ANNUAL REPORT 2021
TRANSFORMING
KSM
GREENER
MORE SUSTAINABLE
MORE PROFITABLE
CORPORATE OVERVIEW
Seabridge Gold’s resource base of gold, copper and silver is one of the world’s largest. Our principal
projects are located in Canada. Our objective is to grow resource and reserve ownership per share.
Our risk-reducing strategy: acquire North American deposits; expand them through exploration;
move them to reserves through engineering; and sell or joint venture them to established
producers for mine construction and operation.
Flying disassembled
equipment up the
Mitchell Valley, KSM
CONTENTS
3 CEO's Report to Shareholders
8 Our 2021 Corporate Report Card and Our 2022 Objectives
16 Mineral Reserves and Resources
18 Management’s Discussion and Analysis
29 Management’s Responsibility for Financial Statements
30 Report of Independent Registered Public Accounting Firm
33 Consolidated Statements of Financial Position
34 Consolidated Statements of Operations and Comprehensive Loss
35 Consolidated Statements of Changes in Shareholders’ Equity
36 Consolidated Statements of Cash Flows
37 Notes to the Consolidated Financial Statements
55 Corporate Information
Forward-Looking Statements
We are making statements and providing information about our expectations for the future which are
considered to be forward-looking information or forwardlooking statements under Canadian and United
States securities laws. These include statements regarding future plans and the timing of them, the
proposed production scenarios in respect of our principal projects, anticipated exploration results at our
projects and our view of the gold and copper market and financial markets generally. The purpose of
these statements is to help the reader understand management’s current views of our future prospects
and is not intended for other purposes. This information will not necessarily be updated unless required
by securities laws. This information is based on a number of material assumptions, and is subject to a
number of material risks, which are discussed in our annual Management's Discussion and Analysis
contained in this document under the headings “Forward-Looking Statements” and “Risks and
Uncertainties”. We also refer shareholders to the more comprehensive discussion of forward-looking
information in our Annual Information Form filed on SEDAR at www.sedar.com and our Annual Report on
Form 40-F filed on EDGAR at www.sec.gov/edgar.shtml.
2
ANNUAL REPORT 2021 CEO'S REPORT TO SHAREHOLDERS
CEO’S REPORT TO SHAREHOLDERS
What is our business at Seabridge? We are in the value-
creation business. The medium within which we work is
the mining industry. We have some very talented people
and some unusually rich opportunities. Every year, we
plan and execute the programs we think will add the
most value to those opportunities.
We work within set limits. We do not build and operate
mines. That mission requires a much bigger and more
skill-diverse enterprise than ours. We find or acquire
mineral assets in lower risk jurisdictions and we use our
imaginations and expertise to make them more valuable.
We explore them to expand their resources and then
the fun begins…shaping the opportunity to get the most
out of it for our shareholders and the communities we
serve. This means designing and permitting potential
mining ventures and going back to work on the ground
to improve them, to bring them nearer to their optimum
potential…an iterative process, not a linear one.
At each stage, we need to decide if the money we are
spending on our assets will multiply in terms of economic
value and social potential. One yardstick is our now
infamous use of per share metrics including the ratio of
resource and reserve ounces of gold per share.
Now here we are with 100% of KSM, one of the world’s
great undeveloped gold/copper districts. We started
serious work at KSM in 2006. Every year, it has been
clear to us that next year’s program had the likelihood
to enhance value more than it cost. We explored and
learned how to explore the project, adding multiple
deposits of different types. We developed a series of
progressively better mining scenarios, permitted one set
of them and then kept improving them economically and
environmentally, for the benefit of all our stakeholders.
A typical junior company might have called a halt to
this process years ago and accepted an offer from a
major to “take it from here” (we had such offers) but
there was always more we could do to add more value
ourselves. In the last two years that has meant buying a
complimentary piece from our next-door neighbor for
USD $100 million, launching a new Preliminary Feasibility
Study (“PFS”) and beginning the process of site capture
and substantially starting the construction to remove a
major project-related risk and add another layer of value
few if any other “juniors” could likely undertake.
Our recent initiatives include:
1. Commencing site capture construction activities
designed
started”
a
designation ensuring that our environmental approvals
remain in place for the life of the project;
“substantially
achieve
to
2. Securing US$225 million
from Sprott
Resource Streaming and Royalty Corp. and Ontario
fund substantial start
Teachers’ Pension Plan to
activities;
funding
in
3. Concluding a critical Facilities Agreement with British
Columbia Hydro and Power Authority (“BC Hydro”)
covering the design and construction of facilities by BC
Hydro to supply hydro-sourced electricity to the project;
and
4. Completing an updated Preliminary Feasibility Study
(“PFS”) incorporating the East Mitchell deposit (formerly
Snowfield) we acquired in late 2020 into KSM’s mine
plans. For the first time, the entirety of the opportunity
nature has provided at KSM is under one roof.
The theme for last year’s annual report was “Gold to
Green” focusing on how copper will play an important
role in transitioning from fossil fuels to new, greener
energy sources. The report told the story on why copper
demand is expected to grow in the coming years, and
how KSM could play a role in the new green initiative.
The theme for this year’s annual report, “Transforming
KSM: greener, more sustainable, more profitable
mining”, is a logical continuation from last year as
sustainability and ESG considerations continue to play an
ever-increasing role in our industry.
On June 28, 2022 we announced the results of the 2022
KSM PFS prepared by Tetra Tech, Inc., the firm that had
also authored our 2016 PFS. The new study shows a
considerably more sustainable and profitable mining
operation than
its 2016 predecessor, now consisting
of an all open pit mine plan that includes the Mitchell,
East Mitchell and Sulphurets deposits only. The primary
reasons for the improvements in the plan arise from the
acquisition of the East Mitchell open pit resource and
an expansion to planned mill throughput. The many
design improvements over the 2016 PFS include a smaller
environmental footprint, reduced waste rock production,
reduced green house gas emissions by electrification of
the mine haul fleet, a 50% increase in mill throughput,
and the elimination of capital-intensive block cave
mining.
The Transformed KSM Design
The KSM project was redesigned for an inflationary
it emphasizes capital and energy
environment, so
efficiency. The mine plan is simplified to bring total
capital down below 2016 estimates despite inflation by
reducing sustaining capital. This is accomplished by
3
ANNUAL REPORT 2021 CEO'S REPORT TO SHAREHOLDERS
Core Boxes at the KSM Project
KSM Glacier Creek Fish Habitat Offsetting Plan
eliminating underground mine development, which
is deferred to future years. Important steps have also
been taken to make the project less dependent on oil,
especially diesel fuel, which is an inflationary hot spot
and likely to remain so. We have done this by maximizing
the use of low cost, green hydroelectric energy.
Notable
compared to the Base Case 2016 PFS include:
improvements
in the Base Case 2022 PFS
Proven and probable gold reserves increase 22%, from
38.8 million ounces to 47.3 million ounces, due to higher
gold grades added from the East Mitchell deposit.
Mill throughput expands from 130,000 metric tonnes
per day (“tpd”) to 195,000 tpd.
Waste to ore strip ratio
is reduced by 23% to
approximately 1:1.
A 90% increase in average annual gold production,
a 22% increase in annual copper production, a 36%
increase
in annual silver production, and a 363%
increase in annual molybdenum production.
Total capital of US$10.5 billion is reduced to $US9.6
billion with increases from inflation and mill expansion
being wholly offset by the elimination of block cave
mining from the PFS plan.
Initial capital increases from US$5.0 billion to US$6.4
billion primarily due to inflation.
A 20 year reduction in mine life from 53 Years to 33 years
due to the increased mill throughput supplied by higher
open pit production.
Total after tax net cash flow increases from US$10.0
billion to US$23.9 billion.
After tax NPV (5%) increases from US$1.5 billion to
US$7.9 billion.
After tax IRR increases from 8.0% to 16.1%.
Payback period drops from 6.8 years to 3.7 years.
Our Production Profile: Less Disturbance and
More Sustainable
The 2022 PFS envisages an open pit mine operation that
is scheduled to operate for 33 years. Ore delivery to the
mill is increased from an initial 130,000 tpd to 195,000
tpd in Year 3. Over the entire 33-year mine life, ore will be
fed to a flotation and gold extraction mill. The flotation
plant will produce a gold/copper/silver concentrate for
transport by truck to a nearby seaport at Stewart, B.C. for
shipment to Pacific Rim smelters. Metallurgical analysis
supported by extensive metallurgical testing projects a
copper concentrate with an average copper grade of 24%
and a high gold (64 grams per tonne (“g/t”)) and silver
(177g/t) content, making it readily saleable. A separate
molybdenum concentrate and gold-silver doré will be
produced at the KSM processing facility.
The open pit only mine production plan using ultra
class mining starts in the higher grade Mitchell pit.
Production from the high grade upper East Mitchell zone
is introduced in Year 3. Waste mined from the Sulphurets,
East Mitchell and Mitchell pit is placed in the Mitchell rock
storage facility (RSF) until the Mitchell pit is mined out by
Year 25. Final waste from East Mitchell is backfilled into
the mined out Mitchell pit from Year 25 onward along
with some waste rehandled from the Mitchell RSF.
The updated mine plan reduces the overall footprint by
not using the McTagg RSF as required in the 2016 PFS
and by utilizing mined out pits for backfilling waste
rock.
Autonomous mine operations where applicable and
an integrated remote operations centre reduce on-site
personnel. Consequently, some of our work force will be
able to work closer to home and spend more time with
their families.
Electrification of the haul truck fleet with trolley assist
reduces carbon emissions and overall mine energy costs
by replacing diesel with low cost energy from electricity.
Mill feed ramps up to 130,000 tpd by Year 2 followed by a
50% increase to 195,000 tpd from Year 3 onwards. Average
annual mill feed throughput for the 33 years of mine life is
estimated at 69.5 million tonnes.
4
ANNUAL REPORT 2021 CEO'S REPORT TO SHAREHOLDERS
At Mitchell, a near-surface higher grade gold zone crops
out allowing for gold production in the first seven years
that is substantially above the mine life average. The
mine plan is specifically designed for mining highest
gold grade first to facilitate a quick capital investment
payback. The project’s post-tax payback period
is
approximately 3.7 years for the Base Case or 11% of mine
life. Metal production for the first seven years, compared
to life of mine average production, is estimated as follows:
Average Annual Metal Production
Average Grades:
Gold (g/t)
Copper (%)
Silver (g/t)
Molybdenum (parts per million)
Annual Production:
Gold (ounces)
Copper (pounds)
Silver (ounces)
Years 1-7
Average
Life of Mine
Average
0.89
0.21
3.0
52
0.64
0.14
2.2
76
1,413,000
1,027,000
251 million
178 million
3.8 million
3.0 million
Molybdenum (pounds)
2.1 million
4.2 million
Note: Annual production shows total metal contained in
copper concentrate, doré, and molybdenum concentrate.
Reduced Capital Costs Include Enhanced
Reclamation Provisions
Initial capital cost (including contingency of US$949
million) is estimated at US$6.4 billion, approximately 28%
higher than the initial capital estimate in the 2016 PFS
primarily due to inflation experienced over the past two
years. Initial capital assumes certain early works (e.g. roads
and power infrastructure) are being completed ahead
of a major project construction decision as a part of the
ongoing KSM substantial start activities.
Sustaining capital over the 33 year mine life is estimated
at US$3.2 billion, a reduction of US$2.3 billion from the
2016 PFS, and is dominated by mill throughput expansion
and mine fleet ramp up in Year 1 and 2, and tailings
sustaining capital mid way through the mine life.
In addition to sustaining capital, a further US$1.3 billion
has been charged against the project including US$653
million set aside in a sinking fund during the production
period to fund estimated water treatment obligations
which continue after closure in perpetuity and US$620
million for physical reclamation and post closure
maintenance after mining operations have ceased.
KSM Mitchell Deposit
5
ANNUAL REPORT 2021
Construction in progress at KSM’s Camp 11
Initial capital and sustaining capital estimates are
summarized as follows:
Capital Costs (US$ million)
combined open pit and block cave mining to open pit
only mining, a 50% increase in mill throughput capacity,
and technology improvements including automation
and electrification of the mine fleet. A breakdown of
estimated unit operating costs is as follows:
Initial
US$ M
Sustaining
US$ M
Initial
US$ M
LOM Average Unit Operating Costs
(US$ Per Tonne Milled)
Direct Costs
Mine
Process
Tailings Management Facility
Environmental
On-site Infrastructure
Off-site Infrastructure
Power Supply/Energy Recovery
Total Direct Capital
Indirect cost
Owner’s cost
Contingency
Total Capital
1,420
2,003
513
15
39
76
121
4,188
1,090
204
949
6,432
97
-
343
1,188
204
1,293
3,210
9,642
Low Operating Costs Ensure a More Sustain-
able Project for Local Communities
Average mine, process and G&A operating costs over the
project’s life (including waste mining and on-site power
credits, excluding off-site shipping and smelting costs)
are estimated at US$11.36 per tonne milled (before base
metal credits). Estimated unit operating costs decreased
8% from the 2016 PFS primarily due to the change from
1,766
309
630
8
-
11
46
3,187
2,312
1,143
23
39
87
167
Mining
Process
G&A + Site Services
Tailings Storage/Handling
Water Management/Treatment
Energy Recovery
Provincial Sales Tax
2,770
6,958
Total Operating Costs
3.31
6.31
1.06
0.11
0.50
-0.07
0.13
11.36
A More Profitable Project
three-year
A Base Case economic evaluation was undertaken
incorporating historical
trailing averages
for metal prices as of June 20, 2022. This approach is
consistent with the 2016 PFS Base Case. Two alternate
cases are also presented: (i) an Alternate Case that
incorporates lower metal prices than used in the Base
Case to demonstrate the project’s sensitivity to lower
prices; and (ii) a Recent Spot Case incorporating recent
spot prices for gold, copper, silver and the US$/Cdn$
exchange rate. The pre-tax and post-tax estimated
economic results in U.S. dollars for all three cases as well
as the 2016 PFS Base Case are as follows:
6
ANNUAL REPORT 2021 CEO'S REPORT TO SHAREHOLDERS
Projected Economic Results (US$)
Metal Prices:
Gold ($/ounce)
Copper ($/pound)
Silver ($/ounce)
Molybdenum ($/lb)
US$/Cdn$ Exchange Rate:
Cost Summary:
Operating Costs Per Ounce of Gold Produced (years 1 to 7)
Operating Costs Per Ounce of Gold Produced (life of mine)
Total Cost Per Ounce of Gold Produced (inclusive of all capital
and closure)
Initial Capital (billions)
Sustaining Capital (billions)
Unit Operating Cost (US$/tonne)
Pre-Tax Results:
Net Cash Flow (billions)
NPV @ 5% Discount Rate (billions)
Internal Rate of Return
Payback Period (years)
Post-Tax Results:
Net Cash Flow (billions)
NPV @ 5% Discount Rate (billions)
Internal Rate of Return
Payback Period (years)
Note:
1. Operating and total cost per ounce of gold are after
copper, silver and molybdenum credits.
2. Total cost per ounce includes all start-up capital,
sustaining capital and reclamation/closure costs.
3. Results include consideration of Royalties and Impact
Benefit Agreements.
4. The post-tax results include the B.C. Mineral Tax and
provincial and federal corporate taxes.
A more profitable KSM means more tax revenues to
the provincial and federal governments, more ability to
meet the social and environmental expectations of local
communities, greater resources to meet the income
and retirement objectives of our employees and the
returns necessary to keep and reward our shareholders…a
greener, more sustainable and more profitable KSM. The
transformed KSM confirms once again that Seabridge is
in the value creation business for all our stakeholders.
2016 PFS
Base Case
2022 PFS
Base Case
2022 PFS
Recent Spot Case
2022 PFS
Alternate Case
1,230
2.75
17.75
8.49
0.80
$119
$277
$673
$5.0
$5.5
$12.36
$15.9
$3.3
10.4%
6.0
$10.0
$1.5
8.0%
6.8
1,742
3.53
21.90
18.00
0.77
$35
$275
$601
$6.4
$3.2
$11.36
$38.6
$13.5
20.1%
3.4
$23.9
$7.9
16.1%
3.7
1,850
4.25
22.00
18.00
0.77
-$83
$164
$490
$6.4
$3.2
$11.36
$46.1
$16.4
22.4%
3.1
$28.6
$9.8
18.0%
3.4
On Behalf of the Board of Directors,
Rudi P. Fronk
Chairman and Chief Executive Officer
July 25, 2022
1,500
3.00
20.00
18.00
0.77
$118
$351
$677
$6.4
$3.2
$11.36
$27.9
$9.2
16.5%
4.1
$17.1
$5.2
13.1%
4.3
7
ANNUAL REPORT 2021 OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
Our 2021 Corporate Report Card
and Our 2022 Objectives
Reporting on Last Year
Since we launched Seabridge in October 1999, we begin
each year with a set of clear objectives focused on
enhancing shareholder value. At year end, our Board of
Directors evaluates how we performed against these
objectives and uses this evaluation in its compensation
deliberations. Last year’s annual report set out eight
objectives; five of them have been achieved and two of
them partially achieved. Here is a recap:
OBJECTIVE #1: Complete a joint venture agreement
on the KSM project with a suitable partner on terms
advantageous to Seabridge
In 2021 we continued to engage with potential partners
that possess the technical, financial and social skills
to develop a project the scale of KSM. Unfortunately,
through much of 2021, COVID-19 travel restrictions into
Canada remained in place. These limitations prevented
site due diligence with prospective partners which
is an essential part of the process leading to a joint
venture.
While we work towards a joint venture deal that meets
our objectives, we continue to improve the quality of the
Project and further de-risk it. We believe that the recently
completed PFS which integrates East Mitchell into the
greater KSM Project confirms significantly
improved
economics over past studies. In addition, our ability to
secure US$225 million in funding to advance substantial
start activities
further strengthens our negotiating
position.
It is also important to note that mining industry M&A is
finally starting to gain momentum following almost two
years of little activity due mostly to COVID-19 restrictions.
The recently announced purchase of Pretium Resources
by Newcrest Mining, and the purchase of GT Gold by
Newmont Mining confirm the growing significance of
northwestern British Columbia to the global mining
industry.
We have stated many times that we only get to do a
joint venture once and, in our view, joint venture terms
are far more important than timing. Our goal in a joint
venture is to maintain a meaningful interest in KSM while
minimizing our capital contributions. We believe that our
patience will be rewarded.
As of now, this objective has not been met.
8
Bell Irving River
Bridge looking
west early June
ANNUAL REPORT 2021 OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
OBJECTIVE #2: Continue to strengthen our social license
by responding effectively to the needs and concerns of
Treaty and First Nations and local communities.
to pandemic-imposed
Our 2021 social license programs were again subject
to the limitations placed on us by COVID-19. At the
same time, COVID-19 provided many opportunities
to demonstrate our commitment to ESG principles.
Adherence
limitations was
required to protect our Treaty and First Nations partners,
particularly their elders. Our protocols and procedures
not only reflected our commitment to safety but also
represented respect for the needs and concerns of Treaty
and First Nations. Here are some of the highlights of our
efforts made this year with respect to advancing our social
license:
Corporate Initiatives
Implemented a social media program to strengthen
information sharing and engagement with
local
Indigenous and non-indigenous communities:
traditional media
Information-sharing with more
including 20,000 newsletters to Northwest
outlets
BC communities, articles
local newspapers and
newsletters. A radio ad campaign in Canada's First
Nations Radio (CFNR) on the benefits of KSM and
celebrating our 10th year with an office in Northwest
BC.
in
Funding and staffing a COVID-19 vaccination clinic
for Seabridge contractors and employees and many
indigenous people prior to the summer season.
Implemented COVID-19 testing for all employees and
contractors at KSM, Iskut and 3 Aces to reduce risks
to employees, contractors and neighboring northern
and remote communities. Enabled other exploration
companies to access our testing facilities to ensure
safety of nearby communities.
inaugural ESG
Initiated our
report which was
completed at the end of 2021. This comprehensive
report included interviews with indigenous groups,
government regulators and stakeholder groups, and
ESG-relevant statistics from our project sites.
Andrew Robinson-Nisga'a Lisims Government
and Elizabeth Miller site tour 2022
KSM Initiatives
Meetings with Senior Nisga’a Lisims Government
(“NLG”) officers to discuss our substantial start program
and implementation of our Impact Benefit Agreement.
