Consolidated Financial Statements
For the years ended
December 31, 2018 and 2017
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
1700 – 475 Howe Street
Vancouver BC
V6C 2B3
(604) 687-1231
Listing
TSX Venture Exchange: EVM
Shares Outstanding: 84,469,317 (April 18, 2019)
2
Table of Contents
Evrim Resources Corp.
INDEPENDENT AUDITORS’ REPORT .................................................................................. 4
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ............................................... 7
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS ....................... 8
CONSOLIDATED STATEMENTS OF CASH FLOWS ............................................................ 9
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY .............. 10
1. NATURE OF OPERATIONS AND GOING CONCERN .................................................... 11
2. STATEMENT OF COMPLIANCE ..................................................................................... 11
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................ 12
4. CAPITAL MANAGEMENT ................................................................................................ 23
5. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS ....................... 23
6. MARKETABLE SECURITIES ........................................................................................... 23
7. AMOUNTS RECEIVABLE ................................................................................................ 24
8. EQUIPMENT .................................................................................................................... 24
9. MINERAL PROPERTY INTERESTS ................................................................................ 25
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ................................................... 33
11. PROVISION FOR ENVIRONMENTAL REHABILITATION ............................................. 33
12. COMMITMENTS AND CONTINGENCIES ..................................................................... 34
13. ISSUED CAPITAL .......................................................................................................... 35
14. INCOME TAXES ............................................................................................................ 39
15. RELATED PARTY TRANSACTIONS ............................................................................. 40
16. SEGMENTED INFORMATION ....................................................................................... 42
17. FINANCIAL RISK MANAGEMENT ................................................................................. 43
18. SUBSEQUENT EVENT .................................................................................................. 46
3
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF EVRIM RESOURCES CORP.
Opinion
We have audited the consolidated financial statements of Evrim Resources Corp. (the "Company"), which
comprise the consolidated statements of financial position as at December 31, 2018 and 2017, and the
consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows
for the years then ended, and notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Company as at December 31, 2018 and 2017, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audits in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained in our audits is sufficient and
appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company
incurred a net loss of $1,983,127 during the year ended December 31, 2018. As stated in Note 1, this event
or condition, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that
may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Other Information
Management is responsible for the other information. The other information comprises of Management's
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon. In connection with our audits of the consolidated
financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditors' report. If, based on
the work we have performed, we conclude that there is a material misstatement of this, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, 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.
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 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Canadian generally accepted auditing standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements. As part of an audit in
accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors' report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
5
Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
The engagement partner on the audit resulting in this independent auditors' report is Kevin Yokichi Nishi.
Chartered Professional Accountants
Vancouver, British Columbia
April 18, 2019
6
Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
Note
5,9
5
6
7,15
12a
8
9
$
$
Assets
Current assets
Cash and cash equivalents
Short term investments
Marketable securities
Amounts receivable
Prepaid expenses and deposits
Non-current assets
Prepaid rent deposit
Equipment
Reclamation bond
Liabilities and Shareholders’ Equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Joint venture partner deposits
$
10,15
9
Non-current liabilities
Provision for environmental rehabilitation
Shareholders’ Equity
Issued capital
Contributed surplus
Accumulated other comprehensive gain/(loss)
Accumulated deficit
11
13
December 31,
2018
December 31,
2017
7,087,898
7,021,863
55,000
269,767
15,919
14,450,447
11,208
96,226
53,000
14,610,881
205,979
1,598,331
1,804,310
66,525
1,870,835
$
$
$
$
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
16,099,827
626,200
(5,000)
(13,337,127)
3,383,900
6,496,170
27,179,476
885,824
-
(15,325,254)
12,740,046
14,610,881
$
Approved and authorized for issue by the Board on April 18, 2019
Paul van Eeden
Director
David A. Caulfield
Director
The accompanying notes are an integral part of these consolidated financial statements
7
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Years Ended December 31,
(Expressed in Canadian Dollars)
Mineral Property Operations
Note
2018
2017
Revenue
Option proceeds
Project management fees
Sale of property rights
Expenses
Acquisition expenditures
Exploration expenditures
Exploration reimbursements
Exploration tax recovery
Government grant
Provision for environmental rehabilitation
Gain/(loss) from mineral property operations
Other Operations
Interest and other revenue
Expenses
Accounting and legal
Depreciation
Foreign exchange loss
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
Net Loss and Comprehensive loss for the year
Basic and diluted loss per share
Weighted average number of common shares
outstanding
$
9
9
9
225,380 $
232,604
1,974,875
2,432,859
181,115
55,629
-
236,744
15(b)
9
9
11
6
8
15(b)
15(b),(c)
13(b),15(c)
209,073
5,438,957
(3,524,725)
(31,890)
(183,000)
20,301
1,928,716
154,488
2,007,620
(1,154,001)
(27,460)
(153,000)
18,305
845,952
504,143
(609,208)
119,643
21,802
333,569
51,845
30,231
255,631
70,132
120,000
85,285
1,097,646
385,190
177,384
2,606,913
156,156
16,849
113,840
197,864
31,126
116,500
47,717
879,707
283,858
111,058
1,954,675
(2,487,270)
(1,983,127)
(1,932,873)
(2,542,081)
-
(5,000)
$
$
(1,983,127) $
(2,547,081)
(0.03) $
(0.04)
76,226,260
59,474,226
The accompanying notes are an integral part of these consolidated financial statements
8
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(Expressed in Canadian Dollars)
Cash flows provided by (used in) operating activities
Net loss
Add (deduct) items not involving cash:
Shares received as option payment
(Gain)/loss on available-for-sale-investment
Depreciation
Unrealized foreign exchange (gain)/ 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
Purchase of short-term investments
Reclamation bond
Purchase of equipment
Net cash flow used in investing activities
Cash flows provided by financing activities
Proceeds from private placement
Proceeds from exercise of warrants
Proceeds from exercise of options
Payment of share issue costs
Net cash flow provided by financing activities
Effects of foreign currency translation on cash and cash
equivalents
Increase 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
2018
2017
$
(1,983,127)
$
(2,547,081)
-
(10,000)
51,845
(52,124)
20,301
32,250
385,190
(1,555,665)
(190,438)
(6,357)
70,189
(1,331,925)
(3,014,196)
(7,021,863)
(22,500)
(110,930)
(7,155,293)
7,272,602
3,654,247
52,500
(57,516)
10,921,833
52,124
804,468
6,283,430
7,087,898
514,764
2,523,134
4,050,000
7,087,898
$
$
$
$
$
$
(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
2,930,856
2,570,712
6,283,430
25,644
Supplemental cash flow information:
Interest received
$
The accompanying notes are an integral part of these consolidated financial statements
25,644
$
9
EVRIM RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years Ended December 31,
(Expressed in Canadian Dollars)
Issued capital
Shares
51,166,282
Amount
$ 12,314,112
14,349,760
7,200
200,000
-
-
-
65,723,242
-
4,848,401
13,662,674
210,000
25,000
-
-
-
84,469,317
4,017,933
1,306
49,875
(283,399)
-
-
$ 16,099,827
-
7,272,602
3,746,045
86,268
32,250
(57,516)
-
-
$ 27,179,476
Contributed
surplus
Accumulated
other
comprehensive
loss
Accumulated
deficit
$ 16,851
286,995
(442)
-
38,938
283,858
-
$ 626,200
-
-
(91,798)
(33,768)
-
-
385,190
-
$ 885,824
$ -
$ (10,795,046)
-
-
-
-
-
(5,000)
$(5,000)
5,000
-
-
-
-
-
-
-
$ -
-
-
-
-
-
(2,542,081)
$ (13,337,127)
(5,000)
-
-
-
-
-
-
(1,983,127)
$ (15,325,254)
Shareholders’
equity
$ 1,535,917
4,304,928
864
49,875
(244,461)
283,858
(2,547,081)
$ 3,383,900
-
7,272,602
3,654,247
52,500
32,250
(57,516)
385,190
(1,983,127)
$ 12,740,046
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
Impact of IFRS 9 adoption (Note 3(r))
Shares issued for cash
Exercise of warrants
Exercise of options
Mineral property acquisition costs
Share issue costs
Share-based compensation
Loss and comprehensive loss
Balance, December 31, 2018
The accompanying notes are an integral part of these consolidated financial statements
10
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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 (2018 - $1,983,127; 2017 -
$2,542,081) and has an accumulated deficit as at December 31, 2018 of $15,325,254 (2017 -
$13,337,127).
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.
11
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.,
1174610 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
Evrim Exploration Canada Corp.
British Columbia
1124798 B.C. Ltd.
British Columbia
1174610 B.C. Ltd.
British Columbia
Sonora, Mexico
Minera Evrim S.A de C.V.
Servicios Mineros Orotac S.A de C.V. Sonora, Mexico
Evrim Resources USA Inc.
Nevada, USA
(b)
Use of estimates
Proportion of
ownership interest
December 31, 2018
100%
100%
100%
100%
100%
100%
Proportion of
ownership interest
December 31, 2017
100%
100%
-
100%
100%
100%
Principal activity
Mineral exploration
Mineral exploration
Holding Company
Mineral exploration
Service company
Mineral exploration
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.
12
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.
13
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.
