2019 YEAR END REPORT
Management’s Discussion and Analysis
and
Consolidated Financial Statements
For year ended December 31, 2019
(Audited)
FILO MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2019
(Amounts in Canadian Dollars unless otherwise indicated)
The following management’s discussion and analysis (“MD&A”) of Filo Mining Corp. (“Filo Mining” or the
“Company”) should be read in conjunction with the consolidated financial statements for the year ended December
31, 2019 and related notes therein. The financial information in this MD&A is reported in Canadian dollars unless
otherwise indicated and is partly derived from the Company’s consolidated financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board. The effective date of this MD&A is March 19, 2020. Additional information about the Company
and its business activities is available on SEDAR at www.sedar.com and the Company’s website www.filo-mining.com.
Some of the statements in this MD&A are forward-looking statements that are subject to risk factors set out in the
cautionary note contained herein.
CORE BUSINESS
Filo Mining is a mineral exploration company, focused on its 100% controlled, flagship Filo del Sol Project, which is
comprised of two adjacent land holdings: the Filo del Sol Property located in San Juan Province, Argentina, and the
Tamberias Property, located in Region III, Chile. The Filo del Sol Project is located between the prolific Maricunga and
El Indio gold belts, two major mineralized trends that contain such deposits as Caspiche, La Coipa, Veladero, and El
Indio. The region is a stable mining jurisdiction and hosts a number of large-scale mining operations. The project area
is covered under the Mining Integration and Complementation Treaty between Chile and Argentina, which provides
the framework for the development of cross border mining projects.
The Company has completed a pre-feasibility study (“PFS”) on the Filo del Sol Project, with an effective date of January
13, 2019, which demonstrated the project’s robust economic potential. The PFS, which was based only on the oxide
portion of the current Mineral Resource and used prices of US$3.00/lb copper, US$1,300/oz gold, and US$20/oz silver,
yielded an after-tax net present value (“NPV”) of US$1.28 billion at a discount rate of 8%, and generated an internal
rate of return (“IRR”) of 23%. Positive valuations were also maintained across a wide range of sensitivities on key
assumptions. The PFS introduced an initial Probable Mineral Reserve estimate for the project, which is comprised of
259.1 million tonnes at 0.39% copper, 0.33 g/t gold and 15.1 g/t silver, containing 2.2 billion pounds of copper, 2.8
million ounces of gold and 126.0 million ounces of silver.
The Company’s most recent Mineral Resource estimate for the Filo del Sol Project, with an effective date of June 11,
2018, is comprised of 425.1 million tonnes at 0.33% copper, 0.32 g/t gold and 10.7 g/t silver, containing 3.1 billion
pounds of copper, 4.4 million ounces of gold and 146.9 million ounces of silver in the Indicated category, and an
Inferred Mineral Resource estimate of 175.1 million tonnes at 0.27% copper, 0.33 g/t gold and 6.2 g/t silver for 1.1
billion pounds of copper, 1.8 million ounces of gold and 34.8 million ounces of silver. Moreover, the Filo del Sol Project
continues to hold significant exploration potential, with less than 20% of the project area explored to date. The
Company’s Mineral Resource estimates are inclusive of the Mineral Reserve estimates as set forth above.
The technical information relating to the PFS is based on a technical report titled “NI 43-101 Technical Report, Pre-
feasibility Study for the Filo del Sol Project” dated February 22, 2019, with an effective date of January 13, 2019 (the
“Technical Report”). The Technical Report was prepared for Filo Mining by Ausenco Engineering Canada Inc.
(“Ausenco”). The Qualified Persons, as defined under NI 43-101, responsible for the Technical Report are Scott Elfen,
P.E., Ausenco; Robin Kalanchey, P.Eng., Ausenco; Bruno Borntraeger, P.Eng., Knight Piesold Ltd.; Fionnuala Devine,
P.Geo., Merlin Geosciences Inc.; Ian Stillwell, BGC Engineering Inc.; Neil Winkelmann, FAusIMM, SRK Consulting
(Canada) Inc.; James N. Gray, P.Geo., Advantage Geoservices Limited; and Jay Melnyk, P.Eng., AGP Mining
Consultants, all of whom are independent of Filo Mining. The Technical Report is available for review under the
Company's profile on SEDAR at www.sedar.com and on the Company's website at www.filo-mining.com.
1
The Company’s strategy is to create value for its shareholders by expanding and increasing the quality of the resources
and reserves at the Filo del Sol Project and by completing engineering and other studies that are required to prepare
the Filo del Sol Project for eventual development by the Company or by third parties.
The Company has a strong management team and board with extensive experience in the resource sector, particularly
in Chile and Argentina. The board and management team have an appropriate mix of geological, engineering, financial,
and business skills to advance the Company’s projects and to generate value for its shareholders.
2019 OPERATING HIGHLIGHTS
Conclusion of PFS and Definition of Maiden Probable Mineral Reserve Estimates
On January 13, 2019, the Company successfully completed a PFS on the oxide portion of the Filo del Sol deposit,
which continued to demonstrate that the Filo del Sol Project exhibits strong economic potential. The PFS was headlined
by a US$ 1.28 billion after-tax NPV using a discount rate of 8% and an IRR of 23%, at US$ 3.00/lb copper, US$
1,300/oz gold, and US$ 20/oz silver.
The PFS also introduced initial Mineral Reserve estimates for the Filo del Sol Project, which at a 0.01 US$/tonne Net
Value per Tonne (“NVPT”) cut-off, were as follows:
Notes to accompany Filo del Sol Mineral Reserves table:
1. Mineral Reserves have an effective date of 13 January 2019. The Qualified Person for the estimate is Mr. Jay Melnyk, P.Eng. of AGP
2.
3.
Mining Consultants, Inc.
The Mineral Reserves were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves;
The Mineral Reserves are supported by a mine plan, based on a pit design, guided by a Lerchs Grossmann (LG) pit shell. Inputs to that
process are:
Metal prices of Cu $3.00/lb, Ag $20/oz, Au $1300/oz;
Mining cost of $2.00/t;
An average processing cost of $9.73/t;
General and administration cost of $2.02/t processed;
Pit slope angles varying from 29 to 45 degrees, inclusive of geotechnical berms and ramp allowances;
Process recoveries were based on rocktype. The average recoveries applied were 83% for Cu, 73% for Au and 80% for Ag,
which exclude the adjustments for operational efficiency and copper recovered as precipitate which were included in the
financial evaluation;
4.
Dilution and Mining Loss adjustments were applied at ore/waste contacts using a mixing zone approach. The volumes of dilution gain
and ore loss were equal, resulting reductions in grades of 1.0%, 1.3% and 1.0% for Cu, Au and Ag respectively;
5. Ore/Waste delineation was based on a Net Value Per Tonne (NVPT) breakeven cut-off considering metal prices, recoveries, royalties,
6.
7.
process and G&A costs as per LG shell parameters stated above;
The life-of-mine (LOM) stripping ratio in tonnes is 1.52:1;
All figures are rounded to reflect the relative accuracy of the estimate. Totals may not sum due to rounding as required by reporting
guidelines.
To date, only the deposit’s uppermost portion, which is comprised of oxide material, has been incorporated into the
Company’s engineering and economic studies, including the PFS. While the Company was aware of the existence of
copper-gold mineralization below this oxide cap, exploration work on the size, scope and grade of this material had
been limited. This deeper mineralization represents potentially transformative upside for the project, which the
Company has recently drill-tested, as discussed below.
2
Confirmation of Large Copper-Gold Porphyry System Underlying Current Resource
During the 2018/2019 field season, which ended March 2019, the Company successfully completed seven diamond
holes, totaling 4,747 metres. The 2018/2019 campaign confirmed the existence of a significant underlying porphyry
copper-gold system, extending to depths of over 1,000 metres below surface, 530 metres deeper than previously
known. Six of the seven holes completed during this campaign also ended in mineralization. The full assay results
from the 2018/2019 drill program were received and disclosed in May 2019 and are summarized in the following table:
Cu
(%)
From
(m)
Hole-ID
FSDH025
incl.
FSDH026
incl.
and incl.
and incl.
and incl.
FSDH027
incl.
FSDH028
incl.
and incl.
incl.
FSDH029
incl.
FSDH030
incl.
and incl.
incl.
and incl.
FSDH031
CuEq1
(%)
0.47
0.71
0.65
0.71
1.06
0.75
0.79
0.44
0.65
1.04
n/a
1.05
1.31
0.44
0.95
1.44
1.67
2.50
n/a
0.80
2.49
1 CuEq is calculated based on US$ 2.80/lb Cu, US$ 1,400/oz Au and US$ 16/oz Ag. The formula is: CuEq % = Cu % + (0.7292 *
Au g/t) + (0.0083 * Ag g/t).
Ag
(g/t)
1.6
1.2
1.6
1.6
1.8
1.4
3.3
1.8
3.5
8.0
15.2
12.9
24.0
1.8
3.1
42.5
1.4
121.5
12.60 260.1
2.6
10.5
Length
(m)
1,025.0
132.0
613.9
460.0
80.0
88.0
54.0
545.4
104.0
547.5
9.0
173.5
67.5
800.1
36.0
378.0
54.0
126.0
12.0
124.0
4.0
To
(m)
1,025.0
466.0
613.9
474.0
94.0
316.0
474.0
545.4
422.0
563.5
164.0
563.5
563.5
800.1
42.0
512.0
244.0
388.0
274.0
512.0
216.0
0.0
334.0
0.0
14.0
14.0
228.0
420.0
0.0
318.0
16.0
155.0
390.0
496.0
0.0
6.0
134.0
190.0
262.0
262.0
388.0
212.0
Au
(g/t)
0.22
0.30
0.34
0.34
0.43
0.33
0.37
0.28
0.34
0.78
22.04
0.54
0.68
0.26
0.20
0.89
0.83
1.79
0.30
0.48
0.39
0.45
0.73
0.50
0.49
0.22
0.37
0.40
0.18
0.55
0.61
0.24
0.78
0.44
1.05
0.19
0.54
0.49
0.08
0.40
3.18
These findings represented a step change in the Company’s understanding of the geology of the Filo del Sol deposit,
and continued to affirm that the current Mineral Resource is only a small portion of a much larger mineralization
system.
Accordingly, for the 2019/2020 field season, which began in November 2019 and is currently being concluded, the
Company executed an extensive field program to follow up on prior season’s findings. Namely, a main focus of the
program was to continue drilling the gold-copper-silver mineralization system, which hosts the Filo del Sol deposit,
with a focus on extending the mineralization on strike and at depth. In addition, the campaign tested the Tamberias
West prospect, a previously unexplored and recently permitted area located southwest of the current Mineral
Resource, for additional near surface oxide mineralization. In addition, the 2019/2020 field program also included the
undertaking of drone magnetometer and full 3D induced polarization (“IP”) geophysical surveys to refine targeting.
To date, partial assay results on the first two diamond holes have been received and verified by the Company. These
first assay batches are highlighted by an intercept of 600 metres of 1.12% Copper Equivalent1 (“CuEq”), comprised
of 0.67% copper and 0.44 g/t gold. A summary of these partial assay results are provided in the table below:
3
Hole-ID
FSDH032
incl.
and incl.
FSDH033
incl.
incl.
and incl.
From
(m)
To
(m)
Length
(m)
Cu
(%)
192.0
378.0
492.0
96.0
176.0
176.0
264.0
978.0
978.0
702.8
366.0
366.0
226.0
284.0
786.0
600.0
210.8
270.0
190.0
50.0
20.0
0.57
0.67
0.90
0.48
0.57
1.31
0.03
Au
(g/t)
0.40
0.44
0.54
0.52
0.58
0.68
0.42
Ag
(g/t)
13.6
16.2
19.5
23.5
33.1
1.8
223.1
CuEq
(%)
0.97
1.12
1.46
1.06
1.27
1.82
2.19
The assay results, particularly those for hole FSDH032, demonstrate the size and scope of this deeper mineralization
and reaffirm that a large porphyry mineralization system exists beneath the current Mineral Resource and extends to
the north. It is important to note that the highlighted 600 metre intercept commences at effectively the floor of the
PFS’ open pit design.
In light of the COVID-19 pandemic, the Company has now curtailed its 2019/2020 field and drill campaign at the Filo
del Sol Project (see the “Outlook and Statement on Readiness and Response to COVID-19” section below). The
remaining assays from the 2019/2020 drill program will be released as data is received and verified by the Company.
CORPORATE UPDATE
Credit Facilities
On January 12, 2019, the Company obtained an unsecured US$ 5.0 million credit facility (the “January 2019 Facility”)
from Zebra Holdings and Investments S.à.r.l (“Zebra”), an insider of the Company, to provide additional financial
flexibility to fund ongoing exploration at the Filo del Sol Project and for general corporate purposes. Zebra reports its
security holdings in the Company as a joint actor with Lorito Holdings S.à.r.l. (“Lorito”), and at the time of entering
into the January 2019 Facility they collectively held more than 20% of the Company’s issued and outstanding common
shares. The January 2019 Facility replaced an existing US$ 2.0 million facility from Zebra, which matured on January
12, 2019, and into which the outstanding balance owed thereunder was transferred. As consideration for the January
2019 Facility, Zebra will receive 300 common shares each month, for every US$ 50,000 in principal outstanding,
prorated accordingly for the number of days outstanding. The January 2019 Facility matures on July 12, 2020, and no
interest is payable in cash during its term.
On February 28, 2019, the Company obtained an additional unsecured US$ 5.0 million short-term credit facility (the
“February 2019 Facility”) from Zebra. As consideration for the February 2019 Facility, Zebra received 6,000 common
shares of the Company upon respective thereof, and shall receive an additional 300 common shares each month, for
every US$ 50,000 in principal outstanding on the facility, prorated accordingly for the number of days outstanding.
The February 2019 Facility matured on February 28, 2020, and no interest was payable in cash during its term.
In addition, on April 26, 2019, the Company obtained an unsecured US$ 4.0 million credit facility (the “April 2019
Facility”) from Zebra. As consideration for the April 2019 Facility, Zebra received 6,000 common shares of the Company
upon execution thereof, and will receive an additional 300 common shares each month, for every US$ 50,000 in
principal outstanding on the facility, prorated accordingly for the number of days outstanding. The April 2019 Facility
matures on April 26, 2020, and no interest is payable in cash during its term.
