Consolidated Financial Statements
For the years ended
December 31, 2017 and 2016
Principal and Registered Office
Suite 910 – 850 West Hastings Street
Vancouver BC
V6C 1E1
T: (604) 248-8648
T: (855) 240-3727 (toll free)
F: (604) 248-8663
E: info@evrimresources.com
Chief Executive Officer and Director
J. Patrick Nicol
Non-Executive Directors
Paul van Eeden
David A. Caulfield
John Thompson
Transfer Agent
Computershare
3rd Floor 510 Burrard Street
Vancouver BC
V6C 3B9
(604) 661-9452
Legal Counsel
Osler, Hoskin & Harcourt LLP
Suite 1700 Guinness Tower 1150 West Hastings Street
Vancouver BC
V6E 2E9
(604) 692-2760
Auditor
Smythe LLP
7th Floor 355 Burrard Street
Vancouver BC
V6C 2G8
(604) 687-1231
Listing
TSX Venture Exchange: EVM
Shares Outstanding: 77,997,042 (April 17, 2018)
2
Table of Contents
Evrim Resources Corp.
INDEPENDENT AUDITORS’ REPORT .................................................................................. 4
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ............................................... 5
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS ....................... 6
CONSOLIDATED STATEMENTS OF CASH FLOWS ............................................................ 7
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY ................ 8
1. NATURE OF OPERATIONS AND GOING CONCERN ...................................................... 9
2. STATEMENT OF COMPLIANCE ....................................................................................... 9
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................ 10
4. CAPITAL MANAGEMENT ................................................................................................ 19
5. MARKETABLE SECURITIES ........................................................................................... 20
6. AMOUNTS RECEIVABLE ................................................................................................ 20
7. EQUIPMENT .................................................................................................................... 21
8. MINERAL PROPERTY INTERESTS ................................................................................ 22
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ..................................................... 29
10. PROVISION FOR ENVIRONMENTAL REHABILITATION ............................................. 29
11. COMMITMENTS AND CONTINGENCIES ..................................................................... 30
12. ISSUED CAPITAL .......................................................................................................... 31
13. INCOME TAXES ............................................................................................................ 35
14. RELATED PARTY TRANSACTIONS ............................................................................. 37
15. SEGMENTED INFORMATION ....................................................................................... 38
16. FINANCIAL RISK MANAGEMENT ................................................................................. 38
17. SUBSEQUENT EVENT .................................................................................................. 42
3
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF EVRIM RESOURCES CORP.
We have audited the accompanying consolidated financial statements of Evrim Resources Corp., which
comprise the consolidated statements of financial position as at December 31, 2017 and 2016 and the
consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows
for the years then ended, and a summary of significant accounting policies and other explanatory
information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards 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. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Evrim Resources Corp. as at December 31, 2017 and 2016, and its financial performance and
its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without qualifying our opinion, we draw your attention to note 1 in the consolidated financial statements,
which describes matters and conditions that indicate the existence of material uncertainties that may cast
significant doubt about the Company’s ability to continue as a going concern.
Chartered Professional Accountants
Vancouver, British Columbia
April 17, 2018
4
Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver7th Floor 355 Burrard StVancouver, BC V6C 2G8T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
Note
December 31,
2017
December 31,
2016
Assets
Current assets
Cash and cash equivalents
Marketable securities
Amounts receivable
Prepaid expenses and deposits
Non-current assets
Prepaid rent deposit
Equipment
Reclamation bond
Liabilities and Shareholders’ Equity
Liabilities
Current liabilities
$
8
5
6, 14
11
7
8
$
Accounts payable and accrued liabilities
Joint venture partner deposits
$
9, 14
8
Non-current liabilities
Provision for environmental rehabilitation
Shareholders’ Equity
Issued capital
Contributed surplus
Accumulated other comprehensive loss
Accumulated deficit
10
12
6,283,430
45,000
79,329
9,562
6,417,321
11,208
37,141
30,500
6,496,170
135,790
2,930,256
3,066,046
46,224
3,112,270
$
$
$
$
1,494,244
-
64,762
12,633
1,571,639
11,208
28,260
20,000
1,631,107
67,271
-
67,271
27,919
95,190
12,314,112
16,851
-
(10,795,046)
1,535,917
1,631,107
16,099,827
626,200
(5,000)
(13,337,127)
3,383,900
6,496,170
$
Approved and authorized for issue by the Board on April 17, 2018
Paul van Eeden
Director
David A. Caulfield
Director
The accompanying notes are an integral part of these consolidated financial statements
5
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Years Ended December 31,
(Expressed in Canadian Dollars)
Mineral Property Operations
Revenue
Option proceeds
Project management fees
Expenses
Acquisition expenditures
Exploration expenditures
Exploration reimbursements
Exploration tax recovery
Government grant
Provision for environmental rehabilitation
Note
2017
2016
$
8
8
181,115 $
55,629
236,744
131,270
5,090
136,360
14(b)
8
8
10
154,488
2,007,620
(1,154,001)
(27,460)
(153,000)
18,305
845,952
93,347
825,915
(50,902)
(13,191)
-
-
855,169
Loss from mineral property operations
(609,208)
(718,809)
Other operations
Interest and other revenue
Expenses
Accounting and legal
Depreciation
Foreign exchange loss
Gain on sale of equipment
General and administrative
Investor services
Management and professional fees
Marketing services
Salaries and support services
Share-based compensation
Travel
Loss from other operations
Net loss
Other Comprehensive Income
Items that will be recycled to profit or loss:
Loss on available-for-sale investment
Comprehensive loss for the year
Basic and diluted loss per share
7
14(b)
14(b)
12(b),14(c)
21,802
21,480
156,156
16,849
113,840
-
197,864
31,126
116,500
47,717
879,707
283,858
111,058
1,954,675
72,252
15,960
34,683
(10,156)
185,322
19,884
114,000
26,029
598,802
-
84,925
1,141,701
(1,932,873)
(2,542,081)
(1,120,221)
(1,839,030)
(5,000)
-
$
$
(2,547,081) $
(1,839,030)
(0.04) $
(0.04)
Weighted average number of common shares
outstanding
59,474,226
50,738,877
The accompanying notes are an integral part of these consolidated financial statements
6
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Expressed in Canadian Dollars)
Cash flows used in operating activities
Net loss
Add (deduct) items not involving cash:
Shares received as option payment
Loss on available-for-sale-investment
Depreciation
Gain on sale of equipment
Unrealized foreign exchange loss
Provision for environmental rehabilitation
Shares issued for mineral property interest
Share-based compensation
Net change in non-cash working capital balances related to
operations:
Amounts receivable
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Joint venture partner deposits
Net cash flow provided by (used in) operating activities
Cash flows used in investing activities
Reclamation bond
Purchase of equipment
Proceeds on disposition of equipment
Net cash flow used in investing activities
Cash flows provided by financing activities
Proceeds from private placement
Proceeds from exercise of warrants
Payment of share issue costs
Net cash flow provided by financing activities
Effects of foreign currency translation on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents are comprised of:
Cash
Cash restricted for exploration
Short-term money market instruments
Supplemental cash flow information:
Interest received
2017
2016
$
(2,547,081)
$
(1,839,030)
(50,000)
5,000
16,849
-
33,495
18,305
49,875
283,858
(2,189,699)
(14,567)
3,071
68,519
2,930,256
797,580
(10,500)
(25,730)
-
(36,230)
4,304,928
864
(244,461)
4,061,331
(33,495)
4,789,186
1,494,244
6,283,430
782,462
2,930,256
2,570,712
6,283,430
25,644
$
$
$
$
$
$
$
$
-
-
15,960
(10,156)
(8,394)
-
-
-
(1,841,620)
38,925
19,318
(78,690)
(123,291)
(1,985,358)
12,456
(26,512)
12,500
(1,556)
-
81,778
(1,388)
80,390
8,817
(1,897,707)
3,391,951
1,494,244
106,515
-
1,387,729
1,494,244
8,648
The accompanying notes are an integral part of these consolidated financial statements
7
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years Ended December 31,
(Expressed in Canadian Dollars)
Issued capital
Shares
50,484,802
Amount
$ 12,193,992
681,480
-
121,508
(1,388)
Contributed
surplus
$ 56,581
(39,730)
-
51,166,282
12,314,112
16,851
14,349,760
7,200
200,000
-
-
-
65,723,242
4,017,933
1,306
49,875
(283,399)
-
-
$ 16,099,827
286,995
(422)
-
38,938
283,858
-
$ 626,200
Accumulated
other
comprehensive
loss
$ -
Accumulated
deficit
$ (8,956,016)
Shareholders’
equity
$ 3,294,557
-
-
-
-
-
(1,839,030)
(10,795,046)
81,778
(1,388)
(1,839,030)
1,535,917
-
-
-
-
-
(5,000)
$ (5,000)
-
-
-
-
-
(2,542,081)
$ (13,337,127)
4,304,928
864
49,875
(244,461)
283,858
(2,547,081)
$ 3,383,900
Balance, December 31, 2015
Exercise of warrants
Share issue costs
Loss and comprehensive loss
Balance, December 31, 2016
Shares issued for cash
Exercise of warrants
Mineral property acquisition costs
Share issue costs
Share-based compensation
Loss and comprehensive loss
Balance, December 31, 2017
The accompanying notes are an integral part of these consolidated financial statements
8
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS AND GOING CONCERN
Evrim Resources Corp. (the “Company” or “Evrim”) is a mineral exploration company. Evrim’s
business plan involves generating a portfolio of prospective mineral properties and advancing
exploration targets through option and joint venture agreements with industry partners to create
shareholder value.
Evrim is a publicly listed company incorporated in Canada with limited liability under the legislation
of the Province of British Columbia. The Company’s shares are listed on the TSX Venture
Exchange under the symbol EVM.
The head office, principal registered and records office of the Company are located at 910 - 850
West Hastings Street, Vancouver, British Columbia, Canada, V6C 1E1.
These consolidated financial statements have been prepared on the basis that the Company is a
going concern, which assumes that the Company will be able to continue in operations and
contemplates the realization of its assets and the settlement of its liabilities in the normal course of
operations. However, the Company has no significant source of recurring revenue, has
experienced recurring losses over the past several fiscal years (2017 - $2,542,081; 2016 -
$1,839,030) and has an accumulated deficit as at December 31, 2017 of $13,337,127 (2016 -
$10,795,046).
The Company’s ability to continue as a going concern is dependent on the Company’s ability to
obtain additional debt or equity financing to successfully advance the exploration and development
of mineral property interests in its exploration portfolio and to be able to derive material proceeds
from the sale or divestiture of those properties and/or other assets, such as sale proceeds, royalty
rights and equity interests. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. Such
adjustments could be material.
2. STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board
(“IASB”).
Except for cash flow information and financial instruments measured at fair value, these
consolidated financial statements were prepared on a historical cost basis using the accrual basis
of accounting.
9
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been applied consistently by the Company and
its subsidiaries to all years presented.
(a)
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the
Company and its subsidiaries (Evrim Exploration Canada Corp. (“EEC”), 1124798 B.C. Ltd.,
Minera Evrim S.A. de C.V. (“Minera”), Servicios Mineros Orotac S.A de C.V. (“SMO”), and
Evrim Resources USA Inc. (“Evrim US”)). Control is based on whether an investor has
power over the investee and the ability to use its power over the investee to affect the
amount of the returns. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commenced until the date that
control ceases. All significant intercompany transactions and balances have been
eliminated.
Place of
incorporation
British Columbia
British Columbia
Sonora, Mexico
Sonora, Mexico
Proportion of
ownership interest
December 31, 2017
100%
100%
100%
100%
Proportion of
ownership interest
December 31, 2016
100%
-
100%
100%
Principal activity
Mineral exploration
Mineral exploration
Mineral exploration
Service company
Nevada, USA
100%
100%
Mineral exploration
Evrim Exploration Canada Corp.
1124798 B.C. Ltd.
Minera Evrim S.A de C.V.
Servicios Mineros Orotac S.A de
C.V.
Evrim Resources USA Inc.
(b)
Use of estimates
The preparation of consolidated financial statements requires management to make
judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets, liabilities, revenues and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances and which form the basis of making judgments
about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and further periods if the revision affects both current
and future periods.
10
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(b)
Use of estimates, continued
Significant assumptions about the future and other sources of estimation uncertainty that
management has made that could result in a material adjustment to the carrying amounts
of assets and liabilities in the event that actual results differ from assumptions made, relate
to, but are not limited to, the following:
(i)
Share-based compensation
The fair value of share-based compensation is subject to the limitations of the
Black-Scholes option pricing model that incorporates market data and involves
uncertainty in estimates used by management in the assumptions. Because the
Black-Scholes option pricing model requires the input of highly subjective
assumptions, including the volatility of share prices, for which changes in
subjective input assumptions can materially affect the fair value estimate.
(ii)
Valuation of deferred tax assets
The Company estimates the expected manner and timing of the realization or
settlement of the carrying value of its assets and liabilities and applies the tax rates
that are enacted or substantively enacted on the estimated dates of realization or
settlement.
(iii)
Provision for environmental rehabilitation
Under IFRS, provisions should be adjusted for changes in the discount rate. The
Company has chosen not
for environmental
rehabilitation, as the amounts are not material (Note 3 (o)).
the provision
to discount
(c)
Critical accounting judgments
Critical accounting judgments are accounting policies that have been identified as being
complex or involving subjective judgments or assessments.
(i)
Determination of functional currency
Several factors were considered in making the judgment that the primary
economic environment for the Company and all subsidiaries is the Canadian dollar
(“CAD”). The Mexican and US subsidiaries are not self-sustaining and require
significant resources provided by Evrim. Evrim raises these funds by issuing
shares in Canadian dollars. In addition, all option or joint venture agreements are
denominated in either Canadian or US dollars (Notes 3 (d) and (e)).
11
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(c)
Critical accounting judgments, continued
(ii)
Future taxable profits
Determination of the likelihood of future taxable profits to enable use of deferred
tax assets requires consideration of current corporate strategies and likely
outcomes with respect to taxable income. Present factors do not support the
probability of deferred tax assets being recovered.
(iii) Going concern
The assessment of the Company’s ability to continue as a going concern and to
raise sufficient funds to pay for its ongoing operating expenditures and meet its
liabilities for the ensuing year as they fall due involves judgment based on historical
experience and other factors including the expectation of future events that are
believed to be reasonable under the circumstances. Management takes into
account all available information about the future, which is at least, but not limited
to, twelve months from the end of the reporting period. The Company is aware that
material uncertainties related to events or conditions that may cast significant
doubt upon the Company’s ability to continue as a going concern exist.
(d)
Presentation and functional currency
The Company’s presentation currency is the CAD. The functional currency of Evrim and its
subsidiaries is the CAD.
(e)
Foreign currency translation
In preparing the financial statements of the individual entities, transactions in currencies
other than the entity’s functional currency are recorded at the rates of exchange prevailing
at the dates of the transactions. At each statement of financial position date, monetary
assets and liabilities are translated using the period-end foreign exchange rate. Non-
monetary assets and liabilities are translated using the historical exchange rate on the date
of the transaction. Non-monetary assets and liabilities that are stated at fair value are
translated using the historical exchange rate on the date that the fair value was determined.
All gains and losses on translation of these foreign currency transactions are included in
profit or loss.
(f)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. The
following specific criteria must be met before revenue is recognized:
12
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f)
Revenue recognition, continued
(i)
Sale of services
Revenue from management services is recognized when all of the following
conditions are satisfied:
•
•
•
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction
will flow to the Company;
the stage of completion at the end of the reporting period can be measured
reliably; and
the costs incurred or to be incurred in respect of the provision of services
can be measured reliably.
