Annual Report 2020
Tsodilo Resources Limited
Table of Contents
Management's Discussion and Analysis - P.1
Financial Reporting Responsibility of Management - P.31
Independent Auditor's Report - P.32
Consolidated Financial Statements - P.35
Information for Investors - IBC
TSODILO RESOURCES LIMITED
Management’s Discussion and Analysis
FOR THE YEAR ENDED
DECEMBER 31, 2020
The Management’s Discussion and Analysis has been authorized for
release by the Company’s Board of Directors on April 12, 2021
1
Management’s Discussion and Analysis
This management’s discussion and analysis (“MD&A”) should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto for the years-ended December 31, 2020 and 2019.
The Company’s consolidated financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS). The Company’s functional and reporting currency is United States dollars and all
amounts stated are in United States dollar unless otherwise noted. In addition, the Company has three
Botswana operating subsidiaries, Newdico (Pty) Ltd., Gcwihaba Resources (Pty) Ltd. and Bosoto (Pty) Ltd. which
have a functional currency of the Botswana Pula, and a South African subsidiary, Idada 361 (Pty) Ltd. which has a
functional currency of South African Rand. This management’s discussion and analysis has been prepared as at
April 12, 2021.
Disclosure of a scientific or technical nature in the MD&A was prepared under the supervision of Dr. Alistair A.
Jeffcoate (Msci, PhD, MAusIMM(CP), MBGA, FGS), the Company’s Project Manage and Chief Geologist and a
Qualified Person, as that term is defined in National Instrument 43-101.
Some of the statements in this MD&A are forward-looking statements that are subject to risk factors set out in
the cautionary note contained herein. Additional information about the Company and its business activities is
available on SEDAR at www.sedar.com.
OVERVIEW
Tsodilo Resources Limited (“Tsodilo” or the “Company”) was organized under the laws of the Province of
Ontario in 1996 and continued under the laws of the Yukon in 2002. It is incorporated under laws of the Yukon
Territory, Canada, under the Business Corporations Act of Yukon and the address of the Company’s registered
office is 161 Bay Street, P.O. Box 508 Toronto, Ontario, Canada, M5J 2S1. The Company currently exists under
the Business Corporations Act of Yukon and its common shares are listed on the Toronto Venture Stock
Exchange (TSX-V) under the symbol TSD.
Tsodilo is an exploration stage company which is engaged principally in the acquisition, exploration and
development of mineral properties in the Republics of Botswana and South Africa. The Company is considered
to be in the exploration and development stage given that none of its properties are in production and, to date,
has not earned any significant revenues. The recoverability of amounts shown for exploration and evaluation
assets is dependent on the existence of economically recoverable reserves, the renewal of exploration licenses,
obtaining the necessary permits to operate a mine, obtaining the financing to complete exploration and
development, and future profitable production.
2
Outstanding Share Data
As of April 12, 2021, 49,152,098 common shares of the Company were outstanding. Of the options to purchase
common shares issued to eligible persons under the stock option plan of the Company, 2,556,250 options are
outstanding of which 2,068,750 are exercisable at exercise prices ranging from CAD $0.07 - $0.85.
Expiry Date
January 1, 2026
Grant Date
January 1, 2021
September 21, 2020 September 21, 2025
January 2, 2020
June 6, 2019
January 2, 2019
March 26, 2018
January 2, 2018
April 3, 2017
January 2, 2017
January 2, 2025
June 6, 2024
January 2, 2024
March 26, 2023
January 2, 2023
April 3, 2022
January 2, 2022
Grant Price (CAD) Granted Outstanding
275,000
368,750
187,500
475,000
50,000
450,000
175,000
400,000
175,000
275,000
425,000
275,000
925,000
250,000
600,000
260,000
600,000
260,000
$0.47
$0.09
$0.07
$0.17
$0 28
$0.55
$0.65
$0.85
$0 69
Exercisable
68,750
156,250
118,750
475,000
50,000
450,000
175,000
400,000
175,000
As of April 12, 2021, the following warrants were outstanding:
Grant Date
January 25, 2021
February 10, 2021
Expiry Date
January 25, 2023
February 10, 2023
Grant Price (USD)
$0.55
$0.55
Granted Outstanding
2,686.038
2,686,038
300,000
300,000
Exercisable
2,686,038
300,000
Principal Shareholders of the Company
To the best of the Company’s knowledge, the principal shareholders (greater than 5%) of the Company as of
April 12, 2021, are as follows:
Name
Description
Shares
Owns, Controls or Directs
% of the Issued and
Outstanding Shares
Azur LLC
Rakeesh Dhir
Investment Trust
Investor
Lucara Diamond Corporation Diamond Mining Co.
David J. Cushing
Investor
James M. Bruchs
Chairman and CEO
4,996,065
4,832,000
4,476,773
4,327,579
2,888,119
10.16%
9.80%
9.10%
8.80%
5.87%
Exploration Activities as at December 31, 2021
Subsidiaries
◊
◊
◊
The Company holds a 100% interest in its Botswana subsidiary, Gcwihaba (Pty) Limited (“Gcwihaba”)
which holds seven (7) metal (base, precious, platinum group, and rare earth) prospecting licenses.
The Company holds a 100% interest in its Botswana subsidiary, Bosoto (Pty) Limited (“Bosoto”), which
holds two (2) precious stone prospecting licenses; PL369/2014 for the area which contains the BK16
kimberlite and precious stone prospecting license PL217/2016.
The Company holds a 100% interest in Newdico (Pty) Limited. (“Newdico”), holds one (1) industrial
mineral prospecting
license PL091/2019, effective January 1, 2020. Newdico also provides
administrative, operational, exploration, geophysical and drilling services to the Company’s other
subsidiaries.
3
◊
◊
The Company holds a 70% interest in its South African subsidiary, Idada Trading 361 (Pty) Limited
(“Idada”), which holds a gold and silver exploration license (Ref: MP30/5/1/1/2/1047PR) in the
Barberton area.
The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its
operating subsidiaries are registered.
1. DIAMOND PROJECTS
The Company holds two prospecting licences for precious stones, registered to Bosoto. These licenses are
summarized in Table 1.
Precious Stone Prospecting Licenses as at December 31, 2020
Table 1
Prospecting
Km²
Grant
Expiry or
Current
Expenditure1
Total Expenditure from
License
Number
Date
Renewal
Stage
Per Annum
Grant Date and if held to
Date
(BWP)
Full License Term
Rental
Work
BWP1
USD as at
Fee
Program
12/31/2020
369/2014
1.02
10/01/19
9/30/21
2nd Renewal
1,000
217/2016
292
7/01/20
6/30/22
1st Renewal
1,460
20,000,000
20,000,000
500,000
500,000
40,002,000
3,752,970
1,002,920
94,094
1 Amounts include services accounted for at market value provided by Tsodilo and its subsidiaries and all expenditure
amounts are incremental in nature and qualified by positive results in the evaluation process throughout the license term.
1.1 PL369/2014 (BK 16)
Bosoto was granted prospecting license (PL369/2014) over the BK16 kimberlite pipe effective October 1, 2014.
The prospecting license was renewed for an additional two-year period commencing October 1, 2017 and a
second two-year renewal application was granted effective October 1, 2019.
The diamondiferous BK16 kimberlite pipe is located within the Orapa Kimberlite Field (” OKF”) in Botswana and
covered by ~25 meters (m) of Kalahari Group sediments. BK16 is located 37 kilometers (km) east-southeast of
the Orapa Diamond Mine AK01, 25 km southeast of the Damtshaa Diamond Mine, and 13 km north-northeast
of the Letlhakane Diamond Mine, all operated by Debswana and 28 km east-northeast from Lucara Diamond
Corporation's Karowe Mine (AK6).
The OKF contains at least 83 kimberlite bodies, varying in size from insignificant dykes to the 110 hectares (ha)
AK01 kimberlite pipe. Ages of emplacement are Cretaceous and range from 111 Ma for Lethlakane-DK01
(Letlhakane Mine) to 85 Ma for Orapa-AK01, representing a protracted period of kimberlite magmatism lasting
4
approximately 20 million years. Of the 83 known kimberlite bodies, eleven (11), AK01, AK02, AK07 (Orapa,
Debswana); AK06 (Karowe, Lucara Diamond Corporation); BK01, BK09, BK12 and BK15 (Damtshaa, Debswana);
DK01 and DK02 (Letlhakane, Debswana); BK11 (Firestone Diamonds), are currently being or have been mined.
In July 2016, Tsodilo Resources Bermuda Limited completed a share repurchase and royalty fee agreement with
its Bosoto (Pty) Ltd minority shareholders. The minority shareholders’ 25% equity interest was purchased for a
2% gross proceeds royalty derived from the sale of diamonds mined from Bosoto’s BK16 kimberlite project. The
result of this transaction resulted in Tsodilo having a 100% interest in Bosoto and its BK16 exploration project.
Summary of Work Performed as at December 31, 2020
Detailed ground magnetic and gravity surveys over the license area defined the surface area of BK16 as ~5.9
hectare (ha) increasing significantly the size from the historical estimate of 3.5 ha. A 3,662-meter (m) core
drilling program followed leading to a significantly updated geological model identifying the main kimberlite
phases and revealing that dilution zones around the historical shaft and tunnel system were limited to the
upper central part of the kimberlite rather than covering the entire kimberlite.
To assess the diamond value of the kimberlite, a Phase I mini-bulk sampling program consisting of fourteen (14)
24-inch Large Diameter Drilling (LDD) drill-holes totaling 3,121 meters was initiated. This program extracted
2,077 tonnes (calipered) of kimberlite. These LDD drill-holes were advance drilled by a 3,220 m core pilot drill-
hole program which tested the geological model for accuracy ahead of the LDD program.
The Phase I LDD samples (243) were processed at the Company’s dense media separation (DMS) plant ahead of
X-Ray diamond separation and final hand sorting at the Company’s secure recovery unit. The diamond recovery
resulted in 509 diamonds weighing 78.403 carats.
Diamonds recovered in the Phase I program were studied by third-party qualified industry experts who
concluded:
sample average price for this sample was US$176.44 per carat (see, Table 2);
BK16 contains very high-quality diamonds dominated by highly marketable shapes and contained no
boart;
diamond breakage was very low; and,
3.8% of these diamonds were positively identified as Type IIa of mainly D color.
The Company retained the services of a leading industry expert in size frequency distribution (SFD) modelling to
model the SFD of the BK16 kimberlite. The SFD of the diamonds recovered from the LDD samples indicated that
the size distribution of BK16 could be coarser than several producers in southern Africa. There are indications
that BK16 could have a broadly similarly coarse shaped size distribution to that of the Lucara’s Karowe Mine
(Botswana), Petra Diamonds’ Premier Mine (South Africa), and Lucapa Diamond’s Mothae Mine (Lesotho). This
5
course distribution could be extrapolated to indicate that BK16 has the potential to host ~2-5% large special
stone of over 10.8 carats in size (which compares favorably with Lucara Diamond Corp.’s Karowe Mine (AK6)
production of specials.
The SDF modelling was further used to extrapolate the likely in-situ or “run of mine” value and grade of BK16,
where the diamond value was modelled at US$ 281 to US$ 792 and the grade was modelled at 4 to 8 carats per
hundred tonne (cpht), see the detailed breakdown in Table 3. These were achieved by forward modelling to a
full kimberlite run of mine projection based on the SFD data for the Phase I LDD diamonds. The SFD study
concluded that there is a clear under sampling of coarse stones thus far at BK16 which adds significant
uncertainty to the grade and value modelled. This uncertainty is explained by the fact that the current 2,077 dry
metric tonne LDD sample represents a distinct under sampling of the true SFD of the BK16 kimberlite (~0.01%
of the total kimberlite body). This under sampling explains why the sample grade and diamond value are well
below the modelled grade and value, and thus why the value and grade modeling reported are so important
and should be considered a more accurate reflection of a likely BK16 run of mine production.
This SFD modeling led to a preliminary range analysis and techno-economic modeling of the deposit at the
scoping level using some defined variables and options for developing the project. The variables and options
considered as part of this analysis were:
◊
Two main alternatives were considered, a 1 Mtpa and 2 Mtpa mine. For each of these alternatives
several geological, processing (mining and treatment) and economic factors were considered.
Low $300 /ct vs. Mid $500 /ct vs. High $650 /ct using the estimated grade (average ~ 5.5
cpht)
Toll treatment option vs. Build Own Plant vs. Treat at a refurbished plant
Discount rate 6.5%, with flat USD/BWP exchange rate and flat diamond price vs. Discount rate
5%, with divergent USD/BWP exchange rate and diamond price rises by 3% vs. Discount rate
8%, with fixed USD/BWP exchange rate and flat diamond price.
◊ Other inputs into the model were sample results from the Phase 1 LDD bulk samples; geostatistical
estimating of the grade; several potential mine designs; an economic model based on estimates for
CAPEX and OPEX for each option were considered.
A combination of the alternatives considered returned a range of possible project Net Present Values (NPV)
considering all options. This range analysis suggests that a positive NPV project of ~150 million USD is possible.
The range analysis suggests that at diamond values around $350/ct the target could support a well-managed
toll treatment operation. As the value increase to $500-550 it would be viable to contemplate a variety of low-
capital intensity operations. At values above $600-650/ct the strategy of a developing a stand-alone full-size
operation should be pursued.
These encouraging results suggest that BK16 has the potential to become a mineable asset, and suggest that
the BK16 project employ a surface bulk sample method to augment the Phase 1 LDD sampling for its next stage
of evaluation.
6
Table 2
Phase I diamond valuation details.
Parcel
1
2
3
All
# of Diamonds
94
130
278
502
Total Carats
17.045
17.700
43.195
77.940
US$ / Carat
$195.45
$196.37
$161.03
$176.44
Phase I SFD modelled grade, diamond value and kimberlite value.