Through the facilities described above, as of the date of this MD&A, the Company currently has access to US$ 9.0
million, which may be used, as necessary, to fund exploration at the Filo del Sol Project and for general corporate
purposes. As of the date of this MD&A, the Company has no amounts outstanding against the facilities.
4
All common shares issued in conjunction with the facilities are subject to a four-month hold period under applicable
securities laws.
Closing of Equity Financings for $40 Million
On August 30, 2019, the Company closed the sale of 7,275,000 common shares of the Company on a bought deal
basis to a syndicate of underwriters led by BMO Capital Markets (the “Underwriters”), at a price of $2.75 per share
(the “Issue Price”) for total gross proceeds of approximately $20.0 million (the “Offering”). On August 30, 2019, the
Company also closed a concurrent private placement of 7,272,727 common shares at the Issue Price for additional
gross proceeds of approximately $20.0 million (the “Concurrent Private Placement”). Lorito acquired 1,818,182
common shares of the Company through the Offering for gross proceeds of $5.0 million, and Zebra was the sole
subscriber in the Concurrent Private Placement. Share issuance costs related to the Offering and Concurrent Private
Placement totaled $1.2 million, and included commissions, professional fees and regulatory fees.
Zebra and Lorito report their shareholding in the Company as joint actors and are related parties of the Company by
virtue of their individual, and in the case of Lorito, combined, shareholding in the Company in excess of 20%. On
August 30, 2019, following the close of the Financings, Zebra and Lorito held 27.38% and 8.54%, respectively, of the
then issued and outstanding common shares of the Company.
Following closing of the Offering and Concurrent Private Placement, approximately $18.5 million of the net proceeds
was used by the Company to fully repay amounts drawn under the credit facilities extended by Zebra. The Company
has used, and plans to continue to deploy, the remaining net proceeds primarily for the ongoing exploration and
development of the Filo del Sol Project, as well as for working capital, corporate overhead and general and
administrative purposes.
OUTLOOK AND STATEMENT ON READINESS AND RESPONSE TO COVID-19
While the oxide material of the Filo del Sol deposit in itself represents a compelling production case, as outlined in the
PFS, with an after-tax NPV of US$1.28 billion at an 8% discount rate and an IRR of 23%, the exploration results
arising out of last two drill programs have confirmed the existence of a large porphyry system underlying the current
Mineral Resource, which may be transformative for the flagship asset’s size and scope. While the primary focus of the
Company’s most recent 2019/2020 field campaign has been the drilling of diamond holes to better define and extend
this deeper mineralization, the Company has also drill-tested other targets on the project’s extensive and largely
unexplored land package, such as the Tamberias West area.
In light of the COVID-19 pandemic, the Company’s 2019/2020 field program is being curtailed with demobilization of
personnel and equipment currently underway. The Company is responding to COVID-19 within the framework of
internal protocols, and local and national health authority requirements and recommendations. The health and safety
of the Company’s employees, contractors, visitors, and stakeholders is Filo Mining’s number one priority. The
Company’s camp facilities and offices have implemented travel restrictions, surveillance, monitoring and response
plans to reduce the risk of COVID-19 exposure and outbreak, including health screening of personnel when
appropriate. All non-critical business travel has also been curtailed. We will continue to monitor the situation and
are prepared to implement additional changes to minimize any potential impacts of the global outbreak that might
emerge at the Company’s project site or offices as necessary.
As a result of an earlier end to the 2019/2020 field program than initially planned, the Company’s completed drilling
will be lower than previously estimated and will total approximately 8,000 metres. Prior to the decision to conclude
the field season early, the Company did successfully complete the planned drone magnetometer survey and full 3D
IP geophysical survey. Despite the early curtailment to the 2019/2020 field season, the Company was able to achieve
its key strategic operating objective for the season in successfully drill-testing the mineralization underlying the current
Mineral Resource, as evidenced by hole FSDH032 described above.
5
The remaining assays results from the 2019/2020 field program will be made available as data is received and verified
by the Company.
RESULTS FROM OPERATIONS
Year Ended
Net loss ($000’s)
Loss per share, basic and diluted ($)
Total assets ($000’s)
Dec-19
Dec-18
Dec-17
28,571
0.37
23,750
28,891
0.41
11,938
18,695
0.30
10,193
Filo Mining is a junior exploration company and, as such, its net losses are largely driven by its exploration and
project investigation activities and there is no expectation of generating operating profits until it identifies and
develops a commercially viable mineral deposit.
Key financial results for the last eight quarters are provided in the table below.
Three Months Ended
Dec-19
Sep-19
Jun-19
Mar-19
Dec-18
Sep-18
Jun-18
Mar-18
Exploration costs ($000's)
5,759
1,895
4,332
11,022
5,183
2,208
3,595
13,132
Operating loss ($000’s)
7,844
2,575
5,243
12,030
6,201
3,816
4,433
14,626
Net loss ($000’s)
8,038
3,105
5,336
12,092
6,191
3,865
4,446
14,389
Net loss per share, basic and
diluted ($)
0.09
0.04
0.07
0.17
0.09
0.05
0.06
0.22
Due to the geographic location of the Filo del Sol Project, the Company’s business activities fluctuate with the
seasons, through increased drilling and other exploration activities during the summer months in South America.
As a result, a general recurring trend is the increase in exploration expenditures, and therefore net losses, for the
fourth quarter and first quarter of a fiscal year, relative to the second and third quarters. In addition, other relevant
factors, such as the financial position of the Company, other corporate initiatives, as well as the type and scope
of planned exploration/project work, could affect the level of exploration activities and net loss in a particular
period.
Filo Mining incurred a net loss of $28.6 million (2018: $28.9 million) for the year ended December 31, 2019.
Exploration and project investigation costs are the most significant expenditures of the Company and account for
approximately 81% (2018: 83%) of the net loss during the year ended December 31, 2019. This is reflective of
the Company’s accounting policy to expense its exploration costs through the consolidated statement of
comprehensive loss, except for mineral property option payments and mineral property acquisition costs, which
are capitalized.
Exploration and project investigation costs for the year ended December 31, 2019 were $23.0 million (2018: $24.1
million), which decreased slightly relative to the prior year. The decrease is generally the result of 2018 reflecting
higher engineering, consultation and technical costs, such as metallurgical testwork, incurred in support of the
PFS then underway, whereas during 2019, no similar technical studies were pursued. Detailed breakdowns of
exploration costs for the years ended December 31, 2019 and 2018, are provided in the notes to the consolidated
financial statements.
6
Excluding share-based compensation, administration costs for the year ended December 31, 2019 were $2.8
million (2018: $2.8 million). Share-based compensation, a non-cash cost, reflects the amortization of the estimated
fair value of options over their vesting period and is based to a large degree on the Company’s share price and its
volatility. The actual future value to the option holders may differ materially from these estimates as it depends
on the trading price of the Company’s shares if and when the options are exercised. In addition, as the granting
of options and their vesting is at the discretion of the Board, the related expense is unlikely to be uniform across
quarters or financial years.
During the year ended December 31, 2019, the Company reported financing costs of $1,339,000, which increased
relative to the prior year (2018: $54,000). This increase is the result of the Company’s heavier use of credit
facilities, as extended by Zebra, during 2019, and the larger resulting number of shares issued and issuable to
Zebra as a result thereof.
Also, during the year ended December 31, 2019, the Company recognized a net monetary gain of $158,000 (2018:
$39,000) in relation to the application of hyper-inflationary accounting for the Company’s Argentine subsidiary,
which began July 1, 2018. The monetary gains recognized are the results of changes in the Argentine price indices
and changes to the Company’s net monetary position during the respective periods. Further discussion regarding
the application of hyper-inflationary accounting has been provided in the notes to the consolidated financial
statements.
No tax recovery is recognized as a result of the nature of the Company’s activities and the lack of reasonably
expected taxable profits in the near term.
In other comprehensive income, the Company reported a foreign exchange translation loss of $514,000 (2018:
$474,000) for the year ended December 31, 2019, on translation of subsidiary company accounts from their
functional currency to the Canadian dollar presentation currency. For the year ended December 31, 2019, the
foreign exchange translation loss is primarily the result of fluctuations of the Canadian dollar relative to the Chilean
peso. In 2018, the foreign exchange translation loss also incorporated the impacts of fluctuations of the Canadian
dollar exchange rate relative to the Argentine peso, however this ceased on July 1, 2018, with the Company’s
application of hyper-inflation accounting for the Company’s Argentine subsidiary. As a result, beginning July 1,
2018, the Company began recognizing the impact of hyperinflation within other comprehensive income. For the
year ended December 31, 2019, the impact of hyperinflation was a loss of $709,000 (2018: gains of $395,000),
and consists of adjustments recognized on the continuing inflation of opening non-monetary balances during the
period and the ongoing translation of the Company’s Argentine subsidiary into the Canadian dollar presentation
currency following July 1, 2018, as mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2019, the Company had cash of $13.8 million and net working capital of $12.7 million, compared
to cash of $2.4 million and a net working capital deficit of $0.6 million, as at December 31, 2018. The increase in the
Company’s cash and net working capital is due primarily to aggregate net proceeds totaling $38.8 million received
from the Offering and Concurrent Private Placement, which closed on August 30, 2019. This cash inflow has been
partially offset by $18.5 million used to fully repay amounts previously drawn under the credit facilities extended by
Zebra and funds used in operations.
Based on Filo Mining’s financial position at December 31, 2019, and exploration expenditures subsequent to year-end
in relation to the 2019/2020 field season, the Company anticipates the need for further funding to support its planned
South American operations, and for general corporate and working capital purposes. The Company is currently
evaluating potential additional sources of financing. Historically, capital requirements have been primarily funded
through equity financing, joint ventures, disposition of mineral properties and investments, and the use of short-term
credit facilities extended by Zebra, such as those described in the “Corporate Update” section above. Zebra is a related
party by virtue of its shareholding in the Company in excess of 20%.
7
While management is confident that additional sources of funding will be secured to fund planned expenditures for at
least twelve months from December 31, 2019, factors that could affect the availability of financing include the progress
and results of ongoing exploration at the Company’s mineral properties, the state of international debt and equity
markets, and investor perceptions and expectations of the global copper, gold, and/or silver markets. There can be
no assurance that such financing will be available in the amount required at any time or for any period or, if available,
that it can be obtained on terms satisfactory to the Company. If necessary, the Company may explore opportunities
to revise the due dates of its liabilities, and/or settle its liabilities through the issuance of the common shares and
other equity instruments. Based on the amount of funding raised, the Company’s planned initiatives and other work
programs may be postponed, or otherwise revised, as necessary.
Moving forward, the Company continues to have the support of the Lundin Family Trusts, such as Zebra, the Company’s
largest shareholder, and expects that the majority of its treasury will be used to fund exploration and development of
the Filo del Sol Project. On an ongoing basis, the Company evaluates and adjusts its planned exploration and
administrative activities to ensure that adequate levels of working capital are maintained.
RELATED PARTY TRANSACTIONS
Under the normal course of operations, the Company may undertake transactions or hold balances with related parties.
Other than those related party transactions identified elsewhere in this MD&A, the Company also engages with
Josemaria Resources Inc. (“Josemaria”, formerly NGEx Resources Inc.) and NGEx Minerals Ltd. (“NGEx Minerals”),
related parties by way of directors, officers and shareholders in common, and Bofill Mir & Alvarez Jana Abogados Ltda.
(“BMJAL”), a Chilean legal firm, of which a director of the Company is a partner.
Related party services
The Company has a cost sharing arrangement with Josemaria and NGEx Minerals. Under the terms of this
arrangement, the Company provides management, technical, administrative and/or financial services (collectively,
“Management Services”) to Josemaria and NGEx Minerals, and vice versa. In addition, the Company engages BMJAL,
as its legal counsel in Chile. These transactions were incurred in the normal course of operations, and are summarized
as follows:
Management Services to Josemaria
Management Services to NGEx Minerals
Management Services from Josemaria
Management Services from NGEx Minerals
Legal services from BMJAL
Year ended
December 31,
2018
735,822
-
(555,443)
-
(86,240)
2019
1,217,414
238,003
(336,044)
(363,373)
(93,659)
8
Related party balances
The amounts due from (to) related parties, and the components of the consolidated statement of financial position in
which they are included, are as follows:
December 31,
2019
December 31,
2018
Receivables and other assets
Receivables and other assets
Related Party
Josemaria
NGEx Minerals
196,489
64,222
Accounts payable and accrued liabilities
Josemaria
(220,366)
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
NGEx Minerals
BMJAL
(57,490)
(22,617)
Extended Camp Use Agreement
523,244
-
(77,492)
-
(15,463)
On June 26, 2019, the Company, through its wholly-owned subsidiary, entered into a transaction with a wholly-owned
subsidiary of Josemaria whereby the Company extended its right to use Josemaria’s Batidero Camp in Argentina until
at least April 1, 2021, being the end of the 2020/2021 field season, in exchange for a cash consideration of US$235,000,
or approximately $331,000.
Key management compensation
The Company’s key management personnel have the authority and responsibility for overseeing, planning, directing
and controlling its activities and consist of the Board of Directors and members of the executive management team.
Total compensation expense for key management personnel, and the composition thereof, is as follows:
Salaries
Short-term employee benefits
Directors fees
Stock-based compensation
Incentive bonuses
Year ended
December 31,
2018
1,087,500
45,477
97,000
1,981,235
470,000
3,681,212
2019
987,604
47,542
97,000
1,784,488
490,000
3,406,634
SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant account policies are described in Note 3 the consolidated financial statements for year
ended December 31, 2018, as on SEDAR at www.sedar.com.
New Accounting Pronouncements
The IASB and the IFRS Interpretations Committee (previously the International Financial Reporting Interpretations
Committee, IFRIC) have issued standards and amendments, or interpretations to existing standards, that were
not yet effective and not applied by the Company as at December 31, 2019. These new standards and
interpretations are not expected to be applicable for the Company for the annual period beginning on or after
January 1, 2020.
