1
Consolidated
Financial Statements
Years ended June 30, 2024 and 2023
In US dollars
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.
KPMG LLP
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INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Highland Copper Company Inc.
Opinion
We have audited the consolidated financial statements of Highland Copper Company Inc. (the
"Entity"), which comprise:
•
the consolidated statements of financial position as at June 30, 2024 and June 30, 2023
•
the consolidated statements of income (loss) and comprehensive income (loss) for the years
then ended
•
the consolidated statements of changes in shareholders’ equity for the years then ended
•
the consolidated statements of cash flows for the years then ended
•
and notes to the consolidated financial statements, including a summary of material accounting
policy information
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at June 30, 2024 and June 30, 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board.
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 Financial Statements" section of our auditor’s report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Page 2
Material Uncertainty Related to Going Concern
We draw attention to Note 3 in the consolidated financial statements, which indicates that the
Entity is still in the exploration stage and, as such, has not yet generated positive cash flows from
its operating activities, that no revenue has been yet been generated, that the Entity has an
accumulated deficit as at June 30, 2024, and that its operations are dependent on obtaining
additional funds to pursue its operations and meet its obligations related to the development of the
Copperwood and White Pine North projects beyond the current fiscal year.
As stated in Note 3 in the consolidated financial statements, these events or conditions, along with
other matters as set forth in Note 3 in the consolidated financial statements, indicate that a material
uncertainty exists that may cast significant doubt on the Entity’s ability to continue as a going
concern.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended June 30, 2024. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the "Material Uncertainty related to Going Concern"
section of the auditor’s report, we have determined the matter described below to be the key audit
matter to be communicated in our auditor’s report.
Evaluation of indicators of impairment for exploration and evaluation assets,
including the exploration and evaluation assets related to the investment in
associate
Description of the matter
We draw attention to Notes 4 d), 4 f), 4 j), and 5 b) of the financial statements. The value of the
exploration and evaluation assets is $19,520,861 and the investment in associate is $16,040,034.
On July 24, 2023, the Entity completed a transaction in which the Entity sold 66% of the common
shares of White Pine Copper LLC, which owns the White Pine North Project (“White Pine”). The
Entity derecognized the assets and liabilities of White Pine from its consolidated statement of
financial position, and recorded its interest at fair value as an investment in associate. The Entity
accounts for its investment in associate using the equity method, which requires, among other
things, the Entity to assess whether indicators of impairment related to the White Pine exploration
and evaluation assets are present.
Page 3
The carrying amounts of exploration and evaluation assets (including exploration and evaluation
assets related to the investment in associate) is assessed by the Entity for impairment when
indicators of impairment exist. Judgment is required in determining whether indicators of
impairment exist and include, but are not limited to, the following factors:
•
Exploration rights have expired or will expire in the near future
•
No significant future exploration expenditures are foreseen
•
No commercially viable quantities are discovered and exploration and evaluation activities will
be discontinued.
Exploration and evaluation assets are assessed for impairment indicators at the end of each
reporting period. There were no impairment indicators for exploration and evaluation assets
(including the exploration and evaluation assets related to the investment in associate) at
June 30, 2024.
Why the matter is a key audit matter
We identified the evaluation of indicators of impairment for exploration and evaluation assets
(including the exploration and evaluation assets related to the investment in associate) as a key
audit matter. This matter represented an area of significant risk of material misstatement given the
magnitude of exploration and evaluation assets and investment in associate. Significant auditor
judgment was required to evaluate the results of our audit procedures to assess the Entity’s
determination of whether the factors, individually and in aggregate, resulted in indicators of
impairment.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
•
We evaluated the Entity’s impairment indicators analysis and considered whether the analysis
was consistent with evidence in other areas of the audit, by examining internal and external
communications and the Entity’s technical reports.
•
We assessed the status of the Entity’s exploration rights by discussing with management and
inspecting available correspondence with government authorities to identify if any rights could
be lost or not renewed by the government authorities.
•
We assessed future exploration expenditures and whether exploration and evaluation activities
will be discontinued by inspecting budgeted expenditures for the upcoming year, the Entity’s
technical reports, and internal and external communications. We evaluated the Entity’s ability to
accurately budget the exploration expenditures by comparing the Entity’s prior year budgeted
exploration expenditures to the actual exploration expenditures incurred.
Page 4
Other Information
Management is responsible for the other information. Other information comprises the information
included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions.
Our opinion on the financial statements does not cover the other information and we do not and will
not express any form of assurance conclusion thereon.
In connection with our audit of the 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 financial statements or our knowledge obtained in the audit and remain alert
for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the
relevant Canadian Securities Commissions as at the date of this auditor’s report. If, based on the
work we have performed on this other information, we conclude that there is a material
misstatement of this other information, we are required to report that fact in the auditor’s report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing the Entity’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
Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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.
Page 5
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 the 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 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 Entity'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 Entity'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 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 Entity to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
•
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.
•
Provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
*CPA auditor, public accountancy permit No. A131804
Page 6
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group Entity to express an opinion on the financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
•
Determine, from the matters communicated with those charged with governance, those matters
that were of most significance in the audit of the 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 auditor’s 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 auditor’s report is Marc-André Fontaine.
Montréal, Canada
August 27, 2024
8
Highland Copper Company Inc.
Consolidated Statements of Financial Position
Approved on behalf of the Board of Directors:
/S/ Barry O’Shea
/s/ Caroline Donally
___________________________
___________________________
Barry O’Shea, CEO
Caroline Donally, Director
June 30
June 30,
(in US dollars)
2024
2023
ASSETS
Current assets
Cash and cash equivalents
20,262,813
$
7,030,317
$
Amounts receivable
74,666
66,870
Prepaid expenses and deposits
375,090
71,655
20,712,569
7,168,842
Non current assets
Environmental bond (Note 5a)
2,351,632
613,633
Investment in associate (Note 5b)
16,040,034
-
Capital assets
-
20,037
Exploration and evaluation assets (Note 5)
19,520,861
24,113,990
Total assets
58,625,096
$
31,916,502
$
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
1,373,965
$
1,997,597
$
Income tax payable (Note 12)
9,878
-
1,383,843
1,997,597
Non current liabilities
Loans and borrowings (Note 6)
2,383,329
-
Deferred income tax liability (Note 12)
964,018
-
Asset retirement obligation (Note 7)
1,184,752
1,939,141
Total liabilities
5,915,942
$
3,936,738
$
SHAREHOLDERS' EQUITY
Share capital (Note 8)
83,948,586
$
83,948,586
$
Contributed surplus
16,766,368
16,058,937
Deficit
(48,633,682)
(72,830,802)
Cumulative translation adjustment
627,882
803,043
Total equity
52,709,154
$
27,979,764
$
Total liabilities and equity
58,625,096
$
31,916,502
$
Going concern (Note 3)
The accompanying notes form an integral part of these audited consolidated financial statements.
9
Highland Copper Company Inc.
Consolidated Statements of Income (loss) and Comprehensive Income (loss)
June 30,
June 30,
(in US dollars)
2024
2023
Expenses and other items
Exploration and evaluation (Note 10)
9,748,207
$
4,672,875
$
Management and administration (Note 11)
2,960,395
2,199,352
Depreciation and amortization
1,289
17,030
Share-based compensation
707,431
838,552
Gain on sale of controlling interest in White Pine (Note 5b)
(39,521,720)
-
Accretion on environmental liability
-
4,142
Share of loss in associates (Note 5b)
1,902,293
-
Interest expense (Note 6)
65,547
-
Finance income
(904,573)
(241,259)
Gain on settlement of accounts payable
-
(492,538)
Gain on foreign exchange
(129,885)
(194,167)
Net income (loss) before income tax expense
25,171,016
(6,803,987)
Current income tax expense (Note 12)
9,878
-
Deferred income tax expense (Note 12)
964,018
-
Net income (loss) for the year
24,197,120
(6,803,987)
Other comprehensive loss
Item that may be subsequently reclassified to income
Foreign currency translation adjustment
(175,161)
(313,406)
Comprehensive income (loss) for the year
24,021,959
$
(7,117,393)
$
Basic and diluted income (loss) per share
0.03
$
(0.01)
$
Weighted average number of common shares
basic and diluted
738,334,938
736,363,619
The accompanying notes form an integral part of these audited consolidated financial statements.
Years ended
10
Highland Copper Company Inc.
Consolidated Statements of Cash Flows
June 30,
June 30,
(in US dollars)
2024
2023
Operating activities
Net income (loss) for the year
24,197,120
$
(6,803,987)
$
Adjustments
Tax expense
964,018
-
Share-based compensation
707,431
838,552
Depreciation and amortization
1,289
17,030
Gain on sale of controlling interest in White Pine (Note 5b)
(39,521,720)
-
Share of loss in associates (Note 5b)
1,902,293
-
Accretion on environmental liability
-
4,142
Accrued Interest expense on Kinterra loan (Note 6)
65,547
-
Accrued Interest income on environmental bond (Note 5a)
(83,952)
-
Unrealized gain on foreign exchange
(129,885)
(194,167)
Gain on settlement of accounts payables
-
(492,538)
Changes in working capital items
Accounts receivable
(7,796)
(15,829)
Prepaid expenses and deposits
(303,435)
(731)
Accounts payable and accrued liabilities
376,368
232,305
Income tax payable
9,878
-
(11,822,844)
(6,415,223)
Investing activities
Reimbursement of an environmental bond (Note 5a)
613,633
1,062,516
Payment to acquire an environmental bond (Note 5a)
(2,267,680)
-
Additions to capital assets
-
(20,331)
Additions to exploration and evaluation assets - Copperwood (Note 5)
(266,025)
(266,025)
Addition to exploration and evaluation assets - White Pine (Note 15)
(1,000,000)
-
Net proceeds from sale of controlling interest in White Pine (Note 5b)
28,190,688
-
Asset retirement obligation
-
(162,426)
Investment in associate
(170,000)
-
25,100,616
613,734
Effect of exchange rate changes on cash held in foreign currency
(45,276)
(98,009)
Net change in cash and cash equivalents
13,232,496
(5,899,498)
Cash and cash equivalents, beginning of the year
7,030,317
12,929,815
Cash and cash equivalents, end of the year
20,262,813
$
7,030,317
$
Supplemental cash flow information (Note 15)
The accompanying notes form an integral part of these audited consolidated financial statements.
Years ended in
11
Highland Copper Company Inc.
Consolidated Statements of Shareholders’ Equity
(in US dollars)
Number of
issued and
outstanding
shares
Share Capital
Contributed
Surplus
Deficit
Cumulative
translation
adjustment
Total
shareholders'
equity
Balance at June 30, 2023
736,363,619
83,948,586
$
16,058,937
$
(72,830,802)
$
803,043
$
27,979,764
$
Net income for the year
-
-
-
24,197,120
-
24,197,120
Share-based compensation
-
-
707,431
-
-
707,431
Foreign currency translation adjustment
-
-
-
-
(175,161)
(175,161)
Balance at June 30, 2024
736,363,619
83,948,586
$
16,766,368
$
(48,633,682)
$
627,882
$
52,709,154
$
Balance at June 30, 2022
736,363,619
83,948,586
$
15,220,385
$
(66,026,815)
$
1,116,449
$
34,258,605
$
Net loss for the year
-
-
-
(6,803,987)
-
(6,803,987)
Share-based compensation
-
-
838,552
-
-
838,552
Foreign currency translation adjustment
-
-
-
-
(313,406)
(313,406)
Balance at June 30, 2023
736,363,619
83,948,586
$
16,058,937
$
(72,830,802)
$
803,043
$
27,979,764
$
The accompanying notes form an integral part of these audited consolidated financial statements.