14
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f)
Revenue recognition
The Company records revenue from joint venture agreements in accordance with the five-
step model in IFRS 15 as follows:
(i)
(ii)
(iii)
identify the contract with a customer;
identify the performance obligation in the contract;
determine the transaction price, which is the total consideration provided by the
customer;
allocate transaction price among the performance obligations in the contract based
on their relative fair values; and
recognize revenue when the relevant criteria are met for each performance
obligation.
(iv)
(v)
Revenues from option payments and joint venture management fees is recognized when
all the performance obligations identified in the agreements are satisfied.
(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.
15
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.
16
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.
17
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n)
Financial instruments
Financial assets
Initial recognition and measurement
A financial asset is measured initially at fair value plus, for an item not at fair value through
profit or loss and transaction costs that are directly attributable to its acquisition or issue.
On initial recognition, a financial asset is classified as measured at amortized cost or fair
value through profit or loss. A financial asset is measured at amortized cost if it meets the
conditions that:
i)
the asset is held within a business model whose objective is to hold assets to collect
contractual cash flows;
the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding; and
is not designated as fair value through profit or loss.
ii)
iii)
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at fair value through profit or loss
Financial assets measured at fair value through profit and loss are carried in the statement
of financial position at fair value with changes in fair value therein, recognized in the
statement of comprehensive loss.
Financial assets measured at amortized cost
A financial asset is subsequently measured at amortized cost, using the effective interest
method and net of any impairment allowance, if:
•
•
the asset is held within a business whose objective is to hold assets in order to collect
contractual cash flows; and
the contractual terms of the financial asset give rise, on specified dates, to cash flows
that are solely payments of principal and interest.
18
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n)
Financial instruments, continued
Derecognition
A financial asset or, where applicable a part of a financial asset or part of a group of similar
financial assets is derecognized when:
•
•
the contractual rights to receive cash flows from the asset have expired; or
the Company has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay to a
third party under a ‘pass-through’ arrangement; and either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has
neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
Financial liabilities
Financial liabilities are recognized when the Company becomes a party to the contractual
provisions of the financial instrument. A financial liability is derecognized when it is
extinguished, discharged, cancelled or when it expires. Financial liabilities are classified as
either financial liabilities at fair value through profit or loss or financial liabilities subsequently
measured at amortized cost. All interest-related charges are reported in profit or loss within
interest expense, if applicable.
Fair value hierarchy
Fair value measurements of financial instruments are required to be classified using a fair
value hierarchy that reflects the significance of inputs used in making the measurements.
The levels of the fair value hierarchy are defined as follows:
Level 1 -
Level 2 -
Level 3 -
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly.
Inputs for assets or liabilities that are not based on observable market data.
19
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(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.
20
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(r)
Accounting standards issued and effective for the current fiscal year
The adoption of the following standards has not had a significant effect on the Company’s
financial position or performance.
IFRS 9 Financial Instruments
The Company has adopted IFRS 9 Financial Instruments (“IFRS 9”) as of January 1, 2018.
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”).
IFRS 9 utilizes a revised model for the classification and measurement of financial
instruments and a single, forward-looking “expected loss” impairment model. Most of the
requirements in IAS 39 for classification and measurement of financial liabilities were
carried forward in IFRS 9, with the exception that for financial liabilities designated at fair
value through profit or loss, the change in fair value that is attributable to changes in credit
risk of that liability is presented in other comprehensive income (loss) instead of in statement
of operations as previously applied.
As a result of the adoption of IFRS 9, the Company has changed accounting policy for
financial instruments retrospectively. The change did not result in a change in the carrying
value of any of the financial instruments on transition date. IFRS 9 does not require
restatement of comparative periods. Accordingly, the Company reflected the retrospective
impact of the adoption of IFRS 9 as an adjustment to opening equity as at January 1, 2018.
As at January 1, 2018, the impact of the adoption of IFRS 9 to the Company’s financial
instruments are as follows:
Under IAS 39
Under IFRS 9
Classification Carrying amount Classification
Carrying
amount
Financial Asset
Cash and cash
equivalents
Marketable Securities
Amounts receivable
Financial Liability
Fair value
through profit
or loss
(“FVPTL”)
Available for
sale
Loans and
receivables
$ 6,283,430 FVPTL
$ 6,283,430
$ 45,000 FVPTL
$ 79,329
Amortized
cost
$ 45,000
$ 79,329
Accounts payable and
accrued liabilities
Other financial
liabilities
$ 135,790
Amortized
cost
$ 135,790
21
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(r)
Accounting standards issued and effective for the current fiscal year, continued
The Company’s marketable securities consist of investment in equity securities. For equity
securities not held for trading, the Company may make an irrevocable election at initial
recognition to recognize changes in fair value through other comprehensive income rather
than profit or loss. The Company elected to designate its equity securities as financial asset
at FVTPL. Subsequent changes in fair value will be recognized in profit or loss. As a result
of this change, the Company reclassified $5,000 of other comprehensive income to opening
accumulated deficit.
The adoption of IFRS 9 has not had a significant impact on the Company’s policies related
to financial assets cash and amounts receivables and financial liabilities.
IFRS 15 Revenue from Contracts with Customers
framework for
This new standard establishes a comprehensive
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 Company has adopted IFRS 15 Revenue from Contracts with Customers, which
replaces IAS 18, effective January 1, 2018 with retrospective application. The adoption of
IFRS 15 did not result in any changes in the Company’s accounting policies for revenue
recognition and does not have any impact on the consolidated financial statements or
opening balances.
(s)
Accounting standards issued but not yet effective
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.
22
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(s)
Accounting standards issued but not yet effective, continued
IFRS 16 Leases
The Company has not early-adopted this revised standard and expects the assets and the
related liability to be increased by $107,300 in the consolidated statement of financial
position as of 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.
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. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents include $3,037,898 (December 31, 2017 – 3,712,718) in the operating
bank accounts and $4,050,000 (December 31, 2017 - $2,570,712) of guaranteed investment
certificates (“GICs”) cashable at any time. Short term investments are GICs placed with major
banks, with maturities ranging from six to twelve months earning interest from 1.75% to 2%.
As of December 31, 2018, $6,573,134 of the total cash and cash equivalents and short-term
deposits were restricted for exploration expenditures (December 31, 2017 - $2,930,256) of which
$4,974,803 (December 31, 2017 - $Nil) were earmarked for the Cuale project (refer Note 13) and
$1,598,332 (December 31, 2017 - $2,930,256) were related to other projects under joint venture.
6. 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 9).
Fair market value as at December 31, 2017
Fair value adjustment
Fair market value as at December 31, 2018
$ 45,000
10,000
$ 55,000
23
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
7. AMOUNTS RECEIVABLE
Amounts receivable is comprised of the following:
Trade receivables
Other receivables
Current tax receivable
December 31, 2018
$ 14,461
49,044
206,262
$ 269,767
December 31, 2017
$ 24,300
9,610
45,419
$ 79,329
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.
8. EQUIPMENT
Computer
equipment
and software
Field
equipment
Leasehold
improvements
Mobile
equipment
Office
equipment
and furniture
Total
Cost
Balance as at
December 31, 2016
Acquisitions
Balance as at
December 31, 2017
Acquisitions
Balance as at
December 31, 2018
$
128,173 $
25,730
25,673 $
-
16,995 $
-
29,668 $
-
23,636 $
-
224,145
25,730
153,903
102,948
25,673
-
16,995
-
29,668
-
23,636
7,982
249,875
110,930
$
256,851 $
25,673 $
16,995 $
29,668 $
31,618 $
360,805
Accumulated depreciation
Balance as at
December 31, 2016
Depreciation
Balance as at
December 31, 2017
Depreciation
Balance as at
December 31, 2018
$
$
(112,497) $
(14,452)
(18,987) $
(1,337)
(13,406) $
(598)
(29,668) $
-
(21,327) $
(462)
(195,885)
(16,849)
(126,949)
(46,664)
(20,324)
(1,091)
(14,004)
(1,690)
(29,668)
-
(21,789)
(2,400)
(212,734)
(51,845)
(173,613) $
(21,415) $
(15,694) $
(29,668) $
(24,189) $
(264,579)
Carrying amounts
December 31, 2016
December 31, 2017
December 31, 2018
$
$
$
15,676 $
6,686 $
3,589 $
26,954 $
5,349 $
2,991 $
83,238 $
4,258 $
1,301 $
- $
- $
- $
2,309 $
28,260
1,847 $
37,141
7,429 $
96,226
Method of depreciation is described in Note 3(k).
24
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. 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
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 subject to a 2% net smelter royalty (“NSR”). Ermitaño is located northeast of
Hermosillo.
In September 2018, both parties signed a settlement agreement, whereby the 100% interest in the
property was transferred to First Majestic for US$1,000,000 subject to the 2% NSR.
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 subject to a
1.5% NSR. Cumobabi is located northeast of Hermosillo.
In September 2018, both parties signed a settlement agreement, whereby the 100% interest in the
property was transferred to First Majestic for US$500,000 subject to the 1.5% NSR.
Pursuant to the Cumobabi acquisition agreement (as amended) with Kiska Metals Corporation,
now Centerra Gold Inc. (“Centerra”), the Company is required to issue further 25,000 and 50,000
shares on September 17, 2018 (issued) and 2019, respectively. 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).