9
CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements in accordance with IFRS, such as the underlying
consolidated financial statements for the year ended December 31, 2019, requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and expenditures. These estimates and
assumptions are based on management’s best knowledge of the relevant facts and circumstances taking into
account previous experience. Actual results could differ from those estimates and such differences could be
material. Estimates are reviewed on an ongoing basis and are based on historical experience and other facts and
circumstances. Revisions to estimates and the resulting effects on the carrying amounts of the Company’s assets
and liabilities are accounted for prospectively. Information about estimates, assumptions and other sources of
estimation uncertainty as at December 31, 2019 that have a risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next year are provided below:
Valuation of mineral properties – The Company carries the acquisition costs of its mineral properties at cost less
any provision for impairment. The Company undertakes periodic reviews of its mineral properties for indicators of
impairment, and if identified would further review the carrying values of the applicable mineral properties to determine
if their carrying values may exceed their fair value. In undertaking the initial review for indicators of impairment, and
also any subsequent review of a mineral property’s carrying value, management of the Company is required to make
significant judgements and estimates. These judgments and estimates are subject to various risks and uncertainties,
which may ultimately have an effect on the expected recoverability of the carrying values of the mineral properties.
FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash, receivables and other assets, and trade payables and accrued
liabilities with carrying values considered to be reasonable approximations of fair value due to the short or near-
term nature of these instruments.
As at December 31, 2019, the Company’s financial instruments are exposed to the following financial risks,
including credit, liquidity and currency risks:
(i) Credit risks associated with cash is minimal as the Company deposits the majority of its cash with a
large Canadian financial institution that has been accorded a strong investment grade rating by a
primary rating agency.
(ii) Liquidity risks associated with the inability to meet obligations as they become due, as further
described in the “Liquidity and Capital Resources” section above, is minimized through the
management of its capital structure and by maintaining good relationships with significant
shareholders and creditors, such as Zebra. The Company also closely monitors and reviews its costs
to date and actual cash flows on a monthly basis. In assessing liquidity risk as at December 31, 2019,
the Company has also considered the impact of funds made available through the credit facilities
described above.
The maturities of the Company’s financial liabilities as at December 31, 2019, are as follows:
10
Total
Less than
1 year
1-5 years
More than
5 years
Accounts payable and
accrued liabilities
Lease liabilities
Total
3,553,545
72,803
3,553,545
60,658
-
12,145
3,626,348
3,614,203
12,145
-
-
(iii) Foreign currency risk can arise when the Company or its subsidiaries transact or have net financial
assets or liabilities which are denominated in currencies other than their respective functional
currencies.
At December 31, 2019, the Company’s largest foreign currency risk exposure existed at the level of
its Canadian headquarters, where the Company held a net financial asset position denominated in US
dollars having a Canadian dollar equivalent of approximately $2.4 million. A 10% change in the foreign
exchange rate between the US dollar and the Canadian dollar, the functional currency of the
Company’s Canadian headquarters, would give rise to increases/decreases of approximately $240,000
in financial position/comprehensive loss.
OUTSTANDING SHARE DATA
As at March 19, 2020, the Company had 88,218,451 common shares outstanding and 8,267,501 share options
outstanding under its share-based incentive plan.
FINANCIAL INFORMATION
The Company’s next scheduled financial report will be for the three months ended March 31, 2020, which is
expected to be published on or around May 6, 2020.
RISKS AND UNCERTAINTIES
The operations of the Company are speculative due to the high-risk nature of its business, which includes the
acquisition, financing, exploration, development and operation of mineral and mining properties. There are a
number of factors that could negatively affect the Company’s business and the value of its common shares,
including the more significant risk factors identified by the Company and listed below. The following information
pertains to the outlook and conditions currently known to the Company that could have a material impact on the
financial condition of the Company. Other factors may arise that are not currently foreseen by management of the
Company that may present additional risks in the future. Current and prospective security holders of the Company
should carefully consider these risk factors, as they could materially affect the Company’s future operations and
could cause actual events to differ materially from those described in forward-looking statements relating to the
Company.
COVID-19
The COVID-19 pandemic has negatively impacted global financial markets, and may continue to do so. As
discussed in further detail below, the economic viability of the Company’s business plan is impacted by its ability
11
to obtain financing, and global economic conditions impact the general availability of financing through public
and private debt and equity markets, as well as through other avenues.
In addition, as the health and safety of the Company’s employees, contractors, visitors, and stakeholders
(collectively, the “Stakeholders”) are the Company’s top priority, the Company will monitor developments with
respect to COVID-19, both globally and within its operating jurisdictions, and will implement any such changes
to its business as may be deemed appropriate to mitigate any potential impacts to its business and the
Stakeholders. Such changes, may include, but are not limited to, temporary closures of the Company’s project
site or offices, and deviations from the timing and nature of previous operating plans.
Exploration and Development Risk
Mining exploration, development and operations generally involve a high degree of risk that cannot be eliminated,
and which can adversely impact the Company’s success and financial performance. Exploration for and
development of mineral deposits involves a high degree of risk and few properties that are explored are ultimately
developed into producing mines.
Major expenses are typically required to locate and establish Mineral Reserves, to develop metallurgical processes
and to construct mining and processing facilities at a particular site. Whether a mineral deposit will be
commercially viable depends on a number of factors, which include, among other things, the following:
•
•
•
•
•
•
•
the interpretation of geological data obtained from drill holes and other sampling techniques;
feasibility studies (which include estimates of cash operating costs based upon anticipated
tonnage and grades of ore to be mined and processed);
the particular attributes of the deposit, such as size, grade and metallurgy; expected recovery
rates of metals from the ore;
proximity to infrastructure and labour; the ability to acquire and access land; the availability and
cost of water and power; anticipated climatic conditions;
cyclical metal prices; fluctuations in inflation and currency exchange rates;
higher input commodity and labour costs; and
government regulations, including regulations relating to prices, taxes, royalties, land tenure, land
use, importing and exporting of minerals and environmental protection.
The risks and uncertainties inherent in exploration activities include but are not limited to: legal and political risk
arising from operating in certain developing countries; civil unrest; general economic; market and business
conditions; the regulatory process and actions; failure to obtain necessary permits and approvals; technical
issues; new legislation; competitive and general economic factors and conditions; the uncertainties resulting from
potential delays or changes in plans; the occurrence of unexpected events; and management’s capacity to
execute and implement its future plans. Discovery of mineral deposits is dependent upon a number of factors,
not the least of which are the technical skills of the exploration personnel involved and the capital required for
the programs. The cost of conducting programs may be substantial and the likelihood of success is difficult to
assess. There is no assurance that the Company’s mineral exploration activities will result in any discoveries of
new bodies of commercial ore. There is also no assurance that even if commercial quantities of ore are discovered
that a new ore body would be developed and brought into commercial production. The commercial viability of a
mineral deposit once discovered is also dependent upon a number of factors, some of which are the particular
attributes of the deposit (such as size, grade, metallurgy and proximity to infrastructure and labour), the
interpretation of geological data obtained from drilling and sampling, feasibility studies, the cost of water and
power; anticipated climatic conditions; cyclical metal prices; fluctuations in inflation and currency exchange rates;
higher input commodity and labour costs, commodity prices, government regulations, including regulations
relating to prices, taxes, royalties, land tenure and use, allowable production, importing and exporting of minerals,
and environmental protection. Most of the above factors are beyond the control of the Company. Development
12
projects will also be subject to the successful completion of final feasibility studies, issuance of necessary permits
and other governmental approvals and receipt of adequate financing. The exact effect of these factors cannot be
accurately predicted, but the combination of any of these factors may adversely affect the Company’s business.
The Company’s operations are subject to all of the hazards and risks normally encountered in the exploration and
development of copper, gold, and silver projects and properties, including unusual and unexpected geologic
formations, seismic activity, rock slides, ground instabilities or failures, mechanical failures, flooding and other
conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction
of facilities, damage to life or property, environmental damage and possible legal liability.
We are concentrated in the copper/gold/silver mining industry, and as such, the Company’s success will be
sensitive to changes in, and the Company’s performance will depend to a greater extent on, the overall condition
of the copper/gold/silver mining industry. The Company’s business may be negatively impacted by fluctuations
in the copper/gold/silver mining industry generally. The Company may be susceptible to an increased risk of loss,
including losses due to adverse occurrences affecting us more than the market as a whole, as a result of the fact
that the Company’s projects and properties are concentrated in the copper/gold/silver mining sector.
The Company attempts to mitigate its exploration risk by maintaining a diversified portfolio and by balancing its
exploration risks through joint ventures and option agreements with other companies.
Dependence on Single Project
The Filo del Sol Project is the Company’s sole project and therefore, any adverse development with respect to
the Filo del Sol Project will have a material adverse effect on the Company.
Mineral Reserves and Mineral Resources Estimates
The Company’s reported Mineral Reserves and Mineral Resources are estimations only. No assurance can be
given that the estimated Mineral Reserves and Mineral Resources are accurate or that the indicated level of
copper, gold, silver or any other mineral will be recovered or produced. Actual mineralization or formations may
be different from those predicted. It may take many years from the initial phase of drilling before production is
possible and during that time the economic feasibility of exploiting a discovery may change. Market price
fluctuations of copper, gold and silver and certain other metals, as well as increased production and capital costs
or reduced recovery rates, may render the Company’s Mineral Reserves uneconomic to develop. Moreover, short-
term operating factors relating to the Mineral Reserves, such as the need for the orderly development of
orebodies, the processing of new or different ore grades, the technical complexity of ore bodies, unusual or
unexpected geological formations, ore dilution or varying metallurgical and other ore characteristics may cause
Mineral Reserves to be reduced. Estimated Mineral Reserves may have to be recalculated based on fluctuations
in the price of metals, or changes in other assumptions on which they are based. Any of these factors may require
the Company to reduces its Mineral Reserves and Mineral Resources, which could have a negative impact on the
Company’s business.
Failure to obtain or maintain necessary permits or government approvals or changes to applicable legislation
could also cause the Corporate to reduce its reserves. In addition, changes to mine plans could cause the
Company to reduce its Mineral Reserves. There is also no assurance that the Company will achieve indicated
levels of copper, gold or silver recovery or obtain the prices assumed in determining such Mineral Reserves.
Mineral resources that are not Mineral Reserves do not have demonstrated economic viability and there is no
assurance that they will ever be mined or processed profitably. Due to the uncertainty which may attach to
Mineral Resources, there is no assurance that all or any part of Measured or Indicated Mineral Resources will ever
13
be converted into Mineral Reserves; and no assurance that all or any part of an Inferred Mineral Resources exists
or is economically or legally mineable.
Negative Operating Cash Flow
The Company is an exploration stage company and has not generated cash flow from operations. The Company
is devoting significant resources to the development and acquisition of its properties, however there can be no
assurance that it will generate positive cash flow from operations in the future. The Company expects to continue
to incur negative consolidated operating cash flow and losses until such time as it achieves commercial production
at a particular project. The Company currently has negative cash flow from operating activities.
Permitting
The Company’s development and exploration activities are subject to permitting requirements in both Argentina
and Chile. In particular, comprehensive environmental assessments will be necessary for the Filo del Sol Project
in Argentina in order to obtain the necessary approval for each of the Filo del Sol Project stages, which assessment
will be conducted in compliance with Argentinian regulations. Project development will also require an
environmental impact assessment study in Chile. Following the receipt of environmental approvals, additional
permits, licences, authorizations, and certificates will be required to proceed to project construction, including,
for example, mining water and fuel delivery, sewage water treatment, hazardous waste plans, drilling and closure
plans. Failure to obtain required permits and/or to maintain compliance with permits once obtained could result
in injunctions, fines, suspension or revocation of permits and other penalties.
There can be no assurance that the Company will obtain all such permits and/or achieve or maintain full
compliance with such permits at all times. Activities required to obtain and/or achieve or maintain full compliance
with such permits can be costly and involve extended timelines.
Previously issued permits may be suspended or revoked for a variety of reasons, including through government
or court action. Failure to obtain and/or comply with required permits can have serious consequences, including:
damage to the Company’s reputation; stopping the Company from proceeding with the development of a project;
negatively impacting further development of a mine; and increasing the costs of development and litigation or
regulatory action against the Company, and may materially adversely affect the Company’s business, results of
operations or financial condition.
Environmental and Socio-Political Risks
The Company seeks to operate within environmental protection standards that meet or exceed existing
requirements in the countries in which the Company conducts activities. The Company also aims to conduct its
activities in accordance with high corporate social responsibility principles. Present or future laws and regulations,
however, may affect the Company’s operations. Future environmental costs may increase due to changing
requirements or costs associated with exploration and the developing, operating and closing of mines. The
Company is subject to environmental regulation in the various jurisdictions in which it operates. Failure to comply
with these laws, regulations and permitting requirements may result in enforcement actions, including orders
issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective
measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged
in mining operations or in the exploration or development of mineral properties may also be required to
compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines
or penalties imposed for violations of applicable laws or regulations. Furthermore, environmental hazards may
14
exist on the properties on which the Company holds interests which are unknown to the Company at present and
which have been caused by previous or existing owners or operators of the properties.
Programs may also be delayed or prohibited in some areas due to technical factors, new legislative constraints,
social opposition or local government capacity or willingness to issue permits to explore in a timely manner.
In parts of Argentina, there is environmental opposition to both mineral exploration and mining. Accordingly,
there may be a certain degree of anti-mining sentiment that could potentially affect the risk of successfully
exploring and developing the Company’s assets in those provinces.
The Argentine Congress has passed legislation designed to protect the country’s glaciers. This law would restrict
development on and around glaciers. The detailed regulations that will govern implementation of the law have
not yet been written but this legislation could affect the Company’s ability to develop parts of the Company’s
properties in Argentina including the Filo del Sol Project. The Chilean Congress is also considering legislation
designed to protect the country’s glaciers. This legislation has not yet been approved but depending on its final
language could affect the Company’s ability to develop the Tamberias property.