(ii)
Option proceeds
Revenue from property option proceeds is recognized when received.
(iii)
Interest income
Interest income is recognized in profit or loss as it accrues.
(g)
Share-based payments
The Company may grant stock options to buy common shares of the Company to directors,
officers, employees and non-employees. The fair value of the options is measured at grant
date, using the Black-Scholes option pricing model, and is recognized over the vesting
period for employees using the graded vesting method. Fair value of share-based payments
for non-employees is recognized and measured at the date the goods or services are
received and is based on the fair value of the goods or services received or the fair value
of the equity instruments issued if this is a more reliable measure. The fair value is
recognized as an expense with a corresponding increase in equity. The amount recognized
as an expense is adjusted to reflect the number of stock options expected to vest.
(h)
Income taxes
Income tax consists of current and deferred tax expense. Income tax expense is recognized
in profit or loss. Current tax expense is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at period-end, adjusted for
amendments to tax payable with regard to previous years.
Deferred tax assets and liabilities are recognized for deferred tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing
assets and liabilities and their respective tax basis and tax losses carried forward. Deferred
tax assets and liabilities are measured using the enacted or substantively enacted tax rates
expected to apply when the asset is realized or the liability settled.
13
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(h)
Income taxes, continued
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
profit or loss in the period that substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits
will be available against which the asset can be utilized. To the extent that the Company
does not consider it probable that a deferred tax asset will be recovered, the deferred tax
asset is not recognized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company intends to settle its current tax
assets and liabilities on a net basis.
(i)
Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net earnings (loss) available to
common shareholders by the weighted average number of shares outstanding during the
reporting period. Diluted earnings (loss) per share is computed similar to basic earnings
(loss) per share, except that the weighted average shares outstanding are increased to
include additional shares for the assumed exercise of stock options and warrants, if dilutive.
The number of additional shares is calculated by assuming that outstanding stock options
and warrants were exercised and that the proceeds from such exercises were used to
acquire common shares at the average market price during the reporting period.
(j)
Cash and cash equivalents
Cash and cash equivalents consists of cash on hand, bank deposits and highly liquid
investments with an original maturity of three months or less.
(k)
Equipment
Equipment is recorded at cost less accumulated depreciation and impairment losses. These
assets are depreciated using the straight-line method based on estimated useful lives,
which generally range from two to five years. Where an item of equipment is comprised of
significant components with different useful lives, the components are accounted for as
separate items of equipment. The depreciation method, useful life and residual values are
assessed annually.
Leasehold improvements are depreciated evenly over the remaining term of the lease. If
the term of the lease is changed, the remaining balance will be depreciated over the new
term of the lease or an impairment loss will be recognized if the lease is terminated early.
14
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(k)
Equipment, continued
The costs of day-to-day servicing are recognized in profit or loss as incurred. These costs
are more commonly referred to as “maintenance and repairs”.
The estimated useful lives of equipment are:
Computer equipment
Computer software
Field equipment
Mobile equipment (trucks)
Office equipment and furniture
Leasehold improvements
3 years
2 years
5 years
2.5 years
5 years
Term of lease
(l)
Mineral property interests
The Company’s mineral property interests are comprised of mineral properties owned by
the Company and rights to ownership of mineral properties, which the Company can earn
through cash or share payments, incurring exploration expenditures or combinations
thereof.
The Company accounts for its mineral property interests by charging all acquisition and
exploration costs to operations as incurred, and crediting all property sales and option
proceeds to operations. When the existence of a mineral reserve on a property has been
established, future acquisition, exploration and development costs will be capitalized for
that property, then amortized using the unit-of-production method following commencement
of production.
(m)
Joint venture partner deposits
The Company receives funds in advance of performing contractual exploration work. The
Company transfers the advances to exploration reimbursements and project management
fees as work is completed.
15
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n)
Financial instruments
Financial assets
Financial assets are classified into one of four categories:
fair value through profit or loss (“FVTPL”);
•
• held-to-maturity (“HTM”);
•
loans and receivables; and
• available-for-sale (“AFS”).
•
The classification is determined at initial recognition and depends on the nature and
purpose of the financial asset.
(i)
FVTPL
Financial assets classified as FVTPL are stated at fair value with any subsequent
change in fair value recognized in profit or loss. The net gain or loss recognized
incorporates any dividend or interest earned on the financial asset. The
Company’s cash and cash equivalents are classified as FVTPL.
(ii)
HTM investments
HTM investments are recognized on a trade-date basis and are initially measured
at fair value, net of transaction costs, and amortized using the effective interest
method. The Company does not have any assets classified as HTM investments.
(iii)
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivables.
Loans and receivables are initially recognized at the transaction value and
subsequently carried at amortized cost less impairment losses. The impairment
loss on receivables is based on a review of all outstanding amounts at period-end.
Bad debts are written off during the year in which they are identified. Interest
income is recognized by applying the effective interest rate method.
(iv)
AFS financial assets
Short-term investments and other assets not otherwise designated are classified
as AFS and stated at fair value on the date of acquisition and each subsequent
consolidated statement of financial position date. Any change in fair value, other
than impairment losses, is recognized as other comprehensive income or loss.
The Company’s marketable securities are classified as AFS investments.
16
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n)
Financial instruments, continued
Financial liabilities
(i)
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity
in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets
of an entity after deducting all of its liabilities. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct issue costs.
Financial liabilities are classified as either financial liabilities at FVTPL or other
financial liabilities.
(ii)
Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction
costs, and are subsequently measured at amortized cost using the effective
interest method.
The effective interest method is a method of calculating the amortized cost of a
financial liability and of allocating interest expenses over the corresponding period.
The effective interest rate is the rate that exactly discounts estimated future cash
payments over the expected life of the financial liability, or, where appropriate, a
shorter period, to the net carrying amount on initial recognition.
The Company has classified accounts payable and accrued liabilities and joint
venture partner deposits as other financial liabilities.
(iii)
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the
Company’s obligations are discharged, cancelled or expired.
(iv)
Fair value hierarchy
The Company provides information about its financial instruments measured at
fair value at one of three levels according to the relative reliability of the inputs
used to estimate the fair value. There were no transfers between the levels during
the year.
• Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
• Level 2 - inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or indirectly
(i.e., derived from prices); and
• Level 3 - inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
17
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(o)
Environmental rehabilitation
The Company records a liability based on the best estimate of costs for site closure and
reclamation activities that the Company is legally or constructively required to remediate.
This liability is recognized at the time the environmental disturbance occurs. The provision
for reclamation liabilities is estimated using expected cash flows for third party
environmental rehabilitation. The estimated cash flow has not been discounted since the
amount of the discount would not be material.
The Company’s estimates of reclamation costs could change as a result of changes in
regulatory requirements and assumptions regarding the amount of the future expenditures.
These changes are recorded directly as an accretion adjustment with a corresponding entry
to the rehabilitation provision. The Company’s estimates are reviewed annually for changes
in regulatory requirements, effects of inflation and changes in estimates. Changes are
charged to profit or loss for the period.
Restoration expense arising from subsequent environmental disturbance, which is incurred
on an ongoing basis during exploration, is charged to exploration expenditures as incurred.
The costs of reclamation that were included in the rehabilitation provision are recorded
against the provision as incurred.
(p)
Reclamation bonds
Reclamation bonds are recorded at amortized cost and held by government agencies.
(q)
Share capital
The Company records proceeds from share issuances net of issue costs. Common shares
issued for consideration other than cash are valued based on their market value at the date
of issuance. Proceeds from the issuance of units are allocated between common shares
and share purchase warrants on a residual value basis, wherein the fair value of the
common shares is based on the market value on the date of announcement of the
placement and the balance, if any, is allocated to the attached warrants.
(r)
Accounting standards issued but not yet effective
The following accounting standards are issued but not yet effective. The Company has not
early-adopted these revised standards and expects no significant effect on the Company’s
consolidated financial statements when adopted.
IFRS 9 Financial Instruments
IFRS 9 includes requirements for recognition, measurement, and derecognition of financial
instruments and hedge accounting. The IASB is adding to the standard as it completes the
various phases of its comprehensive project on financial instruments, and so it will
eventually form a complete replacement for IAS 39 Financial Instruments: Recognition and
Measurement.
18
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(r)
Accounting standards issued but not yet effective, continued
IFRS 9 Financial Instruments, continued
IFRS 9 was originally issued in November 2009, reissued in October 2010, and then
amended in November 2013. The current version of IFRS 9 is applicable to annual periods
beginning on or after January 1, 2018.
IFRS 15 Revenue from Contracts with Customers
framework for
the recognition,
This new standard establishes a comprehensive
measurement and disclosure of revenue replacing 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. The main features
introduced by this new standard compared with predecessor IFRS are revenue is
recognized based on a five-step model, and new disclosure requirements on information
about the nature, amount, timing and uncertainty of revenue and cash flows from contracts
with customers will be required.
The standard was issued in May 2014 and is effective for annual periods beginning on or
after January 1, 2018.
IFRS 16 Leases
IFRS 16 specifies how an IFRS reporter will recognize, measure, present and disclose
leases. The standard 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. Lessors continue to classify leases as operating or
finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its
predecessor, IAS 17 Leases.
The standard was issued in January 2016 and is effective for annual periods beginning on
or after January 1, 2019.
4. CAPITAL MANAGEMENT
The capital structure of the Company consists of equity attributable to common shareholders
comprising issued capital, contributed surplus and accumulated deficit. The Company’s objectives
when managing its capital are to safeguard its ability to continue as a going concern and enable it
to provide shareholder returns and benefits for all stakeholders in the development of its mineral
property interests. These objectives remain unchanged from previous years.
19
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
4. CAPITAL MANAGEMENT, CONTINUED
The Company manages and adjusts its capital structure in response to changes in the risk
characteristics of its underlying assets and/or changes in economic conditions. To maintain or
adjust the capital structure, the Company may issue new shares or other equity instruments. The
Company is not subject to externally imposed capital requirements.
5. MARKETABLE SECURITIES
The Company received from Harvest Gold Corporation (“Harvest”) one million common shares
upon signing of the option agreement for the Cerro Cascaron property (Note 8).
Fair market value as at the date of issue, June 27, 2017
Fair value adjustment
Fair market value as at December 31, 2017
$ 50,000
(5,000)
$ 45,000
6. AMOUNTS RECEIVABLE
Amounts receivable is comprised of the following:
Trade receivables
Other receivables
Current tax receivable
December 31, 2017
$ 24,300
9,610
45,419
$ 79,329
December 31, 2016
$ 16,670
13,452
34,640
$ 64,762
All receivables are current (less than 30 days). No allowance for doubtful accounts or impairment
has been recognized for these amounts, as the amounts are all considered recoverable.
20
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
7. EQUIPMENT
Computer
equipment
and software
Field
equipment
Leasehold
improvements
Mobile
equipment
Office
equipment
and furniture
Total
$
105,902 $
22,271
-
21,432 $
4,241
-
16,995 $
-
-
42,168 $
-
(12,500)
23,636 $
-
-
210,133
26,512
(12,500)
128,173
25,730
-
25,673
-
-
16,995
-
-
29,668
-
-
23,636
-
-
224,145
25,730
-
$
153,903 $
25,673 $
16,995 $
29,668 $
23,636 $
249,875
$
(100,320) $
(12,177)
-
(17,506) $
(1,481)
-
(12,687) $
(719)
-
(38,820) $
(1,004)
10,156
(20,748) $
(579)
-
(190,081)
(15,960)
10,156
(112,497)
(14,452)
-
(18,987)
(1,337)
-
(13,406)
(598)
-
(29,668)
-
-
(21,327)
(462)
-
(195,885)
(16,849)
-
$
(126,949) $
(20,324) $
(14,004) $
(29,668) $
(21,789) $
(212,734)
$
$
$
5,582 $
3,926 $
4,308 $
3,348 $
2,888 $
20,052
15,676 $
6,686 $
3,589 $
26,954 $
5,349 $
2,991 $
- $
- $
2,309 $
28,260
1,847 $
37,141
Cost
Balance as at
December 31, 2015
Acquisitions
Disposals
Balance as at
December 31, 2016
Acquisitions
Disposals
Balance as at
December 31, 2017
Accumulated
depreciation
Balance as at
December 31, 2015
Depreciation
Disposals
Balance as at
December 31, 2016
Depreciation
Disposals
Balance as at
December 31, 2017
Carrying amounts
December 31, 2015
December 31, 2016
December 31, 2017
Method of depreciation is described in Note 3 (k).
21
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS
Exploring for minerals involves a high degree of risk and there can be no assurance that current
exploration programs will result in profitable operations. Many of the Company’s mineral property
interests are located outside of Canada and are subject to the risks associated with foreign
investment, including increases in taxes and royalties, renegotiations of contracts, currency
exchange fluctuations and political uncertainty. Although the Company has taken steps to verify
title to the properties on which it is conducting exploration and in which it has an interest, these
procedures do not guarantee the Company’s title. Property title may be subject to unregistered
prior agreements and non-compliance with regulatory requirements. These risks are not unique to
foreign jurisdictions and apply equally to the Company’s property interests in Canada.
Mexico Portfolio
In an agreement dated September 17, 2010 (the “Kiska agreement”), Evrim acquired the Mexican
operations of Kiska Metals Corporation (“Kiska”) by issuing 2,000,000 common shares to Kiska.
Under the terms of the Kiska agreement, the Company is required to complete the following for
each mineral property that is being actively explored:
(a)
at any time, upon:
(i)
(ii)
the sale of at least a 51% interest in a project for at least $5,000,000 in
consideration; or
the exercise of an option or earn-in to acquire at least a 51% interest in and to a
project,
the Company will issue 250,000 common shares and at the election of the Company, either
pay $250,000 cash or issue an additional 250,000 common shares; and
(b)
at any time, upon the announcement of a decision to put a project into commercial
production based on a positive feasibility study, the Company will issue 1,000,000 common
shares.
The Company acquired an interest in nine exploration projects in Sonora, Durango and Sinaloa
states in Mexico. The nine projects are subject to a 2% net smelter royalty (“NSR”) held by Mining
Royalties Mexico S.A. de C.V. As of December 31, 2017, the Company is maintaining the
Cumobabi project out of the nine projects acquired.
22
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Mexico Portfolio, continued
Ermitaño
In January 2014, the Company entered into an agreement with SilverCrest Mines Inc., now First
Majestic Silver Corp. (“First Majestic”), whereby First Majestic can earn a 100% interest in the
Ermitaño property. To earn a 100% interest, First Majestic must make an initial payment of
US$75,000 and annual payments of US$50,000 at each anniversary of the agreement, complete
a minimum of US$500,000 in exploration expenditures in the first year, and deliver a production
notice specifying mine and construction plans with accompanying permits and economic forecast
model before the end of the fifth anniversary of the agreement. Upon vesting, First Majestic will no
longer be required to make the annual payments and Evrim will retain a 2% NSR. Ermitaño is
located northeast of Hermosillo.
Cumobabi
In October 2014, the Company entered into an agreement with SilverCrest Mines Inc., now First
Majestic, whereby First Majestic can earn a 100% interest in the Cumobabi property. To earn a
100% interest, First Majestic must make an initial payment of US$75,000 and annual payments of
US$50,000 at each anniversary of the agreement, complete a minimum of US$500,000 in
exploration expenditures in the first year, and deliver a production notice specifying mine and
construction plans with accompanying permits and an economic forecast model before the end of
the fifth anniversary of the agreement. Upon vesting, First Majestic will no longer be required to
make the annual payments and Evrim will retain a 1.5% NSR. Cumobabi is located northeast of
Hermosillo.
