MURCHISON MINERALS LTD.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020
(Expressed in Canadian Dollars)
Independent Auditor’s Report
To the Shareholders of Murchison Minerals Ltd.
Opinion
We have audited the consolidated financial statements of Murchison Minerals Ltd. and its
subsidiary (the “Company”), which comprise the consolidated statements of financial position as
at December 31, 2021 and 2020, and the consolidated statements of loss and comprehensive
loss, consolidated statements of equity and consolidated statements of cash flows for the years
then ended, and notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company as at December 31, 2021 and 2020
and its consolidated financial performance and its consolidated cash flows for the years then
ended in accordance with International Financial Reporting Standards (“IFRS”).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the consolidated financial statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1 in the consolidated financial statements, which indicates that the
Company had continuing losses and is not generating positive cash flows from operations. As
stated in Note 1, these events or conditions, along with other matters as set forth in Note 1,
indicate that material uncertainties exist that cast significant doubt on the Company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
Management is responsible for the other information. The other information comprises
Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
Page 1
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we
exercise professional judgement and maintain professional skepticism throughout the audit. We
also:
•
Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risks 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.
Page 2
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
The engagement partner of the audit resulting in this independent auditor’s report is Koko
Yamamoto.
McGovern Hurley LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
March 9, 2022
Page 3
MURCHISON MINERALS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
As at December 31,
ASSETS
Current Assets
Cash
Amounts receivable and prepaid expenses (Note 6)
Total current assets
Investment (Note 7)
Property and equipment (Note 8)
Total assets
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities (Note 14)
Loan payable (Note 16)
Flow-through share premium liability (Note 15)
Total current liabilities
Loan payable (Note 16)
Total liabilities
EQUITY
Share capital (Note 10)
Reserves (Notes 11 and 12)
Deficit
Total equity
Total equity and liabilities
2021
2020
$
1,792,033 $
319,396
2,062,411
90,923
2,111,429
2,153,334
2,584
110,864
3,402
71,580
$
2,224,877 $
2,228,316
$
211,305 $
10,578
191,896
100,439
-
130,459
413,779
230,898
29,385
-
443,164
230,898
35,881,469
1,876,352
(35,976,108)
32,305,495
1,019,705
(31,327,782)
1,781,713
1,997,418
$
2,224,877 $
2,228,316
Nature and Continuance of Operations (Note 1)
Commitments and Contingencies (Notes 9 and 15)
Subsequent events (Note 17)
Approved on Behalf of the Board:
"signed"
"signed"
Jean-Charles Potvin
Director
Denis Arsenault
Director
The accompanying notes are an integral part of these consolidated financial statements
- 1 -
MURCHISON MINERALS LTD.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
For the years ended December 31,
EXPENSES
Exploration expenses (Note 9)
Professional fees
Management fees and salaries (Note 14)
Office and general
Regulatory and transfer agent
Investor relations
Share-based payments (Notes 12 and 14)
Loss before other income and expenses
Interest income
Flow-through shares premium
Unrealized loss (gain) on marketable securities (Note 7)
Loss for the year
Loss per share - basic and diluted
Weighted average number of common shares
outstanding - basic and diluted
$
2021
2020
4,099,155 $
40,122
345,217
58,274
16,511
171,318
435,905
1,781,549
41,309
215,213
63,380
10,396
127,054
301,170
5,166,502
2,540,071
(4,958)
(399,632)
818
(3,347)
(429,413)
(1,206)
$
4,762,730
$
2,106,105
$
0.04 $
0.03
115,846,480
71,316,783
The accompanying notes are an integral part of these consolidated financial statements
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MURCHISON MINERALS LTD.
CONSOLIDATED STATEMENTS OF EQUITY
(Expressed in Canadian Dollars)
Balance, December 31, 2019
Loss for the year
Issuance of common shares (net of issue costs)
Issuance of stock options
Issuance of warrants
Expiry of warrants
Balance, December 31, 2020
Balance, December 31, 2020
Loss for the year
Issuance of common shares (net of issue costs)
Issuance of stock options / share-based compensation
Expiry of stock options
Issuance of warrants
Exercise of warrants
Expiry of warrants
Balance, December 31, 2021
Reserves
Equity settled
share-based
payments
reserve
Share
Capital
Warrants
reserve
Deficit
Total
$ 29,934,685
-
2,370,810
-
-
-
$
532,660
-
-
301,170
-
-
$ 32,305,495
$
833,830
$ 32,305,495
-
3,566,424
-
-
-
9,550
-
$
833,830
-
-
435,905
(107,710)
-
-
-
$
212,475 $ (29,434,152) $
-
-
-
185,875
(212,475)
(2,106,105)
-
-
-
212,475
1,245,668
(2,106,105)
2,370,810
301,170
185,875
-
$
$
185,875 $ (31,327,782) $
1,997,418
185,875 $ (31,327,782) $
-
-
-
-
544,696
(9,550)
(6,694)
(4,762,730)
-
-
107,710
-
-
6,694
1,997,418
(4,762,730)
3,566,424
435,905
-
544,696
-
-
$ 35,881,469
$ 1,162,025
$
714,327 $ (35,976,108) $
1,781,713
The accompanying notes are an integral part of these consolidated financial statements
- 3 -
MURCHISON MINERALS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
For the years ended December 31,
CASH (USED IN) PROVIDED BY:
OPERATING ACTIVITIES
Loss for the year
Share-based payments
Flow-through shares premium
Unrealized loss (gain) on marketable securities
Amortization
Net change in non-cash working capital items:
Amounts receivable and prepaid expenses
Accounts payable and accrued liabilities
Net cash flows used by operating activities
INVESTING ACTIVITIES
Acquisition of property and equipment
Net cash flows used by investing activities
FINANCING ACTIVITIES
Issuance of common shares and warrants exercise
Issue costs
Loan repayments
Issuance of promissory note
Repayment of promissory note
Net cash flows provided by financing activities
NET CHANGE IN CASH
CASH, BEGINNING OF THE YEAR
CASH, END OF THE YEAR
SUPPLEMENTAL CASH FLOW INFORMATION
Finders’ warrants issued
Equipment purchase financed through loan
2021
2020
$ (4,762,730) $ (2,106,105)
301,170
(429,413)
(1,206)
16,163
435,905
(399,632)
818
25,852
(4,699,787)
(2,219,391)
(228,473)
110,866
73,264
64,670
(4,817,394)
(2,081,457)
(21,550)
(76,687)
(21,550)
(76,687)
4,852,394
(280,205)
(3,623)
-
-
2,960,703
(174,495)
-
200,000
(200,000)
4,590,602
2,786,208
(270,378)
2,062,411
628,064
1,434,347
$ 1,792,033
$ 2,062,411
$
41,110
43,586
$
-
-
The accompanying notes are an integral part of these consolidated financial statements
- 4 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
1.
NATURE AND CONTINUANCE OF OPERATIONS
Murchison Minerals Ltd. (the "Company" or “Murchison”) was incorporated under the Canada Business Corporations Act on
July 25, 2001. The principal business of the Company is the acquisition, exploration and evaluation of mineral property
interests. The primary office is located at 5063 North Service Road, Suite 100, Burlington, Ontario, Canada, L7L 5H6.
The consolidated financial statements were approved by the Board of Directors on March 9, 2022.
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that planned
exploration and evaluation programs will result in profitable mining operations. The continuance of the Company is dependent
upon completion of the acquisition of the exploration and evaluation properties, the discovery of economically recoverable
reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain
necessary financing to complete the development and future profitable production or, alternatively, upon disposition of such
property at a profit. Changes in future conditions could require material write downs of the carrying values of the Company's
assets.
Although the Company has taken steps to verify title to its exploration and evaluation properties, in accordance with industry
standards for the current stage of exploration of such property, these procedures do not guarantee the Company's title. Property
title may be subject to unregistered prior agreements and noncompliance with regulatory and, environmental requirements. The
Company's assets may also be subject to increases in taxes and royalties, renegotiation of contracts, currency exchange
fluctuations and restrictions and political uncertainty.
As at December 31, 2021, the Company has a cumulative deficit of $35,976,108 (December 31, 2020 - $31,327,782),
continuing losses and is not yet generating positive cash flows from operations. These factors indicate the existence of a
material uncertainty that may cast significant doubt about the Company’s ability to continue its operations as a going concern.
These consolidated financial statements were prepared on a going-concern basis in accordance with International Financial
Reporting Standards ("IFRS"). Funding for operations has been obtained primarily through private share offerings. Future
operations are dependent upon the Company's ability to finance expenditure requirements and upon the achievement of
profitable operations. Management believes it will be successful in raising the necessary funding to continue operations in the
normal course of operations; however, there is no assurance that these funds will be available on terms acceptable to the
Company or at all (See Note 17). These consolidated financial statements do not include adjustments to the amounts and
classification of assets and liabilities that might be necessary should the Company be unable to continue operations. Such
adjustments could be material.
2.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These consolidated financial statements, including comparatives, have been prepared in accordance with IFRS.
Basis of presentation
These consolidated financial statements have been prepared on a historical cost basis except for investment which has been
presented at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of
accounting except for cash flow information.
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MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation
Subsidiaries are entities over which the Company has control, where control is defined to exist when the Company is exposed
to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are de-consolidated from
the date control ceases.
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. All
intercompany transactions, balances, income and expenses are eliminated upon consolidation.
The following companies have been consolidated within these consolidated financial statements:
Company
Murchison Minerals Ltd.
Flemish Gold Corp.
Exploration and evaluation properties
Registered
Principal activity
Ontario, Canada
Ontario, Canada
Parent company
Exploration company
The acquisition costs of exploration and evaluation properties are expensed the consolidated statements of loss in the period
incurred, as permitted under IFRS 6, Exploration for and Evaluation of Mineral Resources.
The acquisition costs of exploration and evaluation properties include the cash consideration and the estimated fair market
value of share-based payments issued for such property interests.
Exploration costs are expensed in the period incurred. Option payments which are solely at the Company’s discretion are
recorded as acquisition costs as they are made. Administrative expenditures are expensed in the period incurred.
Government grants
Government grants are transfers of resources to an entity by government in return for past or future compliance with certain
conditions relating to the operating activities of the entity. Government assistance is action by government designed to provide
an economic benefit that is specific to an entity or range of entities qualifying under certain criteria.
Government grants and assistance are recognized where there is a reasonable assurance that the grants and assistance will be
received, and conditions will be complied with. Government grants and assistance are recognized as an offset to the expenses
to which they relate.
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of
giving immediate financial support to the entity with no future related costs is recognized in profit or loss of the period in which
it becomes receivable.
Property and equipment
Property and equipment are carried at cost, less accumulated amortization and accumulated impairment losses.
The cost of an item of property and equipment consists of the purchase price, any costs directly attributable to bringing the
asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing
the item and restoring the site on which it is located. Repairs and maintenance costs are charged to profit or loss during the
period in which they are incurred.
- 6 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and equipment (Continued)
An asset's residual value, useful life and amortization method are reviewed, and adjusted if appropriate, on an annual basis.
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the
net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss.
Where an item of property and equipment consists of major components with different useful lives, the components are
accounted for as separate items of property and equipment. Expenditures incurred to replace a component of an item of property
and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized.
Amortization is recognized based on the cost of an item of property and equipment, less its estimated residual value, over its
estimated useful life at the following rates:
Detail
Exploration equipment
Buildings
Financial instruments
Rate
3 years
20 years
Method
Straight-line
Straight-line
Financial assets at amortized cost are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, they are measured using the effective interest method, less any impairment losses.
A financial asset is classified as fair value through profit and loss (“FVPL”) if it is classified as held for trading or is designated
as such upon initial recognition. Financial assets are designated as FVPL if the Company manages such investments and makes
purchases and sale decisions based on their fair value in accordance with the Company’s documented risk management or
investment strategy. Realized and unrealized gains and losses are reflected in the consolidated statement of loss. Transaction
costs associated with FVPL financial assets are expensed as incurred, while transaction costs associated with all other financial
assets are included in the initial carrying amount of the asset. The Company has designated its investments in marketable
securities as FVPL.
Financial liabilities at amortized cost are recognized initially at fair value net of any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest and
any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability or (where appropriate) to the net carrying amount on initial
recognition. Financial liabilities are de-recognized when the obligations are discharged, cancelled or expired.