Monthly meetings with Tahltan Central Government to
provide project updates and discuss environmental and
permitting questions and concerns.
Continued annual educational funding for 62 students
in NW BC from Smithers, Terrace, Telkwa, Witset,
Hazelton and Prince Rupert.
Annual community donations
to Northwest BC
including Smithers, Terrace,
community groups
Stewart, Dease Lake, Telegraph Creek, Kitwanga,
Iskut, Gitwinkshilkw and Hazelton. Programs included
support
for the Stewart Community Connections
Society, Smithers and Stewart public libraries, Hazelton
and Kitwanga book bus, Kitwanga ambulance, Terrace
and Smithers Hospital foundations and Tahltan literacy
camps.
Chaired virtual Mining Month luncheon in Smithers
highlighting benefits of mining to the local economy.
Assisted Gitxsan with COVID-19 preparedness.
in
Participated
local boards
including Smithers
Chamber of Commerce, Bob Quinn Lake Airport
Society, Association of Mineral Exploration BC and BC
Centre of Training and Excellence in Mining (CTEM).
Assisted the Tahltan industry COVID-19-preparedness
the Seabridge
to
committee,
including access
corporate vaccination program.
Seabridge attends Nisga'a Industry Forum
KSM receives Safety Award
9
ANNUAL REPORT 2021
OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
10
ANNUAL REPORT 2021 OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
numbers
summer student, hired as a Geotech.
included
1 Tahltan Mining Engineer
JMM Camp: On average, 12 people were in camp,
including 7 Tahltan, 2 Gitxsan
Letters were received from the NLG, TCG and Gitxsan
Hereditary Chiefs supporting the application for our
EAC extension.
3 Aces
Successfully completed the Yukon Environmental
and Socio-Economic Board (YESAB) Class 4 permit,
with YESAB ultimately recommending to the Decision
Bodies that the Project be allowed to proceed, subject
to specified terms and conditions. Currently awaiting a
decision by Yukon Energy, Mines and Resources on the
Class 4 permit.
Awarded a Class 1 Quartz Permit at 3 Aces, with the
support of the Liard First Nation (LFN), the first time
LFN has submitted a letter of support on a quartz
permit application.
Tahltan Culture Camp conveys traditional knowledge
Completion of a virtual annual environmental
and
to keep
Indigenous communities apprised of our
monitoring program
local
environmental monitoring and exploration programs.
regulators
Participated in the Tahltan virtual roundup meeting to
discuss KSM and Iskut Projects.
Presented virtually to the Terrace town council on KSM
project developments.
Implemented the inaugural Tahltan bursary program,
as per the IBA, to award $40,000 to 20 Tahltan students.
Met with Ross River Chief in Council in Ross River to
discuss exploration plans for 3 Aces including permit
review and environmental programs and concerns.
Implemented safety awards at KSM Camps to highlight
the importance of safety and safety culture.
Met with Chief and Council in Watson Lake to discuss
exploration plans for 3 Aces including permit review
and environmental programs and concerns.
Awarded major contracts to our indigenous partners
with expanded scopes of work.
Tahltan: provided equipment operators for road
and camp construction at Camp 9; Summit
Camp, Hodder Camp, Camp 3 and KSM Camp.
Nisga’a: provided COVID-19 testing and first aid
services. Helped to plan and implement the Glacier
Creek Fish Habitat Offsetting Project.
Hosted 3 Aces site tour with Ross River Development
Corp representative, and government regulators.
Building relationships with LFN Lands department
via virtual and in-person meetings and negotiating
a capacity funding agreement to enable their full
participation
in the review of our proposed work
programs and to begin the process of developing a
relationship based on mutual trust.
Employment statistics:
KSM Camp: On average 39 people were in camp,
including 2 NLG, 12 Tahltan, 8 Gitxsan. These
Participated in a Yukon Chamber of Mines committee
providing recommendations on potential Yukon Mining
Legislation changes.
Highgrade ore found near surface at
3 Aces Project in Canada's Yukon
11
ANNUAL REPORT 2021
OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
Courageous Lake
Updated engagement plan for Mackenzie Valley Land
and Water board in consultation with local indigenous
groups.
Iskut Project
Significant
reclamation progress at
the Johnny
Mountain mine site in 2021 is summarized in detail
below under Objective 6. The work at JMM also
contributed significantly to advancing social license
with indigenous groups not only in British Columbia
but also in the Yukon, where there is a long history of
abandoned exploration and mining projects.
This objective was accomplished.
OBJECTIVE #3: Collect all the data necessary to be in a
position to complete an updated Preliminary Feasibility
Study incorporating East Mitchell (formerly Snowfield)
into the greater KSM project;
2021 field work at KSM collected the necessary data to
incorporate the recently acquired East Mitchell deposit
into an updated KSM PFS. An updated PFS incorporating
East Mitchell into KSM was subsequently completed in
the 2nd quarter of 2022.
Last year’s 9,450 meter drill program at KSM consisted
of 3,484 meters drilled at East Mitchell and Mitchell to
confirm model grades and obtain metallurgical sample
material. The balance of the drilling was to evaluate the
geotechnical characteristics on the margins of the East
Mitchell deposit and along the planned Mitchell-Treaty-
Tunnel (“MTT”) route.
Results confirmed both resource models. Geotechnical
core drilling at the East Mitchell deposit for pit slope
stability studies brought East Mitchell geotechnical pit
slope design to the same level of engineering confidence
as the Mitchell pit. Geotechnical and tunnel engineering
reports are now being prepared for a bid process to select
an MTT contract miner based on geotechnical drilling
along the route planned for the MTT, field mapping and
an updated structural geology model to support ongoing
MTT engineering.
Geotechnical drilling and testing have been completed for
other early-stage site infrastructure such as portals, muck
pads and water treatment ponds at various locations on
the project site. The 2021 drill program also included 1,311
m of drilling in the Mitchell quarry to confirm its suitability
as a source of construction material. Finally, drill core from
previous operators at East Mitchell was relogged by our
geologists to incorporate into a new, single, consistent
geologic model for the combined deposits.
This objective was accomplished.
Iskut environmental monitoring using drones
OBJECTIVE #4: Execute our 3rd drill program at
Snowstorm, continuing to target a Getchell/Twin Creeks
style deposit;
The 3rd drill program at Snowstorm in Nevada completed
in March 2022 targeted the structural zones with
anomalous gold encountered in previous drill campaigns.
Snowstorm is located 15 kilometers north of Turquoise
Ridge on an extension of the prolific Getchell Trend. This
off set drill program was designed to increase the number
of intersections on a gold-bearing, structurally controlled
intrusion to help vector towards higher grades.
The latest drilling re-entered completed holes from past
campaigns, using directional drilling tools to deviate from
the original targets. The newly completed drilling totaled
1,320 meters of exploration drilling utilizing 982 meters of
previous work.
this project
Conditions around advancing
remain
challenging but incremental progress continues. When
Seabridge acquired Snowstorm it knew a multi-year
exploration program would be required to advance a
deep blind target and the Company remains confident of
the potential.
This objective was accomplished in Q1 2022.
OBJECTIVE #5: Conduct a follow-up drill test at Iskut
for a gold/copper porphyry deposit below the gold and
copper mineralization discovered in the 2020 program;
Iskut
In 2020, drilling at
intersected a corridor of
porphyritic intrusive rock with gold and copper. These
intercepts are
the upper explosive
manifestation of a larger porphyry Au-Cu system. Results
indicated that the target was deeper than our initial
assessment and that a follow up program of geophysics
and drilling of 1,800 meters was warranted.
interpreted as
12
ANNUAL REPORT 2021 Seabridge reclaiming the
Johnny Mountain mine site
The 2021 Iskut plan was to expand upon our previous
MT survey to cover the entire Quartz Rise (QR) target
and then drill test an identified target. The original MT
survey conducted in 2016 pre-dated the discovery of the
QR Lithocap and did not provide data over that area.
The survey in 2021 started later than planned due to
snow conditions and had lower field productivity due
to labor shortages and weather delays. Ultimately, the
survey was completed about 3 weeks later than planned
and targeting was designed off field observations rather
than the fully interpreted MT data set to accelerate the
beginning of drilling given the short season.
To expedite late season drilling, a decision was made to
re-enter an existing 730 meter hole and advance it to an
1,800 meter target depth. Progress was reasonable and
completion of the hole seemed within reach by early
October. A winter storm on September 24 dropped the
snowline below 500m elevation and terminated the Iskut
program.
We have also identified a prospective drill target down
dip from the Bronson slope deposit which could account
for copper-gold mineralization
in that deposit and
throughout the area. At the proposed Bronson target drill
location, the avalanche risk was judged unacceptable
after the storm and an initial hole planned for 2021 was
not attempted. It remains a key target for this year.
Although drilling was undertaken at Iskut, we take the
view that this objective was only partially accomplished.
OBJECTIVE #6: Continue the reclamation and closure
of the Johnny Mountain Mine in cooperation with the
Tahltan Nation and B.C. regulators
Reclamation planning for future projects is one thing;
it’s quite another to actually fund and do the work on a
voluntary basis to heal the environmental damage done
Environmental sampling during JMM reclamation activities
by historical mining. The following tasks were completed
in 2021 on the reclamation and closure of the Johnny
Mountain Mine:
Dewatered the TSF, moved approximately 11,700m3 of
PAG waste rock from the portal pads to the TSF to be
stored under water and applied 1700kg of lime mixed
with the PAG rock.
Continued with the spilled hydrocarbon remediation
program and progressive re-vegetation work.
Completed required regulatory environmental field
sampling and reporting requirements.
Continued long-term monitoring programs to ensure
the stability of the Tailings Management Facility and
protection of the environment, including the 5-year
Dam Safety Review.
Implemented an independent IGTB review with Terry
Inaugural meeting
Eldridge as the sole member.
scheduled for December 9, 2021.
Hosted an Iskut and Johnny Mountain Mine site tour
with the Tahltan Central Government (TCG).
13
ANNUAL REPORT 2021 OUR 2021 CORPORATE REPORT CARD AND OUR 2022 OBJECTIVES
Contracted the largest yet number of Tahltan partners
for work at Johnny Mountain including: TNDC, Northern
Labour Services, Inner City Diesel, RTEC and Obsidian
Matrix.
Co-Chaired the BC Technical and Research Committee
on Reclamation conference and presented a video
highlighting Johnny Mountain Mine Reclamation.
This objective was accomplished.
OBJECTIVE #7: Commence field activities at 3 Aces
including geophysical surveys, drill hole relogging and
interpretation to
surface confirmation of structural
be followed by an initial drill program to confirm our
geologic model
Since acquiring the 3 Aces project in 2020 efforts were
dedicated to constructing a 3-dimentional exploration
model. The 2021 plan was to continue to evaluate and
refine the exploration model at surface and move
to testing it with drilling. Initial work on the project
undertook field checking of surface mapping in the
Central Core Area and drill core relogging; results of
that work were fed back into the 3-dimentional model.
The refined models showed two distinct folding events;
an early
long wavelength fold
system, crossed obliquely by a moderate amplitude
and wavelength
intense
fracturing on the anticlinal axis and limbs, creating an
ideal environment for gold accumulation. The folding is
well defined in sandstone and conglomerate units but
generate ductal flow in siltstone units. These features
reliably predict the location of the Hearts and Spades
high-grade zones in the Central Core Area.
fold event that produced
large amplitude and
Two operating permits obtained by the previous owner
expired in 2021: the first provided for camp occupancy and
limited surface exploration, while the second provided
general access for exploration including drilling. The
limited permit was reinstated 2 months after expiration,
subject to some camp improvements, and permitted
the geophysical survey to begin. CSAMT survey was
3 Aces Camp
conducted over part of the Central Core Area confirming
and expanding the location of anticlinal axis favorable for
gold concentrations. These results also explain historical
drill holes that yielded no significant gold results and
encountered rock packages that were not predicted,
resulting in better focused, more favorable fold targets.
The geophysical program was terminated in October
as equipment failures and adverse weather conditions
produced significant down time and permit-stipulated
camp shut down was approaching.
An application for a second and more extensive drilling
permit was submitted
in August 2020, accepted as
complete in April 2021 and has not yet been granted.
We are not clear when the permit will be available to us
but we are advancing under the assumption that a drill
program will be executed for the coming season.
Although field activities were undertaken at 3 Aces, due
to the inability to obtain a new Class 4 drill permit, this
objective was only partially accomplished.
OBJECTIVE #8: Increase gold ownership per common
share by way of accretive resource additions from
acquisitions and/or continued exploration at our projects.
In April 2022 we reported updated resource estimates
(as of March 31, 2022) for the Mitchell and East Mitchell
deposits adding 12.0 million ounces of gold
in the
measured and indicated categories, with a reduction of
0.2 million ounces in the inferred category. Thus, we now
report 100.2 million ounces of gold in the measured and
indicated categories plus an additional 70.6 million ounces
of gold in the inferred category.
From December 30, 2020 through March 31, 2022 we
increased shares outstanding by approximately 5.6 million.
Accordingly, at March 31, 2022 each one of our shares was
backed by 1.26 ounces per share in the measured and
indicated categories plus an additional 0.88 in the inferred
category.
This objective was accomplished.
14
ANNUAL REPORT 2021 Seabridge is focusing on site capture and substantial start activities in 2022
Now for 2022…
Our primary objective continues to be to complete a joint
venture agreement on the KSM Project with a suitable
partner on terms advantageous to Seabridge. Our goal
in a joint venture is to: (1) retain a significant interest in a
producing mine; (2) minimize our capital exposure; and
(3) ensure that our partner must build a mine in order to
keep its interest.
We have reported for some time that due to the size and
complexity of the KSM Project, the number of potential
partners is probably limited to fewer than 10 major gold
and base metal companies. We continue to believe that
the combination of KSM’s size, location, economics and
permit status represent one of the most compelling
development opportunities on the planet. As covered in
this report, the addition of East Mitchell into KSM’s design
has greatly improved KSM’s economics. Additionally, our
ability to fund and undertake site capture activities to
achieve substantially started status, mitigates the risk of
KSM’s environmental approvals expiring in 2026. Finally,
major mining companies are depleting their reserves
faster than they are replacing them and new projects are
needed just to sustain current production levels. We think
all the factors needed for a joint venture on favorable
terms are coming together at the right time.
Here are eight other objectives we set for 2022:
to
1. Continue
license by
responding effectively to the needs and concerns of
Treaty and First Nations and local communities;
strengthen our
social
2. Complete an updated PFS
incorporating the East
Mitchell deposit into the greater KSM project;
3. Advance substantial start activities at KSM to ensure
Environmental Assessment
that
Certificate remains in good standing for the life of the
project;
project’s
the
4. Continue exploration activities at Snowstorm;
5. Conduct additional drilling at Iskut focused on the
discovery of a new gold/copper porphyry deposit;
6. Continue the reclamation and closure of the Johnny
Mountain Mine in cooperation with the Tahltan Nation
and British Columbia regulators;
7. Subject to receipt of permits, conduct an initial drill
program at 3 Aces to confirm our geologic model; and
8. Increase gold ownership per common share by way of
accretive resource additions from acquisitions and/or
continued exploration at our projects.
We look forward to reporting in 2023 how we did against
these eight objectives as well as identifying our new set of
objectives.
15
ANNUAL REPORT 2021 SEABRIDGE GOLD
Mineral Reserves and Resources
June 2022
The following tables provide a breakdown of Seabridge’s most recent National Instrument 43-101 compliant estimates of
mineral reserves and resources by project. Seabridge notes that mineral resources that are not mineral reserves do not
have demonstrated economic viability.
Proven and Probable Mineral Reserves
Project Zone
KSM
Mitchell
East
Mitchell
KSM Totals
Reserve
Category
Proven
Probable
Proven
Probable
Proven
Probable
Total
Proven
Courageous Lake
Probable
Total
Seabridge Totals
Average Grades
Contained Metal
Tonnes
(millions)
Gold
(gpt)
Copper
(%)
Silver
(gpt)
Moly
(ppm)
Gold
(million
ounces)
Copper
(million
pounds)
Silver
(million
ounces)
Moly
(million
pounds)
483
452
814
392
1,297
995
2,292
12
79
91
0.74
0.59
0.69
0.46
0.71
0.55
0.64
2.41
2.17
2.20
0.20
0.15
0.11
0.09
0.15
0.14
0.14
3.3
2.5
1.8
1.7
2.4
1.9
2.2
49
74
91
84
75
77
76
n/a
n/a
n/a
11.5
8.6
18.1
5.8
29.6
17.7
47.3
1.0
5.5
6.5
2,161
1,458
2,043
784
4,203
3,116
7,320
51
36
47
21
98
62
160
53
74
163
73
215
170
385
n/a
n/a
n/a
53.8
7,320
160
385
Mineral Resources (Includes Mineral Reserves as stated above)
Gold
Copper
Silver
Molybdenum
Measured Resources
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
Project
KSM:
Mitchell
East Mitchell
KSM Total
NSR: $10.75
$11.25
Bronson Slope
$9 NSR
Courageous Lake
Quartz Mountain*
0.83
0.34
Total Measured Resources
691,700
1,012,800
1,704,500
84,150
13,401
3,480
0.68
0.65
0.66
0.42
2.53
0.98
15,124
21,098
36,222
1,140
1,090
110
38,562
0.19
0.11
0.14
0.15
n/a
n/a
2,876
2,514
5,390
280
n/a
n/a
5,670
3.3
1.8
2.4
2.2
n/a
n/a
72,831
59,233
132,064
6,010
n/a
n/a
138,074
52
89
74
n/a
n/a
n/a
79
198
277
n/a
n/a
n/a
277
16
ANNUAL REPORT 2021 SEABRIDGE GOLD
Gold
Copper
Silver
Molybdenum
Indicated Resources
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
Project
KSM:
Mitchell
East Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
$10.75-$11.25
NSR
Pits
C$16
NSR
UG
Bronson Slope
$9 NSR
Courageous Lake
Quartz Mountain*
0.83
0.34
Total Indicated Resources
1,667,000
746,200
446,000
374,000
423,000
3,656,200
102,740
93,914
54,330
0.48
0.42
0.55
0.22
0.41
0.44
0.31
2.28
0.91
25,935
10,080
7,887
2,660
5,576
52,138
1,020
6,884
1,591
61,633
0.14
0.08
0.21
0.41
0.22
0.17
0.10
n/a
n/a
5,120
1,390
2,064
3,405
2,051
14,030
222
n/a
n/a
14,252
2.8
1.7
1.0
1.1
4.6
2.4
2.2
n/a
n/a
149,160
41,814
14,339
13,744
62,559
281,616
7,160
n/a
n/a
288,776
66
79
53
5
41
58
n/a
n/a
n/a
241
130
52
4
38
465
n/a
n/a
n/a
465
Measured plus Indicated Resources
Gold
Copper
Silver
Molybdenum
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
Project
KSM:
Mitchell
East Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
$10.75-
$11.25 NSR
Pits
C$16
NSR
UG
2,358,700
1,759,000
446,000
370,000
423,000
5,356,700
East Mitchell
$11.20 NSR
1,759,100
Bronson Slope
$9 NSR
Courageous Lake
Quartz Mountain*
0.83
0.34
186,890
107,315
57,810
Total Measured plus Indicated Resources
Project
KSM:
Mitchell
East Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
Courageous Lake:
FAT Deposit
Walsh Lake
Quartz Mountain*
Total Inferred Resources
$10.75
NSR
Pits
C$16
NSR
UG
0.83
0.60
0.34
1,282,600
281,100
223,000
1,999,000
1,899,000
5,684,700
48,963
4,624
44,800
0.54
0.55
0.55
0.22
0.41
0.51
0.55
0.36
2.31
0.92
41,059
31,178
7,887
2,660
5,576
88,360
31,178
2,160
7,974
1,701
100,195
0.15
0.10
0.21
0.41
0.22
0.16
0.10
0.12
n/a
n/a
7,996
3,904
2,064
3,405
2,051
19,420
3,904
502
n/a
n/a
19,922
2.9
1.8
1.0
1.1
4.6
2.4
1.8
2.2
n/a
n/a
221,991
101,047
14,339
13,744
62,559
413,680
101,047
13,170
n/a
n/a
426,850
62
85
53
5
41
63
85
n/a
n/a
n/a
320
328
52
4
38
742
328
n/a
n/a
n/a
742
Gold
Copper
Silver
Molybdenum
Inferred Resources
0.29
0.37
0.44
0.31
0.45
0.36
2.18
3.24
0.72
11,819
3,372
3,155
19,823
27,474
65,643
3,432
482
1,043
70,600
0.14
0.07
0.13
0.40
0.30
0.28
n/a
n/a
n/a
3,832
403
639
17,720
12,556
35,150
n/a
n/a
n/a
2.5
2.3
1.3
1.8
2.6
2.2
n/a
n/a
n/a
102,228
21,112
9,320
114,431
158,741
405,832
n/a
n/a
n/a
47
61
30
23
30
33
n/a
n/a
n/a
35,150
405,832
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
* As of June 2022 the Quartz Mountain project was subject to an option agreement under which a 100% interest in the project may be acquired from
Seabridge by the optionee.