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
12
1. GENERAL INFORMATION
Highland Copper Company Inc. is a Canadian-based company. Highland and its subsidiaries (together
“Highland” or the “Company”) are primarily engaged in the acquisition, exploration, and development
of mineral properties in Michigan, USA. The address of the Company’s registered office is 1055 West
Georgia Street, Suite 1500, Vancouver, British Columbia, Canada, V6E 4N7. Highland’s common shares
are listed on the TSX Venture Exchange (the “TSXV”) under the symbol “HI” and on the OTCQB Venture
Marketplace under the symbol "HDRSF".
The Company’s principal assets, located in Michigan’s Upper Peninsula region, include the 100%-owned
Copperwood copper project (the “Copperwood Project”) and the 34%-owned White Pine North copper
project (the “White Pine North Project”).
All financial results in these audited consolidated financial statements are expressed in US dollars unless
otherwise indicated.
The Board of Directors approved these audited consolidated financial statements on August 27, 2024.
2. BASIS OF PRESENTATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with IFRS Accounting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Basis of measurement
These consolidated financial statements were prepared on the historical cost basis, less any impairment,
except for the following material items:
Equity-classified share-based payment arrangements are measured at fair value at grant date pursuant
to IFRS 2, Share-based payment.
Asset retirement obligations that are measured at the present value of the expected expenditures to
settle the obligation.
Investment in an associate
The Company accounts for its investment in an associate using the equity method. Under the equity
method, the Company’s investment in an associate is initially recognized at cost and subsequently
increased or decreased to recognize the Company's share of net income/loss and other comprehensive
income/loss of the investees, after any adjustments necessary to give effect to uniform accounting
policies, any other movement in the investees’ reserves, and for impairment losses after the initial
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
13
recognition date. The Company's share of earnings or losses of its investees are recognized in the
Company’s Statement of Income/Loss and Comprehensive Income/Loss during the period.
Functional and reporting currency
These consolidated financial statements are presented in US dollars. The functional currency of Highland
is the Canadian dollar and the functional currency of the Company’s US-based subsidiaries is the US
dollar. The functional currencies of Highland and its subsidiaries have remained unchanged during the
reporting years. The exchange difference resulting from the conversion of the consolidated financial
statements from its functional currency to its reporting currency is included in other comprehensive
income presented in equity.
3. GOING CONCERN
These audited consolidated financial statements have been prepared on a going concern basis, which
assumes that the Company will continue its operations in the foreseeable future and will be able to
realize its assets and discharge its liabilities and commitments in the normal course of operations.
The Company is subject to a number of risks and uncertainties associated with its future exploration and
development activities. The recovery of amounts recorded for exploration and evaluation assets
depends on the ability of the Company to obtain the necessary financing to complete the development
of the projects, future profitable production from the projects, or proceeds from their disposition
thereof.
For the year ended June 30, 2024, the Company had negative cash flows from operations of $11,822,844
($6,415,223 for year ended June 30, 2023). In addition, the Company had an accumulated deficit of
$48,633,682 as at June 30, 2024 ($72,830,802 as at June 30, 2023). The Company will require additional
financing to fund its operations and to meet its planned investment in the Copperwood and White Pine
North projects. As at June 30, 2024, the Company had working capital (total current assets less total
current liabilities) of $19,328,726 ($5,171,245 as at June 30, 2023) and believes it has sufficient liquidity
to meet its obligations for the next 12 months. However, since the Company is in the exploration and
evaluation stage, no revenue nor positive cash flow has yet been generated from its operating activities.
The Company has relied upon external financings, primarily through the issuance of equity, exercise of
warrants and share options, as well as proceeds from the disposal of exploration and evaluation assets,
to fund its operations in the past. While the Company has been successful in raising funds in the past,
there is no assurance that it will be able to obtain adequate financing in the future.
If management is unable to obtain adequate funding, the Company may be unable to continue its
operations, and amounts realized for assets may be less than amounts reflected in these financial
statements.
The conditions and uncertainties described above indicate the existence of a material uncertainty that
casts significant doubt about the Company’s ability to continue as a going concern. These consolidated
financial statements do not reflect any adjustments to the carrying values or the classification of assets
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
14
and liabilities and reported expenses that would be necessary should the Company be unable to continue
as a going concern. Such adjustments could be material.
4. SUMMARY OF MATERIAL ACCOUNTING POLICIES
a) Basis of consolidation
These consolidated financial statements include the accounts of Highland and its subsidiaries. All
intercompany transactions, balances, income and expenses are eliminated upon consolidation. Highland
and its subsidiaries have an annual reporting date of June 30. Details of the Company’s subsidiaries are
as follows:
•
Upper Peninsula Holding Company Inc. (“UPHC”) is the Company’s US-based holding company,
incorporated in February 2014 in the State of Delaware, USA, which in turn wholly owns the
following three (3) companies:
•
Keweenaw Copper Co. (“Keweenaw”), incorporated in July 2011 in the State of Delaware, USA;
•
Copperwood Resources Inc. (“CRI”), acquired in June 2014 and incorporated in the State of
Michigan, USA.
b) Foreign currency translation
The Company and its subsidiaries each determine their functional currency based on the currency of the
primary economic environment in which they operate.
Transactions in foreign currencies are translated to the functional currency at exchange rates in effect at
the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the
reporting date are translated to the functional currency in effect at that date. Non-monetary assets and
liabilities denominated in foreign currencies that are measured at fair value are translated to the
functional currency at the exchange rate in effect at the date on which the fair value was determined.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the
exchange rate in effect at the date of the transaction. Foreign currency differences arising on translation
are recognized in net loss.
The Company’s Canadian operations are translated to the Company’s presentation currency, for
inclusion the consolidated financial statements. Foreign denominated assets and liabilities are translated
at the exchange rate prevailing at the reporting date. Revenues and expenses are translated at the
exchange rate in effect at the transaction date. Unrealized exchange gains and losses resulting from
translation are presented in other comprehensive income.
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
15
c) Financial Instruments
Financial instruments are measured on initial recognition at fair value, plus, in the case of financial
instruments other than those classified as fair value through profit or loss ("FVPL"), directly attributable
transaction costs. Financial instruments are recognized when the Company becomes party to the
contracts that give rise to them and are classified as amortized cost, FVPL or fair value through other
comprehensive income (“FVOCI”), as appropriate. The Company considers whether a contract (other
than a financial asset) contains an embedded derivative when the entity first becomes a party to it. The
embedded derivatives are separated from the host contract if the host contract is not measured at fair
value through profit or loss and when the economic characteristics and risks are not closely related to
those of the host contract. Reassessment only occurs if there is a change in the terms of the contract
that significantly modifies the cash flows that would otherwise be required. The Company has no
financial assets at FVPL and at FVOCI.
Financial assets at amortized cost
A financial asset is measured at amortized cost if it is held within a business model whose objective is to
hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding and is not
designated as FVPL. Financial assets classified as amortized cost are measured subsequent to initial
recognition at amortized cost using the effective interest method. Cash, including accrued interest, is
classified as and measured at amortized cost.
Financial liabilities
After initial recognition, financial liabilities are subsequently measured at amortized cost using the
effective interest method. Gains and losses are recognized in profit or loss when the liabilities are
derecognized as well as through the amortization process. Accounts payable and accrued liabilities, loans
and borrowings, are classified as and measured at amortized cost.
Fair values
Financial instruments that are measured at fair value subsequent to initial recognition, if any, are
grouped into a hierarchy based on the degree to which the fair value is observable as follows: Level 1:
Quoted prices in active markets for identical items (unadjusted); Level 2: Observable direct or indirect
inputs other than Level 1 inputs; or Level 3: Unobservable inputs (not derived from market data).
Derecognition of financial assets and liabilities
A financial asset is derecognised when either the rights to receive cash flows from the asset have expired
or the Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party. If neither the
rights to receive cash flows from the asset have expired nor the Company has transferred its rights to
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
16
receive cash flows from the asset, the Company will assess whether it has relinquished control of the
asset or not. If the Company does not control the asset, then derecognition is appropriate.
A financial liability is derecognised when the associated obligation is discharged or canceled or has
expired. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in profit or loss.
d) Investment in associate
An associate is an entity over which the Company has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control or
joint control over those decisions. The Company is presumed to have significant influence if it holds,
directly or indirectly, 20% or more of the voting power of the investee, unless it can be clearly
demonstrated that the Company does not have significant influence.
The Company accounts for its investment in associate using the equity method. Under the equity
method, the Company’s investment in associate is initially recognized at cost and subsequently increased
or decreased to recognize the Company's share of net earnings/loss and other comprehensive
earnings/loss of the associate, after any adjustments necessary to give effect to uniform accounting
policies, any other movement in the associate's reserves, and for impairment losses after the initial
recognition date. The Company’s share of the associate's losses that are in excess of its investment are
recognized only to the extent that the Company has incurred legal or constructive obligations or made
payments on behalf of the associate. The Company's share of earnings or losses of its associate are
recognized in net earnings during the period. Dividends and repayment of capital received from the
associate are accounted for as a reduction in the carrying amount of the Company’s investment.
Unrealized gains and losses between the Company and its associate are recognized only to the extent of
unrelated investors’ interests in the associate. Intercompany balances and interest expense and income
arising on loans and borrowings between the Company and its associate are not eliminated.
In order to apply the equity method, management has to align White Pine’s accounting policies with
those of the Company, which requires among other things management to assess whether indicators of
impairment related to the White Pine exploration and evaluation assets are present.
e) Exploration and evaluation assets
Costs related to exploration and evaluation of mineral properties are recognized in profit or loss as
incurred. All option and mining lease payments and costs of acquiring mineral rights are capitalized as
exploration and evaluation assets.
Any option payments or proceeds from the sale of royalty interests received by the Company are credited
to the capitalized cost of the related exploration and evaluation asset. If payments received exceed the
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
17
capitalized cost of the exploration and evaluation assets, the excess is recognized as income in the period
received.
Whenever a mining property is considered no longer viable, or is abandoned, the capitalized amounts
are written down to their recoverable amounts with the difference recognized in profit or loss. When
the technical feasibility and the commercial viability of extracting a mineral resource are demonstrable
and a mine development decision has been made by the Company, exploration and evaluation assets
related to the mining property are transferred as tangible assets and related development expenditures
are capitalized. Before the reclassification, the related exploration and evaluation assets are tested for
impairment and any impairment loss is then recognized in profit or loss.
The establishment of technical feasibility and commercial viability of a mineral property is assessed based
on a combination of factors, including a) the extent to which mineral reserves or mineral resources as
defined in National Instrument 43-101 have been identified through a feasibility study or similar
document; b) the results of optimization studies and further technical evaluation carried out to mitigate
project risks identified in the feasibility study; c) the status of environmental permits; and d) the status
of mining leases or permits.
Borrowing costs directly attributable to the acquisition of exploration and evaluation assets are added
to the cost of the project until such time as the assets are substantially ready for their intended use or
sale, which in the case of mining properties is when they are capable of commercial production.
f) Impairment of non-financial assets
At the end of each reporting date, the Company reviews the carrying amounts of its non-financial assets
with finite lives to determine whether there is any indication that those assets have suffered an
impairment loss. Where such an indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss.
