2021 YEAR END REPORT
Management’s Discussion and Analysis
and
Consolidated Financial Statements
For the Twelve Months ended December 31, 2021
(AUDITED)
FILO MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2021
(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, 2021 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 22, 2022. 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 Filo del Sol project (“Filo del Sol” or the
“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 of 23%. Positive valuations were also maintained across a wide range of sensitivities on key assumptions.
The Company’s most recent Mineral Resource and Mineral Reserve statement for the Filo del Sol Project is shown
below.
Category
Mineral Resource
Indicated
Inferred
Mineral Reserve
Proven
Probable
Tonnes
(millions)
Cu
(%)
Au
(g/t)
Ag
(g/t)
Lbs Cu
(billions)
Oz Au
(millions)
Oz Ag
(millions)
425.1
175.1
-
259.1
0.33
0.27
-
0.39
0.32
0.33
-
0.33
10.7
6.2
-
15.1
3.1
1.1
-
2.2
4.4
1.8
-
2.8
146.9
34.8
-
126.0
The Company’s Mineral Resource estimate is inclusive of the Mineral Reserve estimate as set forth above.
1
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. and 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.
The Filo del Sol Project continues to hold significant exploration potential, and drilling completed subsequent to the
PFS has intersected long intervals of copper, gold and silver mineralization well outside of the resource envelope.
Wide-spaced drilling over the past two years has discovered a higher-grade section of the mineralized structure, now
called the Aurora Zone, which contains at least one section with elevated grades. The higher grade section identified
to date has been named Breccia 41, after its discovery hole FSDH041, which returned 163m at 5.43% copper
equivalent (“CuEq”) (2.31% Cu; 2.07g/t Au; 183.0g/t Ag) from a depth of 780m within a broader interval of 858m at
1.80% CuEq (0.86% Cu; 0.70g/t Au; 48.1g/t Ag) from a depth of 188m. Hole FSDH054, collared 60m east of
FSDH041, was also drilled in Breccia 41 and returned 172m at 3.22% CuEq (1.51% Cu; 1.42g/t Au; 75.9g/t Ag) from a
depth of 830m within a broader interval of 1,224m at 1.26% CuEq (0.71% Cu; 0.54g/t Au; 18.0g/t Ag) from a depth
of 146m. This mineralization has been transformative for the Filo del Sol Project, and further exploration thereof will
be a strategic focus for the Company moving forward.
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 through further exploration, and by advancing 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’s common shares traded on the TSX Venture Exchange under the symbol "FIL" until September 30,
2021, at which point it was voluntarily delisted in order for the Company’s common shares to trade on the Toronto
Stock Exchange under the same symbol effective October 1, 2021.
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.
2021 OPERATING HIGHLIGHTS
Transformative 2020/2021 Program Discovers High-grade Breccia 41
The Company’s 2020/2021 drill campaign at the Filo del Sol Project concluded in May 2021, with a total of 11,280m
of drilling completed in 15 holes. The highlight of the program was the discovery of Breccia 41, which was intersected
by hole FSDH041, returning 163m at 5.43% CuEq (2.31% Cu; 2.07g/t Au; 183.0g/t Ag) from 780m depth within a
broader interval of 858m at 1.80% CuEq (0.86% Cu; 0.70g/t Au; 48.1g/t Ag) from 188m depth. Hole FSDH041 ended
in mineralization at a depth of 1,046m, with the final 20m averaging 1.19% CuEq (0.65% Cu; 0.72g/t Au; 2.3g/t Ag).
Wide-spaced drilling over the past two years has discovered a higher-grade section of the deposit, the Aurora Zone,
extending along a north-south length of at least 700m. Breccia 41 represents one section of elevated grades within
this larger Aurora Zone. Both the Aurora Zone and Breccia 41 remain open along strike in both directions and their
full depth extent and east-west lateral width also remain open.
Other highlights from the 2020/2021 drill program include:
Hole FSDH046, which returned the longest mineralized intersection at the project to date, confirming strong
mineralization to over 1,400m below surface. The hole returned 676m at 0.92% CuEq (0.57% Cu; 0.34g/t
Au; 11.3g/t Ag) from a depth of 380m within a broader interval of 1,378m at 0.71% CuEq (0.45% Cu; 0.29g/t
Au; 6.1g/t Ag) from a depth of 78m;
2
Hole FSDH049 returned 425m at 1.55% CuEq (0.42% Cu; 0.44g/t Au; 91.5g/t Ag); included within the long
intercept was the then highest-grade silver intersection on the project to date, with 4m at 5,045.0 g/t Ag
from a depth of 236m contained within a broader silver interval of 56m at 629.1 g/t Ag from a depth of 228m;
and
Hole FSDH051, which is the most northerly hole drilled into the deposit to date, returned 344m at 0.50%
CuEq (0.26% Cu; 0.21g/t Au; 9.4g/t Ag) from 246m, extending the mineralized zone by 750m to the north.
Overall, the 2020/2021 drill program successfully extended the known continuous mineralization of the
deposit over a distance of approximately 4,500m north-south, 1,000m east-west and almost 1,500m deep.
Complete assay results for the 2020/2021 drill program are summarized in the table below:
Hole-ID
FSDH037
plus
plus
incl.
incl.
FSDH040
incl.
FSDH041
incl.
incl.
incl.
FSDH042
FSDH043
incl.
incl.
FSDH044
incl.
FSDH045
plus
FSDH046
incl.
incl.
FSDH047
incl.
FSDH048
incl.
FSDH049
plus
incl.
incl.
incl.
FSDH050
incl.
and incl.
FSDH051
incl.
From
(m)
To
(m)
Length
(m)
Cu
(%)
118.0
208.0
380.0
380.0
396.0
94.0
94.0
188.0
376.0
780.3
780.3
262.0
300.0
774.3
980.0
58.0
350.0
118.0
268.0
77.7
302.0
380.0
86.0
324.0
38.0
498.0
0.0
90.0
220.0
228.0
236.0
276.0
329.2
424.0
246.0
280.0
134.0
240.0
882.0
484.0
404.0
211.5
120.0
1,046.0
1,046.0
943.3
864.0
310.0
1,068.0
1,068.0
1,068.0
1,000.0
1,000.0
142.0
286.0
1,456.0
1,456.0
1,056.0
493.5
493.5
1,118.5
850.0
30.0
515.3
364.6
284.0
240.0
476.8
356.0
476.8
590.0
316.0
16.0
32.0
502.0
104.0
8.0
117.5
26.0
858.0
670.0
163.0
83.7
48.0
768.0
293.7
88.0
942.0
650.0
24.0
18.0
1,378.3
1,154.0
676.0
407.5
169.5
1,080.5
352.0
30.0
425.3
144.6
56.0
4.0
200.8
26.9
52.8
344.0
36.0
0.39
0.25
0.41
0.19
0.21
0.45
1.15
0.86
1.07
2.31
3.13
0.00
0.29
0.47
0.61
0.42
0.51
0.19
0.22
0.45
0.50
0.57
0.29
0.39
0.52
0.63
0.01
0.42
0.58
0.67
0.57
0.26
0.49
0.36
0.26
0.16
Ag
Au
(g/t)
(g/t)
4.8
0.45
0.6
0.21
27.8
0.13
119.9
0.07
473.0
0.09
2.4
0.29
2.3
0.28
48.1
0.70
60.9
0.85
183.0
2.07
272.2
2.40
0.7
1.01
2.0
0.10
2.6
0.16
3.3
0.19
2.2
0.32
2.5
0.37
6.8
0.35
5.3
0.93
6.1
0.29
7.1
0.32
11.3
0.34
2.1
0.16
2.9
0.20
5.3
0.43
6.7
0.64
1.9
1.38
91.5
0.44
249.9
0.61
629.1
0.51
0.36 5,045.0
16.2
0.28
0.34
7.8
48.8
0.40
0.21
9.4
50.5
0.91
CuEq1
(%)
0.76
0.40
0.75
1.30
4.44
0.69
1.37
1.80
2.23
5.43
7.27
0.39
0.61
0.78
0.67
0.80
0.50
0.94
0.71
0.80
0.92
0.43
0.57
0.88
1.16
1.55
3.22
0.60
0.81
1.08
0.50
1.26
3
376.0
and incl.