Table 3
Variable
Unit of
Measure
BK16
Sample
Grade
cpht
US$/carat
Diamond Value
Kimberlite Value US$/tonne
3.8
177
6.6
Current BK16 SFD Study
Min
4
281
11
P20
5
290
15
P80
7
600
38
Max
8
792
67
Future Plans and Outlook for BK16
The encouraging results from the Phase I program justifies moving onto Phase II which is to increase the
number of carats recovered significantly by processing a far larger sample which will lead to an increase in the
certainty of the grade and diamond value. Phase IIa will consist of the following:
Phase IIa Surface Bulk Sampling:
Extract ~20,000 metric tonnes of kimberlite to obtain 800 to 1,600 carats of diamonds;
Significantly improve the understanding of the grade of the deposit in cpht;
Solidify further the accuracy of the high diamond value in US$ per carat;
Further confirm the presence and quality of the Type IIa diamond population;
Confirm the presence of larger stones and demonstrate that BK16 will be a significant producer of
special stones above 10.8 carats and >100 carat stones;
Define an inferred resource; and,
Further refine the accuracy of the economic fundamentals of the project to move towards detailed
feasibility studies and ultimately mining.
Since the completion of Phase I, the Company has been developing the Phase IIa program with third-parties to
ensure that sufficient carats are obtained in the most cost effective and viable manner. It was determined that a
surface bulk sample of a box-cut style design will be the most economic and viable option for Phase IIa.
Engineering studies undertaken for this surface bulk sample comprise a sample location study to maximize
number of diamonds and a final optimized pit design that takes into account geotechnical parameters signed
off by the independent engineers. Further to this, a detailed rehabilitation plan was created that meets statutory
requirements and will ensure the workings and facilities are safe and restore the environment to as close as
possible to its natural state.
7
The envisioned Phase IIa surface bulk sampling of this type constitutes standard industry practice for diamond
exploration of kimberlites like BK16 to gain enough carats for an effective economic analysis. The Phase IIa bulk
sample design will be a basic small and shallow box-cut style sample. Twenty-five (25) meters of over-burden
will be stripped to expose the kimberlite below resulting in a depth of the box-cut design of 30 - 35 meters. If
results are positive from this Phase IIa then a further phase of bulk sampling will be undertaken (Phase IIb) for a
5,000 tonnes LDD program plus another 20,000 tonnes of surface bulk sample in Phase IIb. Phase IIa and Phase
IIb should provide a total of 1,800 to 3,600 carats from and provide a solid foundation for progressing the BK16
project, where it is envisaged that this will lead into mining of the BK16 kimberlite.
1.2 PL217/2016
PL 217/2016 was acquired in the second quarter of 2017. The license has an effective date of January 1, 2017
for an initial period of 3 years followed by two 2-year renewals. The first renewal was granted on the June 29,
2020 with a commencement date of July 1, 2020 for a period of two years.
The license lies within the OKF and is situated some 10 km south of the Orapa Mining area and with the same
distance to the west of the Letlhakane Mining lease. It surrounds the Karowe Mining lease, while the BK11
prospect is directly to the east of the licence. Other kimberlites occur along its northern and eastern borders.
The licence is highly prospective for kimberlites but also has the potential to contain secondary diamond
deposits associated with the paleo-drainage network in the area. The present drainage is to the north and
erosion of the kimberlites would have resulted in the residue, including diamonds, to have been transported in
the same direction. The focus of the exploration work would therefore be not only on finding kimberlites but
also to assess the geomorphology in the search for paleo-channels and alluvial diamond deposits.
Summary of Work Performed as at December 31, 2020
A novel mix of remote sensing strategies which involved studying in combination air magnetic surveys; Aster
LT1; Aster GED Emissivity; Landsat ETM 7+; Landsat LC08, Landsat 8 False Color, Shuttle Radar Topography
Mission (SRTM) digital elevation models (DEM); and regional digitized geology, helped identify a number of
potential alluvial and kimberlite targets for further exploration.
This initial investigation led to a program of ground magnetics surveys over these targets which were
conducted in two stages, and totaled 246 survey line km. This further refined the understanding of the area and
identified 12 kimberlite targets of which 5 are high priority. Additional high-resolution ground gravity surveys
followed and were conducted along lines perpendicular to the previously identified paleo-channels and also
down stream of AK6 and BK11. Modelling of the ground magnetic and ground gravity data led to the
identification of a number of paleo-channels. Where alluvial gravel paleo-channels have characteristically lower
densities, and as such can be identified as having a lower gravity than the surrounding area. This modelling
8
indicated significant overlaps between these ground geophysical surveys and the remote sensing
interpretations for the locations of subsurface paleo-channel alluvial targets. Several prospective paleo-channel
targets close to present-day drainages have been noted. Those channels may contain alluvial diamonds sourced
from AK6 (Karowe / Lucara Diamond Corp.) and BK11 (Firestone Diamonds) and could contain large diamonds
that are characteristic of AK6.
A detailed ground magnetic survey was conducted also conducted over a small annexed portion of the license
located just east of the Letlhakane Mine which up till now was not studied in detail. This was to investigate
some subtle kimberlite anomalies in the regional aeromagnetic data, and also to map out any ancient paleo-
channels within the area. The results for this ground magnetic survey conclude there is no potential for either a
kimberlite or a diamondiferous paleo-channel within this part of the license, as the paleo-flow direction is in the
wrong direction to source diamonds from the Letlhakane mine. As such no further work is warranted and hence
this small annexed area has been wholly relinquished.
Future Work on PL217/2016
The initial exploration results for the remaining ground within this prospecting license are encouraging and
require further investigation. The next exploration program will consist of:
further high-definition ground magnetic surveys over the license to further test for other potential
diamondiferous paleo-channels;
a soil sampling program has been planned to help delineate drilling targets by identifying kimberlite
indicator areas around some of the kimberlite targets identified;
this will lead to a prioritized drill program to test the alluvial targets and the kimberlite targets; and
if successful and diamonds are identified in either the alluvial targets or the kimberlite targets this will
led to a bulk sampling programs of these prospects.
2. METALS (BASE & PRECIOUS, PLATINUM GROUP METALS, AND RARE EARTH ELEMENTS) PROJECTS
The Company’s current seven Prospecting Licences have evolved with time into a package which covers some
4,920.50 km² (Table 5).
9
Table 5: Gcwihaba Metal Licenses as at December 31, 2020
Prospecting
Km²
Grant
Expiry or
Current
Expenditure*
Total Expenditure
license
Number
Date
Renewal
Stage
Per Annum
from Grant Date and if
Date
(BWP)
held to Full License
Term
Rental
Work
BWP
USD as at
Fee
Program
12/31/202
020/2018
570.00 10/01/18
9/30/21
Initial Grant
2,850
240,000+
248,550
021/2018
964.90 10/01/18
9/30/21
Initial Grant
4,825
240,000+
254,475
022/2018
317.10 10/01/18
9/30/21
Initial Grant
1,586
240,000+
244,758
023/2018
978.60 10/01/18
9/30/21
Initial Grant
4,893
240,000+
254,679
024/2018
807.30 10/01/18
9/30/21
Initial Grant
4,037
240,000+
252,111
025/2018
454.50 10/01/18
9/30/21
Initial Grant
2,273
240,000+
246,819
026/2018
828.10 10/01/18
9/30/21
Initial Grant
4,141
240,000+
252,423
0
23,319
23,875
22,963
23,894
23,653
23,156
23,682
4,920.50
1,753,815
164,542
+ 1st year 70,000 BWP; 2nd year 80,000 BWP; and 3rd year 90,000 BWP
The exploration work conducted on the Gcwihaba licenses has developed over time and the following targets
are currently being explored within Neoproterozoic rocks within the licenses which are comprised of Copper
Belt (Lufilian Arc)-equivalent meta-sediments (including graphitic phyllites, schists, marbles (carbonates),
diamictites, and iron formation), metabasites and gabbros (535 Ma):
1. Xaudum Iron Formation Deposit: Comprised of a magnetite banded iron formation deposit and
iron rich schists that are contained within the Grand Conglomerate Formation (linked to the Chuos
in Namibia);
2. Copper and Cobalt Exploration: Sedimentary Cu/Co (Katanga type sediments) within the entire
Neoproterozoic package;
3. Xaudum Gold Exploration: Gold mineralisation linked to the Xaudum Iron Formation; and
4. Rare Earth Element Exploration: Skarn REE and Cu targets. These are secondary skarn targets
hosted within marbles (carbonate) rich lithologies and include significant enrichment in REE and
Cu.
Summary of Work Performed as at December 31, 2020
Exploration for these metals is driven by geophysics as there is no outcrop and there is significant Kalahari
cover overburden of sands and calcrete. To this end, the Company has completed:
Geophysics: Over 1,800 km2 (~20,000-line km) of ground magnetics which has defined the extent of the highly
magnetic XIF. Airborne electro-magnetic survey
(Spectrem) was
flown
(16,934-line km) collecting
electromagnetic (EM), magnetic and radiometric data. A 10,392-line km at a 500 m flight line interval airborne
10
gravity survey also was flown. These surveys have contributed greatly to advancing the structural and geological
modelling of the area, which have aided immensely in exploration targeting.
Drilling and Assaying: 366 core drill samples totalling 77,174 meters of core, including 116 reflex gyro surveys
and over 51,000 samples were sent for assay. Additionally, a 220-hole drill program (13,689 meter) known as
the Kalahari Geochemistry Program (KGP) was conducted to the test soil overburden for hydromorphic
dispersion of copper and other metals from bedrock mineralization via assaying (8,326 samples assayed for As,
Au, Bi, Co, Pb, Al, Ca, Cu, Mg, Ni, Zn, and Ag) on a 2 km grid to locate targets for further exploration and drilling.
This program identified a number or high priority targets for further exploration.
Xaudum Iron Formation: This is a potential prospect for future mining and has been identified as our key
program. To date drilling of Block 1 the northern part of the XIF deposit resulted in a geology and
mineralisation model being generated using the Gocad modelling package. This model was used by SRK
Consulting (U.K.) to define Gcwihaba maiden Mineral Resource Estimate (MRE) in a National Instrument (NI) 43-
101 technical report for Block 1, via standard pit optimisation techniques. This Block 1 resource is defined as
441 million tonnes (Mt) grading 29.4% Fe, 41.0% SiO2, 6.1% Al2O3 and 0.3% P and represents Botswana’s first
and only iron resource. Davis Tube Recovery (DTR) metallurgical test work showed that all major mineralised
units are capable of producing a premium grade magnetite concentrate product of ~67% Fe. This XIF iron
concentrate product will be very similar to the iron ore concentrate fines and pellets feed produced from
premium iron ore producers in the U.S., Canada, Brazil, Sweden etc. and attract a premium value compared to
standard global iron ore products.
The reported Block 1 Mineral Resource represents only a fraction of the potential XIF mineralization delimited
by the ground magnetics. An Exploration Target for the entire strike of the XIF is estimated to be 5 to 7 billion
tonnes with grades ranging between 15-40% Fe. This XIF Exploration Target was generated using inversion
modelling of the ground magnetic signal which was compared to local drill-hole model volumes to create
inversion model volume conversion factors, these values were used to define volumes for the entire XIF which
were converted to tonnes via measured density values. It is important to note that the tonnages and grade
quoted in this exploration target are conceptual in nature, there has been insufficient exploration to define this
fully as a mineral resource and that it is uncertain if further exploration will result in the full target being
delineated as a mineral resource. A Phase II evaluation drilling program has begun within the next major XIF
magnetic anomaly area, referred to as Block 2. A Block 2 drill plan evaluation was undertaken to delineate
priority areas for the initial next phase of drilling in Block 2. This was initiated by a review of the geophysics and
a scoping level geological model has been drafted to help with drill planning based on current drilling and
geophysical signatures.
11
Copper and Cobalt Exploration: Tsodilo has identified within the same area exciting potential for
Copper/Cobalt, Rare Earth Elements (REE), and Gold within these same Katanga meta-sediments and associated
basement complex. Tsodilo has reviewed and refined its targets to fourteen (14) high priority Cu and Co targets
for further exploration. This work led to a soil sampling program to help define these targets further. 5,071 soil
samples were collected and sieved to 180 mesh from the sub-deflation soil zone during the dry season. The first
targets soil samples were sent for a specialized partial digestion technique which has been specially developed
for sampling in covered terrains called TerraLeach at Intertek laboratories Australia. This data was validated and
further studied to remove geomorphological controls and highlighted a significant target of interest that has be
prioritized for drilling. Further geological interpretation and modelling has been on-going and is designed to
aid in delineating zones of alteration, such as albite and Na-feldspar alteration which act as pathfinders for fluid
flow zones that may help in defining areas that may have potential for Cu mobility. This geological
interpretation program has also aided in our understanding of the geology of the area, where there have been
some significant developments in our regional understanding that are being captured and mapped.
Rare Earth Element Exploration: The Company has identified at least two significant skarn associated
prospects (C26 and C27) that contain a standard suite of ordinary carbonate, silicate, and phosphate REE
minerals of well-established metallurgy that can be exploited easily. The holes in the two skarn anomalies C27
and C26 that stand out as being high in TREO% are as follows:
1822C27_6: C27 skarn anomaly - This hole has the highest TREO recorded at 1.49% at 2m of intervals
over 1% TREO and 4 m of intervals over 0.1% TREO.
1822C27_2: C26 skarn anomaly - This hole has 1m over 1% TREO but has 45m of intervals over 0.1%
TREO.
1822C26_1: C26 skarn anomaly - This hole has 18m of intervals over 0.1% TREO.
1822C26_3: C26 skarn anomaly - This hole has 11m of intervals over 0.1% TREO.