Impairment of financial assets:
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired
when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial
assets, the estimated future cash flows of the financial assets have been negatively impacted. Evidence of impairment could
include:
- 7 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (continued)
•
•
•
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
the likelihood that the borrower will enter bankruptcy or financial re-organization.
The carrying amount of financial assets is reduced by any impairment loss directly for all financial assets with the exception of
amounts receivable, where the carrying amount is reduced through the use of a provision for expected credit losses. When an
account receivable is considered uncollectible, it is written off against the provision for expected credit losses account. Changes
in the carrying amount of the provision for expected credit losses are recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated
statement of loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not
exceed what the amortized cost would have been had the impairment not been recognized.
Financial instruments recorded at fair value:
Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value
hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
•
•
•
Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
As at December 31, 2021, the Company’s Investment on the consolidated statement of financial position was recorded at
Level 1 with a fair value of $2,584 (December 31, 2020 - $3,402).
Impairment of non-financial assets
At the end of each reporting period, 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 recoverable amount
is the higher of an asset’s fair value less cost to sell or its value in use. In addition, long-lived assets that are not amortized are
subject to a periodic impairment assessment. The Company evaluates impairment losses for potential reversals when events
or circumstances warrant such consideration.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks, on hand and short-term money market
investments with original maturities of 90 days or less which are readily convertible into a known amount of cash. The
Company’s cash and cash equivalents are invested with major financial institutions in business accounts and are available on
demand by the Company. When cash and cash equivalents include an amount to be incurred in relation to a flow-through
commitment, an amount equal to the minimum commitment is kept in a separate bank account. As at December 31, 2021 and
2020, the Company had no cash equivalents.
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MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provisions
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. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are
lower than the unavoidable cost of meeting its obligations under the contract.
The Company had no material provisions at December 31, 2021 and December 31, 2020.
Share-based payment transactions
The fair value of stock options granted to employees is recognized as an expense over the vesting period with a corresponding
increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes
(direct employee) or provides services similar to those performed by a direct employee, including directors of the Company.
The fair value 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, taking into account 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 stock options that are expected to vest.
Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had
not been modified. An additional expense is recognized for any modification which increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Unexercised expired and modified stock option values are transferred to deficit.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received
in the statement of comprehensive loss. When the value of goods or services received in exchange for the share-based payment
cannot be reliably estimated, the transaction is measured at the fair value of the equity instrument granted.
Income taxes
Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit
or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively
enacted at period end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible
for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. 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.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilized.
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MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Equity
Share capital, stock options, warrants and broker units are classified as equity. Incremental costs directly attributable to the
issuance of shares, warrants and broker units are recognized as a deduction from equity and allocated between share capital
and warrants. Expired stock options and warrants are transferred to deficit.
Flow-through shares
The Company finances some exploration expenditures through the issuance of flow-through shares. The resource expenditure
deductions for income tax purposes are renounced to investors in accordance with the appropriate income tax legislation. When
the common shares are offered, the difference (“premium”) between the amount recognized in common shares and the amount
the investors pay for the shares is recognized as a flow-through share related liability which is reversed into the consolidated
statement of loss when the eligible expenditures are incurred. The amount recognized as a flow-through share related liability
represents the difference between the quoted price of the common shares and the amount the investor pays for the flow-through
shares. The Company indemnifies the subscribers of flow-through shares for additional taxes payable by the subscribers if the
Company does not meet its expenditure requirements.
Restoration, rehabilitation and environmental obligations
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 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 asset, as soon as the obligation to incur such costs arises. Discount
rates using a pretax rate that reflects the time value of money are used to calculate the net present value. These costs are charged
against profit or loss over the economic life of the related asset, through amortization using either a unit-of-production or the
straight-line method as appropriate. The related liability is adjusted for each period for the unwinding of the discount rate and
for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the
obligation. Costs for restoration of subsequent site damage that is created on an ongoing basis during production are provided
for at their net present values and charged against profits as extraction progresses.
The Company has no material restoration, rehabilitation and environmental costs as at December 31, 2021 and December 31,
2020 as the disturbance to date is minimal.
Loss per share
The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable
to common shareholders of the Company by the weighted average number of common shares outstanding during the period.
The diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average
number of common shares outstanding for the effects of all warrants, finders’ warrants and stock options outstanding that may
add to the total number of common shares. Diluted loss per share does not include the effect of stock options, warrants and
finders’ warrants as they are anti-dilutive. See Notes 11 and 12.
Warrants
Warrants are recognized at fair value on the date of grant and are measured using the Black-Scholes option pricing model.
Unexercised expired warrants are transferred to deficit.
- 10 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires the Company’s management to make judgments,
estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and
related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amounts,
events or actions, actual results may differ from those estimates.
The areas which require management to make significant judgments, estimates and assumptions in determining carrying values
include, but are not limited to:
- Assets’ carrying values and impairment charges
In the determination of carrying values and impairment charges, management looks at the recoverable amount, being the
higher of value in use and fair value less costs to sell in the case of non-financial assets and at objective evidence, significant
or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual
assumptions require that management make a decision based on the best available information at each reporting period.
- Income and other taxes
The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining
the Company's provisions for taxes. There are many transactions and calculations for which the ultimate tax determination
is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based
on estimates of whether additional taxes will be due. The determination of the Company's income, value added, withholding
and other tax liabilities requires interpretation of complex laws and regulations. The Company's interpretation of taxation
law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related
filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.
- Share-based payments
Management determines costs for share-based payments using market-based valuation techniques. The fair value of the
market-based and performance-based non-vested share awards are determined at the date of grant using generally accepted
valuation techniques. Assumptions are made and judgment is used in applying valuation techniques. These assumptions and
judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates
and future employee stock option exercise behaviors and corporate performance. Such judgments and assumptions are
inherently uncertain. Changes in these assumptions affect the fair value estimates. The Company currently estimates the
expected volatility of its common shares based on historical volatility taking into consideration the expected life of the options
and warrants.
Contingencies
See Note 15.
New and future accounting policies
During the year ended December 31, 2021, the Company adopted a number of amendments and improvements of existing
standards. These included amendments to IFRS 9 and IFRS 16. These new standards and changes did not have any material
impact on the Company’s consolidated financial statements.
Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or
after January 1, 2022. Many are not applicable or do not have a significant impact to the Company and have been excluded.
The Company is currently assessing the impact of these standards on the consolidated financial statements.
- 11 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
New and future accounting policies (Continued)
IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS
28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that
in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold
or contributed constitute a business. The effective date of these amendments is yet to be determined, however early adoption
is permitted.
IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to
the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments
clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at
the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer
of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion
option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January
1, 2023.
IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The amendments clarify that
when assessing if a contract is onerous, the cost of fulfilling the contract includes all costs that relate directly to the contract –
i.e. a full-cost approach. Such costs include both the incremental costs of the contract (i.e. costs a company would avoid if it
did not have the contract) and an allocation of other direct costs incurred on activities required to fulfill the contract – e.g.
contract management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments are
effective for annual periods beginning on January 1, 2022.
3. CAPITAL MANAGEMENT
The Company manages its capital with the following objectives:
•
•
to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth
opportunities, and pursuit of accretive acquisitions; and
to maximize shareholder return through enhancing the share value.
The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its
objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by
issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is
reviewed by management and the Board of Directors on an ongoing basis.
The Company considers its capital to consist of equity, comprising share capital, reserves and deficit which at December 31,
2021 totalled $1,781,713 (December 31, 2020 - $1,997,418). The Company manages capital through its financial and
operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on
operating expenditures, and other investing and financing activities. The forecast is regularly updated based on its exploration
and development activities. Selected information is regularly provided to the Board of Directors of the Company. The
Company’s capital management objectives, policies and processes have remained unchanged during the years ended December
31, 2021 and 2020. The Company is not subject to any capital requirements imposed by a regulator or lending institution.
4.
FINANCIAL RISK FACTORS
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest
rate, foreign exchange rate and commodity price risk).
- 12 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
4.
FINANCIAL RISK FACTORS (Continued)
Risk management is carried out by the Company's management team under policies approved by the Board of Directors. The
Board of Directors also provides regular guidance for overall risk management. There have been no changes in the risks,
objectives, policies and procedures during the years ended December 31, 2021 and 2020.
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's credit
risk is primarily attributable to cash balances and amounts receivable. Cash is held with reputable banks, from which
management believes the risk of loss to be remote. Financial instruments included in amounts receivable consist of sales tax
receivable and refundable tax credits from government authorities in Canada. Management believes that the credit risk
concentration with respect to financial instruments included in amounts receivable is remote.
Liquidity risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when
due. As at December 31, 2021, the Company had a cash balance of $1,792,033 (December 31, 2020 - $2,062,411) to settle
accounts payable, accrued liabilities and loan payable of $251,268 (December 31, 2020 - $100,439). All of the Company's
financial liabilities generally have contractual maturities of less than 30 days and are subject to normal trade terms, except for
the loan payable as disclosed in Note 16.
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and
commodity prices.
Interest rate risk
The Company has cash balances and no interest-bearing debt other than the loan payable at a fixed interest rate. The Company's
current policy is to invest excess cash in certificates of deposit or interest bearing accounts at major Canadian chartered banks.
The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its Canadian chartered
banks. Management believes that interest rate risk is minimal as cash investments have maturities of three months or less.
Commodity price risk
Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability of
development depends upon the world market price of commodities. Commodity prices have fluctuated widely in recent years.
There is no assurance that, even as commercial quantities of base and/or precious metals may be produced in the future, a
profitable market will exist for them. A decline in the market price of commodities may also require the Company to reduce
its mineral resources, which could have a material and adverse effect on the Company’s value. As at December 31, 2021, the
Company is not a commodities producer. As a result, commodity price risk may affect the completion of future equity
transactions such as equity offerings and the exercise of stock options and warrants. This may also affect the Company's
liquidity and its ability to meet its ongoing obligations.
Sensitivity analysis
Based on management's knowledge and experience, the Company believes the following movements are “reasonably possible”
over a one-year period:
(i)
Based on cash balances earning interest at December 31, 2021, a 1% change in interest rates would result in a
corresponding interest income change of approximately $17,900 for the one-year period.
- 13 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
5.
CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets:
Amortized cost
Cash
FVPL
Investment
Financial liabilities:
Amortized cost
Accounts payable and accrued liabilities
Loan payable
December
2021
December
2020
$
1,792,033 $
2,062,411
2,584
3,402
$
211,305 $
39,963
100,439
-
As of December 31, 2021 and December 31, 2020, the fair value of all the Company's current financial instruments
approximates the carrying value, due to their short-term nature.
6.
AMOUNTS RECEIVABLE AND PREPAID EXPENSES
Sales tax receivable
Prepaid expenses and advances
7.
INVESTMENT
December
2021
December
2020
$
247,327 $
72,069
81,703
9,220
$
319,396 $
90,923
The Company's investment is classified as fair value through profit and loss (“FVPL”) and is carried at fair value. The balance
is comprised of the following:
Number
of shares
December
2021
December
2020
First Mining Gold Corp.
8,612
$
2,584 $
3,402
The Company holds 8,612 (2020 – 8,612) common shares of First Mining Gold Corp. The unrealized loss of $818 for the
year ended December 31, 2021 (December 31, 2020 – unrealized gain of $1,206) was recognized on the consolidated statement
of loss.
8.
PROPERTY AND EQUIPMENT
Year ended December 31, 2020
Opening net book amount
Additions
Amortization for the period
Closing net book amount
Buildings
Exploration
equipment
Total
$
-
48,866
(2,151)
$
11,056 $
27,821
(14,012)
11,056
76,687
(16,163)
$
46,715
$
24,865 $
71,580
- 14 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
At December 31, 2020
Cost
Accumulated amortization
Net book amount
Year ended December 31, 2021
Opening net book amount
Additions
Amortization for the period
Closing net book amount
At December 31, 2021
Cost
Accumulated amortization
Net book amount
$
48,866
(2,151)
$
42,037 $
(17,172)
90,903
(19,323)
$
46,715
$
24,865 $
71,580
$
46,715 $
-
(2,440)
24,865 $
65,136
(23,412)
71,580
65,136
(25,852)
$
44,275 $
66,589 $
110,864
$
48,866
(4,591)
$ 107,173 $ 156,039
(40,584)
(45,175)
$
44,275
$
66,589 $ 110,864
Exploration equipment with a net book value of $33,533 as at December 31, 2021 (2020 - $nil) is used as security for the
loan arrangement described in Note 16.