0.56
1 CuEq for drill intersections is calculated based on US$3.00/lb Cu, US$1,500/oz Au and US$18/oz Ag,
with 80% metallurgical recoveries assumed for all metals. The formula is: CuEq % = Cu % + (0.7292
* Au g/t) + (0.0088 * Ag g/t).
530.0
154.0
0.41
0.14
5.0
Exploration Success Continues with Ambitious 2021/2022 Drill Program
Following camp winterization and maintenance efforts undertaken from June through to early August 2021, the
Company commenced its 2021/2022 drill campaign at Filo del Sol in late August 2021, marking the earliest launch to
a drill campaign in the project’s history. The program commenced with three rigs, and ramped up to five rigs prior to
the end of the year, with the first holes focused around the Breccia 41 area.
Assay results received to date from the ongoing drill program continue to showcase the potential for world-class size
and grades at Filo del Sol. Hole FSDH055A returned the best precious metal intersections on the project to date, with
64m at 1,213.8g/t Ag and 0.49g/t Au from a depth of 362m. In addition, hole FSDH054 was collared 60m east of, and
drilled parallel to, FSDH041 and intersected 172m at 3.22% CuEq (1.51% Cu; 1.42g/t Au; 75.9g/t Ag)
from 830m depth within a broader interval of 1,224m at 1.26% CuEq (0.71% Cu; 0.54g/t Au; 18.0g/t Ag) from a
depth of 146m. The mineralization intersected by FSDH054 is completely outside of the current Mineral Resource,
successfully extended Breccia 41, and remains open to the west, east, north and at depth.
Assay results to date from the 2021/2022 drill program are summarized in the table below:
Hole-ID
FSDH054
plus
plus
incl.
FSDH055A
incl.
incl.
From
(m)
146.0
435.9
498.0
830.0
362.0
374.4
380.0
To
(m)
1,369.5
442.0
1,090.0
1,001.5
426.0
402.0
388.0
Length
(m)
1,223.5
6.1
592.0
171.5
64.0
27.6
8.0
Cu
(%)
0.71
0.59
1.15
1.51
0.01
0.01
0.01
Ag
Au
(g/t)
(g/t)
18.0
0.54
127.5
0.24
31.9
0.84
1.42
75.9
0.49 1,213.8
0.50 2,439.2
0.45 5,280.0
CuEq1
(%)
1.26
1.89
2.04
3.22
1 CuEq for drill intersections is calculated based on US$3.00/lb Cu, US$1,500/oz Au and US$18/oz Ag,
with 80% metallurgical recoveries assumed for all metals. The formula is: CuEq % = Cu % + (0.7292
* Au g/t) + (0.0088 * Ag g/t).
CORPORATE UPDATE
$100 Million Strategic Investment by BHP
On March 11, 2022, the Company closed a non-brokered private placement of 6,270,000 common shares to BHP
Western Mining Resources International Pty Ltd, a wholly owned subsidiary of BHP Group Limited (collectively, "BHP"),
at a price of $15.95 per common share for total gross proceeds of $100 million (the “Private Placement”). No finder's
fee or commissions were payable in connection with the Private Placement.
Upon closing of the Private Placement, BHP owned approximately 5% of the Company’s issued and outstanding
common shares on an undiluted basis. The common shares acquired by BHP pursuant to the Private Placement are
subject to a statutory four-month hold period in accordance with applicable securities regulations.
4
In connection with the Private Placement, BHP has been granted certain participation and top-up rights, allowing BHP
to maintain its ownership interest from time to time, provided that such participation rights will not apply to any
portion of BHP's ownership interest in excess of a 9.9% undiluted ownership level in the Company. In addition, the
Company and BHP have agreed to form a joint advisory committee to share expertise, exploration concepts, and
discuss future project development.
The Company intends to use the proceeds of the Private Placement to advance exploration and development of the
Company's Filo del Sol Project and for working capital and general corporate purposes.
OUTLOOK
The Company’s 2021/2022 drill program is currently ongoing and is planned to continue year-round following camp
winterization efforts completed in August 2021 and the replenishment of its treasury with the closing of the Private
Placement on March 11, 2022. The program is currently operating with five diamond drill rigs, and the Company is in
the process of adding two additional diamond drills and a reverse circulation (“RC”) drill before the end of March 2022.
The RC rig will be utilized to pre-collar some critical holes in order to increase overall drill productivity and reduce
problems encountered in drilling through the intensely altered, near-surface rocks overlying Breccia 41.
The initial holes of the 2021/2022 drill program focus on the area around Breccia 41, and the broader Aurora Zone,
and will seek to improve the Company’s understanding of their geometry, extent and geological context. In addition,
the Company has also planned step-out holes, the objective of which will be to find the edges of the deposit, which
remains open to the north, south, east and at depth. The step-out drilling will be a combination of holes testing the
sparsely drilled area north of FSDH037, the undrilled area north-east of FSDH051 and, eventually, the area south of
the southern extent of the current Mineral Resource. Hole locations will be determined as the drill program progresses,
guided by drill results, surface mapping, and geophysical interpretations. In particular, data collected from the drilling
will be used to develop a comprehensive geological model which will guide further exploration and form the basis of
eventual Mineral Resource estimates.
The Company also plans to undertake preliminary metallurgical testwork on the sulphide mineralization, as well as the
continuation of environmental and social baseline data collection in support of future project permitting.
The Company’s drilling plans have been developed to enable the Company to rapidly define the deposit and advance
key exploration efforts, however the Company’s plans and timelines are subject to equipment and staff availability,
along with being able to operate safely and effectively in accordance with the Company's COVID-19 protocols. As a
result of its current strategies, the Company is confident that it can safely and effectively carry out with its 2021/2022
field program, however, this expectation will be continuously evaluated as the situation with respect to the COVID-19
pandemic in Chile and Argentina develops.
RESULTS FROM OPERATIONS
Year Ended
Net loss ($000’s)
Loss per share, basic and diluted ($)
Total assets ($000’s)
Dec-21
Dec-20
Dec-19
32,419
0.29
30,660
18,879
0.19
47,663
28,571
0.37
23,750
Filo Mining is a junior exploration company and, as such, its net losses are largely driven by its exploration and
project investigation activities. There is no expectation of generating operating profits until it develops a
commercially viable mineral deposit.
5
Key financial results for the last eight quarters are provided in the table below.
Three Months Ended
Dec-21
Sep-21
Jun-21
Mar-21
Dec-20
Sep-20
Jun-20
Mar-20
Exploration costs ($000's)
10,328
8,696
9,358
12,519
4,214
969
1,932
11,940
Operating loss ($000’s)
12,006
11,798
9,996
13,214
4,879
2,665
2,776
12,794
Net loss ($000’s)
8,053
9,142
4,793
10,431
3,271
2,510
1,262
11,836
Net loss per share, basic and
diluted ($)
0.07
0.08
0.04
0.09
0.03
0.02
0.01
0.13
Due to the geographic location of the Filo del Sol Project, the Company’s business activities have historically
fluctuated with the seasons, through increased drilling and other exploration activities during the summer months
in South America. However, from June 2021 to early August 2021, the Company completed winterization
preparations which have allowed it to commence its exploration program in August 2021, prior to the end of winter
in South America. These winterization efforts may also enable the Company to undertake continuous, year-round
field operations potentially reducing this seasonal fluctuation in exploration expenditures moving forward. 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, operating
loss, and net loss in a particular period.