Uncertainty of Funding and Dilution of Shareholders’ Interests in the Company
The exploration and development of mineral properties requires a substantial amount of capital and may depend
on the Company’s ability to obtain financing through joint ventures, debt financing, equity financing or other
means. General market conditions, volatile metals prices, a claim against the Company, a significant disruption
to the Company’s business, or other factors may make it difficult to secure the necessary financing. There is no
assurance that the Company will be successful in obtaining required financing as and when needed on acceptable
terms. Failure to obtain any necessary additional financing may result in delaying or indefinite postponement of
exploration or development or even a loss of property interest. If the Company needs to raise additional funds,
such financing may substantially dilute the economic and voting rights of the Company’s shareholders and reduce
the value of their investment. Since the Company’s capital needs depend on market conditions and other factors
beyond its control, it cannot predict or estimate the amount, timing or nature of any such future offering of
securities. Thus, holders of Common Shares of the Company bear the risk of any future offerings reducing the
market price of the Common Shares and diluting their shareholdings in the Company.
Foreign Operations Risk
The Company conducts exploration activities in foreign countries, including Argentina and Chile. Each of these
countries exposes the Company to risks that may not otherwise be experienced if all operations were located in
Canada. The risks vary from country to country and can include, but are not limited to, civil unrest or war,
terrorism, illegal mining, changing political conditions, fluctuations in currency exchange rates, expropriation or
nationalization without adequate compensation, changes to royalty and tax regimes, high rates of inflation, labour
unrest and difficulty in understanding and complying with the regulatory and legal framework respecting
ownership and maintenance of mineral properties. Changes in mining or investment policies or shifts in political
attitudes may also adversely affect Corporation’s existing assets and operations. Real and perceived political risk
may also affect Corporation’s ability to finance exploration programs and attract joint venture or option partners,
and future mine development opportunities.
Numerous countries have introduced changes to mining regimes that reflect increased government control or
participation in the mining sector, including, but not limited to, changes of law affecting foreign ownership,
mandatory government participation, taxation and royalties, exploration licensing, export duties, and repatriation
of income or return of capital. There can be no assurance that industries, which are deemed of national or
strategic importance in countries in which the Company has assets, including mineral exploration, will not be
nationalized. There is a risk that further government limitations, restrictions or requirements, not presently
foreseen, will be implemented. Changes in policy that alter laws regulating the mining industry could have a
material adverse effect on the Company. There can be no assurance that the Company’s assets in these countries
15
will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by an authority or
body.
In addition, in the event of a dispute arising from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts
in Canada. The Company also may be hindered or prevented from enforcing its rights with respect to a
governmental instrumentality because of the doctrine of sovereign immunity. It is not possible for the Company
to accurately predict such developments or changes in laws or policy or to what extent any such developments
or changes may have a material adverse effect on the Company.
Indigenous Peoples
The Company operates in some areas including parts of the Tamberias area presently or previously inhabited or
used by indigenous peoples. Various international and national laws, codes, resolutions, conventions, guidelines,
and other material relate to the rights of indigenous peoples. Many of these materials impose obligations on
government to respect the rights of indigenous people. Some mandate that government consult with indigenous
people regarding government actions, which may affect indigenous people, including actions to approve or grant
mining rights or permits. ILO Convention 169, which has been ratified by Argentina and Chile, is an example of
such an international convention. The obligations of government and private parties under the various
international and national materials pertaining to indigenous people continue to evolve and be defined. Examples
of recent developments in this area include the United Nations Declaration of the Rights of Indigenous People
and the International Finance Corporation’s revised Performance Standard 7, which requires governments to
obtain the free, prior, and informed consent of indigenous peoples who may be affected by government action,
such as the granting of mining concessions or approval of mine permits. The Company’s current and future
operations are subject to a risk that one or more groups of indigenous people may oppose continued operation,
further development, or new development of the Company’s projects or operations. Such opposition may be
directed through legal or administrative proceedings or expressed in manifestations such as protests, roadblocks
or other forms of public expression against the Company’s activities. Opposition by indigenous people to the
Company’s operations may require modification of, or preclude operation or development of, the Company’s
projects or may require the Company to enter into agreements with indigenous people with respect to the
Company’s projects.
Title Risk
The Company has investigated its right to explore and exploit its properties and, to the best of its knowledge,
those rights are in good standing. The results of the Company’s investigations should not be construed as a
guarantee of title. Other parties may dispute the title to a property, or the property may be subject to prior
unregistered agreements or liens and transfers or land claims by aboriginal, native, or indigenous peoples. The
title may be affected by undetected encumbrances or defects or governmental actions. The Company has not
conducted surveys of all of its properties, and the precise area and location of claims or the properties may be
challenged and no assurances can be given that there are no title defects affecting such properties. The rules
governing mining concessions in Chile and Argentina are complex and any failure by the Company to meet
requirements would have a material adverse effect on the Company. Any defects in the title to the Company’s
properties could have a material and adverse effect on the Company.
No assurance can be given that applicable governments will not revoke or significantly alter the conditions of the
applicable exploration and mining authorizations nor that such exploration and mining authorizations will not be
challenged or impugned by third parties. Although the Company has not had any problem renewing its licenses
16
in the past there is no guarantee that it will always be able to do so. Inability to renew a license could result in
the loss of any project located within that license.
The Company is earning an interest in the Tamberias property through an option agreement requiring property
payments and acquisition of title to the properties is completed only when the option conditions have been met.
If the Company does not satisfactorily complete these option conditions in the period laid out in the option
agreements, the Company’s title to the related property will not vest and the Company will have to write down
its previously capitalized costs related to that property.
Dependence on Key Personnel
The Company’s success will largely depend on the efforts and abilities of certain senior officers and key
employees. Certain of these individuals have significant experience in the mining industry and, in particular the
mining industry in South America. While the Company does not foresee any reason why such officers and key
employees will not remain with the Company, if for any reason they do not, the Company could be adversely
affected. In addition, certain of these individuals are also senior officers and key employees of Josemaria and/or
NGEx Minerals and, pursuant to the terms of the Services Agreement, the employment costs associated with
these individuals are shared between the Company, Josemaria and NGEx Minerals on a pro-rata basis. If such
officers and key employees do not remain employed with Josemaria and/or NGEx Minerals for the purposes of
the cost-sharing basis under the Services Agreement, the Company could be adversely affected. The Company
has not purchased key man life insurance for any of these individuals.
No Operating History
Exploration projects have no operating history upon which to base estimates of future cash flows. Substantial
expenditures are required to develop mineral projects. It is possible that actual costs and future economic returns
may differ materially from Filo Mining’s estimates. There can be no assurance that the underlying assumed levels
of expenses for any project will prove to be accurate. Further, it is not unusual in the mining industry for new
mining operations to experience unexpected problems during start-up, resulting in delays and requiring more
capital than anticipated. There can be no assurance that Filo Mining’s project/properties will move beyond the
exploration stage and be put into production, achieve commercial production or that Filo Mining will produce
revenue, operate profitably or provide a return on investment in the future. Mineral exploration involves
considerable financial and technical risk. There can be no assurance that the funds required for exploration and
future development can be obtained on a timely basis. There can be no assurance that Filo Mining will not suffer
significant losses in the near future or that Filo Mining will ever be profitable.
Surface Access
The Company has surface access rights but does not own any surface rights at the Filo del Sol Project. The
owners of the surface rights are in agreement with the Company’s subsidiaries in conducting exploration activities
on their ground.
From time to time, a land possessor may dispute the Company’s surface access rights and, as a result, the
Company may be barred from its legal temporary occupation rights. Surface access issues have the potential to
result in the delay of planned exploration programs, and these delays may be significant. Such delays may have
a material adverse effect on the Company.
The Company may require additional surface rights and property interests to further develop or exploit the
resources on its properties, which will require negotiations with private landowners for the additional ownership
and/or surface rights in order for the Company to fully operate. Surface rights may also be regulated and restricted
by applicable law. There is no assurance that the Company will be able to obtain the required surface rights or
negotiate successfully with private landowners to allow it to develop its properties and establish commercial
17
mining operations on a timely basis. To the extent additional surface rights are available, they may only be
acquired at significantly increased prices, potentially adversely impacting financial performance of the Company.
Conflicts of Interest
Some of the directors and employees/officers of the Company are also directors and employees/officers of other
companies that are similarly engaged in the business of acquiring, exploring and developing natural resource
properties. In addition, certain individuals also serve as officers of Josemaria and/or NGEx Minerals and are
subject to the Services Agreement. Such associations may give rise to conflicts of interest from time to time. In
particular, one of the consequences will be that corporate opportunities presented to a director or
employee/officer of the Company may be offered to another corporation or companies with which the director or
employee/officer is associated and may not be presented or made available to the Company. The directors and
employees/officers of the Company are required by law to act honestly and in good faith with a view to the best
interests of the Company, to disclose any interest that they may have in any project or opportunity of the
Company, and to abstain from voting on such matter. Conflicts of interest that arise will be subject to and
governed by the procedures prescribed by the Company’s Code of Business Conduct and Ethics and the CBCA.
Operations in Chile
Given its foreign operations in Chile, the Company is exposed to risks that are typical and inherent for companies
that have material assets and property held in that jurisdiction. In particular, previously issued permits may be
suspended or revoked for a variety of reasons, including through government or court action. Chile is typically
viewed as a favourable mining jurisdiction; however, recently certain Canadian issuers have experienced
regulatory action with regards to Chilean operations.
Non-compliance with applicable laws, regulations and permitting requirements (including allegations of such) may
result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to
cease or be curtailed or causing the withdrawal of permits or mining licenses, and the imposition of corrective
measures requiring material capital expenditure or remedial action resulting in materially increased cost of
compliance, reputational damage and potentially impaired ability to secure future approvals and permits. The
Company may be required to compensate third parties for loss or damage and may have civil or criminal fines or
penalties imposed for violations of applicable laws or regulations.
Metal Price Risk
The Company’s portfolio of properties and investments have exposure to predominantly copper, gold, and silver.
Commodity prices fluctuate widely and are affected by numerous factors beyond the Company’s control, such as
the sale or purchase of metals by various central banks and financial institutions, interest rates, exchange rates,
inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional
supply and demand, and the political and economic conditions of major metals-producing and metals-consuming
countries throughout the world. The prices of these metals greatly affect the value of the Company, the price of
the common shares of the Company and the potential value of its properties and investments. This, in turn,
greatly affects its ability to form joint ventures, option agreements and the structure of any joint ventures formed.
This is due, at least in part, to the underlying value of the Company’s assets at different metals prices.
Uncertainty of Funding
The exploration and development of mineral properties requires a substantial amount of capital and may depend
on the Company’s ability to obtain financing through joint ventures, debt financing, equity financing or other
means. General market conditions, volatile metals prices, a claim against the Company, a significant disruption
to the Company’s business, or other factors may make it difficult to secure the necessary financing. There is no
assurance that the Company will be successful in obtaining required financing as and when needed on acceptable
terms. Failure to obtain any necessary additional financing may result in delaying or indefinite postponement of
18
exploration or development or even a loss of property interest. If the Company needs to raise additional funds,
such financing may substantially dilute the interests of shareholders of the Company and reduce the value of
their investment.
Trading Price for the Common Shares is Volatile
The securities of publicly traded companies, particularly mineral exploration and development companies, can
experience a high level of price and volume volatility and the value of the Company’s securities can be expected
to fluctuate depending on various factors, not all of which are directly related to the success of the Company and
its operating performance, underlying asset values or prospects. These include the risks described elsewhere in
this Prospectus. The trading price of the Company’s Common Shares has been and may continue to be subject
to large fluctuations, which may result in losses to investors. The trading price of the Company’s Common Shares
may increase or decrease in response to a number of events and factors, including:
issuances of Shares or debt securities by the Company;
the Company’s operating performance and the performance of competitors and other similar
companies;
the addition or departure of key management and other personnel;
the expiration of lock-up or other transfer restrictions on outstanding Shares;
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving the Company or its competitors;
the public’s reaction to the Company’s press releases, other public announcements and the
Company’s filings with the various securities regulatory authorities;
changes in recommendations by research analysts who track the Company’s Common Shares or the
shares of other companies in the resource sector;
the number of Common Shares to be publicly traded after an offering; and
the factors listed under the heading “Cautionary Note Regarding Forward-Looking Information and
Statements”.
In addition, the market price of the Common Shares is affected by many variables not directly related to the
Company’s success and therefore not within the Company’s control. Factors which may influence the price of the
Company’s securities, include, but are not limited to: worldwide economic conditions; changes in government
policies; local community opposition to mining projects generally; investor perceptions; movements in global
interest rates and global stock markets; variations in operating costs; the cost of capital that the Company may
require in the future; the market price of metals, including copper, gold and silver; the price of commodities
necessary for the Company’s operations; recommendations by securities research analysts; the share price
performance of the Company’s competitors; news reports relating to trends, concerns, technological or
competitive developments, regulatory changes and other related industry and market issues affecting the mining
sector; publicity about the Company, the Company’s personnel or others operating in the industry; loss of a major
funding source; and all market conditions that are specific to the mining industry, including other developments
that affect the market for all resource sector shares, the breadth of the public market for the Common Shares,
and the attractiveness of alternative investments. The effect of these and other factors on the market price of
Shares on the exchanges on which the Company trades has historically made the Company’s share price volatile
and suggests that the Company’s share price will continue to be volatile in the future.
As a result of any of these factors, the market price of the Common Shares at any given point in time may not
accurately reflect the long-term value of the Company. Securities class-action litigation often has been brought
against companies following periods of volatility in the market price of their securities. The Company may in the
19
future be the target of similar litigation. Securities litigation could result in substantial costs and damages and
divert management’s attention and resources.
Control of Filo Mining
As at the date of this MD&A, Zebra and Lorito, who report their security holdings as joint actors, are control
persons of Filo Mining (as defined by the TSXV). As long as Zebra and Lorito maintain significant interests in Filo
Mining, they will have the ability to exercise certain influence with respect to the affairs of Filo Mining and
significantly affect the outcome of the votes of shareholders. There is a risk that the interests of Zebra and Lorito
differ from those of other shareholders.
As a result of the significant holdings of Zebra and Lorito, there is a risk that the Company’s securities are less
liquid and trade at a relative discount compared to circumstances where these persons did not have the ability
to influence or determine matters affecting Filo Mining. Additionally, there is a risk that their significant interests
in Filo Mining discourages transactions involving a change of control of Filo Mining, including transactions in which
an investor, as a holder of the Company’s securities, would otherwise receive a premium for its Corporation’s
securities over the then-current market price.