In September 2014, the Company amended the agreement with Kiska, now Centerra Gold Inc.
(“Centerra”) regarding the share payment structure for Cumobabi. The Company will issue 50,000
shares on each of September 17, 2014 and 2015 (issued), 25,000 shares on each of September
17, 2017 (issued) and 2018 and 50,000 shares on September 17, 2019. In the event the property
is put into commercial production (in which case it is acknowledged that the Company will receive
an NSR in accordance with the terms of the First Majestic option agreement), Evrim will pay to
Centerra one-third of all amounts Evrim receives under the NSR commencing on the date that is
two years following the date on which the property commenced commercial production (as defined
pursuant to the terms of the agreement governing the NSR).
23
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Mexico Portfolio, continued
Cerro Cascaron
In January 2016, the Company acquired the Cerro Cascaron project in Chihuahua, Mexico. The
project covers a historic colonial-era mining district that contains numerous gold and gold-silver
prospects. The core claims contain a large portion of the Serpiente Dorada zone, which was staked
by the Company in late 2015. Three surrounding claims were acquired under two separate
agreements with a third party. In July 2016, the two agreements were consolidated. Under the
terms of the consolidated agreement, the Company will pay $280,000 over a five-year period to
acquire a 100% interest. The agreement is subject to a 2% NSR of which 1% can be purchased
for US$2.5 million. The Company settled a pre-existing selling document that gave mineral rights
to a claim during the year ended December 31, 2016.
Harvest gold option agreement
In June 2017, the Company entered into an agreement with Harvest, whereby Harvest can earn
up to an 80% interest of the Cerro Cascaron property. To earn a 70% interest (“Initial interest”),
Harvest must incur $6 million in exploration expenditures, pay $900,000 in cash and issue two
million common shares over a four-year period (one million shares received). To earn an additional
10% interest, Harvest has to make a cash payment of $200,000 (or issue 200,000 shares at Evrim’s
election) and fund a National Instrument 43-101 compliant feasibility study over a five-year period.
Minimum annual exploration expenditures of $2 million are required during this period and a
$200,000 cash payment has to be made to Evrim if the minimum expenditures are not met during
any given year.
During the Initial Interest period, Harvest can defer exploration expenditures at the end of the first,
second or third anniversary for 12 months by making quarterly cash payments of $25,000 to Evrim
and maintaining all other cash payments and claim maintenance costs.
If Evrim’s interest in Cerro Cascaron is diluted to 10% or less, its interest will convert into a 2%
NSR. Evrim will retain the right to purchase half of a pre-existing 2% NSR from a property vendor
for US$2.5 million. Harvest will be responsible for all other claim maintenance and underlying
vendor costs.
Sarape
In August 2017, the Company announced the acquisition of the Sarape gold-silver project in central
Sonora, Mexico. Sarape was identified through Evrim’s generative programs with reconnaissance
exploration completed in early 2017. The project is 100% owned by Evrim with no underlying
royalties and is located near excellent infrastructure with roads and power crossing the 5,776-
hectare property.
24
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Mexico Portfolio, continued
Callinan Royalties Corp. Alliance, now Altius Minerals Corp. (“Altius”)
Effective December 18, 2012, the Company signed an agreement with Altius for a four-year,
$1.5 million, regional exploration alliance. The alliance initially focused on generating gold and
silver targets within a 40,000 square kilometer area of interest (“AOI”) in prospective mineral belts
with a firm commitment of $500,000 in year one (paid). Evrim conducted generative exploration
within the AOI to stake and acquire new projects (the “Projects”) and develop the Projects for joint
venture purposes. Projects acquired within the AOI during the term of the alliance were 100%
owned by Evrim and subject to a 1.5% NSR in the case of precious metals and a 1.0% NSR in the
case of base metals to Altius. Altius has the right of first offer on the sale of any alliance Project
royalties owned by Evrim.
Llano del Nogal and Cuale properties are subject to the regional exploration alliance with Altius.
Canada Portfolio
Ball Creek Property
In June 2015, the Company acquired a 100% interest in the Ball Creek property from Paget
Minerals Corp. (“Paget”), subject to a 2% NSR with an option to buy back 1% of the NSR for
$1 million.
To earn a 100% interest, the Company is required to make the following payments:
(a)
(b)
(c)
$150,000 upon closing of the agreement (paid);
If the Company enters into an option agreement whereby the Company would receive
payments related to the property at any time within the four years following the date of the
agreement, the Company will be required to pay additional consideration of 40% of
payments received during the first year, 30% of payments received during the second year,
20% of payments received during the third year and 10% of payments received during the
fourth year; and
Milestone share payments (or cash equivalent at the Company’s election) of:
(i.)
(ii.)
(iii.)
100,000 shares upon entering into a future option agreement (issued);
250,000 shares upon completion of 10,000 metres of drilling;
400,000 shares upon announcement of a measured or indicated mineral resource
estimate (National Instrument 43-101 compliant) of at least 500 million tonnes at a
grade of at least 0.50% copper equivalent; and
500,000 shares on the completion of a National Instrument 43-101 compliant
feasibility study.
(iv.)
The property is located in northwest British Columbia. Both Evrim and Paget are each entitled to
50% of the existing bond in place, with Evrim’s share being $20,000 (2016 - $20,000).
25
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Canada Portfolio, continued
Ball Creek Antofagasta agreement
In May 2017, the Company entered into an agreement with a wholly owned subsidiary of
Antofagasta Plc. (“Antofagasta”), whereby Antofagasta can earn up to a 70% interest in the
property by spending up to an aggregate of US$31 million or delivering a prefeasibility study.
Antofagasta can earn an initial 51% interest (“Initial Interest”) by spending US$6 million over a six-
year period. Once Antofagasta has earned its Initial Interest, it may elect to earn an additional 19%
interest (“Additional Interest”) by spending either US$25 million or completing a prefeasibility study
in compliance with National Instrument 43-101 (with expenditures capped at US$25 million), over
a seven-year period. If Antofagasta elects not to earn the Additional Interest, it will transfer a 1.01%
interest to Evrim in exchange for a 0.25% NSR, and Evrim will regain a controlling interest in Ball
Creek. Evrim will be the operator on the Ball Creek property during the Initial Interest phase.
During the year, the Company received $1,918,765 in advances from Antofagasta to be used on
exploration expenditures. Of the advanced amounts, $1,542,006 is included in cash as at
December 31, 2017.
Axe Property
In December 2016, the Company acquired a 100% interest in the Axe property from Liberty Leaf
Holdings Ltd. (“Liberty Leaf”) and Bearclaw Capital Corp. (”Bearclaw”), subject to a 1% NSR
covering 21 claims with an option to buy back the NSR for $1.5 million, and a 2% NSR on four
separate claims with an option to buy back the first 1% NSR for $1 million and the remaining 1%
NSR for $2 million.
To earn a 100% interest, the Company is required to make the following payments:
(a)
(b)
(c)
$30,000 ($21,000 to Liberty Leaf and $9,000 to Bearclaw) upon closing of the agreement
(paid);
If the Company enters into an option agreement whereby the Company would receive
payments related to the property at any time within the four years following the date of the
agreement, the Company will be required to pay additional consideration of 40% of
payments received during the first year, 30% of payments received during the second year,
20% of payments received during the third year and 10% of payments received during the
fourth year; and
Milestone share payments (or cash equivalent at the Company’s election) of:
(i.) 75,000 shares upon entering into a future option agreement (issued);
(ii.) 75,000 shares upon entering into a future agreement to drill 5,000 metres;
(iii.) 200,000 shares upon announcement of a measured or indicated mineral resource
estimate (National Instrument 43-101 compliant) of at least 500 million tonnes at a
grade of at least 0.40% copper equivalent; and
(iv.) 250,000 shares on the completion of a National Instrument 43-101 compliant
feasibility study.
26
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Axe Property, continued
The property is located in south-central British Columbia. During the year, the Company has placed
a reclamation bond in the amount of $7,500.
Axe Antofagasta agreement
In December 2017, the Company entered into an agreement with a wholly owned subsidiary of
Antofagasta, whereby Antofagasta can earn up to a 70% interest in the property by spending up to
an aggregate of US$50 million, making cash payments of US$800,000 and completing an National
Instrument 43-101 compliant Preliminary Economic Analysis over a ten-year period.
Upon completing the terms of the Agreement, Evrim and Antofagasta will participate in a joint
venture on a respective 30:70 basis. If either party’s interest is diluted to 10% or less, it will convert
to a 2% NSR. If Antofagasta terminates the Agreement prior to earning its 70% interest, it will
receive a 0.50% NSR for exploration expenditures exceeding US$10 million, an additional 0.25%
NSR for expenditures in excess of US$20 million and another 0.25% for expenditures in excess of
US$30 million, for a maximum of a 1% NSR. Evrim will be the operator for the first US$10 million
in exploration expenditures.
During the year, the Company received $1,270,100 in advances from Antofagasta to be used on
exploration expenditures. Of the advanced amounts, $1,270,100 is included in cash as at
December 31, 2017.
Jacobite Property
In November 2017, the Company acquired a 100% interest in the Jacobite property from Running
Dog Resources Ltd. and Attunga Holdings Inc. (collectively “Potlickers”), subject to a 1% NSR.
To earn a 100% interest, the Company is required to make the following payments:
(a)
(b)
$15,000 upon closing of the agreement (paid);
Milestone share payments (or cash equivalent at the Company’s election) of:
(i.)
(ii.) $20,000 upon drilling of 1,000 metres; and
(iii.) $30,000 upon announcement of a measured, indicated or inferred mineral resource
$7,500 upon entering into a future option agreement;
estimate (compliant with National Instrument 43-101).
The property is located in south-central British Columbia. During the year, the Company placed
a reclamation bond of $3,000 for the property.
27
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Newmont Alliance
In July 2017, the Company announced signing of a two-year exploration alliance with Newmont
Mining Corporation (“Newmont”). The alliance will focus on generating Greenfield exploration
opportunities in terranes favorable for world-class gold orebodies. Evrim and Newmont will co-fund
the US$1,840,000 exploration program through a respective 30:70 allocation.
During the initial phase of the program, Evrim will undertake project identification, sampling and
reconnaissance mapping with technical input from Newmont. The program will be further advanced
by regional database compilation and target area geochemistry including Newmont's proprietary
bulk leach extractable gold ("BLEG") analysis. The second-year program will be dependent on
results obtained during the initial phase along with follow-up mapping and sampling.
At the end of the two-year alliance period, Newmont will have the right to designate one or more
projects for option by making certain cash payments to Evrim and funding exploration on the
project(s) for up to ten years, or until such time as it has defined a National Instrument 43-101
compliant pre-feasibility study on a minimum two-million-ounce gold resource. Newmont will then
have increased their ownership in the designated project to 80%. Evrim will be the operator for the
initial US$5 million in exploration expenditures.
Evrim and Newmont will then form a joint venture on a respective 20:80 basis whereby Evrim can
maintain its equity interest in the project or elect to have Newmont fund a positive National
Instrument 43-101 compliant feasibility study and reduce Evrim’s equity interest to 15%. At any
point after the Alliance period, Evrim can elect to convert its equity interest in any project to a 2%
NSR of which 0.5% NSR can be purchased for up to US$10 million.
During the year, the Company received $753,732 in advances from Newmont to be used on
exploration expenditures. Of the advanced amounts, $118,150 is included in cash as at
December 31, 2017.
Government Grant
During the year the Company received a government grant of $153,000 which was set off against
its generative exploration work.
28
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
8. MINERAL PROPERTY INTERESTS, CONTINUED
Exploration Expenditures
During the years ended December 31, 2017 and 2016, the Company incurred the following
exploration expenditures that were expensed as incurred:
Camp and support
Aircraft and helicopters
Chemical analysis
Data management and maps
Geological services
Geophysical surveys
Materials and supplies
Project Management
Recording and filing
Travel
Year ended December 31,
2016
2017
$
$
203,092
455,964
118,775
76,169
841,170
-
13,755
24,995
125,005
148,695
2,007,620
$
$
69,158
35,641
42,936
36,581
472,947
55,623
9,152
-
46,037
57,840
825,915
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Accrued liabilities
Current tax payable
December 31, 2017
December 31, 2016
$
$
101,435
34,355
-
135,790
$
$
22,384
34,228
10,659
67,271
The average credit period of purchases is one month. The Company has financial risk management
policies in place to ensure that all payables are paid within the agreed-upon credit terms.
10. PROVISION FOR ENVIRONMENTAL REHABILITATION
The Company’s exploration activities are subject to various federal, provincial and state laws and
regulations governing the protection of the environment. Management’s current estimate of
reclamation and other future site restoration costs to be incurred for existing mineral property
interests has been included in these consolidated financial statements as provision for
environmental rehabilitation. The undiscounted amount of the estimated cash flows required to
settle the obligations, which are expected to be paid over the next four years, is $46,224 (2016 -
$27,919).
29
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
10. PROVISION FOR ENVIRONMENTAL REHABILITATION, CONTINUED
Balance, December 31, 2015
$
27,496
Revision in estimates
Reclamation refund
Balance, December 31, 2016
Revision in estimates
Balance, December 31, 2017
423
27,919
18,305
46,224
$
11. COMMITMENTS AND CONTINGENCIES
(a)
On November 27, 2013, the Company signed a lease for its head office located at 910 -
850 West Hastings Street, Vancouver, British Columbia, effective March 1, 2014 to
February 28, 2020. This lease is classified as an operating lease. The Company has made
a security deposit equivalent to two months’ rent. At December 31, 2017, the Company has
future minimum annual lease commitments as follows:
Lease payment
Operating costs (estimate)
Total
Less than one year
$ 39,917
40,562
$ 80,479
One to five years
$ 46,942
49,337
$ 96,279
(b)
(c)
The Company has leased a photocopier for the head office, which has been classified as
an operating lease since the lease does not include a purchase clause and the term of the
lease is not substantially all of the useful life of the asset. The following are the future
minimum annual lease commitments:
Photocopier lease payment
Less than one year
$ 2,160
One to five years
$ -
Subsequent to the year-end, First Majestic initiated arbitration proceedings in connection
with its purported exercise of the option pursuant to which First Majestic can earn a 100%
interest in the Ermitaño property (note 8) subject to retention of the 2% NSR by Evrim.
Management believes it is premature to estimate potential liability of the proceedings.
30
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
12. ISSUED CAPITAL
(a)
Authorized and issued
The Company’s authorized share capital is an unlimited number of common shares without
par value.
Issuance of common shares
On May 17, 2017, the Company issued 100,000 common shares to Paget pursuant to the
Ball Creek agreement upon completion of the definitive agreement with Antofagasta.
On September 17, 2017, the Company issued 25,000 common shares to AuRico Gold Inc.
(now Centerra) pursuant to the amended Cumobabi agreement.
On December 13, 2017, the Company issued 75,000 common shares to Liberty Leaf and
Bearclaw pursuant to the Axe agreement upon completion of the definitive agreement with
Antofagasta.
Financing
On May 19, 2017, the Company completed a non-brokered private placement issuing
14,349,760 units for gross proceeds of $4,304,928. Each unit consisted of one common
share and one-half of one non-transferable share purchase warrant. Each full warrant is
exercisable into one common share at a price of $0.50 for three years from the closing date.
Part of the financing was subject to finder’s fees of 6% cash commission and 6% finder’s
warrants. Each finder warrant will be exercisable into one common share at a price of $0.30
for 18 months from the closing date. The Company incurred $169,711 cash finder’s fees,
$74,750 for regulatory and other related fees and issued 565,704 finder’s fees warrants.