Filo Mining incurred a net loss of $32.4 million for the year ended December 31, 2021 (2020: $18.9 million),
including an operating loss of $47.0 million (2020: $23.1 million). Exploration and project investigation costs are
generally the most significant expenditures of the Company and for the year ended December 31, 2021, they
accounted for approximately 87% of the operating loss for the year (2020: 82%). 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, 2021 were $40.9 million (2020: $19.1
million), which increased relative to the prior year. The increase in the current exploration costs are primarily the
result of the 2020/2021 drill program having been extended through to May 2021, the undertaking of winterization
efforts from June through to early August 2021, and the 2021/2022 drill program commencing in late August
2021. By comparison, for 2020, the 2019/2020 field program was curtailed in March 2020 as a result of growing
COVID-19 concerns in Chile and Argentina at the time, and no field activity was undertaken from then until
November 2020 with the commencement of the 2020/2021 drill campaign. In addition, the year ended December
31, 2021 includes additional costs related to the implementation of the Company’s COVID-19 operating protocol,
which were not yet required in the prior year.
Detailed breakdowns of exploration costs for the periods presented are provided in the notes to the consolidated
financial statements.
Excluding share-based compensation, administration costs for the year ended December 31, 2021 totalled $3.6
million (2020: $2.5 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.
6
On an overall basis, administration costs for the year ended December 31, 2021, excluding share-based
compensation, were higher than 2020. Most notably, the increases are due to larger incentive bonuses awarded
by the Company to management and other key personnel during the year ended December 31, 2021, which have
resulted in higher compensation costs.
During the year ended December 31, 2021, the Company recognized a net monetary gain of $34,814 (2020:
$132,383) in relation to the application of hyperinflationary accounting for the Company’s Argentine subsidiary,
which began in 2018. The monetary gain recognized is the results of changes in the Argentine price indices and
changes to the Company’s net monetary position during 2021. Further discussion regarding the application of
hyperinflationary accounting has been provided in the notes to the consolidated financial statements.
From time to time, the Company acquires and transfers marketable securities as a mechanism to facilitate
intragroup funding transfers between its Canadian headquarters and its Argentine operating subsidiary.
Accordingly, for the year ended December 31, 2021, the Company recognized a gain of $15.3 million (2020: $4.6
million) on the use of marketable securities for the purposes of facilitating intragroup funding transfers, which
represents the net benefit of having used this funding mechanism over traditional methods. The increase in the
gain is the result of more funding provided to its Argentine subsidiary during the year ended December 31, 2021,
compared to 2020, and an increase in the average spread that the Company is able to achieve through this funding
mechanism.
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 $722,469 for the
year ended December 31, 2021 (2020: gain of $162,891) on translation of subsidiary company accounts from their
respective functional currencies to the Canadian dollar presentation currency. For 2021, the foreign exchange
translation loss is primarily the result of fluctuations of the Canadian dollar relative to the Chilean peso over the
year. For the year ended December 31, 2021, the impacts of hyperinflation amounted to gains of $259,519 (2020:
loss of $432,713) and consist of adjustments recognized on the continuing inflation of opening non-monetary
balances during the year and the ongoing translation of the Company’s Argentine subsidiary into the Canadian
dollar presentation currency.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2021, the Company had cash of $19.4 million and net working capital of $13.1 million, compared
to cash of $36.3 million and net working capital of $33.0 million as at December 31, 2020. The decrease in the
Company’s cash and net working capital is due primarily to funds used to advance exploration at the Filo del Sol
Project, and to a lesser extent, funds spent for general corporate purposes. These decreases have been partially offset
by $9.6 million in gross proceeds received by the Company in relation to the exercise of stock options during the year
ended December 31, 2021. The Company will continue to deploy the majority of its treasury to fund ongoing
advancement of the Filo del Sol Project.
Credit Facility
In July 2020, the Company obtained an unsecured US$5.0 million credit facility from Zebra Holdings and Investments
S.à.r.l. (“Zebra’) (the “July 2020 Facility”). Zebra and Lorito Holdings S.à.r.l. report their shareholding in the Company
as joint actors, as defined by Canadian securities regulations, and are related parties of the Company by virtue of their
combined shareholding in the Company in excess of 20%.
During the year ended December 31, 2021, the Company made no draws against the July 2020 Facility (2020:
US$1,000,000), and it matured on July 12, 2021 with no amounts drawn or owing. No interest was payable in cash
during its term.
7
Private Placement
On March 11, 2022, pursuant to the Private Placement, the Company issued 6,270,000 common shares to BHP at a
price of $15.95 per common share for total gross proceeds of $100 million. The common shares acquired by BHP
pursuant to the Private Placement are subject to a statutory four-month hold period in accordance with applicable
securities regulations.
The Company intends to use the proceeds to advance exploration and development of the Company's Filo del Sol
Project and for working capital and general corporate purposes. The foregoing notwithstanding, no portion of the
proceeds from the Private Placement have yet to be used as at the date of this MD&A.
Use of Proceeds from 2020 Financing
On July 30, 2020 the Company closed the sale of 6,325,000 common shares of the Company, including 825,000
common shares sold pursuant to the full exercise of an over-allotment option, on a bought deal basis to a syndicate
of underwriters led by PI Financial Corp. and Canaccord Genuity Corp. (the “Underwriters”), at a price of $1.85 per
share for total gross proceeds of approximately $11.7 million (the “2020 Offering”). The Company also closed a
concurrent private placement of 16,213,235 common shares at $1.85 per share for additional gross proceeds of
approximately $30.0 million (together with the 2020 Offering, the “2020 Financing”).
The following is a reconciliation of actual use of proceeds from the 2020 Financing to the estimates included in the
Company’s Short Form Prospectus dated July 22, 2020:
Net proceeds from 2020 Financing
40.5
40.5
Estimated
Actual
Repayment of amounts owing
pursuant to the July 2020 Facility
Filo del Sol Project
2020/2021 field and drill
program
2021/2022 field and drill
program
Corporate, public company
overheads and working capital
purposes
1.4
1.3
22.9
14.4
32.1
3.7
1.8
3.4
The net proceeds used to fund the 2020/2021 field and drill program at the Filo del Sol Project exceeded previous
estimates primarily due to changes to the size and the scope of the program. Most notably, the Company’s original
plans had considered a standard end to its field season in or around early April 2021, whereas the program was
extended with drilling continuing through May 2021 and winterization efforts undertaken from July to August 2021 in
preparation for an earlier start to the following campaign.
The increased use of proceeds for corporate overheads relate predominantly to incentive bonuses awarded by the
Company to management and other key personnel during in August 2021 following the success of its 2020/2021 drill
campaign. No incentive bonuses were contemplated or reflected in previous estimates.
8
These increases to the use of proceeds from the 2020 Financing ultimately reduced the funds available for future field
and drill programs, namely the 2021/2022 drill program currently underway, which will be funded through to
completion from the proceeds the Private Placement.
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 and NGEx Minerals Ltd. (“NGEx Minerals”), related parties by way of directors, officers and shareholders in
common. Bofill Mir & Alvarez Jana Abogados Ltda. (“BMJAL”), a Chilean legal firm, was also considered a related party
of the Company until June 18, 2020, as a named partner of BMJAL was also concurrently a director of the Company
until such date.
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
Related party balances
Year ended
December 31,
2020
943,427
433,148
(314,419)
(500,101)
(43,866)
2021
281,813
549,787
(99,869)
(591,415)
-
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:
Receivables and other assets
Receivables and other assets
Accounts payable and accrued liabilities
Related Party
Josemaria
NGEx Minerals
Josemaria
46,678
15,113
(1,667)
Accounts payable and accrued liabilities
NGEx Minerals
(24,343)
Camp usage agreement
-
11,752
-
(5,850)
December 31,
2021
December 31,
2020
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.
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The agreement may be terminated with one year’s prior notice by Josemaria, and the agreement may be renewed for
another year at the Company’s election. On April 27, 2021, Filo Mining provided formal notice of renewal to the
Company for the period through April 1, 2022.