9.
EXPLORATION AND EVALUATION PROPERTIES
Brabant Lake Property – Saskatchewan
As at December 31, 2021, the Company holds a 100% interest in certain claims forming the Brabant Lake property in
Saskatchewan.
HPM Property - Quebec
As at December 31, 2021, the Company holds a 100% interest in certain claims forming the HPM property in Quebec.
Barraute-Landrienne Property - Quebec
On April 28, 2021, the Company entered into an agreement with Gestion Aline Leclerc Inc. (“GAL”) granting Murchison an
option to earn 100% in 75 mineral claims, by making payments totaling $500,000 and property expenditures of $1.0 million
over a 6-year period. The first payment of $20,000 is due on April 28, 2022. GAL will retain a royalty of 1% of net smelter
returns (NSR) on future production. The 1% NSR can be acquired anytime by the Company for $1.0 million.
- 15 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
9.
EXPLORATION AND EVALUATION PROPERTIES (Continued)
The following table details the payments and exploration commitments on an annual basis.
Timeline
on or before April 28, 2022
Cash Payments or Number of Consideration Shares
$20,000 cash
Expenditures
$200,000 (1)
1.
2.
on or before April 28, 2023
3.
on or before April 28, 2024
4.
5.
6.
on or before April 28, 2025
on or before April 28, 2026
on or before April 28, 2027
TOTAL
(1) See Note 17.
$20,000 cash
$30,000 cash
$30,000 cash
$200,000 ($400,000
cumulative)
$200,000 ($600,000
cumulative)
$200,000 ($800,000
cumulative)
$200,000 or equivalent in common shares at the 20-day VWAP
Price, or a combination of both, at the option of Murchison
$200,000 ($1,000,000
cumulative)
$200,000 or equivalent in common shares at the 20-day VWAP
Price, or a combination of both at the option of Murchison
$100,000 cash and $400,000 or equivalent in common shares at the
20-day VWAP Price, or a combination of both at the option of
Murchison
Nil
$1,000,000
The following table sets out the exploration expenses for the last two years:
Brabant Lake
Amortization
Drilling
General Administrative
Geology
Geophysics
Metallurgy
Acquisition and Staking
Total Brabant Lake
HPM
Drilling
Geology
Geophysics
Acquisition and Staking
Total HPM
Barraute-Landrienne
Geology
Geophysics
Acquisition and Staking
Total Barraute-Landrienne
Total exploration expenses
December 31,
2021
December 31,
2020
$
$
$
$
$
24,546
1,531,547
5,084
96,283
71,277
66,451
300
1,795,488
1,619,833
209,622
254,453
80,166
2,164,074
39,663
97,430
2,500
139,593
4,099,155
$
$
$
$
$
16,163
868,116
2,000
292,709
371,275
-
4,421
1,554,684
-
86,425
135,008
5,432
226,865
-
-
-
-
1,781,549
- 16 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
9.
EXPLORATION AND EVALUATION PROPERTIES (Continued)
Government Assistance
The Saskatchewan Targeted Mineral Exploration Incentive (“TMEI”) supports the diversification of Saskatchewan's mineral
sector by encouraging exploration for base metals, precious metals, and diamonds as well as other components such as airborne
geophysical data and complementary ground-based geoscience investigations.
The TMEI provides up to $50,000 financial assistance in the form of a grant to eligible exploration companies that undertake
exploration drilling for base metals, precious metals, or diamonds.
In 2021 and 2020, the Company received $50,000 each year under the TMEI in relation to the drilling completed at the Brabant
Lake project in Saskatchewan. These amounts have been recorded as a reduction of the Brabant Lake exploration drilling
expenses on the statement of loss for the years ended December 31, 2021 and 2020.
10.
SHARE CAPITAL
(a) Authorized Share Capital
The Company’s authorized share capital consists of an unlimited number of common shares.
(b)
Issued
Balance - December 31, 2019
Issuance of common shares (ii)
Issuance of flow-through shares (i)(ii)(iii)(iv)
Flow-through premium (i)(ii)
Warrants (ii)
Issue costs (i)(ii)
Balance – December 31, 2020
Balance - December 31, 2020
Issuance of common shares (v)(vi)
Issuance of flow-through shares (vi)
Exercise of warrants
Flow-through premium (vi)
Warrants (v)(vi)
Issue costs (v)(vi)
Balance – December 31, 2021
Number
64,688,449
6,614,600
27,633,128
-
-
-
98,936,177
Number
98,936,177
23,500,000
30,737,571
436,037
-
-
-
153,609,785
$
$
$
$
Amount
29,934,685
429,949
2,530,754
(229,523)
(185,875)
(174,495)
32,305,495
Amount
32,305,495
1,880,000
2,920,069
61,874
(461,069)
(544,697)
(280,203)
35,881,469
(i) On June 24, 2020, the Company completed a non-brokered flow-through private placement and issued 2,285,714 flow-
through common shares priced at $0.0875 per share for gross proceeds of $200,000 of which, $17,143 was allocated to the
flow-through premium. Finders’ fees of $12,000 were also paid.
- 17 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
10.
SHARE CAPITAL (Continued)
(ii) On July 23 and August 13, 2020, the Company completed two tranches of a non-brokered private placement for gross
proceeds of $841,949. The Company issued 6,614,600 common share units at a price of $0.065 per unit and issued 5,150,000
flow-through units at a price of $0.08 per FT unit. Each common share unit consisted of one common share of the Company
and one full common share purchase warrant. Each warrant entitled the holder to acquire one additional common share for a
period of eighteen months at an exercise price of $0.12 per warrant. Each FT unit consisted of one flow-through common
share and one-half non flow-through common share purchase warrant with each full warrant being exercisable under the same
terms. Finders’ fees of $29,910 were paid in relation to the private placement and $128,170 was allocated to the flow-through
premium.
The fair value of the warrants was estimated at $182,760 using the Black-Scholes option model pricing with the following
assumptions: expected dividend yield of 0%, expected volatility of 147% based on historical trading of the Company’s shares,
risk-free interest rate of 0.26%, expected life of 1.5 years and share price of $0.045.
An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 375,000 flow-through units for gross
proceeds of $290,000. See Note 14.
(iii) On December 9, 2020, the Company completed a non-brokered flow-through private placement and issued 4,210,525 flow-
through common shares priced at $0.095 per share for gross proceeds of $400,000 of which, $84,210 was allocated to the flow-
through premium. Finders’ fees of $24,000 were paid.
(iv) On December 29 and 30, 2020, the Company completed a non-brokered flow-through private placement in tranches and
issued 15,986,889 flow-through common shares priced at $0.095 per share for gross proceeds of $1,518,754. Finder’s fees
totalling $76,402 were paid and an aggregate of 534,233 finders’ warrants were issued. Each finder’s warrant entitled the holder
to acquire one common share of the Company at a price of $0.12 per share until December 31, 2021. A director of the
Company participated in the private placement for a total of $427,500. See Note 14.
The fair value of the finders’ warrants was estimated at $12,855 using the Black-Scholes option model pricing with the
following assumptions: expected dividend yield of 0%, expected volatility of 85%, risk-free interest rate of 0.20%, expected
life of 1 year and share price of $0.10.
(v) On March 5, 2021, the Company completed a non-brokered private placement and issued 10,000,000 common share units
at a price of $0.08 per unit for gross proceeds of $800,000. Each unit consisted of one common share of the Company and one-
half common share purchase warrant. Each full warrant entitled the holder to acquire one additional common share until
September 5, 2022 at an exercise price of $0.12 per common share. All securities issued pursuant to the private placement were
subject to a four month hold period from the date of issue.
The fair value of the warrants was estimated at $120,670 using the Black-Scholes option model pricing with the following
assumptions: expected dividend yield of 0%, expected volatility of 109%, risk-free interest rate of 0.29%, and expected life of
1.5 years. Issue costs of $6,313 were allocated to the warrants.
Finder’s fees totaling $18,000 were paid under the private placement. A director and officers of the Company acquired an
aggregate of 4,150,000 units in the private placement for a total of $332,000. See Note 14
- 18 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
10.
SHARE CAPITAL (Continued)
(vi) On October 21, 2021, the Company completed a $4,000,069 private placement by issuing issued 13,500,000 common share
units at a price of $0.08 per unit and 30,737,571 flow-through units at a price of $0.095 per flow-through unit. Each common
share unit consisted of one common share of the Company and one-half common share purchase warrant. Each full warrant
entitled the holder to acquire one additional common share for a period of twelve months at an exercise price of $0.12 per
warrant. Each FT unit consisted of one flow-through common share and one-half non flow-through common share purchase
warrant with each full warrant being exercisable under the same terms. Finders’ fees of $198,005 were paid in relation to the
private placement and 2,178,997 finder’s warrants valued at $41,110 were issued under the same terms as the warrants issued
as part of the units. Also, $461,069 was allocated to the flow-through premium.
The fair value of the warrants issued as part of the common share units and flow-through units was estimated at $538,010 using
the Black-Scholes option model pricing with the following assumptions: expected dividend yield of 0%, expected volatility of
109% based on historical trading of the Company’s shares, risk-free interest rate of 0.77%, expected life of 1 year and share
price of $0.071.
An officer and a director of the Company acquired, in aggregate, 10,000,000 units and 4,863,100 flow-through units for total
gross proceeds of $1,261,995. See Note 14.
11. WARRANTS AND FINDERS’ WARRANTS
The following summarizes the warrants and finders’ warrants activity for the years ended December 31, 2021 and 2020:
Balance - December 31, 2019
Expired
Issued
Balance – December 31, 2020
Balance - December 31, 2020
Issued
Exercised
Expired
Balance – December 30, 2021
Number of
Warrants
Grant Date Weighted Average
Fair Value
Exercise Price
16,264,023
(16,264,023)
9,723,833
9,723,833
$
$
212,475
(212,475)
185,875
185,875
$
$
0.10
0.10
0.12
0.12
Number of
Warrants
Grant Date Weighted Average
Fair Value
Exercise Price
$
9,723,833
29,297,785
(436,037)
(278,196)
38,307,385
$
185,875
544,696
(9,550)
(6,694)
714,327
$
$
0.12
0.12
0.12
0.12
0.12
As at December 31, 2021, the Company had warrants and finders’ warrants outstanding as follows:
Date of Grant
July 23, 2020
August 13, 2020
March 5, 2021
October 21, 2022
Exercise Grant Date
Number of
Warrants
Price
($)
Fair Value
($)
8,372,100
637,500
5,000,000
24,297,785
38,307,385
0.12
0.12
0.12
0.12
157,622
12,008
114,357
430,340
714,327
- 19 -
Expiry Date
January 23, 2022
February 13, 2022
September 5, 2022
October 21, 2022
Remaining
Contractual Life
(years)
0.07
0.12
0.68
0.81
0.62
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
12.
STOCK OPTIONS
The Company maintains a stock option plan whereby certain key employees, officers, directors and consultants may be granted
stock options for common shares of the Company. The maximum number of common shares that is issuable under the plan
was fixed at 10% of the number of common shares issued and outstanding (a maximum of 5% of the number of common shares
issued and outstanding may be held by any one person). Options expire after a maximum period of five years following the
date of grant. Vesting provisions are determined at the time of each grant.
The following summarizes the stock option activity for the years ended December 31, 2021 and 2020:
Balance - December 31, 2019
Granted (i) (ii)
Balance – December 31, 2020
12.
STOCK OPTIONS (Continued)
Balance - December 31, 2020
Granted (iii)(iv)(v)(vi)(vii)
Expired
Balance – December 31, 2021
Number of
Stock Options
5,155,000
4,100,000
9,255,000
Weighted Average
$
Exercise Price
0.12
0.10
0.11
Number of
Stock Options
9,255,000
5,525,000
(500,000)
14,280,000
Weighted Average
Exercise Price
0.11
0.12
0.25
0.11
$
$
(i) On July 20, 2020, the Company granted 400,000 stock options exercisable at $0.10 for 5 years to an investor relations
consultant of the Company. The grant date fair value of $23,200 was estimated using the Black Scholes valuation model with
the following weighted average assumptions: risk free interest rate – 0.34%, expected volatility – 116%, expected dividend
yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options are vesting over 1 year with 25% every 3
months. The share-based compensation expense is recognized based on the vesting periods and $16,270 was recorded on the
consolidated statement of loss for the year ended December 31, 2020.
