FINANCIAL REVIEW
Fiscal Year Ended December 31, 2019
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2019
(Expressed in Canadian Dollars)
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF RADIUS GOLD INC.
Opinion
We have audited the consolidated financial statements of Radius Gold Inc. (the "Company"), which comprise:
the consolidated statements of financial position as at December 31, 2019 and 2018;
the consolidated statements of loss and comprehensive loss for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at December 31, 2019 and 2018, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises of the information included in
the Management's Discussion & Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon. In connection with our audits 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, and remain alert for indications that the other information appears to be materially misstated.
We obtained the Management’s Discussion & Analysis prior to the date of this auditors' report. If, based on the work
we have performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in this auditors' report. 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.
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Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
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.
Auditors' 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 auditors' 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 auditors' 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 auditors' 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.
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Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
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 auditors' report is Michelle Chi Wai So.
Chartered Professional Accountants
Vancouver, British Columbia
April 27, 2020
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Nanaimo201 – 1825 Bowen RdNanaimo, BC V9S 1H1T: 250 755 2111F: 250 984 0886T: 604 282 3600F: 604 357 1376Langley305 – 9440 202 StLangley, BC V1M 4A6Vancouver1700 – 475 Howe StVancouver, BC V6C 2B3T: 604 687 1231F: 604 688 4675Smythe LLP | smythecpa.com
RADIUS GOLD INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
As at December 31
ASSETS
Current assets
Cash and cash equivalents (Note 5)
Equity investments (Note 6)
Derivative investments (Note 7)
Receivables (Notes 8 and 17)
Prepaid expenses and deposits (Note 17)
Total current assets
Non-current assets
Long-term deposits (Note 17)
Property and equipment (Note 9)
Right-of-use asset (Note 10)
Mineral and royalty interests (Note 12)
Investment in associate (Note 11)
Total non-current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities (Note 17)
Current portion of lease liability (Note 10)
Non-current liabilities
Lease liability (Note 10)
Total liabilities
Shareholders' equity
Share capital (Note 14)
Other equity reserve
Deficit
Accumulated other comprehensive loss
Total shareholders' equity
2019
2018
$ 1,344,891
2,275,534
1,529
71,573
49,621
$ 1,605,190
3,110,932
69,136
240,257
254,689
3,743,148
5,280,204
123,098
32,941
302,667
117,817
1
576,524
123,098
48,536
-
1,377,322
1
1,548,957
$ 4,319,672
$ 6,829,161
$ 106,350
49,547
$ 70,489
-
155,897
275,487
431,384
70,489
-
70,489
56,647,011
7,134,168
(56,476,067)
(3,416,824)
56,599,289
6,979,084
(53,912,942)
(2,906,759)
3,888,288
6,758,672
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 4,319,672
$ 6,829,161
APPROVED ON BEHALF OF THE BOARD OF DIRECTORS AND AUTHORIZED FOR ISSUE ON APRIL 27, 2020 BY:
“Simon Ridgway” , Director
Simon Ridgway
“William Katzin” , Director
William Katzin
The accompanying notes form an integral part of these consolidated financial statements.
5
RADIUS GOLD INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
Exploration expenditures (Note 17)
Write-down of mineral property interests (Note 12)
General and administrative expenses
Amortization (Note 9)
Depreciation of right-of-use asset (Note 10)
Interest expense on lease liability (Note 10)
Legal and audit fees
Management fees (Note 17)
Office and miscellaneous (Notes 13 and 17)
Salaries and benefits (Note 17)
Share-based compensation (Notes 15 and 17)
Shareholder communications (Note 17)
Transfer agent and regulatory fees (Note 17)
Travel and accommodation (Note 17)
2019
2018
$ 753,960
1,259,505
2,013,465
$ 934,434
77,204
1,011,638
16,255
60,302
32,983
80,874
42,000
32,577
122,275
172,939
55,613
15,242
11,219
22,517
-
-
44,671
42,000
109,200
118,050
129,276
14,817
14,238
13,274
642,279
508,043
Loss from operations
(2,655,744)
(1,519,681)
Investment income
Foreign currency exchange loss
Gain from mineral property option agreement (Note 12)
Fair value loss of derivative investments (Note 7)
Net loss for the year
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Gains on sale of equity investments (Note 6)
Fair value losses on equity investments (Note 6)
Total comprehensive loss
43,875
(19,819)
199,170
(130,607)
15,372
(9,465)
83,196
(135,116)
$ (2,563,125)
$ (1,565,694)
367,933
(877,998)
26,597
(1,827,274)
$ (3,073,190)
$ (3,366,371)
Basic and diluted loss per share
$(0.03)
$(0.02)
Weighted average number of common shares outstanding
86,791,467
86,679,479
The accompanying notes form an integral part of these consolidated financial statements.
6
RADIUS GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
Balance, December 31, 2017
Impact of adopting IFRS 9 Financial
Instruments on January 1, 2018
Balance, January 1, 2018
Loss for the year
Shares issued for mineral property
acquisition (Note 12)
Equity investments
Share-based compensation (Note 15)
Balance, December 31, 2018
Loss for the year
Shares issued for mineral property
acquisition (Note 12)
Options exercised (Note 15)
Transfer of other equity reserve
on exercise of options
Equity investments
Share-based compensation (Note 15)
Number
of
common
shares
Other
equity
reserve
Accumulated
other
comprehensive
loss
Share
capital
Deficit
Total
86,675,617
$ 56,592,613
$ 6,849,808
$ 872,770 $(54,326,100)
$ 9,989,091
-
-
-
(1,978,852)
1,978,852
-
86,675,617
-
56,592,613
-
6,849,808
-
(1,106,082)
-
(52,347,248)
(1,565,694)
9,989,091
(1,565,694)
74,183
-
-
6,676
-
-
-
-
129,276
-
(1,800,677)
-
-
-
-
86,749,800
-
56,599,289
-
6,979,084
-
(2,906,759)
-
(53,912,942)
(2,563,125)
33,255
155,000
-
-
-
6,617
23,250
17,855
-
-
-
-
-
-
(17,855)
-
172,939
-
(510,065)
-
-
-
-
-
-
6,676
(1,800,677)
129,276
6,758,672
(2,563,125)
6,617
23,250
-
(510,065)
172,939
Balance, December 31, 2019
86,938,055
$ 56,647,011
$ 7,134,168
$ (3,416,824)
$(56,476,067)
$ 3,888,288
The accompanying notes form an integral part of these consolidated financial statements.
7
RADIUS GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
Cash provided (used in):
OPERATING ACTIVITIES
Net loss for the year
Items not involving cash:
Amortization
Gain from mineral property option agreement
Depreciation of right-of-use asset
Write-down of mineral property interests
Fair value loss of derivative investments
Share-based compensation
Changes in non-cash working capital items:
Receivables
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Cash used in operating activities
FINANCING ACTIVITIES
Proceeds on issuance of common shares
Repayment of lease obligation
Cash used for financing activities
INVESTING ACTIVITIES
Purchase of equity investments
Expenditures on mineral property acquisition costs
Proceeds from mineral property option agreements
Proceeds from sale of equity investments
Purchase of property and equipment
Cash provided by investing activities
2019
2018
$ (2,563,125)
$ (1,565,694)
16,255
(199,170)
60,302
1,259,505
130,607
172,939
22,517
(83,196)
-
77,204
135,116
129,276
(1,122,687)
(1,284,777)
168,684
(4,932)
35,861
(161,505)
(210,263)
(128,789)
(923,074)
(1,785,334)
23,250
(37,935)
(14,685)
(100,000)
(59,883)
265,670
572,333
(660)
677,460
-
-
-
(18,064)
(85,132)
130,620
45,433
-
72,857
Decrease in cash and cash equivalents
(260,299)
(1,712,477)
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year (Note 5)
1,605,190
3,317,667
$ 1,344,891
$ 1,605,190
Supplemental Cash Flow Information (Note 21)
The accompanying notes form an integral part of these consolidated financial statements.
8
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
1. CORPORATE INFORMATION
Radius Gold Inc. (the “Company”) was formed by the amalgamation of Radius Explorations Ltd. and PilaGold Inc.
effective on July 1, 2004 under the laws of British Columbia.
The Company is engaged in the acquisition and exploration of mineral properties and investment in companies which
hold mineral property interests. The address of the Company’s head office and principal place of business is 650 – 200
Burrard Street, Vancouver, BC, Canada V6C 3L6.
2. BASIS OF PREPARATION
These consolidated financial statements have been presented on the basis that the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Statement of Compliance
These consolidated financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
The accounting policies set out in Note 3 have been applied consistently by the Company and its subsidiaries to all
periods presented with the exception of the adoption of IFRS 16 – Leases which was adopted using the modified
retrospective approach.
Basis of Measurement
These consolidated financial statements have been prepared on the historical cost basis, except for certain financial
instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual
basis of accounting, except for cash flow information.
The consolidated financial statements are presented in Canadian dollars (“CDN”), which is the Company’s and its
subsidiaries’ functional currency.
The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting
estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 4.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all years presented in these consolidated financial
statements, except as discussed in Note 3(o).
a) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. A
wholly owned subsidiary is an entity in which the Company has control, directly or indirectly, where control is defined
as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. All
material intercompany transactions and balances have been eliminated on consolidation. Subsidiaries are deconsolidated
from the date control ceases.
Details of the Company’s principal subsidiaries at December 31, 2019 and 2018 are as follows:
Name
Minerales Sierra Pacifico S.A.
Radius Gold (U.S.) Inc.
Geometales Del Norte-Geonorte
Radius (Cayman) Inc
Place of
Incorporation
Guatemala
Nevada, USA
Mexico
Cayman Islands
Interest
%
100%
100%
100%
100%
Principal Activity
Exploration company
Exploration company
Exploration company
Investment Holding company
9
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
b) Revenue Recognition
The Company earns revenue from royalty agreements and are based on amounts contractually due. Royalty revenue is
measured at fair value of the consideration received or receivable when the Company can reliably estimate the amount,
pursuant to the terms of the royalty agreement. For royalty interests, revenue recognition generally occurs in the month
of production from the royalty property.
Royalty revenue may be subject to adjustment upon final settlement of estimated metal prices, weights, and assays.
Adjustments recorded upon final settlement are offset against revenue when incurred. Variations between the estimated
price recorded upon production and the actual final price set upon final settlement are caused by changes in market
commodity prices, and result in an embedded derivative in the receivable. The embedded derivative is recorded at fair
value each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and
included as a component of royalty revenue. As of December 31, 2019 and 2018, there was no embedded derivative.
c) Investment in Associate
Where the Company has significant influence over the financial and operating policy decisions of another entity, it is
classified as an associate. Associates are initially recognized in the consolidated statement of financial position at cost.
The Company's share of post-acquisition profits and losses is recognized in profit or loss, except that losses in excess of
the Company’s investment in the associate are not recognized unless there is an obligation to fund those losses.
Profits and losses arising on transactions between the Company and its associates are recognized only to the extent of
unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these
transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Company's share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalized and included in the carrying amount of the associate. Adjustments to the
carrying amount may also be necessary for changes in the Company's proportionate interest in the associate arising from
changes in the associate's other comprehensive income. Such adjustments to the carrying amount are charged to
operations as a gain or loss on dilution in the associate. Where there is objective evidence that the investment in an
associate has been impaired, the carrying amount of the investment is tested for impairment in the same way as other
non-financial assets.
d) Foreign Currency Translation
The functional and presentation currency of the Company and its principal subsidiaries is the Canadian dollar.
Transactions denominated in a currency other than an entity’s functional currency are translated as follows: unsettled
monetary items denominated in a foreign currency are translated into Canadian dollars at exchange rates prevailing at
the date of the statement of financial position and non-monetary items are translated at exchange rates prevailing when
the assets were acquired or obligations incurred. Foreign currency denominated revenue and expense items are translated
at exchange rates prevailing at the transaction date. Gains or losses arising from the translations are included in profit or
loss.
e) Cash and Cash Equivalents
Cash and cash equivalents include cash at banks and on hand, and other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and are subject to an
insignificant risk of change of value.
10
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
f) Mineral and Royalty Interests
Exploration and evaluation assets
Acquisition costs for exploration and evaluation assets are capitalized and include the cash consideration paid and the
fair value of common shares issued on acquisition, at the earlier of the date the counterparty’s performance is complete
or the share issuance date. Exploration expenditures, net of recoveries, are charged to operations as incurred. After a
property is determined by management to be commercially feasible, exploration and development expenditures on the
property will be capitalized. On transfer to development properties, capitalized exploration and evaluation assets are
assessed for impairment.
Options are exercisable entirely at the discretion of the optionee and amounts received from optionees in connection with
option agreements are credited against the capitalized acquisition costs classified as exploration and evaluation assets on
the consolidated statement of financial position, with amounts received in excess credited to gain from exploration and
evaluation asset option agreements in profit or loss.
Where the Company has entered into option agreements to acquire interests in exploration and evaluation assets that
provide for periodic payments or periodic share issuances, amounts unpaid and unissued are not recorded as liabilities
since they are payable and issuable entirely at the Company’s option. Option payments are recorded as exploration and
evaluation costs when the payments are made or received and the share issuances are recorded as exploration and
evaluation costs using the fair market value of the Company’s common shares at the earlier of the date the counterparty’s
performance is complete or the share issuance date.
The Company is in the process of exploring and developing its exploration and evaluation assets and has not yet
determined the amount of reserves available. Management reviews the carrying value of exploration and evaluation
assets on a periodic basis and whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, the Company will test the asset for impairment based upon a variety of factors, including current
exploration results, the prospect of further work being carried out by the Company, the assessment of future probability
of profitable revenues from the asset or from the sale of the asset. Amounts shown for exploration and evaluation assets
represent costs incurred to date, net of write-downs and recoveries, and are not intended to represent present or future
values.
Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations and which do not contribute to current or future revenue
generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated. Generally, the timing of these accruals would be when the actual
environmental disturbance occurs.
Royalties
Royalty interests consist of acquired royalties in producing and exploration and evaluation stage properties. Royalty
interests are recorded at cost and capitalized as tangible assets. They are subsequently measured at cost less accumulated
depletion and depreciation and accumulated impairment losses. Producing properties are those that have generated
revenue from steady-state operations for the Company. Exploration and evaluation stage properties represent early stage
exploration properties that are speculative and are expected to require more than two years to generate revenue, if ever,
or are currently not active.
Producing royalty interests are recorded at cost and capitalized in accordance with IAS 16, Property, Plant and
Equipment. Producing royalty interests are depleted using the units-of-production method over the life of the property to
which the interest relates, which is estimated using available estimates of proven and probable reserves specifically
associated with the properties. Management relies on information available to it under contracts with the operators and/or
public disclosures for information on proven and probable reserves and resources from the operators of the producing
royalty interest.
11
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
f) Mineral Interests and Royalties – (cont’d)
Royalty interests for exploration and evaluation assets, such as the Company’s Bayovar 12 Project Royalty, are recorded
at cost and capitalized in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources. Acquisition
costs of exploration and evaluation royalty interests are capitalized and are not depleted until such time as revenue-
generating activities begin.
g) Property, Equipment and Amortization
Recognition and Measurement
On initial recognition, property and equipment are valued at cost, being the purchase price and directly attributable costs
of acquisition required to bring the asset to the location and condition necessary to be capable of operating in a manner
intended by the Company, including appropriate borrowing costs and the estimated present value of any future
unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
Property and equipment is subsequently measured at cost less accumulated amortization, less any accumulated
impairment losses, with the exception of land, which is not amortized.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items
(major components) of property and equipment.
Gains and Losses
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from
disposal with the carrying amount, that are recognized net within other income in profit or loss.
Amortization
Amortization is recognized in profit or loss and property and equipment is amortized over their estimated useful lives
using the following methods:
Leasehold improvements
Trucks
Computer equipment
Field equipment
Furniture and equipment
Geophysical equipment
7 – 8 years straight-line (lease term)
4 – 8 years straight-line
25% - 50% declining balance
30% declining balance
20% declining balance
20% declining balance
h) Earnings / Loss per Share
Basic earnings / loss per share is calculated by dividing the net earnings loss available to common shareholders by the
weighted average number of shares outstanding during the year. Diluted earnings per share reflects the potential dilution
of securities that could share in earnings of the Company.
For the year ended December 31, 2019, potentially dilutive common shares (relating to options outstanding at year-end)
totalling 4,835,000 (2018: 4,850,000) were not included in the computation of earnings/loss per share, because their
effect was anti-dilutive. As such, basic and diluted earnings and losses per share were the same for the periods presented.
12
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
i)
Income Taxes
Income tax expense comprises current and deferred tax. Current and deferred tax are recognized in net loss/income except
to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive
loss/income.
Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for
the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are
determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax
base, except for those taxable temporary differences arising on the initial recognition of goodwill or on the initial
recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting nor taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to
those instances where it is probable that future taxable profit will be available against which the deferred tax asset can
be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company
recognizes a previously unrecognized deferred tax asset only to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
j) Share Capital
Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments
issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial
liability or financial asset. The Company’s common shares, share warrants, and options are classified as equity
instruments.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from proceeds.
