UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to __________
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of event requiring this shell company report
Commission File Number:
001-35404
EMX ROYALTY CORPORATION
(Formerly Eurasian Minerals Inc.)
(Exact name of Registrant as specified in its charter)
__________British Columbia, Canada_____________
(Jurisdiction of incorporation or organization)
Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8
(Address of principal executive offices)
Christina Cepeliauskas, Chief Financial Officer
Telephone No.: 604-688-6390
Facsimile No.: 604-688-1157
Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities to be registered pursuant to Section 12(b) of the Act:
Common Shares, without par value
NYSE American LLC
Title of each class Name on each exchange on which registered
Securities to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the
period covered by the annual report: 79,746,271
Indicate by check mark if the registrant is a well-known seasoned Company, as defined in Rule 405 of the Securities Act.
Yes No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
Yes No
to file such reports), and (2) has been subject to such filing requirements for the past ninety days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
an emerging growth company. See definition of “large accelerated filer,"accelerated filer,” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer
Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting
Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included
in this filing:
U.S. GAA P International Financial Reporting Standards as issued Other
by the International Accounting Standards Board
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow:
Item 17 Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
2
EMX ROYALTY CORPORATION
TABLE OF CONTENTS
Glossary of Geological and Mining Terms
Itroduction
Cautionary Statement Regarding Forward-Looking Statements
Cautionary Note to United States Investors Regarding Reserve and Resource Information
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Identity of Directors, Senior Management and Advisors
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Operating, Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other Than Equity Securities
PART II
Defaults, Dividend Arrearages and Delinquencies
Item 13.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 14.
Controls and Procedures
Item 15.
Audit Committee Financial Expert
Item 16A.
Code of Ethics
Item 16B.
Principal Accountant Fees and Services
Item 16C.
Exemptions from the Listing Standards for Audit Committees
Item 16D.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16E.
Change in Registrant’s Certifying Accountant
Item 16F.
Corporate Governance
Item 16G.
Item 16H. Mine Safety Disclosure
PART III
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
Page
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Glossary of Geological and Mining Terms
Certain terms used in this Form 20-F are defined as follows:
Alunite: a hydrated aluminium potassium, sulfate mineral [(KAl3(SO4)2(OH)6].
Andesite: an extrusive igneous rock of intermediate composition with a fine grained to porphyritic texture.
Argillic Alteration: hydrothermal alteration of rock which introduces clay minerals including kaolinite, smectite and illite.
Assay: a quantitative chemical analysis of an ore, mineral or concentrate to determine the amount of specific elements.
Breccia: a coarse-grained clastic rock composed of broken rock fragments held together by a mineral cement or in a fine-
grained matrix.
Carbonate: a sedimentary rock made mainly of calcium carbonate (CaCO3).
Dacite: an extrusive igneous rock with a fine grained to porphyritic texture and intermediate in composition between andesite
and rhyolite.
Diorite: a grey to dark-grey intermediate intrusive igneous rock composed principally of plagioclase feldspar, biotite,
hornblende, and/or pyroxene.
Dike: a tabular igneous intrusion that cuts across the country rock, generally vertical in nature.
Doré: a mixture of predominantly gold and silver produced by a mine, usually in a bar form, before separation and refining
into gold and silver by a refinery.
Epithermal: said of a hydrothermal mineral deposit formed within about 1 kilometer of the Earth’s surface and in the
temperature range of 50oC to 200oC.
Feasibility Study: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a comprehensive technical
and economic study of the selected development option for a mineral project that includes appropriately detailed assessments
of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are
necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable). The results
of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or
finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.
Foliation: repetitive layering in metamorphic rocks.
Footwall: the underlying side of a fault, ore body, or mine working; particularly the wall rock beneath an inclined vein or fault.
Formation: a persistent body of igneous, sedimentary, or metamorphic rock, having easily recognizable boundaries that can
be traced in the field without recourse to detailed paleontologic or petrologic analysis, and large enough to be represented on a
geologic map as a practical or convenient unit for mapping and description.
Gneiss: a type of rock formed by high-grade regional metamorphic processes from pre-existing formations of igneous or
sedimentary rocks.
Granodiorite: a group of plutonic rocks intermediate in composition between quartz diorite and quartz monzonite.
Greenfields: conceptual exploration; relying on the predictive power of ore genesis models to search for mineralization in
relatively unexplored ground.
Hanging wall: the overlying side of an ore body, fault, or mine working, especially the wall rock above an inclined vein or
fault.
1
Hornfels: a fine-grained rock composed of a mosaic of equidimensional grains without preferred orientation and typically
formed by contact metamorphism.
Hydrothermal: of or pertaining to hot water, to the action of hot water, or to the products of this action, such as a mineral
deposit precipitated from a hot aqueous solution, with or without demonstrable association with igneous processes.
Igneous rock: rock that is magmatic in origin.
Indicated mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a
Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient
confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the
economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling
and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated
Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be
converted to a Probable Mineral Reserve.
Inferred mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a
Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and
sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred
Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be
converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded
to Indicated Mineral Resources with continued exploration.
Intercalated: said of layered material that exists or is introduced between layers of a different character; especially said of
relatively thin strata of one kind of material that alternates with thicker strata of some other kind, such as beds of shale
intercalated in a body of sandstone.
Jasperoid: a dense chert-like siliceous rock, in which chalcedony or cryptocrystalline quartz has replaced the carbonate
materials of limestone or dolomite.
Kriging: a weighted, moving-average interpolation method in which the set of weights assigned to samples minimizes the
estimation variance, which is computed as a function of the variogram model and locations of the samples relative to each
other, and to the point or block being estimated.
Leach: to dissolve minerals or metals out of ore with chemicals.
Limestone: a sedimentary rock consisting predominantly of calcium carbonate.
Lithocap: the shallow part of porphyry copper systems typically above the main Cu-Au/-Mo zone; upper alteration zone.
Measured mineral resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as that part of a
Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with
confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of
the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and
testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured
Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred
Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.
Meta: a prefix that, when used with the name of a sedimentary or igneous rock, indicates that the rock has been metamorphosed.
Metamorphic rock: rock which has been changed from igneous or sedimentary rock through heat and pressure into a new
form of rock.
Mineral Reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically mineable
part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may
occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that
include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably
be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the
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processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable
product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public
disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.
Mineral Resource: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a concentration or
occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that
there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other
geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and
knowledge, including sampling.
Modifying factors: is defined in the CIM Definition Standards (2014) as the considerations used to convert Mineral Resources
to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic,
marketing, legal, environmental, social and governmental factors.
Net smelter return royalty or NSR royalty: a type of royalty based on a percentage of the proceeds, net of smelting, refining
and transportation costs and penalties, from the sale of metals extracted from concentrate and doré by the smelter or refinery.
NI 43-101: National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities
Administrators.
Oxide: a compound of ore that has been subjected to weathering and alteration as a result of exposure to oxygen for a long
period of time.
Pegmatite: a very coarse-grained igneous rock that has a grain size of 20 millimetres or more.
Phyllite: a regional metamorphic rock, intermediate in grade between slate and schist. Minute crystals of sericite and chlorite
impart a silky sheen to the surfaces exposed by cleavage.
Plagioclase: a series of tectosilicate minerals within the feldspar family.
Plutonic: intrusive igneous rock that is crystallized from magma slowly cooling below the surface of the Earth.
Porphyry: igneous rock consisting of large-grained crystals dispersed in a fine-grained matrix or groundmass.
Pre-Feasibility Study: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as a comprehensive
study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a
preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established
and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions
on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting
reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting.
A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.
Preliminary Economic Assessment: is defined in NI 43-101 and NI 43-101CP as a study, other than a pre-feasibility or
feasibility study that includes an economic analysis of the potential viability of mineral resources. The term preliminary
economic assessment can include a study commonly referred to as a scoping study. A preliminary economic assessment might
be based on measured, indicated, or inferred mineral resources, or a combination of any of these. These types of economic
analyses include disclosure of forecast mine production rates that might contain capital costs to develop and sustain the mining
operation, operating costs, and projected cash flows.
Probable mineral reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically
mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying
Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. The Qualified
Person(s) may elect to convert Measured Mineral Resources to Probable Mineral Reserves if the confidence in the Modifying
Factors is lower than that applied to a Proven Mineral Reserve.
Proven mineral reserve: is defined in the CIM Definition Standards (2014) as referenced by NI 43-101 as the economically
mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the
Modifying Factors. Application of the Proven Mineral Reserve category implies that the Qualified Person has the highest
degree of confidence in the estimate with the consequent expectation in the minds of the readers of the report. The term should
be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate
3
would not significantly affect the potential economic viability of the deposit. Proven Mineral Reserve estimates must be
demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.
Pyroclastic: pertaining to clastic rock material formed by volcanic explosion or aerial expulsion from a volcanic vent; also,
pertaining to rock texture of explosive origin.
Qualified Person: is defined in NI 43-101 as an individual who (a) is an engineer or geoscientist with a university degree, or
equivalent accreditation, in an area of geoscience, or engineering, relating to mineral exploration or mining; (b) has at least five
years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination
of these, that is relevant to his or her professional degree or area of practice; (c) has experience relevant to the subject matter
of the mineral project and the technical report; (d) is in good standing with a professional association; and (e) in the case of a
professional association in a foreign jurisdiction, has a membership designation that (i) requires attainment of a position of
responsibility in their profession that requires the exercise of independent judgment; and (ii) requires A. a favourable
confidential peer evaluation of the individual’s character, professional judgement, experience, and ethical fitness; or B. a
recommendation for membership by at least two peers, and demonstrated prominence or expertise in the field of mineral
exploration or mining;
Run-of-mine: ore in its natural state as it is removed from the mine that has not been subjected to additional size reduction.
Schist: a strongly foliated crystalline rock, which readily splits into sheets or slabs as a result of the planar alignment of the
constituent crystals. The constituent minerals are commonly specified (e.g. “quartz-muscovite-chlorite schist”).
Shear zone: a tabular zone of rock that has been crushed and brecciated by parallel fractures due to “shearing” along a fault or
zone of weakness. These can be mineralized with ore-forming solutions.
Silicification: the introduction of, or replacement by, silica, generally resulting in the formation of fine-grained quartz,
chalcedony, or opal, which may fill pores and replace existing minerals.
Skarn: metamorphic zone developed in the contact area around igneous rock intrusions when carbonate sedimentary rocks are
invaded by large amounts of silicon, aluminum, iron, and magnesium.
Spectrography: the process of using a spectrograph to map or photograph a spectrum.
Stockwork: a complex system of structurally controlled or randomly oriented veins.
Strata: layers of sedimentary rock with internally consistent characteristics that distinguish them from other layers.
Strike: the direction, or course or bearing of a vein or rock formation measured on a level surface.
Stratibound: confined to a particular stratigraphic layer or unit.
Stratiform: occurring as or arranged in strata.
Strip (or stripping) ratio: the tonnage or volume of waste material that must be removed to allow the mining of one tonne of
ore in an open pit.
Sulfides or sulphides: compounds of sulfur (or sulphur) with other metallic elements.
Tailing: material rejected from a mill after the recoverable valuable minerals have been extracted.
Terrane: a rock formation or assemblage of rock formations that share a common geologic history.
Tuff: a general term for consolidated pyroclastic rocks.
Vein: sheet-like body of minerals formed by fracture filling or replacement of host rock.
Vuggy: containing small cavities in a rock or vein, often with a mineral lining of different composition from that of the
surrounding rock.
4
Linear Measurements
1 inch
1 foot
1 yard
1 mile
Area Measurements
1 acre
1 hectare
1 square mile
Units of Weight
1 short ton
1 long ton
1 metric tonne
1 pound (16 oz.)
1 troy oz.
1 troy oz. per short ton
Analytical
1%
1 gram/tonne
1 troy oz./short ton
10 ppb
100 ppm
=
=
=
=
=
=
=
=
=
=
=
=
=
2.54 centimeters
0.3048 meter
0.9144 meter
1.609 kilometers
0.4047 hectare
2.471 acres
640 acres or 259 hectares or 2.59 square kilometers
2000 pounds or 0.893 long ton
2240 pounds or 1.12 short tons
2204.62 pounds or 1.1023 short tons
0.454 kilograms or 14.5833 troy ounces
31.1035 grams
34.2857 grams per metric tonne
percent
1%
0.0001%
0.003429%
nil
0.01
grams per metric tonne
troy oz per short ton
10,000
1
34.2857
0.01
100
291.667
0.029167
1
0.00029
2.917
Temperature Conversion Formulas
Degrees Fahrenheit
Degrees Celsius
=
=
(°C x 1.8) + 32
(°F - 32) x 0.556
5
Frequently Used Abbreviations and Symbols
AA
Ag
As
Au
°C
CIM
cm
C.P.G.
CSAMT
Cu
ESIA
F
°F
g
g/t
Hg
HSE
ICP AES
ICP MS
atomic absorption spectrometry
silver
arsenic
gold
degrees Celsius (centigrade)
Canadian Institute of Mining, Metallurgy and Petroleum
centimeter
Certified Professional Geologist
Controlled source audio-frequency magnetotellurics
copper
Environmental & Social Impact Assessment
fluorine
degrees Fahrenheit
gram(s)
grams per tonne
mercury
high sulphidation epithermal
inductively coupled plasma atomic emission spectroscopy
inductively coupled plasma mass spectroscopy
ICP MS/AAS
inductively coupled plasma mass spectroscopy/atomic absorption spectroscopy
IOCG
IP
JORC
JV
kg
km
m
Ma
Mn
Mo
n
oz
opt
oz/ton
oz/tonne
Pb
PEA
PGE
ppb
ppm
QA
QC
QP
sq
iron-oxide-copper-gold
Induced polarization
Joint Ore Reserves Committee
joint venture
kilogram
kilometer
meter(s)
million years ago
manganese
molybdenum
number or count
troy ounce
ounce per short ton
ounce per short ton
ounce per metric tonne
lead
Preliminary Economic Assessment
platinum group element
parts per billion
parts per million
quality assurance
quality control
Qualified Person
square
6
Frequently Used Abbreviations and Symbols
Sb
VMS
Zn
antimony
volcanogenic massive sulfide
zinc
7
INTRODUCTION
EMX Royalty Corporation (the “Company” or “EMX”) was incorporated under the laws of the Yukon Territory of Canada on
August 21, 2001 as 33544 Yukon Inc. and, on October 10, 2001, changed its name to Southern European Exploration Ltd. On
November 24, 2003, the Company completed the reverse take-over of Marchwell Capital Corp., a TSX Venture Exchange
(“TSX-V”) listed company incorporated in Alberta on May 13, 1996 and which subsequently changed its name to Eurasian
Minerals Inc. On September 21, 2004, EMX continued into British Columbia from Alberta under the Business Corporations
Act. On July 19, 2017, EMX changed its name to EMX Royalty Corporation to better reflect the nature of its business.
EMX’s head office is located at Suite 501 – 543 Granville Street, Vancouver, British Columbia V6C 1X8, Canada, and its
registered and records office is located at Northwest Law Group, Suite 704 – 595 Howe Street, Vancouver, British Columbia
V6C 2T5, Canada.
EMX is a reporting company under the securities legislation of British Columbia and Alberta and is listed on the TSX-V, as a
Tier 1 Company, and the NYSE American LLC (“NYSE American”). EMX’s common shares without par value (“Common
Shares”) are traded on the TSX-V and the NYSE American under the symbol “EMX”.
BUSINESS OF EMX ROYALTY CORPORATION
EMX is principally in the business of exploring for, and generating royalties from minerals properties, as well as identifying
mineral property royalty opportunities for purchase. Under the royalty generation business model, the Company acquires and
advances early-stage mineral exploration projects and then sells the projects to, and thereby forms relationships with, other
parties in consideration of a retained royalty interest, as well as annual advance royalty and other pre-production cash or share
payments and work commitments. Through its various agreements, EMX may also provide technical and commercial assistance
to such companies as the projects advance. By selling interests in its projects to third parties for a royalty interest, EMX:
(a) reduces its exposure to the costs and risks associated with mineral exploration and project development,
(b) receives near term cash flow from scheduled pre-production and milestone based bonus payments,
(c) maintains the opportunity to participate in exploration upside, and
(d) develops a pipeline for potential production royalty payments and associated greenfields discoveries in the future.
This approach helps preserve the Company’s treasury, which can be utilized for further project acquisitions and other business
initiatives.
Strategic investments are an important complement to the Company’s royalty acquisition and royalty generation initiatives.
These investments are made in under-valued exploration companies identified by the Company. EMX helps to develop the
value of these assets, with exit strategies that can include royalty positions or equity sales.
EMX started receiving royalty income as of August 17, 2012 when it acquired Bullion Monarch Mining, Inc. (“Bullion
Monarch” or “BULM”). The Company’s royalty, exploration, and strategic investment portfolio mainly consists of properties
in North America, Turkey, Europe, Haiti, Australia, New Zealand, the Russian Federation, and Chile.
FINANCIAL AND OTHER INFORMATION
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“C$” or “$”).
References to “US$” are to United States dollars. The Government of Canada permits a floating exchange rate to determine
the value of the Canadian dollar against the U.S. dollar.
FORWARD-LOOKING STATEMENTS
The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act and Rule 405 under the Securities
Act of 1933, as amended (the “Securities Act”). Equity securities of the Company are accordingly exempt from Sections 14(a),
14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3 thereunder.
8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report, including the documents incorporated by reference herein, may contain forward-looking statements.
These forward-looking statements may include statements regarding perceived merit of properties, exploration results and
budgets, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates,
production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, completion
of transactions, market prices for metals or other statements that are not statements of fact. These statements relate to analyses
and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions
of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking
statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as
“expects”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”,
“potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”,
“would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar
expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove
to be significantly incorrect:
•
•
•
•
•
•
•
•
the Company’s ability to achieve production at any of its mineral properties;
estimated capital costs, operating costs, production and economic returns;
estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other
assumptions underlying the Company’s resource and reserve estimates;
the Company’s expected ability to develop adequate infrastructure at a reasonable cost;
assumptions that all necessary permits and governmental approvals will be obtained;
assumptions made in the interpretation of drill results, the geology, grade and continuity of the Company’s mineral
deposits;
the Company’s expectations regarding demand for equipment, skilled labor and services needed for exploration and
development of mineral properties; and
the Company’s activities will not be adversely disrupted or impeded by development, operating or regulatory risks.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could
cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:
•
•
•
•
•
•
•
•
•
•
•
uncertainty of whether there will ever be production at the Company’s mineral exploration and development
properties;
uncertainty of estimates of capital costs, operating costs, production and economic returns;
uncertainties relating to the assumptions underlying the Company’s resource and reserve estimates, such as metal
pricing, metallurgy, mineability, marketability and operating and capital costs;
risks related to the Company’s ability to commence production and generate material revenues or obtain adequate
financing for its planned exploration and development activities;
risks related to the Company’s ability to finance the development of its mineral properties through external financing,
joint ventures or other strategic alliances, the sale of property interests or otherwise;
risks related to the third parties on which the Company depends for its exploration and development activities;
dependence on cooperation of joint venture partners in exploration and development of properties;
credit, liquidity, interest rate and currency risks;
risks related to market events and general economic conditions;
uncertainty related to inferred mineral resources;
risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of the Company’s
mineral deposits;
risks related to lack of adequate infrastructure;
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• mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor
disputes or other unanticipated difficulties with or interruptions in development, construction or production;
the risk that permits and governmental approvals necessary to develop and operate mines on the Company’s properties
will not be available on a timely basis or at all;
commodity price fluctuations;
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9
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risks related to governmental regulation and permits, including environmental regulation;
risks related to the need for reclamation activities on the Company’s properties and uncertainty of cost estimates
related thereto;
uncertainty related to title to the Company’s mineral properties;
uncertainty as to the outcome of potential litigation;
risks related to increases in demand for equipment, skilled labor and services needed for exploration and development
of mineral properties, and related cost increases;
increased competition in the mining industry;
the Company’s need to attract and retain qualified management and technical personnel;
risks related to hedging arrangements or the lack thereof;
uncertainty as to the Company’s ability to acquire additional commercially mineable mineral rights;
risks related to the integration of potential new acquisitions into the Company’s existing operations;
risks related to unknown liabilities in connection with acquisitions;
risks related to conflicts of interest of some of the directors of the Company;
risks related to global climate change;
risks related to adverse publicity from non-governmental organizations;
risks related to political uncertainty or instability in countries where the Company’s mineral properties are located;
uncertainty as to the Company’s passive foreign investment company (“PFIC”) status;
uncertainty as to the Company’s status as a “foreign private issuer” and “emerging growth company” in future years;
uncertainty as to the Company’s ability to maintain the adequacy of internal control over financial reporting; and
risks related to regulatory and legal compliance and increased costs relating thereto.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking
statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future
events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks,
uncertainties and other factors, including, without limitation, those referred to under the heading “Key Information” (as defined
below), which is incorporated by reference herein.
The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date of
this Annual Report, and the Company does not assume any obligation to update forward-looking statements if circumstances
or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above,
investors should not place undue reliance on forward-looking statements.
10
CAUTIONARY NOTE TO UNITED STATES INVESTORS REGARDING RESERVE AND RESOURCE
INFORMATION
Unless otherwise indicated, all resource estimates, and any future reserve estimates, included or incorporated by reference in
this annual report on Form 10-K have been, and will be, prepared in accordance with Canadian National Instrument 43-101
Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum
Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”). NI 43-101 is a rule developed
by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and resource
information contained or incorporated by reference into this annual report on Form 20-F may not be comparable to similar
information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource”
does not equate to the term “reserves”. Under SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless
the determination has been made that the mineralization could be economically and legally produced or extracted at the time
the reserve determination is made. SEC Industry Guide 7 does not define and the SEC’s disclosure standards normally do not
permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred
mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves”
by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred mineral resources”
have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot
be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. Under Canadian
rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases.
Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally
mineable. Disclosure of “contained ounces” or "contained pounds" in a resource is permitted disclosure under Canadian
regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by
SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for
identification of “reserves” are also not the same as those of the SEC, and any reserves reported by us in the future in compliance
with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set
forth herein may not be comparable to information made public by companies that report in accordance with United States
standards.
11
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
3.A.1. and 3.A.2 Selected Financial Data
The selected financial data of the Company for the fiscal years ending December 31, 2017, 2016, 2015, 2014 and 2013 was
derived from the financial statements of the Company that have been audited by Davidson and Company LLP, Independent
Registered Public Accountants, as indicated in their audit report, which are included elsewhere in this Annual Report.
The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable
future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its
business.
Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
Table No. 3
Selected Financial Data
(C$)
3.A.3. Exchange Rates
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“C$”, “CDN”). The
Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar
(“US$”).
Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended December
31, the average rates for the period, and the range of high and low rates for the period. The data for each month during the
most recent six months is also provided.
For purposes of this table, the exchange rate means the Bank of Canada noon rate. The table sets forth the number of Canadian
Dollars required to buy one U.S. dollar. The average exchange rate means the average of the exchange rates on the last day of
each month during the period.
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Year EndedYear EndedYear EndedYear EndedYear EndedDecember 31, 2017December 31, 2016December 31, 2015December 31, 2014December 31, 2013IFRSRoyalty income2,857,927$ 2,227,322$ 1,609,553$ 2,247,334$ 3,102,888$ Exploration expenditures (net)4,471,074 4,999,959 4,364,675 5,022,658 3,839,703 Loss from operations(7,781,070) (8,267,563) (8,087,982) (8,681,619) (7,680,848) Net loss for the year(7,393,384) (2,683,482) (6,875,857) (17,448,041) (13,982,612) Net loss per share - basic and diluted(0.09) (0.04) (0.09) (0.24) (0.19) Wtd. Avg. Shares 78,002,082 73,874,415 73,480,833 73,154,139 72,509,793 Period-end Shares79,725,187 74,089,710 73,534,710 73,371,710 72,980,209 Working capital6,535,893 6,002,318 5,787,109 7,096,916 14,217,999 Exploration and evaluation assets (net)1,841,966 2,145,000 2,381,540 2,379,886 3,031,368 Royalty interest21,943,743 25,831,152 28,798,980 29,327,960 35,063,725 Total assets45,750,784 47,843,555 50,624,129 54,292,093 70,073,220 Share capital124,062,091 117,504,585 117,000,052 116,766,102 116,151,675 Deficit(104,382,744) (96,989,360) (94,305,878) (87,430,021) (69,981,980)
Table No. 4
U.S. Dollar/Canadian Dollar
On March 28, 2018, the exchange rate was C$1.2859 to US$1.
3.B. Capitalization and Indebtedness
Not applicable
3.C. Reasons For The Offer And Use Of Proceeds
Not applicable
3.D. Risk Factors
Investment in the Common Shares involves a significant degree of risk and should be considered speculative due to the nature
of the Company’s business and the present stage of its development. Prospective investors should carefully review the following
factors together with other information contained in this Annual Report before making an investment decision.
Mineral Property Exploration Risks
The business of mineral exploration and extraction involves a high degree of risk. Few properties that are explored ultimately
become producing mines. At present, none of the Company’s properties has a known commercial ore deposit. The main
operating risks include ensuring ownership of and access to mineral properties by confirmation that option agreements, claims
and leases are in good standing and obtaining permits for drilling and other exploration activities.
When EMX earns interests in properties through option agreements, the acquisition of title to the properties is only completed
when the option conditions have been met. These conditions generally include making property payments, incurring exploration
expenditures on the properties and can include the satisfactory completion of pre-feasibility studies. If the Company does not
satisfactorily complete these option conditions in the time frame laid out in the option agreements, the Company’s title to the
related property will not vest and the Company will have to write-off any previously capitalized costs related to that property.
The market prices for precious and base metals can be volatile and there is no assurance that a profitable market will exist for
a production decision to be made or for the ultimate sale of the metals even if commercial quantities of precious and other
metals are discovered.
Revenue and Royalty Risks
The Company cannot predict future revenues or operating results of the area of mining activity. Management expects future
revenues from the Carlin Trend Royalty Claim Block, including the Leeville royalty property in Nevada, to fluctuate depending
on the level of future production and the price of gold. Specifically, there is a risk that the operator of the property, Newmont
Mining Corporation (“Newmont”), will cease to operate in the Company’s area of interest, therefore there can be no assurance
that ongoing royalty payments will materialize or be received by EMX.
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Last 6 months endedAverageHighLow CloseMarch 1 to 28, 2018 1.2926 1.3091 1.2804 1.2859 February 2018 1.2563 1.2790 1.2297 1.2791 January 2018 1.2436 1.2570 1.2301 1.2301 December 2017 1.2755 1.2819 1.2551 1.2551 November 2017 1.2756 1.2886 1.2677 1.2881 October 2017 1.2591 1.2865 1.2462 1.2865 September 2017 1.3244 1.3403 1.3097 1.3403 Last Quarter & Last 5 YearsFiscal Year Ended December 31, 2017 1.2986 1.3743 1.2128 1.2944 Fiscal Year Ended December 31, 2016 1.3251 1.4602 1.2533 1.3437 Fiscal Year Ended December 31, 2015 1.2783 1.3955 1.1613 1.3869 Fiscal Year Ended December 31, 2014 1.1041 1.1643 1.0627 1.1627 Fiscal Year Ended December 31, 2013 1.0298 1.0703 0.9835 1.0694
Financing and Share Price Fluctuation Risks
EMX has limited financial resources and has no assurance that additional funding will be available for further exploration and
development of its projects. Further exploration and development of one or more of the Company’s projects may be dependent
upon the Company’s ability to obtain financing through equity or debt financing or other means. Failure to obtain this financing
could result in delay or indefinite postponement of further exploration and development of its projects which could result in
the loss of one or more of its properties.
The securities markets can experience a high degree of price and volume volatility, and the market price of securities of many
companies, particularly those considered to be development stage companies, such as EMX, may experience wide fluctuations
in share prices which may not necessarily be related to their operating performance, underlying asset values or prospects. There
can be no assurance that share price fluctuations will not occur in the future, and if they do occur, the severity of the impact on
EMX’s ability to raise additional funds through equity issues.
Foreign Countries and Political Risks
The Company operates in countries with varied political and economic environments. As such, it is subject to certain risks,
including currency fluctuations and possible political or economic instability which may result in the impairment or loss of
mineral concessions or other mineral rights, opposition from environmental or other non-governmental organizations, and
mineral exploration and mining activities may be affected in varying degrees by political stability and government regulations
relating to the mineral exploration and mining industry. Any changes in regulations or shifts in political attitudes are beyond
the control of the Company and may adversely affect its business. Exploration and development may be affected in varying
degrees by government regulations with respect to restrictions on future exploitation and production, price controls, export
controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine and site
safety.
Notwithstanding any progress in restructuring political institutions or economic conditions, the present administration, or
successor governments, of some countries in which EMX operates may not be able to sustain any progress. If any negative
changes occur in the political or economic environment of these countries, it may have an adverse effect on the Company’s
operations in those countries. The Company does not carry political risk insurance.
Competition
The Company competes with many companies that have substantially greater financial and technical resources than it in the
acquisition and development of its projects as well as for the recruitment and retention of qualified employees.
We do not intend to pay any cash dividends in the foreseeable future.
The Company has not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We do not intend
to pay cash dividends on the Common Shares in the foreseeable future. We will not declare or pay any dividends until such
time as our cash flow exceeds our capital requirements and will depend upon, among other things, conditions then existing
including earnings, financial condition, restrictions in financing arrangements, business opportunities and conditions and other
factors, or our Board determines that our shareholders could make better use of the cash.
No Assurance of Titles or Borders
The acquisition of the right to exploit mineral properties is a very detailed and time consuming process. There can be no
guarantee that the Company has acquired title to any such surface or mineral rights or that such rights will be obtained in the
future. To the extent they are obtained, titles to the Company’s surface or mineral properties may be challenged or impugned
and title insurance is generally not available. The Company’s surface or mineral properties may be subject to prior unregistered
agreements, transfers or claims and title may be affected by, among other things, undetected defects. Such third party claims
could have a material adverse impact on the Company’s operations.
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Unknown Defects or Impairments in Our Royalty or Streaming Interests
Unknown defects in or disputes relating to the royalty and stream interests we hold or acquire may prevent us from realizing
the anticipated benefits from our royalty and stream interests, and could have a material adverse effect on our business, results
of operations, cash flows and financial condition. It is also possible that material changes could occur that may adversely affect
management’s estimate of the carrying value of our royalty and stream interests and could result in impairment charges. While
we seek to confirm the existence, validity, enforceability, terms and geographic extent of the royalty and stream interests we
acquire, there can be no assurance that disputes over these and other matters will not arise. Confirming these matters, as well
as the title to mining property on which we hold or seek to acquire a royalty or stream interest, is a complex matter, and is
subject to the application of the laws of each jurisdiction to the particular circumstances of each parcel of mining property and
to the documents reflecting the royalty or stream interest. Similarly, royalty and stream interests in many jurisdictions are
contractual in nature, rather than interests in land, and therefore may be subject to change of control, bankruptcy or the
insolvency of operators. We often do not have the protection of security interests over property that we could liquidate to
recover all or part of our investment in a royalty or stream interest. Even if we retain our royalty and stream interests in a
mining project after any change of control, bankruptcy or insolvency of the operator, the project may end up under the control
of a new operator, who may or may not operate the project in a similar manner to the current operator, which may negatively
impact us.
Operators’ Interpretation of Our Royalty and Stream Interests; Unfulfilled Contractual Obligations
Our royalty and stream interests generally are subject to uncertainties and complexities arising from the application of contract
and property laws in the jurisdictions where the mining projects are located. Operators and other parties to the agreements
governing our royalty and stream interests may interpret our interests in a manner adverse to us or otherwise may not abide by
their contractual obligations, and we could be forced to take legal action to enforce our contractual rights. We may or may not
be successful in enforcing our contractual rights, and our revenues relating to any challenged royalty or stream interests may
be delayed, curtailed or eliminated during the pendency of any such dispute or in the event our position is not upheld, which
could have a material adverse effect on our business, results of operations, cash flows and financial condition. Disputes could
arise challenging, among other things:
the existence or geographic extent of the royalty or stream interest;
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• methods for calculating the royalty or stream interest, including whether certain operator costs may properly be
deducted from gross proceeds when calculating royalties determined on a net basis;
third party claims to the same royalty interest or to the property on which we have a royalty or stream interest;
various rights of the operator or third parties in or to the royalty or stream interest;
production and other thresholds and caps applicable to payments of royalty or stream interests;
the obligation of an operator to make payments on royalty and stream interests; and
various defects or ambiguities in the agreement governing a royalty and stream interest.
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Currency Risks
The Company’s equity financings are sourced in Canadian dollars but much of its expenditures are in local currencies or U.S.
dollars. At this time, there are no currency hedges in place. Therefore, a weakening of the Canadian dollar against the U.S.
dollar or local currencies could have an adverse impact on the amount of exploration funds available and work conducted.
Exploration Funding Risk
The Company’s strategy is to seek exploration partners through options to fund exploration and project development. The
main risk of this strategy is that the funding parties may not be able to raise sufficient capital in order to satisfy exploration and
other expenditure terms in a particular agreement. As a result, exploration and development of one or more of the Company’s
property interests may be delayed depending on whether EMX can find another party or has enough capital resources to fund
the exploration and development on its own.
Insured and Uninsured Risks
In the course of exploration, development and production of mineral properties, the Company is subject to a number of risks
and hazards in general, including adverse environmental conditions, operational accidents, labor disputes, unusual or
unexpected geological conditions, changes in the regulatory environment and natural phenomena such as inclement weather
conditions, floods, and earthquakes. Such occurrences could result in the damage to the Company’s property or facilities and
equipment, personal injury or death, environmental damage to properties of the Company or others, delays, monetary losses
and possible legal liability.
15
Although the Company may maintain insurance to protect against certain risks in such amounts as it considers reasonable, its
insurance may not cover all the potential risks associated with its operations. The Company may also be unable to maintain
insurance to cover these risks at economically feasible premiums or for other reasons. Should such liabilities arise, they could
reduce or eliminate future profitability and result in increased costs, have a material adverse effect on the Company’s results
and a decline in the value of the securities of the Company.
Some work is carried out through independent consultants and the Company requires all consultants to carry their own
insurance to cover any potential liabilities as a result of their work on a project.
Environmental Risks and Hazards
The activities of the Company are subject to environmental regulations issued and enforced by government agencies.
Environmental legislation is evolving in a manner that will require stricter standards and enforcement and involve increased
fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened
degree of responsibility for companies and their officers, directors and employees. There can be no assurance that future
changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may
exist on properties in which the Company holds interests which are unknown to the Company at present.
We or the mining properties in which we have an interest are subject to substantial government regulation in the United States
and in the other jurisdictions in which we operate. Changes to regulation or more stringent implementation could have a material
adverse effect on our results of operations and financial condition.
Mining and exploration activities are subject to various laws and regulations relating to the protection of the environment, such
as the federal Clean Water Act and the Nevada Water Pollution Control Law. Although we currently believe that we are in
compliance with existing environmental and mining laws and regulations and that our proposed exploration programs will also
meet those standards, no assurance can be given that we will remain in compliance with applicable regulations or that new
rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit
or curtail production or development of our properties.
Reform of the General Mining Law could adversely impact our results of operations.
A majority of our mining properties in the United States consist of unpatented mining claims on federal lands. Legislation has
been introduced regularly in the U.S. Congress over the last decade to change the General Mining Law of 1872, as amended
(the "Mining Law"), under which we hold these unpatented mining claims. It is possible that the Mining Law may be amended
or replaced by less favorable legislation in the future. Previously proposed legislation contained a production royalty obligation,
new environmental standards and conditions, additional reclamation requirements and extensive new procedural steps which
would likely result in delays in permitting. The ultimate content of future proposed legislation, if enacted, is uncertain. At
present, there is no royalty payable to the United States on production from unpatented mining claims, although legislative
attempts to impose a royalty have occurred in recent years. Amendments to current laws and regulations governing our
operations and activities of exploration, development mining and milling or more stringent implementation thereof could have
a material adverse effect on our business, financial condition and results of operations and cause increases in exploration
expenses, capital expenditures or production costs or reduction in levels of production or require delays or abandonment in the
development of new mining properties. If a royalty on unpatented mining claims were imposed, the profitability of our U.S.
unpatented mining claims could be materially adversely affected.
Any such reform of the Mining Law could increase the costs of mining activities on unpatented mining claims, or could
materially impair our ability to develop or continue operations which derive ore from federal lands, and as a result, could have
an adverse effect on us and our results of operations.
Mineral reserves are only estimates which may be unreliable.
Although mineralization may not be classified as a “reserve” unless the mineralization can be economically and legally
extracted or produced at the time the “reserve” determination is made, “mineral reserves” are estimates only, and no assurance
can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized or
that mineral reserves can be mined or processed profitably. Mineral reserve and mineral resource estimates may be materially
affected by environmental, permitting, legal, title, taxation, socio-political, marketing and other relevant issues. There are
numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond our
control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a
16
function of the quantity and quality of available data, the nature of the mineralized body and of the assumptions made and
judgments used in engineering and geological interpretation. These estimates may require adjustments or downward revisions
based upon further exploration or development work or actual production experience.
Fluctuations in metal prices, results of drilling, metallurgical testing and production, the evaluation of mine plans after the date
of any estimate, permitting requirements or unforeseen technical or operational difficulties may require revision of mineral
reserve estimates. Prolonged declines in the market price of precious and base metals may render mineral reserves containing
relatively lower grades of mineralization uneconomical to recover and could materially reduce our mineral reserves. Should
reductions in mineral reserves occur, we may be required to take a material write-down of our investment in mining properties,
reduce the carrying value of one or more of our assets or delay or discontinue production or the development of new projects,
resulting in increased net losses and reduced cash flow. Mineral reserves should not be interpreted as assurances of mine life
or of the profitability of current or future operations. There is a degree of uncertainty attributable to the calculation and
estimation of mineral reserves and corresponding grades being mined and, as a result, the volume and grade of mineral reserves
mined and processed and recovery rates may not be the same as currently anticipated. Any material reductions in estimates of
mineral reserves, or of our ability to extract these mineral reserves, could have a material adverse effect on our results of
operations and financial condition.
Fluctuating Metal Prices
Factors beyond the control of the Company have a direct effect on global metal prices, which have fluctuated widely,
particularly in recent years, and there is no assurance that a profitable market will exist for a production decision to be made or
for the ultimate sale of the metals even if commercial quantities of precious and other metals are discovered on any of the
Company’s properties. Consequently, the economic viability of any of the Company’s exploration projects and its ability to
finance the development of its projects cannot be accurately predicted and may be adversely affected by fluctuations in metal
prices.
Extensive Governmental Regulation and Permitting Requirements Risks
Exploration, development and mining of minerals are subject to extensive laws and regulations at various governmental levels
governing the acquisition of the mining interests, prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. In
addition, the current and future operations of EMX, from exploration through development activities and production, require
permits, licenses and approvals from some of these governmental authorities. EMX has obtained all government licenses,
permits and approvals necessary for the operation of its business to date. However, additional licenses, permits and approvals
may be required. The failure to obtain any licenses, permits or approvals that may be required or the revocation of existing
ones would have a material and adverse effect on EMX, its business and results of operations.
Failure to comply with applicable laws, regulations and permits may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities requiring the Company’s operations to cease or be curtailed, and may include
corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. EMX may be
required to compensate those suffering loss or damage by reason of its mineral exploration activities and may have civil or
criminal fines or penalties imposed for violations of such laws, regulations and permits. Any such events could have a material
and adverse effect on EMX and its business and could result in EMX not meeting its business objectives.
In addition, we are required to expend significant resources to comply with numerous corporate governance and disclosure
regulations and requirements adopted by U.S. federal and state and Canadian federal and provincial governments, as well as
the TSX and NYSE American. These additional compliance costs and related diversion of the attention of management and
key personnel could have a material adverse effect on our business, financial condition and results of operations.
Key Personnel Risk
The Company’s success is dependent upon the performance of key personnel working in management and administrative
capacities or as consultants. The loss of the services of senior management or key personnel could have a material and adverse
effect on the Company, its business and results of operations. The Company does not carry “key personnel” insurance.
17
Conflicts of Interest
In accordance with the laws of British Columbia and the United States, the directors and officers of a Company are required to
act honestly, in good faith and in the best interests of the Company. EMX’s directors and officers may serve as directors or
officers of other companies or have significant shareholdings in other resource companies and, to the extent that such other
companies may participate in ventures in which the Company may participate, such directors and officers may have a conflict
of interest in negotiating and concluding terms respecting the extent of such participation. If such a conflict of interest arises at
a meeting of the Company’s directors, a director with such a conflict will abstain from voting for or against the approval of
such participation or such terms.
Passive Foreign Investment Company
U.S. investors in common shares should be aware that based on current business plans and financial expectations, EMX
currently expects that it will be classified as a passive foreign investment company (“PFIC”) for the tax year ending December
31, 2018 and expects to be a PFIC in future tax years. If EMX is a PFIC for any tax year during a U.S. shareholder’s holding
period, then such U.S. shareholder generally will be required to treat any gain realized upon a disposition of common shares,
or any so-called “excess distribution” received on its common shares, as ordinary income, and to pay an interest charge on a
portion of such gain or distributions, unless the U.S. shareholder makes a timely and effective “qualified electing fund” election
(“QEF Election”) or a “mark-to-market” election with respect to the common shares. A U.S. shareholder who makes a QEF
Election generally must report on a current basis its share of the Company’s net capital gain and ordinary earnings for any year
in which EMX is a PFIC, whether or not EMX distributes any amounts to its shareholders. For each tax year that EMX qualifies
as a PFIC, EMX intends to: (a) make available to U.S. shareholders, upon their written request, a “PFIC Annual Information
Statement” as described in Treasury Regulation Section 1.1295-1(g) (or any successor Treasury Regulation) and (b) upon
written request, use commercially reasonable efforts to provide all additional information that such U.S. shareholder is required
to obtain in connection with maintaining such QEF Election with regard to EMX. EMX may elect to provide such information
on its website www.EMXRroyalty.com. This paragraph is qualified in its entirety by the discussion below the heading
“Taxation – Certain United States Federal Income Tax Considerations.” Each U.S. investor should consult its own tax advisor
regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership and disposition of common
shares.
U.S. federal income tax reform could adversely affect us
On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or TCJA, was signed into law, significantly
reforming the U.S. Internal Revenue Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes
significant additional limitations on the deductibility of interest, allows for the expensing of capital expenditures, puts into
effect the migration from a “worldwide” system of taxation to a territorial system and modifies or repeals many business
deductions and credits. We continue to examine the impact the TCJA may have on our business. We will evaluate the effect of
the TCJA on our projection of minimal cash taxes or to our net operating losses. The estimated impact of the TCJA is based on
our management’s current knowledge and assumptions and recognized impacts could be materially different from current
estimates based on our actual results and our further analysis of the new law. Our net deferred tax assets and liabilities will be
revalued at the newly enacted U.S. corporate rate, and the impact will be recognized in our tax expense in the year of enactment.
The impact of the TCJA on holders of common shares is uncertain and could be adverse. This Annual Report does not discuss
any such tax legislation or the manner in which it might affect purchasers of common shares. We urge our stockholders,
including purchasers of common shares, to consult with their own legal and tax advisors with respect to such legislation and
the potential tax consequences of investing in common shares.
Corporate Governance and Public Disclosure Regulations
The Company is subject to changing rules and regulations promulgated by a number of United States and Canadian
governmental and self-regulated organizations, including the United States Securities and Exchange Commission (“SEC”), the
British Columbia and Alberta Securities Commissions, the NYSE American and the TSX-V. These rules and regulations
continue to evolve in scope and complexity and many new requirements have been created, making compliance more difficult
and uncertain. The Company’s efforts to comply with the new rules and regulations have resulted in, and are likely to continue
to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-
generating activities to compliance activities.
Internal Controls over Financial Reporting
Applicable securities laws require an annual assessment by management of the effectiveness of the Company’s internal control
over financial reporting. The Company may, in the future, fail to achieve and maintain the adequacy of its internal control over
18
financial reporting, as such standards are modified, supplemented or amended from time to time, and the Company may not be
able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting. Future
acquisitions may provide the Company with challenges in implementing the required processes, procedures and controls in its
acquired operations. Acquired Corporations may not have disclosure controls and procedures or internal control over financial
reporting that are as thorough or effective as those required by securities laws currently applicable to the Company.
No evaluation can provide complete assurance that the Company’s internal control over financial reporting will detect or
uncover all failures of persons within the Company to disclose material information otherwise required to be reported. The
effectiveness of the Company’s controls and procedures could also be limited by simple errors or faulty judgments. In addition,
should the Company expand in the future, the challenges involved in implementing appropriate internal control over financial
reporting will increase and will require that the Company continue to improve its internal control over financial reporting.
ITEM 4. INFORMATION ON THE COMPANY
4.A. History and Development of the Company
General Background
EMX Royalty Corporation was incorporated under the laws of the Yukon Territory of Canada on August 21, 2001 as 33544
Yukon Inc. and, on October 10, 2001, changed its name to Southern European Exploration Ltd. On November 24, 2003, the
Company completed the reverse take-over of Marchwell Capital Corp., a TSX-V-listed company incorporated in Alberta on
May 13, 1996 and which subsequently changed its name to Eurasian Minerals Inc. On September 21, 2004, EMX continued
into British Columbia from Alberta under the Business Corporations Act. On July 19, 2017, EMX changed its name to EMX
Royalty Corporation to better reflect the nature of its business.
EMX is a reporting issuer under the securities legislation of British Columbia and Alberta, and is listed on the TSX-V Exchange
as a Tier 1 issuer and the NYSE American Exchange, with both listings under the symbol “EMX”.
The Company’s corporate office is located at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8,
and its telephone number is 604-688-6390. The Company’s registered and records office is located at Suite 704, 595 Howe
Street, Vancouver, British Columbia, V6C 2T5. The Company’s technical office is located at 10001 W. Titan Road, Littleton,
Colorado, United States of America, 80125, and its telephone number is 303-973-8585. The contact person is Marien Segovia,
Corporate Secretary.
Fiscal Year ended December 31, 2015
•
•
In February 2015, Mr. Paul H. Stephens was appointed to the Company’s advisory board.
In March 2015, Dr. M. Stephen Enders resigned from the position of Chief Operating Officer and as a Director of the
Board. Dr. Enders continued as a consultant and was appointed to the Company’s advisory board.
• On May 4, 2015 the Company announced the signing of an Exploration and Option to Purchase Agreement (the "Superior
West Agreement"), through its wholly owned subsidiary Bronco Creek Exploration Inc. ("BCE"), for the Superior West
porphyry copper project (the "Superior West Project") with Kennecott Exploration Company (“Superior West
Agreement”). The project is located nearby the Resolution porphyry copper project within the Superior Mining District,
approximately 100 kilometers east of Phoenix, Arizona.
Pursuant to the Superior West Agreement, Kennecott can earn a 100% interest in the Project by making a cash payment
upon execution of the Agreement of US$149,187, and thereafter completing US$5,500,000 in exploration expenditures
and paying annual option payments totaling US$1,000,000 before the fifth anniversary of the Superior West Agreement.
Upon exercise of the option the Company will retain a 2% NSR royalty on the properties. Kennecott has the right to buy
down 1% of the NSR royalty covering 14 claims which are optioned (the “Optioned Claims”) from underlying claim
holders by payment of US$4,000,000 to EMX. Except with respect to the Optioned Claims, the royalty is not capped and
not subject to buy-down.
After exercise of the option, annual advanced minimum royalty (“AMR”) payments are due starting at US$125,000 and
commencing on the first anniversary of the exercise of the option. The AMR payments will increase to US$200,000 upon
completion of an Order of Magnitude Study ("OMS") or Preliminary Economic Assessment ("PEA"). Kennecott may
make a one-time payment of US$4,000,000 to extinguish the obligation to make AMR payments. In addition, if not
19
previously extinguished, total AMR payments after the OMS or PEA milestone payment are capped at US$4,000,000, and
all AMR payments cease upon production from the Superior West Project.
In addition, Kennecott will make milestone payments consisting of:
- US$500,000 upon completion of an OMS or PEA;
- US$1,000,000 upon completion of a Prefeasibility Study; and
- US$2,500,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against
future royalty payments.
• On May 26, 2015 the Company reported the initial NI 43-101 resource estimate and Russian Federation project approvals
for the Malmyzh copper-gold porphyry project (see the Section 4D, Strategic Investments, IG Copper LLC for additional
discussion). The Malmyzh exploration and mining licenses, located in the Russian Far East, are held by a Joint Venture
between IG Copper LLC (“IGC”) (51%) and Freeport-McMoRan Exploration Corporation (“Freeport”) (49%), with IGC
operating and managing the project. The Company is IGC’s largest shareholder. EMX’s investment in IGC is in recognition
of the significant potential of the district-scale discovery at Malmyzh, as well as IGC’s success in acquiring additional
exploration properties in a prospective region under-explored for its porphyry copper-gold potential.
• On June 11, 2015 the Company announced that pursuant to the Company’s Stock Option Plan, an aggregate of 1,341,500
incentive stock options, exercisable at a price of $0.66 per share for a period of five years, had been granted to officers,
directors, employees and consultants of the Company.
• On July 13, 2015 the Company announced that the National Instrument 43-101 Standards of Disclosure for Mineral
Projects technical report titled "NI 43-101 Technical Report on the Initial Mineral Resource Estimate for the Malmyzh
Copper-Gold Project, Khabarovsk Krai, Russian Federation" (the "Report") dated July 10, 2015 was filed on SEDAR at
www.sedar.com and on the SEC’s website at www.sec.gov.
• On August 4, 2015 the Company announced the signing of an Exploration and Option to Purchase Agreement, through its
wholly owned subsidiary BCE, for the Aguila de Cobre porphyry copper project (the "Aguila de Cobre Project") with
Kennecott (the “Aguila de Cobre Agreement”). The Aguila de Cobre Project is located approximately 120 kilometers west
of Phoenix, Arizona in a relatively un-explored region of the Arizona porphyry copper belt.
Pursuant to the Aguila de Cobre Agreement, Kennecott can earn a 100% interest in the Aguila de Cobre Project by making
cash payments and performing exploration as follows (all amounts are US$):
Cash Payments:
-
-
-
-
$25,000 upon execution of the Aguila de Cobre Agreement (firm commitment);
$25,000 on the first and second anniversaries of the Agreement;
$50,000 on the third anniversary of the Aguila de Cobre Agreement; and
$100,000 upon exercise of the Option.
Exploration:
- Completing $250,000 of exploration expenditures (or paying the Company that amount) by the first anniversary
of the Aguila de Cobre Agreement (firm commitment); and
- Completing an additional $3,750,000 of exploration expenditures (or paying the Company that amount) by the
third anniversary of the Aguila de Cobre Agreement.
Upon exercise of the option, the Company will retain a 2% NSR royalty on the property. The royalty is not capped and
not subject to buy-down. The Aguila de Cobre Agreement contains a one-mile area of interest provision.
After exercise of the option, AMR payments are due starting at $50,000 and commencing on the first anniversary of the
exercise of the option. The AMR payments will increase to $100,000 upon completion of an OMS or PEA, after which
Kennecott may make a one-time payment of $2,500,000 to extinguish the obligation to make future AMR payments. In
addition, if not previously extinguished, total AMR payments after the OMS or PEA milestone payment are capped at
$2,500,000, and all AMR payments cease upon production from the properties.