The C27 skarn anomaly, which is the larger of the two skarn prospects, has been modeled to a conceptual
Exploration Target of 76 Mt to 92 Mt of skarn with grades ranging from 0.05 % to 1 % Total Rare Earth Elements
Oxide (TREO). This conceptual C27 skarn anomaly Exploration Target was generated by geologically modelling
in 3 dimensions using the drill-hole intersections of the C27 skarn anomaly allowing volumes representing the
C27 skarn to be generated. These modelled volumes were then turned into the tonnages quoted by using a
likely range of densities for this skarn material of 2.5 to 3.0 g/cm3. It is important to note that the tonnages and
grade quoted in this exploration target is are conceptual in nature, there has been insufficient exploration to
define this fully as a mineral resource and that it is uncertain if further exploration will result in the full target
being delineated as a mineral resource.
Gold Exploration: Several Gold anomalies have been seen within some of the Xaudum Iron Formation drill
holes and associated facies as described above. This gold project has thus far identified that there is potential
for gold mineralization to be associated with the XIF, where an analogy has been drawn to the Homestake gold
12
deposit in South Dakota, US, where phyllites acted as the source for the gold deposited in the XIF material. A
detailed review of all data collected to date assisted in identifying a number of potential gold anomalies for
further study within the drill-hole dataset, these have been used to assess the potential for generating Gold
targets for further exploration within this Xaudum Iron Formation and associated units. This led to a significant
core logging and data mining program to identify current holes that can be processed for gold assay, to date 6
holes have been identified as having potential gold mineralization and are awaiting gold assay.
Future Plans and Outlook - Metals Projects
Xaudum Iron Formation: The Company is currently exploring options for developing the XIF resource. To this
end the Company is looking to initiate a Preliminary Economic Assessment (PEA) for this project. The objective
of this PEA will be to conduct an early-stage economic analysis of the potential viability of the mineral resources
and to develop a general strategy to move the project forward, given its premium ore potential. The PEA will
include detailed studies into; processing and engineering strategies; equipment and technology requirements;
transport and infrastructure requirements; identification of potential environmental and social aspects;
associated costs such as capital costs, operational costs, and life-cycle costs; and, anticipated revenues. The
potential for a small-scale start-up mine supplying magnetite to a small-scale ferrosilicon (FeSi) plant which will
sell FeSi products to the mines in Botswana and the mines in the local SADC area is also being explored as a
way of initiating mining at a small scale while a larger scale mine and infrastructure can be explored and
developed.
Copper and Cobalt Exploration: A detailed review of the data is ongoing to further refine exploration
priorities incorporating new detailed structural and geological mapping data alongside the recent soil sampling
information. This work also includes plotting of alteration data logged and assay generated on geological cross
sections, interpolation of information into a 2D map, improved structural interpretations, which will ultimately
lead to updated drill target recommendations. Remaining soil samples will be sent for TerraLeach analysis to
assist in refining the high priority Cu and Co targets so focused drilling of these targets can occur.
Rare Earth Element Exploration: The next stage for REE exploration is to develop a detailed study of the
geology and facies and alterations associated with the skarns and develop a detailed geological and
mineralization model of these skarn anomalies. This will lead to the development of a REE exploration target
tonnage and grade range that will advance the next stage of REE drilling and exploration program to further
define the grade and tonnage of these REE deposits.
Gold Exploration: The gold logging program will continue and holes identified sent for gold assay, which will
lead to drill target generation for further exploration.
13
3. Newdico (Proprietary) Limited (“Newdico”) – Botswana
The Company holds a 100% interest in Newdico (Pty) Limited (“Newdico”) which holds one (1) industrial mineral
(granite & dolerite) license. The license lies within the Central District of Botswana just to the east of the town of
Nata and has an area of 266 km2. The license is prospective for granites/granitic materials and dolerites that are
industrial minerals used mainly in the construction industry as aggregate. This granite when crushed into a
granular aggregate material of various sizes can be suitable for use either on their own or with the addition of
cement, lime or a bituminous binder in construction. Important applications include concrete, manufactured
sand, mortar, road stone, asphalt, railway ballast, drainage courses and bulk fill. This license is summarized in
Table 6.
Industrial Minerals Prospecting License as at December 31, 2020
Table 6
Prospecting
Km²
Grant
Expiry or
Current
Expenditure1
Total Expenditure
License
Number
Date
Renewal
Stage
Per Annum
from Grant Date and
Date
(BWP)
if held to Full License
Term
Rental
Work
BWP
USD as at
Fee
Program
12/31/2020
091/2019
566
01/01/20
12/31/22
Initial
Grant
2,830
130,000
132,830
12,462
+ 1st year 30,000 BWP; 2nd year 60,000 BWP; and 3rd year 40,000 BWP
Summary of Work Performed as at December 31, 2020
A desktop study of the regional geophysical magnetic data was undertaken in the license area in order to
delineate granite and/or dolerite buried beneath the Kalahari. The local geology is characterized by basement
complex outcropping mainly in the northeast corner of the Dukwe area, which is to the east of the license area.
There is some exposure around the Matsitama river where it was mapped as a gneiss and was described as
varying in texture “from fine-grained and granulitic – or schistose – to medium or coarse-grained and granitic”
falling into two broad lithological types; the feldspathic schists and amphibolitic schist. Overlaying the complex
is a succession of Dukwe formations which is the lowest part of the Karoo Supergroup. It comprises of
sedimentary rocks which from the lower part, including beds of sandstone. The upper member is a sequence of
varved shales within a thin bed gritty pellet conglomerate. Overlying the Dukwe formation are successions of
the Mosu and Ntane sandstones. Capping the Ntane sandstones are the Karoo flood basalts, and these can be
inferred from the magnetic structures within the license area.
The Total Magnetic data was reduced to the pole, from which various filters were applied to obtain the first and
second derivatives, Analytical Signal and Tilt derivative maps were utilized enabling an interpretation to be
14
performed. Magnetic “granitic textures” were visible from these maps and inferred granite was outlined. Further
review of the data will take place before field work commences.
4. Idada Trading 361 (Pty) Limited (“Idada”) – Barberton Gold Project, South Africa
Barberton is situated in the De Kaal Valley at the southeastern edge of De Kaap Valley pluton and is fringed by
the Makhonjwa Mountains (Barberton Mountain Land). The Barberton area has a long and colorful history of
gold production producing an estimated 360 tonnes of Au between 1884 and 2012, worth over $13 trillion USD
at today’s gold prices. However, it is noted that around 70% of this was extracted from four main mines Sheba,
New Consort, Fairview and Agnes.
A detailed high-quality aerial survey over the Barberton region in 2011 identified hidden structures and faults
that were unknown prior to the survey. This survey has suggested that the Saddleback-lnyoka Shear Zone and
the southwesterly extension of the Barbrook and Sheba faults are possibly continuous to the northwest rather
than turning south as previously inferred. These fault and shear zones are vitally important and are the main
host of gold in the region. As such this new structural interpretation led to the company to apply for ground
over this new northwest extension of this fault system, via its South African subsidiary Idada in the anticipation
that it may host significant gold mineralization.
The Company holds a 70% interest in its South African subsidiary, Idada. Idada made application for this
exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in February 2012. This application was
accepted in February 2013 and consultation was conducted with interested and affected parties in April and
June 2013. An Environmental Management Plan (EMP) was submitted in April 2013 and a site visit was made by
various governmental departments (DMR, EWT, and REMDEC) in September 2013. During the second quarter
2015, notice was received from the Department of Mineral Resources, South Africa which granted the Company
the prospecting rights for gold and silver in the applied for area subject to certain subsequent conditions being
met. The Company has fulfilled those requirements and the Prospecting Right, together with the EMP, was
executed and became effective on April 7, 2016. The Prospecting Right has been granted for a term of five years
effective May 2015.
Notices have been sent to all surface owners of the five farms informing the owners of our intent to access the
property to commence exploration activities. Three land owners, holding most of the target ground, have
denied access. This issue has been submitted to the Department of Mineral Resources (DMR) for resolution.
During the third quarter 2019, the Company was informed that certain portions of our license areas were
designated as a World Heritage site by UNESCO. UNESCO has informed the Company that in accordance with
the Operational Guidelines for the Implementation of the World Heritage Convention, UNESCO are
15
investigating the situation that the Company brought to their attention. UNESCO has informed us that
according to IUCN, the Advisory Body to the intergovernmental World Heritage Committee concerning
nominations of natural heritage sites on the World Heritage List, the overlapping prospecting license on the
western portion of the property or of the presence of Tsodilo Resources Ltd was not brought to the attention of
IUCN during the evaluation process. The documentation related to the evaluation and inscription of the site on
the World Heritage List from UNESCO’s website at: http://whc.unesco.org/en/list/1575/documents.
As the responsibility for nominating sites to the World Heritage List and the management and protection of the
World Heritage properties inscribed is under the authority of the State Party of South Africa, UNESCO advised
us that they would be contacting the appropriate South African office for clarification. To date, it is our
understanding that neither the Department of Mineral Affairs (DMA) nor the Department of Environmental
Affairs has responded to UNESCO’s inquiry. In addition to UNESCO’s inquiries, we also contacted the DMA for
guidance and received a response but before the issue could be dealt with the South African government was
shut down due to the COVID-19 virus. We will continue our efforts to engage the DMA once the government
resumes its activities on a full-time basis. In the interim, we have filed a renewal application to protect our
license rights.
Summary of Work Performed as at December 31, 2020
A desktop study of all published and available geological, geochemical, and geophysical data was undertaken
to define the geology, and structural regime of the area, including the dip of the target fault structure. This
study also incorporated various remote sensing data sets including open-source Landsat satellite imagery and
Aster hyperspectral data, this has enhanced our understanding of the geomorphology and the interplay this has
with the geology, the important local weathering regimes and soil occurrences. All the known gold and base
metal occurrences in the immediate area were georeferenced and added to the database. This led to the East
Northeast – West Southwest orientated mineralized thrust fault zones being incorporated into our detailed
geological interpretation, including areas that intersect the main target fault zone located on the property, and
as such have been highlighted for priority exploration. This has given the company all the information it
requires to move into the next “ground truthing” phase of the exploration program.
Future Plans and Outlook for the Barberton Gold Project Once the issues with the surface owners and
UNESCO have been resolved the Company will commence a mapping exercise based on the geological
information acquired by the desktop study to verify the local geology, various geological features, and soil
types. Some soil and/or stream samples are planned to be taken, which will be followed by a detailed ground
magnetic survey to cover the main shear/fault zone in the area to help define drill target locations so to
intersect this structural feature, and identify if there is any significant gold mineralization present in the license.
16
Covid-19 Pandemic Relief
In the first Quarter of 2020, the Company initiated efforts to get Covid-19 relief from expenditure and work
requirements on our prospecting licenses due to the exceptional and debilitating global effects of the Covid-19
pandemic. In June 2020, the Ministry of Mineral Resources, Green Technology and Energy Security informed
those holding prospecting licenses that they would entertain granting relief from work and expenditure
requirements on a case-by-case basis. Applications for relief were filed for the Gcwihaba and Bosoto licenses
and on January 8, 2021 the Ministry in accordance with Section 22 of the Mines and Minerals Act, approved the
cancellation of one (1) year of prospecting programme of Bosoto Prospecting License numbers PL 369/2014
and PL 217/2016 and Gcwihaba Prospecting Licenses numbers PL 020 - 026/2018 with effect from April 1, 2020.
Exploration and evaluation additions for the year-ended December 31, 2020 are summarized as follows:
Drilling Expenditures
Amortization Drill Rigs, Vehicles &
Trucks
GIS & Geophysics
Lab Analyses & Assays
License Fees
Office, Maintenance, & Consumables
Salaries, Wages & Services
Project
BK 16
Precious
Stones
$ 1,558
--
--
31,753
87
20,015
71,761
Bosoto
Botswana
Project
PL 217
Precious
Stones
Bosoto
Total
$ 749
$ 2,307
--
--
31,753
--
--
--
Newdico
Botswana
Project
PL091
Industrial
Minerals
$ 5,608
56,932
--
--
--
5,046
19,120
87
25,061
90,881
--
16,817
54,518
Idada
S. Africa
Precious
Metals
Gcwihaba
Botswana
Metals
$ --
--
--
--
--
--
--
$ 11,019
--
--
--
2,138
12,246
36,107
TOTAL
$18,934
56,932
--
31,753
2,225
54,124
181,506
Balance at December 31, 2020
$125,174
$24,915 $150,089 $133,875
$ --
$61,510
$345,474
Exploration and evaluation additions for the year-ended December 31, 2019 are summarized as follows:
Bosoto
Botswana
Project
PL 217
Precious
Stones
$ 1,018
Bosoto
Total
$ 17,140
Newdico
Botswana
Project
PL091
Industrial
Minerals
$ --
Project
BK 16
Precious
Stones
$ 16,122
Idada
S. Africa
Precious
Metals
Gcwihaba
Botswana
Metals
TOTAL
$ --
$ 15,941
$ 33,081
--
--
--
--
--
--
19,131
93,414
--
--
2,257
--
8,395
2,257
15,108
128,346
46,712
358,525
--
--
--
--
--
--
Drilling Expenditures
Amortization Drill Rigs, Vehicles &
Trucks
GIS & Geophysics
Lab Analyses & Assays
License Fees
41,085
33,198
74,283
--
8,395
--
--
--
--
--
8,395
--
Office, Maintenance, & Consumables
Salaries, Wages & Services
26,973
121,273
4,631
108,906
31,604
230,179
Balance at December 31, 2019
$213,848 $147,753 $361,601
$--
$ -- $180,783
$542,384
17
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2020, the Company had a negative working capital of ($1,811,417) [2019: ($1,564,441)],
which included cash of $5,620 (2019: $5,599). These funds are managed in-house in accordance with specific
investment criteria approved by the board of directors, the primary objective being the preservation of capital
to assure funding for exploration activities.