Warrants issued by the Company typically accompany an issuance of shares in the Company (a “Unit”), and entitle the
warrant holder to exercise the warrants for a stated price and a stated number of common shares in the Company. The
fair value of the Unit’s components sold is measured using the residual value approach. The proceeds received are first
allocated to common shares at the time the units are priced, and any excess is allocated to warrants.
k) Share-based Payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged
to profit or loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over
the vesting period is based on the number of options that eventually vest. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where terms and conditions of options are modified before they vest, the increase in the fair value of the options,
measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting
period.
Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted
at the grant date. The grant date fair value is recognized in profit or loss over the vesting period, described as the period
during which all the vesting conditions are to be satisfied.
13
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
k) Share-based Payments – (cont’d)
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services
received in profit or loss. Options or warrants granted related to the issuance of shares are recorded as a reduction of
share capital.
When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the
fair value is measured by use of a valuation model or the fair value of the shares granted.
All equity-settled share-based payments are reflected in other equity reserve, until exercised. Upon exercise, shares are
issued from treasury and the amount reflected in other equity reserve is credited to share capital, adjusted for any
consideration paid.
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions
are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes
the amount that otherwise would have been recognized for services received over the remainder of the vesting period.
Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to
the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any
such excess is recognized as an expense.
l) Provisions
Rehabilitation Provision
The Company is subject to various government laws and regulations relating to environmental disturbances caused by
exploration and evaluation activities. The Company records the present value of the estimated costs of legal and
constructive obligations required to restore the exploration sites in the year in which the obligation is incurred. The nature
of the rehabilitation activities may include restoration, reclamation and revegetation of the affected exploration sites.
The rehabilitation provision generally arises when the environmental disturbance is subject to government laws and
regulations. When the liability is recognized, the present value of the estimated costs is capitalized by increasing the
carrying amount of the related exploration properties. Over time, the discounted liability is increased for the changes in
present value based on current market discount rates and liability specific risks.
As at December 31, 2019 and 2018, the Company had no significant asset retirement or rehabilitation obligations.
Other Provisions
Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events, it is
probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made. If material, provisions are measured at the present value of the
expenditures expected to be required to settle the obligation. The increase in any provision due to passage of time is
recognized as accretion expense.
m) Impairment of Non-Financial Assets
Impairment tests on non-financial assets, including exploration and evaluation assets are undertaken whenever events or
changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an
asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs of disposal, the asset is
written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on
the asset’s cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are
separately identifiable cash inflows that are largely independent of the cash inflows from other assets.
An impairment loss is charged to profit or loss, except to the extent they reverse gains previously recognized in other
comprehensive loss/income.
14
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
n) Financial Instruments
Financial Assets
The Company recognizes a financial asset when it becomes a party to the contractual provisions of the instrument. The
Company classifies financial assets at initial recognition as financial assets: measured at amortized cost, measured at fair
value through other comprehensive income or measured at fair value through profit or loss.
Financial assets measured at amortized costs
A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost.
- The Company’s business model for the such financial assets, is to hold the assets in order to collect contractual
cash flows.
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the amount outstanding.
A financial asset measured at amortized cost is initially recognized at fair value plus transaction costs directly attributable
to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined
using the effective interest method, net of impairment loss, if necessary.
Financial assets measured at fair value through other comprehensive income (“FVTOCI”)
A financial asset measured at fair value through other comprehensive income is recognized initially at fair value plus
transaction costs directly attributable to the asset. After initial recognition, the asset is measured at fair value with changes
in fair value included in other comprehensive income.
Financial assets measured at fair value through profit or loss (“FVTPL”)
A financial asset measured at fair value through profit or loss is recognized initially at fair value with any associated
transaction costs being recognized in profit or loss when incurred. Subsequently, the financial asset is re-measured at fair
value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises.
The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the
Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred
financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and
losses on derecognition are generally recognized in profit or loss. However, gains and losses on derecognition of financial
assets classified as FVTOCI remain within accumulated other comprehensive income (loss).
Financial Liabilities
Financial liabilities are classified as amortized cost, based on the purpose for which the liability was incurred. These
liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the
instrument and subsequently carried at amortized cost using the effective interest rate method. This ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement
of financial position. Interest expense in this context includes initial transaction costs and premiums payable on
redemptions, as well as any interest or coupon payable while the liability is outstanding.
Accounts payables represent liabilities for goods and services provided to the Company prior to the end of the period
which are unpaid. Accounts payable amounts are unsecured and are usually paid within forty-five days of recognition.
15
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
n) Financial Instruments (cont’d)
The Company has made the following designations of its financial instruments:
Cash and cash equivalents
Equity investments
Derivative investments
Receivables
Deposits
Accounts payable and accrued liabilities
FVTPL
FVTOCI
FVTPL
Amortized cost
Amortized cost
Amortized cost
o) Adoption of New Accounting Standards and Amendments
The following outlines the new accounting standards and amendments adopted by the Company effective January 1, 2019:
IFRS 16 Leases
Effective January 1, 2019, the Company adopted IFRS 16 Leases (“IFRS 16”) using the modified retrospective approach.
The comparative figures for the 2018 reporting period have not been restated and are accounted for under IAS 17 Leases,
(“IAS 17”) and IFRIC 4 Determining Whether an Arrangement Contains a Lease, as permitted under the specific
transitional provisions in the standard.
At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when
the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the
underlying asset, and a lease liability, representing its obligation to make lease payments. The Company may elect to not
apply IFRS 16 to leases with a term of less than 12 months or to low value assets, which is made on an asset by asset
basis.
The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially
measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is
subsequently measured at cost less accumulated depreciation, impairment losses and adjusted for certain remeasurements
of the lease liability. The ROU asset is depreciated from the commencement date over the shorter of the lease term or
the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator of
impairment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental
borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a
similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar
economic environment.
Lease payments included in the measurement of the lease liability are comprised of:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Company is reasonably certain to exercise;
• lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option;
and
• penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
16
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
o) Adoption of New Accounting Standards and Amendments (cont’d)
IFRS 16 Leases (cont’d)
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments
made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a
change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes
in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option
is reasonably certain not to be exercised.
Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU
asset and lease liability are recognized as an expense in the consolidated statement of income in the period in which they
are incurred.
The ROU assets are presented within “Right-of-use assets” and the lease liabilities are presented in “Lease liability” on
the consolidated statement of financial position.
The Company has an office lease for its headquarters in Vancouver, British Columbia that was classified as an operating
lease under IAS 17. At transition to IFRS 16, this lease liability was measured at the present value of the remaining lease
payments and discounted using an incremental borrowing rate of 10% as of January 1, 2019. As a result, the Company,
as a lessee, has recognized $362,969 as a lease liability, representing its obligation to make lease payments. A ROU asset
of the same amount was recognized, representing its right to use the underlying asset.
The following table summarizes the difference between the operating lease commitment disclosed immediately
preceding the date of initial application and lease liability recognized on the consolidated statement of financial position
at the date of initial application:
Operating lease obligation as at December 31, 2018
Variable lease payments
Change in estimate in lease component
Effect of discounting at incremental borrowing rate
Lease liability recognized as of January 1, 2019
$ 1,281,188
(476,172)
(322,008)
(120,039)
$ 362,969
p) Standards, Amendments and Interpretations Not Yet Effective
The Company will be required to adopt the following standard and amendments issued by the IASB as described below:
IFRS 17 Insurance Contracts
IFRS 17 is a new standard that requires insurance liabilities to be measured at a current fulfillment value and provides a
more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to
achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4,
Insurance Contracts, and related interpretations.
This standard will be effective for the Company’s annual period beginning January 1, 2021. The Company has assessed
that the impact of IFRS 17 on its consolidated financial statements would not be significant.
17
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities.
Estimates and judgments are continually evaluated based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience
may differ from these estimates and assumptions.
The effect of a change in an accounting estimate is recognized prospectively by including it in profit or loss in the period
of the change, if the change affects that period only, or in the period of the change and future periods, if the change
affects both.
The key areas of judgment applied in the preparation of the consolidated financial statements that could result in a
material adjustment to the carrying amounts of assets and liabilities are as follows:
a) Where the Company holds the largest shareholding in an investment and has the power to exercise significant
influence through common officers and board members, such an investment is treated as an associate. The Company
can exercise significant influence over Rackla Metals Inc. (“Rackla”).
b) The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment
in which the entity operates. Determination of the functional currency may involve certain judgments to determine
the primary economic environment and the Company reconsiders functional currency of its entities if there is a
change in events and conditions which determined the primary economic environment.
c) The application of the Company’s accounting policy for exploration and evaluation assets requires judgment in
determining whether it is likely that future economic benefits will flow to the Company.
If, after exploration and evaluation assets are capitalized, information becomes available suggesting that the carrying
amount of an exploration and evaluation asset may exceed its recoverable amount, the Company carries out an
impairment test at the cash generating unit or group of cash generating units level in the year the new information
becomes available.
d) The determination of when receivables are impaired requires significant judgment as to their collectability.
e) The Company applies judgement in determining whether a contract contains an identified asset, whether they have
the right to control the asset, and the lease term. The lease term is based on considering facts and circumstances,
both qualitative and quantitative, that can create an economic incentive to exercise renewal options. Management
considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to
exercise a termination option.
The key estimates applied in the preparation of the consolidated financial statements that could result in a material
adjustment to the carrying amounts of assets and liabilities are as follows:
a) The Company is subject to income tax in several jurisdictions and significant judgment is required in determining
the provision for income taxes. During the ordinary course of business, there are transactions and calculations for
which the ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on
estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite the
Company's belief that its tax return positions are supportable, the Company believes that certain positions are likely
to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its
accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including
past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve
a series of complex judgments about future events. To the extent that the final tax outcome of these matters is
different than the amounts recorded, such differences will impact income tax expense in the period in which such
determination is made.
b)
In estimating the fair value of share-based payments and derivative instruments, using the Black-Scholes option
pricing model, management is required to make certain assumptions and estimates. Changes in assumptions used to
estimate fair value could result in materially different results.
c) The Company uses estimation in determining the incremental borrowing rate used to measure the lease liability.
Where the rate implicit in the lease is not readily determinable, the discount rate of the lease obligations is estimated
using a discount rate similar to the Company’s specific borrowing rate.
18
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment
or other purposes. The Company does not hold any deposits with maturities of greater than three months from the date
of acquisition. Cash at banks earn interest at floating rates based on daily bank deposit rates. As at December 31, 2019
and 2018, cash and cash equivalents is comprised of the following:
Cash
Cash equivalents
6. EQUITY INVESTMENTS
2019
$ 475,089
869,802
$ 1,344,891
2018
$ 1,150,662
454,528
$ 1,605,190
As of December 31, 2019, and 2018, equity investments consisted of the following:
Number of common shares held as at December 31:
CROPS Inc. (“CROPS”)
Fortuna Silver Mines Inc. (“Fortuna”)
GrowMax Resources Corp. (“GrowMax”)
Medgold Resources Corp. (“Medgold”)
Metalla Royalty and Streaming Ltd. (“Metalla”)
Southern Silver Exploration Corp. (“Southern Silver”)
Volcanic Gold Mines Inc. (“Volcanic”)
Warrior Gold Inc. (“Warrior”)
2019
6,764,027
239,385
1,150,000
10,126,500
-
767,000
460,412
233,781
2018
2,564,027
239,385
1,150,000
10,126,500
166,700
1,259,500
460,412
233,781
Balance, December 31, 2017
Acquisition of shares
Disposition of shares
Net change in fair value recorded in other
comprehensive income
Balance, December 31, 2018
Acquisition of shares
Disposition of shares
Net change in fair value recorded in other
comprehensive income
CROPS
Fortuna
GrowMax
Medgold
Metalla
$ 256,403
-
-
$ 1,570,366
-
-
$ 126,000
-
(7,036)
$ 1,606,400
18,064
-
$ 70,000
-
-
(166,662)
(373,441)
(26,964)
(358,651)
89,741
147,000
-
1,196,925
-
-
92,000
-
-
1,265,813
-
-
70,028
140,028
100,000
(165,000)
(169,101)
69,422
(57,500)
(658,223)
(75,028)
Balance, December 31, 2019
$ 67,640
$ 1,266,347
$ 34,500
$ 607,590
$ -
19
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
6. EQUITY INVESTMENTS (cont’d)
Balance, December 31, 2017
Acquisition of shares
Disposition of shares
Net change in fair value recorded in other
comprehensive income
Balance, December 31, 2018
Acquisition of shares
Disposition of shares
Net change in fair value recorded in other
comprehensive income
Southern
Silver
Volcanic
Warrior
Total
$ 534,660
-
(11,800)
$ 725,149
-
-
$ 50,000
-
-
$ 4,938,978
18,064
(18,836)
(277,258)
(660,691)
(33,635)
(1,827,274)
245,602
-
(39,400)
64,458
-
-
16,365
-
-
3,110,932
247,000
(204,400)
887
9,208
2,337
(877,998)
Balance, December 31, 2019
$ 207,089
$ 73,666
$ 18,702
$ 2,275,534
CROPS and Fortuna each have two common directors with the Company. Medgold and Volcanic each have one common
director with the Company. All of the Company’s equity investment companies are publicly listed as of December 31,
2019 and 2018.
During the year ended December 31, 2019:
i) Volcanic completed a share consolidation so that every seven existing common shares were exchanged for one new
common share of Volcanic. As a result, a total of 3,222,883 common shares of Volcanic held by the Company at
the time of consolidation were converted into 460,412 common shares.
During the year ended December 31, 2019, the Company completed the following transactions:
i) Purchased 4,200,000 units of a CROPS private placement at a cost of $210,000. Each unit consists of one common
share of CROPS and one share purchase warrant; each full warrant entitling the Company to purchase one additional
common share of CROPS at $0.05 for one year. Of the private placement cost, $147,000 was recorded as the cost
of the common shares and $63,000 was allocated as the fair value of the warrants.
ii) Purchased 166,700 common shares of Metalla by way of exercising 166,700 share purchase warrants at a cost of
$100,000.
iii) Sold 492,500 common shares of Southern Silver for net proceeds of $127,099 and recorded a gain of $87,700 on
the sale in other comprehensive income.
iv) Sold its entire Metalla holdings of 333,400 common shares for net proceeds of $445,234 and recorded a gain of
$280,234 on the sale in other comprehensive income.
The Company also held as at December 31, 2019, 3,973,275 free trading common shares of Rackla with a fair value of
$397,328 as at December 31, 2019, which are recorded as an investment in associate (Note 11).
During the year ended December 31, 2018, the Company completed the following transactions:
i) Purchased in the open market 86,500 common shares of Medgold at a cost of $18,064.
ii) Sold 147,500 common shares of Southern Silver for net proceeds of $39,488 and recorded a gain of $27,688 on the
sale in other comprehensive income.
iii) Sold 50,000 common shares of GrowMax for net proceeds of $5,945 and recorded a loss of $1,091 on the sale in
other comprehensive income.
20
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
7. DERIVATIVE INVESTMENTS
As of December 31, 2019, and 2018, derivative investments consisted of the following:
Number of share purchase warrants held as at December 31:
CROPS
Metalla
Volcanic
Warrior
2019
4,885,675
-
160,714
-
2018
685,675
166,700
160,714
116,890
Balance, December 31, 2017
Net change in fair value recorded in net
Income
Balance, December 31, 2018
Acquisition of warrants
Net change in fair value recorded in net
Income
CROPS
Metalla
Volcanic
Warrior
Total
$ 30,717
$ 58,301
$ 107,712
$ 7,522
$ 204,252
(27,131)
3,586
63,000
5,632
(106,312)
(7,305)
(135,116)
63,933
-
1,400
-
217
-
69,136
63,000
(66,261)
(63,933)
(196)
(217)
(130,607)
Balance, December 31, 2019
$ 325
$ -
$ 1,204
$ -
$ 1,529
During the year ended December 31, 2019, the following share purchase warrant activity occurred:
i) Acquired 4,200,000 share purchase warrants of CROPS pursuant to a private placement of 4,200,000 units (Note
6). Each warrant entitles the Company to purchase one additional common share of CROPS at $0.05 for one year.
ii) 166,700 share purchase warrants of Metalla were exercised at a cost of $100,000.
iii) Pursuant to the Volcanic share consolidation described in Note 6, the 1,125,000 share purchase warrants of Volcanic
held by the Company at the time of consolidation were converted to 160,714 share purchase warrants.
iv) 116,890 share purchase warrants of Warrior expired unexercised.
During the year ended December 31, 2018, the following share purchase warrant activity occurred:
i) Upon Champagne’s merger with Warrior, the 312,500 share purchase warrants of Champagne held by the Company
were converted into 116,890 share purchase warrants of Warrior with an exercise price of $0.40 per share and expiry
date of August 9, 2019.
ii) Upon CROPS completing a share consolidation, the 2,742,700 share purchase warrants of CROPS held by the
Company were converted into 685,675 share purchase warrants with an exercise price of $0.40 per share and expiry
date of March 22, 2022.
iii) Upon Metalla’s acquisition of ValGold, the 1,000,000 share purchase warrants of ValGold held by the Company
were converted into 166,700 share purchase warrants of Metalla with an exercise price of $0.60 and expiry date of
October 6, 2019.
iv) A total of 59,571 Volcanic share purchase warrants with an exercise price of $1.75 expired unexercised.