The carrying amounts of exploration and evaluation assets (including exploration and evaluation assets
related to the investment in associate) is assessed by the Company for impairment when indicators of
impairment exist. Judgment is required in determining whether indicators of impairment exist and
include, but are not limited to, the following factors:
•
Exploration rights have expired or will expire in the near future
•
No significant future exploration expenditures are foreseen
•
No commercially viable quantities are discovered and exploration and evaluation activities will be
discontinued
Exploration and evaluation assets are assessed for impairment indicators or the reversal of impairment
indicators (not to exceed the amount of prior impairments) at the end of each reporting period.
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
18
The recoverable amount of the asset is estimated to determine the extent of the impairment loss. The
recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. Value in use
considers estimated future cash flows associated with the asset, such value being discounted to their
present value using a pre-tax discount rate that reflects current market assessment of the time value of
money and the risks specific to the asset. In the case of exploration and evaluation assets, impairment
reviews are carried out on a property-by-property basis, with each property representing a potential
cash-generating unit. A previous impairment is reversed if the asset’s recoverable amount subsequently
exceeds its carrying amount.
g) Provisions and contingent liabilities
A provision is recognized when the Company has a present legal or constructive obligation as a result of
a past event, it is probable that an outflow of economic benefits will be required to settle the obligation,
and the amount of the obligation can be reliably estimated. Timing or amount of the outflow may still
be uncertain. If the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of
money. Provisions are measured at the estimated expenditure required to settle the present obligation,
based on the most reliable evidence available at the reporting date, including the risks and uncertainties
associated with the present obligation. Any reimbursement that the Company can be virtually certain to
collect from a third party with respect to the obligation is recognised as a separate asset. However, this
asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate. In those cases where the possible outflow of
economic resources as a result of present obligations is considered improbable or remote, no liability is
recognized.
A legal or constructive obligation to incur restoration, rehabilitation and environmental costs may arise
when environmental disturbance is caused by the exploration, development or ongoing production of a
mineral property interest. Such costs arising from the decommissioning of plant and other site
preparation work, discounted to their net present value, are provided for and capitalized at the start of
each project to the carrying amount of the related asset, as soon as the obligation to incur such costs
arises and to the extent that such cost can be reasonably estimated.
h) Income taxes
When applicable, income tax on the profit or loss comprises current and deferred tax. Income tax is
recognized in profit or loss except to the extent that it relates to items recognized in other
comprehensive income or directly in equity, in which case it is recognized in other comprehensive
income or directly in equity.
Current tax is the expected tax payable on the taxable profit for the period, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
19
Deferred tax is provided using the liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. However, deferred tax is not provided on the initial recognition of goodwill or on the
initial recognition of an asset or liability unless the related transaction is a business combination which
affects tax or accounting profit. Deferred tax on temporary differences associated with investments in
subsidiaries is not provided for if reversal of these temporary differences can be controlled by the
Company and it is probable that reversal will not occur in the foreseeable future. The amount of deferred
tax provided is based on the expected manner of realization or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting
date and which are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled. A deferred tax asset is recognized only to the extent that it is
probable that future taxable income will be available against which the asset can be utilized. Deferred
tax assets and liabilities are offset only when the Company has a legally enforceable right and intention
to set off current tax assets and liabilities from the same taxation authority.
i) Share-based payment transactions
Equity-settled share-based payments are made in exchange for services received and transactions
related to mineral properties and are measured at their fair value. The fair value of the services rendered,
or the mineral property transaction is determined indirectly by reference to the fair value of the equity
instruments granted when the fair value of services rendered, or the mineral property transaction cannot
be reliably estimated. The fair value of share-based payments to directors, officers, employees and
consultants with employee-related functions is recognized as an expense over the vesting period (the
vesting being conditional in certain instances on the achievement of defined performance conditions)
with a corresponding increase to contributed surplus. Financing warrants and warrants to brokers, in
respect of an equity financing, are recognized as a share issue expense with a corresponding increase to
contributed surplus. The fair value of share options granted is measured at the grant date and recognized
over the period during which the options vest. The fair value of the options granted is measured using
the Black-Scholes option pricing model and considering an estimated forfeiture rate and the terms and
conditions upon which the options were granted. At each reporting date, the amount recognized as an
expense is adjusted to reflect the actual number of share options that are expected to vest. Upon the
exercise of share-based payments, the proceeds received, net of any direct expenses, as well as the
related compensation expense previously recorded as contributed surplus, are credited to share capital.
j) Significant accounting judgments and estimates
The preparation of these consolidated financial statements requires management to make certain
estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and reported amounts of expenses during the reporting
period. Actual outcomes could differ from these estimates. These consolidated financial statements
include estimates which, by their nature, are uncertain and may require accounting adjustments based
on future occurrences. Revisions to accounting estimates, judgments and assumptions are recognized in
the period in which the estimate is revised and future period if the revision affects both current and
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
20
future period. These estimates, judgments and assumptions are based on historical experience, current
and future economic conditions and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Significant assumptions about the future and other
sources of estimation uncertainty that management has made at the financial position reporting date,
that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event
that actual results differ from the assumptions made, include, but are not limited to the following:
Title to mineral property interests
Although the Company has taken steps to verify title to mineral properties in which it has an interest,
these procedures are subject to certain assumptions and do not guarantee the Company’s title. Such
properties may be subject to prior agreements or transfers and title may be affected by undetected
defects.
Exploration and evaluation assets
The application of the Company’s accounting policy for exploration and evaluation assets requires
judgment in determining whether it is likely that future economic benefits will flow to the Company. If
information becomes available suggesting that the carrying amount of an exploration and evaluation
asset may exceed its recoverable amount, the Company carries out an impairment test in the year the
new information becomes available. As at June 30, 2024, there were no impairment indicators, and the
Company has determined that there were no significant events or changes in circumstances that
indicated that the carrying value of its exploration and evaluation assets (including the exploration and
evaluation assets related to the investment in associate) may not be recoverable. As such, no impairment
test was performed, and no impairment loss was recognized during the year ended June 30, 2024.
Going concern
The assessment of the Company’s ability to execute its strategy by funding future working capital
requirements involves judgment. Estimates and assumptions are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances (Note 3).
Asset Retirement Obligation
Environmental liabilities are determined using management's best estimates of the probable amounts
of future cash outflows, the expected timing of payments and discount rates.
k) Accounting standards issued but not yet effective
The Company has not yet adopted certain standards, interpretations to existing standards and
amendments which have been issued but have an effective date of later than June 30, 2024.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
21
on or after the effective date of the pronouncement. New Standards, amendments and Interpretations
not adopted in the current year have not been disclosed as they are not expected to have a material
impact or management has not yet assessed the impact on the Corporation’s consolidated financial
statements.
l) New accounting method
On July 1, 2023, the Company adopted the amendments to IAS 1. The changes include requiring
companies to disclose information about their material accounting policies, rather than their significant
accounting policies; clarifying that accounting policies relating to immaterial transactions, other events
or conditions are themselves immaterial and need not be disclosed; stating that accounting policies
relating to significant transactions, other events or conditions are not themselves all material in relation
to a company's financial statements.
5. EXPLORATION AND EVALUATION ASSETS
a) Environmental Bond
On May 13, 2014, the Company acquired from Copper Range Company (CRC) all rights, title, and
interest in the White Pine North Project. On July 27, 2021, in accordance with the acquisition
agreement, Highland (i) deposited an agreed amount of $1,676,149 with the Michigan Department
of Environment, Great Lakes, and Energy (“EGLE”) associated with the remediation and closure plan
of the previous White Pine operation; and (ii) released CRC from its environmental obligations with
the Michigan Department of Environmental Quality.
In December 2022, the Company secured a surety bond as financial assurance for the White Pine
North Project. As part of that process, the Company placed a cash deposit of $613,633 with the surety
provider, which represented 35% of the value of the total assurance. Following the completion of the
Kinterra Transaction in July 2023 (Note 5b), the financial assurance for the White Pine North Project
of $613,633 was returned.
Copperwood
Project
White Pine
Project
Total
Balance at June 30, 2022
17,804,059
$
5,052,200
$
22,856,259
$
Acquisition
266,025 1,000,000 1,266,025
Effect of foreign exchange
- (8,294) (8,294)
Balance at June 30, 2023
18,070,084
$
6,043,906
$
24,113,990
$
Additions to exploration and evaluation assets
266,025
-
266,025
Addition to asset retirement obligation
1,184,752
-
1,184,752
Disposition of controlling interest in White Pine Copper LLC
-
(6,043,906)
(6,043,906)
Balance at June 30, 2024
19,520,861
$
-
$
19,520,861
$
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
22
In July 2023, the Company secured a surety bond as financial assurance for the Copperwood Project.
The Company paid a cash deposit of $2,267,680, which represents 35% of the financial assurance
valued at $6,479,089. The Company also earned interest on the bond since July 2023 of $83,952. The
value of the environmental bond as at June 30, 2024 is $2,351,632.
b) Deconsolidation of White Pine North Project, Michigan, USA, and investment in associates
On July 24, 2023, the Company completed a transaction with Kinterra Copper USA LLC (‘Kinterra”) in
which the Company sold 66% of the common shares of White Pine Copper LLC, which owns the White
Pine North Project, in exchange for $30 million in cash, net of transaction costs amounting to
$1,809,312.
Effective July 24, 2023, the Company held an interest of 34% (compared to 100% as at June 30, 2023)
in White Pine Copper LLC and management determined that the Company was no longer in a position
of control over White Pine Copper LLC. Management determined it was able to exert significant
influence on White Pine Copper LLC and accordingly, the Company deconsolidated White Pine
Copper LLC on July 24, 2023, and started accounting for its investment in White Pine Copper LLC
using the equity method. The Company hence derecognized the assets and liabilities of the White
Pine North Project from its consolidated statement of financial position, recorded its interest at fair
value as an investment in associate for $15,454,545 at the transaction date of July 24, 2023 and
recognized a gain on sale of controlling interest in subsidiary of $39,521,720.
The following tables summarize the financial information related to White Pine Copper LLC on July
24, 2023, immediately prior to deconsolidation, before intercompany adjustments:
The following table details the gain on sale:
Non-current assets
Capital assets
18,748
$
Exploration and evaluation assets
6,043,906
Non-current liabilities
Asset retirement obligation
(1,939,141)
Total net assets
4,123,513
$
Fair value of consideration received (net)
28,190,688
$
Fair value of retained non-controlling investment in White Pine Copper LLC
15,454,545
Carrying amount of White Pine Copper LLC
(4,123,513)
Gain on sale of controlling interest in subsidiary
39,521,720
$
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
23
Investment in associate:
c) Royalty Agreements
The Company has granted Osisko a 3/26th NSR royalty on all future silver production from the
Copperwood and White Pine North projects in relation to an agreement signed in 2021. Osisko has
the option to acquire the remaining 23/26th NSR royalty on all silver produced from the Copperwood
and White Pine North projects by paying an additional $23 million to the Company within 60 days
following the delivery of a feasibility study on the White Pine North Project. To secure the payment
of future NSR royalty, Osisko has a mortgage on the Copperwood property and a general security
agreement over all the assets of the Company and includes specifically a pledge of the shares of the
following subsidiaries: Upper Peninsula Copper Holdings Inc., Copperwood Resources Inc., White
Pine Copper LLC and Keweenaw Copper Co.