In addition, Kennecott will make milestone payments consisting of:
-
-
$500,000 upon completion of an OMS or PEA;
$500,000 upon completion of a Pre-Feasibility Study; and
20
-
$1,000,000 upon completion of a Feasibility Study - this payment will be credited against future royalty payments.
• On October 30, 2015 the Company announced that it had regained 100% control of the Akarca gold-silver project in
Turkey (the “Property”). The Company had an agreement with Çolakoglu Ticari Yatirim A.S. ("Çolakoglu"), a privately
owned Turkish company, for an option to acquire AES Turkey, a Turkish corporation that controls the property. Çolakoglu
advised the Company that it decided to forego exercising the option. Çolakoglu made cash payments of US $350,000 to
the Company while advancing the property through substantial exploration and drilling programs, as well as metallurgical
and environmental studies.
The Akarca project is a grassroots discovery highlighted by six separate gold-silver mineralized centers occurring within
a district-scale area. Exploration completed at the time included 245 core and reverse circulation holes totaling about
26,400 meters of drilling and property-wide geologic mapping, geochemical sampling, and geophysical surveys. This work
had been conducted primarily through partner-funded programs totaling over US $13 million that considerably advanced
the project.
• On November 2, 2015 the Company announced the sale of its interests in Haiti to joint venture partner Newmont Ventures
Limited (“Newmont” or "NVL"), a wholly owned subsidiary of Newmont Mining Corporation, for a US $4 million (CDN
$5.3 million) cash payment and a retained 0.5% NSR royalty interest.
The now terminated EMX-Newmont joint ventures (the “Joint Ventures”) covered six designated exploration areas along
a 130 kilometer trend of northern Haiti's Massif du Nord mineral belt. Since 2013, activities in the designated exploration
areas were limited to care and maintenance only.
Pursuant to the transaction, Newmont acquired all of the Company's interest in the Research Permit applications on the
following terms:
- Newmont paid US $4 million (CDN $5.3 million) in cash to the Company at closing;
- The Joint Ventures were terminated;
- The Company retains a 0.5% NSR royalty on the 49 Research Permit applications covering the designated
exploration areas; and
- The Company retains the right to acquire any properties proposed to be abandoned or surrendered by Newmont.
• On November 16, 2015, the Company announced the resignation of Valerie Barlow as Corporate Secretary and the
appointment of Kim Casswell in her place.
On November 23, 2015, the Company announced the signing of an Exploration and Option Agreement with Black Sea Copper
& Gold Corp. (“Black Sea”), a privately-held British Columbia corporation (the “Black Sea Agreement”), for the Alankoy
copper-gold property in northwestern Turkey. Black Sea's option to earn a 100% interest in the subsidiary companies that
control the property required work commitments, payments, and annual advance royalties (“AARs”).The Company was
to retain a production royalty of 3% for gold, silver, and other precious metals and 2% for all other minerals produced from
the project.
• On November 24, 2015 the Company announced the signing of an Exploration and Option Agreement (the “Hardshell
Agreement”), through its wholly owned subsidiary BCE, for the Hardshell Skarn property (the "Hardshell Property") with
Arizona Minerals Inc. (“AMI”). The Hardshell Property is located approximately 75 kilometers southeast of Tucson,
Arizona within the Patagonia Mountains and is included in Arizona Minerals's Hermosa project.
Pursuant to the Hardshell Agreement, AMI could earn a 100% interest in the Hardshell Property by making cash payments
totaling $85,000 (all amounts are US$). Upon exercise of the option the Company will retain a 2% NSR royalty on the
Hardshell Property and will receive AAR payments of $5,000 commencing on the first anniversary of the exercise of the
option. The royalty is not capped and not subject to buy-down.
• On December 10, 2015 the Company announced that IGC had advised that an additional license had been granted for the
Malmyzh copper-gold porphyry project in Far East Russia. The Malmyzh licenses are held by IGC (51%) and Freeport
(49%), with IGC operating and managing the project. The new "Malmzyh Flanks" exploration license expands the Joint
Venture's land position covering the Malmyzh district for a total of 226.9 square kilometers, and includes additional areas
for potential infrastructure development as well as extensions to known exploration targets. EMX is IGC's largest
shareholder.
21
• On December 23, 2015 the Company announced it had been advised of the initial shipment of material for processing from
the Balya lead-zinc-silver royalty property by owner and operator Dedeman Balya Kursun Cinko Isletmeleri A.S. The
Company retains an uncapped 4% net smelter return royalty on the Balya property, which is located in the historic Balya
mining district of northwestern Turkey. The Dedeman group (collectively "Dedeman") includes privately-held Turkish
mining companies with active operations that produce lead, zinc, silver, and chromite.
Fiscal Year ended December 31, 2016
• On February 23, 2016 the Company announced the execution of a purchase agreement (the “Golden Predator Agreement”)
for net smelter return royalty interests on the Maggie Creek and Afgan gold properties from Golden Predator US Holding
Corp. (“Golden Predator”), a wholly-owned subsidiary of Till Capital Ltd. ("TCL"). Golden Predator had a 2% NSR
royalty on all precious metals and a 1% NSR royalty on all other minerals for the Maggie Creek property, which is located
north-northeast of Newmont Mining Corporation's ("Newmont") Gold Quarry open pit operations on the Carlin Trend,
and a 1% NSR royalty on all minerals for the Afgan property, which occurs on the Battle Mountain-Eureka Trend. The
addition of these two royalty assets strengthened the Company's growing Nevada gold portfolio that includes the Leeville
royalty property on the Northern Carlin Trend, as well as the Maggie Creek South royalty property located south-southeast
of Gold Quarry.
A summary of the Golden Predator Agreement's commercial terms includes:
-
Purchase by the Company of Golden Predator’s NSR royalties covering the Maggie Creek (2% NSR on precious
metals and 1% NSR royalty on all other minerals) and Afgan (1% NSR royalty) properties;
-
Issuance by the Company of 250,000 EMX shares to TCL as consideration for the purchase; and
- Approval by the TSX-V and NYSE American as a condition precedent to closing the transaction.
• On March 7, 2016 the Company announced that the purchase of net smelter return royalty interests had been completed
for the Maggie Creek and Afgan gold properties from Golden Predator after receiving approvals from the TSX Venture
and NYSE American Exchanges.
•
In Q1 2016, EMX sold its 100% controlled Grand Bois project in Haiti, which was outside the Joint Venture with
Newmont, to a privately held Nevada corporation. EMX retained a 0.5% NSR royalty interest in the Grand Bois project
and the right to acquire any properties proposed to be abandoned or surrendered from the Grand Bois project in the future.
• On July 25, 2016 the Company reported that IGC advised that approval to advance the Malmyzh copper-gold project had
been received from the Government Commission on Monitoring Foreign Investment (the "Commission") chaired by Prime
Minister Dmitry Medvedev. The Malmyzh exploration and mining licenses are held by IGC (51%) and Freeport-
McMoRan Exploration Corporation (49%) (the "Joint Venture"), with IGC operating and managing the project. The
Commission's approval marks a pivotal milestone in the development of the Malmzyh project. EMX is IGC’s largest
shareholder.
IGC advised that the Commission's approval represents the successful completion of the review process required for
“strategically significant” deposits according to Russian law (i.e., the Law on Foreign Investments in Strategic Industries,
also termed the Strategic Industries Law or "SIL"). The SIL approval process commenced after the Joint Venture, through
its Russian subsidiary Amur Minerals LLC, received certified “on balance C1+C2 reserves” from the GKZ (State Reserves
Committee) that exceeded thresholds for both copper and gold defining Malmyzh as a "strategically significant" mineral
deposit. EMX emphasizes that the Malmyzh “C1+C2 reserves” were estimated according to the rules and regulations of
the Russian Federation, and are not the same as reserves under NI 43-101 or SEC Industry Guide 7. According to IGC,
highlights of the Commission's approval included:
- The Joint Venture, as a majority foreign owned business entity, has been approved to retain control of the
Malmyzh project exploration and mining licenses.
- The Joint Venture, therefore, maintains mining and production rights for the Malmyzh and Malmyzh North
exploration and mining licenses.
- The Joint Venture holds 100% of the rights for the Malmyzh and Malmyzh North exploration and mining
licenses, and is entitled to recover all minerals of economic value including copper, gold and by-product minerals.
The conclusion of the SIL process initiated a new, multi-year phase in the project's development, including additional
technical work (i.e., drilling, exploration, metallurgy, engineering, and hydrology), as well as environmental, social, and
economic assessments. This next phase of work will ultimately conclude as a detailed "TEO1 of Permanent Conditions"
report, which is considered to be a precursor to commencement of exploitation and mining.
22
1 Technico-Economicheskiye Obosnovaniye (Technical-Economic Basis)
• On August 3, 2016, the Company announced the sale of EBX Madencilik A.S., the wholly-owned EMX subsidiary that
controls the Sisorta gold property (the “Sisorta Property”) in Turkey, to Bahar Madencilik Sinayi ve Ticaret Ltd Sti
("Bahar"), a privately owned Turkish company, pursuant to a Share Purchase Agreement (the “Sisorta Agreement”) with
Bahar.
The Sisorta Agreement provides for Bahar's staged payments to EMX as summarized below (all amounts in USD):
$250,000 cash payment to EMX upon closing of the sale.
-
- Annual cash payments of $125,000 (“Advance Cash Payments”) payable on each anniversary of the closing date
-
until commencement of commercial production from the Sisorta Property.
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the Sisorta Property
that is processed on-site (increased to 5% if the ore is processed off-site).
- The Advance Cash Payments will be credited at a rate of 80% against the NSR Payment payable after commercial
production commences.
- The NSR Payment is uncapped and cannot be bought out or reduced.
Bahar intends to conduct advanced exploration and development work on the Sisorta project.
• On August 8, 2016 the Company announced the sale of AES Madencilik A.S., the wholly-owned EMX subsidiary that
controls the Akarca gold-silver project (the “Akarca Property”) in western Turkey, to Çiftay İnşaat Taahhüt ve Ticaret
A.Ş. ("Çiftay"), a privately owned Turkish company. The Akarca Property is an EMX grassroots discovery highlighted by
six separate gold-silver mineralized centers occurring within a district-scale area.
The terms of the sale provide payments to EMX as summarized below (all dollar amounts in United States dollars and all
gold payments can be as gold bullion or the cash equivalent):
-
-
-
$2,000,000 cash payment to EMX upon closing of the sale (completed).
500 ounces of gold every six months commencing February 1, 2017 up to a cumulative total of 7,000 ounces of
gold.
7,000 ounces of gold within 30 days after the commencement of commercial production from the Akarca Property
provided that prior gold payments will be credited against this payment.
-
250 ounces of gold upon production of 100,000 ounces of gold from the Akarca Property.
-
250 ounces of gold upon production of an aggregate of 500,000 ounces of gold from the Akarca Property.
- A sliding-scale royalty in the amount of the following percentages of production returns after certain deductions
-
(“Akarca Royalty”) for ore mined from the Akarca Property:
For gold production: 1.0% on the first 100,000 ounces of gold; 2.0% on the next 400,000 ounces of gold; 3.0%
on all gold production in excess of 500,000 ounces produced from the Akarca Property.
For all production other than gold production: 3.0%.
-
- The Akarca Royalty is uncapped and cannot be bought out or reduced.
In addition, Çiftay must conduct a drilling program of at least 3,000 meters on the Akarca Property during each 12-month
period starting on August 5, 2016 until commencement of commercial production.
• On September 8, 2016 the Company provided an update on exploration results from the Company's spring and summer
programs in Norway and Sweden. EMX built a portfolio of exploration projects in Scandinavia, and compiled geologic
information and generated drill targets on those properties. Reconnaissance drilling at the Gumsberg Volcanogenic
Massive Sulfide (“VMS”) project, located in the prolific Bergslagen district of Sweden, yielded several shallow high grade
intercepts of polymetallic mineralization along a > 2 kilometer trend of mineralization.
• On October 17, 2016 the Company announced the sale of five patented mining claims comprising its Ophir property in
Utah (the “Utah Property”), through its wholly owned subsidiary Bullion Monarch Mining Inc., to Kennecott.
Upon closing of the sale of the Utah Property:
- Kennecott paid EMX US$75,000,
- EMX retained a 2% NSR royalty, and
- EMX retains the rights to exploration data generated from the Property.
23
As a result of the sale, the Ophir property has been added to EMX's royalty portfolio.
• On October 19, 2016 the Company announced the execution of an Exploration and Option to Purchase Agreement (the
"Copper King Agreement"), through its wholly owned subsidiary BCE, for the Copper King porphyry copper project (the
“Copper King Project”) with Kennecott. The Copper King Project is located approximately 100 kilometers east of Phoenix,
Arizona within the Superior Mining District, and approximately four kilometers northwest of the Resolution porphyry
copper deposit.
Pursuant to the Copper King Agreement, Kennecott can earn a 100% interest in the Copper King Project by (a) reimbursing
the 2016 holding costs and making option payments, together totaling US$504,314 (US$29,314 related to holding costs
received), and (b) completing US$4,000,000 in exploration expenditures before the fifth anniversary of the Copper King
Agreement. Upon exercise of the option EMX will retain a 2% NSR royalty on the Copper King Project which is not
capped or purchasable.
After exercise of the option, AMR payments are due starting at US$100,000 and commencing on the first anniversary of
the exercise of the option. The AMR payments will increase to US$150,000 upon completion of an Order of Magnitude
Study ("OMS") or PEA. Kennecott may make a one-time payment of US$3,500,000 to extinguish the obligation to make
AMR payments. In addition, if not previously extinguished, total AMR payments after the OMS or PEA milestone payment
are capped at US$3,500,000, and all AMR payments cease upon commencement of production from the Project.
In addition, Kennecott will make milestone payments consisting of:
- US$500,000 upon completion of an OMS or PEA;
- US$1,000,000 upon completion of a Prefeasibility Study; and
- US$2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against
future royalty payments.
• On October 27, 2016 the Company announced that it had entered into an exploration and option agreement (the “Coeur
Agreement”), through its wholly-owned subsidiary BCE, with Coeur Explorations, Inc., a subsidiary of Coeur Mining,
Inc. (“Coeur”) for the Mineral Hill gold-copper property (“Mineral Hill Property”) in Wyoming. EMX’s Mineral Hill
project is held under a pooling agreement with a private group, Mineral Hill L.P. (“MHL”), with all proceeds split 50:50,
except for the sale of surface rights associated with several patented mining claims.
Pursuant to the Coeur Agreement, Coeur may acquire a 100% interest in the Mineral Hill Property by a) making yearly
option payments, beginning upon execution of the Coeur Agreement, totaling US$435,000 (US$10,000 received upon
execution), b) making exploration expenditures totaling US$1,550,000 on or before the fifth anniversary of the agreement,
and c) paying US$250,000 upon exercise of the option.
Upon exercise of the option, EMX and MHL will retain a 4% NSR royalty, of which Coeur may purchase up to 1.5% of
the NSR royalty if, within sixty days after the completion of a PEA, Coeur purchases the first 0.5% for US$1,000,000.
Coeur may purchase an additional 0.5% or 1% of the NSR royalty at any time thereafter for US$2,000,000 per 0.5%
interest (maximum total buy down of 1.5%), with EMX and MHL retaining a 2.5% interest.
After the option exercise, EMX and MHL will receive annual advance minimum royalties of US$150,000 and, upon
completion of a feasibility study, a milestone payment of US$1,000,000.
• On November 22, 2016 the Company announced the execution of a definitive agreement with Boreal Metals Corp.
(“BMC”), a British Columbia corporation, pursuant to which BMC acquired two wholly-owned subsidiaries of the
Company that control the Gumsberg and Adak exploration assets in Sweden and the Tynset and Burfjord assets in Norway
(the “Scandinavian Properties”). Closing occurred in Q1 2017.
- At closing, EMX transferred to BMC its entire interest in its wholly-owned subsidiary Iekelvare AB, which owns
or will own that portion of the Scandinavian Properties located in Sweden, and its entire interest in its wholly-
owned subsidiary EMX Exploration Scandinavia AB, which owns that portion of the Scandinavian Properties
located in Norway.
- At closing, BMC issued to EMX that number of common shares of BMC that represents a 19.9% equity ownership
in BMC; BMC had the continuing obligation to issue additional shares of BMC to EMX to maintain its 19.9%
interest in BMC, at no additional cost to EMX, until BMC has raised CDN$5,000,000 in equity; thereafter EMX
has the right to participate pro-rata in future financings at its own cost to maintain its 19.9% interest in BMC.
24
- EMX will receive an uncapped 3% NSR royalty on each of the Scandinavian Properties. Within five years of the
closing date, BMC has the right to buy down up to 1% of the royalty owed to EMX on any given project (leaving
EMX with a 2% NSR) by paying EMX US$2,500,000 in cash and shares of BMC. Such buy down is project
specific.
- EMX will receive AAR payments of US$20,000 for each of the Properties commencing on the second anniversary
of the closing, with each AAR payment increasing by US$5,000 per year until reaching US$60,000 per year,
except that BMC may forgo AAR payments on two of the four Scandinavian Properties in years two and three.
Once reaching US$60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as
published by the U.S. Department of Labor, Bureau of Labor Statistics).
- EMX will receive a 0.5% NSR royalty on any new mineral exploration projects generated by BMC in Sweden or
Norway, excluding projects acquired from a third party containing a mineral resource or reserve or an existing
mining operation. These royalties are not capped and not subject to a buy down.
- EMX has the right to one seat on the Board of Directors of BMC.
• On December 16, 2016 the Company announced that it was changing the ticker symbol of its common shares listed on the
NYSE American from EMXX to EMX effective Monday, December 26, 2016. The Company trades on both the TSX
Venture and NYSE American exchanges as EMX.
Fiscal Year ended December 31, 2017
• On January 24, 2017 the Company announced initial results from IGC's fall-winter drill program at the Malmyzh copper-
gold porphyry project, including the longest mineralized intercept drilled to date on the property. Drill hole AMM-213
intersected 747.4 meters (108.7-856.1 m) averaging 0.49% copper equivalent (0.41% copper and 0.17 g/t gold) principally
hosted in phreatomagmatic breccias and diorite porphyries at the Freedom Northwest prospect (true width). The hole
doubled the drilled vertical extent of the Freedom Northwest system, while bottoming in mineralization. In addition,
reconnaissance drilling at the Sleeper West prospect intersected a shallow zone of 109 meters averaging 0.58% copper
equivalent (0.53% copper and 0.09 g/t gold) starting at 13.5 meters in hole AMM-210 (true width). Freedom Northwest
and Sleeper West are not included in the current Malmyzh resource estimate, which underscores the project's additional
exploration upside. The Malmyzh exploration and mining licenses are held by IGC (51%) and Freeport-McMoRan
Exploration Corporation (49%) (the "Joint Venture"), with IGC operating and managing the project. EMX is IGC’s largest
shareholder.
• On January 25, 2017 the Company provided an update on the Company's Leeville royalty property that covers portions of
Newmont Mining Corporation's ("Newmont") underground mining operations in the Northern Carlin Trend. EMX has
noted an increase in Leeville royalty revenue and equity gold ounces starting in mid-2016. In addition to royalty income
from gold production, the Leeville property also provides the Company with upside exposure to Newmont's ongoing
exploration advancements at the Rita K and Full House gold deposits. Newmont expects initial resources for Rita K in
2018, and has already outlined resources at Full House.
• On February 8, 2017 the Company announced the receipt of a payment of US $601,825, the cash equivalent of 500 troy
ounces of gold, from Çiftay İnşaat Taahhüt ve Ticaret A.Ş. ("Çiftay"), as part of the payment schedule for the Akarca gold-
silver project in western Turkey. The Akarca Property was transferred to Çiftay in August, 2016 for a combination of cash,
future payment streams denominated in gold bullion, and a royalty interest. Çiftay informed EMX that it had completed
an initial 49 hole diamond drill program comprising 6,032 meters on the Akarca Property in the 4th quarter of 2016.
• On February 28, 2017 the Company announced the execution of an option agreement (the "Copper Springs Agreement"),
through its wholly owned subsidiary BCE, for the Copper Springs porphyry copper project ("Copper Springs Project")
with Anglo American Exploration (USA), Inc. (“Anglo American”). The Copper Springs Project is located approximately
120 kilometers east of Phoenix, Arizona within the Globe-Miami Mining District.
Pursuant to the Copper Springs Agreement, Anglo American can earn a 100% interest in the Copper Springs Project by
(a) reimbursing BCE’s 2016 holding and permitting costs and making annual option payments, together totaling
US$447,000, and (b) completing US$5,000,000 in exploration expenditures before the fifth anniversary of the Agreement.
Upon exercise of the option, Anglo American will pay EMX an additional US$110,000 and EMX will retain a 2% NSR
royalty on the Copper Springs Project. The royalty is not capped or purchasable, except over two parcels of Arizona State
Land where Anglo American can buy a 0.5% NSR royalty from EMX for US$2,000,000.
After exercise of the option, AMR Payments of US$100,000 are due, commencing on the first anniversary of the exercise
of the option. The AMR Payments will increase to US$200,000 upon completion of a Scoping Study or PEA. Anglo
25
American may make a one-time payment of US$3,500,000 to extinguish the obligation to make any post-Scoping Study
AMR payments. All AMR Payments cease upon commencement of production from the project.
In addition, Anglo American will make milestone payments consisting of:
- US$500,000 upon completion of a Scoping Study or PEA;
- US$1,000,000 upon completion of a Prefeasibility Study; and
- US$2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against
future royalty payments.
Anglo American will manage and operate the Copper Springs Project.
• On April 12, 2017 the Company announced the completion of a non-brokered private placement (all dollar amounts in
CDN). The Company raised $7,000,000 by the issuance of 5,000,000 units at a price of $1.40 per unit. Each unit was
comprised of one common share and one-half of one non-transferable common share purchase warrant. Each whole
warrant entitles the holder to purchase an additional common share for $2.00 until April 12, 2019. Fees were paid on a
portion of the Private Placement. The fees consisted of 246,604 units (6% of the units sold to investors introduced by
finders) issued to Sprott Global Resource Investments, Ltd. (219,424 units), Sprott Private Wealth LP (15,000 units),
Haywood Securities Inc. (10,380 units) and Mackie Research Capital Corporation (1,800 units). Insiders of the Company
purchased 89,230 units and Pro Group members a further 19,000 units.
• On May 3, 2017 the Company announced the appointment of Mr. Thomas G. Mair as General Manager of Corporate
Development.
• On July 17, 2017 the Company announced a name change from Eurasian Minerals Inc. to EMX Royalty Corporation
effective July 19, 2017 to better reflect the nature of its business.
• On July 25, 2017 the Company announced IGC's 2017 drill results from the Malmyzh copper-gold porphyry project's
Freedom Northwest prospect, including an intercept of 417.3 meters (219.4-636.7 m) averaging 0.60% copper equivalent
(0.50% copper and 0.21 g/t gold), including a higher grade sub-interval of 142.6 meters (255.4-398.0 m) averaging 0.74%
copper equivalent (0.62% copper and 0.26 g/t gold) from hole AMM-216 (true widths). The mineralization is principally
hosted in magmatic-hydrothermal breccias. The ongoing exploration program at Freedom Northwest represents the first
deep drill testing at Malmyzh, as previous drilling has been concentrated on shallow mineralization throughout the district.
Freedom Northwest is not included in the current Malmyzh resource estimate, which further emphasizes the project's
exploration upside. EMX is IGC’s largest shareholder.
• On August 4, 2017, EMX received a payment of US$634,015, the cash equivalent of 500 troy ounces of gold as the second
gold bullion payment, from Çiftay, as part of the payment schedule for the Akarca gold-silver project in western Turkey.
The Akarca Property was transferred to Çiftay in August, 2016 for a combination of cash, future payment streams
denominated in gold bullion, and a royalty interest.
• On September 19, 2017 the Company announced that Koonenberry Gold Pty Ltd. (“KNB”) had completed the earn-in
requirements under the Exploration and Option Agreement (the “Koonenberry Agreement”) dated January 31, 2014
between North Queensland Mining Pty Ltd. (“NQM”) and the Company, and had elected to acquire EMX’s Koonenberry
exploration licenses (the "Koonenberry Project") in New South Wales, Australia. KNB is the successor in interest to NQM
under the Koonenberry Agreement. In accordance with the Koonenberry Agreement, EMX has transferred its wholly-
owned subsidiary EMX Exploration Pty Ltd, the holder of the Koonenberry licenses, to KNB, a private Australian company
formed for the sole purpose of developing the project. EMX has retained a 3% production royalty on all future production
from the Koonenberry licenses. As a result of this transaction, all of EMX’s interests in the Koonenberry Project have been
converted to retained royalty interests.
• On December 4, 2017 the Company announced the execution of an option agreement (the "Sienna Agreement") for the
Slättberg project (the "Slättberg Project") with Sienna Resources Inc. (“Sienna”) (TSX Venture: SIE). The Sienna
Agreement provides EMX with immediate share equity in Sienna, and upon Sienna's earn-in through work commitments,
additional share equity and a 3% NSR royalty on the Slättberg Project. The Slättberg Project hosts nickel-copper-cobalt
enriched massive sulfide mineralization and is located approximately 25 kilometers northwest of Falun, Sweden.
Pursuant to the Sienna Agreement, Sienna can earn 100% interest in the Slättberg Project by the issuance of shares to EMX
and performance of work during the one-year option period, as described below:
26
- On signing the agreement, Sienna issued to EMX 3 million common shares of Sienna stock.
- As a condition to the exercise of the option, Sienna must undertake work commitments of at least $500,000 on
the Project, including drilling of at least 750 meters.
- Upon exercise of the option, Sienna will issue to EMX an additional 3 million shares of Sienna stock, and EMX
will receive a 3% NSR royalty on the properties comprising the Project.
- Within six years of the execution of the agreement, Sienna may purchase 0.5% of the NSR royalty for $1,500,000,
leaving EMX with a 2.5% NSR royalty.
- After exercise of the option, Sienna will use commercially reasonable efforts to raise $3,000,000 for development
of the project and other activities. Once Sienna has raised that amount, Sienna will issue an additional 4 million
shares to EMX. Thereafter, EMX will have the right to participate pro-rata in future financings at its own cost to
maintain its interest in Sienna.
• On December 18, 2017 the Company announced the execution of an option agreement (the "Antofagasta Agreement")
through its wholly owned subsidiary BCE, for the Greenwood Peak copper porphyry project (the "Greenwood Peak
Project") with a wholly owned subsidiary of Antofagasta plc (“Antofagasta”). The Greenwood Peak Project, located
approximately 175 kilometers northwest of Phoenix, Arizona, contains a copper porphyry target concealed beneath
younger gravels and basin fill sediments.
Pursuant to the Antofagasta Agreement, Antofagasta can earn 100% interest in the Greenwood Peak Project by a)
Reimbursing BCE’s acquisition costs and making annual option payments, together totaling US$630,000; and b)
Completing US$4,500,000 in work expenditures within the five year option period. BCE will be the operator of the Project
for Antofagasta. Upon exercise of the option EMX will retain a 2% NSR royalty on the Project, which is not capped and
not subject to buy-down. After exercise of the option, AAR payments are due starting at US$100,000 on the first
anniversary of the exercise of the option, and will increase to US$175,000 upon completion of a scoping study for the
Project. Antofagasta may make a one-time payment of US$4,000,000 to extinguish the obligation to make AAR payments
after completion of the scoping study. All AAR payments are recoupable against royalty payments owed to EMX.
Antofagasta will also make project milestone payments consisting of:
- US$500,000 upon completion of a scoping study;
- US$1,000,000 upon completion of a pre-feasibility study; and
- US$2,000,000 upon completion of a feasibility study.
The feasibility milestone payment is recoupable against royalty payments owed to EMX.
Subsequent to Year Ended 2017
• On January 16, 2018 EMX announced that the execution of a definitive agreement (the "Boreal Agreement") for the sale
of the Modum cobalt project (the "Modum Project") in Norway to Boreal Metals Corp. (“Boreal”) (TSX Venture: BMX).
The agreement provides EMX with additional share equity in Boreal, a 3% NSR royalty on the project, and advance annual
royalty payments. The Modum Project is located in southern Norway’s Modum mining district, ~75 kilometers west of
Oslo. The project partially surrounds the historic Skuterud mine property, which was Europe’s principal producer of cobalt
from the late eighteenth through nineteenth centuries.
Pursuant to the Boreal Agreement, Boreal can acquire 100% interest in the Modum Project according to the following
terms:
- At closing, Boreal will issue to EMX 1,324,181 common shares of Boreal that will bring EMX’s share of equity
ownership in Boreal to 19.9%. EMX will have the right to participate pro-rata in future financings at its own cost
to maintain its 19.9% interest in Boreal.
- At closing, EMX will transfer its Modum exploration licenses to Boreal.
- EMX will retain a 3% NSR royalty on the Project, of which 1% may be purchased by Boreal on or before the
fifth anniversary of the closing date in 0.5% increments for a total of US $2,500,000 in cash and common shares
of Boreal stock.
- EMX will receive AAR payments, with an initial US $20,000 payment, commencing on the second anniversary
of the closing, with each subsequent AAR payment increasing by US $5,000 per year until reaching US $60,000
per year. Once reaching US $60,000, AAR payments will be adjusted each year according to the Consumer Price
Index (as published by the U.S. Department of Labor, Bureau of Labor Statistics).
27
• On February 5, 2018, EMX received a payment of US$665,525 as the cash equivalent to the third 500 ounce gold bullion
payment from Çiftay, as part of the payment schedule for the Akarca gold-silver project in western Turkey. The Akarca
Property was transferred to Çiftay in August, 2016 for a combination of cash, future payment streams denominated in gold
bullion, and a royalty interest. Receipt of this third payment leaves a pre-production total of 5,500 ounces of gold (or the
cash equivalent) to be paid to EMX.
• On February 8, 2018 the Company announced the execution of an option agreement (the "Kennecott Agreement"), through
its wholly owned subsidiary BCE, for the Buckhorn Creek copper porphyry project (the "Buckhorn Creek Project") with
Kennecott. The Kennecott Agreement provides for work commitments as well as cash payments to EMX during
Kennecott's earn-in period, and upon earn-in, a 2% NSR royalty interest in addition to pre-production and milestone
payments to EMX's benefit. The Buckhorn Creek Project is located in north-central Arizona, approximately 70 kilometers
north of Phoenix, and lies in the greater Castle Creek Mining District.
Pursuant to the Kennecott Agreement, Kennecott can earn 100% interest in the Buckhorn Creek Project by: (a) making a
US $30,000 payment upon execution of the agreement and making subsequent option payments, together totaling US
$550,000, and (b) completing US $4,500,000 in exploration expenditures before the fifth anniversary of the agreement.
Upon exercise of the option EMX will retain a 2% NSR royalty on the project which is not capped or purchasable.
After exercise of the option, annual advance minimum royalty (“AMR”) payments are due starting at US $100,000 and
increasing to US $150,000 upon completion of an Order of Magnitude Study ("OMS") or PEA. Kennecott may make a
one-time payment of US $3,500,000 to extinguish the obligation to make AMR payments. All AMR payments cease upon
commencement of production from the project.
In addition, Kennecott will make milestone payments consisting of:
- US $500,000 upon completion of an OMS or PEA,
- US $1,000,000 upon completion of a Prefeasibility Study, and
- US $2,000,000 upon completion of a Feasibility Study. The Feasibility Study payment will be credited against
future royalty payments.
• On February 9, 2018 the Company announced the execution of a purchase agreement (the "BEMC Agreement") for the
Guldgruvan cobalt project (the "Guldgruvan Project") in Sweden with Boreal Energy Metals Corporation (“BEMC”), a
newly created and wholly owned subsidiary of Boreal Metals Corporation (“Boreal”) (TSX Venture: BMX). The BEMC
Agreement provides EMX with immediate share equity in BEMC, a 3% NSR royalty on the Project, and annual advance
royalty payments. The Guldgruvan Project is located in Sweden’s Los mining district, a significant historic producer of
cobalt and nickel. The Los District was a key source of cobalt locally used for pigments in the 17th and 18th centuries, and
is the discovery locality of nickel.
Pursuant to the Agreement, the Guldgruvan nr 101 license will be transferred to BEMC in exchange for the issuance of
shares of BEMC, a royalty interest on the Guldgruvan Project, and other considerations according to the terms described
below:
- At closing, BEMC will issue to EMX that number of common shares of BEMC that represents a 5.9% equity
ownership in BEMC. BEMC will have the continuing obligation to issue additional shares of BEMC to EMX to
maintain its 5.9% interest, at no additional cost to EMX, until BEMC has raised CDN $3,000,000 in equity.
Thereafter, EMX will have the right to participate pro-rata in future financings at its own cost to maintain its 5.9%
interest in BEMC.
- EMX will receive an uncapped 3% NSR royalty on the project. Within five years of the closing date, BEMC has
the right to buy down up to 1% of the royalty owed to EMX (leaving EMX with a 2% NSR) by paying EMX US
$2,500,000 in cash and shares of BEMC.
- EMX will receive AAR payments of US $20,000 commencing on the second anniversary of the closing, with
each AAR payment increasing by US $5,000 per year until reaching US $60,000 per year. Once reaching US
$60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as published by the
U.S. Department of Labor, Bureau of Labor Statistics).
- EMX will also be reimbursed for its acquisition costs and previous expenditures on the project.
- The issuance of BEMC shares to EMX, as set forth in the Agreement, is subject to TSX Venture Exchange
approval.
28
4.B. BUSINESS OVERVIEW
EMX is principally in the business of exploring for, and generating royalties from minerals properties, as well as identifying
mineral property royalty opportunities for purchase. Under the royalty generation business model, the Company acquires and
advances early-stage mineral exploration projects and then sells the projects to, and thereby forms relationships with, other
parties in consideration of a retained royalty interest, as well as annual advance royalty and other pre-production cash or share
payments and work commitments. Through its various agreements, EMX may also provide technical and commercial assistance
to such companies as the projects advance. By selling interests in its projects to third parties for a royalty interest, EMX:
(a) reduces its exposure to the costs and risks associated with mineral exploration and project development,
(b) receives near term cash flow from scheduled pre-production and milestone based bonus payments,
(c) maintains the opportunity to participate in exploration upside, and
(d) develops a pipeline for potential production royalty payments and associated greenfields discoveries in the future.
This approach helps preserve the Company’s treasury, which can be utilized for further project acquisitions and other business
initiatives.
The Company’s royalty and royalty generation exploration portfolio consists of properties in North America, Turkey, Europe,
Haiti, Australia, and New Zealand. EMX started receiving royalty income as of August 17, 2012 when it acquired Bullion
Monarch Mining, Inc. (“Bullion Monarch” or “BULM”).
Strategic investments are an important complement to the Company’s royalty acquisition and royalty generation initiatives.
These investments are made in under-valued exploration companies identified by the Company. EMX helps to develop the
value of these assets, with exit strategies that can include royalty positions or equity sales.
Government Regulation and Environmental Protection
The Company’s current exploration activities are conducted in North America, Turkey, Europe, Australia and New Zealand.
Such activities are affected in varying degrees by political stability and government regulations relating to foreign investment
and the mining industry. Changes in these regulations or shifts in political attitudes are beyond EMX’s control and may
adversely affect EMX’s business. Operations may be affected in varying degrees by government regulations with respect to
restrictions on production, income taxes, expropriation of property, repatriation of funds, environmental legislation and mine
safety.
The mining industry is also subject to extensive and varying environmental regulations in each of the jurisdictions in which
EMX operates. Environmental regulations establish standards respecting health, safety and environmental matters and place
restrictions on toxins resulting from mining activities. These regulations can have an impact on the selection of mining projects
and facilities, potentially resulting in increased capital expenditures by EMX or its joint venture partners. In addition,
environmental legislation may require certain projects to be abandoned and sites reclaimed to the satisfaction of local
authorities. EMX is committed to complying with environmental and operation legislation wherever it operates.
The Company’s current or future operations, including exploration and development activities on its properties, require permits
from various governmental authorities, and such operations are, and will be, governed by laws and regulations governing
exploration, development, taxes, occupational health, waste disposal, toxic substances, land use, environmental protection and
other matters. Compliance with these requirements may prove to be difficult and expensive. While EMX has properties in
numerous jurisdictions, its most advanced projects are located in Turkey and the United States.
Governmental Regulation in Turkey
Mining Regulation
The legal mining regime in Turkey is principally governed by the Turkish Mining Law No. 3213, as amended most recently
on February 4, 20151 for the purpose of, among other things, avoiding labour accidents, and restating the mining license fees,
1 Turkish Mining Law No.3213 was first adopted on June 4, 1985 with several amendments on December 24, 1986, July 30, 1999, June 15, 2001, May 26
2004, June 3, 2007, June 10, 2010 and with the latest amendment on February 4, 2015.
29
governmental royalties, and sanctions in order to make it more compliant with the most recent global conditions. The Turkish
Mining Activities Implementation Communiqué was adopted and amended during the amendment of Turkish Mining Law on
June 10, 2010; however, this Implementation Communiqué has not been amended yet in accordance with the latest amendments
of Turkish Mining Law dated February 4, 2015. Turkey is still awaiting the adoption of the amendment of Implementation
Communiqué to comply with latest amended Turkish Mining Law. The mining sector is regulated under the umbrella of the
General Directorate of Mining Affairs of the Republic of Turkey, a unit of the Ministry of Energy and Natural Resources of
the Republic of Turkey. Mining rights and minerals are exclusively owned by the Turkish state, and the ownership of minerals
in Turkey is not subject to the ownership of the relevant land. The state, under the Turkish Mining Law and secondary mining
legislation, delegates its rights to explore and operate to Turkish individuals or legal entities established under Turkish law by
issuing licenses for a determined period of time in return for the payment of a royalty. There is no distinction between the
mining rights that may be acquired by local investors and those that may be acquired by foreign investors so long as foreign
investors establish a company in Turkey under Turkish law.
The General Directorate of Mining Affairs, is the authorized body to regulate mining activities and to issue mining licenses in
Turkey. In addition, local administrative bodies of Turkey also have a certain level of authority relating to licenses and the
regulation of mining facilities. Transferring the mining license is subject to the prior approval of the Ministry of Energy and
Natural Resources of the Republic of Turkey.
The Turkish Mining Law classifies underground resources into six different groups, and the licensing procedure for each group
differs slightly. Briefly, the groups are as follows: (I) sand and gravel, (II) marble and other similar decorative stones, (III)
mineral salts from seas, lakes and fresh waters, (IV) energy, metal and industrial minerals, including gold, silver, platinum,
copper, lead, zinc, aluminum, uranium, thorium and radioactive minerals, (V) precious minerals such as gemstones, and (VI)
a group of minerals which is not stated amongst these groups shall be identified by the Ministry of Energy and Natural
Resources of Republic of Turkey under secondary legislation of Turkey.
There are two types of licenses granted for the exploration and operation of mines and one type of operation permit under the
Turkish Mining Law, as follows: Group II (b), Group III, Group IV minerals at the first stage require general exploration
licenses. Group V minerals require exploration certificates. Group I and Group II (a) and (c) are directly granted with operation
licenses.
• Exploration License. Enables its holder to carry out general exploration activities (i.e., all mining activities other than
those carried out for production) in a specific area issued for a period of two years for Group IV minerals including
gold mining and one year for the other groups. If the license holder owning a group of minerals satisfies its obligations,
the license holder owning Group IV minerals will have a right to an additional four years of detailed exploration; for
Group II (b), Group III and Group V mines, the relevant license holder is obliged to meet the operation license’s
requirements until the end of its general exploration period.
• Operation License. Enables its holder to carry out operational activities within the same area as stated in the
exploration license for the proved, potential and feasible mine reserve area. The term of the operation license for
Group I (a) minerals are five years. The other groups of minerals are at least ten years depending on the specific
project. The terms of the operation licenses may generally be extended upon the application of the license holder with
a new operation project provided that such extension request is accepted by the General Directorate of Mining Affairs
of Turkey. The term of the operation license for Group I (a) minerals cannot exceed thirty years, for Group II minerals
cannot exceed forty years, and for other groups of minerals cannot exceed fifty years. Extension requests for more
than thirty years for Group I (a) minerals and forty years for Group II minerals are made directly to the Ministry of
Energy and Natural Resources of the Republic of Turkey and for more than fifty years for other groups of minerals
are made directly to Ministry of Council of Republic of Turkey.
• Operation Permit. Enables its holder to operate a specific mine as specified in the operation license and granted only
for the proved mine reserves area that is determined during the prospecting period. The license holder, within three
years following the issuance of the operation license shall obtain the required approvals, permits such as environmental
impact assessment decision, ownership decision, land usage decision, workplace opening and operation permit and
other permits stated under clause 7 of the Mining Law and then, accordingly, the license holder is granted the operation
permit by the General Directorate of Mining Affairs of Turkey. The operation permit is required to be obtained until
the end of the term of the operation license.
The Turkish Mining Law provides for different royalty percentages for different groups of mines. The royalty percentages for
Group IV minerals, including gold, silver, platinum, lead copper, zinc, aluminum and uranium oxide minerals are in the below
chart.
30
The Royalty Percentages For Group IV Minerals under Turkish Mining Law
Royalty(%) Gold
Silver
Platinum
$/oz
$/oz
$/oz
<800
801-1250
<10
11-20
<500
501-1000
1251-1500
21-25
1501-1750
25-30
1751-2000
31-35
2001-2250
36-40
>2251
>41
1001-
1250
1251-
1500
1501-
1750
1751-
2000
>2001
2
4
6
8
10
14
16
Coppe
r
$/oz
<5000
5001-
7500
7501-
8000
8001-
8500
8501-
9000
9001-
9500
>9501
Environmental Regulation
Lead
Zinc
Chrome
Aluminum
Uranium
Oxide
$/oz
$/oz
$/T
$/T
101-300
301-500
<1000 <1000 <100
1001-
1001-
2500
2000
2501-
2001-
3000
2250
3001-
2251-
3500
2500
3501-
2501-
4000
3000
4001-
3001-
3500
4500
>3501 >4501 >1101
501-700
701-900
<1000
1001-2000
$/lb
<20
20-40
2001-2350
41-80
2351-2600
81-110
2601-2850
111-140
901-1100 2851-3100
141-170
>3101
>171
In Turkey, where EMX’s most advanced projects are located, both the level of environmental regulation and its enforcement
have become more stringent in recent years. Mining operations are subject to environmental laws and regulations promulgated
by the Turkish Ministry of Environment and Urban Planning, the Ministry of Forestry and Water Works and regional and local
authorities. The Turkish Mining Law amended in 2015 has brought more detailed provisions to the mining activities for the
compliance of environmental rules. The Regulation on Environmental Impact Assessments, for example, requires any entity
that is involved in activities that could have an environmental impact to prepare a Report of Environmental Impact Assessment
or a Project Information File. No approvals, permits, incentives, or construction and occupancy licenses may be granted, nor
any investments made, nor any tenders awarded for these projects unless and until the Turkish Ministry of Environment and
Urban Planning issues a positive assessment of the environmental impact of the subject activities. The Turkish environmental
laws and regulations also require certain businesses to comply with ongoing requirements to reduce the environmental impact
of certain operations and activities, which also include mining activities. In addition, in Turkey, the issue of allocation of
environmentally sensitive areas such as forest areas, hunting areas, special protection areas, national parks and agriculture areas
for the granting of licenses for activities to be carried out in such areas is also regulated and is under the supervision of the
Turkish Ministry of Forestry and Water Works.
Under current Turkish environmental laws and regulations, regulatory authorities may suspend or terminate non-compliant
operations, levy monetary penalties and require non-compliant entities to bear the cost of related remediation programs. For
example, under Turkish environmental and criminal laws, non-compliant operations may be subject to private action and liable
for damages arising from their activities, as well as subject to criminal penalties (such as imprisonment and monetary fines) for
deliberately providing regulatory authorities with false or misleading information regarding regulated activities or otherwise
failing to comply with certain regulations. In addition, a property owner may be held liable for the cost of the removal or
remediation of hazardous or toxic wastes discovered on its property, the cost of which could be substantial, where generally
such liability attaches regardless of whether the owner knew of, or was responsible for, the presence of such hazardous or toxic
substances.
Environmental laws, as they may be amended over time, can impose restrictions on the manner of use of properties, and
compliance with these restrictions may require substantial expenditures. Environmental laws and regulations impose sanctions
for non-compliance and may be enforced by governmental agencies. Third parties also may seek recovery from companies for
personal injury or property damage associated with exposure to the release of hazardous substances.
Commercial Regulation
The Turkish Commercial Code numbered 6762, which was in effect as of 1957, has been amended substantially with the new
Turkish Commercial Code numbered 6102 (the “New Turkish Commercial Code”). The New Turkish Commercial Code came
into force on July 1, 2012. The New Turkish Commercial Code is intended to provide for institutionalization, increased
competitive power and the establishment of increased public confidence, corporate governance and transparency, The code
31
permits joint stock companies and limited liability companies to be established with only one shareholder and with one board
member.
Some of the key features of the New Turkish Code include the following:
• Companies are generally obliged to have a website online and to allocate a part of this website to publish certain
issues, documents, financial statements and resolutions whether publicly traded or not.
• For joint stock companies, it is sufficient for the board of directors to consist of solely one member. A legal entity
can also be a board member; however in this case, a natural person must be designated to represent the legal entity.
There is no restriction and mandatory requirement for the board members to reside in Turkey and to be a Turkish
citizen.
• Board members of a joint stock company are no longer required to shareholders in the company.
• The financial tables of a joint stock company are to be prepared in accordance with the financial reporting standards
determined by the Turkish Accounting Standards Board. These standards are expected to be amended to comply with
the International Financial Reporting Standards (“IFRS”).
• The New Turkish Commercial Code enables the board members to attend and to vote in meetings via transfer of image
and voice according to the provisions of the articles of association of the company. The provisions regarding the
meeting and decision quorum of the board of directors shall also be applicable if the meetings of the board of directors
are held in an electronic environment.
• The New Turkish Commercial Code stipulates the rights of shareholders to attend, give proposals, declare opinions
and vote at the general assembly of joint stock company via electronic means.
• The management and representation of a limited company may be performed by one or more managers. For a limited
liability company, it is sufficient to have at least one manager. If there is more than one manager then there is a board
of managers. In this situation, one of the managers is appointed by general assembly as a chairman of the board of
managers. The President of board of managers has an authority to make all statements and declarations on behalf of
the company. In any case, at least one shareholder must be appointed as a manager who has a right to manage and
represent the limited liability company.
• The limited liability company must keep a share ledger. The share ledger shall reflect the following; names/titles and
addresses of the shareholders, number of shares held by each shareholder, share transfer details, nominal value of
shares, class of shares, encumbrances over the shares and the names/titles and addresses of beneficiaries of such
encumbrances created over the shares.
• The limited liability company is obliged to keep the commercial books indicating the commercial transactions and
asset structure of the company. The LLC shall observe and apply Turkish Accounting Standards as announced by the
Turkish Accounting Standards Board, including the conceptual framework of accounting principles and interpretations
while keeping its commercial books. An important change however, is that the compulsory accounting standards will
adopt IFRS. The opening and closing of the books must be certified by a notary public.
• The manager(s) of a limited liability company must prepare and submit to the attention of the general assembly the
financial charts, appendices and the activity report of the company for the preceding accounting period. This must be
done in accordance with the Turkish Accounting Standards and within the first three months of the relevant accounting
period (fiscal year) following the balance sheet date. The relevant Turkish Accounting Standards have been applicable
from January 1, 2013.
EMX cannot predict the outcome of each effect of the New Turkish Code, and compliance with these requirements may prove
to be difficult and expensive.
Repatriation of Earnings
Currently, there are no restrictions on the repatriation of earnings or capital to foreign entities from Turkey, where the
Company’s most advanced projects are located. However, there can be no assurance that any such restrictions on repatriation
of earnings or capital from Turkey or any other country where we may invest will not be imposed in the future.
Governmental Regulation in the United States
Mining Regulation
Mining activities in the United States are subject to numerous federal, state and local laws and regulations. At the federal level,
mines are subject to inspection and regulation by the United States Mine Safety and Health Administration (“MSHA”) under
provisions of the Federal Mine Safety and Health Act of 1977. The Occupation Safety and Health Administration also has
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jurisdiction over certain safety and health standards not covered by MSHA. Mining operations and all proposed exploration
and development require a variety of permits. In addition, any mining operations occurring on federal property are subject to
regulation and inspection by the United States Bureau of Land Management (“BLM”). The Company’s current projects are
also subject to state and local laws and regulations in Arizona, Nevada, Utah and Wyoming.
Environmental Regulation
The Company’s exploration, mining and processing operations are subject to various federal, state and local laws and
regulations governing prospecting, exploration, development, production, labor standards, occupational health, mine safety,
control of toxic substances, and other matters involving environmental protection and employment. United States
environmental protection laws address the maintenance of air and water quality standards, the preservation of threatened and
endangered species of wildlife and vegetation, the preservation of certain archaeological sites, reclamation, and limitations on
the generation, transportation, storage and disposal of solid and hazardous wastes, among other things.
Legislation and implementation of regulations adopted or proposed by the United States Environmental Protection Agency, the
BLM and by comparable agencies in various states directly and indirectly affect the mining industry in the United States. These
laws and regulations address the environmental impact of mining and mineral processing, including potential contamination of
soil and water from tailings, discharges and other wastes generated by mining process. In particular, legislation such as the
Clean Water Act, the Clean Air Act, the Federal Resource Conservation and Recovery Act and the National Environmental
Policy Act require analysis and/or impose effluent standards, new source performance standards, air quality standards and other
design or operational requirements for various components of mining and mineral processing. Mining projects also are subject
to regulations under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, which regulates
and establishes liability for the release of hazardous substances. In addition, statutes may impose liability on mine developers
for remediation of waste they have created.
Our operations are also subject to laws and regulations governing protection of endangered and other specified species. In May
2015, the U.S. Department of the Interior released a plan to protect the greater sage grouse, a species whose natural habitat is
found across much of the western United States, including Nevada. The U.S. Department of the Interior’s plan is intended to
guide conservation efforts on approximately 70 million acres of national public lands. No assurances can be made that
restrictions relating to conservation will not have an adverse impact on our operations in impacted areas.
Specialized Skill and Knowledge
All aspects of EMX’s business require specialized skills and knowledge. Such skills and knowledge include the areas of
geology, finance, accounting and law.
Competitive Conditions
Competition in the mineral exploration industry is intense. EMX competes with other companies, many of which have greater
financial resources and technical facilities, for the acquisition and exploration of mineral interests, as well as for the recruitment
and retention of qualified employees and consultants.
Raw Materials (Components)
Other than water and electrical or mechanical power – all of which are readily available on or near its properties – EMX does
not require any raw materials with which to carry out its business.
Intangible Property
EMX does not have any need for nor does it use any brand names, circulation lists, patents, copyrights, trademarks, franchises,
licenses, software (other than commercially available software), subscription lists or other intellectual property in its business.
Business Cycle & Seasonality
The Company’s royalty and prospect generator business model is cyclical and is impacted by commodity prices and cycles;
however, its business is not seasonal.
