NGEX MINERALS LTD.
2020 YEAR END REPORT
Management’s Discussion and Analysis
and
Consolidated Financial Statements
For the Year Ended December 31, 2020
(AUDITED)
NGEX MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2020
(Amounts in Canadian Dollars unless otherwise indicated)
The following management’s discussion and analysis (“MD&A”) of NGEx Minerals Ltd. (“NGEx Minerals” or the
“Company”) should be read in conjunction with the consolidated financial statements for the year ended December
31, 2020 and related notes therein. The financial information in this MD&A is reported in Canadian dollars unless
otherwise indicated and is derived from the Company’s consolidated financial statements prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board. The effective date of this MD&A is April 15, 2021. Additional information about the Company and its business
activities is available on SEDAR at www.sedar.com and the Company’s website www.ngexminerals.com.
NGEx Minerals was incorporated on February 21, 2019 under the Canada Business Corporations Act in connection
with a plan of arrangement to reorganize the business of Josemaria Resources Inc. (“Josemaria”), which was
completed on July 17, 2019 (the “Josemaria Arrangement”). Accordingly, certain comparative information presented
in this MD&A has been prepared on a continuity of interest basis of accounting, which requires that prior to July 17,
2019, the assets, liabilities and results of operations and cash flows of NGEx Minerals be on a ‘carve-out’ basis from
the consolidated financial statements and accounting records of Josemaria, in accordance with the financial reporting
framework specified in subsection 3.11(6) of National Instruments 52-107, Acceptable Accounting Principles and
Auditing Standards, for carve-out financial statements. As the carve-out entity did not operate as a separate legal
entity prior to July 17, 2019, the financial position, results of operations and cash flows do not necessarily reflect the
financial position, results of operations and cash flows had the carve-out entity operated as an independent entity
during the comparative periods presented.
Some of the statements in this MD&A are forward-looking statements that are subject to risk factors set out in the
cautionary note contained herein.
CORE BUSINESS
NGEx Minerals is a mineral exploration company with current exploration projects in Argentina and Chile. While the
Company currently holds copper-gold and gold projects in South America, going forward it may also consider other
jurisdictions and commodities with an emphasis on the quality and value-creation potential of each opportunity rather
than a strict commodity or geographic focus.
The Company’s current flagship asset is its large Los Helados copper-gold deposit, located in Region III of Chile. The
Company is the majority partner and operator of the Los Helados Project, which is subject to a Joint Exploration
Agreement with its partner, Nippon Caserones Resources Co. Ltd. (“NCR”). NCR became the Company’s partner on
April 1, 2020 when Pan Pacific Copper (“PPC”) transferred its interest in Los Helados to NCR. NCR is a subsidiary of
JX Nippon Mining and Metals Corporation, a Tokyo-based mining and smelting company that also owns the Caserones
Mine, located approximately 12 km from Los Helados.
The Company’s strategy is to create value for its shareholders through prudent management and deployment of its
capital resources, by expanding and increasing the quality of its mineral resources through successful exploration and
acquisitions and by advancing the engineering and other studies that are required to prepare its projects for eventual
development by the Company and its partners or by third parties. The overall objective is to position the Company
as a top tier mineral exploration-development investment.
The Company has a strong management team and board with extensive experience in the resource sector, particularly
in Chile and Argentina, where the Company’s current exploration projects are located. The board and management
team have an appropriate mix of geological, engineering, financial, and business skills to advance the Company’s
projects and to generate value for its shareholders.
1
The Company’s most recent Mineral Resource estimate for the Los Helados Project, with an effective date of April 26,
2019, is summarized in the following table:
Los Helados Mineral Resource (0.33% CuEq Cutoff)
Tonnage
Resource Grade
Contained Metal
Class
(million
tonnes)
Indicated
2,099
Inferred
827
Cu
(%)
0.38
0.32
Au
(g/t)
Ag
(g/t)
CuEq
(%)
0.15
0.10
1.37
1.32
0.48
0.39
Cu
(billion
lbs)
17.6
5.8
Au
(million
oz)
10.1
2.7
Ag
(million
oz)
92.5
35.1
The key assumptions, parameters, and methods used to estimate the mineral resources are contained in the 43-101
technical report for the project, entitled “Technical Report on the Los Helados Porphyry Copper-Gold Deposit, Chile”,
dated August 6, 2019 and authored by F. Devine, P.Geo., G. Zandonai, RMCMC, and G. Di Prisco, P.Geo. This report
is available on the Company’s website at www.ngexminerals.com or under the Company’s profile at www.sedar.com.
The Company’s common shares are listed on the TSX Venture Exchange under the symbol “NGEX”.
2020 OPERATING HIGHLIGHTS
Initial Reconnaissance Program at Valle Ancho Completed
The Company successfully completed an initial field program at the Valle Ancho Project, which was undertaken from
October 2019 to late March 2020. The project consists of a significant land package in the Argentine Province of
Catamarca, covering approximately 1,000 km2 of underexplored and highly prospective ground. The Valle Ancho
Project is located on the Argentine side of Chile’s renowned Maricunga Gold Belt, and earlier exploration work
performed in the 1990’s has yielded some interesting results, including two copper-gold porphyry prospects and one
gold prospect.
During its maiden campaign, the Company achieved its main objectives, which were to review historical data, perform
mapping and surface sampling, and conduct an airborne geophysical survey over the project area to identify, develop
and prioritize targets for further evaluation. Processing and interpretation of the results from the surface sampling
and airborne geophysical surveys undertaken at the Valle Ancho Project have generated several interesting copper
and gold targets for future follow-up, including: two large targets with outcropping porphyry copper mineralization,
two targets with outcropping epithermal gold mineralization; and a copper skarn target.
The Valle Ancho Project is subject to an option agreement, for which an extension was granted in August 2020,
pursuant to which the Company may earn a 100% interest in the project by making US$8.2 million in expenditures
on the project by December 2022.
Low Cost, Business Development Initiatives Continue
For the better part of the year ended December 31, 2020, the Company’s main focus was the identification and
assessment of projects for potential acquisition. The undertaking of these low cost project generation and business
development initiatives is consistent with the Company’s goal of bolstering its asset portfolio and establishing itself as
a top tier mineral exploration-development investment, but also aligned with its implementation of cost savings
measures in response to COVID-19, and the attendant increase in volatility in financial markets.
2
As of the effective date of this MD&A, no discussions with counterparties have progressed to the execution of
contractual agreements, and the Company continues to be patient and diligent in its search for its next cornerstone
asset, which will complement its current exploration portfolio. While at any given time discussions and activities may
be in progress on a number of these potential acquisition targets, there is no assurance that these corporate activities
will ever progress to the stage where a potential acquisition might be successfully completed.
OUTLOOK AND CONTINUED RESPONSE TO COVID-19
Last season’s exploration program confirmed the prospectivity of the Valle Ancho Project and successfully identified a
number of copper and gold targets that merit future analysis and drill testing. The Company has received expressions
of interest in Valle Ancho from potential joint venture partners and continues to assess these options in conjunction
with considering self-funding further work. The extension to the option’s expenditure deadline to December 2022 will
provide the Company with the flexibility to complete a thorough assessment of the foregoing and develop a plan to
advance the Valle Ancho Project.
Notwithstanding, it is anticipated that the Company’s primary focus for the foreseeable future will continue to be its
project generation and business development initiatives, which are directed towards identifying new projects for
potential acquisition. With the strong ongoing support that it receives from its key shareholders, the Company seeks
to capitalize on opportunities to grow its portfolio of exploration and development projects, ultimately strengthening
its thesis as a premier exploration-development investment opportunity.
As the Company continues to monitor developments with respect to COVID-19, both globally and within its operating
jurisdictions, it may implement changes to its business as may be deemed appropriate to mitigate any potential impacts
to its business and its employees, contractors, visitors, and stakeholders (collectively, “Stakeholders”). Such changes
may include, but are not limited to, temporary closures of the Company’s project sites or offices, and deviations from
the timing and nature of previous operating plans. Moreover, sustained COVID-19 outbreaks globally have resulted in
operational and supply chain delays and disruption as a result of governmental regulation and preventative measures
being implemented worldwide, including in Argentina and Chile. The Company could also be required to close, curtail
or otherwise limit its operating activities as a result of the implementation of any such governmental regulation or
preventative measures in the jurisdictions in which the Company operates, or as a result of sustained COVID-19
outbreaks at its project site or facilities. Any such closures or curtailments could have an adverse impact on the
business of the Company. All non-critical business travel continues to be curtailed and this has delayed site visits
related to the Company’s review of potential business development targets.
While the Company initially implemented certain cost saving measures, such as reductions to discretionary
expenditures, in response to the COVID-19 crisis and the resulting global economic instability, it will likely continue
these initiatives until new capital funding arrangements can be secured, in the amounts required, and on terms
satisfactory to the Company. Such arrangements may include but are not limited to equity issuances, credit facilities
and other debt instruments, disposition of mineral properties and investments, or the establishment of joint ventures.
RESULTS FROM OPERATIONS
Year Ended
Net loss ($000’s)
Loss per share, basic and diluted ($)
Dec-20
Dec-191
Dec-181
5,893
0.05
5,307
0.04
6,337
0.05
Total assets ($000’s)
5,003
1 Amounts presented in the table relating to periods prior to July 17, 2019, the completion date of the Josemaria
Arrangement, have been prepared and presented in accordance with the continuity of interest basis of accounting.
10,840
5,378
3
NGEx Minerals is a junior exploration company and, as such, its net losses are largely driven by its exploration
and project investigation activities and there is no expectation of generating operating profits until it identifies and
develops a commercially viable mineral deposit.
Key financial results for the last eight quarters are provided in the table below.
Three Months Ended
Dec-20
Sep-20
Jun-20
Mar-20
Dec-19
Sep-191
Jun-191 Mar-191
Exploration costs ($000's)
563
390
484
1,867
1,092
604
801
1,353
Operating loss ($000’s)
1,302
1,684
829
2,272
1,533
1,085
1,027
1,656
Net loss ($000’s)
1,302
1,678
843
2,070
1,549
1,074
1,034
1,650
Net loss per share, basic and
diluted ($)
0.01
0.01
0.01
0.02
0.01
0.01
0.01
0.01
1 Amounts presented in the table relating to periods prior to July 17, 2019, the completion date of the Josemaria Arrangement, have been
prepared and presented in accordance with the continuity of interest basis of accounting.
Due to the geographic location of the Company’s mineral properties, the Company’s business activities fluctuate
with the seasons, through increased exploration activities during the summer months in South America. As a
result, a general recurring trend is the increase in exploration expenditures, and therefore net losses, for the
fourth quarter and first quarter of a fiscal year, relative to the second and third quarters. In addition, other relevant
factors, such as the financial position of the Company, other corporate initiatives, as well as the type and scope
of planned exploration/project work, could affect the level of exploration activities and net loss in a particular
period.
NGEx Minerals incurred a net loss of $5.9 million for the year ended December 31, 2020 (2019: $5.3 million),
including an operating loss of $6.1 million (2019: $5.3 million). Exploration and project investigation costs are one
of the most significant expenditure categories of the Company and for the year ended December 31, 2020
accounted for approximately 54% of the operating losses (2019: 73%). This is reflective of the Company’s
accounting policy to expense its exploration costs through the consolidated statement of comprehensive loss,
except for mineral property option payments and mineral property acquisition costs, which are capitalized.
Exploration and project investigation costs for the year ended December 31, 2020 were $3.3 million (2019: $3.9
million). The primary driver of this decrease is the cessation of field activity in 2020 as a result of COVID-19 and
related travel restrictions and safety concerns. By comparison, during 2019, the Company continued environmental
baseline studies at the Los Helados Project, which required field and administrative support. In addition, during
the year ended December 31, 2020, the Company terminated its option to earn into the Nacimientos properties,
and accordingly expenditures related to this project have decreased compared to 2019. These decreases have
been partially offset by an increase in project generation activities and a generally larger field program undertaken
at the Valle Ancho Project. Namely, during the 2019/2020 field season, which ran until March 2020, the Company
completed an initial exploration campaign at Valle Ancho, including field examination, surface sampling and mapping
of existing prospects, and the undertaking of an airborne geophysical survey. By comparison, the 2018/2019 field
program, which continued through March 2019, only focused on continuation of environmental baseline studies at
the Los Helados Project, with minimal other field work conducted.
As noted above, in August 2020, the Company wrote off all capitalized costs related to the optioned Nacimientos
properties, totaling $827,343 (2019: $nil). The Company elected to opt out of the earn-in at the Nacimientos
properties, by allowing the extended deadline of August 16, 2020 lapse without making the scheduled US$400,000
option payment.
4
Excluding share-based compensation, administration costs for the year ended December 31, 2020 totaled $1.4
million (2019: $1.0 million). Share-based compensation, a non-cash cost, reflects the amortization of the estimated
fair value of options over their vesting period and is based to a large degree on the Company’s share price and its
volatility. The actual future value to the option holders may differ materially from these estimates as it depends
on the trading price of the Company’s shares if and when the options are exercised. In addition, as the granting
of options and their vesting is at the discretion of the Board, the related expense is unlikely to be uniform across
quarters or financial years. In addition, share-based compensation relating to periods prior to the completion of
the Josemaria Arrangement on July 17, 2019, were allocated from amounts previously reported by Josemaria, and
such allocations may not necessarily reflect, or be otherwise indicative of, the future financial performance of the
Company.
Administration costs, exclusive of share-based compensation costs, for the year ended December 31, 2020 were
higher than 2019 due primarily to higher compensation costs and management fees. The higher administration
costs reflect the additional corporate costs associated with operating a stand-alone public entity following the
completion of the Josemaria Arrangement on July 17, 2019. In addition, for the year ended December 31, 2020,
the Company had higher professional fees than the prior year, which is reflective of increased professional legal
consultation incurred as a result of its aforementioned business development initiatives.