6. LOANS AND BORROWINGS
In addition to its $30 million initial investment in White Pine LLC (see note 5 b), the Company and Kinterra
have agreed to fund, subject to certain conditions, expenditures with respect to the Initial Program to
advance the White Pine North Project. Kinterra will fund its 66% pro rata expenditure, as well as provide
an unsecured loan to the Company to satisfy its pro rata expenditure. The unsecured loan (the “Initial
Loan”) is subject to an interest rate of 10%, compounded annually from the date of each advance, and
matures on July 24, 2026 (the “Initial Maturity Date”). If the Company does not repay all amounts owing
under the Initial Loan, including all accrued interest thereon by the Initial Maturity Date, all amounts
outstanding under the Initial Loan will be automatically converted into a capital contribution of Kinterra,
hence diluting the Company’s proportionate ownership in the White Pine North Project.
A second unsecured loan (the “Advanced Loan”) will become available to the Company to fund its pro
rata expenditure after the Initial Loan has been spent on the White Pine North Project, provided that the
Company has repaid the Initial Loan upon maturity or such amounts have been converted to Kinterra
capital contribution. The Advanced Loan is subject to an interest rate of 10%, compounded annually from
the date of each advance, and matures on the earlier of i) July 24, 2028 and ii) the date of determination
by White Pine North Project’s management committee to commence detailed engineering (the
“Advanced Loan Maturity Date”). If the Company does not repay all amounts owing under the Advanced
Loan, including all accrued interest thereon by the Advanced Loan Maturity Date, all amounts
Year ended
June 30, 2024
Balance as at June 30, 2023
-
$
Fair value of retained non-controlling investment in White Pine Copper LLC
15,454,545
Cash calls
2,487,782
Share of loss
(1,902,293)
Balance as at June 30, 2024
16,040,034
$
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
24
outstanding under the Advanced Loan will be automatically converted into a capital contribution of
Kinterra Copper, hence diluting the Company’s proportionate ownership in the White Pine North Project.
The balance of the Initial Loan is as follows:
7. ASSET RETIREMENT OBLIGATION
During the year, the Company started early site work at Copperwood. The Early Site Work primarily
concentrated on the timely completion of authorized wetland and stream activities alongside the
initiation of onsite wetland mitigation activities. To efficiently perform the permitted wetlands and
stream impacts, the surrounding upland areas were disturbed to create access routes and laydowns.
These disturbances would require future reclamation activities. The asset retirement obligation consists
of a provision for reclamation costs related to the Copperwood Project. The undiscounted cash flow
amount of the total liability was estimated at $1,599,474 at June 30, 2024. The present value of the total
liability was calculated using a discount rate of 4.18% and is reflecting payments to be made from 2039
to 2040, inclusively, while taking into consideration an inflation rate of 2.0% over that period.
8. SHARE CAPITAL
Issued and fully paid
At June 30, 2024, the Company had 736,363,619 issued and outstanding common shares (736,363,619
issued and outstanding common shares at June 30, 2023).
Year ended
June 30, 2024
Balance at June 30, 2023
-
$
Cash call funded by Kinterra on behalf of Highland Copper
2,317,782
Accrued interest
65,547
Balance at June 30, 2024
2,383,329
$
Copperwood
Project
White Pine
Project
Total
Balance at June 30, 2023
-
$
1,939,141
$
1,939,141
$
Addition to asset retirement obligation
1,184,752
-
1,184,752
-
(1,939,141)
(1,939,141)
Balance at June 30, 2024
1,184,752
$
-
$
1,184,752
$
Disposition of controlling interest in White Pine
Copper LLC
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
25
Share purchase warrants
The following table reflects the number of issued and outstanding share purchase warrants as at June
30, 2024 and 2023:
The share purchase warrants expired without being exercised.
9. STOCK OPTIONS
The Company has an equity incentive compensation plan (the “Plan”) which provides that the Board of
Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange
requirements, grant to directors, officers, employees and consultants of the Company, non-transferable
options to purchase common shares, provided that the number of common shares reserved for issuance
will not exceed 10% of the issued and outstanding common shares. Such options will be exercisable for
a period of up to 7 years from the date of grant. Vesting terms are determined by the Board of Directors
at the time of grant.
As at June 30, 2024, the Company had 39,550,002 (23,300,000 as at June 30, 2023) issued and
outstanding stock options.
The following is a summary of stock option activities for years ended June 30, 2024 and 2023:
Grant date
Number of
warrants
June 30, 2023
Expired
Number of
warrants
June 30, 2024
Exercise price
per share
(C$)
Exercise price
per share
($)
Expiry Date
August 27, 2021
126,464,965
(126,464,965)
-
0.18
0.14
August 27, 2023
September 9, 2021
5,250,000
(5,250,000)
-
0.18
0.14
September 9, 2023
131,714,965
(131,714,965)
-
0.18
0.14
Year ended
Year ended
June 30, 2024
June 30, 2023
Number of
stock options
Weighted average
exercise price
(C$)
Number of
stock options
Weighted average
exercise price
(C$)
Options, beginning of period
23,300,000
0.12
17,525,000
0.13
Granted
16,250,002
0.07
13,300,000
0.10
Expired
-
-
(7,525,000)
0.12
Options, end of period
39,550,002
0.10
23,300,000
0.12
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
26
Stock options issued and outstanding as at June 30, 2024 are as follows:
The fair value of the options granted during the year was estimated at CA$0.06 (year ended June 30,
2023 – CA$0.10) per option by applying the Black-Scholes option pricing model, using an expected life of
7 years (year ended June 30, 2023 – 7 years), a risk-free interest rate of 3.78% (year ended June 30, 2023
– 2.92%), a volatility rate of 88.71% and a 0% dividend factor (year ended June 30, 2023 – 94.74% and
0%).
10. EXPLORATION AND EVALUATION EXPENSES
The Company incurred the following exploration and evaluation expenses during the years ended June
30, 2024 and 2023:
11. MANAGEMENT AND ADMINISTRATION EXPENSES
The Company incurred the following management and administration expenses during the years ended
June 30, 2024 and 2023:
Grant date
Number of
stock options
Weighted average
exercise price
(C$)
Remaining
contractual life
(years)
Number of
exercisable
options
Weighted average
exercise price of
exercisable options
(C$)
December 16, 2021
3,500,000
0.11
2.5
3,500,000
0.11
February 24, 2022
6,500,000
0.15
2.7
6,500,000
0.15
July 25, 2022
13,300,000
0.10
5.1
9,800,000
0.10
October 13, 2023
16,250,002
0.07
6.3
5,416,667
0.07
39,550,002
0.10
5.0
25,216,667
0.11
2024
2023
Labour
2,228,092
$
1,979,505
$
Excavation and site works
7,174,185
-
Studies
-
2,083,785
Office, overhead and other administrative costs
345,930
609,585
9,748,207
$
4,672,875
$
Years ended June 30
2024
2023
Administrative and general
1,542,604
$
618,677
$
Office
173,985
199,120
Professional fees
855,501
1,055,952
Investor relations and travel
388,305
325,603
2,960,395
$
2,199,352
$
Years ended June 30
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
27
12. INCOME TAXES
The income tax provision differs from the amount resulting from the application of the combined
Canadian statutory income tax rate as follows:
Recognized deferred tax assets and liabilities are attributable to the following:
Income (loss) before income tax
$
25,171,016
$
(6,803,987)
Tax using the Company's domestic tax rate
6,670,319
26.50%
(1,803,057)
26.50%
Increase (decrease) resulting from:
Stock-based remuneration
187,829
0.75%
222,216
(3.27%)
Non-deductible expenses and non-taxable revenues
19,262
0.08%
1,130
(0.02%)
Effect of tax rate in foreign juridictions
(217,253)
(0.86%)
29,648
(0.44%)
Variation of unrecognized tax assets
699,985
2.78%
1,231,227
(18.10%)
Recognition of previously unrecognized deferred tax assets
(6,832,099)
(27.14%)
-
0.00%
True up and Others
445,853
1.77%
318,836
(4.69%)
Deferred income tax
973,896
3.87%
-
-
Year ended 2024
Year ended 2023
Assets
Liabilities
June 30, 2024
Net
Capital assets
85
-
85
Investment in associates
-
(3,842,801)
(3,842,801)
Exploration and evaluation assets
-
(1,851,794)
(1,851,794)
Asset reitirement obligation
290,595
-
290,595
Advances in foreign currency
-
(421,217)
(421,217)
Non-capital loss carryforward
4,861,114
-
4,861,114
5,151,794
(6,115,812)
(964,018)
Offsetting of tax assets and liablities
(5,151,794)
5,151,794
-
-
(964,018)
(964,018)
Assets
Liabilities
June 30, 2023
Net
Exploration and evaluation assets
-
-
-
Advances in foreign currency
-
(501,592)
(501,592)
Non-capital loss carryforward
501,592
501,592
501,592
(501,592)
-
Offsetting of tax assets and liablities
(501,592)
501,592
-
-
-
-
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
28
Deductible temporary differences for which no deferred tax assets have been recognized are as follows:
Deferred tax assets have not been recognised in respect of these items because of the uncertainties that
future taxable profit will be available against which the Company can utilise these benefits.
Canada
USA
Total
Non-capital loss carryforward
18,096,831
-
18,096,831
Capital assets
238,132
-
238,132
Exploration and evaluation assets
1,512,134
-
1,512,134
Asset retirement obligation
-
-
-
Financing expenses and other
60,160
-
60,160
19,907,257
-
19,907,257
Canada
USA
Total
Non-capital loss carryforward
18,088,273
33,642,696
51,730,969
Capital assets
245,354
18,426
263,780
Exploration and evaluation assets
1,606,129
-
1,606,129
Asset retirement obligation
-
1,939,141
1,939,141
Financing expenses and others
93,288
-
93,288
20,033,044
35,600,263
55,633,307
Year ended June 30, 2024
Year ended June 30, 2023
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
29
Non-capital losses expire as follows:
The Company also has non-capital losses available in the USA amounting to 13,847,807 with no expiry
date. A deferred income tax asset is recognized on all of the USA non-capital losses ($0 in 2023). A
deferred income tax asset on Canadian non-capital losses has been recognized for an amount of
3,178,999 ($1,892,800 in 2023).
13. EARNINGS PER SHARE
The calculation of basic and diluted earnings (loss) per share for the year ended June 30, 2024 was based
on net income attributable to common shareholders of $24,197,120 (a net loss of $6,803,987 in 2023)
and the weighted average number of common shares outstanding of 738,334,938 (736,363,619 in 2023).
For periods where the Company records a loss, it calculates diluted loss per share using the basic
weighted average number of shares. If the diluted weighted average number of shares were used, the
USA
Canada
2026
-
75,419
2027
-
87,916
2028
-
221,786
2029
-
393,287
2030
-
543,870
2031
-
694,742
2032
42,591
1,001,159
2033
841,758
70,272
2034
2,525,524
830,056
2035
-
1,801,402
2036
-
755,502
2037
-
1,569,921
2038
-
1,719,402
2039
-
1,426,668
2040
-
1,601,473
2041
-
1,480,270
2042
-
2,292,678
2043
-
2,306,996
2044
-
2,403,011
3,409,873
21,275,830
2024
2023
Weighted average common shares outstanding
Basic
736,363,619
736,363,619
Plus net incremental share from:
Assumed conversion: stock option
1,971,319
-
Diluted weighted average common shares outstanding
738,334,938
736,363,619
Years ended June 30
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
30
result would be a reduction in the loss, which would be anti-dilutive. There are a total of 10,000,000
options which are anti-dilutive as at June 30, 2024.