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Economic Dependence
Other than the contracts disclosed in this Form 20-F, the Company’s business is not substantially dependent on any contract
such as a contract to sell the major part of its products or services or to purchase the major part of its requirements for goods,
services or raw materials, or on any franchise or license or other agreement to use a patent, formula, trade secret, process or
trade name upon which its business depends.
Renegotiation or Termination of Contracts
It is not expected that the Company’s business will be affected in the current financial year by the renegotiation or termination
of contracts or sub-contracts.
Environmental Protection
All phases of the Company’s exploration are subject to environmental regulation in the various jurisdictions in which it
operates.
Environmental legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of
responsibility for companies and their officers, directors and employees. While manageable, EMX expects this evolution
(which affects most mineral exploration companies) might result in increased costs.
Employees
At December 31, 2017, EMX had 39 employees and consultants working at various locations throughout the world.
Foreign Operations
Many of the Company’s properties are located outside of North America and many are located in areas traditionally considered
to be risky from a political or economic perspective.
Bankruptcy Reorganizations
There have not been any voluntary or involuntary bankruptcy, receivership or similar proceedings against EMX within the
three most recently completed financial years or the current financial year.
Material Reorganizations
There has not been any material reorganization of EMX or its subsidiaries within the three most recently completed financial
years or the current financial year.
Social or Environmental Policies
EMX has implemented various social policies that are fundamental to its operations, such as policies regarding its relationship
with the communities where the Company operates.
1. Environmental Policy
The Company believes that good environmental management at every project it manages, whether in the exploration phase,
feasibility stage, project construction or mine site operation, requires proactive health and safety procedures, transparent
interaction with local communities and implementation of prudent expenditures and business performance standards that
constitutes the foundation for successful exploration and subsequent development if the results warrant it.
EMX will develop and implement appropriate standard operating procedures for different stages of its ground technical surveys,
prospecting and evaluation and development work which procedures will be designed to meet all applicable environmental
requirements and best environmental practices in the mineral exploration industry.
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2. Community Relations, Communication and Notification Policy
Proactive interaction with the stakeholders on whom the Company’s exploration and development programs may impact is
considered an important part of the long-term investment that the Company is planning in its exploration programs in North
America, Turkey, Europe, Australia, and the Asia-Pacific region.
EMX recognizes that from the inception of exploration activities or a new field work program, and as the exploration project
progresses towards development, it will be important to:
♦
♦
♦
communicate and proactively engage with all local communities and other stakeholders that may be affected by its
exploration programs;
inform and obtain a consensus with the full range of stakeholders that may be impacted upon by exploration, evaluation
and development; and
identify any vulnerable or marginalized groups within the affected communities (e.g. women, elders or handicapped)
and ensure they are also reached by above information disclosure and consultation activities.
In these respects, EMX will work actively and transparently with governmental authorities, other elected parties, non-
governmental organizations, and the communities themselves to ensure that the communities are aware of the activities of the
Company, and that the impact and benefits of such activities are a benefit to the communities.
When detailed or advanced exploration activities, including drilling, evaluation and other such programs, are implemented, the
Company will endeavor to identify how the impacts of such work on communities can best be managed, and how benefits can
best be provided to communities through its activities. This will be undertaken in consultation with the affected communities.
3.
Labour, Health and Safety Policy
The health and safety of its employees, contractors, affected communities and any other role players that may participate and
be affected by the activities of EMX are crucial to the long term success of the Company.
The Company will establish and maintain a constructive work-management relationship, promote the fair treatment, non-
discrimination, and equal opportunity of workers.
Every effort will be made through training, regular reviews and briefings, and other procedures to ensure that best practice
labor, health and safety and good international industry practices are implemented and maintained by EMX, including prompt
and in-depth accident and incident investigation and the implementation of the conclusions thereof. The Company will take
measures to prevent any child labor or forced labor.
The Company’s aim is at all times to achieve zero lost-time injuries and fatalities.
4. Development Stage Environmental and Social Management Policy
EMX will communicate and consult with local communities and stakeholders with a view to fostering mutual understanding
and shared benefits through the promotion and maintenance of open and constructive dialogue and working relationships.
United States vs. Foreign Sales/Assets
At December 31, 2017, 2016, and 2015, the Company’s assets were located in North America, Turkey, Europe, Haiti, Australia
and New Zealand.
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4.C. Organization Structure
The following table sets out the name, jurisdiction of incorporation and percentage ownership in each of the Company’s
significant subsidiaries:
4.D. Property, Plant and Equipment
The Company’s executive offices are located in rented premises of approximately 4,200 sq. ft., shared by seven other companies
at 543 Granville Street, Suite 501, Vancouver, British Columbia Canada V6C 1X8. The Company began occupying these
facilities on May 1, 2011.
The Company owns a house in Littleton, Colorado which serves as the Company’s office.
The Company’s royalty, exploration, and strategic investment portfolio mainly consists of properties in North America, Turkey,
Europe, Haiti, Australia, New Zealand, the Russian Federation, and Chile.
The terms “measured resource”, “indicated resource” and “inferred resource” used in this report are Canadian geological and
mining terms as defined in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects of the
Canadian Securities Administrators using the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum
(the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council as may be amended from
time to time by the CIM. We advise U.S. investors that while such terms are recognized and permitted under Canadian
regulations, the SEC does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral
deposits in the measured and indicated categories will ever be converted into reserves.
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NamePlace of IncorporationOwnership PercentageBullion Monarch Mining, IncUtah, USA100%EMX (USA) Services Corp.Nevada, USA100%Bronco Creek Exploration Inc.Arizona, USA100%Eurasia Madencilik Ltd. SirketiTurkey100%Azur Madencilik Ltd. SirketiTurkey100%Eurasian Minerals Cooperatief U.A.Netherlands100%Eurasian Minerals Sweden ABSweden100%Viad Royalties ABSweden100%Waikato Gold Limited New Zealand100%
An inferred resource is that part of a mineral resource for which quantity and grade are estimated on the basis of limited
geological evidence and sampling. Geological evidence is sufficient to imply, but not verify, geological and grade continuity.
It is reasonably expected that the majority of inferred resources could be upgraded to indicated resources with continued
exploration. Inferred resources must not be included in the economic analysis, production schedule, or estimated mine life in
publicly disclosed Pre-Feasibility or Feasibility Studies, or in the Life of Mine plans and cash flow models of developed mines.
Inferred mineral resources can only be used in economic studies as provided under NI 43-101. U.S. investors are cautioned
not to assume that any part or all of an inferred resource exists, or is economically or legally mineable.
Disclosure of gold and silver resources expressed in ounces, or copper, lead, and zinc resources expressed in pounds or tonnes
in the mineral resource categories in this document is in compliance with Canadian NI 43-101, but does not meet the
requirements of Industry Guide 7, Description of Property by Corporations Engaged or to be Engaged in Significant Mining
Operations, of the SEC, which will accept only the disclosure of tonnage and grade estimates for non-reserve mineralization.
See “Cautionary Note To United States Investors Regarding Reserve And Resource Information”.
EMX has been generating exploration projects for over fourteen years. Even if the Company completes its programs on its
exploration properties and is successful in identifying mineral deposits, a substantial amount of capital will still have to be
spent on each deposit for further drilling and engineering studies before management will know that the Company has a
commercially viable mineral deposit (a reserve) on the property. In order to balance this risk, EMX focuses on entering into
agreements with other parties to convert its royalty generation exploration assets into royalty interests with partners advancing
the projects. EMX also looks to purchase royalty properties in the open market to help accelerate revenue streams.
EMX has built a portfolio of precious metal, base metal, and polymetallic mineral property and royalty interests that spans five
continents and covers over 1.5 million acres. These assets provide revenue streams from royalty, advance royalty and success-
based bonus payments, while maintaining exposure to exploration upside as projects are advanced by the operators and partners.
The Company supplements mineral property revenue streams and value creation by making strategic investments in companies
with under-valued mineral property assets that provide shareholders with upside potential from exit strategies can include
royalty positions, equity sales, or a combination of both.
EMX has a material interest in the Leeville royalty property located in Nevada's Northern Carlin Trend. Additional property
descriptions are included in this report, but the Company does not consider that individually these properties are material at
this time. The Company also has a material equity investment in IG Copper LLC, a private company that has exploration
property interests located in the Russian Far East.
Leeville and Royalty Property Overview
The Leeville royalty property is a material EMX asset acquired in the 2012 merger with Bullion Monarch that covers portions
of Newmont Mining Corporation’s Leeville, Turf, and other underground gold mining operations and deposits in the Northern
Carlin Trend. The Leeville 1% gross smelter return ("GSR") royalty paid approximately US$1.86 million during the 12 months
ending December 31, 2017, which included settlement of prior year production payments due. Royalty production reported by
Newmont for 2017 totaled 1,308 troy ounces of gold that were principally sourced from the Leeville (58%) and Turf
underground operations (42%), with negligible contributions from other Newmont operations. The average realized gold price
from the Leeville royalty in 2017 was approximately US$1,255 per troy ounce. Newmont has stated that its Turf Vent Shaft
Project, which was commissioned in November 2015, will provide the ventilation required to “increase production” and
“unlock” additional resources at “greater Leeville”. As understood by the Company, "greater Leeville" includes portions of
EMX’s royalty property, and the Turf Vent Shaft Project as described by Newmont may potentially have a positive impact on
the Leeville royalty. However, the Company does not have access to the information from Newmont in order to confidently
assess what, if any, that impact has been or will be. Newmont also reported ongoing exploration successes at Four Corners, as
well as along the Rita K and Full House gold mineralized corridor which is partially covered by the Leeville royalty. These
ongoing Newmont exploration successes underscore the prospectivity of the Leeville royalty property.
Further Carlin Trend exploration upside is provided by EMX’s Maggie Creek South 3% NSR and Maggie Creek 2% NSR
royalty properties. The Maggie Creek South royalty property was also acquired in the 2012 merger with Bullion Monarch. The
Maggie Creek royalty property is one of two royalties acquired from Golden Predator Corp ("Golden Predator") (TSX-V: GPY)
in 2016. The Maggie Creek South and Maggie Creek royalty properties collectively cover approximately 12.4 square kilometers
of prospective ground within ~1.6 kilometers of Newmont’s Gold Quarry open pit mining operation.
In addition to EMX’s Carlin Trend royalty properties, the Company has important royalty property interests elsewhere in the
western U.S., as well as in Turkey, Serbia, Norway, Sweden, and Haiti including:
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• Arizona Mining Inc. ("AMI") (TSX: AZ) continued to advance the Hermosa property's Taylor discovery that is
directly north of EMX's Hardshell Skarn royalty claim block. AMI released an updated mineral resource and PEA
study for the Hermosa project in 2017 (see AMI news release dated April 3, 2017).
• EMX received pre-production and royalty payments from its Turkish portfolio in 2017, including the initial two pre-
production payments from the Akarca project totaling US$1,235,840 (the cash equivalent of 1,000 troy ounces of
gold). As a subsequent event, EMX received a payment of US$665,525 on February 5, 2018, as the cash equivalent
to the third 500 ounce gold bullion payment to be made under the terms of the Akarca agreement. Receipt of this third
payment leaves a pre-production total of 5,500 ounces of gold (or the cash equivalent) to be paid to EMX on a schedule
of 500 ounces every six months. EMX also received the first royalty payment from the Balya property in 2017. The
Company anticipates ongoing payments from Akarca and Balya, as well as advancement of the other Turkish assets
in 2018.
• EMX’s portfolio in Serbia represents a combination of organically generated royalties complemented by a key royalty
purchase that covers the Timok Project's Cukaru Peki copper-gold deposit, which is being advanced by Nevsun
Resources Ltd. ("Nevsun") (TSX: NSU). Cukaru Peki's high grade massive sulfide Upper Zone had a positive PEA
and updated resource completed in 2017 (see Nevsun news release dated October 26, 2017). According to Nevsun,
"key activities" for 2018 include the completion of the Upper Zone prefeasibility study and commencement of an
exploration decline once permits are received (see Nevsun news release dated January 31, 2018). Nevsun states that
Lower Zone porphyry exploration drilling program will continue in 2018.
•
In Scandinavia, EMX closed the sale of four exploration properties in Norway and Sweden in early 2017 to Boreal
Metals Corp. ("Boreal") for a 3% NSR royalty, a 19.9% Boreal equity interest, and other considerations. Also in 2017,
EMX optioned the Slättberg nickel-copper-cobalt project in Sweden to Sienna Resources Inc. (“Sienna”) (TSX-V:
SIE) for immediate share equity in Sienna, and upon Sienna's earn-in through work commitments, additional share
equity and a 3% NSR royalty on the project. The Viscaria copper royalty property in Sweden, acquired in 2010, was
advanced by Sunstone Metals Ltd. (ASX: STM) (name changed from Avalon Minerals Ltd. in Q3 2017) with ongoing
Environmental Impact Statement Assessment (“EISA”) studies and exploration drilling.
• All of EMX's interests in Haiti have been converted into NSR royalties, with the sale of joint venture interests to
Newmont in 2015 for a US$4 million cash payment as well as a 0.5% NSR royalty, and the 2016 sale of the Grand
Bois property to a privately held corporation for a retained 0.5% NSR royalty interest.
EMX’s other properties that are either optioned or have been sold include EMX royalty options. Many of these properties
provide milestone and advance minimum royalty ("AMR") or advance annual royalty ("AAR") payments that generate early
revenue streams to EMX’s benefit prior to production. Additional details on EMX’s royalty and royalty generation property
portfolio are included in the following sections.
North America
EMX’s portfolio in North America totals 40 royalty and royalty generation properties covering more than 47,000 hectares.
There are 16 royalty properties, including the producing Leeville royalty (see above section), that are being advanced by their
respective operating companies, and 24 royalty generation properties available for partnership in Arizona, Nevada, Utah, and
Wyoming. The royalty generation properties are advanced through wholly-owned subsidiary BCE, and include porphyry
copper-molybdenum, porphyry copper-gold, Carlin-type gold, and high-grade gold-silver vein projects.
The Company’s 2017 work focused on advancing partner funded projects, executing new agreements for available projects,
generative exploration, identifying royalty assets for purchase, and growing the portfolio by acquiring new properties on open
ground. EMX is in discussions with multiple potential partners for the available North American properties, as well as for
regional exploration alliances.
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Maggie Creek and Maggie Creek South Properties
The Maggie Creek gold property is located approximately two kilometers north-northeast of Newmont's Gold Quarry mining
operation on the Carlin Trend. EMX purchased the Maggie Creek 2% NSR royalty on all precious metals and a 1% NSR royalty
on all other minerals from Golden Predator in 2016. The Maggie Creek royalty property covers approximately 7.2 square
kilometers and is controlled by Renaissance Gold Inc. Maggie Creek occurs along the northeast projection of the Gold Quarry
fault zone, which is an important mineralizing control at the Gold Quarry mine. Renaissance did not report of any work
completed on the project in 2017.
EMX's Maggie Creek South 3% NSR royalty was acquired in 2012. Maggie Creek South occurs approximately 1.5 kilometers
south-southeast of Gold Quarry, and covers about 5.2 square kilometers of ground controlled by Newmont. Maggie Creek
South occurs on the southeast projection of the Good Hope fault trend, which has an alignment of deposits along its length
including Mike, Tusc, Mac, and Gold Quarry, as well as the down-dip projection of favorable host rocks (see EMX news
release dated February 23, 2016). EMX is not aware of any work conducted by Newmont on the property during 2017.
Afgan Property
The Afgan gold property is located about 40 kilometers northwest of Eureka, Nevada on the Battle Mountain-Eureka Trend.
EMX purchased the Afgan 1% NSR royalty as part of the 2016 Golden Predator transaction that also included the Maggie
Creek royalty (see above section). The Afgan unpatented lode mining claim block is controlled by McEwen Mining Inc.
("McEwen Mining") (TSX: MUX, NYSE: MUX). The property hosts a semi-continuous, 1,050 by 450 meter, north-northwest
oriented zone of oxide gold mineralization delineated by historic drilling programs and hosting a historic resource (see EMX
news release dated February 23, 2016). McEwen Mining did not report any work completed on the project in 2017.
Cathedral Well Property
The Cathedral Well gold project is located at the southern end of the Battle Mountain-Eureka gold trend and surrounds most
of the historic Green Springs mine.
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EMX executed an Option Agreement with Ely Gold Inc. for the Cathedral Well property in 2014 for staged option payments
and a 2.5% NSR royalty interest, inclusive of an underlying 0.5% NSR. Ely Gold completed their earn-in for the property in
November of 2016 through a trade with EMX, whereby a subsidiary of Ely Gold executed a quit claim deed for 36 mining
claims adjacent to EMX’s Spring Canyon property in Nevada in lieu of its last US$25,000 option payment. In December 2016,
Ely Gold announced it had optioned the property to Colorado Resources Ltd. (TSX-V: CXO). Both the property and agreement
remained in good standing during 2017.
Hardshell Skarn Property
The Hardshell Skarn lead-zinc-silver property is located approximately 75 kilometers southeast of Tucson, Arizona. The
property is included as part of Arizona Mining Inc.'s ("Arizona Mining" or "AMI”) Hermosa project. EMX's early stage
exploration programs targeted base and precious metals mineralization hosted in skarn and replacement bodies within a series
of Paleozoic limestones.
An Exploration and Option Agreement was executed in 2015 for the Hardshell Skarn project with Arizona Mining. In 2017,
Arizona Mining earned 100% interest in the project under the agreement by accelerating and completing the required
US$85,000 in cash payments. EMX now retains a 2% NSR royalty on the property that is not capped nor subject to buy-down,
and also will receive annual advanced royalty payments.
During 2017, AMI continued to advance the Hermosa property's Taylor discovery that is directly north of EMX's Hardshell
Skarn royalty claim block (the "royalty claim block"). AMI's work included exploration and drill programs at the Taylor Deeps
discovery. In Q3, EMX announced results from two AMI angle diamond drill holes that intersected mineralization within the
royalty claim block, including intercepts of 32 feet (3170-3202 ft) averaging 12.21% zinc, 8.19% lead, and 2.25 oz/ton silver
in hole HDS-353 (true width) (last 3 feet of intercept within the claim block) and 25 feet (2948.5-2973.5 ft) averaging 1.47%
zinc, 1.95% lead, and 4.15 oz/ton silver in hole HDS-380 (true width ~90%) (intercept entirely within the claim block) (see
EMX news release dated August 30, 2017). AMI describes the HDS-353 and HDS-380 intercepts as "Taylor Sulfide"
mineralization. Also in 2017, AMI announced the results from its PEA for the Taylor Sulfide deposit (see AMI news release
dated April 3, 2017).
Greenwood Peak Property
The Greenwood Peak copper porphyry project, located approximately 175 kilometers northwest of Phoenix, Arizona, contains
a copper porphyry target beneath younger gravels and basin fill sediments.
EMX executed an Option Agreement with a wholly owned subsidiary of Antofagasta plc (“Antofagasta”) (LSE: Anto) in late
2017 for Greenwood Peak (see EMX news release dated December 18, 2017). Antofagasta can earn 100% interest in the project
by: a) reimbursing EMX’s acquisition costs and making annual option payments, together totaling US$630,000, and b)
completing US$4,500,000 in work expenditures within the five year option period. Upon exercise of the option EMX will
retain a 2% NSR royalty on the project, which is not capped and not subject to buy-down. After exercise of the option, annual
advance royalty and milestone payments will be due to EMX.
The Greenwood Peak project is fully permitted, and Antofagasta commenced a reconnaissance drill program in December,
2017 to test concealed supergene and hypogene copper porphyry targets.
Copper King Property
The Copper King porphyry copper-molybdenum project is located approximately four kilometers northwest of the Resolution
porphyry copper deposit in the Superior (Pioneer) mining district of Arizona.
In 2016, EMX executed an Exploration and Option to Purchase Agreement with Kennecott Exploration Company
("Kennecott"), part of the Rio Tinto Group, for Copper King (see EMX news release dated October 19, 2016). Pursuant to the
agreement, Kennecott can earn 100% interest in the project by a) reimbursing the 2016 holding costs and making option
payments, together totaling US$504,314, and b) completing US$4,000,000 in exploration expenditures before the fifth
anniversary of the agreement. Upon exercise of the option, EMX will retain a 2% NSR royalty on the project which is not
capped and not subject to buy-down. After exercise of the option, annual AMR and milestone payments will be due to EMX.
During 2017, Kennecott funded work at Copper King included geologic mapping, geochemical sampling, a magnetotelluric
geophysical survey, and one drill hole to test the deep, western edge of a concealed porphyry copper target.
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Superior West Property
The Superior West project is located west of the historic mining town of Superior, Arizona and Resolution Copper’s property.
The project covers several porphyry copper targets, as well as the interpreted western extension of the historic Magma Vein.
EMX executed an Exploration and Option to Purchase Agreement with Kennecott for the Superior West project in 2015.
Kennecott may earn 100% interest in the project by completing US$5.5 million in exploration expenditures and making cash
payments totaling US$1,149,187, after which EMX will retain a 2% NSR in addition to annual AMR and certain project
milestone payments (see EMX news release dated May 4, 2015).
During 2017, Kennecott funded work included additional magnetotelluric geophysical surveys, further consolidating the
project's land position, the identification of priority porphyry targets for follow-up, and completion of cultural (archaeological)
and biological surveys to permit 15 additional drill sites that were added as options to the project's Plan of Operations.
Buckhorn Creek Property
The Buckhorn Creek project is located in north-central Arizona's greater Castle Creek Mining District. The project lies within
a highly extended belt of rocks that include multiple outcrops of porphyry-related alteration and mineralization. EMX’s work
on the property led to the recognition of an un-tested porphyry target situated to the east of altered outcrops, and concealed
beneath volcanic and sedimentary cover rocks.
As a subsequent event in February 2018, EMX executed an Option Agreement with Kennecott. Kennecott can earn 100%
interest in the project by: a) making annual option payments totaling US$550,000, and b) completing US$4,500,000 in
exploration expenditures before the fifth anniversary of the agreement (see EMX news release dated February 8, 2018). Upon
exercise of the option, EMX will retain a 2% NSR royalty on the project which is not capped or purchasable. After exercise of
the option, annual advance minimum payments and milestone payments will be due to EMX.
Kennecott is currently conducting a geologic mapping and sampling program in anticipation of an initial drill test.
Copper Springs Property
The Copper Springs project is located in the southern part of Arizona's Globe-Miami mining district. EMX's work and geologic
interpretations led to the recognition that the property covers a previously unrecognized porphyry trend that crosses largely
untested, structurally down-dropped blocks concealed beneath younger basin fill.
In 2017, EMX executed an Option Agreement for Copper Springs with Anglo American Exploration (USA), Inc. (“Anglo
American”) (see EMX news release dated February 28, 2017). Anglo American can earn 100% interest in the project by: a)
reimbursing 2016 holding and permitting costs and making annual option payments, together totaling US$447,000, and b)
completing US$5,000,000 in exploration expenditures before the fifth anniversary of the agreement. Upon exercise of the
option, Anglo American will pay EMX an additional US$110,000 and EMX will retain a 2% NSR royalty on the project. The
royalty is not capped or purchasable, except over two parcels of Arizona State Land where Anglo American can buy a 0.5%
NSR royalty from EMX for US$2,000,000. After exercise of the option, annual AMR payments and milestone payments will
be due to EMX.
Anglo American funded work during 2017 included expanding the project's land position, the completion of a property-wide
aeromagnetic survey, and the commencement of a two-hole reconnaissance drill program in December to test concealed
porphyry targets.
Mineral Hill Property
The Mineral Hill gold-copper project is located in the Black Hills of Wyoming, approximately 20 kilometers west of the Wharf
mine in South Dakota. The project is centered on an Eocene age alkaline intrusive complex consisting of an outer ring complex,
interior intrusive complex, and interior breccia zone. Historic small scale production in the project vicinity occurred between
the 1870’s and 1930’s, and principally was sourced from alluvial gold in drainages, gold and silver mineralization at the
Treadwell Mine, and gold and copper mineralization near the Interocean Mine.
EMX entered into an Exploration and Option Agreement with Coeur Explorations, Inc. (“Coeur”), a subsidiary of Coeur Inc.
for Mineral Hill in 2016 (see EMX news release dated October 27, 2016). The project is held under a pooling agreement with
Mineral Hill L.P. (“MHL”), with all proceeds split 50:50, except the sale of surface rights associated with patented mining
claims held by MHL. Coeur may earn a 100% interest in the project by a) making option payments totaling US$435,000
(US$10,000 received upon execution), b) making exploration expenditures totaling US$1,550,000 and c) paying US$250,000
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upon exercise of the option, with EMX and MHL retaining a 4% NSR royalty and receiving annual advance minimum royalty
payments and a milestone payment upon completion of a feasibility study. Coeur may purchase up to 1.5% of the NSR royalty
for US$5,000,000 if the first increment is purchased within 60 days of the completion of a PEA.
In 2017, Coeur expanded the property position by staking new claims, conducted geologic mapping and geochemical sampling
work, and began permitting for an anticipated drill program on US Forest Service land.
Ophir Royalty Property
The Ophir property is located in the northern portion of Utah's Ophir mining district, approximately 15 kilometers southwest
of Rio Tinto’s Bingham Canyon mine. The Ophir district is characterized by silver-lead-zinc-copper replacement deposits and
fissure veins hosted within carbonate sedimentary rocks and associated with monzonitic stocks and dikes. The property contains
several small-scale historic mines with dump material characterized by mineralization similar to other historic mines in the
district. The district's silver and base metals mineralization may be a distal expression of associated porphyry copper
mineralization at depth.
In 2016, EMX sold the five patented mining claims comprising the Ophir property to Kennecott. EMX received US$75,000 in
cash upon closing and retained a 2% NSR royalty interest from the sale (see EMX news release dated October 17, 2016).
Kennecott advises that in 2017 the claims were maintained and that the property is in good standing.
Yerington West Property
The Yerington West property, located in the Yerington mining district of west-central Nevada, contains porphyry copper-
molybdenum and copper-iron skarn targets beneath post-mineral cover rocks. Yerington West is under a 2009 Option
Agreement. The agreement was originally with Entrée Gold Inc. ("Entrée"), and now is with Mason Resources Corp. ("Mason")
(TSX: MNR) as a result of a 2017 "spin out" whereby Entrée transferred the Ann Mason project, which includes EMX's
Yerington West property, into Mason, a newly incorporated company.
Under the agreement, Mason can earn up to an 80% interest in the project by a) incurring expenditures, making cash payments,
and issuing shares of the Company within three years (completed by Entrée), b) making advance royalty payments; and c)
delivering a feasibility study before the tenth anniversary of the agreement. Under the agreement, once earn-in has been
completed, EMX can convert its interest to a 2.5% NSR royalty. Mason has the option to buy down 1.5% of the NSR royalty
for US$4.5 million.
An updated PEA for the Ann Mason project was announced in March 2017, with the Blue Hill and Ann Mason deposits outlined
~1.5 to 3 kilometers east-northeast of EMX's block of 216 unpatented claims (see Mason news release dated May 10, 2017 and
SEDAR filed technical report). EMX's claims and the option agreement with Mason remained in good standing during 2017.
Red Top Property
The Red Top property is a porphyry copper-molybdenum project located in the Globe-Miami mining district of Arizona.
EMX executed an Option Purchase Agreement in 2013 with Desert Star Resources Ltd. ("Desert Star") whereby Desert Star
could acquire a 100% interest in the project for cash, shares, and work commitments, after which EMX would retain a 2.5%
NSR royalty. Desert Star advanced the project with geologic and alteration mapping, geophysical studies, and drill permitting.
The project returned to 100% EMX control after Desert Star elected to terminate its option for the property in January of 2017.
The Red Top property is currently permitted for drill testing and available for partnership.
Other Work Conducted by EMX in the U.S.
EMX continued evaluation of property and royalty acquisition opportunities in North America, with generative work focused
on gold opportunities in the Great Basin and porphyry copper targets in Arizona and Utah. EMX acquired the following
properties in 2017 by staking on open ground: 1) the Swift and Selena gold projects in Nevada, and the 2) the Ripsey West,
Dragon's Tail, Spike E Hills, and Midnight Juniper copper projects in Arizona. The Swift and Midnight Juniper projects
represent large, highly prospective land positions and are located within world class mining districts (Cortez-Pipeline and
Morenci districts, respectively).
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Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified and
approved the above technical disclosure on North America.
Turkey
EMX has royalty and royalty generation property interests in Turkey’s Western Anatolia and Eastern Pontides mineral belts.
These properties include bulk tonnage gold, gold-silver vein, polymetallic carbonate replacement, and porphyry gold-copper
targets. Five of the seven EMX projects in Turkey are operated by partner companies. EMX has retained Dama Muhendislik
Proje ve Maden San.Tic. A.S (“Dama”), an internationally recognized Turkish engineering company based in Ankara, to
manage EMX's interests in Turkey.
Akarca Property
The Akarca royalty property covers an epithermal gold-silver district located in the Western Anatolia mineral belt that was
discovered by EMX in 2006. The project has six zones of gold-silver mineralization defined by drilling, geologic mapping,
geochemical sampling, and geophysical survey programs principally funded by partner companies.
In 2016, EMX sold AES Madencilik A.S., the wholly-owned EMX subsidiary that controls the Akarca project, to Çiftay İnşaat
Taahhüt ve Ticaret A.Ş. ("Çiftay"), a privately owned Turkish company (see EMX news release dated August 8, 2016).
Commercial terms of the sale provide payments to EMX as summarized below (gold payments can be as gold bullion or the
cash equivalent):
• US$2,000,000 cash payment to EMX upon closing of the sale (completed).
•
•
•
•
500 ounces of gold every six months commencing February 2, 2017 up to a cumulative total of 7,000 ounces of gold.
By year-end 2017, the following 500 ounce cash equivalent payment have been made to EMX: US$601,825 in
February 2017, US$634,825 in July 2017, and US$665,525 in February 2018. Receipt of these payments leaves a pre-
production total of 5,500 ounces of gold (or the cash equivalent) to be paid to EMX.
7,000 ounces of gold within 30 days after the commencement of commercial production from the property provided
that prior gold payments will be credited against this payment.
250 ounces of gold upon production of 100,000 ounces of gold.
250 ounces of gold upon production of an aggregate of 500,000 ounces of gold.
• A sliding-scale royalty in the amount of the following percentages of production returns after certain deductions
(“Royalty”):
For gold production: 1.0% on the first 100,000 ounces of gold; 2.0% on the next 400,000 ounces of gold; 3.0%
on all gold production in excess of 500,000 ounces.
For all production other than gold production: 3.0%.
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• The Royalty is uncapped and cannot be bought out or reduced.
Çiftay made its first two pre-production payments totaling US$1,235,840 to EMX (the cash equivalent of 1,000 troy ounces of
gold) during 2017. As a subsequent event, EMX received a payment of US$665,525 on February 5, 2018, as the cash equivalent
to the third 500 ounce gold bullion payment to be made under the terms of the agreement. Receipt of this payment leaves a pre-
production total of 5,500 ounces of gold (or the cash equivalent) to be paid to EMX.
In addition, Çiftay has work requirements that include drilling at least 3,000 meters on the property during each 12-month
period starting from August 5, 2016. Çiftay completed a 49 hole diamond drill program comprising 6,032 meters in 2016, a 67
hole diamond drill program comprising approximately 7,300 meters in 2017, and over 4,200 meters of trenches in 2017. Çiftay
also advised it is undertaking various engineering and environmental base line studies on the property.
Sisorta Property
The Sisorta royalty property, located in the Eastern Pontides mineral belt, is a near-surface, volcanic-hosted, high sulfidation
epithermal gold deposit. Exploration programs at Sisorta, principally funded by partner companies, have included diamond
drilling, geologic and alteration mapping, geochemical sampling, and geophysical surveys. This work has outlined a 1000 by
600 meter zone of shallow oxide gold mineralization with underlying copper and gold porphyry potential at depth.
In 2016, EMX sold EBX Madencilik A.S., the wholly-owned EMX subsidiary that controls the Sisorta property, to Bahar
Madencilik Sinayi ve Ticaret Ltd Sti ("Bahar"), a privately owned Turkish company (see EMX news release dated August 3,
2016). The terms of the sale provide for Bahar's staged payments to EMX as summarized below:
• US$250,000 cash payment to EMX upon closing of the sale (completed).
• Annual cash payments of US$125,000 (“Advance Cash Payments”) payable on each anniversary of the closing date
until commencement of commercial production.
•
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the property that is processed
on-site (increased to 5% if the ore is processed off-site).
• The Advance Cash Payments will be credited at a rate of 80% against the NSR Payment payable after commercial
production commences.
• The NSR Payment is uncapped and cannot be bought out or reduced.
Bahar advised EMX that it concluded an initial 20 hole diamond drill program comprising 1,748 meters in 2016, and that
environmental permitting continued in 2017 as a key step towards mine development.
Balya Property
The Balya royalty property is located in the historic Balya lead-zinc-silver mining district in northwestern Turkey. EMX holds
an uncapped 4% NSR royalty that it retained from the sale of the property to Dedeman Madencilik San ve Tic. A.S.
("Dedeman"), a privately owned Turkish company, in 2006.
EMX understands that since acquiring the property, Dedeman has completed over 36,000 meters of diamond drilling in addition
to commencing small scale underground development at the Hastanetepe deposit in 2015. Hastanetepe is a moderately dipping,
750 by 450 meter zone that extends from depths of 10-20 meters to 200-300 meters as multiple stacked horizons of lead-zinc-
silver mineralization primarily developed along contacts between limestones and dacitic intrusions. Dedeman's development
work has concentrated on an area of shallow, higher grade lead-zinc-silver mineralization on the northeast margin of
Hastanetepe with a production shaft and two working levels. Dedeman advised EMX that it is continuing with production of
lead-zinc-silver mineralized material at Hastanetepe.
The Balya royalty due to EMX from 2016 production totaled US$154,299, from which Dedeman's earlier advance royalty
payment of US$100,000 was credited, resulting in an adjusted payment to EMX of US$54,299 completed in 2017. EMX will
receive full royalty payments going forward, with additional payments expected for sales of materials as mining continues.
Dedeman advised it had been selling both mineral concentrates and run-of-mine materials into the market during 2017.
Golcuk Property
The Golcuk royalty property is located in the Eastern Pontides metallogenic belt of northeast Turkey. The mineralization at
Golcuk primarily occurs as stacked, stratabound horizons with disseminated copper and silver hosted in volcanic units, as well
as in localized cross-cutting fault-controlled veins and stockworks of bornite, chalcopyrite and chalcocite.
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Pasinex Resources Ltd. (“Pasinex”) (CSE:PSE) signed an agreement in 2012 granting Pasinex an option to acquire 100%
interest in the Golcuk property for 3,000,000 common shares of PSE and work commitments. EMX retains a 2.9% NSR royalty,
which Pasinex has the option of buying down to 0.9% within six years of the agreement date for US$1 million. In 2017 EMX
received 224,150 shares of Pasinex and US $49,204 in cash for the advance royalty payment due in September, 2017.
Pasinex conducted limited (i.e., ~1000 m) reconnaissance drill testing on the Golcuk South copper target in 2017.
Trab-23 Property
The Trab-23 property is located in northeast Turkey. The project hosts both porphyry gold (copper-molybdenum)
mineralization and epithermal quartz-barite-gold veins.
Tumad Madencilik Sanayi ve Ticaret A.S. (“Tumad”), a privately owned Turkish company, executed an option agreement in
February 2013 granting it an option to acquire Trab-23 from EMX. The Trab-23 agreement provided for in-ground spending
requirements, a revenue stream of annual earn-in and pre-production payments, and a revenue stream based upon production.
Tumad's payment and drill requirements have not been met. Tumad terminated the agreement in 2017, and is currently in the
process of returning the property to 100% EMX control.
Alankoy Property
The Alankoy gold-copper property, located in the Biga Peninsula of northwestern Turkey, occurs in an area noted for
discoveries characterized by alunite-rich epithermal alteration and the development of vuggy silica lithocaps. EMX's work has
outlined a six square kilometer area of lithocaps and quartz–alunite and argillic alteration with gold-copper mineralization as
well as skam and replacement style mineralization based upon geologic mapping, rock and soil sampling, spectral analyses,
ground magnetics, and historic reconnaissance drill results.
EMX executed an Exploration and Option Agreement for Alankoy with Black Sea Copper & Gold Corp. (“Black Sea”), a
privately-held British Columbia corporation, in November, 2015. In 2016, Black Sea conducted surface exploration programs,
and met statutory requirements to keep the property in good standing. In 2017, Black Sea terminated the agreement, and EMX
regained 100% control of the project. Alankoy is currently available for partnership.
Other Property Interests
EMX has a royalty interest in the Aktutan polymetallic project sold to Dedeman in 2007 for considerations that include a 4%
uncapped NSR and annual advance royalty payments. Dedeman advises it is currently evaluating the next steps for the project,
while awaiting approval for an operations permit.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and
approved the above technical disclosure on Turkey.
Europe
EMX has been actively exploring in Europe since 2003, and has assembled a diverse portfolio of copper, polymetallic, nickel
and cobalt royalty and royalty generation properties in Scandinavia, as well as a portfolio of copper and gold royalty properties
in Serbia. In Scandinavia, the Company continued to pursue strategic royalty partnerships for properties in the portfolio and
add value through low cost generative exploration. These efforts have resulted in the conversion of five exploration properties
to royalty and equity interests, as well as the addition of multiple gold, polymetallic, nickel and cobalt royalty generation
properties to the portfolio. EMX also has important royalty interests in Serbia that include Nevsun's Timok Project and the
Cukaru Peki copper-gold deposit located in the prolific Timok Magmatic Complex.
Scandinavia
Scandinavia is a favorable jurisdiction for mineral exploration and development, and EMX has been focused on organically
generating and growing the royalty portfolio. The sale of core assets to Boreal Metals Corp. ("Boreal"), which closed in Q1
2017, included the Gumsberg and Adak properties in Sweden, and the Tynset and Burfjord properties in Norway. These
properties were acquired by EMX between 2013 and 2015 by license application on open ground. Gumsberg, Adak, and Tynset
host Volcanogenic Massive Sulfide (“VMS”) polymetallic mineralization, and Burfjord is characterized by Iron-Oxide-Copper-
Gold (“IOCG”) mineralization. EMX identified multiple exploration targets on these properties based upon combinations of
historic data compilations, geologic mapping, geochemical sampling, geophysical surveys, and reconnaissance drilling.
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Commercial terms of the agreement with Boreal are summarized below (see EMX news release dated November 22, 2016):
• At closing, EMX transferred to Boreal its wholly-owned subsidiaries that owned the properties.
• At closing, Boreal issued to EMX common shares of Boreal representing a 19.9% equity ownership in Boreal. Boreal
had the continuing obligation to issue additional shares of Boreal to EMX to maintain its 19.9% interest in Boreal, at
no additional cost to EMX, until Boreal raised CDN $5,000,000 in equity (completed). Thereafter, EMX has the right
to participate pro-rata in future financings at its own cost to maintain its 19.9% interest in Boreal.
• EMX will receive an uncapped 3% net smelter return (“NSR”) royalty on each of the properties. Within five years of
the closing date, Boreal has the right to buy down up to 1% of the royalty on any given project by paying EMX
US$2,500,000 in cash and shares of Boreal. Such buy down is project specific.
• EMX will receive annual advance royalty (“AAR”) payments of US$20,000 for each of the properties commencing
on the second anniversary of the closing, with each AAR payment increasing by US$5,000 per year until reaching
US$60,000 per year, except that Boreal may forgo AAR payments on two of the four Properties in years two and
three. Once reaching $60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as
published by the U.S. Department of Labor, Bureau of Labor Statistics).
• EMX will receive a 0.5% NSR royalty on any new mineral exploration projects generated by Boreal in Sweden or
Norway, excluding projects acquired from a third party containing a mineral resource or reserve or an existing mining
operation. These royalties are not capped and not subject to a buy down.
• EMX has the right to nominate one seat on the Board of Directors of Boreal (completed).
The conversion of the four properties in Sweden and Norway to royalty and equity interests marked the achievement of a major
Company objective. Boreal subsequently raised over CDN $5,000,000 of capital via equity and private placement financings,
46
and obtained an initial public listing on the TSX Venture Exchange as a Tier 2 issuer (TSX Venture: BMX). As of December
13, 2017 EMX held 9,205,882 common shares of Boreal representing ~18.1% on an issued and outstanding basis (see EMX
news release dated December 13, 2017). The agreement with Boreal provides EMX with near-term AAR payments, potential
royalty revenue in the future, and upside from a equity holding in a Scandinavian-focused resource company.
Following the Boreal transaction, EMX continued to aggressively acquire new properties in Scandinavia during 2017, with a
focus on orogenic lode/intrusion-related gold, Iron-Oxide-Copper-Gold (“IOCG”), Volcanogenic Massive Sulfide (“VMS”),
Carbonate Replacement Deposit ("CRD"), and nickel-copper-cobalt projects. The Company has acquired, or has pending
applications for, over 120,000 hectares of prospective ground in Sweden and Norway that include:
● Intrusion-related gold projects along the Skellefteå area, most of which are located along the “Gold Line”, Sweden’s
chief gold producing region. Additional base metal projects were also acquired in the Skellefteå district.
● Multiple acquisitions in the Bergslagen region of southern Sweden, including EMX’s Riddarhyttan IOCG/VMS
project, as well as several polymetallic VMS, CRD, and nickel-copper-cobalt style targets.
● New acquisitions in Norway, including a prospective orogenic lode gold style project with outcropping gold
mineralization, and a cobalt project along a trend of historic cobalt mines.
Most of these new royalty generation projects in Sweden and Norway are available for partnership (see discussion of subsequent
events below), and have attracted interest from a number of potential partners.
In December 2017, EMX executed an option agreement for the sale of the Slättberg Project to Sienna Resources Inc. (“Sienna”)
(TSX Venture: SIE) (see EMX news release dated December 4, 2017). The Slättberg Project hosts nickel-copper-cobalt
enriched massive sulfide mineralization, and is located approximately 25 kilometers northwest of Falun, Sweden. Sienna can
earn 100% interest in the Project during a one-year option period, with commercial terms of the agreement summarized below
(all dollar amounts in CAD):
• On signing the agreement, Sienna issued EMX 3 million common shares of Sienna stock.
• As a condition to the exercise of the option, Sienna must undertake work commitments of at least $500,000 on the
Project, including drilling of at least 750 meters.
• Upon exercise of the option, Sienna will issue to EMX an additional 3 million shares of Sienna stock, and EMX will
receive a 3% NSR royalty on the Project.
• After exercise of the option, Sienna will use commercially reasonable efforts to raise $3,000,000 for development of
the Project and other activities. Once Sienna has raised that amount, Sienna will issue an additional 4 million shares
to EMX. Thereafter, EMX will have the right to participate pro-rata in future financings at its own cost to maintain its
interest in Sienna.
• Within six years of the execution of the agreement, Sienna may purchase 0.5% of the NSR royalty for $1,500,000,
leaving EMX with a 2.5% NSR royalty.
As a subsequent event in 2018, EMX executed a definitive agreement for the sale of the Modum cobalt project to Boreal (see
EMX news release dated January 16, 2018). The Modum Project is located in southern Norway’s Modum mining district, ~75
kilometers west of Oslo. The Project partially surrounds the historic Skuterud mine property, which was Europe’s principal
producer of cobalt from the late eighteenth through nineteenth centuries. Pursuant to the agreement, Boreal will acquire 100%
interest in the Project according to the following commercial terms (all dollar amounts in USD):
• At closing, Boreal will issue to EMX 1,324,181 common shares of Boreal that will bring EMX’s share of equity
ownership in Boreal to 19.9%. EMX will have the right to participate pro-rata in future financings at its own cost to
maintain its 19.9% interest in Boreal.
• At closing, EMX will transfer its Modum exploration licenses to Boreal.
• EMX will retain a 3% NSR royalty on the Project, of which 1% may be purchased by Boreal on or before the fifth
anniversary of the closing date in 0.5% increments for a total of $2,500,000 in cash and common shares of Boreal
stock.
• EMX will receive AAR payments, with an initial $20,000 payment, commencing on the second anniversary of the
closing, with each subsequent AAR payment increasing by $5,000 per year until reaching $60,000 per year. Once
reaching $60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as published by
the U.S. Department of Labor, Bureau of Labor Statistics).
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EMX also holds an effective 0.5% NSR royalty interest in Sunstone’s (formerly Avalon) Viscaria copper project located in the
Kiruna mining district of northern Sweden. The Viscaria royalty was acquired by EMX from the purchase of the Phelps Dodge
Exploration Sweden AB assets in 2010. Upon receipt of US$12 million in royalty revenues, the royalty rate increases to a 1.0%
NSR. Avalon completed a mineral resource estimate and "scoping study" based upon a combination open pit and underground
scenario in 2015, and updated the scoping study in 2016 (see Sunstone news releases dated December 15, 2015 and April 5,
2016). During 2017, Sunstone continued to advance the Environmental and Social Impact Assessment (ESIA) and permitting
process for the project, and conducted exploration drilling on the "D Zone South" target (see Sunstone's December 2017
Quarterly Activities Report).
Serbia
EMX's royalty portfolio in Serbia initially resulted from prospect generation and organic royalty growth via the 2006 sale of
its properties, including Brestovac West, to Reservoir Capital Corp., for uncapped NSR royalties of 2% for gold and silver and
1% for all other metals. Reservoir Capital Corp. later transferred those interests to Reservoir Minerals Inc. (“Reservoir”).
Subsequently, EMX acquired 0.5% NSR royalty interests (note: the royalty percentage is subject to reduction only as provided
in the royalty agreement) covering the Brestovac and Jasikovo-Durlan Potok properties (see EMX news release dated February
4, 2014). On April 24, 2016, Reservoir announced a definitive agreement with Nevsun Resources Ltd. ("Nevsun") to combine
their respective companies. On May 2, 2016 Reservoir and Nevsun reported that a ROFO on the project was successfully
exercised, with Reservoir acquiring Freeport's interest in the Cukaru Peki deposit's Upper Zone, and increasing its interest in
the Lower Zone joint venture with Freeport. Subsequently, Nevsun closed the acquisition of Reservoir as announced on June
23, 2016.
EMX's Brestovac and Brestovac West royalty properties are included in Nevsun's Timok Project, with Brestovac covering the
Cukaru Peki deposit's Upper and Lower Zones. EMX notes that a) the original Brestovac and Brestovac West permits are now
covered by the Brestovac Metonivca and Brestovac Zapad permits, and b) portions of a reconfigured Jasikovo-Durlan Potok
permit (i.e., expanded in some areas and reduced in other areas) are not covered by the EMX royalty. Brestovac (Brestovac
Metonivca) hosts high sulfidation epithermal and porphyry copper-gold mineralization at the Cukaru Peki deposit.
In 2017, Nevsun reported an updated PEA for the Timok Project's Upper Zone with measured and indicated resources of 28.7
million tonnes averaging 3.7% copper and 2.4 g/t gold, and inferred resources of 13.9 million tonnes averaging 1.6% copper
and 0.9 g/t gold at a "Resource NSR" cutoff > US$35/tonne (based upon $3.49/lb Cu, $1565/oz Au, and technical and economic
parameters given in the PEA study) (see Nevsun news release dated October 26, 2017 and SEDAR filed technical report). The
PEA outlined a 15 year mine life producing over 2.1 billion pounds of payable copper and 569 thousand ounces of payable
gold, with an after tax NPV8 of US$1.5 billion. Nevsun's 2018 guidance stated that an in-progress Pre-Feasibility Study ("PFS")
would be completed in Q1 2018, and a $15 million work program budgeted for the exploration decline was contingent on
permitting by the State of Serbia (see Nevsun news release dated January 31, 2018). Nevsun further stated that it will invest
US$50-60 million to advance development of the Timok Upper Zone Project in 2018.
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In addition to Upper Zone development work, Nevsun has budgeted for Upper and Lower Zone exploration in 2018. This work
will include follow-up on a new high grade zone of copper-gold mineralization drilled 500 meters east of the Upper Zone that
occurs over an area of 250 by 250 meters and has reported intercepts that include 2.93% Cu and 2.54 g/t Au over 27 meters
starting at 396 meters (true width estimated at 80-95%) (see Nevsun news release dated January 16, 2018). In addition, the
ongoing 2017-2018 drill program for the Timok Lower Zone project, which is in a joint venture with Freeport, is anticipated
to be completed in early 2018. Drill results for the Lower Zone, which outlines a 1,000 by 1,500 meter footprint of porphyry
copper-gold mineralization, include 1.08% copper and 0.27 g/t Au over 747.4 meters starting at 1,341 meters (true width
estimated to be ~50-60%) (see Nevsun news release dated December 4, 2017).
EMX's Timok royalty properties add significant upside potential from one of the world's top copper development projects.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and
approved the above technical disclosure on Europe.
Australia and New Zealand
The Company's programs in the Australia and New Zealand region continued to operate at a reduced expenditure rate, while
continuing to evaluate generative royalty opportunities. The Koonenberry royalty property in New South Wales, Australia is
being advanced by operator Koonenberry Gold Pty Ltd. In New Zealand, the Neavesville gold-silver royalty property is being
advanced by operator E2 Metals Ltd. The QLD Gold property in Queesnland, Australia, was added to the Company's royalty
generation portfolio in 2017. The Ohakuri and Muirs Reef gold projects, located on New Zealand's North Island, were dropped
in 2017 due to concerns about acquiring social license to advance the properties.
Koonenberry Property
The Koonenberry royalty property hosts gold occurrences and gold geochemical anomalies coincident with prominent
structural features related to the regional scale Koonenberry fault. In 2017, Koonenberry Gold Pty Ltd. (“KNB”) completed
the earn-in requirements under the Exploration and Option Agreement (the “Agreement”) between North Queensland Mining
49
Pty Ltd. (“NQM”) and the Company, and elected to acquire EMX’s Koonenberry exploration licenses (see EMX news release
dated September 19, 2017). KNB, a private Australian company formed for the purpose of developing the project, is the
successor in interest to NQM under the Agreement. The Company has now transferred its wholly-owned subsidiary, EMX
Exploration Pty Ltd, the holder of the Koonenberry licenses, to KNB. EMX retains a 3% royalty on all future production from
the Koonenberry licenses. As a result of this transaction, all of EMX’s interests in the Koonenberry gold project have now been
converted to royalties. KNB has informed EMX of their intention to continue to explore and evaluate the development potential
of both the eluvial/alluvial and bedrock sources of gold at Koonenberry.
Neavesville Property
The Neavesville property consists of a single exploration permit in the Hauraki Goldfield of New Zealand's North Island. EMX
acquired Neavesville on open ground with minimal cost. The property hosts epithermal gold-silver mineralization that has
geologic features similar to other deposits of the Hauraki Goldfield.
The project is under a definitive agreement with an Australian company, E2 Metals Ltd. (ASX: E2M), which acquired the
EMX subsidiary that controls the Neavesville property. The agreement with E2M provides for work commitments, staged
payments, milestone payments based upon JORC reserves, and a 3% NSR production payment, all to the benefit of EMX.