Also, the Company recognized a net monetary loss of $6,022 during the year ended December 31, 2020 (2019:
$31,882), in relation to the application of hyperinflationary accounting for the Company’s Argentine subsidiaries,
which began July 1, 2018. The monetary loss recognized is the result of changes in the Argentine price indices
and changes to the Company’s net monetary position during the respective years. Further discussion regarding
the application of hyperinflationary accounting has been provided in the notes to the consolidated financial
statements.
In addition, during 2020, the Company began acquiring and transferring marketable securities as a mechanism to
facilitate intragroup funding transfers between its Canadian parent and its Argentine operating subsidiaries.
Accordingly, for the year ended December 31, 2020, the Company recognized a gain of $270,198 (2019: $nil) on
the use of marketable securities for the purposes of facilitating intragroup funding transfers, which represents the
net benefit of having used this funding mechanism over traditional methods.
No tax recovery is recognized as a result of the nature of the Company’s activities and the lack of reasonably
expected taxable profits in the near term.
In other comprehensive income, the Company reported a foreign currency translation gain of $62,413 for the year
ended December 31, 2020 (2019: loss of $508,120) on translation of subsidiary company accounts from their
functional currency to the Canadian dollar presentation currency. For the year ended December 31, 2020, the
foreign currency translation gain is primarily the result of fluctuations of the Canadian dollar relative to the Chilean
peso over the year. In addition, for the year ended December 31, 2020, the impact of hyperinflation was a loss of
$179,426 (2019: $49,427), and consists of adjustments recognized on the continuing inflation of opening non-
monetary balances during the year and the ongoing translation of the Company’s Argentine subsidiaries into the
Canadian dollar presentation currency.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2020, the Company had cash of $0.9 million and net working capital of $0.5 million, compared to
cash of $5.6 million and net working capital of $5.3 million, as at December 31, 2019. The decrease in the Company’s
cash and net working capital is due primarily to funds used in operations.
The Company plans to use the majority of its cash towards maintenance of its key exploration projects in South
America, progressing its business development efforts, and general corporate activities.
5
As an exploration company with no sources of revenue, the economic viability of the Company’s long-term business
plan is impacted by its ability to obtain financing, and global economic conditions impact the general availability of
financing through public and private debt and equity markets, as well as through other avenues. Accordingly, the
Company is cognisant of the heightened volatility of global financial markets following the novel coronavirus outbreak
worldwide and recent geopolitical developments, and will continue reducing discretionary expenditures and exercising
additional caution and prudence in the management and deployment of its current working capital.
On February 19, 2021, the Company obtained an unsecured US$3.0 million credit facility (the “2021 Facility”) from
Zebra Holdings and Investments S.à.r.l. (“Zebra”) and Lorito Holdings S.à.r.l. (“Lorito”) to provide financial flexibility
to fund ongoing exploration and for general corporate purposes. Zebra and Lorito report their security holdings in the
Company as a joint actor, as the term is defined by Canadian securities regulations, and are related parties by virtue
of their combined shareholding in the Company in excess of 20%.
Based on NGEx Minerals’ financial position at December 31, 2020, and the 2021 Facility, the Company does not
anticipate the need to obtain further funding to continue its planned operations for at least twelve months from
December 31, 2020. However, the Company does anticipate the need for further funding should it seek to reinitiate
substantial field programs at its South American projects or to repay amounts drawn against the 2021 Facility, which
matures in February 2022. Accordingly, the Company is currently evaluating potential additional sources of financing.
Historically, including the period prior to the completion of the Josemaria Arrangement, capital requirements have
been primarily funded through equity financing, joint ventures, disposition of mineral properties and investments, and
the use of short-term credit facilities extended by its major shareholders, such as Zebra and Lorito.
While management is confident that additional sources of funding will be secured to fund future field programs at its
South American projects, if so decided, and to repay amounts drawn against the 2021 Facility in February 2022, factors
that could affect the availability of financing include the progress and results of ongoing exploration at the Company’s
mineral properties, the state of international debt and equity markets, and investor perceptions and expectations of
the global copper, gold, and/or silver markets. There can be no assurance that such financing will be available in the
amount required at any time or for any period or, if available, that it can be obtained on terms satisfactory to the
Company. If necessary, the Company may explore opportunities to reduce its discretionary expenditures, revise the
due dates of its liabilities, negotiate deferrals on upcoming lump sum payments with respect to the Company’s mineral
properties, and/or settle its liabilities through the issuance of the common shares and other equity instruments. Based
on the actual deployment of the Company’s current working capital, the amounts available through the 2021 Facility,
and the amount of funding raised, if any, the Company’s planned initiatives and other work programs may be revised,
as necessary.
RELATED PARTY TRANSACTIONS
Under the normal course of operations, the Company may undertake transactions or hold balances with related parties.
Namely, the Company engages with Josemaria and Filo Mining Corp. (“Filo Mining”), related parties by way of directors,
officers and shareholders in common, and MOAR Consulting Inc. (“MOAR”), an exploration consulting firm, of which a
director of the Company is the president and proprietor.
Related party services
The Company has a cost sharing arrangement with Josemaria and Filo Mining. Under the terms of this arrangement,
the Company provides management, technical, administrative and/or financial services (collectively, “Management
Services”) to Josemaria and Filo Mining, and vice versa. In addition, the Company engages MOAR, to provide
exploration consultation. These transactions were incurred in the normal course of operations, and are summarized
as follows:
6
Management Services to Josemaria
Management Services to Filo Mining
Management Services from Josemaria
Management Services from Filo Mining
Exploration Consultation from MOAR
Related party balances
Year ended
December 31,
2019
2020
139,906
500,101
(150,750)
(433,148)
(106,875)
84,051
363,373
(72,485)
(238,003)
(15,625)
The amounts due from (to) related parties, and the components of the consolidated statement of financial position in
which they are included, are as follows:
Receivables and other assets
Receivables and other assets
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Key management compensation
Related Party
December 31,
2020
December 31,
2019
Josemaria
Filo Mining
Josemaria
Filo Mining
MOAR
-
5,850
-
(11,752)
(14,125)
16,848
57,490
(102,675)
(64,222)
(17,656)
The Company’s key management personnel have the authority and responsibility for overseeing, planning, directing
and controlling its activities and consist of the Board of Directors and members of the executive management team.
Total compensation expense for key management personnel, and the composition thereof, is as follows:
Salaries and wages
Short-term employee benefits
Directors fees
Stock-based compensation
Year ended
December 31,
2019
304,824
6,351
60,538
404,852
776,565
2020
435,333
15,440
82,000
514,877
1,047,650
SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are provided in Note 3 to the consolidated financial statements for
the year ended December 31, 2020, as on SEDAR at www.sedar.com.
New Accounting Pronouncements
The IASB and/or the IFRS Interpretations Committee have issued new standards and amendments, or
interpretations to existing standards, which were not yet effective and not applied by the Company as at December
31, 2020. The Company continues to evaluate these changes to determine their impact, if any.
7
IAS 16, Property, plant and equipment
IAS 16 has been amended to provide clarity with respect to the treatment of net proceeds generated from selling
any items produced while bringing an item of property, plant and equipment to the location and condition
necessary for it to be capable of operating in the manner intended by the entity. Specifically, the amendments
prohibit entities from deducting amounts resulting from the selling of items produced during this phase from the
cost of property, plant and equipment. Instead, an entity shall recognize such sales proceeds and related costs in
profit or loss.
The amendments to IAS 16 are effective for annual reporting periods beginning on or after January 1, 2022, with
early adoption permitted. Upon adoption, the amendments shall be applied retrospectively, but only to property,
plant and equipment assets commissioned for their intended use by management on or after the beginning of the
earliest period presented in the financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements in accordance with IFRS requires management to make
estimates, assumptions and judgements that affect the reported amounts of assets, liabilities and expenditures
on the financial statements. These estimates, assumptions and judgements are based on management’s best
knowledge of the relevant facts and circumstances taking into account previous experience. Actual results could
differ and such differences could be material. Estimates, assumptions and judgements are reviewed on an ongoing
basis and are based on historical experience and other facts and circumstances. Revisions to estimates,
assumptions and judgements, and the resulting effects on the carrying amounts of the Company’s assets and
liabilities, are accounted for prospectively. Information about estimates, assumptions, judgments and other
sources of estimation uncertainty as at December 31, 2020 that have a risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within the next year are provided below:
Valuation of mineral properties – The Company carries the acquisition costs of its mineral properties at cost
less any provision for impairment. The Company reviews its mineral properties for indicators of impairment at
each reporting period end, which requires the Company to exercise key judgements, including but not limited to,
the Company’s right to explore the mineral property, whether the Company has further plans or budgets for
substantive expenditures for the ongoing exploration and evaluation of the mineral property, the impact of
exploration and evaluation results to date with respect to the mineral property, and the likelihood that the carrying
value of the mineral property will be recovered in the future through development or sale of the asset. If indicators
of impairment are identified, the Company would further review the carrying values of the applicable mineral
properties to determine if their carrying values may exceed their fair value, which also requires the Company to
make significant judgments and estimates. The judgments and estimates mentioned above are subject to various
risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values
of the mineral properties.
The Company has determined that no indicators of impairment exist for its mineral properties as of December 31,
2020.
8
FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash, receivables and other assets, trade payables and accrued
liabilities, and the amounts due to its exploration partner. Other than for the amounts due to its exploration
partner, the carrying values of the Company’s financial instruments are considered to be reasonable
approximations of fair value due to their short term nature. For amounts due to its exploration partner, the
Company revalues the liability from time to time based on revisions to the timing and amounts of expected future
settlement, which the Company believes is a reasonable approximation of fair value. Between revaluations, the
liability is accreted.
As at December 31, 2020, the Company’s financial instruments are exposed to the following financial risks,
including credit, liquidity and currency risks:
(i) Credit risks associated with cash is mitigated by the Company’s practice of holding the majority of its
cash with a large Canadian financial institution that has been accorded a strong investment grade
rating by a primary rating agency.
(ii) Liquidity risks associated with the inability to meet obligations as they become due, as further
discussed under the “Liquidity and Capital Resources” section above, is minimized through the
management of its capital structure and by maintaining good relationships with significant
shareholders and creditors. The Company also closely monitors and reviews its costs to date and
actual cash flows on a monthly basis.
Based on NGEx Minerals’ financial position at December 31, 2020, and the 2021 Facility, the
Company does not anticipate the need to obtain further funding to support ongoing operations
and maintenance of its South American exploration projects, as currently planned. However, the
Company does anticipate, the need for further funding should it seek to reinitiate field programs
at its South American projects and to repay amounts drawn against the 2021 Facility, which
matures in February 2022. Please refer to the discussion provided in the Liquidity and Capital
Resources section above for further details.
The maturities of the Company’s financial liabilities as at December 31, 2020 are as follows:
Total
Less than
1 year
1-5 years
More than
5 years
Accounts payable and
accrued liabilities
Due to exploration partner
Total
590,516
4,355,430
590,516
-
4,945,946
590,516
-
-
-
-
4,355,430
4,355,430
Pursuant to the Josemaria Arrangement, the Company assumed from Josemaria an obligation to fund
a partner’s share of exploration expenditures related to the La Rioja properties (the “Obligation”). In
accordance with the terms of a Joint Exploration Agreement between the Company and the partner,
NCR, the Company has elected to settle the Obligation through funding NCR’s share of exploration
expenditures, which remained US$3.4 million as at December 31, 2020, and has no defined timeline
for settlement. The Obligation has been discounted and recorded at its present value at an annual
effective rate of 8%.
9
(iii) Foreign currency risk can arise when the Company or its subsidiaries transact or have net financial
assets or liabilities which are denominated in currencies other than their respective functional
currencies.
At December 31, 2020, the Company’s largest foreign currency risk exposure existed at the level of
its Canadian headquarters, where the Company held a net financial liability position denominated in
US dollars having a Canadian dollar equivalent of approximately $276,000. A 10% change in the
foreign exchange rate between the US dollar, and the Canadian dollar, NGEx Minerals’ functional
financial
currency, would give rise
position/comprehensive loss.
increases/decreases of approximately $28,000
to
in
OUTSTANDING SHARE DATA
As at April 15, 2021, the Company had 124,836,604 common shares outstanding and 7,182,500 share options
outstanding under its share-based incentive plan.
RISKS AND UNCERTAINTIES
The operations of the Company are speculative due to the high-risk nature of its business, which includes the
acquisition, financing, exploration, development and operation of mineral and mining properties. There are a
number of factors that could negatively affect the Company’s business and the value of its common shares, and
these risk factors could materially affect the Company’s future operations and financial position and could cause
actual events to differ materially from those described in forward-looking statements relating to the Company.
Significant risk factors have been identified by the Company and are listed below. The following information
pertains to the outlook and conditions currently known to the Company that could have a material impact on the
financial condition of the Company. Other factors may arise that are not currently foreseen by management of the
Company that may present additional risks in the future. Current and prospective security holders of the Company
should carefully consider these risk factors, as they could materially affect the Company’s future operations and
could cause actual events to differ materially from those described in forward-looking statements relating to the
Company.
Exploration and Development Risk
Mining exploration, development and operations generally involve a high degree of risk that cannot be
eliminated, and which can adversely impact the Company’s success and financial performance.
Exploration for and development of mineral deposits involves a high degree of risk and few properties
that are explored are ultimately developed into producing mines.