21
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
7. DERIVATIVE INVESTMENTS (cont’d)
The fair value of the derivative investments as of December 31, 2019 was determined using the Black-Scholes option
pricing model with the following inputs:
Volatility
factor
Risk-free
interest rate
Expected
Life
(years)
Expected
dividend
yield
CROPS
Volcanic
103% – 115%
113%
1.69%
1.69%
0.04 – 2.22
2.19
0%
0%
The share purchase warrants for CROPS and Volcanic are not tradable on an exchange.
The fair value of the derivative investments as of December 31, 2018 was determined using the Black-Scholes option
pricing model with the following inputs:
Volatility
factor
Risk-free
interest rate
93%
100%
100%
121%
1.87%
1.85%
1.87%
1.79%
Expected
Life
(years)
Expected
dividend
yield
3.22
0.76
3.19
0.61
0%
0%
0%
0%
CROPS
Metalla
Volcanic
Warrior
8. RECEIVABLES
Royalty receivable
Provision for impairment (Note 12 – Guatemala Tambor Project)
Royalty revenue receivable, net
Sales taxes
Exploration expenditure recoveries
Other receivables
December 31,
2019
December 31,
2018
$ 784,180
(784,180)
-
14,482
40,439
16,652
$ 784,180
(784,180)
-
61,572
174,003
4,682
$ 71,573
$ 240,257
The provision for impairment of the royalty receivable was included in profit or loss during the 2016 fiscal year.
Uncollectable amounts included in the provision are written off against the provision when there is no expectation of
recovery. The royalty revenue receivable was uncollected as of December 31, 2019 as the Company has allowed Kappes,
Cassiday & Associates (“KCA”) to defer payment of the balance while KCA continues a legal strategy to overturn the
suspension of operations of its mine-site and seek compensation from the Guatemalan authorities, from which the
Company would seek to benefit as well (Note 12).
22
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
9. PROPERTY AND EQUIPMENT
Leasehold
improvements
Trucks
Computer
equipment
Furniture
and
equipment
Geophysical
equipment
Field
equipment
Total
Cost
Balance, December 31, 2017
$ 62,762
$ 253,095
$ 252,068
$ 62,656
$ 84,882
$ 2,480
$ 717,943
Balance, December 31, 2018
62,762
253,095
252,068
62,656
84,882
2,480
717,943
Additions
-
-
660
-
-
-
660
Balance, December 31, 2019
$ 62,762
$ 253,095
$ 252,728
$ 62,656
$ 84,882
$ 2,480
$ 718,603
Accumulated amortization
Balance, December 31, 2017
$ 54,967
$ 219,811
$ 242,211
$ 53,896
$ 73,699
$ 2,306
$ 646,890
Charge for year
6,300
9,098
2,957
1,751
2,237
174
22,517
Balance, December 31, 2018
61,267
228,909
245,168
55,647
75,936
2,480
669,407
Charge for year
1,495
9,301
2,268
1,402
1,789
-
16,255
Balance, December 31, 2019
$ 62,762
$ 238,210
$ 247,436
$ 57,049
$ 77,725
$ 2,480
$ 685,662
Carrying amounts
At December 31, 2018
$ 1,495
$ 24,186
$ 6,900
$ 7,009
$ 8,946
$ -
$ 48,536
At December 31, 2019
$ -
$ 14,885
$ 5,292
$ 5,607
$ 7,157
$ -
$ 32,941
10. RIGHT-OF-USE ASSET AND LEASE LIABILITY
The Company has a lease agreement for its headquarter office space in Vancouver, British Columbia. Upon transition to IFRS
16, the Company recognized $362,969 for a ROU asset and $362,969 for a lease liability.
The continuity of the ROU asset and lease liability for the year ended December 31, 2019 is as follows:
Right-of-use asset
Value of right-of-use asset recognized as at January 1, 2019
Depreciation
Value of right-of-use asset as at December 31, 2019
$ 362,969
(60,302)
$ 302,667
Lease liability
Lease liability recognized as of January 1, 2019
Lease payments
Lease interest
Lease liability recognized as of December 31, 2019
Current portion
Long-term portion
$ 362,969
(70,918)
32,983
$ 325,034
$ 49,547
275,487
$ 325,034
23
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
11. INVESTMENT IN ASSOCIATE
Rackla
As at December 31, 2019, the Company held 3,973,275 (2018: 3,973,275) common shares of Rackla, representing 19.6%
(2018: 19.6%) of Rackla’s outstanding common shares.
Rackla meets the definition of an associate and has been equity accounted for in the consolidated financial statements.
The following table shows the continuity of the Company’s investment in Rackla for years ended December 31, 2019
and 2018:
Balance, December 31, 2018
Balance, December 31, 2019
$ 1
$ 1
Prior to the 2015 fiscal year the Company’s share of losses in Rackla exceeded the carrying value of its interest and
therefore the Company discontinued recognizing its share of further losses. The cumulative unrecognized share of losses
for the associate as at December 31, 2019 is $655,382 (2018: $601,882).
The financial statement balances of Rackla are as follows:
Total current assets
Total assets
Total liabilities
Net loss
December 31,
2019
December 31,
2018
$ 19,350
$ 80,351
$ 308,347
$ 273,047
$ 97,012
$ 160,173
$ 176,068
$ 175,739
At December 31, 2019, the fair value of the 3,973,275 common shares of Rackla was $397,328 (2018: $357,595) based
on the market price of the common shares of Rackla.
12. MINERAL INTERESTS AND ROYALTIES
Acquisition costs
Balance, December 31, 2017
Additions – cash
Additions – shares
Acquisition costs recovered
Write-off acquisition costs
Balance, December 31, 2018
Additions – cash
Additions – shares
Acquisition costs recovered
Write-off acquisition costs
Balance, December 31, 2019
Peru United States
$ 137,288
57,732
-
-
(77,204)
117,816
-
-
-
-
$ 117,816
$ 1,259,505
-
-
-
-
1,259,505
-
-
-
(1,259,505)
$ -
Guatemala
$ 1
-
-
-
-
1
-
-
-
-
$ 1
Mexico
$ 13,348
27,400
6,676
(47,424)
-
-
59,883
6,617
(66,500)
-
$ -
Total
$ 1,410,142
85,132
6,676
(47,424)
(77,204)
1,377,322
59,883
6,617
(66,500)
(1,259,505)
$ 117,817
24
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
12. MINERAL INTERESTS AND ROYALTIES (cont’d)
USA
i) Bald Peak Property
In 2017, the Company acquired a 100% interest in the Bald Peak gold property from Nevada Select Royalty, Inc.
(“Nevada Select”) in consideration of a cash payment to Nevada Select of $46,032 (US$35,115), the granting to
Nevada Select and/or a former property owner of a total 3% NSR royalty, and making annual advance royalty
payments to Nevada Select of US$25,000. The advance royalty payments become payable on the date the Company
receives a drill permit for the property and on each annual anniversary thereof so long as the Company holds title to
the property. The Company has the right to reduce either royalty by 1% by paying US$1.0 million to Nevada Select,
and/or US$500,000 to the former owner.
In 2017, the Company staked an additional 113 unpatented mining claims at a cost of $71,784, increasing the land
position of the Bald Peak Property to 151 unpatented mining claims in Mineral County, Nevada, and one mineral
prospecting licence in Mono County, California.
ii) Coyote Property
In March 2018, the Company was granted a lease and option agreement with Geologic Services Inc. (“Geologic”)
on the Coyote gold property which consisted of 128 unpatented mineral claims located in Elko County, Nevada.
Pursuant to this agreement, the Company paid $25,657 to Geologic as reimbursement for the staking costs of 70 of
these claims.
Geologic granted the Company an exclusive lease of a 100% interest in the property for a period of up to 15 years,
in consideration for the granting to Geologic of a 2.0% to 3.0% NSR royalty, the percentage to depend on the
prevailing price of gold. In order to keep the lease in good standing, the Company was to make annual advance
royalty payments to Geologic, beginning with a payment of $32,075 (US$25,000) (paid) that was made upon the
execution of the agreement. At any time during the term of the lease, the Company may have elected to acquire a
100% interest in the Coyote property by making a cash payment of US$2.0 million to Geologic.
In January 2019, management decided to terminate the option agreement and as a result, acquisition costs totaling
$57,732 were written off during the 2018 fiscal year.
iii) Spring Peak Property
In 2016, the Company entered into an option agreement with Kinetic Gold (US) Inc. (“Kinetic”) for the right to
acquire a 100% interest in the Spring Peak gold property which consisted of 37 United States federal mineral claims
located in Mineral County, Nevada.
In 2018, management decided to terminate the option agreement and as a result, acquisition costs totaling $19,472
were written off during the 2018 fiscal year.
Mexico
i) Amalia Project
In 2017, the Company signed a binding agreement with a private individual to option the Amalia Project in the State
of Chihuahua, Mexico. The Company can earn a 100% interest in the Amalia Project by making an initial cash
payment of US$5,000 (paid) and by completing staged payments over a period of five years totaling US$845,000
cash (US$65,000 paid, of which $53,141 / US$40,000 was paid during the year ended December 31, 2019) and,
subject to stock exchange approval, US$15,000 in shares of the Company ($13,293 / US$10,000 in shares issued).
25
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
12. MINERAL INTERESTS AND ROYALTIES (cont’d)
Mexico (cont’d)
i) Amalia Project (cont’d)
In 2018, the Company entered into an option agreement with Pan American Silver Corp. (“Pan American”) whereby
Pan American can earn up to an initial 65% interest in the Amalia Project by making cash payments to the Company
totaling US$1.5 million, of which $130,620 (US$100,000) was received in 2018 and $199,170 (US$150,000) was
received during the year ended December 31, 2019, and expending US$2.0 million on exploration over four years.
Pan American may earn an additional 10% by advancing the property to a preliminary feasibility stage. The option
payment of $199,170 received during the current year was recorded as a gain from mineral property option
agreement.
ii) Palmillas Property
In November 2019, the Company signed a binding agreement with a private family to option the Palmillas property
that adjoins the Amalia Project in the State of Chihuahua, Mexico. The Company can earn a 100% interest in the
Palmillas property by completing staged payments over a period of five years totaling US$350,000 of which $6,742
(US$5,000) was paid upon signing of the agreement and US$200,000 is a final payment at the end of five years. The
owners retain a 1% NSR royalty.
Pursuant to the Company’s option agreement with Pan American on the Amalia Project, Pan American had the right
to elect to pay the acquisition costs of the Palmillas property and add the property to the Amalia Project. Subsequent
to December 31, 2019, Pan American elected to exercise this right.
iii) Plata Verde Project
Subsequent to December 31, 2019, the Company entered into an option agreement with a local concession holder to
acquire the Plata Verde Project in the State of Chihuahua, Mexico. The Company can earn a 100% interest in the
Plata Verde Project by making staged payments totaling US$800,000 over four years, of which the final payment is
US$400,000 at the end of the fourth year. The Company also made a US$8,000 payment upon signing of the
agreement. The concession holder retains a 1% NSR royalty which the Company can buy back for US$1,000,000.
iv) Rambler Project
During the year ended December 31, 2019, the Company staked a 10,379-hectare property called the Rambler
Project, located in the State of Chihuahua.
v) Tinamaxte Property
In October 2019, the Company entered into an option agreement with a private individual to acquire a 100% interest
in the Tinamaxte Property in the State of Sonora, Mexico. The Company made an initial cash option payment in
2019 of US$15,000. Prior to December 31, 2019, the Company terminated the option agreement after it was
unsuccessful in negotiating an access agreement with the local community.
vi) Tarros Project
In 2017, the Company signed a binding agreement with a private Mexican company to option the (473-hectare)
Tarros Project in the State of Chihuahua, Mexico. The Company could earn a 100% interest in the Tarros Project by
making an initial cash payment of US$3,250 (paid) and by completing staged payments over a period of 4.5 years
totaling US$1,098,500. During the 2018 fiscal year, the Company terminated the option agreement prior to the due
date of the next required cash option payment.
26
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
12. MINERAL INTERESTS AND ROYALTIES (cont’d)
Mexico (cont’d)
vii) Lithium Brine Projects
In 2016, the Company submitted applications for mineral concessions covering four lithium brine projects in the
States of Chihuahua and Coahuila, Mexico at a cost of $23,748.
In 2017, the Company submitted an application for an additional 10,000-hectare mineral concession covering an
adjacent lithium brine project in the State of Chihuahua, but subsequently withdrew this and allowed three other
lithium applications in Chihuahua to lapse. The Company currently retains one application in the State of Coahuila.
Guatemala
i) Tambor Project Royalty
In 2012, the Company sold its interest in its subsidiary, Exploraciones Mineras de Guatemala S.A., which holds the
Tambor gold project, to KCA, giving KCA a 100% interest in the project. KCA agreed to make royalty payments to
the Company, upon commercial production, based on the then price of gold and the number of ounces produced
from the property.
Commercial production commenced in December 2014. In May 2016, KCA informed the Company that mining
operations were suspended by the Supreme Court of Guatemala due to a lack of consultation by the Guatemalan
Ministry of Mines with local indigenous people when the mine was permitted in 2011. To date, the Supreme Court
has not made a decision on when the mine may re-open.
There was no royalty income recognized for the years ended December 31, 2019 and 2018.
As at December 31, 2019, all gold sales subject to the Company’s royalty had been final settled and the balance that
remained unpaid to the Company was $784,180. Due to the uncertainty as to when the mine may re-open and when
the amount owing by KCA to the Company will be paid, a provision of $784,180 against the receivable amount was
charged to operations in 2016.
ii) Southeast Guatemala Ag-Au Epithermal Fields (formerly called Banderas)
The Company’s 100% owned land holdings in southeast Guatemala as at December 31, 2019 consist of 32
concessions (one granted exploration licence, twenty-seven exploration applications, three exploitation applications,
and one reconnaissance application) filed with the Guatemala Ministry of Energy and Mines covering a total of
222,209 hectares. The three exploitation applications were filed in order to convert one previously granted
exploration licence to exploitation; until the exploitation licences are granted, the granted exploration licence
remains in place.
Peru
Bayovar 12 Project Royalty
In April 2015, the Company purchased from CROPS a production royalty equivalent to 2% of CROPS’s 70% interest in
future phosphate production from the Bayovar 12 project located in the Sechura district of northern Peru. The purchase
price for the royalty was $1,259,505 (US$1,000,000). Subsequent to December 31, 2019, CROPS decided to relinquish
its rights to the Bayovar 12 project and as a result, the Company wrote off the acquisition cost of $1,259,505 for the year
ended December 31, 2019.
The Company and CROPS have two common directors.
27
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
13. COMMITMENTS
The Company has entered into an operating lease agreement for its office premises. The Company also rents space to
other companies related by common directors and officers on a month to month basis, the amounts of which are netted
against rental expense; however, there are no commitments from these companies and thus the amounts presented below
are the gross commitments. The annual commitments under the lease are as follows:
2020
2021
2022
2023
2024
$ 126,202
128,119
130,035
131,952
133,869
$ 650,177
For the year ended December 31, 2019, the Company received a total of $160,734 (2018: $154,246) from those
companies which share office space with the Company.
14. SHARE CAPITAL AND RESERVES
a) Common Shares
The Company is authorized to issue an unlimited number of common shares without par value.
During the year ended December 31, 2019, the following share capital activity occurred:
i) A total of 155,000 options were exercised for gross proceeds of $23,250. The Company reallocated the fair
value of these options previously recorded in the amount of $17,855 from other equity reserve to share capital;
and
ii)
the Company issued 33,255 common shares with a value of $6,617 (US$5,000) pursuant to its option agreement
on the Amalia Project (Note 12).
During the year ended December 31, 2018, the Company issued 74,183 common shares with a value of $6,676
(US$5,000) pursuant to its option agreement on the Amalia Project (Note 12).
15. SHARE-BASED PAYMENTS
a) Option Plan Details
The Company has a formal stock option plan in accordance with the policies of the TSX Venture Exchange (“TSX-
V”) under which it is authorized to grant options up to 10% of its outstanding shares to officers, directors, employees
and consultants. The exercise price of each option is not less than the closing market price of the Company’s stock
on the trading day prior to the date of grant. Options granted to investor relations personnel vest in accordance with
TSX-V regulation. The options are for a maximum term of ten years.
28
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
15. SHARE-BASED PAYMENTS (cont’d)
a) Option Plan Details (cont’d)
The following is a summary of changes in options for the year ended December 31, 2019:
Grant date
Expiry date
Exercise
price
Opening
balance
Granted Exercised
Forfeited /
expired
Closing
balance
Vested and
exercisable
During the year
Jan 8, 2010
Jan 7, 2020
Jul 29, 2019
Dec 1, 2022
$0.29
$0.24
10,000
-
-
150,000
Dec 13, 2012
Dec 12, 2022
$0.20
1,585,000
Oct 19, 2016
Oct 18, 2026
$0.15
1,540,000
May 22, 2018 May 21, 2028
$0.15
1,515,000
Nov 5, 2018
Nov 4, 2028
Oct 8, 2019
Oct 7, 2029
$0.15
$0.25
200,000
-
850,000
-
-
-
(130,000)
(25,000)
-
-
-
-
-
-
Weighted average exercise price
$0.17
$0.25
$0.15
4,850,000
1,000,000
(155,000)
-
-
-
-
-
-
-
-
-
10,000
10,000
150,000
37,500
1,585,000
1,585,000
1,410,000
1,410,000
1,490,000
1,490,000
200,000
850,000
200,000
850,000
5,695,000
5,582,500
$0.18
$0.18
The weighted average stock price for options exercised during the year ended December 31, 2019 was $0.29 per
share (2018: $nil).