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,
2020
762,667
22,447
108,495
1,368,514
540,000
2,802,123
2021
965,333
28,107
162,004
2,040,635
1,030,000
4,226,079
SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant account policies are described in Note 3 the consolidated financial statements for year
ended December 31, 2021, as filed on SEDAR at www.sedar.com.
New Accounting Pronouncements
The IASB and/or the IFRS Interpretations Committee have issued new standards, amendments, or interpretations
to existing standards, which were not yet in effect nor applied by the Company as at December 31, 2021, such
as:
IAS 16, Property, plant and equipment
IAS 16 has been amended to provide clarity with respect to the treatment of net proceeds generated from selling
any items produced while bringing an item of property, plant and equipment to the location and condition
necessary for it to be capable of operating in the manner intended by the entity. Specifically, the amendments
prohibit entities from deducting amounts resulting from the selling of items produced during this phase from the
cost of property, plant and equipment. Instead, an entity shall recognize such sales proceeds and related costs in
profit or loss.
The amendments to IAS 16 are effective for annual reporting periods beginning on or after January 1, 2022, and
are not expected to have an impact on the Company’s financial results for the year ending December 31, 2022.
There are no other IFRS standards or International Financial Reporting Interpretations Committee interpretations
that are not yet effective or early adopted that are expected to have any impact on the Company.
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CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS
The preparation of the consolidated financial statements in accordance with IFRS, such as the underlying
consolidated financial statements for the year ended December 31, 2021, requires management to make
estimates, assumptions and judgements that affect the reported amounts of assets, liabilities and expenditures.
These estimates, assumptions and judgements are based on management’s best knowledge of the relevant facts
and circumstances taking into account previous experience. Actual results could differ and such differences could
be material. Estimates, assumptions and judgements are reviewed on an ongoing basis and are based on historical
experience and other facts and circumstances. Revisions to estimates, assumptions and judgements, and the
resulting effects on the carrying amounts of the Company’s assets and liabilities, are accounted for prospectively.
Information about estimates, assumptions, judgements and other sources of estimation uncertainty as at December
31, 2020 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. At each reporting date, the Company reviews its mineral properties for indicators
of impairment, which requires the Company to exercise key judgements, including but not limited to, the
Company’s right to explore the mineral property, whether the Company has further plans or budgets for
substantive expenditures for the ongoing exploration and evaluation of the mineral property, the impact of
exploration and evaluation results to date with respect to the mineral property, and the likelihood that the carrying
value of the mineral property will be recovered in the future through development or sale of the asset. If indicators
of impairment are identified, the Company would further review the carrying values of the applicable mineral
properties to determine if their carrying values may exceed their fair value, which also requires the Company to
make significant judgments and estimates. The judgments and estimates mentioned above 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.
The Company has determined that no indicators of impairment exist for its mineral properties as of December 31,
2021.
FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash, receivables and other assets, and trade payables and accrued
liabilities. The carrying values of the Company’s financial instruments are considered to be reasonable
approximations of fair value due to their anticipated short-term nature.
As at December 31, 2021, 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.
Liquidity risks associated with the inability to meet obligations as they become due 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.
The maturities of the Company’s financial liabilities as at December 31, 2021, are as follows:
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Total
Less than
1 year
1-5 years
More than
5 years
Accounts payable and
accrued liabilities
Total
7,062,830
7,062,830
7,062,830
7,062,830
-
-
-
-
(ii) 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, 2021, the Company’s largest foreign currency risk exposures 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 $1.2 million. A 10% change in the foreign
exchange rate between the US dollar and the Canadian dollar, the functional currency of Filo Mining,
financial
to an
would give
position/comprehensive loss.
increase/decrease of approximately $117,000
rise
in
OUTSTANDING SHARE DATA
As at March 22, 2022, the Company had 121,428,938 common shares outstanding and 6,121,599 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, 2022, which is
expected to be published on or around May 4, 2022.
DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
Disclosure controls and procedures (“DC&P”)
DC&P are designed to provide reasonable assurance that information required to be disclosed by the Company in
its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods specified in the securities legislation. They include
controls and procedures designed to ensure that information required to be disclosed by the Company in its annual
filings, interim filings or other reports filed or submitted under securities legislation is accumulated and
communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
There have not been any material changes in the Company’s DC&P during the year ended December 31, 2021.
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Internal controls over financial reporting (“ICFR”)
The Company’s ICFR are designed to provide reasonable assurance regarding the reliability of financial reporting
and preparation of financial statements for external purposes in accordance with IFRS. The Company’s ICFR
include policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and disposition of assets; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of the financial statements in accordance with IFRS; that receipts
and expenditures are being made only in accordance with authorization of management and directors of the
Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of assets that could have a material effect on the financial statements.
Any system, no matter how well conceived or operated, has inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable, not absolute, assurance with respect to financial statement
preparation and presentation and will not prevent all, or detect all, misstatements and frauds. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide
absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented
or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control.
The design of any control system also is based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
Management uses the Internal Control – Integrated Framework (2013 Framework) issued by the Committee of
Sponsoring Organizations for the Treadway Commission (COSO) in order to assess the effectiveness of the
Company’s ICFR.
There have not been any material changes in the Company’s internal controls during the year ended December
31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
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, and
these risk factors could materially affect the Company’s future operations and financial position and could cause
actual events to differ materially from those described in forward-looking statements relating to the Company.
Significant risk factors have been identified by the Company and are listed below. Further discussion and additional
risk factors are also available in the Company’s most recent annual information form, as filed on SEDAR at
www.sedar.com. 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.
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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.
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 dependent upon a number of factors, some of which are
discussed separately in the subsequent sections, and include the particular attributes of the deposit (such
as size, grade, metallurgy, expected recovery rates of metals from the ore and proximity to infrastructure
and labour), the interpretation of geological data obtained from drilling and sampling; feasibility studies;
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; commodity price fluctuations; 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 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, as 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. 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.
As appropriate, the Company may seek to mitigate its exploration risk by diversifying its portfolio, or
through the establishment of joint ventures and option agreements with third parties.
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 ore bodies, 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
14
price of metals, or changes in other assumptions on which they are based. Any of these factors may
require the Company to reduce 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 Company 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 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.
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.
Economic and Political Instability in Argentina
The Filo del Sol Project is predominantly 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 and 2020, 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 current 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).
15
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. In addition, economic instability in Argentina may negatively impact the timeliness or
recoverability of amounts collectible from the government of Argentina.
The current government has also reversed corporate tax rate reductions previously introduced by the
previous opposition government.
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. Environmental legislation is
evolving in a manner that requires stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their officers, directors and employees. The Company is
currently engaged in exploration with limited environmental impact. 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 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.
In Chile, a newly elected government is discussing changes to its constitution which may include changes
to the current environmental and socio-political landscape in that country. Additionally, the Chilean
Congress is also considering legislation designed to protect the country’s glaciers. No changes have yet
been made to the constitution and any proposed legislation has not yet been approved; however,
depending on its final language, these changes could affect the Company’s ability to develop the
Tamberias property.
16
Uncertainty of Long-term 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. Notwithstanding the Private Placement which closed on March 11 ,2022,
general market conditions which may be impacted by geopolitics or international conflict, 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 in the long term. 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.
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.
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 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 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.
17
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.
Ability to Achieve Year-round Operations
Between June and August 2021, the Company undertook winterization efforts to prepare its camp and
facilities for year-round operations at the Filo del Sol Project moving forward. The ability to conduct year-
round operations will allow the Company to better achieve its strategic objectives at Filo del Sol and/or
achieve these objectives on an expedited basis.
To date the Company has not yet attempted to conduct field or drill programs through the South
American winter, and there can be no assurances that the Company’s preparation and winterization
efforts have adequately anticipated, and safeguarded against, all the challenges of conducting
exploration programs through winter in the high Andes. Risks and uncertainties associated with the
Company’s ability to achieve year-round operations include, but are not limited to, the nature, duration
or extent of weather and other natural events and the availability of personnel, logistical support and
key contractors to provide services in challenging winter conditions.