14. RELATED PARTY TRANSACTIONS
Compensation of key management personnel
Key management personnel are persons responsible for planning, directing, and controlling the activities
of the Company, including directors and officers. For the years ended June 30, 2024 and 2023, key
management compensation comprises:
15. SUPPLEMENTAL CASH FLOW INFORMATION
The non-cash financing activities not already disclosed in the consolidated statements of cash flows were
as follows:
16. CAPITAL MANAGEMENT
The Company defines capital that it manages as loans and borrowings and shareholders’ equity. When
managing capital, the Company’s objectives are a) to ensure the entity continues as a going concern; b)
to increase the value of the entity’s assets; and c) to achieve optimal returns to shareholders. These
objectives will be achieved by identifying the right exploration projects, adding value to these projects
and ultimately taking them to production or obtaining sufficient proceeds from their disposal. As at June
30, 2024, managed capital was $52,709,154 ($27,979,764 at June 30, 2023).
The Company’s properties are in the exploration and evaluation stage and, as a result, the Company
currently has no source of operating cash flows. The Company intends to raise such funds as and when
required to complete the exploration and development of its projects. The only sources of other future
funds presently available to the Company are through the sale of equity capital of the Company, the sale
2024
2023
Salaries, fees, bonuses, and termination payments
1,426,330
$
705,353
$
Share-based compensation
707,431
838,552
2,133,761
$
1,543,905
$
Years ended June 30
2024
2023
Financing activities
Loans and borrowings from Kinterra to fund White Pine cash calls
2,317,782
$
-
$
Addition to asset retirement obligation
1,184,752
-
-
(1,000,000)
Years ended June 30
Addition to exploration and evaluation assets included in accounts
payable and accrued liabilities
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
31
by the Company of an interest in any of its properties in whole or in part or loans. The ability of the
Company to arrange such financing in the future will depend in part upon the prevailing capital market
conditions as well as on its business performance. There can be no assurance that the Company will be
successful in its efforts to arrange additional financing on terms satisfactory to the Company in
reasonable terms. There were no changes in the Company’s approach to capital management during the
year ended June 30, 2024. The Company is not subject to any externally imposed capital requirements
as at June 30, 2024.
17. FINANCIAL RISK MANAGEMENT
The Company thoroughly examines the various financial risks to which it is exposed and assesses the
impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the
Board of Directors. There were no changes to the financial objectives, policies and processes during the
year ended June 30, 2024.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise
the funds required for its continued operations. The Company generates cash flow only from its financing
activities.
The following table summarizes the contractual maturities of the Company’s financial liabilities as at June
30, 2024 and 2023:
June 30, 2024
Carrying
amount
Settlement
amount
Within one
year
Two
years
Over two
years
$
$
$
$
$
1,373,964 1,373,964 1,373,964 - -
Loans and borrowings
2,383,329 2,866,570 - - 2,866,570
3,757,293 4,240,534 1,373,964 - 2,866,570
June 30, 2023
Carrying
amount
Settlement
amount
Within one
year
Two
years
Over two
years
$
$
$
$
$
1,997,597 1,997,597 1,997,597 - -
1,997,597 1,997,597 1,997,597 - -
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
32
Credit risk
Credit risk is the risk that the Company will incur losses due to the non-payment of contractual
obligations by third parties. The Company is exposed to credit risk with respect to cash and cash
equivalent held at major Canadian & US chartered banks, a regional US bank as well as the environmental
bond (Note 5a).
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Cash equivalents, environmental bond and the promissory
note bear interest at a fixed rate.
The Company's exposure to interest rate risk on its long-term financial liabilities is limited because they
bear interest at fixed rates.
Currency risk
In the normal course of operations, the Company is exposed to currency risk on transactions that are
denominated in a currency other than the respective functional currencies of each of the entities within
the consolidated group. The currencies in which these transactions are denominated are primarily the
Canadian and the US dollar. The consolidated entity does not presently enter into hedging arrangements
to hedge its currency risk. The Board considers this policy appropriate, considering the consolidated
entity’s size, current stage of operations, financial position and the Board’s approach to risk
management.
At June 30, 2024, financial assets and liabilities denominated in a foreign currency consisted of cash of
CAD $417,243 as well as accounts payable and accrued liabilities of CAD $112,104. The impact on profit
or loss of a 10% increase or decrease in the US dollar against the Canadian dollar would be approximately
$40,000.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents and accounts payable and accrued liabilities is considered
to be a reasonable approximation of their fair value due to their immediate or short-term maturity.
Fair value of environmental bond is very similar to the amortized cost due to the nature of the underlying
asset. The carrying value of loans and borrowings is considered to be a reasonable approximation of its
fair value. The loans and borrowings amount in the balance sheet represents the amount owing to
Kinterra Capital (“Kinterra Loan”). The Kinterra loan is a transaction negotiated between two informed
unrelated parties; therefore, the transaction price represents fair value of the transaction.
Highland Copper Company Inc.
Notes to the Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in US dollars)
33
19. SEGMENTED INFORMATION
The Company has one reportable operating segment being the acquisition and exploration of mineral
properties in Michigan, USA. Assets are located as follows:
20. SUBSEQUENT EVENT
Subsequent to the year end, the Company issued 8,075,000 incentive stock options, 2,244,242 Restricted
Share Units and 1,812,500 Deferred Share Units to directors, executive officers and employees of the
Company. The options are exercisable at an exercise price of $0.12 per share for a period of up to five
years and will vest as to one third immediately and one third on each of the first and second anniversary
of the grant. The Restricted Share Units and Deferred Share Units will vest as to one third on each of the
first, second and third anniversary of the grant.
As at June 30, 2024
Canada
USA
Total
Current assets
1,348,137
$
19,364,432
$
20,712,569
$
Environmental bond
-
2,351,632
2,351,632
Investment in associate
-
16,040,034
16,040,034
Exploration and evaluation assets
-
19,520,861
19,520,861
Total assets
1,348,137
$
57,276,959
$
58,625,096
$
As at June 30, 2023
Canada
USA
Total
Current assets
6,946,673
222,169
7,168,842
Environmental bond
-
613,633
613,633
Capital assets
-
20,037
20,037
Exploration and evaluation assets
-
24,113,990
24,113,990
Total assets
6,946,673
$
24,969,829
$
31,916,502
$
1
Management’s Discussion
and Analysis
For the years ended
June 30, 2024
In US dollars
2
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended June 30, 2024
This management discussion and analysis (“MD&A”) of financial position and results of operations of
Highland Copper Company Inc. (“Highland” or the “Company”) is prepared as of August 27, 2024 and
should be read in conjunction with the Company’s consolidated financial statements for the year ended
June 30, 2024.
The Company reports its financial position, results of operations and cash flows in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”). All amounts are expressed in US dollars unless otherwise indicated. Additional
information relevant to the Company’s activities can be found on SEDAR+ at www.sedarplus.ca and on
the Company’s website, www.highlandcopper.com.
DESCRIPTION OF BUSINESS
Highland and its subsidiaries are engaged in the acquisition, exploration, and development of mineral
properties. The Company’s principal projects are Copperwood, a feasibility stage copper project, and
White Pine North (34% interest), an advanced exploration stage copper project, both located in the
Upper Peninsula region (the “U.P.”) of the State of Michigan, USA. Copperwood is anticipated to produce
approximately 30,000 tons of copper per year for 11 years, with potential upside from the inferred
tonnage1. Copperwood is permitted for site development and operation. White Pine North is a joint
project with Kinterra Copper USA, LLC (“Kinterra”), who is also the operator of the project. White Pine
North is anticipated to produce approximately 42,000 tons of copper per year for more than 20 years2.
Highland is a Canadian-based company, incorporated under the Business Corporations Act (British
Columbia) in 2006. Highland’s common shares are listed on the TSX Venture Exchange (“TSXV”) under
the symbol “HI” and on the OTCQB Venture Marketplace (the "OTCQB") under the symbol "HDRSF". As
of June 30, 2024, the Company has 736,363,619 common shares issued and outstanding. Orion Resource
Partners, Condire Investors LLC, and Greenstone Resources II LP hold respectively 27.7%, 16.2% and
15.9% of the Company’s issued and outstanding common shares.
1 See the NI 43-101 technical report entitled “Feasibility Study Update Copperwood Project Michigan, USA” with an issue date of
April 20, 2023, prepared for the Company by G Mining Services Inc. and available under the Company’s profile on SEDAR+, for
the assumptions, risks and analysis underlying anticipated production at the Copperwood Project (the “Copperwood Project
Feasibility Study”).
2 See the NI 43-101 technical report entitled “Preliminary Economic Assessment White Pine North Project Michigan, USA” with
an issue date of September 7, 2023, prepared for the Company by G Mining Services Inc. and available on SEDAR+, for the
assumptions, risks and analysis underlying anticipated production at the White Pine North Project.
3
ANNUAL HIGHLIGHTS
Copperwood Project (“Copperwood”)
•
The Company initiated early site preparation work in 2023 to advance stream relocation and
wetland mitigation structures. The work is required to maintain permits in good standing. The
project is progressing as planned and is anticipated to be completed by the fourth quarter of 2024.
•
On March 26, 2024, after a thorough review of the Company’s permitted Copperwood Project, the
Michigan Strategic Fund Board unanimously approved a performance-based grant of $50 million
from the Strategic Site Readiness Program (“SSRP”). In May, Highland presented the merits of
Copperwood to the Appropriations Committees at both the Michigan House and Senate. The
transfer of funds for the proposed $50 million Michigan Economic Development Corporation State
grant has received approval from the Appropriations Committee at the Michigan House and is now
pending final approval from the Appropriations Committee at the Michigan Senate.
•
On November 29, 2023, the Company announced the results of the Economic Contribution Analysis
for the Copperwood Project conducted by Public Sector Consultants (“PSC”) out of Lansing,
Michigan. The study demonstrates the potential economic contributions of the Copperwood
Project to the local Upper Peninsula communities and State of Michigan through job creation,
indirect economic activity, and taxes to support local infrastructure.
White Pine North Project (“White Pine North” or “White Pine”)
•
In July 2023, the Company issued an updated Preliminary Economic Assessment (“PEA”) on White
Pine North dated effective July 12, 2023 (posted to SEDAR on September 7, 2023). The PEA
demonstrates the economic strength of this long-lived project.
•
On July 24, 2023, Highland announced Kinterra as a partner on the project. Kinterra brings additional
financial and technical strength required to progress the White Pine project through to
development. Kinterra made a cash payment of $30 million to Highland for a 66% stake in the White
Pine North project. Additionally, the parties agreed to an Initial Program and Budget to advance the
project through permitting, infill drilling and feasibility study. Highland’s 34% stake of White Pine
remains significant to its overall asset value. After the transaction, Kinterra became the operator of
the White Pine project.
•
In March 2024, the parties have successfully completed its winter drilling program at White Pine
North. The goal of the drilling program was primarily to collect samples for geotechnical and
metallurgical testing to support Feasibility Study work. The program ran from mid-January 2024
through March 2024 and was completed as planned, drilling a total of 6,593 meters in 10 holes
focusing on the first ten years of the mine plan area.
•
In June 2024, Kinterra initiated a second drill program of approximately 14,500 metres to collect
samples for engineering study test work, in addition to assaying for the purposes of a resource
update. The parties also initiated key engineering trade-off studies and environmental baselining
at White Pine.
Corporate Activities
•
On February 22, 2024, the Company announced the appointment of Barry O’Shea as Chief Executive
Officer. Mr. O’Shea was also appointed to Highland’s Board of Directors. Mr. O’Shea joined Highland
4
Copper in February 2022 as the Company’s Chief Financial Officer.