The following is a summary of changes in options for the year ended December 31, 2018:
During the year
Grant date
Expiry date
Exercise
price
Opening
balance
Granted Exercised
Forfeited /
expired
Closing
balance
Vested and
exercisable
Jan 08, 2010
Jan 07, 2020
$0.29
1,245,000
May 26, 2010 May 25, 2020
$0.36
100,000
Sep 24, 2010
Sep 23, 2020
$0.69
100,000
Dec 13, 2012
Dec 12, 2022
$0.20
1,885,000
Oct 19, 2016
Oct 18, 2026
$0.15
1,740,000
-
-
-
-
-
May 22, 2018 May 21, 2028
Nov 5, 2018
Nov 4, 2028
$0.15
$0.15
-
-
1,515,000
200,000
Weighted average exercise price
$0.22
$0.15
5,070,000
1,715,000
-
-
-
-
-
-
-
-
-
(1,235,000)
10,000
10,000
(100,000)
(100,000)
-
-
-
-
(300,000)
1,585,000
1,585,000
(200,000)
1,540,000
1,540,000
-
-
1,515,000
1,515,000
200,000
200,000
(1,935,000)
4,850,000
4,850,000
$0.29
$0.17
$0.17
b) Fair Value of Options Granted During the Year
The weighted average fair value at grant date of options granted during the year ended December 31, 2019 was
$0.19 per option (2018: $0.08).
The weighted average remaining contractual life of the options outstanding at December 31, 2019 is 6.55 years
(2018: 7.11 years).
Options Issued to Employees
The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
29
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
15. SHARE-BASED PAYMENTS (cont’d)
b) Fair Value of Options Granted During the Year (cont’d)
Options Issued to Non-Employees
Options issued to non-employees are measured based on the fair value of the goods or services received, at the date
of receiving those goods or services. If the fair value of the goods or services received cannot be estimated reliably,
the options are measured by determining the fair value of the options granted using the Black-Scholes option pricing
model.
The model inputs for options granted during the year ended December 31, 2019 included:
Grant date
Expiry date
Jul 29, 2019
Dec 1, 2022
Oct 8, 2019
Oct 7, 2029
Share price
at grant
date
Exercise
price
Risk-free
interest
rate
Expected
life
Volatility
factor
Dividend
yield
$0.23
$0.24
$0.24
$0.25
1.43% 3.35 years
1.29%
10 years
86%
81%
0%
0%
The model inputs for options granted during the year ended December 31, 2018 included:
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Risk-free
interest
rate
Expected
life
Volatility
factor
Dividend
yield
May 22, 2018 May 21, 2028
Nov 5, 2018
Nov 4, 2028
$0.095
$0.105
$0.15
$0.15
2.48%
10 years
2.52%
10 years
87%
79%
0%
0%
The expected volatility is based on the historical volatility (based on the remaining contractual life of the options),
adjusted for any expected changes to future volatility due to publicly available information. The risk free rate of
return is the yield on a zero-coupon Canadian Treasury Bill of a term consistent with the assumed option life. The
expected average option term is the average expected period to exercise, based on the historical activity patterns for
each individually vesting tranche.
Option pricing models require the input of highly subjective assumptions, including the expected price volatility.
Changes in these assumptions can materially affect the fair value estimate and, therefore, the existing models do not
necessarily provide a reliable single measure of the fair value of the Company’s stock options.
c) Expenses Arising from Share-based Payment Transactions
Total expenses arising from the share-based payment transactions recognized during the year ended December 31,
2019 as part of share-based compensation expense were $172,939 (2018: $129,276).
30
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
16. INCOME TAXES
Taxation in the Company and its subsidiaries’ operational jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The difference between tax expense for the year and the expected income taxes based on the statutory tax rate arises as
follows:
Loss before income taxes
Tax recovery based on the statutory rate of 27%
Non-deductible expenses
Different tax rates in other jurisdictions
Non-taxable portion of capital gains
Initial recognition exemption and other
Under provided in prior years
Changes in unrecognized deferred tax assets
Total income tax expense / (recovery)
December 31, 2019 December 31, 2018
$ (1,565,694)
$ (2,563,125)
(692,000)
39,000
(34,000)
(50,000)
-
-
737,000
(423,000)
35,000
(37,000)
(22,000)
(182,000)
(1,844,000)
2,473,000
$ -
$ -
The tax rates represent the federal statutory rate applicable for the 2019 taxation year, 0% for Cayman Islands, 27% for
the United States, 30.0% for Mexico and 25.0% for Guatemala.
No deferred tax asset has been recognized in respect of the following losses and temporary differences as it is not
considered probable that sufficient future taxable profit will allow the deferred tax asset to be recovered:
Loss carry forwards
Property and equipment
Lease liability
Mineral properties
Available-for-sale investments
Investment in Associates
Other deductible temporary differences
Unrecognized tax assets
December 31, 2019 December 31, 2018
$ 2,294,000
(8,000)
88,000
2,091,000
423,000
492,000
411,000
(5,791,000)
$ 2,001,000
74,000
-
2,104,000
200,000
133,000
357,000
(4,869,000)
$ -
$ -
As at December 31, 2019, the Company has estimated non-capital losses of $7,768,000 (2018: $6,454,600) for Canadian
income tax purposes and $610,000 (2018: $478,400) for Mexico income tax purposes that may be carried forward to
reduce taxable income derived in future years. Non-capital Canadian tax losses expire in various amounts from 2026 to
2039. Non-capital Mexico tax losses expire in various amounts until 2029.
31
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
17. RELATED PARTY TRANSACTIONS
The Company had transactions during the years ended December 31, 2019 and 2018 with related parties who consisted
of directors, officers and the following companies with common directors:
Related Party
Mill Street Services Ltd. (“Mill Street”)
Gold Group Management Inc. (“Gold Group”)
Medgold
CROPS
Rackla (Associate)
Nature of Transactions
Management fees
Shared general and administrative expenses
Investment and shared personnel expenses
Investment
Investment and shared personnel expenses
In addition to related party transactions disclosed elsewhere in the consolidated financial statements, the Company
incurred the following expenditures charged by non-key management officers and companies which have common
directors with the Company in the years ended December 31, 2019 and 2018:
General and administrative expenses:
Salaries and benefits
Exploration expenditures:
Salaries and benefits
2019
2018
$ 20,800
$ 23,040
15,922
10,000
$ 36,722
$ 33,040
The Company reimburses Gold Group, a company controlled by the Chief Executive Officer of the Company, for shared
administrative costs and other business-related expenses paid by Gold Group on behalf of the Company. During the years
ended December 31, 2019 and 2018, the Company reimbursed Gold Group the following:
General and administrative expenses:
Office and miscellaneous
Shareholder communications
Salaries and benefits
Transfer agent and regulatory fees
Travel and accommodation
2019
2018
$ 31,876
5,885
116,160
4,005
7,322
$ 37,907
1,960
108,069
4,012
7,575
$ 165,248
$ 159,523
Exploration expenditures
$ 2,886
$ 2,663
Gold Group salaries and benefits costs for the years ended December 31, 2019 and 2018 include those for the Chief
Financial Officer and Corporate Secretary.
During the year ended December 31, 2019, the Company was reimbursed $Nil (2018: $12,079) from Medgold, a
company which has a common director with the Company, for shared exploration personnel costs.
Receivables include an amount of $7,445 (2018: $Nil) owed from Rackla, a company which has two common directors
with the Company, for shared exploration personnel costs provided during the year ended December 31, 2019.
32
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
17. RELATED PARTY TRANSACTIONS (cont’d)
Prepaid expenses and deposits include an amount of $5,115 (2018: $9,887) paid to Gold Group for shared office and
administrative services and $Nil (2018: $216,500) paid to CROPS for a subscription towards a private placement that
closed in January 2019.
Long-term deposits include an amount of $60,000 (2018: $60,000) paid to Gold Group as a deposit on the shared office
and administrative services agreement.
Accounts payable and accrued liabilities include $4,853 (2018: $Nil) payable to Gold Group for shared administrative
costs.
During the year ended December 31, 2019, the Company purchased 4,200,000 units of a CROPS private placement at a
cost of $210,000 (Note 6).
During the year ended December 31, 2018, the Company acquired 86,500 common shares of Medgold on the open
market for a cost of $18,064 (Note 6).
Key management compensation
Key management personnel are persons responsible for planning, directing and controlling the activities of an entity,
and include certain directors and officers. Key management compensation comprises:
Management fees
Geological fees included in exploration expenditures
Salaries, benefits and fees*
Share-based payments (value of stock option grants)
*Included in reimbursements to Gold Group
2019
2018
$ 42,000
60,000
34,375
-
$ 42,000
60,000
28,876
22,691
$ 136,375
$ 153,567
Key management compensation includes management and geological fees paid to Mill Street, a company controlled by
the Chief Executive Officer of the Company.
Total share-based payments to directors not included in the above table during the year ended December 31, 2019 was
$Nil (2018: $31,809).
33
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
18. SEGMENTED INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate
resources and in assessing performance. All of the Company’s operations are within the mining sector relating to mineral
exploration except for a royalty interest in a gold producing property. Due to the geographic and political diversity, the
Company’s exploration operations are decentralized whereby exploration managers are responsible for business results
and regional corporate offices provide support to the exploration programs in addressing local and regional issues. The
Company’s operations are therefore segmented on a district basis. The Company’s assets were located in Canada, USA,
Guatemala, Peru, Mexico, and Cayman Islands. Details of identifiable assets by geographic segments are as follows:
Year ended December 31, 2019
Canada
USA
Guatemala
Mexico
Other Consolidated
Exploration expenditures
$ -
$ 118,696
$ 148,339
$ 388,483
$ 98,442
$ 753,960
Mineral property acquisition costs written off
Gain from mineral property option agreements
Investment income
Amortization
Depreciation on right-of-use asset
Interest expense on lease liability
Net income (loss)
Capital expenditures*
-
-
43,875
6,756
60,302
32,983
-
-
-
-
-
-
-
-
-
-
-
-
-
1,259,505
1,259,505
199,170
-
9,499
-
-
-
-
-
-
-
199,170
43,875
16,255
60,302
32,983
(790,177)
(118,696)
(148,339)
(188,715)
(1,317,198)
(2,563,125)
-
-
-
67,160
-
67,160
Year ended December 31, 2018
Canada
USA
Guatemala
Mexico
Other Consolidated
Exploration expenditures
$ -
$ 731,424
$ 70,002
$ 43,182
$ 89,826
$ 934,434
Mineral property acquisition costs written off
Gain from mineral property option agreement
Investment income
Amortization
Net loss
Capital expenditures*
-
-
15,372
13,418
77,204
-
-
-
-
-
-
-
-
83,196
-
9,099
-
-
-
-
77,204
83,196
15,372
22,517
(228,536)
(955,394)
(87,195)
(153,526)
(141,043)
(1,565,694)
-
57,732
-
34,076
-
91,808
*Capital expenditures consists of additions of property and equipment and exploration and evaluation assets
As at December 31, 2019
Canada
USA
Guatemala
Peru
Mexico
Other
Consolidated
Total current assets
$ 2,365,556
$ -
$ 8,005
$ -
$ 85,380
$1,284,207
$ 3,743,148
Total non-current assets
443,361
117,816
-
-
15,347
-
576,524
Total assets
$ 2,808,917
$ 117,816
$ 8,005
$ -
$ 100,727
$1,284,207
$ 4,319,672
Total liabilities
$ 407,291
$ -
$ 13,823
$ -
$ 10,270
$ -
$ 431,384
As at December 31, 2018
Canada
USA
Guatemala
Peru
Mexico
Other
Consolidated
Total current assets
$ 5,186,121
$ -
$ 10,065
$ -
$ 56,674
$ 27,344
$ 5,280,204
Total non-current assets
147,450
117,816
-
1,259,505
24,186
-
1,548,957
Total assets
$ 5,333,571
$ 117,816
$ 10,065
$ 1,259,505
$ 80,860
$ 27,344
$ 6,829,161
Total liabilities
$ 63,536
$ -
$ 3,524
$ -
$ 3,429
$ -
$ 70,489
34
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company is exposed to the following financial risks:
Market Risk
Credit Risk
Liquidity Risk
In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments.
This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these risks is presented throughout these consolidated
financial statements.
General Objectives, Policies and Processes
The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives
and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance
function. The Board of Directors receive periodic reports through which it reviews the effectiveness of the processes put
in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.
a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market prices are comprised of three types of risk: foreign currency risk, interest rate risk, and equity
price risk.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. The Company is exposed to fluctuations in foreign currencies through its operations
in foreign countries. The Company monitors this exposure but has no hedge positions. As at December 31, 2019 and
2018, the Company is exposed to currency risk through the following financial assets and liabilities denominated in
currencies other than the Canadian dollar:
December 31, 2019
December 31, 2018
US Dollar
Mexican
Peso
Guatemala
Quetzal
US Dollar
Mexican
Peso
Guatemala
Quetzal
Nicaragua
Cordoba
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
Cash
Receivables
Current liabilities
$ 49,500
28,248
(38,991)
$ 965
5,557
(1,503)
$ 2,925
-
(13,823)
$ 16,426
-
(19,359)
$ 138
49,294
(1,346)
$ 77
-
(3,524)
$ 646
-
-
$ 38,757
$ 5,019
$ (10,898)
$ (2,933)
$ 48,086
$ (3,447)
$ 646
Based on the above net exposures at December 31, 2019, a 10% depreciation or appreciation of the above currencies
against the Canadian dollar would result in approximately a $3,300 (2018: $4,200) increase or decrease in profit or loss,
respectively.
35
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d)
Commodity Price Risk
The Company’s royalty revenue is derived from a royalty interest that is based on the extraction and sale of gold. Factors
beyond the control of the Company may affect the marketability of gold discovered. Gold prices have historically
fluctuated widely. Consequently, the economic viability of the Company’s royalty interest cannot be accurately predicted
and may be adversely affected by fluctuations in gold prices. The Company has not engaged in any hedging activities.
The Company is not exposed to commodity price risk as the Company has not earned any royalties during the years
ended December 31, 2019 and 2018.
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered on
cash held with chartered Canadian financial institutions. The Company considers this risk to be limited as it holds no
assets or liabilities subject to variable rates of interest.
Equity Price Risk
Equity price risk is the uncertainty associated with the valuation of assets arising from changes in equity markets. The
Company’s equity investments consisting of common shares and derivative investments consisting of share purchase
warrants are exposed to significant equity price risk due to the potentially volatile and speculative nature of the businesses
in which the investments are held. The Company’s equity investments are monitored by the Board with decisions on sale
or exercise taken by Management. A 10% decrease in fair value of the shares and warrants would result in an approximate
$228,000 (2018: $311,000) decrease in comprehensive income and shareholders’ equity.
b) Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its
contractual obligations. The Company’s credit risk is primarily attributable to its cash and cash equivalents, equity
investments, derivative investments and receivables. The Company limits exposure to credit risk by maintaining its cash
and cash equivalents with large financial institutions. The Company does not have cash and cash equivalents or equity
investments that are invested in asset based commercial paper. For advances and other receivables, the Company
estimates, on a continuing basis, the probable losses and provides a provision for losses based on the estimated realizable
value.
c) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to
meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows required by operations and
anticipated investing and financing activities. At December 31, 2019, the Company had working capital of $3.6 million
(2018: $5.2 million) available to apply against short-term business requirements. All of the Company’s financial
liabilities have contractual maturities of less than 45 days and are subject to normal trade terms with the expectation of
the Company’s lease liability which matures based on the lease agreement.
Determination of Fair value
Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When
applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific
to that asset or liability.
Management considers that due to their short-term nature the carrying amounts of financial assets and financial liabilities,
which include cash and cash equivalents, receivables, deposits, and accounts payables and accrued liabilities are assumed
to approximate their fair values.
36
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d)
Determination of Fair value (cont’d)
The fair value investments in associate are detailed in the following table:
Financial assets
Shares held in Rackla (Note 11)
Fair Value Hierarchy
December 31,
2019
Book value
December 31,
2019
Fair value
$ 1
$ 397,328
Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based
on the degree to which the fair value is observable:
Level 1
Level 2
Level 3
Unadjusted quoted prices in active markets for identical assets or liabilities;
Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The equity investments are based on quoted prices and are therefore considered to be Level 1. The derivative instruments
are based on inputs other than quoted prices and therefore considered to be Level 3. As of December 31, 2019, there was
no embedded derivative on royalty income receivables derived from gold prices to include as a Level 2 measurement
and therefore no fair value measurement was necessary.
20. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern
in order to advance its mineral properties. In order to facilitate the management of its capital requirements, the Company
prepares periodic budgets that are updated as necessary. The Company manages its capital structure and adjusts it to
effectively support the acquisition and exploration of mineral properties. The properties in which the Company currently
has an interest are in the exploration stage. As such the Company is dependent on external financing to fund its activities.