(ii) On December 31, 2020, the Company granted 3,700,000 stock options exercisable at $0.10 for 5 years to directors and
officers of the Company. The options grant date fair value of $284,900 was estimated using the Black Scholes valuation model
with the following weighted average assumptions: risk free interest rate – 0.39%, expected volatility – 116%, expected dividend
yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $284,900 fair
value was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31,
2020.
(iii) On April 14, 2021, the Company granted 200,000 stock options exercisable at $0.095 for 5 years to an officer of the
Company. The grant date fair value of these options of $9,800 was estimated using the Black Scholes valuation model with the
following weighted average assumptions: risk free interest rate – 0.95%, expected volatility – 113%, expected dividend yield
– 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $9,800 fair value
was recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021.
(iv) On May 25, 2021, the Company granted 500,000 stock options exercisable at $0.095 for 5 years to a director, an officer, a
consultant and employees of the Company. The grant date fair value of these options of $26,000 was estimated using the Black
Scholes valuation model with the following weighted average assumptions: risk free interest rate – 0.86%, expected volatility
– 109%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested
immediately and the $26,000 fair value was recorded as share-based payment expense on the consolidated statement of loss
for the year ended December 31, 2021.
- 20 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
12.
STOCK OPTIONS (Continued)
(v) On July 2, 2021, the Company granted 200,000 stock options exercisable at $0.095 for 5 years to an advisor of the Company.
The grant date fair value of these options of $10,800 was estimated using the Black Scholes valuation model with the following
weighted average assumptions: risk free interest rate – 0.96%, expected volatility – 101%, expected dividend yield – 0%,
expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately and the $10,800 fair value was
recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021.
(vi) On October 11, 2021, the Company granted 1,000,000 stock options exercisable at $0.08 for 5 years to an officer of the
Company. The grant date fair value of these options of $59,000 was estimated using the Black Scholes valuation model with
the following weighted average assumptions: risk free interest rate – 1.20%, expected volatility – 98%, expected dividend yield
– 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options vested immediately for 700,000 options and
300,000 vesting on April 11,2022. The fair value of $50,150 of the vested options was recorded as share-based payment expense
on the consolidated statement of loss for the year ended December 31, 2021.
(vii) On December 20, 2021, the Company granted 3,625,000 stock options exercisable at $0.13 for 5 years to directors, officers,
consultants and employees of the Company. The grant date fair value of these options of $351,625 was estimated using the
Black Scholes valuation model with the following weighted average assumptions: risk free interest rate – 1.22%, expected
volatility – 101%, expected dividend yield – 0%, expected forfeiture rate of – 0% and expected life – 5 years. The options
vested immediately except for 200,000 options to vest on May 1, 2022. The fair value of $332,225 of the vested options was
recorded as share-based payment expense on the consolidated statement of loss for the year ended December 31, 2021.
As at December 31, 2021, the Company had incentive stock options issued to directors, officers, employees and key consultants
of the Company outstanding as follows:
Date of Grant
January 10, 2018
March 6, 2019
December 23, 2019
July 20, 2020
December 31, 2020
April 14, 2021
May 25, 2021
July 2, 2021
October 11, 2021
December 20, 2021
Options
Outstanding(1)
Exercise
Price ($)
Grant Date
Fair Value ($)
Expiry Date
Weighted Average
Remaining
Contractual Life
(years)
710,000
645,000
3,300,000
400,000
3,700,000
200,000
500,000
200,000
1,000,000
3,625,000
14,280,000
0.19
0.095
0.085
0.10
0.095
0.095
0.095
0.095
0.08
0.13
0.11
121,410
59,340
244,200
23,200
284,900
9,800
26,000
10,800
59,000
351,625
1,190,275
January 10, 2023
March 6, 2024
December 23, 2024
July 20, 2025
December 31, 2025
April 14, 2026
May 25, 2026
July 2, 2026
October 11, 2026
December 20, 2026
1.03
2.18
2.98
3.55
4.00
4.29
4.40
4.50
4.78
4.97
3.85
(1) All options are exercisable, except for 500,000 as per (vi) and (vii) above.
- 21 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
13.
INCOME TAXES
(a) Provision for income taxes
Major items causing the Company’s income tax to differ from the combined Canadian federal and provincial statutory rate of
27% (2020 - 27%) were as follows:
Combined Canadian statutory income tax rate
Loss before income taxes
Expected income tax recovery based on the statutory rate
Adjustment to expected income tax benefit:
Permanent differences and other
Deferred tax assets not recognized
Deferred income tax provision (recovery)
(b) Deferred income tax
2021
$
27%
(4,762,730)
2020
$
27%
(2,106,105)
(1,276,000)
(564,000)
117,000
1,159,000
-
81,000
483,000
-
Deferred income tax assets have not been recognized in respect of the following deductible temporary differences:
Capital losses
Non-capital losses
Resource properties
Share issue costs - Canada
Other
2021
$
20,209,000
18,735,000
5,675,000
390,000
74,000
2020
$
20,209,000
17,530,000
5,399,000
236,000
519,000
Total
45,083,000
43,893,000
(c) As at December 31, 2021, the Company had approximately $5,675,000 (2020 - $5,399,000) of Canadian development and
exploration expenses and foreign exploration and development expenses, which, under certain circumstances, may be utilized
to reduce taxable income of future years.
(d) Tax loss carry-forwards
As at December 31, 2021, the Company had approximately $18,735,000 of non-capital losses in Canada, which may be used
to reduce taxable income in future years. These losses expire from 2025 to 2041.
- 22 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
14. RELATED PARTY TRANSACTIONS
a) Remuneration of directors and officers was as follows:
Salaries and benefits
Share-based payments
2021
2020
$ 330,940
380,250
$
215,213
284,900
$ 711,190
$
500,113
For the year ended December 31, 2021, the salaries and benefits amount above includes $144,875 (2020 - $98,250) for fees
invoiced by a corporation controlled by the CFO of the Company for his services and $138,000 (2020 - $116,963) for fees
invoiced by the Executive Chairman (former CEO until October 11, 2021) of the Company for his services as CEO and
Executive Chairman. The salaries and benefits also includes $48,065 (2020 - $nil) for fees invoiced by a corporation
controlled by the new CEO of the Company for his services as CEO. Included in accounts payable and accrued liabilities at
December 31, 2020 is $nil (2020 - $19,650) owed to corporation controlled by the CFO, $nil (2020 - $12,335) owed to the
Executive Chairman and $5,923 owed to the CEO. The amounts payable are unsecured, non-interest bearing and have no fixed
terms of repayment.
b) Promissory Note
On March 27, 2020, the Company issued a $200,000 promissory note to Vyco Limited (“Vyco”). The amount owing under
this promissory note bore interest at an annual rate of 5.0% and, in the event that the principal amount was not repaid in full by
the due date of June 30, 2020, the interest accrued at the rate of 10% per annum from the due date until payment was effected.
Vyco is a corporation controlled by a family trust. Mr. Donald K. Johnson, director of the Company, is a discretionary
beneficiary of such trust and President of Vyco. The promissory note was repaid on September 9, 2020 along with interest of
$6,493.
c) Private Placements
As part of the private placement completed on March 5, 2021, a director and officers of the Company subscribed for 4,150,000
units pursuant to this private placement for aggregate gross proceeds of $332,000. See Note 10.
As part of the private placement completed on October 21, 2021, a director and an officer of the Company acquired, in
aggregate, 10,000,000 common share units and 4,863,100 flow-through units for total gross proceeds of $1,261,995. See Note
10.
An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 375,000 flow-through units for gross
proceeds of $290,000 in the private placement closed on July 23, 2020. As part of the private placement completed on December
30, 2020, a director of the Company subscribed for 4,500,000 flow-through common shares for gross proceeds of $427,500.
See Note 10.
15. COMMITMENTS AND CONTINGENCIES
Management Contracts
The Company entered into consulting agreements for the services of its President and CEO, CFO and Executive Chairman.
Under the agreements, additional payments totalling $775,000 are be made upon the occurrence of a change of control. As a
triggering event has not taken place, the contingent payments have not been reflected in the consolidated financial statements.
The commitment upon termination of the agreements is $295,000, in aggregate. The minimum commitment due within one
year under the terms of the agreements is $296,400, in aggregate.
- 23 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
15. COMMITMENTS AND CONTINGENCIES (Continued)
Property Option Agreement
On April 28, 2021, the Company optioned certain claims forming the Barraute-Landrienne property whereby Murchison can
earn 100% in 75 mineral claims, by making payments totaling $500,000 and property expenditures of $1.0 million over a 6-
year period. See Notes 9 and 16.
Flow-Through Obligation
As at December 31, 2021, the Company has to incur $1,215,325 in qualifying exploration expenditures by December 31, 2022
to meet its flow-through commitments. At this time, management anticipates meeting that obligation and as a result, no
additional provisions are required.
The flow-through agreements require the Company to renounce certain tax deductions for Canadian exploration expenditures
incurred on the Company’s mineral properties to flow-through participants. The Company indemnified the subscribers for any
related tax amounts that become payable by the subscribers as a result of the Company not meeting its expenditure
commitments.
COVID-19
The Company’s operations could be significantly adversely affected by the effects of the global spread of the contagious
coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a pandemic by the World Health
Organization in March 2020. The Company has followed the instructions and advice of Federal and Provincial health
authorities, as well as industry-wide best practice guidelines, and has limited travel and field activities to help control the spread
of COVID-19 and protect local communities. Since March 2020, the impacts the COVID-19 pandemic on its operations were
minimal. The Company cannot predict other pandemic uncertainties, including the duration of the pandemic, the ultimate
severity of the disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the impact
on schedules and timelines for planned operations or exploration programs. In addition, this widespread health crisis and related
business lockdowns have adversely affected the economies and financial markets of many countries at different levels that
could eventually affect the Company’s operations and ability to finance its planned operations.
Environmental
The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company
believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws and regulations.
16.
LOAN PAYABLE
In June 2021, the Company financed the purchase of an exploration vehicle in the amount of $43,586. The loan bears an
interest rate of 7.89% and is repayable over 60 monthly payments of $881 and is secured by the vehicle. The balance payable
at December 31, 2021 was $39,963 of which $10,578 is due within the next 12 months.
Undiscounted payments over successive years are as follows:
2022
2023-2026
Total contractual cash flows
Less: interest
$
$
10,578
37,022
47,600
(7,637)
Obligation at December 31, 2021
$
39,963
- 24 -
MURCHISON MINERALS LTD.
Notes to the Consolidated Financial Statements
December 31, 2021 and 2020
(Expressed in Canadian Dollars)
17.
SUBSEQUENT EVENTS
Stock Options
On January 24, 2022, the Company granted 200,000 stock options at an exercise price of $0.135 to a consultant for a period of
for five years. The options vest over 18 months (1/3 on grant date, 1/3 in 9 months and 1/3 in 18 months).
GAL Agreement
On January 28, 2022, the GAL agreement as disclosed in Note 9 was amended to reflect an exploration commitment change
from $200,000 down to $140,000 in the first year of the option agreement. The cumulative expense exploration commitments
over the years from 2023 to 2026 remained the same.
Warrants Exercised
In January and February 2022, a total of 7,025,000 warrants were exercised at a price of $0.12 for aggregate gross proceeds
of $843,000. The warrants had expiry dates between January 23, 2022 and February 13, 2022. A total of 1,984,600
warrants expired unexercised on January 23, 2022 and February 13, 2022.
End of Notes to Financial Statements
- 25 -
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2021
This Management’s Discussion and Analysis (“MD&A”) is intended to supplement the consolidated
financial statements and notes of Murchison Minerals Ltd. (the “Company” or “Murchison”) for the year
ended December 31, 2021 with comparatives for the same period a year earlier. The consolidated financial
statements including comparative figures have been prepared by the Company in accordance with
International Financial Reporting Standards (“IFRS”) applicable to preparation of financial statements. This
MD&A should be read in conjunction with the Company’s audited consolidated financial statements and
accompanying notes for the year ended December 31, 2021, which are available on the Company’s
website (www.murchisonminerals.com). This MD&A covers the most recently completed financial year end
and the subsequent period up to March 9, 2022. The information is presented in Canadian dollars unless
stated otherwise.