Note: United States investors are cautioned that the requirements and terminology of NI 43-101 differ significantly from the requirements of the SEC,
including Industry Guide 7 under the US Securities Act of 1933. Accordingly, the Issuer’s disclosures regarding mineralization may not be comparable
to similar information disclosed by companies subject to the SEC’s Industry Guide 7. Mineral Resources which are not Mineral Reserves do not have
demonstrated economic viability. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral
Resources with continued exploration.
133
38
15
103
126
415
n/a
n/a
n/a
415
17
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion And Analysis
For the year ended December 31, 2021
The following is a discussion of the results of operations
and financial condition of Seabridge Gold Inc. and its
subsidiary companies for the years ended December
31, 2021 and 2020. This report is dated March 24, 2022
and should be read in conjunction with the audited
consolidated financial statements for the years ended
December 31, 2021 and 2020, the Company’s Annual
Information Form filed on SEDAR at www.sedar.com, and
the Annual Report on Form 40-F filed on EDGAR at www.
sec.gov/edgar.shtml. Other corporate documents are also
available on SEDAR and EDGAR as well as the Company’s
website www.seabridgegold.com. As the Company has
no operating project at this time, its ability to carry out
its business plan rests with its ability to sell projects or to
secure equity or other financings. All amounts contained
in this document are stated in Canadian dollars unless
otherwise disclosed.
The consolidated financial statements for the year ended
December 31, 2021 and the comparative year ended
December 31, 2020 have been prepared by the Company
in accordance with International Financial Reporting
International
Standards
Accounting Standards Board.
(“IFRS”) as
issued by
the
Selected Annual Information
Summary Operating Results ($000s – except per share amounts)
Gain on disposition of mineral interests
Corporate and administrative expenses
Other income - flow-through shares
Environmental rehabilitation expense
Equity loss of associate
Unrealized gain on convertible notes receivable
Interest income
Income tax recovery (expense)
Finance expense and other
Net income (loss)
Basic earnings (loss) per share
Summary Statements of Financial Position ($000s)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Equity
Total liabilities and equity
Company Overview
is a company engaged
Seabridge Gold Inc.
in the
acquisition and exploration of mineral properties, with an
emphasis on gold resources, located in North America.
The Company’s objective is to provide its shareholders
with exceptional leverage to a rising gold price and
the returns from significant copper resources it has
acquired. The Company’s business plan is to increase its
mineral resources in the ground, through exploration,
but not to go into production on its own. The Company
intends to sell projects or participate in joint ventures
towards production with major mining companies. Since
inception in 1999, Seabridge has acquired interests in
numerous advanced-stage gold projects situated
in
North America and its principal projects include the KSM
property located in British Columbia and the Courageous
Lake property located in the Northwest Territories. The
Company also holds a 100% interest in the Iskut Project in
British Columbia and the Snowstorm Project in Nevada.
In 2020, the Company purchased its 100% interest in the 3
Aces gold project in Yukon and acquired the East Mitchell
property, adjacent to the KSM project, in British Columbia.
Although focused on gold exploration, the Company
has made significant copper discoveries, in particular, at
KSM. Seabridge’s common shares trade in Canada on the
Toronto Stock Exchange under the symbol “SEA” and in
the United States on the New York Stock Exchange under
the symbol “SA”.
2021
21,943
2020
-
2019
-
(13,379)
(16,530)
(13,340)
2,373
(5,377)
(221)
104
176
(4,630)
(94)
895
$ 0.01
2021
54,159
693,583
747,742
17,301
28,108
702,333
747,742
1,676
-
(187)
-
114
800
(815)
(14,942)
$ (0.23)
2020
46,229
601,588
647,817
10,194
22,905
614,718
647,817
1,218
-
(200)
-
279
697
(267)
(11,613)
$ (0.19)
2019
19,213
430,159
449,372
6,690
27,659
415,023
$ 449,372
18
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
Results of Operations, 2021 Compared to 2020
The Company recorded net income of $0.9 million or $0.01
per share for the year ended December 31, 2021 compared
to a net loss of $14.9 million or $0.23 per share for the year
ended December 31, 2020.
During the year ended December 31, 2021, the most
significant items contributing to net income included
the gain on disposition of mineral interests, other income
reported for flow-through shares, and interest income,
partially offset by corporate and administrative expenses,
income taxes, and environmental rehabilitation expense.
These and other items are discussed further below.
During the second quarter 2021, the Company disposed of
its residual interests in its previously owned Red Mountain
project located in northwestern British Columbia, for
cash proceeds of US$18 million and recorded a gain of
$21.9 million through the statement of operations and
comprehensive
(loss). The capitalized costs
incurred and accumulated while the Company held the
project had previously been recovered through option
and acquisition payments and the residual interest in the
project had no carrying value, resulting in the gain.
income
Corporate and administrative expenses for 2021 were
$13.4 million, down $3.2 million or 19% from prior year
in stock-based
mainly due to $5.3 million decrease
compensation, partially offset by $1.0 million increase in
cash compensation, $0.7 million increase in professional
fees and $0.5 million increase in other general and
administrative expenses.
Cash compensation for 2021 was $5.8 million, up $1.0
million or 20% from the prior year. The increase was
due both increase in base salary and headcount. Cash
compensation is expected to remain stable or increase
marginally given the growth in project and corporate
activity in the Company.
in professional
Increase
fees and other general
and administrative expenses was mainly related to
increase in recruitment costs and the costs associated
with the Company wide risk assessment review and
the preparation and publication of
inaugural
sustainability report. The inaugural sustainability report
was prepared with select disclosures and guidance
from the Sustainability Standards Accounting Board
Metals and Mining Industry Standards and the Global
Reporting Initiative Standards, as well as metrics designed
specifically for the Company.
its
Lower stock-based compensation expense in 2021 when
compared to prior year was primarily due to the fact that
the expense in 2020 was inclusive of fair value recognition
for
the non-market performance options granted
between 2015 and 2019 that were vested in late 2020.
The Company’s stock-based compensation expense
related to stock options and restricted share units are
illustrated on the following tables:
($000s)
Options granted
June 24, 2015
December 14, 2017
October 11, 2018
December 12, 2018
June 26, 2019
RSUs granted
December 12, 2019
December 16, 2020
September 01, 2021
September 07, 2021
October 01, 2021
December 13, 2021
Exercise
price ($)
Number
of options
Grant date
fair value
Cancelled
prior to 2020
Expensed
prior to 2020
Expensed
in 2020
Expensed
in 2021
9.00
13.14
16.94
15.46
17.72
475,000
605,000
50,000
568,000
50,000
5,774
4,303
421
4,719
416
149
-
-
-
-
149
1,266
4,085
334
3,383
168
9,236
4,359
218
87
1,328
248
6,240
($000s)
-
-
-
8
-
8
Number
of RSUs
Grant date
fair value
Expensed
prior to 2020
Expensed
in 2020
Expensed
in 2021
139,600
135,450
20,000
10,000
10,000
123,800
2,351
3,413
454
229
195
2,622
274
-
-
-
-
-
2,077
487
-
-
-
-
274
2,564
-
2,926
75
36
24
437
3,498
Balance to
be
expensed
-
-
-
-
-
-
Balance to
be
expensed
-
-
379
193
171
2,185
2,928
19
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company has,
the
since
compensation practices away from issuing a combination
of stock options and RSUs to only issuing RSUs with
shorter terms and service periods.
refocused
2019,
During the third and fourth quarter 2021, the Board
granted 40,000 RSUs to new members of senior
management. Half of the RSUs will vest on the first
anniversary of employment and the remaining half on
the second anniversary. The fair value of the grants, of
$0.9 million, was estimated as at the grant date to be
amortized over the expected service period of the grants.
As at December 31, 2021, $0.1 million of the fair value of the
grants was amortized.
During the second quarter of 2021, 135,450 RSUs, granted
in mid-December 2020, vested upon the Company
completing the 2020 exploration program at Snowstorm
and were exchanged for common shares of the Company.
In December 2020, $0.5 million of the full fair value of $3.4
million was charged to the statement of operations and
comprehensive income (loss) and the remaining fair value
of the grant of $2.9 million was charged to the statement
of operations and comprehensive income (loss) in the first
quarter in 2021.
In 2020, 139,600 RSUs fully vested to the holders of RSUs
granted at the end of 2019 upon the Company attaining
pre-established vesting conditions and $2.1 million of fair
value was expensed through the statement of operations
and comprehensive income (loss).
In June 2020, shareholders resolved to approve that
425,000 options that were granted to the directors of
the Company in 2015 and due to expire in April 2020, be
extended for one year. The fair value of the extension
was determined to be $4.4 million. In December 2020,
upon acquisition of the Snowfield property (discussed
below) the performance condition for these options,
amongst other grants made between 2016 and 2019, was
met and management adjusted the estimated vesting
period to that date and a total of $6.0 million of fair value
was expensed through the statement of operations and
comprehensive income (loss).
In 2021, the Company recognized $2.4 million of other
income related to the flow-through share premium
recorded on the financings completed in June 2020 and
in June 2021 (discussed below). During the comparative
year, the Company recognized $1.7 million of other income
related to the flow-through share premium recorded on
the financings completed in September 2019 and June
2020 (discussed below).
In 2018, the Company filed an updated reclamation
and closure plan for the Johnny Mountain mine site
and charged $7.4 million of rehabilitation expenses
to the consolidated statements of operations and
comprehensive income (loss). The Johnny Mountain Mine
site was acquired, along with the Iskut Project, during
the Snip Gold acquisition in 2016. Expenditures were
expected to be incurred between 2018 and 2022 and
include the estimated costs for the closure of all adits and
vent raises, removal of the mill and buildings, treatment
of landfills and surface water management as well as
ongoing logistics, freight and fuel costs. The Company’s
reclamation activities were somewhat curtailed during
2020 while non-essential activities were halted, and the
Company strived to reduce the numbers of personnel
in any camp at any one-time. In late 2021, the Company
reassessed the closure plan for the Johnny Mountain Mine
and charged an additional $5.4 million of rehabilitation
expenses to the consolidated statements of operations
and comprehensive income (loss). Costs are now expected
to be incurred until 2024.
the Company
In 2021,
incurred $3.3 million of
environmental rehabilitation expenditures (2020 - $0.8
million) that were recorded as a reduction to the provision
for reclamation liabilities on the consolidated statements
of financial position.
Reclamation activities at Johnny Mountain focused on
four areas in 2021:
- Waste rock collection from portals, mixed with lime and
relocated to the tailings management facility
- In-situ hydrocarbon remediation treatment continued
at the historic tank farm mill sites
- Landfill operations and
inspections and detailed
engineered drawings prepared for future expansion,
and
- Continued revegetation and environmental monitoring.
The Company holds common shares of several mining
companies that were received as consideration for
optioned mineral properties and other short-term
investments, including one gold exchange traded receipt.
In 2021, the Company recognized a decrease in fair value
of investments, net of income taxes, of $0.4 million.
During the comparative year, the Company recognized
an increase in fair value of investments, net of income
taxes, of $0.7 million. The change in the fair value of
these investments was recorded within comprehensive
loss on the consolidated statements of operations and
comprehensive income (loss).
The Company holds one investment in an associate that
is accounted for on the equity basis. In 2021, the Company
recognized $0.2 million (2020 - $0.2 million), representing
its proportionate loss in the associate.
In 2021, the Company recognized income tax expense
of $4.6 million primarily due to the deferred tax liability
arising from the gain recognized on disposition of the
Company’s residual interests in its previously owned
Red Mountain project, and from the renouncement of
20
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
expenditures related to the June 2020 and June 2021 flow-
through shares issued, that are capitalized for accounting
purposes but renounced to investors for tax purposes. The
income tax expense was partially offset by income tax
recovery arising from the losses in the year.
In 2020, the Company recognized income tax recovery of
$0.8 million resulting from the losses incurred during the
year. The tax recovery was partially offset by the deferred
tax expense arising from exploration expenditures related
to the September 2019 and June 2020 flow-through
issued, that were capitalized for accounting
shares
purposes but were renounced to
investors for tax
purposes.
Results of Operations, 2020 Compared to 2019
The Company incurred $14.9 million net loss or $0.23 per
share for the year ended December 31, 2020 compared
to a net loss of $11.6 million or $0.19 per share for the year
ended December 31, 2019.
Corporate and administrative expenses, including stock-
based compensation, were the most significant items
contributing to losses in fiscal 2020 and 2019. In 2020
and 2019 other income reported for flowthrough shares
offset some of these expenses. These and other items are
discussed further below.
Corporate and administrative expenses for 2020 were
$16.5 million, up $3.2 million or 24% from prior year mainly
due to $3.4 million increase in stock-based compensation
and $0.2 million increase in cash compensation. The
increase
in stock-based compensation expense was
primarily due to the recognition of the fair value of non-
market performance options granted between 2015 and
2019 that were vested in late 2020.
Cash compensation for 2020 was $4.8 million, up $0.2
million or 4% from the prior year. The increase was mainly
due to higher headcount.
Quarterly Information
Selected financial information for the last eight quarters ending December 31, 2021 is as follows:
(in thousands of Canadian dollars,
except per share amounts)
Revenue
Income (loss) for period
Basic earnings (loss) per share
Q4
-
(8,546)
(0.11)
Q3
-
(822)
(0.01)
Q2
-
Q1
-
Q4
-
14,548
(4,285)
(12,653)
0.19
(0.06)
(0.18)
Q3
-
4,977
0.07
Q2
-
(4,068)
(0.06)
Q1
-
(3,198)
(0.05)
2021
2020
In the fourth quarter 2021, the loss included $5.4 million of
rehabilitation expenses related to the Johnny Mountain
Mine. In the second quarter 2021, net income included
$21.9 million gain on disposition of interest in the Red
Mountain project. In the first quarter 2021, the loss for the
period included $2.9 million of stockbased compensation
expense related to amortization of RSUs granted in
December 2020 that were vested during the second
quarter 2021.
In the third quarter 2020, net income included a $4.9
million reversal of stock-based compensation expense,
related to non-market condition, performance vesting
stock options granted in the years 2015 to 2019, that
was previously recognized through the statement of
operations and comprehensive income (loss). The reversal
reflected a revised estimated vesting period of those
options. In the fourth quarter 2020, that vesting period
was re-estimated to reflect the purchase of the Snowfield
property from Pretium Resources Inc. for $127.5 million.
The purchase, discussed below, added 25.9 million ounces
of gold and 3.0 billion pounds of copper in the measured
and indicated categories of resources and alone increased
the measured and indicated gold ounces at KSM by 51%
and by 28% for copper. The estimated service period for
these stock options, including those whose fair value
was reversed in the previous quarter, was reset to the
Snowfield property acquisition date, and $8.6 million
stock-based compensation expense was recognized
through the statement of operations and comprehensive
income (loss) in the fourth quarter 2020.
Mineral Interest Activities
In response to the COVID-19 pandemic, the Company
has implemented measures to safeguard the health and
well-being of
its employees, contractors, consultants,
and community members. Many of the Company’s
employees worked remotely prior to the pandemic, and
through most of 2020 and 2021, all employees have been
working remotely during ongoing periods of lockdowns
in various jurisdictions. The Company reduced the scope
of some of the work programs at its projects that it had
originally planned for in the prior year and has conducted
its 2021 programs around social distancing protocols that
included safety and preventative actions at its exploration
camps. The Company executed
its 2021 exploration
and development work at KSM, Iskut, Snowstorm and
21
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
3 Aces projects under the same successful protocols it
implemented in 2020. The Company’s engagement with
potential joint venture partners, or potential acquirors of
KSM or Courageous Lake diminished in both 2020 and
2021 as major mining companies focused on addressing
the needs of their existing operations as a result of the
pandemic.
The Company continues to have full access to
its
properties in Canada and the United States and has
managed to adequately staff its camps for conducting
its programs. The Company has not experienced
problems obtaining the supplies and services needed
for its work programs. The Company has instituted and
will continue to implement operational and monitoring
protocols to ensure the health and safety of its employees
and stakeholders, which follow the advice of
local
governments and health authorities where it operates.
The Company plans work programs on an annual basis
and adjusts its plans to the conditions it faces. The
Company fully expects to be able to continue operating
its planned programs on this basis going forward, as
required, and anticipates that the pandemic will continue
to have minimal impact on its exploration activities. One
factor that the Company must plan for is the recent
resurgence of inflation above past multi-decade levels.
Budgets prepared for 2022 have incorporated inflation
factors, including labour costs, fuel and energy costs and
camp operations and supplies. These increases have not
materially impacted planned operations or the Company’s
ability to fund and execute its plans.
In 2021, the Company added an aggregate of $44.4
million of expenditures that were attributed to mineral
interests. Cash expenditures of $43.7 million were made
at KSM (70%), Snowstorm (15%), Iskut (9%), 3 Aces (4%), and
Courageous Lake (1%).
During the year, the Company commenced site capture
activities that are designed to ensure that KSM’s
Environmental Assessment Certificate
(EAC) remains
in good standing as well as collecting additional data
that will be required for an updated pre-feasibility study,
expected to be filed in the second quarter of 2022 and
for an eventual final feasibility study. On substantial
start, under the B.C. Environmental Assessment Act,
a project’s EAC is subject to expiry if the project has not
been substantially started by the deadline specified in the
EAC. The deadline for KSM’s EAC is July 29, 2026. However,
if the B.C. Minister of Environment and Climate Change
Strategy determines that a project has been substantially
started before the deadline, the EAC remains in effect for
the life of the project.
The Company also conducted drilling programs for
metallurgical testing at the East Mitchell
(formerly
(see below) and Mitchell deposits and
Snowfields)
geotechnical drilling at East Mitchell and at various
sites that will be utilized in engineering studies. Work
continued on various, significant, components of the
line. Planning and
eventual design, including connection to BC Hydro’s
initial work was
transmission
conducted on
including the
infrastructure projects,
commencement of the construction of the first section of
the Coulter Creek access road as well as new temporary
and permanent camp installations. Expenditures totaling
$30 million were made on construction in progress and
equipment purchase at KSM in the current year.
in 2021, the Company continued to evaluate
Also
the geotechnical and exploration drilling programs
conducted in 2020. The objective of the geotechnical
drilling program was to test the condition of the rocks
along the proposed route of the Mitchell Treaty Tunnels,
a proposed key infrastructure component of the project.
The exploration program included drilling in an area
previously untested. Results of the evaluation of the
programs were followed up with a small drilling program.
Exploration activities in 2021 have remained focused on
optimizing the resource models and designing programs
for detailed definition drilling of deposits for mine
planning and production decisions.
In 2021, the Company deposited $8.5 million in the
form of security for reclamation activities related to the
infrastructure programs mentioned above.
to KSM and
In December 2020, the Company closed the transaction
acquiring a 100% interest in the East Mitchell property
its addition
immediately adjacent
significantly transforms the KSM project,
increasing
measured and indicated gold ounces of KSM by 51%
and 28% for copper and enables new development
opportunities for KSM which could have a positive impact
on the overall project economics. Management has
been studying the integration of East Mitchell into a new
KSM mine plan. It is expected that a large portion of the
East Mitchell mineral resource could be exploited in a
combined operation, which could potentially improve
KSM's internal rate of return and net present value
projections as well as shortening the payback period
of initial capital. The programs mentioned above have
enabled management to generate sufficient additional
data necessary to prepare a new preliminary feasibility
study (PFS) for the project integrating the East Mitchell
property into the project.