25
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. 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.
Harvest Gold Corporation (“Harvest”) 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 $6.0 million in exploration expenditures, pay $900,000 in cash and issue two
million common shares over a four-year period (one million shares received in 2017). 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 $2.0 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.
In April 2018, the completion date to fulfil the first years’ obligations was extended to December 31,
2018, for a fee of $30,000. During the year, the Company received $1,118,952 in advances from
Harvest to be used on exploration expenditures. As at December 31, 2018, of the advanced
amounts, $455,812 is included in cash and cash equivalents.
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.
26
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Mexico Portfolio, continued
Sarape, continued
In May 2018, the Company signed a definitive agreement with a subsidiary of Coeur Mining Inc.
(“Coeur”). 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
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. The initial cash payment due upon
signing of the agreement of US$100,000 was received in September 2018.
During the year, the Company received $482,266 in advances from Coeur to be used on
exploration expenditures. As at December 31, 2018, of the advanced amounts, $179,600 is
included in cash and cash equivalents.
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. Projects acquired 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
$1.0 million.
To earn a 100% interest, the Company is required to make the following payments:
(a)
$150,000 upon closing of the agreement (paid);
(b)
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
27
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Canada Portfolio, continued
Ball Creek Property, continued
(c)
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).
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 ended December 31, 2017, the Company received $1,918,765 in advances from
Antofagasta to be used on exploration expenditures. As at December 31, 2018, of the advanced
amounts, $745,650 (December 31, 2017 - $154,006) is included in cash and cash equivalents.
The agreement was terminated as at December 31, 2018. Subsequent to year-end the Company
repaid the remaining joint venture deposit of $712,865 to the joint venture partner.
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.
28
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Canada Portfolio, continued
Axe Property, continued
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.
The property is located in south-central British Columbia. As at December 31, 2018, the Company
has placed a reclamation bond in the amount of $30,000 (December 31, 2017 - $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 a 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 ended December 31, 2017, the Company received $1,270,100 in advances from
Antofagasta to be used on exploration expenditures. As at December 31, 2018, of the advanced
amounts, $86,816 (December 31, 2017) is included in cash and cash equivalents.
29
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Canada Portfolio, continued
Axe Antofagasta agreement, continued
The agreement was terminated as at December 31, 2018. Subsequent to year-end the Company
repaid the remaining joint venture deposit of $48,672 to the joint venture partner.
Jacobite Property
In November 2017, the Company acquired a 100% interest in the Jacobite property from Running
Dog Resources Ltd. and Attunga Holdings Inc., 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.
Lemon Lake Property
In October 2018, the Company acquired a 100% interest in the Lemon Lake property from
Metalogic Exploration Inc.
To earn a 100% interest, the Company is required to make the following payments:
(a) $15,000 upon closing of the agreement (paid);
(b) milestone share payments (or cash equivalent at the Company’s election) of:
• $25,000 upon entering into a future option agreement;
• $25,000 upon entering in to an agreement to drill 10,000 metres;
• $150,000 upon announcement of a measured, indicated or inferred mineral resource
estimate (compliant with National Instrument 43-101); and
• $500,000 upon decision to bring the property into commercial production.
The property is located in south-central British Columbia.
30
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
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 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 its 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 ended December 31, 2018, the Company received $822,144 (December 31, 2017
- $753, 732) in advances from Newmont to be used on exploration expenditures for the second
year. As at December 31, 2018, of the advanced amounts, $130,453 (December 31, 2017 -
$118,150) is included in cash and cash equivalents.
In March 2019, the Company announced the designation of the Astro project for option from the
Newmont alliance. The 250 square kilometre Astro project is located in the Northwest Territoties,
six kilometres north of the Mile 222 airstrip and 195 kilometres northeast of Ross River, providing
seasonal road access to the southern boundary of the property.
Yamana Alliance
In October 2018, the Company signed a three-year exploration alliance with a subsidiary of
Yamana Gold Inc. (“Yamana”). The alliance allows Evrim royalty free access to Yamana’s dataset
in the western United States for gold and base metal project generation.
31
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Yamana Alliance, continued
During the alliance period, Evrim will compile a fully digital and comprehensive dataset to generate
new targets and ideas within the designated area. Should Evrim acquire a project within the
designated area, Yamana will have the exclusive right for 60 days to enter into an option agreement
to earn a 75% interest on terms as follows:
• within the first two years, Yamana will fund (at least) US$1,000,000 for initial exploration
•
expenditures, including any acquisition or land staking costs;
solely fund additional exploration expenditures between years 3 and 10, or until such
time as Yamana has defined a NI 43-101 compliant pre-feasibility study on a minimum
1.0 million ounce gold equivalent resource;
• make a cash payment of US$150,000 upon signing the option agreement and additional
•
•
payments of US$100,000 on the first, second and third anniversaries;
upon Yamana earning its interest and the formation of a joint venture, Yamana and
Evrim will jointly fund programs on a respective 75%/25% basis;
should Evrim’s interest in a project fall below 10%, its interest will convert to a 2.5%
NSR of which 1.25% NSR can be purchased by Yamana prior to production for US$5
million; and
• Evrim will be operator during the first US$10 million of exploration expenditures. The
option period is independent of the alliance period and may extend beyond the three-
year term. At the end of the Alliance, both parties will retain a copy of the digital
database.
Government grant
During the year, the Company received a grant of $183,000 from the North West Territories
Government (December 31, 2017 - $153,000) for the exploration work carried out in Canada.
32
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
9. MINERAL PROPERTY INTERESTS, CONTINUED
Exploration Expenditures
During the years ended December 31, 2018 and 2017, the Company incurred the following
exploration expenditures that were expensed as incurred:
Camp and support
Aircraft and helicopters
Chemical analysis
Data management and maps
Drilling and trenching
Geological services
Geophysical surveys
Materials and supplies
Project Management
Recording and filing
Travel
Year ended December 31,
2017
2018
498,037
572,971
539,831
88,396
982,662
1,675,058
510,228
134,931
7,519
166,260
263,064
5,438,957
$
$
203,092
455,964
118,775
76,169
-
841,170
-
13,755
24,995
125,005
148,695
2,007,620
$
$
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Accrued liabilities
December 31, 2018
94,192
111,787
205,979
$
$
December 31, 2017
101,435
34,355
135,790
$
$
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.
11. 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 a 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 $66,525 (2017 -
$46,224).
33
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
11. PROVISION FOR ENVIRONMENTAL REHABILITATION, CONTINUED
Balance, December 31, 2016
Revision in estimates
Balance, December 31, 2017
Revision in estimates
Balance, December 31, 2018
$
$
27,919
18,305
46,224
20,301
66,525
12. 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, 2018, the Company has
future minimum annual lease commitments as follows:
Lease payment
Operating costs (estimate)
Total
Less than one year
One to five years
$ 40,236
42,152
$ 82,388
$ 6,706
7,185
$ 13,891
(b)
(c)
The Company has leased a photocopier for the head office, which has been classified as
an operating lease as 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
$ 2,580
One to five years
7,740
The Company has entered into a rental agreement with Javier Antonio García Penqueño,
which includes the renting of the administrative offices in Hermosillo, Mexico. The annual
rent totals $21,000. This agreement is for a period of three years and expires on
December 31, 2020. The Company may terminate the agreement with a penalty equivalent
to two months’ rent payment.
34
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
13. 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 September 17, 2018, the Company issued 25,000 common shares to AuRico Gold Inc.
(now Centerra) pursuant to the amended Cumobabi agreement.
Financing
During the year ended December 31, 2018, the Company completed a strategic private
placement with Newmont. A total of 4,848,401 shares of the Company were issued to
Newmont at a price of $1.50 per share for gross proceeds of $7,272,602.
Evrim and Newmont have entered into an investment agreement (the “Agreement”)
pursuant to which Newmont will complete the private placement and will have certain
investment rights for a period ending on the earlier of the fifth anniversary from the date of
closing or the date on which Evrim enters into an agreement to divest all or part of its interest
in the Cuale project to Newmont or third parties, including the following:
• Voting support whereby Newmont will support matters recommended by Evrim’s
Board of Directors so long as those matters do not adversely prejudice
Newmont’s rights under the Agreement;
• Re-sale restriction on certain Newmont share dispositions;
• Newmont will retain participation rights in any future equity financings to maintain
its pro rata ownership interest;
• Newmont will retain a Right of First Offer on the Cuale project in the event Evrim
seeks to divest all or part of its interest in the Cuale project;
• The formation of a joint technical committee to advance the Cuale project; and
• Eighty percent (80%) of the gross proceeds from the private placement
($5,818,081) will be earmarked for the advancement of Cuale, unless Newmont
and the Company mutually agree to re-allocate the funds elsewhere.
Newmont and Evrim have also agreed to a standstill clause whereby Newmont will be
restricted from acquiring Evrim shares until February 28, 2020, subject to acceleration in
the event Evrim enters into a transaction with respect to the Cuale project prior to that date.
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.
35
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
13. ISSUED CAPITAL, CONTINUED
(a)
Authorized and issued, continued
Financing, continued
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 finders’ fees,
$74,750 for regulatory and other related fees and issued 565,704 finders’ fees warrants.