In order to carry out the planned exploration and pay for general administrative costs, the Company will spend its existing
working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek
to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has
adequate financial resources to do so.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the
relative size of the Company, is reasonable. The Company monitors its cash and cash equivalents, equity investments,
derivative investments, common shares, warrants and stock options as capital. There were no changes in the Company’s
approach to capital management during the year ended December 31, 2019. The Company’s investment policy is to hold
cash in interest bearing bank accounts and highly liquid short-term interest-bearing investments with maturities of one
year or less and which can be liquidated at any time without penalties. Neither the Company nor any of its subsidiaries
is subject to externally imposed capital requirements and does not have exposure to asset-backed commercial paper or
similar products. The Company expects its current capital resources to be sufficient to carry out its planned exploration
programs and operating costs for the next twelve months.
37
Radius Gold Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
21. SUPPLEMENTAL CASH FLOW INFORMATION
Shares issued for mineral property option payment
Purchase of equity investments included in prepaids
Taxes paid
Interest paid
22. EVENTS AFTER THE REPORTING DATE
2019
2018
$ 6,617
$ 6,676
-
-
-
210,000
-
-
Subsequent to December 31, 2019, the following events which have not been disclosed elsewhere in these consolidated
financial statements have occurred:
i) A total of 205,000 stock options with a weighted average exercise price of $0.21 per share were forfeited or expired
unexercised.
ii) A total of 280,000 stock options with an exercise price of $0.15 per share were granted.
iii) A total of 4,200,000 CROPS warrants held by the Company expired unexercised.
iv) Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”,
has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These
measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing,
have caused material disruption to business globally resulting in an economic slowdown. Global equity markets
have experienced significant volatility and weakness. The duration and impact of the COVID-19 outbreak is
unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably
estimate the length and severity of these developments and the impact on the financial results and condition of the
Company in future periods.
38
(the “Company”)
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year End Report – December 31, 2019
General
This Management’s Discussion and Analysis (“MD&A”) supplements, but does not form part of, the annual audited
consolidated financial statements of the Company for the fiscal year ended December 31, 2019. The following
information, prepared as of April 27, 2020, should be read in conjunction with the December 31, 2019 consolidated
financial statements. The Company reports its financial position, results of operations and cash flows in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”). All amounts are expressed in Canadian dollars unless otherwise indicated.
The Company’s public filings, including its most recent unaudited and audited financial statements can be reviewed
on the SEDAR website (www.sedar.com).
Forward Looking Information
This MD&A contains certain statements which constitute forward-looking information within the meaning of
applicable Canadian securities legislation (“Forward-looking Statements”). All statements included herein, other
than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and
unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected
in the Forward-looking Statements. The Forward-looking Statements in this MD&A include, without limitation,
statements relating to:
the Company’s planned exploration activities for its mineral properties;
•
• The Company’s derivative investments and equity investments;
•
•
•
the suspension of receiving royalty payments from the Tambor Project;
the intended use of proceeds received from past and possible future financing activities;
the sufficiency of the Company’s cash position and its ability to raise, if needed, equity capital or access debt
facilities; and
• maturities of the Company’s financial liabilities or other contractual commitments.
Often, but not always, these Forward-looking Statements can be identified by the use of words such as “anticipates”,
“believes”, “plans”, “estimates”, “expects”, “forecasts”, “scheduled”, “targets”, “possible”, “strategy”, “potential”,
“intends”, “advance”, “goal”, “objective”, “projects”, “budget”, “calculates” or statements that events, “will”,
“may”, “could” or “should” occur or be achieved and similar expressions, including negative variations.
- 2 -
Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially different from any results,
performance or achievements expressed or implied by the Forward-looking Statements. Such uncertainties and
factors include, among others:
•
risks associated with mineral exploration activities, and investing in companies which conduct mineral
exploration and development activities;
• due diligence investigations on potential investments not identifying all relevant facts;
•
•
•
•
•
•
inability to dispose of illiquid securities;
receipt of royalty payments from the Tambor Project;
fluctuations in commodity prices;
fluctuations in foreign exchange rates and interest rates;
credit and liquidity risks;
changes in national and local government legislation, taxation, controls, regulations and political or economic
developments in countries in which the Company does or may carry on business;
reliance on key personnel;
•
• property title matters and local community relationships;
•
risks associated with potential legal claims generally or with respect to environmental matters;
•
adequacy of insurance coverage;
• dilution from further equity financing;
•
• uncertainties relating to general economic conditions; and
•
competition;
risks relating to a global pandemic, including the coronavirus COVID-19, which unless contained could cause
a slowdown in global economic growth and impact the Company’s business, operations, financial condition
and share price.
as well as those factors referred to in the “Risks and Uncertainties” section in this MD&A.
Forward-looking Statements contained in this MD&A are based on the assumptions, beliefs, expectations and
opinions of management, including but not limited to:
•
•
all required third party contractual, regulatory and governmental approvals will be obtained for the
exploration and development of the Company’s properties;
there being no significant disruptions affecting operations, whether relating to labor, supply, power, damage
to equipment or other matter;
• permitting, exploration and/or development activities proceeding on a basis consistent with the Company’s
current expectations;
ability to sell our equity investments as needed;
royalty payments from the Tambor Project to begin being received again;
•
•
• due diligence investigations on potential investments will reveal all relevant facts;
•
expected trends and specific assumptions regarding commodity prices and currency exchange rates; and
• prices for and availability of fuel, electricity, equipment and other key supplies remaining consistent with
current levels.
These Forward-looking Statements are made as of the date hereof and the Company disclaims any obligation to
update any Forward-looking Statements, whether as a result of new information, future events or results or
otherwise, except as required by law. There can be no assurance that Forward-looking Statements will prove to be
accurate, as actual results and future events could differ materially from those anticipated in such statements.
Accordingly, investors should not place undue reliance on Forward-looking Statements.
Business of the Company
- 3 -
The Company has been exploring for gold in the Americas for over a decade which has resulted in the discovery of
several gold deposits in Central America. Management has been conducting an ongoing review of exploration
projects and/or distressed junior companies that may be available for acquisition or joint venture with the aim of
expanding the geographic and commodity focus of the Company.
A summary of the Company’s investments, royalties and properties is provided below:
Investments
For a description of the Company’s equity investments activity during the year ended December 31, 2019, please
see Note 6 of the Company’s December 31, 2019 consolidated financial statements.
The Company’s current cash and cash equivalents on hand is approximately $865,000 and its current investments
consist of:
CROPS Inc. (“CROPS”)
6,764,027 shares
Current market value: $101,000
Plus: warrants to purchase an additional 685,675
shares
Fortuna Silver Mines Inc. (“Fortuna”)
239,385 shares
Current market value: $916,000
GrowMax Resources Corp (“GrowMax”)
1,150,000 shares
Current market value: $23,000
Medgold Resources Corp. (“Medgold”)
10,126,500 shares (10+% of issued)
Current market value: $708,000
CROPS is a Canadian-listed exploration company
which is actively looking for new projects.
Fortuna is a growth oriented, precious metal
producer with its primary assets being the
Caylloma silver mine in southern Peru, the San
Jose silver-gold mine in Mexico and the Lindero
gold project, currently under construction, in
Argentina.
GrowMax is a TSX Venture Exchange (“TSX-V”)
listed company which owns phosphate and
potassium-rich brine resources on its Bayovar
concessions in northwestern Peru and is focusing
on leveraging its strong cash position to make new
investments in other industries.
Medgold is a TSX-V listed, project generator
company targeting early-stage gold properties in
the Balkan region. Its holdings include the
Tlamino gold-silver project in Serbia which has an
Inferred Mineral Resource containing
approximately 680,000 oz AuEq.
- 4 -
Rackla Metals Inc. (“Rackla”)
3,973,275 shares (10+% of issued)
Current market value: $417,000
Rackla is a mineral exploration company actively
looking for new projects in the Americas to add to
its portfolio of mineral claims in the Yukon
Territory.
Southern Silver Exploration Corp. (“Southern
Silver”)
767,000 shares
Current market value: $111,000
Southern Silver is engaged in the acquisition,
exploration and development of high-grade
precious / base metals properties within North
America, and is continuing to advance its flagship
Cerro Las Minitas silver-lead-zinc property in
Mexico.
Volcanic Gold Mines Inc. (“Volcanic”)
460,412 shares
Current market value: $112,000
Volcanic is a TSX-V listed company focused on
building multi-million ounce gold resources in
underexplored countries.
Plus: warrants to purchase an additional 160,714
shares
Warrior Gold Inc. (“Warrior Gold”)
233,785 shares
Current market value: $12,000
Warrior Gold is a TSX-V listed company engaged
in the exploration of mineral resource properties in
northern Ontario with a focus on gold deposits. It
has a significant land position in the world class
Kirkland Lake Gold Camp five kilometres from
the Town of Kirkland Lake and adjacent to
Kirkland Lake Gold Inc.’s high grade producing
gold mine.
Property Interests
Current Status
Due to restrictions on travel and for the safety of our employees because of the COVID-19 pandemic, the Company
has curtailed operations for the time being. Most of the geological staff have returned home and in the corporate
office where possible staff are working from home. We will return to the field and office when it is safe and cost
effective to do so; meanwhile we will preserve the cash position of the Company.
Mexico – Amalia Project
The Amalia Project comprises 10,250 hectares located in the Sierra Madre gold belt in the State of Chihuahua,
Mexico. In June 2017, the Company signed a binding agreement with a private individual to option 380 hectares of
the project area which is host to high grade epithermal silver-gold mineralization. Following the signing of the
option agreement, the Company staked an additional 9,081 hectares surrounding the Amalia Project, covering three
new regional target areas. In late 2019, the Company signed a binding agreement with a private family to option
- 5 -
the 800-hectare Palmillas Property which hosts high-grade epithermal gold-silver mineralization. The Palmillas
concessions cover the northeastern and southwestern strike extension of the Amalia fault zone.
In July 2018, the Company entered into an agreement with Pan American Silver Corp. (“Pan American”) to drill
and explore the Amalia Project – see “Pan American Option Terms” below.
The Amalia Project is located approximately 25 kilometres SW of the historic Guadalupe y Calvo mining district
in Chihuahua, Mexico. During due diligence evaluation the Company’s geologists sampled bonanza grade outcrop
containing 20.4 g/t Au and 5,360 g/t Ag from a 1.2 metre chip. The Company established a camp at Amalia and
completed an initial exploration program comprising geological mapping, prospecting, and channel sampling of the
three main targets: San Pedro, Guadalupe and Dulces. Epithermal Au-Ag mineralization was sampled by the
Company in several veins, vein breccias and disseminated zones over 3.5 kilometres of strike length and a 600
metre vertical interval following the trace of the large regional Amalia fault zone.
Initial Drill Program
In October and November 2018, the Company conducted an initial 9 hole - 1,909 metre diamond core drill program
at Amalia to test the three target zones across a strike length of 1.8 kilometres following the trace of the Amalia
regional fault and associated surficial epithermal gold and silver mineralization.
Five drill holes (AMDD-001 / 003 / 007 / 008 / 009) were drilled within the San Pedro structural corridor,
intercepting gold and silver mineralization in all holes and defining a 650 metre strike length of epithermal banded
veining, stockworks and multiphase breccia with significant gold and silver mineralization. A table of results is
listed below. This initial drill program was designed to test the targets between 50 and 150 metres below ground
surface. Considering the topography, the drill holes cut mineralization in a range between 1,988 metres above sea
level (asl) and 1,882 metres asl, effectively testing the mineralization over a 100 metre vertical interval. AMDD-
001 cut the zone highest in the system at 1,988 metres asl and was still within the upper rhyolite host. AMDD-009
cut the system at the deepest level (1,908 metres als) and recorded the best widths (26 metres) and highest grades
with bonanza intervals, including 5 metres at 14.71 g/t Au and 1,378 g/t Ag.
Maps and sections of
http://www.radiusgold.com/s/amalia.asp
the Amalia Stage 1 drilling are available on
the Company’s website at:
On strike from San Pedro, along the Amalia regional fault system, high grade gold and silver mineralization
outcrops at intervals vertically at least 600 metres below San Pedro. Similar style major epithermal mines of the
Sierra Madre (e.g. Palmerejo, Pinos Altos, La Cienega) located in the same regional volcanic belt as Amalia are
known to have mineralization occurring over large vertical intervals between 600 and 750 metres, indicating the
potential for a significant discovery with further drilling.
Stage 2 Drill Program
During January and February 2019, the Company completed access agreements with the landowners at Amalia to
allow for a second drill program. The Company submitted a new environmental permit with 52 proposed drill pad
locations and has constructed a new and permanent camp. SEMARNAT, the permitting authority in Chihuahua,
gave its approval in early April 2019, and Stage 2 drilling commenced at Amalia on April 11, 2019 which was
designed to follow-up the high grade drill intercepts from Stage 1 drilling within the San Pedro zone.
The Company completed the Stage 2 drill program with six diamond holes, AMDD19-010 to AMDD19-015, drilled
totalling 1,743 metres. Assay results are provided below.
- 6 -
AMDD19-010 intersected 44 metres grading 12.38 g/t Au and 309 g/t Ag with estimated true width of 34 metres.
Mineralization is hosted within the hanging wall of the San Pedro fault with disseminated fine black sulphides and
sulphide veining commencing within rhyolitic ignimbrites, and transitioning to intense silicification, stockwork
veining and brecciation.
AMDD19-011 was drilled approximately 100 metres south of 010 and 50 metres below 003 (hole 003 returned 30
metres at 0.3g/t Au and 65 g/t Ag) targeting the San Pedro structure. Hole 011 intersected multiple zones of variable
white chalcedonic stockworks, amythyst, silicification, hydrothermal breccias and diorite dykes and returned a
broad zone of anomalous Au and Ag in the hanging wall of the fault; however no economic grade mineralization
was encountered.
AMDD19-012 was drilled 200 metres south of 010 targeting the San Pedro structure approximately 50 metres
below 008 (hole 008 returned two intervals within a 33 metre wide mineralized zone (1 metre at 2.28 g/t Au and
521 g/t Ag and 5 metres at 0.59 g/t Au and 571 g/t Ag) ). Hole 012 intersected 5 metres at 647 g/t Ag and 1 metre
at 0.35 g/t Au and 140 g/t Ag within a zone of variable white chalcedonic stockworks, silicification and
hydrothermal breccias.
AMDD19-013 was drilled 100 metres north of 010. The hole cut 17 metres of moderate to strong silica and adularia
alteration, brecciation and traces of fine black sulphides; however, no potentially economic mineralization was
encountered.
AMDD19-014 was drilled 50 metres north of 010. Hole 014 intersected 28 metres at 2.3 g/t Au and 126 g/t Ag,
including 3 metres at 9.85 g/t Au and 761 gt/ Ag within a zone of strong silicification, brecciation, and stockwork
veining with moderate fine disseminated black sulphides and quartz sulphide veinlets. Estimated true thickness is
24 metres.
AMDD19-015 was drilled on section of 009 - 010 and 50 metres down dip from 010. Hole 015 intersected an
interval of 81 metres (from 216.7 to 297.7 metres) at 3.75 g/t Au and 61 g/t Ag, including 21 metres at 7.91 g/t Au
and 65 g/t Ag, within a zone of strong silica adularia alteration, brecciation and stockwork veining. Estimated true
thickness is 65 metres, although the hole remains open to expansion. From 297.7 metres to the end of the hole at
322.5 metres (an interval of 24 metres) the hole transitions from vein breccia into the lower Tarahumara formation
andesites which visually appeared to be un-mineralized, hence initially was not completely sampled. The final 24
metres of hole 015 (297.7 to 322.05 EOH) assayed 1.14 g/t Au and 16 g/t Ag. While this does not alter the main
reported interval of 81 metres at 3.75 g/t Au and 61 g/t Ag and the hole remains in mineralization to the end, these
additional results indicate that subsequent drilling should be deeper and account for potential “blind” mineralization.
Table 1. Drill results for San Pedro Zone, Amalia Project
Hole
Collar, WGS84
From
To
Interval
TRUE
Au g/t Ag g/t
Estimated
UTM E
UTM N
(m)
(m)
(m)
width (m)
AMDD18-001
295,998
2,863,234
44.4
56.4
AMDD18-003
296,025
2,863,269
107.4
137.4
AMDD18-007
296,234
2,862,867
129.1
133.1
AMDD18-008
296,077
2,863,172
98.7
99.7
and
126.7
131.7
12
30
4
1
5
9.5
24
3
0.8
4
0.1
0.3
0.29
2.28
0.59
44
65
229
521
571
- 7 -
AMDD18-009
295,988
2,863,347
144.4
170.4
including
165.4
170.4
AMDD19-010
295,978
2,863,560
210.7
254.7
AMDD19-011
296,019
2,863,477
170.5
176.5
AMDD19-012
296,090
2,863,401
176.9
181.9
26
5
44
6
5
22
4
34
4
4
AMDD19-013
295,878
2,863,631
no significant result
AMDD19-014
295,964
2,863,626
235.7
263.7
including
256.7
259.7
AMDD19-015
295,978
2,863,560
216.7
297.7
including
234.7
255.7
28
3
81
21
24
2.6
65
17
7.08
517
14.71
1378
12.38
1.05
-
2.3
9.85
3.75
7.91
309
24
647
126
761
61
65
Drill holes AMD002 / 004 / 005 / 006 targeted mineralization at the Guadalupe and Dulces zones. These drill holes
did not intercept significant gold/silver mineralization.