Discovery of mineral deposits is dependent upon a number of factors, not the least of which are the
technical skills of the exploration personnel involved and the capital required for the programs. The cost
of conducting programs may be substantial and the likelihood of success is difficult to assess. There is
no assurance that the Company’s mineral exploration activities will result in any discoveries of new bodies
of commercial ore. There is also no assurance that even if commercial quantities of ore are discovered
that a new ore body would be developed and brought into commercial production. The commercial
viability of a mineral deposit once discovered is dependent upon a number of factors, some of which are
discussed separately in the subsequent sections, and include the particular attributes of the deposit (such
as size, grade, metallurgy and proximity to infrastructure and labour), the interpretation of geological
data obtained from drilling and sampling; feasibility studies; the cost of water and power; anticipated
climatic conditions; cyclical metal prices; fluctuations in inflation and currency exchange rates; higher
input commodity and labour costs; commodity price fluctuations; government regulations, including
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regulations relating to prices, taxes, royalties, land tenure and use, allowable production, importing and
exporting of minerals, and environmental protection. Most of the above factors are beyond the control
of the Company. Development projects will also be subject to the successful completion of final feasibility
studies, issuance of necessary permits and other governmental approvals and receipt of adequate
financing, as major expenses are typically required to locate and establish Mineral Reserves, to develop
metallurgical processes and to construct mining and processing facilities at a particular site. The exact
effect of these factors cannot be accurately predicted, but the combination of any of these factors may
adversely affect the Company’s business.
The Company’s operations are subject to all of the hazards and risks normally encountered in the
exploration and development of copper, gold, and silver projects and properties, including unusual and
unexpected geologic formations, seismic activity, rock slides, ground instabilities or failures, mechanical
failures, flooding and other conditions involved in the drilling and removal of material, any of which could
result in damage to, or destruction of, facilities, damage to life or property, environmental damage and
possible legal liability.
As appropriate, the Company may seek to mitigate its exploration risk by diversifying its portfolio, or
through the establishment of joint ventures and option agreements with third parties.
Mineral Resources Estimates
The Company’s reported Mineral Resources are estimations only. No assurance can be given that the
estimated Mineral Resources will be recovered. By their nature, Mineral Resource estimations are
imprecise and depend, to a certain extent, upon statistical inferences, which may ultimately prove
unreliable because, among other factors, they are based on limited sampling, and, consequently, are
uncertain because the samples may not be representative. Mineral Resource estimations may require
revision (either up or down). There are numerous uncertainties inherent in estimating Mineral Resources,
including many factors beyond the Company’s control. Such estimation is a subjective process, and the
accuracy of any Mineral Resource estimate is a function of the quantity and quality of available data and
of the assumptions made and judgments used in engineering and geological interpretation. There can
be no assurance that recoveries in small scale laboratory tests will be duplicated in larger scale tests
under on-site conditions. In particular, factors that may affect Mineral Resource estimates include:
changes in interpretations of mineralization geometry and continuity of mineralization zones;
input parameters used in the Whittle shell that constrains the Mineral Resources amenable to
open pit mining methods;
metallurgical and mining recoveries;
operating and capital cost assumptions;
metal price and exchange rate assumptions;
confidence in modifying factors, including assumptions that surface rights to allow infrastructure
to be constructed will be forthcoming;
delays or other issues in reaching agreements with local or regulatory authorities and
stakeholders;
changes in land tenure requirements or permitting requirements from those discussed in the
report; and
changes in the environmental regulations or laws governing the property.
Changes in key assumptions and parameters could result in a restatement of Mineral Resource estimates.
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability and there
is no assurance that they will ever be mined or processed profitably. Due to the uncertainty which may
attach to Mineral Resources, there is no assurance that all or any part of Measured or Indicated Mineral
Resources will ever be converted into Mineral Reserves. Any material reductions in estimates of Mineral
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Resources could have a material adverse effect on the Company’s results of operations and financial
condition.
Title Risk
The Company has investigated its right to explore and exploit its properties and, to the best of its
knowledge, those rights are in good standing. The results of the Company’s investigations should not be
construed as a guarantee of title. Other parties may dispute the title to a property, or the property may
be subject to prior unregistered agreements or liens and transfers or land claims by aboriginal, native,
or indigenous peoples. The title may be affected by undetected encumbrances or defects or
governmental actions. The Company has not conducted surveys of all of its properties, and the precise
area and location of claims or the properties may be challenged and no assurances can be given that
there are no title defects affecting such properties. The rules governing mining concessions in Chile and
Argentina are complex and any failure by the Company to meet requirements would have a material
adverse effect on the Company. Any defects in the title to the Company’s properties could have a material
and adverse effect on the Company.
No assurance can be given that applicable governments will not revoke or significantly alter the conditions
of the applicable exploration and mining authorizations nor that such exploration and mining
authorizations will not be challenged or impugned by third parties. Although the Company has not had
any problem renewing its licenses in the past there is no guarantee that it will always be able to do so.
Inability to renew a license could result in the loss of any project located within that license.
The Company is earning an interest in the Valle Ancho properties through an option agreement requiring
the Company to make certain expenditures with respect to the properties within a specific time period.
If the Company does not satisfactorily complete these option conditions in the period laid out in the
option agreement, the Company’s title to the related properties will not vest and the Company would
forego its interest in the Valle Ancho properties.
Surface Access
The Company has surface access rights but does not own any surface rights at the Los Helados Project.
The owners of the surface rights are in agreement with the Company’s subsidiaries in conducting
activities on their ground.
From time to time, a land possessor may dispute the Company’s surface access rights and, as a result,
the Company may be barred from its legal temporary occupation rights. Surface access issues have the
potential to result in the delay of planned exploration programs, and these delays may be significant.
Such delays may have a material adverse effect on the Company.
The Company may require additional surface rights and property interests to further develop or exploit
the resources on its properties, which will require negotiations with private landowners for the additional
ownership and/or surface rights in order for the Company to fully operate. Surface rights may also be
regulated and restricted by applicable law. There is no assurance that the Company will be able to obtain
the required surface rights or negotiate successfully with private landowners to allow it to develop its
properties and establish commercial mining operations on a timely basis. To the extent additional surface
rights are available, they may only be acquired at significantly increased prices, potentially adversely
impacting financial performance of the Company.
Environmental and Socio-Political Risks
The Company seeks to operate within environmental protection standards that meet or exceed existing
requirements in the countries in which the Company conducts activities. The Company also aims to
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conduct its activities in accordance with high corporate social responsibility principles. Present or future
laws and regulations, however, may affect the Company’s operations. Environmental legislation is
evolving in a manner that requires stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their officers, directors and employees. The Company is
currently engaged in exploration with limited environmental impact. Future environmental costs may
increase due to changing requirements or costs associated with exploration and the developing,
operating and closing of mines. The Company is subject to environmental regulation in the various
jurisdictions in which it operates. Failure to comply with these laws, regulations and permitting
requirements may result in enforcement actions, including orders issued by regulatory or judicial
authorities causing operations to cease or be curtailed, and may include corrective measures requiring
capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining
operations or in the exploration or development of mineral properties may also be required to
compensate those suffering loss or damage by reason of the mining activities and may have civil or
criminal fines or penalties imposed for violations of applicable laws or regulations. Furthermore,
environmental hazards may exist on the properties on which the Company holds interests which are
unknown to the Company at present and which have been caused by previous or existing owners or
operators of the properties.
Programs may also be delayed or prohibited in some areas due to technical factors, new legislative
constraints, social opposition or local government capacity or willingness to issue permits to explore in a
timely manner.
In parts of Argentina, there is environmental opposition to both mineral exploration and mining.
Accordingly, there may be a certain degree of anti-mining sentiment that could potentially affect the risk
of successfully exploring and developing the Company’s assets in those provinces.
Foreign Operations Risk
The Company conducts exploration activities in foreign countries, including Argentina and Chile. Each of
these countries expose the Company to risks that may not otherwise be experienced if all operations
were located in Canada. The risks vary from country to country and can include, but are not limited to,
civil unrest or war, terrorism, illegal mining, changing political conditions, fluctuations in currency
exchange rates, expropriation or nationalization without adequate compensation, changes to royalty and
tax regimes, high rates of inflation, labour unrest and difficulty in understanding and complying with the
regulatory and legal framework respecting ownership and maintenance of mineral properties, as well as
the revocation or suspension of previously issued mining permits. Changes in mining or investment
policies or shifts in political attitudes may also adversely affect Company’s existing assets and operations.
Real and perceived political risk may also affect Company’s ability to finance exploration programs and
attract joint venture or option partners, and future mine development opportunities. Chile is typically
viewed as a favourable mining jurisdiction; however, certain Canadian issuers have recently experienced
regulatory action with regards to Chilean operations, specifically with respect to increased permitting
timelines.
Numerous countries have introduced changes to mining regimes that reflect increased government
control or participation in the mining sector, including, but not limited to, changes of law affecting foreign
ownership, mandatory government participation, taxation and royalties, exploration licensing, export
duties, and repatriation of income or return of capital. There can be no assurance that industries, which
are deemed of national or strategic importance in countries in which the Company has assets, including
mineral exploration, will not be nationalized. There is a risk that further government limitations,
restrictions or requirements, not presently foreseen, will be implemented. Changes in policy that alter
laws regulating the mining industry could have a material adverse effect on the Company. There can be
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no assurance that the Company’s assets in these countries will not be subject to nationalization,
requisition or confiscation, whether legitimate or not, by an authority or body.
In addition, in the event of a dispute arising from foreign operations, the Company may be subject to
the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in Canada. The Company also may be hindered or prevented from enforcing its
rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. It
is not possible for the Company to accurately predict such developments or changes in laws or policy or
to what extent any such developments or changes may have a material adverse effect on the Company.
Non-compliance with applicable laws, regulations and permitting requirements (including allegations of
such) may result in enforcement actions, including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed or causing the withdrawal of permits or mining licenses, and
the imposition of corrective measures requiring material capital expenditure or remedial action resulting
in materially increased cost of compliance, reputational damage and potentially impaired ability to secure
future approvals and permits. The Company may be required to compensate third parties for loss or
damage and may have civil or criminal fines or penalties imposed for violations of applicable laws or
regulations.
Economic and Political Instability in Argentina
Some of the Company’s mineral properties, such as the Valle Ancho Project, are located in Argentina.
There are risks relating to an uncertain or unpredictable political and economic environment in Argentina,
especially as there is social opposition to mining operations in certain parts of the country. During an
economic crisis in 2001 to 2003 and again in 2014, Argentina defaulted on foreign debt repayments and
on the repayment on a number of official loans to multinational organizations. In addition, the
government has renegotiated or defaulted on contractual arrangements. The recently elected
government, which took office in December 2019, has reinstated currency controls previously lifted by
the opposition government, which, among other impacts, restricts the ability of companies and its citizens
to obtain United States dollars, in each case requiring Central Bank approval (resulting in, at times, a
limitation on the ability of multi-national companies to distribute dividends abroad in United States
dollars). While the political environment in Argentina continues to develop, and the status of currency
controls and restrictions remains fluid, past actions indicate that the Argentinean government may from
time to time alter or impose additional requirements or policies that may adversely affect the Company’s
activities in Argentina, or in its ability to attract joint venture partners or obtain financing for its projects
in the future. In addition, economic instability in Argentina may negatively impact the timeliness or
recoverability of amounts collectible from the government of Argentina.
Negative Operating Cash Flow
The Company is an exploration stage company and has not generated cash flow from operations. The
Company is devoting significant resources to the development and acquisition of its properties, however
there can be no assurance that it will generate positive cash flow from operations in the future. The
Company expects to continue to incur negative consolidated operating cash flow and losses until such
time as it achieves commercial production at a particular project. The Company currently has negative
cash flow from operating activities.
Uncertainty of Funding and Dilution of Shareholders’ Interests in the Company
The exploration and development of mineral properties requires a substantial amount of capital and may
depend on the Company’s ability to obtain financing through joint ventures, debt financing, equity
financing or other means. General market conditions, volatile metals prices, a claim against the Company,
a significant disruption to the Company’s business, or other factors may make it difficult to secure the
14
necessary financing. There is no assurance that the Company will be successful in obtaining required
financing as and when needed on acceptable terms. Failure to obtain any necessary additional financing
may result in delaying or indefinite postponement of exploration or development or even a loss of
property interest. If the Company needs to raise additional funds, such financing may substantially dilute
the economic and voting rights of the Company’s shareholders and reduce the value of their investment.
Since the Company’s capital needs depend on market conditions and other factors beyond its control, it
cannot predict or estimate the amount, timing or nature of any such future offering of securities. Thus,
holders of common shares of the Company bear the risk of any future offerings reducing the market
price of the common shares and diluting their shareholdings in the Company.
Metal Price Risk
The Company’s portfolio of properties and investments have exposure to predominantly copper, gold,
and silver. Commodity prices fluctuate widely and are affected by numerous factors beyond the
Company’s control, such as the sale or purchase of metals by various central banks and financial
institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United
States dollar and foreign currencies, global and regional supply and demand, and the political and
economic conditions of major metals-producing and metals-consuming countries throughout the world.
The prices of these metals greatly affect the value of the Company, the price of the common shares of
the Company and the potential value of its properties and investments. This, in turn, greatly affects its
ability to form joint ventures, option agreements and the structure of any joint ventures formed. This is
due, at least in part, to the underlying value of the Company’s assets at different metals prices.
COVID-19
The COVID-19 pandemic has negatively impacted and increased volatility of global financial markets and
may continue to do so. The economic viability of the Company’s long-term business plan is impacted by
its ability to obtain financing, and global economic conditions impact the general availability of financing
through public and private debt and equity markets, as well as through other avenues.
The health and safety of the Stakeholders remain the Company’s priority, and the Company’s facilities
and offices have implemented travel restrictions, surveillance, monitoring and response plans to reduce
the risk of COVID-19 exposure and outbreak, including health screening of personnel when appropriate.
All non-critical business travel has also been curtailed.
