance, October 31, 201844,041,753 30,055,499$ 2,151,843$ 432,941$ (15,250)$ (7,706,052)$ 24,918,981$ Share CapitalReserves
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
1. Nature of Operations
The Company is in the business of acquiring interests in resource properties that are considered to be sites of
potential economic mineralization, and then subsequently developing such assets with a view to enhancing their
value and to bringing on a major mining partner for development of the assets. The Company may sell property
for an enhanced value or seek a major mining partner to advance one of its projects on a joint venture basis.
Currently the Company is principally engaged in the exploration of mineral properties which cannot be considered
economic until a commercial feasibility study has been completed. The Company has no sources of operating
revenue and, except for cash flow generated from exploration management fees, property option fees and sale of
available-for-sale investments, is dependent upon equity financing to maintain current operations and to
ultimately develop a mineral property interest or interests which can be profitably sold or further developed and
placed into successful commercial production.
The Company has not generated any revenue since inception and has never paid any dividends and is unlikely to
pay dividends or generate earnings in the immediate or foreseeable future. With the exception of the prior year,
the Company has incurred losses since inception and has an accumulated operating deficit of $7,706,052. The
continuation and long-term viability of the Company remains dependent upon its ability to obtain necessary equity
financing to continue operations and to determine the existence, discovery and successful exploitation of
economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the
underlying properties, and the attainment of profitable operations.
The head office and principal address of the Company is #320 – 800 West Pender Street, Vancouver, British
Columbia, Canada, V6C 2V6.
2. Basis of Preparation
a) Statement of Compliance
The accompanying financial statements have been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The
accounting policies, methods of computation and presentation applied in these financial statements are
consistent with those of the previous financial year.
b) Consolidated Financial Statements
These consolidated financial statements of the Company for the years ended October 31, 2018 and 2017 were
approved and authorized for issue by the Board of Directors on February 20, 2019.
These consolidated financial statements include the accounts of the Company, its 100% controlled entities,
Constantine North Inc. (an Alaska corporation) and JT Mining Inc. (an Alaska corporation), and its 51% interest in
Constantine Mining LLC (“CML”) (a Delaware corporation, registered in the state of Alaska). The Company
records its proportionate interest in the assets, liabilities and expenses of CML in its consolidated financial
statements.
Inter-company balances and transactions, including unrealized income and expenses arising from inter-company
transactions, are eliminated on consolidation.
7
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
2. Basis of Preparation (continued)
c) Adoption of New and Revised Standards and Interpretations
Effective for annual periods beginning on or after January 1, 2018:
· IFRS 9, Financial Instruments;
Under IFRS 9, financial assets are required to be classified into three measurement categories on initial
recognition: those measured at fair value through profit and loss, those measured at fair value through other
comprehensive income and those measured at amortized cost. Investments in equity instruments are
required to be measured by default at fair value through profit or loss. However, there is an irrevocable option
for each equity instrument to present fair value changes in other comprehensive income. Measurement and
classification of financial assets is dependent on the entity’s business model for managing the financial
assets and the contractual cash flow characteristics of the financial asset.
IFRS 9 provides a three-stage expected credit loss model for calculating impairment for financial assets.
Expected credit losses are required to be recognized when financial instruments are initially recognized, and
the amount of expected credit losses recognized are required to be updated at each reporting date to reflect
changes in the credit risk of the financial instruments.
On initial recognition, IFRS 9 requires financial liabilities to be classified as subsequently measured at
amortized cost except for when one of the specified exceptions applies. In cases where the fair value option
is taken for financial liabilities, the part of a fair value change relating to an entity’s own credit risk is recorded
in other comprehensive income rather than the statement of loss, unless this creates an accounting
mismatch.
Effective for annual periods beginning on or after January 1, 2019:
· IFRS 16, Leases
Under IFRS 16, the Company is required to review all its contracts to determine if they contain leases or
lease-type arrangements. Virtually all leases are required to be accounted for as finance leases rather than
operating leases, where the required lease payments are disclosed as a commitment in the notes to the
financial statements (Note 12). As a result, the Company will be required to recognize leased assets (“right-
of-use” assets) and the related lease liability on the statement of financial position.
3. Significant Accounting Policies
a) Judgments and Estimates
The preparation of these consolidated financial statements requires management to make judgments, estimates
and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenues and
expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances and which form the basis of making
judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the
revision affects only that period, or in the period of the revision and further periods if the revision affects both
current and future periods.
8
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
3. Significant Accounting Policies (continued)
a) Judgments and Estimates (continued)
Significant areas requiring the use of estimates relate to the determination of impairment of exploration and
evaluation properties, determination of mineral reserves, and provision for closure and reclamation.
A significant judgment applicable to the financial statements of the current year relates to the determination of the
appropriate accounting treatment for the Company’s investment in Constantine Mining LLC. Refer to Notes 3(m)
and 5(a).
b) Cash and Cash Equivalents
Cash in the statement of financial position comprises cash at banks and on hand. Cash equivalents is comprised
of highly liquid investments held at major financial institutions, having maturity dates of three months or less from
the date of purchase, which are readily convertible into known amounts of cash.
c) Foreign Currency Translation
The functional and reporting currency of the Company and its subsidiaries is the Canadian dollar. Transactions
in currencies other than the functional currency are recorded at the rate of exchange prevailing on the dates of
transactions. Monetary assets and liabilities that are denominated in foreign currencies are translated at the
rates prevailing at each reporting date. Non-monetary assets and liabilities denominated in foreign currencies that
are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair
value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated. Foreign currency translation differences are recognized in profit or loss, except for
differences on the retranslation of available-for-sale instruments, which are recognized in other comprehensive
loss.
d) Exploration and Evaluation Properties
Costs directly related to the exploration and evaluation of resource properties are capitalized once the legal rights
to explore the resource properties are acquired or obtained. When the technical and commercial viability of a
mineral resource have been demonstrated and a development decision has been made, the capitalized costs of
the related property are transferred to mining assets and depreciated using the units of production method on
commencement of commercial production.
If it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the
property is abandoned or management has determined an impairment in value, the property is written down to its
recoverable amount. Resource properties are reviewed for impairment at each reporting date.
From time to time, the Company acquires or disposes of properties pursuant to the terms of option agreements.
Options are exercisable entirely at the discretion of the optionee and, accordingly, are recorded as mineral
property costs or recoveries when the payments are made or received. After costs are recovered, the balance of
the payments received are recorded as a gain on option or disposition of mineral property.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in
which it has an interest, in accordance with industry standards for the current stage of exploration of such
properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered
prior agreements and non-compliance with regulatory requirements.
9
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
3. Significant Accounting Policies (continued)
e)
Impairment of Non-current Assets
The Company’s tangible and intangible assets are reviewed for an indication of impairment at the end of each
reporting period. If an indication of impairment exists, the Company makes an estimate of the asset’s
recoverable amount. Individual assets are grouped for impairment assessment purposes at the lowest level at
which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.
The recoverable amount of an asset group is the higher of its fair value less costs to sell and its value in use.
Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered
impaired and is written down to its recoverable amount. Impairment losses are recognized in profit or loss to the
extent the carrying amount exceeds the recoverable amount. In assessing value in use, the estimated future
cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money.
An assessment is made at each reporting date as to whether there is any indication that previously recognized
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount
is estimated. A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation, if no impairment loss had been recognized.
f) Provision for Closure and Reclamation
The Company recognizes liabilities for legal or constructive obligations associated with the retirement of resource
properties and equipment. The net present value of future rehabilitation costs is capitalized to the related asset
along with a corresponding increase in the rehabilitation provision in the period incurred.
Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present
value.
The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements,
discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are
recorded directly to the related assets with a corresponding entry to the rehabilitation provision. The increase in
the provision due to the passage of time is recognized as interest expense.
g)
Income Taxes
The Company uses the balance sheet method of accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. Deferred income tax
assets also result from unused loss carry-forwards, resource related pools and other deductions. A deferred tax
asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is
probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
10
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
3. Significant Accounting Policies (continued)
h) Share-based Payments
The Company has a stock option plan that is described in Note 6(c). Share-based payments to employees are
measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based
payments to non-employees are measured at the fair value of the goods or services received or the fair value of
the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably
measured, and are recorded at the date the goods or services are received. The amount recognized as an
expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to stock
options reserve. Consideration received on the exercise of stock options is recorded as share capital and the
related stock options reserve is transferred to share capital. Charges for options that are forfeited before vesting
are reversed from stock options reserve.
i) Loss per Share
Basic loss per share is calculated by dividing the loss available to common shareholders by the weighted average
number of common shares outstanding in the year. For all years presented, the loss available to common
shareholders equals the reported loss. Diluted loss per share is calculated by the treasury stock method. Under
the treasury stock method, the weighted average number of common shares outstanding for the calculation of
diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and
warrants are used to repurchase common shares at the average market price during the period. In the
Company’s case, diluted loss per share is the same as basic loss per share, as the effects of including all
outstanding options and warrants would be anti-dilutive.
j) Financial Instruments and Comprehensive Income
i)
Financial Assets
The Company classifies its financial assets in the following categories: held-to-maturity, fair value
through profit or loss (“FVTPL”), loans and receivables, and available-for-sale (“AFS”). The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of financial assets at recognition.
Held-to-maturity
Held-to-maturity financial assets are recognized on a trade-date basis and are initially measured at
fair value using the effective interest rate method. The Company has no assets classified as held-to-
maturity.
Financial assets at fair value through profit or loss (“FVTPL”)
Financial assets at FVTPL are initially recognized at fair value with changes in fair value recorded
through profit or loss. Cash is included in this category of financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are classified as current assets or non-current assets
based on their maturity date. Loans and receivables are carried at amortized cost less any
impairment. Loans and receivables comprise amounts receivable.
11
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
3. Significant Accounting Policies (continued)
j) Financial Instruments and Comprehensive Income
Available-for-sale (“AFS”) financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or not
classified in any of the other financial asset categories. Changes in the fair value of AFS financial
assets are recognized as other comprehensive income and classified as a component of equity. AFS
assets include investments in marketable securities.
Management assesses the carrying value of AFS financial assets at least annually and any
impairment charges are also recognized in profit or loss. When financial assets classified as AFS are
sold, the accumulated fair value adjustments recognized in other comprehensive income are
included in profit or loss.
ii) Financial Liabilities
The Company classifies its financial liabilities in the following category:
Borrowings and other financial liabilities
Borrowings and other financial liabilities are non-derivatives and are recognized initially at fair value,
net of transaction costs incurred, and are subsequently stated at amortized cost. Any difference
between the amounts originally received, net of transaction costs, and the redemption value is
recognized in the statement of loss and comprehensive loss over the period to maturity using the
effective interest method.
Borrowings and other financial liabilities are classified as current or non-current based on their
maturity date. Financial liabilities include trade payables and accrued liabilities, amounts due to joint
venture partner and amounts due to related parties.
iii) Fair Value Hierarchy
Fair value measurements of financial instruments are required to be classified using a fair value
hierarchy that reflects the significance of inputs in making the measurements. The levels of the fair
value hierarchy are defined as follows:
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 or indirectly.
Level 3 – Inputs for the asset or liability that are not based on observable market data.
k) Share Capital
The Company records proceeds from share issuances, net of issue costs. Common shares issued for
consideration other than cash are valued based on their market value at the date the agreement to issue shares
was concluded.