On July 23, 2020, the Company reached an agreement with TBM (Pty) Ltd. ("TBM") to grant royalties on its
Botswana subsidiary Gcwihaba (Pty) Ltd. ("Gcwihaba") seven (7) metal licenses (base and precious minerals,
platinum group metals and rare-earth elements) projects in consideration of the payment of $500,000 USD.
On July 27, 2020, $61,864 in notes were paid and retired to an employee and director of the Company.
On October 1, 2020, a promissory note was issued for $196,053 to an employee, who is a director of the
Company. The note is payable on demand and has an annual interest rate of 8%.
As at December 31, 2020, term notes payable had outstanding balances of $1,055,735 from related parties,
contractors and employees as settlement of compensation, service fees and expenses payable. The notes have
an annual interest rate of 8% and are due September 30, 2020, December 30, 2020 and June 30, 2021. The notes
carry a termination fee of 10% upon early redemption of the notes for which there is an embedded derivative
arising – the fair value of this is NIL. There was no material gain / (loss) arising on this. In addition, at the option
of the note holders, the notes can be converted to stock during future private placements that raise a minimum
of CAD $500,000, at the price of those future private placements. $843,576 of the notes was from related parties
(see note 9).
Summary of Notes December 31, 2020 are as follows:
Date
Balance
January 1, 2020
Changes
in 2020
Balance
December 31, 2020
Interest
Rate
Termination
Fee
Maturity
Date
1-Oct-18
31-Dec-18
31-Jan-19
30-June-19
30-Sept-19
31-Dec-19
01-Oct-20
20,000
(14,181)
443,343
(96,764)
85,000
293,687
--
--
98,146
(61,684)
95,146
--
192,042
5,819
347,579
85,000
293,687
36,462
95,146
192,042
8%
8%
8%
8%
8%
8%
8%
2,000
30-Sep-20
44,434
31-Dec-20*
8,500
31-Jan-21
8,646
31-Dec-20
3,646
31-Dec-20
3,746
31-Dec-20
NIL
30-Jun-21
Total
$1,036,322 $19,413
$1,055,735
$70,972
*Subsequent to December 31, 2020, $237,005 of notes payable had it’s maturity date extended from
December 31, 2020 to December 31, 2021.
18
On July 24, 2020, $61,684 in promissory notes were paid and retired to an employee and director of the
Company.
On October 1, 2020, a promissory note was issued for $192,042 to an employee, who is a director of the
Company.
On December 31, 2020, $110,945 in promissory notes were extinguished upon option issuance and retired
to an employee and directors of the Company
The notes payable at April 9, 2021 are summarized as follows:
Date
Balance
December 31, 2020
Changes
in 2021
Balance
April 9, 2021
Interest
Rate
Termination
Fee
Maturity
Date
1-Oct-18
31-Dec-18
31-Jan-19
30-June-19
30-Sept-19
31-Dec-19
01-Oct-20
5,819
(5,819)
--
347,579
(74,574)
273,005
85,000
(85,000)
--
293,687
(86,446)
207,241
36,462
(36,462)
--
95,146
(37,462)
57,684
192,042
--
192,042
8%
8%
8%
8%
8%
8%
8%
--
--
27,300
30-Dec-21
--
--
NIL On Demand
--
--
NIL On Demand
NIL On Demand
Total
$1,055,735
($325,763)
$729,972
$27,300
Financial Instruments
The carrying amounts reflected in the consolidated Statement of Financial Position for cash, accounts
receivable, accounts payable, accrued liabilities and loan notes payable approximate their fair values due to the
maturities of these instruments. Certain of the Company’s warrants are classified as derivative liabilities and are
recorded at their estimated fair value. There are no warrants outstanding in any of the reporting periods. Due
to the nature of the Company’s operations, there is no significant credit or interest rate risk.
Operating Activities
Cash outflow used in operating activities before working capital adjustment increased to an outlay of ($634,794)
from the year-ended December 31, 2020 from an outlay of ($386,567) for the year-ended December 31, 2019.
Overall operating expenses slightly decreased for the year-ended December 31, 2020 in total expenses by a
$19,921 reduction compared to 2019. One large operating expense reduction for 2020 was in stock-based
compensation expense $65,812 compared to 2019. The largest impacts on loss for the year were the services
income reduction of $201,427 and for disposal of property, plant and equipment reduction of 201,600 from
2019. The largest impact on Comprehensive loss for the year was foreign exchange translation loss of $171,480
in 2020, compared to a gain of $115,543 in 2019.
19
Annual Information
(in US Dollars)
Fiscal Year
December 31
2020
Fiscal Year
December 31
2019
Fiscal Year
December 31
2018
Net income (loss) for the year
Basic loss per share
Basic diluted loss per share
Total other comprehensive income (loss)
Total comprehensive income (loss) for the year
Basic comprehensive loss per share
Diluted comprehensive loss per share
Total assets
Total long-term liabilities
Cash dividend
($654,974)
($0.01)
($0.01)
(171,480)
($826,404)
($0.02)
($0.02)
$7,377,506
$--
--
($297,611)
($0.01)
($0.01)
115,543
($182,068)
($0.00)
($0.00)
$7,742,854
$--
--
($1,015,437)
($0.03)
($0.03)
(660,663)
($1,676,100)
($0.04)
($0.04)
$7,158,233
$464,343
--
Quarterly Information
(in US Dollar)
Fiscal Period ended December 31, 2018
Net income (loss) for the period
Basic income (loss) per share
Diluted basic income (loss) per share
Comprehensive income (loss) for the period
Basic comprehensive income (loss) for the period
Diluted comprehensive income (loss) per share
Total assets
Total long-term liabilities
Quarterly Information
(in US Dollar)
Fiscal Period ended December 31, 2019
Net income (loss) for the period
Basic income (loss) per share
Diluted basic income (loss) per share
Comprehensive income (loss) for the period
Basic comprehensive income (loss) for the period
Diluted comprehensive income (loss) per share
Total assets
Total long-term liabilities
Quarterly Information
(in US Dollars)
Fiscal Period ended December 31, 2020
Net income (loss) for the period
Basic income (loss) per share
Diluted basic income (loss) per share
Comprehensive income (loss) for the period
Basic comprehensive income (loss) for the period
Diluted comprehensive income (loss) per share
Total assets
Total long-term liabilities
Quarter 1 Quarter 2 Quarter 3 Quarter 4
($285,524)
($0.01)
($0.01)
$151,822
($0.00)
($0.00)
$8,074,849
--
($239,001)
($0.00)
($0.00)
($1,061,034)
($0.02)
($0.02)
$7,157,478
--
($208,679)
($0.00)
($0.00)
($351,854)
($0.01)
($0.01)
$6,982,227
--
($282,233)
($0.01)
($0.01)
($415,034)
($0.01)
($0.01)
$8,227,394
$464,343
Quarter 1
Quarter 2 Quarter 3 Quarter 4
($64,605)
($0.00)
($0.00)
$35,244
($0.00)
($0.00)
$7,370,351
$549,343
($65,588)
($0.00)
($0.00)
(51,766)
($0.00)
($0.00)
$7,530,085
$624,107
$66,043
($0.00)
($0.00)
(246,799)
($0.01)
($0.01)
$7,370,436
$613,337
($233,461)
($0.01)
($0.01)
81,253
($0.00)
$0.00
$7,742,854
--
Quarter 1 Quarter 2 Quarter 3 Quarter 4
($89,776)
($0.00)
($0.00)
($1,209,629)
($0.03)
($0.03)
$6,637,478
--
($124,636)
($0.00)
($0.00)
($145,209)
($0.00)
($0.00)
$6,693,750
--
$320,401
$0.01
$0.01
$452,654
$0.01
$0.01
$6,982,140
--
($760,913)
($0.02)
($0.02)
$75,780
$0.00
$0.00
$7,377,506
--
20
Investing Activities
Cash flow applied in investing activities increased to $290,148 for the year-ended December 31, 2020 [2019:
($136,580)].
Total expenditures of $345,474 on exploration properties for the year-ended December 31, 2020 were
attributable to the Gcwihaba, Newdico and Bosoto projects in northwest Botswana and the Idada project in
Barberton, South Africa. There were no material expenses or funding of the exploration projects in the year as
the Covid-19 pandemic reduced operation activities.
Financing Activities
The Company finances its corporate and exploration activities through the issuance of equity units by way of
non-brokered private placements. Each unit has consisted of one common share of the Company and one
warrant with each full such warrant entitling the holder to purchase one common share of the Company for a
purchase price equal to the unit price for a period of two years from the date of issuance. No private
placements took place in 2020 or 2019.
In the third quarter of 2017, the Company reached an agreement with Sandstorm Gold Ltd. ("Sandstorm")
(NYSE MKT: SAND, TSX: SSL) to grant royalties on three projects in consideration of the payment of $1,500,000.
The package of assets in the Royalty Sale includes:
1.
2.
3.
the grant of a 1% NSR on the Company's wholly owned Botswana subsidiary Gcwihaba Resources (Pty)
Ltd. prospecting metal licenses in northwest Botswana;
the grant of a 1% GPR on the Company's Botswana wholly owned subsidiary Bosoto (Pty) Ltd. precious
stone prospecting license (PL217/2016) located in the Orapa Kimberlite Field; and,
the grant of a 1% NSR on the Company's 70% owned South African subsidiary Idada 361 (Pty) Ltd.
gold and silver prospecting license located in the Barberton Greenstone Belt in the Mpumalanga
province of South Africa.
Sandstorm shall have a right of first refusal with respect to any third-party bona fide offers to purchase a metal
or precious stone royalty on the properties.
On July 23, 2020, the Company reached an agreement with TBM (Pty) Ltd. ("TBM") to grant royalties on its
Botswana subsidiary Gcwihaba (Pty) Ltd. ("Gcwihaba") seven (7) metal licenses (base and precious minerals,
platinum group metals and rare-earth elements) projects in consideration of the payment of $500,000 USD.
On January 25, 2021, the Company closed the first tranche of a private placement financing (the "Financing") for
gross proceeds to the Company of C$1,343,019. Pursuant to the Financing, the Company issued 2,686,038 units
of securities of the Company (the "Units") at a subscription price of C$0.50 per Unit. Each Unit is comprised of
21
one common share in the capital of the Company ("Common Share") and one common share purchase warrant
("Warrant"). Each Warrant entitles the holder thereof to purchase one Common Share for a period of 24 months
from the date of issuance at an exercise price of USD$0.55.
On February 10, 2021, the Company closed the second and final tranche of the Financing for gross proceeds to
the Company of C$150,000. Pursuant to the Financing, the Company issued 300,000 units of securities of the
Company at a subscription price of C$0.50 per Unit. Each Unit is comprised of one common share in the capital
of the Company ("Common Share") and one common share purchase warrant. Each Warrant entitles the holder
thereof to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price
of USD$0.55.
Tsodilo expects to raise the amounts required to fund the Newdico, Gcwihaba, Bosoto and Idada projects and
corporate general and administration expenses, by way of non-brokered private placements and joint ventures.
On March 4, 2021, the Company’s stock began trading on the US OTCQB Venture Market under the symbol
"TSDRF".
RESULTS OF OPERATIONS
On a consolidated basis, the Company recorded a comprehensive net loss of $826,404 for the year-ended
December 31, 2020 – ($0.02) per common share, compared to a comprehensive net loss of $182,068 for the
year-ended December 31, 2019 ($0.00) per common share.
Total capitalized exploration expenditures including amortization of property, plant and equipment used in
exploration activities on all projects amounted to net $7,063,327 as at December 31, 2020 compared to
$7,391,765 as at December 31, 2019. Total capitalized exploration expenditures incurred on the Newdico
project as at December 31, 2020 was $141,691 compared to NIL as at December 31, 2019. Additions of
$133,875 in 2020 were offset by exchange translations in 2020. Total capitalized exploration expenditures
incurred on Gcwihaba’s projects as at December 31, 2020 were $2,482,155 compared to $2,988,190 as at
December 31, 2019. Additions of 61,510 in 2020 were offset by exchange translations in 2020. During the year
the Company sold royalties of $500,000 which were a reduction to Gcwihaba’s exploration properties. Total
capitalized exploration expenditures incurred on Bosoto’s projects as at December 31, 2020 were $4,431,690
compared to $4,395,453 as at December 31, 2019. Additions of ($150,089) in 2020 were offset by exchange
translations in 2020. Total capitalized exploration expenditures incurred on the Idada’s project as at December
31, 2020 was $7,792 compared to $8,122 as at December 31, 2019. There were no additions and the difference
is exchange translations in 2020. A table is presented in the Exploration and Evaluation Additions section above
with specific details.
22
PERSONNEL
At December 31, 2020, the Company and its subsidiaries employed ten (10) compared to fifteen (15) at
December 31, 2019, including senior officers, administrative and operations personnel including those on a
short-term service basis.
YEAR-ENDED DECEMBER 31, 2020
The year-ended December 31, 2020 was conservative with an operating period challenged by the COVID-19
restrictions and uncertainty. Operating expenses were at normal levels for the period. See COVID-19 discussions
below.
RISKS AND UNCERTAINTIES
Operations of the Company are speculative due to the high-risk nature of its business which includes
acquisition, financing, exploration and development of diamond and metal properties (collectively “mineral”).
Material risk factors and uncertainties, which should be taken into account in assessing the Company's activities,
include, but are not necessarily limited to, those set below. Any one or more of these risks and others could
have a material adverse effect on the Company.
COVID-19 Global pandemic risk
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a global
pandemic. The majority of governments across the jurisdictions in which Tsodilo operates declared a state of
emergency in response to the COVID-19 pandemic.
In March 2020, the Company implemented a crisis management strategy in relation to COVID-19, to protect the
health and well-being of its employees in Botswana under new measures and guidelines implemented by the
Government of Botswana.
Tsodilo’s planned work programs for 2020 were largely focused on the further evaluation of its Bosoto BK16
diamond project and further exploration on its Gcwihaba metals project. Given the present uncertainty related
to 2021 funding, a review of these programs is being performed to focus on critical-path items through 2021.