Fair value of the finders’ 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 finders’ warrants granted was $0.11 per
share. The Company determines the fair value of the finders’ 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.
Warrant exercise
During the year ended December 31, 2018, 13,662,674 (December 31, 2017 – 7,200)
warrants were exercised with an exercise price ranging from $0.25 to $0.50 (December 31,
2017 - $0.12) for gross proceeds of $3,654,247 (December 31, 2017 - $864), and $91,798
(2016 - $442) was reclassified from contributed surplus to capital stock.
Stock options exercise
During the year ended December 31, 2018, 210,000 (December 31, 2017 – nil) stock
options with an exercise price of $0.25 were exercised for gross proceeds of $52,590 and
$33,678 was reclassified from contributed surplus to capital stock.
(b)
Incentive stock options
The Company has a rolling stock option plan (the “Plan”) that allows for the reservation of
common shares issuable under the Plan to a maximum of 10% of the number of issued and
outstanding common shares at any given time. The Plan allows the board of directors to
grant 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 Company did not issue any stock options during the year ended December 31, 2018.
36
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
13. ISSUED CAPITAL, CONTINUED
(b)
Incentive stock options, continued
In 2017, 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, 2018
Number of
shares
5,925,000
-
(210,000)
-
5,715,000
2,640,000
Weighted average
exercise price
$ 0.25
-
$ 0.25
$ -
$ 0.25
$ 0.25
December 31, 2017
Weighted average
Number of
exercise price
shares
$ 0.18
100,000
$ 0.25
5,825,000
$ -
-
$ -
-
$ 0.25
5,925,000
$ 0.25
1,450,000
The following share purchase options were outstanding at December 31, 2018.
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
5,615,000
5,715,000
100,000
2,540,000
2,640,000
$ 0.18
$ 0.25
$ 0.25
1.37
3.86
3.82
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, 2018 was $385,190 (2017 – $283,858).
37
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
13. ISSUED CAPITAL, CONTINUED
(c)
Warrants
The Company did not issue any warrants during the year ended December 31, 2018.
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.
Share purchase warrants outstanding at December 31, 2018 and 2017 are as follows:
Exercise price
Expiry date
Balance
December 31,
2017
Issued
during the
year
Exercised/expired
during the year
Balance
December 31,
2018
$0.25
$0.50
$0.30
December 16, 2020(i)
May 19, 2020
12,568,800
7,174,800
November 19, 2018
565,704
Weighted average exercise price
Weighted average remaining life
Exercise price
Expiry date
$0.12
$0.25
$0.50
$0.30
December 16, 2017
December 16, 2020(i)
May 19, 2020
November 19, 2018
Weighted average exercise price
Weighted average remaining life
-
-
-
-
(12,568,800)
(841,171)
-
6,333,629
(565,704)
-
(13,975,675)
6,333,629
$0.50
1.38
20,309,304
$0.34
2.70
Balance
December 31,
2016
Issued
during the
year
Exercised during
the year
Balance
December 31,
2017
7,200
12,568,800
-
-
12,576,000
7,174,880
565,704
7,740,584
0.49
(7,200)
-
-
-
(7,200)
0.12
$0.25
3.96
38
-
12,568,800
7,174,880
565,704
20,309,384
$0.34
2.70
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
14. INCOME TAXES
(a)
Income tax expense differs from the amount that would be computed by applying the
Canadian statutory income tax rate of 27% (2017 - 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,
2017
$ (2,542,081)
26%
(660,941)
110,299
(17,831)
(45,714)
(195,633)
809,820
$ -
2018
$ (1,983,125)
27%
(535,444)
89,638
8,715
(26,629)
(243,706)
707,426
$ -
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, 2018
$ 29,203
(28,408)
(795)
(29,203)
$ -
(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
39
December 31,
2018
$15,794,386
3,508,013
2,500
258,717
184,553
$ 19,748,169
December 31,
2017
$ 13,930,781
648,871
2,596
327,692
142,761
$ 15,052,701
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
14. INCOME TAXES, CONTINUED
(c)
continued
The Company’s unused non-capital tax losses have the following expiry years:
Year
Canada
Mexico
USA
Total
2018
2019
2020
2021
2024
2025
2026
2027
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
-
-
$ - $ 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
2,404,000
$ 11,659,000
-
-
-
-
-
-
-
-
-
$ 3,069,000
$ -
-
-
-
-
-
-
-
-
-
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
2,404,000
$ 14,793,000
15. 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, 2018 was $5,539
(2017 - $4,919) owing to a company with a director in common.
(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 $105,258 during the year ended December 31, 2018 (2017 -
$154,172), which was set off against the related costs. As at December 31, 2018, $4,158
(2017 - $13,700) is included in amounts receivable. The Chief Financial Officer services
ended June 30, 2018.
40
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
15. RELATED PARTY TRANSACTIONS, CONTINUED
(b)
Transactions involving related parties, continued
During the year ended December 31, 2018, the Company paid $55,727 (2017 - $23,530)
for community engagement services to a company with a director 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 beneficially owned by
a director.
(c)
Compensation of key management personnel
The remuneration paid to directors and other key management personnel during the years
ended December 31, 2018 and 2017 were as follows:
Salaries of senior executives(i)
Short-term employee
benefits(ii)
Non-executive directors’ fees
Share-based compensation
Year ended December 31,
2017
2018
$ 711,172
$ 889,103
32,025
28,289
120,000
281,040
$ 1,322,168
116,500
178,725
$ 1,034,686
(i)
(ii)
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, 2018 and 2017.
41
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
16. SEGMENTED INFORMATION
During the years ended December 31, 2018 and 2017, 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 common management
located at the Company’s head office. The Company’s non-current assets by geographic areas for
the years ended December 31, 2018 and 2017 are as follows:
December 31, 2018
Non–current assets
Prepaid rent and deposits
Equipment
Reclamation bond
December 31, 2017
Non –current assets
Prepaid rent and deposits
Equipment
Reclamation bond
Canada
United States
Mexico
Total
$ 11,208
75,777
53,000
$ 139,985
$ -
-
-
$ -
$ -
20,450
-
$ 20,450
$ 11,208
96,227
53,000
$ 160,434
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
The Company’s mineral property revenues by geographic areas for the twelve months ended
December 31, 2018 are as follows:
Revenues
Property option proceeds
Sale of property rights
Project management fees
Revenues
Property option proceeds
Project management fees
Canada
Mexico
Total
December 31, 2018
$ 30,000
-
205,090
$ 235,090
$ 195,380
1,974,875
27,514
$ 2,197,769
$ 225,380
1,974,875
232,604
$ 2,432,859
Canada
December 31, 2017
Mexico
Total
$ -
35,821
$ 35,821
$ 181,115
19,808
$ 200,923
$ 181,115
55,629
$ 236,744
42
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
17. FINANCIAL RISK MANAGEMENT
(a)
Fair value of financial instruments
The fair values of cash and cash equivalents, short term investments, 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.
(b)
Categories of financial instruments
Financial assets
FVTPL
Cash and cash equivalents
Short term investments
Marketable securities
Loans and receivables
Amounts receivable
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities
Joint venture partner deposit
December 31,
2018
December 31,
2017
$
$
$
$
7,087,898
7,021,863
55,000
63,505
14,228,266
205,979
1,598,331
1,804,310
$
$
$
$
6,283,430
-
45,000
33,910
6,362,340
135,790
2,918,046
3,053,836
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.
43
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
17. 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,
2018
(US*)
$ 1,397,331
-
(561)
(328,267)
December 31,
2018
(MXN*)
$ 49,728
-
December 31,
2017
(US*)
$ 1,450,022
-
December 31,
2017
(MXN*)
$ 89,290
-
(2,842)
-
695
-
-
-
$ 1,068,503
$ 46,886
$ 1,450,717
$ 89,290
*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 0.90% (2017 – 1.59%).
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 approximated 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,
2018
2017
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
$ 278,000
$ 247,600
$ 40,000
$ -
44
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
17. FINANCIAL RISK MANAGEMENT, CONTINUED
(d)
Interest rate risk
The Company’s cash and cash equivalents consist of cash held in bank accounts and GICs
that earn interest at 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 approximately $200,000. 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 and short-term investments 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, 2018
11,071,863
3,037,898
63,505
14,173,266
$
December 31, 2017
2,570,712
$
3,712,718
33,910
6,317,340
$
At December 31, 2018, the Company's short-term money market instruments were invested
in GICs earning annual interest rates of 1.55% to 2.33%.
(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.
45
EVRIM RESOURCES CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2018 and 2017
(Expressed in Canadian Dollars)
17. 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. The Company has
invested part of the excess cash flow through a financial institution.
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, 2018
116,464
$
193,188
7,740
317,392
$
December 31, 2017
101,435
34,355
-
135,790
$
$
(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.
18. SUBSEQUENT EVENT
Option grant
In February 2019, the Company granted 200,000 incentive stock options to employees under the
terms of the Company’s stock option plan. The stock options are exercisable at a price of $0.32
per share for a period of five years.
46
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED
DECEMBER 31, 2018
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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
contains 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, 2018 and 2017, 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 and western Canada. The Company also owns a geological
database covering parts of Mexico and western 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 18,
2019.
2
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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.