12
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
3. Significant Accounting Policies (continued)
l) Valuation of Equity Units Issued in Private Placements
Proceeds received on the issuance of units, consisting of common shares and warrants, are allocated first to
common shares based on the market trading price of the common shares at the time the units are priced, and
any excess is allocated to warrants.
m) Accounting Standards Adopted, or Issued but not yet Effective
The Company adopted no material new accounting standards during its current fiscal year, and is unaware of any
applicable, but not-yet-adopted standards that are expected to materially affect the financial statements of future
periods.
n) Joint Arrangements
The Company conducts exploration work jointly with other parties in joint ventures and other related legal entities
in circumstances where neither party can be said to authoritatively control the entity. Such arrangements are
considered, for accounting purposes, to be joint ventures when a separate legal entity exists and where the
Company’s investment is substantially related only to the net assets of that entity. The Company’s interests in a
joint venture are accounted for on the equity basis, reflective of the Company’s net investment at cost plus the
Company’s proportionate share of the entity’s subsequent income, less its share of any losses incurred.
In circumstances where the Company’s interest is considered to substantially relate to the development of a
particular asset or assets, such an arrangement in considered to be a joint operation and the Company’s
proportionate interest in the accounts of that entity are consolidated on a line by line basis with those of the
Company in the financial statements of the Company.
n) Comparative Figures
Certain comparative figures have been reclassified in accordance with the current year’s presentation.
4.
Investments
In May 2018, the Company received 25,000 shares of Fireweed Zinc Ltd. (“Fireweed”) in connection with a
mineral property option payment received for some of the Company’s Yukon mineral claims (Note 5b(v)). The
Fireweed shares were valued at $37,750 at the time of acquisition and had a fair value of $22,500 as of October
31, 2018. Due to a decrease in the fair value of the Fireweed shares, the Company recorded an other
comprehensive loss of $15,250 for the year ended October 31, 2018.
13
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties
The following tables are a summary of the Company’s exploration and evaluation property interests:
(continued on next page)
14
BalanceFiscal BalanceFiscalBalance October 312017October 312018October 312016Expenditures2017Expenditures2018PALMER PROJECT, ALASKAPalmer PropertySee (i) See (ii) and (iii) Acquisition costs 878,712$ -$ 878,712$ -$ 878,712$ Less: Recovery of acquisition costs(1,140,225) - (1,140,225) - (1,140,225) Advance royalty payments492,794 48,082 540,876 27,898 568,774 Assaying and testing411,081 117,222 528,303 105,477 633,780 Field transportation5,233,636 634,155 5,867,791 472,702 6,340,493 Geophysics790,698 101,554 892,252 4,827 897,079 Drilling12,969,230 2,179,223 15,148,453 1,708,344 16,856,797 Property maintenance 706,581 85,900 792,481 71,492 863,973 Geology and field support8,825,094 1,515,267 10,340,361 642,925 10,983,286 Environmental 1,232,901 355,082 1,587,983 435,321 2,023,304 Technical consulting and engineering- - - 470,869 470,869 Travel488,963 142,557 631,520 218,693 850,213 Construction and development- - - 105,531 105,531 Cost recoveries(21,446,470) (2,936,971) (24,383,441) - (24,383,441) 9,442,995$ 2,242,071$ 11,685,066$ 4,264,079$ 15,949,145$ Haines Block See (i) See (ii) and (iii) Acquisition costs129,165$ -$ 129,165$ -$ 129,165$ Assaying and testing5,261 - 5,261 - 5,261 Field transportation342,680 85,139 427,819 101,024 528,843 Geophysics51,796 47,323 99,119 14,084 113,203 Drilling566,376 (2,982) 563,394 382,635 946,029 Property maintenance - - - 68,045 68,045 Geology and field support174,793 5,199 179,992 194,924 374,916 Environmental 22,986 - 22,986 - 22,986 Travel5,781 - 5,781 - 5,781 Construction and development- - - 236,075 236,075 Cost recoveries(1,009,361) - (1,009,361) - (1,009,361) 289,477$ 134,679$ 424,156$ 996,787$ 1,420,943$ Palmer Project Totals9,732,472$ 2,376,750$ 12,109,222$ 5,260,866$ 17,370,088$ (i) These amounts include 51% of the expenditures of Constantine Mining LLC for the period July 1 - October 31, 2017.(iii) Certain historical costs were re-allocated from the Palmer Property to the Haines Block during the year.(ii) These amounts include 51% of the expenditures of Constantine Mining LLC for the year November 1, 2017 - October 31, 2018.
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
(continued on next page)
15
`BalanceFiscal BalanceFiscalBalance October 312017October 312018October 312016Expenditures2017Expenditures2018GOLD PROJECTSJohnson Tract Property, AlaskaAcquisition costs-$ -$ -$ 93,991$ 93,991$ Community relations & advocacy- - - 261 261 Administration- - - 6,469 6,469 Camp costs and field support- - - 202,626 202,626 Field transportation- - - 136,747 136,747 Geology and project mgmt- - - 312,963 312,963 Environmental - - - 1,192 1,192 Travel- - - 6,210 6,210 -$ -$ -$ 760,459$ 760,459$ Munro-Croesus Property, Ontario, CanadaAcquisition costs487,932$ 6,944$ 494,876$ 1,266$ 496,142$ Assaying and testing107,655 - 107,655 10 107,665 Drilling1,127,740 - 1,127,740 - 1,127,740 Field transportation23,678 - 23,678 - 23,678 Geophysics149,446 - 149,446 - 149,446 Travel74,386 - 74,386 - 74,386 Geology and field support543,000 11,395 554,395 4,027 558,422 Proceeds allocated on sale of mineral claims (Note 5b(ii))- (440,512) (440,512) - (440,512) 2,513,837$ (422,173)$ 2,091,664$ 5,303$ 2,096,967$ Four Corners Property, Ontario, Canada Acquisition costs146,681$ -$ 146,681$ -$ 146,681$ Assaying and testing24,791 - 24,791 - 24,791 Drilling243,471 - 243,471 - 243,471 Geophysics56,893 - 56,893 - 56,893 Field Transportation946 - 946 - 946 Travel8,058 - 8,058 - 8,058 Technical consulting81,673 - 81,673 - 81,673 Geology and field support39,618 1,638 41,256 - 41,256 Proceeds allocated on sale of mineral claims- (603,769) (603,769) - (603,769) 602,131$ (602,131)$ -$ -$ -$ Gold Projects (Sub-Total)3,115,968$ (1,024,304)$ 2,091,664$ 765,762$ 2,857,426$
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
16
BalanceFiscal BalanceFiscalBalance October 312017October 312018October 312016Expenditures2017Expenditures2018Gold Projects (Balance forward)3,115,968$ (1,024,304)$ 2,091,664$ 765,762$ 2,857,426$ Golden Mile Property, Ontario, CanadaAcquisition costs148,374 70,000 218,374 - 218,374$ Advance royalty payments- - - 10,000 10,000 Assaying and testing40,829 - 40,829 - 40,829 Drilling396,613 - 396,613 - 396,613 Field transportation22,514 - 22,514 - 22,514 Geophysics160,669 - 160,669 - 160,669 Geology and field support522,198 2,868 525,066 22,619 547,685 Technical consulting90,970 - 90,970 - 90,970 Travel31,133 - 31,133 3,201 34,334 Cost recoveries(1,230,468) - (1,230,468) - (1,230,468) 182,832$ 72,868$ 255,700$ 35,820$ 291,520$ Golden Perimeter Property, Ontario, CanadaAcquisition costs- - - 17,900 17,900 Geophysics- - - 40,000 40,000 Geology and field support- - - 852 852 -$ -$ -$ 58,752$ 58,752$ Yukon, CanadaAcquisition costs52,401 4,620 57,021 4,620 61,641$ Assaying and testing197,379 - 197,379 - 197,379 Field transportation476,911 - 476,911 - 476,911 Geology184,753 481 185,234 1,679 186,913 Geochemisty290,093 - 290,093 - 290,093 Technical consulting61,608 - 61,608 - 61,608 Other573,494 - 573,494 1,440 574,934 Cost recoveries(25,000) - (25,000) - (25,000) Writedown of exploration and evaluation properties (1,811,638) (5,101) (1,816,739) (7,739) (1,824,478) 1$ -$ 1$ -$ 1$ Total Gold Projects3,298,801$ (951,436)$ 2,347,365$ 860,334$ 3,207,699$ Total Palmer and Gold Projects13,031,273$ 1,425,314$ 14,456,587$ 6,121,200$ 20,577,787$
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
a) Palmer Project, Alaska USA
i)
Limited Liability Company Formed for Palmer Project
In December 2016 Dowa Metals & Mining Co., Ltd. (“Dowa”) completed its option to earn a 49% interest
in the Palmer Project, having completed US$22,000,000 in aggregate exploration expenditures on the
project. A limited liability company (Constantine Mining LLC, or “CML”) was then formed at the end of
June 2017 and began operating in July 2017, with the Company owning 51% and Dowa owning 49% of
the new entity. The Company’s rights to the Palmer Property and a portion of the Haines Block land
parcel (see below) have been assigned to CML.
Under the terms of the CML members’ agreement, the Company is operator of CML and each party is
responsible for its proportionate share of expenses, determined on the basis of ownership and subject to
dilution according to standard dilution provisions.
For accounting purposes, the Company’s investment in CML is considered to primarily relate to the
continued advancement, with Dowa, of the Palmer property and the related elements of the Haines Block
land parcel. Funding of CML by both venturers is on an ongoing cash-call basis, and accordingly the
third-party assets, liabilities and expenses of CML, other than its mineral property interest, are expected
to be relatively nominal at any point in time. Management’s judgement is that the fairest accounting
presentation for this arrangement is to provide, as a priority, a clear continuity of the Company’s
beneficial interest in the underlying property costs incurred. Accordingly, the Company’s interest in CML
has been considered a joint operation and its 51% interest in the accounts of CML have been
consolidated within its own financial statements on a line by line basis. The Company recovers, from
CML, a 7% management fee on eligible expenditures incurred. On consolidation, this fee is accounted
for as a property cost recovery to the extent of Dowa’s 49% share, and is offset against the Company’s
recognition of the same amount recorded as a property cost.
From a legal perspective, during the comparative year the Company disposed of certain directly-held
property interests to CML in consideration for its interest in CML. There was material uncertainty
associated with any attempt to measure the current fair value the Company’s 51% interest in CML, and
accordingly the Company considered that that this transaction, having been completed with Dowa as the
beneficial counterparty and only for purposes of further advancing the underlying exploration project,
lacked commercial substance. On this basis, no gain or loss was recognized in respect to it and the
Company accounted for its 51% joint venture interest at cost based on its associated historical
exploration costs incurred. The continuity of the Company’s exploration costs incurred on these interests
has therefore been maintained in the financial statement presentation.
ii) Palmer Project
The Palmer Project is comprised of 340 federal mining claims subject to a 99 year mining lease, dated
December 19, 1997, and 63 state mining claims located near Haines, Alaska. To maintain the lease,
there is a requirement to make annual advance royalty payments of US$42,500 and pay Federal claim
annual maintenance fees, which were US$52,700 in 2018.
The lease is subject to a 2.5% net smelter returns (“NSR”) royalty. CML has a right of first refusal to
purchase the NSR or any portion thereof at any time during the term of the lease. The advance royalty
payments are deductible from the NSR royalty.
17
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
a)
Palmer Project, Alaska USA (continued)
iii) Haines Block Lease
In 2014, the Company entered into an agreement with the Alaska Mental Health Trust Authority (the
“Trust”) for the mineral exploration and development of an approximately 92,000 acre package of land
(the “Haines Block”). There was a reduction in the size of the land package to 65,196 acres in 2017, in
accordance with the terms of the lease agreement. The principal terms of the lease agreement are as
follows:
1. Annual payments of US$25,000 per year for the initial 3 year lease term, US$40,000 for years 4
to 6, US$55,000 for years 7 through 9;
2. Work commitments of US$75,000 per year, escalating by US$50,000 annually;
3. Annual payments are replaced by royalty payments upon achieving commercial production;
4. Production royalties payable to the Trust include a sliding scale 1% to 4.5% royalty for gold,
based on gold price, and a 3.5% royalty on minerals other than gold.