•
On November 20 2023, the Board appointed Cybill Tsung as the Company’s interim CFO. Ms. Tsung
was appointed to the CFO role on a full-time basis in August 2024.
•
Subsequent to the year end, the Company issued 8,075,000 incentive stock options, 2,244,242
Restricted Share Units and 1,812,500 Deferred Share Units to directors, executive officers and
employees of the Company. The options are exercisable at an exercise price of $0.12 per share for
a period of up to five years and will vest as to one third immediately and one third on each of the
first and second anniversary of the grant. The Restricted Share Units and Deferred Share Units will
vest as to one third on each of the first, second and third anniversary of the grant.
•
The Company realized a net income of $25.2 million for the year ended June 30, 2024 ($0.03 per
share) compared to net loss of $7.1 million during the comparative period in 2023 ($(0.01) per
share).
•
As at June 30, 2024, the Company had working capital (total current assets less total current
liabilities) of $19.3 million.
PROJECT UPDATES
Copperwood Project
The Copperwood project is Highland’s 100%-owned, fully-permitted copper project in the Upper
Peninsula, Michigan, USA. The Copperwood Feasibility Study issued in April 2023 demonstrated a project
producing 64.6 million pounds of copper annually (approximately 30 thousand tonnes) over an initial 11-
year mine life. Notably, the project has significant leverage to copper price and multiple opportunities to
improve project economics, particularly converting its significant inferred resource (which is excluded
from Feasibility Study economics).
5
Early Site Work
In the fall of 2023, Highland completed certain pre-construction activities including site clearing and
grubbing focused on wetland and stream areas, the development of stream relocation infrastructure,
improvements to existing site roads, and the initiation of key environmental mitigation projects.
During the current construction season, which spans from May to November 2024, the Company
continues to leverage its successful 2023 and early 2024 site works efforts under the Wetlands and
Streams Permit, authorized by the Michigan Department of Environment, Great Lakes, and Energy
("EGLE"), as it progresses with essential initiatives within the Copperwood Project. These endeavours
encompass a range of activities, including the continuation of the stream relocation project, involving a
shift of focus from intensive earthworks to the implementation of in-stream structures and the creation
of approximately 4 acres of emergent wetlands along the stream. Additionally, the Company is dedicated
to finalizing its onsite wetland mitigation project including significant earth excavation, which upon
completion will result in the establishment of 14.3 acres of wetlands, culminating in a total of 18.3 acres
of newly created emergent wetlands on-site. Concurrently, off-site activities for stream mitigation are
slated to commence this construction season, most notably the replacement of a restrictive multi-culvert
stream crossing with a single-span crossing, a measure designed to significantly enhance fish and wildlife
passage.
The site work satisfies key obligations under the Wetland and Streams Permit, maintaining permits in
good standing, in addition to establishing operating presence and spending a portion of initial capital.
Highland intends on initiating detailed engineering and project financing in 2024 as it proactively
advances Copperwood toward a construction decision. Copperwood remains one of few fully-permitted
copper projects in the US and stands ready to take advantage of strong long-term copper fundamentals.
Application for Government Grant
On March 26, 2024, the Company announced that the Michigan Strategic Fund Board had unanimously
approved a performance-based grant of $50 million from the Strategic Site Readiness Program for the
Copperwood Project. During May 2024, Highland was invited to present the merits of Copperwood to
the Appropriations Committees at both the Michigan House and Senate. The transfer of funds for the
proposed $50 million grant has received approval from the Appropriations Committee at the Michigan
House and is now pending final approval from the Appropriations Committee at the Michigan Senate.
The Copperwood Project is strongly aligned with Michigan’s focus on mobility and electrification and has
the potential to be a key source of U.S. domestic copper to supply the ongoing clean energy transition.
The transfer of funds is pending final approval from the Appropriations Committee at the Michigan
Senate.
The SSRP program is funded through the Strategic Outreach and Attraction Reserve Fund (“SOAR”) and
provides economic assistance for the purpose of creating investment-ready sites to attract and promote
investment in the state. The grant award comes after a thorough review of the Copperwood Project by
the state of Michigan and the Company’s demonstration of the importance of the Project’s development
to the Upper Peninsula. The grant funds will be in the form of performance-based reimbursements for
eligible activities relating to infrastructure development, most notably expenditure on roads,
communications infrastructure and bringing power to site. The infrastructure improvements supported
6
by the grant will provide benefits to the surrounding communities and businesses, both during the
operations and in the long-term.
The Copperwood Project team has been working alongside local and regional community groups,
government representatives and regulatory bodies in the Upper Peninsula for over a decade.
Transparent and regular communications are central to the Company’s values and have resulted in
strong support for the project throughout this application process. In addition to the 22 formal
resolutions of support and approximately 10 letters of support that accompanied the grant application,
more than 20 local community members and representatives participated in the MSF Board meeting and
provided public comment in support of the project, speaking to its importance for the region.
The Western Upper Peninsula has suffered industry closures in the past decades that took their toll on
the local economy. The return of mining to the area is seen as an opportunity for significant economic
uplift and can become a transformative catalyst to renewed industrial investments in the area that will
support the regional economy for the decades to come. In addition, the potential creation of
approximately 380 long-term, family sustaining jobs as well as substantial direct, indirect and induced
economic benefits from additional spending in the area, can play a role in kickstarting a new chapter of
prosperity for the Western Upper Peninsula.
White Pine North Project
In July 2023, the Company issued a Preliminary Economic Assessment3 for White Pine reflecting a 22-
year mine life with average annual payable copper production of 93.5 million pounds (approximately 42
thousand tonnes). In the same month, Highland introduced Kinterra as a partner on the project. Kinterra
brings additional financial and technical strength required to progress the project through to
development. Kinterra made a cash payment of $30 million to Highland for a 66% stake in the White Pine
North project. Additionally, the parties agreed to an Initial Program and Budget to advance the project
through permitting, infill drilling and feasibility study, with Kinterra making available to Highland a three
year loan facility that the Company can draw on to finance its proportionate share of expenditures . Key
White Pine updates for the year ended June 30, 2024 include:
•
In January 2024, White Pine concluded a winter drill program of 10 holes or approximately 6,600
metres. The primary goal of the drill program was to collect ore samples for geotechnical and
metallurgical testing to support further engineering studies.
•
In May 2024, White Pine initiated a second drill program expected to be approximately 14,500
metres. This program will continue to collect sample for engineering study test work and will
also be assayed for the purposes of a resource update.
•
Geotechnical test work has been initiated on samples collected to date and will continue with
the second drill program samples. Engineering trade-off studies are underway to evaluate mining
methods, mine access options, and material handling systems.
3 The preliminary economic assessment is preliminary in nature, includes inferred mineral resources that are considered too
speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral
reserves, and there is no certainty that the preliminary economic assessment will be realized. Information regarding the basis
for the preliminary economic assessment and the qualifications and assumptions relied upon, are set out in detail in the report
entitled Preliminary Economic Assessment, White Pine North Project, Michigan, USA” dated September 7, 2023 available under
Highland’s profile on SEDARPlus (the “White Pine Technical Report”).
7
•
Metallurgical test work has been initiated to focus on comminution tests, flotation, grind size
variability, flow sheet development options, and metal recoveries.
•
Environmental baseline studies have been initiated including surface water flow and water
quality monitoring, groundwater elevation and water quality monitoring, aquatic habitat,
threatened and endangered species, wetlands and streams, wildlife habitat, and archaeological
and cultural surveys. Baselining is a key initial step to support permit applications.
•
Highland is funding its share of joint venture expenditures on White Pine by drawing down on
the loan facility provided by Kinterra.
OUTLOOK
For the upcoming year, the Company will continue to proactively advance Copperwood toward a
construction decision. The key strategic initiatives to support the advancement include:
•
Successfully completing the early site work in 2024 to maintain permits in good standing;
•
Continue to derisk the project in high priority areas;
•
Staffing for potential development;
•
Securing state funding;
•
Preparing for detailed engineering.
At White Pine, we will continue to work alongside Kinterra in advancing the White Pine North project
through permitting and feasibility study.
As of June 30, 2024, Highland Copper has $2.4 million outstanding loan payable to Kinterra representing
the draw down on the facility provided by Kinterra to fund Highland’s share of total expenditures. The
Company has available working capital (total current assets less total current liabilities) of approximately
$19.3 million as at June 30, 2024.
The Company is subject to a number of risks and uncertainties associated with its future exploration and
development activities. The recovery of amounts recorded for exploration and evaluation assets
depends on the ability of the Company to obtain the necessary financing to complete the development
of the projects, and future profitable production from the projects or proceeds from their disposition
thereof.
To date, the Company has not yet generated positive cash flows from its operating activities and it is in
the exploration and development stage. The Company has a deficit of $48,633,682 at June 30, 2024 (a
deficit of $72,830,802 at June 30, 2023). At June 30, 2024, the Company has working capital (total current
assets less total current liabilities) of $19,328,726 ($5,171,245 at June 30, 2023). The Company has relied
upon external financings, primarily through the issuance of equity, as well as proceeds from the disposal
of exploration and evaluation assets, to fund its operations in the past. Since the Company does not
generate revenues, the Company will need to obtain additional funds through the issuance of shares,
the exercise of share options or from other sources to pursue its operations and meet its obligations
related to the development of the Copperwood and White Pine North projects beyond the [current]
fiscal year. Despite the fact that it has been able to raise funds in the past, there is no guarantee of
success for the future. If management is unable to obtain new funding, the Company may be unable to
continue its operations, and amounts realized for assets may be less than amounts reflected in these
8
financial statements.
The conditions and uncertainties described above indicate the existence of a material uncertainty that
may cast significant doubt about the Company’s ability to continue as a going concern. If the going
concern assumption was not appropriate for the consolidated financial statements, adjustments which
could be material would be necessary to the carrying value of assets and liabilities and reported
expenses.
The Company estimates that the current working capital will be sufficient: (i) to provide for management
and administration expenses for at least the next 12 months; (ii) complete the require site works at
Copperwood to meet permit obligations; and (iii) meet its White Pine North cash call obligations over
the next 12 months.
SCIENTIFIC AND TECHNICAL INFORMATION
The scientific and technical information related to Highland’s mineral properties set out in this MD&A
has been reviewed and approved by Michael J. Foley, P.Eng., a qualified person as defined in NI 43-101.
SELECTED ANNUAL INFORMATION
The following table provides information for the years ended June 30, 2024 and 2023. This information
should be read in conjunction with the Company’s June 30, 2024 and 2023 consolidated financial
statements.
Financial Position
June 30, 2024
June 30, 2023
Cash
$
20,262,813
$
7,030,317
Investment in associate
16,040,034
-
Exploration and evaluation assets
19,520,861
24,113,990
Total assets
58,625,096
31,916,502
Shareholders' equity
52,709,154
27,979,764
Comprehensive Income (Loss)
Year ended
June 30, 2024
Year ended
June 30, 2023
Net income (loss) for the year
$
24,197,120
$
(6,803,987)
Basic and diluted earnings (loss) per share
0.03
(0.01)
Cash Flows
Operating activities
$
(11,822,844)
$
(6,415,223)
Investing activities
25,100,616
613,734
9
SELECTED QUARTERLY INFORMATION
The following table provides information for the eight fiscal quarters ended June 30, 2024:
The changes in the Company’s financial results on a quarter-by-quarter basis are primarily due to
fluctuations in the activity level of the Company’s exploration and evaluation programs, project
acquisitions, and corporate functions. The Company is a mineral exploration and development company
and does not currently generate operating revenue.