Future Offerings of Debt or Equity Securities
The Company may require additional funds to finance further exploration, development and production activities,
or to take advantage of unanticipated opportunities. If the Company raises additional funds by issuing additional
equity securities, such financing would dilute the economic and voting rights of the Company’s shareholders.
Since the Company’s capital needs depend on market conditions and other factors beyond its control, it cannot
predict or estimate the amount, timing or nature of any such future offering of securities. Thus, holders of
common shares of the Company bear the risk of any future offerings reducing the market price of the common
shares and diluting their shareholdings in the Company.
Economic and Political Instability in Argentina
The Filo del Sol Project is located in San Juan Province, Argentina. There are risks relating to an uncertain or
unpredictable political and economic environment in Argentina, especially as there is social opposition to mining
operations in certain parts of the country. During an economic crisis in 2001 to 2003 and again in 2014, Argentina
defaulted on foreign debt repayments and on the repayment on a number of official loans to multinational
organizations. In addition, the government has renegotiated or defaulted on contractual arrangements. The
recently elected government, which took office in December 2019, has reinstated currency controls previously
lifted by the opposition government, which, among other impacts, restricts the ability of companies and its citizens
to obtain United States dollars, in each case requiring Central Bank approval (resulting in, at times, a limitation
on the ability of multi-national companies to distribute dividends abroad in United States dollars). While the
political environment in Argentina continues to develop, and the status of currency controls and restrictions
remains fluid, past actions indicate that the Argentinean government may from time to time alter or impose
additional requirements or policies that may adversely affect the Company’s activities in Argentina or in its ability
to attract joint venture partners or obtain financing for its projects in the future.
Infrastructure
Development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable
roads, bridges, power and water supplies are important determinants that affect costs. The Company’s ability to
obtain a secure supply of power and water at a reasonable cost depends on many factors, including: global and
regional supply and demand; political and economic conditions; problems that can affect local supplies; delivery;
and relevant regulatory regimes. Power and water are currently in short supply throughout Northern Chile and
this may adversely affect the ability of the Company to explore and develop its Chilean projects. Unusual or
20
infrequent weather phenomena, sabotage or government, and other interference in the maintenance or provision
of such infrastructure could adversely affect the activities and profitability of the Company.
Establishing such infrastructure will require significant resources, identification of adequate sources of raw
materials and supplies and necessary cooperation from national and regional governments, none of which can
be assured. There is no guarantee that the Company will secure these power, water and access rights going
forward or on reasonable terms.
Global Financial Conditions Can Reduce Share Prices and Limit Access to Financing
The economic viability of the Company’s business plan is impacted by the Company’s ability to obtain financing.
Global economic conditions impact the general availability of financing through public and private debt and equity
markets, as well as through other avenues.
Significant political, market and economic events may have wide-reaching effects and, to the extent they are not
accurately anticipated or priced into markets, may result in sudden periods of market volatility and correction.
Periods of market volatility and correction may have an adverse impact on economic growth and outlook, as well
as lending and capital markets activity, all of which may impact the Company’s ability to secure adequate financing
on favourable terms, or at all.
In the wake of the 2008 financial crises and Eurozone sovereign debt crisis, increased regulatory scrutiny
contributed to financial institutions oftentimes applying more stringent lending criteria as compared to before the
crises and the availability of debt was relatively low by historical comparison. While debt markets stabilized, and
lending activity has since strengthened, there is no guarantee that credit market conditions will not worsen.
Recently, certain economists and market commentators have pointed to historically high levels of household debt
in Canada, the effect of which on the Canadian economy and credit markets is unknown. Should credit market
conditions worsen, the Company may have difficulty borrowing on economically favourable terms, or at all.
While equity markets in Canada and the United States have enjoyed relatively healthy performance coming out
of the 2008 financial crisis, there is no guarantee that favourable equity market conditions will persist.
Furthermore, while recent overall equity market performance has been relatively healthy, certain sectors, such
as metals and mining, and energy, have at times experienced periods of increased volatility and changing market
sentiment during the recent past. A general risk-adverse approach to investing, which may become more
predominant as a result of market turmoil, may limit the Company’s ability to obtain future equity financing.
Inability to obtain financing at all, or on acceptable terms, may have a material adverse effect on the Company’s
business, financial condition, results of operations, cash flows or prospects.
Furthermore, general market, political and economic conditions, including, for example, inflation, interest and
currency exchange rates, structural changes in the global mining industry, global supply and demand for
commodities, political developments, legislative or regulatory changes, social or labour unrest and stock market
trends will affect the Company’s operating environment and its operating costs, profit margins and share price.
Uncertainty or adverse changes relating to government regulation, economic and foreign policy matters, and
other world events have the potential to adversely affect the performance of and outlook for the Canadian and
global economies, which in turn may affect the ability of the Company to access financing on favourable terms
or at all. For example, recent uncertainty regarding Canada’s ability to access North American markets via the
North American Free Trade Agreement and increased levels of turmoil in certain geopolitical hotspots have the
potential to increase uncertainty and volatility in Canadian and global markets, respectively. The occurrence of
21
negative sentiment or events in the Canadian and broader global economy could have a material adverse effect
on the Company’s business, financial condition, results of operations, cash flows or prospects.
Currency Risk
The Company will transact business in a number of currencies including but not limited to the US Dollar, the
Argentine Peso and the Chilean Peso. The Argentine Peso in particular has had significant fluctuations in value
relative to the US and Canadian dollars. Ongoing economic uncertainty in Argentina as well as unpredictable
changes to foreign exchange rules may result in fluctuations in the value of the Argentine Peso that are greater
than those experienced in the recent past. Fluctuations in exchange rates may have a significant effect on the
cash flows of the Company. Future changes in exchange rates could materially affect the Company’s results in
either a positive or a negative direction. The Company does not currently engage in foreign currency hedging
activities.
Information Systems and Cyber Security
The Company's operations depend on information technology (“IT”) systems. These IT systems could be subject
to network disruptions caused by a variety of sources, including computer viruses, security breaches and cyber-
attacks, as well as disruptions resulting from incidents such as cable cuts, damage to physical plants, natural
disasters, terrorism, fire, power loss, vandalism and theft. The Company's operations also depend on the timely
maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive
expenses to mitigate the risks of failures. Any of these and other events could result in information system
failures, delays and/or increase in capital expenses. The failure of information systems or a component of
information systems could, depending on the nature of any such failure, adversely impact the Company's
reputation and results of operations.
Although to date the Company has not experienced any material losses relating to cyber attacks or other
information security breaches, there can be no assurance that the Company will not incur such losses in the
future. The Company's risk and exposure to these matters cannot be fully mitigated because of, among other
things, the evolving nature of these threats. As a result, cyber security and the continued development and
enhancement of controls, processes and practices designed to protect systems, computers, software, data and
networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the
Company may be required to expend additional resources to continue to modify or enhance protective measures
or to investigate and remediate any security vulnerabilities.
Application of Anti-Corruption and Anti-Bribery Laws
The Company is required to comply with anti-corruption and anti-bribery laws, including the Extractive Sector
Transparency Measures Act, the Canadian Corruption of Foreign Public Officials Act and the U.S. Foreign Corrupt
Practices Act, as well as similar laws in the countries in which the Company conducts its business. If the Company
finds itself subject to an enforcement action or is found to be in violation of such laws, this may result in significant
penalties, fines and/or sanctions imposed on the Company resulting in a material adverse effect on the Company.
Internal Controls
Internal controls over financial reporting are procedures designed to provide reasonable assurance that
transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated,
22
can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and
financial statement preparation.
Competition
There is aggressive competition within the mining industry for the discovery and acquisition of properties
considered to have commercial potential, as well as the necessary labour and supplies required to develop such
properties. The Company competes with other exploration and mining companies, many of which have greater
financial resources, operational experience and technical capabilities than the Company, for the acquisition of
mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified
employees and other personnel. The Company may not be able to maintain or acquire attractive mining properties
on terms it considers acceptable, or at all. Consequently, its financial condition could be materially adversely
affected.
Uninsurable Risks
Exploration, development and production operations on mineral properties involve numerous risks, including
unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other
environmental occurrences, as well as political and social instability. It is not always possible to obtain insurance
against all such risks and the Company may decide not to insure against certain risks because of high premiums
or other reasons. Should such liabilities arise, they could reduce or eliminate any further profitability and result
in increasing costs and a decline in the value of the securities of the Company. The Company does not maintain
insurance against political risks.
Tax
The Company runs its business in different countries and strives to run its business in as tax efficient a manner
as possible. The tax systems in certain of these countries are complicated and subject to changes. For this reason,
future negative effects on the result of the Company due to changes in tax regulations cannot be excluded.
Repatriation of earnings to Canada from other countries may be subject to withholding taxes. The Company has
no control over withholding tax rates.
QUALIFIED PERSON
The scientific and technical disclosure for the Filo del Sol Project included in this MD&A have been reviewed and
approved by Bob Carmichael, P. Eng. (BC) and/or James Beck, B.A.Sc., P.Eng. Mr. Carmichael is Filo Mining's Vice-
President of Exploration and a Qualified Person under National Instrument 43-101 Standards of Disclosure for Mineral
Projects. (“NI 43-101”). Mr. Beck is Filo Mining’s President and is also a Qualified Person under NI 43-101.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made and information contained herein in the MD&A constitutes “forward-looking information” and
forward-looking statements” within the meaning of applicable securities legislation (collectively, “forward-looking
information” or “forward-looking statements”) concerning the business, operations, financial performance and
condition of Filo Mining. The forward-looking information contained in this MD&A is based on information available to
the Company as of the date of this MD&A. Except as required under applicable securities legislation, the Company
does not intend, and does not assume any obligation, to update this forward-looking information. Generally, any
statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance, (often, but not always, identified by words or phrases such
as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends",
“projects” , “estimates”, “budgets”, “scheduled”, “forecasts”, “assumes”, “intends”, “strategy”, “goals”, “objectives”,
23
“potential”, “possible”, "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events, conditions or results “will”, "may", "could", "would", “should”, "might" or "will
be taken", "will occur" or "will be achieved" or the negative connotations thereof and similar expressions) are not
statements of historical fact and may be forward-looking statements.
All statements other than statements of historical fact may be forward-looking statements. Forward-looking information
is necessarily based on estimates and assumptions that are inherently subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or implied by such forward-looking information, including
but not limited to: risks and uncertainties relating to, among other things, the inherent uncertainties regarding Mineral
Resource estimates, cost estimates, changes in commodity prices, currency fluctuation, financings, unanticipated
resource grades, infrastructure, results of exploration activities, cost overruns, availability of materials and equipment,
timeliness of government approvals, taxation, political risk and related economic risk and unanticipated environmental
impact on operations as well as other risks, and uncertainties and other factors, including, without limitation, those
referred to in the “Risks and Uncertainties” section of the MD&A and in the Company’s most recent Annual Information
Form, under the heading “Risks Factors”, and elsewhere, which may cause the actual results, level of activity,
performance or achievements of the Company to be materially different from those expressed or implied by such
forward-looking information.
The Company believes that the expectations reflected in the forward-looking statements and information included in
this MD&A are reasonable but no assurance can be given that these expectations will prove to be correct and such
forward-looking statements and information should not be unduly relied upon. This statement and information is as
of the date of the MD&A. In particular, this MD&A contains forward-looking statements or information pertaining to
the assumptions used in the PFS for the Filo del Sol Project, the assumptions used in the Mineral Reserves and
Resources estimates for the Filo del Sol Project, including, but not limited to, geological interpretation, grades, metal
price assumptions, metallurgical and mining recovery rates, geotechnical and hydrogeological conditions, as applicable;
ability to develop infrastructure; assumptions made in the interpretation of drill results, geology, grade and continuity
of mineral deposits; expectations regarding access and demand for equipment, skilled labour and services needed for
exploration and development of mineral properties; and that activities will not be adversely disrupted or impeded by
exploration, development, operating, regulatory, political, community, economic and/or environmental risks. In
addition, this MD&A may contain forward-looking statements or information pertaining to: the Company's plans for its
2019/2020 field program at its 100% owned Filo del Sol Project, including the expected timing of results related
thereto; potential upside at the Filo del Sol Project; assumptions and interpretations around prospectivity of the
Tamberias West area; the Company’s ability to define and understand the structural controls applicable to the high-
grade gold zones within the Filo del Sol deposit; the ability of the Company to secure additional financing and/or the
quantum and terms thereof; support of the Lundin Family Trusts; exploration and development plans and
expenditures; the timing and nature of studies and any potential development scenarios; opportunities to improve
project economics; the success of future exploration activities; potential for resource expansion; potential for the
discovery of new mineral deposits; ability to build shareholder value; expectations with regard to adding to Mineral
Reserves or Resources through exploration; expectations with respect to the conversion of inferred resources to an
indicated resources classification; ability to execute the planned work programs; estimation of commodity prices,
Mineral Reserves and Resources, estimations of costs, and permitting time lines; ability to obtain surface rights and
property interests; currency exchange rate fluctuations; requirements for additional capital; government regulation of
mining activities; environmental risks; unanticipated reclamation expenses; title disputes or claims; limitations on
insurance coverage; and other risks and uncertainties.
Forward-looking information is based on certain assumptions that the Company believes are reasonable, including that
the current price of and demand for commodities will be sustained or will improve, the supply of commodities will
remain stable, that the general business and economic conditions will not change in a material adverse manner, that
financing will be available if and when needed on reasonable terms and that the Company will not experience any
material labour dispute, accident, or failure of plant or equipment. These factors are not, and should not be construed
as being, exhaustive. Although the Company has attempted to identify important factors that would cause actual
results to differ materially from those contained in forward-looking information, there may be other factors that cause
24
results not to be as anticipated, estimated, or intended. There can be no assurance that such statements will prove
to be accurate, as the Company’s actual results and future events could differ materially from those anticipated in
such statements, as a result of the factors discussed in the “Risk and Uncertainties” section of this MD&A, and
elsewhere, and in the “Risk Factors” section of the Company’s most recent Annual Information Form, which is available
under the Company’s profile on SEDAR at www.sedar.com. All of the forward-looking information contained in this
document is qualified by these cautionary statements. Readers are cautioned not to place undue reliance on forward-
looking information due to the inherent uncertainty thereof.