The Haines Block is contiguous with and surrounds the Federal and State mining claims that make up
the Palmer Property.
A portion of the Haines Block land parcel with surface and mineral rights comprising approximately 3,483
acres, has been contributed to CML (Note 5a(i) and (iv)).
iv) Haines Block Selection Agreement
In July 2016, the Company signed a Selection Agreement (the “Selection Agreement”) with Dowa on the
Haines Block mining lease, which terms have now been met or expired. Under the terms of the Selection
Agreement, Dowa selected a small subset of the Haines Block (the “Selection Area”) including both
surface and mineral rights, to become part of the Agreement. The remaining mineral rights of the Haines
Block, representing approximately 96 percent of the total Haines Block land package, are 100 percent
owned by the Company, and were subject to a Right of First Offer (“ROFO”) by Dowa, which expired on
September 1, 2017.
The main elements of the Selection Agreement were as follows:
1. Dowa selected a Haines Block land parcel with surface and mineral rights comprising approximately
3,483 acres, exclusive of all pre-existing federal claims, to be included as part of the Palmer Property
joint venture.
2. The Company will maintain its 100% interest in the balance of the property of the Haines Block
exclusive of the Selection Area and any exploration done in such area outside of the Selection Area
will be at the Company’s expense.
3. The Company granted Dowa a ROFO on Haines Block lands located outside of the Selection Area
for a 3 year period beginning as of September 1, 2014, which terminated on September 1, 2017.
18
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
b) Gold Projects
i) Johnson Tract Property, Alaska
In June 2018, the Company signed a letter agreement (“Letter Agreement”) with Cook Inlet Region, Inc.
(“CIRI”) for the lease rights to the 20,942 acre Johnson Tract property (the “Property”) located 200
kilometers southwest of Anchorage, in Southcentral Alaska. Commercial terms outlined in the non-
binding Letter Agreement signed by the Company and CIRI include a 10-year lease with a renewal
option, and annual lease payments of US$75,000 for years one through five, escalating to $150,000 from
year six onwards, until production is achieved. Under the terms of the Letter Agreement, the Company
may exercise its option to maintain the lease rights by incurring US$10 million in expenditures over the
first 10 years, inclusive of at least US$7.5 million within the first 6 years. Upon completing such
expenditure requirements and satisfying other lease conditions, the Company may renew the lease for an
additional 5 years (11 through 15) by making annual lease payments of $150,000 per year (inflation
adjusted) and completing an additional US$10 million in expenditures. The lease rights would be subject
to CIRI’s “back-in” right to acquire a 15-25% interest in the lease rights, as well as an NSR on the base
metals of 2-3% and a gold NSR ranging from 2.5% to 4.0%, depending on the price of gold at the time.
The Company paid a US$25,000 non-refundable deposit upon signing of the Letter Agreement. As at
October 31, 2018, a definitive agreement between the Company and CIRI has not been completed.
ii) Munro-Croesus Property
The Company owns 100% of the Munro-Croesus gold mineral property located 90 kilometers east of
Timmins, Ontario, which includes the former Munro-Croesus gold mine.
Under the terms of the original acquisition agreement, there is a 2% NSR production royalty payable on
the property, of which 0.5% can be purchased by the Company for $1,000,000, with a right of first refusal
on the remaining 1.5% NSR royalty.
The Company transferred a portion of its Munro-Croesus claims to Lake Shore in connection with the
sale of the Four Corners property to Lake Shore (Note 5b(v)), and allocated $440,512 of the proceeds on
the transaction to the sale of Munro-Croesus mineral claims.
The Company received one mineral claim from Lake Shore in connection with the Four Corners
transaction (the Munro claim), which has been added to the Munro-Croesus claims.
As at October 31, 2018, the Munro-Croesus property consists of 15 patented mining claims and leases
and 2 staked claims.
iii) Golden Mile Property
In December 2016, the Company completed the earn-in obligations of an option agreement to acquire
100% of the Golden Mile property located in northern Ontario, Canada. The Company has made a total
of $175,000 in cash payments and issued 180,000 shares to complete this acquisition. The Company
has granted a 3% NSR to the previous owners of the property, of which 1/3 of the NSR may be
purchased by the Company at any time for $1,000,000. The Company must make annual advance
royalty payments of $10,000, commencing on December 10, 2017 (paid), which are deductible from
future NSR payments.
19
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
b) Gold Projects (continued)
iv) Golden Perimeter Property
During 2018, the Company entered into a verbal agreement to acquire the Golden Perimeter property,
comprised of 561 claims located in the Porcupine Mining Division in northern Ontario, Canada.
Subsequent to the fiscal year-end a formal option agreement was signed, with an effective date of
December 15, 2018. Under the terms of the agreement, in order to maintain its option and acquire the
property the Company must make cash payments totaling $75,000 and issue 100,000 of its shares over
a four year period. Upon completion of the full purchase price of cash and shares, the Company will
make annual advance royalty payments of $10,000, commencing on December 15, 2024 and each year
thereafter, until commercial productions commences. Under the terms of the agreement, the Company
has also granted the vendor a 2.5% NSR, of which, 1.0% can be purchased by the Company at any time
for $750,000. The Company will retain the right of first refusal on the remaining 1.5% NSR.
v) Yukon Land Position and Joint Venture
The Company and Carlin Gold Corporation (“Carlin Gold”) control over 3,000 claims in the Mayo and
Watson Lake Mining Districts, Yukon. The claims are distributed in twelve blocks that total approximately
65,000 hectares (250 square miles).
In April 2016, the Company recorded a $858,218 writedown of the property to a carrying value of $1,
based on an impairment review of the property for accounting purposes. In the fiscal year ended October
31, 2017, the Company recorded a write-off of $5,101 for expenditures incurred on its Yukon land
position. In the year ended October 31, 2018, the Company recorded a write-off of $7,739 for
expenditures incurred on its Yukon land position (2017-$5,101).
Mineral Property Option Agreement with Fireweed Zinc Ltd. (“Fireweed”)
In April 2018, the Company entered into a mineral property option agreement granting Fireweed an
option to purchase a 100% interest in three properties totaling 624 claims in the Mac Pass area, Yukon.
Total consideration for Fireweed to acquire a 100% interest in the properties includes the payment of an
aggregate of $500,000 in cash and the issuance of 300,000 common shares in the capital of Fireweed,
over three years. The subject claims were staked under the Constantine Carlin Joint Venture (“CCJV”),
and all option payments and royalties will be split as to 50% payable to the Company and 50% payable to
Carlin Gold Corporation. Under the terms of the Agreement, NSR rights will be retained by Constantine
and Carlin Gold Corporation, consisting of a 0.5% NSR on base metals and silver and a 2.0% NSR on all
other metals. An additional payment of $750,000 will be payable upon Fireweed producing an indicated
resource of 2.0 million tonnes on the optioned properties. In May 2018, the Company received the first
payment of cash and shares from Fireweed, consisting of $37,500 cash and 25,000 shares of Fireweed
valued at $37,750 (Note 4).
20
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
5. Exploration and Evaluation Properties (continued)
b) Gold Projects (continued)
vi) Sale of Ontario Mineral Claims to Lake Shore Gold Corp.
In January 2017, the Company sold its 100% interest in the Four Corners property located east of
Timmins, Ontario to Lake Shore Gold Corp. (“Lake Shore”). Principal terms of the Property Purchase
Agreement were:
a. a $4,500,000 cash payment for the sale of a 100% interest in the mineral claims known as the
Horseshoe, Four Corners and the Meunier Add-on claims (received).
b. The Company retains a 1% NSR on the Horseshoe claims, as well as the right of first refusal on the
NSR associated with the underlying property agreement.
c. Lake Shore transferred to the Company a 100% interest in patented mining claim L39421 that is
contiguous to Company’s Munro-Croesus claims. Lake Shore will retain a 1.5% NSR on the
transferred claim.
d. The Company retains the rights to the NSR buy-down provisions associated with the underlying
property agreements on all of the properties sold to Lake Shore.
During the year ended October 31, 2017, the Company allocated $603,769 of the Lake Shore proceeds
to the cost of the Four Corners property and recorded a gain of $3,455,719 on the sale of the property.
6. Share Capital
a) Common Shares
Authorized: unlimited common shares without par value
Issued and outstanding: 44,041,753 common shares
i) On May 18, 2018, the Company consolidated the outstanding share capital of the Company on the basis of
four pre-consolidated shares for one post-consolidated share.
ii) On May 30, 2018, the Company completed the first tranche of a $10,000,000 private placement, for proceeds
of $8,392,570. The Company issued 12,342,013 units, with each unit consisting of one common share and
one transferable share purchase warrant. Each warrant from the first tranche entitles the holder to purchase
one common share at a price of $1.00 per share until May 29, 2023.
iii) On July 19, 2018, the Company issued 2,363,868 units for the second tranche of the above private
placement, for proceeds of $1,607,430. Each warrant from the second tranche entitles the holder to purchase
one common share at a price of $1.00 per share until July 19, 2023.
b) Stock Options
The Company has established a stock option plan whereby the board of directors may, from time to time, grant
options to directors, officers, employees or consultants. Options granted must be exercised no later than five
years from the date of grant or such lesser period as determined by the Company’s board of directors. The
exercise price of an option is not less than the closing price on the Exchange on the last trading day preceding
the grant date. Options begin vesting on the grant date based on a schedule outlined in the share purchase
option plan. The maximum number of options to be granted under the plan is 10% of the Company’s issued
capital.
21
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
6. Share Capital (continued)
b) Stock Options (continued)
On June 6, 2018, the Company issued 225,000 incentive share options, exercisable at a price of $0.68, expiring
June 5, 2023. The stock options were issued to a director, an officer and an employee of the Company.
On February 5, 2018, the Company issued 75,000 incentive share options, exercisable at a price of $0.74,
expiring February 5, 2023. The stock options were issued to an officer of the Company.
On June 2, 2017, the Company issued 581,250 incentive share options, exercisable at a price of $0.64, expiring
June 2, 2022. The stock options were issued to directors, officers and employees of the Company.
A summary of the status of the Company’s stock options at October 31, 2018 and 2017 and changes during the
years therein is as follows:
In the year ended October 31, 2018, the Company recorded share-based payment costs of $215,087 (2017-
$214,133) in regard to stock options vested and issued during the year.
The fair value cost of the stock options granted in June 2018 and February 2018 were calculated using the Black-
Scholes Pricing Model using the following range of assumptions:
The fair value computed using the Black-Scholes model is only an estimate of the potential value of the individual
options and the Company is not required to make payments for such transactions.
22
WeightedWeightedNumber ofaverageNumber ofaverageoptionsexercise priceoptionsexercise priceBalance, beginning of year2,856,250 0.40$ 2,781,250 0.36$ Granted300,000 0.74 581,250 0.64 Expired or cancelled- - (506,250) 0.44 Balance, end of year3,156,250 2,856,250 Year endedYear endedOctober 31, 2018October 31, 2017June 2018February 2018Risk-free interest rate1.93%2.04%Expected life (in days)1,8251,825Annualized volatility137.93%82.51%Dividend raten/an/a
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
6. Share Capital (continued)
b) Stock Options (continued)
A summary of the Company’s stock options outstanding as at October 31, 2018 is as follows:
c) Warrants
During the year ended October 31, 2018, the Company issued 14,705,881 warrants (2017 – Nil), exercisable at a
price of $1.00, for a period of five years from the date of issue.