Despite the challenges presented by the COVID-19 pandemic, as at December 31, 2020 the evaluation and
exploration continue to operate, with social distancing and other critical health and safety measures designed
to limit the spread of the virus being observed.
23
As a relatively novel risk, the duration and full financial effect of the COVID-19 pandemic is unknown at this
time, as is the efficacy of government and central bank interventions in the jurisdictions in which Tsodilo
operates. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic
and the impacts of COVID-19 on our business, including the duration and impact that it may have on our ability
to raise funds to independently finance continued exploration through joint ventures; providing commercial
services to third parties; the sale or lease of equipment; or, the sale of a partial interest in a project cannot be
reasonably estimated at this time. Accordingly estimates of the extent to which the COVID-19 pandemic may
materially and adversely affect the Company’s operations, financial results and condition in future periods are
also subject to significant uncertainty.
Covid-19 Pandemic Relief
In the first Quarter of 2020, the Company initiated efforts to get Covid-19 relief from expenditure and work
requirements on our prospecting licenses due to the exceptional and debilitating global effects of the Covid-19
pandemic. In June 2020, the Ministry of Mineral Resources, Green Technology and Energy Security informed
those holding prospecting licenses that they would entertain granting relief from work and expenditure
requirements on a case-by-case basis. Applications for relief were filed for the Gcwihaba and Bosoto licenses
and on January 8, 2021 the Ministry in accordance with Section 22 of the Mines and Minerals Act, approved the
cancellation of one (1) year of prospecting programme of Bosoto Prospecting License Nos. PL 369/2014 and PL
217/2016 and Gcwihaba Prospecting Licenses Nos. PL 020 - 026/2018 with effect from April 1, 2020.
Additional Funding Requirements
Further development and exploration of the various mineral projects in which the Company holds an interest
depends upon the Company's ability to obtain financing through equity or debt financing, joint ventures or
other means. While the Company has been successful in the past in obtaining financing through the sale of
equity securities and royalty transactions, there can be no assurance that the Company will be successful in
obtaining additional financing in the amount and at the time required and, if available, that it can be obtained
on terms satisfactory to the Company.
These consolidated financial statements have been prepared on the basis of accounting principles applicable to
a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the
normal course of business. The Company incurred a loss of $654,924 and comprehensive loss of $826,404
during the year ended December 31, 2020 and as of that date, the Company had an accumulated deficit of
$49,834,360 and negative working capital of ($1,811,417). Management has carried out an assessment of the
going concern assumption and has concluded that the cash position of the Company is not sufficient to finance
exploration and resource evaluation at the projected levels, and to finance continued operations for the 12-
month period subsequent to December 31, 2020. The continuity of the Company’s operations is dependent on
24
raising future financing for working capital, the continued exploration and development of its properties and for
acquisition and development costs of new projects.
Management believes that it will be able to secure the necessary financing through a combination of the issue
of new equity or debt instruments, the entering into of joint venture arrangements or the exercise of warrants
and options for the purchase of common shares. However, there is no assurance the Company will be successful
in these actions. There can be no assurance that adequate financing will be available, or available under terms
favorable to the Company.
Should it be determined that the Company is no longer a going concern, adjustments, which could be
significant, would be required to the carrying value of assets and liabilities. These consolidated financial
statements do not reflect the adjustments to the carrying value of assets and liabilities, or the impact on the
consolidated statement of operation and comprehensive income (loss), and consolidated statement of financial
position classifications that would be necessary were the going concern assumption not appropriate.
Failure to obtain equity or debt financing on a timely basis may cause the Company to postpone its exploration
and development plans or forfeit rights in some of its projects.
Uncertainties Related to Mineral Resource Estimates
There is a degree of uncertainty attributable to the calculation of mineral resources and corresponding grades
being mined or dedicated to future production. Until resources are actually mined and processed, the quantity
of resources and grades must be considered as estimates only. In addition, the quantity and value of reserves or
resources June vary, depending on mineral prices. Any material changes in the quantity of resources, grades or
stripping ratio June affect the economic viability of the Company's properties. In addition, there is no assurance
that recoveries in small-scale laboratory tests will be duplicated in larger-scale tests under on-site conditions, or
during production. Determining the economic viability of a mineral project is complicated and involves a
number of variables.
Commodity Prices and Marketability
The mining industry, in general, is intensely competitive and there is no assurance that, even if commercial
quantities of minerals are discovered, a profitable market will exist for the sale of minerals produced. Factors
beyond the control of the Company June affect the marketability of any minerals produced and which cannot
be accurately predicted, such as market fluctuations, and such other factors as government regulations,
including regulations relating to royalties, allowable production, importing and exporting of minerals and
environmental protection, any combination of which factors June result in the Company not receiving an
25
adequate return on investment capital. Prices received for minerals produced and sold are also affected by
numerous factors beyond the Company's control such as international economic and political trends, global or
regional consumption and demand and supply patterns. There is no assurance that the sale price of minerals
produced from any deposit will be such that they can be mined at a profit.
Currency Risk
The Company's business is mainly transacted in Botswana Pula and U.S. dollar currencies. As a consequence,
fluctuations in exchange rates June have a significant effect on the cash flows and operating results of the
Company in either a positive or negative direction.
Foreign Operations Risk
The Company's current significant projects are located in Botswana. This exposes the Company to risks that may
not otherwise be experienced if its operations were domestic. The risks include, but are not limited to,
environmental protection, land use, water use, health safety, labor, restrictions on production, price controls,
currency remittance, and maintenance of mineral tenure and expropriation of property. There is no assurance
that future changes in taxes or such regulation in the various jurisdictions in which the Company operates will
not adversely affect the Company's operations. Although the operating environments in Botswana are
considered favorable compared to those in other developing countries, there are still political risks. These risks
include, but are not limited to terrorism, hostage taking, military repression, expropriation, extreme fluctuations
in currency exchange rates, high rates of inflation and labor unrest. Changes in mining or investment policies or
shifts in political attitudes may also adversely affect the Company's business.
Mineral Exploration and Development
The business of exploring for minerals and mining is highly, speculative in nature and involves significant
financial and other risks which even careful evaluation, experience and knowledge June not eliminate. There is
no certainty that expenditures made or to be made by the Company in exploring and developing mineral
properties in which it has an interest will result in the discovery of commercially mineable deposits. Most
exploration projects do not result in the discovery of commercially mineable deposit. While discovery of a
mineral deposit June result in substantial rewards, few properties which are explored are ultimately developed
into producing mines. Major expenses June be required to establish reserves by drilling and to construct mining
and processing facilities at a site. There can be no guarantee that exploration programs carried out by the
Company will result in the development of profitable mining operations.
26
Title Matters
Any changes in the laws of Botswana and South Africa relating to mining could have a material adverse effect to
the rights and title to the interests held in those countries by the Company. No assurance can be given that
applicable governments will not revoke or significantly alter the conditions of applicable exploration and mining
authorizations nor that such exploration and mining authorizations will not be challenged or impugned by third
parties.
Infrastructure
Exploration, development, mining and processing activities depend on the availability of adequate
infrastructure. Reliable roads, bridges, sewer and water supply are important determinants which affect capital
and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in
the maintenance of provision of such infrastructure could adversely affect activities and profitability of the
Company.
Uninsured Risks
The mining business is subject to a number of risks and hazards including, but not limited to, environmental
hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other
geological or grade problems, encountering unanticipated ground or water conditions, cave~ ins, pit wall
failures, flooding, rock bursts, periodic interruptions due to inclement or hazardous weather conditions and
other acts of God. Such risks could result in damage to mineral properties or facilities, personal injury or death,
environmental damage, delays in exploration, development or mining, monetary losses and possible legal
liability. The Company maintains insurance against certain risks that are associated with its business in amounts
that it believes to be reasonable at the current stage of operations. There can be no assurance that such
insurance will continue to be available at economically acceptable premiums or will be adequate to cover any
future claim.
Key Personnel
The Company is dependent upon on a relatively small number of key employees, the loss of any of whom could
have an adverse effect on the Company. The Company currently does not have key personal insurance on these
individuals.
New Standards, Amendments and Interpretations Adopted
There are no other standards which the Company would have been required to adopt in the period.
27
New Standards, Amendments and Interpretations Not Yet Effective
Certain pronouncements were issued by the ISAB or the IFRS Interpretive Committee that are mandatory for
accounting periods beginning January 1, 2021 or later periods. These standards are not expected to have a
material impact on the Company.
Classification of Liabilities as Current or Non-current (Amendment to IAS 1)
The amendment to IAS 1 provide a more general approach to the classification of liabilities based on the
contractual agreements in place at the reporting date. These amendments are effective for the reporting dates
beginning on or after January 1, 2023.
RELATED PARTY TRANSACTIONS
Remuneration of Key Management Personnel of the Company
Short term employee remuneration and benefits
$278,106
$291,312
Stock based compensation
38,521
102,016
Total compensation attributed to key management personnel
$316,627
$393,328
2020
2019
During the year an individual related to the CEO provided administrative and management services to the
Company and was remunerated in 2020 in the amount of $48,000 (2019: $41,000).
During the year, individuals related to key management personnel of the company received NIL in stock based
compensation during the period (2019: $5,536).
Board members were issued notes in the amount of $843,576 (2019: $721,803).
As at December 31, 2020, there was a total of $85,038 (2019: $56,935) payables to related parties included
within accounts payable and accrued liabilities.
There are no other related party transactions.
OUTLOOK
Precious stones and metals exploration remain a high-risk undertaking requiring patience and persistence.
Despite difficult capital markets in the junior resource sector and the general decrease in commodity prices, the
Company remains committed to international commodity exploration through carefully managed programs.
The Company does not invest in financial instruments, nor does it do any hedging transactions.
ADDITIONAL INFORMATION
Additional information relating to Tsodilo Resources Limited is available on its website at:
www.TsodiloResources.com or through SEDAR at www.sedar.com
28
FORWARD-LOOKING STATEMENTS
The Annual Report, including this MD&A, contains, contains certain forward-looking statements related to,
among other things, expected future events and the financial and operating results of the Company. Forward-
looking statements are based on the opinions, assumptions and estimates of management as of the date such
statements are made, and they are subject to a number of known and unknown risks, uncertainties and other
factors which June cause the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievement expressed or implied by such forward-looking
statements. Such assumptions include: the Company’s ability to obtain necessary financing; the Company’s
expectations regarding the economy generally, results of operations and the extent of future growth and
performance; and assumptions that the Company’s activities will not be adversely disrupted or impeded by
development, operating or regulatory risk. The Company believes that expectations reflected in this forward-
looking information are reasonable but no assurance can be given that these expectations will prove to be
correct and such forward-looking information included in this MD&A should not be unduly relied upon.
There can be no assurance that such statements will prove to be accurate, as the Company’s results and future
events could differ materially from those anticipated in this forward-looking information as a result of those
factors discussed in or referred to under the heading “Risks and Uncertainties” in the Company’s AIF, as well as
changes in general business and economic conditions, changes in interest and foreign currency rates, the
supply and demand for, deliveries of and the level and volatility of prices of rough diamonds, costs and
availability of power and diesel, acts of foreign governments and the outcome of legal proceedings, inaccurate
geological and recoverability assumptions (including with respect to the size, grade and recoverability of
mineral reserves and resources) and unanticipated operational difficulties (including failure of plant, equipment
or processes to operate in accordance with specifications or expectations, cost escalations, unavailability of
materials and equipment, government action or delays in the receipt of government approvals, industrial
disturbances or other job actions, adverse weather conditions, and unanticipated events relating to health
safety and environmental matters).
Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date the statements were made, and the Company does not assume any obligations to
update or revise them to reflect new events or circumstances, except as required by law.
James M. Bruchs
Chairman and Chief Executive Officer
Gary A. Bojes
Chief Financial Officer
29 TSODILO RESOURCES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020
30 Financial Reporting Responsibility of Management
The annual report and consolidated financial
reporting
and
internal
control.
The Audit
statements have been prepared by management.
Committee is composed of three directors, all of
The consolidated financial statements have been
whom qualify as unrelated directors and are
prepared
in accordance with
International
independent of management and free from any
Financial Reporting Standards and
include
interest or business relationship which could, or
amounts that are based on informed judgments
could be perceived to materially interfere with
and best estimates. The financial
information
their ability to act in the best interests of the
presented in this annual report is consistent
Company. This committee meets periodically with
with
the consolidated
financial
statements.
management and the external auditors to review
Management acknowledges responsibility for the
accounting, auditing, internal control and financial
fairness,
integrity
and objectivity of
all
reporting matters. The Audit Committee reviews
information contained
in the annual report
the annual financial statements before they are
including the consolidated financial statements.
presented to the Board of Directors for approval
Management
is
also
responsible
for
the
and considers the independence of the auditors.
maintenance of financial and operating systems,
which
include effective controls
to provide
The consolidated financial statements for the year
reasonable assurance that assets are properly
ended December 31, 2020 have been audited by
protected and that relevant and reliable financial
Crowe MacKay LLP external auditors, in accordance
information
is produced. Our
independent
with Canadian generally
accepted
auditing
auditors have the responsibility of auditing the
standards on behalf of the shareholders. Their
consolidated financial statements and expressing
report follows hereafter.
an opinion on them.
The Board of
Directors,
through its Audit
Committee,
is responsible for ensuring that
management
fulfills
its
responsibilities
for
financial
James M. Bruchs
Chairman and Chief Executive Officer
April 12, 2021
Dr Gary A. Bojes
Chief Financial Officer
April 12, 2021
31 Crowe MacKay LLP
1100 - 1177 West Hastings St.