In 2021, at Iskut, the Company commenced an exploration
and drilling program. The program was based on the
evaluation the
results of the exploration program
conducted in 2020 and results of a geophysical survey
in 2021. It was designed to drill a
conducted early
geochemical target and to test for a potential gold/copper
porphyry deposit below the Quartz Rise lithocap. The
program was completed by year end and results will be
analyzed into 2022. In addition to exploration work at Iskut,
the Company continued its planned 2021 reclamation and
closure activities at the Johnny Mountain mine site as
described in the results of operations section above.
22
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
During the year at Snowstorm, the Company commenced
a drilling program designed to follow-up on the 2020
and early 2021 program that found discrete gold-bearing
intervals hosted within a similar structural setting and
rocks as mines on the same trends. Drilling has entailed
re-entering existing drill holes and using directional
drilling tools to continue the drill from known gold-
bearing intersections toward prospective higher-grade
structures. Approximately 2,500 meters of drilling
is
planned for this program and has continued into the early
part of 2022.
In June 2020, the Company acquired a 100% interest in
the 3 Aces gold project in the Yukon, Canada and in 2021,
management conducted field activities with line cutting
that will support a 42 line kilometer geophysical survey.
The program is designed to build a 3-D earth image to
integrate with historical drilling, to expand high-grade
gold targets previously identified, and to detect new
targets for initial drill testing. Also in 2021, several hundred
drilled but un-assayed core samples collected by the
predecessor operator, as well as field samples collected
during the current year, were delivered to labs for analysis.
During the year, the Company continued to evaluate the
best path forward at Courageous Lake. Options include
securing a joint venture partner, the sale of all or a portion
of the project, updating the 2012 PFS with a smaller initial
project, or conducting additional exploration outside the
area of known reserves and resources.
Liquidity and Capital Resources
in current
The Company’s working capital position at December
31, 2021, was $36.9 million compared to $36.0 million
at December 31, 2020. Included
liabilities
at December 31, 2021, is $1.4 million of flow-through
premium liability which is a non-cash item (December 31,
2020 - $2.3 million) and will be reduced as flowthrough
expenditures are incurred. The marginal increase in cash
resources, including cash and cash equivalents and short-
term deposits, was the net result of cash raised through
(discussed below), disposition of mineral
financings
interests, and exercise of stock options and warrants,
offset by cash used in environmental, reclamation and
exploration projects, corporate and administrative costs,
early
infrastructure development and corresponding
equipment, and reclamation bonding deposits for KSM.
During the second quarter of 2021, the Company
disposed of its residual interests in its previously owned
Red Mountain project located in northwestern British
Columbia, for net cash proceeds of $21.9 million.
in June 2017, the Company
As part of the acquisition agreement of Snowstorm
Exploration LLC
issued
500,000 common share purchase warrants exercisable for
four years at $15.65 per share. During 2021, all the warrants
were exercised for net proceeds of $7.8 million and
500,000 common shares were issued.
Also in 2021, the Company received $17.7 million upon the
exercise of 1,585,501 stock options and subsequent to the
year end, the Company received $1.6 million upon the
exercise of an additional 117,500 stock options.
In June 2021, the Company issued 350,000 flow-through
common shares at $28.06 per common share
for
aggregate gross proceeds of $9.8 million. The Company
committed to renounce its ability to deduct qualifying
exploration expenditures for the equivalent value of the
gross proceeds of the flow-through financing and transfer
the deductibility to the purchasers of the flow-through
shares. The effective date of the renouncement was
December 31, 2021. At the time of issuance of the flow-
through shares, $1.5 million premium was recognized
as a liability on the consolidated statements of financial
position. During 2021, the Company incurred $1.1 million
of qualifying exploration expenditures and $0.2 million
of the premium was recognized through other income
on the consolidated statements of operations and
comprehensive income (loss).
During the fourth quarter of 2019, the Company entered
into an agreement with two securities dealers, for an At-
The-Market offering program, entitling the Company, at
its discretion, and from time to time, to sell up to US$40
million in value of common shares of the Company.
During 2020, the Company issued 1,327,046 shares, at an
average selling price of $21.94 per share, for net proceeds
of $28.5 million under Company’s At-The-Market offering.
During the fourth quarter of 2019, the Company issued
231,084 shares, at an average selling price of $17.58 per
share, for net proceeds of $4.0 million under the offering.
During the first quarter of 2021, the Company entered into
a new agreement with two securities dealers, for an At-
The-Market offering program, entitling the Company, at
its discretion, and from time to time, to sell up to US$75
million in value of common shares of the Company. This
program can be in effect until the Company’s current
US$775 million Shelf Registration Statement expires
in January 2023. In 2021, the Company issued 2,242,112
shares, at an average selling price of $22.71 per share,
for net proceeds of $49.9 million under Company’s At-
The-Market offering. Subsequent to the year end, the
Company issued 537,037 shares, at an average selling
price of $22.09 per share, for net proceeds of $7.6 million
under Company’s At-The-Market offering.
On December 4, 2020, the Company entered into an
agreement to sell, on a bought deal basis, 6,100,000
common shares of the Company, at US$17.25 per common
share, for gross proceeds of US$105.0 million. As part of
the agreement, the Company granted an option to the
underwriters to sell up to an additional 610,000 common
shares of the Company, at a price of US$17.25 per common
share, for gross proceeds of US$10.5 million. The financing
closed on December 9, 2020, and the underwriters fully
exercised their option to purchase the additional common
shares. In aggregate, 6,710,000 common shares were
23
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
issued, at a price of US$17.25 per common share, for gross
proceeds of US$115.7 million.
In June 2020, the Company issued 345,000 flow-through
for
common shares at $32.94 per common share
aggregate gross proceeds of $11.4 million. The Company
committed to renounce its ability to deduct qualifying
exploration expenditures for the equivalent value of the
gross proceeds of the flow-through financing and transfer
the deductibility to the purchasers of the flow-through
shares. The effective date of the renouncement was
December 31, 2020. In accordance with draft legislation
released on December 16, 2020 in relation to the COVID-19
pandemic, a 12-month extension has been proposed to
the normal timelines in which the qualifying exploration
expenditures should be incurred. At the time of issuance
of the flow-through shares, $3.9 million premium was
recognized as a liability on the consolidated statements of
financial position. During 2020, the Company incurred
$4.7 million of qualifying exploration expenditures and
$1.6 million of the premium was recognized through other
income on the consolidated statements of operations
and comprehensive
income (loss). During 2021, the
Company incurred $6.5 million of qualifying exploration
expenditures and $2.2 million of the premium was
recognized through other income on the consolidated
statements of operations and comprehensive income
(loss).
In April 2020, the Company closed a non-brokered private
placement of 1.2 million common shares, at a price of
$11.75 per common share, for gross proceeds of $14.1
million. As part of the private placement agreement, the
Company granted an option to increase the size of the
private placement by an additional 240,000 common
shares exercisable until May 15, 2020. The 240,000 options
were fully exercised on May 6, 2020 at a price of $11.75 per
share, for gross proceeds of $2.8 million.
As outlined above, in 2021, the Company was successful
in raising $85 million in net proceeds with the issuance of
common shares through various financings and upon the
exercise of stock options and warrants. Comparatively, the
Company raised $200 million in 2020. These financings
took place during the COVID-19 pandemic and the
Company is confident in its ability to continue to finance
its operations when required, through similar equity
issuances and the exercise of stock options. The Company
did not rely on any local, regional, or national government
assistance, in 2021, to fund any of its operations.
including working
During 2021, operating activities,
capital adjustments, used $11.7 million cash compared to
$9.7 million cash used by operating activities in 2020. The
increase in the year-over-year basis was mainly related
to $2.5 million increase in environmental rehabilitation
disbursements, and $2.1 million increase in general and
administrative expenses, partially offset by $2.5 million
decrease in cash used in working capital. Higher general
and administrative expenses in 2021 was mainly related
to higher cash compensation, increase in recruitment
costs, and the costs associated with the risk assessment
review and sustainability programs implemented in 2021.
Operating activities in the near-term are expected to
remain stable or increase marginally given the growth in
project and corporate activity in the Company.
As previously disclosed in the Company’s prior years
financial statements,
in 2019 the Company received
a notice from the CRA that it proposed to reduce
the amount of expenditures reported as Canadian
Exploration Expenses (CEE) for the three-year period
ended December 31, 2016. The Company has funded
certain of its exploration expenditures, from time-to-time,
with the proceeds from the issuance of flow-through
shares and renounced, to subscribers, the expenditures
which it determined to be CEE. The notice disputes the
eligibility of certain types of expenditures previously
audited and approved as CEE by the CRA. The Company
strongly disagrees with the notice and responded to
the CRA auditors with additional information for their
consideration. In 2020, the CRA auditors responded to
the Company’s submission and, although accepting
additional expenditures as CEE, reiterated that their
position remains largely unchanged and subsequently
issued reassessments to the Company reflecting the
additional CEE expenditures accepted and $2.3 million
of Part Xll.6 tax owing. The Company has been made
aware that the CRA has reassessed certain investors
who subscribed for flow-through shares in 2013 and will
reassess other investors with reduced CEE deductions.
Notice of objections to the Company’s and investors’
reassessments have and will be filed as received and will
be appealed to the courts, should the notice of objections
be denied. The Company has indemnified the investors
that subscribed for the flow-through shares. The potential
tax indemnification to the investors is estimated to be
$10.8 million, plus $2.6 million potential interest. No
provision has been recorded related to the tax, potential
interest, nor the potential indemnity as the Company
and its advisors do not consider it probable that there will
ultimately be an amount payable.
During 2016, upon the completion of an audit of the
application by tax authorities of the British Columbia
Mineral Exploration Tax Credit (“BCMETC”) program,
the Company was reassessed $3.6 million,
including
accrued interest, for expenditures that the tax authority
has categorized as not qualifying for the BCMETC
program. The Company recorded a $3.6 million provision
within non-trade payables and accrued expenses on
the consolidated statements of financial position as
at December 31, 2016 with a corresponding increase in
mineral interests. In 2017 the Company filed an objection
to the reassessment with the appeals division of the tax
authorities and paid one-half of the accrued balance
to the Receiver General and reduced the provision by
$1.8 million. In 2019, the Company received a decision
from the appeals division that the Company’s objection
was denied, and the Company filed a Notice of Appeal
24
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
with the British Columbia Supreme Court. The Attorney
General of Canada replied to the facts and arguments in
the Company’s Notice of Appeal and stated its position
that the Company’s expenditures did not qualify for
the BCMETC program. Subsequent to the year end, the
Company completed discoveries with the Department
of Justice and will continue to move the appeal process
forward as expeditiously as possible. The Company
intends to continue to fully defend its position. As at
December 31, 2021, the Company has recognized $3.9
million of long-term receivable from the CRA, including
$2.3 million of HST credit due to the Company.
The Company will continue its objective of advancing its
major gold projects, KSM and Courageous Lake, and to
further explore the Iskut, Snowstorm and 3 Aces projects
to either sell or enter into joint venture arrangements
with major mining companies. The market for metals
streams and royalty interests seems to be growing and
the Company will determine the merits of disposing of
options it holds on non-core net profits interests and
net smelter returns. On financing future exploration and
development by selling or entering into new streaming
and royalty arrangements, see discussions below under
outlook.
Contractual Obligations
The Company has the following commitments as at December 31, 2021:
($000s)
Mineral interests
Flow-through share expenditures
Total
9,107
8,933
18,040
Subsequent to the year ended December 31, 2021, the
Company entered
into a Facilities Agreement with
British Columbia Hydro and Power Authority ("BC Hydro")
covering the design and construction of facilities by
BC Hydro to supply construction phase hydro-sourced
electricity to the KSM project.
KSM will connect to BC Hydro's existing Northwest
Transmission Line ("NTL") running parallel to Highway
37 and 30 km from the proposed KSM plant site. The
transmission line is scheduled to be constructed in 2023
with completion and commissioning planned for late
2024.
The cost to complete the construction is estimated to be
$28.9 million of which the Company paid $6.6 million to
BC Hydro during February 2022, with an additional $1.2
million due in the second quarter of 2022 and $21.1 million
due in 2023. In addition, the Facilities Agreement requires
$54.2 million in security or cash from the Company
for BC Hydro system reinforcement which is required
to make the power available of which the Company
paid $10 million to BC Hydro in February 2022, and an
additional $11.2 million due in the second quarter of 2022
and $33 million due in 2023. The $54.2 million system
reinforcement security will be forgiven annually, typically
over a period of less than 8 years, based on project power
consumption.
Payments due by years
2023-24
2025-26
2027-28
2,859
-
2,859
2,937
-
2,937
2,335
-
2,335
2022
976
8,933
9,909
Outlook
As mentioned above, the COVID-19 pandemic has not
materially impacted the Company’s operations, financial
condition or financial performance, but it has caused it to
reduce the scale of certain programs and has hindered,
and may continue to hinder, the pace of advancement at
the affected projects. The Company has been able to carry
out its 2021 exploration and monitoring programs at its
projects safely and within the constraints and measures
implemented and the pandemic had no material impact
to the results of operations. Although the capital markets
are relatively volatile, the Company has not experienced
limitations nor does it foresee limitations to accessing
capital on acceptable terms. No disruptions to supply
chains have been experienced nor have there been delays
in project activity.
The pandemic 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 social distancing, have caused material
disruption to business globally resulting in an economic
slowdown. Governments and central banks have reacted
with significant monetary and fiscal
interventions
designed to stabilize economic conditions. Working
closely with the health authorities and with its business
partners, the Company developed effective procedures for
operating safely in the current global health crisis.
With the increase in the price of gold since the start of
the pandemic, the Company has enjoyed favourable
25
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
capital markets and has continued to raise
funds
under its ATM offering of common shares and other
financings mentioned above and its financial condition
has not been adversely impacted by the pandemic. As a
company without revenue from operations, its financial
performance has not been impacted by the pandemic.
The Company will continue to monitor developments of
the pandemic and continuously assess the pandemic’s
potential further impact on the Company’s operations
and business.
Subsequent to December 31, 2021, the Company entered
into an agreement selling a secured note (“Note”) that
is to be exchanged at maturity for a 60% gross silver
royalty (the “Silver Royalty”) on the KSM project to Sprott
Resource Streaming and Royalty Corp. and Ontario
Teachers’ Pension Plan (jointly, the “Investors”) for US$225
million. The proceeds of the financing will be used to
continue ongoing physical works at KSM and advance the
project towards a designation of ‘substantially started’.
The
the
‘substantially started’ designation ensures
continuity of the KSM project’s approved Environmental
Assessment Certificate (“EAC”) for the life of the project.
The Note bears interest at 6.5% per annum, payable
quarterly in arrears. The Company can elect to satisfy
interest payments in cash or by delivering common
shares. The Company’s obligations under the Note
will be secured by a charge over all of the assets of its
wholly owned subsidiary, KSM Mining ULC, and a limited
recourse guarantee from the Company secured by a
pledge of the shares of KSM Mining ULC.
If project financing to develop, construct and place
KSM into commercial production is not in place by the
fifth anniversary from closing, the Investors can put the
Note back to the Company for US$232.5 million in cash
or common shares at the Company’s option. This right
expires once such project financing is in place. If the
Investors exercise this put right, the Investors’ right to
purchase the Silver Royalty terminates.
is
If the EAC expires at any time while the Note
outstanding, the Investors can put the Note back to
the Company for US$247.5 million at any time over the
following nine months, in cash or common shares at
the Company’s option. If the Investors exercises this put
right, the Investors’ right to purchase the Silver Royalty
terminates.
When the Note matures, the Investors will use all of the
principal amount repaid on maturity to purchase the
Silver Royalty. The Note matures upon the first of either
commercial production being achieved at KSM and either
the 10-year anniversary, or if the EAC expires and the
Investors do not exercise their right to put the Note to the
Company, the 13-year anniversary of the issue date of the
Note.
If commercial production is not achieved at KSM prior
to the tenth anniversary from closing, the Silver Royalty
payable to the Investors will increase to a 75% gross silver
royalty. If the EAC expires during the term of the Note and
the corresponding put right is not exercised, the increase
will occur at the thirteenth anniversary from closing.
The Company has the option to buy back 50% of the
Silver Royalty, once exchanged on or before 3 years after
commercial production has been achieved, for an amount
that provides the Investors a minimum guaranteed
annualized return.
No amount payable may be paid in common shares of
Seabridge if, after the payment, any of the Investors would
own more than 9.9% of Seabridge’s outstanding shares.
The financing provides most of the capital necessary
to attain substantial start and reduces the time from
the construction schedule once a construction decision
has been made. The Company will continue its efforts
to integrate East Mitchel into KSM’s development and
complete the work required to advance the new PFS
expected to be finalized in the second quarter of 2022.
The Company intends to continue its pursuit of a joint
venture agreement on the KSM project with a suitable
partner on terms advantageous to the Company, since it
does not intend to build or operate the project alone. The
KSM project includes multiple deposits and provides a
joint venture partner, or purchaser, flexibility in the design
of the project. In accordance with its priorities and risk
tolerance, the Company believes that it does not make
sense for it to start preparing a feasibility study on the
KSM project on its own. The current KSM PFS includes
recommendations on additional work that could be
completed to advance the project, including budget
estimates. It is anticipated that the updated PFS will
contain similar recommendations. The work that a joint
venture partner might choose to complete might include
some or all of this recommended work and might include
significantly more work, and so the timing and cost for a
joint venture partner to conclude the recommended work
or a feasibility study is impossible to predict. The Company
plans its work to advance the KSM project on an annual
basis, when the results of one year’s work have been
received and analyzed, planning for the next year begins.
When planning its programs, the Company will consider
the recommended work in the PFS, but the Company
will decide work based on its priorities, the results of its
advancement work and the items it believes are best left
for a joint venture partner to decide. Plans for each year
are typically announced in the second quarter of the year
and budgets are established at the beginning of that year.
At Iskut, the Company will evaluate its 2021 exploration
activities that focused on a potential porphyry deposit
below the Quartz Rise lithocap. The 2020 drill campaign
confirmed the presence of a favourable mineralized
intrusion with the presence of gold and copper, and the
2021 geophysical surveys and two deeper drill holes, now
26
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
completed, will be evaluated for evidence of the source of
the intrusions. Environmental work will also continue on
the reclamation and closure plan for the Johnny Mountain
mine weather permitting.
Workplace Employment Policy; and its Policy Statement
on Diversity. The Inaugural Sustainability Report and all
of the Company’s policies related to ESG can be found on
the Company’s website www.seabridgegold.com.
At Snowstorm, the Company will utilize the results of the
2021 drill program, that is expected to be completed in
late March or early April 2022, to undertake a follow-up
drill program based on those results.
At the Company’s new project, 3 Aces, the Company will
continue to evaluate historical data to determine the
scope of an initial drill program that would focus on high
grade mineralized targets.
Environment, Social and Governance
Management and the Board of Directors have formalized
several key policies that entrench the Company’s
environmental, social and governance
(ESG) goals,
priorities and strategies to operate safely, sustainably
and with the highest governance standards. The Board
of Directors has established a Sustainability Committee
and granted that committee the authority to investigate
any activity of the Corporation and its affiliates relating to
sustainability and ESG. As the Company operates in the
natural resource extraction industry, the Company strives
to achieve the highest operating standards, assessing
and mitigating the impacts on the physical environment
and the communities in which the Company operates.
The Company is committed to sustainability and the
integration of sustainability principles into all of our
activities and has adopted its Sustainability Policy and
produced and published its inaugural sustainability report
that was prepared with select disclosures and guidance
from the Sustainability Standards Accounting Board
Metals and Mining Industry Standards and the Global
Reporting Initiative Standards, as well as metrics designed
for specifically for the Company. The Company has
also published its ESG Performance Tables for its first
reporting year, 2020. The sustainability report highlights
the Company’s accomplishments and approach to three
critical pillars: the economy, society, and the environment.
These pillars are seen as interdependent, each necessary
and supportive to the other. The Company recognizes that
sustainability involves protecting environmental values
in the area of our projects, contributing to the health and
the economic and social well-being of our employees
and the local communities, and taking action on national
and global priorities. A sustainable human environment
requires the Company to consider issues such as cultural
respect, inclusiveness, diversity, and broad participation
in the opportunities and benefits which derive from our
efforts.