Financing
On August 31, 2018, the Company completed a strategic financing with Newmont Canada
Corporation (“Newmont”) for gross proceeds of $7,272,602 at a price of $1.50 per share.
The financing is subject to an investment agreement which will expire on the earlier of the
fifth anniversary from the date of closing, or the date on which Evrim enters into an
agreement to divest all or part of its interest in the Cuale project to Newmont or third parties.
The financing includes the following provisions:
•
voting support whereby Newmont will support matters recommended by Evrim’s Board of
directors as long as those matters do not adversely prejudice Newmont’s rights under the
investment agreement;
re-sale restriction on certain Newmont share dispositions;
•
• Newmont will retain participation rights in any future equity financings to maintain its pro
rata ownership interest;
• Newmont will retain a Right of First Offer on the Cuale project in the event Evrim seeks to
divest all or part of its interest in the Cuale project;
the formation of a joint technical committee to advance the Cuale project; and
•
• eighty percent of the gross proceeds from the private placement ($5,818,081) will be
earmarked for the advancement of Cuale, unless Newmont and the Company mutually
agree that funds can be spent elsewhere.
Warrant exercise
During the year, the Company received $3,654,247 from the exercise of common share purchase
warrants, of which $3,063,950 relates to 12,255,800 common share purchase warrants with an
exercise price of $0.25 issued as part of the December 16, 2015 private placement. The balance
consists of 565,704 finders’ warrants with an exercise price of $0.30, and 841,171 common share
purchase warrants with an exercise price of $0.50 issued as part of the May 19, 2017 private
placement.
Stock option exercise
During the year, the Company received $52,500 from the exercise of 210,000 of stock options with
an exercise price of $0.25.
Alliance and joint venture agreements
Exploration alliance in the western United States
On October 31, 2018, the Company announced a three-year exploration alliance with Meridian
Gold Co., a wholly-owned subsidiary of Yamana Gold Inc. (“Yamana”). The alliance allows Evrim
royalty free access to Meridian’s dataset in the western United States for gold and base metal
project generation.
3
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.2
Overview, (continued)
Alliance and joint venture agreements, (continued)
Exploration alliance in the western United States, (continued)
During the alliance period, Evrim will compile a fully digital and comprehensive dataset to generate
new targets and ideas within the designated area. Should Evrim acquire a project within the
designated area, Yamana will have the exclusive right for 60 days to enter into an option agreement
to earn a 75% interest on the following terms:
• within the first two years, Yamana will fund a minimum of US$1,000,000 for initial exploration
•
expenditures, including any acquisition and/or land staking costs;
solely fund additional exploration expenditures between years 3 and 10, or until such time as
Yamana has defined a National Instrument (“NI”) 43-101 compliant pre-feasibility study on a
minimum 1-million-ounce gold equivalent resource;
• make a cash payment of US$150,000 upon signing the option agreement and additional
payments of US$100,000 on the first, second and third anniversaries;
• upon Yamana earning its interest and the formation of a joint venture, Yamana and Evrim will
•
jointly fund programs on a respective 75%/25% basis;
should Evrim’s interest in a project fall below 10%, its interest will convert to a 2.5% net smelter
royalty ("NSR") of which 1.25% NSR can be purchased by Yamana prior to production for
US$5 million; and
• Evrim will be the operator during the first US$10 million of exploration expenditures.
The option period is independent of the alliance period and may extend beyond the three-year
term. At the end of the alliance, both parties will retain a copy of the digital database.
Sarape
In June 2018, the Company announced an option agreement with a subsidiary of Coeur Mining
Inc. (“Coeur”) on the Company’s Sarape project in Sonora, Mexico.
Coeur may acquire an 80% interest in Sarape by spending US$16.5 million on exploration, making
staged cash payments of US$2.55 million and completing an 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.
Exercise of Ermitaño and Cumobabi option agreements
On September 10, 2018, the Company announced that First Majestic Silver Corp. (“First Majestic”)
and Evrim exercised option agreements of Ermitaño and Cumobabi projects in Sonora, Mexico
where First Majestic completed its 100% earn-in for both projects. In connection with the exercise,
First Majestic has made a US$1.5 million cash payment to Evrim and granted Evrim a 2% NSR in
the case of the Ermitaño project and a 1.5% NSR in the case of the Cumobabi project.
4
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.2
Overview, (continued)
Exercise of Ermitaño and Cumobabi option agreements, (continued)
On March 29, 2019, First Majestic announced a resource update at Ermitaño as follows:
• a total of 8.81 million silver-equivalent ounces (approximately 119,000 gold-equivalent
ounces) has been upgraded to indicated status from the 2018 inferred resources;
• additional Inferred resources of 48.98 million silver-equivalent ounces (approximately
659,000 gold-equivalent ounces) representing a 20% increase over the 2018 maiden
resource; and
• First Majestic is planning to complete 16,000 metres of drilling in 2019 to investigate the
continuity of mineralization at shallow depths that may be amenable to open pit extraction.
Metal prices used by First Majestic for mineral resource estimates were US$17.50 per ounce silver
and US$1,300 per ounce gold.
1.3
Selected Annual Information
Revenue and interest income
Net loss
Net loss per share
Total assets
Current liabilities
Long-term liabilities
Shareholders’ equity
Cash dividends declared
1.4
Results of Operations
Exploration Projects
Year ended
December 31
2018
$ 2,552,502
(1,983,127)
(0.03)
14,610,881
1,804,310
66,525
12,740,046
Nil
Year ended
December 31
2017
Year ended
December 31
2016
$ 253,546 $ 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
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. In June 2018, the Company joint ventured the project to Coeur. 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 an 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.
5
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Mexico, (continued)
Sarape, (continued)
The project consists of 5,349 hectares of mineral tenure which hosts the 6 kilometre long and 12
metre wide Sarape vein and the 2.6 kilometre long and 3 metre wide Chiltepin vein. In February
2019, the Company announced the commencement of a 2,500 metre drill program to test the two
vein targets.
Work completed in 2018 included detailed mapping of the veins and surrounding area, sampling,
and an airborne magnetic and radiometric survey. Systematic channel sampling has shown that
the western portion of both veins contains barren white quartz and calcite that are interpreted to
be a late, shallow part of the system. The eastern portion of the Sarape vein includes a separate
phase of low-temperature, tan green quartz that grades from 0.10 to 3.63 grams per tonne (“g/t”)
gold and individual samples at the Chiltepin vein assay from trace to 3.66 g/t gold.
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 were staked by the Company in late 2016 and three
surrounding claims were subsequently acquired under two separate agreements with a third party.
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 Gold Corporation (“Harvest”)
on the Cerro Cascaron property. Harvest can earn a 70% interest (the “Initial Interest”) in the
property by spending 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 were
received upon signing).
After earning the Initial Interest, Harvest can earn an additional 10% interest (the “Additional
Interest”) by paying $200,000 or 200,000 shares at Evrim’s election and funding an NI 43-101
compliant feasibility study over a five-year period. Minimum exploration expenditures of $2 million,
or a $200,000 cash payment are required each 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.
In April 2018, the completion date to fulfil the first years’ obligations was extended to December
31, 2018, for a fee of $30,000. Effective January 31, 2019, the agreement was extended to March
31, 2019 by mutual agreement of both parties.
6
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Mexico, (continued)
Cerro Cascaron, (continued)
As of April 1, 2019, Harvest is in default of Section 4 (b) of the Cerro Cascaron agreement and it
is anticipated that both parties will attempt to negotiate an amenable outcome.
In 2018, the Company completed a ten-hole, 2,255 metre drill program at Cerro Cascaron designed
to test the Cascarita, Serpiente Dorada and San Pedro areas. Drilling at Serpiente Dorada tested
a structural corridor over a strike length of 180 metres at approximately 100 metres below surface.
Mineralization was intersected within broad zones of quartz veining and silicification where the
structure intersects interpreted hydrothermal breccias and a contact between andesitic and rhyolitic
volcanic rocks. Drill hole SPT18-01 returned 1.0 metre grading 20.1 g/t gold and 22.5 g/t silver
from 225.5 metres downhole.
Drilling at San Pedro intersected a banded quartz vein hosted in rhyolitic tuff and andesite,
containing multi-episodal chalcedonic quartz and quartz breccias. Drill hole SPED19-02
intersected 0.35 metres grading 5.39 g/t gold and a separate 4.8 metre interval grading 1.02 g/t
gold. The textures identified in SPED19-02 and SPED19-03 (see results below) are interpreted to
be located above a boiling zone where the best mineralization is expected. Hole SPED19-04
tested a deeper part of the system and intersected a zone of pervasive silicification and quartz
veinlets with anomalous gold and pathfinder elements without a well developed quartz fissure vein.
Four drill holes at Cascarita intersected a predominately rhyolitic tuff sequence with zones of
silicification and veining throughout each hole. Veinlets are predominantly crystalline quartz with
rare colloform quartz and no significant results were intersected. Significant Intersections are
tabulated below:
Hole
SPED19-02
and
SPED19-03
including
SPT18-01
Including
SPT19-02
and
From
(m)
141.0
154.45
162.5
162.5
224.5
225.5
119.5
219.0
To
(m)
145.8
154.8
166.0
164.9
231.0
226.5
131.0
220.0
Width
(m)
4.8
0.35
3.5
2.4
6.5
1.0
11.5
1.0
Gold
(g/t)
1.02
5.39
0.74
0.98
3.29
20.1
0.48
1.57
Silver
(g/t)
13.0
23.7
26.5
36.6
6.3
22.5
3.9
1.2
All intervals given for mineralized intervals are core lengths and the true widths of the intersections
are not known.