Fair value of the finder’s warrants issued was $60,706; $21,768 of the total share issuance
cost has been allocated to the warrants issued in relation to the units offering during the
year.
The weighted average grant-date fair value of the finder’s warrants granted was $0.11 per
share. The Company determines the fair value of the finder’s warrants for the purposes of
determining compensation expense using the Black-Scholes option pricing model and used
the following weighted average assumptions: volatility of 85.85%, risk-free interest rate of
0.66%, an expected life of 1.5 years, and a dividend yield of 0%. Volatility was estimated
using historical prices of the Company’s shares.
31
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
12. ISSUED CAPITAL, CONTINUED
(a)
Authorized and issued, continued
Warrant exercise
During the year ended December 31, 2017, 7,200 (2016 - 681,480) warrants were exercised
with an exercise price of $0.12 (2016 - $0.12) for gross proceeds of $864 (2016 - $81,778),
and $422 (2016 - $39,730) was reclassified from contributed surplus to capital stock.
(b)
Incentive stock options
During the year, the Company announced a new fixed incentive option plan (“Fixed Plan”)
to replace its long-term cash bonus plan. The Fixed Plan allows the board of directors to
grant up to an aggregate of 6,000,000 stock options of the Company to encourage equity
participation among senior officers, employees, consultants and directors through the
acquisition of common shares of the Company.
The board of directors has approved the grant of 5,825,000 stock options to officers,
employees and consultants of the Company at a price of $0.25 per share for a period of five
years. The options vest over a five-year period for senior executives and three years for
employees and consultants.
Changes in share purchase options during the fiscal year
Outstanding at beginning of the year
Granted
Exercised
Forfeited/Expired
Outstanding at end of the year
Options exercisable at end of the year
December 31, 2017
Number of
shares
100,000
5,825,000
-
-
5,925,000
1,450,000
Weighted average
exercise price
$ 0.18
$ 0.25
$ -
$ -
$ 0.25
$ 0.25
December 31, 2016
Weighted average
exercise price
$ 0.18
$ -
$ -
$ -
$ 0.18
$ 0.18
Number of
shares
100,000
-
-
-
100,000
100,000
32
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
12. ISSUED CAPITAL, CONTINUED
(b)
Incentive stock options, continued
The following share purchase options were outstanding at December 31, 2017.
Expiry date
Options
outstanding
(number of shares)
Options exercisable
(number of shares)
Exercise price
Weighted
average
remaining life
May 13, 2020
November 9, 2022
100,000
5,825,000
5,925,000
100,000
1,350,000
1,450,000
$ 0.18
$ 0.25
$ 0.25
2.37
4.86
4.82
The weighted average grant-date fair value of the share purchase options granted was
$0.16 per share. The Company determines the fair value of the options using the Black-
Scholes option pricing model and used the following weighted average assumptions:
volatility of 79.89%, risk-free interest rate of 1.63%, an expected life of 5 years and a
dividend yield of 0%. Volatility was estimated using historical prices of the Company’s
shares.
The total share-based compensation expense charged against operations for the year
ended December 31, 2017 was $283,858 (2016 – $Nil)
The Company did not issue any options during the year ended December 31, 2016.
(c) Warrants
The Company issued 7,174,880 warrants as part of the unit offering completed on May 19,
2017 and 565,704 warrants as finder’s fees related to the financing.
The weighted average grant-date fair value of the finder’s warrants granted was $0.11 per
share. The Company determines the fair value of the finder’s warrants for the purposes of
determining compensation expense using the Black-Scholes option pricing model and used
the following weighted average assumptions: volatility of 85.85%, risk-free interest rate of
0.66%, an expected life of 2 years and a dividend yield of 0%. Volatility was estimated using
historical prices of the Company’s shares.
33
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
12. ISSUED CAPITAL, CONTINUED
(c) Warrants, continued
Share purchase warrants outstanding at December 31, 2017 and 2016 are as follows:
Exercise price
Expiry date
Balance
December 31,
2016
Issued
during the
year
Exercised
during the
year
Balance
December 31,
2017
$0.12
$0.25
$0.50
$0.30
December 16, 2017
December 16, 2020(i)
May 19, 2020
November 19, 2018
7,200
12,568,800
-
-
7,174,880
565,704
(7,200)
-
-
-
-
12,568,800
7,174,880
565,704
Weighted average exercise price
Weighted average remaining life
12,576,000
$0.25
3.96
7,740,584
0.49
(7,200)
0.12
20,309,384
$0.34
2.70
Exercise price
Expiry date
$0.12
$0.25
December 16, 2017
December 16, 2020(i)
Weighted average exercise price
Weighted average remaining life
Balance
December 31,
2015
Exercised
during the
year
Balance
December 31,
2016
688,680
12,568,800
13,257,480
$0.24
4.81
(681,480)
-
(681,480)
$0.12
7,200
12,568,800
12,576,000
$0.25
3.96
(i)
If the shares of the Company trade higher than $0.35 for 20 consecutive trading days after the four-
month holding period, the exercise of these warrants may be accelerated to the date that is 20 days
after the twentieth consecutive trading day.
34
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
13. INCOME TAXES
(a)
Income tax expense differs from the amount that would be computed by applying the
Canadian statutory income tax rate of 26% (2016 - 26%) to loss before income taxes.
Loss before tax
Statutory income tax rate
Expected income tax recovery
Items non-deductible for income tax purposes
Difference between Canadian and foreign tax rates
Other
Impact of foreign exchange on tax assets and liabilities
Unused tax losses and tax offsets not recognized in tax asset
Total income taxes
December 31, December 31,
2016
$ (1,839,030)
26%
(478,148)
71,413
(29,000)
(22,898)
190,305
268,328
$ -
2017
$ (2,542,081)
26%
(660,941)
110,299
(17,831)
(45,714)
(195,633)
809,820
$ -
The Mexican corporate tax rate is to remain at 30% indefinitely.
(b)
The tax effected items that give rise to significant portions of the deferred income tax assets
and deferred income tax liabilities are as follows:
Deferred income tax asset:
Non-capital losses
Deferred income tax liabilities:
Property and equipment
Deposits
Total deferred income tax liabilities
Net deferred income tax liabilities
December 31, 2017
$ 30,437
(29,837)
(600)
(30,437)
$ -
35
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
13. INCOME TAXES, CONTINUED
(c)
The Company recognizes tax benefits on losses or other deductible amounts generated in
countries where it is probable the Company will generate sufficient taxable income to utilize
its deferred tax assets. The Company’s unrecognized deductible temporary differences and
unused tax losses for which no deferred tax asset is recognized consist of the following
amounts:
Non-capital losses
Mineral properties
Available for sale securities
Share issue costs
Equipment
December 31,
2017
$ 13,930,781
648,871
2,596
327,692
142,761
$ 15,052,701
December 31,
2016
$ 10,717,051
592,943
113,469
122,854
$ 11,546,317
The Company’s unused non-capital tax losses have the following expiry years:
Year
Canada
Mexico
USA
Total
$ -
-
-
-
-
-
-
-
-
-
1,000
1,000
55,000
8,000
-
-
-
$ 65,000
$ 1,018,000
5,000
7,000
3,000
823,000
463,000
750,000
28,000
127,000
414,000
1,257,000
1,201,000
1,295,000
1,329,000
1,101,000
916,000
1,652,000
$ 12,389,000
2018
2019
2020
2021
2024
2025
2026
2027
2029
2030
2031
2032
2033
2034
2035
2036
2037
-
-
$ - $ 1,018,000
5,000
7,000
3,000
823,000
463,000
750,000
-
-
-
-
-
28,000
127,000
414,000
1,256,000
1,200,000
1,240,000
1,321,000
1,101,000
916,000
1,652,000
$ 9,255,000
-
-
-
-
-
-
-
-
$ 3,069,000
36
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
14. RELATED PARTY TRANSACTIONS
Transactions between the Company and related parties are disclosed below.
(a)
Due to related parties
Included in accounts payable and accrued liabilities at December 31, 2017 was $4,919
(2016 - $1,050) owing to a company with common directors.
(b)
Transactions involving related parties
Effective March 1, 2016, the Company entered into an agreement with Mirasol Resources
Ltd. to share Chief Financial Officer services, office administration support services and
office sharing. Evrim received $154,172 during the year ended December 31, 2017 (2016 -
$126,530), which was set off against the related costs. As at December 31, 2017, $13,700
(2016 - $14,113) is included in amounts receivable.
During the year ended December 31, 2017, the Company paid $23,530 (2016 - $8,575) for
community engagement services to a company with two directors in common.
During the year ended December 31, 2017, the Company entered into an option agreement
to purchase a 100% interest in the Jacobite property from a company with a director in
common and paid $7,500 pursuant to the agreement.
(c)
Compensation of key management personnel
The remuneration paid to directors and other key management personnel during the years
ended December 31, 2017 and 2016 were as follows:
Salaries of senior executives(i)
Short-term employee
benefits(ii)
Non-executive directors’ fees
Share-based compensation
Relocation fees(iii)
Year ended December 31,
2016
$ 520,500
2017
$ 711,172
28,289
116,500
178,725
-
$ 1,034,686
23,115
114,000
-
10,000
$ 667,615
(i)
(ii)
(iii)
Senior executives include the Chief Executive Officer, Chief Financial Officer, Vice President, New
Opportunities and Exploration, and Vice President, Technical Services.
Key management personnel were not paid post-employment benefits or other long-term benefits during
the years ended December 31, 2017 and 2016.
One-time payment was paid to relocate an executive of the Company.
37
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
15. SEGMENTED INFORMATION
During the years ended December 31, 2017 and 2016, the Company operated in one industry
segment: mineral exploration; within three geographic segments: Canada, United States and
Mexico. The Company and all subsidiaries are operated as one entity with a common management
located at the Company’s head office. The Company’s non-current assets by geographic areas for
the years ended December 31, 2017 and 2016 are as follows:
December 31, 2017
Non–current assets
Prepaid rent and deposits
Equipment
Reclamation bond
December 31, 2016
Non –current assets
Prepaid rent and deposits
Equipment
Reclamation bond
Canada
United States
Mexico
Total
$ 11,208
25,985
30,500
$ 67,693
$ -
-
-
$ -
$ -
11,156
-
$ 11,156
$ 11,208
37,141
30,500
$ 78,849
Canada
United States
Mexico
Total
$ 11,208
23,229
20,000
$ 54,437
$ -
-
-
$ -
$ -
5,031
-
$ 7,375
$ 11,208
28,260
20,000
$ 61,812
The Company’s mineral property revenues by geographic areas for the twelve months ended
December 31, 2017 are as follows:
Revenues
Property option proceeds
Project management fees
Canada
Mexico
Total
December 31, 2017
$ -
35,821
$ 35,821
$ 181,115
19,808
$ 200,923
$ 181,115
55,629
$ 236,744
The Company’s property option proceeds and project management fee revenues were earned in
Mexico during the years ended December 31, 2016.
16. FINANCIAL RISK MANAGEMENT
(a)
Fair value of financial instruments
The fair values of cash and cash equivalents, amounts receivable, accounts payable and
accrued liabilities, and joint venture partner deposits approximate their carrying values due
to the short-term to maturities of these financial instruments.
38
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
16. FINANCIAL RISK MANAGEMENT, CONTINUED
(b)
Categories of financial instruments
Financial assets
FVTPL
Cash and cash equivalents
Marketable securities
Loans and receivables
Amounts receivable
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities
Joint venture partner deposit
December 31,
2017
December 31,
2016
$
$
$
$
6,283,430
45,000
33,910
6,362,340
135,790
2,918,046
3,053,836
$
$
$
$
1,494,244
-
30,122
1,524,366
67,271
-
67,271
The Company’s financial instruments are exposed to certain financial risks, which include
foreign currency risk, interest rate risk, credit risk, liquidity risk and other price risk. The
Company’s risk management program focuses on the unpredictability of financial markets
and seeks to minimize potential adverse effects on the Company’s financial performance.
The Company’s exposure to these risks and its methods of managing the risks remain
consistent.
(c)
Foreign currency risk
The Company incurs certain expenses in currencies other than the Canadian dollar. The
Company is subject to foreign currency risk as a result of fluctuations in exchange rates.
The Company manages this risk by maintaining bank accounts in US dollars and Mexican
pesos (“MXN”) to pay these foreign currency expenses as they arise. Receipts in foreign
currencies are maintained in those currencies. The Company does not undertake currency
hedging activities. The Company also does not attempt to hedge the net investment and
equity of integrated foreign operations.
39
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
16. FINANCIAL RISK MANAGEMENT, CONTINUED
(c)
Foreign currency risk, continued
The carrying amount of the Company’s foreign currency denominated monetary assets are
as follows:
Cash
Amounts receivable
Accounts payable and accrued
liabilities
Joint venture partner deposits
Net assets denominated in
foreign currencies
December 31,
2017
(US*)
$ 1,450,022
-
December 31,
2017
(MXN*)
$ 89,290
-
December 31,
2016
(US*)
$ 25,774
-
December 31,
2016
(MXN*)
$ 2,636
-
695
-
-
-
-
-
(19,315)
-
$ 1,450,717
$ 89,290
$ 25,774
$ (16,679)
*Figures in this table are Canadian dollars, converted from the foreign currency, at the closing exchange rate
for that date.
The Company uses a sensitivity analysis to measure the effect on total assets of reasonably
foreseen changes in foreign exchange rates. The analysis is used to determine if these
risks are material to the financial position of the Company. On the basis of current market
conditions, the Company has determined that a 10% change in foreign exchange rates
would affect the fair value of total assets by 1.59% (2016 – 0.02%).
The sensitivity of the Company’s loss and comprehensive loss due to changes in the
exchange rate between the Mexican peso and the Canadian dollar, and between the US
dollar and the Canadian dollar are summarized in the tables below. The change, due to the
effect of the exchange rate on financial instruments, is reported in the consolidated
statements of loss and comprehensive loss as foreign exchange gains (losses).
Years ended December 31,
2017
2016
10% Increase in
MXN : CAD rate
10% Increase in
USD : CAD rate
10% Increase in
MXN : CAD rate
10% Increase in
USD : CAD rate
Change in net loss and
comprehensive loss
$ 40,317
$ -
$ 81,746
$ 772
40
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
16. FINANCIAL RISK MANAGEMENT, CONTINUED
(d)
Interest rate risk
The Company’s cash and cash equivalents consist of cash held in bank accounts and two
short-term investments that earn interest at a fixed interest rate. Future cash flows from
interest income on cash and cash equivalents will be affected by declining cash balances.
The Company manages interest rate risk by investing in short-term fixed interest financial
instruments with varying maturity periods when feasible to provide access to funds as
required. The effect of a 1% change in interest rates on comprehensive income based on
the cash and cash equivalents at the end of each period would be immaterial. Actual
financial results for the coming year will vary since the balances of financial assets are
expected to decline as funds are used for Company expenses.
(e)
Credit risk
Credit risk is the risk of an unexpected loss if an exploration partner, counterparty or third
party to a financial instrument fails to meet its contractual obligations. To reduce credit risk,
cash and cash equivalents are on deposit at major financial institutions. The Company is
not aware of any counterparty risk that could have an impact on the fair value of such
investments. The carrying value of the financial assets represents the maximum credit
exposure.