In addition to the Sustainability Policy, the Company
has also
its Environmental Policy;
Health and Safety Policy including a separate policy
on discrimination bullying harassment and violence; a
implemented
Internal Controls Over Financial Reporting
IFRS. Management
in accordance with
The Company’s management under the supervision of
the Chief Executive Officer and Chief Financial Officer
are responsible for designing adequate internal controls
over financial reporting or causing them to be designed
under their supervision in order to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
is
purposes
responsible for establishing and maintaining adequate
internal controls over financial reporting. Management
evaluated the effectiveness of the Company’s internal
controls over financial reporting as of December 31,
2021 based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO). Based on that evaluation of the internal controls
at December 31, 2021, management has concluded
that the Company’s internal controls and procedures
are appropriately designed and operating effectively.
The registered public accounting firm that audited the
Company’s consolidated financial statements has issued
their attestation report on management’s assessment
of the effectiveness of internal control over financial
reporting as of December 31, 2021.
Changes to Internal Controls Over Financial
Reporting
There was no change in the Company’s internal controls
over financial reporting that occurred during the period
beginning on October 1, 2021 and ended on December
31, 2021 that has materially affected, or is reasonably likely
to materially affect, the Company’s internal controls over
financial reporting.
Disclosure Controls and Procedures
Disclosure controls and procedures have been designed
to ensure that information required to be disclosed by
the Company is recorded, processed, summarized and
reported within the time periods specified in the rules
and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed
to ensure that information required to be disclosed by
the Company is accumulated and communicated to
management as appropriate, to allow timely decisions
regarding required disclosure. The Company’s Chief
Executive Officer and Chief Financial Officer have
concluded, based on their evaluation of the design of the
disclosure controls and procedures as of December 31,
2021, that they are appropriately designed and effective.
27
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
Limitations of Controls and Procedures
Risks and Uncertainties
The Company’s management, including the Chief Executive
Officer and Chief Financial Officer, believe that any internal
controls over financial reporting and disclosure controls and
procedures, no matter how well designed, can have inherent
limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance that the
objectives of the control system are met.
Cybersecurity
The Company’s management is responsible for cybersecurity
risks that face the Company, and the Board of Directors
has granted the Audit Committee the authority to oversee
management’s assessment of those risks and their prevention
and mitigation approaches and to investigate any material
breaches. To date, there have been no material breaches of
security measures.
An independent review of access to information and other
security protocols around the Company’s IT systems was
undertaken in 2020 and another review is planned for 2022.
The review, among other items, verifies all employees’ ability to
recognize potentially malicious emails or other communications
that could enable an intruder to download malware onto the
Company’s systems leading to the potential circumventing of
the Company’s security protocols and to potentially steal or hold
ransom Company data.
Shares Issued and Outstanding
At March 24, 2022, the issued and outstanding common
shares of the Company totaled 79,630,686. In addition,
there were 905,834 stock options and 163,000 RSUs
outstanding. Assuming the conversion of all of these
instruments outstanding, there would be 80,699,520
common shares issued and outstanding.
Related Party Transactions
During year ended December 31, 2021 and 2020,
there were no payments to related parties other than
compensation paid to key management personnel. These
transactions were in the normal course of operations and
were measured at the exchange amount, which is the
amount of consideration established and agreed to by the
related parties.
Recent Accounting Pronouncements
Refer to Note 3 (N) in the Company’s audited consolidated
financial statements for the year ended December 31,
2021.
Critical Accounting Estimates
Refer to Note 3 (C) in the Company’s audited consolidated
financial statements for the year ended December 31,
2021.
The risks and uncertainties are discussed within the
Company’s most recent Annual Information Form filed
on SEDAR at www.sedar.com, and the Annual Report on
Form 40-F filed on EDGAR at www.sec.gov/edgar.shtml.
Forward Looking Statements
The consolidated financial statements and management’s
discussion and analysis and any other materials included
with them, contain certain forward-looking statements
relating but not limited to the Company’s expectations,
intentions, plans and beliefs. Forward-looking information
can often be identified by forwardlooking words such as
“anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”,
“estimate”, “may” and “will” or similar words suggesting
future outcomes, or other expectations, beliefs, estimates,
plans, objectives, assumptions, intentions or statements
about future events or performance. Forward-looking
information may include reserve and resource estimates
and expected changes to them, estimates of future
production and related financial analysis, unit costs,
costs of capital projects and timing of commencement
of operations, and is based on current expectations that
involve a number of business risks and uncertainties.
Factors that could cause actual results to differ materially
from any forward-looking statement include, but are not
limited to, failure to establish estimated resources and
reserves, the grade and recovery of ore which is mined
varying from estimates, capital and operating costs
varying significantly from estimates, delays in obtaining or
failures to obtain required governmental, environmental
or other project approvals, inflation, changes in exchange
rates, fluctuations in commodity prices, delays in the
development of projects and other factors. Forward-
looking statements are subject to risks, uncertainties
and other factors that could cause actual results to differ
materially from expected results.
Potential shareholders and prospective investors should
be aware that these statements are subject to known
and unknown risks, uncertainties and other factors
that could cause actual results to differ materially from
those suggested by the forward-looking statements.
Shareholders are cautioned not to place undue reliance
on forward-looking information. By its nature, forward-
looking
involves numerous assumptions,
inherent risks and uncertainties, both general and
specific, that contribute to the possibility that the
predictions, forecasts, projections and various future
events will not occur. The Company undertakes no
obligation to update publicly or otherwise revise any
forward-looking information whether as a result of new
information, future events or other such factors which
affect this information, except as required by law.
information
28
ANNUAL REPORT 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Responsibility
for Financial Statements
The accompanying consolidated financial statements
have been prepared by management in accordance with
International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
Financial statements include certain amounts based on
estimates and judgments. When an alternative method
exists under IFRS, management has chosen a policy it
deems most appropriate in the circumstances in order
to ensure that the consolidated financial statements are
presented fairly, in all material respects, in accordance
with IFRS.
and to satisfy itself that each party is properly discharging
its responsibilities. The Audit Committee also reviews
the consolidated financial statements, management’s
discussion and analysis, the external auditors’ reports,
examines the fees and expenses for audit services,
and considers the engagement or reappointment of
the external auditors. The Audit Committee reports its
findings to the Board of Directors for its consideration
when approving the consolidated financial statements
for issuance to the shareholders. KPMG LLP, the external
auditors, have full and free access to the Audit Committee.
The Company maintains adequate systems of internal
controls. Such systems are designed to provide reasonable
assurance that transactions are properly authorized
and recorded, the Company’s assets are appropriately
accounted for and adequately safeguarded and that the
financial information is relevant and reliable.
The Board of Directors of the Company is responsible for
ensuring that management fulfills
its responsibilities
for financial reporting and is ultimately responsible for
reviewing and approving the consolidated financial
statements and
the accompanying management’s
discussion and analysis. The Board of Directors carries out
this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of
Directors and all of its members are non-management
directors. The Audit Committee meets periodically with
management and the external auditors to discuss internal
controls, auditing matters and financial reporting issues,
Rudi P. Fronk
Chairman & CEO
March 24, 2022
Christopher J. Reynolds
Vice President, Finance and Chief Financial Officer
March 24, 2022
29
ANNUAL REPORT 2021 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent
Registered Public Accounting Firm
To the Shareholders and Board of Directors of Seabridge
Gold Inc.
Opinion on the Consolidated Financial
Statements
We have audited
the accompanying consolidated
statements of financial position of Seabridge Gold Inc.
(the Company) as of December 31, 2021 and 2020, the
related consolidated statements of operations and
comprehensive income (loss), changes in shareholders’
equity, and cash flows for each of the years in the twoyear
period ended December 31, 2021, and the related notes
(collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and its
financial performance and its cash flows for each of the
years in the two-year period ended December 31, 2021,
International Financial Reporting
in conformity with
Standards as issued by the International Accounting
Standards Board.
PCAOB and are required to be independent with respect
to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
in accordance with the
We conducted our audits
standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement, whether
due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to
error or fraud, and performing procedures that respond
included examining,
to those risks. Such procedures
on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles
used and significant estimates made by management, as
well as evaluating the overall presentation of the
consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control
over financial reporting as of December 31, 2021, based
on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our
report dated March 24, 2022 expressed an unqualified
opinion on the effectiveness of the Company’s internal
control over financial reporting.
Critical Audit Matters
The critical audit matter communicated below is a matter
arising from the current period audit of the consolidated
financial statements that was communicated or required
to be communicated to the audit committee and that:
(1) relate to accounts or disclosures that are material to
the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex
judgments. The communication of a critical audit matter
Basis for Opinion
These consolidated financial
the
responsibility of the Company’s management. Our
these
responsibility
consolidated financial statements based on our audits.
We are a public accounting firm registered with the
to express an opinion on
statements are
is
30
ANNUAL REPORT 2021 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing
separate opinions on the critical audit matter or on the
accounts or disclosures to which it relates.
the uncertain tax positions including controls related to
the interpretation of tax law. We involved tax professionals
with specialized skills and knowledge who assisted in,
evaluating the Company’s tax position by:
Uncertain Tax Positions
As discussed in Notes 3c and 17 to the consolidated
financial statements, in 2019 the Company received a
notice of re-assessment from the Canadian Revenue
Agency (tax authority) that reduces the amount of
expenditures reported, as Canadian Exploration Expenses
(CEE) for the three-year period ended December 31, 2016.
In connection with the issuance of flow-through shares
which financed the CEE, the Company has indemnified
investors for any disallowed renouncements of CEE.
The Company has not recorded any expense related to
this uncertain tax position as the Company believes it is
probable its tax position will be upheld.
We identified the Company’s evaluation of the uncertain
tax position related to CEE as a critical audit matter. This
critical audit matter required a high degree of auditor
interpretation
judgment to evaluate the Company’s
of, and compliance with, the income tax laws and the
probability of the ultimate resolution of its CEE filing
positions.
The following are the primary procedures we performed
to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain
internal controls related to the Company’s assessment of
• inspecting the notice and other correspondence with
the tax authority
• inspecting and evaluating conclusions obtained by
Company’s external legal advisors
• evaluating the Company’s analysis and conclusions
regarding its assertion, which included an assessment
of the Company’s analysis of tax laws and regulations
• performing an
independent assessment of
the
Company’s uncertain tax positions based on our
understanding and
laws and
comparing it to the Company’s assessment.
interpretation of tax
Chartered Professional Accountants,
Licensed Public Accountants
We have served as the Company’s auditor since 2002.
Toronto, Canada
March 24, 2022
31
ANNUAL REPORT 2021 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent
Registered Public Accounting Firm
To the Shareholders and Board of Directors of Seabridge
Gold Inc.
Opinion on Internal Control Over Financial
Reporting
We have audited Seabridge Gold Inc.’s (the Company)
internal control over financial reporting as of December
31, 2021, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting
as of December 31, 2021, based on criteria established in
Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated statements
of financial position of the Company as of December 31,
2021 and 2020, the related consolidated statements of
operations and comprehensive income (loss), changes in
shareholders’ equity, and cash flows for each of the years
in the two-year period ended December 31, 2021 and the
related notes (collectively, the consolidated financial
statements), and our report dated March 24, 2022
expressed an unqualified opinion on those consolidated
financial statements.
Basis for Opinion
is
responsible
for
The Company’s management
maintaining effective
internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting, appearing under
the heading Internal Control over Financial Reporting in
Management’s Discussion and Analysis for the year ended
December 31, 2021. Our responsibility is to express an
opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange
Commission and the PCAOB.
audit of internal control over financial reporting included
internal control over
obtaining an understanding of
financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing
such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements
in accordance with generally accepted accounting
receipts and expenditures of
principles, and
that
the company are being made only
in accordance
with authorizations of management and directors of
the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial
statements.
its
inherent
limitations,
Because of
internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance
about whether effective internal control over financial
reporting was maintained in all material respects. Our
Chartered Professional Accountants,
Licensed Public Accountants
Toronto, Canada
March 24, 2022
32
ANNUAL REPORT 2021 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Financial Position
(Expressed in thousands of Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Short-term deposits
Amounts receivable and prepaid expenses
Investment in marketable securities
Non-current assets
Investment in associate
Convertible notes receivable
Long-term receivables
Mineral interests, property and equipment
Reclamation deposits
Total assets
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities
Flow-through share premium
Lease obligations
Provision for reclamation liabilities
Non-current liabilities
Deferred income tax liabilities
Lease obligations
Provision for reclamation liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Note
December 31, 2021
December 31, 2020
4
4
5
6
6
7
8
9
11
10
12
11
16
11
12
$
11,523
29,243
10,026
3,367
54,159
2,429
606
13,038
662,279
15,231
693,583
$
17,528
19,905
4,970
3,826
46,229
2,611
529
-
591,681
6,767
601,588
$
747,742
$
647,817
$
12,165
1,366
90
3,680
17,301
23,164
182
4,762
28,108
45,409
$
5,377
2,276
41
2,500
10,194
19,034
207
3,664
22,905
33,099
702,333
614,718
$
747,742
$
647,817
Subsequent events (Notes 7, 8, 12 and 18), commitments and contingencies (Note 17)
The accompanying notes form an integral part of these consolidated financial statements.
These financial statements were approved by the Board of Directors and were signed on its behalf:
Rudi P. Fronk
Director
Richard C. Kraus
Director
33
ANNUAL REPORT 2021
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Operations and Comprehensive Income (Loss)
(Expressed in thousands of Canadian dollars except common share and per common share amounts)
Note
Year Ended
December 31, 2021
Year Ended
December 31, 2020
9
14
12
11
6
16
Gain on disposition of mineral interests
Corporate and administrative expenses
Other income - flow-through shares
Environmental rehabilitation expense
Equity loss of associate
Unrealized gain on convertible notes receivable
Interest income
Finance expense and other expense
Income (loss) before income taxes
Income tax (expense) recovery
Income (loss) for the year
Other comprehensive income (loss)
Items that will not be reclassified to net income or loss
Change in fair value of marketable securities, net of income taxes (a)
Comprehensive income (loss) for the year
Weighted average number of common shares outstanding
Basic
Diluted
Earnings (loss) per common share
Basic
Diluted
$
$
$
$
$
$
$
$
21,943
(13,379)
2,373
(5,377)
(221)
104
176
(94)
5,525
(4,630)
895
(398)
497
76,413,554
77,600,688
0.01
0.01
$
-
(16,530)
1,676
-
(187)
-
114
(815)
(15,742)
800
$
(14,942)
$
$
$
$
$
$
688
(14,254)
66,369,942
66,369,942
(0.23)
(0.23)
a) Net of tax recovery of $0.1 million (2020 - tax expense of $0.1 million)
The accompanying notes form an integral part of these consolidated financial statements.
34
ANNUAL REPORT 2021
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Changes in Shareholders’ Equity
(Expressed in thousands of Canadian dollars except number of shares)
Number
of Shares
Share
Capital Warrants
Stock-based
Compensation
Contributed
Surplus
Deficit
Accumulated
Other
Comprehensive
Gain (Loss)
Total
Equity
As at December 31, 2020
74,162,286
$ 704,599
$ 3,275
$
23,011
$ 36,089 $ (150,878)
$ (1,378) $ 614,718
Share issuance - Private
placement
Share issuance - At-The-
Market offering
Share issuance - Options
exercised
Share issuance – Other
Share issuance - RSUs
vested
Share issuance costs
Deferred tax on share
issuance costs
Stock-based compensation
Expired options
Other comprehensive loss
Net income for the year
350,000
8,358
2,242,112
50,929
1,585,501
32,077
500,000
135,450
-
-
-
-
-
-
11,100
3,413
(1,645)
438
-
-
-
-
As at December 31, 2021
78,975,349
$ 809,269
-
-
-
(3,275)
-
-
-
-
-
-
-
-
-
-
(14,370)
-
(3,413)
-
-
3,506
(37)
-
-
-
-
-
-
-
-
-
-
37
-
-
-
-
-
-
-
-
-
-
-
-
895
-
-
-
-
-
-
-
-
-
(398)
-
8,358
50,929
17,707
7,825
-
(1,645)
438
3,506
-
(398)
895
$
8,697
$ 36,126
$ (149,983)
$ (1,776) $ 702,333
As at December 31, 2019
63,510,487
$ 494,857
$ 3,275
$ 18,820
$ 36,073
$
(135,936)
$ (2,066) $ 415,023
Share issuance - Bought
deal
Share issuance - Private
placement
Share issuance - At-The-
Market offering
Share issuance - Other
Share issuance - Options
exercised
Share issuance - RSUs
vested
Share issuance costs
Deferred tax on share
issuance costs
Stock-based compensation
Expired options
Other comprehensive
income
Net loss for the year
6,710,000
148,192
-
1,785,000
24,424
1,327,046
29,116
300,000
390,153
6,564
6,548
139,600
2,351
-
-
-
-
-
-
(10,151)
2,698
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,246)
(2,351)
-
-
8,804
(16)
-
-
-
-
-
-
-
-
-
-
-
16
-
-
-
-
-
-
-
-
-
-
-
-
-
- $ 148,192
-
-
-
-
-
-
-
-
-
688
24,424
29,116
6,564
4,302
-
(10,151)
2,698
8,804
-
688
(14,942)
-
(14,942)
As at December 31, 2020
74,162,286
$ 704,599
$ 3,275
$
23,011
$ 36,089
$ (150,878)
$ (1,378) $ 614,718
The accompanying notes form an integral part of these consolidated financial statements.
35
ANNUAL REPORT 2021 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Operating Activities
Net income (loss)
Adjustment for non-cash items:
Gain on disposition of mineral interests
Stock-based compensation
Environmental rehabilitation expense
Other income - flow-though shares
Unrealized gain on convertible notes receivable
Income tax expense (recovery)
Equity loss of associate
Finance costs adjustments
Depreciation on right-of-use assets
Adjustment for cash items:
Environmental rehabilitation disbursements
Changes in working capital items:
Amounts receivable and prepaid expenses
Accounts payable and accrued liabilities
Net cash used in operating activities
Investing Activities
Mineral interests
Cash proceeds from disposition of mineral interests
Investment in security deposits
Investment in short-term deposits
Redemption of short-term deposits
Property and equipment
Investment in associate
Long-term receivables
Net cash used in investing activities
Financing Activities
Share issuance, net of costs
Exercise of options
Warrant exercises
Payment of lease liabilities
Net cash from financing activities
Effects of exchange rate fluctuation on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents during the year
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
$
The accompanying notes form an integral part of these consolidated financial statements.
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
895
$
(14,942)
(21,943)
3,506
5,377
(2,373)
(104)
4,630
221
294
85
(3,320)
(5,056)
6,090
(11,698)
(43,587)
21,943
(8,465)
(24,349)
15,011
(30,024)
(39)
(9,172)
(78,682)
59,104
17,707
7,825
(77)
84,559
(184)
(6,005)
17,528
11,523
-
8,804
-
(1,676)
-
(800)
187
887
36
(811)
(1,696)
266
(9,745)
(158,795)
-
(5,440)
(29,816)
14,024
-
(437)
-
(180,464)
195,440
4,302
-
(21)
199,721
(777)
8,735
8,793
$
17,528
36
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021 and 2020
1. Reporting entity
Inc.
is comprised of Seabridge
Seabridge Gold
Gold Inc. (“Seabridge” or the “Company”) and its
subsidiaries, KSM Mining ULC, Seabridge Gold (NWT)
Inc., Seabridge Gold (Yukon) Inc., Seabridge Gold
Corp., SnipGold Corp. and Snowstorm Exploration
(LLC), and is a company engaged in the acquisition
and exploration of gold properties located in North
America. The Company was incorporated under the
laws of British Columbia, Canada on September 4, 1979
and continued under the laws of Canada on October
31, 2002. Its common shares are listed on the Toronto
Stock Exchange trading under the symbol “SEA” and
on the New York Stock Exchange under the symbol
“SA”. The Company is domiciled in Canada, the address
of its registered office is 10th Floor, 595 Howe Street,
Vancouver, British Columbia, Canada V6C 2T5 and the
address of its corporate office is 106 Front Street East,
4th Floor, Toronto, Ontario, Canada M5A 1E1.
2. Basis of preparation
A. Statement of compliance
These consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards
issued by the
International Accounting Standards Board (“IASB”).
These financial statements were authorized
for
issuance by the Board of Directors of the Company on
March 24, 2022.