As the Company continues to monitor developments with respect to COVID-19, both globally and within
its operating jurisdictions, it will remain adaptive and will implement any such changes to its COVID-19
protocol, or its business in general, as may be deemed appropriate to mitigate any potential impacts to
its business and its Stakeholders. Such changes, may include, but are not limited to, temporary closures
of the Company’s project site or offices, and deviations from the timing and nature of previous operating
plans. Moreover, sustained COVID-19 outbreaks have resulted in operational and supply chain delays
and disruption as a result of governmental regulation and preventative measures being implemented
worldwide, including in Argentina. The Company could also be required to close, curtail or otherwise limit
its operating activities as a result of the implementation of any such governmental regulation or
preventative measures in the jurisdictions in which the Company operates, or as a result of sustained
COVID-19 outbreaks at its project site or facilities. Any such closures or curtailments could have an
adverse impact on the business of the Company.
Dependence on Key Personnel
The Company’s success will largely depend on the efforts and abilities of certain senior officers and key
employees. Certain of these individuals have significant experience in the mining industry and, in
particular, the mining industry in South America. While the Company does not foresee any reason why
15
such officers and key employees will not remain with the Company, if for any reason they do not, the
Company could be adversely affected. In addition, certain of these individuals are also senior officers
and key employees of Josemaria and/or Filo Mining and, pursuant to the terms of the Services
Agreement, the employment costs associated with these individuals are shared between the Company,
Josemaria and Filo Mining on a pro-rata basis. If such officers and key employees do not remain employed
with Josemaria and/or Filo Mining for the purposes of the cost-sharing basis under the Services
Agreement, the Company could be adversely affected. The Company has not purchased key man life
insurance for any of these individuals.
No Operating History
Exploration projects have no operating history upon which to base estimates of future cash flows.
Substantial expenditures are required to develop mineral projects. It is possible that actual costs and
future economic returns may differ materially from the Company’s estimates. There can be no assurance
that the underlying assumed levels of expenses for any project will prove to be accurate. Further, it is
not unusual in the mining industry for new mining operations to experience unexpected problems during
start-up, resulting in delays and requiring more capital than anticipated. There can be no assurance that
the Company’s projects will move beyond the exploration stage and be put into production, achieve
commercial production or that the Company will produce revenue, operate profitably or provide a return
on investment in the future. Mineral exploration involves considerable financial and technical risk. There
can be no assurance that the funds required for exploration and future development can be obtained on
a timely basis. There can be no assurance that the Company will not suffer significant losses in the near
future or that the Company will ever be profitable.
Conflicts of Interest
Some of the directors and employees/officers of the Company are also directors and employees/officers
of other companies that are similarly engaged in the business of acquiring, exploring and developing
natural resource properties. In addition, certain individuals also serve as officers of Josemaria and/or Filo
Mining and are subject to the Services Agreement. Such associations may give rise to conflicts of interest
from time to time. In particular, one of the consequences will be that corporate opportunities presented
to a director or employee/officer of the Company may be offered to another company or companies with
which the director or employee/officer is associated and may not be presented or made available to the
Company. The directors and employees/officers of the Company are required by law to act honestly and
in good faith with a view to the best interests of the Company, to disclose any interest that they may
have in any project or opportunity of the Company, and to abstain from voting on such matter. Conflicts
of interest that arise will be subject to and governed by the procedures prescribed by the Company’s
Code of Business Conduct and Ethics and the Canada Business Corporations Act.
Trading Price for the Common Shares is Volatile
The securities of publicly traded companies, particularly mineral exploration and development companies,
can experience a high level of price and volume volatility and the value of the Company’s securities can
be expected to fluctuate depending on various factors, not all of which are directly related to the success
of the Company and its operating performance, underlying asset values or prospects. These include the
risks described elsewhere in this MD&A. The trading price of the Company’s common shares has been
and may continue to be subject to large fluctuations, which may result in losses to investors. The trading
price of the Company’s common shares may increase or decrease in response to a number of events and
factors, including:
issuances of common shares or debt securities by the Company;
the Company’s operating performance and the performance of competitors and other similar
companies;
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the addition or departure of key management and other personnel;
the expiration of lock-up or other transfer restrictions on outstanding common shares;
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving the Company or its competitors;
the public’s reaction to the Company’s press releases, other public announcements and the
Company’s filings with the various securities regulatory authorities;
changes in recommendations by research analysts who track the Company’s common shares or
the shares of other companies in the resource sector;
the number of common shares to be publicly traded after an offering; and
the factors listed under the heading “Cautionary Note Regarding Forward-Looking Statements”.
In addition, the market price of the common shares is affected by many variables not directly related to
the Company’s success and therefore not within the Company’s control. Factors which may influence the
price of the Company’s securities, include, but are not limited to: worldwide economic conditions;
changes in government policies; local community opposition to mining projects generally; investor
perceptions; movements in global interest rates and global stock markets; variations in operating costs;
the cost of capital that the Company may require in the future; the market price of metals, including
copper, gold and silver; the price of commodities necessary for the Company’s operations;
recommendations by securities research analysts; the share price performance of the Company’s
competitors; news reports relating to trends, concerns, technological or competitive developments,
regulatory changes and other related industry and market issues affecting the mining sector; publicity
about the Company, the Company’s personnel or others operating in the industry; loss of a major funding
source; and all market conditions that are specific to the mining industry, including other developments
that affect the market for all resource sector shares, the breadth of the public market for the common
shares, and the attractiveness of alternative investments. The effect of these and other factors on the
market price of Shares on the exchanges on which the Company trades has historically made the
Company’s share price volatile and suggests that the Company’s share price will continue to be volatile
in the future.
As a result of any of these factors, the market price of the common shares at any given point in time
may not accurately reflect the long-term value of the Company. Securities class-action litigation often
has been brought against companies following periods of volatility in the market price of their securities.
The Company may in the future be the target of similar litigation. Securities litigation could result in
substantial costs and damages and divert management’s attention and resources.
Control of NGEx Minerals
As at the date of this MD&A, Zebra and Lorito, who report their security holdings as joint actors, are
control persons of NGEx Minerals (as defined by the Canadian securities regulations). As long as Zebra
and Lorito maintain significant interests in the Company, they will have the ability to exercise certain
influence with respect to its affairs and significantly affect the outcome of the votes of shareholders.
There is a risk that the interests of Zebra and Lorito differ from those of other shareholders.
As a result of the significant holdings of Zebra and Lorito, there is a risk that the Company’s securities
are less liquid and trade at a relative discount compared to circumstances where these persons did not
have the ability to influence or determine matters affecting NGEx Minerals. Additionally, there is a risk
that their significant interests in the Company discourages transactions involving a change of control
thereof, including transactions in which an investor, as a holder of the Company’s securities, would
otherwise receive a premium for its Company’s securities over the then-current market price.
17
Infrastructure
Development and exploration activities depend, to one degree or another, on adequate infrastructure.
Reliable roads, bridges, power and water supplies are important determinants that affect costs. The
Company’s ability to obtain a secure supply of power and water at a reasonable cost depends on many
factors, including: global and regional supply and demand; political and economic conditions; problems
that can affect local supplies; delivery; and relevant regulatory regimes. Power and water are currently
in short supply throughout Northern Chile and this may adversely affect the ability of the Company to
explore and develop its Chilean project. Unusual or infrequent weather phenomena, sabotage or
government, and other interference in the maintenance or provision of such infrastructure could
adversely affect the activities and profitability of the Company.
Establishing such infrastructure will require significant resources, identification of adequate sources of
raw materials and supplies and necessary cooperation from national and regional governments, none of
which can be assured. There is no guarantee that the Company will secure these power, water and
access rights going forward or on reasonable terms.
Current Global Financial Conditions
Market events and conditions can cause significant volatility to commodity prices. Notwithstanding
various actions by governments, concerns about the general condition of the capital markets, financial
instruments, banks, investment banks, insurers and other financial institutions can increase the levels of
volatility in the global stock markets, which can adversely affect the Company’s operations and the value
and price of the Company’s common shares. The Company is dependent on the equity markets as its
main source of operating working capital and the Company’s capital resources are largely determined by
the strength of the resource markets and by the status of the Company’s projects in relation to these
markets, and its ability to compete for the investor support of its projects. Access to public financing has
been negatively impacted by concerns over global growth rates and conditions. Consequently, equity
financing may not be available to the Company in the amount required at any time or for any period or,
if available, it may not be obtained on terms satisfactory to the Company.
Most recently, global financial markets experienced a period of correction and increased volatility during
the COVID-19 pandemic, which began in March 2020. While financial markets have generally recovered,
there is no guarantee that credit market conditions will not worsen, nor that favourable equity market
conditions will persist. A general risk-adverse approach to investing, decreases in consumer spending
and increases in the unemployment rate and consumer debt levels, which may become more
predominant as a result of market turmoil, may limit the Company’s ability to obtain future equity
financing. Inability to obtain financing at all, or on acceptable terms, may have a material adverse effect
on the Company’s business, financial condition, results of operations, cash flows or prospects.
Other events may also result in volatility and disruption to global supply chains, operations, mobility of
people, patterns of consumption and service, and financial markets, and therefore potentially have a
negative impact on the Company’s ability to secure financing on favourable terms, or at all, its access to
its projects, or its ability to execute its business initiatives, including its field programs. Such events may
include catastrophic events, either on a global scale or in the specific jurisdictions where the Company
has its projects, and include, but are not limited to, financial crises, such as that which occurred globally
in 2008, earthquakes, tsunamis, floods, typhoons, fires, power disruptions, other natural or manmade
disasters, terrorist attacks, wars, riots, civil unrest or other conflicts, outbreaks of a public health crises,
including epidemics, pandemics or outbreaks of new infectious diseases or viruses, as well as related
and attendant events.
Furthermore, general market, political and economic conditions, including, for example, inflation, interest
and currency exchange rates, structural changes in the global mining industry, global supply and demand
18
for commodities, political developments, legislative or regulatory changes, social or labour unrest and
stock market trends will affect the Company’s operating environment and its operating costs, profit
margins and share price. Uncertainty or adverse changes relating to government regulation, economic
and foreign policy matters, and other world events have the potential to adversely affect the performance
of and outlook for the Canadian and global economies, which in turn may affect the ability of the
Company to access financing on favourable terms or at all. The occurrence of negative sentiment or
events in the Canadian and broader global economy could have a material adverse effect on the
Company’s business, financial condition, results of operations, cash flows or prospects.
Currency Risk
The Company will transact business in a number of currencies including but not limited to the US Dollar,
the Argentine peso and the Chilean peso. The Argentine peso in particular has had significant fluctuations
in value relative to the US and Canadian dollars. Ongoing economic uncertainty in Argentina as well as
unpredictable changes to foreign exchange rules may result in fluctuations in the value of the Argentine
peso that are greater than those experienced in the recent past. Fluctuations in exchange rates may
have a significant effect on the cash flows of the Company. Future changes in exchange rates could
materially affect the Company’s results in either a positive or a negative direction. The Company does
not currently engage in foreign currency hedging activities.
Information Systems and Cyber Security
The Company's operations depend on information technology (“IT”) systems. These IT systems could
be subject to network disruptions caused by a variety of sources, including computer viruses, security
breaches and cyber-attacks, as well as disruptions resulting from incidents such as cable cuts, damage
to physical plants, natural disasters, terrorism, fire, power loss, vandalism and theft. The Company's
operations also depend on the timely maintenance, upgrade and replacement of networks, equipment,
IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these
and other events could result in information system failures, delays and/or increase in capital expenses.
The failure of information systems or a component of information systems could, depending on the
nature of any such failure, adversely impact the Company's reputation and results of operations.
Although to date the Company has not experienced any material losses relating to cyber attacks or other
information security breaches, there can be no assurance that the Company will not incur such losses in
the future. The Company's risk and exposure to these matters cannot be fully mitigated because of,
among other things, the evolving nature of these threats. As a result, cyber security and the continued
development and enhancement of controls, processes and practices designed to protect systems,
computers, software, data and networks from attack, damage or unauthorized access remain a priority.
As cyber threats continue to evolve, the Company may be required to expend additional resources to
continue to modify or enhance protective measures or to investigate and remediate any security
vulnerabilities.
19
Application of Anti-Corruption and Anti-Bribery Laws
The Company is required to comply with anti-corruption and anti-bribery laws, including the Extractive
Sector Transparency Measures Act, the Canadian Corruption of Foreign Public Officials Act and the U.S.
Foreign Corrupt Practices Act, as well as similar laws in the countries in which the Company conducts its
business. If the Company finds itself subject to an enforcement action or is found to be in violation of
such laws, this may result in significant penalties, fines and/or sanctions imposed on the Company
resulting in a material adverse effect on the Company.
Competition
There is aggressive competition within the mining industry for the discovery and acquisition of properties
considered to have commercial potential, as well as the necessary labour and supplies required to develop
such properties. The Company competes with other exploration and mining companies, many of which
have greater financial resources, operational experience and technical capabilities than the Company, for
the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and
retention of qualified employees and other personnel. The Company may not be able to maintain or
acquire attractive mining properties on terms it considers acceptable, or at all. Consequently, its financial
condition could be materially adversely affected.
Uninsurable Risks
Exploration, development and production operations on mineral properties involve numerous risks,
including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods,
earthquakes and other environmental occurrences, as well as political and social instability. It is not
always possible to obtain insurance against all such risks and the Company may decide not to insure
against certain risks because of high premiums or other reasons. Should such liabilities arise, they could
reduce or eliminate any further profitability and result in increasing costs and a decline in the value of
the securities of the Company. The Company does not maintain insurance against political risks.
Tax
The Company runs its business in different countries and strives to run its business in as tax efficient a
manner as possible. The tax systems in certain of these countries are complicated and subject to
changes. For this reason, future negative effects on the result of the Company due to changes in tax
regulations cannot be excluded. Repatriation of earnings to Canada from other countries may be subject
to withholding taxes. The Company has no control over withholding tax rates.