E2M's February 23, 2017 Replacement Prospectus included results from a JORC (2012) inferred resource estimate for Trig's
Bluff reported at a gold cut-off of 0.7 g/t gold as 1,489,500 tonnes averaging 2.58 g/t gold (123,600 oz Au contained) and 9.69
g/t Ag (509,100 oz Ag contained). The independent resource statement, provided by Mining Plus, was based upon drill results
used for inverse distance squared block model grade estimation within constraining mineralization and alteration wireframes.
In Q2, E2M commenced trading on the ASX Exchange following completion of an initial public offering that raised AUD $6
million (see E2M news release dated April 19, 2017).
During 2017, E2M conducted limited geologic work at Neavesville while remaining focused on fulfilling statutory and filing
requirements to keep the license in good standing.
QLD Gold Property
EMX's license application for the QLD Gold project in southeastern Queensland, Australia, was granted for a period of five
years on March 30, 2017. The project contains historic copper-zinc skarn prospects, as well as a number of diorite hosted gold
mineralized prospects. The QLD Gold project is available for partnership.
Qualified Person
Eric P. Jensen, CPG, a Qualified Person as defined by NI 43-101 and employee of the Company, has reviewed, verified and
approved the above technical disclosure on Australia and New Zealand.
Haiti
EMX's interests in Haiti have been converted into NSR royalties. These royalty properties principally resulted from EMX and
Newmont Ventures Limited (collectively, the “JV” or "Joint Venture") exploring a land position along a 130 kilometer trend
of Haiti’s Massif du Nord mineral belt starting in 2008, with Newmont funding and managing the Joint Venture. In 2015, EMX
sold its Haiti Joint Venture interests, which covered six designated exploration areas, to Newmont. Pursuant to the transaction,
Newmont acquired all of EMX's interest in the designated exploration areas on the following terms: a) Newmont paid US$4
million in cash to EMX at closing, b) the Joint Ventures were terminated, c) EMX retained a 0.5% NSR royalty on the 49
Research Permit applications covering the designated exploration areas, and d) EMX retains the right to acquire any properties
proposed to be abandoned or surrendered by Newmont.
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In 2016, EMX sold the Grand Bois project, which was outside the Joint Venture with Newmont, to Sono Global Holdings Inc.
("Sono"), a privately held Nevada corporation. EMX retained a 0.5% NSR royalty interest in the Grand Bois project and the
right to acquire any properties proposed to be abandoned or surrendered from the Grand Bois project in the future. In Q3 2017,
3D Resources Inc., an ASX listed company, announced that it had executed a definitive agreement to acquire a 70% interest
in Ayiti Gold Company SA, Sono's Haitian entity holding the Grand Bois license (see 3D Resources news release dated August
9, 2017). According to the agreement, 3D Resources must complete a positive feasibility study, as well as fulfill other
obligations, by September 15, 2018.
As EMX understands, the Haitian government continued working on a new mining law during 2017, which has been under
review since 2013 when the Mining Convention process was suspended.
Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified and
approved the above technical disclosure on Haiti.
Strategic Investments
IG Copper LLC
EMX is a strategic investor in IGC, a privately held company with exploration properties in Khabarovsk Krai of Russia's Far
East Russia region. IGC's projects include the Malmyzh copper-gold porphyry joint venture with Freeport (51% IGC, 49%
Freeport), which is operated and managed by IGC. IGC’s other exploration properties are 100% controlled by IGC and not
subject to the joint venture with Freeport. EMX was an early investor in IGC, and is its largest shareholder, with approximately
41% of the issued and outstanding shares (40% equity position on a fully-diluted basis) from investments totaling over US$11
million. IGC is a material investment to the Company.
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Malmyzh Project
Malmyzh is a district-scale discovery with over 15 porphyry copper-gold centers identified within a 16 by 5 kilometer intrusive
corridor. The project, which occurs 220 kilometers northeast of the Russia-China border at Khabarovsk, has excellent logistical
characteristics and available infrastructure, including high voltage power lines, a natural gas pipeline, a paved national highway,
the Amur River, and a rail line that are all nearby to the property.
The property’s 152.8 square kilometers (15,280 hectares) of exploration and mining licenses consist of: 1) HAB 02018 granted
9/18/2006 and expiring 12/31/2026, and 2) HAB 02334 granted 7/23/2010 and expiring 12/31/2030. The "Malmyzh Flanks"
exploration license (HAB 02746 BP) was granted 10/26/2015, expires 12/31/2022, and covers 74.1 square kilometers (7,410
hectares). The total Malmyzh land position totals 226.9 square kilometers (22,690 hectares), and includes additional areas for
potential project development as well as extensions to known exploration targets. IGC advises that the terms for the licenses
can be granted extensions.
Copper-gold mineralization occurs in diorite porphyry intrusives, as well as in hornfels-altered and stockworked sedimentary
wall rocks, and consists of near-surface zones (i.e., within 1 to 50 meters of the surface) of variable chalcocite enrichment
grading into chalcopyrite-rich and chalcopyrite-bornite-magnetite mineralization to depth. The extent of the porphyry copper-
gold mineralized systems has not been fully determined within the Malmyzh district. Much of the property has more than 15
meters of cover and is undrilled, thereby providing substantial exploration potential for additional discoveries.
In 2015, a statement of inferred resources for Malmyzh's Valley, Central, Freedom (Southeast), and Flats deposits under NI
43-101 and CIM definition standards was provided by Phil Newall, PhD, BSc, CEng, FIMMM, a Qualified Person under NI
43-101 and managing director of Wardell Armstrong International ("WAI"), an independent UK based consulting company.
The open pit constrained inferred resources at a 0.30% copper equivalent cut-off are 1,661 million tonnes at average grades of
0.34% copper and 0.17 g/t gold, or 0.42% copper-equivalent, containing 5.65 million tonnes (12.45 billion pounds) copper and
9.11 million ounces gold, or 7.06 million tonnes (15.56 billion pounds) copper-equivalent. Copper equivalent (CuEq) was
calculated as CuEq = Cu% + (Au g/t * 0.5) based on assumed prices of $3.25/lb Cu and $1400/oz Au, with recoveries of 90%
for Cu and 70% for Au.
At the time of WAI's 2015 resource estimate, project drilling totaled about 70,500 meters in over 211 core holes, with the
majority of the drilling (~55,000 m) concentrated on defining the four resource deposits at nominal 200 by 200 meter centers,
and generally to less than 500 meters depth. See EMX's May 26, 2015 news release and SEDAR filed technical report titled
"NI 43-101 Technical Report on the Initial Mineral Resource Estimate for the Malmyzh Copper-Gold Project, Khabarovsk
Krai, Russian Federation" with an effective date of May 1, 2015 and dated July 10, 2015 for more information on the exploration
results, QA/QC procedures, and methodology used to estimate the Malmyzh inferred resources.
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The copper-gold mineralization in the Valley, Central, Freedom (Southeast), and Flats resource deposits have favorable open-
pit geometries with potentially low stripping ratios. All four resource deposits are open at depth (> 350-600 m), and importantly,
there are zones of shallow, higher grade copper-gold mineralization at the Valley and Freedom (SE) deposits, and high grade
below the resource pit at Central. Furthermore, there is copper-gold mineralization at the Freedom Northwest prospect not
currently included in the Malmyzh inferred resource estimate due to the need for in-fill drilling.
IGC advised that the Malmyzh joint venture had also advanced Malmyzh in 2015 by receiving approval of the “official on
balance C1+C2 reserves” from the GKZ (State Reserves Committee), the government agency authorized to approve resources
and reserves in the Russian Federation. The Malmyzh “official government approved reserves” were estimated according to
the rules and regulations of the Russian Federation, and are not the same as reserves under NI 43-101 or SEC Industry Guide
7. The GKZ “official reserves” have been listed and added to the “State Balance of Reserves”. In addition, IGC advised that
the “prospecting phase” of the Malmyzh exploration and mining licenses were successfully completed. Subsequently, the joint
venture filed documents to continue to the advanced exploration and mining phase of the project's development as required for
“strategically significant” deposits according to Russian law (i.e., the Law on Foreign Investments in Strategic Industries, also
termed the Strategic Industries Law or "SIL").
In 2016, IGC advised that SIL approval to advance the Malmyzh project had been received from the Government Commission
on Monitoring Foreign Investment (the "Commission") (see EMX news release dated July 25, 2016). According to IGC,
highlights of the Commission's approval include:
• The Joint Venture, as a majority foreign owned business entity, has been approved to retain control of the Malmyzh
project exploration and mining licenses.
• The Joint Venture, therefore, maintains mining and production rights for the Malmyzh and Malmyzh North
exploration and mining licenses.
• The Joint Venture holds 100% of the rights for the Malmyzh and Malmyzh North exploration and mining licenses, and
is entitled to recover all minerals of economic value including copper, gold and by-product minerals.
The conclusion of the SIL process initiated a new, multi-year phase in the project's development. The Malmyzh team outlined
plans and programs which include additional technical work (i.e., drilling, exploration, metallurgy, engineering, and
hydrology), as well as environmental, social, and economic assessments. This next phase of work will ultimately conclude as
a detailed "TEO of Permanent Conditions" report, which is considered to be a precursor to commencement of exploitation and
mining (TEO is the acronym for "Technico-Economicheskiye Obosnovaniye" which translates as Technical-Economic Basis).
After receiving SIL approval, IGC commenced a reconnaissance diamond drilling program in late 2016 at the Freedom
Northwest, North, Sleeper West, and Sleeper prospects totaling ten holes for 3,474.8 meters. After final assays were received
from IGC in early 2017, EMX announced the results in a January 24, 2017 news release. The last hole of the program (AMM-
213), drilled at Freedom Northwest, provided particularly notable results, intersecting 747.4 meters (108.7-856.1 m) averaging
0.49% copper equivalent (0.41% copper and 0.17 g/t gold) principally hosted in phreatomagmatic and magmatic hydrothermal
breccias (approximate true width in porphyry style mineralization). AMM-213 was a vertical hole designed to commence in-
fill of the 200 by 400 meter grid pattern at Freedom Northwest, which is not currently included as a resource deposit, to the
200 by 200 meter pattern used to delineate inferred resources. The 747.4 meter intercept is the longest mineralized interval
drilled at Malmyzh to date. Further, the hole was terminated due to equipment limitations, and bottomed in mineralization (1.4
m interval from 854.7-856.1 m of 0.46% copper equivalent from 0.32% copper and 0.29 g/t gold). The drilling at Sleeper West
and North prospects also returned encouraging results.
IGC's 2017 follow-up diamond drilling program at the Freedom Northwest prospect totaled three holes (AMM-214, -215, and
-216) for 2,437.6 meters. The results, as reported in an EMX news release dated July 25, 2017, included an intercept of 417.3
meters (219.4-636.7 m) averaging 0.60% copper equivalent (0.50% copper and 0.21 g/t gold), with a higher grade sub-interval
of 142.6 meters (255.4-398.0 m) averaging 0.74% copper equivalent (0.62% copper and 0.26 g/t gold) from hole AMM-216
(approximate true widths). The copper-gold mineralization in all three follow-up holes drilled in 2017 is principally hosted in
magmatic-hydrothermal breccias, and combined with earlier Freedom Northwest drill results, suggests a broad, inferred outline
of a pipe-like breccia body with approximate dimensions of 800 x 800 meters in plan view, and a vertical dimension of ~650
to over 850 meters. The interpreted breccia pipe footprint generally coincides with a nearly circular magnetic anomaly defined
from IGC's high resolution ground magnetic surveys.
The 2017 exploration program at Freedom Northwest represents the first deep drill testing at Malmyzh, as previous drilling
was concentrated on shallow mineralization throughout the district. In late 2017, IGC advised that it drilled one hole each at
the Freedom Southeast and Valley deposits, totaling 1,045 meters, to provide sample material for proposed metallurgical test
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work. IGC is planning further follow-up at Freedom Northwest in 2018 based upon the encouraging results from the initial
phase of deep targeted drilling.
EMX is an investor in IGC, and as a result there are no direct holding costs to the Company. Regarding the joint venture
agreement, IGC and Freeport fund at their respective level of ownership interest, or dilute. Should either company dilute to less
than a 10% interest, remaining ownership is converted to a US$0.005 (one-half cent) per pound copper equivalent reserve
payment, which remains in effect through the life of mine. Freeport retains no claw-back or NSR provisions.
Other IGC Projects
At year-end 2017, IGC also had 100% control of the 390 square kilometer Shelekhovo and 260 square kilometer Salasinskaya
exploration properties, as well as the more recent Okchonskaya and Medvedzhe acquisitions. At the Shelekhovo project,
historic government exploration surveys identified multiple occurrences of gold, silver, and copper associated with quartz
veining and alunite. IGC's 2017 reconnaissance exploration at Shelekhovo included geochemical sampling that identified broad
gold-in-soil anomalies (+20 ppb Au) over the Predgornoe (~1500x1000 m) and Bistroe (400x400 m) prospects associated with
silicified material, as well as arsenic and copper anomalies. Salasinskaya is considered to be the northern extension of the
Shelekhovo anomaly cluster, and underwent limited evaluation in 2017 according to IGC. Okchonskaya is a 96 square kilometer
property situated directly west-southwest of Shelekhovo that is characterized by gold anomalies and prospects identified from
historic government work. The 71.5 square kilometer Medvedzhe property is located 25 kilometers southeast of Malmyzh, and
contains historic Soviet era geochemical anomalies as well as host rocks similar to those at Malmyzh.
Further discussion of IGC’s exploration results and EMX’s due diligence data verification and QA and QC procedures can be
found in the Company’s May 26, 2015, January 24, 2017, and July 25, 2017 news releases, as well as in the SEDAR filed
Malmyzh Technical Report with an effective date of May 1, 2015.
Revelo Resources Corp.
EMX has a strategic investment in Revelo Resources Corp. ("Revelo") (TSX-V:RVL), a company focused on the acquisition
and exploration of mineral properties in the prolific metallogenic belts of northern Chile. Revelo has a portfolio of 19
exploration projects prospective for copper, gold and silver, as well as royalty interests covering seven exploration properties.
Qualified Person
Dean D. Turner, CPG, a Qualified Person as defined by NI 43-101 and consultant to the Company, has reviewed, verified
and approved the above technical disclosure on Strategic Investments.
GEOTHERMAL ROYALTIES
EMX initiated a geothermal energy program in 2010, and acquired assets in Slovakia and Peru. EMX subsequently sold its
geothermal assets in 2013 to Starlight Geothermal Ltd. ("Starlight") for cash payments, an equity position in Starlight, and
gross royalties from future geothermal energy production. In 2017, Starlight advised that the geothermal concessions in Peru
had been dropped due to a lack of proactive government support to encourage development (i.e., favorable feed-in tariffs, etc.).
Starlight also advised that the geothermal concessions in Slovakia were maintained in 2017, with the potential for advancement
in 2018 assuming project financing is secured.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Years Ended December 31, 2017, 2016 and 2015
GENERAL
This discussion and analysis of financial position and results of operations is prepared as at April 3, 2018 and should be read
in conjunction with the audited annual consolidated financial statements of the Company for the years ended December 31,
2017, 2016 and 2015 and the related notes thereto.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial
Reporting Interpretations Committee (“IFRIC”).
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The Company and its subsidiaries operate as a royalty and prospect generator engaged in exploring for, and generating royalties
from, metals and minerals properties. The Company’s royalty and exploration portfolio mainly consists of properties in North
America, Turkey, Europe, Australia, and New Zealand. See Item 4.D. “Property, Plant and Equipment”.
The Company’s working capital position at December 31, 2017 was $6,535,893. With its current plans for the year and the
budgets associated with those plans, in order to continue funding its administrative and royalty generation programs from the
date of this Form 20-F, management believes it will require additional working capital to undertake it’s current business plan.
The Company has incurred recurring losses and has an accumulated deficit of $104,382,744. In order to maintain or adjust the
capital structure, the Company may issue new shares through public and/or private placements, sell assets, or return capital to
shareholders. These uncertainties may cast doubt upon the Company’s ability to continue as a going concern.
Some of the Company’s activities for exploration and evaluation assets are located in emerging nations and, consequently, may
be subject to a higher level of risk compared to other developed countries. Operations, the status of mineral property rights
and the recoverability of investments in emerging nations can be affected by changing economic, legal, regulatory and political
situations.
At the date of these consolidated financial statements, the Company has not identified a known body of commercial grade
mineral on any of its exploration and evaluation assets. The ability of the Company to realize the costs it has incurred to date
on these exploration and evaluation assets is dependent upon the Company identifying a commercial mineral body, to finance
its development costs and to resolve any environmental, regulatory or other constraints which may hinder the successful
development of the exploration and evaluation assets.
These consolidated financial statements of the Company are presented in Canadian dollars unless otherwise noted, which is the
functional currency of the parent company and its subsidiaries except as to Bullion Monarch, the holder of a royalty income
stream whose functional currency is the United States dollar.
DESCRIPTION OF BUSINESS
The Company is principally in the business of developing cash flows from a) organically generated royalties derived from a
portfolio of mineral property interests and b) royalty acquisitions. These cash flows are supplemented by upside from strategic
investments. EMX’s portfolio mainly consists of properties in North America, Turkey, Europe, Haiti, Australia, and New
Zealand. These three key components of the Company's business model are briefly summarized as:
• Royalty Generation. EMX's fourteen year track record of successful exploration initiatives has developed into an
avenue to organically generate mineral property royalty interests and cash flows. The strategy is to leverage in-country
geologic expertise to acquire prospective properties on open ground through license application or claim staking, and
to build value through low cost work programs and targeting. These properties are sold to partner companies for
retained royalty interests, advance minimum royalty payments, project milestone payments, and other considerations
that may include equity interests. Pre-production payments provide early-stage cash flows to EMX, while the operating
companies build value through exploration and development. EMX participates in project upside at no additional cost,
with the potential for future royalty payments upon the commencement of production.
• Royalty Acquisition. EMX has been pursuing the prudent acquisition of royalty property interests since 2011. The
purchase of royalty interests allows EMX to choose quality assets for acquisition that range from producing mines to
development properties. These purchases are designed to "jump start" the organic royalty portfolio growth process by
providing EMX with immediate to near term royalty revenue. The timely identification of top tier acquisition
candidates is often informed by the Company's in-country royalty generation initiatives.
• Strategic Investment. An important complement to EMX's royalty generation and royalty acquisition initiatives
comes from strategic investment in opportunities with under-valued mineral assets and upside exploration potential.
Exit strategies can include royalty positions, equity sales, or a combination of both. As well, these investments can
lead to the Company's identification of candidates for acquisition or merger.
EMX is focused on increasing global revenue streams from royalties, advance royalties and other cash payments to balance
overall company-wide expenditures. This approach provides a foundation for supporting EMX’s growth and increasing
shareholder value over the long term.
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5.A. Operating Results
Year ended December 31, 2017, 2016, and 2015
The net loss for the year ended December 31, 2017 (“FY17”) was $7,393,384 compared to $2,683,482 for the prior year
(“FY16”), and $6,875,857 for the year ended December 31, 2015 (“FY15”). The loss for FY17 was made up of a net royalty
income of $455,033 (FY16 – Loss $47,265; FY15 – Loss $187,773) after depletion and related tax, net exploration expenditures
of $4,471,074 (FY16 - $4,999,959; FY15 - $4,364,675), general and administrative expenditures of $3,765,029 (FY16 -
$3,220,339; FY15 - $3,535,534) and other losses totaling $2,102,216 (FY16 – Gain $4,144,749; FY15 - $2,219,105) offset by
a deferred income tax recovery of $2,489,902 (FY16 - $1,439,332; FY15 - $3,431,230). Key items in “other losses” include;
an impairment of royalty intersts in FY17 of $Nil (FY16 - $Nil; FY15 - $3,973,699), a gain in FY17 on the sale of exploration
and evaluation assets of $1,305,237 (namely sale of Sweden properties to Boreal), a gain of $6,834,999 (namely Akarca and
Sisorta) in FY16, and a gain of $5,393,305 in FY15 (namely sale of Haiti operations), a dilution gain on associated companies
of $503,543 (FY16 - $982,634; FY15 - $Nil), an equity loss in associated companies of $994,548 (FY16 - $1,295,568; FY15
- $1,062,146), and a write-down of goodwill of $2,709,239 (FY16 - $1,518,328; FY15 - $3,047,605).
Revenues
In FY17, the Company earned $2,857,927 (FY16 - $2,227,322; FY15 - $1,609,553) of royalty income. This included royalty
income earned for 1,308 (FY16 - 1,361; FY15 – 1,096) ounces of gold totaling $2,114,236 (FY16 - $2,227,322; FY15 -
$1,609,553) and the settlement of prior year production payments due totaling $298,132 (FY16 - $2,112; FY15 - $12,263) from
the Company's Leeville royalty property, as well as AMRs received. In FY17, the average realized gold price for the Leeville
royalty was US$1,255 per ounce, which is comparable to the US$1,250 received for FY16, and US$1,160 for FY15. Royalty
income offset by gold tax and depletion of $2,402,894 (FY16 - $2,274,587; FY15 - $1,797,326) for a net royalty gain of
$455,033 (FY16 - loss $47,265; FY15 – loss $187,773). The increase in royalty income for 2017 was mainly due to the
settlement of prior year provisional gold ounces and AMR’s received from Turkish operations.
Exploration Expenditures
Exploration expenditures (gross) decreased by $81,414 in FY17 compared to FY16, and decreased by $466,731 in FY16
compared to FY15. Recoveries increased by $447,471 in FY17 compared to FY16, and decreased by $168,553 in FY16
compared to FY15 for a net decrease in exploration expenditures of $528,885 in FY17 compared to FY16, and a net increase
in exploration expenditures of $635,284 in FY16 compared to FY15. Some of the differences between FY17 and FY16 are as
follows:
•
•
•
•
In Scandinavia, gross expenditures increased by $553,902 compared to the prior period, and recoveries and option
payments increased by $989,088 in 2017. The increase was mainly due to additional land acquisition in the region.
Recoveries and option payments related to recoveries from Boreal for work performed by EMX personnel, as well as
$750,000 as the value of the Sienna shares (option payment related to sale of licenses).
In the USA, gross expenditures increased from $3,342,206 to $3,878,815 and recoveries decreased from $886,872 to
$666,932. The increase in expenditures is primarily a result of an increase in property holding costs.
In Turkey, gross expenditures decreased by $974,765 due to the sale in FY16 of Akarca and Sisorta.
In the Asia Pacific region, net expenditures for 2017 totaled $305,574 compared to net expenditures of $10,572 in
2016. The lower amount in FY16 resulted from Option Payments of $180,476.
General and Administrative
General and administrative expenses (“G&A”) of $3,765,029 were incurred compared to $3,220,339 in FY16, and
$3,535,534 in FY15. G&A costs (before share-based payments) have decreased each year since 2012 as the Company
found ways to streamline and reduce the G&A expenses of our business. Some changes between FY17 and FY16 to note
are:
•
Investor relations increased by $114,256 in FY17 compared to FY16, and increased by $56,235 in FY16 compared to
FY15. With the increase in market activity and interest in the mining sector, the Company attended more industry
trade shows in FY17. The Company also re-branded in 2017, which included a new name, logo, website and
corresponding marketing materials.
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• Professional fees increased by $153,762 in FY17 compared to FY16, and decreased by $63,534 from FY15 to FY16.
Most of the increase in FY17 related to costs incurred on due diligence of potential royalty acquisitions.
• Salaries and consultants are one of the largest expense in G&A. It should be noted that many of our personnel
expenditures companywide are denominated in United States dollars (“USD”) and an increase or decrease in the value
of the USD compared to the Canadian dollar, which is our reporting currency, will increase or decrease expenditures.
Salaries and consultants increased in 2017 by $129,665 compared to FY16, and decreased by $66,942 in FY16
compared to FY15. The Company added to its management team with the hiring of a General Manager of Corporate
Development in 2017.
• Share-based payments included in general and administrative expenses increased by $208,115 in FY17 compared to
FY16 mainly due to the issuance of shares pursuant to employment agreements and other compensation agreements,
as well as the fair value of RSU’s vesting during FY17.
Other
• The Company recognized a net gain on the sale of certain exploration and evaluation assets during the year of
$1,305,237 compared to $6,834,999 in the prior year, and $5,393,305 in FY15. In FY17, the gain on sale was the
result of the Boreal transaction, offset by a small loss on the sale of EMX Australia Pty. In FY16 the gain resulted
from the sale of two significant assets in Turkey including $6,683,560 related to the sale of AES to Çiftay, and the
gain in FY15 resulted from the sale of certain Haitian interests to Newmont for a $5,277,542 (US $4,000,000).
•
In FY15, as a result of the decline in the production of gold from the Carlin Trend Royalty Claim Block, and decrease
in the realized gold prices, the Company revised its estimated annual gold production over the expected mine life and
decreased its long term gold price forecast from US$1,300 to US$1,200 per ounce. As a result, the Company recorded
$3,973,699 in impairment charges related to the Carlin Trend Royalty Claim Block and related assets that make up
the same cash-generating unit (“CGU”). There was no comparable impairment recorded for FY17 or FY16.
• The Company applies a one-step approach to determine if the Carlin Trend Royalty Claim Block and the related assets
within the same CGU are impaired. The impairment loss is the amount by which the CGU’s carrying amount exceeds
its recoverable amount. The loss is first applied to reduce the asset component if such indicators for impairment exist,
and any excess to goodwill within the CGU. Since there was no impairment, the full amount went to Goodwill, and
as a result, the Company has written down goodwill by $2,709,239 (FY16 - $1,518,328; FY15 - $3,047,605).
• The Company recorded a deferred income tax recovery of $2,489,902 compared to $1,439,332 in FY16, and
$3,431,230 in FY15, and a net decrease in deferred tax liabilities of $2,933,017 (FY16 - $1,748,562; FY15 -
$1,715,656). A significant component of the deferred tax recovery and decrease in the related liability is the result of
any impairment of the royalty interest partially offset by a cumulative translation loss as a result of the strengthening
$USD compared to $CAD. The increase in the deferred income tax recovery for FY17 compared to FY16 was mainly
the result of a decrease in the long term expected federal tax rates for the US operations, which decreased from 35%
to 21%. There was no impairment to the royalty interests in FY17 or FY16.
• The Company’s share of the net loss related to its 41% (FY16 – 39%; FY15 – 42%) equity investment in IGC for the
year ended December 31, 2017 was $994,548 (FY16 - $1,295,568; FY15 - $1,062,146). In FY17, the Company also
recorded a dilution gain of $503,543 (FY16 - $982,634; FY15 - $Nil) related to the Company’s change in ownership
interest in IGC.
SIGNIFICANT INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
The Company has a 41% (2016 – 39%; 2015 – 42%) equity investment in IGC. At December 31, 2017, including the conversion
of convertible notes, cash purchases of shares, and interest on any balances due from IGC, the Company has invested an
aggregate of US$11,355,000 towards its investment (2016 - US$8,967,000; 2015 - $7,782,500). At December 31, 2017, the
Company’s investment including dilution gains, less its share of accumulated equity losses was $7,578,989 (2016 - $4,992,823;
2015 - $3,333,491). The Company’s share of the net loss for the year ended December 31, 2017 was $994,548 (2016 -
$1,295,568; 2015 - $1,062,146).
The Company has a minority position on the Board of IGC, and does not control operational decisions. The Company’s
judgment is that it has significant influence, but not control and accordingly equity accounting is appropriate.
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As at December 31, 2017, associated companies’ aggregate assets, aggregate liabilities and net loss for the year ended are as
follows:
As at December 31, 2016, associated companies’ aggregate assets, aggregate liabilities and net loss for the year are as follows:
As at December 31, 2015, associated companies’ aggregate assets, aggregate liabilities and net loss for the year are as follows:
During the year ended December 31, 2017, the Company recognized a dilution gain of $503,543 (2016 - $982,634; 2015 -
$Nil) related to the Company’s change in ownership percentage as a result of IGC’s share issuance for cash proceeds and loan
conversions.
SELECTED ANNUAL INFORMATION
The year ended December 31, 2017 saw an impairment charge of $Nil (2016 - $Nil; 2015 - $3,973,699) on the royalty interests,
a related write-down of goodwill of $2,709,239 (2016 - $1,518,328; 2015 - $3,047,605), and a recovery of $2,489,902 (2016 -
$1,439,332; 2015 - $3,431,230) of deferred income taxes, offset by a gain of $1,305,237 (2016 - $6,834,999; 2015 - $5,393,305)
on the acquisition and sale of exploration and evaluation assets, and a dilution gain on associated companies of $503,543 (2016
- $982,634; 2015 - $Nil) which have a significant impact on the net losses for the respective fiscal years.
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December 31, 2017IGCAggregate assets 6,127,735$ Aggregate liabilities (1,108,694) Loss for the year(2,713,490) The Company's ownership %41%The Company's share of loss for the year(994,548) December 31, 2016IGCAggregate assets 6,884,378$ Aggregate liabilities (1,471,260) Loss for the year(3,216,120) The Company's ownership %39%The Company's share of loss for the year(1,295,568) December 31, 2015IGCAggregate assets 6,980,045$ Aggregate liabilities (2,917,038) Loss for the year(2,515,741) The Company's ownership %42%The Company's share of loss for the year(1,062,146) As atDecember 31, 2017December 31, 2016December 31, 2015December 31, 2014Financial positionsWorking capital6,535,893$ 6,002,318$ 5,787,109$ 7,096,916$ Exploration and evaluation assets (net)1,841,966 2,145,000 2,381,540 2,379,886 Royalty interest21,943,743 25,831,152 28,798,980 29,327,960 Total assets45,750,784 47,843,555 50,624,129 54,292,093 Share capital124,062,091 117,504,585 117,000,052 116,766,102 Deficit(104,382,744) (96,989,360) (94,305,878) (87,430,021) Year ended December 31, 2017Year ended December 31, 2016Year ended December 31, 2015Year ended December 31, 2014Financial resultsRoyalty income2,857,927$ 2,227,322$ 1,609,553$ 2,247,334$ Exploration expenditures (net)4,471,074 4,999,959 4,364,675 5,022,658 Loss from operations(7,781,070) (8,267,563) (8,087,982) (868,619) Net loss for the year(7,393,384) (2,683,482) (6,875,857) (17,448,041) Net loss per share - basic and diluted(0.09) (0.04) (0.09) (0.24)
OUTSTANDING SHARE DATA
As at April 3, 2018, the Company had 79,746,271 common shares issued and outstanding. There were also 5,247,500 stock
options outstanding with expiry dates ranging from April 25, 2019 to August 28, 2022, and 2,623,306 warrants outstanding
expiring on April 12, 2019.
Critical Accounting Policies and Estimates
STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting
Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified
as fair value through profit or loss or available for sale, which are stated at their fair value. In addition, these consolidated
financial statements have been prepared using the accrual basis of accounting except for cash flow information.
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the accounts of EMX Royalty Corp., the parent company, and its controlled
subsidiaries, after the elimination of all significant intercompany balances and transactions.
Subsidiaries
Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability
to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company until the date on which control ceases.
The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting
policies. Inter-company transactions, balances and unrealized gains or losses on transactions are eliminated. The Company’s
principal operating subsidiaries are as follows:
Functional and Reporting Currency
The functional currency is the currency of the primary economic environment in which the entity operates. The functional
currency for the Company and its subsidiaries is the Canadian dollar except the functional currency of the operations of Bullion
Monarch which is the US dollar. The functional currency determinations were conducted through an analysis of the
consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.
Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Monetary assets and liabilities denominated in foreign currencies are
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NamePlace of IncorporationOwnership PercentageBullion Monarch Mining, IncUtah, USA100%EMX (USA) Services Corp.Nevada, USA100%Bronco Creek Exploration Inc.Arizona, USA100%Eurasia Madencilik Ltd. SirketiTurkey100%Azur Madencilik Ltd. SirketiTurkey100%Eurasian Minerals Cooperatief U.A.Netherlands100%Eurasian Minerals Sweden ABSweden100%Viad Royalties ABSweden100%Waikato Gold Limited New Zealand100%
re-measured at the rate of exchange at each financial position date. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in profit or loss.
On translation of the entities whose functional currency is other than the Canadian dollar, revenues and expenses are translated
at the exchange rates approximating those in effect on the date of the transactions. Assets and liabilities are translated at the
rate of exchange at the reporting date. Exchange gains and losses, including results of re-translation, are recorded in the foreign
currency translation reserve.
Financial Instruments
All financial instruments are classified into one of the following four categories:
(a) Financial assets and financial liabilities at fair value through profit or loss (“FVTPL”)
Financial assets and financial liabilities classified as FVTPL are acquired or incurred principally for the purpose
of selling or repurchasing them in the near term. They are recognized at fair value based on market prices, with
any resulting gains and losses reflected in profit or loss for the period in which they arise.
(b) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed
maturity that an entity has the positive intention and ability to hold to maturity. They are measured at amortized
cost using the effective interest rate method less any impairment loss. A gain or loss is recognized in profit or loss
when the financial asset is derecognized or impaired, and through the amortization process.
(c) Available for sale financial assets
Available for sale (“AFS”) financial assets are non-derivative financial assets that are designated as available for
sale, or that are not classified as loans and receivables, held-to-maturity investments, or FVTPL. They are
measured at fair value. Fair value is determined based on market prices. Equity instruments that do not have a
quoted market price in an active market are measured at cost. Gains and losses are recognized directly in other
comprehensive income (loss) until the financial asset is derecognized, at which time the cumulative gain or loss
previously recognized in accumulated other comprehensive income (loss) is recognized in profit or loss for the
period.
(d) Loans and receivables and other financial liabilities
Loans and receivables and other financial liabilities are measured at amortized cost, using the effective interest
rate method less any impairment loss.
The Company’s financial instruments consist of cash and cash equivalents, investments, receivables, restricted cash,
reclamation bonds, notes receivable, strategic investments, accounts payable and accrued liabilities, and advances from joint
venture partners. Unless otherwise noted the fair value of these financial instruments approximates their carrying values.
Cash and cash equivalents are classified as loans and receivables. Cash equivalents are held for the purpose of meeting short-
term cash commitments rather than for investment or other purposes.
Warrants held through investments are classified as derivative financial assets at FVTPL and are accounted for at fair value.
For warrants that are not traded on an exchange, no market value is readily available. When there are sufficient and reliable
observable market inputs, a valuation technique is used; if no such market inputs are available, the warrants are valued at
intrinsic value, which is equal to the higher of the market value of the underlying security less the exercise price of the warrant,
or zero.
Investments (Marketable securities) classified as FVTPL are measured at fair market value. Changes in fair value of FVTPL
assets are reflected in profit or loss in the period in which they occur. Changes in fair value of AFS assets are reflected in
accumulated other comprehensive income on the statement of financial position until sold or if there is an other than temporary
impairment in value.
Reclamation bonds are classified as financial assets held-to-maturity.
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The Company classifies its restricted cash and certain receivables as loans and receivables and its accounts payable and accrued
liabilities and advances from joint venture partners as other financial liabilities.
Certain receivables related to the sale of Akarca are considered to be derivative financial assets as they are subject to variations
in gold price per ounce on record date and final price received and are accordingly classified as FVTPL. The derivative
receivable is recorded at fair value each period until final settlement occurs, with changes in fair value reflected in profit or
loss for the period in which they arise.
Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired
when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial
assets, the estimated future cash flows of the financial assets have been impacted.
For all financial assets, objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty;
• Default or delinquency in interest or principal payments; or,
•
It becoming probable that the borrower will enter bankruptcy or financial re-organization.
For certain categories of financial assets that are assessed not to be impaired individually, they are subsequently assessed for
impairment on a collective basis. The carrying amount of financial assets is reduced by the impairment loss directly for all
financial assets with the exception of receivables, where the carrying amount is reduced through the use of an allowance
account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance
account are recognized in profit or loss.
With the exception of FVTPL marketable securities, if in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In
respect of AFS marketable securities, impairment losses previously recognized through profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity.
Convertible Notes Receivable
The notes receivable are hybrid financial assets that consist of a note receivable component and a separate equity conversion
component. The conversion feature is measured at fair value on initial recognition by discounting the stream of future interest
and principal payments at the rate of interest prevailing at the date of the issue for instruments of similar term and risk. Interest
income based on the rate of the note will be receivable on maturity are recognized through profit and loss as interest income.
The equity conversion option is an embedded derivative that has been separated from the notes receivable and is valued based
on residual value.
Investments in Associated Companies
The Company accounts for its long-term investments in affiliated companies over which it has significant influence using the
equity basis of accounting, whereby the investment is initially recorded at cost, adjusted to recognize the Company’s share of
earnings or losses and reduced by dividends received.
The Company assesses its equity investments for impairment if there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the equity investment and that the event or events has an impact on
the estimated future cash flow of the investment that can be reliably estimated. Objective evidence of impairment of equity
investments includes:
• Significant financial difficulty of the associated companies;
• Becoming probable that the associated companies will enter bankruptcy or other financial reorganization; or,
• National or local economic conditions that correlate with defaults of the associated companies.
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Exploration and evaluation assets and exploration expenditures
Acquisition costs for exploration and evaluation assets, net of recoveries, are capitalized on a property-by-property basis.
Acquisition costs include cash consideration and the value of common shares, based on recent issue prices, issued for
exploration and evaluation assets pursuant to the terms of the agreement. Exploration expenditures, net of recoveries, are
charged to operations as incurred. After a property is determined by management to be commercially feasible, an impairment
test is conducted and subsequent development expenditures on the property will be capitalized.
When there is little prospect of further work on a property being carried out by the Company or its partners, when a property
is abandoned, or when the capitalized costs are no longer considered recoverable, the related property costs are written down
to management’s estimate of their net recoverable amount. The costs related to a property from which there is production,
together with the costs of production equipment, will be depleted and amortized using the unit-of-production method.
An exploration and evaluation asset acquired under an option agreement, where payments are made at the sole discretion of
the Company, is capitalized at the time of payment. Option payments received are treated as a reduction of the carrying value
of the related acquisition cost for the mineral property until the payments are in excess of acquisition costs, at which time they
are then credited to profit or loss. Option payments are at the discretion of the optionee and, accordingly, are accounted for
when receipt is reasonably assured.
Revenue recognition
The Company recognizes revenue in accordance with IAS 18 Revenue and based upon amounts contractually due pursuant to
the underlying royalty agreements. Specifically, royalty revenue is recognized in accordance with the terms of the underlying
royalty agreements subject to (i) when persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership
have been transferred; (iii) the royalty or stream being fixed or determinable; and (iv) the collectability of the royalty being
reasonably assured. In some instances, the Company will not have access to sufficient information to make a reasonable
estimate of revenue and, accordingly, revenue recognition is deferred until management can make a reasonable
estimate. Royalty revenue may be subject to adjustment upon final settlement of estimated metal prices, weights, and assays.
Adjustments to revenue from metal prices are recorded monthly and other adjustments are recorded on final settlement and are
offset against revenue when incurred.
Royalty interests
Royalty interests in mineral properties include acquired royalty interests in production stage and exploration stage properties.
In accordance with IAS 38 Intangible Assets, the cost of acquired royalty interests in mineral properties is capitalized as
intangible assets.
Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the
related mineral property, which is calculated using estimated reserves. Acquisition costs of royalty interests on exploration
stage mineral properties, where there are no estimated reserves, are not amortized. At such time as the associated exploration
stage mineral interests are converted to estimated reserves, the cost basis is amortized over the remaining life of the mineral
property, using the estimated reserves. The carrying values of exploration stage mineral interests are evaluated for impairment
at such time as information becomes available indicating that production will not occur in the future.
Goodwill
Goodwill represents the excess of the price paid for the acquisition of a consolidated entity over the fair value of the net
identifiable tangible and intangible assets and liabilities acquired in a business combination. Goodwill is allocated to the cash
generating unit to which it relates.
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment.
Impairment is determined by assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds
its recoverable amount.
Property and equipment
Property and equipment is recorded at cost. Buildings are depreciated using a 5 year straightline method. Equipment is
depreciated over its estimated useful life using the declining balance method at a rate of 20% per annum. Depreciation on
equipment used directly on exploration projects is included in exploration expenditures for that mineral property.
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Decommissioning liabilities
Decommissioning liabilities are recognized for the expected obligations related to the retirement of long-lived tangible assets
that arise from the acquisition, construction, development or normal operation of such assets. A decommissioning liability is
recognized in the period in which it is incurred and when a reasonable estimate of the fair value of the liability can be made
with a corresponding decommissioning cost recognized by increasing the carrying amount of the related long-lived asset. The
decommissioning cost is subsequently allocated in a rational and systematic method over the underlying asset’s useful life.
The initial fair value of the liability is accreted, by charges to profit or loss, to its estimated future value.
Environmental disturbance restoration
During the operating life of an asset, events such as infractions of environmental laws or regulations may occur. These events
are not related to the normal operation of the asset and are referred to as environmental disturbance restoration provisions. The
costs associated with these provisions are accrued and charged to profit or loss in the period in which the event giving rise to
the liability occurs. Any subsequent adjustments to these provisions due to changes in estimates are also charged to profit or
loss in the period of adjustment. These costs are not capitalized as part of the long-lived assets’ carrying value.
Impairment of assets
Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular
year. The Company assesses its cash generating units annually to determine whether any indication of impairment exists. Where
an indicator of impairment exists, an estimate of the recoverable amount is made, which is the higher of the fair value less costs
to sell and value in use. The determination of the recoverable amount for value in use requires the use of estimates and
assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and future
operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s
length transaction between knowledgeable and willing parties.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily
convertible to known amounts of cash.
Share-based payments
Share-based payments include option and stock grants granted to directors, employees and non-employees. The Company
accounts for share-based compensation using a fair value based method with respect to all share-based payments measured and
recognized, to directors, employees and non-employees. For directors and employees, the fair value of the options and stock
grants is measured at the date of grant. For non-employees, the fair value of the options and stock 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. For directors,
employees and non-employees, the fair value of the options and stock grants is accrued and charged to operations, with the
offsetting credit to share based payment reserve for options, and commitment to issue shares for stock grants over the vesting
period. If and when the stock options are exercised, the applicable amounts are transferred from share-based payment reserve
to share capital. When the stock grants are issued, the applicable fair value is transferred from commitment to issue shares to
share capital. Option based compensation awards are calculated using the Black-Scholes option pricing model while stock
grants are valued at the fair value on the date of grant.
The Company has granted certain employees and non-employees restricted share units (“RSUs”) to be settled in shares of the
Corporation. The fair value of the estimated number of RSUs that will eventually vest, determined at the date of grant, is
recognized as share-based compensation expense over the vesting period, with a corresponding amount recorded as equity. The
fair value of the RSUs is estimated using the market value of the underlying shares as well as assumptions related to the market
and non-market conditions at the grant date.
Income taxes
Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent
that it relates to items recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Deferred tax is calculated providing for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
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Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable income nor loss. In addition, deferred tax is not recognized for taxable temporary
differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied
to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting
date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied
by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the
temporary difference 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.
Income (loss) per share
Basic income or loss per share is calculated by dividing the net income or loss for the year by the weighted average number of
shares outstanding during the year. Diluted income or loss per share is calculated whereby the weighted average number of
shares outstanding used in the calculation of diluted income or loss per share assumes that the deemed proceeds received from
the exercise of stock options, share purchase warrants and their equivalents would be used to repurchase common shares of the
Company at the average market price during the year, if they are determined to have a dilutive effect.
Existing stock options and share purchase warrants have not been included in the current year computation of diluted loss per
share as to do so would be anti-dilutive. For the years presented the basic and diluted losses per share are the same.
Valuation of equity units issued in private placements
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private
placement units. The residual value method first allocates value to the more easily measurable component based on fair value
and then the residual value, if any, to the less easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable
component and were valued at their fair value, as determined by the closing quoted bid price on the day prior to the issuance
date. The balance, if any, was allocated to the attached warrants. Any fair value attributed to the warrants is recorded in
reserves.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segment, has been identified as the Chief Executive Officer.
Accounting pronouncements not yet effective
The following standards and pronouncements have been issued by the IASB and have not yet been adopted by the Company.
IFRS 9 requires financial assets 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. 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. For financial liabilities, the standard
retains most of the IAS 39 requirements.
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers ("IFRS 15"), which supersedes IAS 11
Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction
of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC 31 Revenue - Barter Transactions involving Advertising
Services. IFRS 15 establishes a single five-step model framework for determining the nature, amount, timing and uncertainty
of revenue and cash flows arising from a contract with a customer. The standard is effective for annual periods beginning on
or after January 1, 2018, with early adoption permitted.
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IFRS 16 Leases was issued in January 2016 (effective January 1, 2019) and provides a single lessee accounting model, requiring
lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a
low value.
The Company expects that these new IFRS standards will have an insignificant effect on its consolidated financial statements
other than increased note disclosure.
Critical Accounting Judgments and Significant Estimates and Uncertainties
The preparation of the consolidated financial statements requires management to make judgments and estimates and form
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported
revenue and expenses during the periods presented therein. On an ongoing basis, management evaluates its judgments and
estimates in relation to assets, liabilities, royalty revenues and expenses. Management bases its judgments and estimates on
historical experience and on other various factors it believes to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions and conditions.
The Company has identified the following critical accounting policies in which significant judgments, estimates and
assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and
may materially affect financial results or the financial position reported in future periods. Further details of the nature of these
assumptions and conditions may be found in the relevant notes to the consolidated financial statements.
a) Royalty interest and related depletion
In accordance with the Company’s accounting policy, royalty interests are evaluated on a periodic basis to determine whether
there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed
and an impairment loss recognized to the extent that carrying amount exceeds recoverable amount. The recoverable amount of
a royalty asset is measured at the higher of fair value less costs to sell and value in use. The determination of fair value and
value in use requires management to make estimates and assumptions about expected production and sales volumes, the
proportion of areas subject to royalty rights, commodity prices (considering current and historical prices, price trends and
related factors), and reserves. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility
that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such
circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with
the impact recorded in profit or loss.
b) Goodwill
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment.
Impairment is determined by assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds
its recoverable amount. The assessment of the recoverable amount used in the goodwill impairment analysis is subject to similar
judgments and estimates as described above for property and equipment and royalty interests.
c) Exploration and Evaluation Assets
Recorded costs of exploration and evaluation assets are not intended to reflect present or future values of exploration and
evaluation assets. The recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing
knowledge, that a change in future conditions could require a material change in the recognized amount.
d) Taxation
The Company’s accounting policy for taxation requires management’s judgment as to the types of arrangements considered to
be a tax on income in contrast to an operating cost. Judgment is also required in assessing whether deferred tax assets and
certain deferred tax liabilities are recognized on the statement of financial position.
Deferred tax assets, including those arising from unused tax losses, capital losses and temporary differences, are recognized
only where it is considered probable that they will be recovered, which is dependent on the generation of sufficient future
taxable profits. Deferred tax liabilities arising from temporary differences caused principally by the expected royalty revenues
generated by the royalty property are recognized unless expected offsetting tax losses are sufficient to offset the taxable income
and therefore, taxable income is not expected to occur in the foreseeable future. Assumptions about the generation of future
taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and
sales volumes, commodity prices, and reserves. Judgments are also required about the application of income tax legislation in
foreign jurisdictions. These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that
changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities
recognized on the statement of financial position and the amount of other tax losses and temporary differences not yet
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recognized. In such circumstances, some or the entire carrying amount of recognized deferred tax assets and liabilities may
require adjustment, resulting in a corresponding credit or charge to profit or loss.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts
recognized in the consolidated financial statements include, but are not limited to, the following:
a) Functional Currencies
The functional currency of each of the Company’s subsidiaries is the currency of the primary economic environment in which
the entity operates. Determination of the functional currency may involve certain judgments to determine the primary economic
environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions,
which determined the primary economic environment.
b) Classification of investments as subsidiaries, joint ventures, associated company and portfolio investments
Classification of investments requires judgement as to whether the Company controls, has joint control of or significant
influence over the strategic financial and operating decisions relating to the activity of the investee. In assessing the level of
control or influence that the Company has over an investment, management considers ownership percentages, board
representation as well as other relevant provisions in shareholder agreements. If an investor holds 20% or more of the voting
power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this
is not the case. Conversely, if the investor holds less than 20% of the voting power of the investee, it is presumed that the
investor does not have significant influence, unless such influence can be clearly demonstrated.
5.B. Liquidity and Capital Resources
The Company considers items included in shareholders’ equity as capital. The Company’s objective when managing capital
is to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders
and benefits for other stakeholders.
As at December 31, 2017, the Company had working capital of $6,535,893 (2016 - $6,002,318). The Company has continuing
royalty income that will vary depending on royalty ounces received, the price of gold, and foreign exchange rates on US royalty
payments. The Company has granted 5,247,500 stock options and 2,623,306 warrants which could generate additional cash if
exercised. The Company manages the capital structure and makes adjustments in light of changes in economic conditions and
the risk characteristics of the underlying assets. The Company estimates it will need additional financing within the next 12
months to undertake its current business plan. In order to maintain or adjust the capital structure, the Company may issue new
shares through public and/or private placements, sell assets, or return capital to shareholders. The Company is not subject to
externally imposed capital requirements.
Operating Activities
Cash used in operations was $3,441,424 for the year ended December 31, 2017 (2016 - $5,315,543) and represents expenditures
primarily on mineral property exploration and general and administrative expense for both periods, offset by royalty income
received in the year.
Financing Activities
During the year ended December 31, 2017, the Company completed a non-brokered private placement for gross proceeds of
$7,000,000 through the sale of 5,000,000 units at a price of $1.40 per Unit. Each Unit will consisted of one common share and
one-half of one non-transferable share purchase warrant. Each whole warrant entitles the holder to purchase one additional
Share at a price of $2.00 for a period of two years. The Company received $85,700 (2016 - $127,800) from the exercise of
stock option.
Investing Activities
Some of the significant investment activities during the year ended December 31, 2017 are:
- The Company sold certain exploration assets in Sweden to Boreal for a gain of $1,393,224.
- The Company advanced $1,405,277 to an associated company pursuant to a convertible loan agreement.
- The Company received $86,543 from interest on cash and cash equivalents.
- The Company purchased shares of an associated company in the amount of $2,059,631.
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5.C. Research and Development, Patents and Licenses, etc.
See subtopic “Exploration Expenditures” under “Item 5.A., Operating Results”.
5.D. Trend Information
See “Property Overview” under “Item 5, Operating and Financial Review and Prospects”, and “Other” under “Item 5.A.,
Operating Results”.
5.E. Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
5.F Tabular Disclosure of Contractual Obligations
The Company has no Contractual Obligations.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
6.A. Directors and Senior Management
Directors and Senior Management
Name
Position
David M. Cole
Brian E. Bayley (1)(2)(3)
Brian K. Levet (1)(2)
Larry M. Okada (1)(2)(3)
Michael D. Winn (3)
Christina Cepeliauskas
Marien Segovia
President, CEO, Director
Director
Director
Director
Director and Chairman
Chief Financial Officer
Corporate Secretary
(1) Member of Audit Committee
(2) Member of the Compensation Committee
(3) Member of Corporate Governance Committee
David M. Cole (President, CEO and Director)
Age
56
65
65
69
56
54
50
Date of
First Election
Or Appointment
November 24, 2003
May 13, 1996
March 18, 2011
June 11, 2013
November 24, 2003
September 18, 2008
February 27, 2018
Mr. Cole has over 25 years of industry experience, coming to EMX Royalty Corp. from Newmont Mining Company. At
Newmont, he held a number of management and senior geologic positions, gaining extensive global experience as a project,
mine, and generative exploration geologist in Nevada, Southeast Asia, South America, Europe, and Central Asia. Mr. Cole's
success as part of Newmont's exploration team includes contributions at the world class Carlin Trend, Yanacocha, and
Minahasa mines. Subsequently, he established and managed Newmont's exploration programs in Turkey while also identifying
early-stage acquisition targets in Eastern Europe. Mr. Cole specializes in developing new exploration ideas and opportunities,
based upon solid technical expertise coupled with a keen business sense. He studied under Dr. Tommy Thompson at Colorado
State University, earning an M.S. in Geology.