(“IFRS”) as
B. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities over which the Company
has control. Control over an entity exists when the
Company is exposed or has rights to returns from
its involvement with the entity and has the ability
to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the
Company. They are deconsolidated from the date
on which control ceases.
Business acquisitions are accounted for using the
acquisition method whereby acquired assets and
liabilities are recorded at fair value as of the date
of acquisition with the excess of the purchase
consideration over such fair value being recorded
as goodwill and allocated to cash generating units.
in an acquisition may
Non-controlling
be measured at either fair value or at the non-
controlling interest’s proportionate share of the fair
value of the acquiree’s net identifiable assets.
interest
the
fair value of the net assets acquired
If the
exceeds
the
difference is recognized immediately as a gain
in the consolidated statement of operations and
comprehensive income (loss).
consideration,
purchase
is achieved
Where a business combination
in
stages, previously held non-controlling equity
interests
in the acquiree are re-measured at
acquisition-date fair value and any resulting gain
or loss is recognized in the consolidated statement
of operations and comprehensive income (loss)
or other comprehensive income, as appropriate.
Acquisition related costs are expensed during
the period in which they are incurred, except for
the cost of debt or equity instruments issued in
relation to the acquisition which is included in the
carrying amount of the related instrument. Certain
fair values may be estimated at the acquisition
date pending confirmation or completion of the
valuation process. Where provisional values are
used in accounting for a business combination,
they may be adjusted retrospectively during the
measurement period. However, the measurement
period will not exceed one year from the acquisition
date.
(ii) Associates
influence
An associate is an entity over which the Company
has significant influence but not control nor joint
control. Significant
is presumed to
exist where the Company has between 20% and
50% of the voting rights but can also arise where
the Company has less than 20% if influence is
exerted over policy decisions that affect the entity.
The Company’s share of the net assets and net
income or loss of associates is accounted for in the
consolidated financial statements using the equity
method of accounting.
37
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant accounting policies
Mineral reserves and resources
The significant accounting policies used
in the
preparation of these consolidated financial statements
are described below.
A. Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis, except certain
financial instruments described in note “L”, which are
measured at fair value.
B. Translation of foreign currencies
These consolidated financial statements are presented
in Canadian dollars, which is the Company’s, and each
of its subsidiaries’, functional currency.
into
Foreign currency transactions are translated
Canadian dollars using the exchange rates prevailing
at the dates of the transactions or valuation where
items are re-measured. Foreign exchange gains
and losses resulting from the settlement of such
in the consolidated
transactions are recognized
statement of operations and comprehensive income
(loss).
Monetary assets and
liabilities of the Company
denominated in a foreign currency are translated
into Canadian dollars at the rate of exchange at the
statement of financial position date. Non-monetary
assets and liabilities are translated at historical rates.
Revenues and expenses are translated at average
exchange rates prevailing during the period. Exchange
gains and losses are included in the determination of
profit or loss for the year.
C. Critical accounting judgments and estimation
uncertainty
In applying the Company’s accounting policies in
conformity with IFRS, management is required to
make judgments, estimates and assumptions about
the carrying amounts of certain assets and liabilities.
These estimates and
judgments are continually
evaluated and are based on historical experience
and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances. Actual results may differ from these
estimates.
(i) Critical accounting judgments
The following are the critical judgments that the
Company has made in the process of applying the
Company’s accounting policies and that have the
most significant effect on the amounts recognized
in the consolidated financial statements (refer to
appropriate accounting policies for details).
assumptions
and evaluates
To calculate reserves and resources, the Company
uses
technical,
economic and geological conditions for each ore
body. Measured grade of the ore and geotechnical
considerations can have a significant effect on the
carrying value of mineral properties and therefore
the recoverability of costs. Future market prices for
gold and copper and other commodities are also
factored into valuation models. Changes to these
factors can affect the recoverability of mineral
properties and impairment.
Impairment of mineral interests
Mineral interests are tested for impairment when
events or changes in circumstances indicate that
the carrying amount may not be recoverable.
When an indication of impairment exists, and the
carrying amount of the mineral interest exceeds its
estimated recoverable amount, the carrying value
is written down to the recoverable amount and the
loss is recognized in the statement of operations
and comprehensive
the
Company performs an impairment test if the period
for which the Company has the right to explore
within the project has expired during the period or
will expire in the near future and is not expected to
be renewed.
(loss). Also,
income
Asset retirement obligations
When the Company has judged that a constructive
or
legal obligation exists for reclamation and
rehabilitation activities on mineral claims disturbed,
an estimate of future costs is recognized as an
expense on the statement of operations and
comprehensive income (loss).
(ii) Key sources of estimation uncertainty
Mineral properties
is based on market conditions
The recoverability of the carrying value of mineral
properties and associated deferred exploration
expenses
for
minerals, underlying mineral resources associated
with the properties and future costs that may be
required for ultimate realization through mining
operations or by sale. The Company is in an industry
that is dependent on a number of factors including
the
environmental,
existence of economically recoverable reserves, the
ability of the Company and its subsidiaries to obtain
necessary financing to complete the development,
and future profitable production or the proceeds of
disposition thereof.
legal and political
risks,
38
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asset retirement obligations
The provision
for asset retirement obligations
is the best estimate of the present value of the
the environment
reclaiming
future costs of
that has been subject to disturbance through
exploration activities or historical mining activities.
The Company uses assumptions and evaluates
technical conditions for each project that have
inherent uncertainties, including changes to laws
and practices and changes in the status of the
site from time-to-time. The timing and cost of
the rehabilitation is also subject to uncertainty.
For the closed sites, these changes, if any, and
changes in discount rates are charged directly
to the consolidated statement of operations
and comprehensive income (loss). The periodic
unwinding of the discount is recognized in income
as accretion expense included in finance costs
in the consolidated statement of operations and
comprehensive income (loss).
Contingencies
to
subscribers,
The Company funds certain of
its exploration
expenditures, from time-to-time, with the proceeds
from the issuance of flow-through shares and
renounces,
the expenditures
which it determines to be Canadian Exploration
Expenses (“CEE”). The Canada Revenue Agency
(“CRA”) has disputed the eligibility of certain types
of expenditures within the years 2014 to 2016. The
Company strongly disagrees with their position and
intends to fully defend the Company’s tax filings.
No provision has been recorded related to the
contingent taxes if the Company does not consider
it probable that there will ultimately be an amount
payable.
in the measurement of exploration and evaluation
costs where they are related directly to activities
in a particular area of interest. The fair value of any
recoveries from the disposition or optioning of a
mineral property is credited to the carrying value of
mineral properties.
Once a project has been established as
commercially viable and technically feasible, related
development expenditures are capitalized. This
includes costs incurred in preparing the site for
mining operations. Capitalization ceases when
the mine is capable of operating as intended by
management.
The actual
recoverable value of capitalized
expenditures for mineral properties and deferred
exploration costs will be contingent upon the
discovery of economically viable reserves and the
Company’s financial ability at that time to fully
exploit these properties or determine a suitable
plan of disposition.
When a decision
is made to proceed with
development in respect of a particular area of
interest, the relevant exploration and evaluation
asset
impairment, reclassified to
development properties, and then amortized over
the life of the reserves associated with the area of
interest once mining operations have commenced.
is tested for
(ii) Construction in progress
in
power
progress
Construction
infrastructure, camps, bridges, and roads related
to early infrastructure development at KSM. Costs
are not depreciated until the underlying assets are
ready for use as intended by management.
includes
D. Mineral interests, property and equipment
(iii) Equipment
(i) Mineral interests
Mineral resource properties are carried at cost. The
Company considers exploration and development
costs and expenditures to have the characteristics
of property and equipment and, as such, the
Company capitalizes all exploration costs, which
include acquisition costs, advance royalties, holding
costs, field exploration and field supervisory costs
and all costs associated with exploration and
evaluation activities relating to specific properties
as incurred, until those properties are determined
to be economically viable for mineral production.
General and administrative costs are only included
Equipment located at project site are earth moving
equipment, vehicles and other equipment used
in the early infrastructure development at KSM.
To the extent that the Company utilizes its own
equipment for the activities which are capitalized
for the mineral properties or the construction in
progress, the associated depreciation is capitalized
to those assets.
39
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Depreciation
Effective from the point an asset is available for
its
intended use, property and equipment are
depreciated using the straight-line method over
the estimated economic life of the asset. Estimated
useful lives normally vary from three to fifteen years
for equipment to a maximum of twenty years for
buildings.
Residual values, useful
lives and depreciation
methods are reviewed at least annually and adjusted
if appropriate. The impact of changes to the estimated
useful lives, depreciation method or residual values is
accounted for prospectively.
F. Leasing arrangements
Leases are recognized as a right-of-use (“ROU”) asset
and a corresponding liability at the date at which
the leased asset is available for use by the Company.
Each lease payment is allocated between the liability
and finance cost. The finance cost is charged to
profit or loss over the lease period. The ROU asset is
depreciated over the shorter of the asset's useful life
and the lease term on a straight-line basis. Payments
associated with short-term leases and leases of low-
value assets are recognized on a straight-line basis
as an expense in profit or loss. Short-term leases are
leases with a lease term of 12 months or less.
G. Impairment and reversal of impairment
(i) Financial assets
Financial assets measured at amortized cost are
reviewed for impairment at each reporting date to
determine whether there is any objective evidence
of impairment. A financial asset is considered to
be impaired if objective evidence, that can be
estimated reliably,
indicates that one or more
events have had a negative effect on the estimated
future cash flows of that asset.
An impairment charge in respect of a financial
asset measured at amortized cost is calculated as
the difference between its carrying amount and
the present value of the estimated future cash flows
discounted at the original effective interest rate.
impairment charge
A prior period
is reviewed
for possible reversal of impairment whenever an
event or change in circumstance indicates the
impairment may have reversed. If it has been
determined that the
impairment has reversed,
the carrying amount of the asset is increased
to its recoverable amount to a maximum of the
carrying amount that would have been determined
had no impairment charge been recognized in
prior periods. Impairment charge reversals are
in the Consolidated statement of
recognized
operations and comprehensive income (loss).
(ii) Non-financial assets
for
is assessed
The carrying value of the Company's mineral
interests
impairment when
indicators of such impairment exist. Indicators may
include the loss of the right to explore in the area;
the Company deciding not to continue exploring
or incur substantial additional expenditures on
the project; or it is determined that the carrying
amount of the project is unlikely to be recovered
by its development or sale. If any indication of
impairment exists, an estimate of the asset's
recoverable amount is calculated to determine
the extent of the impairment loss, if any. The
recoverable amount is determined as the higher
of the fair value less costs of disposal for the asset
and the asset's value in use. In assessing value in
use, the estimated future cash flows are discounted
to their present value using a discount rate that
reflects current market assessments of the time
value of money and the risks specific to the asset
for which the estimates of future cash flows have
not been adjusted.
impairment
impairment on an
Impairment is determined on an asset by asset
basis, whenever possible. If it is not possible to
individual asset
determine
basis, then
is considered on the
basis of a cash generating unit (“CGU”). CGUs
represent the lowest level for which there are
separately identifiable cash inflows that are largely
independent of the cash flows from other assets or
other group of assets.
If the carrying amount of the asset exceeds its
recoverable amount, the asset is impaired, and
an impairment loss is charged immediately to
comprehensive
the consolidated
statements of operations and comprehensive
income (loss) so as to reduce the carrying amount
to its recoverable amount.
loss within
An assessment is made at each reporting date as
to whether there is any indication that previously
recognized impairment losses may no longer exist
or may have decreased. If such indication exists, the
Company makes an estimate of the recoverable
amount.
40
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A previously recognized impairment loss is reversed
only if there has been a change in the estimates
used to determine the asset's recoverable amount
since the last impairment loss was recognized. If
this is the case, the carrying amount of the asset is
increased to its recoverable amount. The increased
amount cannot exceed the carrying amount that
would have been determined had no impairment
loss been recognized for the asset in prior years.
Such reversal is recognized in the consolidated
statements of operations and comprehensive
income (loss).
H. Reclamation liabilities
for
restoration
Provisions
are
environmental
recognized when: (i) the Company has a present
legal or constructive obligation as a result of past
exploration, development or production events; (ii)
it is probable that an outflow of resources will be
required to settle the obligation; and (iii) the amount
can be reliably estimated. Provisions do not include
obligations which are expected to arise from future
disturbance.
Provisions are measured at the present value of
the expenditures expected to be required to settle
the obligation
incorporating risks specific to the
obligation using a pre-tax rate that reflects current
market assessments of the time value of money.
When estimates of obligations are revised, the present
value of the changes in obligations is recorded in the
period by a change in the obligation amount and a
corresponding adjustment to the mineral interest
asset.
‘unwinding’ of the discount
The amortization or
applied
in establishing the net present value of
provisions due to the passage of time is charged
to the consolidated statements of operations and
comprehensive
in each accounting
period.
income (loss)
The ultimate cost of environmental remediation is
uncertain and cost estimates can vary in response to
many factors including changes to the relevant legal
requirements, the emergence of new restoration
techniques or experience at other mine sites. The
expected timing of expenditure can also change, for
example in response to changes in ore reserves or
production rates. As a result, there could be significant
adjustments to the provisions for restoration and
environmental cleanup, which would affect future
financial results.
Funds on deposit with third parties provided as
security for future reclamation costs are included in
reclamation deposits on the statement of financial
position.
I.
Income taxes
Income tax expense comprises current and deferred
tax. Current and deferred tax are recognized
in
profit or loss except to the extent that it relates to a
business combination or items recognized directly in
equity. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognized using the asset and liability
method, providing for temporary differences between
the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax
is measured at the rates that are
expected to be applied to temporary differences
when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting
date. Deferred tax is not recognized for the following
temporary differences; the initial recognition of assets
or liabilities in a transaction that is not a business
combination and that affects neither accounting
nor taxable profit or loss, and differences relating
to investments in subsidiaries and jointly controlled
entities to the extent that it is probable that they will
not reverse in the foreseeable future where the timing
of the reversal of the temporary differences can be
controlled by the parent. In addition, deferred tax
is not recognized for taxable temporary differences
arising on the initial recognition of goodwill which is
not deductible for tax purposes.
A deferred tax asset is recognized only to the extent
that it is probable that future taxable profits will be
available against which the asset can be utilized.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
The Company has certain non-monetary assets and
is
liabilities for which the tax reporting currency
different from its functional currency. Any translation
gains or losses on the remeasurement of these items
at current exchange rates versus historic exchange
rates that give rise to a temporary difference
is
recorded as a deferred tax asset or liability.
J. Stock-based compensation (options and restricted
share units)
The Company applies the fair value method for
stock-based compensation and other stock-based
payments. The fair value of options is valued using the
Black Scholes option-pricing model and other models
for the two-tiered options and restricted share units
as may be appropriate. The grant date fair value of
stock-based payment awards granted to employees
41
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is recognized as an employee expense, with a
corresponding increase in equity, over the period that
the employees unconditionally become entitled to
the awards. The amount recognized as an expense is
adjusted to reflect the number of awards for which the
related service and non-market vesting conditions are
expected to be met, such that the amount ultimately
recognized as an expense is based on the number of
awards that meet the related service and non-market
performance conditions at the vesting date (Note 11).
The Company reviews estimated forfeitures of options
on an ongoing basis.
The
factors affecting stock-based compensation
include estimates of when stock options might be
exercised share price volatility and the assessment
of the probability and timing of those instruments
that have non-market performance vesting criteria.
The timing for exercise of options is out of the
Company’s control and will depend upon a variety of
factors, including the market value of the Company’s
shares and financial objectives of the share-based
instrument holders. The Company uses historical data
to determine volatility in accordance with appropriate
fair value methodology. However, the future volatility is
uncertain, and the model has its limitations.
K. Flow-through shares
for
the
shares. Consideration
The Company finances a portion of its exploration
activities through the
issuance of flow-through
common shares. The tax deductibility of qualifying
expenditures is transferred to the investor purchasing
transferred
the
deductibility of the qualifying expenditures is often
paid through a premium price over the market price
of the Company’s shares. The Company reports this
premium as a liability on the statement of financial
is reported as share
position and the balance
capital. At each reporting period, and as qualifying
is
expenditures have been
reduced on a proportionate basis and
income
is recognized
in the consolidated statements of
operations and comprehensive income (loss).
incurred, the
liability
L. Net earnings (loss) per common share
Basic earnings (loss) per common share is computed
based on the weighted average number of common
shares outstanding during the year. The Company
uses the treasury stock method
for calculating
diluted earnings per share which assumes that stock
options with an exercise price lower than the average
quoted market price were exercised at the later of
the beginning of the year, or time of issue and RSUs.
Stock options with an exercise price greater than the
average quoted market price of the common shares
are not included in the calculation of diluted earnings
(loss) per share as the effect is anti-dilutive.
M. Financial instruments
The Company recognizes financial assets and financial
liabilities on the date the Company becomes a party
instruments.
to the contractual provisions of the
A financial asset is derecognized either when the
Company has transferred substantially all the risks
and rewards of ownership of the financial asset
or when cash flows expire. A financial liability is
derecognized when the obligation specified in the
contract is discharged, canceled or expired. Certain
financial instruments are recorded at fair value in the
consolidated statement of financial position.
Non-derivative financial instruments
Non-derivative financial instruments are recognized
initially at fair value plus attributable transaction
costs, where applicable for financial
instruments
not classified as fair value through profit or loss.
Subsequent
recognition, non-derivative
financial instruments are classified and measured as
described below.
initial
to
Financial assets at fair value through profit or loss
Cash and cash equivalents and short-term deposits
are classified as financial assets at fair value through
profit or loss and are measured at fair value. Cash
equivalents are short-term deposits with maturities
of up to 90 days at the date of purchase. Short-term
deposits consist of investments with maturities from
91 days to one year at the date of purchase. Convertible
notes receivable are recorded at fair value through
profit or loss.
Financial assets at amortized cost
Trade and other receivables are classified as and
measured at amortized cost using the effective
interest rate method, less impairment losses, if any.
Financial assets at
comprehensive income
fair value
through other
investments
The Company’s
in equity marketable
securities are designated as financial assets at fair
value through other comprehensive income and are
recorded at fair value on the trade date with directly
attributable transaction costs included in the recorded
amount. Subsequent changes
fair value are
recognized in other comprehensive income.
in
Non-derivative financial liabilities
Accounts payable and accrued liabilities are accounted
for at amortized cost, using the effective interest rate
method.
42
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. Accounting pronouncements
New accounting standards
effective:
issued but not yet
have not been early adopted. These pronouncements
are not expected to have a material impact on the
Company's consolidated financial statements upon
adoption.
Amendments to
IAS
Equipment: Proceeds before Intended Use
16
- Property, Plant and
items before the
The IASB issued an amendment to IAS 16, Property,
Plant and Equipment to prohibit the deducting from
property, plant and equipment amounts received
from selling
items produced while preparing an
asset for its intended use. Instead, sales proceeds
and its related costs must be recognized in profit
or loss. The amendment will require companies to
distinguish between costs associated with producing
and selling
item of property,
plant and equipment is available for use and costs
associated with making the item of property, plant
and equipment available for its intended use. The
amendment is effective for annual periods beginning
on or after January 1, 2022, with earlier application
permitted. The amendments apply retrospectively, but
only to assets brought to the location and condition
necessary for them to be capable of operating in the
manner intended on or after the beginning of the
earliest period presented in the financial statements
in which the Company first applies the amendments.
The Company has analyzed the impact of adoption of
the amendment and does not expect its adoption to
have a material impact on the consolidated financial
statements.
Other pronouncements have been issued by the IASB
that are not mandatory for the current period and
4. Cash and cash equivalents
and short-term deposits
($000s)
Cash and cash equivalents
Short-term deposits
December 31,
2021
December 31,
2020
11,523
29,243
40,766
17,528
19,905
37,433
All of the cash and cash equivalents are held in a
Canadian Schedule I bank. Short-term deposits consist of
Canadian Schedule I bank guaranteed deposits and are
cashable in whole or in part with interest at any time to
maturity.