Statements relating to "Mineral Resources" are deemed to be forward looking information, as they involve the implied
assessment, based on certain estimates and assumptions, that the Mineral Resources described can be profitably
produced in the future.
25
Independent auditor’s report
To the Shareholders of Filo Mining Corp.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Filo Mining Corp. and its subsidiaries (together, the Company) as at December 31,
2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2019 and 2018;
the consolidated statements of comprehensive loss for the years then ended;
the consolidated statements of cash flows for the years then ended;
the consolidated statements of changes in equity for the years then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
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. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Other information
Management is responsible for the other information. The other information comprises the 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 audit 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.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, 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.
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.
Auditor’s 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 auditor’s
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 auditor’s
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 auditor’s 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.
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 auditor’s report is Lana Kirk.
(signed) PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
March 19, 2020
Filo Mining Corp.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
Note
December 31,
2019
December 31,
2018
5
6
7
8
ASSETS
Current assets:
Cash
Receivables and other assets
Non-current assets:
Right-of-use asset
Mineral properties
TOTAL ASSETS
LIABILITIES
Current liabilities:
Trade payables and accrued liabilities
Amounts owing pursuant to credit facility
Lease liabilities
Non-current liabilities:
Lease liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Contributed surplus
Deficit
Accumulated other comprehensive loss
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
Nature of Operations and Liquidity Risk (Note 1)
Subsequent Event (Note 6)
Commitments (Note 16)
$ 13,753,440
2,595,966
16,349,406
$ 2,405,109
2,414,486
4,819,595
88,832
7,312,220
7,401,052
-
7,118,233
7,118,233
23,750,458
11,937,828
3,553,545
-
60,658
3,614,203
12,145
12,145
3,218,576
2,202,548
-
5,421,124
-
-
3,626,348
5,421,124
125,577,816
7,729,168
(111,814,641)
(1,368,233)
20,124,110
84,350,227
5,554,793
(83,244,040)
(144,276)
6,516,704
$ 23,750,458
$ 11,937,828
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board:
/s/Alessandro Bitelli
Director
/s/Adam I. Lundin
Director
Filo Mining Corp.
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
Expenses
Exploration and project investigation
General and administration:
Salaries and benefits
Share-based compensation
Management fees
Professional fees
Travel
Promotion and public relations
Office and general
Operating loss
Other expenses
Financing costs
Foreign exchange loss (gain)
Net monetary gain
Gain on disposal of mineral properties
Net loss
Note
Year ended
December 31,
2018
2019
10
$ 23,007,517
$ 24,117,885
9c
3o,7
4
1,786,349
1,906,469
198,700
177,260
139,500
261,611
214,481
27,691,887
1,338,936
(302,041)
(158,181)
-
28,570,601
1,664,034
2,115,183
226,225
132,109
143,392
439,272
237,942
29,076,042
53,719
223,265
(39,164)
(422,635)
28,891,227
Other comprehensive loss (gain)
Items that may be reclassified subsequently to net loss:
Foreign currency translation adjustment
Impact of hyperinflation
Comprehensive loss
4
514,478
709,479
$ 29,794,558
473,961
(394,920)
$ 28,970,268
Basic and diluted loss per common share
$ 0.37
$ 0.41
Weighted average common shares outstanding
78,215,358
70,834,466
The accompanying notes are an integral part of these consolidated financial statements.
2
Filo Mining Corp.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Cash flows used in operating activities
Net loss for the year
Items not involving cash:
Share-based compensation
Financing costs
Net monetary loss
Gain on disposal of mineral properties
Unrealized foreign exchange loss
Net changes in working capital items:
Receivables and other
Trade payables and accrued liabilities
Cash flows from financing activities
Proceeds from equity financings, net
Drawdown of credit facilities
Repayment of credit facilities
Proceeds from exercise of share options
Repayment of lease liabilities
Cash flows used in investing activities
Mineral properties and related expenditures
Proceeds from disposal of mineral properties
Note
9c
3o,7
Year ended
December 31,
2018
2019
$ (28,570,601) $ (28,891,227)
2,469,795
1,338,936
452,304
-
-
2,720,921
53,719
63,158
(422,635)
53,522
(1,172,236)
1,563,745
(23,918,057)
(1,766,718)
2,263,185
(25,926,075)
8
6
38,797,273
16,603,165
(18,454,800)
790,558
(102,130)
37,634,066
24,384,864
2,127,288
-
408,275
-
26,920,427
(654,579)
-
(654,579)
(528,895)
64,919
(463,976)
Effect of exchange rate change on cash
(1,713,099)
(542,674)
Increase (decrease) in cash during the year
11,348,331
(12,298)
Cash, beginning of year
Cash, end of year
$
2,405,109 $
2,417,407
$
13,753,440 $
2,405,109
The accompanying notes are an integral part of these consolidated financial statements.
3
Filo Mining Corp.
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
Number of
Shares
Note
Share Capital
Contributed
Surplus
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance, January 1, 2018
Share-based compensation
Shares issued pursuant to the equity
financings
Share issuance costs
Shares issued pursuant to credit facilities
Exercise of options
Net loss and other comprehensive loss
Balance, December 31, 2018
Balance, January 1, 2019
Share-based compensation
Shares issued pursuant to the equity
financings
Share issuance costs
Shares issued pursuant to credit facilities
Exercise of options
Net loss and other comprehensive loss
Balance, December 31, 2019
9c
8
8
62,268,450
-
$ 59,481,338 $ 2,877,642
2,720,921
-
$ (54,352,813)
-
$ (65,235)
-
$ 7,940,932
2,720,921
9,823,195
-
12,300
471,250
-
72,575,195
25,540,307
(1,155,443)
31,980
452,045
-
-
-
-
-
(28,891,227)
$ 84,350,227 $ 5,554,793 $(83,244,040)
-
-
-
(43,770)
-
-
-
-
-
(79,041)
$ (144,276)
25,540,307
(1,155,443)
31,980
408,275
(28,970,268)
$ 6,516,704
72,575,195
-
$ 84,350,227 $ 5,554,793
2,469,795
-
$ (83,244,040)
-
$ (144,276)
-
$ 6,516,704
2,469,795
14,547,727
-
497,196
598,333
-
-
-
-
-
(1,223,957)
88,218,451 $ 125,577,816 $ 7,729,168 $(111,814,641) $ (1,368,233)
-
-
-
-
(28,570,601)
40,006,249
(1,208,976)
1,344,338
1,085,978
-
-
-
-
(295,420)
-
40,006,249
(1,208,976)
1,344,338
790,558
(29,794,558)
$ 20,124,110
The accompanying notes are an integral part of these consolidated financial statements.
4
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
1. NATURE OF OPERATIONS AND LIQUIDITY RISK
Filo Mining Corp. (the “Company” or “Filo Mining”) was incorporated on May 12, 2016 under the Canada
Business Corporations Act in connection with the plan of arrangement to reorganize Josemaria
Resources Inc. (“Josemaria”, formerly NGEx Resources Inc. (“NGEx”)), which was completed on August
16, 2016.
The Company’s principal business activities are the exploration and development of the Filo del Sol and
Tamberias Properties, which are comprised of adjacent mineral titles in the San Juan Province in
Argentina and in Chile. Its registered office is located at Suite 2200, 885 West Georgia Street, Vancouver,
British Columbia, V6C 3E8, Canada. The Company’s common shares trade on the TSX Venture Exchange
(the "TSXV") and the NASDAQ First North Growth Market under the symbol "FIL".
While these consolidated financial statements have been prepared on the basis that the Company will
continue as a going concern, which assumes that it will be able to meet its existing obligations and
commitments and fund ongoing operations in the normal course of business for at least twelve months
from December 31, 2019, the Company anticipates the need for further funding to support its planned
South American operations, and for general corporate and working capital purposes. The Company is
currently evaluating potential additional sources of financing. Historically, capital requirements have
been primarily funded through equity financing, joint ventures, disposition of mineral properties and
investments, and the use of short-term credit facilities extended by Zebra Holdings and Investments
S.à.r.l (“Zebra”), such as those described in Note 7 below. Zebra is a related party by virtue of its
shareholding in the Company in excess of 20%.
While management is confident that additional sources of funding will be secured to fund planned
expenditures for at least twelve months from December 31, 2019, factors that could affect the
availability of financing include the progress and results of ongoing exploration at the Company’s mineral
properties, the state of international debt and equity markets, and investor perceptions and expectations
of the global copper, gold, and/or silver markets. There can be no assurance that such financing will be
available in the amount required at any time or for any period or, if available, that it can be obtained
on terms satisfactory to the Company. If necessary, the Company may explore opportunities to revise
the due dates of its liabilities, and/or settle its liabilities through the issuance of the common shares and
other equity instruments. Based on the amount of funding raised, the Company’s planned initiatives and
other work programs may be postponed, or otherwise revised, as necessary.
2. BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), on
a going concern basis, which contemplates the realization of assets and settlement of liabilities in the
normal course of business. These consolidated financial statements are prepared on a historical cost
basis except for certain financial assets, which are measured at fair value.
These consolidated financial statements were authorized for issuance by the Board of Directors of the
Company on March 19, 2020.
5
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
The consolidated financial statements of the Company include the following subsidiaries:
Subsidiaries
NGEx Filo del Sol Holdings Inc.
NGEx Chile Holdings Inc.
Filo del Sol Uruguay S.A.
Frontera Holdings (Bermuda) IV Ltd.
Frontera Holdings (Bermuda) V Ltd.
Filo del Sol Exploracion S.A.
Frontera Chile Limitada
Jurisdiction
Canada
Canada
Uruguay
Bermuda
Bermuda
Argentina
Chile
Nature of operations
Holding company
Holding company
Holding company
Holding company
Holding company
Exploration company
Exploration company
The Company consolidates an entity when it has power over that entity, is exposed, or has rights, to
variable returns from its involvement with that entity and has the ability to affect those returns through
its power over that entity.
All the Company’s subsidiaries are wholly-owned and all intercompany balances, transactions, including
income and expenses arising from inter-company transactions are eliminated in preparing the
consolidated financial statements.
b) Critical accounting estimates and assumptions
The preparation of the consolidated financial statements in accordance with IFRS requires management
to make estimates and assumptions that affect the reported amounts of assets, liabilities and
expenditures on the financial statements. These estimates and assumptions are based on management’s
best knowledge of the relevant facts and circumstances taking into account previous experience. Actual
results could differ from those estimates and such differences could be material. Estimates are reviewed
on an ongoing basis and are based on historical experience and other facts and circumstances. Revisions
to estimates and the resulting effects on the carrying amounts of the Company’s assets and liabilities are
accounted for prospectively. Information about estimates, assumptions and other sources of estimation
uncertainty as at December 31, 2019 that have a risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next year are provided below:
Valuation of mineral properties – The Company carries the acquisition costs of its mineral properties
at cost less any provision for impairment. The Company undertakes periodic reviews of its mineral
properties for indicators of impairment, and if identified would further review the carrying values of the
applicable mineral properties to determine if their carrying values may exceed their fair value. In
undertaking the initial review for indicators of impairment, and also any subsequent review of a mineral
property’s carrying value, management of the Company is required to make significant judgements and
estimates. These judgments and estimates are subject to various risks and uncertainties, which may
ultimately have an effect on the expected recoverability of the carrying values of the mineral properties.
6
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
c) Foreign currency translation
These consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional and presentation currency. The functional currency of its material subsidiaries, which have
operations in Chile and Argentina, is the Chilean peso and the Argentine peso, respectively.
For the Company’s Argentine subsidiary, which is affected by hyper-inflationary accounting as described
in Notes 3n and 4 below, and uses the Argentine peso as its functional currency, the results and financial
position of this subsidiary are translated into the presentation currency using the exchange rate prevailing
at the date of the statement of financial position.
The results and financial position of all other subsidiaries that have a functional currency different from
the presentation currency are translated into the presentation currency as follows:
Assets and liabilities for each statement of financial position presented are translated using the
exchange rate prevailing at the date of that statement of financial position.
Income, expenses, and other comprehensive income for each statement of comprehensive income
are translated at average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions).
All resulting exchange differences are recognized as a separate component of equity and in other
comprehensive income.
d) Mineral properties and exploration expenditure
The Company capitalizes acquisition costs for property rights, including payments for exploration rights
and estimated fair value of exploration properties acquired as part of an acquisition.
Mineral exploration costs and maintenance payments are expensed prior to the determination that a
property has economically recoverable ore reserves. When it has been established that a mineral property
is considered to be sufficiently advanced to the development stage and economic viability has been
demonstrated, all further expenditures for the current year and subsequent years are capitalized as
incurred and subsequently amortized on a units of production based on proven and probable reserves of
the assets to which they relate.
e) Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-
generating units, or “CGU’s”). Value in use is determined as the present value of future cash inflows
expected to be derived from a CGU using a pre-tax discount rate that reflects the current time value of
money and the risks specific to that CGU.
Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.
7
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
f) Financial instruments
(i) Classification and measurement
The following table shows the classification and measurement of the Company’s financial instruments:
Measurement
basis
Classification
under
Cash
Receivables and others
Trade payables and accrued liabilities
Amounts owing pursuant to credit facility
Note 1 – Financial assets and liabilities at amortized costs are initially recognized at fair value plus or minus
transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Note 1
Note 1
Note 1
Note 1
(ii) De-recognition
The Company derecognizes financial assets when the contractual rights to cash flows from the financial
assets expire, or when it transfers the financial assets and substantially all of the associated risk and
rewards of ownership to another entity. A financial liability is derecognized when the obligation under
the liability is discharged, canceled or expired. Gains and losses on de-recognition of financial assets
and liabilities are generally recognized in the consolidated statements of comprehensive losses.
(iii) Impairment
The Company recognizes a loss allowance for expected credit losses on financial assets that are
measured at amortized costs based on a probability-weighted estimate of credit losses over the expected
life of the financial asset.