Michael D. Winn (Director and Chairman)
Mr. Winn is President of Seabord Capital Corp., which provides investment analysis and financial services to companies
operating in the energy and mining sectors. He is also President of Seabord Services Corp., a Canadian company that provides
management, administrative, and regulatory services to private and public mining companies. Prior to starting Seabord Capital
in January 2013, Mr. Winn was President of Terrasearch Inc. (1997 to 2012) a predecessor company to Seabord Capital. He
also worked as an analyst for Global Resource Investments Ltd. (1993 to 1997) where he specialized in the evaluation of
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emerging oil and gas and mining companies. Mr. Winn has worked in the oil and gas industry since 1983 and the mining
industry since 1992, and is currently a director and officer of several companies operating in Canada, Latin America, Europe
and Africa. Mr. Winn received a B.Sc. in Geology from the University of Southern California.
Brian E. Bayley (Director)
Mr. Bayley is currently the President of Earlston Management Corp., (private management company) since December 1996
and Executive Chairman of Earlston Investments Corp., (private merchant bank) since January 2018. Previously he held the
following positions with Quest Capital Corp. (a predecessor company to Sprott Resource Lending Corp.), a publicly traded
resource lending company listed on the TSX and NYSE: Director from June 2003 to July 2013; Resource Lending Advisor
from Sept. 2010 to June 2013; President and Chief Executive Officer from May 2009 to September 2010; Co-Chairman From
January 2008 to May 2009; Chief Executive Officer from June 2003 to March 2008; and President from June 2003 to January
2008. Mr. Bayley is also a director and officer of several other public companies and holds an MBA from Queen’s University.
Brian K. Levet (Director)
Mr. Levet draws on over 40 years of diversified executive and management experience in mineral exploration, mine
development and operations. He began his career with Rio Tinto Rhodesia and Zimbabwe Iron and Steel Company. The
majority of Mr. Levet's career was with Newmont Mining Company (27 years), retiring in 2011 as the Group Executive for
Worldwide Exploration. His distinguished career has been built upon a track record of team-oriented discovery success, with
a number of these discoveries currently in production. He is recognized within the mining industry for exploration expertise
and team leadership that resulted in a number of major discoveries, including the Batu Hijau and Elang copper-gold deposits
in Indonesia, the North Lanut gold deposit in North Sulawesi, Indonesia, the McPhillamys gold deposit in New South Wales,
Australia, as well as playing a significant role in the identification of Yanacocha as a world-class gold mining camp. Mr. Levet
has a B.Sc. in Geology from the University of London.
Larry M. Okada (Director)
Mr. Okada is a Chartered Professional Accountant in British Columbia and Alberta, as well as a Certified Public Accountant
in Washington State. He has been in public practice with Deloitte LLP, his own firm, Okada & Partners, and
PricewaterhouseCoopers LLP for over 35 years. For more than 30 years, the majority of Mr. Okada's clients have been public
mining companies listed on the TSX-V and TSE. Mr. Okada has extensive experience in accounting, finance, and corporate
governance.
Christina Cepeliauskas (Chief Financial Officer)
Ms. Cepeliauskas is a CPA, CGA professional accountant with more than 20 years of financial accounting and treasury
experience in the mineral exploration and mining industry. She also has her ICD.D designation from the Institute of Corporate
Directors. She is currently the Chief Financial Officer of EMX Royalty Corp. and Reservoir Capital Corp. and was formerly
a Director and Chairperson of the Audit Committee of Revelo Resources Corp. Ms. Cepeliauskas also holds the volunteer
position of Chair of the Governance Committee of Fraserside Community Services Society, an organization committed to
helping people overcome challenges.
Marien Segovia (Corporate Secretary)
Ms. Segovia has over 17 years of experience in the administration of public companies. Prior to joining EMX Royalty
Corp., Ms. Segovia worked as Assistant Corporate Secretary at Great Panther Silver Limited for four years. Previously, she
provided corporate secretarial services to several publicly traded companies and served as Corporate Secretary for Silvermex
Resources Inc. (acquired by First Majestic Silver Corp. in 2012). Prior to that, Ms. Segovia spent 10 years at Silver Standard
Resources providing support as corporate and legal administrator. Ms. Segovia has a BA degree in Business Information
Systems and a Corporate & Securities Paralegal Certification. She is a Certified Spanish Translator and a Member of the B.C.
Society of Translators & Interpreters.
The Directors have served in their respective capacities since their election and/or appointment and will serve until the next
Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-
Laws of the Company.
No Director and/or Senior Management had been the subject of any order, judgment, or decree of any governmental agency or
administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority
of such person or of any Company of which he is a Director and/or Senior Management, to engage in the securities business or
68
in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any Company of
which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the
purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of
the securities business or of theft or of any felony.
There are no family relationships between any two or more Directors or Senior Management.
There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any
person referred to above was selected as a director or member of senior management.
6.B. Compensation
Compensation Discussion and Analysis
The Compensation Committee of the Board is responsible for ensuring that the Corporation has appropriate procedures for
reviewing executive compensation and making recommendations to the Board with respect to the compensation of the
Corporation’s executive officers. The Compensation Committee seeks to ensure that total compensation paid to all executive
officers is fair and reasonable and is consistent with the Corporation’s compensation philosophy.
The Compensation Committee is also responsible for recommending compensation for the directors, stock options grants to
the directors, officers, employees and consultants pursuant to the Corporation’s Stock Option Plan (the “Option Plan”) and
issuances of Common Shares to directors and officers pursuant to the Corporation’s Incentive Restricted Share Unit Plan (the
“RSU Plan”). Both the Option Plan and the RSU Plan assists the Corporation in employee retention and cash preservation,
while encouraging Common Share ownership and entrepreneurship on the part of the Corporation’s Named Executive Officers
(“NEOs”).
The Compensation Committee consists of Brian E. Bayley (Chairman up to October 24, 2017), Brian K. Levet (Chairman as
of October 24, 2017), and Larry M. Okada, all of whom are independent (outside, non-management) directors. The Board is
satisfied that the composition of the Compensation Committee ensures an objective process for determining compensation.
Each of the members of the Committee has skills and direct experience relevant to his responsibilities as a member of the
Committee as follows:
Brian E. Bayley: Mr. Bayley is experienced in the areas of natural resource and real estate lending, corporate restructuring and
management and administration of public companies. He is the President of Earlston Management Corp. (formerly called Ionic
Management Corp.), a private management company providing services to public and private companies. Mr. Bayley has held
active senior management positions in both private and public natural resource companies and has over 30 years of public
issuer experience as both a director and an officer.
Brian K. Levet: Mr. Levet has over 40 years of diversified executive and management experience in mineral exploration,
project start-up and mine development and operation. He spent over 27 years with Newmont Mining Company, most recently
as the Group Executive for Worldwide Exploration, from which he retired in 2011.
Larry M. Okada: Mr. Okada is a Chartered Professional Accountant in British Columbia and Alberta, as well as a Certified
Public Accountant in Washington State. He has been in public practice with Deloitte LLP, his own firm, Okada & Partners,
and PricewaterhouseCoopers LLP for over 35 years. For more than 30 years, the majority of Mr. Okada's clients have been
public mining companies listed on the TSX-V and TSE. Mr. Okada has extensive experience in accounting, finance, and
corporate governance.
Philosophy and Objectives
The philosophy used by the Compensation Committee and the Board in determining compensation is that the compensation
should:
(i)
(ii)
assist the Corporation in attracting and retaining high caliber executives;
align the interests of executives with those of the Shareholders;
(iii)
reflect the executive’s performance, expertise, responsibilities and length of service to the Corporation; and
(iv)
reflect the Corporation’s current state of development, performance and financial status.
69
Risk Assessment
Under the direction of the Board, the Compensation Committee evaluates the potential risks associated with Corporation’s
compensation policies and practices. The Committee has not identified any risks arising from the Corporation’s compensation
policies and practices which would have a material adverse effect on the Corporation.
As outlined above in “Philosophy and Objectives” above, the Compensation Committee evaluates and recommends to the
Board compensation strategies which align each NEO’s goals and values with those of the Shareholders and other stakeholders
to ensure the Corporation’s short and long term goals are met without exposing the Corporation to unnecessary risk. The
Compensation Committee considers a mix of base salary, short term incentives and long term incentives to attract high caliber
executives sufficient to encourage behaviour that leads to creation of long term value while limiting incentives that might
promote inappropriate risk-taking.
As part of the annual review of the compensation packages of the Corporation’s NEOs, the Compensation Committee identifies
and if necessary changes strategies to mitigate risks. The Committee considers several factors as part of this review including
retention of key employees; competitive salaries within the context of peer companies, short term incentives linked to specific
goals as discussed below and long term incentives (stock options and Restricted Share Unit’s (“RSU’s”) which link executive
pay to real value creation and long term share appreciation.
Compensation Hedging
No NEO or director is permitted to purchase financial instruments, including prepaid variable forward contracts, equity swaps,
collars, or units of exchange funds, designed to hedge or offset a decrease in market value of equity securities granted as
compensation or held, directly or indirectly, by the NEO or director.
Compensation Components
The compensation of the Corporation’s NEOs is comprised primarily of (i) base salary, (ii) annual short-term incentives in the
form of cash bonuses and stock grants under the RSU Plan, (iii) long-term incentives in the form of performance related stock
grants under the RSU Plan and stock options granted under the Option Plan, and (iv) benefits related to health and pension
plans, such as United States 401(k) plans.
In determining the amounts payable under the various compensation components, the Corporation also retains, from time to
time, a compensation consultant.
Lane Caputo Compensation Inc. Independent Executive Compensation Report
In November 2016, the Compensation Committee retained Lane Caputo Compensation Inc., independent Executive
Compensation Specialists based in Vancouver and Calgary to review and make recommendations regarding the Corporation’s
compensation arrangements for its executive team and non-executive directors and to recommend required changes (if any) to
align pay elements and/or strategy with both current market practices and the Company’s business strategy. The report
containing Lane Caputo’s recommendations (the “Lane Caputo Report”) was used by the Compensation Committee to guide
and assist it in 2017 in establishing short and long term equity incentive programs (“STIP” and “LTIP”) and compensation
levels. To facilitate these programs, the Board has adopted, and approval received from disinterested Shareholders at the
Corporation’s Annual General Meeting held on May 17, 2017, a Restricted Share Unit (“RSU”) plan.
The key components of the Lane Caputo Report are as follows:
Peer Group
Standard compensation methodology involves benchmarking compensation practices against a group of peer companies of
similar size with relevant operations in the same regional geography; the resulting peer group then represents a realistic
“market” against which to define the Company’s compensation strategy.
As the availability of cash flow tends to determine pay mix to a certain extent, matching the development stages of peer
companies is particularly important. Whereas exploration-stage companies tend to rely more heavily on equity-based
compensation in order to focus the majority of available cash on exploration activities, companies that have achieved a
sustainable level of commercial production, and have associated predictable cash flow levels, gradually reduce their reliance
on equity-based compensation in favor of cash compensation.
70
Geographical similarity of peer companies allows for a more accurate benchmarking of the skillsets required to manage
international versus domestic operations and reflects the additional time commitment often associated with international
operations. The inclusion of internationally-focused companies can have an influence on pay practices due to the risk/reward
profile of international operations and the market for executives with international operating experience.
The magnitude of executive compensation is closely correlated to the size of organization the executive oversees; as such,
compensation levels are compared to companies that would be considered of relevant size to EMX.
Lane Caputo developed a peer group of mining companies based on the parameters mentioned above against which they
benchmarked the compensation competitiveness of EMX’s executive team members and non-executive directors. In order to
reflect EMX’s unique business model, consideration was limited to companies that have an element of royalty income or project
generation as part of their business strategy. The 19 companies in the peer group developed for the review are:
Abitibi Royalties Inc.
Marathon Gold Corp.
Riverside Resources Inc.
Almaden Minerals Ltd.
Millrock Resources Inc.
Sabina Gold & Silver Corp.
Altius Minerals Corp.
Mirasol Resources Ltd.
Sandstorm Gold Ltd.
ATAC Resources Ltd.
NexGen Energy Ltd.
Solitario Exploration & Royalty Corp.
AuRico Metals Inc.
NGEx Resources Inc.
Strategic Metals Ltd.
Balmoral Resources Ltd.
Orex Minerals Inc.
Treasury Metals Inc.
Corvus Gold Inc.
Compensation Philosophy
EMX’s compensation philosophy is based on the fundamental principles that the Company’s compensation program should
assist the Company in attracting and retaining high caliber executives, align the interests of executives with those of the
shareholders, reflect the executive’s performance, expertise, responsibilities and length of service to the Company and reflect
the Company’s current state of development, performance and financial status. Given the skillsets required to execute the
Company’s complex business strategy, the proposed positioning for each element of compensation under such a philosophy is
as follows:
Salary: is based on relevant marketplace information, experience, past performance and level of responsibility. For a fully-
qualified incumbent in a given position, EMX will target salary at the 75th percentile of the peer group to reflect the complexity
of the multiple aspects of the Corporation’s business strategy. The Corporation may pay above or below this target to reflect
each incumbent’s relative experience or performance versus the market, or to reflect competitive market pressures for a given
skill set.
Short-Term Incentives: awards are based on the performance of the executive against predetermined individual performance
objectives and the performance of the Company against predetermined annual corporate performance objectives. Target
incentive levels (as a percentage of salary) are established to maintain total cash compensation (salary + bonus) at the 75th
percentile of the market when performance is at target levels. Incentive opportunity will have sufficient leverage that total cash
compensation (salary + bonus) can achieve top quartile levels of cash compensation when performance warrants. In an effort
to manage cash flow and/or provide executives with more exposure to the company’s stock, EMX may consider paying annual
incentives in Restricted Share Units, rather than cash.
As with any compensation plan, the Compensation Committee or the Board as a whole should always have discretion to reward
above, or below, plan parameters when an individual or team has made an exceptional contribution to the performance of the
Company, or conversely, if the financial performance of the company is above targeted levels for external market or economic
conditions despite poor operational performance of the management team.
Long-Term Incentives: are a particularly important component of compensation in the mining industry, as executives and
employees need to be aligned with the risk/reward profile of shareholders through participation in share price appreciation. The
number of stock options and other equity-based incentives granted annually to each position is targeted at median levels in the
peer group and should be sufficient that, when combined with each position’s other elements of compensation, will allow total
direct compensation to achieve upper quartile positioning for superior share price performance.
Based on the Lane Caputo Report, the Compensation Committee established the following compensation components for its
2017 financial year:
71
Base Salary
In conjunction with the compensation review and the establishment of the STIP and LTIP programs, David M. Cole, CEO,
agreed to decrease his annual cash salary from US$ 400,000 to US$ 325,000, to further align his interests with the overall
success of the Corporation.
Annual/Short Term Incentives
A structured incentive program based on quantifiable corporate and personal goals and objectives that are tied to the overall
success of the Corporation and that are closely aligned with the Corporation’s business strategy has been established. The
Compensation Committee and the NEOs and other executive officers will develop meaningful, yet attainable, targets for the
following key performance indicators, which will be measured over a one year period:
• Capital spent by third party partners
• Cash management
• Corporate Social Responsibility measures (both internal and 3rd party partner programs)
• New projects staked/acquired
• New exploration and option agreements
In conjunction with the adoption of a structured plan, annual incentive levels to achieve the stated compensation philosophy
are proposed as follows: Minimum = 0% of base salary; Target = 15% of base salary; Maximum = 25% of base salary.
2017 incentives to by paid under the STIP have yet to be finalized. During the year, stock grants for 2016 success were granted
to the CEO and CFO.
Long-term Incentives
As recommended in the Lane Caputo Report, a more robust LTIP was implemented, with both Stock Options and performance
related RSU’s as key components of the LTIP. Lane Caputo recommended a fixed number of awards annually over the near-
term, such that executives have maximum exposure to the upside in the stock through their efforts as possible (a fair value, or
“Black-Scholes’ approach requires a reduction in the number of incentives awarded as the share price increases). EMX may
ultimately need to move to a fair value approach as the company grows.
Stock Options are generally granted on an annual basis subject to the imposition of trading black-out periods, in which case
options scheduled for grant will be granted subsequent to the end of the black-out period. All options granted to NEOs are
recommended by the Compensation Committee and approved by the Board.
The Corporation adopted a RSU Plan with the following guidelines:
• Performance measured over a three year period, with the entire award vesting at the end of the performance period
(known as “cliff-vesting”) to generate sufficient long-term incentive.
In order for RSUs to vest, the Participant must satisfy performance criteria set each year by the Compensation Committee. For
2017, the performance criteria were as follows:
▪ Half of the RSU award is subject to the Company achieving cash flow neutrality in three years from January 1, 2017.
▪ Half of the RSU award is subject to Total Shareholder Return (“TSR”) performance relative to the S&P/Global Gold
Index as recommended by Lane Caputo.
The following relative TSR performance versus payout multiple will apply to the 50% of RSU award that is subject to
TSR:
➢ Below-median Performance (0 – 49th percentile): 0% of RSU’s vest
➢ 3rd Quartile Performance (50th percentile – 74th percentile): 100% of RSU’s vest
➢ Upper Quartile Performance (75th percentile – 100th percentile): 200% of RSU’s vest
On August 28, 2017, stock options and RSU’s were granted to NEOs of the Corporation. See Summary Compensation Table
below for details.
72
The fees charged by Lane Caputo during the Company’s 2017, 2016 and 2015 financial years were as follows:
Nature of Fee
Executive Compensation-Related Fees
All Other Fees
Cash Compensation
2017
$48,000
Nil
2016
Nil
Nil
2015
Nil
Nil
The following table contains a summary of the compensation paid to the Directors and NEOs during the last three financial
years.
Summary Compensation Table
Name and Principal
Position
David M. Cole
President & CEO
Michael D. Winn
Chairman & Director
Christina Cepeliauskas(3)
CFO
Brian E. Bayley
Director
Brian K. Levet
Director
Larry M. Okada
Director
Kim Casswell(3)(4)
Former Corporate
Secretary
Annual Compensation
Year
Salary
$
STIP
Payouts
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
478,853
529,738
516,280
77,882
79,228
76,692
86,250
86,250
86,250
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
29,800
29,800
3,150
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Other
Annual
Compensatio
n $
14,019(2)
14,046(2)
13,549(2)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Long-Term
Compensation
Awards
Payouts
Securities
Under
Options/SA
Rs Granted
Bonus
Shares or
Restricted
Share Units
200,000
150,000
150,000
100,000
75,000
75,000
75,000
55,000
55,000
75,000
50,000
50,000
75,000
50,000
50,000
75,000
50,000
50,000
30,000
30,000
Nil
100,000(1)
Nil
Nil
Nil
Nil
Nil
37,500(1)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
LTIP
Payouts
$
All Other
Comp.
$
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1) RSUs granted under the Company’s RSU Plan on August 28, 2017. The vesting date and payout date for RSUs is January 1, 2020,
subject to performance criteria.
(2) For officers and employees in the United States, the Company pays 4% of the annual salary each year to the officer or employees’
401(k) retirement plan effective January 1, 2012.
(3) Pursuant to a Management Services Agreement between the Company and Seabord Services Corp. (“Seabord”), Ms. Cepeliauskas’
and Ms. Casswell’s remuneration is paid by Seabord.
(4) Ms. Casswell was Corporate Secretary of the Company from November 13, 2015 to February 27, 2018.
The following Stock Options were granted to directors and NEOs during the fiscal year ended December 31, 2017:
73
Name
Number
Of
Options
Granted
% of
Total
Options
Granted
Exercise
Price
Per
Share
Grant
Date
Expiration
Date
David M. Cole
200,000
13.6%
Michael D. Winn
100,000
Christina
Cepeliauskas
Brian E. Bayley
Brian K. Levet
Larry M. Okada
Kim Casswell
75,000
75,000
75,000
75,000
30,000
6.8%
5.1%
5.1%
5.1%
5.1%
2%
$1.20
$1.20
$1.20
$1.20
$1.20
$1.20
$1.20
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
August 28, 2017
August 28, 2022
Mkt. Value of
Securities
Underlying
Options on
Date of
Grant
$1.20
$1.20
$1.20
$1.20
$1.20
$1.20
$1.20
The following RSUs were granted to NEOs during the fiscal year ended December 31, 2017:
Name
David M. Cole
Number
of
RSUs
Granted
100,000
Christina Cepeliauskas
37,500
August 28, 2017
Outstanding Share-Based and Option-Based Awards
Date of Grant
Vesting Period /
Vesting Date
Expiration Date /
Payout Date
August 28, 2017
3 years /
January 1, 2020
3 years /
January 1, 2020
January 1, 2020
January 1, 2020
The following table sets out all option-based and share-based awards outstanding for each Director and NEO as at December
31, 2017.
Option-based Awards
Share-based Awards (RSUs)
Name
David M. Cole
Christina
Cepeliauskas
Michael D. Winn
Number of
Securities
Underlying
Unexercised
options
(vested-
unvested)
200,000 – 0
150,000 - 0
150,000 - 0
150,000 - 0
75,000 - 0
55,000 - 0
55,000 - 0
55,000 - 0
75,000 - 0
75,000 - 0
75,000 - 0
100,000 - 0
Option
Exercise
price
($ per
share)
1.20
1.30
0.66
1.20
1.20
1.30
0.66
1.20
1.20
1.30
0.66
1.20
Option
Expiration
date
(m/d/y)
8/28/2022
10/18/2021
6/8/2020
4/25/2019
8/28/2022
10/18/2021
6/8/2020
4/25/2019
8/28/2022
10/18/2021
6/8/2020
4/25/2019
Value of
unexercised
“in-the-
money”
options(1)
($)
Number of
shares or
units
of shares
that
have not
vested
(#)
Market or
payout
value of
share-based
awards that
have not
vested(3)
($)
Market or
payout value of
shares vested
but not paid
out
($)
100,000(2)
103,000
Nil
37,500(2)
38,625
Nil
Nil
Nil
Nil
0
0
555,000
0
0
0
20,350
0
0
0
27,750
0
74
Brian E. Bayley
Brian K. Levet
Larry M. Okada
Kim Casswell
50,000 - 0
50,000 - 0
50,000 - 0
75,000 - 0
50,000 - 0
50,000 - 0
50,000 - 0
75,000 - 0
50,000 - 0
50,000 - 0
50,000 - 0
75,000 - 0
5,000 - 0
30,000 - 0
30,000 - 0
1.20
1.30
0.66
1.20
1.20
1.30
0.66
1.20
1.20
1.30
0.66
1.20
1.20
1.30
1.20
8/28/2022
10/18/2021
6/8/2020
4/25/2019
8/28/2022
10/18/2021
6/8/2020
4/25/2019
8/28/2022
10/18/2021
6/8/2020
4/25/2019
8/28/2022
10/18/2021
4/25/2019
0
0
18,500
0
0
0
18,500
0
0
0
18,500
0
0
0
0
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1) The closing price of the Company’s common shares on the TSX-V on December 31, 2017 was $1.03.
(2) RSUs granted under the Company’s RSU Plan on August 28, 2017. The vesting date and payout date for RSUs granted on August 28,
2017, is January 1, 2020, subject to performance criteria.
(3) The Company valued the RSUs at the market value of the Company’s common shares on the TSX-V on December 31, 2017, being the
closing price of $1.03 per share.
Director Compensation.
The fees payable to the independent directors of the Company are for their services as directors and as members of committees
of the Board as follows:
Board or
Committee Name
Board of Directors
Annual Retainer
($)
Meeting Stipend
($)
24,000
Nil
Per diem fees
($)
Nil
Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors.
Change of Control Remuneration.
Chief Executive Officer
The Company is a party to an employment agreement with David M. Cole, President and CEO of the Company, effective June
1, 2017. Under the agreement, Mr. Cole receives US$ 325,000 per year. The agreement may be terminated by the Company
without reason by written notice and a lump sum payment equal to 24 months of salary and benefits and all unvested stock
options and grants. Mr. Cole may terminate the agreement for any reason upon two months’ notice to the Company during
which time he will continue to receive his usual remuneration and benefits.
If Mr. Cole’s agreement is terminated or his duties and responsibilities are materially changed within 6 months following a
change in control of the Company, he is entitled to receive a lump sum payment equal to 24 months of his salary and benefits
and all unvested stock options and grants.
Other Executive Officers
The Company has not entered into another employment or consulting contracts with its other Executive Officers.
For the purposes of this section, “Change of control” means an event occurring after the effective date of this agreement
pursuant to which:
a)
a merger, amalgamation, arrangement, consolidation, reorganization or transfer takes place in which securities of
EMX possessing more than 50% of the total combined voting power of the EMX’s outstanding voting securities
75
are acquired by a person or persons (other than one or more members of the EMX Group) different from the
person holding those voting securities immediately prior to such event, and the composition of the Board of
Directors of EMX or following such event is such that EMX’s directors prior to the transaction constitute less
than 50% of the Board membership following the event; or
b)
c)
any person (other than a member of the EMX Group), or any combination of persons (none of which is a member
of the EMX Group) acting jointly or in concert by virtue of an agreement, arrangement, commitment or
understanding acquires, directly or indirectly, 50% or more of the voting rights attached to all outstanding voting
securities or the right to appoint a majority of the directors of EMX ; or
EMX sells, transfers or otherwise disposes of all or substantially all of its assets, except that no Change of Control
will be deemed to occur if such sale or disposition is made to a member of the EMX Group.
Bonus/Profit Sharing/Non-Cash Compensation. Except for the Company’s short-term and long-term incentive programs
discussed in Item 6.B., the Company had no material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to the Company's Directors or Senior Management.
Pension/Retirement Benefits. For the officers and employees in the United States, the Company pays 4% of the annual salary
each year to the officer or employees’ 401(k) retirement plan effective January 1, 2012.
6.C. Board Practices
6.C.1. Terms of Office.
Refer to Item 6.A.1.
6.C.2. Directors’ Service Contracts.
Not applicable.
6.C.3. Board of Director Committees.
Audit Committee
The Company has an Audit Committee, which recommends to the Board of Directors the engagement of the independent
auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the
Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company.
The current members of the Audit Committee are: Brian E. Bayley, Brian K. Levet and Larry M. Okada (Chairman). The
Audit Committee met four times during Fiscal year 2017. The Company’s Audit Committee Charter sets out its mandate and
responsibilities, and is attached as Exhibit 15.4 to this Annual Report. See Item 19 – “Exhibits”.
Compensation Committee
The Compensation Committee is responsible for the review of all compensation paid (including stock options granted under
the Option Plan and Common Shares issued under the Stock Grant Program) by the Company to the Board, officers and
employees of the Company and any subsidiaries, to report to the Board on the results of those reviews and to make
recommendations to the Board for adjustments to such compensation. The current members of the Compensation Committee
are: Brian K. Levet (Chairman), Brian E. Bayley and Larry M. Okada.
Corporate Governance Committee
The Corporate Governance Committee is responsible for advising the Board of the appropriate corporate governance
procedures that should be followed by the Company and the Board and monitoring whether they comply with such procedures.
The current members of the Corporate Governance Committee are: Michael Winn (Chairman), Brian E. Bayley and Larry M.
Okada.
The Corporate Governance Committee evaluates the effectiveness of the Board and its committees. To facilitate this evaluation,
each committee will conduct an annual assessment of its performance, consisting of a review of its Charter, the performance
of the committee as a whole and will submit a Committee Annual Report to the Corporate Governance Committee, including
recommendations. In addition, the Board will conduct an annual review of its performance.
76
6.D. Employees/ Consultants
As of December 31, 2017, EMX had 39 employees and consultants working at various locations throughout the world.
As of April 3, 2018, the Chief Financial Officer and Corporate Secretary are based in Vancouver, Canada. The President &
CEO is based in the Company’s office in Littleton, Colorado through the Company’s wholly-owned subsidiary, EMX USA.
There are eight employees located in Arizona including seven geologists and one office manager. The Company has one
consultant in Haiti, one consultant in Australia, 2 consultants in Turkey and 3 consultants in Scandinavia.
See Item 6 – “Directors, Senior Management & Employees” for a description of their job responsibilities.
6.E. Share Ownership
The table below lists, as of April 3, 2018, Directors and Senior Management who beneficially own the Company's voting
securities, consisting solely of Common Shares, and the amount of the Company's voting securities owned by the Directors
and Senior Management as a group.
Shareholdings of Directors and Senior Management
Shareholdings of 5% Shareholders
Title of Class
Name of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Percent of Class(1)
Common
Common
Common
Common
Options
Common
Common
David M. Cole (2)
Michael D. Winn (3)
Christina Cepeliauskas (4)
Brian E. Bayley (5)
Brian K. Levet (6)
Larry M. Okada (7)
Paul H. Stephens (8)
2,757,496
1,290,208
526,500
411,375
425,000
240,000
15,408,491
3.46%
1.62%
0.66%
0.52%
0.53%
0.30%
19.32%
(1) Based on 79,746,271 shares outstanding as of April 3, 2018.
(2) Of these shares, 1,065,015 are represented by currently exercisable share purchase options, warrants and RSUs.
(3) Of these shares, 457,100 are represented by currently exercisable share purchase options and warrants.
(4) Of these shares, 367,500 are represented by currently exercisable share purchase options and RSUs.
(5) Of these shares, 225,000 are represented by currently exercisable share purchase options.
(6) Of these shares, 425,000 are represented by currently exercisable share purchase options.
(7) Of these shares, 230,000 are represented by currently exercisable share purchase options and warrants.
(8) Of these shares, nil are represented by currently exercisable share purchase options.
Restricted Share Unit Plan
The RSU Plan was approved by shareholders at the Annual General Meeting of the Company on May 17, 2017.
The RSU Plan provides that restricted share units (“RSUs”) may be granted by the Board, based on the advice of the
Compensation Committee, to officers, directors and employees of, and consultants to, the Corporation (“Eligible Persons”)
as a discretionary payment in consideration for significant contributions to the short-term (one year or less) and long-term (one
to three years) successes of the Corporation. The Board may, in its sole discretion, set vesting conditions on RSUs granted to
Eligible Persons, which conditions will be primarily based on the performance criteria set by the Compensation Committee.
Pursuant to the RSU Plan, the aggregate maximum number of Common Shares reserved for issuance under the RSU Plan in
combination with the aggregate number of Common Shares issuable under all of the Corporation’s other equity incentive plans
in existence from time to time, including the Option Plan, shall not exceed 10% of the issued and outstanding Common Shares.
In addition, the RSU Plan provides that the number of Common Shares which may be issuable under the RSU Plan and all of
the Corporation's other previously established or proposed share compensation arrangements, including the Option Plan,
within a 12 month period, to:
77
(a)
(b)
(c)
any one Eligible Person shall not exceed 5% of the total number of issued and outstanding Common Shares on the
date of the grant on a non-diluted basis unless the Corporation has obtained the approval of Shareholders who are not
Insiders (“Disinterested Shareholders”), which approval is not being sought;
Insiders as a group within a 12 month period shall not exceed 10% of the total number of issued and outstanding
Common Shares on a non-diluted basis unless the Corporation has obtained the approval of Disinterested Shareholders,
which approval is also not being sought; and
any one consultant, or Eligible Person engaged in providing investor relations services to the Corporation, shall not
exceed 2% in the aggregate of the total number of issued and outstanding Common Shares on the date of the grant on
a non-diluted basis.
Unless redeemed earlier in accordance with the RSU Plan, the RSUs of each Eligible Person will be redeemed on or within
30 days after the RSU Payment Date (as defined below) for cash or Common Shares, as determined by the Board, for an
amount equal to the Fair Market Value (the closing market price of the Common Shares on the TSX-V on the day prior to
redemption) of an RSU, less applicable withholding taxes, and as increased or decreased by a “performance factor”
determined by the Board in its sole discretion. The “RSU Payment Date” in respect of any RSU means a date not later than
December 15th of the third year following the year in which such RSU was granted to the Eligible Person, unless (i) an earlier
date has been approved by the Board as the RSU Payment Date in respect of such RSU, or (ii) there is a “Change of Control”
of the Corporation (as defined in the RSU Plan), the RSU Plan is terminated or upon an Eligible Person’s death or termination
of employment.
Under the RSU Plan, the Board may from time to time amend or revise the terms of the RSU Plan or may discontinue the
RSU Plan at any time. Subject to receipt of requisite Disinterested Shareholder, TSX-V and NYSE American approvals, the
Board may make amendments to the RSU Plan to
•
•
•
change the maximum number of Common Shares issuable under the RSU Plan,
change the method of calculation of the redemption of RSUs held by Eligible Persons, and
provide an extension to the term for the redemption of RSUs held by Eligible Persons.
All other amendments to the RSU Plan may be made by the Board without obtaining shareholder approval.
If an Eligible Person ceases to be an Eligible Person for any reason (excluding death), all of the Eligible Person’s RSUs which
have vested at the time of such cessation shall be redeemed for cash or Common Shares and the remainder shall be cancelled.
No amount shall be paid by the Corporation to the Eligible Person in respect of the RSUs so cancelled. If an Eligible Person
ceases to be an Eligible Person due to death, any of the Eligible Person’s RSUs which would otherwise vest within the next
year following the date of death shall be redeemed for cash or Common Shares as determined by the Board.
In the event of a Change of Control, then the Corporation may redeem, subject to prior approval of the TSX-V and NYSE
American, all of the RSUs granted to the Eligible Persons and outstanding under the RSU Plan for that number of Common
Shares equal to the number of RSUs then held by the Eligible Persons. If the employment of an Eligible Person is terminated
within six months following a Change of Control, all RSUs held by such Eligible Person shall become vested and be redeemed
for cash or Common Shares.
Stock Option Plan
The Board established the Option Plan to attract and motivate the directors, officers and employees of the Company (and any
of its subsidiaries), employees of any management company and consultants to the Company (collectively the “Optionees”)
and thereby advance the Company’s interests by providing them an opportunity to acquire an equity interest in the Company
through the exercise of stock options granted to them under the Option Plan.
Pursuant to the Option Plan, the Board, based on the recommendation of the Compensation Committee, may grant options to
Optionees in consideration of them providing their services to the Company or a subsidiary. The number of Common Shares
subject to each option is determined by the Board within the guidelines established by the Option Plan. The options enable the
Optionees to purchase Common Shares at a price fixed pursuant to such guidelines. The options are exercisable by the Optionee
giving the Company notice and payment of the exercise price for the number of Common Shares to be acquired.
The Option Plan authorizes the Board to grant stock options to the Optionees on the following terms:
78
1.
2.
3.
4.
5.
6.
7.
The number of Common Shares subject to issuance pursuant to outstanding options, in the aggregate, cannot exceed
10% of the outstanding Common Shares.
The number of Common Shares subject to issuance upon the exercise of options granted under the Option Plan by one
Optionee or all Optionees providing investor relations services is subject to the following limitations
(a)
no Optionee can be granted options during a 12 month period to purchase more than
(i)
5% of the issued Common Shares unless disinterested Shareholder approval has been obtained (such
approval has not been sought), or
(ii)
2% of the issued Common Shares, if the Optionee is a consultant, and
(b)
the aggregate number of Common Shares subject to options held by all Optionees providing investor relations
services cannot exceed 2% in the aggregate.
Unless the Option Plan has been approved by disinterested Shareholders (such approval has not been obtained),
options granted under the Option Plan, together with all of the Company’s previously established and outstanding
stock options, stock option plans, employee stock purchase plans or any other compensation or incentive mechanisms
involving the issuance or potential issuance of Common Shares, shall not result, at any time, in
(a)
(b)
(c)
the number of Common Shares reserved for issuance pursuant to stock options granted to insiders exceeding
10% of the outstanding Common Shares at the time of granting,
the grant to insiders, within a one year period, of options to purchase that number of Common Shares
exceeding 10% of the outstanding Common Shares, or
the issuance to any one insider and such insider’s associates, within a one year period, of Common Shares
totaling in excess of 5% of the outstanding Common Shares.
The exercise price of the options cannot be set at less than the greater of $0.10 per Common Share and the closing
trading price of the Common Shares on the day before the granting of the stock options. If the Optionee is subject to
the tax laws of the United States of America and owns (determined in accordance with such laws) greater than 10%
of the Common Shares, the exercise price shall be at least 110% of the price established as aforesaid.
The options may be exercisable for up to 10 years.
There are not any vesting requirements unless the Optionee is a consultant providing investor relations services to the
Company, in which case the options must vest over at least 12 months with no more than one-quarter vesting in any
three month period. However, the Board may impose additional vesting requirements and, subject to obtaining any
required approval from the Exchange, may authorize all unvested options to vest immediately. If there is a potential
“change of control” of the Company due to a take-over bid being made for the Company or a similar event, all unvested
options, subject to obtaining any required approval from the Exchange, shall vest immediately.
The options can only be exercised by the Optionee (to the extent they have already vested) for so long as the Optionee
is a director, officer or employee of, or consultant to, the Company or any subsidiary or is an employee of the
Company’s management Company and within a period thereafter not exceeding the earlier of:
(a)
the original expiry date;
(b)
90 days after ceasing to be a director, officer or employee of, or consultant at the request of the Board or for
the benefit of another director or officer to, the Company unless the Optionee is subject to the tax laws of the
United States of America, in which case the option will terminate on the earlier of the 90th day and the third
month after the Optionee ceased to be an officer or employee; and
(c)
if the Optionee dies, within one year from the Optionee’s death.
If the Optionee is terminated “for cause”, involuntarily removed or resigns (other than at the request of the Board or
for the benefit of another director or officer) from any such positions, the option will terminate concurrently.
79
8.
9.
10.
The options are not assignable except to a wholly-owned holding company. If the option qualifies as an “incentive
stock option” under the United States Internal Revenue Code, the option is not assignable to a holding company.
No financial assistance is available to Optionees under the Option Plan.
Any amendments to outstanding stock options are subject to the approval of the TSX-V and NYSE American and, if
required by either exchange or the Option Plan, of the Shareholders of the Company, possibly with only “disinterested
Shareholders” being entitled to vote. Disinterested Shareholder approval must be obtained for the reduction of the
exercise price of options (including the cancellation and re-issuance of options within a one year period so as to
effectively reduce the exercise price) of options held by insiders of the Company. The amendment to an outstanding
stock option will also require the consent of the Optionee.
11.
Any amendments to the Option Plan are subject to the approval of the TSX-V and NYSE American and, if required
by either exchange or the Option Plan, of the Shareholders of the Company, possibly with only “disinterested
Shareholders” being entitled to vote.
No options have been granted under the Option Plan which are subject to Shareholder approval.
The Option Plan does not permit stock options to be transformed into stock appreciation rights.
Outstanding Stock Options
Name
Officers & Directors:
David M. Cole
Michael D. Winn
Christina Cepeliauskas
Brian E. Bayley
Brian K. Levet
Larry M. Okada
Kim Casswell
Consultants/Employees
Number of
Shares of
Common
Stock
Exercise
Price
Grant
Date
Expiration
Date
200,000
150,000
150,000
150,000
100,000
75,000
75,000
75,000
75,000
55,000
55,000
55,000
75,000
50,000
50,000
50,000
75,000
50,000
50,000
50,000
75,000
50,000
50,000
50,000
30,000
30,000
5,000
842,500
814,500
752,500
60,000
17,500
822,500
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$0.66
$1.20
$1.20
$1.30
$1.20
$1.20
$1.30
$0.66
$0.87
$0.88
$1.20
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
06/08/2015
04/25/2014
08/28/2017
10/18/2016
04/25/2014
08/28/2017
10/18/2016
06/08/2015
12/22/2014
06/26/2014
04/25/2014
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
06/08/2020
04/25/2019
08/28/2022
10/18/2021
04/25/2019
08/28/2022
10/18/2021
06/08/2020
12/22/2019
06/26/2019
04/25/2019
80
Total for all Officers and Directors
Total for all Employees and Consultants
Total for all Officers, Directors, Employees and Consultants
1,955,000
3,309,500
5,264,500
Stock Grant Program.
The Board created the Incentive Stock Grant Program for the benefit of the President and CEO, Chairman of the Board, and
COO in 2010. The grants have a two-year vesting period
The purpose of the Stock Grant Program is as follows. Firstly, to reward and provide an incentive to such persons for the
ongoing efforts towards the continuing successes and goals of the Company as many of its successes directly result from their
very significant efforts. Secondly, to provide such persons with a long-term incentive to remain with the Company. Finally,
from time to time, the Company may provide additional compensation in the form of stock grants as part of annual salaries.
The Stock Grant Program provides that, following the approval of the independent members of the Compensation Committee,
up to 300,000 Common Shares may be awarded in each year. The Common Shares awarded will vest and be issued in three
separate tranches over a two year period – on the date of grant, and on the first and second anniversaries of the initial grant.
None of the 300,000 Common Shares not awarded in one year can be rolled over or awarded in subsequent years. If the recipient
ceases to be a director or officer of the Company before the relevant anniversary, he or she will not be entitled to receive any
further Common Shares under the Stock Grant Program, including Common Shares previously awarded for issuance on such
anniversary (with the exception of historical stock grants to Mr. Michael Winn, who shall receive the Common Shares even if
he ceases to be the director).
The actual number of Common Shares awarded in each year is that number recommended and approved by the independent
members of the Compensation Committee or independent directors of the Company.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders.
7.A.1.a. Holdings By Major Shareholders.
The Company is aware of one person who beneficially own 5% or more of the Registrant's voting securities. The table below
lists as of April 3, 2018, persons and/or companies holding 5% or more beneficial interest in the Common Shares.
Title of Class
Name of Owner
Amount and Nature of
Beneficial Ownership
Percent of Class(1)
Common
Paul H. Stephens
15,408,491
19.32%
(1) Based on 79,746,271 shares outstanding as of April 3, 2018.
7.A.1.b. Significant Changes in Major Shareholders’ Holdings.
Not applicable.
7.A.1.c. Different Voting Rights.
The Company’s major shareholders do not have different voting rights.
7.A.2. Canadian Share Ownership.
On April 3, 2018, the Company’s shareholders’ list showed 79,746,271 common shares outstanding and 341 registered
shareholders. The Company has researched the indirect holdings by depository institutions and other financial institutions
estimates that there are 17 “holders of record" resident in Canada representing 36,586,003 Common Shares, 290 “holders of
81
record" resident in the USA representing 42,760,179 Common Shares, and 34 “holders of record” resident internationally
representing 397,089 Common Shares.
The Company is a foreign private issuer for its current fiscal year. As of the last business day of the Company’s second fiscal
quarter, the majority of the Company’s executive officers and directors were not US citizens or residents, the majority of the
Company’s assets are not in the United States, and the Company is administered principally in Canada. The Company’s major
shareholders in common shares have the same voting rights as other holders of common shares. The Company is not directly
or indirectly owned or controlled by another corporation, a foreign government or any other natural or legal persons severally
or jointly. There are no arrangements known to the Company which may result in a change of control of the Company.
7.A.3. Control of the Company
The Company is a publicly owned Canadian Company, the shares of which are owned by U.S. residents, Canadian residents
and other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described
in Item 4.A., “History and Growth of the Company”, and Item 6.E., “Share Ownership”.
7.A.4. Change of Control of Company Arrangements.
Not applicable.
7.B. Related Party Transactions
The aggregate value of transactions and outstanding balances relating to key management personnel and directors were as
follows:
* Directors fees include $5,000 per month paid to the Company’s non-Executive Chairman, who does not receive the fees paid to the other independent
director’s.
Seabord Services Corp. (“Seabord”) is a management services company controlled by the Chairman of the Board of Directors
of the Company. Seabord provides a Chief Financial Officer, a Corporate Secretary, accounting and administration staff, and
office space to the Company. The Chief Financial Officer and Corporate Secretary are employees of Seabord and are not paid
directly by the Company.
Included in the table above for the year ended December 31, 2015 is $247,660 in termination payments to a former officer of
the Company. The amount has been included in Other expenses for that year.
Shareholder Loans
82
Share-basedFor the year ended December 31, 2017Salary or FeesPaymentsTotalManagement733,244$ 361,865$ 1,095,109$ Outside directors *149,882 226,614 376,496 Seabord Services Corp. 357,600 - 357,600 Total1,240,726$ 588,479$ 1,829,205$ Share-basedFor the year ended December 31, 2016Salary or FeesPaymentsTotalManagement803,033$ 215,933$ 1,018,966$ Outside directors *151,228 167,534.00 318,762 Seabord Services Corp. 357,600 - 357,600 Total1,311,861$ 383,467$ 1,695,328$ Share-basedFor the year ended December 31, 2015Salary or FeesPaymentsTotalManagement1,067,210$ 108,637$ 1,175,847$ Outside directors *158,257 79,898 238,155 Seabord Services Corp. 413,700 - 413,700 Total1,639,167$ 188,535$ 1,827,702$
Not applicable.
Amounts Owing to Senior Management/Directors
Included in accounts payable and accrued liabilities at December 31, 2017 is $7,177 (2016 - $5,913; 2015 - $3,467) owed to
key management personnel and $23,568 (2016 - $17,559; 2015 - $24,329) to other related parties.
Other than as disclosed above, there have been no transactions since December 31, 2017, or proposed transactions, which have
materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more
than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will
have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as
favorable to the Company as the Company could have obtained from unaffiliated parties.
Other Related Party Transactions
In October 2017, the Company issued a note receivable to Revelo, a related party by way of a common director for the principal
amount of $400,000. The note was due on December 31, 2017, together with accrued interest at a rate of 1% per month and a
bonus of $20,000. As at December 31, 2017, the balance owed to the Company pursuant to the note was $429,973 including
accrued interest and bonus fee. The Company is negotiating the terms of repayment.
Other than as disclosed above, there have been no transactions or loans between the Company and (a) enterprises that directly
or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the company;
(b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the Company giving them
significant influence over the Company, and close members of any such individual’s family; (d) key management personnel
and close members of such individuals’ families; and (e) enterprises substantially owned or controlled, directly or indirectly,
by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
7.C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
8.A. Consolidated Statements and Other Financial Information
The Company's financial statements are stated in Canadian Dollars and are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
See ‘‘Item 18. Financial Statements’’ for our Annual Audited Consolidated Financial Statements, related notes and other
financial information filed with this annual report on Form 20-F.
8.A.7. Legal/Arbitration Proceedings
The Directors and the management of the Company do not know of any material active or pending, legal proceedings; nor is
the Company involved as a plaintiff in any material proceeding or pending litigation.
8.A.8. Dividends.
The Company has not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We do not intend
to pay cash dividends on the Common Shares in the foreseeable future. We will not declare or pay any dividends until such
time as our cash flow exceeds our capital requirements and will depend upon, among other things, conditions then existing
including earnings, financial condition, restrictions in financing arrangements, business opportunities and conditions and other
factors, or our Board determines that our shareholders could make better use of the cash.
8.B. Significant Changes
83
There have been no significant changes to the Company’s financial condition since the end of the fiscal year.
ITEM 9. THE OFFER AND LISTING
9.A. Common Share Trading Information
The Common Shares began trading on the TSX-V on November 23, 2003 and the Common Shares began trading on the NYSE
American on January 30, 2012.
The table below lists the high and low sales prices on the TSX-V and NYSE American for: each of the last six months; for the
two most recent full financial years and subsequent period, each full financial quarter; and the last five fiscal years.
Prior Fiscal Years Ended
December 31, 2017
December 31, 2016
December 31, 2015
December 31, 2014
December 31, 2013
Prior Quarters Ended
Q4 - December 31, 2017
Q3 - September 30, 2017
Q2 - June 30, 2017
Q1 - March 31, 2017
Q4 - December 31, 2016
Q3 - September 30, 2016
Q2 - June 30, 2016
Q1 - March 31, 2016
Last 6 Months Ended
February 28, 2018
January 31, 2018
December 31, 2017
November 30, 2017
October 31, 2017
September 30, 2017
NYSE American
TSX-V
High
(in US$)
Low
(in US$)
High
(in Cdn$)
Low
(in Cdn$)
$1.24
$ 1.40
$ 0.81
$ 1.23
$ 2.20
$0.92
$1.04
$0.97
$1.24
$ 1.20
$ 1.40
$ 1.03
$ 0.65
$0.95
$0.97
$0.86
$0.92
$0.86
$1.00
$0.67
$ 0.35
$ 0.35
$ 0.63
$ 0.78
$0.67
$0.82
$0.75
$0.92
$ 0.85
$ 0.62
$ 0.57
$ 0.35
$0.86
$0.81
$0.72
$0.70
$0.67
$0.82
$1.60
$ 1.84
$ 0.97
$ 1.93
$ 2.15
$1.18
$1.32
$1.32
$1.60
$ 1.50
$ 1.84
$ 1.34
$ 0.85
$1.17
$1.23
$1.09
$1.18
$1.08
$1.24
$0.85
$ 0.50
$ 0.48
$ 0.90
$ 0.86
$0.85
$1.02
$1.05
$1.22
$ 1.15
$ 0.86
$ 0.77
$ 0.50
$1.11
$1.02
$0.91
$0.91
$0.85
$1.02
ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
Not applicable.
10.B. Memorandum and Articles of Association
New British Columbia Corporations Act
Background
Effective March 29, 2004, the Business Corporations Act (British Columbia) (the “New Act”) replaced the previous Company
Act (British Columbia) (the “Old Act”). As a consequence, all British Columbia companies are now governed by the New Act.
The New Act is intended to modernize and streamline company law in British Columbia.
84
Objects and Purposes
The Articles of EMX place no restrictions upon the type of business that the Company may engage in.
Disclosure of Interest of Directors,
Part 17 of the Articles
17.1
A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in
a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any
profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and the extent
provided in the Business Corporations Act.
17.2
A director who holds a disclosable interest in a contract into which the Company has entered or proposes to enter is
not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable
interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.
17.3
A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes
to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be
counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.
17.4
A director of senior officer who holds any office or possesses any property, right or interest that could result, directly
or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or
senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.
17.5
A director may hold any office or place of profit with the Company, other than the office of auditor of the Company,
in addition to their office of director for a period and on the terms (as to remuneration or otherwise)that the directors may
determine.
17.6
No director or intended director is disqualified by their office from contracting with the Company either with regard
to the holding or any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no
contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be
voided for that reason.
17.7
A director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for
the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for
professional services as if that director or officer were not a director or officer.
17.8
A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in
which the Company may be interested as a shareholder or otherwise, and the director or officer is not accountable to the
Company for any remuneration or other benefits received by them as director, officer or employee of, or from their interest in,
such other person.
Powers and Duties of Directors
Part 16 of the Articles
The directors must, subject to the Articles, manage or supervise the management of the business and affairs of the
16.1
Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or
by the Articles, required to be exercised by the shareholders of the Company.