The Stage 2 drill program expanded multiphase gold and silver mineralization with two high grade mineralized
shoots identified to date at San Pedro structure. Geological controls on the mineralization are complex with multiple
events of gold and silver mineralization within veins, stockworks and hydrothermal breccias. The Amalia structure
trends 320/60E and can be traced for several kilometers. The Amalia fault is a large robust fault zone separating
Tertiary rhyolitic ignimbrites from the Late Cretaceous Tarahumara formation with gold and silver mineralization
typically occurring within the hanging wall. High grade shoot control is still uncertain but appears to be located by
cross faults. Exploration drilling at this stage is wide spaced and large areas remain untested. With drilling on just
five sections covering 850 metres strike and testing a vertical component limited to approximately 200 metres down
dip, the Company believes the system is still wide open and shows potential for a significant discovery.
Stage 3 Drill Program
With Pan American as operator, a Stage 3 drill program at Amalia was conducted in October 2019. The drill
program included holes AMDD19-016 to AMDD19-021. The program was successful in proving that the high-
grade mineralized shoot continues with depth, beyond its current testing up to 300 metres, and its lateral extents
have been better defined. The gold-silver mineralization is still open with depth and preparation is underway for the
next phase of drilling where it will be tested deeper.
AMDD19-016 intersected 120 m grading 1.53 g/t Au and 21 g/t Ag with an estimated true width of 78 metres,
including 23 metres (estimated true width 15 metres) at 4.61 g/t Au and 41 g/t Ag. Mineralization is hosted within
the hanging wall of the San Pedro fault with disseminated fine black sulphides and sulphide veining commencing
within rhyolitic ignimbrites, and transitioning to intense silicification, stockwork veining and brecciation. Hole
AMDD19-016 was drilled down dip and on section from drillholes AMDD18-009, AMDD19-010 and AMDD19-
015. These four drillholes define a continuous zone of high-grade multi-phase gold silver mineralization from
surface to the current drill defined depth of 300 metres.
AMDD19-017 was drilled 100 metres north of 016, on section with AMDD19-013 and 150 m down dip. The hole
cut a 30 metre wide silicified fault breccia with anomalous gold and silver values up to 2.26 g/t Au and 23 g/t Ag
but no economically viable ore was encountered.
- 8 -
AMDD19-018 was drilled 100 metres south of 016 on the same drill pad as 011. 018 was drilled on section with
previous drillholes 001, 003, and 011 and targeted the structure 60 metres down dip of 011. The hole intersected
1.3 metres grading 12.5 g/t Au and 2320 g/t Ag and 13.7 metres grading 1.4 g/t Au. Mineralization in sulphide rich
veinlets hosted within rhyolite volcanics in the hanging wall extends to a depth of 325 metres below surface and is
open with depth.
AMDD19-019 was drilled 200 metres south of 016, on section with 008 and 012 and 100 metres down dip of 012.
The hole did not intersect the same silver-mineralized structure down dip from 008 (4 metres at 158 g/t Ag and 0.8
g/t Au) and 012 (5 metres at 647 g/t Ag); however, it encountered a 7.4 metre at 22 g/t Ag and 0.5 g/t Au interval
in a quartz vein breccia near the contact between the upper rhyolites and lower andesites.
AMDD19-020 and 021 were drilled 400 and 300 metres south of 016 respectively, on new sections with no previous
drill holes. Both drillholes encountered anomalous Au and Ag values at the San Pedro Fault ~350 metres below the
surface but no quartz veining or significant mineralization was encountered.
Note. Reported drill hole intervals are drilled widths. Full drill data, locations, sections and estimated true widths are published
on http://www.radiusgold.com/s/amalia.asp.
Cross-sections,
(http://www.radiusgold.com/s/amalia.asp).
long-section, plan map and core photos are available on
the Company’s website
Stage 4 Drill Program
Environmental permits are in progress for a fourth phase of drilling at Amalia. Currently nine deep holes are planned
to test down dip and lateral expansions of the high grade gold and silver mineralization defined at San Pedro in drill
stages 1 to 3.
Addition of Palmillas Property / El Cuervo Target
In late 2019, the Company signed a binding agreement with a private family to option the 800-hectare Palmillas
Property which hosts high-grade epithermal gold-silver mineralization. The Palmillas concessions are immediately
adjoining the Amalia Project and cover the northeastern and southwestern strike extension of the Amalia fault zone.
Pan American has elected to exercise its right to include the Palmillas Property within the Amalia Project joint
venture. Pan American, as the operator will fund and manage the expanded project according to its option agreement
with the Company. The Palmillas Property hosts multiple exploration targets, including high-grade silver-gold
mineralization, outcropping 1.8 kilometres northwest along strike from the drill defined high-grade zone at San
Pedro.
The highlight of progress to date is the development of the El Cuervo target at Palmillas, where wide zones (up to
40 metres) of silicification, breccias and veining with strong gold and silver rock chip geochemistry is being mapped
and sampled 3.8 kilometres southeast of the current drilled area at San Pedro.
Since optioning the Palmillas Property, Pan American has conducted detailed geological mapping and collected
over 250 rock chip samples from selected targets along 6 kilometres of the Amalia fault system.
Quality Assurance / Quality Control
- 9 -
Reported drilling was carried out using NQ and HQ size tooling. Drill core was cut in half using a rock saw with
one half of the core then taken as a sample for analysis. Sample intervals are generally between 1 metre and 1.5
metres producing samples of between 2 to 9 kg. Half-core samples are delivered to the ALS Geochemistry
laboratory facilities in Chihuahua, Mexico. The samples are fire assayed for Au and are analysed for Ag and multi-
elements using method code ME-ICP61 following a four-acid digestion. Overlimits are analysed using an
appropriate method. The Company inserted multi-element geochemical standards and blanks into the drill core
sample stream to monitor laboratory performance. Quality control samples submitted to ALS were returned within
acceptable limits.
Mexico – Plata Verde Project
In early 2020, the Company entered into an option agreement with a local concession holder to acquire a 100%
interest in a 300 hectare property covering an historic silver mining camp located in Chihuahua, Mexico. The Plata
Verde Project is located in Chihuahua, Mexico, north of the Company’s Amalia Gold-Silver project and east of the
historic Batopilas silver mining district (1708 to 1920) which reputedly produced over 300 million ounces of silver
from high grade veins and structures. The property is accessible by road, with a 4 hour hike required to access the
historic mines.
At Plata Verde, the Company’s geologists have re-discovered an undocumented large scale underground bulk
mining operation where in the late 1800’s, historic miners hand excavated an extensive series of anastomosing
caverns, producing silver bars at an associated smelter operation. The project appears to be un-explored since the
miners ceased their operations, and no references have been found within the Mexican Geological Survey. The few
local residents have no knowledge of exploration companies working in the area and there are no indications of
prior exploration within the mines or surrounding outcrops. Initial prospecting rock chips by Company geologists
have returned silver grades between 5 and 1,070 g/t Ag.
Geology and Mineralization
Silver mineralization at Plata Verde occurs as massive to crustiform banded barite calcite with silver chlorides,
sulphosalt minerals and native silver infilling and cementing fractures and breccia within a basaltic/andesite
extrusive volcanic. The basaltic/andesite host occurs at the base of the Upper Rhyolitic Volcanics of the Northern
Sierra Madre. In general the host volcanics and associated silver mineralization is covered by the overlying rhyolitic
ignimbrites and is only exposed along the length of a small creek.
On the eastern side of the creek a number of small entrances, hardly visible, lead to an extensive network of
anastomosing mining tunnels and cavities. The mining and excavation were done by hand with hammer, chisel and
black powder explosives, leaving behind large underground cavities up to 50 x 50 x 30 metres high. Throughout
the mines roman numerals painted on the walls record up to 58 mining areas. The mining excavations define a strike
extension of over 500 metres and up to 100 metres wide. The host volcanic unit is at least 60 metres thick. The
southern extension is abruptly cut by a fault which forms a large cliff face. To the north, east and west the host
volcanic flows and silver mineralization is covered by the ignimbrites, but remains open to unknown extent in these
directions. On the opposite western side of the creek exposures of the mineralized unit host good silver grades.
Sampling Results
- 10 -
The Company has collected 110 prospecting rock chip samples with silver grades ranging between 5 and 1,070 g/t
Ag. Within the largest mining area, which has been named Mina Mojonera, 35 rock chip samples were collected
from the walls and remaining pillars (2 x 2 metre panel samples or 2 metre chip channel samples) at stations
approximately 10 to 20 metres apart covering the irregularly shaped +5,000 square metre mining area. These
samples ranged from 5 to 849 g/t Ag and averaged 276 g/t Ag. The silver mineralization contains no gold, low Sb
and As and trace amounts of Pb, Zn and Cu.
Exploration Targets
The priority for the Company is to define the outcropping extents of the mineralization and to map and sample in
detail all the known mineralized areas and mines. Most of the extensions are covered by rhyolitic ignimbrite
volcanics so outcrop is limited. As the host basaltic/andesites are magnetic, and cover rhyolites are not, the Company
plans to fly an airborne magnetic survey to help define the extensions of the host rocks under cover.
The barite/silver chloride mineralization appears to be a late stage low temperature mineralizing event with the
source and feeder systems as yet unknown and an attractive exploration target. Barite and silver chloride are often
part of the upper levels or supergene zone around large silver deposits. The solubility of barite and silver chlorides
is low, and hence the source zone is likely to be close by or directly below.
At the Plata Verde Project the Company has rapidly secured the property rights, completed formal access
agreements with the local landowners and constructed a camp and communications. Detailed geological mapping
and prospecting has commenced. Management looks forward to expanding its knowledge of this exciting new
discovery and developing drill targets.
Due to COVID-19 and associated travel restrictions, the project will not advance as quickly as normal. The
Company has a Mexican geological team in Chihuahua and in the coming weeks our teams will decide how best to
advance, based on the situation in Chihuahua and our team’s personal and family safety.
The Agreement
The Company may earn a 100% interest in the project by making staged payments totalling US$800,000 over four
years with the final payment equal to $400,000 at the end of year four. An $8,000 signing payment has been paid
to date. The owner retains a 1% NSR which the Company may buy back for US$1,000,000.
Quality Assurance and Quality Control
Reported assays are rock chip and channels samples taken by the Company’s geologists and trained sampling teams.
Sample intervals are generally 2 metre chip channels or 2x2 metre panels producing samples of between 2 to 9 kg.
Samples are delivered to the ALS Geochemistry laboratory facilities in Chihuahua, Mexico. The samples are fire
assayed for Au and are analysed for Ag and multi-elements using method code ME-ICP61 following a four-acid
digestion. Overlimits are analysed using an appropriate method. The Company routinely inserts multi-element
geochemical standards and blanks into the sample stream to monitor laboratory performance. Quality control
samples submitted to ALS were returned within acceptable limits.
Mexico – Tinamaxte Project
- 11 -
The Tinamaxte Project comprises 576 hectares located in the State of Sonora, Mexico. In October 2019, the
Company signed an option agreement whereby it could earn a 100% interest in the Tinamaxte Project by making
cash payments to the property owner over a period of five years totaling US$925,000 (US$15,000 paid).
Access to the property is dependent on reaching an acceptable agreement with the local community. The Company
was unsuccessful in negotiating an exploration and access agreement with the community, and accordingly, the
Company terminated the option agreement.
Mexico – Rambler Project
In January 2019, the Company staked the 10,379 hectare Rambler Project located in the Sierra Madre Mountains
of the State of Chihuahua, Mexico, approximately 20 kilometres northwest of the Company’s Amalia Project. The
project area is previously unexplored with only minor historic artisanal-scale pitting of surface outcrops known.
The Company’s geologists discovered the project during regional prospecting surveys. Epithermal silver/gold (plus
significant copper, zinc and lead) mineralization has been sampled by the Company in several veins, vein breccias
and disseminated zones over a 9 kilometre north-west trend. Additional field campaigns of mapping and sampling
defined several mineralized zones, but the identified mineralization appears to be discontinuous and the Company
has not been able to define compelling drill targets. The property has additional targets that have not yet been
explored, and the Company will evaluate these before a final decision is made on the merits of the property.
USA – Nevada – Bald Peak Property
In March 2017, the Company added to the Company’s property portfolio an epithermal gold prospect located in the
Aurora gold camp, Nevada with the acquisition of the Bald Peak gold property from Ely Gold & Minerals Inc. (“Ely
Gold”) (TSX-V: ELY) and its wholly owned subsidiary, Nevada Select Royalty Inc. Subsequently, the Company
increased its land position by staking an additional 113 unpatented mining claims which are contiguous to the claims
acquired from Ely Gold.
The Bald Peak Property currently consists of 151 unpatented mining claims in Mineral County, Nevada, and one
mineral prospecting licence in Mono County, California. The property covers an 8 kilometre by 2 kilometre area
which trends northeast from inside the California border into Nevada, parallel to the trend of the neighboring Bodie,
Aurora, and Borealis mining camps.
Bald Peak is an un-eroded epithermal gold prospect in the Aurora-Bodie mining district. Sinter terraces outcrop
along the length of the property, evidence that the epithermal system has not been eroded beyond its paleo-surface
elevation and is thus likely fully preserved. Despite the property’s proximity to several Au-rich mining districts, the
area has seen limited exploration activity. Several operators have acquired the property over the last 30 years and
mapped alteration zones and various other criteria pertinent to epithermal gold discoveries. The area has seen very
limited drilling however, and its potential remains untested.
Sinters are formed at the surface by deposition of amorphous silica from a hot spring vent in active geothermal
areas. They represent the paleo-surfaces of epithermal systems and are normally barren of gold and silver. Gold
grades above 0.05 g/t Au within sinters are highly anomalous and gold grades above 1 g/t Au are extremely rare.
The Company’s management discovered the San Martin gold deposit in Honduras, and the Cerro Blanco gold
deposit in Guatemala, both of which are significant gold deposits that occur beneath sinters anomalous in gold. The
Company’s team has been specifically searching for these unique systems since those early discoveries. The Bald
Peak Property covers a 6 kilometre strike length of multiple sinter and epithermal vein targets and is one of the few
- 12 -
hot spring sinter epithermal targets where the sinter carries relatively high-grade gold along with cross cutting veins
and breccias. Combined with a large and deeply penetrating resistive root zone, the Bald Peak Property is a uniquely
attractive target.
Work by the Company at Bald Peak in 2017 consisted of geological mapping and prospecting, rock and soil
geochemistry, and compilation work of historical exploration and academic and government datasets. The work has
demonstrated the presence of a strong gold-bearing epithermal alteration system that can be traced along strike for
over six kilometres in a northeast trend, with an anomalous zone of up to several hundred metres in width on surface.
In 2018 the Company conducted a 128 station CSAMT survey, more rock and soil sampling, and planned for drill
holes.
In July 2019, the Company announced it had sampled a 21 metre wide vein stockwork and hydrothermal breccia
zone grading 1.32 g/t Au at Bald Peak. Significantly, the vein zone outcrops ~40 metre uphill of the Beauty Peak
sinter. Combined with the recently completed CSAMT survey, the sampling shows the vein zone and sinter occur
above a large and robust ~450 metre long resistive body that extends to at least an ~1,225 metre depth (the maximum
depth of the survey). The vein and hot spring sinter outcrops, combined with the robust and deeply penetrating
resistive zone, define compelling drill and exploration targets described below. Maps showing the property and the
targets have been placed on the Company’s website.
Beauty Peak Sinter
The vein and sinter outcrops at the Beauty Peak sinter target cover an area of roughly 300 x 200 metres before going
under cover. The extensive sinter outcrops are frequently brecciated and cut by stockwork veins. Grades within the
sinter have returned a maximum of 1.91 g/t Au and the banded vein float around the sinter runs up to 8.12 g/t Au.
Great Wall Vein
The Great Wall is a zone of robust outcropping stockwork of parallel quartz vein and vein breccias hosted in
trachyandesite. Samples from this vein returned up to 5.36 g/t Au with a 2 metre chip-channel sample at 3.19 g/t
Au. This vein is surrounded by multiple veins and anomalous soil and rock geochemical anomalies. The target is
associated with a 2 kilometre NE trending gold in soil anomaly.
Central Gold Soil Anomaly
An approximately 2 kilometre by 150 metre wide well-defined gold in soil anomaly with values up to 1.24 g/t Au.
Northern Sinters
A 0.5 square kilometre area of sinter outcrops and float with clay alteration and soil anomalies in mercury, arsenic,
and antimony.
Bald Peak Drill Permits
The Company is currently permitting a plan of operations with the United States Forest Service (“USFS”) and the
California State Lands Commission. Archeological, cultural, biological and botany surveys have been completed
by the USFS, and the process is advancing well. It is expected that the permitting process will run through 2020
before drilling is authorized.
Quality Assurance / Quality Control
- 13 -
The work program at the Bald Peak Property was planned by Company personnel and implemented by Company
personnel, consultants, and contractors. The Company utilizes industry-standard QA/QC program. Samples were
prepared and analyzed at ALS laboratories in Nevada and Canada. Blanks and certified reference standards are
inserted into the sample stream to monitor laboratory performance and the results have been within acceptable
limits.
Guatemala - Southeast Guatemala Ag-Au Epithermal Fields
As a result of continued uncertainty surrounding the granting of both exploration and exploitation concessions in
Guatemala, and a general increase in the level of anti-mining activism in many parts of the country, the Company
ceased its ongoing exploration activities in the country in the third quarter of 2013 though care and maintenance of
the properties continue. Recent changes in the political landscape, however, give management optimism that the
government will welcome the employment opportunities created by foreign investment in the resource sector.