5. Amounts receivable and prepaid expenses
($000s)
HST
Trade and other receivables
due from related parties
Prepaid expenses and other
receivables
December 31,
2021
December 31,
2020
1,698
281
8,047
2,793
-
2,177
10,026
4,970
6. Investments
($000s)
Current assets:
Fair value
through other
comprehensive
income (loss)
Loss of
associates
January 1, 2021
Additions
December 31, 2021
Investment in marketable securities
3,826
(459)
-
-
3,367
Non-current assets:
Investment in associate
($000s)
Current assets:
2,611
-
(221)
39
2,429
January 1,
2020
Fair value
through other
comprehensive
income (loss)
Loss of
associates
Additions
December 31, 2020
Investment in marketable securities
3,032
794
-
-
3,826
Non-current assets:
Investment in associate
2,361
-
(187)
437
2,611
43
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company holds common shares of several mining
companies that were received as consideration for
optioned mineral properties and other short-term
investments, including one gold exchange traded
receipt. These financial assets are recorded at fair value
of $3.4 million (December 31, 2020 - $3.8 million) in
the consolidated statements of financial position. At
December 31, 2021, the Company revalued its holdings
in its investments and recorded a fair value decrease
of $0.5 million on the statement of comprehensive
income (loss).
Investment in associate relates to the Company’s
investment
in Paramount Gold Nevada Corp
(“Paramount”). As at December 31, 2021, the Company
holds 6.4% (December 31, 2020 – 7.42%) interest in
Paramount for which it accounts using the equity
method on the basis that the Company has the
ability to exert significant
its
representation on Paramount’s board of directors.
During 2021, the Company recorded its proportionate
share of Paramount’s net loss of $0.2 million (2020
– $0.2 million) within equity loss of associate on
the consolidated statements of operations and
comprehensive income (loss). As at December 31, 2021,
the carrying value of the Company’s investment in
Paramount was $2.4 million (December 31, 2020 – $2.6
million).
influence through
The Company also holds convertible notes issued
by Paramount (Note 7) and received semi-annual
interest payments in the current and comparative
year in the form of Paramount common shares. In
June 2020, the Company also participated in a non-
brokered registered direct offering and purchased
288,460 common shares of Paramount at US$1.04 per
common share for a total of $0.4 million.
7. Convertible Notes Receivable
In September 2019, the Company participated
in
a private placement to purchase US$410,000, at
face value, of secured convertible notes issued by
Paramount. Each convertible note had an issue price
of US$975 per US$1,000 face value with a four-year
maturity. The Company purchased 410 convertible
notes for a total of $0.5 million (US$399,750). The
convertible notes bear interest at a rate of 7.5% per
annum, payable semi-annually. At any time after the
issuance of the convertible notes, the Company can
convert all or any portion of the outstanding amount
into common shares of Paramount at a price of
US$1.00 per common share. The convertible notes
receivable are recorded at fair value through profit or
loss. The fair value of the convertible notes receivable
is determined by using the Binomial Option Pricing
model.
As at December 31, 2021, the fair value of the
convertible notes
receivable was $0.6 million
(December 31, 2020 - $0.5 million). The fair value
was determined using the binomial option pricing
model using the following assumptions: risk-free
rate of 0.91%, 1.75 years expected remaining life of the
convertible note, volatility of 47% based on Paramount
stock price volatility, forfeiture rate of nil, and dividend
yield of nil.
As at December 31, 2020, the fair value of the
convertible notes was determined using the binomial
option pricing model using the following assumptions:
risk-free rate of 0.20%, 2.75 years expected remaining
life of the convertible note, volatility of 50% based on
Paramount stock price volatility, forfeiture rate of nil,
and dividend yield of nil.
During 2021, the Company received 30,086 common
shares of Paramount for payment of interest on the
secured convertible notes accrued between July 2020
and June 2021. During 2020, the Company received
25,794 common shares of Paramount for payment
of interest on the secured convertible notes accrued
between September 2019 and June 2020. Subsequent
to December 31, 2021, the Company received 22,610
common shares of Paramount
for payment of
interest on the secured convertible notes accrued and
receivable as at December 31, 2021.
44
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Long-term Receivables
($000s)
Canadian Exploration
Expenses (note 17)
British Columbia Mineral
Exploration Tax Credit 1
December 31,
2021
December 31,
2020
9,172
3,866
13,038
-
-
-
1) During 2016, upon the completion of an audit of the
application by tax authorities of the British Columbia
Mineral Exploration Tax Credit (“BCMETC”) program,
the Company was reassessed $3.6 million, including
accrued interest, for expenditures that the tax authority
has categorized as not qualifying for the BCMETC
program. The Company recorded a $3.6 million
provision within non-trade payables and accrued
expenses on the consolidated statements of financial
position as at December 31, 2016 with a corresponding
increase in mineral interests. In 2017 the Company filed
an objection to the reassessment with the appeals
division of the tax authorities and paid one-half of the
accrued balance to the Receiver General and reduced
9. Mineral Interests, Property and Equipment
the provision by $1.8 million. In 2019, the Company
received a decision from the appeals division that the
Company’s objection was denied, and the Company
filed a Notice of Appeal with the British Columbia
Supreme Court. The Attorney General of Canada replied
to the facts and arguments in the Company’s Notice
of Appeal and stated its position that the Company’s
expenditures did not qualify for the BCMETC program.
Subsequent to December 31, 2021, the Company
completed discoveries with the Department of Justice
and will continue to move the appeal process forward
as expeditiously as possible. The Company intends to
continue to fully defend its position. As at December
31, 2021, The Company has paid $1.6 million to the
Receiver General, and the Canada Revenue Agency
(CRA) has withheld $2.3 million of HST credits due
to the Company that would fully cover the residual
balance,
interest, should the Company
be unsuccessful in its challenge. In 2021, based on
further study of the facts and circumstances of the
Company’s objection, the Company concluded that it
was more likely than not that it will be successful in its
objection and reclassified the $3.9 million as long-term
receivables on the consolidated statements of financial
position as at December 31, 2021.
including
($000s)
Cost
As at January 1, 2020
Additions
As at December 31, 2020
Additions
As at December 31, 2021
Accumulated Depreciation
As at January 1, 2020
Depreciation expense
As at December 31, 2020
Depreciation expense 1
As at December 31, 2021
Net Book Value
As at December 31, 2020
As at December 31, 2021
Mineral interests
Construction
in progress
Property &
equipment
Right-of-use
assets
425,671
165,775
591,446
40,559
632,005
-
-
-
-
-
591,446
632,005
-
-
-
27,061
27,061
-
-
-
-
-
-
-
-
-
2,963
2,963
-
-
-
-
-
-
27,061
2,963
307
-
307
100
407
(36)
(36)
(72)
(85)
(157)
235
250
1) Depreciation expense related to equipment is capitalized to construction in progress.
Total
425,978
165,775
591,753
70,683
662,436
(36)
(36)
(72)
(85)
(157)
591,681
662,279
45
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mineral interests expenditures on projects are considered as exploration and evaluation and their related costs consist
of the following:
($000s)
KSM
Courageous Lake
Iskut
Snowstorm
3 Aces
Grassy Mountain
($000s)
KSM
Courageous Lake
Iskut
Snowstorm
3 Aces
Grassy Mountain
January 1, 2021
Acquisitions
Expenditures 1
December 31, 2021
444,167
76,522
37,949
24,924
7,113
771
591,446
-
-
-
-
-
-
-
27,607
654
3,830
6,547
1,921
-
40,559
471,774
77,176
41,779
31,471
9,034
771
632,005
January 1, 2020
Acquisitions
Expenditures
December 31, 2020
296,509
75,721
32,215
20,455
-
771
425,671
127,530
-
-
-
6,564
-
134,094
20,128
801
5,734
4,469
549
-
31,681
444,167
76,522
37,949
24,924
7,113
771
591,446
1) During the year ended December 31, 2021, the Company added an aggregate of $44.4 million of expenditures to the
mineral interests. The total expenditure was reduced by a $3.9 million credit for reclassification of receivables, related to
the BCMETC program, from mineral interests to long-term receivables (refer to note 8).
Continued exploration of the Company’s mineral properties is subject to certain lease payments, project holding costs,
rental fees and filing fees.
a) KSM (Kerr-Sulphurets-Mitchell)
In 2001, the Company purchased a 100% interest
in contiguous claim blocks in the Skeena Mining
Division, British Columbia. The vendor maintains a 1%
net smelter royalty interest on the project, subject to
maximum aggregate royalty payments of $4.5 million.
The Company is obligated to purchase the net smelter
royalty interest for the price of $4.5 million in the event
that a positive feasibility study demonstrates a 10% or
higher internal rate of return after tax and financing
costs.
In 2011 and 2012, the Company completed agreements
granting a third party an option to acquire a 2% net
smelter royalty on all gold and silver production sales
from KSM for a payment equal to the lesser of $160
million or US$200 million. The option is exercisable
for a period of 60 days following the announcement
of receipt of all material approvals and permits, full
project financing and certain other conditions for the
KSM Project.
In December 2020, the Company purchased the
Snowfield (renamed East Mitchell) property from
Pretium Resources Inc. The East Mitchell property,
located in the same valley that hosts KSM's Mitchell
deposit, was purchased for US$100 million ($127.5
million) in cash, a 1.5% net smelter royalty on East
Mitchell property production, and a conditional
following
payment of US$20 million, payable
the earlier of (i) commencement of commercial
production
(ii)
announcement by the Company of a bankable
feasibility study which includes production of reserves
from the East Mitchell property. US$15 million of the
conditional payment can be credited against future
royalty payments.
from East Mitchell property, and
b) Courageous Lake
In 2002, the Company purchased a 100% interest in
the Courageous Lake gold project from Newmont
Canada Limited and Total Resources (Canada) Limited.
The Courageous Lake gold project consists of mining
leases located in Northwest Territories of Canada.
c) Iskut
On June 21, 2016, the Company purchased 100% of
the common shares of SnipGold Corp. which owns
the Iskut Project,
in northwestern British
Columbia.
located
46
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d) Snowstorm
11. Provision for reclamation liabilities
In 2017, the Company purchased 100% of the common
shares of Snowstorm Exploration LLC which owns
the Snowstorm Project, located in northern Nevada.
In connection with the acquisition, the Company has
agreed to make a conditional cash payment of US$2.5
million if exploration activities at the Snowstorm
Project result in defining a minimum of five million
ounces of gold resources compliant with National
Instrument 43-101 and a further cash payment of
US$5.0 million on the delineation of an additional five
million ounces of gold resources.
e) 3 Aces
In 2020, the Company acquired a 100% interest in
the 3 Aces gold project in the Yukon, Canada from
Golden Predator Mining Corp. through the issuance
of 300,000 common shares valued at $6.6 million.
Should the project attain certain milestones, including
the confirmation of a National Instrument 43-101
compliant mineral resource of 2.5 million ounces of
gold, the Company will pay an additional $1 million,
and upon confirmation of an aggregate mineral
resource of 5 million ounces of gold, the Company will
potentially pay an additional $1.25 million.
f) Grassy Mountain
In 2013, the Company sold 100% of its interest in the
Grassy Mountain Project with a net book value of $0.8
million retained within mineral properties, related to
the option to either receive, at the discretion of the
Company, a 10% net profits interest royalty or a $10
million cash payment. Settlement is due four months
after the later of: the day that the Company receives
a feasibility study on the project; and the day that the
Company is notified that permitting and bonding for
the mine is in place. The current owner of the Grassy
Mountain Project is Paramount who completed a
feasibility study in 2020 but they have not notified the
Company that permitting and bonding for the mine is
in place.
10. Accounts payable and accrued liabilities
($000s)
Trade payables
Trade and other payables
due to related parties
Non-trade payables and
accrued expenses
December 31,
2021
December 31,
2020
10,190
136
1,839
12,165
2,466
57
2,854
5,377
($000s)
December 31,
2021
December 31,
2020
Beginning of the period
6,164
6,865
Disbursements
(3,320)
(811)
Environmental rehabilitation
expense
Accretion
End of the period
Provision for reclamation
liabilities - current
Provision for reclamation
liabilities - long-term
5,515
-
83
110
8,442
6,164
3,680
2,500
4,762
3,664
8,442
6,164
for
The estimate of
reclamation
the provision
obligations, as at December 31, 2021, was calculated
using the estimated discounted cash flows of future
(December 31,
reclamation costs of $8.4 million
2020 - $6.2 million) and the expected timing of cash
flow payments required to settle the obligations
between 2022 and 2026. As at December 31, 2021, the
undiscounted future cash outflows are estimated
at $8.2 million (December 31, 2020 – $6.2 million)
primarily over the next three years. For the year
ended December 31, 2021, reclamation disbursements
amounted to $3.3 million (2020 - $0.8 million).
In 2018, the Company filed an updated reclamation
and closure plan for the Johnny Mountain mine site
and charged $7.4 million of rehabilitation expenses
to the consolidated statements of operations and
comprehensive income (loss). The Johnny Mountain
Mine site was acquired, along with the Iskut Project,
during the Snip Gold acquisition in 2016. Expenditures
were expected to be incurred between 2018 and
2022 and include the estimated costs for the closure
of all adits and vent raises, removal of the mill and
buildings, treatment of landfills and surface water
management as well as ongoing logistics, freight and
fuel costs. In 2021, the Company updated the closure
plan for the Johnny Mountain mine site and charged
an additional $5.4 million of rehabilitation expenses
to the consolidated statements of operations and
comprehensive income (loss).
As at December 31, 2021, the Company has placed
a total of $15.2 million (December 31, 2020 - $6.8
million) on deposit with financial institutions or with
government regulators that are pledged as security
against reclamation liabilities. This includes an $8.5
million deposit placed with a financial institution in
2021 (December 31, 2020 - $5.2 million) pledged as
security for the fish habitat offsetting plans, and access
road reclamation obligations at KSM. The deposits are
recorded on the consolidated statements of financial
position as security deposits.
47
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Shareholders’ equity
The Company is authorized to issue an unlimited
number of preferred shares and common shares with
no par value. No preferred shares have been issued or
were outstanding at December 31, 2021 or December
31, 2020.
The Company manages
its capital structure and
makes adjustments to it, based on the funds available
to the Company, in order to support the acquisition,
exploration and development of mineral properties.
The Board of Directors does not establish quantitative
return on capital criteria for management, but rather
relies on the expertise of the Company's management
to sustain future development of the business.
The properties in which the Company currently has
an interest are in the exploration stage, as such the
is dependent on external financing to
Company
fund its activities. In order to carry out the planned
exploration and pay for administrative costs, the
Company will spend its existing working capital and
raise additional amounts as needed.
reviews
its capital management
Management
approach on an ongoing basis and believes that this
approach, given the relative size of the Company, is
reasonable. There were no changes in the Company's
approach to capital management during 2021. The
Company considers its capital to be share capital,
stock-based compensation, warrants, contributed
surplus and deficit. The Company is not subject to
externally imposed capital requirements.
a) Equity financings
In 2019, the Company entered into an agreement with
two securities dealers, for an At-The-Market offering
program, entitling the Company, at its discretion,
and from time to time, to sell up to US$40 million in
value of common shares of the Company. In 2020, the
Company issued 1,327,046 shares, at an average selling
price of $21.94 per share, for net proceeds of $28.5
million under Company’s At-The-Market offering.
During the first quarter of 2021, the Company entered
into a new agreement with two securities dealers,
for an At-The-Market offering program, entitling the
Company, at its discretion, and from time to time, to
sell up to US$75 million in value of common shares of
the Company. This program can be in effect until the
Company’s current US$775 million Shelf Registration
Statement expires
In 2021, the
Company issued 2,242,112 shares, at an average selling
price of $22.71 per share, for net proceeds of $49.9
million under Company’s At-The-Market offering.
Subsequent to the year end, the Company issued
537,037 shares, at an average selling price of $22.09
per share, for net proceeds of $11.6 million under
Company’s At-The-Market offering.
in January 2023.
In June 2021, the Company issued 350,000 flow-
through common shares at $28.06 per common
share for aggregate gross proceeds of $9.8 million.
The Company committed to renounce its ability to
deduct qualifying exploration expenditures for the
equivalent value of the gross proceeds of the flow-
through financing and transfer the deductibility to the
purchasers of the flow-through shares. The effective
date of the renouncement was December 31, 2021.
At the time of issuance of the flow-through shares,
$1.5 million premium was recognized as a liability on
the consolidated statements of financial position.
During 2021, the Company incurred $1.1 million of
qualifying exploration expenditures and $0.2 million of
the premium was recognized through other income
on the consolidated statements of operations and
comprehensive income (loss).
On December 4, 2020, the Company entered into an
agreement to sell, on a bought deal basis, 6,100,000
common shares of the Company, at US$17.25 per
common share, for gross proceeds of US$105 million.
As part of the agreement, the Company granted an
option to the underwriters to sell up to an additional
610,000 common shares of the Company, at a price
of US$17.25 per common share, for gross proceeds of
US$10.5 million. The financing closed on December
9, 2020, and the underwriters fully exercised their
option to purchase the additional common shares.
In aggregate, 6,710,000 common shares were issued,
at a price of US$17.25 per common share, for gross
proceeds of US$115.7 million.
In June 2020, the Company issued 345,000 flow-
through common shares at $32.94 per common
share for aggregate gross proceeds of $11.4 million.
The Company committed to renounce its ability to
deduct qualifying exploration expenditures for the
equivalent value of the gross proceeds of the flow-
through financing and transfer the deductibility
to the purchasers of the flow-through shares. The
effective date of the renouncement was December
31, 2020. In accordance with draft legislation released
on December 16, 2020 in relation to the COVID-19
pandemic, a 12-month extension has been proposed
to the normal timelines
in which the qualifying
exploration expenditures should be incurred. At the
time of issuance of the flow-through shares, $3.9
million premium was recognized as a liability on
the consolidated statements of financial position.
During 2020, the Company
incurred $4.7 million
of qualifying exploration expenditures and $1.6
million of the premium was recognized through
other
income on the consolidated statements of
operations and comprehensive income (loss). During
2021, the Company incurred $6.5 million of qualifying
exploration expenditures and $2.2 million of the
income
premium was recognized through other
on the consolidated statements of operations and
comprehensive income (loss).
48
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2020, the Company closed a non-brokered
private placement of 1.2 million common shares, at a
price of $11.75 per common share, for gross proceeds
of $14.1 million. As part of the private placement
agreement, the Company granted an option to
increase the size of the private placement by an
additional 240,000 common shares exercisable until
May 15, 2020. The 240,000 options were fully exercised
on May 6, 2020 at a price of $11.75 per share, for gross
proceeds of $2.8 million.
b) Warrants
As part of the acquisition agreement of Snowstorm
Exploration LLC in June 2017, the Company issued
500,000 common share purchase warrants exercisable
for four years at $15.65 per share. During 2021, all the
warrants were exercised for net proceeds of $7.8
million and 500,000 common shares were issued.
c) Stock options and Restricted share units
The Company provides compensation to directors and
employees in the form of stock options and Restricted
Share Units (“RSU”s).
Pursuant to the Share Option Plan, the Board of
Directors has the authority to grant options, and to
establish the exercise price and life of the option at
the time each option is granted, at a price not less
than the closing price of the common shares on the
Toronto Stock Exchange on the date of the grant of
such option and for a period not exceeding five years.
All exercised options are settled in equity. Pursuant to
the Company’s RSU Plan, the Board of Directors has
the authority to grant RSUs, and to establish terms of
the RSUs including the vesting criteria and the life of
the RSU. The life of the RSU is not to exceed two years.