OVERALL PERFORMANCE
Description of Business
‐
Murchison is a Canadian
based exploration company focused on nickel-copper-cobalt exploration at the
100%-owned HPM project in Quebec and the exploration and development of the 100%-owned Brabant-
silver deposit located on the Brabant Lake property (the
McKenzie (the “Deposit”) VMS zinc
“Property”) in north
central Saskatchewan. The Company also has an option to earn 100% interest in the
Barraute-Landrienne zinc-silver-gold project in Quebec. The Company expects to acquire additional
properties as attractive opportunities are identified. The Company does not have any projects that generate
revenue at this time. The Company’s ability to carry out its business plan in the future rests entirely on its
ability to secure equity and other financings or realize cash from the sale of assets.
copper
‐
‐
‐
Trends
The financing, exploration and development of any properties the Company holds or may acquire in the
future will be subject to a number of factors including the commodity prices for minerals, applicable laws
and regulations, political conditions, currency fluctuations, the hiring of qualified people, and obtaining
necessary services in jurisdictions where the Company operates. The current trends relating to these
factors could change at any time and negatively affect the Company’s operations and business. Apart
from these, the risk factors noted under the heading “Uncertainties and Risk Factors” and “Forward Looking
Statement” included in this MD&A, management is not aware of any other trends, commitments, events or
uncertainties that would have a material effect on the Company’s business, financial condition or results
of operations.
The Company’s operations could be significantly adversely affected by the effects of the global spread of
the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a
pandemic by the World Health Organization in March 2020. The Company has followed the instructions
and advice of Federal and Provincial health authorities, as well as industry-wide best practice guidelines,
and has limited travel and field activities to help control the spread of COVID-19 and protect local
communities. The Company cannot accurately predict the impact the COVID-19 pandemic will have on its
operations, including uncertainties relating to the duration of the pandemic, the ultimate severity of the
disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the
impact on schedules and timelines for planned operations or exploration programs.
OUTLOOK
In October 2021, the Company appointed Troy Boisjoli as President and Chief Executive Officer. Jean-
Charles Potvin maintains an active role in the Company as Murchison’s Executive Chairman.
During 2022 the Company will be continuing its exploration activities, in Quebec, at the HPM project. The
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Company is planning to expand VTEM coverage over the entirety of the HPM project area. Subsequently,
the Company will then be commencing a prospecting program this spring/summer, while also drilling high-
priority targets. Additionnally, the Company will be advancing the Brabant-McKenzie (BMK) project through
commencing comprehensive desktop studies on results to date, with the following objectives i) define
drilling plan to optimize the BMK mineral resource focussing on expanding high-grade domains and testing
open areas on strike and down dip, and ii) define exploration plans to test blue sky potential along the BMK
trend.
The Company also plans to increase its investor relations activities with the objective of getting wider
recognition of the Company’s exploration activities to current and potential investors. This will also be
achieved by Murchison’s attendance at several resource specific conferences.
There are no known legal, political, environmental or other risks that could materially affect the potential
development of Company’s exploration projects. Management is of the opinion that it will be able to
maintain the status of its current exploration obligations and to keep its properties in good standing.
Advancing exploration at the mineral properties will require substantially more financial resources. In the
past, the Corporation has been able to rely on its ability to raise financing via equity private placements.
Management’s main objective is to advance its current projects and maximize their potential via the use of
different exploration techniques available. The long-term goal remains to develop the Company’s
properties and achieve commercial production. The Company may enter into partnerships in order to fully
exploit the production potential of its exploration assets.
MINERAL PROPERTIES – EXPLORATION ACTIVITIES
HPM PROPERTY – QUEBEC
At HPM, a VTEM airborne geophysical survey started on April 14, 2021 to follow up on promising
prospecting results on its 100%-owned HPM Ni-Cu-Co project in Quebec. The Geotech VTEM 655-line
kilometre survey over the HPM property was flown 100 metre line spacing and was concluded on April 30,
2021. Based on the VTEM survey Condor Consulting defined 55 discrete conductive trends totaling 42 km
in cumulative length, varying in strike extent from 290 m to 2.3 km.
In June, Murchison completed a field program focused on the mapping and sampling of historical showings
and targets, as well as select EM conductors newly identified during the VTEM survey of the property
earlier in 2021. Six newly identified target areas and historical mineral showings were comprehensively
surveyed and sampled using the Beep Mat and backpack drill combination; significant sulphide
mineralization was successfully discovered and sampled in five of the six locations explored in this
program. During the program, significant sulphide mineralization on surface at the PYC showing over a
strike length in excess of 1.7 km was identified. In total, 58 short backpack drill holes were completed and
100 litho-geochem samples were collected. The results were announced on August 16, 2021 and
confirmed widespread nickel-copper-cobalt surface mineralization across the entirety of the traced 1.7 km
strike length of sulphide mineralization. The results are from grab samples and short backpack drill core
samples, featuring assays as high as 1.28% nickel equivalent or 2.59% copper equivalent (0.79% Ni,
0.14% Cu, 0.15% Co) from 0.83 metre of backpack drill core. The assay results also confirm mineralization
south-east of the PYC target at the newly discovered Dix showing, which assayed as high as 0.90% nickel
equivalent or 1.83% copper equivalent (0.44% Ni, 0.39% Cu, 0.10% Co) from 0.45 metre of backpack drill
core. See press release dated June 29, 2021 and August 16, 2021 for full details.
Subsequent to the results of the field program, the Company planned a drill program designed to test the
subsurface continuation of the significant nickel-copper-cobalt surface mineralization discovered at the
PYC target. The inaugural drill program was announced on November 2, 2021, and was completed in early
December. In total 1,781 metres of drilling were completed in 8 holes with all holes completed at the PYC
target. Of the 1.95 km long PYC target, 550 metres of strike length was ultimately tested with significant
2
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
sulphide mineralization noted in all holes. The Company has thus far received assays for 2 holes (PYC21-
007 and 008) of which both intersected broad intervals of nickel-copper-cobalt sulphide mineralization.
Hole PYC21-007 intersected a composite thickness of 62.21 metres of mineralization at 0.24% nickel
equivalent (0.14% Ni, 0.07% Cu, 0.03% Co) and Hole PYC21-008 intersected a composite thickness of
69.9 metres at 0.24% nickel equivalent (0.13% Ni, 0.06% Cu, 0.03% Co) (see press release dated March
07, 2022 for full assay and interval details). The mineralization intersected is prospective for low grade
bulk tonnage. The remaining assays for the other 6 holes are pending.
Simultaneous with the Q4/2021 drill program, prospecting at the Syrah target was also completed. The
crews have now mapped sulphide mineralization over a strike length of approximately 375 metres
corresponding with a 600 metre long geophysical anomaly. Samples collected returned up to 0.83% Ni
Eq. (0.58% Ni, 0.24% Cu, 0.05% Co). The Syrah target is considered highly prospective to host significant
mineralization at depth and is a high priority drill target.
As a result of the field observations from the 2021 prospecting and drill program, in early December
Murchison quadrupled it mineral tenements from 13,897 hectares to 57,586 hectares. The claims cover
the majority of the eastern Haut-Plateau region in one contiguous claim block with localized exclusions
and Murchison now has a dominant land package in the region. The new claims cover an area where rafts
of paragneiss reside within a highly prospective assemblage of norite, gabbro, and anorthosite intrusive
rocks which host the nickel-copper-cobalt occurrences. These rock assemblages are similar to those rock
types found at other prestigious nickel mining camps, such as Voisey’s Bay.
The HPM project continues to show tremendous promise with its numerous gossanous nickel-copper-
cobalt-bearing outcrops spatially linked to historical airborne EM anomalies. The HPM property has
developed into an exploration project with mining camp scale prospectivity.
Historically, exploration and drilling on the HPM property focused on the immediate area around the Barre
de Fer showing. The anomalous Ni-Cu-Co results from mafic/ultramafic intrusions which are located
throughout the HPM Project and demonstrate significant exploration potential across the entirety of the
project area.
The HPM property lies within the Grenville Province’s Allochthonous Belt and is host to numerous Ni-Cu-
Co showings associated with mafic to ultramafic intrusions, including the high-grade Barre de Fer
magmatic nickel sulphide occurrence. The Barre de Fer occurrence returned up to 1.74% Ni, 0.90% Cu,
and 0.09% Co over 43.18 m in historic diamond drilling.
BRABANT LAKE PROPERTY – SASKATCHEWAN
The Property is owned 100% by Murchison is strategically located along Highway 102 approximately 175
kilometres northeast of the town of La Ronge and near major infrastructure, including grid power. The
Property consists of the Brabant-McKenzie VMS Deposit and multiple known mineralized showings and
identified geophysical conductors over approximately 57-kilometre strike length of favourable geological
horizon, all of which remain under-explored and mostly untested. The 627 km2 Property shares geological
characteristics, including similar age, with the Flin Flon and Lynn Lake volcanogenic massive sulphide
(VMS) mining camps in Manitoba.
Drilling
In January 2021, the Company initiated a drilling program targeting various targets identified during
previous geophysical surveys and field exploration programs where a total of 3,925 metres (14 holes) were
drilled. 1,938 metres (6 holes) were in drilled in the Deposit area, 771 metres (2 holes) in the Zn-Cu Betty
Zone, 925 metres (3 holes) in the Main Lake target and 351 metres (3 holes) in three high-priority regional
drill targets. The drill program was completed in the last week of March 2021. The best intercept observed
in the winter 2021 drill program was from hole BM21-004 which assayed 9.07% zinc, 0.81% copper, 0.26%
3
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
lead, 0.11 g/t gold and 35.11 g/t silver over 15.35 metres (80 to 95% true thickness). The hole was designed
to expand the indicated resources at the Deposit as well as to collect material for metallurgical testing.
The drill results from the regional targets all intersected distal VMS style sulphide iron formation
mineralization but failed to intersect any notable economic mineralization. Drilling at the Main Lake target
intersected very strong VMS type alteration with hole ML21-002 intersecting two lens of sulphide
mineralization. First interval assayed 0.84% zinc, 0.36% copper and 8.5 g/t silver over 3.59 metres (149.5
to 153.15m) and includes 0.47 metres of 3.6% zinc, 0.2% copper and 6.6 g/t silver. The second interval
assayed 1.27% zinc, 0.03% copper, and 14.75 g/t silver over 4.08 metres (176.5 to 180.59m) and includes
1.01 metres of 4.71% zinc, 0.04% copper and 21.2 g/t silver.
Holes BZ21-001 (381 metres) and BZ21-002 (330 metres) drilled at the Betty Zone both intersected VMS
mineralization similar to what is observed at the Deposit. The observed mineralization consists of a narrow
interval of abundant sphalerite and chalcopyrite. The best intercept was observed in hole BZ21-002 which
intersected 4.40% zinc, 1.33% copper, 12.95 g/t silver from 280.73 to 281.65 metres (0.92 m) including
0.42 m at 3.76% zinc, 2.40% copper, 21.70 g/t silver and 0.12 g/t gold.
The Company drilled 2 holes in July 2021 at the Betty Zone. The 877 metre program consisted of two
diamond drill holes targeting the observed borehole geophysical anomaly at the Betty Zone. Both holes
intersected a thick interval of graphite mineralization which effectively explains the borehole anomaly and
was later confirmed by a subsequent borehole EM geophysical survey. The second hole BZ21-004 (473
metres) intersected narrow zinc rich VMS sulphide mineralization which assayed 1.93% ZnEq over 2.70
metres including 3.88% ZnEq over 0.66 metres. The mineralization encountered is considered prospective
and requires follow-up drilling along strike to fully test VMS mineralization potential. .
The sulphide mineralization encountered is not conductive and did not respond to the borehole geophysical
survey. Both drill holes, BZ21-003 and BZ21-004 encountered graphite mineralization that fully explained
the targeted geophysical anomaly. The lack of geophysical response of the zinc mineralization is attributed
to a very-high amount of sphalerite (zinc sulphide) that is not conductive. The presence of VMS-style
sphalerite mineralization demonstrates a fertile system warranting future exploration that will be guided by
updated geologic modelling.