Management is currently reassessing plans for its Guatemala projects, with a view to ramping up exploration
activities as the mining investment climate improves.
Royalty Interests
Guatemala – Tambor Project Royalty
In 2012, the Company sold its interest in its subsidiary, Exploraciones Mineras de Guatemala S.A., which holds the
Tambor gold project in Guatemala, to Kappes, Cassiday & Associates (“KCA”), giving KCA a 100% interest in the
project. In part consideration therefor, KCA agreed that upon commercial production at Tambor, KCA would
commence making royalty payments to the Company.
Commercial production commenced in December 2014 and royalty payments are now due to the Company based
on the price of gold at the time and the number of ounces of gold produced as follows:
Gold Price (US$)
Below $1,200
$1,201 - $1,300
$1,301 - $1,400
$1,401 - $1,500
$1,501 and greater
Per Ounce of Gold
$100
$125
$150
$200
$250
up to a maximum of US$10.0 million. After the US$10.0 million has been paid and cumulative gold production
from the Tambor Project has exceeded 100,000 ounces, the cash payments will be based on the then price of gold
and the number of ounces of gold produced as follows:
Gold Price (US$)
Below $1,500
$1,501 - $1,750
$1,751 - $2,000
$2,001 and greater
Per Ounce of Gold
$25
$35
$40
$50
Receipt of royalty payments by the Company commenced during the third quarter of 2015. To date, the Company
has recognized net royalty income of $1,530,555 of which $746,375 has been received to date.
- 14 -
On May 11, 2016, KCA informed the Company that mining operations were suspended by the Supreme Court of
Guatemala due to a lack of consultation by the Guatemalan Ministry of Mines with local indigenous people when
the mine was permitted in 2011. To date, the Supreme Court has not made a decision on when the mine may re-
open, and as a result, KCA initiated a Central America Free Trade Agreement Arbitration action against the
Guatemalan government to overturn the suspension of operations and seek compensation from the Guatemalan
authorities, from which the Company would benefit as well. KCA is currently in the valuation stage of the
Arbitration and the determinative hearing is scheduled for December 2021. Until these proceedings are concluded,
the Company is allowing KCA to defer payment of the remaining balance owing to the Company. Due to these
circumstances, for accounting purposes, a provision was recorded against the KCA receivable in the 2016 fiscal
year.
Peru – Bayovar 12 Project Royalty
The Company held a production royalty, equivalent to a 2% net smelter return, on CROPS’ 70% interest in future
phosphate production from the Bayovar 12 project located in the Sechura district of northern Peru. In February
2020, CROPS announced that due to ongoing soft phosphate market prices, high property holding costs and a lack
of interest from third parties to invest in the development of the Bayovar 12 Project, CROPS was relinquishing its
70% interest in the Project. Accordingly, the Company wrote off the acquisition cost of the royalty during the 2019
fiscal year. The Company and CROPS are related parties.
Mexico - Tlacolula Property Royalty
In 2017, the Company completed the sale of its Tlacolula silver property, Mexico to Fortuna in consideration for
239,385 common shares of Fortuna, a cash payment of US$150,000, and a 2% NSR royalty on the property. Fortuna
retains the right to purchase one-half of the royalty by paying the Company US$1.5 million. The Company and
Fortuna are related parties.
Outlook
Management of the Company is encouraged by the results of drilling at its Amalia Project to date and looks forward
to continued advancement of both the Amalia and Plata Verde Projects. The Company plans to continue its strategy
of conducting property evaluations and grassroots prospecting on properties in various jurisdictions and with
various commodities but with a focus on gold and silver in the United States and Mexico. The Company’s geologists
use a low cost and effective method of field testing targets that are generated through desktop research and through
submittals.
Qualified Person: Bruce A Smith, M.Sc., MAIG., a member of the Australian Institute of Geoscientists, is the
Company’s Qualified Person as defined by National Instrument 43-101, and has approved the disclosure of the
technical information in this MD&A.
Selected Annual Information
- 15 -
The following table sets forth selected annual financial information of the Company for, and as at, the end of each
of the last three financial years ended December 31, 2019, 2018, and 2017:
Investment and other income
Exploration expenditures
Net income (loss) for the year
Total
Basic & fully diluted per share
Total assets
Total long-term liabilities
Cash dividends
2019 ($)
43,875
753,960
2018 ($)
15,372
934,434
(2,563,125)
(0.03)
4,319,672
275,487
-
(1,565,694)
(0.02)
6,829,161
-
-
2017 ($)
10,673
1,140,432
194,003
0.00
10,188,369
-
-
The 2017 fiscal year had a net income due to gain of $1,658,928 on the sale of a mineral property interest. The
Company first started recording royalty income in the 2015 fiscal year as a result of the previously held Tambor
Project going into production in December 2014. Due to the suspension of mine operations in May 2016, there was
no royalty revenue during the 2019, 2018 and 2017 fiscal years.
Quarterly Information
The following table provides information for the eight fiscal quarters ended December 31, 2019:
Quarter ended
Investment and other income
Dec. 31,
2019 ($)
2,573
Sep. 30,
2019 ($)
36,351
June 30,
2019 ($)
Mar. 31,
2019 ($)
2,146
2,805
Dec. 31,
2018 ($)
3,754
Sep. 30,
2018 ($)
3,822
June 30,
2018 ($)
Mar. 31,
2018 ($)
3,999
3,797
Exploration
expenditures
Net loss
Basic and diluted
loss per share
305,613
255,088
76,954
116,305
289,095
131,754
359,379
154,206
(1,869,743)
(470,509)
(73,651)
(149,222)
(538,965)
(167,774)
(587,123)
(271,832)
(0.01)
(0.01)
(0.00)
(0.00)
(0.01)
(0.00)
(0.01)
(0.00)
The net loss for the quarter ended June 30, 2019 is less than all other quarters presented due to a gain of $199,170
from a property option agreement. The results for the quarter ended September 30, 2018 included a gain of $103,518
from a mineral property agreement.
Results of Operations
Quarter ended December 31, 2019
The quarter ended December 31, 2019 had a net loss of $1,869,743 compared to $538,965 for the quarter ended
December 31, 2018, an increase of $1,330,778. The current quarter’s loss was higher primarily due to a $1,259,505
write-off of the Company’s Bayovar 12 Project royalty interest. The comparative quarter net loss included write-
offs totaling $77,204 on mineral property interests relating to the Spring Peak and Coyote properties in the USA.
Net exploration expenditures for the current quarter totaled $305,613 compared to $289,095 for the comparative
quarter, an increase of $16,518. Exploration expenditures include property investigation costs which relate to
evaluating new opportunities and exploration activities on properties held by the Company. Exploration
expenditures for both current and comparative quarters were both reduced by Pan American funding the exploration
activity on the Amalia Project pursuant to an option agreement.
- 16 -
General and administrative expenses for the current quarter were $316,316, compared to $140,657 for the
comparative quarter, an increase of $175,659. This increase is primarily due to a share-based compensation expense
of $169,836 relating to the fair value of stock options granted during the current period, an increase of $153,493
over the comparative quarter’s expense of $16,343. The current quarter results also include new expense items
consisting of $15,241 for depreciation of a right-of-use asset and $7,997 for interest expense on a lease liability.
These two expense items are related to the adoption of a new accounting standard regarding leases (see Accounting
Policies and Basis of Presentation section below) that was effective January 1, 2019. A notable cost decrease in
the current quarter was in office and miscellaneous which was due to the Company’s office lease costs being
partially offset by reimbursements from other companies that share the office space.
Year ended December 31, 2019
The year ended December 31, 2019 had a net loss of $2,563,125 compared to $1,565,694 for the year ended
December 31, 2018, an increase of $997,431. As with the quarterly comparison, the current year net loss included
the $1,259,505 write-off of the Peruvian royalty interest compared to write-offs totaling $77,204 for the comparative
year, an increase of $1,182,301. Net exploration expenditures in the current year totaled $753,960 compared to
$934,434 in the comparative year, a decrease of $180,474. Similar to the quarterly comparison, both the current
year and comparative year exploration costs were reduced by Pan American funding activity on the Amalia Project.
General and administrative expenses for the current year were $642,279, compared to $508,043 for the comparative
year, an increase of $134,236. This increase is due in part to new expense items consisting of $60,302 for
depreciation of a right-of-use asset and $32,983 for interest expense on a lease liability. The current year also
recorded a share-based compensation expense of $172,939 compared to $129,276 for the comparative year. Another
notable expense increase for the current year was $55,613 in shareholder communication costs which relate to
tradeshow and promotional activities and $36,203 in legal fees relating to the preparation of a definitive property
option agreement. A notable cost decrease in the current year was in office and miscellaneous which was due to the
same reason as in the quarterly comparison.
The current year recorded a gain of $199,170 from a mineral property option agreement and investment income of
$43,875 compared to $83,196 and $15,372, respectively, for the comparative year. Investment income for the
current year was higher due to a one-time dividend from one of the Company’s equity investments. Both the current
and comparative years recorded a loss on derivative investments, with those losses being $130,607 and $135,116,
respectively. Derivative investments consist of share purchase warrants that were acquired along with common
shares in private placement investments and the fair value gains and losses on such are charged to profit or loss.
Mineral Properties Expenditures
A summary of the Company’s expenditures on its mineral properties during the year ended December 31, 2019 is
as follows:
United States – A total of $118,696 was incurred on exploration, permitting, property investigation, and
miscellaneous administrative costs, of which $101,126 was on the Bald Peak property.
Mexico – A total of $850,905, excluding cost recoveries, was incurred on exploration, property investigation, and
miscellaneous administrative costs, of which $393,683 was incurred on the Amalia property, $31,959 on the
Rambler property, and $9,693 on the Tinamaxte property. A cost recovery of $462,422 relating to funding from the
optionee on the Amalia property resulted in a net recovery of $68,739 for that property.
Guatemala – A total of $148,339 was incurred on exploration, property investigation, and miscellaneous
administrative costs, of which $107,411 was on the Southeast Guatemala Ag-Au Epithermal Fields property.
Other – A total of $98,442 was incurred on property investigation costs in regions other than USA, Mexico, and
Guatemala.
- 17 -
Further details regarding exploration expenditures for the years ended December 31, 2019 and 2018 are provided
in the schedules at the end of this MD&A.
Liquidity and Capital Resources
The Company’s cash and cash equivalents were $1.34 million at December 31, 2019 compared to $1.61 million at
December 31, 2018. As at December 31, 2019, working capital was $3.59 million compared to $5.21 million at
December 31, 2018. Included in working capital is the fair value of the Company’s equity investments which as at
December 31, 2019 was $2.28 million compared to $3.11 million as at December 31, 2018.
In addition to its working capital assets, the Company held 3,973,275 common shares in Rackla with a fair value of
$397,328 as at December 31, 2019; however, the investment is being accounted for as an investment in associate,
using the equity method, since the Company may be able to exercise significant influence on Rackla.
The Company did not earn any royalty revenue from the Tambor Project during the current year as the operations
at Tambor continue to be suspended.
The Company intends to use the proceeds from any sales of its equity and derivative investments, option payments
received and royalty income payments received to fund its exploration programs, investment opportunities, and
general working capital requirements. The Company expects its current capital resources to be sufficient to carry
out its exploration and investment plans and operating costs for the next twelve months.
Commitment
The Company has entered into an operating lease agreement for its office premises. The Company shares its office
space with other companies related by common directors and officers on a month to month basis, and the portion
of the rent paid by these companies is netted against the Company’s rental expense. However, as there are no
commitments from these companies, the amounts presented below are the gross commitments of the Company.
The annual commitments under the lease are as follows:
2020
2021
2022
2023
2024
$ 126,202
128,119
130,035
131,952
133,869
$ 650,177
For the year ended December 31, 2019, the Company received a total of $160,734 (2018: $154,246) from those
companies which share office space with the Company.
Financial Instruments and Risk Management
The Company is exposed to the following financial risks:
• Market Risk
• Credit Risk
• Liquidity Risk
In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments.
This section describes the Company’s objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these risks is presented throughout the
accompanying consolidated financial statements.
- 18 -
General Objectives, Policies and Processes
The Board of Directors has overall responsibility for the determination of the Company’s risk management
objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for
designing and operating processes that ensure the effective implementation of the objectives and policies to the
Company’s finance function. The Board of Directors receive periodic reports through which it reviews the
effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.
a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market prices are comprised of three types of risk: foreign currency risk, interest rate risk,
and equity price risk.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Company is exposed to fluctuations in foreign currencies through
its operations in foreign countries. The Company monitors this exposure but has no hedge positions. As at
December 31, 2019 and 2018, the Company is exposed to currency risk through the following financial assets and
liabilities denominated in currencies other than the Canadian dollar:
December 31, 2019
December 31, 2018
US Dollar
Mexican
Peso
Guatemala
Quetzal
US Dollar
Mexican
Peso
Guatemala
Quetzal
Nicaragua
Cordoba
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
(CDN
equivalent)
Cash
Receivables
Current liabilities
$ 49,500
28,248
(38,991)
$ 965
5,557
(1,503)
$ 2,925
-
(13,823)
$ 16,426
-
(19,359)
$ 138
49,294
(1,346)
$ 77
-
(3,524)
$ 646
-
-
$ 38,757
$ 5,019
$ (10,898)
$ (2,933)
$ 48,086
$ (3,447)
$ 646
Based on the above net exposures at December 31, 2019, a 10% depreciation or appreciation of the above currencies
against the Canadian dollar would result in approximately a $3,300 (2018: $4,200) increase or decrease in profit or
loss, respectively.
Commodity Price Risk
The Company’s royalty revenue is derived from a royalty interest that is based on the extraction and sale of gold.
Factors beyond the control of the Company may affect the marketability of gold discovered. Gold prices have
historically fluctuated widely. Consequently, the economic viability of the Company’s royalty interest cannot be
accurately predicted and may be adversely affected by fluctuations in gold prices. The Company has not engaged
in any hedging activities. The Company is not exposed to commodity price risk as the Company has not earned any
royalties during the years ended December 31, 2019 and 2018.
- 19 -
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered
on cash held with chartered Canadian financial institutions. The Company considers this risk to be limited as it
holds no assets or liabilities subject to variable rates of interest.
Equity Price Risk
Equity price risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.
The Company’s equity investments consisting of common shares and derivative investments consisting of share
purchase warrants are exposed to significant equity price risk due to the potentially volatile and speculative nature
of the businesses in which the investments are held. The Company’s equity investments are monitored by the Board
with decisions on sale or exercise taken by Management. A 10% decrease in fair value of the shares and warrants
would result in an approximate $228,000 (2018: $311,000) decrease in comprehensive income and shareholders’
equity.
b) Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its
contractual obligations. The Company’s credit risk is primarily attributable to its cash and cash equivalents, equity
investments, derivative investments, and receivables. The Company limits exposure to credit risk by maintaining
its cash and cash equivalents with large financial institutions. The Company does not have cash and cash equivalents
or equity investments that are invested in asset based commercial paper. For advances and other receivables, the
Company estimates, on a continuing basis, the probable losses and provides a provision for losses based on the
estimated realizable value.
c) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds
to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows required by
operations and anticipated investing and financing activities.
Related Party Transactions
The Company had transactions during the years ended December 31, 2019 and 2018 with related parties who
consisted of directors, officers and the following companies with common directors:
Related Party
Mill Street Services Ltd. (“Mill Street”)
Gold Group Management Inc. (“Gold Group”)
Medgold
CROPS
Rackla (Associate)
Nature of Transactions
Management fees
Shared general and administrative expenses
Investment and shared personnel expenses
Investment
Investment and shared personnel expenses
The Company incurred the following expenditures charged by non-key management officers and companies which
have common directors with the Company during the periods ended December 31, 2019 and 2018:
- 20 -
Three months ended
December 31,
2018
2019
Year ended
December 31,
2018
2019
$ 6,000
$ 4,800
$ 20,800
$ 23,040
3,960
10,000
15,922
10,000
$ 9,960
$ 14,800
$ 36,722
$ 33,040
General and administrative expenses:
Salaries and benefits
Exploration expenditures:
Salaries and benefits
The Company reimburses Gold Group, a company controlled by the Chief Executive Officer of the Company, for
shared administrative costs and other business related expenses paid by Gold Group on behalf of the Company.
During the years ended December 31, 2019 and 2018, the Company reimbursed Gold Group the following:
General and administrative expenses:
Office and miscellaneous
Shareholder communications
Salaries and benefits
Transfer agent and regulatory fees
Travel and accommodation
Three months ended
December 31,
2018
2019
Year ended December 31,
2018
2019
$ 8,857
500
33,450
235
1,404
$ 9,458
750
24,012
560
2,232
$ 31,876
5,885
116,160
4,005
7,322
$ 37,907
1,960
108,069
4,012
7,575
$ 44,446
$ 37,012
$ 165,248
$ 159,523
Exploration expenditures
$ -
$ -
$ 2,886
$ 2,663
Gold Group salaries and benefits costs for the years ended December 31, 2019 and 2018 include those for the Chief
Financial Officer and Corporate Secretary.
During the year ended December 31, 2019, the Company was reimbursed $Nil (2018: $12,079) from Medgold, a
company which has a common director with the Company, for shared exploration personnel costs.