QUALIFIED PERSON AND TECHNICAL INFORMATION
The scientific and technical disclosure included in this MD&A have been reviewed and approved by Bob Carmichael, P.
Eng. (BC). Mr. Carmichael is the Company's Vice-President of Exploration and a Qualified Person under National
Instrument 43-101 Standards of Disclosure for Mineral Projects. (“NI 43-101”).
Mineral Resource estimates for the Los Helados Project have an effective date of April 26, 2019. The key assumptions,
parameters, and methods used to estimate the mineral resources are contained in the 43-101 technical report for the
project, entitled “Technical Report on the Los Helados Porphyry Copper-Gold Deposit, Chile”, dated August 6, 2019
and authored by F. Devine, P.Geo., G. Zandonai, RMCMC, and G. Di Prisco, P.Geo. This report is available on the
Company’s website at www.ngexminerals.com or under the Company’s profile at www.sedar.com.
20
Mineral Resources are reported using a CuEq cutoff grade. Copper equivalent is calculated using US$3.00/lb copper,
US$ 1,300/oz gold and US$23/oz silver, and includes a provision for selling costs and metallurgical recoveries
corresponding to three zones defined by depth below surface. The formulas used are: CuEq% = Cu% + 0.6264*Au
(g/t) + 0.0047*Ag (g/t) for the Upper Zone (surface to ~ 250 m); Cu% + 0.6366*Au (g/t) + 0.0077*Ag (g/t) for the
Intermediate Zone (~250 m to ~600 m); Cu% + 0.6337*Au (g/t) + 0.0096*Ag (g/t) for the Deep Zone (> ~600 m).
The Company’s Mineral Resource estimates as reported in this MD&A have been prepared in accordance with the CIM
Definition Standards that are incorporated by reference in NI 43-101.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made and information contained herein in the MD&A constitutes “forward-looking information” and
forward-looking statements” within the meaning of applicable securities legislation (collectively, “forward-looking
information” or “forward-looking statements”) concerning the business, operations, financial performance and
condition of NGEx Minerals. The forward-looking information contained in this MD&A is based on information available
to the Company as of the date of this MD&A. Except as required under applicable securities legislation, the Company
does not intend, and does not assume any obligation, to update this forward-looking information. Generally, any
statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance, (often, but not always, identified by words or phrases such
as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends",
“projects” , “estimates”, “budgets”, “scheduled”, “forecasts”, “assumes”, “intends”, “strategy”, “goals”, “objectives”,
“potential”, “possible”, "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events, conditions or results “will”, "may", "could", "would", “should”, "might" or "will
be taken", "will occur" or "will be achieved" or the negative connotations thereof and similar expressions) are not
statements of historical fact and may be forward-looking statements.
All statements other than statements of historical fact may be forward-looking statements. Forward-looking information
is necessarily based on estimates and assumptions that are inherently subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or implied by such forward-looking information, including
but not limited to: risks and uncertainties relating to, among other things, the inherent uncertainties regarding Mineral
Resource estimates, cost estimates, changes in commodity prices, currency fluctuation, financings, unanticipated
resource grades, infrastructure, results of exploration activities, cost overruns, availability of materials and equipment,
timeliness of government approvals, taxation, political risk and related economic risk and unanticipated environmental
impact on operations as well as other risks, and uncertainties and other factors, including, without limitation, those
referred to in the “Risks and Uncertainties” section of the MD&A, and elsewhere, which may cause the actual results,
level of activity, performance or achievements of the Company to be materially different from those expressed or
implied by such forward-looking information.
The Company believes that the expectations reflected in the forward-looking statements and information included in
this MD&A are reasonable but no assurance can be given that these expectations will prove to be correct and such
forward-looking statements and information should not be unduly relied upon. This statement and information is as
of the date of the MD&A. In particular, this MD&A contains forward-looking statements or information pertaining to:
the assumptions used in the Mineral Resources estimates for the Los Helados Project, including, but not limited to,
geological interpretation and grades; assumptions made in the interpretation of drill results, geology, grade and
continuity of mineral deposits; expectations regarding access and demand for equipment, skilled labour and services
needed for exploration and development of mineral properties; and that activities will not be adversely disrupted or
impeded by exploration, development, operating, regulatory, political, community, economic and/or environmental
risks. In addition, this MD&A may contain forward-looking statements or information pertaining to: the Company’s
ability to respond to or navigate, and/or methods by which it responds to or navigates, the COVID-19 pandemic; the
expected timing, nature or results of the Company’s recent business development initiatives; the expected nature or
usefulness of results related to the Company’s recently completed field season; potential of identifying prospective
21
targets at the Valle Ancho Project that warrant further evaluation and potential drill testing; the results and impact of
future exploration at the Valle Ancho Project; assumptions and interpretations around historical exploration results
obtained in regards to the Valle Ancho Project; the exploration potential of the Valle Ancho Property; assumptions and
interpretations around the Valle Ancho Project’s location relative to the Maricunga Gold Belt and the potential
correlation with respect to prospectivity; the timing, amount and duration of reductions to discretionary expenditures
and salaries; the materialization of opportunities for the Company to make acquisition of strategic assets; the ability of
the Company to secure additional financing and/or the quantum and terms thereof; exploration and development
plans and expenditures; the timing and nature of work undertaken to advance the Los Helados Project; the success
of future exploration activities; potential for the discovery of new mineral deposits; ability to build shareholder value;
expectations with regard to adding to Mineral Resources through exploration; expectations with respect to the
conversion of inferred resources to an indicated resources classification; ability to execute the planned work programs;
estimation of commodity prices, Mineral Resources, estimations of costs, and permitting time lines; ability to obtain
surface rights and property interests; currency exchange rate fluctuations; requirements for additional capital;
government regulation of mining activities; environmental risks; unanticipated reclamation expenses; title disputes or
claims; limitations on insurance coverage; and other risks and uncertainties.
Forward-looking information is based on certain assumptions that the Company believes are reasonable, including that
the current price of and demand for commodities will be sustained or will improve, the supply of commodities will
remain stable, that the general business and economic conditions will not change in a material adverse manner, that
financing will be available if and when needed on reasonable terms and that the Company will not experience any
material labour dispute, accident, or failure of plant or equipment. These factors are not, and should not be construed
as being, exhaustive. Although the Company has attempted to identify important factors that would cause actual
results to differ materially from those contained in forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated, or intended. There can be no assurance that such statements will prove
to be accurate, as the Company’s actual results and future events could differ materially from those anticipated in
such statements, as a result of the factors discussed in the “Risk and Uncertainties” section of this MD&A, and
elsewhere. All of the forward-looking information contained in this document is qualified by these cautionary
statements. Readers are cautioned not to place undue reliance on forward-looking information due to the inherent
uncertainty thereof.
Statements relating to "Mineral Resources" are deemed to be forward-looking information, as they involve the implied
assessment, based on certain estimates and assumptions, that the Mineral Resources described can be profitably
produced in the future.
22
Independent auditor’s report
To the Shareholders of NGEx Minerals Ltd.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of NGEx Minerals Ltd. and its subsidiaries (together, the Company) as at
December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
●
●
●
●
●
the consolidated statements of financial position as at December 31, 2020 and 2019;
the consolidated statements of comprehensive loss for the years then ended;
the consolidated statements of cash flows for the years then ended;
the consolidated statements of changes in equity for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
●
●
●
●
●
●
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Lana Kirk.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
April 15, 2021
NGEx Minerals Ltd.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
ASSETS
Current assets:
Cash
Receivables and other assets
Non-current assets:
Taxes receivable
Equipment
Mineral properties
TOTAL ASSETS
LIABILITIES
Current liabilities:
Trade payables and accrued liabilities
Non-current liabilities:
Due to exploration partner
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Contributed surplus
Deficit
Accumulated other comprehensive loss
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
Nature of Operations and Liquidity Risk (Note 1)
Commitments (Note 17)
Subsequent Events (Notes 17 and 18)
Note
December 31,
2020
December 31,
2019
5
5
6
$ 898,818
241,367
1,140,185
$ 5,559,454
479,886
6,039,340
105,950
26,314
4,105,871
4,238,135
-
35,106
4,765,205
4,800,311
5,378,320
10,839,651
590,516
718,065
7
345,977
309,481
936,493
1,027,546
43,053,810
1,058,841
(37,786,415)
(1,884,409)
4,441,827
43,053,810
419,228
(31,893,537)
(1,767,396)
9,812,105
$ 5,378,320
$ 10,839,651
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board:
/s/William A. Rand
Director
/s/Wojtek A. Wodzicki
Director
NGEx Minerals Ltd.
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
Note
2020
Year ended
December 31,
2019
Expenses
Exploration and project investigation
Impairment of mineral property interest
General and administration:
Salaries and benefits
Share-based compensation
Management fees
Professional fees
Travel
Promotion and public relations
Office and general
Operating loss
Other expenses (income)
Financing costs
Foreign exchange gain
Net monetary loss
Gain on use of marketable securities, net
Other losses (gains)
Other expenses
Net loss
Other comprehensive loss
Items that may be reclassified
subsequently to net loss:
Foreign currency translation
adjustment
Impact of hyperinflation
Comprehensive loss
10
6
9c
4
14
7
4
$ 3,303,659
$ 3,850,337
827,343
-
710,398
539,085
142,500
348,087
7,029
52,434
157,014
6,087,549
26,238
(18,041)
6,022
(270,198)
24,114
37,194
5,892,878
508,147
430,840
54,173
219,621
31,281
37,335
169,204
5,300,938
13,292
(22,633)
31,882
-
(16,560)
-
5,306,919
(62,413)
179,426
$ 6,009,891
508,120
49,427
$ 5,864,466
Basic and diluted loss per common share
$ 0.05
$ 0.04
Weighted average common shares
outstanding
124,793,652
124,793,652
The accompanying notes are an integral part of these consolidated financial statements.
2
NGEx Minerals Ltd.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Cash flows used in operating activities
Net loss for the year
Items not involving cash:
Depreciation
Write down of mineral property interest
Share-based compensation
Finance costs
Foreign exchange loss (gain)
Net monetary loss
Other losses (gains)
Net changes in working capital items:
Receivables and other
Trade payables and accrued liabilities
Cash flows from (for) financing activities
Cash received pursuant to the Josemaria
Arrangement
Funding received from Josemaria for operations
Payments made on behalf of exploration partner
Cash flows used in investing activities
Acquisition of equipment
Mineral properties and related expenditures
Note
2020
Year ended
December 31,
2019
6
9c
7
$
(5,892,878)
$
(5,306,919)
7,299
827,343
639,613
26,238
(7,892)
44,791
24,114
2,943
-
535,464
13,292
8,437
101,231
(16,560)
64,553
(19,990)
(4,286,809)
(335,960)
453,451
(4,544,621)
-
(5,965)
(5,965)
7,300,000
3,547,819
(13,292)
10,834,527
6
-
(133,558)
(133,558)
(35,578)
(735,664)
(771,242)
Effect of exchange rate change on cash
(234,304)
(214,969)
Increase (decrease) in cash during the year
(4,660,636)
5,303,695
Cash, beginning of the year
$ 5,559,454
$
255,759
Cash, end of the year
$ 898,818
$ 5,559,454
The accompanying notes are an integral part of these consolidated financial statements.
3
NGEx Minerals Ltd.
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
Note
Number of
Shares
Share Capital
Contributed
Surplus
Other Capital
Reserves
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
- $ - $ - $ 114,010,097
$ (108,186,386)
$ (1,209,849)
$ 4,613,862
-
-
-
-
-
-
-
-
3,549,600
535,464
6,977,645
-
81,599,768
(5,306,919)
-
(557,547)
$ (31,893,537) $ (1,767,396)
-
(5,864,466)
$ 9,812,105
$ (31,893,537)
-
(5,892,878)
$ (1,767,396)
-
(117,013)
$ (37,786,415) $ (1,884,409)
$ 9,812,105
639,613
(6,009,891)
$ 4,441,827
Balance, January 1, 2019
Funding and expenses paid by
Josemaria
Share-based compensation
Net cash received and liabilities
assumed pursuant to the Josemaria
Arrangement
Shares issued pursuant to the
Josemaria Arrangement
Adjustment for shares issued pursuant
to the Josemaria Arrangement
Net loss and other comprehensive loss
Balance, December 31, 2019
-
-
-
-
-
-
124,793,652
43,053,810
-
-
-
-
-
419,228
3,549,600
116,236
6,977,645
(43,053,810)
(81,599,768)
-
-
-
-
124,793,652 $ 43,053,810 $ 419,228 $ -
Balance, January 1, 2020
Share-based compensation
Net loss and other comprehensive loss
Balance, December 31, 2020
9c
124,793,652 $ 43,053,810 $ 419,228 $ -
-
-
-
-
-
639,613
-
124,793,652 $ 43,053,810 $ 1,058,841 $ -
The accompanying notes are an integral part of these consolidated financial statements.
4
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
1. NATURE OF OPERATIONS AND LIQUIDITY RISK
NGEx Minerals Ltd. (the “Company” or “NGEx Minerals”) was incorporated on February 21, 2019 under
the laws of the Canada Business Corporations Act in connection with a plan of arrangement to
reorganize Josemaria Resources Inc. (“Josemaria”), which was completed on July 17, 2019 (the
“Josemaria Arrangement”).
Pursuant to the Josemaria Arrangement, Josemaria transferred to NGEx Minerals cash of $7,300,000
million, its wholly owned subsidiaries that directly or indirectly hold the Los Helados properties in Chile,
the Nacimientos properties in Argentina and the La Rioja properties in Argentina, and $322,355 in
liabilities, comprised primarily of a contractual obligation to fund an exploration partners’ share of future
exploration activities at La Rioja. In exchange, NGEx Minerals issued to Josemaria 124,793,652 common
shares of the Company, which were distributed to holders of common shares of Josemaria on a pro
rata basis.