The mineralization observed at Main Lake and the Betty Zone indicate the potential for additional VMS
mineralization outside of the Deposit. The Brabant project has mining camp potential and both of these
target areas are on strike with the Deposit and require future follow-up to locate more significant sulphide
mineralization.
Metallurgy
August 2021, the Company announced the results from preliminary metallurgical testing on core samples
collected from the Deposit. The results indicate that a simple flotation test using a coarse grind with a
rougher and scavenger circuit was able to upgrade the zinc grade from 9.13% to 27% with a 98% recovery.
A further 4-stage cleaner flotation test resulted in a zinc concentrate of 50.2% with an 85.06% recovery.
The recycling of cleaner tails is expected to result in an overall net zinc recovery of at least 90%. Precious
metals were concentrated in the 4th stage cleaner tail material with a grade of 180 g/t silver and 1.13 g/t
gold. Excellent results for copper recovery were also achieved with the simple rougher and scavenger
flotation test increasing the grade to 2.19% with 92.9% recovery and the 4-stage cleaner flotation resulting
in a grade of 4.12% with a 74.7% recovery. These preliminary results are highly encouraging and it is
assumed they can be improved through further optimization. Please see press release dated August 10,
2021 for full results.
BARRAUTE-LANDRIENNE PROPERTY - QUEBEC
On April 28, 2021, the Company entered into an agreement with Gestion Aline Leclerc Inc. (“GAL”) granting
Murchison an option to earn 100% in 75 mineral claims covering 2,377 hectares, by making payments
totaling $500,000 and property expenditures of $1.0 million over a 6-year period. The first payment of
4
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
$20,000 is due on April 28, 2022. GAL will retain a royalty of 1% of net smelter returns (NSR) on future
production. The 1% NSR can be acquired anytime by the Company for $1.0 million.
The claims, split into 4 blocks are located in the Barraute-Landrienne mining camp, approximately 60 km
north of Val-d'Or, and about 4 km northwest of the municipality of Barraute in Québec and were selected
targeting new zinc-silver-gold deposits. These four blocks of claims are believed to host some of the best
untested geological/geophysical base-metal targets in the area and are considered ready for drilling.
Exploration work completed throughout the past several years by GAL and others resulted in a new
geological interpretation suggesting the correlation of the Abcourt-Barvue Mine stratigraphy within the
Barraute property. Further west, the Landrienne property hosts several untested isolated Megatem
geophysical anomalies, near felsic-mafic volcanic contacts.
TMC Geophysics out of Val-d’Or was contracted to complete a combined magnetic, electromagnetic and
induced polarization ground survey over the historic Megatem geophysical anomalies at the Barraute A, B
and Landrienne B properties. The work was commenced on July 22, 2021 and completed on August 25th,
2021. In total 15.735 km of mag, 5.8 km of IP, and 15.2 km of EM was completed. EM anomalies were
located and interpretation of the results is ongoing.
The Barraute mining camp hosts several mineralized showings and polymetallic metal deposits including
the substantial 15.7 Mt zinc-silver Abcourt-Barvue deposit located at only 2 km from the Barraute property.
Zinc-silver mineralization was discovered in the region in 1950. The Abcourt-Barvue deposit of Abcourt
Mines Inc. was in operation during two periods: between 1952 and 1957 by Barvue Mines Limited and
between 1985 and 1990 by Abcourt. In all, 5,002,19 metric tonnes grading 38.74 g/t silver and 2.98% zinc
were mined from the Barvue open pit and 632,319 metric tonnes grading 131.65 g/t silver and 5.04% zinc
were mined from underground production.
These newly acquired properties are located near all infrastructure and human resources for exploration
and possible future operations.
Qualified Persons
The scientific and technical disclosures included in this MD&A have been reviewed by John Shmyr, P.Geo.,
VP Exploration, a registered member of the Professional Engineers and Geoscientists of Saskatchewan
and current holder of a special authorization with the Ordre des Géologues du Québec. Mr. Shmyr is a
Qualified Person as defined by National Instrument 43-101.
Access to Properties
The Company’s access to its Canadian properties is dependent on climate and weather conditions. The
Brabant property in Saskatchewan is accessible all year round. All projects in Québec can be accessed
from January to September as weather limits the activities during other times of the year.
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS
The following table sets out the exploration expenses for the last two years:
HPM, Quebec
Drilling
Geology
Geophysics
Mineral Property & Staking
Total HPM
December 31,
2021
December 31,
2020
$ 1,619,833
209,622
254,453
80,166
$ 2,164,074
$
$
-
86,425
135,008
5,432
226,865
5
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Brabant Lake, Saskatchewan
Amortization
Drilling
General Administrative
Geology
Geophysics
Metallurgy
Mineral Property & Staking
Total Brabant Lake
Barraute-Landrienne, Quebec
Geology
Geophysics
Mineral Property and Staking
Total Barraute-Landrienne
Total exploration expenses
RESULTS OF OPERATIONS
December 31,
2021
December 31,
2020
$
24,546
1,531,547
5,084
96,283
71,277
66,451
300
$ 1,795,488
$
$
16,163
868,116
2,000
292,709
371,275
-
4,421
1,554,684
December 31,
2021
December 31,
2020
$
$
$
39,663
97,430
2,500
139,593
$
$
-
-
-
-
4,099,155
$
1,781,549
For the year ended December 31, 2021, the Company incurred a loss of $4,762,730 (2020 - $2,106,105).
The increase of $2,656,625 is mainly related to the following factors: 1. higher exploration expenses of
$2,317,606 (2021 - $4,099,155 vs 2020 - $1,781,549) as the Company completed a summer field
program, a geophysical survey and a 1,781 metre drilling program at the HPM. 2. higher management
fees and salaries of $130,004 (2021 - $345,217 vs 2020 - $215,213) related to hire of a new President and
CEO and bonuses paid to officers, and; 3. higher non-cash share-based payments of $134,735
(2021 - $435,905 vs 2020 - $301,170) as the Company granted more options in 2021 which translated into
a higher fair value.
6
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
SELECTED ANNUAL INFORMATION
The following table sets out financial performance highlights for the last three years and was prepared in
accordance with IFRS.
December 31, 2021
December 31, 2020
December 31, 2019
Interest Income
Operating Expenses (1)
Loss
Basic and Diluted loss
per share
Total Assets
Exploration Expenses
$4,958
$4,730,597
$4,762,730
$0.04
$2,224,877
$4,099,155
$3,347
$2,238,901
$2,106,105
$0.03
$2,228,316
$1,781,549
$7,732
$1,341,001
$1,470,586
$0.03
$1,611,786
$894,935
(1) The exploration expenses are included in operating expenses and share-based payments are excluded from operating
expenses.
The interest income fluctuation from year to year is the direct result of the cash balance and short-term
investments available in each of the years. The timing of equity financing and ensuing exploration and
operating expenses are the main factors affecting the level of funds invested from time to time. The
variation in the interest rates also has an impact on the interest income but such variation has been minimal
for the years 2019 to 2021. The higher loss in 2021 was related to the increased exploration activities at
HPM during the year. In 2020 and 2019, the majority of the exploration was on Brabant Lake. The total
assets in 2021 and 2020 included $1.79 million and $2.06 million in cash respectively compared to $1.43
in 2019.
SELECTED QUARTERLY RESULTS
Total Assets
Current Assets
Non-current Assets
Total Liabilities
Interest Income
Loss
Loss Per Share (1)
(i) Loss per share remains the same on a diluted basis
Fourth
Quarter 2021
$
2,224,877
2,111,429
113,448
443,164
1,788
2,173,753
0.02
Total Assets
Current Assets
Non-current Assets
Total Liabilities
Interest Income
Loss
Loss Per Share (1)
Fourth
Quarter 2020
$
2,228,316
2,153,334
74,982
227,906
406
540,295
0.01
Third
Quarter 2021
$
379,466
280,639
98,827
159,350
308
811,766
0.01
Third
Quarter 2020
$
871,386
791,516
79,870
347,843
320
371,675
0.00
Second
Quarter 2021
$
1,390,752
1,283,008
107,744
370,157
1,226
509,351
0.00
Second
Quarter 2020
$
580,520
497,054
83,466
358,980
103
86,718
0.00
First
Quarter 2021
$
1,750,731
1,680,207
70,524
258,682
1,636
1,267,860
0.01
First
Quarter 2020
$
628,930
543,461
85,469
490,679
2,518
1,107,417
0.02
Due to the nature of the business, the cash balance and short-term investments generating interest income
are subject to fluctuations from quarter to quarter. The timing of equity financing and ensuing exploration
7
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
and operating expenses are the main factors affecting the level of funds invested from time to time. The
variation in interest rates also has an impact on the interest income.
In Q4/21, the Company raised gross proceeds of $4,000,069 via the completion of a private placement.
The total liability at the end of Q4/21 included 191,896 in non-cash flow-through share liability. The loss in
Q4/21 includes $1.85 million in exploration expenses. The non-current assets increase during 2021 is
related to the acquisition of exploration equipment. In Q1/21, the Company completed a private placement
for gross proceeds of $800,000. In Q4/20, the Company raised gross proceeds of $1,918,754 in two flow-
through private placements. The total liability at the end of Q4/20 included 130,459 in non-cash flow-
through share liability. In Q3/20, the Company raised gross proceeds of $841,949 via a private placement.
In Q2/20, the Company completed a $200,000 flow-through private placement and received a financial
assistance payment of $50,000 under the Targeted Mineral Exploration Incentive program from the
Government of Saskatchewan which was related to the drilling completed in the winter 2020. In Q1/20,
the loss includes exploration expenses of $1,277,846 related to drilling and geophysical surveys at the
Brabant Lake project.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2021, the Company had a cash of $1,792,033 and working capital (excluding flow-
through share premium liability) of $1,889,546 (December 31, 2020 – $2,062,411 and $2,052,895,
respectively). The Company’s excess cash, when available, is deposited into interest-bearing accounts or
invested in redeemable GICs with major Canadian chartered banks.
As at December 31, 2021, the Company had amounts receivable and prepaid expenses totaling $319,396
which included sales tax receivable of $247,327 and prepaid expenses of $72,069.
During 2021, the Company acquired exploration equipment at a cost of $65,136, which included the
purchase of an exploration vehicle in the amount of $43,586. This amount was financed via a loan bearing
an annual interest rate of 7.89% and is repayable over 60 monthly payments of $881. The balance payable
at December 31, 2021 was $39,963.
The December 31, 2021, consolidated financial statements were prepared in accordance with accounting
principles applicable to a going concern, which assumes that the Company will be able to realize its assets
and discharge liabilities in the normal course of business. The Company’s ability to continue as a going
concern is always dependent on its ability to raise new funds to meet its obligations and continue its
exploration activities.
Equity Financing
The Company’s exploration projects are at an early stage and it has not yet been determined whether any
of its properties contain economically recoverable ore. As a result, the Company has no current sources
of revenue and has relied on the issuance of shares to generate the funds required to further its projects.
Private Placements
On March 5, 2021, the Company completed a non-brokered private placement and issued 10,000,000
common share units at a price of $0.08 per unit for gross proceeds of $800,000. Each unit consisted of
one common share of the Company and one-half common share purchase warrant. Each full warrant
entitles the holder to acquire one additional common share until September 5, 2022 at an exercise price
of $0.12 per common share. Finder’s fees totaling $18,000 were paid under this private placement.
Insiders of the Company acquired an aggregate of 4,150,000 units in this private placement for a total of
$332,000.
On October 21, 2021, the Company completed a $4,000,069 private placement by issuing issued
13,500,000 units at a price of $0.08 per unit as well as 30,737,571 flow-through units at a price of $0.095
8
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
per flow-through unit. Finder’s fees of $198,005 were paid in relation to the private placement. Insiders
acquired 10,000,000 units and 4,863,100 flow-through units for aggregate proceeds of $1,261,995.
Warrants
As part of the March 5, 2021 private placement, the Company issued 5,000,000 warrants at an exercise
price of $0.12 per warrant expiring 18 months expiring September 5, 2022.
As part of the October 21, 2021 private placement, the Company issued 22,118,788 warrants and
2,178,997 finders warrants all exercisable at $0.12 until October 21, 2022.