A summary of the Company warrants outstanding as of October 31, 2018 is as follows:
23
Expiry DateWeightedAverageExercisePriceNumberof OptionsOutstandingWeightedAverageRemainingContractualLife(in years)Numberof OptionsExercisableJanuary 17, 20190.28$ 1,312,500 0.21 1,312,500 March 6, 20200.56 350,000 1.35 350,000 June 30, 20210.40 612,500 2.67 612,500 June 2, 20220.64 581,250 3.59 456,250 February 5, 20230.74 75,000 4.27 75,000 June 6, 20230.68 225,000 4.60 225,000 0.44$ 3,156,250 1.85 3,031,250 Expiry DateExercisePriceNumberof WarrantsMay 29, 20231.00$ 12,342,013 July 19, 20231.00 2,363,868 1.00$ 14,705,881
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
7. Related Party Transactions
The following represents the details of related party transactions paid or accrued for the years ended October 31,
2018 and 2017:
The Company paid or accrued to NS Star Enterprises Ltd., a company controlled by Mr. Wayne Livingstone,
$71,940 for consulting, management and administration services during the years ended October 31, 2018
(2017-$38,039). The Company paid or accrued to Morfopoulos Consulting Associates Ltd., a company controlled
by the CFO, $101,679 for accounting, and management and administration services during the year ended
October 31, 2018 (2017-$73,789). The Company paid D. Green Geoscience Inc., a company controlled by the
vice-president of exploration, $204,750 for technical consulting and management and administration services
during the year ended October 31, 2018 (2017-$187,013).
For the year ended October 31, 2018, the Company paid wages totaling $141,000 (2017-$132,000) to Mr. J.
Garfield MacVeigh in his capacity as President of the Company. For the years ended October 31, 2018, the
Company paid wages totaling: $181,228 (2017-$180,463) to Elizabeth Cornejo in her capacity as Vice-President,
Community and External Affairs of the Company; $186,322 to Mr. Ian Cunningham-Dunlop in his capacity as
Vice-President, Advanced Projects; and $25,286 (2017-Nil) to Naomi Nemeth in her capacity as Vice-President,
Investor Relations.
In the year ended October 31, 2018, the Company paid an aggregate of $93,000 (2017-Nil) in directors fees to
the non-executive directors of the Company.
At October 31, 2018, the Company had accounts payable of $17,750 due to related parties for outstanding
expense reimbursements, which were all paid subsequent to the year-end.
At October 31, 2018, the Company’s amounts receivable balance includes $253,681, representing the 49% non-
consolidated portion of the amount receivable from CML (2017-$165,357), $17,264 from Carlin Gold Corporation
representing amounts receivable for rent and joint venture expenses and $6,900 from New Oroperu Resources
Inc. representing amounts receivable for rent.
8. Management of Capital
The Company manages its cash, common shares, stock options and warrants as capital. The Company’s
objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order
to pursue the development of its exploration and evaluation properties and to maintain a flexible capital structure
which optimizes the costs of capital at an acceptable risk. The Company does not have any externally imposed
capital requirements to which it is subject. There were no significant changes in the Company’s approach or the
Company’s objectives and policies for managing its capital.
24
For the year ended October 31,20182017Consulting, administrative and technical fees paid or accrued to companies owned by directors82,150$ 38,039$ Consulting fees paid to officers205,975 187,013 Directors fees93,000 - Accounting and administration fees paid or accrued to a company 50% owned by an officer101,681 73,789 Share-based payments to key management159,996 139,210 642,802$ 438,051$
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
8. Management of Capital (continued)
The Company manages the capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the
Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the amount of cash
and cash equivalents.
In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that
are updated as necessary depending on various factors, including successful capital deployment and general
industry conditions.
9. Financial Instruments
a) Financial Risk Management
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework. The Company’s financial instruments consist of cash and cash equivalents, amounts
receivable, available-for-sale investments, trade payables and amounts due to related parties.
The fair values of cash and cash equivalents, amounts receivable, deposits, trade payables and amounts due to
related parties approximate their book values because of the short-term nature of these instruments.
b) Financial Instrument Risk Exposure
The Company is exposed in varying degrees to a variety of financial instrument-related risks. The Board
approves and monitors the risk management processes.
Credit Risk
The Company’s only exposure to credit risk is on its cash and cash equivalents. Cash and cash equivalents are
with a Canadian Schedule 1 bank and a US bank for its subsidiary. The Company has no asset-backed
commercial paper.
Liquidity Risk
The Company ensures that there is sufficient capital in order to meet short-term business requirements, after
taking into account the Company’s holdings of cash. A portion of the Company’s cash is invested in business
accounts which are available on demand.
Market Risk
The only significant market risk exposure to which the Company is exposed is interest rate risk. The Company’s
bank account earns interest income at variable rates. The fair value of its marketable securities portfolio is
relatively unaffected by changes in short-term interest rates. The Company’s future interest income is exposed to
short-term rates and fluctuations, however management does not consider this risk to be significant.
Exchange Risk
The Company’s significant operations are carried out in Canada and in Alaska, USA. As a result a portion of the
Company’s cash and cash equivalents, amounts receivable, and trade payables are denominated in US dollars
and are therefore subject to fluctuations in exchange rates. Management does not believe that the exchange risk
is significant.
25
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
9. Financial Instruments (continued)
c) Fair Value Measurements
The carrying value of financial assets and financial liabilities at October 31, 2018 and 2017 are as follows:
The Company does not use Level 2 or Level 3 valuation inputs.
26
20182017Financial AssetsFVTPL, measured at fair value Cash and cash equivalents4,307,962$ 1,780,392$ Loans and receivables, measured at amortized cost Amounts receivable322,442 203,232 Investments, measured at fair value Investments22,500 - Financial LiabilitiesOther liabilities, measured at amortized cost Trade payables and accrued liabilities443,203$ 553,519$ Amounts due to related parties17,750 - The fair value hierarchy of financial instruments measured at fair value is as follows:As at20182017Level 1Level 1Cash and cash equivalents4,307,962$ 1,780,392$
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
10. Segmented Information
The Company has one operating segment, which is exploration and evaluation of its mining properties.
At October 31, 2018, the Company operates in two geographic areas, being Canada and the United States. The
following is an analysis of the non-current assets by geographical area:
11. Income Taxes
A reconciliation of income taxes at statutory rates is as follows:
2018
2017
Net income (loss) for the year
$
(939,466)
$
2,377,178
Expected income tax expense (recovery)
Net adjustment for amortization and other non-deductible amounts
Unrecognized benefit of DIT assets
Recognition of prior year non-capital losses
(265,465)
(21,859)
-
287,324
618,246
121,856
8,362
(748,464)
Total income tax recovery
$
-
$
-
There are no deferred tax assets presented in the statement of financial position.
Subject to confirmation with regulatory authorities, deductible temporary differences, unused tax losses and
unused tax credits for which no deferred tax assets have been recognized are attributable to the following:
Deferred income tax assets (liabilities):
Net mineral property carrying amounts in excess of tax pools
$
Equipment
Share issue costs
Non-capital loss carryforwards
2018
2017
(2,063,000)
59,000
244,000
4,668,000
$
(2,071,000)
59,000
-
7,068,000
$
2,908,000
$
5,056,000
27
CanadaUnited StatesTotalNon-Current AssetsExploration and Evaluation PropertiesAs at October 31 20182,388,488$ 18,130,547$ 20,519,035$ As at October 31, 20172,347,365 12,131,009 14,478,374 Performance BondsAs at October 31, 2018- 137,013 137,013 As at October 31, 2017- 32,465 32,465
Notes to the Consolidated Financial Statements
For the year ended October 31, 2018
__________________________________________________________________________________________
11. Income Taxes (continued)
The Company has Canadian non-capital losses of approximately $3,596,000 (2017 - $2,964,000) and US non-
capital losses of US $816,000 (2016–US $970,000), which will be available to reduce future taxable income in
Canada and the US, respectively. The respective non-capital losses will begin to expire in 2017 until 2036.
The Canadian non-capital losses, if not utilized, will expire in the years presented below:
2031
2032
2033
2034
2035
2036
2037
2038
804,000
790,000
540,000
203,000
154,000
429,000
-
676,000
$ 3,596,000
12. Commitments
The Company has a lease agreement for the rental of office space, which expires on May 31, 2021.
The future minimum lease obligations under the lease are as follows:
2019 fiscal year
2020 fiscal year
2021 fiscal year
Amount
42,469
43,626
25,449
111,544
$
$
The Company currently rents out a portion of its office space on a month-to-month basis for $1,000 per month
(Note 2(c)).
13. Events Subsequent to the End of the Year
In December 2018, the Company granted 225,000 options to a director and an officer of the Company,
exercisable at a price of $0.44 each for a period of five years from the date of issue.
During the months of December 2018 and January 2018, an aggregate of 1,312,500 stock options of the
Company were exercised at a price of $0.28 each, resulting in the issuance of 1,312,500 shares of the Company
and cash proceeds to the Company of $367,500.
28
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
General
The information in this Management’s Discussion and Analysis, or MD&A, is intended to assist the reader
in the understanding and assessment of the trends and significant changes in the results of operations
and financial conditions of Constantine Metal Resources Ltd. (the “Company” or “Constantine”). This
MD&A should be read in conjunction with the audited consolidated financial statements of the Company,
including the notes thereto, for the years ended October 31, 2018 and 2017, and the MD&A of such
financial statements, and other information relating to the Company on file with the Canadian provincial
securities regulatory authorities on SEDAR at www.sedar.com. The Company’s audited consolidated
financial statements for the years ended October 31, 2018 and 2017 have been prepared in accordance
with International Financial Reporting Standards (“IFRS”). This MD&A has taken into account information
available up to and including February 20, 2019.
Constantine is an exploration company engaged in the exploration and development of several mineral
properties. Its principal project is a polymetallic (copper-zinc-gold-silver) massive sulphide advanced
exploration project in southeast Alaska known as the Palmer Project. Constantine has gold exploration
properties in Ontario and the Yukon and a letter agreement to acquire the high-grade Johnson Tract gold
deposit in Alaska (see Highlights and Outlook below). The Company’s principal Ontario gold projects are
the Golden Mile project in the Timmins, Ontario gold camp and the Munro-Croesus project, which
includes the past-producing high-grade Croesus gold mine located east of the Timmins gold camp.
The Company is a reporting issuer in British Columbia, Alberta and Ontario and trades on the TSX
Venture Exchange under the symbol CEM and is quoted on the US Over-the-counter trading platform,
OTCQB, moving to the OTCQX platform in Q2 2019.
Historical results of operations and trends that may be inferred from the following discussions and
analysis may not necessarily indicate future results from operations. The Company is currently engaged
in exploration and development of mineral properties and does not have any source of revenue or
operating assets, however the Company has generated cash flow from option earn-in agreements, from
fees for management of option-joint venture exploration projects and from sale of available-for-sale
investments. The recoverability of the amounts shown for mineral properties is dependent upon the ability
of the Company to obtain necessary financing to complete exploration, technical studies and, if
warranted, development and future profitable production or proceeds from the disposition of properties.
The amounts shown as mineral properties represent net costs to date and do not necessarily represent
present or future values.