The exploration and evaluation expenditures for the quarters ended June 30, 2024, December 31 and
September 30, 2023, included costs relating to the early site work conducted at the Copperwood Project
required for the Wetlands and Streams Permit. The first phase of the work was completed in the fall of
2023. No site work was carried out during the winter months. The Company re-initiated the second and
final phase of the stream and wetland mitigation work in May 2024. The work is expected to be
completed by November 2024.
In the quarter ended September 30, 2023, the Company completed the sale of controlling interest in
White Pine Copper, LLC to its partner Kinterra, resulting in a gain of $39,521,720 for the period.
June 30,
March 31,
December 31, September 30,
2024
2024
2023
2023
Exploration and evaluation expenditures
1,541,989
$
248,435
$
3,211,949
$
4,745,834
$
Net loss (income)
3,396,497
1,870,105
4,873,235
(34,336,957)
Loss per share - basic and diluted
0.00
0.00
0.01
(0.05)
June 30, 2023
March 31,
December 31, September 30,
2023
2023
2022
2022
Exploration and evaluation expenditures
1,272,006
$
1,615,948
1,167,075
617,846
Net loss
2,259,526
2,130,147
1,906,474
1,000,382
Loss per share - basic and diluted
0.01
0.01
0.00
0.00
10
RESULTS OF OPERATIONS
Results of operations for the three months ended June 30, 2024 (“Q4 2024”) compared to the three
months ended June 30, 2023 (“Q4 2023”) and year ended June 30, 2024 (“YTD 2024”) compared to the
year ended June 30, 2023 (“YTD 2023”) are as follows:
Exploration and evaluation expenditures
Exploration and evaluation expenditures remained consistent in Q4 2024 compared to Q4 2023. The
increase in exploration and evaluation expenditures of $5.0 million in YTD 2024 compared to YTD 2023
is mainly attributable to the increase in excavation and site works of $7.2 million due to the early site
work conducted at Copperwood started in the fall of 2023. The work was required to maintain the
Copperwood permits in good standing. This was offset by a decrease in evaluation studies by $2.2 million
since the studies were completed in the prior year.
Management and administration
Management and administration expenditures decreased by $0.3 million in Q4 2024 compared to Q4
2023 primarily due to a decrease in professional fees. The increase of $0.8 million in YTD 2024 compared
to YTD 2023 is primarily due to termination payments incurred with change in management and
increased professional fees associated with increased corporate activities.
Gain on sale of controlling interest in White Pine
In the quarter ended September 30, 2023, the Company completed the sale of a controlling interest in
White Pine Copper, LLC to its partner Kinterra, resulting in a gain of $39,521,720 for the period.
June 30,
June 30,
2024
2023
2024
2023
Exploration and evaluation
1,541,989
$
1,272,006
$
9,748,207
$
4,672,875
$
Management and administration
466,971
779,227
2,960,395
2,199,352
Depreciation and amortization
-
8,705
1,289
17,030
Share-based compensation
111,799
141,291
707,431
838,552
Gain on sale of controlling interest in White Pine
-
-
(39,521,720)
-
Accretion on environmental liability
-
(660)
-
4,142
Share of loss in associates
337,401
-
1,902,293
-
Finance income
(347,626)
(85,836)
(904,573)
(241,259)
Interest expense on Kinterra loan
65,547
-
65,547
-
Gain on settlement of accounts payable
-
(492,538)
-
(492,538)
Loss (gain) on foreign exchange
246,520
144,793
(129,885)
(194,167)
Income tax expense
973,896
-
973,896
-
Net (loss) income for the period
(3,396,497)
$
(1,766,988)
$
24,197,120
$
(6,803,987)
$
Three months ended
Years ended
11
Share of loss in associates
The Company accounts for its 34% interest in the White Pine North Project using the equity method. The
amount recognized as ‘share of loss in associate’ for the period represents the Company’s share of White
Pine’s loss incurred during Q4 2024 and YTD 2024.
Finance income
Finance income represents interest earned on the Company’s cash and cash equivalents. The increase
in finance income during Q4 2024 and YTD 2024 compared to same periods last year is a result of higher
interest rate and higher cash and cash equivalent balances during the year ended June 30, 2024.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2024, the Company had working capital (total current assets less total current liabilities)
of $19,328,726 compared to $5,171,245 at June 30, 2023. The increase in working capital during the year
ended June 30, 2024, is mainly attributable to the sale of the Company’s controlling interest in the White
Pine North Project for gross proceeds of $30 million. Uses of cash during the year ended June 30, 2024
included funding the early site work at the Copperwood Project and corporate activities.
The Company will continue to fund its portion of the White Pine North Project by drawing on the
unsecured loan provided by its partner Kinterra.
The Company currently has no source of operating cash flow. Continuance as a going concern is
dependent upon the Company’s ability to obtain adequate equity or debt financing, or, alternatively,
dispose of its non-core properties on an advantageous basis, among other things. While the Company
has been successful in the past in obtaining financing for its operations, there is no assurance that it will
be able to obtain adequate financing in the future, and as a result, a material uncertainty exists that casts
significant doubt about the Company’s ability to continue as a going concern.
CAPITAL MANAGEMENT
The Company’s properties are in the exploration and development stage and, as a result, the Company
currently has no source of operating cash flows. The Company intends to raise such funds as and when
required to complete the exploration and development of its projects. The only sources of other future
funds presently available to the Company are through the sale of equity capital of the Company, the sale
by the Company of an interest in any of its properties in whole or in part or shareholder loans. The ability
of the Company to arrange such financing in the future will depend in part upon the prevailing capital
market conditions as well as on its business performance. There can be no assurance that the Company
will be successful in its efforts to arrange additional financing on terms satisfactory to the Company in
reasonable terms. There were no changes in the Company’s approach to capital management during the
year ended June 30, 2024. The Company is not subject to any externally imposed capital requirements
as at June 30, 2024.
12
OFF BALANCE-SHEET ARRANGEMENTS
During the period ending June 30, 2024, the Company was not a party to any off-balance sheet
arrangements that have, or are reasonably likely to have, a current or future effect on the results of
operations, financial condition, capital expenditures, liquidity, or capital resources of the Company.
RELATED PARTY TRANSACTIONS
Key management personnel are people responsible for planning, directing, and controlling the activities
of the Company, including directors and officers. For the years ended June 30, 2024 and 2023, key
management compensation comprises:
PROPOSED TRANSACTIONS
There are no proposed transactions that have not been disclosed herein.
OUTSTANDING SHARE DATA
As of the date of this MD&A, the Company has 736,363,619 common shares, 47,625,002 stock options,
1,812,500 Deferred Share Units and 2,244,242 Restricted Share Units outstanding.
BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The Company’s consolidated financial statements have been prepared in accordance with IFRS as issued
by the International Accounting Standards Board. The accounting policies, methods of computation and
presentation applied in the Company’s consolidated financial statements are consistent with those of
the previous year. The significant accounting policies of Highland are presented in Note 4 of the June 30,
2024 consolidated financial statements filed on SEDAR.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Company’s consolidated financial statements requires management to make
certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities
at the date of the consolidated financial statements and reported amounts of expenses during the
reporting period. These estimates, judgments and assumptions are based on historical experience,
current and future economic conditions and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. Significant assumptions about the future and
other sources of estimation uncertainty that management has made at the financial position reporting
date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the
event that actual results differ from the assumptions made, include title to mineral property interests,
exploration and evaluation assets, fair value of liabilities, going concern and environmental liabilities.
Details of the significant accounting judgments and estimates are presented in Note 4 of the June 30,
2024
2023
2024
2023
Salaries, fees, bonuses, and termination payments
175,349
$
181,288
$
1,426,330
$
705,353
$
Share-based compensation
111,799
141,291
707,431
838,552
287,148
$
322,579
$
2,133,761
$
1,543,905
$
Three months ended
Years ended June 30
13
2024 consolidated financial statements filed on SEDAR.
FINANCIAL RISK FACTORS
The Company thoroughly examines the various financial risks to which it is exposed and assesses the
impact and likelihood of those risks. These risks include liquidity risk, credit risk, interest rate risk and
currency risk. Where material, these risks are reviewed by the Board of Directors.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company has no history of earnings and has limited financial resources. The Company’s ability
to continue as a going concern is dependent on management’s ability to raise the funds required for its
continued operations.
The following table summarizes the contractual maturities of the Company’s financial liabilities at June
30, 2024:
Credit risk
Credit risk is the risk that the Company will incur losses due to the non-payment of contractual
obligations by third parties. The Company is exposed to credit risk with respect to cash which is mainly
held in accounts with a major Canadian-based chartered bank.
Interest Rate Risk
The Company’s interest rate risk relates to cash and the promissory note. As at June 2024, the Company
has $2,383,329 of loans due to Kinterra.
Currency Risk
In the normal course of operations, the Company is exposed to currency risk on transactions that are
denominated in a currency other than the respective functional currencies of each of the entities within
the consolidated group. The currency in which these transactions are denominated are primarily the
June 30, 2024
Carrying
amount
Settlement
amount
Within one
year
Two
years
Over two
years
$
$
$
$
$
1,373,964 1,373,964 1,373,964 - -
Loans and borrowings
2,383,329 2,866,570 - - 2,866,570
3,757,293 4,240,534 1,373,964 - 2,866,570
June 30, 2023
Carrying
amount
Settlement
amount
Within one
year
Two
years
Over two
years
$
$
$
$
$
1,997,597 1,997,597 1,997,597 - -
1,997,597 1,997,597 1,997,597 - -
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
14
Canadian and the US dollars. The consolidated entity does not presently enter into hedging
arrangements to hedge its currency risk. The Board of Directors considers this policy appropriate, taking
into account the consolidated entity’s size, current stage of operations, financial position and the Board’s
approach to risk management.
At June 30, 2024, financial assets and liabilities denominated in a foreign currency consisted of cash of
$417,243 as well as accounts payable and accrued liabilities of $112,104. The impact on profit or loss of
a 10% increase or decrease in the US dollar against the Canadian dollar would be approximately $40,000.
OTHER RISKS AND UNCERTAINTIES
The Company is subject to a number of significant risks and uncertainties due to the nature of its business
which includes the acquisition, exploration and development of mineral projects. Failure to successfully
address such risks and uncertainties could have a significant negative impact on the Company’s overall
operations and financial condition and could materially affect the value of the Company’s assets and
impact its future operating results and business plans. Therefore, an investment in the securities of
Highland involves significant risks and should be considered speculative. The risks and uncertainties
described below are not necessarily the only ones that the Company could be facing. Additional risks or
uncertainties not presently known to the Company or that the Company currently considers immaterial
may also impair its business operations. The Company cannot give assurance that it will successfully
address these risks. Readers should carefully consider these risks and uncertainties.
Requirement for additional capital
The ability of the Company to achieve its plans and objectives is dependent on its ability to raise sufficient
amount of capital through equity financings, debt financings, joint venture, sale of projects and / or other
means. The Company will need substantial amount of funds to develop its Copperwood Project and to
place it into commercial production. If adequate financing is not available, the construction of a mine
and the commencement of production may be delayed indefinitely. The Company will also require
substantial funds to maintain its interest in White Pine North through its development and ultimately to
production, assuming that project is determined to be feasible. If the Company is unable to fund its
proportionate share of exploration and development expenditures on White Pine North, its interest in
the White Pine North project will be diluted.