In October and November 2021, 180,000 warrants issued in July 2020 were exercised for proceeds of
$21,600. In November 2021, 256,037 finder’s warrants issued in December 2020 were exercised for
proceeds of $30,724. The balance of 278,196 finder’s warrants expired on December 30, 2021.
In January and February 2022, a total of 7,025,000 warrants were exercised at a price of $0.12 for
aggregate gross proceeds of $843,000. The warrants had expiring dates between January 23, 2022 and
February 13, 2022. A total of 1,984,600 warrants with expiry dates between January 23, 2022 and
February 13, 2022 were not exercised and expired.
Stock Options
On April 14, May 25 and July 2, 2021, the Company granted a total of 900,000 stock options exercisable
at $0.095 for a period of 5 years. All options vested immediately.
On October 11, 2021, the Company granted 1,000,000 stock options exercisable at $0.08 for a period of
five years of which 700,000 vested immediately and 300,000 will vest on April 11, 2022.
On December 20, 2021, the Company granted 3,625,000 stock options exercisable at $0.13 for 5 years to
directors, officers, consultants and employees of the Company. All options vested immediately except for
200,000 vesting on May 1, 2022.
General
The Company’s ability to successfully acquire mineral projects or recover amounts expended on mineral
properties is conditional on its ability to secure financing when required. The Company expects to meet
additional financing requirements through equity financing. The Company may seek other alternatives for
financing in the future depending on market conditions and exploration results; however, there can be no
assurance that such financing attempts will be successful. The impact on our business and the cost and
availability of financing remain uncertain and could affect our overall liquidity.
Commitments and Obligations
Management Contracts
The Company entered into consulting agreements for the services of its President and CEO, CFO and
Executive Chairman. Under the agreements, additional payments totalling $775,000 are be made upon
the occurrence of a change of control. As a triggering event has not taken place, the contingent payments
have not been reflected in the consolidated financial statements. The commitment upon termination of the
agreements is $295,000, in aggregate. The minimum commitment due within one year under the terms of
the agreements is $296,400, in aggregate.
Property Option Agreement
On April 28, 2021, the Company optioned certain claims forming the Barraute-Landrienne property
whereby Murchison can earn 100% in 75 mineral claims covering 2,377 hectares, by making payments
totaling $500,000 and property expenditures of $1.0 million over a 6-year period.
9
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Flow-Through Obligation
As at December 31, 2021, the Company has to incur $1,215,325 in qualifying exploration expenditures by
December 31, 2022 to meet its flow-through commitments. At this time, management anticipates meeting
that obligation and as a result, no additional provisions are required.
The flow-through agreements require the Company to renounce certain tax deductions for Canadian
exploration expenditures incurred on the Company’s mineral properties to flow-through participants. The
Company indemnified the subscribers for any related tax amounts that become payable by the subscribers
as a result of the Company not meeting its expenditure commitments.
COVID-19
The Company’s operations could be significantly adversely affected by the effects of the global spread of
the contagious coronavirus causing the outbreak of COVID-19 respiratory disease, which was declared a
pandemic by the World Health Organization in March 2020. The Company has followed the instructions
and advice of Federal and Provincial health authorities, as well as industry-wide best practice guidelines,
and has limited travel and field activities to help control the spread of COVID-19 and protect local
communities. The Company cannot accurately predict the impact the COVID-19 pandemic will have on its
operations, including uncertainties relating to the duration of the pandemic, the ultimate severity of the
disease, the duration of travel and quarantine restrictions imposed by governmental authorities, and the
impact on schedules and timelines for planned operations or exploration programs. In addition, this
widespread health crisis and related business lockdowns have adversely affected the economies and
financial markets of many countries, resulting in an economic downturn that could affect the Company’s
operations and ability to finance its planned operations.
Environmental
The Company's mining and exploration activities are subject to various laws and regulations governing the
protection of the environment. These laws and regulations are continually changing and generally
becoming more restrictive. The Company believes its operations are materially in compliance with all
applicable laws and regulations. The Company has made, and expects to make in the future, expenditures
to comply with such laws and regulations.
The Company has no long-term contractual obligations other than the loan payable as disclosed above.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
a)
Remuneration of directors and the officers was as follows:
Salaries and benefits
Share-based payments
2021
2020
$ 330,940
380,250
$ 215,213
284,900
$ 711,190
$ 500,113
For the year ended December 31, 2021, the salaries and benefits amount above includes $144,875 (2020
- $98,250) for fees invoiced by a corporation controlled by the CFO of the Company for his services and
$138,000 (2020 - $116,963) for fees invoiced by the Executive Chairman (former CEO until October 11,
10
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
2021) of the Company for his services as CEO and Executive Chairman. The salaries and benefits also
includes $48,065 (2020 - $nil) for fees invoiced by a corporation controlled by the new CEO of the Company
for his services as CEO. Included in accounts payable and accrued liabilities at December 31, 2021 is $nil
(2020 - $19,650) owed to corporation controlled by the CFO, $nil (2020 - $12,335) owed to the Executive
Chairman and $5,923 owed to the CEO. The amounts payable are unsecured, non-interest bearing and
have no fixed terms of repayment.
Promissory Note
b)
On March 27, 2020, the Company issued a $200,000 promissory note to Vyco Limited (“Vyco”). The
amount owing under this promissory note bore interest at an annual rate of 5.0% and, in the event that the
principal amount was not repaid in full by the due date of June 30, 2020, the interest accrued at the rate
of 10% per annum from the due date until payment was effected. Vyco is a corporation controlled by a
family trust. Mr. Donald K. Johnson, director of the Company, is a discretionary beneficiary of such trust
and President of Vyco. The promissory note was repaid on September 9, 2020 along with interest of
$6,493.
Private Placements
c)
As part of the private placement completed on March 5, 2021, a director and officers of the Company
subscribed for 4,150,000 units pursuant to this private placement for aggregate gross proceeds of
$332,000.
As part of the private placement completed on October 21, 2021, a director and an officer of the Company
acquired, in aggregate, 10,000,000 common share units and 4,863,100 flow-through units for total gross
proceeds of $1,261,995.
An officer and a director of the Company acquired, in aggregate, 4,000,000 units and 500,000 flow-through
units for gross proceeds of $290,000 in the private placement closed on July 23, 2020. As part of the
private placement completed on December 30, 2020, a director of the Company subscribed for 4,500,000
flow-through common shares for gross proceeds of $427,500.
PROPOSED TRANSACTIONS
The Company continues to evaluate quality exploration projects and financing opportunities. There are no
transactions currently pending.
CHANGES IN ACCOUNTING POLICIES
New and future accounting policies
Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods
commencing on or after January 1, 2022. Many are not applicable or do not have a significant impact to
the Company and have been excluded. The Company is currently assessing the impact of these standards
on the consolidated financial statements.
IAS 16 - Property, Plant and Equipment was amended. The amendments introduce new guidance, such
that the proceeds from selling items before the related property, plant and equipment is available for its
intended use can no longer be deducted from the cost. Instead, such proceeds are to be recognized in
profit or loss, together with the costs of producing those items. The amendments are effective for annual
periods beginning on January 1, 2022.
IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and
Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the
requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture,
the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a
11
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
business. The effective date of these amendments is yet to be determined, however early adoption is
permitted.
IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more
general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in
place at the reporting date. The amendments clarify that the classification of liabilities as current or
noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs
to be unconditional and must have substance. The amendments also clarify that the transfer of a
company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise
of a conversion option meeting the definition of an equity instrument. The amendments are effective for
annual periods beginning on January 1, 2023.
IAS 37 – Provisions, Contingent Liabilities, and Contingent Assets (“IAS 37”) was amended. The
amendments clarify that when assessing if a contract is onerous, the cost of fulfilling the contract includes
all costs that relate directly to the contract – i.e. a full-cost approach. Such costs include both the
incremental costs of the contract (i.e. costs a company would avoid if it did not have the contract) and an
allocation of other direct costs incurred on activities required to fulfill the contract – e.g. contract
management and supervision, or depreciation of equipment used in fulfilling the contract. The amendments
are effective for annual periods beginning on January 1, 2022.
IFRS 3 – Business Combinations (“IFRS 3”) was amended. The amendments introduce new exceptions
to the recognition and measurement principles in IFRS 3 to ensure that the update in references to the
revised conceptual framework does not change which assets and liabilities qualify for recognition in a
business combination. An acquirer should apply the definition of a liability in IAS 37 – rather than the
definition in the Conceptual Framework – to determine whether a present obligation exists at the acquisition
date as a result of past events. For a levy in the scope of IFRIC 21, the acquirer should apply the criteria
in IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has
occurred by the acquisition date. In addition, the amendments clarify that the acquirer should not recognize
a contingent asset at the acquisition date. The amendments are effective for annual periods beginning on
January 1, 2022.
FINANCIAL INSTRUMENTS
Financial assets:
Amortized cost
Cash and cash equivalents
FVPL
Investments
Financial liabilities:
2021
2020
$ 1,792,033
$ 2,062,411
2,584
3,402
Amortized cost
Accounts payable and accrued liabilities
Loan payable
$ 211,305
39,963
$
100,439
-
As of December 31, 2021 and December 31, 2020, the fair value of all the Company's financial instruments
approximates the carrying value, due to their short-term nature, except as for the investment which is
presented at fair value.
As at December 31, 2021, the Company’s Investment on the consolidated statements of financial position
was recorded at level 1 with a fair value of $2,584 (2020 - $3,402).
12
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Significant accounting judgments and estimates:
The preparation of consolidated financial statements in conformity with IFRS requires the Company’s
management to make judgments, estimates and assumptions about future events that affect the amounts
reported in the consolidated financial statements and related notes to the financial statements. Although
these estimates are based on management’s best knowledge of the amount, event or actions, actual
results may differ from those estimates.
The areas that require management to make significant judgments, estimates and assumptions in
determining carrying values include, but are not limited to the following:
•
•
•
Assets’ carrying values and impairment charges
In the determination of carrying values and impairment charges, management looks at the higher of
recoverable amount or fair value less costs to sell in the case of assets and at objective evidence,
significant or prolonged decline of fair value on financial assets indicating impairment. These
determinations and their individual assumptions require that management make a decision based
on the best available information at each reporting period.
Income and other taxes
Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income
tax is recognized in profit or loss except to the extent that it relates to items recognized directly in
equity, in which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable income for the period, using tax
rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with
regards to previous years.
Deferred tax is provided using the statement of financial position 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. The following temporary differences are not
provided for: goodwill not deductible for tax purposes and the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit. 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.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilized.
Share-based payments
Management determines costs
for share-based payments using market-based valuation
techniques. The fair value of the market-based and performance-based non-vested share awards
are determined at the date of grant using generally accepted valuation techniques. Assumptions
are made and judgments used in applying valuation techniques. These assumptions and judgments
include estimating the future volatility of the stock price, expected dividend yield, future employee
turnover rates and future employee stock option exercise behaviors and corporate performance.
Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect
the fair value estimates. The Company currently estimates the expected volatility of its common
shares based on historical volatility taking into consideration the expected life of the options and
warrants.
13
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Capital Management:
The Company manages its capital with the following objectives:
•
•
to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding
of future growth opportunities, and pursuit of accretive acquisitions and
to maximize shareholder return through enhancing the share value.
The Company monitors its capital structure and makes adjustments according to market conditions in an
effort to meet its objectives given the current outlook of the business and industry in general. The Company
may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital
spending, or disposing of assets. The capital structure is reviewed by Management and the Board of
Directors on an ongoing basis.
The Company considers its capital to consist of equity, comprising share capital, reserves and deficit. The
Company manages capital through its financial and operational forecasting processes. The Company
reviews its working capital and forecasts its future cash flows based on operating expenditures, and other
investing and financing activities. The forecast is regularly updated based on its exploration and
development activities. Selected information is regularly provided to the Board of Directors of the
Company. The Company’s capital management objectives, policies and processes have remained
unchanged during the years ended December 31, 2021 and 2020. The Company is not subject to any
capital requirements imposed by a regulator or lending institution.