Stock option and RSU transactions were as follows:
Outstanding January 1, 2021
Granted
Exercised option or vested RSU
Expired
Number of
Options
2,611,691
-
(1,585,501)
(2,856)
Amortized value of stock-based compensation
-
-
8
Outstanding at December 31, 2021
Exercisable at December 31, 2021
1,023,334
1,023,334
14.61
8,125
163,800
Outstanding January 1, 2020
Granted
Exercised option or vested RSU
Expired
Number of
Options
3,003,150
-
(390,153)
(1,306)
Amortized value of stock-based compensation
-
-
Outstanding at December 31, 2020
Exercisable at December 31, 2020
2,611,691
2,608,357
12.51
22,524
135,450
Options
RSUs
Total
Weighted
Average
Exercise
Price ($)
Amortized
Value of
options
($000s)
Amortized
Value
of RSUs
($000s)
Stock-based
Compensation
($000s)
Number
of RSUs
22,524
135,450
-
163,800
487
573
23,011
573
(14,370)
(135,450)
(3,413)
(17,783)
(37)
-
-
-
2,925
572
(37)
2,933
8,697
Options
RSUs
Total
Weighted
Average
Exercise
Price ($)
Amortized
Value of
options
($000s)
Amortized
Value
of RSUs
($000s)
Stock-based
Compensation
($000s)
Number
of RSUs
12.51
-
11.17
6.30
12.32
-
11.03
6.30
18,546
139,600
-
135,450
274
487
(2,246)
(139,600)
(2,351)
(16)
6,240
-
-
-
2,077
487
18,820
487
(4,597)
(16)
8,317
23,011
49
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The outstanding share options at December 31, 2021 expire at various dates between December 2022 and June 2024. A
summary of options outstanding, their remaining life and exercise prices as at December 31, 2021 is as follows:
Options Outstanding
Options Exercisable
Exercise price
Number outstanding
Remaining contractual life
Number exercisable
$13.14
$16.94
$15.46
$17.72
453,334
50,000
470,000
50,000
1,023,334
1 year
1 year 10 months
2 years
2 years 6 months
453,334
50,000
470,000
50,000
1,023,334
During the year ended December 31, 2021, 1,585,501
options were exercised (year ended December 31,
2020, 390,153) for proceeds of $17.7 million (year ended
December 31, 2020, $4.3 million) and 135,400 RSUs
vested (year ended December 31, 2020, 139,600). In
total, 1,720,951 common shares were
issued (year
ended December 31, 2020, 529,753). The weighted
average share price at the date of exercise of options
exercised during the year ended December 31, 2021
was $22.39 (year ended December 31, 2020 – $24.03).
On June 25, 2020, shareholders resolved to approve
that 425,000 options that were granted to the
directors of the Company in 2015 and due to expire in
April 2020, be extended for one year. These options
vested in December 2020 upon the acquisition of the
East Mitchell property. The $4.4 million fair value of the
extension was charged to the statement of operations
(loss) at that time,
income
and comprehensive
matching the revised estimated service period.
In December 2020, 608,000 options that were
granted to Board members and senior management
during December 2018 and June 2019 vested upon
the acquisition of the East Mitchell property and $1.6
million of the fair value of these options, not previously
expensed, was charged to the statement of operations
and comprehensive income (loss) on an accelerated
basis to match the change in the estimate of the
service period.
In October 2018, 50,000 five-year options with an
exercise price of $16.94, to purchase common shares
of the Company, with a grant-date fair value of $0.4
million, were granted to a new Board member. These
options also vested in December 2020 upon the
acquisition of the East Mitchell property and $0.1
million of the fair value of these options, not previously
expensed, was charged to the statement of operations
and comprehensive income (loss) on an accelerated
basis, to match the change in the estimated service
period.
the
The Company has, since 2019,
compensation practices away
issuing a
combination of stock options and RSUs to only issuing
RSUs with shorter terms and service periods. The
refocused
from
fair value of the RSU grants is determined using the
closing price of the common shares on the Toronto
Stock Exchange on the business day immediately prior
to the grant date and is amortized over the expected
service period of the grants.
In December 2021, 123,800 RSUs were granted. Of
these, 28,000 RSUs were granted to Board members,
72,500 RSUs were granted to members of senior
management, and the remaining 20,600 RSUs were
granted to other employees of the Company. The fair
value of the grants, of $2.6 million, was estimated as
at the grant date to be amortized over the expected
service period of the grants. The expected service
period of approximately four months from the date
of the grant was dependent on certain corporate
objectives being met. As at December 31, 2021, $0.4
million of the fair value of the grants was amortized.
During the third and fourth quarter 2021, 40,000
RSUs were granted to three new members of senior
management. Half of the RSUs will vest on the first
anniversary of employment and the remaining half
on the second anniversary. The fair value of the grants,
of $0.9 million, was estimated as at the grant date to
be amortized over the expected service period of the
grants. As at December 31, 2021, $0.1 million of the fair
value of the grants was amortized.
In December 2020, the Board granted 135,450 RSUs.
Of these, 28,000 RSUs were granted to the board
members, 80,300 RSUs were granted to members of
senior management, and the remaining 27,150 RSUs
were granted to other employees of the Company. The
fair value of the grants, of $3.4 million, was estimated
as at the grant date to be amortized over the expected
service period of the grants. The expected service
period of approximately four months from the date
of the grant was dependent on certain corporate
objectives being met. Of the $3.4 million fair value of
the grants, $0.5 million was amortized during the
fourth quarter 2020, and the remaining $2.9 million
was amortized during the first quarter 2021. During
the second quarter 2021, 135,450 RSUs were vested and
were exchanged for common shares of the Company.
Subsequent to December 31, 2021, 117,500 options were
exercised for proceeds of $1.6 million.
50
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d) Basic and diluted net loss per common share
Basic and diluted net earnings attributable to
common shareholders of the Company for the year
ended December 31, 2021 was $0.9 million (year ended
December 31, 2020 - $14.9 million net loss).
Earnings per share has been calculated using the
weighted average number of common shares and
common share equivalents issued and outstanding
during the period. Stock options are reflected in
diluted earnings per share by application of the
treasury method. The following table details the
weighted average number of outstanding common
shares for the purpose of computing basic and diluted
earnings per common share for the following periods:
Weighted average number of
common shares outstanding
Dilutive effect of options 1
Dilutive effect of RSUs 1
Years ended December 31,
2021
2020
76,413,554
66,369,942
1,023,334
163,800
-
-
77,600,688
66,369,942
1) The
impact of outstanding potentially dilutive
options and RUSs is excluded from the diluted
share calculation for loss per share amounts as they
are anti-dilutive.
13. Fair value of financial assets and liabilities
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date. The fair value hierarchy
establishes three
inputs to
valuation techniques used to measure fair value.
levels to classify the
Level 1: Inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities.
Level 2: Inputs are quoted prices in markets that
are not active, quoted prices for similar assets
or liabilities in active markets, inputs other than
quoted prices that are observable for the asset
or liability (for example, interest rate and yield
curves observable at commonly quoted intervals,
forward pricing curves used to value currency and
commodity contracts, volatility measurements used
to value option contracts and observable credit
default swap spreads to adjust for credit risk where
appropriate), or inputs that are derived principally
from or corroborated by observable market data or
other means.
Level 3: Inputs are unobservable (supported by little
or no market activity).
The fair value hierarchy gives the highest priority to
Level 1 inputs and the lowest priority to Level 3 inputs.
securities,
The Company’s financial assets and liabilities as at
December 31, 2021 and December 31, 2020 are cash
and cash equivalents, short-term deposits, accounts
receivable, marketable
convertible
notes receivable and accounts payable. Other than
investments and convertible notes receivable, the
carrying values approximate their fair values due
to the immediate or short-term maturity of these
financial instruments and are classified as a Level 1
measurement. The Company’s equity
investments
are measured at fair value based on quoted market
prices and are classified as a level 1 measurement. The
convertible notes receivable are measured at fair value
and are classified as a level 3 measurement.
The Company's financial risk exposures and the
impact on the Company's financial instruments are
summarized below:
Credit Risk
to
loss
Credit risk is the risk that one party to a financial
instrument will cause a financial
the
counterparty by failing to discharge an obligation. The
maximum amount of credit risk is equal to the balance
of short-term deposits, convertible notes receivable,
and receivables included in amounts receivable and
prepaid expenses. The Company has no significant
concentration of credit risk arising from operations.
The short-term deposits consist of Canadian Schedule
I bank guaranteed notes, with terms up to one year
but are cashable in whole or in part with interest
at any time to maturity, for which management
believes the risk of loss to be remote. Management
believes that the risk of loss with respect to financial
in amounts receivable and
instruments
prepaid expenses and convertible notes receivable to
be remote. The convertible notes receivable can be
converted to common shares of Paramount and be
sold in the open market to recover the carrying value
of the notes.
included
Liquidity Risk
The Company's approach to managing liquidity risk
is to ensure that it will have sufficient liquidity to
meet liabilities when due. As at December 31, 2021,
the Company had cash and cash equivalents of
$11.5 million and short-term deposits of $29.2 million
(December 31, 2020 - $17.5 million and $19.9 million,
for settlement of current financial
respectively)
liabilities of $12.1 million (December 31, 2020 - $5.4
million). The short-term deposits consist of Canadian
Schedule I bank guaranteed deposits and are cashable
in whole or in part with interest at any time to
maturity. The Company's financial liabilities primarily
have contractual maturities of 30 days and are subject
to normal trade terms. The Company’s ability to fund
its operations and capital expenditures and other
51
ANNUAL REPORT 2021 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
obligations as they become due is dependent upon
market conditions.
As the Company does not generate cash inflows from
operations, the Company is dependent upon external
sources of financing to fund its exploration projects
and on-going activities. If required, the Company will
seek additional sources of cash to cover its proposed
exploration and development programs at its key
projects, in the form of equity financings and from the
sale of non-core assets. Refer to note 12 for details on
equity financings.
Market Risk
(a) Interest Rate Risk
The Company has no interest-bearing debt. The
Company's current policy is to invest excess cash
in Canadian bank guaranteed notes (short-term
deposits). The short-term deposits can be cashed in
at any time and can be reinvested if interest rates
rise.
(b) Foreign Currency Risk
The Company's functional currency is the Canadian
dollar and major purchases are transacted
in
Canadian and US dollars. The Company funds
certain operations, exploration and administrative
expenses in the United States on a cash call basis
using US dollar cash on hand or converted from
its Canadian dollar cash. Management believes
the foreign exchange risk derived from currency
conversions is not significant to its operations and
therefore does not hedge its foreign exchange
risk. As at December 31, 2021, $4.8 million of cash
and cash equivalents and $0.8 million of accounts
payable and accrued liabilities are denominated in
US dollars.
(c) Investment Risk
The Company holds $0.1 million investment in
other publicly listed exploration companies which
are included in investments. These shares were
received as option payments on certain exploration
properties the Company owns or has sold. In
addition, the Company holds $3.3 million in a gold
exchange traded receipt that is recorded on the
consolidated statements of financial position in
investments. The risk on these
is
significant due to the nature of the investment but
the amounts are not significant to the Company.
investments
14. Corporate and administrative expenses
($000s)
Employee compensation
Stock-based compensation
Professional fees
Other general and administrative
2021
5,781
3,506
1,828
2,264
13,379
2020
4,815
8,804
1,106
1,805
16,530
15. Related party disclosures
Compensation to key management personnel of the
Company:
($000s)
2021
2020
Compensation of directors:
Directors fees
Stock-based compensation
431
704
1,135
Compensation of key management personnel:
Salaries and consulting fees
Stock-based compensation
5,773
2,226
7,999
9,134
713
1,609
2,322
5,269
5,637
10,906
13,228
During year ended December 31, 2021 and 2020,
there were no payments to related parties other than
compensation paid to key management personnel.
These transactions were in the normal course of
operations and were measured at the exchange
amount, which
is the amount of consideration
established and agreed to by the related parties.
16. Income taxes
($000s)
Deferred tax expense (recovery)
Tax expense (recovery) recognized in other
comprehensive income or directly in equity
($000s)
Financing costs - recognized in
statement of equity
Unrealized gain or loss on marketable
securities - recognized in OCI
2021
4,630
4,630
2020
(800)
(800)
2021
(438)
2020
(2,698)
(61)
106
(499)
(2,592)
52
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2021, the Company recognized income tax expense
of $4.6 million (2020 - income tax recovery of $0.8
million) primarily due to the deferred tax liability
arising from the gain recognized on disposition of
its previously
the Company’s residual
owned Red Mountain project during second quarter
in 2021, and from the renouncement of expenditures
related to the flow-through shares issued which are
capitalized for accounting purposes. The income tax
expense was partially offset by income tax recovery
arising from the losses in the period.
interests
in
(a) Rate Reconciliation
income taxes differs from the
The provision for
amount that would have resulted by applying
the combined Canadian Federal, Ontario, British
Columbia, Northwest Territories and Yukon statutory
income tax rates of 26.63% (2020 - 26.58%).
($000s)
2021
2020
Income (loss) before income taxes
5,525
(15,742)
Tax expense calculated
Using statutory rates
Non-deductible items
Difference in foreign tax rates
Change in deferred tax rates
Movement in tax benefits not recognized
Impact of true-up of prior year balances
Renouncement of flow-through
expenditures
Other
Income tax expense (recovery)
(b) Deferred Income Tax
26.63%
26.58%
1,471
303
(8)
(132)
949
1
2,020
24
4,630
(4,184)
1,897
10
1,217
(1,078)
27
1,357
(46)
(800)
following
The
components of deferred
liabilities:
table summarizes
the significant
income tax assets and
($000s)
Deferred income tax assets:
Property and equipment
Provision for reclamation liabilities
Financing costs
Non-capital loss carryforwards
December
31, 2021
December
31, 2020
292
595
2,080
33,098
258
822
2,480
28,664
Deferred income tax liabilities:
Mineral interests
Net deferred income tax liabilities
(59,229)
(23,164)
(51,258)
(19,034)
(c) Unrecognized deferred tax assets
The company has not recognized deferred income
tax assets in respect of the following tax effected
deductible temporary differences:
($000s)
Marketable securities
Loss carryforwards
Investment tax credits
Foreign tax credits
Mineral properties
Provision for reclamation liabilities
December
31, 2021
December
31, 2020
182
798
1,481
268
140
1,083
167
742
1,481
268
153
241
Deferred tax has not been recognized on the
deductible temporary difference of $3.2 million (2020
- $3.5 million) relating to investments in subsidiaries
as these amounts will not be distributed in the
foreseeable future.
The tax losses not recognized expire as per the
amount and years noted below. The deductible
temporary differences do not expire under the current
tax legislation. Deferred tax assets have not been
recognized in respect of these items because it is not
probable that future taxable profit would be available
against which the Company can utilize the benefits
there from.
(d) Income Tax Attributes
As at December 31, 2021, the Company had the
following income tax attributes to carry forward.
($000s)
Expiry date
Canadian non-capital losses
124,029
2026 to 2041
Canadian capital losses
2,571
Indefinite
Canadian tax basis of mineral interest
371,059
Indefinite
U.S. non-capital losses
U.S. capital losses
432
1,634
2041
2025
U.S. tax basis of mineral interest
18,824
Indefinite
53
ANNUAL REPORT 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and contingencies
($000s)
Mineral interests
Flow-through share expenditures
Payments due by years
Total
9,107
8,933
18,040
2022
2023-24
2025-26
2027-28
976
8,933
9,909
2,859
-
2,859
2,937
-
2,937
2,335
-
2,335
18. Subsequent events
a) Subsequent to December 31, 2021, the Company
entered into an agreement selling a secured note
(“Note”) that is to be exchanged at maturity for a
60% gross silver royalty (the “Silver Royalty”) on the
KSM project to Sprott Resource Streaming and
Royalty Corp. and Ontario Teachers’ Pension Plan
(jointly, the “Investors”) for US$225 million. The
Note bears interest at 6.5% per annum, payable
quarterly in arrears.
b) Subsequent to the year ended December 31, 2021,
the Company entered into a Facilities Agreement
with British Columbia Hydro and Power Authority
("BC Hydro") to construct and supply hydro-
sourced electricity to the KSM project.
The cost to complete the construction is estimated
to be $28.9 million of which the Company paid $6.6
million to BC Hydro during February 2022, with an
additional $1.2 million due in the second quarter
of 2022 and $21.1 million due in 2023. In addition,
the Facilities Agreement requires $54.2 million in
security or cash from the Company for BC Hydro
system reinforcement which is required to make
the power available of which the Company paid
$10 million to BC Hydro in February 2022, and an
additional $11.2 million due in the second quarter of
2022 and $33 million due in 2023. The $54.2 million
system reinforcement security will be forgiven
annually, over a period of less than 8 years, based
on project power consumption.
As previously disclosed in the Company’s prior years
financial statements, in 2019 the Company received
a notice from the CRA that it proposed to reduce
the amount of expenditures reported as Canadian
Exploration Expenses (CEE) for the three-year period
ended December 31, 2016. The Company has funded
certain of its exploration expenditures, from time-
to-time, with the proceeds from the issuance of
flow-through shares and renounced, to subscribers,
the expenditures which it determined to be CEE.
The notice disputes the eligibility of certain types of
expenditures previously audited and approved as
CEE by the CRA. The Company strongly disagrees
with the notice and responded to the CRA auditors
with additional information for their consideration. In
2020, the CRA auditors responded to the Company’s
submission and, although accepting additional
expenditures as CEE, reiterated that their position
remains
subsequently
issued reassessments to the Company reflecting the
additional CEE expenditures accepted and $2.3 million
of Part Xll.6 tax owing. The Company has been made
aware that the CRA has reassessed certain investors
who subscribed for flow-through shares
in 2013
and will reassess other investors with reduced CEE
deductions. Notice of objections to the Company’s
and investors’ reassessments have and will be filed as
received and will be appealed to the courts, should
the notice of objections be denied. The Company has
indemnified the investors that subscribed for the flow-
through shares. The potential tax indemnification
to the investors is estimated to be $10.8 million, plus
$2.6 million potential interest. No provision has been
recorded related to the tax, potential interest, nor the
potential indemnity as the Company and its advisors
do not consider it probable that there will ultimately
be an amount payable.
largely unchanged and
During the current year ended December 31, 2021, the
Company deposited $9.2 million into the accounts of
certain investors with the Receiver General, in return
for their agreement to object to their respective
assessments and agreement to repay the Company
the full amount deposited on their behalf upon
resolution of the Company’s appeal. The deposits
made has been recorded as long-term receivables on
the statement of financial position as at December 31,
2021.
54
ANNUAL REPORT 2021
Corporate Information
DIRECTORS
Rudi P. Fronk
Chairman of the Board
Michael G. Skurski
Vice President,
Technical Services
Trace Arlaud
Eliseo Gonzalez-Urien
Richard C. Kraus
Jay S. Layman
Melanie R. Miller
Clement A. Pelletier
John W. Sabine
(Lead Director)
Gary A. Sugar
Carol T. Willson
OFFICERS
Rudi P. Fronk
Chief Executive Officer
Jay S. Layman
President and
Chief Operating Officer
William E. Threlkeld
Senior Vice President,
Exploration
Peter D. Williams
Senior Vice President,
Technical Services
Christopher J. Reynolds
Vice President, Finance and
Chief Financial Officer
R. Brent Murphy
Senior Vice President,
Environmental Affairs
C. Bruce Scott
Vice President,
General Counsel and
Corporate Secretary
Elizabeth Miller
Vice President, Environment and
Social Responsibility
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services Inc.
100 University Avenue
8th Floor, North Tower
Toronto, Ontario M5J 2Y1
Canada
Julie Rachynski
Vice President, Human Resources
Toll free (North America): 1 800 564 6253
International Direct Dial: 514 982 7555
Ryan Hoel
Vice President, Projects
Tracey Meintjes
Vice President, Engineering Studies
Neggar Shafai
Assistant Corporate Secretary
Computershare Investor Services Inc.
250 Royall Street
Canton, Massachusetts 02021
USA
Toll free (North America): 1 800 564 6253
International Direct Dial: 514 982 7555
STOCK EXCHANGE LISTINGS
AUDITORS
Toronto Stock Exchange, symbol “SEA”
New York Stock Exchange, symbol “SA”
CUSIP Number 811916105
HEAD OFFICE
Seabridge Gold Inc.
106 Front Street East, Suite 400
Toronto, Ontario M5A 1E1
Canada
Tel: 416 367 9292, Fax: 416 367 2711
info@seabridgegold.com
www.seabridgegold.com
www.ksmproject.com
INVESTOR RELATIONS
Rudi P. Fronk
Tel: 416 367 9292
info@seabridgegold.com
KPMG LLP
333 Bay Street, Suite 4600
Toronto, Ontario M5H 2S5
Canada
LEGAL COUNSEL
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600
P.O. Box 49314
Vancouver, British Columbia
V7X 1L3 Canada
Carter Ledyard & Milburn LLP
28 Liberty Street, 41st Foor
New York, NY 10005
USA
DuMoulin Black LLP
10th Floor, 595 Howe Street
Vancouver, British Columbia
V6C 2T5 Canada
55
ANNUAL REPORT 2021
Seabridge Gold Inc.
106 Front Street East, Suite 400
Toronto, Ontario M5A 1E1
Canada
Phone: 416 367 9292
Fax: 416 367 2711
info@seabridgegold.com
www.seabridgegold.com
www.ksmproject.com