COVID-19
The COVID-19 pandemic has negatively impacted and increased volatility of global financial markets and
may continue to do so. The economic viability of the Company’s long-term business plan is impacted by
its ability 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.
The health and safety of the Company’s employees, contractors, visitors, and stakeholders (collectively,
“Stakeholders”) remain the Company’s priority, and pursuant to its COVID-19 operating protocol, 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.
As the Company continues to monitor developments with respect to COVID-19, both globally and within
its operating jurisdictions, it will remain adaptive and will implement any such changes to its COVID-19
protocol, or its business in general, as may be deemed appropriate to mitigate any potential impacts to
its business and its Stakeholders. Such changes, may include, but are not limited to, reduced operations,
temporary closures of the Company’s project site or offices, and deviations from the timing and nature
of previous operating plans. Moreover, sustained COVID-19 outbreaks have resulted in operational and
supply chain delays and disruption as a result of governmental regulation and preventative measures
being implemented worldwide, including in Argentina. The Company could also be required to close,
curtail or otherwise limit its operating activities as a result of the implementation of any such
governmental regulation or preventative measures in the jurisdictions in which the Company operates,
or as a result of sustained COVID-19 outbreaks at its project site or facilities. Any such closures or
curtailments could have an adverse impact on the business of the Company.
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.
18
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.
OFF-BALANCE SHEET ARRANGEMENTS
During the year ended December 31, 2021, there were no material off-balance sheet transactions which have not
been recorded in the Company’s consolidated financial statements. The Company has not entered into any specialized
financial arrangement to minimize its currency risk.
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 Jamie 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 Chief Executive Officer 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”,
“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
19
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 potential exploration
results or anticipated outcomes of infill or step-out drilling planned at Filo del Sol; exploration and development plans
and expenditures, including but not limited to its plans to add rigs to the 2021/2022 drill campaign, the sequencing or
prioritization of drill targets, the impact of reverse circulation drilling for the purposes of pre-collaring, and a transition
to year-round operations; the ability of the Company’s COVID-19 operating protocol to continue to meet government
mandated health and safety guidelines enabling it to conduct its field programs as planned; the ultimate size and
scope of its field programs and the Company’s ability to achieve the objectives thereof; the size and scope of its field
programs and the Company’s ability to achieve the objectives thereof; the impact of the Company’s winterization
efforts at Filo del Sol, and whether such efforts will enable year-round operations and have adequately anticipated the
challenges of winter operation, including but not limited to weather and potential supply chain disruptions; the
anticipated use of proceeds from the Private Placement; the timing or results of an upgrade to the Mineral Resources
estimate at Filo del Sol, including the inputs used therein; 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 timelines; 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
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.
20
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.
21
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,
2021 and 2020, 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, 2021 and 2020;
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 significant accounting policies and
other explanatory information.
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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2021. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Assessment of impairment indicators of
mineral properties
Our approach to addressing the matter included
the following procedures, among others:
Refer to note 3(b) – Critical accounting estimates,
assumptions and judgements, note 3(d) – Mineral
properties and exploration expenditure, note 3(f) –
Impairment of non-financial assets and note 7 –
Mineral properties to the consolidated financial
statements.
The total book value of mineral properties
amounted to $8.1 million as at December 31, 2021.
At each reporting period, management applies
judgement in assessing whether there are any
indicators of impairment relating to mineral
properties. If any such indicator exists, then an
impairment test is performed by management.
Information considered by management in
assessing indicators of impairment may include (i)
the period for which the entity has the right to
conduct its exploration and project investigation
activities, including expected renewals, (ii) whether
substantive expenditure on further exploration and
project investigation of mineral properties is
budgeted, (iii) the evaluation of the results of
exploration and project investigation activities up to
the reporting date and (iv) other information that
may indicate that the carrying value of mineral
properties may not be recovered in full from
successful development or sale of the asset. No
Evaluated the reasonableness of
management’s assessment of impairment
indicators, which included the following:
− Assessed the period for which the entity
has the right to conduct its exploration
and project investigation activities,
including expected renewals, by agreeing
the Company’s list of mining titles and title
expiration dates to government agency
websites, and other regulatory bodies, as
applicable.
− Assessed whether substantive
expenditure on further exploration and
project investigation of mineral properties
is budgeted by considering the results of
current year work programs and
management’s long term plans, the Board
of Directors’ minutes and approved
budgets.
− Assessed the evaluation of the results of
exploration and project investigation
activities up to the reporting date by
considering the results of the current year
work programs and considering evidence
obtained in other areas of the audit.
impairment indicators were identified by
management as at December 31, 2021.
We considered this a key audit matter due to (i) the
significance of the mineral properties balance and
(ii) the subjectivity in performing audit procedures
to evaluate management’s indicators of impairment
assessment, which required management
judgement.
Other information
− Assessed whether there is other
information that may indicate that the
carrying value may not be recovered from
successful development or sale of the
asset, by considering evidence obtained
in other areas of the audit.
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.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Kevin Bromley.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
March 22, 2022
Filo Mining Corp.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
ASSETS
Current assets:
Cash
Receivables and other assets
Non-current assets:
Equipment and facilities
Right-of-use asset
Taxes receivable
Mineral properties
TOTAL ASSETS
LIABILITIES
Current liabilities:
Trade payables and accrued liabilities
Lease liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Contributed surplus
Deficit
Accumulated other comprehensive loss
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
Subsequent event (Note 18)
Note
December 31,
2021
December 31,
2020
5
6
5
7
9
$ 19,416,984
697,660
20,114,644
$ 36,326,118
810,243
37,136,361
168,347
-
2,314,091
8,062,918
10,545,356
-
12,275
1,656,495
8,857,401
10,526,171
30,660,000
47,662,532
7,062,830
-
7,062,830
4,097,835
13,013
4,110,848
180,266,718
8,544,029
(163,112,572)
(2,101,005)
23,597,170
166,119,611
9,763,491
(130,693,363)
(1,638,055)
43,551,684
$ 30,660,000
$ 47,662,532
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board:
/s/Alessandro Bitelli
Director
/s/James Beck
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
Net monetary gain
Gain on use of marketable securities
Other foreign exchange loss (gain)
Argentina wealth tax
Net loss
Note
Year ended
December 31,
2020
2021
11
$ 40,901,439
$ 19,055,232
10c
4
15
2,386,974
2,486,014
128,100
236,521
21,826
309,748
543,845
47,014,467
330
(34,814)
(15,281,148)
128,821
591,553
32,419,209
1,519,194
1,605,500
169,180
185,770
13,221
377,608
188,794
23,114,499
31,005
(132,383)
(4,602,750)
(99,200)
567,551
18,878,722
Other comprehensive loss (gain)
Items that may be reclassified subsequently to net loss:
Foreign currency translation adjustment
Impact of hyperinflation
Comprehensive loss
4
722,469
(259,519)
$ 32,882,159
(162,891)
432,713
$ 19,148,544
Basic and diluted loss per common share
$ 0.29
$ 0.19
Weighted average common shares outstanding
112,765,794
97,769,050
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
Unrealized foreign exchange loss (gain)
Net changes in working capital and other items:
Receivables and other
Trade payables and accrued liabilities
Cash flows from (for) financing activities
Proceeds from equity financings, net
Drawdown of credit facilities
Repayment of credit facilities
Proceeds from option exercises
Repayment of lease liabilities
Cash flows for investing activities
Acquisition of equipment and facilities
Mineral properties and related expenditures
Note
2021
Year ended
December 31,
2020
10c
$ (32,419,209) $ (18,878,722)
3,301,123
330
739,682
27,525
2,034,323
31,005
136,292
(162,835)
(928,417)
4,887,150
(24,391,816)
(719,388)
469,778
(17,089,547)
-
-
-
9,626,522
(12,411)
9,614,111
40,514,416
1,350,960
(1,349,900)
-
(60,665)
40,454,811
6
(165,698)
(1,114,460)
(1,280,158)
-
(207,501)
(207,501)
Effect of exchange rate change on cash
(851,271)
(585,085)
Increase (decrease) in cash during the year
(16,909,134)
22,572,678
Cash, beginning of the year
$
36,326,118 $ 13,753,440
Cash, end of the year
$
19,416,984 $ 36,326,118
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)
Note
Number of
Shares
Share Capital
Contributed
Surplus
Deficit
Balance, January 1, 2020
Share-based compensation
Shares issued pursuant to the equity
financings
Share issuance costs
Shares issued pursuant to credit facilities
Net loss and other comprehensive loss
Balance, December 31, 2020
88,218,451 $ 125,577,816 $ 7,729,168 $ (111,814,641)
-
2,034,323
-
-
22,538,235
-
14,084
-
-
-
-
(18,878,722)
110,770,770 $ 166,119,611 $ 9,763,491 $(130,693,363)
41,695,735
(1,181,319)
27,379
-
-
-
-
-
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
$ (1,368,233)
-
$ 20,124,110
2,034,323
-
-
-
(269,822)
41,695,735
(1,181,319)
27,379
(19,148,544)
$ (1,638,055) $ 43,551,684
Balance, January 1, 2021
Share-based compensation
Shares issued pursuant to stock option
exercises
Net loss and other comprehensive loss
Balance, December 31, 2021
10c
10b
110,770,770
-
$ 166,119,611
-
$ 9,763,491
3,301,123
$(130,693,363)
-
$ (1,638,055)
-
$ 43,551,684
3,301,123
4,272,169
-
-
(462,950)
115,042,939 $ 180,266,718 $ 8,544,029 $(163,112,572) $ (2,101,005)
-
(32,419,209)
(4,520,585)
-
14,147,107
-
9,626,522
(32,882,159)
$ 23,597,170
The accompanying notes are an integral part of these consolidated financial statements.