The Company’s ability to raise additional funds will depend on a number of factors including the market’s
perception of its mineral projects, the results of the studies and work programs on the projects, the price
of and demand for copper and other metals, the state of the capital market to finance mineral resource
projects and global market conditions in general, social acceptability for the development of the projects
and regulatory approvals. No assurance can be given that additional capital will be available at all or
available on terms acceptable to the Company.
Other Company Specific Risks
•
The mineral resources and/or mineral reserves of the Copperwood and White Pine North
deposits are estimates and depend upon geological interpretation and statistical inferences
drawn from drilling and sampling analysis, which may prove to be inaccurate. Actual recoveries
of copper and silver from a deposit may be lower than those indicated by test work. Any material
change in the quantity of mineralization, grade or stripping ratio may affect the economic
15
viability of those projects. In addition, there can be no assurance that metal recoveries in small-
scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during
production. Mineral resources that are not mineral reserves do not have demonstrated
economic viability.
•
The market price of Highland’s common shares, the Copperwood resource and reserve
estimates, the assumptions used in the Copperwood feasibility study and in the White Pine PEA,
and Highland’s ability to complete a financing may be significantly and adversely affected by
various factors including a decline in the price of copper. Copper prices are volatile and can be
affected by many factors beyond the control of Highland, including, amongst others: changes in
supply and demand, speculative activities, international economic conditions, political conflicts
and wars. The price of copper has fluctuated widely in the past.
•
Putting a mining project into production requires substantial planning and expenditures and,
while members of the Company’s management have mine construction and operating
experience, as a corporation, the Company does not have any experience in taking a mining
project to production; as a result, the Company’s future success is more uncertain than if it had
a proven history of mine construction and operation.
•
In Michigan, mineral rights are property rights that can be sold, transferred or leased. The
Company has taken steps to verify title with respect to its most material mineral properties.
Although the Company believes that titles are in good standing there is no guarantee that title
to such mineral properties will not be challenged or impugned.
•
The Company’s operations are subject to various laws and regulations governing the protection
of the environment, exploration, development, production, occupational health, waste disposal,
safety and other matters. Environmental legislation provides for restrictions and prohibitions on
spills, releases or emissions of various substances produced in association with certain mining
operations which would result in environmental pollution. A breach of such legislation by the
Company may result in the imposition of fines and penalties which can be substantial.
•
The Company is subject to environmental risks and most particularly as it relates to the White
Pine North Project which is subject to a consent decree; as part of the acquisition of the White
Pine North Project, the Company has assumed environmental responsibilities and risks related
to the former White Pine mine site which Highland may be unable or choose not to insure.
•
Necessary permits to operate may not be granted or may be granted later than anticipated.
•
The executive officers, directors, and several shareholders of Highland (including Orion, Condire
and Greenstone) and their affiliated entities together beneficially own a majority of Highland’s
outstanding common shares. As a result, these shareholders, if they act together or in a block,
could have significant influence over most matters that require shareholder approval, including
the election of directors and approval of significant corporate transactions, even if other
shareholders oppose them. This concentration of ownership might also have the effect of
delaying or preventing a change of control of Highland that other shareholders may view as
beneficial.
16
•
It may be difficult for the Company to find and hire qualified people in the mining industry
currently residing in Michigan or to obtain all of the necessary services or expertise to conduct
operations in Michigan. The Company may need to obtain the services of qualified people
located outside of the USA which would require work permits and compliance with applicable
laws and could result in delays and higher costs.
•
The Company faces substantial competition within the mining industry from other mineral
companies with much greater financial and technical resources.
•
Future issuance of common shares into the public market may result in dilution to the existing
shareholders.
•
Certain directors and senior officers of the Company also serve as officers and/or directors of
other mineral resource companies, which may give rise to conflicts.
Industry Risks
•
Mineral exploration and development is a high risk, speculative business. Few properties that
are explored are ultimately developed into producing mines.
•
Development projects are uncertain and actual capital and operating costs and economic returns
may differ significantly from those estimated for a project prior to production. The economic
feasibility of development projects is based on many factors such as: estimation of mineral
reserves, anticipated metallurgical recoveries, environmental considerations and permitting,
future metals prices, and anticipated capital and operating costs of these projects. Any of the
following events, among others, could affect the profitability or economic feasibility of a project:
unanticipated changes in grade and tonnes of ore to be mined and processed, unanticipated
adverse geological conditions, unanticipated metallurgical recovery problems, incorrect data on
which engineering assumptions are made, availability and costs of labour, costs of processing
and refining facilities, availability of economic sources of power, permitting of third party power
sources if needed, adequacy of water supply, availability of surface on which to locate processing
and refining facilities, adequate access to the site, unanticipated transportation costs,
government regulations (including regulations with respect to royalties, duties, taxes,
permitting, restrictions on production, quotas on exportation of minerals, and the environment),
fluctuations in metals prices, and accidents, labour actions and force-majeure events. It is not
unusual in new mining operations to experience unexpected problems during the start-up phase,
and delays can often occur at the start of production. It is likely that actual results for a project
will differ from estimates and assumptions, and these differences may be material. In addition,
experience from actual mining or processing operations may identify new or unexpected
conditions that could reduce production below, or increase capital or operating costs above,
estimates.
•
Environmental legislation is evolving in the direction of stricter standards and enforcement,
higher fines and penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and their directors,
officers and employees. Compliance with changing environmental laws and regulations may
require significant capital outlays, including obtaining additional permits, and may cause
material changes or delays in, or the cancellation of, operations.
17
•
Current economic uncertainties globally have created market volatility and risk aversion among
investors, limiting capital raising options in the mining sector.
•
Social and environmental groups may be opposed to the development of mining projects.
CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION
This MD&A contains “forward-looking information” within the meaning of Canadian securities legislation
and “forward-looking statements” within the meaning of the United States Private Securities Litigation
Reform Act of 1995 (collectively, “forward-looking statements”). These forward-looking statements are
made as of the date of this MD&A and the Company does not intend, and does not assume any
obligation, to update these forward-looking statements, except as required under applicable securities
legislation. Forward-looking statements relate to future events or future performance and reflect
expectations or beliefs of the Company’s management regarding future events. Forward-looking
statements include but are not limited to statements with respect to: (i) funding requirements to explore
and develop the Copperwood and White Pine North projects; (ii) the estimation of mineral resources and
mineral reserves at the Company’s mineral projects; (iii) the timing and cost of the construction of the
Copperwood Project; (iv) the timing and amount of estimated future production, costs of production and
capital expenditures for both the Copperwood and White Pine North projects; (v) the Company’s ongoing
and proposed activities at Copperwood and the White Pine project’s ongoing and anticipated activities
at White Pine North ; (vi) the projected employment for both construction and operation of the
Copperwood Project; (vii) the anticipated economic benefits to the local and state economies resulting
from the construction and operation of the Copperwood Project; (viii) the timing of completion of,
anticipated size of, and expected results of, the summer drill program for the White Pine North Project;
(xix) the anticipated approval of the grant from the Michigan Strategic Fund (“MSF”) Board; and (x) the
Company’s other plans and objectives.
In certain cases, forward-looking statements can be identified by the use of words such as “plans”,
“expects”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes” or
variations of such words and phrases, or statements that certain actions, events or results “may”,
“could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or
comparable terminology. In this document certain forward-looking statements are identified by words
including “anticipation”, “plan” and “expected”.
By their very nature, forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance, or achievements to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking
statements. Such factors include, but are not limited to: (i) the Company’s ability to raise capital
necessary to maintain and to advance its mineral projects; (ii) risks related to the volatility in future prices
of copper and other metals which may have a negative impact on the Company’s share price or ability
to raise funds capital; (iii) the accuracy of mineral resource and mineral reserve estimates, and any
inaccuracy of the assumptions used in preparing the Copperwood Feasibility Study, the White Pine North
PEA, and the PSC report; (iv) increased operating and capital costs which could negatively impact not
only the Company’s operations, but also the results of the Copperwood Feasibility Study and the White
Pine North PEA; (v) the impact of inflation on project costs and budgets for 2025 and beyond; (vi) changes
to governmental regulations, compliance with governmental regulations and environmental laws and
regulations; (vii) reliance on approvals and permits from governmental authorities and the ability of the
18
Company to maintain state permits for Copperwood, or for the White Pine project to obtain necessary
permits at White Pine; (viii) challenges to title to the Company’s mineral properties; (xix) the ability of
the Company to maintain its social license to operate; (x) dependence on key management personnel;
(xi) competition in the mining industry; (xii)the inability of the Company to insure against all risks; and
(xii) inherent risks involved in the exploration, development and production of minerals, and the
presence of unknown geological and other physical and environmental hazards at the Company’s
projects; as well as those factors detailed from time to time in the Company’s interim and annual
financial statements and MD&A, the Copperwood Feasibility Study and the White Pine North PEA, and
the Company’s annual information form (if applicable) all of which are, or will be, filed and available for
review under the Company’s profile on SEDAR+ at www.sedarplus.ca. Although the Company has
attempted to identify important factors that could cause actual results, performance, or achievements
to differ materially from those described in these forward-looking statements, there may be other
factors that cause results, performance, or achievements not to be as anticipated, estimated or intended.
There can be no assurance that these forward-looking statements will prove to be accurate, as actual
results, performance or achievements could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on these forward-looking statements.
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING RESOURCE ESTIMATES
The resource estimates and other technical disclosure in this MD&A were prepared in accordance with
National Instrument 43-101 adopted by the Canadian Securities Administrators (“NI 43-101”) and the
2014 CIM Standards. NI 43-101 is a rule developed by the Canadian Securities Administrators that
establishes standards for all public disclosure an issuer makes of scientific and technical information
concerning mineral projects. Highland is not required to provide disclosure on its mineral properties in
the form required by the United States Securities and Exchange Commission (the “SEC”) as Highland is
presently a “foreign issuer” under the U.S. Exchange Act. Accordingly, United States investors are
cautioned that the disclosure Highland provides on its mineral properties in this MD&A and under its
continuous disclosure obligations in Canada may be different from the disclosure that Highland would
otherwise be required to provide as a U.S. domestic issuer.
United States investors are cautioned that while terms used under the SEC rules are “substantially
similar” to CIM Definitions, there are differences in the definitions.
There is no assurance any resources and reserves that Highland reports as “measured mineral
resources”, “indicated mineral resources” and “inferred mineral resources” and “proven mineral
reserves” and “probable mineral reserves” under NI 43-101 would be the same had Highland prepared
these estimates under the standards adopted by the SEC.
United States investors are also cautioned that while the SEC now recognizes “measured mineral
resources”, “indicated mineral resources” and “inferred mineral resources”, investors should not assume
that any part or all the mineral deposits in these categories will ever be converted into a higher category
of mineral resources or into mineral reserves. Mineralization described by these terms has a great
amount of uncertainty as to their existence, and great uncertainty as to their economic and legal
feasibility. Investors are cautioned not to assume that any “measured mineral resources”, “indicated
mineral resources”, or “inferred mineral resources” that we report in this AIF are or will be economically
or legally mineable.
19
Further, “inferred resources” have a great amount of uncertainty as to their existence and as to whether
they can be mined legally or economically. Therefore, investors are also cautioned not to assume that all
or any part of the inferred resources exist. In accordance with Canadian rules, estimates of “inferred
mineral resources” cannot form the basis of feasibility or other economic studies, except in limited
circumstances where permitted under NI 43-101.