7
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Mexico, (continued)
Cuale
Cuale is an early stage exploration property prospective for copper and gold mineralization, located
185 kilometres west of Guadalajara, Mexico. In November 2017, the Company received formal
title for 97 square kilometres of the Cuale project and commenced exploration in December 2017.
The project is subject to a 1.5% precious metal NSR and 1% base metal NSR payable to Altius
Minerals Corporation (“Altius”).
Three phases of mapping, soil sampling, rock chip sampling, hand trenching, and geophysical
surveys were completed. An anomalous gold-rich zone with grades greater than 0.01 grams per
tonne (“g/t”) gold in a 2,300 metre by 800 metre area was defined that coincides with quartz and
advanced argillic alteration characteristic of a high sulphidation hydrothermal system. Within this
anomaly a central corridor of 1,700 metres by 300 metres greater than 0.1 g/t gold in soils was
identified with abundant rock chip samples greater than 0.5 g/t gold.
A total of 760 metres of trenching was completed in eight trenches at the La Gloria prospect.
Mineralization is hosted within a debris flow containing rhyolite tuff and rhyolite fragments. The
unit is pervasively altered to quartz-pyrophyllite with a hematite matrix interpreted to be the
wreathing and oxidation of hypogene pyrite. Significant trench results are tabulated below:
Trench
From
To
Width
Au (g/t)
Trench 1*
Including
And
Trench 2
Including
Trench 3*
Trench 4
Including
And
Trench 5
Including
Trench 6
Including
Trench 7
Including
Trench 8
0
44.6
269.8
0
162.5
0
0
29.4
85.6
0
114.0
0
142.0
46.0
107.1
22.0
351.8
307.8
277.8
184.1
184.1
53.7
156.2
150.2
150.2
174.0
154.0
158.8
156.8
187.1
187.1
46.0
351.8
263.2
8.0
184.1
21.6
53.7
156.2
120.8
64.6
174.0
40.0
158.8
14.8
141.1
80.0
24.0
1.28
1.67
5.22
0.85
4.18
0.28
9.57
12.30
20.85
0.62
1.45
1.00
5.19
0.72
1.02
0.23
Cut Au (g/t)
[Cut at 30.0 g/t]
n/a
n/a
n/a
0.72
3.07
n/a
2.90
3.67
4.71
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Comment
Whole trench
Whole trench
Whole trench
Whole trench
Whole trench
Whole trench
All intervals were reported on an uncut basis. The 10 samples that returned greater than 10 g/t
gold in the original 30 gram fire assay analysis were retested with two 50 gram fire assays and a
50 gram metallic screen fire assay.
Metallic screen assays reported acceptable repeatability including 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.
8
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Mexico, (continued)
Cuale, (continued)
In February 2019, the Company announced the results from ten diamond drill holes totaling 2,179
metres. The drill program was designed to test an exposed high sulphidation gold target defined
by quartz-pyrophyllite-hematite alteration with high grade gold over significant lengths in trenches,
pit sampling, rock chips and soils. The drilling confirmed the alteration, but gold results diminished
notably beneath the trenches.
A mid-January review of the drilling indicates that the host sequence is dominated by submarine
volcanic rocks with a lower stratabound copper rich-horizon and an upper gold rich horizon with
high-sulphidation alteration. The overall setting identified by drilling is interpreted as a laterally
extensive Volcanic Massive Sulphide (“VMS”) style system. The upper gold rich horizon is
interpreted to have undergone lateritic weathering and mechanical concentration to produce the
high gold grades in the trenches that do not extend to depth.
The significant drill intersections are tabulated below:
Hole
GLR18-01
Including
And
GLR18-02
And
GLR18-03
Including
GLR18-04
Including
And
GLR18-05
GLR18-07
GLR18-09
GLR18-10
And
From
(m)
0
1.0
238.8
0
213.0
6.0
33.0
0
0
78.0
26.0
1.0
36.0
6.0
136.0
To
(m)
14.0
11.0
249.0
17.0
216.0
35.0
34.0
32.0
22.0
90.0
28.0
7.0
47.0
7.0
140.0
Width
(m)
14.0
10.0
10.2
17.0
3.0
29.0
1.0
32.0
22.0
12.0
2.0
6.0
11.0
1.0
4.0
Gold
(g/t)
1.92
2.51
-
0.52
-
0.87
11.3
0.83
1.06
-
0.85
0.14
0.31
0.43
-
Copper
(%)
-
-
1.58
-
0.76
-
-
-
-
0.34
-
-
-
-
0.42%
The Company is currently evaluating the project for further reconnaissance style exploration or for
a possible joint venture partnership.
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 ten claims covering 9,795 hectares.
9
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Mexico, (continued)
LIano del Nogal, (continued)
Work carried out by the Company discovered a new porphyry target 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.
Canada
Ball Creek
Ball Creek is a copper porphyry and epithermal gold project 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 a 100% interest on the property the Company paid $150,000 and must 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 $1 million.
The project was subject to a joint venture with a wholly owned subsidiary of Antofagasta Plc.
(“Antofagasta”). 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. 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.
Exploration at Ball Creek in 2017 and 2018 comprised mapping, coarse and detailed grid soil
sampling and rock sampling on seven separate targets: the Quash zone, North and South More
targets, the Rainbow North target, the ME/Goat targets, the Cliff zone and the Ball Creek porphyry,
as well as a remote sensing assessment and a detailed airborne magnetic and radiometric survey.
The Quash zone is marked by distal porphyry alteration and geochemistry related to Golden Ridge
Resources’ Williams porphyry discovery, located approximately 200 metres to the southeast.
10
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Canada, (continued)
Ball Creek, (continued)
The North and South More targets are significant alkalic porphyry alteration zones where
anomalous soil and rock geochemistry extend over four kilometres by one kilometre although a
defined drill target was not identified. North of the Ball Creek Porphyry a strong stockwork zone
with B-type quartz veins containing pyrite, chalcopyrite, bornite and molybdenite returned a rock
chip sample grading 0.30% copper and 0.67 g/t gold. The Cliff zone south of the Ball Creek
porphyry contains quartz, sericite and pyrite alteration superimposed over deeper level alteration.
Rainbow North is a gold target where a 2017 rock sample that returned 17 g/t gold and 0.66%
copper was collected 32 metres north of historic drill hole RN11-01 which intersected 91 metres
grading 0.05% copper and 0.76 g/t gold, including 42.9 metres of 0.06% copper and 0.99 g/t
gold. There is no drilling to the northeast and southwest of this intersection.
As of December 31, 2018, Antofagasta, relinquished their option on the project. The Company
plans to re-option the project to prospective exploration partners.
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.
In July 2018, the Company completed a 4-hole 2,114 metre diamond drill program to test targets
generated by the 2017 core re-logging and re-interpretation and inversion of 2012 airborne
magnetic data. In addition to geologic mapping, 695 metres of reverse circulation drilling in 41
holes tested the till-covered area west of the South, Mid and West zones for additional centres of
porphyry mineralization. Diamond drill holes were completed at the West, South, Adit and newly-
identified Ohio zone targets.
11
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Canada, (continued)
Axe, (continued)
Drilling at the West zone targeted a strong magnetic high beneath and adjacent to gold and copper
mineralization associated with a magnetite skarn assemblage on the edge of a porphyry intrusion.
Drill hole AXD18-01 intersected discontinuous mineralization throughout the hole including 28.8
metres of 0.52 g/t gold and 0.13% copper from 2.6 metres.
The South zone represents another strong magnetic high beneath historic drilling with copper
mineralization and drill hole AXD18-02 intersected an intensely altered porphyritic intrusion with a
weak sulphide content.
Drill hole AXD18-03 intersected magnetic potassic alteration with no significant sulphides at the
Ohio zone magnetic target. Mapping defined the Adit zone as a higher priority target with a 200
metre wide zone of chalcopyrite mineralization overprinted by sericite alteration. The target was
tested by drill hole AXD18-04, which intersected a porphyritic intrusion containing zones of fine-
grained chalcopyrite largely overprinted by sericite alteration. This mineralization includes 63.0
metres grading 0.20% copper with narrow intervals of high copper grades as tabled below:
Hole
AXD18-01
And
And
And
And
And
AXD18-02
And
And
AXD18-03
AXD18-04
And
And
Including
And
And
From
(m)
2.6
76.55
192.9
242.55
278.9
367.0
156.0
278.0
596.32
No Significant
Intersections
196.0
248.0
270.0
311.0
341.0
432.0
To
(m)
31.4
87.0
210.0
263.0
300.0
398.5
192.14
302.47
633.0
224.0
266.0
333.0
319.0
363.0
439.0
Width
(m)
28.8
10.45
17.1
20.45
21.1
31.5
36.14
24.47
36.68
28.0
18.0
63.0
8.0
22.0
7.0
Gold
(g/t)
0.52
0.72
0.71
0.13
0.07
0.34
0.07
0.05
0.08
0.14
0.04
0.03
0.04
0.01
0.01
Copper
(%)
0.13
0.30
0.08
0.32
0.18
0.06
0.18
0.21
0.29
0.23
0.15
0.20
0.63
0.15
0.70
As of December 31, 2018, Antofagasta, relinquished their option on the project.