The Company’s principal business activities are the acquisition, exploration and development of mineral
properties located in South America. The Company’s registered office is located at Suite 2000, 885
West Georgia Street, Vancouver, British Columbia, V6C 3E8, Canada. The Company’s common shares
trade on the TSX Venture Exchange (the "TSXV") under the symbol "NGEX".
Based on NGEx Minerals’ financial position at December 31, 2020, and an unsecured US$3.0 million
credit facility secured by the Company subsequent thereto (see Note 18), these consolidated financial
statements have been prepared on the basis that the Company will continue as a going concern, which
assumes that it will be able to meet its existing obligations and commitments and fund ongoing
operations in the normal course of business for at least twelve months from December 31, 2020.
However, the Company does anticipates the need for further funding should it seek to reinitiate
substantial field programs at its South American projects or to repay amounts drawn against the credit
facility, which matures in February 2022.
Accordingly, the Company is currently evaluating potential additional sources of financing. Historically,
including the period prior to the completion of the Josemaria Arrangement, capital requirements have
been primarily funded through equity financing, joint ventures, disposition of mineral properties and
investments, and the use of short-term credit facilities extended by its major shareholders, such as
Zebra Holdings and Investments S.à.r.l. (“Zebra”) and Lorito Holdings S.à.r.l. (“Lorito”). Zebra and
Lorito are companies controlled by a trust settled by the late Adolf H. Lundin, and jointly extended the
Company the aforementioned US$3.0 million credit facility in February 2021. Zebra and Lorito report
their respective security holdings in the Company as joint actors, as the term is defined by Canadian
securities regulations, and are related parties by virtue of their combined shareholding in the Company
in excess of 20% (see Note 18).
5
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
While management is confident that additional sources of funding will be secured to fund future field
programs at its South American projects, if so decided, and to repay amounts drawn pursuant to the
credit facility, factors that could affect the availability of financing include the progress and results of
ongoing exploration at the Company’s mineral properties, the state of international debt and equity
markets (see Note 19), and investor perceptions and expectations of the global copper, gold, and/or
silver markets. There can be no assurance that such financing will be available in the amount required
at any time or for any period or, if available, that it can be obtained on terms satisfactory to the
Company. If necessary, the Company may explore opportunities to reduce its discretionary
expenditures, revise the due dates of its liabilities, negotiate deferrals on upcoming lump sum payments
with respect to the Company’s mineral properties, and/or settle its liabilities through the issuance of
the common shares and other equity instruments. Based on the actual deployment of the Company’s
current working capital, the amounts available through the aforementioned credit facility, and the
amount of funding raised, if any, the Company’s planned initiatives and other work programs may be
revised, as necessary.
2. BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), on
a going concern basis, which contemplates the realization of assets and settlement of liabilities in the
normal course of business. These consolidated financial statements are prepared on a historical cost
basis except for certain financial assets, which are measured at fair value.
In addition, certain comparative information as presented in these consolidated financial statements
have been prepared on a continuity of interest basis of accounting, which requires that prior to July
17, 2019, the assets, liabilities, results of operations and cash flows of NGEx Minerals be on a ‘carve-
out’ basis from the consolidated financial statements and accounting records of Josemaria, in
accordance with the financial reporting framework specified in subsection 3.11(6) of National
Instrument 52-107, Acceptable Accounting Principles and Auditing Standards, for carve-out financial
statements. As the carve-out entity did not operate as a separate legal entity, the financial position,
results of operations and cash flows do not necessarily reflect the financial position, results of
operations and cash flows had the carve-out entity operated as an independent entity during the
comparative period presented.
These consolidated financial statements were authorized for issuance by the Board of Directors of the
Company on April 15, 2021.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
These consolidated financial statements of the Company include the following subsidiaries:
6
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
Subsidiaries
Suramina Resources Inc.
NGEx Argentina Holdings Inc.
NGEx RioEx Holdings Inc.
Frontera Holdings (Bermuda) I Ltd.
Frontera Holdings (Bermuda) II Ltd.
Frontera Holdings (Bermuda) III Ltd.
Urupampa S.A.
RioEx Uruguay S.A.
Minera Frontera del Oro SPA.
Desarrollo de Prospectos Mineros Peruanos S.A.C.
Pampa Exploracion S.A.
RioEx S.A.
Jurisdiction
Canada
Canada
Canada
Bermuda
Bermuda
Bermuda
Uruguay
Uruguay
Chile
Peru
Argentina
Argentina
Nature of operations
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Exploration company
Exploration Company
Exploration company
Exploration company
The Company consolidates an entity when it has power over that entity, is exposed, or has rights, to
variable returns from its involvement with that entity and has the ability to affect those returns through
its power over that entity.
All the Company’s subsidiaries are wholly-owned and all intercompany balances, transactions, including
income and expenses arising from inter-company transactions, are eliminated in preparing the
consolidated financial statements.
b) Critical accounting estimates and assumptions
The preparation of the consolidated financial statements in accordance with IFRS requires management
to make estimates, assumptions and judgements that affect the reported amounts of assets, liabilities
and expenditures on the financial statements. These estimates, assumptions and judgements are based
on management’s best knowledge of the relevant facts and circumstances taking into account previous
experience. Actual results could differ and such differences could be material. Estimates, assumptions
and judgements are reviewed on an ongoing basis and are based on historical experience and other
facts and circumstances. Revisions to estimates, assumptions and judgements, and the resulting effects
on the carrying amounts of the Company’s assets and liabilities, are accounted for prospectively.
Information about estimates, assumptions, judgments and other sources of estimation uncertainty as
at December 31, 2020 that have a risk of resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next year are provided below:
Valuation of mineral properties – The Company carries the acquisition costs of its mineral properties
at cost less any provision for impairment. The Company reviews its mineral properties for indicators of
impairment at each reporting period end, which requires the Company to exercise key judgements,
including but not limited to, the Company’s right to explore the mineral property, whether the Company
has further plans or budgets for substantive expenditures for the ongoing exploration and evaluation of
the mineral property, the impact of exploration and evaluation results to date with respect to the mineral
property, and the likelihood that the carrying value of the mineral property will be recovered in the
future through development or sale of the asset. If indicators of impairment are identified, the Company
would further review the carrying values of the applicable mineral properties to determine if their
carrying values may exceed their fair value, which also requires the Company to make significant
judgments and estimates. The judgments and estimates mentioned above are subject to various risks
and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying
values of the mineral properties.
7
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
The Company has determined that no indicators of impairment exist for its mineral properties as of
December 31, 2020.
c) Foreign currency translation
These consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional and presentation currency. The functional currencies of its material subsidiaries, which have
operations in Chile and Argentina, are the Chilean peso and the Argentine peso, respectively.
For the Company’s Argentine subsidiaries, which are affected by hyper-inflationary accounting as
described in Notes 3n and 4 below, and use the Argentine peso as their functional currency, the results
and financial position of this subsidiary are translated into the presentation currency using the exchange
rate prevailing at the date of the statement of financial position.
The results and financial position of all other subsidiaries that have a functional currency different from
the presentation currency are translated into the presentation currency as follows:
Assets and liabilities for each statement of financial position presented are translated using the
exchange rate prevailing at the date of that statement of financial position.
Income, expenses, and other comprehensive income for each statement of comprehensive income
are translated at average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions).
All resulting exchange differences are recognized as a separate component of equity and in other
comprehensive income.
d) Mineral properties and exploration expenditure
The Company capitalizes acquisition costs for property rights, including payments for exploration rights
and estimated fair value of exploration properties acquired as part of a business acquisition.
Mineral exploration costs and maintenance payments are expensed prior to the determination that a
property has economically recoverable ore reserves. When it has been established that a mineral
property is considered to be sufficiently advanced to the development stage, with economic viability and
technical feasibility demonstrated, all further expenditures for the current year and subsequent years
are capitalized as incurred and subsequently amortized on a units of production based on proven and
probable reserves of the assets to which they relate.
e) Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable, which may include indicators of impairment as they
relate to mineral properties. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating
units, or “CGU’s”). Value in use is determined as the present value of future cash inflows expected to
be derived from a CGU using a pre-tax discount rate that reflects the current time value of money and
the risks specific to that CGU.
8
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.
f) Financial instruments
(i) Recognition
The Company measures and classifies its financial assets based on its business model for managing its
financial assets and the contractual cash flow characteristics of those financial assets. Financial assets
are classified into three measurement categories on initial recognition: those measured at fair value
through profit or loss, those measured at fair value through other comprehensive income (“OCI”) and
those measured at amortized cost.
Financial assets and liabilities at amortized costs are initially recognized at fair value plus or minus
transaction costs, respectively, and subsequently carried at amortized cost loss any impairment.
Investments in marketable securities, such as equity instruments of publicly listed entities, are required
to be measured at fair value through profit or loss, unless the Company makes an irrevocable election
to present subsequent changes in the fair value of such instruments through OCI. The Company has
not elected to measure any of its marketable securities through OCI.
(ii) Derecognition
The Company derecognizes financial assets when the contractual rights to cash flows from the financial
assets expire, or when it transfers the financial assets and substantially all the associated risk and
rewards of ownership to another entity. A financial liability is derecognized when the obligation under
the liability is discharged, canceled or expired. Gains and losses on derecognition of financial assets and
liabilities are generally recognized in the consolidated statements of comprehensive losses.
(iii) Impairment
The Company recognizes a loss allowance for expected credit losses on financial assets that are
measured at amortized costs based on a probability-weighted estimate of credit losses over the expected
life of the financial asset.
At each reporting date, the Company measures the loss allowance for the financial asset at an amount
equal to the lifetime expected credit losses if the credit risk on the financial asset has increased
significantly since initial recognition. If at the reporting date, the credit risk on the financial asset has
not increased significantly since initial recognition, the Company measures the loss allowance for the
financial asset at an amount equal to twelve month expected credit losses. Impairment losses on
financial assets carried at amortized cost are reversed in subsequent periods if the expected credit losses
are reversed after the impairment was recognized.
g) Cash
Cash and cash equivalents include cash on hand, and deposits held with financial institutions with a
fixed deposit term of three months or less, net of bank overdrafts.
9
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
h) Equipment
Equipment is carried at cost less accumulated depreciation and impairment losses. The cost of an asset
consists of its purchase price, any directly attributable costs of bringing the asset to the working
condition and location of its intended use and an initial estimate of the costs of dismantling and removing
the item and restoring the site on which it is located.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably.
Depreciation of each asset is calculated using the straight line method to allocate its cost less its residual
value over its estimated useful life. The depreciation rates and methods for the Company’s equipment
are as follows:
Vehicles/Mobile Equipment
Straight line over 5 years
The assets’ residual values, depreciation methods, and useful lives are reviewed, and adjusted if
appropriate, at each statement of financial position date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
When an asset is disposed of, the difference between the net sale proceeds and its carrying amount is
recognized as a gain or loss within net loss on the consolidated statement of comprehensive loss.
i) Current and deferred income tax
The Company follows the liability method of accounting for income taxes. Under the liability method,
deferred income tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases, unused tax losses and other income tax deductions. Deferred income tax assets
are recognized for deductible temporary differences, unused tax losses and other income tax deductions
to the extent that it is probable the Company will have taxable income against which those deductible
temporary differences, unused tax losses and other income tax deductions can be utilized.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted tax rates
expected to apply when the related assets are realized or the liabilities are settled. The measurement
of deferred income tax assets and liabilities reflects the tax consequences that would follow from the
manner in which the Company expects, at the reporting date, to recover and settle the carrying amounts
of its assets and liabilities, respectively. The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in the period in which the change is substantively enacted.
j) Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of new
ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
10
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
k) Share-based compensation
The Company has a share-based compensation plan, whereby it is authorized to grant share options to
officers, employees, directors, and other eligible persons. The fair value of the options is measured at
the date the options are granted, using the Black-Scholes option-pricing model with assumptions for
risk-free interest rates, dividend yields, volatility of the expected market price of the common shares
and an expected life of the options. The fair value less estimated forfeitures is charged over the vesting
period of the related options as an expense on its financial statements.
l) Provisions
Provisions for restructuring costs and legal claims are recognized when: the Company has a present
legal or constructive obligation as a result of past events; it is probable that an outflow of resources
will be required to settle the obligation; and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligations using the pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognized as interest expense.
m) Segment reporting
As the Company primarily focuses its activity on the exploration and development of mineral properties,
its operating and reportable segments are the Los Helados Project, the Company’s exploration projects
in Argentina, other exploration projects, and the Company’s corporate administration function.
Operating segments are components of an entity that engage in business activities from which they
incur expenses and whose operating results are regularly reviewed by a chief operating decision maker
to make resource allocation decisions and to assess performance. The Chief Executive Officer, the chief
operating decision-maker for the Company, obtains and reviews operating results of each operating
segment on a monthly basis.
n) Hyperinflation
On July 1, 2018, the Company adopted IAS 29, Financial Reporting in Hyperinflationary Economies,
which outlines the use of the hyperinflationary accounting to consolidate and report its Argentine
operating subsidiary.
The application of hyperinflationary accounting requires restatement of the Argentine subsidiary’s non-
monetary assets and liabilities, shareholders’ equity and comprehensive loss items from the transaction
date when they were first recognized into the current purchasing power which reflects a price index
current at the end of the reporting period before being included in the consolidated financial
statements. To measure the impact of inflation on its financial position and results, the Company has
elected to use the Wholesale Price Index (Indice de Precios Mayoristas or “IPIM”) for periods up to
December 31, 2016, and the Retail Price Index (Indice de Precios al Consumidor or “IPC”) thereafter.