The directors may from time to time, by power of attorney or other instrument, under seal if so required by law,
16.2
appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the
board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to
appoint or remove officers appointed by the directors and to declare dividends)and for such period, and with such remuneration
and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the
protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized
by the director to sub-delegate all or any of the powers, authorities and discretions for the time being vested in them.
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Borrowing Powers of Directors,
Part 8 of the Articles
8.1.
The directors, if authorized by the directors, may:
(1)
conditions as they consider appropriate;
borrow money in such manner and amount, on the security, from the sources and upon the terms and
issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation
(2)
of the Company or any other person and at such discounts or premiums and on such other terms as they consider
appropriate;
(3)
person; and
guarantee the repayment of money by any other persons or the performance of any obligation of any other
(4)
security on, the whole or any part of the present and future assets and undertaking of the Company.
mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other
Remuneration of Directors
Part 13 of the Articles
The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time
13.5
determine. If they so decide, the remuneration, if any, of the directors will be determined by the shareholders. That
remuneration may be in addition to any salary or other remuneration paid to any officer of employee of the Company as such,
who is also a director.
13.6
the Company.
The Company must reimburse each director for the reasonable expenses they may incur in and about the business of
If any director performs any professional or other services for the Company that in the opinion of the directors are
13.7
outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business,
they may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such
remuneration may be either in addition to, or in substitution for, any other remuneration that they may be entitled to receive.
Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or
13.8
pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to
their spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any
such gratuity, pension or allowance.
Required Ownership of Capital by Directors
Part 13 of the Articles
13.4. A director is not required to hold a share in the capital of the Company as qualification for their office but must be
qualified as required by the Business Corporations Act to become, act or continue to act as a director.
Dividend Rights
Part 22 of the Articles
22.2
The directors may from time to time declare and authorize payment of such dividends as they may deem advisable.
Special Rights and Restrictions
Part 9 and 10 of the Articles
9.2
The Company may by ordinary resolution:
create special rights or restrictions for, and attach those special rights or restrictions to, the shares
(1)
of any class or series of shares, unless any of those shares have been issued in which case the
Company may do so only be special resolution; or
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vary or delete any special rights or restrictions attached to the shares of any class or series of
(2)
shares, unless any of those shares have been issued in which case the Company may do so only be
ordinary resolution.
Rules pertaining to annual general and special general meetings of shareholders are described in Sections Ten of the Company’s
Articles. These rules are summarized as follows:
10.1
The Company must, unless an annual general meeting is deferred or waived in accordance with the Business
Corporations Act, hold its first annual general meeting following incorporation, amalgamation or continuation within 18
months after the date on which it was incorporated or otherwise created and recognized, and after that must hold an annual
general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such
time and place as may be determined by the directors; and
10.2
If all the shareholders entitled to vote at an annual general meeting consent by unanimous resolution under the Business
Corporations Act to all of the business required to be transacted at that annual general meeting, the meeting is deemed to have
been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this
Article 10.2, select the Company’s annual reference date a date that would be appropriate for the holding of the applicable
annual general meeting.
10.3
The directors may, whenever they think fit, call a meeting of shareholders to be held in British Columbia, Calgary,
Alberta or Toronto, Ontario or at such other location as may be approved by the Registrar of Companies at such time and place
as may be determined by the directors.
10.4
The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided
by these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the
resolution has been give or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the
Company, unless these Articles otherwise provide, at least the following number of days before the meeting:
(1)
if and for so long the Company is a public company, 21 days;
(2)
otherwise, 10 days.
10.5
The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any
meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two
months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than
four months. The record date must not precede the date on which the meeting is held by fewer than:
(1)
if and for so long as the Company is a public company, 21 days;
(2)
otherwise, 10 days.
If no record date is set, it is 5:00 p.m. on the business day immediately preceding the first date on which the notice is sent or,
if no notice is sent, the beginning of the meeting.
10.6
The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any
meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two
months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than
four months. If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the
notice is sent or, if no notice is sent, the beginning of the meeting.
10.7
The accidental omission to send notice of any meetings to, or the non-receipt of any notice by, any of the persons
entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of such meeting of
shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.
10.8
must:
If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting
(1)
state the general nature of the special business; and
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(2)
if the special business includes considering, approving, ratifying, adopting or authorizing any document or
the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of
the document will be available for inspection by shareholders:
(a)
(b)
at the Company’ records office, or at such other reasonably accessible location in British
Columbia as is specified in such notice; and
during statutory business hours o any one or more specified days before the day set for the holding
of the meeting.
Proceedings at Meetings of Shareholders
Part 11 of the Articles
11.1
At a meeting of shareholders, the following business is special business:
(1)
at a meeting of shareholders that is not an annual general meeting, all business is special business except
business relating to the conduct of or voting at the meeting;
(2)
at an annual general meeting, all business is special business except for the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
business relating to the conduct or voting at the meeting;
consideration of any financial statements of the Company presented to the meeting;
consideration of any reports of the directors or auditor;
the setting or changing of the number of directors;
the election or appointment of directors;
the appointment of an auditor;
the setting of the remuneration of the auditor;
business arising out of a report of the directors not requiring the passing of a special resolution or
an exceptional resolution; and
any other business under which, under these Articles or the Business Corporations Act, may be
transacted at a meeting of shareholders without prior notice of the business being given to the
shareholders.
11.2
thirds of the votes cast on the resolution.
The majority of votes required for the Company to pass a special resolution at a meeting of shareholders are two-
11.3
transaction of business at a meeting of shareholders is two shareholders present in person or represented by proxy.
Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the
11.4
If there is only one shareholder entitled to vote at a meeting of shareholders:
(1)
(2)
the quorum of one person who is, or who represents by proxy, that shareholder; and
that shareholder, present in person or by proxy, may constitute the meeting.
11.5
The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company,
auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if
any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled
to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.
11.6
No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted
at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting,
but such quorum need not be present throughout the meeting.
11.7
If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:
(1)
in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and
(2)
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week
at the same time and place.
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11.8
If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within
one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by
proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.
11.9
The following individuals are entitled to preside as chair at a meeting of shareholders:
(1)
the chair of the board, if any; or
(2)
if the chair of the board is absent or unwilling to act as chair of the meeting, the first of the following individuals
to agree to act as chair: the president, if any.
11.10
If, at any meeting of shareholders, the chair of the board or president are not present within 15 minutes after the time
set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the
chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not
be present at the meeting, one of the chief executive officer, the chief financial officer, a vice-president, the secretary or the
Company’s legal counsel may act as chair of the meeting and, failing them, the directors present must choose one of their
number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose of if no director
is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person at the
meeting to chair the meeting.
11.11 The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to
time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished
at the meeting from which the adjournment took place.
11.12
It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at any adjourned
meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must
be given as in the case of the original meeting.
11.13 Every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on
the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder
entitled to vote who is present in person or by proxy.
11.14 The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with
the result of the show of hands or the poll, as the case may be, and that decision must be entered into the minutes of the meeting.
A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the
chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded
in favor of or against the resolution.
11.15 No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise,
and the chair of any meeting of shareholders is entitled to propose or second a motion.
11.16
have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.
In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll,
11.17 Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:
(1)
the poll must be taken:
(a)
(b)
at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs;
and
in the manner, at the time and at the place that the chair of the meeting directs;
(2)
(3)
the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and
the demand for the poll may be withdrawn by the person who demanded it.
11.18 A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.
11.19
determine the dispute, and their determination made in good faith is final and conclusive.
In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must
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11.20 On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.
11.21 No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.
11.22 The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the
continuation of a meeting for the transaction of any business other than the question on which a poll had been demanded.
11.23 The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each
proxy voted at the meeting at its records office, and, during that period, makes them available for inspection during normal
business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the
Company may destroy such ballots and proxies.
Votes of Shareholders
Part 12 of the Articles
12.1
shareholders under Article 12.3:
Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint
(1)
(2)
Other Issues
on a vote by a show of hands, every person present who is a shareholder or proxy holder and entitled to vote
on the matter has one vote; and
on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be
voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.
Neither the Company’s articles nor British Columbia law permit: staggered terms for Directors; cumulative voting; shareholder
approval of corporate matter by written consent; the adoption of various “poison pill” measures precluding shareholders from
realizing a potential premium over the market value of their shares. Neither the Company’s articles nor British Columbia law
require retirement or non-retirement of directors under an age limit requirement.
There are no limitations on the rights to own securities.
There is no provision of the Company’s articles that would have an effect of delaying, deferring or preventing a change in
control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving
the Company (or any of its subsidiaries).
Shareholder ownership must be disclosed to the British Columbia Securities Commission and the TSX-V by any shareholder
who owns more than 10% of the Company’s common stock.
10.C. Material Contracts
Pursuant to a management service agreement dated February 13, 2014 as amended December 1, 2015 between the Company
and Seabord Services Corp. of Suite 501, 543 Granville Street, Vancouver, British Columbia, the Corporation pays $29,800
per month to Seabord in consideration of Seabord providing the services of the CFO and Corporate Secretary and office,
reception, secretarial, accounting and corporate records services to the Company. The Chief Financial Officer and Corporate
Secretary are employees of Seabord and are not paid directly by the Company.
Seabord is a private company wholly-owned by Michael D. Winn, the Chairman and director of the Company.
10.D. Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a
Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the
remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company’s securities,
except as discussed in Item 10, ”Taxation" below.
Restrictions on Share Ownership by Non-Canadians - There are no limitations under the laws of Canada or in the organizing
documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment
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Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the
Company by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the
voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a Company,
partnership, trust or joint venture that is ultimately controlled by non-Canadians.
10.E. Taxation
Canadian Federal Income Tax Considerations
The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common
shares of the Company (a "U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and
who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada – United States Income Tax Convention
(the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does
not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not
discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.
Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends
paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the
U.S. Holder is a Company that beneficially owns at least 10% of the voting shares of the Company and the dividends may be
exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.
In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the
Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of
any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the
U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares of the
Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For
this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and
other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from
such resources, certain other rights in respect of natural resources situated in Canada and shares of a Company the value of
whose shares is derived principally from real property situated in Canada.
The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with
respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign
Company, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income
is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the
production of, passive income is at least 50% for a taxable year. The Company believes that it was a passive foreign investment
company as at December 31, 2016.
Dividends
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available
under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the
Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and
7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident
of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10%
of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the
dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and
remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.
Disposition of Common Shares
A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian
tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as
defined by the Tax Act. Generally, a common share of a public Company will not constitute taxable Canadian property of a
Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at
arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25%
or more of the shares of any class of the capital stock of the Company. The Canadian Venture Exchange is a prescribed stock
exchange under the Tax Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a
common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from
Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in,
91
Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business
property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the
disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately
preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition,
and (ii) owned the common share when he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include
three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder
may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of
taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property
and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any
subsequent year.
Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as
defined below) arising from and relating to the acquisition, ownership, and disposition of common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential
U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership,
and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances
of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific
tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should
not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address
the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S.
Holders of the acquisition, ownership, and disposition of common shares. Except as specifically set forth below, this summary
does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisor regarding the U.S.
federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences
relating to the acquisition, ownership and disposition of common shares.
No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will
be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common
shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and
contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject
to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final,
temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Treaty, and U.S. court
decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any of the authorities
on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be
applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this
summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that,
if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares that is for U.S. federal
income tax purposes:
•
•
an individual who is a citizen or resident of the U.S.;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the
laws of the U.S., any state thereof or the District of Columbia;
•
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
92
•
a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S.
persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to
be treated as a U.S. person.
Non-U.S. Holders
For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of common shares that is not a U.S. Holder or is a
partnership. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and
relating to the acquisition, ownership, and disposition of common shares. Accordingly, a non-U.S. Holder should consult its
own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local,
and non-U.S. tax consequences (including the potential application of and operation of any income tax treaties) relating to the
acquisition, ownership, and disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special
provisions under the Code, including, but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified
retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters,
insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders
in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a "functional currency" other than
the U.S. dollar; (e) own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or
other arrangement involving more than one position; (f) acquired common shares in connection with the exercise of employee
stock options or otherwise as compensation for services; (g) hold common shares other than as a capital asset within the
meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) are required to accelerate the
recognition of any item of gross income with respect to Securities as a result of such income being recognized on an applicable
financial statement; or (i) own or have owned (directly, indirectly, or by attribution) 10% or more of the total combined voting
power or value of the outstanding shares of EMX . This summary also does not address the U.S. federal income tax
considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons
that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Act; (c) persons that use or
hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in
Canada; (d) persons whose common shares constitute "taxable Canadian property" under the Act; or (e) persons that have a
permanent establishment in Canada for the purposes of the Treaty. U.S. Holders that are subject to special provisions under
the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S.
tax consequences relating to the acquisition, ownership and disposition of common shares.
If an entity or arrangement that is classified as a partnership (or "pass-through" entity) for U.S. federal income tax purposes
holds common shares, the U.S. federal income tax consequences to such partnership and the partners (or owners) of such
partnership generally will depend on the activities of the partnership and the status of such partners (or owners). This summary
does not address the tax consequences to any such partnership or partner (or owner). Partners (or owners) of entities or
arrangements that are classified as partnerships for U.S. federal income tax purposes should consult their own tax advisors
regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of
common shares.
Passive Foreign Investment Company Rules
If EMX were to constitute a "passive foreign investment company" (a “PFIC”), as defined below, within the meaning of Section
1297 of the Code, for any year during a U.S. Holder’s holding period, then certain different and potentially adverse rules will
affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of
common shares. In addition, in any year in which EMX is classified as a PFIC, such holder will be required to file an annual
report with the IRS containing such information as Treasury Regulations or other IRS guidance may require. A failure to
satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S.
Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules,
including the requirement to file an IRS Form 8621.
PFIC Status of EMX
EMX generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of EMX is passive income (the "income
test"), or (b) 50% or more of the value of EMX ’s assets either produce passive income or are held for the production of passive
income, based on the quarterly average of the fair market value of such assets (the "asset test"). "Gross income" generally
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includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations
or sources, and "passive income" generally includes, for example, dividends, interest, certain rents and royalties, certain gains
from the sale of stock and securities, and certain gains from commodities transactions.
Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all
(85% or more) of a foreign corporation’s commodities are stock in trade of such foreign corporation or other property of a kind
which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation
primarily for sale to customers in the ordinary course of business and certain other requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if EMX owns, directly or indirectly, 25% or more of the
total value of the outstanding shares of another corporation, EMX will be treated as if it (a) held a proportionate share of the
assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In
addition, for purposes of the PFIC income test and asset test described above, and assuming certain other requirements are met,
"passive income" does not include certain interest, dividends, rents, or royalties that are received or accrued by EMX from
certain "related persons" (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the
income of such related person that is not passive income.
EMX currently expects that it will be classified as a passive foreign investment company (“PFIC”) for the tax year ending
December 31, 2018 and expects to be a PFIC in future tax years. No opinion of legal counsel or ruling from the IRS concerning
the status of EMX as a PFIC has been obtained or is currently planned to be requested. The determination of whether any
corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules,
which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on
the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with
certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any
determination made by EMX concerning its PFIC status. Each U.S. Holder should consult its own tax advisor regarding the
PFIC status of EMX .
Default PFIC Rules Under Section 1291 of the Code
If EMX is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of
common shares will depend on whether such U.S. Holder makes an election to treat EMX as a "qualified electing fund", or
"QEF", under Section 1295 of the Code, or a "QEF Election", or a mark-to-market election under Section 1296 of the Code, or
a "Mark-to-Market Election". A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be
referred to in this summary as a "Non-Electing U.S. Holder".
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to, (a) any gain recognized
on the sale or other taxable disposition of common shares, and (b) any excess distribution received on common shares. A
distribution generally will be an "excess distribution" to the extent that such distribution (together with all other distributions
received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or
during a U.S. Holder’s holding period for common shares, if shorter).
Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of common shares and any "excess
distribution" received on common shares must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period
for the respective common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition
or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary
income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate
applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such
year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation
must treat any such interest paid as "personal interest", which is not deductible.
If EMX is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, EMX will continue to be
treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether EMX ceases to be a PFIC in one or
more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain
(which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if such common shares were
sold on the last day of the last tax year for which EMX was a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which its holding period of its common
shares begins generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common
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shares. A U.S. Holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on such U.S.
Holder’s pro rata share of, (a) the net capital gain of EMX, which will be taxed as long-term capital gain to such U.S. Holder,
and (b) the ordinary earnings of EMX, which will be taxed as ordinary income to such U.S. Holder. Generally, "net capital
gain" is the excess of (i) net long-term capital gain over (ii) net short-term capital loss, and "ordinary earnings" are the excess
of (i) "earnings and profits" over (ii) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal
income tax on such amounts for each tax year in which EMX is a PFIC, regardless of whether such amounts are actually
distributed to such U.S. Holder by EMX. However, for any tax year in which EMX is a PFIC and has no net income or gain,
U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S.
Holder that made a QEF Election has an income inclusion, such U.S. Holder may, subject to certain limitations, elect to defer
payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as "personal interest", which is not deductible.
A U.S. Holder that makes a timely and effective QEF Election with respect to EMX generally, (a) may receive a tax-free
distribution from EMX to the extent that such distribution represents "earnings and profits" of EMX that were previously
included in income by the U.S. Holder because of such QEF Election, and (b) will adjust such U.S. Holder’s tax basis in
common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election.
In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable
disposition of common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will
depend on whether such QEF Election is timely. A QEF Election will be treated as "timely" if such QEF Election is made for
the first year in the U.S. Holder’s holding period for common shares in which EMX was a PFIC. A U.S. Holder may make a
timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income
tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S.
Holder’s holding period for common shares, the U.S. Holder may still be able to make a timely and effective QEF Election in
a subsequent year if such U.S. Holder also makes a "purging" election to recognize gain (which will be taxed under the rules
of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day the
QEF Election is effective.
A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless
such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes
a QEF Election and, in a subsequent tax year, EMX ceases to be a PFIC, the QEF Election will remain in effect (although it
will not be applicable) during those tax years in which EMX is not a PFIC. Accordingly, if EMX becomes a PFIC in another
subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above
during any subsequent tax year in which EMX qualifies as a PFIC.
For each tax year that EMX qualifies as a PFIC, EMX intends to: (a) make available to U.S. Holders, upon their written request,
a “PFIC Annual Information Statement” as described in Treasury Regulation Section 1.1295-1(g) (or any successor Treasury
Regulation) and (b) upon written request, use commercially reasonable efforts to provide all additional information that such
U.S. Holder is required to obtain in connection with maintaining such QEF Election with regard to EMX. EMX may elect to
provide such information on its website, www.EMXRoyalty.com. Each U.S. Holder should consult its own tax advisor
regarding the availability of, and procedure for making, a QEF Election.
A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information
Statement, to a timely filed U.S. federal income tax return. However, if EMX does not provide the required information with
regard to EMX, U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the
rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains
and excess distributions.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock. Common shares
generally will be "marketable stock" if the common shares are regularly traded on, (a) a national securities exchange that is
registered with the SEC, (b) the national market system established pursuant to section 11A of the U.S. Exchange Act, or (c) a
foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is
located, provided that, (i) such foreign exchange has trading volume, listing, financial disclosure, and meets other requirements
and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure
that such requirements are actually enforced, and (ii) the rules of such foreign exchange ensure active trading of listed stocks.
If EMX’s common shares are traded on such a qualified exchange or other market, the common shares generally will be
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"regularly traded" for any calendar year during which common shares are traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter.
A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the
rules of Section 1291 of the Code discussed above with respect to such common shares. However, if a U.S. Holder does not
make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for common shares or
such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to
certain dispositions of, and distributions on, common shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which EMX is a
PFIC, an amount equal to the excess, if any, of (i) the fair market value of common shares, as of the close of such tax year over
(ii) such U.S. Holder’s tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed
a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in common shares, over (ii)
the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result
of the Mark-to-Market Election for prior tax years).
A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in common shares
to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition,
upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize
ordinary income or ordinary loss (not to exceed the excess, if any, of (i) the amount included in ordinary income because of
such Mark-to-Market Election for prior tax years over (ii) the amount allowed as a deduction because of such Mark-to-Market
Election for prior tax years).
A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed U.S. federal income
tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each
subsequent tax year, unless common shares cease to be "marketable stock" or the IRS consents to revocation of such election.
Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market
Election.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would
cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common
shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the
specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which common shares are
transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if EMX is a PFIC, regardless of whether such U.S.
Holder makes a QEF Election. For example under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as
security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of
such common shares.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject
to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for
the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated,
and a U.S. Holder should consult with their own tax advisor regarding the availability of the foreign tax credit with respect to
distributions by a PFIC.
The PFIC rules are complex, and each U.S. Holder should consult its own tax advisor regarding the PFIC rules and how the
PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common
shares.
Ownership and Disposition of Common Shares
The following discussion is subject to the rules described above under the heading "Passive Foreign Investment Company
Rules".
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Distributions on Common Shares
Subject to the PFIC rules discussed above, a U.S. Holder that receives a distribution, including a constructive distribution, with
respect to common shares will be required to include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated "earnings
and profits" of EMX, as computed for U.S. federal income tax purposes. A dividend generally will be taxed to a U.S. Holder
at ordinary income tax rates if EMX is a PFIC. To the extent that a distribution exceeds the current and accumulated "earnings
and profits" of EMX, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax
basis in common shares and thereafter as gain from the sale or exchange of such common shares. See "Sale or Other Taxable
Disposition of Common Shares" below. However, EMX may not maintain the calculations of earnings and profits in
accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by
EMX with respect to common shares will constitute ordinary dividend income. Dividends received on common shares
generally will not be eligible for the "dividends received deduction". Subject to applicable limitations and provided EMX is
eligible for the benefits of the Treaty, dividends paid by EMX to non-corporate U.S. Holders, including individuals, generally
will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period
and other conditions are satisfied, including that EMX not be classified as a PFIC in the tax year of distribution or in the
preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the
application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed above, upon the sale or other taxable disposition of common shares, a U.S. Holder generally
will recognize capital gain or loss in an amount equal to the difference between the amount of cash plus the fair market value
of any property received and such U.S. Holder's tax basis in such common shares sold or otherwise disposed of. Subject to the
PFIC rules discussed above, gain or loss recognized on such sale or other disposition generally will be long-term capital gain
or loss if, at the time of the sale or other disposition, common shares have been held for more than one year.
Preferential tax rates apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently
no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are
subject to significant limitations under the Code.
Additional Considerations
Additional Tax on Passive Income
Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8%
tax on all or a portion of their "net investment income", which includes dividends on the common shares and net gains from
the disposition of the common shares. Further, excess distributions treated as dividends, gains treated as excess distributions
under the PFIC rules discussed above, and mark-to-market inclusions and deductions are all included in the calculation of net
investment income.
Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this
additional tax, that distributions of previously taxed income will be treated as dividends and included in net investment income
subject to the additional 3.8% tax. Additionally, to determine the amount of any capital gain from the sale or other taxable
disposition of common shares that will be subject to the additional tax on net investment income, a U.S. Holder who has made
a QEF Election will be required to recalculate its basis in the common shares excluding QEF basis adjustments.
Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in a PFIC for which a
QEF Election has been made and which is held in that year or acquired in future years. Under this election, a U.S. Holder pays
the additional 3.8% tax on QEF income inclusions and on gains calculated after giving effect to related tax basis adjustments.
U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax
to any of their income or gains in respect of the common shares.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition
of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate
applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A
U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who
converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or
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loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit
purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own U.S. tax
advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income
tax with respect to dividends paid on common shares generally will be entitled, at the election of such U.S. Holder, to receive
either a deduction or a credit for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal
income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal
income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through
withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the
proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s "foreign source" taxable income
bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income
and deduction must be classified, under complex rules, as either "foreign source" or "U.S. source". Generally, dividends paid
by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a
foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an
applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with
respect to common shares that is treated as a "dividend" may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this
limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and
each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns
with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations
(and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in
excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts
maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or
security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty
other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless
their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these
information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of
filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or
other taxable disposition of, common shares will generally be subject to information reporting and backup withholding tax, at
the rate of 24%, if a U.S. Holder, (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally
on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S.
Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of
perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified
such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from
these information reporting and backup withholding rules. Any amounts withheld under the U.S. backup withholding tax rules
will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S.
Holder furnishes required information to the IRS in a timely manner.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting
requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of
the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to
assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax
advisors regarding the information reporting and backup withholding rules.
10.F. Dividends and Paying Agents
Not applicable.
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10.G. Statement by Experts
Not applicable.
10.H. Documents on Display
Copies of the documents referenced in this annual report are available at the Company’s office located at Suite 501, 543
Granville Street, Vancouver, British Columbia, Canada.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit Risk
The Company is exposed to credit risk by holding cash and cash equivalents and receivables. This risk is minimized by holding
a significant portion of the funds in Canadian banks. The Company’s exposure with respect to its receivables is primarily
related to royalty streams, recovery of exploration evaluation costs, and convertible promissory notes.
Interest Rate Risk
The Company is exposed to interest rate risk because of fluctuating interest rates. Management believes the interest rate risk
is low given interest rates on promissory notes is fixed and the current low global interest rate environment. Fluctuations in
market rates is not expected to have a significant impact on the Company’s operations due to the short term to maturity and no
penalty cashable feature of its cash equivalents.
Market Risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities and other
company investments. The Company has no control over these fluctuations and does not hedge its investments. Based on the
December 31, 2017 portfolio values, a 10% increase or decrease in effective market values would increase or decrease net
shareholders’ equity by approximately $334,000.
Liquidity Risk
Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages
this risk by careful management of its working capital to ensure the Company’s expenditures will not exceed available
resources.
Commodity Risk
The Company’s royalty revenues are derived from a royalty interest and are based on the extraction and sale of precious and
base minerals and metals. Factors beyond the control of the Company may affect the marketability of metals discovered. Metal
prices have historically fluctuated widely. Consequently, the economic viability of the Company’s royalty interests cannot be
accurately predicted and may be adversely affected by fluctuations in mineral prices.
Currency Risk
Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The Company operates in Canada, Turkey, Sweden, Australia and the
U.S.A. The Company funds cash calls to its subsidiary companies outside of Canada in US dollars and a portion of its
expenditures are also incurred in local currencies.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide
reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known
to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others
within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Principal
Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act) as of December 31, 2017. The CEO
and CFO concluded that the disclosure controls and procedures as of December 31, 2017, were effective to give reasonable
assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange
Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and
(ii) accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over
financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information
prepared by the Company for external purposes is reliable and has been recorded, processed and reported in an accurate and
timely manner in accordance with GAAP. The Board of Directors is responsible for ensuring that management fulfills its
responsibilities. The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review
of the interim and annual financial statements. Management reviewed the results of their assessment with the Company’s Audit
Committee.
Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all
possible misstatements or frauds. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or
procedures may deteriorate.
To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal
Control - Integrated Framework (2013), which is a suitable, recognized control framework established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Management has assessed the effectiveness of the
Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective
as of December 31, 2017.
Limitations on the Effectiveness of Controls
The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls
will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
100
override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed achieving its stated goals under all potential future
conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
As a non-accelerated filer, the Company is not required to provide the registered public accounting firm’s attestation report
on management’s assessment of the Company’s internal control over financial reporting.
Changes in Internal Controls Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting that occurred during the period covered
by this Form 20-F, that has materially affected or is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Company’s Board has determined that Messrs. Levet, Bayley and Okada qualify as audit committee financial experts (as
defined in Item 407(d)(5) of Regulation S-K under the U.S. Exchange Act), are financially sophisticated (as determined in
accordance with Section 803B(2)(iii) of the NYSE American Company Guide), and are independent (as determined under U.S.
Exchange Act Rule 10A-3 and Section 803A of the NYSE American Company Guide).
ITEM 16B. CODE OF ETHICS
The Board of Directors of the Company has responsibility for the stewardship of the Company including responsibility for
strategic planning, identification of the principal risks of the Company’s business and implementation of appropriate systems
to manage these risks, succession planning (including appointing, training and monitoring senior management),
communications with investors and the financial community and the integrity of the Company’s internal control and
management information systems. To facilitate meeting this responsibility, the Board of Directors seeks to foster a culture of
ethical conduct by striving to ensure the Company carries out its business in line with high business and moral standards and
applicable legal and financial requirements. In that regard, the Board has:
•
•
adopted a written Code of Business Conduct and Ethics (the “Code”) for its directors, officers, employees and
consultants and a written Code of Business Conduct and Ethics for its CEO and Senior Financial Officers.
established a whistleblower policy which details complaint procedures for financial concerns.
Copies of the Code are available without charge to any person upon request from the Company’s CFO at
www.EMXRoyalty.com or at the Company’s headquarters at Suite 501, 543 Granville Street, Vancouver, British Columbia,
Canada V6C 1X8.
The Board must also comply with the conflict of interest provisions of the British Columbia Business Corporations Act, as well
as the relevant securities regulatory instruments, in order to ensure that directors exercise independent judgment in considering
transactions and agreements in respect of which a director or Executive Officer has a material interest.
ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table discloses the fees billed to the Company by its external auditor during the last two financial years.
Financial Year Ending
December 31, 2017
December 31, 2016
Audit Fees (1)
$117,000
$130,000
Audit-Related Fees (2)
0
$14,000
Tax Fees (3)
0
0
All Other Fees
0
$450
(1)
The aggregate fees billed by the Company’s auditor for audit fees.
(2)
The aggregate fees billed for assurance and related services by the Company’s auditor that are reasonably
related to the performance of the audit or review of the Company’s financial statements and are not
disclosed in the ‘Audit Fees’ column. These fees are related to the auditor’s reviews of the Company’s
Form 20F and the Company’s first quarter interim financial statements in relation to the compliance and
conversion to International Financial Reporting Standards.
101
(3)
The aggregate fees billed for professional services rendered by the Company’s auditor for tax
compliance, tax advice, and tax planning.
The audit committee has established policies and procedures that are intended to control the services provided by the
Company’s external auditors and to monitor their continuing independence. Under these policies, no services may be
undertaken by the auditors, unless the engagement is specifically approved by the audit committee or the services are included
within a category which has been pre-approved by the audit committee. The maximum charge for services is established by
the audit committee when the specific engagement is approved or the category of services pre-approved. Management is
required to notify the audit committee of the nature and value of pre-approved services undertaken.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECFURITIES BY THE COMPANY/AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
The Common Shares are listed on the NYSE American and the TSX-V. Under the rules of the NYSE American, listed
companies are generally required to have a majority of their Board of Directors independent as defined by the NYSE American
Company Guide Rules. Currently, as permitted under applicable Canadian regulations, the Company’s Board consists of 5
directors, of which 3 are considered to be independent.
Other than in the composition of the Board of Directors as described above, in the opinion of management the Company’s
corporate governance practices do not differ in any significant way from those required of U.S. domestic companies listed on
the NYSE American.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
The Company's financial statements are stated in Canadian Dollars and are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
This Form 20-FAnnual Report contains the audited consolidated financial statements of the Company for the fiscal years
ended December 31, 2017, 2016 and 2015 with the Report of Independent Registered Public Accounting Firm, comprised of:
a) Consolidated Statements of Financial Position at December 31, 2017, 2016 and 2015.
b) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2017, 2016 and 2015.
c) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015.
d) Consolidated Statements of Shareholders Equity for the years ended December 31, 2017, 2016 and 2015.
e) Notes to Consolidated Financial Statements
102
ITEM 19. EXHIBITS
1.1
1.2
4.1
Articles of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) – Incorporated by reference to Exhibit
99.1 to Form 6-K filed on July 16, 2014.
Certificate of Change of Name and Notice of Articles dated July 19, 2017 – Previously filed with the SEC on Form
6-K on July 19, 2017.
Services Agreement between the Company and Seabord Services Corp., dated December 1, 2015 - Previously filed
with the SEC on Form 20-F Annual Report on April 30, 2015.
8.1
List of Significant Subsidiaries - Included under Item 4.C, Organizational Structure.
12.1
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)
12.2
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)
13.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
13.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
15.1
Consent of Qualified Person – Eric P. Jensen
15.2
Consent of Qualified Person - Dean D. Turner
15.3
Consent of Qualified Person - Phil Newell
15.4
Audit Committee Charter
101.
XBRL Interactive Data Files
103
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this Annual Report on its behalf.
EMX ROYALTY CORPORATION
/s/ Christina Cepeliauskas
Christina Cepeliauskas
Chief Financial Officer
DATED: April 3, 2018
104
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
December 31, 2017
105
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
EMX Royalty Corp. (formerly Eurasian Minerals Inc.)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of EMX Royalty Corp. (formerly Eurasian Minerals Inc.)
(the “Company”), which comprise the consolidated statements of financial position as of December 31, 2017 and 2016, the
consolidated statements of loss, comprehensive loss, shareholders’ equity, and cash flows for the years ended December 31,
2017, 2016, and 2015 and the related notes, comprising a summary of significant accounting policies and other explanatory
information (collectively referred to as the consolidated financial statements).
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2017 and 2016 and its financial performance and its cash flows for the years ended December
31, 2017, 2016 and 2015 in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Material Uncertainty Related to Going Concern
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements, which indicates that the
Company has recurring losses, an accumulated deficit of $104,382,744 and the Company anticipates it will require additional
working capital to undertake its current business plan. As stated in Note 1 to the consolidated financial statements, these events
or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that casts substantial
doubt on the Company’s ability to continue as a going concern.
Basis for Opinion
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.
Auditors’ 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 and the standards of the Public Company Accounting
Oversight Board (United States) (“PCAOB”). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement, whether due to error or
fraud. Those standards also require that we comply with ethical requirements, including independence. We are required to be
independent with respect to the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB. We are a public accounting firm registered with the PCAOB.
106
An audit includes performing procedures to assess the risks of material misstatements of the consolidated financial statements,
whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included obtaining and
examining, on a test basis, audit evidence regarding the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on our 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, we consider internal control relevant to
the Company’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 Company’s
internal control. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies and principles 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 in our audits is sufficient and appropriate to provide a reasonable basis
for our audit opinion.
We have served as the Company’s auditor since 2002.
Vancouver, Canada
March 21, 2018
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
107
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
Nature of operations and going concern (Note 1)
Events subsequent to the reporting date (Note 20)
Approved on behalf of the Board of Directors on March 21, 2018
Signed: “David M Cole”
Director
Signed: “Larry Okada”
Director
The accompanying notes are an integral part of these consolidated financial statements.
108
ASSETSDecember 31, 2017December 31, 2016CurrentCash and cash equivalents 3,533,611$ 3,199,686$ Investments (Note 3)1,139,447 262,756 Receivables (Note 4)3,376,411 3,430,006 Prepaid expenses45,194 28,496 Total current assets8,094,663 6,920,944 Non-currentRestricted cash (Note 5)771,434 359,172 Receivables (Note 4)- 1,412,727 Property and equipment (Note 6)450,278 471,704 Notes receivable (Note 7)429,973 - Investment in associated companies (Note 8)7,578,989 4,992,823 Strategic investments (Note 3)2,199,199 212,798 Exploration and evaluation assets (Note 9)1,841,966 2,145,000 Royalty interest (Note 10)21,943,743 25,831,152 Reclamation bonds (Note 11)515,748 639,427 Goodwill (Note 12)1,820,307 4,753,324 Other assets 104,484 104,484 Total non-current assets37,656,121 40,922,611 TOTAL ASSETS45,750,784$ 47,843,555$ LIABILITIESCurrentAccounts payable and accrued liabilities 749,865$ 577,265$ Advances from joint venture partners (Note 13)808,905 341,361 Total current liabilities1,558,770 918,626 Non-currentDeferred income tax liability (Note 15)1,820,307 4,753,324 TOTAL LIABILITIES3,379,077 5,671,950 SHAREHOLDERS' EQUITYCapital stock (Note 14)124,062,091 117,504,585 Commitment to issue shares (Note 14)23,825 - Reserves22,668,535 21,656,380 Deficit(104,382,744) (96,989,360) TOTAL SHAREHOLDERS' EQUITY42,371,707 42,171,605 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY45,750,784$ 47,843,555$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF LOSS
(Expressed in Canadian Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
109
Year ended December 31, 2017Year ended December 31, 2016Year ended December 31, 2015ROYALTY INCOME (Note 10) $ 2,857,927 $ 2,227,322 $ 1,609,553 Cost of salesGold tax (120,618) (111,366) (80,478)Depletion (Note 10) (2,282,276) (2,163,221) (1,716,848)Net royalty (loss) income 455,033 (47,265) (187,773)EXPLORATION EXPENDITURES (Note 9) 6,334,119 6,415,533 5,948,802 Less: recoveries (1,863,045) (1,415,574) (1,584,127)Net exploration expenditures 4,471,074 4,999,959 4,364,675 GENERAL AND ADMINISTRATIVE EXPENSESAdministrative and office 724,519 721,645 900,453 Depreciation (Note 6) 28,622 114,489 116,119 Investor relations and shareholder information 389,222 274,966 218,731 Professional fees 664,295 510,533 574,067 Salaries and consultants (Note 16) 1,023,831 894,166 961,108 Share-based payments (Note 14 and 16) 676,054 467,939 470,116 Transfer agent and filing fees 168,445 165,040 107,566 Travel 90,041 71,561 187,374 Total general and administrative expenses 3,765,029 3,220,339 3,535,534 Loss from operations (7,781,070) (8,267,563) (8,087,982)Change in fair value of fair value throught profit or loss investments 122,191 258,702 (427,022)Permanent loss recorded in the fair value of available for sale investments (Note 3) - (697,675) - Gain on acquisition and sale of exploration and evaluation assets (Note 9) 1,305,237 6,834,999 5,393,305 Equity loss in associated companies (Note 8) (994,548) (1,295,568) (1,062,146)Dilution gain in associated companies (Note 8) 503,543 982,634 - Foreign exchange gain (loss) (659,473) (159,862) 1,220,085 Realized gain (loss) on sale of investments 83,345 (287,204) (58,360)Interest and other gains on derivative instruments 246,728 16,328 (172,168)Impairment of royalty interest (Note 10) - - (3,973,699)Write-off of exploration and evaluation assets (Note 9) - - (56,085)Impairment of accounts receivable - - (51,302)Writedown of goodwill (Note 12) (2,709,239) (1,518,328) (3,047,605)Gain on derecognition and sale of property and equipment - 10,723 15,892 Loss before income taxes (9,883,286) (4,122,814) (10,307,087)Deferred income tax recovery (Note 15) 2,489,902 1,439,332 3,431,230 Loss for the year $ (7,393,384) $ (2,683,482) $ (6,875,857)Basic and diluted loss per share $ (0.09) $ (0.04) $ (0.09)Weighted average number of common shares outstanding 78,002,082 73,874,415 73,480,833
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
110
Year ended December 31, 2017Year ended December 31, 2016Year ended December 31, 2015Loss for the year $ (7,393,384) $ (2,683,482) $ (6,875,857)Other comprehensive income (loss)Change in fair value of available-for-sale investments 609,733 88,515 (105,714)Permanent loss on financial instruments - 697,675 - Currency translation adjustment (1,424,814) (862,335) 4,350,667 Comprehensive loss for the year $ (8,208,465) $ (2,759,627) $ (2,630,904)
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
Supplemental disclosure with respect to cash flows (Note 19)
The accompanying notes are an integral part of these consolidated financial statements.
111
Year ended December 31, 2017Year ended December 31, 2016Year ended December 31, 2015Cash flows from operating activitiesLoss for the year(7,393,384)$ (2,683,482)$ (6,875,857)$ Items not affecting operating activities:Interest income received (254,261) (5,590) (22,270) Unrealized foreign exchange effect on cash and cash equivalents(173,740) (71,562) 290,504 Items not affecting cash:Change in fair value of fair value throught profit or loss investments(122,191) (258,702) 427,022 Commitment to issue shares- 27,462 66,089 Permanent loss on financial instruments- 697,675 - Interest on notes receivable(81,850) (58,342) (53,222) Accretion interest on receivable(167,718) (72,806) - Derivative loss on accounts receivable- 120,900 - Share - based payments1,415,639 943,334 476,424 Deferred income tax recovery(2,489,902) (1,439,332) (3,431,230) Depreciation39,344 136,200 150,782 Depletion2,282,276 2,163,221 1,716,848 Impairment of royalty interest- - 3,973,699 Writedown of goodwill2,709,239 1,518,328 3,047,605 Impairment of receivables- - 51,302 Realized (gain) loss on sale of investments(83,345) 287,204 58,360 Gain on acquistion and sale of exploration and evalution assets(1,305,237) (6,834,999) (5,393,305) Gain on derecognition and sale of property and equipment(29,766) (10,723) (15,892) - - 56,086 Equity loss in associated companies994,548 1,295,568 1,062,146 Dilution gain in associated companies(503,543) (982,634) - Unrealized foreign exchange (gain) loss597 (67,249) (466,587) Shares received from joint venture partners included in exploration recoveries(810,521) (134,738) (115,000) Changes in non-cash working capital items:Receivables1,908,945 (6,343) 101,200 Prepaid expenses(16,698) 3,848 21,366 Accounts payable and accrued liabilities 172,600 (86,317) 83,056 Advances from joint venture partners467,544 203,536 (291,350) Total cash used in operating activities(3,441,424) (5,315,543) (5,082,224) Cash flows from investing activities161,048 3,005,280 5,297,357 Interest received on cash and cash equivalents86,543 5,590 22,270 Notes receivable(1,405,277) (542,622) (973,236) Proceeds from sale of fair value through profit and loss investments, net139,365 130,737 136,263 Proceeds of available-for-sale financial instruments- 17,375 - Purchase of investments in associated companies(2,059,631) - - Restricted cash(412,262) (89,402) - Purchase and sale of property and equipment, net(24,784) (16,999) 2,403 Reclamation bonds123,679 171,307 71,964 Total cash provided by (used in) investing activities(3,391,319) 2,681,266 4,557,021 Cash flows from financing activitiesProceeds received from private placement, net of share issue costs6,907,228 Proceeds from exercise of options85,700 127,800 - Total cash provided by financing activities6,992,928 127,800 - Effect of exchange rate changes on cash and cash equivalents173,740 71,562 (290,504) Change in cash and cash equivalents333,925 (2,434,915) (815,707) Cash and cash equivalents, beginning3,199,686 5,634,601 6,450,308 Cash and cash equivalents, ending3,533,611$ 3,199,686$ 5,634,601$ Write-off of exploration and evaluation assetsAcquisition and sale of exploration and evaluation assets, net of option payments received
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Expressed in Canadian Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
112
Number of common sharesCapital stockCommitment to issue sharesShare-based paymentsAccumulated other comprehensive gain (loss)DeficitTotalBalance as at December 31, 201674,089,710 117,504,585$ -$ 11,607,230$ 10,049,150$ (96,989,360)$ 42,171,605$ Shares issued for exercise of stock options75,000 85,700 - - - - 85,700 Shares issued for private placement5,000,000 6,200,000 - 800,000 - - 7,000,000 Finder's fees in units246,604 305,789 - 39,457 - - 345,246 Share-based payments313,873 358,490 23,825 1,033,324 - - 1,415,639 Share issuance costs in units- (345,246) - - - - (345,246) Share issuance costs in cash- (92,772) - - - - (92,772) Reclass of reserves for exercise of options- 45,545 - (45,545) - - - Foreign currency translation adjustment- - - - (1,424,814) - (1,424,814) Change in fair value of financial instruments- - - - 609,733 - 609,733 Loss for the year- - - - - (7,393,384) (7,393,384) Balance as at December 31, 201779,725,187 124,062,091$ 23,825$ 13,434,466$ 9,234,069$ (104,382,744)$ 42,371,707$ ReservesNumber of common sharesCapital stockCommitment to issue sharesShare-based paymentsAccumulated other comprehensive gain (loss)DeficitTotalBalance as at December 31, 201573,534,710 117,000,052$ 139,138$ 10,362,229$ 10,125,295$ (94,305,878)$ 43,320,836$ Shares issued for acquisition of a royalty interest250,000 145,000 - - - - 145,000 Shares issued as incentive stock grants140,000 166,600 (166,600) - - - - Shares issued from exercise of options165,000 127,800 - - - - 127,800 Equity investment share-based payments- - - 366,800 - 366,800 Commitment to issue shares- - 27,462 943,334 - - 970,796 Reclassification of fair value of options exercised- 65,133 - (65,133) - - - Foreign currency translation adjustment- - - - (862,335) - (862,335) Change in fair value of financial instruments- - - - 88,515 - 88,515 Permanent loss on financial instruments- - - - 697,675 - 697,675 Loss for the year- - - - - (2,683,482) (2,683,482) Balance as at December 31, 201674,089,710 117,504,585$ -$ 11,607,230$ 10,049,150$ (96,989,360)$ 42,171,605$ Reserves
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Expressed in Canadian Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
113
Number of common sharesCapital stockCommitment to issue sharesShare-based paymentsAccumulated other comprehensive gain (loss)DeficitTotalBalance as at December 31, 201473,371,710 116,766,102$ 306,999$ 9,562,905$ 5,880,342$ (87,430,021)$ 45,086,327$ Shares issued as incentive stock grants163,000 233,950 (233,950) - - - - Commitment to issue shares- - 66,089 - - - 66,089 Equity investment share-based payments- - - 322,900 - - 322,900 Share - based payments- - - 476,424 - - 476,424 Foreign currency translation adjustment- - - - 4,350,667 - 4,350,667 Change in fair value of financial instruments- - - - (105,714) - (105,714) Loss for the year- - - - - (6,875,857) (6,875,857) Balance as at December 31, 201573,534,710 117,000,052$ 139,138$ 10,362,229$ 10,125,295$ (94,305,878)$ 43,320,836$ Reserves
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
1. NATURE OF OPERATIONS AND GOING CONCERN
EMX Royalty Corporation (the “Company” or “EMX”) and its subsidiaries operates as a royalty and prospect generator engaged in the exploring for, and generating royalties from,
metals and minerals properties. The Company’s royalty and exploration portfolio mainly consists of properties in North America, Turkey, Europe, Haiti, Australia, and New Zealand.
The Company’s common shares are listed on the TSX Venture Exchange (“TSX-V”) and the NYSE MKT under the symbol of “EMX”. The Company’s head office is located at 501 -
543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8.
On July 19, 2017 the Company officially changed its name to EMX Royalty Corporation, formerly Eurasian Minerals Inc.
These consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”) applicable to a going concern, which assumes that the
Company will be able to realize its assets, discharge its liabilities and continue in operation for the following twelve months.
With its current plans for the year and the budgets associated with those plans, in order to continue funding its administrative and royalty generation programs from the date of
these consolidated financial statements, management believes it will require additional working capital to undertake it’s current business plan. The Company has incurred recurring
losses and has an accumulated deficit of $104,382,744. In order to maintain or adjust the capital structure, the Company may issue new shares through public and/or private
placements, sell assets, or return capital to shareholders. These uncertainties may cast doubt upon the Company’s ability to continue as a going concern.
Some of the Company’s activities for exploration and evaluation assets are located in emerging nations and, consequently, may be subject to a higher level of risk compared to
other developed countries. Operations, the status of mineral property rights and the recoverability of investments in emerging nations can be affected by changing economic,
legal, regulatory and political situations.
At the date of these consolidated financial statements, the Company has not identified a known body of commercial grade mineral on any of its exploration and evaluation assets.
The ability of the Company to realize the costs it has incurred to date on these exploration and evaluation assets is dependent upon the Company identifying a commercial mineral
body, to finance its development costs and to resolve any environmental, regulatory or other constraints which may hinder the successful development of the exploration and
evaluation assets.
These consolidated financial statements of the Company are presented in Canadian dollars unless otherwise noted, which is the functional currency of the parent company and
its subsidiaries except as to Bullion Monarch Mining, Inc., the holder of a royalty income stream whose functional currency is the United States (“US”) dollar.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) and interpretations of
the International Financial Reporting Interpretations Committee (“IFRIC”).
114
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as fair value through profit or loss or available for
sale, which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow
information.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements comprise the accounts of EMX Royalty Corp., the parent company, and its controlled subsidiaries, after the elimination of all significant
intercompany balances and transactions.
Subsidiaries
Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.
The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company transactions, balances and
unrealized gains or losses on transactions are eliminated. The Company’s principal operating subsidiaries are as follows:
115
NamePlace of IncorporationOwnership PercentageBullion Monarch Mining, IncUtah, USA100%EMX (USA) Services Corp.Nevada, USA100%Bronco Creek Exploration Inc.Arizona, USA100%Eurasia Madencilik Ltd. SirketiTurkey100%Azur Madencilik Ltd. SirketiTurkey100%Eurasian Minerals Cooperatief U.A.Netherlands100%Eurasian Minerals Sweden ABSweden100%Viad Royalties ABSweden100%Waikato Gold Limited New Zealand100%
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Functional and Reporting Currency
The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency for the Company and its subsidiaries is the
Canadian dollar except the functional currency of the operations of Bullion Monarch which is the US dollar. The functional currency determinations were conducted through an
analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.
Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-
measured. Monetary assets and liabilities denominated in foreign currencies are re-measured at the rate of exchange at each financial position date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognized in profit or loss.
On translation of the entities whose functional currency is other than the Canadian dollar, revenues and expenses are translated at the exchange rates approximating those in
effect on the date of the transactions. Assets and liabilities are translated at the rate of exchange at the reporting date. Exchange gains and losses, including results of re-
translation, are recorded in the foreign currency translation reserve.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Financial Instruments
All financial instruments are classified into one of the following four categories:
(e) Financial assets and financial liabilities at fair value through profit or loss (“FVTPL”)
Financial assets and financial liabilities classified as FVTPL are acquired or incurred principally for the purpose of selling or repurchasing them in the near term. They
are recognized at fair value based on market prices, with any resulting gains and losses reflected in profit or loss for the period in which they arise.
(f) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention
and ability to hold to maturity. They are measured at amortized cost using the effective interest rate method less any impairment loss. A gain or loss is recognized in
profit or loss when the financial asset is derecognized or impaired, and through the amortization process.
(g) Available for sale financial assets
116
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Available for sale (“AFS”) financial assets are non-derivative financial assets that are designated as available for sale, or that are not classified as loans and receivables,
held-to-maturity investments, or FVTPL. They are measured at fair value. Fair value is determined based on market prices. Equity instruments that do not have a
quoted market price in an active market are measured at cost. Gains and losses are recognized directly in other comprehensive income (loss) until the financial asset
is derecognized, at which time the cumulative gain or loss previously recognized in accumulated other comprehensive income (loss) is recognized in profit or loss for
the period.
(h) Loans and receivables and other financial liabilities
Loans and receivables and other financial liabilities are measured at amortized cost, using the effective interest rate method less any impairment loss.
The Company’s financial instruments consist of cash and cash equivalents, investments, receivables, restricted cash, reclamation bonds, notes receivable, strategic investments,
accounts payable and accrued liabilities, and advances from joint venture partners. Unless otherwise noted the fair value of these financial instruments approximates their carrying
values.
Cash and cash equivalents are classified as loans and receivables. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment
or other purposes.
Warrants held through investments are classified as derivative financial assets at FVTPL and are accounted for at fair value. For warrants that are not traded on an exchange, no
market value is readily available. When there are sufficient and reliable observable market inputs, a valuation technique is used; if no such market inputs are available, the
warrants are valued at intrinsic value, which is equal to the higher of the market value of the underlying security less the exercise price of the warrant, or zero.