At each reporting date, the Company measures the loss allowance for the financial asset at an amount
equal to the lifetime expected credit losses if the credit risk on the financial asset has increased
significantly since initial recognition. If at the reporting date, the credit risk on the financial asset has
not increased significantly since initial recognition, the Company measures the loss allowance for the
financial asset at an amount equal to twelve month expected credit losses. Impairment losses on
financial assets carried at amortized cost are reversed in subsequent periods if the expected credit
losses are reversed after the impairment was recognized.
g) Cash
Cash includes cash on hand, and deposits held with financial institutions with a fixed deposit term of
three months or less, net of bank overdrafts.
8
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
h) Current and deferred income tax
The Company follows the liability method of accounting for income taxes. Under the liability method,
deferred income tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases, unused tax losses and other income tax deductions. Deferred income tax assets
are recognized for deductible temporary differences, unused tax losses and other income tax deductions
to the extent that it is probable the Company will have taxable income against which those deductible
temporary differences, unused tax losses and other income tax deductions can be utilized.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted tax rates
expected to apply when the related assets are realized or the liabilities are settled. The measurement of
deferred income tax assets and liabilities reflects the tax consequences that would follow from the
manner in which the Company expects, at the reporting date, to recover and settle the carrying amounts
of its assets and liabilities, respectively. The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in the period in which the change is substantively enacted.
i) Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of new
ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
j) Share-based compensation
The Company has a share-based compensation plan, whereby it is authorized to grant share options to
officers, employees, directors, and other eligible persons. The fair value of the options is measured at
the date the options are granted, using the Black-Scholes option-pricing model with assumptions for risk-
free interest rates, dividend yields, volatility of the expected market price of the common shares and an
expected life of the options. The fair value less estimated forfeitures is charged over the vesting period
of the related options as an expense on its financial statements.
k) Provisions
Provisions for restructuring costs and legal claims are recognized when: the Company has a present
legal or constructive obligation as a result of past events; it is probable that an outflow of resources will
be required to settle the obligation; and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligations using the pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognized as interest expense.
l) Leases
On January 1, 2019, the Company adopted IFRS 16, Leases, which sets out the accounting standards
for the recognition, measurement, presentation and disclosure of leases, as described in Note 3o below.
9
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
m) Segment reporting
As the Company primarily focuses its activity on the exploration and development of mineral properties,
its operating and reportable segments are the Filo del Sol Project, comprised of the Filo del Sol Property
and the Tamberias Property, other general exploration and project generation initiatives, and the
Company’s corporate administration function. Operating segments are components of an entity that
engage in business activities from which they incur expenses and whose operating results are regularly
reviewed by a chief operating decision maker to make resource allocation decisions and to assess
performance. The Chief Executive Officer, the chief operating decision-maker for the Company, obtains
and reviews operating results of each operating segment on a monthly basis.
n) Hyperinflation
On July 1, 2018, the Company adopted IAS 29, Financial Reporting in Hyper-Inflationary Economies,
which outlines the use of the hyper-inflationary accounting to consolidate and report its Argentine
operating subsidiary.
The application of hyper-inflationary accounting requires restatement of the Argentine subsidiary’s non-
monetary assets and liabilities, shareholders’ equity and comprehensive loss items from the transaction
date when they were first recognized into the current purchasing power which reflects a price index
current at the end of the reporting period before being included in the consolidated financial statements.
To measure the impact of inflation on its financial position and results, the Company has elected to use
the Wholesale Price Index (Indice de Precios Mayoristas or ”IPIM”) for periods up to December 31,
2016, and the Retail Price Index (Indice de Precios al Consumidor or “IPC”) thereafter. These price
indices have been recommended by the Government Board of the Argentine Federation of Professional
Councils of Economic Sciences (“FACPCE”).
As the consolidated financial statements of the Company have been previously presented in Canadian
dollars, a stable currency, the comparative period amounts do not require restatement.
o) Adoption of new accounting policy: leases
On January 1, 2019, the Company adopted IFRS 16, Leases, which specifies how leases should be
recognized, measured, presented and disclosed. The standard provides a single lessee accounting
model, requiring lessees to recognize assets and liabilities for almost all leases, unless the lease term is
12 months or less or the underlying asset has a low value, in which case, lease payments are recognized
as an expense on a straight-line basis over the lease term or another systematic basis, if deemed more
representative.
The Company has adopted IFRS 16 retroactively from January 1, 2019, but has not restated the 2018
comparative periods presented, as permitted under the specific transitional provision in the standard.
Accordingly, any adjustments arising from the new lease accounting rules have been recognized in the
opening balance sheet on January 1, 2019.
On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases, which were
previously classified as ‘operating leases’ under the principles of the predecessor standard, IAS 17,
Leases. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as at January 1, 2019. The weighted average
incremental borrowing rate used to measure the opening lease liability on January 1, 2019 was 12.6%.
10
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
Accordingly, on January 1, 2019, the Company recognized a total lease liability in the amount of
approximately $199,000.
On January 1, 2019, the Company did not have any leases, which were previously classified as finance
leases under IAS 17.
A corresponding right-of-use asset has also been recognized on January 1, 2019, in relation to the
leased properties, mainly offices and warehouses in South America, which was measured at an amount
equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments
recognized at the date of initial application, as applicable. The Company did not have any onerous lease
contracts that would have required an adjustment to the right-of-use assets at the date of initial
application. Accordingly, on January 1, 2019, the Company recognized a total right-of-use asset in the
amount of approximately $199,000.
In applying IFRS 16 for the first time, the Company used a practical expedient permitted by the standard,
which allowed the Company to not reassess whether its contracts are, or contain, a lease at the date of
initial application. Instead, pursuant to this practical expedient, for contracts entered into before the
transition date, the Company was permitted to rely on its previous assessments made under IAS 17 and
IFRIC 4, Determining Whether an Arrangement Contains a Lease.
As a result of adopting IFRS 16, the Company recognized accretion on the lease liability in the amount
of approximately $16,000 for the year ended December 31, 2019, as financing costs in the consolidated
statement of loss. The Company also recognized approximately $95,000 for the year ended December
31, 2019, in amortization of the right-of-use asset through exploration and project investigation costs.
p) New accounting pronouncements
The IASB and the IFRS Interpretations Committee (previously the International Financial Reporting
Interpretations Committee, IFRIC) have issued standards and amendments, or interpretations to
existing standards, that were not yet effective and not applied by the Company as at December 31,
2019. These new standards and interpretations are not expected to be applicable for the Company for
the annual period beginning on or after January 1, 2020.
11
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
4. HYPERINFLATION
Argentina was designated a hyper-inflationary economy as of July 1, 2018 for accounting purposes.
The Company recognized a loss of $709,479 for the year ended December 31, 2019 (2018: gain of
$394,920) in relation to the impact of hyperinflation within other comprehensive income, which is
primarily the result of devaluation of the Argentine Peso relative to the Canadian dollar during the
respective periods.
As a result of changes in the IPC and changes to the Company’s net monetary position during the year
ended December 31, 2019, the Company recognized a net monetary gain $158,181, respectively during
the year ended December 31, 2019 (2018: $39,164) to adjust transactions recorded during the year
into a measuring unit current as of December 31, 2019.
The level of the IPC at December 31, 2019 was 283.4 (December 31, 2018: 184.2), which represents
an increase of approximately 54% over the IPC at December 31, 2018, and an approximate 22%
increase over the average level of the IPC during the year ended December 31, 2019.
5. RECEIVABLES AND OTHER ASSETS
Taxes receivable
Other receivables
Prepaid expenses and deposits
6. MINERAL PROPERTIES
January 1, 2018
Additions
December 31,
2019
December 31,
2018
1,060,702
968,536
566,728
2,595,966
660,881
1,064,246
689,359
2,414,486
Filo del Sol
Tamberias
Total
$ 3,177,844
$ 3,301,500
$ 6,479,344
-
528,895
-
528,895
357,961
(163,144)
(247,967)
Adjustment for the impacts of hyperinflation
Effect of foreign currency translation
357,961
(84,823)
December 31, 2018
Additions
$ 3,450,982
$ 3,667,251
$ 7,118,233
-
654,579
654,579
Adjustment for the impacts of hyperinflation
Effect of foreign currency translation
December 31, 2019
(40,255)
-
$ 3,410,727
-
(420,337)
$ 3,901,493
(40,255)
(420,337)
$ 7,312,220
12
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
The Company’s primary mineral property assets are the Filo del Sol and Tamberias Properties (together,
the “Filo del Sol Project”), which are comprised of adjacent mineral titles in the San Juan Province in
Argentina and in Chile, and are 100% controlled by Filo Mining either through direct ownership or option
agreements.
Filo del Sol Property (San Juan Province, Argentina)
Sole ownership of the Filo del Sol Property was acquired by Filo del Sol Exploracion S.A., a wholly owned
subsidiary of the Company, in October 2014, through the acquisition of its then joint exploration partner’s
40% interest in the property.
Tamberias Property (Region III, Chile)
Through its wholly owned subsidiary, Frontera Chile Limitada, the Company is party to an option
agreement with Compania Minera Tamberias SCM (“Tamberias SCM”) whereby the Company can earn
a 100% interest in the Tamberias Property by making certain scheduled option payments. In addition,
Tamberias SCM will retain a 1.5% net smelter royalty, which will be paid only after the Company has
recovered all its exploration and development costs.
As at December 31, 2019, the Company’s total remaining option payments totalled US$16.3 million
Effective January 3, 2020, the Company amended the terms of the remaining option payments payable
pursuant to option agreement with Tamberias SCM, so that the remaining option payments, which total
US$16.3 million, have been deferred and rescheduled from June 30, 2020 to June 30, 2026. Pursuant
to these amendments, the next option payment, which is due June 30, 2020, will be US$550,000.
7. CREDIT FACILITIES
On January 12, 2019, the Company obtained an unsecured US$5.0 million credit facility (the “January
2019 Facility”) from Zebra, a related party of the Company by virtue of its shareholding in the
Company in excess of 20%, to provide additional financial flexibility to fund ongoing exploration at
the Filo del Sol Project and for general corporate purposes. Zebra reports its security holdings in the
Company as a joint actor with Lorito Holdings S.à.r.l. (“Lorito”), and at the time of entering into the
January 2019 Facility they collectively held more than 20% of the Company’s issued and outstanding
common shares. The January 2019 Facility replaced an existing US$2.0 million facility from Zebra,
which matured on January 12, 2019, and into which the outstanding balance owed thereunder was
transferred. As consideration for the January 2019 Facility, Zebra will receive 300 common shares
each month, for every US$50,000 in principal outstanding, prorated accordingly for the number of
days outstanding. The January 2019 Facility matures on July 12, 2020, and no interest is payable in
cash during its term.
On February 28, 2019, the Company obtained an additional unsecured US$5.0 million short-term
credit facility (the “February 2019 Facility”) from Zebra. As consideration for the February 2019
Facility, Zebra received 6,000 common shares of the Company upon execution thereof, and shall
receive an additional 300 common shares each month, for every US$50,000 in principal outstanding
on the facility, prorated accordingly for the number of days outstanding. The February 2019 Facility
matures on February 28, 2020, and no interest is payable in cash during its term.
13
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
On April 26, 2019, the Company obtained an additional unsecured US$4.0 million short-term credit
facility (the “April 2019 Facility”) from Zebra. As consideration for the April 2019 Facility, Zebra
received 6,000 common shares of the Company upon execution thereof, and shall receive an
additional 300 common shares each month, for every US$50,000 in principal outstanding on the
facility, prorated accordingly for the number of days outstanding. The April 2019 Facility matures on
April 26, 2020, and no interest is payable in cash during its term.
During the year ended December 31, 2019, the Company fully drew and repaid the amounts
extended by the facilities. As a result of the amounts previously drawn, the Company issued 497,196
common shares during the year ended December 31, 2019, which was comprised of 8,361 common
shares related to amounts drawn and outstanding in December 2018 and 488,835 common shares
related to amounts drawn and outstanding from January to September 2019. The latter resulted in
$1,322,599 (2018: $31,980) in financing costs recognized through the consolidated statement of
loss.
All common shares issued in conjunction with the facilities are subject to a four-month hold period
under applicable securities laws.
8. SHARE CAPITAL
The Company has authorized an unlimited number of voting common shares without par value.
On August 30, 2019, the Company closed a bought deal offering of common shares and a concurrent
non-brokered private placement of common shares (the “Financings”). In aggregate, 14,547,727
common shares of the Company were sold at a price of $2.75 per common share (the “Price”),
generating aggregate gross proceeds of $40.0 million. Share issuance costs related to the Financings
totaled $1.2 million, and included commissions, professional fees and regulatory fees.
Zebra and Lorito, which report their shareholding in the Company as joint actors and are related
parties of the Company by virtue of their combined shareholding in the Company in excess of 20%,
acquired 9,090,909 common shares of the Company through the Financings, for gross proceeds of
$25.0 million. Zebra subscribed to 7,272,727 common shares pursuant to the concurrent non-
brokered private placement of common shares, and Lorito acquired 1,818,182 common shares from
the underwriter of the bought deal offering. On August 30, 2019, following the close of the
Financings, Zebra and Lorito held 27.38% and 8.54%, respectively, of the then issued and
outstanding common shares of the Company.
14
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
9. SHARE OPTIONS
a) Share option plan
The Company has a share option plan adopted by the Board of Directors on July 8, 2016 and
amended May 12, 2017, which reserves an aggregate of 10% of the issued and outstanding shares
of the Company for issuance upon the exercise of options granted. The granting, vesting and terms
of the share options are at the discretion of the Board of Directors.
b) Share option outstanding
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:
Balance at January 1, 2018
Options granted
Exercised
Balance at December 31, 2018
Options granted
Exercised
Expired or forfeited
Number of
shares issuable
pursuant to
share options
Weighted
average
exercise price
per share
4,618,750
2,500,000
(471,250)
6,647,500
2,395,000
(598,333)
(176,666)
$ 1.96
2.20
0.87
$ 2.13
2.75
1.32
2.19
Balance at December 31, 2019
8,267,501
$ 2.37
On October 11, 2019, the Company granted a total of 2,395,000 share options to officers, employees,
directors and other eligible persons at an exercise price of $2.75 per share.