These price indices have been recommended by the Government Board of the Argentine Federation of
Professional Councils of Economic Sciences (“FACPCE”).
As the consolidated financial statements of the Company have been previously presented in Canadian
dollars, a stable currency, the comparative period amounts do not require restatement.
11
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
o) New accounting pronouncements
The IASB and/or the IFRS Interpretations Committee have issued new standards and amendments, or
interpretations to existing standards, which were not yet effective and not applied by the Company as
at December 31, 2020. The Company continues to evaluate these changes to determine their impact,
if any.
IAS 16, Property, plant and equipment
IAS 16 has been amended to provide clarity with respect to the treatment of net proceeds generated
from selling any items produced while bringing an item of property, plant and equipment to the location
and condition necessary for it to be capable of operating in the manner intended by the entity.
Specifically, the amendments prohibit entities from deducting amounts resulting from the selling of
items produced during this phase from the cost of property, plant and equipment. Instead, an entity
shall recognize such sales proceeds and related costs in profit or loss.
The amendments to IAS 16 are effective for annual reporting periods beginning on or after January 1,
2022, with early adoption permitted. Upon adoption, the amendments shall be applied retrospectively,
but only to property, plant and equipment assets commissioned for their intended use by management
on or after the beginning of the earliest period presented in the financial statements.
4. HYPERINFLATION
Argentina was designated a hyperinflationary economy as of July 1, 2018 for accounting purposes.
The Company recognized a loss of $179,426 for the year ended December 31, 2020 (2019: $49,427)
in relation to the impact of hyperinflation within other comprehensive income, which is primarily the
result of devaluation of the Argentine peso relative to the Canadian dollar during the year.
As a result of changes in the IPC and changes to the Company’s net monetary position during the
year ended December 31, 2020, the Company recognized a net monetary loss of $6,022 (2019:
$31,882) to adjust transactions recorded during the year into a measuring unit current as of
December 31, 2020.
The level of the IPC at December 31, 2020 was 385.9 (December 31, 2019: 283.4), which represents
an increase of approximately 36% over the IPC at December 31, 2019, and an approximate 17%
increase over the average level of the IPC during the year ended December 31, 2020.
12
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
5. RECEIVABLES AND OTHER ASSETS
Current
Taxes receivable
Other receivables
Prepaid expenses and deposits
Non-current
Taxes receivable
December 31,
2020
December 31,
2019
62,297
41,175
137,895
241,367
105,950
105,950
145,331
154,683
179,872
479,886
-
-
Pursuant to local regulations, the Company is entitled to a refund of certain value added taxes (“VAT”)
paid in Argentina. While the Company continues to expect full payment of the amounts claimed, the
timing of receipt of the refunds has become increasingly uncertain. Accordingly, the corresponding taxes
receivable balance has been reclassified as non-current.
6. MINERAL PROPERTIES
Los Helados
Project
Nacimientos
Properties
Total
January 1, 2019
$ 4,040,164
$ 494,826
$ 4,534,990
Additions
Effect of foreign currency
translation
Adjustments for impacts of
hyperinflation
328,774
406,890
735,664
(444,564)
-
(444,564)
-
(60,885)
(60,885)
December 31, 2019
$ 3,924,374
$ 840,831
$ 4,765,205
Additions
133,558
-
(827,343)
133,558
(827,343)
Write down
Effect of foreign currency
translation
Adjustments for impacts of
hyperinflation
December 31, 2020
Los Helados Project
47,939
-
47,939
-
$ 4,105,871
(13,488)
$ -
(13,488)
$ 4,105,871
The Company’s primary mineral property assets are the Los Helados properties and the La Rioja
properties (together, the “Los Helados Project”), which are comprised of adjacent mineral titles in
Region III, Chile, and the San Juan Province in Argentina.
13
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
The Company is the majority partner and operator of the Los Helados Project, which is subject to a
Joint Exploration Agreement (“JEA”) with its exploration partner, Nippon Caserones Resources Co. Ltd.
(“NCR”). NCR became the Company’s partner on April 1, 2020 when Pan Pacific Copper Co. Ltd.
transferred its interest in the Los Helados Project to NCR, a subsidiary of JX Nippon Mining and Metals
Corporation, a Tokyo-based mining and smelting company that also owns the Caserones Mine, located
approximately 12 kilometres from the Los Helados properties.
The Company holds an approximate 64% interest in the underlying Los Helados properties, which are
located in Region III, Chile, and a 60% interest in the La Rioja properties, located in the adjacent San
Juan Province in Argentina.
The Company has been funding and accounting for 100% of the expenditures related to the Los
Helados Project following the election by the exploration partner pursuant to the JEA not to fund its
share of expenditures since September 1, 2015. The sole funding of expenditures at the Los Helados
Project has resulted in dilution of NCR’s interest, and corresponding increases to the Company’s
interest, resulting in the amounts noted in the preceding paragraph.
Nacimientos Properties
On May 3, 2017, the Company signed an option agreement whereby it could acquire a 100% interest
in the Nacimientos properties located in the San Juan Province, Argentina by making option payments
totaling US$1.65 million in cash over a four-year period ending May 15, 2021 (the “Earn-in Date”). In
order to acquire a 100% interest, the Company was also required to fund at least US$2.5 million in
expenditures on the Nacimientos properties on or before the Earn-in Date.
In August 2020, the Company elected to opt out of the earn-in at the Nacimientos properties, by
allowing an August 16, 2020 deadline lapse without making the scheduled US$400,000 option payment.
Accordingly, the Company has written off all capitalized costs related to Nacimientos on August 16,
2020.
Valle Ancho Properties
On August 29, 2019, the Company entered into an option agreement with the Province of Catamarca,
Argentina to earn a 100% interest in the Valle Ancho, Interceptor, Filo del las Vicunas properties
(collectively, the “Valle Ancho Properties”), located in Catamarca, Argentina, by making US$8.2 million
in expenditures on the Valle Ancho Properties over a two-year period. In August 2020, the option period
for Valle Ancho was extended from August 2021 to December 2022.
7. DUE TO EXPLORATION PARTNER
Pursuant to the Josemaria Arrangement, the Company assumed from Josemaria an obligation to fund
a partner’s share of exploration expenditures related to the La Rioja properties (the “Obligation”). In
accordance with the terms of the JEA between the Company and the partner, NCR, the Company has
elected to settle the Obligation through funding NCR’s share of exploration expenditures, which
remained US$3.4 million as at December 31, 2020, and has no defined timeline for settlement.
The Company considered the estimated timeframe required to expend the remaining US$3.4 million on
behalf of NCR at the La Rioja properties and has presented the remaining obligation as a non-current
liability, discounted to its present value at an annual effective rate of 8%.
14
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
As at December 31, 2020, the Company reviewed the nature and timing of future expenditures at the
La Rioja properties and increased its expected annual funding of PPC’s share of future exploration
expenditures from US$19,600 to US$22,400 based on its best estimate of exploration activities to be
conducted on the project. This revision reduces the estimated timeframe for the settlement of the
Obligation. The effect of this change in future estimated expenditures at the La Rioja properties is an
increase in the amount due to exploration partner by $24,114, with a corresponding amount recognized
within other losses on the consolidated statement of comprehensive loss for the year ended December
31, 2020.
8. SHARE CAPITAL
The Company has authorized an unlimited number of voting common shares without par value.
9. SHARE OPTIONS
a) Share option plan
The Company has a share option plan adopted by the Board of Directors on May 7, 2019, which
reserves an aggregate of 10% of the issued and outstanding shares of the Company for issuance upon
the exercise of options granted. The granting, vesting and terms of the share options are at the
discretion of the Board of Directors.
b) Share option outstanding
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:
Balance at January 1, 2019
Options pursuant to Josemaria Arrangement
Options granted
Expired
Number of
shares issuable
pursuant to
share options
Weighted
average
exercise price
per share
-
$ -
3,305,000
3,445,000
(92,500)
0.81
0.48
0.86
Balance at December 31, 2019
6,657,500
$ 0.64
Options granted
Expired
December 31, 2020
2,660,000
(1,182,500)
0.54
0.89
8,135,000
$ 0.57
On November 30, 2020, the Company granted a total of 2,660,000 share options to officers, employees,
directors and other eligible persons at an exercise price of $0.54 per share.
15
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
The Company uses the Black-Scholes option pricing model to estimate the fair value for all options
granted and the resulting stock-based compensation. The weighted average assumptions used in this
pricing model, and the resulting fair values per option, for the 2,660,000 share options granted during
the year ended December 31, 2020, are as follows:
(i)
(ii)
(iii)
(iv)
(v)
Risk-free interest rate:
Expected life:
Expected volatility:
Expected dividends:
Fair value per option:
0.32%
5 years
63.16%
nil
$0.28
The following table details the share options outstanding and exercisable as at December 31, 2020:
Outstanding options
Weighted
average
remaining
contractual
life
(Years)
3.74
4.92
3.15
0.16
3.63
Weighted
average
exercise
price
$0.475
$0.54
$0.68
$0.85
$0.57
Options
outstanding
3,445,000
2,660,000
1,077,500
952,500
8,135,000
Exercise
prices
$0.475
$0.54
$0.68
$0.85
Exercisable options
Weighted
average
remaining
contractual
life
(Years)
3.74
4.92
3.15
0.16
3.16
Weighted
average
exercise
price
$0.475
$0.54
$0.68
$0.85
$0.60
Options
exercisable
2,296,668
886,667
1,077,500
952,500
5,213,335
c) Share-based compensation
Exploration and project investigation
General and administration
Year ended
December 31,
2019
104,624
430,840
535,464
2020
100,528
539,085
639,613
10. EXPLORATION AND PROJECT INVESTIGATION
Due to the geographic location of the Company’s main mineral property interests, the Company’s
business activities generally fluctuate with the seasons, with increased exploration activities during the
summer months in South America. As a result, a general recurring trend is the increase in exploration
expenditures, and therefore net losses, for the fourth quarter and first quarter of a fiscal year, relative
to the second and third quarters.
The Company expensed the following exploration and project investigation costs for the years ended
December 31, 2020 and 2019:
16
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
Year ended
December 31,
2020
2019
Land holding and access costs
Fuel, camp costs and field supplies
Roadwork, travel and transport
Engineering and conceptual studies
Consultants, geochemistry and geophysics
Environmental and community relations
VAT and other taxes
Office, field and administrative salaries,
overhead and other administrative costs
Share-based compensation
Total
Land holding and access costs
Fuel, camp costs and field supplies
Roadwork, travel and transport
Consultants, geochemistry and geophysics
Environmental and community relations
VAT and other taxes
Office, field and administrative salaries,
overhead and other administrative costs
Share-based compensation
Los Helados
Project
Nacimientos
Properties
Valle
Ancho
Other
Total
809,249
34,127
29,811
26,517
53,131
64,427
29,640
6,194
12,316
3,009
-
-
184
11,935
9,481
117,974
143,720
-
394,712
35,339
208,739
32,071
44
51
-
157,190
-
11,179
856,995
164,461
176,591
26,517
605,033
99,950
261,493
293,366
42,063
1,382,331
42,756
2,398
660,571
49,290
78,792 1,619,826
15,398
6,777
222,710
1,012,091
100,528
3,303,659
862,184
59,241
65,889
-
515,527
58,778
657,455
65,448
10,193
42,380
76,540
3,893
2,232
51,057
21,996
110,783
122,622
307,554
23,429
34,929
170,553
11,238
439,050
24,953
40,284
81
17
18,570
-
8,819
41,657
2,985
934,657
212,485
265,068
330,017
541,188
153,583
1,308,715
104,624
Total
2,284,522
368,086 1,085,316
112,413
3,850,337
17
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
11. RELATED PARTY TRANSACTIONS
Under the normal course of operations, the Company may undertake transactions or hold balances
with related parties. Namely, the Company engages with Josemaria and Filo Mining Corp. (“Filo
Mining”), related parties by way of directors, officers and shareholders in common, and MOAR
Consulting Inc. (“MOAR”), an exploration consulting firm, of which a director of the Company is the
president and proprietor.
a) Related party services
The Company has a cost sharing arrangement with Josemaria and Filo Mining. Under the terms of this
arrangement, the Company provides management, technical, administrative and/or financial services
(collectively, “Management Services”) to Josemaria and Filo Mining, and vice versa. In addition, the
Company engages MOAR, to provide exploration consultation. These transactions were incurred in the
normal course of operations, and are summarized as follows:
Management Services to Josemaria
Management Services to Filo Mining
Management Services from Josemaria
Management Services from Filo Mining
Exploration Consultation from MOAR
b) Related party balances
Year ended
December 31,
2019
84,051
363,373
(72,485)
(238,003)
(15,625)
2020
139,906
500,101
(150,750)
(433,148)
(106,875)
The amounts due from (to) related parties, and the components of the consolidated statements of
financial position in which they are included, are as follows:
Related Party
December 31,
2020
December 31,
2019
Receivables and other assets
Receivables and other assets
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Josemaria
Filo Mining
Josemaria
Filo Mining
MOAR
-
5,850
-
(11,752)
(14,125)
16,848
57,490
(102,675)
(64,222)
(17,656)
18
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
c) Key management compensation
The Company’s key management personnel have the authority and responsibility for overseeing,
planning, directing and controlling its activities and consist of the Board of Directors and members of
the executive management team. Total compensation expense for key management personnel, and
the composition thereof, is as follows:
Salaries and wages
Short-term employee benefits
Directors fees
Stock-based compensation
12. INCOME TAXES
Year ended
December 31,
2019
2020
435,333
15,440
82,000
514,877
1,047,650
304,824
6,351
60,538
404,852
776,565
Income tax expense differs from the amount that would result from applying the Canadian federal and
provincial income tax rates to the loss for the year. These differences result from the following items:
Loss before taxes
Combined Canadian federal and provincial statutory
income tax rates
Income tax recovery based on the above rate
Income tax benefits that have not been recognized
and other items
Impacts of changes and differences in foreign tax and
currency rates
Non-deductible expenses and permanent differences
Total income tax recovery
Year ended
December 31,
2019
2020
5,892,878
5,306,919
27.00%
1,591,077
27.00%
1,432,868
(1,152,100)
1,643,886
(133,457)
(305,520)
-
(2,872,459)
(204,295)
-
The Company’s unrecognized deductible temporary differences and unused tax losses for which no
deferred tax asset has been recognized consist of the following:
Non-capital losses carried forward
Mineral properties and related expenditures
19
Year ended
December 31,
2019
891,741
18,946,275
20,400,020 19,838,016
2020
1,216,823
19,183,197
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
As at December 31, 2020, the non-capital loss carry-forwards and their respective expiration dates are
as follows:
Year
2021
2022
2023
2024
2025 and onwards
Canada
Argentina
-
-
-
-
3,963,122
3,963,122
20,442
20,319
362,628
21,219
22,298
446,906
Other
30,045
20,245
23,010
37,454
25,211
135,965
Total
50,487
40,564
385,638
58,673
4,010,631
4,545,993
13. SEGMENTED INFORMATION
The Company is principally engaged in the acquisition, exploration and development of mineral
properties in South America. The information regarding mineral properties and exploration and project
investigation costs presented in Notes 6 and 10, respectively, represent the manner in which
management reviews its business performance. Materially all of the Company’s mineral properties and
exploration and project investigation costs relate to South America, particularly Chile and Argentina. The
net gains on the use of marketable securities are allocated to the Nacimientos and Valle Ancho Projects,
as they are the result of funding provided to the Company’s Argentine subsidiary in support of these
projects. Materially all of the Company’s administrative costs are incurred by the Canadian parent, where
materially all of the Company’s cash is held in the normal course of business until it is required to be
deployed to the Company’s South American subsidiaries in support of ongoing and planned work
programs.