Vancouver, BC V6E 4T5
Main +1 (604) 687-4511
Fax +1 (604) 687-5805
www.crowemackay.ca
Independent Auditor's Report
To the Shareholders of Tsodilo Resources Limited
Opinion
We have audited the consolidated financial statements of Tsodilo Resources Limited ("the Group"), which
comprise the consolidated statements of financial position as at December 31, 2020 and December 31, 2019
and the consolidated statements of operations and comprehensive income (loss), changes in shareholders'
equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, 2020 and December 31, 2019, and its
consolidated financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Basis for Opinion
We conducted our audit
in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the
Consolidated Financial Statements section of our report. We are independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 to the consolidated financial statements which describes the material uncertainty
that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Other Information
Management is responsible for the other information. The other information comprises:
(cid:127)
Management's Discussion and Analysis
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
We obtained the other information prior to the date of this auditor's report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information,
we are required to report that fact in this auditor's report. We have nothing to report in this regard.
32 Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor's report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
33 responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Diana Huang.
"Crowe MacKay LLP"
Chartered Professional Accountants
Vancouver, Canada
April 12, 2021
34 Tsodilo Resources Limited
Consolidated Statements of Financial Position
(In United States dollars)
ASSETS
Current
Cash
Accounts receivable and prepaid expenses
Total Current Assets
Exploration and Evaluation Assets (note 3)
Property, Plant and Equipment (note 4)
Total Assets
LIABILITIES
Current
Accounts payable and accrued liabilities (note 9)
Notes payable (note 5)
Total Current Liabilities
Total Liabilities
SHAREHOLDERS' EQUITY
Share capital (note 6a)
Contributed surplus (note 6c)
Foreign currency translation reserve
Deficit
Total Equity
Total Liabilities and Equity
Nature of operations (note 1)
Commitments and contingencies (note 12)
Subsequent events (note 14)
December 31
2020
$
5,620
60,473
66,093
7,063,327
248,086
,
December 31
2019
$
5,599
32,593
38,192
7,391,765
312,897
$ 7,377,506
$7,742,854
$ 821,774
1,055,735
1,877,509
1,877,509
49,518,357
11,639,437
(5,823,437
)
(49,834,360)
5,499,997
$ 7,377,506
$ 566,311
1,036,322
1,602,633
1,602,633
49,281,890
11,689,724
(5,651,957)
(49,179,436)
6,140,221
$7,742,854
See accompanying notes to the consolidated financial statements
APPROVED ON BEHALF OF THE BOARD OF DIRECTORS
Jonathan R. Kelafant
Chairman, Audit Committee
James M. Bruchs
Chairman & CEO
35 Tsodilo Resources Limited
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In United States dollars)
Years Ended December 31
Administrative Expenses
Corporate remuneration
Corporate travel and subsistence
Investor relations
Legal and audit
Filings and regulatory fees
Administrative expenses
Amortization
Stock-based compensation (note 6c)
Other Income (Expense)
Other services income, net of cost
Interest income
Realized gain on disposal of property, plant and
equipment
Gain on debt settlement
Foreign exchange gain (loss)
Loss for year
Other Comprehensive Gain/(Loss)
Foreign currency translation
Total Other Comprehensive Gain/(Loss)
Total Comprehensive Income (Loss) for the year
2020
2019
$ 426,842
$ 429,605
1,903
7,029
61,074
36,506
203,068
--
44,417
780,839
101,626
2
--
28,747
(4,460)
125,915
(654,924)
(171,480)
(171,480)
$ (826,404)
1,457
7,189
53,096
28,022
170,255
907
110,229
800,760
303,053
4
201,600
--
(1,508)
503,149
(297,611)
115,543
115,543
$ (182,068)
Basic and diluted loss per share (note 8)
($0.01)
($0.01)
See accompanying notes to the consolidated financial statements
36 Tsodilo Resources Limited
Consolidated Statements of Changes in Shareholders’ Equity
(In United States dollars except for shares)
2020
Share Capital
Contributed Surplus
Shares Issued
Amount
Stock-based
compensation & Other
Foreign
Translation
Reserve
Deficit
Total
Equity
Balance January 1, 2020
Options exercised in 2020
Stock Based Compensation
Comprehensive loss
45,347,310
818,750
--
--
$49,281,890
236,467
--
--
$11,689,724
(94,704)
44,417
--
($5,651,957)
($49,179,436)
--
(171,480)
--
(654,924)
$6,140,221
141,763
44,417
(826,404)
Balance December 31, 2020
46,166,060
$49,518,357
$11,639,437
($5, 823,437)
($49,834,360)
$5,499,997
See accompanying notes to the consolidated financial statements
2019
Share Capital
Contributed Surplus
Shares Issued
Amount
Stock-based
compensation & Other
Foreign
Translation
Reserve
Deficit
Total
Equity
Balance January 1, 2019
Stock Based Compensation
Comprehensive (loss) income
45,347,310
--
--
$49,281,890
--
--
$11,579,495
110,229
--
($5,767,500)
--
115,543
($48,881,825)
--
(297,611)
$6,212,060
110,229
(182,068)
Balance December 31, 2019
45,347,310
$49,281,890
$11,689,724
($5, 651,957)
($49,179,436)
$6,140,221
See accompanying notes to the consolidated financial statements.
37 Tsodilo Resources Limited
Consolidated Statements of Cash Flows
(In United States dollars)
Cash provided by (used in):
Operating Activities
Net Loss for the year
Adjustments for non-cash items:
Gain on disposal of equipment
Gain on debt settlement
Amortization
Foreign exchange loss (gain)
Stock-based compensation
Net change in non-cash working capital balances (note 13)
Investing Activities
Additions to exploration properties
Proceeds from sale of royalty
Proceeds on disposal of equipment
Financing Activities
Payment of notes payable
Impact of exchange on cash
Change in cash - for the year
Cash - beginning of year
Cash - end of year
Years Ended December 31
2020
2019
$(654,924)
$(297,611)
--
(28,747)
--
4,460
44,417
(634,794)
410,811
(223,983)
(290,852)
500,000
--
290,148
(61,684)
(61,684)
(4,460)
21
5,599
5,620
$
(201,600)
--
907
1,508
110,229
(386,567)
522,773
136,206
(338,180)
--
201,600
(136,580)
--
--
(1,508)
(1,882)
7,481
5,599
$
38 Tsodilo Resources Limited
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(All amounts are in U.S. dollars unless otherwise noted)
1. NATURE OF OPERATIONS
Tsodilo Resources Limited (“Tsodilo” or “the Company”) is an exploration stage company which is engaged
principally in the acquisition, exploration and development of mineral properties in the Republic of Botswana.
The Company is considered to be in the exploration and development stage given that none of its properties are
in production and, to date, have not earned any revenues. The recoverability of amounts shown for
exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the
renewal or extension of exploration licenses, obtaining the necessary permits to operate a mine, obtaining the
financing to complete exploration and development, and future profitable production. The Company is
incorporated under the laws of the Yukon Territory, Canada, under the Business Corporations Act of Yukon and
the address of the Company’s registered office is 161 Bay Street, P.O. Box 508 Toronto, Ontario, Canada, M5J
2S1. The Company currently exists under the Business Corporations Act of Yukon and its common shares are
listed on the Toronto Venture Stock Exchange (“TSXV”) under the symbol TSD.
These consolidated financial statements have been prepared on the basis of accounting principles applicable to a
going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal
course of business. The Company incurred a loss of $654,924 and comprehensive loss of $826,404 during the year
ended December 31, 2020 and as of that date, the Company had an accumulated deficit of $49,834,360 and
negative working capital of ($1,811,417). The Company has not generated any revenues or cash flows from
operations since inception and does not expect to do so for the foreseeable future. The Company’s
continuation as a going concern depends on its ability to successfully raise financing. Although the Company has
been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate
financing in the future or that such financing will be on terms acceptable to the Company; therefore giving rise
to a material uncertainty which may cast significant doubt as to whether the Company’s cash resources and
working capital will be sufficient to enable the Company to continue as a going concern for the 12-month period
after the date of these Consolidated Financial Statements.
Consequently, management is pursuing various financing alternatives to fund operations and advance its
business plan. To facilitate the management of its capital requirements, the Company prepares annual
expenditure budgets that are updated as necessary depending on various factors, including successful capital
deployment and general industry conditions. The Company may determine to reduce the level of activity and
39 expenditures further, or divest of certain mineral property assets, to preserve working capital and alleviate any
going concern risk.
The consolidated financial statements have been prepared on a going concern basis that contemplates the
realization of assets and discharge of liabilities at their carrying values in the normal course of business for the
foreseeable future; and do not give effect to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be unable to continue as a going concern.
COVID-19 Global pandemic risk
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a global
pandemic. The majority of governments across the jurisdictions in which Tsodilo operates declared a state of
emergency in response to the COVID-19 pandemic.
As a relatively novel risk, the duration and full financial effect of the COVID-19 pandemic is unknown at
this time,
as is the efficacy of government and central bank interventions in the jurisdictions in which Tsodilo operates.
While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts
of COVID-19 on our business, including the duration and impact that it may have on our ability to raise funds to
independently finance continued exploration through joint ventures; providing commercial services to third
parties; the sale or lease of equipment; or, the sale of a partial interest in a project cannot be reasonably estimated
at
this time. Accordingly estimates of the extent to which the COVID-19 pandemic may materially and
adversely affect the Company’s operations, financial results and condition in future periods are also subject to
significant uncertainty.
2. Significant Accounting Policies
(a) Statement of Compliance with International Financial Reporting Standards
These consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of
the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been authorized for release by the Company’s Board of
Directors on April 12, 2021.
(b) Basis of Preparation
These consolidated financial statements have been prepared on a historical cost basis except for financial
instruments classified as fair value through profit or loss which are stated at their fair value. These
40 consolidated financial statements are presented in United States dollars and include the accounts of the
Company and the following direct and indirect subsidiaries:
ENTITY
Tsodilo Resources Bermuda Limited (“TRBL”) [Bermuda]
Bosoto (Proprietary) Limited (“Bosoto”) [Botswana]
2020
2019
100%
100%
100%
100%
Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”) [Botswana]
100%
100%
Newdico (Proprietary) Limited (“Newdico”) [Botswana]
100%
100%
Idada Trading 361 (Pty) Ltd. (“Idada”) [South Africa]
70%
70%
All intercompany transactions have been eliminated on consolidation
The accounting policies set out below have been applied consistently to all periods and years presented.
(c) Significant Accounting Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the application of polices and reporting amounts of
assets and liabilities, income and expenses. Actual results may differ from these estimates.
Accounts that require estimates as the basis for determining the stated amounts include stock-based
compensation expense. The amounts estimated for stock based compensation is calculated using the
Black-Scholes Option Pricing model, which requires significant estimates with respect to the expected
life and volatility of such instruments.
Significant judgments are required with respect to the carrying value of the Company’s exploration and
evaluation assets, the determination of the functional currency of the Company and its subsidiaries, the
recoverability of the Company’s deferred tax assets, potential tax exposures given the company operates in
multiple jurisdictions, and the going concern assumptions. In particular, the carrying value of the Company’s
exploration and evaluation assets is dependent upon the Company’s determination with respect to the
future prospects of its exploration and evaluation assets and the ability of the Company to successfully
complete the renewal or extension process for its exploration properties as required. The Company has
defined the cash generating units to be precious stones, metals and radioactive minerals. The quantification
of potential tax exposures is dependent on the relevant tax authorities’ acceptance of the Company’s
positions.
41 (d) Earnings (Loss) per Common Share
Earnings (loss) per share calculations are based on the net income (loss) attributable to common
shareholders for the year divided by the weighted average number of common shares issued and
outstanding during the year.
Diluted earnings per share calculations are based on the net income (loss) attributable to common
shareholders for the year divided by the weighted average number of common shares outstanding during
the year plus the effects of dilutive common share equivalents. This method requires that the dilutive effect
of outstanding options and warrants issued be calculated using the treasury stock method. This method
assumes that all common share equivalents have been exercised at the beginning of the year (or at the time
of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the
Company at the average trading price of common shares during the year. The incremental number of
common shares that would be issued is included in the calculation of diluted earnings per share.
(e) Exploration and Evaluation Assets
Exploration and evaluation assets include acquired mineral use rights for mineral properties held by the
Company. The amount of consideration paid (in cash or share value) for mineral use rights is capitalized.
The amounts shown for exploration and evaluation assets represents all direct and indirect costs relating to
the acquisition, exploration and development of exploration properties, less recoveries, and do not
necessarily reflect present or future values. These costs will be amortized against revenue from future
production or written off if the exploration and evaluation assets are abandoned or sold. The Company has
classified exploration and evaluation assets as intangible in nature. Depletion of costs capitalized on projects
put into commercial production will be recorded using the unit-of-production method based upon
estimates of proven and probable reserves.
Proceeds received from farm-out agreements or recoveries of costs are credited against the cost of related
claims.
Ownership of exploration and evaluation assets involves certain inherent risks, including geological,
commodity prices, operating costs, and permitting risks. Many of these risks are outside the Company’s
control. The ultimate recoverability of the amounts capitalized for exploration and evaluation assets is
dependent upon the delineation of economically recoverable ore reserves, the renewal or extension of
exploration licenses, obtaining the necessary financing to complete their development, obtaining the
necessary permits to operate the mine, and realizing profitable production or proceeds from the disposition
thereof. Management’s estimates of recoverability of the Company’s investment in its Botswana and South
Africa Exploration and Evaluation Assets have been based on current and expected conditions. However, it is
42 possible that changes could occur which could adversely affect management’s estimates and may result in
future write-downs of exploration and evaluation assets carrying values. See note 3 for additional disclosures
related to license commitments and strategic partners commitments and earn-in agreement.