The Company minimizes credit risk by reviewing the credit risk of the counterparties to its
arrangements on a periodic basis. The Company’s concentration of credit risk and
maximum exposure thereto is as follows:
Short-term money market instruments
Cash bank accounts
Amounts receivable
Total
$
December 31, 2017
2,570,712
3,712,718
33,910
6,317,340
$
December 31, 2016
1,387,729
$
106,515
30,122
1,524,366
$
At December 31, 2017, the Company's short-term money market instruments were
$1,270,712, $300,000 and $1,000,000 term deposits earning interest at 0.6%,0.9% and
1.4% per annum, respectively, and cashable at any time.
(f)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as
they fall due. The Company has a planning and budgeting process in place to help
determine the funds required to support the Company’s normal operating requirements on
an ongoing basis, including exploration plans. The Company attempts to ensure that there
are sufficient funds to meet its short-term business requirements, taking into account its
anticipated cash flows from operations and holdings of cash and cash equivalents.
41
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
(Expressed in Canadian Dollars)
16. FINANCIAL RISK MANAGEMENT, CONTINUED
(f)
Liquidity risk, continued
The Company’s policy is to invest its excess cash in highly liquid, fully guaranteed, bank-
sponsored instruments. The Company staggers the maturity dates of its investments over
different time periods when feasible to maximize interest earned. This strategy remains
unchanged from prior years.
The following table summarizes the Company’s significant liabilities and corresponding
maturities.
Accounts Payable and Accrued Liabilities
Due Date
0 – 90 days
90 – 365 days
365 + days
Total
$
$
December 31, 2017
101,435
34,355
-
135,790
December 31, 2016
33,043
34,228
-
67,271
$
$
(g)
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate due to changes in market prices, other than those arising from interest rate
risk and foreign currency risk. The Company is not exposed to significant other price risk.
17. SUBSEQUENT EVENT
Warrant exercise
In March 2018, the Company announced the receipt of $3,063,950 from the exercise of
12,255,800 common share purchase warrants with an exercise price of $0.25 representing
98% of the warrants issued as part of the December 16, 2015 private placement.
42
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED
DECEMBER 31, 2017
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
Introduction
This Management Discussion and Analysis of the financial position and results of Evrim Resources
Corp. (the “Company” or “Evrim was prepared to conform to National Instrument 51-102F1 and
was approved by the Board of Directors prior to its release. Readers are cautioned that the MD&A
forward-looking statements and that actual events may vary from management’s expectations.
Readers are encouraged to read the Forward Looking Statement disclaimer included with this
MD&A.
The audited consolidated financial statements and MD&A are presented in Canadian dollars,
unless otherwise indicated, and have been prepared in accordance with International Financial
Reporting Standards (“IFRS”). The statements and any summary of results presented in the MD&A
were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”). Please consult the audited consolidated
financial statements for the years ended December 31, 2017 and 2016, for more complete financial
information.
All of the Company's public disclosure filings, including its most recent management information
circular, material change reports, press releases and other information, may be accessed via
www.sedar.com and readers are urged to review these materials, including the technical reports
filed with respect to the Company’s mineral properties.
About Evrim
Evrim is a mineral exploration company with a diverse portfolio of quality copper, gold, and silver
exploration projects in Mexico, southwestern United States, and western Canada. The Company
also owns a geological database covering Mexico and portions of southwestern United States.
Evrim's business plan is to generate and acquire exploration projects that it will advance through
option and joint venture agreements with industry partners to create shareholder value. The
projects generated and acquired to date form a solid foundation for Evrim's execution of the joint
venture business model, which will be further enhanced by a pipeline of new projects being
developed internally.
The Company was incorporated on May 11, 2005, as a capital pool company for the purposes of
the policies of the TSX Venture Exchange (“Exchange”) and is a reporting issuer in British
Columbia, Alberta, Saskatchewan, and Ontario. The shares of the Company commenced trading
on the Exchange under the symbol “EVM” on January 25, 2011.
1.1
Date
This MD&A has been prepared based on information available to the Company as of April 17,
2018.
2
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.2
Overview
The Company has no substantial revenue and supports its operations through the sale of equity or
assets such as mineral properties. The value of any mineral property is dependent upon the
existence or potential existence of economically recoverable mineral reserves. See Section 1.15
“Risk Factors”, below.
Warrant Exercise
In March 2018, the Company announced receiving $3,063,950 from the exercise of 12,255,800
common share purchase warrants with an exercise price of $0.25 representing 98% of the warrants
issued as part of the December 16, 2015, private placement.
Financing
In May 2017, the Company completed a non-brokered private placement issuing 14,349,760 units
for gross proceeds of $4,304,928. Each Unit consisted of one common share and one-half non-
transferable common share purchase warrant. Each whole warrant is exercisable into one
common share at a price of $0.50 until May 19, 2020.
Part of the financing was subject to finder’s fees of 6% cash commission and 6% finder’s warrants.
Finder's fees of $169,711 were paid and 565,704 finder's warrants ("Finder Warrants") were issued
in aggregate to Sprott Global Resource Investments, Ltd., Canaccord Genuity Corp., Haywood
Securities Inc., and PI Financial Corp. Each Finder Warrant is exercisable into one common share
at a price of $0.30 until November 19, 2018. The fair value of the Finder Warrants was $60,706.
The Company incurred $74,750 of regulatory, legal, and other financing related costs.
Letter of Intent (“LOI”)
In February 2018, the Company announced singing an LOI with a subsidiary of Coeur Mining Inc.
(“Coeur”) on the Company’s Sarape project in Sonora, Mexico.
Coeur may acquire up to an 80% interest in Sarape by spending US$16.5 million on exploration,
making staged cash payments of US$2.4 million, and completing a National Instrument (“NI”) 43-
101 compliant Feasibility Study on a minimum measured and indicated resource estimate of
1,000,000 ounces of gold equivalent, within a ten-year period.
Project acquisition
Cuale
In November 2017, the Company announced the acquisition of the Cuale gold property. The
project was initially staked under the Callinan Royalties Generative Alliance (now owned by Altius
Minerals Corporation (“Altius”)) with formal title granted to Evrim for 100% ownership. The project
is subject to a 1.5% precious metal net smelter royalty (“NSR”) and a 1% base metal NSR payable
to Altius.
Sampling, trenching, mapping, and an induced polarization survey were completed during January
and February 2018.
3
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.2
Overview, continued
Jacobite
In November 2017, the Company announced the acquisition of the Jacobite project in south central
British Columbia, Canada. To earn a 100% interest, the Company is required to make a $15,000
payment upon closing of the agreement (paid) and $ 57,500 milestone payments in shares or cash,
at the discretion of the Company. The project is subject to a 1% NSR.
Sarape
In August 2017, the Company announced the acquisition of the Sarape gold silver project in central
Sonora, Mexico. Sarape was identified through Evrim’s generative programs with reconnaissance
exploration completed in early 2017. The project is 100% owned by Evrim and is located near
excellent infrastructure with roads and power crossing the 5,776 hectare property.
Option agreements
Axe
In December 2017, the Company signed an agreement with a wholly owned subsidiary of
Antofagasta Plc. (“Antofagasta”), whereby Antofagasta can earn up to a 70% interest in the
property by spending up to an aggregate of US$50 million, making cash payments of US$800,000
and completing an NI 43-101 compliant Preliminary Economic Analysis over a ten-year period.
Upon completing the terms of the agreement Evrim and Antofagasta will participate in a joint
venture on a respective 30:70 basis. If either party’s interest is diluted to 10% or less, it will convert
to a 2% NSR. If Antofagasta terminates the agreement prior to earning its 70% interest, it will
receive a 0.50% NSR for exploration expenditures exceeding US$10 million, an additional 0.25%
NSR for expenditures in excess of US$20 million and another 0.25% for expenditures in excess of
US$30 million, for a maximum of a 1% NSR. Evrim will be the operator for the first US$10 million
in exploration expenditures.
Cerro Cascaron
In June 2017, the Company signed an option agreement with Harvest Gold Corporation (“Harvest”)
on the Cerro Cascaron property. Harvest can earn a 70% interest in the property by spending up
to an aggregate of $6 million in exploration expenses, making cash payments of $900,000 and
issuing two million shares over a four year period (one million shares received upon signing). After
earning a 70% interest, Harvest can earn an additional 10% interest by paying $200,000 or 200,000
shares at Evrim’s election and funding of an NI 43-101 compliant feasibility study over a five year
period. Minimum annual exploration expenditures of $2 million are required during this period or a
$200,000 cash payment has to be made to Evrim if the minimum expenditures are not met during
any given year.
During the Initial Interest period, Harvest can defer exploration expenditures at the end of the first,
second or third anniversary for up to 12 months by making quarterly cash payments of $25,000 to
Evrim and maintaining all other cash payments and claim maintenance costs.
4
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.2
Overview, continued
If Evrim’s interest in Cerro Cascaron is diluted to 10% or less it will convert into a 2% NSR. Evrim
will retain the right to purchase half of a pre-existing 2% NSR from a property vendor for US$2.5
million. Harvest will be responsible for all other claim maintenance and underlying vendor costs.
The first phase $225,000 field program of detailed geological mapping and geochemical soil
sampling has been completed.
Ball Creek
In May 2017, the Company signed a definitive agreement with Antofagasta on the Ball Creek
property. Antofagasta can earn an initial 51% interest (“Initial Interest”) by spending US$6 million
over a six year period. Once Antofagasta has earned its Initial Interest, it may elect to earn an
additional 19% interest (“Additional Interest”) by spending either US$25 million or completing a
prefeasibility study (with expenditures capped at US$25 million), over a seven year period. If
Antofagasta elects not to earn the Additional Interest, it will transfer a 1.01% interest to Evrim in
exchange for a 0.25% NSR, and Evrim will regain a controlling interest in Ball Creek. Evrim will be
the operator on the Ball Creek property during the Initial Interest phase.
An exploration program of US$300,000 comprising geological mapping and geochemical soil
sampling has been completed.
Alliance
Newmont Alliance
In July, 2017, the Company signed a two year exploration alliance with Newmont Mining
Corporation (“Newmont”). The Alliance will focus on generating greenfield exploration
opportunities in terranes favorable for world-class gold orebodies. Evrim and Newmont will co-
fund the US$1,840,000 exploration program on a 30:70 basis.
During the initial phase of the program, Evrim will undertake project identification, sampling, and
reconnaissance mapping with technical input from Newmont. The program will be further
advanced by regional database compilation and target area geochemistry including Newmont's
proprietary bulk leach extractable gold ("BLEG") analysis. The first year exploration program
comprised regional-scale stream sediment sampling using Newmont’s BLEG analysis and
conventional analysis on ultrafine sediment fractions and mapping and prospecting.
At the end of the two-year alliance period, Newmont will have the right to designate one or more
projects for option by making certain cash payments to Evrim and funding exploration on the
project(s) for up to ten years, or until such time as it has defined an NI 43-101 compliant pre-
feasibility study on a minimum two million ounce gold resource. Newmont will then have increased
their ownership in the designated project to 80%. Evrim will be the operator for the initial US$5
million in exploration expenditures.
Evrim and Newmont will then form a joint venture on a respective 20:80 basis whereby Evrim can
maintain its equity interest in the project or elect to have Newmont fund a positive NI 43-101
compliant feasibility study and reduce Evrim’s equity interest to 15%. At any point after the Alliance
period, Evrim can elect to convert its equity interest in any project to a 2% NSR of which 0.5% NSR
can be purchased for up to US$10 million.
5
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.3
Selected Annual Information
Year ended
December 31
2017
Year ended
December 31
2016
$ 258,546 $ 157,840
(1,839,030)
(2,547,081)
(0.04)
(0.04)
1,631,107
6,496,170
67,271
3,066,046
27,919
46,224
1,535,917
3,383,900
Nil
Nil
Year ended
December 31
2015
$ 230,717
(2,091,051)
(0.04)
3,591,305
269,252
27,496
3,294,557
Nil
Revenue and interest income
Net loss
Net loss per share
Total assets
Current liabilities
Long-term liabilities
Shareholder’s equity
Cash dividends declared
1.4
Results of Operations
Exploration Projects
The Company’s exploration activities are at an early stage and there are no known economically
recoverable deposits of minerals on any of the Company’s exploration properties. All activities of
the Company are highly speculative in nature.
Mexico
Sarape
In August 2017, the Company announced the acquisition of the Sarape gold silver project in central
Sonora, Mexico.
An initial exploration program has defined two major veins: the Sarape vein, a northwest trending
vein measuring 6.0 kilometres in length and up to 12.0 metres in width, and the Chiltepin vein, a
west trending vein measuring 2.6 kilometres in length and up to 3.0 metres in width. Both veins
are located either side of a Laramide age horst block. Systematic channel sampling revealed that
the western portion of both veins contains barren white quartz and calcite veins that are interpreted
to represent late influx and boiling of meteoric fluids during the collapse of the hydrothermal
system. The eastern portion of the veins are composed of a separate phase of low-temperature,
tan-green quartz that consistently assayed from 0.10 to 0.36 g/t gold across sampled widths, with
individual samples containing up to 3.6 g/t gold.
In February 2018, the Company announced singing an LOI with Coeur (Please refer section 1.2).
Cerro Cascaron
In January 2016, the Company acquired the Cerro Cascaron project in Chihuahua, Mexico. The
project covers 6,842 hectares in a historic Colonial-era mining district hosting numerous gold and
gold-silver prospects. The core claims include a large portion of the Serpiente Dorada zone and
were staked by the Company in late 2016. Three surrounding claims were acquired under two
separate agreements with a third party.
6
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Mexico (continued)
The two agreements were consolidated in July 2016. Under the terms of the consolidated
agreement, the Company will pay $280,000 over a five-year period to acquire a 100% interest. The
agreement is subject to a 2% NSR of which 1% can be purchased for US$2.5 million.
In June 2017, the Company signed an option agreement with Harvest (Please refer section 1.2).
The first phase of a $225,000 field program incorporating detailed geological mapping and
geochemical soil sampling has been completed. Detailed mapping and rock chip sampling carried
out at the Cascarita prospect identified six sub-parallel northwest-trending veins in a 900 by 300
metre area. Four of these veins were chip-sampled and vein widths ranged from 0.8 to 3.3 metres
wide. The veins contain polymetallic sulphides that returned significant silver and base metal
values and the veins are interpreted as part of an intermediate sulphidation system. Sampling of
these four structures returned weighted averages from 11.6 to 311.3 g/t silver and from 15.5 to 542
g/t silver-equivalent mineralization. Silver-equivalent calculations and assumptions are noted
below.
Cascarita Sampling Highlights:
Sample
Cut
C10
C11
C12
C13
C14
Width
(metres)
1.4
2.0
2.3
2.1
3.3
Silver
(g/t)
114
127
311
245
104
Lead
(%)
5.24
8.73
1.60
6.42
2.40
Zinc Ag-equivalent*
(%)
1.28
0.54
0.26
0.49
0.48
(g/t)
402
524
393
542
231
*Note: Silver-Equivalent Ag-Eq = Ag + (Pb%*22.046*Pb price*31.103/Ag price) + (Zn%*22.046*Zn price*31.103/Ag
price). Metal prices used for this formula: Ag = $US 16.25/oz, Pb = $US 1.00/lb, Zn = $US 1.25/lb. Recoveries of
100% are assumed for the silver-equivalent values.
Soil sampling was conducted over the Cascaron vein field covering a 4.5 by 1.6 kilometre area to
define the extension of the veins northward and at higher elevations. Gold and multi-element
pathfinder soil geochemical anomalies are coincident with previously identified quartz veins and
define strike lengths ranging from 600 metres to 1.8 kilometres. The veins that were sampled
occur at higher elevations above the workings and the interpreted boiling zone. The mapping and
sampling program defined two new areas of veining at El Salto and La Puerta.