Astro
In March 2019, the Company announced the designation of the Astro project for option from the
Newmont Exploration Alliance. Under the terms of the option agreement, Newmont can earn up
to an 80% interest by making staged cash payments totaling US$600,000 and solely funding
exploration until it has defined an NI 43-101 compliant pre-feasibility study on a minimum two-
million-ounce gold resource within a ten-year period. Evrim will be the operator for the initial US$5
million in exploration expenditures.
12
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Canada, (continued)
Astro, (continued)
Evrim may then elect to form a joint venture with Newmont on a 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%. Thereafter, Evrim may elect
to contribute its pro-rata share of adopted programs and budgets or convert to a 2% NSR of which
0.5% may be purchased by Newmont for US$10 million.
The 250 square kilometre Astro project is located in the Northwest Territories, six kilometres north
of the Mile 222 airstrip and 195 kilometres northeast of Ross River, providing seasonal road
access.
Soil sampling within the Astro project defined a 9.5 kilometre north-northwest trending corridor of
gold anomalism that includes limited surface sampling of the high-grade Radio and Microwave
gossans:
•
•
chip sampling at the Radio prospect returned 11.6 g/t gold over 18.0 metres including
32.1 g/t gold over 6.0 metres;
chip sampling at the Microwave prospect returned 4.68 g/t gold over 7.5 metres including
6.73 g/t gold over 3.0 metres;
• approximately 40 metres east of the Microwave prospect is a second zone of
•
mineralization grading 2.25 g/t gold over 11.0 metres; and
the mineralized intersections at the Radio and Microwave prospects are open along strike
in both directions.
Jacobite Property
In November 2017, the Company acquired a 100% interest in the Jacobite property subject to a
1% NSR. To earn a 100% interest on the property the Company paid $15,000 and is required to
make $57,500 in staged payments, in cash or shares, at the Company’s election upon meeting
certain milestones. The property is located in south-central British Columbia.
Preparatory field work for a 2019 program of IP geophysics, mapping and soil sampling was carried
out in October 2018.
Lemon Lake Property
In October 2018, the Company acquired a 100% interest in the Lemon Lake property. To earn a
100% interest, the Company paid $15,000 and is required to make $700,000 of staged payments
in cash or shares, at the Company’s election, upon meeting certain milestones. The property is
located in south-central British Columbia.
13
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Canada, (continued)
Lemon Lake Property, (continued)
A program of mapping and soil sampling was carried out over a historic IP chargeability anomaly
that was tested by one historic drill hole and returned 21 metres grading 0.25% copper. Mapping
identified alteration consistent with porphyry copper-gold mineralization and soil sampling
confirmed a copper-gold geochemical anomaly associated with the historic chargeability anomaly.
The Company is focusing on attracting exploration partners for the project.
Newmont Alliance
In July 2017, the Company signed a two-year exploration alliance with Newmont Mining
Corporation (“Newmont”). The alliance focus is on generating greenfield exploration opportunities
in terranes favorable for world-class gold orebodies. Evrim and Newmont have been co-funding
the US$1,840,000 exploration program on a 30:70 basis.
During the initial phase of the program, Evrim undertook 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 2017 exploration program
comprised regional-scale stream sediment sampling using Newmont’s BLEG analysis and
conventional analysis on ultrafine sediment fractions, mapping and prospecting. The 2018
exploration program followed up the 2017 program with additional regional-scale stream sediment
sampling, soil sampling, mapping, prospecting and rock sampling. Combined the 2017 and 2018
exploration programs included 1,046 stream sediment samples, 400 rock chip samples, 2,300 soil
samples, detailed mapping, and staking of 891 square kilometres of claims.
At the end of the alliance, Newmont has 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.
14
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
United States
Yamana Alliance
In October 2018, the Company announced a three-year exploration alliance with a subsidiary of
Yamana Gold Inc. (“Yamana”). The alliance allows Evrim royalty free access to Yamana’s dataset
in the western United States for gold and base metal project generation.
During the alliance period, Evrim will compile a fully digital and comprehensive dataset to generate
new targets and ideas within the designated area. Should Evrim acquire a project within the
designated area, Yamana will have the exclusive right for 60 days to enter into an option agreement
to earn a 75% interest on terms as follows:
• within the first two years, Yamana will fund minimum of US$1,000,000 for initial exploration
•
expenditures, including any acquisition or land staking costs;
solely fund additional exploration expenditures between years 3 and 10, or until such time
as Yamana has defined a NI 43-101 compliant pre-feasibility study on a minimum 1-million-
ounce gold equivalent resource;
• make a cash payment of US$150,000 upon signing the option agreement and additional
payments of US$100,000 on the first, second and third anniversaries;
• upon Yamana earning its interest and the formation of a joint venture, Yamana and Evrim
•
will jointly fund programs on a respective 75:25 basis;
should Evrim’s interest in a project fall below 10%, its interest will convert to a 2.5% NSR
of which 1.25% NSR can be purchased by Yamana prior to production for US$5 million;
and
• Evrim will be operator during the first US$10 million of exploration expenditures. The option
period is independent of the alliance period and may extend beyond the three-year term.
At the end of the Alliance, both parties will retain a copy of the digital database.
The Company commenced compilation of the dataset in March 2019.
15
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
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 targets in Sonora, Chihuahua,
Sinaloa, Durango and on porphyry copper-gold projects in British Columbia. As of December 31,
2018, 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 grant of $183,000 from the Northwest Territories Government, 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.
16
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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, 2018
and 2017. 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
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Acquisition costs
$
36,946
$
2,142
$
30,018
$
6,250
$
4,743
$
38,675
$
2,050
$
24,687
$
19,265
$
29,107
$
19,651
$
12,634
Exploration costs
Aircraft and helicopter
Camp and support
Chemical analysis
Data management and maps
Drilling and trenching
Geological and engineering
Geophysical Surveys
Project management
Materials and supplies
Recording and filing
Travel
Exploration reimbursements
Acquisition & exploration costs net of,
reimbursements
Government grant
Provision for environmental rehabilitation
-
808
-
-
-
51
-
-
-
-
534
1,393
-
1,393
38,339
-
-
-
4,728
-
108
-
1,201
-
-
-
5,620
-
11,657
-
11,657
13,799
-
-
Option proceeds
(63,700)
(66,675)
-
-
-
-
-
1,690
-
-
-
-
-
1,690
-
1,690
-
118
-
-
-
-
-
-
-
-
-
118
-
118
185,656
104,893
28,096
12,259
-
304,461
70,175
-
8,942
-
27,517
741,999
(725,763)
16,236
69,252
39,238
13,010
28,429
-
201,622
-
-
5,393
-
25,430
382,374
-
141,862
74,108
14,706
529,716
301,920
-
-
28,307
-
30,750
1,121,369
(350,623) (1,098,031)
23,338
31,751
-
9,164
2,636
8,005
-
72,020
-
-
748
-
1,316
93,889
-
93,889
-
43,072
20,420
845
233,623
151,492
-
-
13,306
28,190
67,493
558,441
(613,896)
(55,455)
-
9,236
48,401
1,798
-
68,888
-
-
1,924
17,059
8,378
155,684
(198,076)
(42,392)
317,194
82,129
150,425
17,979
-
472,705
-
37,796
7,519
-
54,437
1,140,184
(811,883)
328,301
386,712
107,657
21,959
6,733
-
223,770
-
24,995
3,373
1,871
75,013
852,083
(605,302)
246,781
31,708
-
-
-
6,368
-
-
(64,440)
20,979
-
70,426
-
25,388
-
118,576
-
(36,190)
-
(13,285)
-
347,952
-
259,415
-
-
-
-
-
-
-
-
-
-
-
(30,000)
(50,000)
-
-
-
-
Net expenditures (recoveries), for the year
(25,361)
(52,876)
31,708
(58,072)
20,979
70,426
25,388
118,576
(66,190)
(63,285)
347,952
259,415
Projects continued on next page
17
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Exploration Projects, (continued)
Llano del Nogal
Cuale
Sarape
Generative
Other
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Acquisition costs
$
19
$
5,727
$
25,158
$
954
$
6,090
$
-
$
38,416
$
17,658
$
26,717
$
16,654
$
209,073
$
154,488
Exploration costs
Aircraft and helicopter
Camp and support
Chemical analysis
Data management and maps
Drilling and trenching
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
-
2,508
2,292
447
-
29,801
-
-
331
29,789
3,131
68,299
-
68,299
68,318
-
-
-
-
2,478
-
461
-
6,618
-
-
-
54,244
2,057
65,858
-
65,858
71,585
-
-
-
70,121
98,709
219,114
14,812
213,682
241,578
290,862
-
40,841
86,556
62,804
1,339,079
-
1,339,079
1,364,237
-
-
-
-
5,306
-
178
-
28,160
-
-
1,267
18,055
4,404
57,370
-
57,370
58,324
-
-
-
-
8,365
18,418
1,803
-
61,410
149,191
-
3,682
9,946
7,428
260,243
(275,152)
(14,909)
(8,819)
-
-
(131,680)
-
2,328
-
491
-
17,211
-
-
89
2,978
2,369
25,466
-
25,466
-
4,363
-
22,492
-
48,791
-
-
644
8,676
3,106
88,072
-
88,072
-
21,237
27,623
17,868
-
193,228
-
-
895
25,178
29,728
315,757
-
315,757
-
11,328
26,958
3,053
5,641
61,159
-
-
1,082
3,103
5,864
118,188
-
118,188
-
1,602
5,146
12,098
-
28,452
-
-
66
-
-
47,364
-
47,364
572,971
498,037
539,831
88,396
982,662
1,675,058
510,228
37,796
104,654
166,260
263,064
5,438,957
(3,524,725)
1,914,232
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
25,466
-
126,488
(183,000)
333,415
(153,000)
144,905
(31,890)
64,018
27,460
-
2,123,305
(214,890)
1,008,107
(180,460)
-
-
-
-
-
-
20,301
18,305
20,301
18,305
-
-
(225,380)
(181,115)
Net expenditures (recoveries), for the year
68,318
71,585
1,364,237
58,324
(140,499)
25,466
(56,512)
180,415
133,316
54,863
1,703,336
664,837
18
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.4
Results of Operations, (continued)
Financial Results
For the year ended December 31, 2018 (“2018”), Evrim incurred a net loss of $1,983,127 ($0.03
per share) compared to a net loss of $2,547,081 ($0.04 per share) for the year ended December
31, 2017 (“2017”). The decrease in net loss in 2018 is due to the sale of property rights related
to the Ermitaño and Cumobabi projects for US$1,500,000 ($1,973,775) and increased exploration
activities related to joint ventures.