4
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
1. NATURE OF OPERATIONS
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.), 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 San Juan Province, Argentina
and Region III, Chile. Its registered office is located at Suite 2000, 885 West Georgia Street, Vancouver,
British Columbia, V6C 3E8, Canada. The Company’s common shares trade on the Toronto Stock
Exchange under the symbol “FIL”. In addition, the Company’s common shares trade on the NASDAQ
First North Growth Market under the symbol "FIL" and on the OTCQX under the symbol “FLMMF”.
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 22, 2022.
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.
5
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
b) Critical accounting estimates, assumptions and judgements
The preparation of the consolidated financial statements in accordance with IFRS requires management
to make estimates, assumptions and judgements that affect the reported amounts of assets, liabilities
and expenditures on the financial statements. These estimates, assumptions and judgements are based
on management’s best knowledge of the relevant facts and circumstances taking into account previous
experience. Actual results could differ and such differences could be material. Estimates, assumptions
and judgements are reviewed on an ongoing basis and are based on historical experience and other facts
and circumstances. Revisions to estimates, assumptions and judgements, and the resulting effects on
the carrying amounts of the Company’s assets and liabilities, are accounted for prospectively. Information
about estimates, assumptions, judgments and other sources of estimation uncertainty as at December
31, 2021 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. At each reporting date, the Company a reviews its mineral
properties for indicators of impairment, which requires the Company to exercise key judgements,
including but not limited to, the Company’s right to explore the mineral property, whether the Company
has further plans or budgets for substantive expenditures for the ongoing exploration and evaluation of
the mineral property, the impact of exploration and evaluation results to date with respect to the mineral
property, and the likelihood that the carrying value of the mineral property will be recovered in the future
through development or sale of the asset. If indicators of impairment are identified, the Company would
further review the carrying values of the applicable mineral properties to determine if their carrying
values may exceed their fair value, which also requires the Company to make significant judgments and
estimates. The judgments and estimates mentioned above 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.
The Company has determined that no indicators of impairment exist for its mineral properties as of
December 31, 2021.
c) Foreign currency translation
These consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional and presentation currency. The functional currencies of its material subsidiaries, which have
operations in Chile and Argentina, are the Chilean peso and the Argentine peso, respectively.
For the Company’s Argentine subsidiary, which is affected by hyperinflationary accounting as described
in Notes 3o) 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.
6
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
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, with economic viability and technical
feasibility 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) Equipment and facilities
Equipment and facilities are carried at cost less accumulated depreciation and impairment losses. The
cost of an asset consists of its purchase price, any directly attributable costs of bringing the asset to the
working condition and location of its intended use and an initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is located.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably.
Depreciation of each asset is calculated using the straight-line method to allocate its cost less its residual
value over its estimated useful life. Depreciation of an asset begins when it is available for use at the
location, and in the condition, as intended by management.
The assets’ residual values, depreciation methods, and useful lives are reviewed, and adjusted if
appropriate, at each statement of financial position date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
When an asset is disposed of, the difference between the net sale proceeds and its carrying amount is
recognized as a gain or loss within net loss in the consolidated statement of comprehensive loss.
7
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
f) 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 have been previously impairment are reviewed for possible reversal of the
impairment at each reporting date.
g) Financial instruments
(i) Recognition
The Company measures and classifies its financial assets based on its business model for managing its
financial assets and the contractual cash flow characteristics of those financial assets. Financial assets
are classified into three measurement categories on initial recognition: those measured at fair value
through profit or loss, those measured at fair value through other comprehensive income (“OCI”) and
those measured at amortized cost.
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus
transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Investments in marketable securities, such as equity instruments of publicly listed entities, are required
to be measured at fair value through profit or loss, unless the Company makes an irrevocable election
to present subsequent changes in the fair value of such instruments through OCI. The Company has
not elected to measure any of its marketable securities through OCI.
(ii) Derecognition
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 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 derecognition of financial assets and
liabilities are generally recognized in the consolidated statement of comprehensive loss.
8
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
(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.
h) 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.
i) 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.
j) 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.
k) 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.
9
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
l) 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.
m) Leases
The Company recognizes a right-of-use asset, and corresponding lease liability, 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.
n) 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.
o) Hyperinflation
The Company applies IAS 29, Financial Reporting in Hyperinflationary Economies, which outlines the
use of the hyperinflationary accounting, to consolidate and report its Argentine operating subsidiary.
The application of hyperinflationary 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.
10
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
p) New accounting pronouncements
The IASB and/or the IFRS Interpretations Committee have issued new standards and amendments, or
interpretations to existing standards, which were not yet effective and not applied by the Company as
at December 31, 2021. The Company continues to evaluate these changes to determine their impact, if
any.
IAS 16, Property, plant and equipment
IAS 16 has been amended to provide clarity with respect to the treatment of net proceeds generated
from selling any items produced while bringing an item of property, plant and equipment to the location
and condition necessary for it to be capable of operating in the manner intended by the entity.
Specifically, the amendments prohibit entities from deducting amounts resulting from the selling of items
produced during this phase from the cost of property, plant and equipment. Instead, an entity shall
recognize such sales proceeds and related costs in profit or loss.
The amendments to IAS 16 are effective for annual reporting periods beginning on or after January 1,
2022 and are not expected to have an impact on the Company’s financial results for the year ended
December 31, 2022.
There are no other IFRS standards or International Financial Reporting Interpretations Committee
interpretations that are not yet effective or early adopted that are expected to have any impact on the
Company.
4. HYPERINFLATION
Argentina was designated a hyperinflationary economy as of July 1, 2018 for accounting purposes.
The Company recognized a gain of $259,519 for the year ended December 31, 2021 (2020: loss of
$432,713) in relation to the impact of hyperinflation within other comprehensive income, which is
primarily the result of continued inflation during the year and the resulting adjustments recognized on
the net asset position of held by the Company’s Argentine operating subsidiary.