ADDITIONAL INFORMATION
Outstanding Shareholders’ Equity Data
As of March 9, 2022, the following are outstanding:
•
•
•
Common Shares
Stock Options
Warrants
160,634,785
14,280,000
29,297,785
Uncertainties and Risk Factors
An investment in the securities of the Company is highly speculative and involves numerous and significant
risks. Such investment should be undertaken only by investors whose financial resources are sufficient to
enable them to assume these risks and who have no need for immediate liquidity in their investment.
Prospective investors should carefully consider the risk factors that have affected, and which in the future
are reasonably expected to affect, the Company and its financial position.
In addition to the risks outlined below, Murchison has identified the extreme volatility occurring in the
financial markets as a significant risk for the Company. As a result of the market turmoil, investors are
moving away from assets they perceive as risky to those they perceive as less so. Companies like
Murchison are considered risk assets and as mentioned above are highly speculative. The volatility in the
markets and investor sentiment may make it difficult for the Company to access the capital markets to
raise the funds required for its future expenditures.
Exploration, Development and Operating Risks
Mining operations generally involve a high degree of risk. The Company’s operations are subject to all the
hazards and risks normally encountered in the exploration, development and production of gold, precious
metals and other minerals, including unusual and unexpected geologic formations, seismic activity, rock
bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which
could result in damage to, or destruction of, mines and other producing facilities, damage to life or property,
environmental damage and possible legal liability. Although adequate precautions to minimize risk will be
14
MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
taken, milling operations are subject to hazards such as equipment failure or failure of retaining dams
around tailings disposal areas which may result in environmental pollution and consequent liability.
The exploration for and development of mineral deposits involves significant risks which even a
combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of a
mineral-bearing structure may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines.
Major expenses may be required to locate and establish mineral reserves, to develop metallurgical
processes and to construct mining and processing facilities at a particular site. It is impossible to ensure
that the exploration or development programs planned by The Company will result in a profitable
commercial mining operation. Whether a gold or other mineral deposit will be commercially viable depends
on a number of factors, some of which are: the particular attributes of the deposit, such as quantity and
quality of mineralization and proximity to infrastructure; mineral prices which are highly cyclical; and
government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but the combination of these factors may result in The Company not receiving an
adequate return on invested capital.
There is no certainty that the expenditures made by the Company towards the search and evaluation of
gold or other minerals will result in discoveries of commercial quantities of gold or other minerals.
Country Risk
The Company may conduct business in jurisdictions and some countries in which the title to its properties
may be uncertain or where access to infrastructure, or political stability, or security, among other things,
may be unknown, or known, and prevent, or severely compromise, the Company from carrying out
business. It may be that the Company accepts some or all of these risks, to the extent that they can be
determined at all, in favour of acquiring properties with exceptional exploration and development potential,
and may ultimately be prevented from exploring and developing those properties for any number of
reasons which may, or may not, be predictable, foreseeable, or manageable.
Current Economic Conditions
There are significant uncertainties regarding the price of precious metals and other minerals and the
availability of equity financing for the purposes of mineral exploration and development. The prices of
precious metals and other minerals have fluctuated substantially over the past several years. The
Company’s future performance is largely tied to the development of its current mineral properties and the
overall financial markets. Current financial markets are likely to be volatile for the remainder of the calendar
year, reflecting ongoing concerns about the stability of the global economy and global growth prospects.
As well, concern about global growth has led to sustained drops in the commodity markets for commodities
other than gold. As a result, the Company may have difficulties raising equity financing for the purposes
of mineral exploration and development, particularly without excessively diluting present shareholders of
the Company. These economic trends may limit the Company’s ability to develop and/or further explore
its mineral property interests.
Limited Operating History
The Company has a limited history of operations, is in the early stage of exploration and must be
considered a start-up company. As such, the Company is subject to many risks common to such
enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial
and other resources and lack of revenues. It is common in new mining operations to experience
unexpected problems and delays. In addition, delays in the commencement of mineral production often
occur. There is no assurance that the Company will be successful in achieving a return on shareholders’
investment or successfully establish mining operations and the likelihood of success must be considered
in light of its early stage of operations.
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MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
Reliability of Resource Estimates
There is no certainty that any mineral resources identified in the future on any of the Company’s properties
will be realized. Until a deposit is actually mined and processed the quantity of mineral resources and
grades must be considered as estimates only. In addition, the quantity of mineral resources may vary
depending on, among other things, metal prices. Any material change in quantity of mineral resources,
grade or stripping ratio may affect the economic viability of any project undertaken by the Company. In
addition, there can be no assurance that gold recoveries or other metal recoveries in small-scale laboratory
tests will be duplicated in a larger scale test under on-site conditions or during production.
Fluctuations in gold and other base or precious metals prices, results of drilling, metallurgical testing and
production and the evaluation of studies, reports and plans subsequent to the date of any estimate may
require revision of such estimate. Any material reductions in estimates of mineral resources could have a
material adverse effect on the Company’s results of operations and financial condition from time to time.
Insurance and Uninsured Risks
The Company’s business is subject to a number of risks and hazards generally, including adverse
environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological
conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural
phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result
in damage to mineral properties or production facilities, personal injury or death, environmental damage
to The Company’s properties or the properties of others, delays in mining, monetary losses and possible
legal liability.
Although the Company may in the future maintain insurance to protect against certain risks in such
amounts as it considers to be reasonable, its insurance will not cover all the potential risks associated with
a mining company’s operations. The Company may also be unable to maintain insurance to cover these
risks at economically feasible premiums. Insurance coverage may not continue to be available or may not
be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental
pollution or other hazards as a result of exploration and production is not generally available to the
Company or to other companies in the mining industry on acceptable terms. The Company might also
become subject to liability for pollution or other hazards which may not be insured against or which the
Company may elect not to insure against because of premium costs or other reasons. Losses from these
events may cause the Company to incur significant costs that could have a material adverse effect upon
its financial performance and results of operations.
Environmental Risks and Hazards
All phases of the Company’s operations are subject to environmental regulation in the jurisdictions in which
it operates. These regulations mandate, among other things, the maintenance of air and water quality
standards and land reclamation. They also set forth limitations on the generation, transportation, storage
and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for non-compliance, more
stringent environmental assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Company’s operations. Environmental
hazards may exist on the properties on which the Company holds interests which are unknown to the
Company at present and which have been caused by previous or existing owners or operators of the
properties.
Government approvals and permits are currently and may in the future be required in connection with the
Company’s operations. To the extent such approvals are required and not obtained, the Company may be
curtailed or prohibited from continuing its exploration or mining operations or from proceeding with planned
exploration or development of mineral properties.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement
actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease
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MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
or be curtailed, and may include corrective measures requiring capital expenditures, installation of
additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or
development of mineral properties may be required to compensate those suffering loss or damage by
reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of
applicable laws or regulations.
Amendments to current laws, regulations and permits governing operations and activities of mining and
exploration companies, or more stringent implementation thereof, could have a material adverse impact
on the Company and cause increases in exploration expenses, capital expenditures or production costs
or reduction in levels of production at producing properties or require abandonment or delays in
development of new mining properties.
Infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on adequate
infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which
affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or
other interference in the maintenance or provision of such infrastructure could adversely affect the
Company’s operations, financial condition and results of operations.
Land Title
No assurances can be given that there are no title defects affecting property or any other property interests
of the Company. Title insurance generally is not available, and the Company’s ability to ensure that it has
obtained secure claim to individual mineral properties or mining concessions may be severely constrained.
Furthermore, the Company has not conducted surveys of the claims in which it holds an interest and,
therefore, the precise area and location of such claims may be in doubt. Accordingly, the Company’s
mineral properties may be subject to prior unregistered liens, agreements, transfers or claims, including
native land claims, and title may be affected by, among other things, undetected defects. In addition, the
Company may be unable to operate its properties as permitted or to enforce its rights with respect to its
properties.
Competition
The mining industry is competitive in all of its phases. The Company faces strong competition from other
mining companies in connection with the acquisition of properties producing, or capable of producing,
precious and base metals. Many of these companies have greater financial resources, operational
experience and technical capabilities than the Company. As a result of this competition, the Company may
be unable to maintain or acquire additional attractive mining properties on terms it considers acceptable
or at all. Consequently, the Company’s revenues, operations and financial condition could be materially
adversely affected.
Additional Capital
The development and exploration of the Company’s properties will require substantial additional financing.
Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration,
development or production on any or all of the Company’s properties or even a loss of property interest.
The primary source of funding available to the Company consists of equity financing. There can be no
assurance that additional capital or other types of financing will be available if needed or that, if available,
the terms of such financing will be favourable to the Company.
Commodity Prices
The price of the Company’s common shares, the Company’s financial results and exploration,
development and mineral development activities may in the future be significantly adversely affected by
declines in the price of precious metals or other minerals. The price of precious metals and other minerals
fluctuates widely and is affected by numerous factors beyond the Company’s control such as the sale or
purchase of commodities by various central banks and financial institutions, interest rates, exchange rates,
inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and
regional supply and demand, the political and economic conditions of major mineral-producing countries
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MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
throughout the world, and the cost of substitutes, inventory levels and carrying charges. Future serious
price declines in the market value of precious metals or other minerals could cause continued development
of and commercial production from the Company’s properties to be impracticable. Depending on the price
of precious metals and other minerals, cash flow from mining operations may not be sufficient and the
Company could be forced to discontinue production and may lose its interest in, or may be forced to sell,
some of its properties. Future production from the Company’s mineral exploration properties is dependent
upon the prices of precious metals and other minerals being adequate to make these properties economic.
In addition to adversely affecting the Company’s future resource or reserve estimates, if any, and its
financial condition, declining commodity prices can impact operations by requiring a reassessment of the
feasibility of a particular project. Such a reassessment may be the result of a management decision or may
be required under financing arrangements related to a particular project. Even if the project is ultimately
determined to be economically viable, the need to conduct such a reassessment may cause substantial
delays or may interrupt operations until the reassessment can be completed.
Government Regulation
The development and mineral exploration activities of the Company are subject to various laws governing
prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic
substances, land use, water use, land claims of local people and other matters. In addition, no assurance
can be given that new rules and regulations will not be enacted or that existing rules and regulations will
not otherwise be applied in a manner which could limit or curtail production or development in any of the
jurisdictions in which the Company operates. Amendments to other current laws and regulations governing
mineral exploration and development or more stringent implementation thereof could also have a
substantial adverse impact on the Company.
Dividend Policy
No dividends on the common shares have been paid by the Company to date. Payment of any future
dividends will be at the discretion of the Company’s board of directors after taking into account many
factors, including the Company’s operating results, financial condition and current and anticipated cash
needs.
Dilution to the Company Common Shares
As of March 9, 2022, the Company had 160,634,785 common shares and 43,577,785 convertible
securities issued and outstanding. The increase in the number of securities issued and outstanding and
the possibility of sales of such shares may have a depressive effect on the price of the common shares.
In addition, as a result of such additional securities, the voting power of the existing shareholders in the
Company will be diluted.
Key Executives
The Company is dependent on the services of key executives, including the directors of Murchison and a
small number of highly skilled and experienced executives and personnel. Due to the relatively small size
of the Company, the loss of these persons or the Company’s inability to attract and retain additional highly
skilled employees may adversely affect its business and future operations.
Conflicts of Interest
Certain directors and officers of the Company also serve as directors and/or officers of other companies
involved in natural resource exploration and development and consequently there exists the possibility for
such directors and officers to be in a position of conflict. Any decision made by any of such directors and
officers involving Murchison should be made in accordance with their duties and obligations to deal fairly
and in good faith with a view to the best interests of Murchison and its shareholders. In addition, each of
the directors is required to declare and refrain from voting on any matter in which such directors may have
a conflict of interest in accordance with the procedures set forth in the Canada Business Corporations Act
and other applicable laws.
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MURCHISON MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS – DECEMBER 2021
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements based on the Company’s current expectations.
Forward-looking information can often be identified by forward looking words such as “anticipate”,
“believe”, “expect”, “goal”, “plan”, “intend”, “estimate” or similar words suggesting future outcomes, or other
expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or
performance.
These forward-looking statements are subject to risks, uncertainties and other factors that could cause
actual results to differ materially from those presented in this document. Accordingly, the Company
undertakes no obligation to update forward-looking statements if circumstances or management’s
estimates or opinions should change, unless required by law. Readers are cautioned not to place undue
reliance on forward-looking information.
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