Excluding the non-cash items, the net loss for 2018 is $1,535,791 (2017: $2,223,069). Non-cash
items include share-based compensation, loss on available for sale investment, provision for
environmental rehabilitation and depreciation.
The Company reported a $504,143 gain from its mineral property operations in 2018, compared
to a loss of $609,208 in 2017. Option proceeds, sale of property rights and management fee
revenue of $2,432,859 was earned during 2018 ($236,744 in 2017). The Company incurred
$5,438,957 in exploration expenditures in 2018, compared to $2,007,620 in 2017. Four active
Company operated joint ventures and an alliance resulted in the increase in the exploration costs.
The Company received $3,524,725 in exploration reimbursements in 2018, compared to
$1,154,001 in 2017. The Company received a $183,000 ($153,000 in 2017) government grant
and $31,890 ($27,460 in 2017) in exploration tax credits for exploration work carried out in
Canada.
The largest component of administrative expenditures is salaries and support services (2018:
$1,097,646; 2017: $879,707) for the permanent staff of the Company. The increase in 2018 is
due to an increase in gross salary for some of the permanent staff members, increase in bonuses
and termination of the CFO sharing services with Mirasol Resources Ltd.(“Mirasol”) as of June
2018. Accounting and legal fees (2018: $333,569; 2017: $156,156) increased in 2018 due to
costs related to the arbitration process with First Majestic. The general administrative cost (2018:
$255,631; 2017: $197,864) increased in 2018 due to a new office in Mexico, increase in the
insurance coverage to meet limits required by the joint venture partners and expenses related to
software upgrades. Travel expenses (2018: $177,384; 2017: $111,058) increased in 2018 due
to an increase in travel related to trade shows, site visits and corporate activities. Marketing
expenses (2018: $85,285; 2017: $47,717) increased in 2018 due to increased participation in
trade shows, site visits and institutional meetings. Investor services (2018: $70,132; 2017:
$31,126) include the costs of maintaining a listing on the TSX Venture Exchange and DTC status,
as well as transfer agent fees. Increase in the cost is due to a change in transfer agents and costs
incurred to obtain DTC eligibility. The Company experienced a foreign exchange loss of $30,231
in 2018 compared to a loss of $113,840 in 2017.
19
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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
2018
Q3
2018
Q2
2018
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Revenues
$ 142,449
$ 2,089,298
$ 244,845
$ 75,910
$ 73,890
$ 105,385
$ 9,873
$ 69,398
Net gain/(loss)
(1,464,903)
992,343
(859,116)
(651,451)
(1,149,261)
(490,246)
(430,873)
(476,701)
Loss per common
share
$ (0.02)
$ 0.01
$ (0.01)
$ (0.01)
$ (0.02)
$ (0.01)
$ (0.01)
$ (0.01)
The differences shown above are primarily the result of variations in factors such as partner
funding, project acquisition, sale of property rights and timing differences. The Company has a
portfolio of exploration properties on which it has undertaken significant exploration as well as
paying on-going claim maintenance costs. 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, 2018, were $7,087,898 compared
to $6,283,430 at December 31, 2017. Short-term investments at December 31, 2018, were
$7,021,863 ($ Nil December 31, 2017). The Company had working capital of $12,646,137 at
December 31, 2018, compared to working capital of $3,351,275 at December 31, 2017. The
increase in working capital is attributable to the sale of property rights, financing with Newmont
and warrants being exercised during the year.
As of December 31, 2018, $4,974,803 of the working capital was earmarked for exploration
expenditures at the Cuale project as per the Newmont investment agreement.
During the year, $3,014,196 of net cash flow was used in operating activities compared to an
inflow of $797,580 in 2017. The difference is due to an increase in the exploration and general
and administration costs of the Company. Financing activities generated $7,215,086 from private
placements net of share issuance costs (2017: $4,060,467), $3,654,247 from exercise of warrants
(2017: $864) and $52,500 from exercise of options (2017: $Nil).
The Company’s financial instruments are cashable at any time without restriction except for the
short-term investments of which $4,000,000 is cashable in March 2019 and $3,021,863 is
cashable in September 2019.
The Company has no long-term debt.
20
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.6
Liquidity, (continued)
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 2019 fiscal year total $82,388 for lease and operating costs, and the estimates
for 2020 total $13,891. The Company has leased a photocopier for the head office with
commitment outstanding of $2,580 for the fiscal year 2019, and the estimates for 2020 to 2023
total $7,740. 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. The CFO services were terminated effective June 30, 2018.
The Company has entered into a rental agreement with Javier Antonio García Penqueño, which
includes the renting of the administrative offices in Hermosillo, Mexico. The annual rent totals
$21,000. This agreement is for a period of three years and expires on December 31, 2020. The
Company may terminate the agreement with a penalty equivalent to two months’ rent payment.
The Company received one million common shares from Harvest Gold upon signing of the option
agreement for the Cerro Cascaron property. The fair value of the shares as of December 31,
2018 was $55,000.
As the Company has no substantial 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”.
1.7
Capital Resources
The Company had 84,469,317 issued and outstanding common shares as of December 31, 2018,
(December 31, 2017 – 65,723,242).
During the year the Company issued shares for private placement, exercise of warrants, exercise
of options and acquisition of mineral property rights.
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
$105,258 during the period ended December 31, 2018 (2017 - $154,172) which were set off
against the related costs. As at December 31, 2018, $4,158 is included in amounts receivable
(2017 - $13,700).
21
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.9
Transactions with Related Parties, (continued)
Compensation of key management personnel
During the year ended December 31, 2018, the Company paid $55,727 (2017 - $23,530) for
community engagement services to a company with a director in common. As at December 31,
2018, $5,539 is included in accounts payable and accrued liabilities (2017 – $4,919).
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 beneficially owned by a
director.
IFRS requires that compensation of key management personnel be included as a transaction with
related parties. In Note 15 (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, 2018, compared to December 31, 2017.
1.10 Fourth Quarter
The Company carried out its regular generative exploration work, a drill program at the Cuale
project and partner funded exploration work during the fourth quarter. The Company announced
a three-year exploration alliance with Yamana during the quarter. The Company recognized
share-based compensation expenses of $68,156 during the fourth quarter. The Company
received $31,890 of mineral exploration tax credit and $75,057 of management fees during the
fourth quarter.
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.
Accounting estimates considered to be significant were used in 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.
22
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.12 Critical Accounting Estimates, (continued)
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:
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.
The Company has not early adopted this revised standard and expects the assets and the related
liability to be increased by $107,300 in the consolidated statement of financial position as of
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.
23
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.14 Financial Instruments and Other Instruments, (continued)
Interest Rate Risk
The Company’s cash and cash equivalents and short-term investments consist of cash held in
bank accounts and GICs that earn interest at fixed interest rates. 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.
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 into 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 material. Readers are cautioned to refer to Note 17 (c) and (d)
of the annual audited consolidated financial statements of the Company for the years ended
December 31, 2018 and 2017. 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.
24
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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.
25
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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.
26
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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.
27
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
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 84,469,317 issued and outstanding common
shares. In addition, the Company has 5,915,000 options outstanding that expire through February
13, 2024 and 6,333,705 warrants outstanding that expire through May 19, 2020. Details of issued
share capital are included in Note 13 of the audited consolidated financial statements for the years
ended December 31, 2018 and 2017.
Other Information
All technical reports on material properties, press releases and material change reports are filed
on SEDAR at www.sedar.com.
28
EVRIM RESOURCES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.15 Other Requirements, (continued)
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.
29