7
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Kiska Agreement (now owned by Centerra Gold Inc.)
In an agreement dated September 17, 2010, Evrim acquired an interest in nine exploration projects
in Sonora, Durango, and Sinaloa States in Mexico and all of the outstanding shares in Minera
Evrim S.A. de C.V. (“MGE”) from Kiska Metals Corporation (“Kiska”) by issuing 2,000,000 common
shares of Evrim Resources Corp. In addition to the initial share payment, Kiska received annual
payments of 10,000 or 50,000 shares per property, depending on the status of the property, for a
maximum period of five years.
Kiska is also entitled to additional share and cash payments for certain milestones relating to each
of the nine properties MGE held as of the date of the agreement. Kiska will receive a 1,000,000
share payment for every property that is advanced to a positive production decision.
The nine projects acquired are subject to a 2% NSR held by Mining Royalties Mexico S.A. de C.V.
The projects were acquired for their porphyry copper-gold-molybdenum and epithermal gold-silver-
base metal potential. Exploration development ranges from grassroots reconnaissance to
previously completed drill programs. Since signing the agreement eight projects were relinquished.
The Cumobabi project, which is subject to the Kiska agreement, has an active joint venture.
Ermitaño
Ermitaño is located 130 kilometres northeast of Hermosillo and consists of two claims covering
16,527 hectares. The primary targets at Ermitaño are epithermal gold-silver vein systems similar
to the systems at First Majestic’s Santa Elena Mine.
In January, 2014, the Company entered in to an agreement with SilverCrest Mines Inc., now First
Majestic Silver Corp. (“First Majestic”), whereby First Majestic can earn a 100% interest in the
Ermitaño property. To earn a 100% interest, First Majestic must make an initial payment of
US$75,000 and annual payments of US$50,000 at each anniversary of the agreement, complete
a minimum of US$500,000 in exploration expenditures in the first year, and deliver a production
notice specifying mine and construction plans with accompanying permits and economic forecast
model before the end of the fifth anniversary of the agreement. Upon vesting, First Majestic will no
longer be required to make the annual payments and Evrim will retain a 2% NSR.
In November 2017, the Company received a purported production notice from First Majestic for the
exercise of the Ermitaño option agreement. The Company considers the production notice to be
not valid as the notice was not supported by a mining reserve or resource estimate, permits or any
economic forecast. First Majestic has initiated arbitration proceedings in connection with its
purported exercise of the option,
In January 2018, the Company announced the results of the remaining six holes of a ten hole 3,156
metre diamond drilling program completed by First Majestic at the Ermitaño West vein in early
2017.
8
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Mexico (continued)
Ermitaño West Drilling Highlights
Hole
From
(m)
EW16-01
EW16-02
Including
EW16-03
Including
EW16-04
Including
EW16-05
Including
EW16-06
Including
EW16-07
EW16-08
EW16-09
Including
96.6
157.1
164.0
195.8
199.6
224.5
228.1
126.4
132.7
268.8
271.3
191.5
347.7
268.5
271.3
and
318.0
EW16-10
Including
147.4
147.4
To
(m)
105.4
170.3
168.2
205.4
202.7
242.5
240.1
152.6
144.9
301.6
279.5
212.6
371.5
282.3
279.5
321.3
163.8
152.9
Interval
(m)
Gold
(g/t)
Silver
(g/t)
Gold-Equiv
(g/t)
8.8
13.2
4.2
9.6
3.1
18.0
12.0
26.2
12.2
32.8
8.2
21.1
23.8
13.8
8.2
3.3
16.4
5.5
0.8
1.1
2.5
1.8
4.9
11.4
15.7
4.2
7.3
3.8
11.5
0.3
2.0
3.3
4.4
6.2
2.2
4.8
10
29
58
24
36
86
107
52
72
187
633
10
37
72
87
27
35
65
0.9
1.5
3.3
2.1
5.4
12.6
17.1
4.9
8.3
6.3
19.9
0.4
2.5
4.3
5.6
6.6
2.6
5.7
*Note: Holes EW16-01 to EW16-04 were announced on January 17, 2017. Gold equivalent (“Gold-Equiv”) is
calculated using a gold to silver ratio of 1:75. Recoveries of 100% are assumed for the calculation of gold-equivalent
values.
Every drill hole has intersected a quartz vein with associated stockwork on either side hosted in
strongly silicified rhyolite tuff or the contact between rhyolite tuff and andesite tuff. The quartz veins
are composed of green to cream coloured, colloform banded, chalcedonic, and locally crystalline
quartz, common adularia bands, zones of quartz-healed breccia with milled vein fragments, iron
oxides after sulphide and minor manganese oxide. Zones with better grades including holes
EW16-04, EW16-06, and EW16-09 are in the core of the interpreted boiling zone and exhibit
greater brecciation as well as quartz replacing bladed calcite.
9
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Mexico (continued)
Drill holes EW16-01 to EW16-10 intersected a wide, east-west trending, low-intermediate
sulphidation epithermal vein with an accompanying hangingwall stockwork zone that has been
mapped over a 1,200 by 600 metre area. The principal east-west striking vein has been traced by
drilling 590 metres in strike and up to 210 metres deep with an average thickness of approximately
11 metres. Mineralization remains open at depth and to the west.
In March, 2018, First Majestic announced an Inferred Resource on the Ermitaño West vein of 40.8
million silver equivalent ounces with average silver and gold grades of 68 g/t and 4.0 g/t,
respectively. Mineral Resources have been classified in accordance with the CIM Definition
Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by
reference into the NI 43-101. Metal prices considered for Mineral Resource estimates were $20
per ounce silver, $1,450 per ounce gold, $1.20 per pound lead, and $1.50 per pound zinc. All
metal price assumptions, metallurgical recovery, and payable metal determinations were made by
First Majestic and disclosed in its most recent Annual Information Form. Using First Majestic’s
metal prices along with other assumptions stated in its March 29, 2018 news release, the Company
calculated the inferred resource to approximately 562,000 ounces gold equivalent.
Cumobabi
Cumobabi hosts a porphyry and breccia copper-molybdenum-silver target that is also prospective
for epithermal gold-silver mineralization and is located 130 kilometres northeast of Hermosillo. The
property consists of nine claims covering 18,615 hectares.
In September, 2014, the Company amended the agreement with Kiska, now Centerra Gold
Inc.(“Centerra”) regarding the share payment structure for Cumobabi. The Company will issue
50,000 shares to Centerra on each of September 17, 2014 and 2015 (issued), 25,000 shares on
each of September 17, 2017 (issued) and 2018 and 50,000 shares on September 17, 2019. In the
event the property is put into commercial production (in which case it is acknowledged that the
Company will receive an NSR in accordance with the terms of the First Majestic option agreement),
Evrim will pay to Centerra one-third of all amounts Evrim receives under the NSR commencing on
the date that is two years following the date on which the property commenced commercial
production (as defined pursuant to the terms of the agreement governing the NSR).
In October, 2014, the Company entered into an agreement with SilverCrest Mines Inc., now First
Majestic, whereby First Majestic can earn a 100% interest in the Cumobabi property. To earn a
100% interest, First Majestic must make an initial payment of US$75,000 and annual payments of
US$50,000 at each anniversary of the agreement, complete a minimum of US$500,000 in
exploration expenditures in the first year, and deliver a production notice specifying mine and
construction plans with accompanying permits and an economic forecast model before the end of
the fifth anniversary of the agreement. Upon vesting, First Majestic will no longer be required to
make the annual payments and Evrim will retain a 1.5% NSR.
10
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Mexico (continued)
LIano del Nogal
In February 2014, the Company was reimbursed for exploration and acquisition costs as part of
the Callinan Royalties Generative Alliance and the project became subject to a 1.5% precious
metal NSR and 1% base metal NSR payable to Altius.
LIano del Nogal hosts a porphyry copper and epithermal gold-silver target located approximately
180 kilometres north of Hermosillo and 60 kilometres southeast of Cananea. The property consists
of two claims covering 10,436 hectares.
In October 2016, the Company announced the results of a geological mapping and ground
magnetics survey. A new porphyry target was discovered at the Suanse prospect consisting of a
donut shaped magnetic anomaly coincident with a 900 metre by 500 metre multi-element soil and
rock geochemical anomaly. The central magnetic low is coincident with a quartz, iron-oxide
breccia.
The Company interprets the prospect as representing the upper levels of a Laramide age porphyry
system juxtaposed against windows of deeper potassic alteration due to post mineral faulting. In
the southern portion of Llano del Nogal, predominantly northeast trending veins are interpreted to
be transitional from Laramide in age to a younger Sierra Madre age system. These veins are also
interpreted to represent a transition from deeper level base metal veins in the southwest to a high-
level paleo-water table environment with epithermal veining in the northeast. The Company is
focusing on attracting exploration partners for the project.
Cuale
In November 2017, the Company received formal title for the Cuale project and in December 2017,
a trench mapping and sampling program was completed. The formal title covers 97 square
kilometres. Cuale is an early stage exploration property prospective for high sulphidation
epithermal gold-silver mineralization, located 185 kilometres west of Guadalajara in the Cordillera
Madre del Sur and is close to infrastructure with roads and powerlines crossing the property.
The property is located within a complex accreted arc terrane that developed during the Mesozoic
Era and that hosts the majority of volcanogenic massive sulphide (VMS) deposits in Mexico. The
accreted arc terrane comprises an interbedded sequence of rhyolitic volcanics and volcaniclastics
that are weakly deformed. These units are intruded by the Cretaceous Puerto Vallarta batholith.
Mineralization is found in moderately to strongly silicified lithic tuff that contains up to 10% specular
hematite as disseminations and boxworks that is interpreted to have formed after pyrite. Zones of
pervasive silicification with strong clay alteration of phenocrysts and local vuggy quartz are
observed but the distribution is not yet well understood. On the margin and at lower elevations,
high temperature clays including pyrophyllite and dickite are noted before the system grades
towards kaolinite with abundant specular hematite (up to 15%) distally and at lower elevations.
The high temperature alteration covers an area measuring 2.3 by 2.2 kilometres.
11
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Mexico (continued)
Trenching was carried out in the La Gloria zone located within the area of high temperature
alteration and defined a mineralized area covering a 300 by 200 metre. First phase trench
highlights include:
• Trench 1 returned 0.53 grams g/t gold over 25.4 metres
• Trench 2 returned 7.4 g/t gold over the entire 9.4 metre length of the trench
• Trench 3 returned 0.61 g/t gold over the entire 20.0 metre length of the trench
Trench one was completed in the northeast corner of the core La Gloria zone and the reported
mineralized intersection is a subset of the 62.6 metre-long trench. Trench two was located 50
metres southwest of trench one and trench three is located 270 metres south-southwest of trench
one.
A follow-up phase of trenching and induced polarization was started at the La Gloria zone in
February, 2018 and results have been received for the trenching. Trench one was extended 290
metres south-southwest and across trench three, trench two was extended 20 metres to the
northwest, and trench four was completed 125 metres south-southwest of trench two. Highlights
for the extended trenches one through four are presented below.
Trench
From
To
Width
Au (g/t)
Top Cut Au (g/t)
[Cut at 30.0 g/t]
Trench 1
Including
Including
Including
And
Including
Including
and
Trench 2
Including
Trench 3
Including
Trench 4
Including
Including
And
Including
0
44.6
92.3
113.8
157.8
187.8
223.8
269.8
0
11.5
0
21.7
0
29.4
38.6
85.6
100.6
351.8
307.8
285.8
121.8
277.8
199.8
235.8
277.8
29.4
29.4
53.7
36.7
135.6
135.6
63.6
135.6
108.1
351.8
263.2
193.5
8
120
12
12
8
29.4
17.9
53.7
15
135.6
106.2
25
50
7.5
1.28
1.67
2.09
5.77
2.46
4.25
3.98
5.22
2.94
4.55
0.28
0.76
10.72
13.61
4.12
26.13
163.3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.12
3.21
n/a
n/a
3.03
3.80
n/a
5.28
24.3
*Whole trench includes non-mineralized zones.
12
Comment
Whole trench*
Whole trench
Whole trench*
Whole trench*
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
All intervals have been reported on an uncut basis. High grade gold samples (above 10 g/t) have
been re-assayed. The original 30 gram fire assay was re-analyzed with two 50 gram fire assays
and a 50 gram metallic screen fire assay. Metallic screen assays reported acceptable repeatability
with excellent repeatability at the highest gold grades. Metallic screen analysis reports coarse and
fine gold mineralization separately and the results from these analyses suggest that gold grades
are associated with fine disseminated mineralization with a minimal nugget effect.
Two east-west induced polarization (IP) lines were surveyed across the area of high temperature
clay alteration. The induced polarization survey has defined a 100 by 300 metre zone of high
resistivity immediately beneath the trenching at the La Gloria zone with a possible extension 400
metres to the west. The second line was surveyed 500 metres to the north and has outlined a
1,200 metre long and 50 to 120 metre deep highly resistive ledge that coincides well with an
outcropping zone of massive to saccharoidal quartz alteration with minor gold anomalism in sparse
rock chip sampling. An interpreted feeder target at depth was identified on each of the IP lines. A
shallowly dipping, strongly conductive and weakly chargeable body beneath the ledge on each
survey line may be clay and pyrite alteration. The entire surveyed area east of a mapped phyllite
is marked by low chargeability and is interpreted to represent extensive oxidization to depth.
Canada
Ball Creek
Ball Creek project is a copper porphyry and epithermal gold property comprising 52,442 hectares,
located in the Golden Triangle, northwestern British Columbia in close proximity to infrastructure.
The ground contains several porphyry copper-gold and epithermal gold systems associated with
Jurassic intrusives.
To earn a100% interest on the property the Company paid $150,000 and has to pay additional
consideration of cash or shares upon meeting certain exploration milestones or receipt of joint
venture payments over a four year period. The property is subject to a 2% NSR with an option to
buy back 1% for $1million.
Evrim holds the existing exploration bonds, subject to a refund of 50% to Paget Minerals Corp. of
any proceeds relating to their release.
In May 2017, the Company signed a definitive agreement with Antofagasta (Please refer section
1.2).
An exploration program of US$300,000 comprising geological mapping and geochemical soil
sampling has been completed.
Ball Creek contains four known porphyry systems (Ball Creek, Rainbow North, South More, and
Mess Creek) and the 2017 program identified a new fifth porphyry target at Quash. A combination
of mapping and rock chip sampling was undertaken at three of the systems and a soil grid
undertaken between them to define new target areas.
13
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Canada (continued)
The previously-drilled Ball Creek porphyry is open to the northeast and southwest and 2017
mapping has demonstrated three sub-parallel porphyry alteration systems; two of which have been
tested by limited drilling. Mapping in 2017 at the Rainbow North porphyry system identified high-
grade gold and copper sheeted vein mineralization that is similar to the porphyry systems of the
Maricunga belt of Chile. Soil sampling at South More in 2017 defined a large, 3.2 by 1.0 kilometre,
copper, gold and molybdenum in soil anomaly that has never been drilled. Mineralization in this
system is hosted by silica unsaturated syenite which is a setting similar to that found at the Galore
Creek porphyry deposit. A broad 500 metre-spaced soil sampling program was undertaken in
2017 to search for new systems outside of areas of known mineralization and the survey identified
a new 1.2 by 0.7 kilometre copper, gold, and molybdenum soil anomaly at the Quash Zone. The
Quash Zone is associated with potassically-altered andesite float that hosts quartz veining,
chalcopyrite, and bornite. Follow-up work at the Ball Creek, Rainbow North, South More, and
Quash areas will be completed in 2018.