Highlights and Outlook
• Palmer Project Expanded South Wall-RW Zones Resource and the First AG Zone Mineral
Resource - An updated South Wall and RW mineral resource estimate for the Palmer Copper-
Zinc-Gold-Silver Project was released on September 27, 2018. Subsequent to that, a December
2018 announcement included a maiden AG Zone discovery Inferred Resource consisting of 4.24
million tonnes of 4.64% zinc, 0.12% copper, 0.96% lead, 119.5g/t silver, 0.53 g/t gold and 34.8%
barite. The Palmer project resource now contains 4.68 million tonnes Indicated grading 5.23%
zinc, 1.49% copper, 30.8g/t silver, 0.30g/t gold, 23.9% barite plus the expanded Inferred
Resource of 9.6 million tonnes at 4.95% zinc, 0.59% copper, 0.43 % lead, 69.3 g/t silver,
0.39g/t gold, 27.7% barite.
1
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
• 2018 Palmer Exploration Program – Constantine completed a 10,094 meter drill program with
two drill rigs in 2018. Seven holes tested and expanded the South Wall Zone and 16 holes tested
and expanded the AG Zone, a new silver-gold-zinc rich discovery made in 2017. The 2018 AG
Zone drill results were incorporated into the maiden AG Zone resource estimate reported in
December 2018. Four holes that tested the Boundary prospect intersected the targeted horizon
with promising geology, alteration and low-grade mineralization.
Road access to the site of a proposed exploration portal on the Haines Block Mental Health Trust
lease was also completed as part of the 2018 work program.
• Palmer Metallurgical Improvements – 2018 metallurgical test results demonstrated that a
premium-quality barite concentrate could be produced as a co-product at the Palmer Copper-
Zinc-Gold-Silver Project. The results also indicated improved zinc recoveries from 84.5% to 93%
with a concentrate grade of 61.3%, and confirmed previous good recoveries of 89% for copper to
good quality marketable zinc and copper concentrates. Combined total silver and gold recovery
to copper and zinc concentrates are 90.6% and 69.6%, respectively, the large majority of which
reports to the copper concentrate. These metallurgical results were used to update the Palmer
Net Smelter Return (“NSR”) formula and validate inclusion of barite in the new 2018 resource
estimates.
• 2018 Palmer Preliminary Economic Study (“PEA”) - JDS Energy & Mining Inc. (“JDS”) was
engaged in late August 2018 to prepare a PEA of the potential viability of the mineral resources
at the Palmer Copper-Zinc-Gold-Silver Project. The Company has also engaged Klohn Crippen
Berger Ltd. (“KCB”) to complete the water and waste management design components for the
PEA. The study will be based on the new resource estimates completed in September and
December 2018.
• Letter Agreement for Johnson Tract Gold Property in Alaska – In June 2018, the Company
announced it had signed a non-binding Letter Agreement with Cook Inlet Region, Inc. (“CIRI”),
an Alaskan Native Corporation, for the lease rights to the 20,942 acre high grade Johnson Tract
gold-zinc property located near tidewater, 200 kilometers southwest of Anchorage, Southcentral
Alaska. This property includes the very high-grade Johnson Tract Au-Ag-Zn-Cu-Pb deposit along
with excellent exploration potential indicated by several other prospects over a 12 km strike
length. The Johnson Tract drill discovery made by Anaconda in 1982 (pre NI 43-101) reported
102.6 meters grading 10.94 g/t gold, 8.01% zinc, 0.75% copper, 2.13% lead and 8.5 g/t
silver, including 50 meters grading 20.0 g/t gold, 9.4% zinc, 1.0% copper, 2.8% lead and
12.7 g/t silver. The Johnson Tract acquisition will be a “flagship” addition to the Company’s gold
portfolio and has the potential to add fundamental value to a planned spinout of the Company’s
gold assets. The Lease Agreement is being finalized and a NI 43-101 report is being prepared on
the pre-1995 historic assay result data.
• $10,000,000 Private Placement – A $10,000,000 private placement was completed in July
2018. The financing was preceded by a 4:1 share consolidation on May 18, 2018.
2
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Expanded South Wall-RW Zones Resource and the first AG Zone Mineral Resource on Palmer
Project
In the September 2018 South Wall – RW Zone resource estimate (Table 1, below), the previous Inferred
Resource was expanded and upgraded to an Indicated Resource of 4.68 million tonnes grading 5.23%
zinc, 1.49% copper, 30.8g/t silver, 0.30g/t gold, 23.9% barite plus an expanded Inferred Resource of 5.34
million tonnes at 5.20% zinc, 0.96% copper, 29.2 g/t silver, 0.28g/t gold, 22.0% barite.
Subsequent to the September release, a December 2018 resource included a maiden AG Zone discovery
Inferred Resource (Table 2, below) consisting of 4.24 million tonnes of 4.64% zinc, 0.12% copper, 0.96%
lead, 119.5g/t silver, 0.53 g/t gold and 34.8% barite. The total Palmer project resource now stands at 4.68
million tonnes Indicated grading 5.23% zinc, 1.49% copper, 30.8g/t silver, 0.30g/t gold, 23.9% barite
and 9.6 million tonnes Inferred at 4.95% zinc, 0.59% copper, 0.43 % lead, 69.3 g/t silver, 0.39g/t gold,
27.7% barite.
The resource now reports barite mineralization for the Palmer deposit, that based on metallurgical and
market studies, highlights the opportunity for barite to contribute value as an industrial mineral co-
product.
Table 1. Total Mineral Resource for the Palmer Project (all deposits)
Notes:
1. See NI 43-101 technical report filed on SEDAR dated January 31, 2019.
2. Net Smelter Return (“NSR”) equals (US$16.01 x Zn% + US$48.67 x Cu% + US$23.45 x Au g/t + US$0.32 x Ag g/t). NSR
formula is based on estimated metallurgical recoveries, assumed metal prices, and assumed offsite costs that include
transportation of concentrate, smelter treatment charges, and refining charges.
3. ZnEq equals = ($66 x Cu% + $25.3 x Zn% + $22 x Pb% + $0.51 x Ag g/t + $40.19 x Au g/t) / 25.3.
4. Assumed metal prices for NSR and ZnEq formulas are US$3.00/lb. for copper (Cu), US$1.15/lb. for zinc (Zn), US$ $1.00/lb.
for lead, US$1,250/oz for gold (Au), US$16/oz for silver (Ag).
5. Estimated metal recoveries for Palmer Deposit are 93.1% for zinc, 88.9% for copper, 90.9% for silver (70.8% to the Cu
concentrate and 20.1% to the Zn concentrate) and 69.6% for gold (49.5% to the Cu concentrate and 20.1% to the Zn
concentrate) as determined from metallurgical locked cycle flotation tests completed in 2018. No recovery data is available for
AG Zone deposit.
6. Barite (BaSO4) not included in the Cut-off determination or reported ZnEq and CuEq.
3
TonnesZnCuPbAgAuBariteZnEqCuEq(1,000s)(%)(%)(%)(g/t)(g/t)(BaSO4%)(%)(%)$75/t NSRIndicated4,6775.231.49-30.80.3023.910.213.92$75/t NSRInferred5,3385.200.96-29.20.2822.08.743.35AG Zone5.0% ZnEqInferred4,2564.640.120.96119.50.5334.89.043.46Indicated4,6775.231.49-30.80.3023.910.213.92Inferred9,5944.950.590.4369.30.3927.78.873.40ZnCuPbAgAuBariteZnEqCuEq(M lb)(M lb)(M lb)(M oz)(K oz)(K tonnes)(M lbs)(M lbs)Indicated539154-4.645.11,1161,053404Inferred1,0471249021.4120.62,6541,876719Resource CategoryTotal:ZoneCut-off Resource CategoryRW andSouth WallCONTAINED METALTotal:
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Table 2. AG Zone Deposit Only: Sensitivity by Cut-off Grade
INFERRED MINERAL RESOURCE ESTIMATE (effective date December 18, 2018)
Tonnes
(1,000s)
4,648
4,256
3,975
Cut-off
Grade
(% ZnEq)
4.5
5.0
5.5
Cut-off
Grade
(% ZnEq)
4.5
5.0
5.5
Zn
(%)
4.48
4.64
4.78
Zn
(M lb)
459
435
419
Cu
(%)
0.12
0.12
0.13
Contained Metal
Pb
(%)
0.90
0.96
1.00
Ag
(g/t)
114.2
119.5
122.2
Au
(g/t)
0.50
0.53
0.54
Barite
(BaSO4%)
34.1
34.8
34.7
ZnEq
(%)
8.68
9.04
9.31
Cu
(M lb)
12
11
11
Pb
(M lb)
92
90
88
Ag
(M oz)
17.1
16.4
15.6
Au
(K oz)
74.7
72.5
69.0
Barite
(K tonnes)
1,583
1,480
1,379
ZnEq
(M lbs)
889
848
816
Includes all drill holes completed at AG Zone; drilling completed between June 2017 and September 2018.
Notes:
1.
2. Zinc Equivalent (“ZnEq”) based on assumed metal prices and 100% recovery and payable for Cu, Zn, Pb, Ag and Au.
3. ZnEq equals = ($66 x Cu% + $25.3 x Zn% + $22 x Pb% + $0.51 x Ag g/t + $40.19 x Au g/t) / 25.3.
4. Assumed metal prices are US$3.00/lb. for copper (Cu), US$1.15/lb. for zinc (Zn), US$ $1.00/lb. for lead, US$1,250/oz for gold
(Au), US$16/oz for silver (Ag).
5. Barite (BaSO4) not included in the Cut-off determination or reported ZnEq.
6. Mineral resources as reported are undiluted.
7. Mineral resource tonnages have been rounded to reflect the precision of the estimate.
8. Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability.
2018 Palmer Exploration Program
The very successful 2018 exploration program completed on the Company’s flagship Palmer project
included a drilling program focused on advancing and expanding on the main South Wall-RW deposit
area and the new 2017 AG zone discovery and tested one regional prospect, the Boundary prospect.
The 2018 program saw the completion of the road access to a proposed future portal site on the Haines
Block Mental Health Trust lease land. The 10,094 meter drill program was completed by the latter part of
September 2018.
South Wall Drilling
Three South Wall drill holes tested the western extension of the zone, following-up on the positive results
of last season. Hole CMR18-108 intersected 15.5 meters grading 1.6% copper and 4.8% zinc
approximately 50 meters west and 50 meters down-dip of CMR17-97, which intersected 14.5 meters of
1.9% copper and 7.5% zinc (see Constantine news release dated October 2, 2017). The results expand
the zone to the west and confirm continuity of grade and width to the west and down-plunge toward the
deeper South Wall EM zone. One hole tested for the fault offset of the down dip South Wall and three
holes tested for the shallow up-dip northeast edge of Zone 2.
4
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
AG Zone Drilling
The AG Zone is a new deposit discovered in 2017 located three kilometers southwest from the main
South Wall mineral resource, and relatively close to existing road infrastructure. The significant precious
metal mineralization observed at AG Zone is characteristic of other Late Triassic volcanogenic massive
sulphide (“VMS”) deposits in the region such as Greens Creek, one of the largest and lowest cost primary
silver mines in the world. A total of 16 holes targeted the AG Zone in 2018. The large step-outs very
quickly expanded the total known extent of the mineralization and the results have been incorporated into
the maiden AG Zone Inferred Resource released in December 2018. A highlight AG zone step-out hole of
the 2018 season was CMR18-110 with 43.3 meters grading 143 g/t silver, 0.5 g/t gold, 6.5% zinc, 2.5%
lead that includes 28.8 meters grading 141 g/t silver, 0.5 g/t gold, 9.0% zinc, 3.5% lead. The zone
remains open to further expansion along strike and to depth.