Investments (Marketable securities) classified as FVTPL are measured at fair market value. Changes in fair value of FVTPL assets are reflected in profit or loss in the period in which
they occur. Changes in fair value of AFS assets are reflected in accumulated other comprehensive income on the statement of financial position until sold or if there is an other
than temporary impairment in value.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Financial Instruments (Continued)
Reclamation bonds are classified as financial assets held-to-maturity.
The Company classifies its restricted cash and certain receivables as loans and receivables and its accounts payable and accrued liabilities and advances from joint venture partners
as other financial liabilities.
117
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Certain receivables related to the sale of Akarca (Note 4) are considered to be derivative financial assets as they are subject to variations in gold price per ounce on record date
and final price received and are accordingly classified as FVTPL. The derivative receivable is recorded at fair value each period until final settlement occurs, with changes in fair
value reflected in profit or loss for the period in which they arise.
Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of
one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been impacted.
For all financial assets, objective evidence of impairment could include:
•
Significant financial difficulty of the issuer or counterparty;
• Default or delinquency in interest or principal payments; or,
•
It becoming probable that the borrower will enter bankruptcy or financial re-organization.
For certain categories of financial assets that are assessed not to be impaired individually, they are subsequently assessed for impairment on a collective basis. The carrying amount
of financial assets is reduced by the impairment loss directly for all financial assets with the exception of receivables, where the carrying amount is reduced through the use of an
allowance account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
With the exception of FVTPL marketable securities, if in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS
marketable securities, impairment losses previously recognized through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized directly in equity.
Convertible Notes Receivable
The notes receivable are hybrid financial assets that consist of a note receivable component and a separate equity conversion component. The conversion feature is measured at
fair value on initial recognition by discounting the stream of future interest and principal payments at the rate of interest prevailing at the date of the issue for instruments of
similar term and risk. Interest income based on the rate of the note will be receivable on maturity are recognized through profit and loss as interest income. The equity conversion
option is an embedded derivative that has been separated from the notes receivable and is valued based on residual value.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Investments in Associated Companies
118
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
The Company accounts for its long-term investments in affiliated companies over which it has significant influence using the equity basis of accounting, whereby the investment
is initially recorded at cost, adjusted to recognize the Company’s share of earnings or losses and reduced by dividends received.
The Company assesses its equity investments for impairment if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition
of the equity investment and that the event or events has an impact on the estimated future cash flow of the investment that can be reliably estimated. Objective evidence of
impairment of equity investments includes:
Significant financial difficulty of the associated companies;
•
• Becoming probable that the associated companies will enter bankruptcy or other financial reorganization; or,
• National or local economic conditions that correlate with defaults of the associated companies.
Exploration and evaluation assets and exploration expenditures
Acquisition costs for exploration and evaluation assets, net of recoveries, are capitalized on a property-by-property basis. Acquisition costs include cash consideration and the
value of common shares, based on recent issue prices, issued for exploration and evaluation assets pursuant to the terms of the agreement. Exploration expenditures, net of
recoveries, are charged to operations as incurred. After a property is determined by management to be commercially feasible, an impairment test is conducted and subsequent
development expenditures on the property will be capitalized.
When there is little prospect of further work on a property being carried out by the Company or its partners, when a property is abandoned, or when the capitalized costs are no
longer considered recoverable, the related property costs are written down to management’s estimate of their net recoverable amount. The costs related to a property from
which there is production, together with the costs of production equipment, will be depleted and amortized using the unit-of-production method.
An exploration and evaluation asset acquired under an option agreement, where payments are made at the sole discretion of the Company, is capitalized at the time of payment.
Option payments received are treated as a reduction of the carrying value of the related acquisition cost for the mineral property until the payments are in excess of acquisition
costs, at which time they are then credited to profit or loss. Option payments are at the discretion of the optionee and, accordingly, are accounted for when receipt is reasonably
assured.
Revenue recognition
The Company recognizes revenue in accordance with IAS 18 Revenue and based upon amounts contractually due pursuant to the underlying royalty agreements. Specifically,
royalty revenue is recognized in accordance with the terms of the underlying royalty agreements subject to (i) when persuasive evidence of an arrangement exists; (ii) the risks
and rewards of ownership have been transferred; (iii) the royalty or stream being fixed or determinable; and (iv) the collectability of the royalty being reasonably assured. In some
instances, the Company will not have access to sufficient information to make a reasonable estimate of revenue and, accordingly, revenue recognition is deferred until management
can make a reasonable estimate. Royalty revenue may be subject to adjustment upon final settlement of estimated metal prices, weights, and assays. Adjustments to revenue
from metal prices are recorded monthly and other adjustments are recorded on final settlement and are offset against revenue when incurred.
119
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Royalty interests
Royalty interests in mineral properties include acquired royalty interests in production stage and exploration stage properties. In accordance with IAS 38 Intangible Assets, the
cost of acquired royalty interests in mineral properties is capitalized as intangible assets.
Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the related mineral property, which is calculated using
estimated reserves. Acquisition costs of royalty interests on exploration stage mineral properties, where there are no estimated reserves, are not amortized. At such time as the
associated exploration stage mineral interests are converted to estimated reserves, the cost basis is amortized over the remaining life of the mineral property, using the estimated
reserves. The carrying values of exploration stage mineral interests are evaluated for impairment at such time as information becomes available indicating that production will
not occur in the future.
Goodwill
Goodwill represents the excess of the price paid for the acquisition of a consolidated entity over the fair value of the net identifiable tangible and intangible assets and liabilities
acquired in a business combination. Goodwill is allocated to the cash generating unit to which it relates.
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by assessing if the carrying
value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount.
Property and equipment
Property and equipment is recorded at cost. Buildings are depreciated using a 5 year straightline method. Equipment is depreciated over its estimated useful life using the declining
balance method at a rate of 20% per annum. Depreciation on equipment used directly on exploration projects is included in exploration expenditures for that mineral property.
Decommissioning liabilities
Decommissioning liabilities are recognized for the expected obligations related to the retirement of long-lived tangible assets that arise from the acquisition, construction,
development or normal operation of such assets. A decommissioning liability is recognized in the period in which it is incurred and when a reasonable estimate of the fair value
of the liability can be made with a corresponding decommissioning cost recognized by increasing the carrying amount of the related long-lived asset. The decommissioning cost
is subsequently allocated in a rational and systematic method over the underlying asset’s useful life. The initial fair value of the liability is accreted, by charges to profit or loss, to
its estimated future value.
120
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Environmental disturbance restoration
During the operating life of an asset, events such as infractions of environmental laws or regulations may occur. These events are not related to the normal operation of the asset
and are referred to as environmental disturbance restoration provisions. The costs associated with these provisions are accrued and charged to profit or loss in the period in which
the event giving rise to the liability occurs. Any subsequent adjustments to these provisions due to changes in estimates are also charged to profit or loss in the period of adjustment.
These costs are not capitalized as part of the long-lived assets’ carrying value.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Impairment of assets
Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year. The Company assesses its cash generating units
annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, an estimate of the recoverable amount is made, which is the higher
of the fair value less costs to sell and value in use. The determination of the recoverable amount for value in use requires the use of estimates and assumptions such as long-term
commodity prices, discount rates, future capital requirements, exploration potential and future operating performance. Fair value is determined as the amount that would be
obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash.
Share-based payments
Share-based payments include option and stock grants granted to directors, employees and non-employees. The Company accounts for share-based compensation using a fair
value based method with respect to all share-based payments measured and recognized, to directors, employees and non-employees. For directors and employees, the fair value
of the options and stock grants is measured at the date of grant. For non-employees, the fair value of the options and stock 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. For directors, employees and non-employees, the fair value of the options and stock grants is accrued and charged to operations, with the offsetting
credit to share based payment reserve for options, and commitment to issue shares for stock grants over the vesting period. If and when the stock options are exercised, the
applicable amounts are transferred from share-based payment reserve to share capital. When the stock grants are issued, the applicable fair value is transferred from commitment
to issue shares to share capital. Option based compensation awards are calculated using the Black-Scholes option pricing model while stock grants are valued at the fair value on
the date of grant.
The Company has granted certain employees and non-employess restricted share units (“RSUs”) to be settled in shares of the Corporation. The fair value of the estimated number
of RSUs that will eventually vest, determined at the date of grant, is recognized as share-based compensation expense over the vesting period, with a corresponding amount
121
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
recorded as equity. The fair value of the RSUs is estimated using the market value of the underlying shares as well as assumptions related to the market and non-market conditions
at the grant date.
Income taxes
Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax
payable in respect of previous years. Deferred tax is calculated providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable
income nor loss. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates
that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Income taxes (Continued)
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the temporary difference 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.
Income (loss) per share
Basic income or loss per share is calculated by dividing the net income or loss for the year by the weighted average number of shares outstanding during the year. Diluted income
or loss per share is calculated whereby the weighted average number of shares outstanding used in the calculation of diluted income or loss per share assumes that the deemed
proceeds received from the exercise of stock options, share purchase warrants and their equivalents would be used to repurchase common shares of the Company at the average
market price during the year, if they are determined to have a dilutive effect.
Existing stock options and share purchase warrants have not been included in the current year computation of diluted loss per share as to do so would be anti-dilutive. For the
years presented the basic and diluted losses per share are the same.
122
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Valuation of equity units issued in private placements
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first
allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at their fair value, as
determined by the closing quoted bid price on the day prior to the issuance date. The balance, if any, was allocated to the attached warrants. Any fair value attributed to the
warrants is recorded in reserves.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is
responsible for allocating resources and assessing performance of the operating segment, has been identified as the Chief Executive Officer.
Accounting pronouncements not yet effective
The following standards and pronouncements have been issued by the IASB and have not yet been adopted by the Company.
IFRS 9 requires financial assets 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. 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. For financial liabilities, the standard retains most of the IAS 39
requirements.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers ("IFRS 15"), which supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer
Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC 31 Revenue - Barter Transactions involving
Advertising Services. IFRS 15 establishes a single five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a
contract with a customer. The standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.
IFRS 16 Leases was issued in January 2016 (effective January 1, 2019) and provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all
leases unless the lease term is 12 months or less or the underlying asset has a low value.
The Company expects that these new IFRS standards will have an insignificant effect on its consolidated financial statements other than increased note disclosure.
123
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Critical Accounting Judgments and Significant Estimates and Uncertainties
The preparation of the consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the periods presented therein. On an ongoing basis, management
evaluates its judgments and estimates in relation to assets, liabilities, royalty revenues and expenses. Management bases its judgments and estimates on historical experience and
on other various factors it believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.
The Company has identified the following critical accounting policies in which significant judgments, estimates and assumptions are made and where actual results may differ from
these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the
nature of these assumptions and conditions may be found in the relevant notes to the consolidated financial statements.
e) Royalty interest and related depletion
In accordance with the Company’s accounting policy, royalty interests are evaluated on a periodic basis to determine whether there are any indications of impairment. If any such
indication exists, a formal estimate of recoverable amount is performed and an impairment loss recognized to the extent that carrying amount exceeds recoverable amount. The
recoverable amount of a royalty asset is measured at the higher of fair value less costs to sell and value in use. The determination of fair value and value in use requires management
to make estimates and assumptions about expected production and sales volumes, the proportion of areas subject to royalty rights, commodity prices (considering current and
historical prices, price trends and related factors), and reserves. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes in
circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be
further impaired or the impairment charge reduced with the impact recorded in profit or loss.
f) Goodwill
Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be impairment. Impairment is determined by assessing if the carrying
value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount. The assessment of the recoverable amount used in the goodwill impairment
analysis is subject to similar judgments and estimates as described above for property and equipment and royalty interests.
2. STATEMENT OF COMPLIANCE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Summary of Significant Accounting Policies (Continued)
Critical Accounting Judgments and Significant Estimates and Uncertainties (Continued)
g) Exploration and Evaluation Assets
Recorded costs of exploration and evaluation assets are not intended to reflect present or future values of exploration and evaluation assets. The recorded costs are subject to
measurement uncertainty and it is reasonably possible, based on existing knowledge, that a change in future conditions could require a material change in the recognized amount.
124
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
h) Taxation
The Company’s accounting policy for taxation requires management’s judgment as to the types of arrangements considered to be a tax on income in contrast to an operating cost.
Judgment is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on the statement of financial position.
Deferred tax assets, including those arising from unused tax losses, capital losses and temporary differences, are recognized only where it is considered probable that they will be
recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences caused principally by the expected
royalty revenues generated by the royalty property are recognized unless expected offsetting tax losses are sufficient to offset the taxable income and therefore, taxable income
is not expected to occur in the foreseeable future. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These
depend on estimates of future production and sales volumes, commodity prices, and reserves. Judgments are also required about the application of income tax legislation in
foreign jurisdictions. These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which
may impact the amount of deferred tax assets and deferred tax liabilities recognized on the statement of financial position and the amount of other tax losses and temporary
differences not yet recognized. In such circumstances, some or the entire carrying amount of recognized deferred tax assets and liabilities may require adjustment, resulting in a
corresponding credit or charge to profit or loss.
Information about critical judgments in applying ac counting policies that have the most significant effect on the amounts recognized in the consolidated financial statements
include, but are not limited to, the following:
a) Functional Currencies
The functional currency of each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates. Determination of the
functional currency may involve certain judgments to determine the
primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions, which determined the primary
economic environment.
b) Classification of investments as subsidiaries, joint ventures, associated company and portfolio investments
Classification of investments requires judgement as to whether the Company controls, has joint control of or significant influence over the strategic financial and operating
decisions relating to the activity of the investee. In assessing the level of control or influence that the Company has over an investment, management considers ownership
percentages, board representation as well as other relevant provisions in shareholder agreements. If an investor holds 20% or more of the voting power of the investee, it is
presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the investor holds less than 20% of the voting
power of the investee, it is presumed that the investor does not have significant influence, unless such influence can be clearly demonstrated.
3.
INVESTMENTS
For the years ended December 31, 2017 and 2016, the Company had the following investments:
125
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
During the year ended December 31, 2017, the Company recorded a loss of $Nil (2016 - $697,675) related to the permanent impairment of certain available-for-sale marketable
securities. The Company had sustained significant unrealized losses for which there was no expectation of reversal in the forseable future.
4. RECEIVABLES
The Company’s receivables are related to the sale of foreign subsidiaries, royalty receivable, goods and services tax and harmonized sales taxes receivable from government
taxation authorities, and recovery of exploration expenditures from joint venture partner.
As at December 31, 2017 and 2016, the current receivables were as follows:
126
December 31, 2017CostAccumulated unrealized lossFair valueFair value through profit or lossMarketable securities2,396,251$ (1,256,804)$ 1,139,447$ Total Fair value through profit or loss2,396,251 (1,256,804) 1,139,447 Available-for-saleMarketable securities2,287,141 (87,942) 2,199,199 Total investments4,683,392$ (1,344,746)$ 3,338,646$ December 31, 2016CostAccumulated unrealized lossFair valueFair value through profit or lossMarketable securities1,641,751$ (1,378,995)$ 262,756$ Total Fair value through profit or loss1,641,751 (1,378,995) 262,756 Available-for-saleMarketable securities910,473 (697,675) 212,798 Total investments2,552,224$ (2,076,670)$ 475,554$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
4. RECEIVABLES (Continued)
The carrying amounts of the Company’s current and non – current receivables are denominated in the following currencies:
5. RESTRICTED CASH
At December 31, 2017, the Company classified $771,434 (2016 - $359,172) as restricted cash. This amount is comprised of $179,502 (2016 - $189,233) held as collateral for its
corporate credit cards, $Nil (2016 - $65,706) held as a security deposit for the Company’s Haiti exploration program, and $591,932 (2016 – $104,233) cash held by wholly-owned
subsidiaries of the Company whose full amount is for use and credit to the Company’s exploration venture partners in USA pursuant to expenditure requirements for ongoing
option agreements.
127
CategoryDecember 31, 2017December 31, 2016Sale of Akarca (Note 9)2,447,595$ 4,145,898$ Royalty income receivable258,223 306,513 Refundable taxes151,163 142,857 Recoverable exploration expenditures and advances270,547 79,090 Other248,883 168,375 As at December 31, 20173,376,411 4,842,733 Less: Long term portion- (1,412,727) Total3,376,411$ 3,430,006$ CurrencyDecember 31, 2017December 31, 2016Canadian Dollars280,925$ 48,448$ US Dollars3,040,347 4,744,825 Turkish Lira24,535 41,785 Swedish Krona29,575 6,824 Other1,029 851 Total3,376,411$ 4,842,733$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
6. PROPERTY AND EQUIPMENT
During the year ended December 31, 2017 depreciation of $10,722 (2016 - $21,711; 2015 - $34,633) has been included in exploration expenditures.
128
ComputerFieldOfficeVehiclesBuildingLandTotalCostAs at December 31, 201491,713$ 146,041$ 6,635$ 197,200$ 572,443$ 414,526$ 1,428,558$ Additions7,981 10,224 1,170 16,105 6,065 - 41,545 Disposals and derecognition- (2,152) (3,059) (165,888) - - (171,099) As at December 31, 201599,694 154,113 4,746 47,417 578,508 414,526 1,299,004 Additions10,549 6,450 - - - - 16,999 Disposals and derecognition- (79,630) (2,365) (47,417) - - (129,412) As at December 31, 2016110,243 80,933 2,381 - 578,508 414,526 1,186,591 Additions- - - - 20,447 4,337 24,784 Disposals and derecognition- (20,756) - - - - (20,756) As at December 31, 2017110,243$ 60,177$ 2,381$ -$ 598,955$ 418,863$ 1,190,619$ Accumulated depreciationAs at December 31, 201491,713$ 106,850$ 3,958$ 157,625$ 317,183$ -$ 677,329$ Additions7,981 8,161 1,832 15,595 117,213 - 150,782 Disposals and derecognition- (1,680) (1,656) (140,231) - - (143,567) As at December 31, 201599,694 113,331 4,134 32,989 434,396 - 684,544 Additions7,438 12,601 - 671 115,490 - 136,200 Disposals and derecognition- (70,444) (1,753) (33,660) - - (105,857) As at December 31, 2016107,132 55,488 2,381 - 549,886 - 714,887 Additions3,111 7,104 - - 29,129 - 39,344 Disposals and derecognition- (13,890) - - - - (13,890) As at December 31, 2017110,243$ 48,702$ 2,381$ -$ 579,015$ -$ 740,341$ Net book valueAs at December 31, 20163,111$ 25,445$ -$ -$ 28,622$ 414,526$ 471,704$ As at December 31, 2017-$ 11,475$ -$ -$ 19,940$ 418,863$ 450,278$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
During the year ended December 31, 2017, the Company sold fully amortized equipment to an associated entity and recorded a gain on sale of $29,766 and a corresponding
receivable due from the investment in the associated entity. The sale value of the equipment was determined to be market value. Included in gain (loss) on acquisition and sale
of exploration and evaluation assets was field equipment in Australia with a book value of $6,866.
During the year ended December 31, 2016, the Company sold certain foreign operations for a gain of $6,834,999. Included in this gain was property and equipment with a net
book value of $23,555.
During the year ended December 31, 2015, the Company acquired and sold certain exploration and evaluation assets for a net gain of $5,393,305. Included in this gain was the
acquisition of property and equipment with a net book value of $7,013. Also, during the year ended December 31, 2015 the Company sold property and equipment with a net
book value of $21,041 for total proceeds of $36,933 for a net gain of $15,892, and included in exploration and evaluation expenditures is a loss on disposal of property and
equipment with a net book value of $6,490.
7. NOTES RECEIVABLE
On February 5, 2015, the Company entered into a convertible loan agreement with IG Copper, LLC (“IGC”), an associated company of EMX (Note 8) allowing IGC to borrow up to a
maximum of US$500,000. The loan carried an interest rate of 8% per annum and the full amount of the principal and interest was due January 3, 2017. The full US$ 500,000 had
been drawn and during the year ended December 31, 2016, the Company entered into an amended and restated loan agreement with IGC such that the IGC Loan shall include
any additional sums that were advanced by the Company to, or paid by the Company on behalf of IGC from time to time prior to January 3, 2017. As such, US$198,953 of expenses
paid by the Company on behalf of IGC were added to the IGC Loan.
At any time prior to the maturity date, the Company had the right to convert all or any part of the outstanding amount of the loan into membership units at US$6.00 per unit. If
IGC completed a financing at less than US$6.00 per unit, the conversion price will be adjusted to the price used in the financing. Each membership unit represents a single
membership interest in IGC. Additionally, if subsequent to the date of the Amended Agreement, IGC completes a financing and, as part of that financing, issues warrants to
purchase Units or other securities of IGC, then the Company shall be entitled, upon conversion of the IGC Loan and accrued and unpaid interest, to also receive warrants to
purchase Units or other securities of IGC on the same terms as the warrants issued in such financing.
During fiscal 2016, the Company advanced an additional US$400,000. On August 15, 2016, the Company converted the full amount of the outstanding loan, US$1,184,511 inclusive
of accrued interest of US$85,558, at US$5.00 per unit, which was the unit price of the most recently completed financing, into 236,902 membership units and 236,902 warrants
of IGC.
During the year ended December 31, 2017, the Company issued convertible notes to IGC allowing IGC to borrow up to US$750,000. The notes carried an interest rate of 8% per
annum and the full amount of the principal and interest is due 12 months from the date of the note. The full US$750,000 was drawn. At any time prior to the maturity date, the
Company had the right to convert all or any part of the principal sums and accrued interest into membership Units of IGC at US$5.00 per Unit. Each membership Unit consists of
one Membership Interest and one warrant to purchase one Membership Interest for US$6.00 during a period of 12 months from the conversion date.
The notes receivable consisted of two components: the note receivable component and the equity conversion option. At initial recognition the fair value of the equity conversion
option was estimated to be $79,220. The fair value of the note receivable component was estimated at $926,057. The note receivable component is accreted over its expected
term using the effective interest method at an effective rate of approximately 18%. For the year ended December 31, 2017, the Company recorded $51,877 of interest income,
129
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
as well as a foreign exchange loss of $38,401. . On November 30, 2017, the Company converted the full amount of the outstanding loans, $1,017,540 (US$789,967) inclusive of
accrued interest of $51,877 (US$39,967), at US$5.00 per unit, which was the unit price of the most recently completed financing, into 157,993 membership units and 157,993
warrants of IGC.
On October 16, 2017, the Company issued notes receivable to Revelo Resources Corp., a related party by way of a common director for the principal amount of $400,000. The
note was due on December 31, 2017, together with accrued interest at a rate of 1% per month and a bonus of $20,000. As at December 31, 2017, the balance owed to the
Company pursuant to the note was $429,973 including accrued interest and bonus fee. The Company is negotiating the terms of repayment.
8. INVESTMENTS IN ASSOCIATED COMPANIES
The Company has a 41% (2016 – 39%; 2015 – 42%) equity investment in IGC. At December 31, 2017, including the conversion of convertible notes, cash purchases of shares, and
interest on any balances due from IGC, the Company has invested an aggregate of US$11,354,977 towards its investment (2016 - US$8,967,010; 2015 - US$7,782,500). At
December 31, 2017, the Company’s investment including dilution gains, less its share of accumulated equity losses was $7,578,989 (2016 - $4,992,823). The Company’s share of
the net loss for the year ended December 31, 2017 was $994,548 (2016 - $1,295,568; 2015 - $1,062,146).
The Company has a minority position on the Board of IGC, and does not control operational decisions. The Company’s judgment is that it has significant influence, but not control
and accordingly equity accounting is appropriate.
As at December 31, 2017, associated companies’ aggregate assets, aggregate liabilities and net loss for the year ended are as follows:
As at December 31, 2016, associated companies’ aggregate assets, aggregate liabilities and net loss for the year are as follows:
130
December 31, 2017IGCAggregate assets 6,127,735$ Aggregate liabilities (1,108,694) Loss for the year(2,713,490) The Company's ownership %41%The Company's share of loss for the year(994,548) December 31, 2016IGCAggregate assets 6,884,378$ Aggregate liabilities (1,471,260) Loss for the year(3,216,120) The Company's ownership %39%The Company's share of loss for the year(1,295,568)
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
During the year ended December 31, 2017, the Company recognized a dilution gain of $503,543 (2016 - $982,634) related to the Company’s change in ownership percentage as a
result of IGC’s share issuance for cash proceeds and loan conversions.
9. EXPLORATION AND EVALUATION ASSETS
Acquisition Costs
At December 31, 2017 and 2016, the Company has capitalized the following acquisition costs on its exploration and evaluation assets:
During the year ended December 31, 2017, the Company received a $133,383 (US$100,000) annual option payment related to an exploration and option to purchase agreement
for the Superior West project with Kennecott Exploration Company (“Kennecott”). The Company also received the annual option payment related to an option agreement with
Mason Resources
Corp (“Mason”) for $88,527 (US$75,000) and applied against the Yerington project. Also during the year ended December 31, 2017, the Company sold the wholly owned Australian
subsidiary that held the Koonenberry licences in Australia. As part of the sale, the Company transferred the ownership of the Koonenberry property which had a capitalized cost
of $81,124.
During the year ended Dececmber 31, 2016, the Company received a $129,820 (US$100,000) annual option payment related to an exploration and option to purchase agreement
for the Superior West project with Kennecott Exploration Company (“Kennecott”) applied against the Superior West capitalized costs. Also during the year ended December 31,
2016, the Company sold its Sisorta project in Turkey and all capitalized costs were recovered.
During the year ended December 31, 2015 the Company wrote-off $56,085 of capitalized exploration costs related to the termination of a 1% net smelter returns royalty (“NSR”)
agreement on one of its interests in Haiti.
131
RegionPropertiesDecember 31, 2017December 31, 2016Asia PacificVarious-$ 81,124$ SwedenVarious16,671 16,671 Viad royalties421,084 421,084 TurkeyAlankoy153,960 153,960 Sisorta- - Trab78,587 78,587 United StatesSuperior West, Arizona867,096 1,000,479 of AmericaYerington, Nevada304,568 393,095 Total1,841,966$ 2,145,000$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Sweden and Norway Licenses
The Company holds certain exploration permits in Sweden and Norway. There are no specific spending commitments on the Swedish licenses and permits.
On February 14, 2017, the Company completed an agreement to sell certain wholly owned subsidiaries in Sweden previously announced in November 2016, to Boreal Metals Corp.
(“BMC”)(TSX-V: BMX), a British Columbia corporation. Pursuant to the agreement BMC acquired two wholly-owned subsidiaries of the Company that control the Gumsberg and
Adak exploration assets in Sweden and the Tynset and Burfjord assets in Norway. In exchange for the transfer of its wholly-owned subsidiary Iekelvare AB, which owns the
Gumsberg and Adak properties, and its entire interest in its wholly-owned subsidiary EMX Exploration Scandinavia AB, which owns the Tynset and Burfjord properties BMC must
complete the following:
• BMC issued 1,713,390 common shares to EMX representing a 19.9% equity ownership in BMC. BMC had thecontinuing obligation to issue additional shares of BMC to
EMX to maintain its 19.9% interest in Boreal, at no additional cost to EMX, until BMC raised CAD $5,000,000 in equity (completed). EMX now has the right to participate
pro-rata in future financings at its own cost to maintain its 19.9% interest in Boreal.
• BMC also agreed to reimburse SEK 550,000 ($81,996, received) to the Company for license fees related to the Adak license.
• As part of the agreement, EMX will receive an uncapped 3% NSR royalty on each of the properties. Within five years of the closing date, BMC has the right to buy down
up to 1% of the royalty on any given project by paying EMX US$2,500,000 in cash and shares of BMC. Such buy down is project specific.
• Additionally, EMX will receive annual advance royalty (“AAR”) payments of US$20,000 for each of the properties commencing on the second anniversary of the closing,
with each AAR payment increasing by US$5,000 per year until reaching US$60,000 per year, except that BMC may forgo AAR payments on two of the four Properties in
years two and three.
EMX will also receive a 0.5% NSR royalty on any new mineral exploration projects generated by BMC in Sweden or Norway, excluding projects acquired from a third party
containing a mineral resource or reserve or an existing mining operation. These royalties are not capped and not subject to a buy down.
•
• As part of the agreement, EMX also has the right to nominate one seat on the Board of Directors of BMC.
Pursuant to the sale agreement, the Company received 1,713,390 shares of BMC on signing and valued the shares received at $0.05 per share or $85,670, and paid a US$12,000
($15,862) finders fee. Subsequent to signing, pursuant to equity and private placements completed by BMC, BMC issued EMX a further 7,492,492 shares to EMX valued at
$1,290,998. Pursuant to the sale agreement, EMX has recorded a total gain on sale of $1,393,224. As at December 31, 2017, EMX held 9,205,882 shares of BMC representing
approximately a 17.8% interest.
Sweden and Norway Licenses (continued)
In December 2017, the Company executed an option agreement for the sale of the Slättberg licenses in Sweden to Sienna Resources Inc. (“Sienna”) (TSX-V: SIE). As part of the
agreement, Sienna can earn a 100% interest in the project during a one-year option period by completing the following:
• On signing the agreement, Sienna issued EMX 3,000,000 common shares of Sienna stock valued at $750,000;
• As a condition to the exercise of the option, Sienna must undertake work commitments of at least $500,000 on the project, including drilling of at least 750 meters.
• Upon exercise of the option, issue to EMX an additional 3,000,000 common shares of Sienna, and EMX will receive a 3% NSR royalty on the project.
132
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
• After exercise of the option, Sienna will use commercially reasonable efforts to raise $3,000,000 for development of the project and other activities. Once Sienna has
raised that amount, Sienna will issue an additional 4,000,000 common shares to EMX. Thereafter, EMX will have the right to participate pro-rata in future financings at
its own cost to maintain its interest in Sienna.
• Within six years of the execution of the agreement, Sienna may purchase 0.5% of the NSR royalty for $1,500,000, leaving EMX with a 2.5% NSR royalty.
United States
Aguila de Cobre, Arizona
On July 30, 2015, the Company, through its wholly-owned subsidiary Bronco Creek Exploration Inc. (“BCE”), entered into an option agreement to sell the Aguila de Cobre property
for a combination of cash payments and work commitments. The agreement grants Kennecott Exploration Company (“KEX”), part of the Rio Tinto Group, the option to acquire a
100% interest in the property.
During April 2016, KEX terminated its option to aquire the interest in the property.
Cathedral Well, Nevada
In June 2014, the Company signed an exploration and option agreement through its wholly-owned subsidiary BCE, with Ely Gold and Minerals Inc. (“Ely Gold”) (TSX Venture: ELY)
to earn a 100% interest in the Cathedral Well project by paying EMX a total of US$100,000 over the next three years after which the Company will retain a 2.5% NSR royalty,
inclusive of an underlying 0.5% NSR royalty. Ely Gold completed their earn-in for the property in November of 2016 through a trade with EMX, whereby a subsidiary of Ely Gold
executed a quit claim deed for certain mining claims adjacent to EMX’s Spring Canyon property in Nevada in lieu of its last US$25,000 option payment. In December 2016, Ely Gold
announced it had optioned the property to Colorado Resources Ltd. (TSX-V: CXO).
Hardshell Skarn, Arizona
The Company holds a 100% interest in the Hardshell Skarn property comprised of certain unpatented federal lode mining claims.
In October 2015, the Company signed an exploration and option agreement through its wholly-owned subsidiary FOBC LLC, with Arizona Mining Inc, to earn a 100% interest in the
project by paying the Company a total of US$85,000 as follows: US$25,000 (received) upon execution of the agreement and US$60,000 (received) over the next three years. In
2017, Arizona Mining earned a 100% interest in the project under the agreement by accelerating and completing the required US$85,000 in cash payments. The Company now
retains a 2% NSR. After exercise of the option, annual advanced royalty payments of US$5,000 commence on the first anniversary of the exercise of the option. After
commencement of commercial production, the Company is due payments of US$5,000 or the royalty coming due that year, whichever is greater.
United States (continued)
Greenwood Peak, Arizona
133
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
In November 2017, EMX executed an Option Agreement with a wholly owned subsidiary of Antofagasta plc (“Antofagasta”) (LSE: Anto) wherby Antofagasta can earn a 100%
interest in the Greenwood Peak project by: a) reimbursing EMX’s acquisition costs and making annual option payments, together totaling US$630,000 ($30,000 received), and b)
completing US$4,500,000 in work expenditures within the five year option period. Upon exercise of the option EMX will retain a 2% NSR royalty on the project, which is not capped
and not subject to buy-down. After exercise of the option, annual advance royalty and milestone payments will be due to EMX.
Copper Springs, Copper King, and Red Top Properties, Arizona
In September 2013, the Company, through its wholly owned subsidiary BCE, entered into option agreements to sell the Copper Springs, Copper King, and Red Top projects for a
combination of cash payments, work commitments, and common shares. The agreements grant Desert Star Resources Ltd. (“Desert Star”), a TSX-V listed company, the option to
acquire a 100% interest in each of the projects.
Desert Star delivered 1,050,000 common shares of Desert Star and is required to incur a minimum of US$5,000,000 in exploration expenditures by the seventh anniversary of the
signing date, and making additional milestone payments to the Company.
Copper Springs, Arizona
In January, 2015, Desert Star terminated its interest in the Copper Springs project and the Company regained 100% control of the project.
On February 25, 2017, through BCE, the Company executed an Option Agreement for Copper Springs with Anglo American Exploration (USA), Inc. (“Anglo American”). Anglo
American can earn a 100% interest in the project by: a) reimbursing 2016 holding and permitting costs and making annual option payments, together totaling US$447,000 ($82,000
received), and b) completing US$5,000,000 in exploration expenditures before the fifth anniversary of the agreement. Upon exercise of the option, Anglo American will pay EMX
an additional US$110,000 and EMX will retain a 2% NSR royalty on the project. The royalty is not capped or purchasable, except over two parcels of Arizona State Land where
Anglo American can buy a 0.5% NSR royalty from EMX for US$2,000,000. After exercise of the option, annual advanced minimum royalty (“AMR”) payments and milestone
payments will be due to EMX.
Copper King, Arizona
On September 1, 2014, and July 21, 2015 the Copper King agreement was amended, extending the 2nd anniversary payments and work commitments into 2016. On March 1,
2016, Desert Star terminated its option on the Copper King project. In October 2016, the Company, through BCE, entered into an option agreement to sell the Copper King property
for a combination of cash payments and work commitments. The agreement grants Kennecott the option to acquire a 100% interest in the property.
Pursuant to the Agreement, Kennecott can earn a 100% interest in the Project by (a) reimbursing the 2016 holding costs and making option payments, together totaling US$504,314
(US$79,314 received), and (b) completing US$4,000,000 in exploration expenditures before the fifth anniversary of the Agreement Upon exercise of the option EMX will retain a
2% NSR royalty on the project which is not capped or purchasable.
After exercise of the option, AMR payments and milestone payments will be due to EMX.
134
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
9. EXPLORATION AND EVALUATION ASSETS (Continued)
United States (continued)
Red Top, Arizona
On September 1, 2014, and July 31, 2015 the Red Top agreement was amended extending the 2nd anniversary payments and work commitments into 2016. In January 2017
Desert Star terminated its option on the Red Top project and returned 100% control of the project to BCE.
Buckhorn Creek and Frazier Creek Properties, Arizona and Nevada
In October 2013, the Company, through its wholly owned subsidiary BCE, entered into option agreements to sell the Frazier Canyon and Buckhorn Creek projects for a combination
of cash payments, work commitments, and common shares. The agreements granted Savant Explorations Ltd. (“Savant”), a TSX-V listed company, the option to acquire a 100%
interest in each of the projects.
On April 27, 2015, Savant terminated its option to acquire the Frazier Creek property and the Company relinquished all mineral rights on the Frazier Creek property. On September
24, 2015, Savant terminated its interest in the Buckhorn Creek property with the Company retaining 100% ownership of the property.
Superior West, Arizona
The Company holds a 100% interest in the mineral rights comprised of certain federal unpatented mining claims, located on Tonto National Forest lands and unpatented federal
mining claims under option. The Company also may earn a 100% interest in additional adjacent claims under option from a third party for cash payments totaling US$1,000,000
on or before January 2017 and subject to a 2% NSR Royalty, 1% of which may be purchased for US$2,000,000 in 0.5% increments. The Company exercised the option in December
2016, and retains a 100% interest in the project.
On May 4, 2015, the Company entered into an exploration and option to purchase agreement, through its wholly owned subsidiary BCE, for the Superior West project with
Kennecott. Pursuant to the agreement, Kennecott can earn a 100% interest in the project by making cash payment upon execution of the agreement of US$149,187 (received),
and thereafter completing US$5,500,000 in exploration expenditures and paying annual option payments totaling US$1,000,000 (US $100,000 received in March 2016, and
US$100,000 received in January 2017 ) before the fifth anniversary of the agreement. For the execution payment, US$50,000 ($52,500) was applied against the Superior West
capitalized costs, and the balance of US$99,187 was a direct reimbursement to the Company for holding costs to maintain the property in good standing. Upon exercise of the
option EMX will retain a 2% NSR royalty on the properties. Kennecott has the right to buy down 1% of the NSR royalty from underlying claim holders by payment of US$4,000,000
to EMX.
Kennecott has maintained or exceeded any minimum requirements for expenditures on the project and the agreement remains in good standing.
135
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Mineral Hill, Wyoming
In October 2016, the Company, through its wholly-owned subsidiary BCE, entered into an option agreement with Coeur Explorations, Inc., a subsidiary of Coeur Mining, Inc. (NYSE:
CDE) (“Coeur”) to acquire a 100% interest in the property. The Company’s Mineral Hill project is held under a pooling agreement with a private group, Mineral Hill L.P. (“MHL”),
with all proceeds split 50:50, except for the sale of surface rights associated with several patented mining claims.
Pursuant to the Agreement, Coeur may acquire a 100% interest in the Property by a) making yearly option payments, beginning upon execution of the Agreement, totaling
US$435,000 (US$10,000 received upon execution, US$15,000 received in October 2017), b) making exploration expenditures totaling US$1,550,000 on or before the fifth
anniversary of the agreement, and c) paying US$250,000 upon exercise of the option.
9. EXPLORATION AND EVALUATION ASSETS (Continued)
United States (continued)
Upon exercise of the option, EMX and MHL will retain a 4% NSR royalty, of which Coeur may purchase up to 1.5% of the NSR royalty if, within sixty days after the completion of a
PEA, Coeur purchases the first 0.5% for US$1,000,000. Coeur may purchase an additional 0.5% or 1% of the NSR royalty at any time thereafter for US$2,000,000 per 0.5% interest
(maximum total buy down of 1.5%), with EMX and MHL retaining a 2.5% interest.
After the option exercise, EMX and MHL will receive annual advance minimum royalties of US$150,000 and, upon completion of a feasibility study, a milestone payment of
US$1,000,000.
Ophir, Utah
In October 2016, the Company completed the sale of five patented mining claims comprising its Ophir property in Utah, through its wholly owned subsidiary Bullion Monarch
Mining Inc., to Kennecott. The terms of the sale include a cash payment of US$75,000 (received) to EMX at closing, with the Company retaining a 2% NSR royalty on the property.
Yerington West, Nevada
The Yerington West property is comprised of certain unpatented federal mining claims located on lands administered by the BLM. Yerington West is under an Option Agreement,
dated September 24, 2009 originally with Entrée Gold Inc. ("Entrée"), and now is with Mason Resources Corp. ("Mason") (TSX: MNR) as a result of a 2017 "spin out" whereby
Entrée transferred the Ann Mason project, which includes EMX's Yerington West property, into Mason, a newly incorporated company.
Under the agreement, Mason can earn up to an 80% interest in the project by a) incurring expenditures of $1,000,000, making cash payments of $140,000, and issuing 85,000
shares within three years (completed by Entrée), b) making aggregate advance royalty payments totaling $375,000, being US$50,000 per year between the fifth and seventh
anniversaries (received), and $75,000 per year between the eighth and tenth anniversaries ($75,000 received during the year ended Dececmber 31, 2017); and (c) delivering a
feasibility study before the tenth anniversary of the agreement. Under the agreement, once earn-in has been completed, EMX can convert its interest to a 2.5% NSR. Mason has
the option to buy down 1.5% of the NSR for US$4,500,000 million.
136
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Various
The Company holds interests acquired by staking in several jurisdictions including Utah, Nevada, Arizona, Colorado and Wyoming.
Turkey
The Company has acquired numerous exploration licenses in Turkey for which there are no specific spending commitments.
Akarca Property
On June 20, 2013, the Company entered into an option agreement to sell its 100% interest in AES Madencilik A.S. ("AES Turkey"), a Turkish corporation that controls the Akarca
property, for a combination of cash payments, gold bullion, work commitments, and a royalty interest to Çolakoglu, a privately owned Turkish company.
Colakoglu paid $350,000 and completed drilling requirements on the project and was required to pay additional amounts to earn its interest. In October, 2015, Çolakoglu advised
EMX that it decided to forego exercising the option and the Company regained 100% control of the Akarca project.
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Turkey (continued)
Effective July 29, 2016, the Company entered into a share purchase agreement for the sale of AES Madencilik A.S. (“AES”), the wholly-owned EMX subsidiary that
controls the Akarca gold-silver project in western Turkey, to Çiftay İnşaat Taahhüt ve Ticaret A.Ş. ("Çiftay"), a privately owned Turkish company.
The terms of the sale provide payments to EMX as summarized below (gold payments can be made as gold bullion or the cash equivalent):
• US$2,000,000 cash payment ($2,630,760) to EMX upon closing of the sale (received);
•
•
500 ounces of gold every six months commencing February 2, 2017 up to a cumulative total of 7,000 ounces of gold. Received US$601,825 in February, 2017 and
US$634,825 in July, 2017, and credited against accounts receivable. Receipt of these payments leaves a pre-production total of 6,000 ounces of gold (or the cash
equivalent) to be paid to EMX.
7,000 ounces of gold within 30 days after the commencement of commercial production from the Property provided that prior gold payments will be credited against
this payment;
250 ounces of gold upon production of 100,000 ounces of gold from the Property;
250 ounces of gold upon production of an aggregate of 500,000 ounces of gold from the Property;
•
•
• A sliding-scale royalty in the amount of the following percentages of production returns after certain deductions (“Royalty”) for ore mined from the Property:
o
For gold production: 1.0% on the first 100,000 ounces of gold; 2.0% on the next 400,000 ounces of gold; 3.0% on all gold production in excess of 500,000 ounces
produced from the Property, and;
137
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
o
For all production other than gold production: 3.0%.
•
The Royalty is uncapped and cannot be bought out or reduced.
In addition, Çiftay must conduct a drilling program of at least 3,000 meters on the Property during each 12-month period commencing on August 5, 2016 until commencement of
commercial production.
Pursuant to the agreement, Çiftay has guaranteed the future payments of 2,500 ounces of gold, or cash equivalent. As at December 31, 2017, the Company has recorded a
receivable of $2,447,595 (including $167,718 of accreted interest income) related to the guaranteed payments which was estimated using a valuation model that requires
significant judgments and assumptions, including to future metal prices and discount rates. Included in the calculation for the year ended December 31, 2017, the Company used
a long term gold price of US$1,332 per ounce and a discount rate of 6%.
The sale of AES resulted in a gain of $6,683,560, resulting from proceeds of $6,737,452, less the net assets of AES of $53,892 which is included in the gain on acquisition and sale
of exploration and evaluation assets for the year ended December 31, 2016.
Subsequent to December 31, 2017, EMX received a payment of US$665,525 on February 5, 2018, as the cash equivalent to the third 500 ounce gold bullion payment to be made
under the terms of the agreement.
Sisorta Property
On April 2, 2012, the Company and Chesser Resources Ltd (“Chesser”) executed an agreement to sell the Sisorta property to Çolakoglu Ticari Yatrim A.S. (“Çolakoglu”) for a
combination of option payments and expenditure requirements. Çolakoglu terminated the option effective March 21, 2013, leaving Chesser and the Company with a 51% and
49% interest in the Sisorta project, respectively. Until March 2015, the Company accounted for its 49% interest as an Investment in Associated Company and had written down
the value of the investment to $Nil due to the pick-up of its share of net losses in the associated company. On March 20, 2015, Chesser and the Company signed definitive
agreements pursuant to which the Company acquired all of Chesser’s interest in the Sisorta project for a total purchase price of $156,800 (AUD$162,092). As a result of
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Turkey (continued)
the purchase, the Company recorded a gain on acquisition of $26,407, and $131,440 of the purchase price was allocated to exploration and evaluation assets.
Effective July 1, 2016, the Company entered into a share purchase agreement for the sale of EBX Madencilik A.S. (“EBX”), a wholly-owned subsidiary that controlled
the Sisorta gold property in Turkey, to Bahar Madencilik Sinayi ve Ticaret Ltd Sti ("Bahar"), a privately owned Turkish company.
The agreement provides for Bahar's staged payments to EMX as summarized below:
• US$250,000 cash payment ($332,969) to EMX upon closing of the sale (received).
138
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
• Annual cash payments of US$125,000 (received) beginning on July 1, 2017 until commencement of commercial production from the Property.
•
3.5% of production returns after certain deductions (“NSR Payment") for ore mined from the Property that is processed on-site (increased to 5% if the ore is processed
off-site).
The Advance Cash Payments will be credited at a rate of 80% against the NSR Payment payable after commercial production commences.
The NSR Payment is uncapped and cannot be bought out or reduced.
•
•
Pursuant to the sale of Sisorta, during the year ended December 31, 2016, the Company paid a finders fee of US$48,740 ($63,549) and recorded a gain on the sale of EBX of
$86,041 which is included in the gain (loss) on acquisition and sale of exploration and evaluation assets. The future annual cash payments are not accrued as there is no guarantee
of payment, and the shares of EBX could be returned if the payments are not made.
Balya Property
EMX holds an uncapped 4% NSR royalty that it retained from the sale of the property to Dedeman Madencilik San ve Tic. A.S. ("Dedeman"), a privately owned Turkish company,
in 2006. The Balya royalty due to EMX from 2016 production totaled US$154,299, from which Dedeman's earlier advance royalty payment of US$100,000 was credited, resulting
in an adjusted payment to EMX of US$54,299 . Including applicable taxes in Turkey, $40,217 (US$30,762) has been included in royalty income. The AMR’s and net royalty payments
have been included in Royalty income.
Golcuk Transfer and Royalty Agreement
On July 17, 2012, amended on January 29, 2013, and amended again by a second amending agreement dated as of November 8, 2016, the Company entered into an agreement
with Pasinex Resources Limited (“PRL”) to transfer a 100% interest in the Golcuk property in exchange for PRL issuing shares to the Company as follows,
500,000 PRL shares on the initial issuance date (received during the year ended December 31, 2013 and valued at $27,500 or $0.055 per share);
•
• An additional 500,000 PRL shares on or before the first anniversary of the initial issuance date (received during the year ended December 31, 2014 and valued at $25,000
or $0.05 per share);
• An additional 1,000,000 PRL shares on or before the second anniversary of the initial issuance date (received in February 2015 and valued at $115,000 or $0.115 per
share); and,
• An additional 1,000,000 PRL Shares on or before the third anniversary of the initial issuance date (received in February 2016 and valued at $55,000 or $0.055 per share).
In addition to the transfer of shares, Pasinex will then pay the Company a 2.9% NSR royalty from production. Pasinex may pay the first minimum royalty payment by delivering
664,483 common shares in the capital of PRL to the Royalty Holder on or before November 30, 2016 (received valued at $79,738). Pasinex has the option of purchasing 0.9% of
the royalty for US$1,000,000 prior to the 6th anniversary of the effective date of the agreement. In 2017 EMX received 224,150 shares of Pasinex and US$49,204 in cash for the
advance royalty payment due in September, 2017.
139
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Tumad Agreement - Trab-23
The Trab-23 property is located in northeast Turkey. In February 2013 Tumad Madencilik San.Ve TIC, A.S. (“Tumad”), executed an option agreement (the “Trab-23 Agreement”)
to acquire Trab-23 from the Company. The Trab-23 Agreement provides an upfront transfer of the two licenses to Tumad, in-ground spending requirements, a revenue stream of
annual earn-in and pre-production payments, and a revenue stream based upon production. The Trab-23 Agreement is contingent upon approval by Turkey’s General Directorate
of Mining Affairs ("MIGEM") to combine the two licenses into a single exploitation license. This license combination and transfer occurred on September 11, 2014 (the “Transfer
Date”). Provided that Tumad has made the payments and performed the work described in the Trab-23 Agreement, on or before September 11, 2017 Tumad may exercise its
option to retain the property, and after such election, shall pay annual minimum royalties of US$100,000 commencing upon the first anniversary of such exercise. Upon production
from the Trab-23 licenses, Tumad will pay the Company a 3% NSR royalty from production. The annual minimum royalties will be credited to 80% of the NSR royalty then payable.
Tumad's payment and drill requirements have not been met and Tumad terminated the agreement in 2017, and is currently in the process of returning the property to 100% EMX
control.
Ferrite Agreement - Alankoy
On December 20, 2013, the Company signed an Exploration and Option Agreement (the “Alankoy Agreement”) with Ferrite Resources Ltd. (“Ferrite”), a privately-held Australian
company, whereby Ferrite had the option to acquire the Company’s subsidiaries that hold the Alankoy project, with the Company retaining a 3% NSR. To do so, Ferrite paid
US$35,000 upon signing and must expend at least US$200,000 on exploration activities each year for the three years after June 3, 2014 (the Effective Date). In addition, Ferrite is
required to make annual deliveries of gold bullion to the Company as Advanced Annual Royalties (AARs) on each anniversary of the Effective Date.
In October 2015, Ferrite informed the Company they would not continue with the option agreement and paid to EMX US$25,000 ($33,205) related to reimbursement of
expenditures owed by Ferrite.
Alankoy Property – Black Sea Copper & Gold Agreement
On November 23, 2015, the Company signed an Exploration and Option Agreement with Black Sea Copper & Gold Corp. (“Black Sea”), a privately-held British Columbia corporation,
for the Alankoy copper-gold property in northwestern Turkey, whereby Black Sea has the option to acquire the Company’s subsidiaries that hold the Alankoy project, with the
Company retaining a 3% production royalty. To do so, Black Sea paid US$25,000 (received $35,408 in January 2016) upon signing and must incur certain exploration expenditure
milestones.
In February 2017, the Company received notification that 0955767 B.C Ltd (Formerly Black Sea) was terminating the Alankoy agreement and paid US$16,439 to EMX for
reimbursement of costs. EMX has regained 100% control of the project.
Aktutan Property
EMX has a royalty interest in the Aktutan polymetallic project sold to Dedeman in 2007 for considerations that include a 4% uncapped NSR and annual advance royalty payments.
During the year ended December 31, 2017, EMX received two advanced royalty payments on its Aktutan property for $261,473 (US$200,000) from Dedeman.
140
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Australia exploration licenses
The Company’s Australian properties are comprised of contiguous exploration licenses along the Koonenberry gold belt in New South Wales, Australia. The Australian properties
are acquired either directly through staking or through agreements with license holders.