As a result of changes in the IPC and changes to the Company’s net monetary position, the Company
recognized a net monetary gain of $34,814 for the year ended December 31, 2021 (2020: $132,383),
to adjust transactions recorded during the year into a measuring unit current as of December 31, 2021.
The level of the IPC at December 31, 2021 was 582.5 (December 31, 2020: 385.9), which represents
an increase of approximately 51% over the IPC at December 31, 2020, and an approximate 19%
increase over the average level of the IPC during the year ended December 31, 2021.
11
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
5. RECEIVABLES AND OTHER ASSETS
Current
Taxes receivable
Other receivables
Prepaid expenses and deposits
Non-current
Taxes receivable
December 31,
2021
December 31,
2020
59,150
237,238
401,272
697,660
165,043
347,870
297,330
810,243
2,314,091
2,314,091
1,656,495
1,656,495
Pursuant to regulations, the Company is entitled to a refund of certain value added taxes (“VAT”) paid
in Argentina. While the Company continues to expect full payment of the amounts claimed, the timing
of receipt of the refunds has become increasingly uncertain. Accordingly, the corresponding taxes
receivable balance has been classified as non-current.
6. EQUIPMENT AND FACILITIES
The Company’s equipment and facilities relate to mobile equipment and modular field facilities acquired
for its Filo del Sol property in Argentina.
Works in progress
Equipment
Facilities
Total
Cost
January 1, 2021
Additions
Adjustment for the impacts of hyperinflation
December 31, 2021
$ -
32,309
(529)
$ 31,780
$ -
133,389
3,178
$ 136,567
$ -
165,698
2,649
$ 168,347
Net Book Value
December 31, 2021
$ 31,780
$ 136,567
$ 168,347
12
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
7. MINERAL PROPERTIES
Filo del Sol
Tamberias
Total
January 1, 2020
$ 3,410,727
$ 3,901,493
$ 7,312,220
Additions
Adjustment for the impacts of hyperinflation
Effect of foreign currency translation
December 31, 2020
-
(25,196)
-
$ 3,385,531
1,465,136
-
105,241
$ 5,471,870
1,465,136
(25,196)
105,241
$ 8,857,401
Adjustment for the impacts of hyperinflation
Effect of foreign currency translation
December 31, 2021
108,294
-
$ 3,493,825
-
(902,777)
$ 4,569,093
108,294
(902,777)
$ 8,062,918
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 San Juan Province, Argentina
and Region III, 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.
Pursuant to a series of amendments to the terms of the remaining option payments payable under the
option agreement with Tamberias SCM, the last of which was executed on May 13, 2020 (the “Option
Amendments”), the remaining option payments were rescheduled and extended through to June 30,
2026.
During the year ended December 31, 2021, the Company made payments totaling US$900,000 pursuant
to the Option Amendments. As at December 31, 2021, the Company’s total remaining option payments
were as follows:
13
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
Payment by:
June 30, 2022
June 30, 2023
June 30, 2024
June 30, 2025
June 30, 2026
Amount
(US$)
500,000
750,000
950,000
1,050,000
12,000,000
15,250,000
8. CREDIT FACILITIES
In July 2020, the Company obtained an unsecured US$5.0 million credit facility (the “July 2020
Facility”) from Zebra Holdings and Investments S.à.r.l ("Zebra"). Zebra reports its security holdings in
the Company as a joint actor, as defined by Canadian securities regulations, with Lorito Holdings
S.à.r.l. (“Lorito”), and at the time of entering into the July 2020 Facility they collectively held more
than 20% of the Company’s issued and outstanding common shares. Accordingly, Zebra and Lorito
are considered to be related parties of the Company.
As consideration for the July 2020 Facility, Zebra received 480 common shares each month, for every
US$50,000 in principal outstanding, prorated accordingly for the number of days outstanding.
During the year ended December 31, 2021, the Company made no draws against this facility (2020:
US$1,000,000) and it matured on July 12, 2021 with no amounts drawn or owing. No interest was
payable in cash during its term.
9. SHARE CAPITAL
The Company has authorized an unlimited number of voting common shares without par value.
10. 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.
14
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
b) Share options outstanding
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:
Balance at January 1, 2020
Options granted
Expired or forfeited
Balance at December 31, 2020
Options granted
Exercised
Expired or forfeited
Balance at December 31, 2021
Number of
shares issuable
pursuant to
share options
8,267,501
1,450,000
(261,667)
9,455,834
1,082,600
(4,272,169)
(28,667)
6,237,598
Weighted
average
exercise price
per share
$ 2.37
1.91
2.53
$ 2.29
9.04
2.25
6.49
$ 3.47
The weighted average share price on the exercise date for the share options exercised during the
year ended December 31, 2021 was $8.72.
On June 7, 2021, the Company granted a total of 15,000 share options to a newly appointed officer
of the Company at an exercise price of $11.00 per share. In addition, on August 18, 2021, the
Company granted a total of 1,052,000 share options to the officers, employees, directors and other
eligible persons at an exercise price of $8.95 per share. Furthermore, on November 17, 2021, the
Company granted a total of 15,600 share options to a recently appointed director of the Company
at an exercise price of $12.90 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 1,082,600 share options granted
during the year ended December 31, 2021, were as follows:
(i)
(ii)
(iii)
(iv)
(v)
Risk-free interest rate:
Expected life:
Expected volatility:
Expected dividends:
Fair value per option:
0.72%
4.0 years
61.03%
nil
$4.22
15
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
The following table details the share options outstanding and exercisable as at December 31, 2021:
Exercisable options
Weighted
average
remaining
contractual
life
(Years)
3.63
1.62
0.70
2.78
4.63
4.44
4.88
2.29
Weighted
average
exercise
price
$1.91
$2.20
$2.50
$2.75
$8.95
$11.00
$12.90
$2.86
Options
exercisable
775,001
1,365,000
1,070,000
1,538,332
343,001
5,000
5,200
5,101,534
Year ended
December 31,
2020
428,823
1,605,500
2,034,323
2021
815,109
2,486,014
3,301,123
Outstanding options
Weighted
average
remaining
contractual
life
(Years)
3.63
1.62
0.70
2.78
4.63
4.44
4.88
2.65
Weighted
average
exercise
price
$1.91
$2.20
$2.50
$2.75
$8.95
$11.00
$12.90
$3.47
Exercise
price
$1.91
$2.20
$2.50
$2.75
$8.95
$11.00
$12.90
Options
outstanding
1,223,333
1,365,000
1,070,000
1,538,332
1,010,333
15,000
15,600
6,237,598
c) Share-based compensation
Exploration and project investigation
General and administration
16
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
11. EXPLORATION AND PROJECT INVESTIGATION
All exploration and project investigation costs are related to the Filo del Sol Project. Due to the
geographic location of the Filo del Sol Project, the Company’s business activities have historically
fluctuated with the seasons, through increased drilling and other exploration activities during the
summer months in South America. However, commencing in June 2021, the Company has
undertaken winterization efforts which may allow for continuous, year-round field operations
potentially reducing this seasonal fluctuation in exploration expenditures moving forward.
The Company expensed the following exploration and project investigation costs, all incurred in
relation to the Filo del Sol Project:
Land holding and access costs
Drilling, fuel, camp costs and field supplies
Roadwork, travel and transport
Consultants, geochemistry and geophysics
Environmental and community relations
VAT and other taxes
Office, field and administrative salaries, overhead and
other administrative costs
COVID-19-related health and safety
Share-based compensation
Year ended
December 31,
2020
515,701
9,310,843
2,478,956
964,632
489,547
1,869,125
2021
610,952
20,624,075
5,762,367
1,043,631
751,171
5,555,377
3,719,574
2,019,183
815,109
40,901,439
2,447,112
550,493
428,823
19,055,232
12. 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.
Bofill Mir & Alvarez Jana Abogados Ltda. (“BMJAL”), a Chilean legal firm, was also considered a
related party of the Company until June 18, 2020, as a named partner of BMJAL was also concurrently
a director of the Company until such date.