New Prospects Drilling
The 2018 drilling program included testing one of several previously untested property-wide exploration
targets. The Boundary Prospect that hosts numerous surface occurrences of high-grade mineralization
was tested with four holes from one drill pad location. The Company is encouraged by the promising
geological setting, alteration and low-grade mineralization encountered in this initial exploration drilling
that shares similarities with the AG Zone and RW Zone.
Palmer Metallurgical Improvements
The test work quantified the recovery of barite, a mineral that is abundant within the high-grade copper-
zinc resource at Palmer. This was important to determine because the barite would otherwise become
waste generated in the production of copper and zinc concentrates. However, if commercially viable,
removal would significantly reduce the quantity of tailings. Results were also reported for copper-zinc
flotation work and grindability tests that confirm and enhance the attractive mineral processing
characteristics produced by previous metallurgical test work. This includes a significant improvement in
zinc recoveries to 93.1% to a concentrate grading 61.3% zinc, and high recoveries for copper with silver
and gold reporting mainly to the copper concentrate.
Highlights of Barite Test Results:
• Barite recovery of 91.1% to a clean, high-grade barite concentrate with a high Specific Gravity
(SG) of 4.44,
• Produced barite concentrate meets all specifications for oilfield drilling grade barite, including
specific gravity, particle size, and purity, and appears to be a market-ready product, and
• Simple flowsheet with barite recovered by flotation from the tails of copper and zinc flotation.
Highlights of Copper-Zinc Test Results:
• Very high zinc recovery of 93.1% to a concentrate grading 61.3% zinc; an improvement in
recovery of 8.2% and an increase in zinc concentrate grade over previous locked cycle tests,
• High copper recoveries of 88.9% to a concentrate grading 24.5% copper; reproducing similar
results to previous locked cycle tests
• Combined total silver and gold recovery to copper and zinc concentrates of 90.6% and 69.6%
respectively, the large majority of which reports to the copper concentrate, and
5
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
• Grindability tests indicate a low Bond Work Index of 6.3 kWh/tonne, which is considered very
soft, and therefore will have low grinding cost and power consumption.
Barite Market Study
A barite market study has been completed for the Palmer Project that supports the potential economics of
recovering barite as a saleable commodity. In addition to estimating wholesale price and size of North
American drilling-grade barite markets, the study also assessed the logistics and cost of transportation.
The majority of the estimated 3 million tonnes of barite consumed each year in the United States is
imported from overseas. The Palmer Project is expected to have a significant competitive advantage due
to its location in North America, proximity to deep tidewater and highway systems, and low production
costs because the barite would be a co-product of copper and zinc production that would already being
mined and milled.
Barite content within the 2018 resources averages 22 to 35% by weight within the sulphide mineralization
and may have some economic enhancement for the Project. With the new metallurgical data
demonstrating that barite is recoverable in a saleable form, barite is now modelled and reported along
with copper, zinc, silver and gold in the new September 27, 2018 and December 18, 2018 mineral
resource estimates.
2018 Palmer Preliminary Economic Study
In August 2018, the Company announced that it selected JDS Energy & Mining Inc. (“JDS”) to prepare a
preliminary economic assessment of the potential viability of the mineral resources at the Palmer
Copper-Zinc-Gold-Silver Project and engaged Klohn Crippen Berger Ltd. (“KCB”) to complete the water
and waste management design components. JDS and KCB are both highly skilled and reputable
companies, and their work is supported by Company personnel and other key technical consultants.
Johnson Tract Gold Deposit, Alaska
The Johnson Tract deposit is a gold and base metal rich quartz vein stockwork in Jurassic-aged
volcaniclastic rocks. Mineralization
floor setting
contemporaneous with the host stratigraphy – a similar age and environment to the well-known precious
and base metal-rich Eskay Creek deposit. Past work includes eighty-eight (88) drill holes for a total of
26,840 meters, and major engineering and mining related studies by Westmin Resources Ltd. that
evaluated direct shipping ore to their Premier mill in Stewart, BC. The Project reverted back to the Cook
Inlet Region, Incorporated (“CIRI”) in the late 1990’s and has seen no work in over 20 years.
in a sub-sea
interpreted
to have
formed
is
Historical metallurgical testing (pre NI 43-101) on drill core samples have generally indicated that good
recoveries can be expected and predicted marketable concentrates with very good gold recoveries.
The Johnson Tract quartz stockwork deposit is dominated by zinc mineralization with exceptional gold
values. One of the discovery holes drilled in 1982 has a mineralized interval of 102.6 meters, assaying
10.94 g/t gold, 8.01% zinc, 0.75% copper, 2.13% lead and 8.49 g/t silver, including a subinterval of 14.0
meters assaying 59.09 g/t gold, 9.81% zinc, 0.88% copper, 3.12% lead and 18.23 g/t silver. This drill hole
and selected others in the Johnson Tract deposit is provided in Table 3 below.
6
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Table 3: Some Selected Johnson Tract Deposit Intersections**
from(m)
to(m)
L(m)
Au(g/t)
Zn(%)
Cu(%)
Pb(%)
Ag(g/t)
194.0
155.4
190.0
198.0
182.0
178.5
178.5
228.0
246.7
257.6
277.5
303.2
294.4
150.0
155.0
155.0
140.8
187.0
143.9
179.0
244.0
258.0
240.0
212.0
218.0
224.3
188.4
246.6
318.1
266.5
290.6
314.4
318.4
249.7
168.0
158.0
253.0
195.0
236.5
188.0
50.0
102.6
50.0
14.0
36.0
45.8
9.9
18.6
71.4
8.9
13.1
11.2
24.0
99.7
13.0
3.0
112.2
8.0
92.6
9.0
2.14
10.94
20.01
59.09
13.41
9.07
40.65
6.32
20.94
88.48
19.10
29.15
7.26
10.07
28.05
78.16
10.34
39.22
9.17
51.60
10.23
8.01
9.43
9.81
2.01
7.54
24.76
19.60
5.21
9.21
7.16
3.69
2.15
6.34
3.68
3.10
5.01
9.61
3.03
6.94
0.56
0.75
1.01
0.88
0.41
0.90
1.80
0.47
1.23
5.61
1.36
0.52
0.28
0.90
1.50
1.10
0.66
1.10
0.71
3.04
1.18
2.13
2.78
3.12
0.20
0.20
0.01
0.24
1.51
0.12
4.07
1.61
0.36
1.27
1.39
0.44
1.48
2.45
1.44
0.88
7.01
8.49
12.66
18.23
3.57
6.72
11.52
10.12
9.81
22.12
11.07
8.66
3.29
6.68
10.81
13.83
6.35
12.73
6.63
22.21
Hole No.
JR82-3
JR82-4
includes
includes
JR82-7
JR83-12
includes
JR84-28
JR88-34
includes
includes
includes
JR90-42
JR93-65
includes
includes
JR93-68
includes
JR93-69
includes
There are at least nine other prospect areas of alteration and mineralization to the southeast and north of
the Johnson Tract deposit over an approximate 12 kilometer strike length, most of which have seen little
or no drilling. Best known is the Difficult Creek prospect area that consists of several surface showings
about 4.5 kilometers northeast of the Johnson Tract deposit. One of the Difficult Creek prospects that was
previously drill tested returned significant values in 2 holes: DC-001 returned 3 meters of 7.54 g/t gold,
3.72% zinc, 0.11% copper, 1.15% lead and 27.4 g/t silver; DC-02 returned 13.0 meters of 8.57 g/t
gold, 4.7% zinc, 0.5% copper, 0.9% lead and 37.7 g/t silver.
**Drill results have been compiled from historical reports, drill logs, and databases from previous work on the property by
Anaconda Minerals Company, Westmin Resources Ltd. and others. The work was completed prior to the introduction of NI 43-
101 regulations; quality assurance and quality control procedures are unknown. Reported intersections are drilled width;
information on true width is currently unavailable.
About the Johnson Tract Property
The 20,942 acre Property consists of two parts: (1) a 11,342 acre fee simple land package (South Tract)
that hosts the known deposit and (2) the 9,600 acre North Tract consisting of mineral rights only with
several known high grade prospects. The Johnson Tract property is an inholding in Lake Clark National
Park and the property was conveyed to CIRI under the terms of the Alaskan Native Claims Settlement Act
(ANSCA) and the Cook Inlet Land Exchange. Ratified by an act of Congress and approved by the Alaska
7
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Legislature in 1976, CIRI is entitled to mutually agreed upon transportation and port easements through
Park lands for mineral extraction.
Letter Agreement Terms
Constantine and CIRI aim to finalize terms of a 10-year lease with a renewal option as soon as
practicable. Commercial terms outlined in the non-binding letter agreement signed by Constantine and
CIRI include annual lease payments of $75,000 for years one through five, escalating to $150,000 from
year six onwards, until production is achieved. Constantine may exercise its option to maintain the lease
rights by incurring US$10.0 million in expenditures over the first 10 years with at least US$7.5 million
within the first 6 years. Upon completing these expenditure requirements and satisfying other lease
conditions, Constantine may renew the lease for an additional 5 years (11 through 15) by making annual
lease payments of $150,000/year (inflation adjusted) and completing an additional US$10 million in
expenditures.
Upon completion of a feasibility study and a decision to construct a mine, CIRI has the one-time right to
back-in to the project and participate to a maximum 25% interest. CIRI will also receive NSR royalties of
2% to 3% on base metals and a gold price adjusted NSR royalty of 2.5% to 4%.
2018 Project Activity
All the historic work on the project pre-dates NI 43-101 reporting requirements. Initial work is being
directed to compiling this data into digital format and producing a NI 43-101 report that will document the
historical exploration and provide recommendations to guide future exploration. 2018 activity included:
1)
Initiating the collection and compiling of all the historic technical hard copy data into a functional
digital format.
2) Upgrading the condition of the existing camp, equipment and airstrip in preparation for a 2019
exploration program.
3) Completing a high precision GPS survey control check on drill hole collar locations and historic
survey control stations.
4) Re-logging and re-sampling portions of selected drill holes to confirm previous sampling results.
All the historic drill cores are stored in secure containers at the camp site.
Initial scoping of the surface geology and access routes.
5)
$10,000,000 Private Placement
In July 2018, the Company closed a $10,000,000 private placement. The financing was completed in two
tranches, totaling of 14,705,881 units (the “Units”) at a price of $0.68 per Unit for aggregate gross
proceeds of $10,000,000 that was preceded by a 4:1 share consolidation that became effective on May
18, 2018. The Units were placed with strategic investors, existing shareholders and insiders. The
financing included significant investment by the Electrum Strategic Opportunities Fund II L.P. (“Electrum”),
an investment fund managed by The Electrum Group LLC, and by Altius Minerals Corporation and Mr.
John Tognetti, a major shareholder and insider.
Each Unit consisted of one share and one transferable share purchase warrant. Each warrant entitles the
holder to purchase one common share at a price of $1.00 per share for a period of five years. Under the
terms of its unit purchase agreement with the Company, Electrum has certain pre-emptive rights on future
8
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
financings. As well, Electrum was given 2 board seat nominations which were filled by Stuart Harshaw
and Richard Williams.
Summary of Base Metal Project (Palmer Property)
Palmer is an advanced stage, high-grade VMS project, with an Indicated Resource of 4,677,000 tonnes
grading 5.23% zinc, 1.49% copper, 30.8 g/t silver, 0.30 g/t gold, 23.9% barite and 9,594,000 million
tonnes Inferred at 4.95% zinc, 0.59% copper, 0.43 % lead, 69.3 g/t silver, 0.39g/t gold, 27.7% barite.