Receivables include an amount of $7,445 (2018: $Nil) owed from Rackla, a company which has two common
directors with the Company, for shared exploration personnel costs provided during the year ended December 31,
2019.
Prepaid expenses and deposits include an amount of $5,115 (2018: $9,887) paid to Gold Group for shared office
and administrative services and $Nil (2018: $216,500) paid to CROPS for a subscription towards a private
placement that closed in January 2019.
Long-term deposits as of December 31, 2019 include an amount of $60,000 (2018: $60,000) paid to Gold Group as
a deposit on the shared office and administrative services agreement.
Accounts payable and accrued liabilities include $4,853 (2018: $Nil) payable to Gold Group for shared
administrative costs.
During the year ended December 31, 2019, the Company purchased 4,200,000 units of a CROPS private placement
at a cost of $210,000.
During the year ended December 31, 2018, the Company acquired 86,500 common shares of Medgold on the open
market for a cost of $18,064.
- 21 -
Key management compensation
Key management personnel are persons responsible for planning, directing and controlling the activities of an
entity, and include certain directors and officers. Key management compensation comprises:
Management fees
Geological fees
Salaries, benefits and fees*
Share-based payments
(value of stock option grants)
Three months ended
December 31,
2018
2019
Year ended
December 31,
2018
2019
$ 10,500
15,000
9,625
$ 10,500
15,000
6,875
$ 42,000
60,000
34,375
$ 42,000
60,000
28,876
-
-
-
22,691
$ 35,125
$ 32,375
$ 136,375
$ 153,567
*Included in reimbursements to Gold Group
Key management compensation includes management and geological fees paid to Mill Street, a company controlled
by the Chief Executive Officer of the Company.
Total share-based payments to directors not included in the above table during the year ended December 31, 2019
was $Nil (2018: $31,809).
Other Data
Additional information related to the Company is available for viewing at www.sedar.com.
Share Position and Outstanding Options
As at the date of this MD&A, the Company’s outstanding share position is 86,938,055 common shares and the
following incentive stock options are outstanding:
Number of
options
75,000
1,495,000
1,380,000
1,490,000
200,000
850,000
280,000
5,770,000
STOCK OPTIONS
Exercise
price
$0.24
$0.20
$0.15
$0.15
$0.15
$0.25
$0.15
Expiry date
May 27, 2020
December 12, 2022
October 18, 2026
May 21, 2028
November 4, 2028
October 7, 2029
March 15, 2030
Investments in Associates
Rackla
- 22 -
The Company currently has an investment in one associated company, Rackla, which is equity accounted for in the
consolidated financial statements.
As at December 31, 2019, the Company held 3,973,275 (2018: 3,973,275) common shares of Rackla, representing
19.6% (2018: 19.6%) of Rackla’s outstanding common shares. The Rackla share purchase warrants were not
tradable on an exchange.
The following table shows the continuity of the Company’s investment in Rackla for the years ended December 31,
2019 and 2018:
Balance, December 31, 2018
Balance, December 31, 2019
$ 1
$ 1
Prior to the 2015 fiscal year the Company’s share of losses in Rackla exceeded the carrying value of its interest and
therefore the Company has not recognized any of its share of losses for the year ended December 31, 2019 and
2018. The cumulative unrecognized share of losses for the associate as at December 31, 2019 is $655,382 (2018:
$601,882).
The financial statement balances of Rackla are as follows:
Total current assets
Total assets
Total liabilities
Net loss
December 31,
2019
December 31,
2018
$ 19,350
$ 97,012
$ 80,351 $ 160,173
$ 308,347 $ 176,068
$ 273,047 $ 175,739
At December 31, 2019, the fair value of the 3,973,275 common shares of Rackla was $397,328 (2018: $357,595)
based on the market price of the common shares of Rackla.
Accounting Policies and Basis of Presentation
The Company’s significant accounting policies and future changes in accounting policies are presented in the audited
consolidated financial statements for the year ended December 31, 2019. The following outlines the new accounting
standards and amendments adopted by the Company effective January 1, 2019:
IFRS 16 Leases
Effective January 1, 2019, the Company adopted IFRS 16 Leases (“IFRS 16”) using the modified retrospective
approach. The comparative figures for the 2018 reporting period have not been restated and are accounted for under
IAS 17 Leases, (“IAS 17”) and IFRIC 4 Determining Whether an Arrangement Contains a Lease, as permitted
under the specific transitional provisions in the standard.
At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease
when the contract conveys a right to control the use of an identified asset for a period of time in exchange for
consideration.
- 23 -
The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use
the underlying asset, and a lease liability, representing its obligation to make lease payments. The Company may
elect to not apply IFRS 16 to leases with a term of less than 12 months or to low value assets, which is made on an
asset by asset basis.
The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is
initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received.
It is subsequently measured at cost less accumulated depreciation, impairment losses and adjusted for certain
remeasurements of the lease liability. The ROU asset is depreciated from the commencement date over the shorter
of the lease term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if
there is an indicator of impairment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined,
the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay
to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to
the ROU asset in a similar economic environment.
Lease payments included in the measurement of the lease liability are comprised of:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Company is reasonably certain to exercise;
• lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension
option; and
• penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease
payments made. It is remeasured when there is a change in future lease payments arising from a change in an index
or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as
appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be exercised.
Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the
ROU asset and lease liability are recognized as an expense in the consolidated statement of income in the period in
which they are incurred.
The ROU assets are presented within “Right-of-use assets” and the lease liabilities are presented in “Lease liability”
on the consolidated statement of financial position.
The Company has an office lease for its headquarters in Vancouver, British Columbia that was classified as an
operating lease under IAS 17. At transition to IFRS 16, this lease liability was measured at the present value of the
remaining lease payments and discounted using an incremental borrowing rate of 10% as of January 1, 2019. As a
result, the Company, as a lessee, has recognized $362,969 as a lease liability, representing its obligation to make
lease payments. A ROU asset of the same amount was recognized, representing its right to use the underlying asset.
The following table summarizes the difference between the operating lease commitment disclosed immediately
preceding the date of initial application and lease liability recognized on the consolidated statement of financial
position at the date of initial application:
- 24 -
Operating lease obligation as at December 31, 2018
Variable lease payments
Change in estimate in lease component
Effect of discounting at incremental borrowing rate
Lease liability recognized as of January 1, 2019
$ 1,281,188
(476,172)
(322,008)
(120,039)
$ 362,969
Future Changes in Accounting Policies
The following new standard has been issued by the IASB but is not yet effective:
IFRS 17 Insurance Contracts
IFRS 17 is a new standard that requires insurance liabilities to be measured at a current fulfillment value and
provides a more uniform measurement and presentation approach for all insurance contracts. These requirements
are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17
supersedes IFRS 4, Insurance Contracts, and related interpretations.
This standard will be effective for the Company’s annual period beginning January 1, 2021. The Company has
assessed that the impact of IFRS 17 on its consolidated financial statements would not be significant.
Risks and Uncertainties
Global Pandemic
The Company faces risks related to health epidemics and other outbreaks of communicable diseases, which could
significantly disrupt its operations and may materially and adversely affect its business and financial conditions.
The Company’s business could be adversely impacted by the effects of the COVID-19 coronavirus which was
declared a global pandemic by the World Health Organization in March 2020. COVID-19 has spread from China
where the virus was originally reported to several other countries, including Canada, USA, Mexico and Guatemala,
countries in which the Company operates, and infections have been reported globally.
The extent to which COVID-19 may impact the Company’s business, including its operations and the market for
its securities, will depend on future developments which cannot be predicted, and include the duration, severity and
scope of the outbreak and the actions taken to contain or treat the outbreak. The continued spread of COVID-19
globally could materially and adversely impact the Company’s business, financial condition and results of
operations including without limitation, employee health, workforce productivity, increased insurance premiums,
limitations on travel, the availability of industry experts and personnel, restrictions to any drill programs and/or the
timing to process drill and other metallurgical testing, and other factors that will depend on future developments
beyond the Company’s control.
The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary
business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such
public health crises can result in operating and supply chain delays and disruptions, global stock market and
financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages,
and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention
measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit ratings,
credit risk and inflation.
- 25 -
Royalty revenue
The Company cannot predict future revenues from or operating results of mining activity. Management expects
future royalty revenues from the Tambor Project to fluctuate depending on the level of future production and the
price of gold. The owner of the Tambor Project is not obligated to continue production from the Tambor Project
and the Company will not be entitled to any compensation if this mining operation does not meet its forecasted gold
production targets or if the mine operations are discontinued on a temporary or permanent basis. Risks that could
negatively affect a mine’s operations include, but are not limited to economics, lack of financial capital, floods, fire,
mechanical malfunctions, social unrest, expropriation, environmental regulations, and legal and/or political
changes. The Tambor Project is currently subject to a suspension of operations imposed by the Supreme Court of
Guatemala.
Competition
The Company faces competition from other capital providers, all of which compete with it for investment
opportunities. These competitors may limit the Company’s opportunities to acquire interests in investments that are
attractive to the Company. The Company may be required to invest otherwise than in accordance with its Investment
Policy and strategy in order to meet its investment objectives. If the Company is required to invest other than in
accordance with its Investment Policy and strategy, its ability to achieve its desired rates of return on its investments
may be adversely affected.
Inability to dispose of illiquid securities
There is a possibility that the Company will be unable to dispose of illiquid securities held in its portfolio and if the
Company is unable to dispose of some or all of its investments at the appropriate time, a return on such investment
may not be realized.
Due diligence
The due diligence process undertaken by the Company in connection with investments that it makes or wishes to
make may not reveal all relevant facts in connection with an investment. Before making investments, the Company
will conduct due diligence investigations that it deems reasonable and appropriate based on the facts and
circumstances applicable to each investment. The due diligence investigations that are carried out with respect to
any investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in
evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the
investment being successful.
Mineral property exploration and mining
The business of mineral deposit exploration and extraction involves a high degree of risk. Few properties that are
explored ultimately become producing mines. At present, none of the Company’s properties has a known
commercial ore deposit. The main operating risks include: securing adequate funding to maintain and advance
exploration properties; ensuring ownership of and access to mineral properties by confirmation that option
agreements, claims and leases are in good standing; and obtaining permits for drilling and other exploration
activities.
If the Company does not satisfactorily complete its contribution requirements to any joint ventures it may be a party
to, the Company’s interest in a joint venture can be diluted to a point where all interest in the joint venture is
forfeited.
- 26 -
Joint venture funding
The Company’s strategy includes seeking partners through joint ventures to fund exploration and project
development. The main risk of this strategy is that funding partners may not be able to raise sufficient capital in
order to satisfy exploration and other expenditure terms in a particular joint venture agreement. As a result,
exploration and development of one or more of the Company’s property interests may be delayed depending on
whether the Company can find another partner or has enough capital resources to fund the exploration and
development on its own.
Commodity price
The Company is exposed to commodity price risk. Declines in the market price of gold, silver, base metals and
other minerals may adversely affect the Company’s ability to raise capital or attract joint venture partners in order
to fund its ongoing operations. Commodity price declines could also reduce the amount the Company would receive
on the disposition of one of its mineral properties to a third party. The Company’s royalty revenue has been derived
from a royalty interest that is based on the extraction and sale of gold. Factors beyond the control of the Company
may affect the marketability of precious and base metals discovered. Metal prices have historically fluctuated
widely. Consequently, the economic viability of the Company’s property and royalty interests cannot be accurately
predicted and may be adversely affected by fluctuations in metal prices.
Financing and share price fluctuation
The Company had a limited source of operating cash flow in the form of royalty revenue from the Tambor property;
however, that property is currently subject to suspension of operations. There is no assurance that additional funding
from this or other sources will be available to the Company when needed for further exploration and development
of its projects. Further exploration and development of one or more of the Company’s projects may be dependent
upon the Company’s ability to obtain financing through equity or debt financing or other means. Failure to obtain
this financing could result in delay or indefinite postponement of further exploration and development of its projects
which could result in the loss of one or more of its properties.
Securities markets have at times in the past experienced a high degree of price and volume volatility, and the market
price of securities of many companies, particularly those considered to be exploration stage companies such as the
Company, have experienced wide fluctuations in share prices which have not necessarily been related to their
operating performance, underlying asset values or prospects. There can be no assurance that these kinds of share
price fluctuations will not occur in the future, and if they do occur, how severe the impact may be on the Company’s
ability to raise additional funds through equity issues or the value of the Company’s equity and derivative
investments and corresponding effect on the Company’s financial position.
Political, regulatory and currency
Some of the Company’s mineral property interests are located in emerging nations. Properties in emerging nations
may be subject to a higher level of risk compared to developed countries. Operations, the status of mineral property
rights, title to the properties and the recoverability of amounts shown for mineral properties in emerging nations
can be affected by changing economic, regulatory and political situations. The Company’s equity financings are
sourced in Canadian dollars but for the most part it incurs its exploration and property maintenance expenditures in
US dollars, Guatemalan quetzals, and Mexican pesos. At this time there are no currency hedges in place. Therefore
a weakening of the Canadian dollar against the US dollar, Guatemalan quetzal, or Mexican peso could have an
adverse impact on the amount of exploration conducted.
- 27 -
Insurance
In the course of exploration, development and production of mineral properties, the Company is subject to a number
of hazards and risks in general, including adverse environmental conditions, operational accidents, labor disputes,
unusual or unexpected geological conditions, changes in the regulatory environment and natural phenomena such
as inclement weather conditions, floods, earthquakes, and pandemics. Such occurrences could result in damage to
the Company’s properties or facilities and equipment, personal injury or death, environmental damage to properties
of the Company or others, delays, monetary losses and possible legal liability.
Although the Company may maintain insurance to protect against certain risks in such amounts as it considers
reasonable, its insurance may not cover all the potential risks associated with its operations. The Company may also
be unable to maintain insurance to cover these risks at economically feasible premiums or for other reasons. Should
such liabilities arise, they could reduce or eliminate future profitability and result in increased costs, have a material
adverse effect on the Company’s results and a decline in the value of the securities of the Company.
Environmental and social
The activities of the Company are subject to environmental regulations issued and enforced by government
agencies. Environmental legislation is evolving in a manner that will require stricter standards and enforcement and
involve increased fines and penalties for non-compliance, more stringent environmental assessments of proposed
projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There
can be no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s
operations. Environmental hazards may exist on properties in which the Company holds interests which are
unknown to the Company at present. Social risks are fairly significant in some of the Company’s areas of operations.
Violence, kidnapping, theft and other criminal activities could disrupt supply chains and discourage qualified
individuals from being involved with the Company's operations.
Mineral Properties Expenditure Detail (see following page)
Mineral Properties Expenditure Detail
- 28 -
CONSOLIDATED SCHEDULE OF EXPLORATION EXPENDITURES
For the year ended December 31, 2019
USA
Guatemala
Mexico
General
Mineral
General
Mineral
General
Mineral
Other
General
Exploration
Properties
Exploration
Properties
Exploration
Properties
Exploration
Total
Exploration administration
$ 1,779
$ 573
$ 9,655
$ 340
$ 7,810
$ 7,993
$ 2,995
$ 31,145
Field and camp
Geochemistry
Geological services
Legal and accounting
Licenses, rights and taxes
Salaries and wages
Travel and accommodation
Value-added taxes
-
2,195
13,596
-
-
-
-
-
-
599
47,586
-
43,189
-
9,179
-
-
-
-
3,382
-
25,672
2,219
-
-
-
91,037
-
3,043
662
12,329
-
-
45,273
186,625
18,742
10,658
20,358
105,504
20,600
20,206
9,880
-
-
20,206
57,947
172,629
72,745
584,218
19,372
13,228
95,952
96,075
-
-
-
22,702
-
-
41,496
70,118
165,346
225,306
20,600
17,570
101,126
40,928
107,411
415,570
435,335
98,442
1,216,382
Expenditures recovered
-
-
-
-
-
(462,422)
-
(462,422)
$ 17,570
$ 101,126
$ 40,928
$ 107,411
$ 415,570
$ (27,087)
$ 98,442
$ 753,960
CONSOLIDATED SCHEDULE OF EXPLORATION EXPENDITURES
For the year ended December 31, 2018
USA
Guatemala
Mexico
Other
General
Mineral
General
Mineral
General
Mineral
General
Exploration
Properties
Exploration
Properties
Exploration
Properties
Exploration
Total
Drilling
$ -
$ 117,957
$ -
$ -
$ -
$ -
$ -
$ 117,957
Exploration administration
3,224
2,163
22,263
13,432
5,201
Field and camp
Geochemistry
Geological services
Legal and accounting
Licenses, rights and taxes
524
6,972
16,652
-
-
Travel and accommodation
6,539
3,716
36,464
417,202
-
63,295
56,732
-
-
29,009
5,298
-
-
-
-
-
-
-
-
33,911
697,529
56,570
13,432
1,033
7,639
36,084
14,120
4,765
12,941
81,783
61,641
19,715
2,518
6,972
114,896
-
-
24,988
53,593
119,660
80,100
698,707
12,639
26,534
53,568
-
-
32,057
94,594
5,438
135,218
296,275
92,510
1,272,010
Expenditures recovered
-
-
-
-
-
(334,876
(2,700)
(337,576)
$ 33,911
$ 697,529
$ 56,570
$ 13,432
$ 81,783
$ (38,601)
$ 89,810
$ 934,434