Management periodically reviews the carrying values of its investments in exploration and evaluation assets
and will recognize impairment in value based upon current exploration results, the prospect of further work
being carried out by the Company and the assessment of future probability of revenues from the property or
from the sale of the property. A decision to abandon, reduce or expand activity on a specific property is
based upon many factors including general and specific assessments of mineral resources, anticipated future
mineral prices, anticipated costs of developing and operating a producing mine, the expiration date of
mineral property leases and the availability of financing. The Company does not set a pre-determined
holding period for properties with unproven resources. However, properties which have not demonstrated
suitable prospects at the conclusion of each phase of an exploration program are re-evaluated to determine
if future exploration is warranted and that carrying values are appropriate.
(f) Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is calculated on
a straight-line basis over the following terms:
Hangar
Vehicles
Furniture and equipment
over remaining life of land lease
5 Years
3 – 4 Years
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of
the asset, determined as the difference between the net disposal proceeds and the carrying amount of
the asset, is recognized in profit or loss.
Where an item of property, plant and equipment comprises major components with different useful lives,
the components are accounted for as separate items of plant and equipment. Expenditures incurred to
replace a component of an item of property, plant and equipment that is accounted for separately,
including major inspection and overhaul expenditures, are capitalized.
(g) Cash
Cash consists of cash held in banks and petty cash.
43 (h) Foreign Currency Translation
(i) Functional and presentation currency
The Company’s functional and presentation currency is the United States dollar (“U.S. Dollar”). The
functional currencies of the Company’s subsidiaries are as follows:
Tsodilo Resources Bermuda Limited
(”TRBL”)
U.S. Dollar
Gcwihaba Resources (Pty) Limited
(“Gcwihaba”)
Botswana Pula
Newdico (Pty) Limited
Bosoto (Pty) Limited
Idada Trading 361 (Pty) Ltd
(“Newdico”)
Botswana Pula
(“Bosoto”’)
("‘Idada”)
Botswana Pula
South African Rand
Each subsidiary and the Company’s parent entity determine their own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded by applying the exchange rates prevailing at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated
into functional currency at the exchange rate prevailing at the reporting date.
(iii) Translation of foreign operations
As at the reporting date the assets and liabilities of Gcwihaba, Newdico, Bosoto, and Idada are translated
into the presentation currency of the Company at the rate of exchange prevailing at the reporting date
and their revenue and expenses are translated at the average exchange for the period. On consolidation,
the exchange differences arising on the translation are recognized in other comprehensive income (loss)
and accumulated in the foreign currency translation reserve.
If Gcwihaba, Newdico, Bosoto, and Idada were sold, the amount recognized in the foreign currency
reserve would be realized and reflected in the statement of operations and comprehensive inc ome (loss)
as part of the gain or loss on disposal.
(i)
Income Taxes
Current taxes are the expected tax payable or receivable on the local taxable income or loss for the year,
using the local tax rate enacted or substantively enacted at the reporting date, and includes any
adjustments to tax payable or receivable in respect of previous years.
Deferred income taxes are recorded using the liability method whereby deferred tax is recognized in respect
to temporary differences between the carrying amounts of assets and liabilities for financial reporting
44 purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when they are realized or settled, based on the laws that
have been enacted or substantively enacted by the reporting date. Deferred tax is not recognized for
temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affect neither accounting, nor taxable profit or loss.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
(j)
Share-based Compensation
The Company follows the fair value method of accounting for stock option awards granted to employees
and directors, whereby services are rendered as consideration for equity instruments (equity-settled
transactions). The fair value of stock options is determined by the Black-Scholes Option Pricing model with
assumptions for risk-free interest rates, dividend yields, volatility of the expected market price of the
Company’s common shares and an expected life of the options. The number of stock option awards
expected to vest are estimated using a forfeiture rate based on historical experience and future
expectations. The fair value of direct awards of stock is determined by the quoted market price of the
Company’s stock. Share-based compensation is amortized over the vesting period of the related option to
earnings and no portions were capitalized. Upon participants’ retirement from their duties, their shares are
forfeited and any charges already recognized relating to unvested options are reversed. When an award is
cancelled by the entity or by the counterparty, any remaining element of fair value of the award is expensed
immediately through profit or loss.
The Company uses graded or accelerated amortization which specifies that each vesting tranche must be
accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is
subsequently amortized separately and in parallel from the grant date.
Option-pricing models require the use of highly subjective estimates and assumptions including the
expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value
estimates.
(k) Severance Benefits
Under Botswana law, the Company is required to pay severance benefits for full-time employees upon the
completion of 5 years of continued service if the employee so elects or upon the termination of
employment. Severance is earned at the rate of one day per month for an employee with less than five
45 years of service and two days per month for employees with greater than five years of service. The specifics
and benefits of the severance program mandated in Botswana are extended to full-time employees residing
and working outside of Botswana. The cost of these severance benefits is accrued over the year of service
until the benefit becomes payable. Portions of the severance expenses are capitalized to exploration and
evaluation assets.
(l)
Financial Assets
Under IFRS 9, all financial assets are initially recorded at fair value and designated upon inception into
one of the following three categories: amortized cost, fair value through other comprehensive income
(“FVOCI”) or at fair value through profit or loss (“FVTPL”). All of the Company’s financial assets are
classified as amortized cost, being subsequently measured at amortized cost using the effective interest
rate method.
(m) Financial Liabilities
All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or at
amortized cost. Financial liabilities classified as at amortized cost are initially recognized at fair value less
directly attributable transaction costs. After initial recognition, at amortized cost are subsequently measured
at amortized cost using the effective interest rate method. The effective interest rate method is a method
of calculating the amortized cost of a financial liability and of allocating interest expenses over the
relevant year. The effective interest rate is the rate that discounts estimated future cash payments through
the expected life of the financial liability. The Company’s accounts payable and accrued liabilities, and notes
payable are classified as at amortized cost. Financial liabilities classified as FVTPL include warrants with
exercise prices denominated in a currency other than the Company’s functional currency. Derivatives,
including separated embedded derivatives are also classified as FVTPL and recognized at fair value with
changes in fair value recognized in earnings unless they are designated as effective hedging instruments.
Fair value changes on financial liabilities classified as FVTPL are recognized in earnings. Transaction costs
associated with FVTPL liabilities are expensed as incurred.
(n)
Impairment of Assets
At the end of each reporting period, the Company assesses each cash-generating unit to determine whether
there is any indication that those assets are impaired. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount
is the higher of the fair value less cost to sell and the value in use. Fair value is determined as the amount
that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable
and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present
46 value using a discount rate that reflects current market assessment of the time value of money and the risk
of a specific asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in
profit or loss for the period. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs. Exploration and
evaluation assets are excluded from the fair value impairment test.
When an impairment subsequently reverses, the carrying amount of the asset (or cash generating unit) is
increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the
carrying amount that would have been determined had no impairment loss been recognized for the asset
(or cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit
or loss. No impairment adjustments were recognized in 2020 and 2019.
(o) Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making financial and operating decisions.
Related parties may be individuals or corporate entities and includes, but is not limited to, key management
personnel, directors, affiliated companies, and project partners. A transaction is considered to be a related
party transaction when there is a transfer of resources, services or obligations between related parties.
(p) Share Capital
The Company engages in equity financing transactions to obtain the funds necessary to continue operations
and explore and evaluate resource properties. These equity financing transactions may involve issuance of
common shares or units. A unit comprises a certain number of common shares and a certain number of share
purchase warrants (“Warrants”). Depending on the terms and conditions of each equity financing agreement
(“Agreement”), the Warrants are exercisable into additional common shares prior to expiry at a price
stipulated by the Agreement. Warrants that are part of units are valued using residual value method which
involves comparing the selling price of the units to the Company’s share price on the announcement date of
the financing. The market value is then applied to the common share, and any residual amount is assigned to
the warrants. Warrants that are issued as payment for agency fee or other transaction costs are accounted for
as share-based payments and are recognized in equity. When warrants are forfeited or are not exercised at
the expiry date, the amount previously recognized in equity is transferred from reserves to deficit. In situations
where share capital is issued, or received, as non-monetary consideration and the fair value of the asset
received, or given up is not readily determinable, the fair market value (as defined) of the shares is used to
record the transaction. The fair market value of the shares issued, or received, is based on the trading price of
those shares on the appropriate Exchange on the date the shares are issued.
47 (q) Provision for Environmental Rehabilitation
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with
the retirement of exploration and evaluation assets and equipment, when those obligations result from the
acquisition, construction, development or normal operation of the assets. The net present value of future
rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is
capitalized to mining assets along with a corresponding increase in the rehabilitation provision in the period
incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net
present value. The rehabilitation asset is depreciated on the same basis as mining assets. The Company’s
estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates
and assumptions regarding the amount and timing of the future expenditures. These changes are recorded
directly to mining assets with a corresponding entry to the rehabilitation provision. The Company’s estimates
are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes
in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation
costs, are charged to profit or loss for the period. As at December 31, 2020 and 2019, the Company has
determined that it does not have any decommissioning obligations.
(r) New Standards, Amendments and Interpretations Not Yet Effective
Certain pronouncements were issued by the ISAB or the IFRS Interpretive Committee that are mandatory for
accounting periods beginning January 1, 2021 or later periods. These standards are not expected to have a
material impact on the Company.
Classification of Liabilities as Current or Non-current (Amendment to IAS 1)
The amendment to IAS 1 provide a more general approach to the classification of liabilities based on the
contractual agreements in place at the reporting date. These amendments are effective for the reporting
dates beginning on or after January 1, 2023.
48 3.
EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation assets are summarized as follows:
Bosoto Botswana
Project
BK 16
Precious
Stones
Project
PL 217
Precious
Stones
Bosoto
Total
Newdico
Botswana
Project
PL091
Industrial
Minerals
Stones
Idada
S. Africa
Precious
Metals
Gcwihaba
Botswana
Metals
TOTAL
Balance at December 31,
2018
Additions
Net Exchange Differences
Balance at December 31,
2019
Additions
Net Exchange Differences
Subtotal
Royalty contribution/reduction
in exploration cost
Balance at December 31,
2020
$3,437,018
$502,038
$3,939,056
$ --
$7,902
$2,752,504
$6,699,462
213,848
147,753
80,473
14,323
361,601
94,796
3,731,339
644,114
4,395,453
--
--
--
--
220
180,783
54,903
542,384
149,919
8,122
2,988,190
7,391,765
125,174
(96,594)
24,915
150,089
133,875
0
61,510
345,474
(17,258)
(113,852)
7,816
(330)
(67,545)
(173,911)
3,759,919
671,771
4,431,690
141,691
7,792
2,982,155
7,563,327
--
--
--
--
--
(500,000)
(500,000)
$3,759,919
$671,771
$4,431,690
$141,691
$7,792
$2,482,155
$7,063,327
Exploration and evaluation additions for the year-ended December 31, 2020 are summarized as follows:
Bosoto Botswana
Project
BK 16
Precious
Stones
Project
PL 217
Precious
Stones
Bosoto
Total
Newdico
Botswana
Project
PL091
Industrial
Minerals
Stones
Idada
S. Africa
Precious
Metals
Gcwihaba
Botswana
Metals
TOTAL
$ 1,558
$ 749
$ 2,307
$ 5,608
$ --
$ 11,019
$18,934
--
--
31,753
87
20,015
71,761
--
--
--
--
5,046
19,120
--
--
31,753
87
25,061
90,881
56,932
--
--
--
16,817
54,518
--
--
--
--
--
--
--
--
--
2,138
12,246
36,107
56,932
--
31,753
2,225
54,124
181,506
$125,174
$24,915
$150,089
$133,875
$ --
$61,510
$345,474
Drilling Expenditures
Amortization Drill Rigs,
Vehicles & Trucks
GIS & Geophysics
Lab Analyses & Assays
License Fees
Office, Maintenance, &
Consumables
Salaries, Wages & Services
Balance at December 31,
2020
49 Exploration and evaluation additions for the year ended December 31, 2019 are summarized as follows:
Bosoto Botswana
Project
BK 16
Precious
Stones
Project
PL 217
Precious
Stones
Bosoto
Total
Newdico
Botswana
Project
PL091
Industrial
Minerals
Stones
Idada
S. Africa
Precious
Metals
Gcwihaba
Botswana
Metals
TOTAL
Drilling Expenditures
Amortization Drill Rigs,
Vehicles & Trucks
GIS & Geophysics
Lab Analyses & Assays
License Fees
Office, Maintenance, &
Consumables
Salaries, Wages & Services
Balance at December 31,
2019
$ 16,122
$ 1,018
$ 17,140
$ --
$ --
$ 15,941
$ 33,081
41,085
33,198
74,283
--
8,395
--
--
--
--
--
8,395
--
29,973
4,631
121,273
108,906
31,604
230,179
--
--
--
--
--
--
--
--
--
--
--
--
19,131
93,414
--
--
2,257
--
8,395
2,257
15,108
128,346
46,712
358,525
$213,848
$147,753
$361,601
$--
$ --
$180,783
$542,384
General
Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of
permits and the potential for problems arising from government conveyance accuracy, prior unregistered
agreements or transfers, native land claims, confirmation of physical boundaries, and title may be affected by
undetected defects. The Company does not carry title insurance. The Company has evaluated title to all of its
mineral properties and believes, to the best of its knowledge, that evidence of title is adequate and acceptable
given the current stage of exploration.
Exploration and Evaluation Assets (Royalties)
In the third Quarter 2017, the Company reached an agreement with Sandstorm Gold Ltd. (“Sandstorm”) (NYSE
MKT: SAND, TSX: SSL) to grant royalties on three projects in consideration of the payment of $1,500,000 USD.
The package of assets in the Royalty Sale includes:
à
à
à
the grant of a 1% Net Smelter Return (NSR) on the Company’s wholly owned Botswana subsidiary Gcwihaba
Resources (Pty) Ltd. prospecting metal licenses in northwest Botswana;
the grant of a 1% Gross Proceeds Royalty (GPR) on the Company’s Botswana wholly owned subsidiary
Bosoto (Pty) Ltd. precious stone prospecting license (PL217/2016) located in the Orapa Kimberlite Field; and,
the grant of a 1% NSR on the Company’s 70% owned South African subsidiary Idada 361 (Pty) Ltd. gold
and silver prospecting license located in the Barberton Greenstone Belt in the Mpumalanga province of
South Africa.