Axe
In December 2016, the Company acquired a 100% interest in the Axe project in south central
British Columbia, Canada. The project covers 4,938 hectares of gold-rich copper porphyry targets,
within the Quesnel Terrane in the southern portion of the Intermontane Belt. The project has road
access and a powerline crosses the property. The property hosts porphyry copper and gold
mineralization hosted in Triassic volcanic rocks that are intruded by Triassic to Cretaceous intrusive
rocks.
Under the terms of the agreement to acquire the project, the Company paid $30,000 and has to
pay additional consideration of cash or shares upon meeting certain exploration milestones or
receipt of joint venture payments over a four year period. Twenty one claims on the property are
subject to a 1% NSR which can be purchased for $1.5 million. Four separate claims are subject
to a 2% NSR of which 1% can be purchased for $1 million and the balance for $2 million.
The Axe property contains a four by two kilometre hydrothermal alteration footprint with multiple
intrusive stocks including the previously drilled South, Mid, Adit, and West zones. An NI 43-101
resource of 71 million tonnes grading 0.38% copper at an indicated and inferred level was
published in 2005. Gold was not included due to lack of historic assay data.
The project contains multiple untested targets including magnetic cores at the West and South
zone and the unexplained source of the 1516 zone geochemical anomaly.
In March 2017, the Company completed a program of re-logging the historic core and a
geophysical inversion of airborne magnetic data. The core re-logging program established better
geological controls on mineralization in the West and South Zones. The mineralized systems in
the West and South Zones are controlled by a predictable pattern of alteration and mineralization
that includes an association between copper and gold mineralization with magnetite development
and magnetic highs from the inverted airborne magnetic data. Alteration and mineralization
zonation and the inverted magnetic data has defined targets in at least the West, South and Mid
Zones that are untested by drilling.
14
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
The 1516 zone is an unexplored copper, gold, molybdenum, bismuth and tungsten in soil anomaly
immediately east of the Adit and South zones and covers a 1,000 metre by 500 metre area. The
1516 Zone has been tested by only four holes on its eastern edge and is associated with a quartz-
sericite-pyrite altered gossan and coincident chargeability and conductivity highs.
In December 2017, the Company signed an agreement with Antofagasta (Please refer section 1.2).
Newmont Alliance
The Company completed data compilation to identify targets for a regional-scale stream-sediment
sampling, mapping and prospecting program to identify geochemical signals similar to Carlin-style
gold mineralization.
Generative Initiatives
The Company allocated resources during the year to generate new projects in Canada and Mexico.
Targeting focused on epithermal gold-silver and porphyry copper-related targets in Sonora,
Chihuahua, Sinaloa, Durango and on porphyry copper-gold projects in British Columbia. As of
December 31, 2017, thirty two projects were reviewed and six site visits were undertaken.
Due diligence and sampling are underway on recommended projects. Favourable results could
lead to the acquisition of new projects that the Company hopes to advance to the joint venture
stage.
The Company received a government grant of $153,000 which was set off against the generative
exploration.
Technical Disclosure
All technical disclosure covering the Company’s mineral properties was prepared under the
supervision of Stewart Harris, P.Geo. Vice President, Technical Services for the Company and a
“Qualified Person” within the meaning of NI 43 -101.
15
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
The following table indicates the exploration undertaken on the Company’s properties during the twelve months ended December 31, 2017
and 2016. Results for minor properties which are not subject to option or alliance agreements have been aggregated to permit presentation
of the results for the comparable period in the previous fiscal year.
Ermitaño
Cumobabi
Ball Creek
Axe
Cerro Cascaron
Optioned Properties
Alliance
Newmont
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Acquisition costs
$
2,142
$
-
$
6,250
$
376
38,675
$
-
$
24,687
$
30,015
$
29,107
$
61,628
$
12,634
$
-
Exploration costs
Aircraft and helicopter
Camp and support
Chemical analysis
Data management and maps
Geological and engineering
Geophysical Surveys
Project management
Materials and supplies
Recording and filing
Travel
Exploration reimbursements
-
4,728
-
108
1,201
-
-
-
5,620
-
11,657
-
11,657
-
2,035
-
-
1,518
-
-
-
-
349
3,902
-
3,902
-
118
-
-
-
-
-
-
-
-
118
-
118
-
1,120
-
82
357
-
-
-
-
-
1,559
-
1,559
69,252
39,238
13,010
28,429
201,622
-
-
5,393
-
25,430
382,374
(350,623)
31,751
Acquisition & exploration costs net of,
reimbursements
Government grant and tax recovery
Provision for environmental rehabilitation
Option proceeds
13,799
-
-
(66,675)
3,902
-
-
(67,135)
6,368
-
-
(64,440)
1,935
-
-
(64,135)
70,426
-
-
-
35,641
10,109
-
11,941
81,309
200
-
1,253
(4,563)
12,671
148,561
(13,191)
135,370
135,370
-
-
-
-
9,164
2,636
8,005
72,020
-
-
748
-
1,316
93,889
-
93,889
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,236
48,401
1,798
68,888
-
-
1,924
17,059
8,378
155,684
(198,076)
(42,392)
-
24,803
21,189
11,730
140,969
-
-
3,926
27,374
21,294
251,285
-
251,285
118,576
-
-
-
30,015
-
-
-
(13,285)
-
-
(50,000)
312,913
-
-
-
386,712
107,657
21,959
6,733
223,770
-
24,995
3,373
1,871
75,013
852,083
(605,302)
246,781
259,415
-
-
-
Net expenditures (recoveries), for the year
(52,876)
(63,233)
(58,072)
(62,200)
70,426
135,370
118,576
30,015
(63,285)
312,913
259,415
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Projects continued on next page
16
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Exploration Projects (continued)
Llano del Nogal
Cuale
Sarape
Generative
Other
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Acquisition costs
$
5,727
$
915
$
954
$
-
$
-
$
-
$
17,658
$
-
$
16,654
$
413
$
154,488
$
93,347
Exploration costs
Aircraft and helicopter
Camp and support
Chemical analysis
Data management and maps
Geological and engineering
Geophysical Surveys
Project management
Materials and supplies
Recording and filing
Travel
Exploration reimbursements
Acquisition & exploration costs net of,
reimbursements
Government grant and tax recovery
Provision for environmental rehabilitation
Option proceeds
-
2,478
-
461
6,618
-
-
-
54,244
2,057
65,858
-
65,858
71,585
-
-
-
-
2,820
1,542
1,782
30,933
40,841
-
144
3,989
4,406
86,457
-
86,457
87,372
-
-
-
-
5,306
-
178
28,160
-
-
1,267
18,055
4,404
57,370
-
57,370
58,324
-
-
-
Net expenditures (recoveries), for the year
71,585
87,372
58,324
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,237
27,623
17,868
193,228
-
-
895
25,178
29,728
315,757
-
315,757
333,415
(180,460)
-
-
-
25,918
20,205
9,741
206,978
-
-
3,742
19,237
17,030
302,851
-
302,851
302,851
-
-
-
-
1,602
5,146
12,098
28,452
-
-
66
-
-
47,364
-
47,364
64,018
-
18,305
-
-
2,353
-
1,305
10,640
14,582
-
87
-
2,090
31,057
(50,902)
(19,845)
(19,432)
-
-
-
455,964
203,092
118,775
76,169
841,170
-
24,995
13,755
125,005
148,695
2,007,620
(1,154,001)
853,619
35,641
69,158
42,936
36,581
472,947
55,623
-
9,152
46,037
57,840
825,915
(64,093)
761,822
1,008,107
(180,460)
18,305
(181,115)
855,169
-
-
(131,270)
152,955
302,851
64,018
(19,432)
664,837
723,899
-
-
-
-
243
-
-
-
-
-
243
-
243
243
-
-
-
243
-
2,328
-
491
17,211
-
-
89
2,978
2,369
25,466
-
25,466
25,466
-
-
-
25,466
17
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.4
Results of Operations (continued)
Financial Results
For the year ended December 31, 2017 (“2017”), Evrim incurred a net loss of $2,547,081 ($0.04
per share) compared to a net loss of $1,839,030 ($0.04 per share) for the year ended December
31, 2016 (“2016”). The increase in net loss in 2017 is due an increase in operating activates of
the Company and an increase in foreign exchange loss for the year.
Share based costs, loss on available for sale investment, and depreciation are non-cash items.
Excluding the non-cash items, the net loss for 2017 is $2,241,374 (2016: $1,823,070)
The Company reported a $609,208 loss from its mineral property operations in 2017, compared
to $718,809 in 2016. The Company incurred $2,007,620 in exploration expenditures in 2017,
compared to $825,915 in 2016. Two active joint ventures and an alliance contributed to the
in exploration
increase
reimbursements in 2017, compared to $50,902 in 2016. Management fee revenue increased by
$50,539 in 2017 as a result of the increased exploration related to the joint ventures.
the exploration costs. The Company received $1,154,001
in
The largest component of administrative expenditures is salaries and support services (2017:
$879,707; 2016: $598,802) for the permanent staff of the Company. The increase in 2017 is due
to an increase in gross salary for some of the permanent staff members and increase in number
of staff members of the Company. Travel expenses (2017: $111,058; 2016: $84,925) increased
in 2017 due to an increase in travel related to trade shows and corporate activities. Marketing
expenses (2017: $47,717; 2016: $26,029) increased in 2017 due to replacement of the corporate
booth and increased activity levels related to marketing initiatives. The accounting and legal
expenditures (2017: $156,156; 2016: $72,252) and general and administration expenses (2017:
$197,864; 2016: $185,322) increased due to an increase in professional services obtained and
administrative expenses incurred by the Company as a result of the increase in operation and
business development activities. Expenditures related to management and professional fees
were consistent in 2017 with that of 2016. Investor services (2017: $31,126; 2016: $19,884)
include the costs of maintaining a listing on the TSX Venture Exchange as well as transfer agent
fees. The Company experienced a foreign exchange loss of $113,840 in 2017, compared to a
loss of $34,683 in 2016.
1.5
Summary of Quarterly Results
Selected quarterly information for each of the eight most recently completed financial periods is
set out below. All results were compiled using IFRS.
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Q4
2016
Q3
2016
Q2
2016
Q1
2016
$ 73,890
$ 105,385
$ 9,873
$ 69,398
$ 54,245
$ 21,801
$ 5,091
$ 76,703
(1,149,261)
(490,246)
(430,873)
(476,701)
(456,826)
(567,041)
(465,335)
(349,828)
$ (0.02)
$ (0.01)
$ (0.01)
$ (0.01)
$ (0.01)
$ (0.01)
$ (0.01)
$ (0.01)
Revenues
Net loss
Loss per common
share
The differences shown above are primarily the result of variation in exploration due to factors such
as partner funding, project acquisition, and timing differences. The Company has a portfolio of
18
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.5
Summary of Quarterly Results (continued)
exploration properties on which it has undertaken significant exploration as well as paying on-
going claim maintenance costs. During 2017, most of the exploration was focused on properties
subject to option agreements or alliances and, therefore, total exploration expenditures
decreased. However, increased activity levels resulted in an overall cost increase for the year.
1.6
Liquidity
The Company’s cash and cash equivalents at December 31, 2017, were $6,283,430 compared
to $1,494,244 at December 31, 2016. The Company had working capital of $3,351,275 at
December 31, 2017, compared to working capital of $1,504,368 at December 31, 2016. The
increase in working in capital is attributable to the private placement completed in May 2017.
During the year, $797,580 of net cash inflow was generated in operating activities compared to
an outflow of $1,985,358 in 2016. The difference is due to receipt of joint venture partner funding
for planned exploration work. Financing activities generated $4,060,467 from private placements
net of share issuance costs (2016: $Nil) and $864 from exercise of warrants (2016: $80,390).
The Company’s financial instruments are cashable at any time without restriction.
The Company has no long-term debt.
The Company has leased premises for its head office at 910-850 West Hastings Street,
Vancouver, British Columbia, effective March 1, 2014 to February 28, 2020. Commitments
outstanding for the 2018 fiscal year total $80,479 for lease and operating costs, and the estimates
for 2019 to 2020 total $96,279. The Company has leased a photocopier for the head office with
commitment outstanding of $2,160 for the fiscal year 2018. Effective March 1, 2016, the Company
entered into an agreement with Mirasol Resources Ltd. to share the office space, CFO services,
and administration services, as a cost saving measure.
Subsequent to the year end, First Majestic initiated arbitration proceedings in connection with its
purported exercise of the option pursuant to which First Majestic can earn a 100% interest in the
Ermitaño property subject to retention of the 2% NSR by Evrim. The management believes it is
premature to estimate potential liability of the proceedings.
As the Company has limited revenues, its ability to fund operations is dependent upon its ability
to secure financing through the sale of equity or assets. The value of any mineral property is
dependent upon the existence of economically recoverable mineral reserves, or the possibility of
discovering such reserves, or proceeds from the disposition of such properties. See Section 1.15
“Risk Factors”, below.
1.7
Capital Resources
The Company had 65,723,242 issued and outstanding common shares as of December 31, 2017,
(December 31, 2016 – 51,166,282).
In May 2017, the Company completed a non-brokered private placement issuing 14,349,760 units
for gross proceeds of $4,304,928.
19
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.7
Capital Resources (continued)
Each Unit consisted of one common share and one-half non-transferable share purchase warrant.
Each whole warrant is exercisable into one common share at a price $0.50 until May 19, 2020.
In March 2018, the Company announced receiving $3,063,950 from the exercise of 12,255,800
common share purchase warrants with an exercise price of $0.25 representing 98% of the
warrants issued as part of the December 16, 2015 private placement.
Proceeds from the private placement and warrant exercise are being used for exploration and
working capital purposes.
1.8
Off-Balance Sheet Arrangements
As a policy, the Company does not enter into off-balance sheet arrangements with special-
purpose entities in the normal course of business, nor does it have any unconsolidated affiliates.
1.9
Transactions with Related Parties
Effective March 1, 2016, the Company entered in to an agreement with Mirasol Resources Ltd.
to share CFO services, office administration support services and office sharing. Evrim received
$154,172 during the period ended December 31, 2017 (2016 - $126,530) which were set off
against the related costs. As at December 31, 2017, $13,700 is included in amounts receivable
(2016 - $14,113).
During the year ended December 31, 2017, the Company paid $23,530 (2016 – $8,575) for
community engagement services to a company with two directors in common. As at December
31, 2017, $4,919 is included in accounts payable and accrued liabilities (2016 –$1,050).
During the year ended December 31, 2017, the Company entered into an option agreement to
purchase 100% interest in Jacobite property from a company with a director in common and paid
$7,500 pursuant to the agreement.
Compensation of key management personnel
IFRS requires that compensation of key management personnel be included as a transaction with
related parties. In Note 13 (c) of the audited consolidated financial statements, a table is included
which details compensation paid to the senior officers of the Company (Chief Executive Officer,
Chief Financial Officer, Vice President New Opportunities and Exploration, Vice President
Technical Services) and non-executive directors. The Company incurred higher salaries and
benefits for the year ended December 31, 2017, compared to December 31, 2016.
1.10 Fourth Quarter
The Company carried out its regular generative exploration work and partner funded exploration
work during the fourth quarter. During the period the Company acquired the Cuale property,
Jacobite property, and entered in to a joint venture agreement with Antofagasta for Axe property.
The officers, employees, and consultants of the Company received 5,825,000 stock options with
an exercise prices of $0.25 per share expiring November 9, 2022. The Company recognized
share based compensation expenses of $283,858 during the fourth quarter. The Company
received US$ 50,000 pursuant to the Cumobabi option agreement.