Koonenberry Property
In February 2014, the Company signed an exploration and option agreement with North Queensland Mining Pty Ltd. (“NQM”), a privately-held Australian company, giving NQM
the right to acquire the Company’s Koonenberry exploration licenses in New South Wales, Australia. NQM will bear responsibility of satisfying all existing work commitments and
honoring all underlying property agreements during the term of the agreement. NQM has the option to earn a 100% interest in the EMX subsidiary that holds the licenses, with
EMX retaining a 3% production royalty.
In 2017, Koonenberry Gold Pty Ltd. (“KNB”) completed the earn-in requirements under the exploration and option Agreement between NQM and the Company, and elected to
acquire EMX’s Koonenberry exploration licenses. KNB, a private Australian company, is the successor in interest to NQM under the agreement. The Company transferred its
wholly-owned subsidiary, EMX Exploration Pty Ltd, the holder of the Koonenberry licenses, to KNB. EMX retains a 3% royalty on all future production from the Koonenberry
licenses. As a result of this transaction, all of EMX’s interests in the Koonenberry gold project have now been converted to royalties. As a result of the sale, the Company recorded
a loss of $87,987 being the capitalized costs of the Koonenberry property and field equipment with a book value of $6,866 transferred to KNB at the time of sale.
New Zealand exploration licenses
In September 2014, and amended in December 2015 the Company signed an option agreement with Land & Mineral Limited (“L&M”), a privately-held Australian company, giving
L&M the right to acquire Hauraki Gold Ltd. (“Hauraki”), the wholly-owned EMX subsidiary that controls the Neavesville gold-silver property located in the Hauraki goldfield of New
Zealand’s North Island. The purchase and sale agreement included an execution payment of $100,000 ($50,000 received on signing in 2015, and $50,000 received in May 2016,
being the balance of the execution payment) and a series of anniversary and milestone payments equal to a certain amount of troy ounces of gold. Pursuant to the agreement, In
September 2016, the Company received a $129,562 payment equivalent to a required payment of 75 troy ounces of gold.
Haiti exploration permits
Eurasian and joint venture partner Newmont Ventures Limited (“Newmont”), a wholly owned subsidiary of Newmont Mining Corporation (collectively, the “JV”), had the right to
establish specific exploration areas along the trend of Haiti’s Massif du Nord mineral belt. Newmont was funding and managing six joint venture Designated Projects (“DP’s”)
across the exploration areas. The Company’s work on the 100% controlled Grand Bois gold-copper project is outside of the JV with Newmont.
On November 2, 2015, the Company terminated the EMX –Newmont JV that covered the six designated exploration areas and sold its interest in Haiti to Newmont for a $5,277,542
(US$4,000,000) cash payment and a retained 0.5% NSR royalty interest.
141
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
9. EXPLORATION AND EVALUATION ASSETS (Continued)
Exploration Expenditures
During the year ended December 31, 2017, the Company incurred the following exploration expenditures by projects, which were expensed as incurred:
During the year ended December 31, 2017, The Company:
• Received or accrued $239,088 in expenditures recovered from Boreal in Sweden;
• Received 3,000,000 common shares of Sienna valued at $750,000;
• Received a $65,368 (US$50,000) option payment related to an exploration and option to purchase agreement for the Copper King project with Kennecott;
• Received as part of the Copper Springs option agreement with Anglo American, US$ 82,000 ($106,436) as reimbursement of previously paid land holding costs; and
• Recorded an option payment from Pasinex pursuant to a property agreement on the Company’s Golcuk property for the equivalent to 75 ounces of gold in the form of
$61,805 (US$49,204) cash and 224,150 shares of Pasinex valued at $60,521.
142
Kennecott ExplorationAnglo AmericanOther USATotalNew ZealandOther TotalAdministration Cost 67,159$ 74$ 292$ 185,833$ 186,199$ 65,877$ 40,765$ 10,669$ 51,434$ 6,073$ 376,742$ Assays 24,972 7,727 - 6,031 13,758 940 - - - - 39,670 Drilling / Trenching 13,509 370 - 89,142 89,512 - - - - - 103,021 Land and Legal73,870 - - 198,126 198,126 23,062 3,511 15,334 18,845 9,534 323,437 Logistics 26,040 8,326 6,168 187,423 201,917 1,379 - - - - 229,336 Personnel 566,367 35,565 18,052 1,593,930 1,647,547 175,649 13,606 106,659 120,265 44,619 2,554,447 Property Cost 347,792 363 39,396 901,022 940,781 27,130 3,965 25,238 29,203 - 1,344,906 Professional Services77,768 - - 6,498 6,498 93,506 - 72,497 72,497 27,180 277,449 Share Based Payments111,887 - - 476,569 476,569 52,362 5,318 28,456 33,774 64,993 739,585 Technical Studies 17,921 10,370 - 2,554 12,924 - - 34,506 34,506 31,873 97,224 Travel 118,904 735 - 104,249 104,984 11,584 1,567 6,844 8,411 4,419 248,302 Total Expenditures1,446,189 63,530 63,908 3,751,377 3,878,815 451,489 68,732 300,203 368,935 188,691 6,334,119 Recoveries(239,088) (69,812) (167,690) (166,028) (403,530) (21,338) (26,434) (31,578) (58,012) - (721,968) Operator fees- (7,451) - (22,319) (29,770) - - - - - (29,770) Option Payments & Shares Received(750,000) (64,901) - (110,333) (175,234) (122,326) - - - - (1,047,560) Other Property Income- (2,090) (714) (55,594) (58,398) - (5,349) - (5,349) - (63,747) Total Recoveries(989,088) (144,254) (168,404) (354,274) (666,932) (143,664) (31,783) (31,578) (63,361) - (1,863,045) Net Expenditures457,101$ (80,724)$ (104,496)$ 3,397,103$ 3,211,883$ 307,825$ 36,949$ 268,625$ 305,574$ 188,691$ 4,471,074$ TotalScandinaviaUSATurkeyAsia PacificOther
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
9. EXPLORATION AND EVALUATION ASSETS (Continued)
During the year ended December 31, 2016, the Company incurred the following exploration expenditures by projects, which were expensed as incurred:
*
Kennecott applied as to $105,100 to the Superior West capitalized costs, and $24,720 to exploration recoveries.
The Company received a $129,820 (US$100,000) annual option payment related to an exploration and option to purchase agreement for the Superior West project with
Significant components of “Other” total exploration expenditures for the year ended December 31, 2016 were Haiti - $148,455; Austria - $48,767; and other general
exploration costs in Europe totalling - $146,159.
143
Kennecott ExplorationDesert Star ResourcesOther USATotalAkarcaOtherTotalNew ZealandOther TotalAdministration Cost 37,498$ 109$ 25$ 157,106$ 157,240$ 27,055$ 92,397$ 119,452$ 2,220$ 9,520$ 11,740$ 24,650$ 350,580$ Assays 8,596 845 - 6,635 7,480 676 - 676 - - - - 16,752 Drilling / Trenching 76,687 314,972 - 91 315,063 44,283 14,679 58,962 - - - - 450,712 Land and Legal48,632 - - 182,160 182,160 39,603 160,831 200,434 - 23,778 23,778 40,384 495,388 Logistics 14,535 57,164 1,822 70,590 129,576 13,810 5,708 19,518 - 9,155 9,155 5,282 178,066 Personnel 195,223 118,679 12,676 1,420,907 1,552,262 297,586 264,527 562,113 - 99,751 99,751 171,881 2,581,230 Property Cost 165,640 2,677 39,460 485,365 527,502 154,526 32,426 186,952 37,230 47,219 84,449 - 964,543 Professional Services135,527 - - 13,664 13,664 61,577 22,029 83,606 496 1,772 2,268 17,625 252,690 Share Based Payments40,285 - - 295,008 295,008 32,805 69,020 101,825 - 17,673 17,673 48,066 502,857 Technical Studies 106,093 42,666 - 16,107 58,773 38,383 6,544 44,927 - 11,397 11,397 163,444 384,634 Travel 63,571 - - 103,478 103,478 16,310 31,479 47,789 - 6,861 6,861 16,382 238,081 Total Expenditures892,287 537,112 53,983 2,751,111 3,342,206 726,614 699,640 1,426,254 39,946 227,126 267,072 487,714 6,415,533 Recoveries- (555,217) (51,833) (21,938) (628,988) (43,550) - (43,550) - (48,781) (48,781) - (721,319) Operator fees- (56,271) (1,263) - (57,534) - - - - - - - (57,534) Option Payments *- (24,720) - (125,890) (150,610) - (170,146) (170,146) (180,476) - (180,476) - (501,232) Other Property Income- (9,720) (265) (39,755) (49,740) - (56,466) (56,466) (27,243) - (27,243) (2,040) (135,489) Total Recoveries- (645,928) (53,361) (187,583) (886,872) (43,550) (226,612) (270,162) (207,719) (48,781) (256,500) (2,040) (1,415,574) Net Expenditures892,287$ (108,816)$ 622$ 2,563,528$ 2,455,334$ 683,064$ 473,028$ 1,156,092$ (167,773)$ 178,345$ 10,572$ 485,674$ 4,999,959$ TotalScandinaviaUSATurkeyAsia PacificOther
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
9. EXPLORATION AND EVALUATION ASSETS (Continued)
During the year ended December 31, 2015, the Company incurred the following exploration expenditures by projects, which were expensed as incurred:
*
and Russia - $32,137.
Significant components of “Other” total exploration expenditures for the year ended December 31, 2015 were Haiti - $359,827; Germany - $107,899; Austria - $69,667;
144
Kennecott ExplorationDesert Star ResourcesOther USATotalAkarcaOtherTotalNew ZealandOther TotalAdministration Cost 61,523$ 676$ 1,271$ 127,873$ 129,820$ 16,296$ 43,532$ 59,828$ 4,767$ 2,932$ 7,699$ 44,763$ 303,633$ Assays 5,307 1,825 142 22,472 24,439 - 5,509 5,509 - - - 1,480 36,735 Drilling / Trenching 11,874 - - 7,111 7,111 - - - - - - - 18,985 Land and Legal39,518 - - 132,178 132,178 23,208 45,957 69,165 4,914 10,136 15,050 31,480 287,391 Logistics 26,978 32,211 2,646 98,391 133,248 12,014 40,408 52,422 499 4,475 4,974 48,472 266,094 Personnel 423,697 154,004 24,500 1,261,865 1,440,369 205,665 561,082 766,747 45,557 101,586 147,143 201,162 2,979,118 Property Cost 60,369 87,771 75,530 415,594 578,895 176,773 116,132 292,905 8,921 44,322 53,243 43,094 1,028,506 Professional Services86,874 - - 13,813 13,813 42,381 117,062 159,443 28,938 10,410 39,348 161,232 460,710 Share Based Payments7,103 - - 75,468 75,468 - 12,430 12,430 - (1,793) (1,793) (20,811) 72,397 Technical Studies 28,083 77,485 5,151 68,265 150,901 - 17,183 17,183 3,508 25,407 28,915 112,739 337,821 Travel 59,934 128 - 27,107 27,235 - 28,263 28,263 3,781 10,609 14,390 27,590 157,412 Total Expenditures811,260 354,100 109,240 2,250,137 2,713,477 476,337 987,558 1,463,895 100,885 208,084 308,969 651,201 5,948,802 Recoveries- (426,190) (118,065) (93,549) (637,804) (295,024) (33,305) (328,329) - - - (96,675) (1,062,808) Operator fees- (44,067) (4,258) (9,457) (57,782) - - - - - - - (57,782) Option Payments- (31,955) - (127,820) (159,775) - (242,820) (242,820) - - - - (402,595) Other Property Income- (13,102) - (32,922) (46,024) - - - (14,918) - (14,918) - (60,942) Total Recoveries- (515,314) (122,323) (263,748) (901,385) (295,024) (276,125) (571,149) (14,918) - (14,918) (96,675) (1,584,127) Net Expenditures811,260$ (161,214)$ (13,083)$ 1,986,389$ 1,812,092$ 181,313$ 711,433$ 892,746$ 85,967$ 208,084$ 294,051$ 554,526$ 4,364,675$ ScandinaviaUSATurkeyAsia PacificTotalOther *
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
10. ROYALTY INTEREST
Changes in royalty interest for the years ended December 31, 2017, 2016, and 2015:
During the year ended December 31, 2016, the Company acquired a 2% NSR royalty on all precious metals and a 1% NSR
royalty on all other minerals for the Maggie Creek property (non-producing) in Nevada, and a 1% NSR royalty on all minerals
for the Afgan property (non-producing) in Nevada from Golden Predator US Holdings Corp, a wholly-owned subsidiary of Till
Capital Ltd. (“TCL”). In consideration of the acquisition, the Company issued 250,000 of its common shares to TCL valued at
$145,000.
Carlin Trend Royalty Claim Block
The Company holds an interest in the Carlin Trend Royalty Claim Block in Nevada which includes the following Royalty
Properties:
Leeville Mine: Located in Eureka County, Nevada, the Company is receiving a continuing 1% gross smelter return royalty
(“GSRR”).
East Ore Body Mine: Located in Eureka County, Nevada, the property is currently being mined and the Company is receiving
a continuing 1% GSRR.
North Pipeline: Located in Lander County, Nevada. Should the property become producing, the Company will receive a
production royalty of US$0.50 per yard of ore processed or 4% of net profit, whichever is greater.
During the year ended December 31, 2017, $2,857,927 (2016 - $2,227,322; 2015 - $1,609,553) in royalty income was included
in operations offset by a 5% direct gold tax and depletion.
Impairment of Non-Current Assets
The Company’s policy for accounting for impairment of non-current assets is to use the higher of the estimates of fair value
less cost of disposal of these assets or value in use. The Company uses valuation techniques that require significant judgments
and assumptions, including those with respect to future production levels, future metal prices and discount rates.
Non-current assets are tested for impairment when events or changes in circumstances suggest that the carrying amount
may not be recoverable. The Company continuously reviews the production of gold from the Carlin Trend Royalty Claim
2
Balance, December 31, 201429,327,960$ Adjusted for:Depletion(1,716,848) Impairment charge(3,973,699) Cumulative translation adjustments5,161,567 Balance, December 31, 201528,798,980 Adjusted for:Acquisition145,000 Depletion(2,163,221) Cumulative translation adjustments(949,607) Balance, December 31, 201625,831,152 Adjusted for:Depletion(2,282,276) Cumulative translation adjustments(1,605,133) Balance, December 31, 201721,943,743$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
10. ROYALTY INTEREST (Continued)
Block, expected long term gold prices to be realized, foreign exchange, and interest rates. As a result, periodically the
Company revises its estimated annual gold production over the expected mine life and adjusts it’s long term gold price. As a
result of these adjustments, the Company recorded $Nil (2016 - $Nil, 2015 - $3,973,699) in impairment charges for the year
ended December 31, 2017 related to the Carlin Trend Royalty Claim Block.
11. RECLAMATION BONDS
Reclamation bonds are held as security towards future exploration work and the related future potential cost of reclamation
of the Company’s land and unproven mineral interests. Once reclamation of the properties is complete, the bonds will be
returned to the Company.
12. GOODWILL
The Company’s goodwill represents the excess of the purchase price paid during fiscal 2012 for the acquisition of Bullion
Monarch Mining Inc. over the fair value of the net identifiable tangible and intangible assets and liabilities acquired.
Changes in goodwill for the year ended December 31, 2017, 2016, and 2015:
The Company applies a one-step approach to determine if the Carlin Trend Royalty Claim Block and the related assets within
the same Cash Generating Unit (“CGU”) are impaired (Note 10). The impairment loss is the amount by which the CGU’s
carrying amount exceeds its recoverable amount. There was no impairment for the royalty interest and goodwill has been
written down in conjunction with the decline of $2,709,239 (2016 - $1,518,328, 2015 - $3,047,605) of the related deferred
income tax liability.
3
December 31, 2017December 31, 2016Australia - various properties-$ 67,694$ Sweden - various properties12,625 8,043 Turkey - various properties5,669 26,362 U.S.A - various properties497,454 537,328 Total515,748$ 639,427$ Balance, December 31, 20148,217,542$ Adjusted for:Impairment charge(3,047,605) Cumulative translation adjustment1,331,949 Balance, December 31, 20156,501,886 Adjusted for:Impairment charge(1,518,328) Cumulative translation adjustment(230,234) Balance, December 31, 20164,753,324 Adjusted for:Impairment charge(2,709,239) Cumulative translation adjustment(223,778) Balance, December 31, 20171,820,307$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
13. ADVANCES FROM JOINT VENTURE PARTNERS
Advances from joint venture partners relate to unspent funds received pursuant to approved exploration programs by the
Company and its joint venture partners. The Company’s advances from joint venture partners consist of the following:
14. CAPITAL STOCK
Authorized
As at December 31, 2017, the authorized share capital of the Company was an unlimited number of common and preferred
shares without par value.
Common Shares
During the years ended December 31, 2017, 2016, and 2015, the Company:
•
Completed a non-brokered private placement raising $7,000,000 by the issuance of 5,000,000 units at a price of
$1.40 per Unit. Each Unit was comprised of one common share and one-half of one non-transferable common share
purchase warrant. Each whole warrant entitles the holder to purchase an additional common share for $2.00 until
April 12, 2019.
The Company incurred share issue costs totaling $438,018. Included in this amount was 246,604 Units (6% of the
Units sold to investors introduced by finders) valued at $345,246 and $92,772 in cash. The units paid as finders fees
included the same terms as the private placement Units.
The gross proceeds of the private placement were allocated using a residual value method with respect to the
measurement of shares and warrants issued as private placement units. This resulted in $6,200,000 recorded as
share capital and $800,000 being allocated to reserves. For the finders fees paid in Units, $305,789 was allocated to
capital and $39,457 was allocated to reserves .
Issued 75,000 (2016 – 165,000; 2015 - Nil) shares valued at $85,700 (2016 - $127,800; 2015 - $Nil) pursuant to the
exercise of stock options.
Issued 68,873 shares valued at $79,190 pursuant to employment and consulting agreements, of which the full
amount has been included in exploration expenditures. Included in commitment to issue shares is $23,825 for
accruals in exploration expenditures for shares approved to be issued pursuant to an employment and consulting
agreement for shares issued in January 2018.
Issued 245,000 (2016 - 140,000; 2015 – 163,000) shares valued at $279,300 (2016 - $166,600; 2015 – $233,950)
pursuant to an incentive stock grant program to employees of the Company. The shares issued for 2016 and 2015
were applied against commitment to issue as they related to prior period accruals.
Issued Nil (2016 - 250,000; 2015 – Nil) shares valued at $Nil (2016 - $145,000; 2015 - $Nil) pursuant to a purchase
agreement for the Maggie Creek and Afgan royalties (Note 10).
•
•
•
•
4
December 31, 2017December 31, 2016U.S.A.808,905$ 341,361$ Total808,905$ 341,361$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
14. CAPITAL STOCK (Continued)
Stock Options
The Company adopted a stock option plan (the “Plan”) pursuant to the policies of the TSX-V. The maximum number of shares
that may be reserved for issuance under the plan is limited to 10% of the issued common shares of the Company at any time.
The vesting terms are determined at the time of the grant, subject to the terms of the plan.
During the years ended December 31, 2017, 2016, and 2015, the change in stock options outstanding is as follows:
The following table summarizes information about the stock options which were outstanding and exercisable at December
31, 2017:
The weighted average remaining useful life of stock options is 3.10 years (2016 – 2.92 years; 2015 – 3.56 years).
Restricted share units
In 2017, the Company introduced a long-term restricted share unit plan (“RSUs”). The RSU’s entitle employees, directors, or
officers to common shares of the Company upon vesting based on vesting terms determined by the Company’s Board of
Directors at the time of grant.
5
NumberWeighted Average Exercise PriceBalance as at December 31, 20145,493,200 2.03$ Granted1,341,500 0.66 Expired(1,406,200) 2.12 Balance as at December 31, 20155,428,500 1.67 Granted1,277,500 1.30 Exercised(165,000) 0.77 Expired(1,729,500) 2.66 Balance as at December 31, 20164,811,500 1.24 Granted1,472,500 1.20 Exercised(75,000) 1.14 Expired(961,500) 1.97 Balance as at December 31, 20175,247,500 1.10 Number of options exercisable as at December 31, 20175,235,000 1.10$ Date GrantedNumber of OptionsExercisableExercise Price $Expiry DateApril 25, 2014 1,290,500 1,290,500 1.20 April 25, 2019June 26, 201417,500 17,500 0.88 June 26, 2019December 22, 201460,000 60,000 0.87 December 22, 2019June 8, 20151,167,500 1,167,500 0.66 June 8, 2020October 18, 20161,239,500 1,239,500 1.30 October 18, 2021August 28, 2017*1,472,500 1,460,000 1.20 August 28, 2022Total5,247,500 5,235,000 *25,000 Options granted for investor relations services vest 25% every 3 months from the date of grant.
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
14. CAPITAL STOCK (Continued)
Restricted share units (continued)
The total RSU share-based expense recognized in the consolidated statements of comprehensive loss was $27,575 for the
year ended December 31, 2017. The RSU’s had a a fair value of $1.01 per unit on grant date.
Share-based Payments
During the year ended December 31, 2017, the Company recorded aggregate share-based payments of $1,415,639 (2016 -
$970,796; 2015 - $542,513) as they relate to the fair value of stock options granted or vested during the period, fair value of
incentive stock grants, the fair value of RSU’s vested during the period, and the accrual for the fair value of stock granted.
Share-based payments for the years ended December 31, 2017, 2016, and 2015 are allocated to expense accounts as follow:
The weighted average fair value of the stock options granted during the year ended December 31, 2017 was $0.70 per stock
option (2016 - $0.74; 2015 - $0.36). The fair value of stock options granted was estimated using the Black-Scholes option
pricing model with weighted average assumptions as follows:
6
Expiry DateDecember 31, 2016GrantedVested Expired/CancelledDecember 31, 2017December 31, 2019- 312,500 - - 312,500 Year ended December 31, 2017General and Administrative ExpensesExploration ExpendituresTotalShares issued for services85,500$ 272,990$ 358,490$ Commitment to issue shares- 23,825 23,825 RSU's vested27,575 - 27,575 Fair value of stock options granted562,979 442,770 1,005,749 676,054$ 739,585$ 1,415,639$ Year ended December 31, 2016General and Administrative ExpensesExploration ExpendituresTotalCommitment to issue shares27,462$ -$ 27,462$ Fair value of stock options granted440,477 502,857 943,334 467,939$ 502,857$ 970,796$ Year ended December 31, 2015General and Administrative ExpensesExploration ExpendituresTotalCommitment to issue shares100,233$ (34,144)$ 66,089$ Fair value of stock options granted369,883 106,541 476,424 100,233$ (34,144)$ 542,513$ Year endedYear endedYear endedDecember 31, 2017December 31, 2016December 31, 2015Risk free interest rate1.53%0.73%1.02%Expected life (years)5 5 5 Expected volatility70.81%69.80%62.33%Dividend yield- - -
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
14. CAPITAL STOCK (Continued)
Warrants
During the years ended December 31, 2017, 2016, and 2015, the change in warrants outstanding is as follow:
The following table summarizes information about the warrants which were outstanding and exercisable at December 31,
2017:
15. INCOME TAXES
Deferred Income Tax Liability
The tax effects of temporary differences between amounts recorded in the Company’s accounts and the corresponding
amounts as computed for income tax purposes gives rise to deferred tax liabities as follows:
As at December 31, 2017, no deferred tax assets are recognized on the following temporary differences as it is not probable
that sufficient future taxable profit will be available to realize such assets:
Income Tax Expense
7
NumberWeighted Average Exercise PriceBalance as at December 31, 2014 9,175,533 4.56$ Expired(9,175,533) 4.56 Balance as at December 31, 2015 and 2016- - Issued2,623,306 2.00 Balance as at December 31, 20172,623,306 2.00$ Number of WarrantsExercise PriceExpiry DatePrivate placement, April 12, 20172,500,004 2.00$ April 12, 2019Finders warrants, April 12, 2017123,302 2.00$ April 12, 2019Total2,623,306 December 31, 2017December 31, 2016December 31, 2015Royalty interest(4,159,013)$ (8,090,497)$ (9,053,435)$ Tax loss carryforwards2,261,886 3,212,368 2,433,008 Other76,820 124,805 118,541 (1,820,307)$ (4,753,324)$ (6,501,886)$ December 31, 2017December 31, 2016December 31, 2015Expiry Date RangeTax loss carry forwards42,094,000$ 39,318,000$ 37,728,000$ 2026-2037Exploration and evaluation assets1,485,000 2,137,000 10,022,960 No expiryOther10,425,000$ 11,371,000$ 8,385,770$ No expiryDecember 31, 2017December 31, 2016December 31, 2015Current tax expense-$ -$ -$ Deferred tax recovery (2,489,902) (1,439,332) (3,431,230) (2,489,902)$ (1,439,332)$ (3,431,230)$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
15. INCOME TAXES (Continued)
The provision for income taxes differs from the amount calculated using the Canadian federal and provincial statutory income
tax rates of 27.00% (2016 – 26%; 2015 – 26.00%) as follows:
In September 2017, the British Columbia (BC) Government proposed changes to the general corporate income tax rate to
increase the rate from 11% to 12% effective January 1, 2018 and onwards. This change in tax rate was substantively enacted
on October 26, 2017. The relevant deferred tax balances have been remeasured to reflect the increase in the Company's
combined Federal and Provincial (BC) general corporate income tax rate from 26% to 27%.
In December 2017, the United States Government proposed changes to the Federal corporate income tax rate to reduce the
rate from 35% to 21% effective January 1, 2018 and onwards. This change in tax rate was substantively enacted on December
22, 2017. The relevant deferred tax balances have been remeasured to reflect the decrease in the Company's Federal income
tax rate from 35% to 21% applicable to the Company's US subsidiaries.
16. RELATED PARTY TRANSACTIONS
The aggregate value of transactions and outstanding balances relating to key management personnel were as follows:
8
December 31, 2017December 31, 2016December 31, 2015Expected income tax (recovery)(2,569,654)$ (886,149)$ (2,679,842)$ Effect of lower tax rates in foreign jurisdictions(1,534,592) (474,971) (2,393,803) Permanent differences1,007,427 1,010,562 2,594,459 Change in unrecognized deductible temporary differences and other260,595 (1,428,442) (60,006) Foreign exchange346,322 339,668 (892,038) (2,489,902)$ (1,439,332)$ (3,431,230)$ Share-basedFor the year ended December 31, 2017Salary or FeesPaymentsTotalManagement733,244$ 361,865$ 1,095,109$ Outside directors *149,882 226,614 376,496 Seabord Services Corp. 357,600 - 357,600 Total1,240,726$ 588,479$ 1,829,205$ Share-basedFor the year ended December 31, 2016Salary or FeesPaymentsTotalManagement803,033$ 215,933$ 1,018,966$ Outside directors *151,228 167,534.00 318,762 Seabord Services Corp. 357,600 - 357,600 Total1,311,861$ 383,467$ 1,695,328$ Share-basedFor the year ended December 31, 2015Salary or FeesPaymentsTotalManagement1,067,210$ 108,637$ 1,175,847$ Outside directors *158,257 79,898 238,155 Seabord Services Corp. 413,700 - 413,700 Total1,639,167$ 188,535$ 1,827,702$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
* Directors fees include US$5,000 per month paid to the Company’s non-Executive Chairman, who does not receive the fees
paid to the other independent director’s.
16. RELATED PARTY TRANSACTIONS (Continued)
Seabord Services Corp. (“Seabord”) is a management services company controlled by the Chairman of the Board of Directors
of the Company. Seabord provides a Chief Financial Officer, a Corporate Secretary, accounting and administration staff, and
office space to the Company. The Chief Financial Officer and Corporate Secretary are employees of Seabord and are not paid
directly by the Company.
Included in the table above for the year ended December 31, 2015 is $247,660 in termination payments to a former officer
of the Company. The amount has been included in Other expenses for that year.
Included in accounts payable and accrued liabilities at December 31, 2017 is $7,177 (2016 - $5,913) owed to key management
personnel and $23,568 (2016 - $17,559) to other related parties. By way of a common director, included in Notes receivable
(Note 7) are certain balances owing from a related party.
17. SEGMENTED INFORMATION
The Company operates within the resource industry. At December 31, 2017 and 2016, the Company had equipment and
exploration and evaluation assets located geographically as follows:
The Company’s royalty interest, goodwill, deferred income tax liability and royalty income and depletion are from a CGU
located in the U.S.A, except for a $200,000 royalty interest held in Serbia.
18. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS
The Company considers items included in shareholders’ equity as capital. The Company’s objective when managing capital
is to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders.
As at December 31, 2017, the Company had working capital of $6,535,893 (2016 - $6,002,318). The Company has continuing
royalty income that will vary depending on royalty ounces received, the price of gold, and foreign exchange rates on US
royalty payments. The Company manages the capital structure and makes adjustments in light of changes in economic
conditions and the risk characteristics of the underlying assets. The Company estimates it will need additional financing
within the next 12 months to undertake it’s current business plan. In order to maintain or adjust the capital structure, the
9
EXPLORATION AND EVALUATION ASSETSDecember 31, 2017December 31, 2016Asia Pacific-$ 81,124$ Sweden437,755 437,755 Turkey232,547 232,547 U.S.A1,171,664 1,393,574 Total1,841,966$ 2,145,000$ PROPERTY AND EQUIPMENTDecember 31, 2017December 31, 2016Asia Pacific-$ 8,376$ Haiti- - Sweden26,159 3,110 Turkey- 1,091 U.S.A424,119 459,127 Total450,278$ 471,704$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
Company may issue new shares through public and/or private placements, sell assets, or return capital to shareholders. The
Company is not subject to externally imposed capital requirements.
18. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS (Continued)
Fair Value
The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the
degree to which they are observable. The three levels of the fair value hierarchy are as follows:
•
•
•
Level 1: inputs represent quoted prices in active markets for identical assets or liabilities. Active markets are those
in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: inputs other than quoted prices that are observable, either directly or indirectly. Level 2 valuations are based
on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can
be observed or corroborated in the market place.
Level 3: inputs that are less observable, unavoidable or where the observable data does not support the majority of
the instruments’ fair value.
As at December 31, 2017, there were no changes in the levels in comparison to December 31, 2016. Financial instruments
measured at fair value on the statement of financial position are summarized in levels of the fair value hierarchy as follows:
The carrying value of receivables (excluding the receivable related to the sale of certain Turkish subsidiaries in the year ended
December 31, 2016), notes receivable, accounts payable and accrued liabilities, and advances from joint venture partners
approximate their fair value because of the short-term nature of these instruments.
Accounts receivable, including both long and current portions related to the sale of certain Turkish subsidiaries in the year
ended December 31, 2016 were valued using a pricing model which require a variety of inputs, such as expected gold prices
and foreign exchange rates. Included in the calculation for the year ended December 31, 2017, the Company used a long
term gold price of US$ 1,332 per ounce and a discount rate of 6%. These receivables are valued using observable market
commodity prices and thereby classified within Level 2 of the fair value hierarchy.
The Company’s financial instruments are exposed to certain financial risks, including credit risk, interest rate risk, market risk,
liquidity risk and currency risk.
Credit Risk
The Company is exposed to credit risk by holding cash and cash equivalents and receivables. This risk is minimized by holding
a significant portion of the funds in Canadian banks. The Company’s exposure with respect to its receivables is primarily
related to royalty streams, recovery of exploration evaluation costs, and the sale of AES (Note 9).
Interest Rate Risk
The Company is exposed to interest rate risk because of fluctuating interest rates. Management believes the interest rate
risk is low given interest rates on promissory notes is fixed and the current low global interest rate environment. Fluctuations
10
AssetsLevel 1Level 2Level 3TotalCash and cash equivalents3,533,611$ -$ -$ 3,533,611$ Restricted cash771,434 - - 771,434 Fair value through profit or loss investments 1,139,447 - - 1,139,447 Strategic investments 2,199,199 - - 2,199,199 Accounts receivable - 3,376,411 - 3,376,411 Total7,643,691$ 3,376,411$ -$ 11,020,102$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
in market rates is not expected to have a significant impact on the Company’s operations due to the short term to maturity
and no penalty cashable feature of its cash equivalents.
18. RISK AND CAPITAL MANAGEMENT: FINANCIAL INSTRUMENTS (Continued)
Market Risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities and
other company investments. The Company has no control over these fluctuations and does not hedge its investments. Based
on the December 31, 2017 portfolio values, a 10% increase or decrease in effective market values would increase or decrease
net shareholders’ equity by approximately $334,000.
Liquidity Risk
Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages
this risk by careful management of its working capital to ensure the Company’s expenditures will not exceed available
resources.
Commodity Risk
The Company’s royalty revenues are derived from a royalty interest and are based on the extraction and sale of precious and
base minerals and metals. Factors beyond the control of the Company may affect the marketability of metals discovered.
Metal prices have historically fluctuated widely. Consequently, the economic viability of the Company’s royalty interests
cannot be accurately predicted and may be adversely affected by fluctuations in mineral prices.
Currency Risk
Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The Company operates in Canada, Turkey, Sweden, Australia and the
U.S.A. The Company funds cash calls to its subsidiary companies outside of Canada in US dollars and a portion of its
expenditures are also incurred in local currencies.
The exposure of the Company’s cash and cash equivalents, restricted cash, receivables, convertible notes receivable, and
accounts payable and accrued liabilities to foreign exchange risk as at December 31, 2017 is as follows:
The balances noted above reflect the US dollar balances held within the parent company and any wholly owned subsidiaries.
Balances denominated in another currency other than the functional currency held in foreign operations are considered
immaterial.
Based on the above net exposure as at December 31, 2017, and assuming that all other variables remain constant, a 10%
depreciation or appreciation of the Canadian dollar against the US dollar would result in an increase/decrease of
approximately $534,000 in the Company’s pre-tax profit or loss.
11
AccountsUS dollarsCash and cash equivalents2,286,117$ Restricted cash615,636 Receivables2,442,545 Accounts payable and accrued liabilities(446,604) Advances from joint venture partners(644,497) Net exposure4,253,198 Canadian dollar equivalent5,338,027$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
19. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
The significant non-cash investing and financing transactions during the year ended December 31, 2017 included:
a. Recorded a gain through accumulated other comprehensive income of $609,733 related to the fair value
adjustments on AFS financial instruments;
b. Adjusted non-current assets and liabilities for $1,424,814 related to cumulative translation adjustments (“CTA”), of
which $1,605,133 relates to CTA loss on royalty interest, $223,778 relates to CTA loss on goodwill, $443,115 relates
to a CTA gain on deferred tax liability and $39,018 relates to CTA loss in the net assets of a subsidiary with a functional
currency different from the presentation currency;
c. Reclass of reserves on exercise of options for $45,545;
d. Recorded the movement of $1,017,540 from a convertible loan to an investment in associated company upon
conversion of the loan (Note 8); and
e. Recorded through reserves $39,457 related to the value of warrants issued as finders fees as part of a private
placement (Note 14).
The significant non-cash investing and financing transactions during the year ended December 31, 2016 included:
a. Recorded a gain through accumulated other comprehensive income of $88,515 related to the fair value adjustments
on AFS financial instruments;
Issuance of 140,000 incentive stock grants valued at $166,600 applied to commitment to issue shares;
b.
c. Adjusted reserves and investment in associated companies for $366,800 related to share-based payments made by
an associated company;
d. Adjusted non-current assets and liabilities for $862,335 related to cumulative translation adjustments (“CTA”), of
which $949,607 relates to CTA loss on royalty interest, $230,234 relates to CTA loss on goodwill, $309,230 relates to
a CTA gain on deferred tax liability and $8,276 relates to CTA gain in the net assets of a subsidiary with a functional
currency different from the presentation currency; and
e. Recorded the movement of $1,605,466 from a convertible loan to an investment in associated company upon
conversion of the loan (Note 8).
The significant non-cash investing and financing transactions during the year ended December 31, 2015 included:
a. Recorded a loss through accumulated other comprehensive income of $105,714 related to the fair value adjustments
on available-for-sale (“AFS”) financial instruments;
Issuance of 163,000 bonus shares valued at $233,950 applied to commitment to issue shares;
b.
c. Adjusted reserves and investment in associated companies for $322,900 related to share-based payments made by
an associated company; and
d. Adjusted non-current assets and liabilities for $4,350,667 related to cumulative translation adjustments (“CTA”), of
which $5,161,567, relates to CTA gain on royalty interest, $1,331,949 relates to CTA gain on goodwill, $1,715,574
relates to a CTA loss on deferred tax liability and $427,275 relates to a CTA loss in the net liabilities of a subsidiary
with a functional currency different from the presentation currency.
12
December 31, 2017December 31, 2016December 31, 2015Cash3,354,109$ 3,132,480$ 5,365,271$ Short-term deposits179,502 67,206 269,330 Total3,533,611$ 3,199,686$ 5,634,601$
EMX ROYALTY CORPORATION (FORMERLY EURASIAN MINERALS INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Year Ended December 31, 2017
20. EVENTS SUBSEQUENT TO THE REPORTING DATE
Subsequent to the year ended December 31, 2017, the Company,
Sweden
a) executed a definitive agreement for the sale of the Guldgruvan cobalt project to Boreal Energy Metals Corporation
(“BEMC”), subsidiary of BMC in southern Norway. Pursuant to the agreement, BEMC will acquire 100% interest in the
project according to the following terms (all dollar amounts in USD):
• At closing, BEMC will issue to EMX that number of common shares of BEMC that represents a 5.9% equity ownership
in BEMC. BEMC will have the continuing obligation to issue additional shares of BEMC to EMX to maintain its 5.9%
interest, at no additional cost to EMX, until BEMC has raised $3,000,000 in equity. Thereafter, EMX will have the
right to participate pro-rata in future financings at its own cost to maintain its 5.9% interest in BEMC.
• At closing, EMX will transfer its Guldgruvan exploration licenses to BEMC.
•
EMX will retain a 3% NSR royalty on the Project, of which 1% may be purchased by BEMC on or before the fifth
anniversary of the closing date in 0.5% increments for a total of $2,500,000 in cash and common shares of BEMC
stock.
EMX will receive AAR payments, with an initial $20,000 payment, commencing on the second anniversary of the
closing, with each subsequent AAR payment increasing by $5,000 per year until reaching $60,000 per year. Once
reaching $60,000, AAR payments will be adjusted each year according to the Consumer Price Index (as published by
the U.S. Department of Labor, Bureau of Labor Statistics).
•
b) amended the sale agreement with BMC (Note 9) to include the Modum project in Norway in exchange for an additional
1,324,181 common shares of BMC. EMX now holds 10,530,063 common shares of BMC representing 19.9% of the
outstanding common shares.
Buckhorn Creek Property
c) executed an Option Agreement with Kennecott whereby Kennecott can earn a 100% interest in the project by: a) making
annual option payments totaling US$550,000, and b) completing US$4,500,000 in exploration expenditures before the
fifth anniversary of the agreement. Upon exercise of the option, EMX will retain a 2% NSR royalty on the project which
is not capped or purchasable. After exercise of the option, annual advance minimum payments and milestone payments
will be due to EMX.
Turkey
d) received a payment of US$665,525 on February 5, 2018, as the cash equivalent to the third 500 ounce gold bullion
payment to be made under the terms of the agreement (Note 10).
13
CERTIFICATION
I, David M. Cole, certify that:
1. I have reviewed this annual report on Form 20-F of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) (the
"Company");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the
periods presented in this report;
4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) tor the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the company's internal control over financial reporting.
Date: April 3, 2018
/s/ David M. Cole
David M. Cole
President and Chief Executive Officer
33
CERTIFICATION
I, Christina Cepeliauskas, certify that:
1. I have reviewed this annual report on Form 20-F of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) (the
"Company");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the
periods presented in this report;
4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) tor the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and
5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the Company's internal control over financial reporting.
Date: April 3, 2018
/s/ Christina Cepeliauskas
Christina Cepeliauskas
Chief Financial Officer
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF
TITLE 18, UNITED STATES CODE)
In connection with the annual report of EMX Royalty Corporation, formerly Eurasian Minerals Inc. (the "Company") on
Form 20-F for the fiscal year ending December 31, 2017 (the “Report”) I, David M. Cole, Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operation of the Company.
Date: April 3, 2018
/s/ David M. Cole
David M. Cole
President and Chief Executive Officer
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF
TITLE 18, UNITED STATES CODE)
In connection with the annual report of EMX Royalty Corporation, formerly Eurasian Minerals Inc. (the "Company") on
Form 20-F for the fiscal year ending December 31, 2017 (the “Report”) I, Christina Cepeliauskas, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operation of the Company.
Date: April 3, 2018
/s/ Christina Cepeliauskas
Christina Cepeliauskas
Chief Financial Officer
CONSENT OF ERIC P. JENSEN
In connection with the filing of the annual report on Form 20-F for the year ended December 31, 2017 (the “Annual
Report”) of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) with the U.S. Securities and Exchange
Commission, I hereby consent to the references to my name in the Annual Report.
Dated: April 3, 2018
/s/ Eric P. Jensen
Eric P. Jensen
CONSENT OF DEAN D. TURNER
In connection with the filing of the annual report on Form 20-F for the year ended December 31, 2017 (the “Annual
Report”) of EMX Royalty Corporation (formerly Eurasian Minerals Inc.) with the U.S. Securities and Exchange
Commission, I hereby consent to the references to my name in the Annual Report.
Dated: April 3, 2018
/s/ Dean D. Turner
Dean D. Turner
CONSENT OF PHIL NEWALL
In connection with the filing of the annual report on Form 20-F (the “Annual Report”) of EMX Royalty
Corporation (formerly Eurasian Minerals Inc.) with the U.S. Securities and Exchange Commission, I hereby
consent to the references to my name and to the use of the technical report entitled “Technical Report on the
Initial Mineral Resource Estimate for the Malmyzh Copper-Gold Project, Khabarovsk Krai, Russian Federation,”
dated July 10, 2015, and the information derived from such report, included in the Annual Information Form of
the Company for the year ended December 31, 2017, which is filed as an exhibit to, and incorporated by reference
into, the Annual Report.
Dated: April 3, 2018
/s/ Phil Newall
Phil Newall
Exhibit 15.4
CHARTER
FOR
THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
I. MANDATE
The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of EMX Royalty Corporation (the
“Company”) shall assist the Board in fulfilling its financial oversight responsibilities by overseeing the accounting and
financial reporting processes of the Company and the audits of the financial statements of the Company. The Committee’s
primary duties and responsibilities under this mandate are to serve as an independent and objective party to monitor:
1.
2.
3.
4.
II.
A.
The quality and integrity of the Company’s financial statements and other financial information;
The compliance of such statements and information with legal and regulatory requirements;
The qualifications and independence of the Company’s independent external auditor (the “Auditor”); and
The performance of the Company’s internal accounting procedures and Auditor.
STRUCTURE AND OPERATIONS
Composition
The Committee shall be comprised of at least three members, each of whom is a director of the Company who meets the
independence, financial literacy and other requirements set out below.
B.
Qualifications
Each member of the Committee must meet the independence requirements of all applicable Canadian and United States
securities laws and stock exchange rules (collectively, the “AC Rules”) unless an exemption is available.
No member of the Committee may, other than in his or her capacity as a member of the Committee, the Board, or any other
committee of the Board, accept directly or indirectly any consulting, advisory, or other “compensatory fee” (as such term is
defined under applicable AC Rules) from, or be an “affiliated person”2 (as such term is defined under applicable AC Rules) of,
the Company or any subsidiary of the Company unless an exemption or exception under applicable AC Rules is available.
A member of the Committee must not have participated in the preparation of the financial statements of the Company or any
current subsidiary of the Company at any time during the past three years unless an exemption or exception under applicable
AC Rules is available.
2
Each member of the Committee must be able to read and understand fundamental financial statements, including the
Company’s balance sheet, income statement, and cash flow statement.
At least one member of the Committee must be “financially sophisticated” in that he or she has past employment experience
in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background
which results in the individual’s financial sophistication, including but not limited to being or having been a chief executive
officer, chief financial officer, other senior officer with financial oversight responsibilities. An “audit committee financial
expert” (as such term is defined under Item 407(d)(5)(ii) and (ii) of Regulation S-K) is presumed to qualify as financially
sophisticated.
C.
Appointment and Removal
In accordance with the Company’s Articles, the members of the Committee shall be appointed by the Board and shall serve
until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. Any member
of the Committee may be removed, with or without cause, by a majority vote of the Board.
D.
Chair
Unless the Board shall appoint a Chair, the members of the Committee shall designate a Chair by the majority vote of all of the
members of the Committee. The Chair shall call, set the agendas for, and chair all meetings of, the Committee.
E.
Sub-Committees
The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate,
including the authority to grant pre-approvals of audit and permitted non-audit services, provided that a decision of such
subcommittee to grant a pre-approval shall be presented to the full Committee at its next scheduled meeting.
F.
Meetings
The Committee shall meet as often as is necessary to fulfil its duties respecting the Company’s quarterly and annual financial
statements but not less than on a quarterly basis as provided in this Charter. The Committee should meet with the Auditor and
management annually to review the Company’s financial statements in a manner consistent with, and to discharge its duties
under, Section III of this Charter.
The Auditor shall be given reasonable notice of, and be entitled to attend and speak at, each meeting of the Committee
concerning the Company’s annual financial statements and, if the Committee feels it is necessary or appropriate, at every other
meeting. On request by the Auditor, the Chair shall call a meeting of the Committee to consider any matter that the Auditor
believes should be brought to the attention of the Committee, the Board or the shareholders of the Company.
At each meeting, a quorum shall consist of a majority of the members comprising the Committee.
As part of its goal to foster open communication, the Committee may periodically meet separately with each of management
and the Auditor to discuss any matters that the Committee believes would be appropriate to discuss privately.
The Committee may invite to its meetings any director, any manager of the Company, and any other person whom it deems
appropriate to consult in order to carry out its responsibilities. The Committee may also exclude from its meetings any person
it deems appropriate to exclude in order to carry out its responsibilities.
III.
DUTIES
A.
Introduction
The following functions shall be the common recurring duties of the Committee in carrying out its purposes outlined in Section
I of this Charter. These duties should serve as a guide with the understanding that the Committee may fulfill additional duties
and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory or
other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from
time to time related to the purposes of the Committee outlined in Section I of this Charter.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern which
the Committee in its sole discretion deems appropriate for study or investigation by the Committee.
The Committee shall be given full access to the Company’s internal accounting staff, managers, other staff and Auditor as
necessary to carry out these duties. While acting within the scope of its stated purpose, the Committee shall have all the
authority of, but shall remain subject to, the Board. Notwithstanding the foregoing, the Committee is directly responsible for
the appointment, compensation, retention and oversight of the work of the Auditor and any other registered public accounting
firm engaged for the purpose of preparing or issuing an audit or performing other audit, review or attest services for the
Company.
The Company must provide appropriate funding, as determined by the Committee, for payment of (i) compensation to any
registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Company, (ii) compensation to any independent counsel or other advisors employed by the
Committee, and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out the
Committee’s duties.
B.
Powers and Responsibilities
The Committee will have the following responsibilities and, in order to perform and discharge these responsibilities, will be
vested with the powers and authorities set forth below, namely, the Committee shall:
Independence of Auditor
1).
2).
3).
4).
Actively engage in a dialogue with the Auditor with respect to any disclosed relationships or services that may impact
the objectivity and independence of the Auditor and, obtain a formal written statement from the Auditor setting forth
all relationships between the Auditor and the Company.
Take, or recommend that the Board take, appropriate action to oversee the independence of the Auditor.
Require the Auditor and any other registered public accounting firm engaged for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services for the Company to report directly to the Committee.
Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees
of the Auditor and former independent external auditor of the Company.
Performance & Completion by Auditor of its Work
5).
6).
7).
Be directly responsible for the appointment, compensation, retention and oversight of the work of the Auditor and any
other registered public accounting firm engaged (including resolution of disagreements between management and the
Auditor or such public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for the Company.
Review annually the performance of the Auditor, and either appoint a new Auditor or recommend to shareholders that
the existing Auditor be re-elected.
Pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be
performed for the Company by the Auditor; provided, however, that pre-approval of services other than audit, review
or attest services is not required if such services:
(a)
constitute, in the aggregate, no more than 5% of the total amount of revenues paid by the Company to the
Auditor during the fiscal year in which the services are provided;
(b)
were not recognized by the Company at the time of the engagement to be non-audit services; and
(c)
are promptly brought to the attention of the Committee and approved prior to the completion of the audit by
the Committee or by one or more members of the Committee to whom authority to grant such approvals has
been delegated by the Committee.
Preparation of Financial Statements
8).
9).
10).
11).
Discuss with management and the Auditor significant financial reporting issues and judgments made in connection
with the preparation of the Company’s financial statements, including any significant changes in the Company’s
selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal
controls and any special steps adopted in light of material control deficiencies.
Discuss with management and the Auditor any correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material issues regarding the Company’s financial statements
or accounting policies.
Discuss with management and the Auditor the effect of regulatory and accounting initiatives as well as off-balance
sheet structures on the Company’s financial statements.
Discuss with management the Company’s major financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Company’s risk assessment and risk management policies.
12).
Discuss with the Auditor the matters required to be discussed relating to the conduct of any audit, in particular:
a)
b)
The adoption of, or changes to, the Company’s significant auditing and accounting principles and practices
as suggested by the Auditor or management.
Any difficulties encountered in the course of the audit work, including any restrictions on the scope of
activities or access to requested information, and any significant disagreements with management.
Public Disclosure by the Company
13).
14).
15).
Review the Company’s annual and quarterly financial statements, management discussion and analysis (MD&A) and
press releases respecting earnings before the Board approves and the Company publicly discloses this information.
Review the Company’s financial reporting procedures and internal controls to be satisfied that adequate procedures
are in place for the review of the Company’s public disclosure of financial information extracted or derived from its
financial statements, other than disclosure described in the previous paragraph, and periodically assessing the
adequacy of those procedures.
Review any disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer
during their certification process of the Company’s financial statements and public disclosure about any significant
deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the Company’s internal controls.
Related Party Transactions
16).
Review and approve related party transactions if required under applicable AC Rules.
Manner of Carrying Out its Mandate
17).
18).
19).
Consult, to the extent it deems necessary or appropriate, with the Auditor but without the presence of management,
about the quality of the Company’s accounting principles, internal controls and the completeness and accuracy of the
Company’s financial statements.
Request any officer or employee of the Company or the Company’s outside counsel or Auditor to attend a meeting of
the Committee or to meet with any members of, or consultants to, the Committee.
Have the authority, if it deems it necessary or appropriate, to engage independent legal counsel, and accounting or
other advisers to advise the Committee.
20). Meet separately, if it deems it necessary or appropriate, with management and the Auditor.
21). Make periodic reports to the Board as is necessary or required.
22).
Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for
approval.
23).
Annually review the Committee’s own performance.
24).
Provide an open avenue of communication between the Auditor and the Board.
25).
Not delegate these responsibilities other than to one or more independent members of the Committee the authority to
pre-approve, which the Committee must ratify at its next meeting, audit and permitted non-audit services to be
provided by the Auditor.
C.
Whistle-Blower Policy
The Committee shall establish and annually review the procedures for (i) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential,
anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
D.
Limitation of Audit Committee’s Role
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities
of management and the Auditor.
This Charter, as amended, was approved by the Board of Directors on March 27, 2017.