The Company uses the Black-Scholes option pricing model to estimate the fair value for all options
granted and the resulting stock-based compensation. The weighted average assumptions used in
this pricing model, and the resulting fair values per option, for the 2,395,000 share options granted
during the year ended December 31, 2019, were as follows:
(i)
(ii)
(iii)
(iv)
(v)
Risk-free interest rate:
Expected life:
Expected volatility:
Expected dividends:
Fair value per option:
1.46%
5 years
56.63%
nil
$1.17
The weighted average share price on the exercise date for the share options exercised during year
ended December 31, 2019 was $2.48.
15
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
The following table details the share options outstanding and exercisable as at December 31, 2019:
Outstanding options
Weighted
average
remaining
contractual
life
(Years)
1.93
3.62
2.70
4.78
3.38
Weighted
average
exercise
price
$2.00
$2.20
$2.50
$2.75
$2.37
Options
outstanding
1,985,000
2,330,001
1,557,500
2,395,000
8,267,501
Exercise
prices
$2.00
$2.20
$2.50
$2.75
Exercisable options
Weighted
average
remaining
contractual
life
(Years)
1.93
3.62
2.70
4.78
2.97
Weighted
average
exercise
price
$2.00
$2.20
$2.50
$2.75
$2.29
Options
exercisable
1,985,000
1,541,667
1,557,500
798,334
5,882,501
c) Share-based compensation
Exploration and project investigation
General and administration
Year ended
December 31,
2018
605,738
2,115,183
2019
563,326
1,906,469
2,469,795
2,720,921
10. EXPLORATION AND PROJECT INVESTIGATION
Due to the geographic location of the Filo del Sol Project, the Company’s business activities fluctuate
with the seasons, through increased drilling and other exploration activities during the summer
months in South America. As a result, a general recurring trend is the increase in exploration
expenditures, and therefore net losses, for the fourth quarter and first quarter of a fiscal year,
relative to the second and third quarters.
16
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
The Company expensed the following exploration and project investigation costs, all incurred in South America, for the years ended
December 31, 2019 and 2018:
Year ended
December 31,
2019
Land holding and access costs
Drilling, fuel, camp costs and field supplies
Roadwork, travel and transport
Engineering and conceptual studies
Consultants, geochemistry and geophysics
Environmental and community relations
VAT and other taxes
Office, field and administrative salaries,
overhead and other administrative costs
Share-based compensation
Filo del Sol
Project
857,254
8,991,119
3,215,580
309,794
1,066,062
2,742,382
2,604,952
2,517,945
561,568
Other
58,534
-
159
-
-
-
70,053
10,357
1,758
Total
915,788
8,991,119
3,215,739
309,794
1,066,062
2,742,382
2,675,005
2,528,302
563,326
Total
22,866,656
140,861
23,007,517
2018
Land holding and access costs
Drilling, fuel, camp costs and field supplies
Roadwork, travel and transport
Engineering and conceptual studies
Consultants, geochemistry and geophysics
Environmental and community relations
VAT and other taxes
Office, field and administrative salaries,
overhead and other administrative costs
Share-based compensation
Total
555,168
9,180,627
3,495,147
1,509,830
2,036,903
1,568,081
2,182,251
25,603
-
181
-
-
-
87,997
580,771
9,180,627
3,495,328
1,509,830
2,036,903
1,568,081
2,270,248
2,859,661
602,531
23,990,199
10,698
3,207
127,686
2,870,359
605,738
24,117,885
17
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
11. RELATED PARTY TRANSACTIONS
Under the normal course of operations, the Company may undertake transactions or hold balances
with related parties. Other than those related party transactions identified elsewhere in these
consolidated financial statements, the Company also engages with Josemaria and NGEx Minerals
Ltd. (“NGEx Minerals”), related parties by way of directors, officers and shareholders in common,
and Bofill Mir & Alvarez Jana Abogados Ltda. (“BMJAL”), a Chilean legal firm, of which a director of
the Company is a partner.
a) Related party services
The Company has a cost sharing arrangement with Josemaria and NGEx Minerals. Under the terms of
this arrangement, the Company provides management, technical, administrative and/or financial
services (collectively, “Management Services”) to Josemaria and NGEx Minerals, and vice versa. In
addition, the Company engages BMJAL, as its legal counsel in Chile. These transactions were incurred
in the normal course of operations, and are summarized as follows:
Management Services to Josemaria
Management Services to NGEx Minerals
Management Services from Josemaria
Management Services from NGEx Minerals
Legal services from BMJAL
b) Related party balances
Year ended
December 31,
2018
735,822
-
(555,443)
-
(86,240)
2019
1,217,414
238,003
(336,044)
(363,373)
(93,659)
The amounts due from (to) related parties, and the components of the consolidated statements of
financial position in which they are included, are as follows:
Receivables and other assets
Receivables and other assets
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
c) Extended Camp Use Agreement
Related Party
Josemaria
NGEx Minerals
Josemaria
NGEx Minerals
BMJAL
December 31,
2019
December 31,
2018
196,489
64,222
(220,366)
(57,490)
(22,617)
523,244
-
(77,492)
-
(15,463)
On June 26, 2019, the Company, through its wholly-owned subsidiary, entered into a transaction with
a wholly-owned subsidiary of Josemaria whereby the Company extended its right to use Josemaria’s
Batidero Camp in Argentina until at least April 1, 2021, being the end of the 2020/2021 field season, in
exchange for a cash consideration of US$235,000, or approximately $331,000.
18
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
d) Key management compensation
The Company’s key management personnel have the authority and responsibility for overseeing,
planning, directing and controlling its activities and consist of the Board of Directors and members of
the executive management team. Total compensation expense for key management personnel, and
the composition thereof, is as follows:
Salaries
Short-term employee benefits
Directors fees
Stock-based compensation
Incentive bonuses
12. INCOME TAXES
Year ended
December 31,
2018
1,087,500
45,477
97,000
1,981,235
470,000
3,681,212
2019
987,604
47,542
97,000
1,784,488
490,000
3,406,634
Income tax expense differs from the amount that would result from applying the Canadian federal and
provincial income tax rates to the loss for the year. These differences result from the following items:
Year ended
December 31,
2019
Year ended
December 31,
2018
Loss before taxes
Combined Canadian federal and provincial statutory
income tax rates
Income tax recovery based on the above rate
28,570,601
28,891,227
27.00%
7,714,062
27.00%
7,800,631
Income tax benefits that have not been recognized
and other items
Impacts of changes in foreign tax and currency rates
Differences between Canadian and foreign tax rates
Non-deductible expenses
Total income tax recovery
(3,331,520)
(3,610,455)
412,203
(1,184,290)
-
(3,374,226)
(4,100,813)
396,446
(722,038)
-
19
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
The Company’s unrecognized deductible temporary differences and unused tax losses for which no
deferred tax asset has been recognized consist of the following:
Non-capital losses carried forward
Mineral properties and related expenditures
Other
December 31,
2019
2,903,562
8,885,625
477,010
12,266,197
December 31,
2018
2,863,581
7,276,341
306,954
10,446,876
As at December 31, 2019, the non-capital loss carry-forwards and their respective expiration dates are
as follows:
Year
2020
2021
2022
2023
2024 and onwards
Canada
-
-
-
-
10,239,132
Argentina
80
140,643
135,423
7,770
217,494
Other
10,628
5,101
26,903
11,943
-
Total
10,708
145,744
162,326
19,713
10,456,626
10,239,132
501,410
54,575
10,795,117
13. SEGMENTED INFORMATION
The Company is principally engaged in the acquisition, exploration and development of mineral properties
in South America. The information regarding mineral properties and exploration and project investigation
costs presented in Notes 6 and 10, respectively, represent the manner in which management reviews its
business performance. Materially all of the Company’s mineral properties and exploration and project
investigation costs relate to the Filo del Sol Project, which straddles the border between the San Juan
Province, Argentina and Region III, Chile and is comprised of the Filo del Sol Property and the Tamberias
Property. Materially all of the Company’s administrative costs are incurred by the Canadian parent, where
materially all of the Company’s cash is held in the normal course of business until it is required to be
deployed to the Company’s South American subsidiaries in support of ongoing and planned work
programs.
20
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
The following are summaries of the Company’s current and non-current assets, current liabilities, and
net losses by segment:
As at
December 31,
2019
Filo del Sol
Project
6,509,343
88,832
7,312,220
13,910,395
3,233,542
12,145
3,245,687
Current assets
Right-of-use asset
Mineral properties
Total assets
Current liabilities
Lease liabilities
Total liabilities
2018
Current assets
Mineral properties
Total assets
4,516,473
7,118,233
11,634,706
Current liabilities
2,472,242
Other
Corporate
Total
-
-
-
-
-
-
-
-
-
-
-
9,840,063
-
-
9,840,063
16,349,406
88,832
7,312,220
23,750,458
380,661
-
380,661
3,614,203
12,145
3,626,348
303,122
-
303,122
4,819,595
7,118,233
11,937,828
746,334
3,218,576
Year ended
December 31,
2019
2018
Exploration and
project
investigation
General and
administration
and other items
Net loss
Exploration and
project
investigation
General and
administration
and other items
Net loss
Filo del Sol
Project
Other
Corporate
Total
22,866,656
140,861
-
23,007,517
(141,845)
22,724,811
-
140,861
5,704,929
5,704,929
5,563,084
28,570,601
23,990,199
127,686
-
24,117,885
(39,164)
23,951,035
-
127,686
4,812,506
4,812,506
4,773,342
28,891,227
21
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
14. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard its ability to continue as a going
concern in order to pursue the development of its mineral properties and to maintain a flexible capital
structure which optimizes the costs of capital at an acceptable risk. In the management and definition
of capital, the Company considers the items included in shareholders’ equity to be capital.
The Company manages the capital structure and makes adjustments, as necessary, in light of
changes in economic conditions and the risk characteristics of its assets. In order to maintain or
adjust the capital structure, the Company may attempt to issue new shares or debt instruments,
acquire or dispose of assets, or to bring in joint venture partners.
To facilitate the management of its capital requirements, the Company prepares annual expenditure
budgets that are updated as necessary depending on various factors, including, but not limited to,
successful capital deployment and general industry conditions. The annual and updated budgets are
approved by the Board of Directors.
15. FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
The Company has estimated the fair values of its financial instruments based on appropriate
valuation methodologies. These values are not materially different from their carrying value.
The Company classifies the fair value of its financial instruments according to the following hierarchy
based on the amount of observable inputs used to value the instrument:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the
assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The Company’s financial instruments consist of cash, receivables and other assets, trade payables
and accrued liabilities, and the amounts owing pursuant to credit facilities, with carrying values
considered to be reasonable approximations of fair value due to the short-term nature of these
instruments.
As at December 31, 2019, the Company’s financial instruments are exposed to the following financial
risks, including credit, liquidity and currency risks:
(i)
Credit risks associated with cash is minimal as the Company deposits the majority of its cash
with a large Canadian financial institution that has been accorded a strong investment grade
rating by a primary rating agency.
22
Filo Mining Corp.
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars, unless otherwise stated)
(ii)
Liquidity risks associated with the inability to meet obligations as they become due, as further
discussed in Note 1, is minimized through the management of its capital structure as
explained on Note 14 and by maintaining good relationships with significant shareholders
and creditors. The Company also closely monitors and reviews its costs to date and actual
cash flows on a monthly basis. In assessing liquidity risk as at December 31, 2019, the
Company has also considered the impact of funds made available through the credit facilities
described in Note 7.
The maturities of the Company’s financial liabilities as at December 31, 2019 are as follows:
Total
Less than
1 year
1-5
years
More than
5 years
Accounts payable and
accrued liabilities
Lease liabilities
Total
3,553,545
72,803
3,553,545
60,658
-
12,145
3,626,348
3,614,203
12,145
-
-
(iii)
Foreign currency risk can arise when the Company or its subsidiaries transact or have net
financial assets or liabilities which are denominated in currencies other than their respective
functional currencies.
At December 31, 2019, the Company’s largest foreign currency risk exposure existed at the
level of its Canadian headquarters, where the Company held a net financial asset position
denominated in US dollars having a Canadian dollar equivalent of approximately $2.4 million. A
10% change in the foreign exchange rate between the US dollar and the Canadian dollar, the
functional currency of the Company’s Canadian headquarters, would give rise to
increases/decreases of approximately $240,000 in financial position/comprehensive loss.
16. COMMITMENTS
In November 2017, the Company entered into agreements with the owners of certain lands, accesses
and surface rights related to the Tamberias Property (the “Access Agreements”). Under the terms of
the Access Agreements, in exchange for total payments of US$1.26 million, the Company secured
its right to use and maintain roads and accesses, which allow entry to the Filo del Sol Project from
Chile, and also perform any surface disturbances as necessary to undertake its exploration work
programs, such as establishing drill platforms, for a period of four years.
As of December 31, 2019, the Company has one remaining payment of US$315,875 each, which is
payable in November 2020.
23
CORPORATE DIRECTORY
OFFICERS
Adam Lundin
Chief Executive Officer
James Beck
President
Robert Carmichael
VP Exploration
Jeffrey Yip
Chief Financial Officer
Brenda Nowak
Corporate Secretary
DIRECTORS
Lukas Lundin, Chairman (non-executive)
Adam Lundin
Alessandro Bitelli
Ashley Heppenstall
Paul McRae
Pablo Mir
Wojtek Wodzicki
AUDITORS
PricewaterhouseCoopers LLP
Vancouver, British Columbia, Canada
LEGAL COUNSEL
Cassels Brock & Blackwell LLP
Vancouver, British Columbia, Canada
CORPORATE OFFICE
Suite 2000 - 885 West Georgia Street
Vancouver, British Columbia
Canada V6C 3E8
Telephone: (604) 689-7842
Fax: (604) 689-4250
REGISTERED & RECORDS OFFICE
Suite 2200 - 885 West Georgia Street
Vancouver, British Columbia
Canada V6C 3E8
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
Vancouver, British Columbia
Canada
SHARE LISTINGS
TSX Venture Exchange &
Nasdaq First North Growth Market
Symbol: FIL
CUSIP No.: 31730E101
ISIN: CA31730E1016