20
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.11 Proposed Transactions
The Company has a business plan that includes identifying and acquiring exploration projects,
conducting initial exploration and optioning the projects to partners. Acquisitions and dispositions
are an essential and on-going part of this plan.
1.12 Critical Accounting Estimates
The preparation of the Company’s consolidated financial statements requires management to
make certain estimates that affect the amounts reported in the consolidated financial statements.
The accounting estimates considered to be significant include the recognition of deferred income
tax assets and share-based compensation.
Deferred income tax assets
The Company does not believe it is likely that current tax losses will be utilized before they expire,
therefore related deferred tax assets have not been recognized in the consolidated financial
statements. When the situation changes, such that the future tax benefits of unused tax losses
and other deductions carried forward are more likely to be realized, the deferred tax assets will
be recorded in the accounts of the Company.
Share-based compensation
Calculating share-based compensation requires estimates of expected volatility in the share price,
risk-free interest rates, number of options expected to vest, and a determination that standard
option pricing models such as Black-Scholes fairly represent the actual compensation associated
with options. Share price volatility is calculated using the Company’s own trading history. The risk-
free interest rate is obtained from the Bank of Canada zero coupon bond yield for the expected
life of the options. The Company believes that the Black-Scholes option pricing model is
appropriate for determining the compensation cost associated with the grant of options.
1.13 Changes in Accounting Policies including Initial Adoption
Accounting standards issued but not yet effective:
The following accounting standards are issued but not yet effective. The Company has not early-
adopted these revised standards and expects no significant effect on the Company’s consolidated
financial statements when adopted.
IFRS 9 Financial Instruments
IFRS 9 includes requirements for recognition, measurement, and de-recognition of financial
instruments and hedge accounting. The IASB is adding to the standard as it completes the various
phases of its comprehensive project on financial instruments, and so it will eventually form a
complete replacement for IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 was originally issued in November 2009, reissued in October 2010, and then amended in
November 2013. The current version of IFRS 9 is applicable to annual periods beginning on or
after January 1, 2018.
21
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.13 Changes in Accounting Policies including Initial Adoption (continued)
IFRS 15 Revenue from Contracts with Customers
This new standard establishes a comprehensive framework for the recognition, measurement and
disclosure of revenue replacing 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.
The main features introduced by this new standard compared with predecessor IFRS are revenue
is recognized based on a five-step model, and new disclosure requirements on information about
the nature, amount, timing and uncertainty of revenue and cash flows from contracts with
customers will be required.
The standard was issued in May 2014 and is effective for annual periods beginning on or after
January 1, 2018.
IFRS 16 Leases
IFRS 16 specifies how an IFRS reporter will recognize, measure, present and disclose leases.
The standard 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. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach
to lessor accounting substantially unchanged from its predecessor, IAS 17 Leases.
The standard was issued in January 2016 and is effective for annual periods beginning on or after
January 1, 2019.
1.14 Financial Instruments and Other Instruments
The Company’s activities expose it to a variety of financial risks, which include foreign currency
risk, interest rate risk, credit risk and liquidity risk. The Company’s risk management program
focuses on the unpredictability of financial markets and seeks to minimize potential adverse
effects on the Company’s financial performance.
Foreign Currency Risk
The Company incurs certain expenses in currencies other than the Canadian dollar. The
Company is subject to foreign exchange risk as a result of fluctuations in exchange rates. The
Company manages this risk by maintaining bank accounts in US dollars and Mexican pesos to
pay foreign currency expenses as they arise. Receipts in foreign currencies are maintained in
those currencies. The Company does not undertake currency hedging activities. The Company
also does not attempt to hedge the net investment and equity of integrated foreign operations.
Interest Rate Risk
The Company’s cash and cash equivalents consist of cash held in bank accounts and two short-
term investments that earn interest at fixed interest rate.
22
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.14 Financial Instruments and Other Instruments (continued)
Due to the short-term fixed interest rate nature of these financial instruments, fluctuations in
market rates do not have an impact on estimated fair values as of December 31, 2017. Future
cash flows from interest income on cash and cash equivalents will be affected by interest rate
fluctuations. The Company manages interest rate risk by investing in short-term financial
instruments with varying maturity periods.
Interest Rate Risk, Continued
The effect of a 1% change in interest rates on comprehensive loss based on the cash and cash
equivalents at the end of each period would be immaterial. Actual financial results for the coming
year will vary since the balances of financial assets are expected to decline as funds are used for
Company expenses.
Credit Risk
Credit risk is the risk of an unexpected loss if an exploration partner, counterparty or third party to
a financial instrument fails to meet its contractual obligations. To reduce credit risk, cash and cash
equivalents are on deposit at major financial institutions. The Company is not aware of any
counterparty risk that could have an impact on the fair value of the cash and cash equivalents.
The carrying value of the financial assets represents the maximum credit exposure.
The Company minimizes credit risk by reviewing the credit risk of the counterparties to its
arrangements prior to entering in to such agreements.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
fall due. The Company has a planning and budgeting process in place to help determine the funds
required to support the Company’s normal operating requirements on an ongoing basis, including
exploration plans. The Company attempts to ensure that there are sufficient funds to meet its
short-term business requirements, taking into account its anticipated cash flows from operations
and holdings of cash and cash equivalents.
The Company’s policy is to invest its excess cash in highly liquid, fully guaranteed, bank-
sponsored instruments. This strategy remains unchanged from prior years.
Sensitivity Analysis
The Company measures the effect on total assets or total receipts of reasonably foreseen
changes in interest rates and foreign exchange rates. The analysis is used to determine if these
risks are material to the financial position of the Company. On the basis of current market
conditions, the Company has determined that a 1% change in interest rates or a 10% change in
foreign exchange rates would be immaterial. Actual financial results for the coming year will vary
since the balances of financial assets are expected to change as funds may be raised through
equity offering and are used for Company expenses.
23
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.15 Other Requirements
Risks Factors and Uncertainties
Overview
The Company is subject to many risks that may affect future operations over which the Company
has little control. These risks include, but are not limited to, intense competition in the resource
industry, market conditions and the Company’s ability to access new sources of capital, mineral
property title, results from property exploration and development activities, and currency
fluctuations. The Company has a history of recurring losses and there is no expectation that this
situation will change in the foreseeable future.
Competition
Other exploration companies, including those with greater financial resources than the Company,
could adopt or may have adopted the same business strategies and thereby compete directly with
the Company, or may seek to acquire and develop mineral claims in areas targeted by the
Company. While the risk of direct competition may be mitigated by the Company’s experience
and technical capabilities, there can be no assurance that competition will not increase or that the
Company will be able to compete successfully.
Access to Capital
The exploration and subsequent development of mineral properties is capital intensive. Should it
not be possible to raise additional equity funds when required, the Company may not be able to
continue to fund its operations which would have a material adverse effect on the Company’s
potential profitability and ability to continue as a going concern. At present, the Company has
cash resources to fund planned exploration for the next twelve months. Timing of additional equity
funding will depend on market conditions as well as exploration requirements.
In recent years, the securities markets in Canada have experienced a high level of price and
volume volatility, and the market price of securities of many companies, particularly those
considered exploration stage companies, have experienced wide fluctuations in price which have
not necessarily been related to the operating performance, underlying asset values or prospects
of such companies. These conditions may persist for an indeterminate period of time.
Foreign Operations and Political Risk
The Company’s mineral properties are located in Canada and Mexico. In foreign jurisdictions,
mineral exploration and mining activities may be affected in varying degrees by political or
economic instability, expropriation of property and changes in government regulations such as
tax laws, business laws, environmental laws and mining laws. Any changes in regulations or shifts
in political conditions are beyond the control of the Company and may materially adversely affect
its business, or if significant enough, may make it impossible to continue to operate in certain
countries. Operations may be affected in varying degrees by government regulations with respect
to restrictions on production, price controls, foreign exchange restrictions, export controls, income
taxes, expropriation of property, environmental legislation and exploration health and safety.
These risks are not unique to foreign jurisdictions and apply equally to the Company’s property
interest in Canada.
24
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.15 Other Requirements (continued)
Risks Factors and Uncertainties (continued)
Mineral Property Tenure and Permits
The Company has completed a review of its mineral property titles and believes that all
requirements have been met to ensure continued access and tenure for these titles. However,
ongoing requirements are complex and constantly changing so there is no assurance that these
titles will remain valid. The operations of the Company will require consents, approvals, licenses
and/or permits from various governmental authorities. There can be no assurance that the
Company will be able to obtain all necessary consents, approvals, licenses and permits that may
be required to carry out exploration, development and production operations at its projects.
Although the Company acquired the rights to some or all of the resources in the ground subject
to the tenures that it acquired, in most cases it does not thereby acquire any rights to, or ownership
of, the surface to the areas covered by its mineral tenures. In such cases, applicable laws usually
provide for rights of access to the surface for the purpose of carrying on exploration activities,
however, the enforcement of such rights can be costly and time consuming. It is necessary, as a
practical matter, to negotiate surface access.
There can be no guarantee that, despite having the right at law to access the surface and carry
on exploration activities, the Company will be able to negotiate a satisfactory agreement with
existing landowners for such access, and therefore it may be unable to carry out exploration
activities. In addition, in circumstances where such access is denied, or no agreement can be
reached, the Company may need to rely on the assistance of local officials or the courts in such
jurisdictions.
Joint Venture Risks
A key aspect of the Company’s business is to enter into joint venture agreements with reputable
mining companies to advance its projects. Often this results in the Company holding a minority
ownership interest in the projects and the Company does not always act as operator of the project,
meaning it must rely on the decisions and expertise of its project partners regarding operational
matters. The interests of the Company and its project partners are not always aligned, and it may
be difficult or impossible for the Company to ensure that the projects are operated in the best
interest of the Company. The Company may also be dependent on its project partners for
information such as the results of mineral exploration programs. The Company may also
experience disputes with project partners regarding operational decisions or the interpretation of
agreements in connection with its projects. While the Company strives to maintain effective
channels of communication and positive working relationships with all its project partners, there
can be no assurance that disputes will not arise that may lead to legal action and could result in
significant costs to the Company.
Speculative Nature of Mineral Exploration and Development
The exploration for and development of mineral deposits involves significant risk which even a
combination of careful evaluation, experience and knowledge may not adequately mitigate. While
the discovery of an ore body may result in substantial rewards, few properties which are explored
are ultimately developed into producing mines. There is no assurance that commercial quantities
of ore will be discovered on any of the Company’s properties.
25
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.15 Other Requirements (continued)
Risks Factors and Uncertainties (continued)
Even if commercial quantities of ore are discovered, there is no assurance that the mineral
property will be brought into production. Whether a mineral deposit will be commercially viable
depends on a number of factors, including the particular attributes of the deposit, such as its size,
grade, metallurgy, and proximity to infrastructure; commodity prices, which have fluctuated widely
in recent years; and government regulations, including those relating to taxes, royalties, land
tenure, land use, aboriginal rights, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted, and the Company’s
business may be adversely affected by its inability to advance projects to commercial production.
Uninsured or Uninsurable Risks
The Company may become subject to liability for pollution or hazards against which it cannot
insure or against which it may elect not to insure where premium costs are disproportionate to the
Company’s evaluation of the relevant risks. The payment of such insurance premiums and of
such liabilities would reduce the funds available for exploration and operating activities.
Commodity Prices
The prices of gold, silver, copper, lead, zinc, molybdenum, and other minerals have fluctuated
widely in recent years and are affected by a number of factors beyond the Company’s control,
including international economic and political conditions, expectations of inflation, international
currency exchange rates, interest rates, consumption patterns, and speculative activities and
increased production due to improved exploration and production methods. Fluctuations in
commodity prices will influence the willingness of investors to fund mining and exploration
companies and the willingness of companies to participate in joint ventures with the Company
and the level of their financial commitment. The supply of commodities is affected by various
factors, including political events, economic conditions and production costs in major producing
regions. There can be no assurance that the price of any commodities will be such that any of the
properties in which the Company has, or has the right to acquire, an interest may be mined at a
profit.
Conflicts of Interest
Certain directors and officers of the Company also serve as directors, officers, and advisors of
other companies involved in natural resource exploration and development. To the extent that
such companies may participate in ventures with the Company, such directors and officers may
have conflicts of interest in negotiating and concluding the terms of such ventures. Such other
companies may also compete with the Company for the acquisition of mineral property rights. In
the event that any such conflict of interest arises, the Company’s policy is that such director or
officer will disclose the conflict to the board of directors and, if the conflict involves a director, such
director will abstain from voting on the matter. In accordance with the Business Corporations Act
(BC), the directors and officers of the Company are required to act honestly and in good faith with
a view to the best interests of the Company.
26
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
1.15 Other Requirements (continued)
Risks Factors and Uncertainties (continued)
Dependence Upon Others and Key Personnel
The success of the Company’s operations will depend upon numerous factors including its ability
to attract and retain additional key personnel in exploration, marketing, joint venture operations
and finance. This will require the use of outside suppliers as well as the talents and efforts of the
Company and its consultants and employees. There can be no assurance that the Company will
be successful in finding and retaining the necessary employees, personnel and/or consultants in
order to be able to successfully carry out such activities. This is especially true as the competition
for qualified geological, technical personnel, and consultants can be particularly intense.
Government Regulation
The Company operates in an industry which is governed by numerous regulations, including but
not limited to, environmental regulations as well as occupational health and safety regulations.
Most of the Company’s mineral properties are subject to government reporting regulations. The
Company believes that it is in full compliance with all regulations and requirements related to
mineral property interest claims.
However, it is possible that regulations or tenure requirements could be changed by the respective
governments resulting in additional costs or barriers to development of the properties. This would
adversely affect the value of properties and the Company’s ability to hold onto them without
incurring significant additional costs. It is also possible that the Company could be in violation of,
or non-compliant with, regulations it is not aware of.
Additional Disclosure for Venture Issuers without Significant Revenue
The significant components of general and administrative expenditures are presented in the
consolidated financial statements. Significant components of mineral property expenditures are
included in Section 1.4 Results of Operations.
Outstanding Share Data
As of the date of this MD&A, the Company had 77,997,042 issued and outstanding common
shares. In addition, the Company has 5,925,000 options outstanding that expire through
November 9, 2022 and 7,722,579 warrants outstanding that expire through May 19, 2020. Details
of issued share capital are included in Note 12 of the audited consolidated financial statements
for the years ended December 31, 2017 and 2016.
Other Information
All technical reports on material properties, press releases and material change reports are filed
on SEDAR at www.sedar.com.
27
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017
Forward-Looking Statements
This document includes certain forward looking statements concerning the future performance of the
Company’s business, its operations, its financial performance and condition, as well as management’s
objectives, strategies, beliefs and intentions. Forward-looking statements are frequently identified by
such words as “may”, “will”, “plan”, “expect”, “anticipate”, “estimate”, “intend” and similar words
referring to future events and results. Forward-looking statements are based on the current opinions
and expectations of management. All forward-looking information is inherently uncertain and subject
to a variety of assumptions, risks and uncertainties. Factors that may cause actual results to vary from
forward looking statements include, but are not limited to, the Company’s ability to access capital, the
speculative nature of mineral exploration and development, fluctuating commodity prices, competitive
risks and reliance on key personnel, as described in more detail in this document under “Risk Factors
and Uncertainties”. Statements relating to estimates of reserves and resources are also forward-
looking statements as they involve risks and assumptions (including, but not limited to, assumptions
with respect to future commodity prices and production economics) that the reserves and resources
described exist in the quantities and grades estimated and are capable of being economically
extracted. Actual events or results may differ materially from those projected in the forward-looking
statements and we caution against placing undue reliance thereon.
28