The Project is being advanced in partnership with Dowa, who have earned 49% in the project by
completing aggregate expenditures of US$22 million over four years at the end of 2016. Since that time
Dowa and Constantine have advanced the project by funding on a 49%/51% basis respectively. The
Palmer project is located in a very accessible part of coastal southeast Alaska, with road access on the
property to the immediate South Wall deposit area and is within 60 kilometers of the year-round deep sea
port of Haines. Mineralization at Palmer occurs within the same belt of rocks that is host to the Greens
Creek mine, one of the world’s richest VMS deposits. There are at least 25 separate base metal and/or
barite occurrences and prospects on the Palmer property, indicating the potential for discovery of multiple
deposits beyond the RW-South Wall deposit area.
Summary of Gold Projects
Constantine controls a 100% interest in the core Munro Croesus gold mine property and the Golden Mile
property, that collectively represent a land position with high potential in the prolific Timmins gold camp in
Ontario. The Munro Croesus project, which includes the famous high-grade past-producing Croesus Gold
Mine, is located along the north side of the Pipestone Fault and within the Porcupine Destor Fault zone
corridor approximately 75 kilometers east of the center of the Timmins gold camp. The large (68 square
kilometers) Golden Mile property is in the Timmins gold camp, nine kilometers northeast of Goldcorp’s
multimillion ounce Hoyle Pond Mine, and is strategically located at the intersection of the projection of the
Timmins camp giant mine corridor with the Pipestone fault. The Company further increased its Ontario
portfolio of mineral properties by recently acquiring an option to earn a 100% interest in the Golden
Perimeter property, consisting of 561 claims in the Timmins area.
In Alaska, the Company holds a 100% interest in the portion of the Haines Block Lease property that
covers areas upland of the active Porcupine placer gold district that has estimated past production of
82,489 ounces. Other gold assets include a 50/50 Joint Venture formed in 2010 with Carlin Gold
Corporation exploring a large land position in a new Carlin-type gold district in Yukon.
The recently announced acquisition of the Johnson Tract high grade gold-zinc property in Southcentral
Alaska described in the highlights section above is a “flagship” addition to the Company’s gold portfolio
and should add fundamental value to a planned spinout of the Company’s gold assets once a lease
agreement is finalized and NI 43-101 report is completed on the pre-1995 historic data.
9
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Results of Operations
The Company recorded a net loss of $939,466 for the year ended October 31, 2018 (2017-$2,377,178
net income).
Exploration and Evaluation Expenditures
In the year ended October 31, 2018, the Company recorded expenditures of $6,121,200 on exploration
and evaluation properties. The Palmer Project accounted for $5,260,866 of those expenditures. During
the year ended October 31, 2018, the Company made cash contributions totaling $6,518,685 to maintain
its 51% interest in the Palmer Project joint venture. During the year, the Company also incurred costs of
$760,459 (2017-Nil) on the acquisition and initial field work of the new Johnson Tract project in Alaska.
Note on Palmer Project Joint Venture Accounting
Effective July 1, 2017, the Company began accounting for the Palmer Project joint venture as a joint
operation for accounting purposes, and only 51% of the exploration expenditures on the Palmer Project
joint venture are included in the Company’s financial statements since that date.
Operating Costs
The Company recorded net cash operating expenses of $773,824 for the year ended October 31, 2018,
compared to cash operating costs of $813,794 for the previous year. Consulting costs ($141,063) were
higher than the previous year ($55,404) as a result of increased costs related to new acquisitions. Legal
costs for 2018 ($8,823) showed a marked reduction compared to the previous year ($422,846), which
were high in 2017 due to: (a) one-time transaction costs on the asset sale to Lake Shore Gold Corp.; and,
(b) organizational costs incurred on the start of the Palmer Project joint venture.
General and administrative costs were higher in the year ended October 31, 2018 primarily due to
increased expenditures on conferences, trade shows and advertising, which doubled from $48,917 in
2017 to $100,448 in 2018. The Company is continuing to expand its effort in this area and these costs
are expected to continue to increase in the coming year. A breakdown of total general and administrative
costs for the year ended October 31, 2018 is shown in the table below:
10
`General and Administrative expenses for the year ended October 31, 2018AmountConferences, trade shows and advertising $ 100,448 Accounting and administration40,317Office expenses26,255Transfer agent, listing and filing fees36,129Total $ 203,149
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Annual Financial Information
Selected annual financial information for the three years ended October 31, 2018, 2017 and 2016 are as
follows:
At October 31,
Loss before other items
Net income (loss) for the year
Income (loss) per share
Total assets
Total liabilities
Total shareholders’ equity
Summary of Quarterly Results
2018
$ (988,911)
(939,466)
(0.03)
25,379,934
460,953
24,918,981
2017
$ (1,027,927)
2,377,178
0.08
16,516,869
553,519
15,963,350
2016
$ (637,325)
(618,003)
(0.04)
13,704,263
332,224
13,372,039
In the three months ended October 31, 2018, the Company recorded a net loss of $116,492 (2017-
$157,083). The Company recorded cash operating costs of $136,277 for the quarter, compared to cash
operating costs of $256,481 for the same quarter last year. Operating costs were offset by a $28,026 gain
on foreign exchange during the quarter. Prior year operating costs were higher due to transaction and
organization costs, as described in the Operating Costs section above. In the three months ended
October 31, 2018, the Company incurred aggregate expenditures of $3,195,108 on exploration and
evaluations properties, the majority of which ($2,518,338) was incurred on the Palmer Project, the
Company’s main operational focus during the year.
The following is a summary of certain consolidated financial information of the Company for the past eight
quarters:
Financial Condition, Liquidity and Capital Resources
The Company is not in commercial production on any of its mineral properties and accordingly, it does not
generate cash from operations. The Company finances its activities by raising capital through the equity
11
For Quarter EndedTotalAssetsIncome(Loss)Income(Loss)per shareOctober 31, 2018$ 25,379,934 $ (116,492)$ (0.01)July 31, 2018 25,852,498 (328,971) (0.01)April 30, 2018 15,694,175 (244,992) (0.01)January 31, 2018 15,847,100 (249,011) (0.01)October 31, 2017 16,516,869 (157,083) (0.01)July 31, 201716,759,739 (714,145) (0.02)April 30, 2017 18,985,980 51,745 0.00 January 31, 2017 19,293,609 3,196,661 0.11
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
markets, by the sale of mineral property assets, and by option and joint venture agreements that provide
cash payments and management fees.
The Company and Dowa are responsible for funding the cash requirements of the Palmer Project joint
venture, based on their 51:49 interests. As at October 31, 2018, the Company has made aggregate cash
contributions to the Palmer Project joint venture totaling US$7,311,625.
The Company's cash position at October 31, 2018 was $4,307,962 (2017-$1,780,392) and its working
capital was $4,204,181 (2017-$1,474,298).
In July 2018, the Company completed a $10,000,000 private placement. The Company incurred cash
financing costs of $304,740 in connection with the private placement. The proceeds of the private
placement were originally announced as intended for the Palmer project and general corporate purposes.
As a result of signing a letter of intent to acquire a lease interest in the Johnston Tract property,
management determined it to be in the best interests of the Company to utilize a portion of the private
placement proceeds for continued acquisition and due diligence costs plus camp restoration work. A total
of $760,459 was incurred on the Johnson Tract property in the fiscal year ended October 31, 2018.
The Company is dependent on equity capital to fund exploration and development of exploration
properties and its on-going operations. The Company projects that it will require additional equity capital
in the coming year to continue to fund its portion of the Palmer Project joint venture and other exploration
work as may be determined by the Company’s management.
At this time, the Company has no material contractual commitments for capital expenditures.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet financing arrangements.
Related Party Transactions
The following represents the details of related party transactions paid or accrued for the years ended
October 31, 2018 and 2017:
The Company paid or accrued to NS Star Enterprises Ltd., a company controlled by Mr. Wayne
Livingstone, $71,940 for consulting, management and administration services during the years ended
12
For the year ended October 31,20182017Consulting, administrative and technical fees paid or accrued to companies owned by directors82,150$ 38,039$ Consulting fees paid to officers205,975 187,013 Directors fee93,000 - Accounting and administration fees paid or accrued to a company 50% owned by an officer101,682 73,789 Share-based payments to key management159,996 139,210 642,803$ 438,051$
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
October 31, 2018 (2017-$38,039). The Company paid or accrued to Morfopoulos Consulting Associates
Ltd., a company controlled by the CFO, $101,679 for accounting, and management and administration
services during the year ended October 31, 2018 (2017-$73,789). The Company paid D. Green
Geoscience Inc., a company controlled by the vice-president of exploration, $204,750 for technical
consulting and management and administration services during the year ended October 31, 2018 (2017-
$187,013).
For the year ended October 31, 2018, the Company paid wages totaling $141,000 (2017-$132,000) to Mr.
J. Garfield MacVeigh in his capacity as President of the Company. For the years ended October 31,
2018, the Company paid wages totaling: $181,228 (2017-$180,463) to Elizabeth Cornejo in her capacity
as Vice-President, Community and External Affairs of the Company; $186,322 to Mr. Ian Cunningham-
Dunlop in his capacity as Vice-President, Advanced Projects; and $25,286 (2017-Nil) to Naomi Nemeth in
her capacity as Vice-President, Investor Relations.
In the year ended October 31, 2018, the Company paid an aggregate of $93,000 (2017-Nil) in directors
fees to the non-executive directors of the Company.
At October 31, 2018, the Company had accounts payable of $17,750 due to related parties for
outstanding expense reimbursements, which were all paid subsequent to the year-end.
At October 31, 2018, the Company’s amounts receivable balance includes $253,681, representing the
49% non-consolidated portion of the amount receivable from CML (2017-$165,357), $17,264 from Carlin
Gold Corporation representing amounts receivable for rent and joint venture expenses and $6,900 from
New Oroperu Resources Inc. representing amounts receivable for rent.
Management of Capital
The Company manages its cash, common shares and stock options as capital. The Company’s
objectives when managing capital are to safeguard the Company’s ability to continue as a going concern
in order to pursue the development of its mineral properties and to maintain a flexible capital structure
which optimizes the costs of capital at an acceptable risk. The Company does not have any externally
imposed capital requirements to which it is subject.
The Company manages the capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure,
the Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the
amount of cash and cash equivalents.
In order to facilitate the management of its capital requirements, the Company prepares expenditure
budgets that are updated as necessary depending on various factors, including successful capital
deployment and general industry conditions.
In order to maximize ongoing exploration efforts, the Company does not pay out dividends. The
Company’s investment policy is to keep its cash treasury on deposit in an interest bearing Canadian
chartered bank account.
13
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Summary of Outstanding Shares Data
On May 18, 2018, the Company consolidated outstanding share capital on the basis of four pre-
consolidated shares for one post-consolidated share.
The Company had 44,041,753 shares outstanding on October 31, 2018 and 45,354,253 as of the date of
this report.
The following stock options were outstanding at October 31, 2018:
No. of Stock Options
1,312,500
350,000
612,500
581,250
75,000
225,000
3,156,250
Price per Share
$0.28
$0.56
$0.40
$0.64
$0.74
$0.68
The following stock options are outstanding as of the date of this report:
No. of Stock Options
350,000
612,500
581,250
75,000
225,000
225,000
2,068,750
Price per Share
$0.56
$0.40
$0.64
$0.74
$0.68
$0.44
Expiry Date
January 17, 2019
March 6, 2020
June 30, 2021
June 2, 2022
February 5, 2023
June 6, 2023
Expiry Date
March 6, 2020
June 30, 2021
June 2, 2022
February 5, 2023
June 6, 2023
December 24, 2023
Corporate Governance
Management of the Company is responsible for the preparation and presentation of the interim and
annual financial statements and notes thereto, MD&A and other information contained in this MD&A.