20
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
The following are summaries of the Company’s current and non-current assets, current liabilities, and net losses by segment:
As at
Los Helados
Nacimientos
& Valle Ancho
Corporate
Total
December 31, Current assets
2020
Tax receivable
Equipment
Mineral properties
Total assets
Current liabilities
Due to exploration
partner
Total liabilities
December 31, Current assets
2019
Equipment
Mineral properties
Total assets
Current liabilities
Due to exploration
partner
Total liabilities
128,924
-
-
4,105,871
4,234,795
67,847
-
67,847
219,069
-
3,924,374
4,143,443
112,396
-
112,396
201,442
105,950
26,314
-
333,706
809,819
-
-
-
809,819
1,140,185
105,950
26,314
4,105,871
5,378,320
222,337
300,332
590,516
-
222,337
345,977
646,309
345,977
936,493
663,209
35,106
840,831
1,539,146
5,157,062
-
-
5,157,062
6,039,340
35,106
4,765,205
10,839,651
359,599
246,070
718,065
-
359,599
309,481
555,551
309,481
1,027,546
21
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
Year ended
December 31,
2020
2019
Exploration and
project
investigation
Write down of
mineral property
interest
Gain on use of
marketable
securities
General and
administration
and other items
Net loss
Exploration and
project
investigation
General and
administration
and other items
Net loss
Los Helados
Nacimientos
& Valle Ancho
Corporate
Other
Total
1,382,331
1,698,618
-
-
827,343
(270,198)
-
-
-
222,710
3,303,659
-
-
827,343
(270,198)
80,798
1,463,129
60,184
2,315,947
1,891,092
1,891,092
-
222,710
2,032,074
5,892,878
2,284,522
1,453,402
-
112,413
3,850,337
71,770
2,356,292
53,604
1,507,006
1,331,208
1,331,208
-
112,413
1,456,582
5,306,919
22
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
14. USE OF MARKETABLE SECURITIES
From time to time, the Company may acquire and transfer marketable securities to facilitate
intragroup funding transfers between the Canadian parent and its Argentine operating subsidiaries.
The Company does not acquire marketable securities or engage in these transactions for speculative
purposes. In this regard, under this strategy, the Company generally uses marketable securities of
large and well established companies, with high trading volumes and low volatility. Nonetheless, as
the process to acquire, transfer and ultimately sell the marketable securities occurs over several
days, some fluctuations are unavoidable.
As the marketable securities are acquired with the intention of a near term sale, they are considered
financial instruments that are held for trading, all changes in the fair value of the instruments,
between acquisition and disposition, are recognized through profit or loss.
As a result of having utilized this mechanism for intragroup funding for the year ended December
31, 2020, the Company realized a net gain of $270,198 (2019: $nil), comprised of a favorable
foreign currency impact of $219,831 (2019: $nil) and a trading gain of $50,367 (2019: $nil).
15. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard its ability to continue as a going
concern in order to pursue the development of its mineral properties and to maintain a flexible
capital structure which optimizes the costs of capital at an acceptable risk. In the definition and
management of capital, the Company considers the items included in shareholders’ equity to be
capital.
The Company manages the capital structure and makes adjustments, as necessary, in light of
changes in economic conditions and the risk characteristics of its assets. In order to maintain or
adjust the capital structure, the Company may attempt to issue new shares or debt instruments,
acquire or dispose of assets, or to bring in joint venture partners.
To facilitate the management of its capital requirements, the Company may prepare expenditure
plans and budgets that are updated as necessary depending on various factors, including, but not
limited to, successful capital deployment and general industry conditions.
16. FINANCIAL INSTRUMENTS AND MANAGEMETN OF FINANCIAL RISKS
The Company has estimated the fair values of its financial instruments based on appropriate
valuation methodologies. These values are not materially different from their carrying value.
The Company classifies the fair value of its financial instruments according to the following hierarchy
based on the amount of observable inputs used to value the instrument:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the
assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
23
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
The Company’s financial instruments consist of cash, receivables and other assets, trade payables
and accrued liabilities, and the amounts due to its exploration partner. Other than for the amounts
due to its exploration partner, the carrying values of the Company’s financial instruments are
considered to be reasonable approximations of fair value due to their short term nature. For
amounts due to its exploration partner, the Company revalues the liability from time to time based
on revisions to the timing and amounts of expected future settlement, which the Company believes
is a reasonable approximation of fair value. Between revaluations, the liability is accreted.
As at December 31, 2020, the Company’s financial instruments are exposed to the following financial
risks, including credit, liquidity and currency risks:
(i)
(ii)
Credit risks associated with cash is minimal as the Company deposits the majority of its cash
with a large Canadian financial institution that has been accorded a strong investment grade
rating by a primary rating agency.
Liquidity risks associated with the inability to meet obligations as they become due is minimized
through the management of its capital structure as explained on Note 15 and by maintaining
good relationships with significant shareholders and creditors, such as Zebra and Lorito. The
Company also closely monitors and reviews its costs to date and actual cash flows on a monthly
basis.
Based on NGEx Minerals’ financial position at December 31, 2020, and an unsecured US$3.0
million credit facility secured by the Company subsequent thereto (see Note 18), these
consolidated financial statements have been prepared on the basis that the Company will
continue as a going concern, which assumes that it will be able to meet its existing obligations
and commitments and fund ongoing operations in the normal course of business for at least
twelve months from December 31, 2020. However, the Company does anticipates the need
for further funding should it seek to reinitiate substantial field programs at its South American
projects or to repay amounts drawn against the credit facility, which matures in February 2022
Based on the Company’s financial position at December 31, 2020, and an unsecured US$3.0
million credit facility secured by the Company subsequent thereto (see Note 18), the Company
does not anticipate the need for further funding to meet its existing obligations and
commitments and to support ongoing operations for at least twelve months from December
31, 2020. However, the Company does anticipates the need for further funding should it seek
to reinitiate substantial field programs at its South American projects or to repay amounts
drawn against the credit facility, which matures in February 2022. Please refer to Note 1 for
further discussion.
The maturities of the Company’s financial liabilities as at December 31, 2020 are as follows:
Total
Less than
1 year
1-5
years
More than
5 years
Accounts payable and
accrued liabilities
Due to exploration partner
Total
590,516
4,355,430
590,516
-
4,945,946
590,516
-
-
-
-
4,355,430
4,355,430
24
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
In accordance with the terms of a JEA between the Company and the partner, NCR, the
Company has elected to settle the Obligation through funding NCR’s share of exploration
expenditures, which remained US$3.4 million as at December 31, 2020, and has no defined
timeline for settlement. The Obligation has been discounted and recorded at its present
value at an annual effective rate of 8%.
(iii)
Foreign currency risk can arise when the Company or its subsidiaries transact or have net
financial assets or liabilities which are denominated in currencies other than their respective
functional currencies.
At December 31, 2020, the Company’s largest foreign currency risk exposure existed at the
level of its Canadian headquarters, where the Company held a net financial liability position
denominated in US dollars having a Canadian dollar equivalent of approximately $276,000.
A 10% change in the foreign exchange rate between the US dollar, and the Canadian dollar,
NGEx Minerals’ functional currency, would give rise to increases/decreases of approximately
$28,000 in financial position/comprehensive loss.
17. COMMITMENTS
As at December 31, 2020, the Company had a contractual agreement with the owners of the surface
rights covering the Los Helados Properties, which gave the Company access over these surface
rights for exploration, development, and mining through to closure of any mining operation, in
exchange for certain payments which are linked to project activities and certain development
milestones (the “Original Surface Access Agreement”). The Original Surface Access Agreement
provided for minimum annual payments of US$0.5 million which cover basic access to the property
and minimal surface disturbance such as road maintenance.
On January 26, 2021, the Original Surface Access Agreement was mutually terminated by the
Company and the holders of the surface rights, and replaced with a temporary surface access
agreement with an effective period of three years (the “Temporary Surface Access Agreement”).
The Temporary Surface Access Agreement reduces the Company’s payments to the holders of the
surface rights to coincide with the reduced field programs planned for the Los Helados properties.
As a result, the payments by the Company to the holders of the surface rights have been reduced,
with US$200,000 paid upon execution and another US$200,000 to be paid in January 2022. In
return, during the effective period of the Temporary Surface Access Agreement, the Company is
permitted to access the surface rights for conducting environmental data collection, site visits, and
general maintenance of the Los Helados Properties, but prohibits the undertaking of programs for
the purposes of exploration or development.
25
NGEx Minerals Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian Dollars, unless otherwise stated)
18. SUBSEQUENT EVENT
On February 19, 2021, the Company obtained an unsecured US$3.0 million credit facility (the “2021
Facility”) from Zebra and Lorito to provide financial flexibility to fund ongoing exploration and for
general corporate purposes. Zebra and Lorito report their security holdings in the Company as a
joint actor, as the term is defined by Canadian securities regulations, and at the time of entering
into the 2021 Facility they collectively held more than 20% of the Company’s issued and outstanding
common shares.
As consideration for the 2021 Facility, Zebra and Lorito received 40,000 common shares upon
execution thereof, and shall receive an additional 600 common shares each month, for every
US$50,000 in principal outstanding, prorated accordingly for the number of days outstanding.
The 2021 Facility matures on February 19, 2022, and no interest is payable in cash during its term.
As at April 15, 2021, the Company has drawn a total of US$450,000 against the 2021 Facility.
19. COVID-19 IMPACT AND RESPONSE
On March 11, 2020, the World Health Organization officially declared the global outbreak of the
novel coronavirus, COVID-19, a pandemic. The impacts of COVID-19 on global commerce and
financial markets to date have been broad and significant.
The Company continues to respond to the COVID-19 pandemic within the framework of internal
protocols, and local and national health authority requirements and recommendations. The health
and safety of the Company’s employees, contractors, visitors, and stakeholders remain NGEx
Minerals’ top priority. Since March 2020, the Company has implemented travel restrictions,
surveillance, monitoring and response plans to reduce the risk of COVID-19 exposure and outbreak.
Any tightening/retightening of COVID-19-related travel restrictions or new developments in local or
national health protocols, particularly in Chile and Argentina, would likely impact the activities of
the Company and result in a reduction to cash expenditures and exploration costs during the period
impacted. As of the date of these consolidated financial statements, the Company cannot be certain
of the impact of the COVID-19 pandemic on its future financial position, results of operations and
cash flows.
The Company’s longer term business plans remain dependent on its ability to obtain additional
financing through global financial markets. It is anticipated that should the COVID-19 pandemic
and/or the resultant high levels of volatility in financial markets and commodity prices persist in the
longer term, the Company’s ability to access financing on favorable terms may be negatively
impacted.
26
NGEX Minerals Corporate Directory
Company Head Office
Registered and Records Office
Suite 2000 - 885 West Georgia Street
Vancouver, BC
V6C 3E8 Canada
Phone: +1 604 689 7842
Fax: +1 604 689 4250
2200-885 West Georgia Street
Vancouver, BC
V6C 3E8 Canada
Auditors
Registrar and Transfer Agent
Pricewaterhouse Coopers LLP
Vancouver, BC
Canada
Computershare Trust Company of Canada
Vancouver, BC
Canada
Phone: +1 604 661 9400
Officers
Company Information
Wojtek Wodzicki - President and CEO
Jeff Yip - CFO
Bob Carmichael - Vice President
Exploration
Brenda Nowak - Corporate Secretary
Amanda Strong
Investor Relations
Email: info@ngexminerals.com
Phone: +1 604 689 7842
Solicitors
Cassels Brock
Vancouver, BC
Canada
Directors
William Rand (Chairman)
Adam I. Lundin
Wojtek Wodzicki
David Mullen
Cheri Pedersen
Neil O’Brien
Share Listing
TSX-Venture - NGEX
CUSIP number 65343P103