17
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
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. 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,
2020
943,427
433,148
(314,419)
(500,101)
(43,866)
2021
281,813
549,787
(99,869)
(591,415)
-
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
c) Camp usage agreement
Related Party
Josemaria
NGEx Minerals
Josemaria
NGEx Minerals
December 31,
2021
December 31,
2020
46,678
15,113
(1,667)
(24,343)
-
11,752
-
(5,850)
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.
The agreement may be terminated with one year’s prior notice by Josemaria, and the agreement may
be renewed for another year at the Company’s election. On April 27, 2021, Filo Mining provided formal
notice of renewal to the Company for the period through April 1, 2022.
18
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(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
13. INCOME TAXES
Year ended
December 31,
2020
762,667
22,447
108,495
1,368,514
540,000
2,802,123
2021
965,333
28,107
162,004
2,040,635
1,030,000
4,226,079
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:
Loss before taxes
Combined Canadian federal and provincial statutory
income tax rates
Income tax recovery based on the above rate
Income tax benefits that have not been recognized
and other temporary differences
Non-deductible expense
Other permanent differences
Impacts of changes in foreign tax and currency rates
Differences between Canadian and foreign tax rates
Total income tax recovery
Year ended
December 31,
2020
2021
32,419,209
18,878,722
27.00%
8,753,186
27.00%
5,097,255
(9,703,799)
(111,588)
6,325,850
(7,021,540)
1,757,891
-
(3,256,439)
(900,389)
1,878,319
(3,090,555)
271,809
-
19
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(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,
2021
December 31,
2020
6,442,468
16,543,307
1,066,502
24,052,277
3,968,318
10,620,277
996,792
15,585,387
As at December 31, 2021, the non-capital loss carry-forwards and their respective expiration dates are
as follows:
Year
2022
2023
2024
2025
2026 and onwards
Canada
-
-
-
-
19,428,070
19,428,070
Argentina
77,039
4,420
123,728
323,580
3,972,696
4,501,463
Other
26,903
11,943
-
239,088
8,158
286,092
Total
103,942
16,363
123,728
562,668
23,408,924
24,215,625
14. SEGMENTED INFORMATION
The Company is principally engaged in the acquisition, exploration and development of mineral properties
in South America. The information regarding equipment and facilities, mineral properties and exploration
and project investigation costs presented in Notes 6, 7, and 11, respectively, represent the manner in
which management reviews its business performance. All the Company’s equipment and facilities, 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. The net gains on the use of marketable securities
are allocated to the Filo del Sol Project, as they are the result of funding provided to the Company’s
Argentine subsidiary in support of the project. Materially all 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 the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(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,
2021
Current assets
Equipment and facilities
Taxes receivable
Mineral properties
Total assets
Filo del Sol
Project
6,524,265
168,347
2,314,091
8,062,918
17,069,621
Corporate
Total
13,590,379
-
-
-
13,590,379
20,114,644
168,347
2,314,091
8,062,918
30,660,000
Current liabilities
6,628,841
433,989
7,062,830
2020
Current assets
Right-of-use asset
Taxes receivable
Mineral properties
Total assets
3,397,742
12,275
1,656,495
8,857,401
13,923,913
33,738,619
-
-
-
33,738,619
37,136,361
12,275
1,656,495
8,857,401
47,662,532
Current liabilities
3,854,243
256,605
4,110,848
21
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
Year ended
December 31,
Filo del Sol
Project
Corporate
Total
2021
Exploration and project
investigation
Gain on use of marketable
securities
General and administration and
40,901,439
(15,281,148)
-
-
40,901,439
(15,281,148)
other items
Net loss
(34,814)
25,585,477
6,833,732
6,833,732
6,798,918
32,419,209
2020
Exploration and project
investigation
Gain on use of marketable
securities
General and administration and
19,055,232
(4,602,750)
-
-
19,055,232
(4,602,750)
other items
Net loss
(291,593)
14,160,889
4,717,833
4,717,833
4,426,240
18,878,722
15. USE OF MARKETABLE SECURITIES
From time to time, the Company may acquire and transfer marketable securities to facilitate intragroup
funding transfers between the Canadian parent and its Argentine operating subsidiary.
The Company does not acquire marketable securities or engage in these transactions for speculative
purposes. In this regard, under this strategy, the Company generally uses marketable securities of
large, well established companies, with high trading volumes and low volatility. Nonetheless, as the
process to acquire, transfer and ultimately sell the marketable securities occurs over several days, some
fluctuations are unavoidable.
As the marketable securities are acquired with the intention of a near term sale, they are considered
financial instruments that are held for trading. Accordingly, all changes in the fair value of the
instruments, between acquisition and disposition, are recognized through profit or loss.
As a result of having utilized this mechanism for intragroup funding for the year ended December 31,
2021, the Company realized a net gain of $15,281,148 (2020: $4,602,750). The net gain for the year
ended December 31, 2021 was comprised of a favorable foreign currency impact of $18,425,317 (2020:
$5,514,960) and a trading loss of $3,144,170 (2020: $912,211), including the impact of fees and
commissions.
22
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
16. 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.
17. 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, and trade
payables and accrued liabilities. The carrying values of the Company’s financial instruments are
considered to be reasonable approximations of fair value due to their anticipated short-term nature.
As at December 31, 2021, the Company’s financial instruments are exposed to the following financial
risks, including credit, liquidity and currency risks:
(i)
(ii)
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.
Liquidity risks associated with the inability to meet obligations as they become due is
minimized through the management of its capital structure as explained on Note 16 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.
23
Filo Mining Corp.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise stated)
The maturities of the Company’s financial liabilities as at December 31, 2021 are as follows:
Total
Less than
1 year
1-5
years
More than
5 years
Accounts payable and
accrued liabilities
Total
7,062,830
7,062,830
7,062,830
7,062,830
-
-
-
-
(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, 2021, the Company’s largest foreign currency risk exposures 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 $1.2 million.
A 10% change in the foreign exchange rate between the US dollar and the Canadian dollar,
the functional currency of Filo Mining, would give rise to an increase/decrease of
approximately $117,000 in financial position/comprehensive loss.
18. SUBSEQUENT EVENT
On March 11, 2022, the Company closed a non-brokered private placement of 6,270,000 common
shares to BHP Western Mining Resources International Pty Ltd, a wholly owned subsidiary of BHP
Group Limited (collectively, "BHP"), at a price of $15.95 per common share for total proceeds of
$100 million (the “Private Placement”). No finder's fee or commissions were payable in connection
with this Private Placement.
Upon closing of the Private Placement, BHP owned approximately 5% of the Company’s issued and
outstanding common shares on an undiluted basis. The common shares acquired by BHP pursuant
to the Private Placement are subject to a statutory four-month hold period in accordance with
applicable securities regulations.
In connection with the Private Placement, BHP has been granted certain participation and top-up
rights, allowing BHP to maintain its ownership interest from time to time, provided that such
participation rights will not apply to any portion of BHP's ownership interest in excess of a 9.9%
undiluted ownership level in the Company. In addition, the Company and BHP have agreed to form
a joint advisory committee to share expertise, exploration concepts, and discuss future project
development.
The Company intends to use the proceeds of the Private Placement to advance exploration and
development of the Company's Filo del Sol Project and for working capital and general corporate
purposes.
24
CORPORATE DIRECTORY
OFFICERS
Jamie Beck
President & CEO
Robert Carmichael
VP Exploration
Trevor D’Sa
VP Corporate Development & IR
Jeffrey Yip
Chief Financial Officer
DIRECTORS
Adam Lundin, Chairman
Jamie Beck
Lukas Lundin
Wojtek Wodzicki
Phil Brumit
Erin Johnston
Alessandro Bitelli
Carmel Daniele
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: +1 604 689-7842
Fax: +1 604 689-4250
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 & Nasdaq First North
Growth Market: FIL
OTCQX: FLMMF
CUSIP No.: 31730E101
ISIN: CA31730E1016