Additionally, it is management’s responsibility to ensure the Company complies with the laws and
regulations applicable to its activities.
The Company’s management is held accountable to the Board of Directors (“Directors”), each member of
which is elected annually by the shareholders of the Company. The Directors are responsible for
reviewing and approving the annual audited financial statements and MD&A. Responsibility for the
review and approval of the Company’s unaudited interim financial statements and MD&A is delegated by
the Directors to the Audit Committee, which is comprised of three directors, two of whom are independent
of management. Additionally, the Audit Committee pre-approves audit and non-audit services provided
by the Company’s auditors.
14
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
The auditors are appointed annually by the shareholders to conduct an audit of the financial statements in
accordance with generally accepted auditing standards. The external auditors have complete access to
the Audit Committee to discuss the audit, financial reporting and related matters resulting from the annual
audit as well as assist the members of the Audit Committee in discharging their corporate governance
responsibilities.
Risk Factors
Companies operating in the mining industry face many and varied kind of risks. While risk management
cannot eliminate the impact of all potential risks, the Company strives to manage such risks to the extent
possible and practical. Following are the risk factors most applicable to the Company.
Financial
The Company has not generated any revenue since inception and has never paid any dividends and is
unlikely to pay dividends or generate earnings in the immediate or foreseeable future. As at October 31,
2018, the Company has incurred significant losses since inception and has an accumulated operating
deficit of $7,706,052. The continuation and long-term viability of the Company remains dependent upon
its ability to obtain necessary equity financing to continue operations and to determine the existence,
discovery and successful exploitation of economically recoverable reserves in its resource properties,
confirmation of the Company’s interests in the underlying properties, and the attainment of profitable
operations.
Industry
Exploring and developing mineral resource projects bears a high potential for all manner of risks.
Additionally, few exploration projects successfully achieve development due to factors that cannot be
predicted or foreseen. Moreover, even one such factor may result in the economic viability of a project
being detrimentally impacted such that it is not feasible or practical to proceed. The Company monitors
its risk based activities and periodically employs experienced consulting, engineering, insurance and legal
advisors to assist in its risk management reviews.
Although the Company has taken steps to verify the title to mineral properties in which it has an interest,
in accordance with industry standards for the current stage of exploration of such properties, these
procedures do not guarantee the company's title. Property title may be subject to unregistered prior
agreements or transfers and title may be affected by undetected defects.
Metal Prices
The principal activity of the Company is the exploration and development of precious metal and base
metal resource properties. The feasible development of such properties is highly dependent upon the
price of gold, silver, copper lead and zinc. A sustained and substantial decline in precious metal and
base metal commodity prices could result in the write-down, termination of exploration and development
work or loss of its interests in identified resource properties. Although such prices cannot be forecasted
with certainty, the Company carefully monitors factors which could affect precious metal and base metal
commodity prices in order to assess the feasibility of its resource projects.
15
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Political Risk
The resource properties on which the Company is actively pursuing its exploration and development
activities are located in Alaska, USA, Yukon and Ontario, Canada. While the political climate in Alaska,
Yukon, British Columbia and Ontario is considered by the Company to be stable, there can be no
assurances that this will continue indefinitely. To alleviate such risk, the Company funds its operations on
an as-needed basis. The Company does not presently maintain political risk insurance for its foreign
exploration projects.
Environmental
Exploration and development projects are subject to the environmental laws and regulations of the state
of Alaska and of the United States of America (Palmer project and Johnson Tract) and the environmental
laws and regulations of Canada and the province of Ontario (Munro-Croesus and Golden Mile projects).
As such laws are subject to change, the Company monitors proposed and potential changes and
management believes the Company remains in compliance with current environmental regulations in the
relevant jurisdictions.
On the Palmer project, reclamation of disturbances related to the Company’s permitted exploration
activities are bonded under the Alaska State-wide Bond Pool. The Company has also contracted an
ASTM Phase 1 environmental site assessment (ESA) on the federal lode mining claims of the Palmer
project. The ESA concluded that there are no environmental concerns associated with the Property at this
time.
The Munro Croesus project includes the very small past producing Munro Croesus Gold Mine that mined
approximately 5000 tons of ore. The Company has assumed the environmental liability at the Croesus
minesite on the Munro Croesus property. To date it has not incurred any material expenses, however it
does remain an uncertain liability. The Ontario government requires a closure plan if the claims are
abandoned or become inactive and the closure plan will require some water sampling and site
reclamation costs. The previous owner completed remediation of what the Company considers to be the
major liabilities, which included capping the Walsh and Croesus shafts. The Croesus minesite was visited
by a mines inspector in September 2010 and an inspection report received from the Ministry of Northern
Development, Mines and Forestry (Ontario) in early 2011. The summary of field observations and
recommendations in the Inspection Report are near surface stope stability concerns and recommendation
for a crown pillar stability assessment. There is a specific near-term recommendation to secure the
location of a small raise to surface that is filled with waste rock with a fence and signs and this remedial
action has been taken. The small raise area was fenced and cautionary signage was installed. A
preliminary evaluation of the near surface stope stability and a crown pillar stability assessment was
completed by a qualified engineer, independent of the Company. The initial conclusion based on historic
data and new information from drill data through the old workings and the recent excavation work is that
the “old workings will stand for a long time” and that “surface subsidence would be minimal at the down-
dip edge of the zone and could be as much as 1 meter near the upper edge.” Now that the crown pillar is
exposed, a site visit by a qualified Ontario mining engineer is required with formal reporting of the
conclusions to be made to the Ministry of Northern Development, Mines and Forestry (Ontario). Surface
water samples upstream and downstream of the site have been recommended to determine water quality
issues. No specific schedule has been established to carry out this work.
16
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Operational
Exploration development projects require third party contractors for the execution of certain activities.
The availability and cost of third party contractors is subject to a competitive environment for their use,
which is beyond the control of the Company.
Cyber security risk
Cyber security risk is the risk of negative impact on the operations and financial affairs of the Company
due to cyber-attacks, destruction or corruption of data, and breaches of its electronic systems.
Management believes that it has taken reasonable and adequate steps to mitigate the risk of potential
damage to the Company from such risks. The Company also relies on third-party service providers for the
storage and processing of various data. A cyber security incident against the Company or its service
providers could result in the loss of business sensitive, confidential or personal information as well as
violation of privacy and security laws, litigation and regulatory enforcement and costs. The Company has
not experienced any material losses relating to cyber-attacks or other information security breaches,
however there can be no assurance that it will not incur such losses in the future.
Credit risk
Credit risk is the risk of potential loss to the Company if a customer or counterparty to a financial
instrument fails to meets its contractual obligations. The Company’s credit risk is limited to the carrying
amount on the balance sheet and arises from the Company’s cash and receivables.
The Company’s cash is held primarily through a Canadian chartered bank, which is a high-credit quality
financial institution. The credit risk in receivables is considered low by management as it consists
primarily of amounts owing for Canadian government sales tax credits.
Liquidity risk
Liquidity risk is the risk that the Company will not meet its financial obligations as they fall due. The
Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet
liabilities when due. At October 31, 2018, the Company had a total cash balance of $4,307,962 to settle
current liabilities of $460,953.
All financial liabilities (except accrued liabilities) have maturities of 30 days or are due on demand and are
subject to normal trade terms.
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates and
foreign exchange rates.
Interest rate risk
The Company has cash balances and no interest-bearing debt. The Company’s current policy is to invest
excess cash in investment-grade short-term certificates of deposits issued by its banking institutions. The
17
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
Company periodically monitors the investments it makes and is satisfied with the credit ratings of its
banks.
Foreign currency rate risk
The Company’s functional currency is the Canadian dollar and major purchases are transacted in
Canadian dollars. Management believes the foreign exchange risk derived from currency conversions is
insignificant and therefore does not hedge its foreign exchange risk.
Sensitivity analysis
The carrying value of cash, receivables, accounts payable, and amounts due to related parties closely
approximate their fair values in view of the relatively short periods to maturities of these financial
instruments.
Based on management’s knowledge of and experience in the financial markets, management does not
believe that the Company’s current financial instruments will be materially affected by credit risk, liquidity
risk or market risk.
Forward-Looking Statements
Forward-looking statements include, but are not limited, to statements regarding the use of proceeds,
costs and timing of the development of new deposits, statements with respect to success of exploration
and development activities, permitting time lines, currency fluctuations, environmental risks, unanticipated
reclamation expenses, and title disputes or claims.
Forward-looking statements often, but not always are identified by the use of words such as “plans”,
“seeks”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “targets”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and
phrases or statements that certain actions, events or results “may”, “should”, “could”, “would”, “might”,
“will”, or “will be taken”, “occur” or “be achieved”.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other
factors which may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements expressed or implied by the
forward-looking statements. These statements are based on a number of assumptions and factors,
including assumptions regarding general market conditions; future prices of gold and other metals;
possible variations in ore resources, grade or recovery rates; actual results of current exploration
activities; actual results of current reclamation activities; conclusions of future economic evaluations;
changes in project parameters as plans continue to be refined; failure of plant, equipment, or processes
to operate as anticipated; accidents, labour disputes and other risks of the mining industry; risks related to
joint venture operations; timing and receipt of regulatory approvals of operations; the ability of the
Company and other relevant parties to satisfy regulatory requirements; the availability of financing for
proposed transactions and programs on reasonable terms; the ability of third-party service providers to
deliver services on reasonable terms and in a timely manner; and delays in the completion of
development or construction activities. Other factors that could cause the actual results to differ include
market prices, results of exploration, availability of capital and financing on acceptable terms, inability to
obtain required regulatory approvals, unanticipated difficulties or costs in any rehabilitation which may be
18
Management’s Discussion and Analysis
For the year ended October 31, 2018
(Expressed in Canadian dollars)
necessary, market conditions and general business, economic, competitive, political and social
conditions. Although the Company has attempted to identify important factors that could cause actual
results to differ materially from those expressed or implied in forward-looking statements, there may be
other factors which cause actual results to differ. Significant additional drilling is required by the Company
at its Palmer property to fully understand the system size before a meaningful resource can be calculated
and completed. Accordingly, readers should not place undue reliance on forward-looking statements.
This MD&A includes, but is not limited to, forward-looking statements regarding: the Company’s plans for
upcoming exploration work on the Company’s exploration properties in Alaska, and the Company’s ability
to meet its working capital needs for the next fiscal year.
Forward-looking statements contained herein are made as of the date of this MD&A and the Company
disclaims any obligation to update any forward-looking statements, whether as a result of new
information, future events or results or otherwise, except as required by applicable securities laws.
Approval
Darwin Green, P. Geo., Vice-President Exploration for Constantine, and a qualified person as defined by
Canadian National Instrument 43-101, has reviewed the technical information contained in this MD&A
and has also verified the analytical data for drill core samples disclosed in this release by reviewing the
blanks duplicates and certified reference material standards and confirming that they fall within limits as
determined by acceptable industry practice.
Ian Cunningham-Dunlop, P.Eng. Vice-President, Advanced Projects, is a Qualified Person as defined by
NI 43-101 for the Palmer project. James N. Gray, P.Geo. of Advantage Geoservices Ltd. is the Qualified
Person as defined by NI 43-101 for the resource estimate discussed above. They have reviewed and
approved the resource estimate statements in this MD&A.
The Board of Directors of the Company has approved the disclosure contained in this MD&A. A copy of
this MD&A will be provided to anyone who requests it.
Additional Information
Additional disclosures pertaining to the Company’s technical reports, management information circulars,
material change reports, press releases and other information are available on the SEDAR website at
www.sedar.com.
19