50 Sandstorm shall have a right of first refusal with respect to any third-party bona fide offers to purchase a metal or
precious stone royalty on the properties.
On July 23, 2020, the Company reached an agreement with TBM (Pty) Ltd. ("TBM") to grant royalties (Royalty
income) on its Botswana subsidiary Gcwihaba (Pty) Ltd. ("Gcwihaba") seven (7) metal prospecting licenses in
consideration of the payment of $500,000 USD.
The package of assets in the Royalty Sale includes:
à
the grant of a 0.5% Net Smelter Return or Net Mineral Return on Gcwihaba's seven (7) prospecting metal
licenses in northwest Botswana.
Gcwihaba Resources (Pty) Ltd (“Gcwihaba”) – Botswana
In 2017, Gcwihaba, a wholly owned subsidiary of the Company, held twenty-one (21) metal (base, precious,
platinum group, and rare earth) prospecting licenses in the North-West district of which seven (7) were then in
renewal. A review of the merits of each license was undertaken in the fourth quarter of 2017 in an effort to
determine which licenses were the most prospective in terms of exploration, discovery and development and an
economic resource. The review determined that 7 licenses were more prospective than the others. A series of
meeting were held with the Department of Mines (“DOM”) and it was proposed that the Company would
relinquish the aforesaid twenty-one (21) licenses in exchange for an initial grant of the core seven (7) licenses. The
proposal was accepted by the DOM and the 21 licenses were relinquished at year-end and the core seven licenses
were given an initial grant effective October 1, 2018. These new licenses have an initial grant term of three (3)
years to be followed by 2 two-year renewal periods. The relinquishment of the aforementioned licenses or
portions thereof did not cause a reduction or change in the continuing overall exploration program nor impact
the chances of the overall success of the program. The licenses cover 4,920.50 square kilometers and collectively
have a proposed minimum spending commitment of BWP 1,753,815 ($164,542 USD as at December 31, 2020) if
held to their full initial term.
Bosoto (Pty) Ltd (“Bosoto”) - Botswana
Tsodilo was granted a prospecting license (PL369/2014) over the BK16 kimberlite pipe through its 100%
owned Botswana subsidiary, Bosoto, effective October 1, 2014. The prospecting license was renewed for an
additional two-year period commencing October 1, 2017 and a second two-year renewal application was
granted effective October 1, 2019.
The diamondiferous BK16 kimberlite pipe is located within the Orapa Kimberlite Field in Botswana and covered
by 25 meters of Kalahari Group sediments. BK16 is located 37 km east-southeast of the Orapa Diamond Mine
AK01, 25 km southeast of the Damshtaa Diamond Mine, and 13 km north-northeast of the Letlhakane
51 Diamond Mine, all operated by Debswana and 28 km east-northeast from Lucara Diamond Corporation's
Karowe mine (F/K/A AK6). Tsodilo has a 100% interest in Bosoto. The Company’s current prospecting license
extends to September 30, 2021.
The Company estimated that it would take approximately BWP 42,002,000 ($3,752,970 USD as at December 31,
2020) in expenditures, goods and services over the two year renewal period to continue the evaluation of the
BK16 kimberlite’s economic potential and if warranted the preparation of a compliant NI 43-101 Feasibility Study
(FS). This estimate is based on the agreed work plan with the MMEWR. At any point the work plan may be
amended, and a new work plan agreed to with the MMEWR.
PL 217/2016 is situated within the Orapa Kimberlite Field and is located some 10 km south of the Orapa
Mining area and with the same distance to the west of the Letlhakane Mining lease. It surrounds the Karowe
Mining lease, while the BK11 prospect is directly to the east of the license.
PL 217/2016 was acquired in the second quarter of 2017. The license has an effective date of January 1, 2017 for
an initial period of 3 years followed by two 2-year renewals. The first renewal was granted on the June 29, 2020
with a commencement date of July 1, 2020 for a period of two years. The license currently covers an area of 292
square kilometers and has a minimum exploration expenditure requirement of 1,002,920 BWP ($94,094 USD as at
December 31, 2020).
Newdico (Pty) Ltd (“Newdico”) - Botswana
The Company holds a 100% interest in Newdico, which holds one (1) industrial minerals prospecting license
PL091/2019, effective January 1, 2020. The license comprises 580 square kilometers and has a proposed minimum
spending commitment of BWP 131,330 ($12,462 USD as at December 31, 2020).
Newdico also provides administrative, operational, exploration, geophysical and drilling services to the Company’s
other subsidiaries.
Idada Trading 361 (Pty) Ltd (“Idada”) – South Africa
The Company holds a 70% interest in its South African subsidiary, Idada. Idada made application for an
exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in February 2012. This application was
accepted in February 2013 and consultation was conducted with interested and affected parties in April and June
2013. An Environmental Management Plan (EMP) was submitted in April 2013 and a site visit was made by
various governmental departments (DMR, EWT, and REMDEC) in September 2013. During the second quarter
2015, notice was received from the Department of Mineral Resources, South Africa which granted the Company
the prospecting rights for gold and silver in the applied for area subject to certain subsequent conditions
52 being met. The Company has fulfilled those requirements and the Prospecting Right, together with the EMP,
was executed and became effective on April 7, 2016. The Prospecting Right has been granted for a term of five
years effective as of May 2015.
Notices were sent to all surface owners of the five farms informing the owners of our intent to access the property
to commence exploration activities. Three landowners, holding most of the target ground, have denied access. This
issue has been submitted to the Department of Mineral Resources (DMR) for resolution.
During the third quarter 2019, the Company was informed that certain portions of our license areas were
designated as a World Heritage site by UNESCO. UNESCO has informed the Company that in accordance with the
Operational Guidelines for the Implementation of the World Heritage Convention, UNESCO is investigating the
situation that the Company brought to their attention. UNESCO has informed the Company that according to
IUCN, the Advisory Body to the intergovernmental World Heritage Committee concerning nominations of natural
heritage sites on the World Heritage List, the overlapping prospecting license on the western portion of the
property or of the presence of Tsodilo Resources Ltd was not brought to the attention of IUCN during the
evaluation process. The documentation related to the evaluation and inscription of the site on the World Heritage
List from UNESCO’s website at: http://whc.unesco.org/en/list/1575/documents .
As the responsibility for nominating sites to the World Heritage List and the management and protection of the
World Heritage properties inscribed is under the authority of the State Party of South Africa, UNESCO advised the
Company that they would be contacting the appropriate South African office for clarification. To date, it is the
Company’s understanding, that neither the Department of Mineral Affairs (DMA) nor the Department of
Environmental Affairs has responded to UNESCO’s inquiry. In addition to UNESCO’s inquiries, the Company also
contacted the DMA for guidance and received a response, but before the issue could be dealt with the South
African government was shut down due to the COVID-19 virus. The Company will continue our efforts to engage
the DMA once the government resumes its activities on a full-time basis. In the interim, the Company has filed a
renewal application to protect our license rights.
The license comprises 9,033 hectares and all expenditures have been curtailed until such time as access to the
license area is provided.
Covid-19 Pandemic Relief
In the first Quarter of 2020, the Company initiated efforts to get Covid-19 relief from expenditure and work
requirements on our prospecting licenses due to the exceptional and debilitating global effects of the Covid-19
pandemic. In April 2020, the Ministry of Mineral Resources, Green Technology and Energy Security informed those
holding prospecting licenses that they would entertain granting relief from work and expenditure requirements on
53 a case-by-case basis. Applications for relief were filed for the Gcwihaba and Bosoto licenses and on January 8,
2021 the Ministry in accordance with Section 22 of the Mines and Minerals Act, approved the cancellation of one
(1) year of prospecting programme of Bosoto Prospecting License No. PL 369/2014 and PL 217/2016 and Gcwihaba
Prospecting Licenses. Nos. PL 020 – 026/2018, with effect from April 1, 2020.
4. PROPERTY, PLANT, AND EQUIPMENT
Cost
Hangar
Vehicles
Furniture and
Equipment
Total
As at December 31, 2018
Disposals
Net Exchange Difference
$182,780
$ 1,229,756
(271,276)
$ 507,828
(68,244)
$ 1,920,364
(339,520)
2,900
19,512
7,258
29,670
As at December 31, 2019
$185,680
$ 977,992
$ 446,842
$ 1,610,514
As at December 31, 2019
Disposals
Net Exchange Difference
As at December 31, 2020
Hangar
Vehicles
$185,680
--
(2,540)
$183,140
t
$ 977,992
(153,161)
(22,318)
$802,513
Furniture and
Equipmen
$ 446,842
--
(5,874)
$440,968
Accumulated Depreciation
Hangar
Vehicles
Furniture and
Equipment
As at December 31, 2018
Depreciation
Disposals
Net Exchange Difference
As at December 31, 2019
As at December 31, 2019
Depreciation
Disposals
Net Exchange Difference
As at December 31, 2020
Net book value
$40,245
20,442
--
639
$1,197,202
11,024
(271,276)
18,994
$279,574
65,365
(68,244)
3,652
$61,326
$955,944
$280,347
$1,297,617
Hangar
Vehicles
Furniture and
Equipment
$61,326
18,964
--
1,053
$955,944
(9,375)
(153,161)
(3,943)
$81,343
$789,465
$280,347
47,343
--
(19,963)
$307,727
Total
$1,297,617
56,932
(153,161)
(22,853)
$1,178,535
As at December 31, 2019
$124,354
$22,048
$166,495
$312,897
As at December 31, 2020
$101,797
$13,048
$133,241
$248,086
For the period ended December 31, 2020, an amount of $56,932 (2019: $95,924) of amortization has been
capitalized under exploration properties.
Total
$1,610,51
4
(153,161)
(30,732)
$1,426,621
Total
$1,517,021
96,831
(339,520)
23,285
54 5. NOTES PAYABLE
As at December 31, 2020, term notes payable in the amount of $1,055,735 were outstanding from related parties,
contractors and employees as settlement of compensation, service fees and expenses payable. The notes have an
annual interest rate of 8% and are due September 30, 2020, December 31, 2020 and June 30, 2021. The notes
carry a termination fee of 10% upon early redemption of the notes for which there is an embedded derivative
arising – the fair value of this is NIL. There was no material gain / (loss) arising on this. In addition, at the option
of the note holders, the notes can be converted to stock during future private placements at the price, that raise a
minimum of CAD $500,000, of those future private placements, $843,576 of the notes was from related parties
(see note 9).
Date
Balance
January 1, 2020
Changes
in 2020
Balance
December 31, 2020
Interest
Rate
Termination
Fee
Maturity
Date
01-Oct-18
$ 20,000
31-Dec-18
31-Jan-19
30-Jun-19
30-Sep-19
31-Dec-19
01-Oct-20
444,343
85,000
293,687
98,146
95,146
$1,036,322
($14,181)
(96,764)
--
(61,684)
192,042
$19,413
$5,819
347,579
85,000
293,687
36,462
95,146
192,042
8%
8%
8%
8%
8%
8%
8%
$ 2,000
30-Sep-20
44,434 31-Dec-20*
8,500 31-Jan-21
8,646 31-Dec-20
3,646 31-Dec-20
3,746 31-Dec-20
30-June-21
$1,055,735
$70,972
*Subsequent to December 31, 2020, $273,005 of notes payable had its maturity extended from December 31,
2020 to December 31, 2021.
·
·
·
On October 1, 2020, promissory note was issued for $192,042 respectively to an employee, who is a director of
the Company. The notes are payable on demand and have an annual interest rate of 8%.
On July 24, 2020, $61,684 in promissory notes were paid and retired to an employee and director of the
Company.
On December 31, 2020, $110,945 in promissory notes were extinguished upon exercise of options.
6. SHARE CAPITAL
(a)Common Shares
Authorized, Issued and outstanding
The authorized capital stock of the Company comprises an unlimited number of common shares with no par value.
Issued and outstanding: 46,166,060 Common Shares as at December 31, 2020 (December 31, 2019, 45,347.310):
1)
Issued during the year-ended December 31, 2020:
(i) On December 31, 2020, 818,750 options were exercised for proceeds of $141,763 (C$181,188). The fair value of
$94,704 were reclassified from contributed surplus to share capital:
55 o
o
o
o
o
o
o
87,500 shares at a price of C$0.07 for proceeds to the Company of $4,792 (C$6,125). The fair value
associated with the exercised options that were reclassified from contributed surplus to share
capital was $3,142.
56,250 shares at a price of C$0.09 for proceeds to the Company of $3,961 (C$5,063). The fair value
associated with the exercised options that were reclassified from contributed surplus to share
capital was $2,460.
450,000 shares at a price of C$0.17 for proceeds to the Company of $59,854 (C$76,500). The fair
value associated with the exercised options that were reclassified from contributed surplus to share
capital was $39,959.
150,000 shares at a price of C$0.28 for proceeds to the Company of $32,861 (C$42,000). The fair
value associated with the exercised options that were reclassified from contributed surplus to share
capital was $21,698.
25,000 shares at a price of C$0.65 for proceeds to the Company of $12,713 (C$16,250). The fair
value associated with the exercised options that were reclassified from contributed surplus to share
capital was $9,193.
25,000 shares at a price of C$0.69 for proceeds to the Company of $13,496 (C$17,250). The fair
value associated with the exercised options that were reclassified from contributed surplus to share
capital was $9,193.
25,000 shares at a price of C$0.72 for proceeds to the Company of $14,083 (C$18,000). The fair
value associated with the exercised options that were reclassified from contributed surplus to share
capital was $9,193.
The weighted average trading price on date of option exercise was C$0.47.
2)
Issued during the year-ended December 31, 2019: None
(b)Warrants
As at December 31, 2020, there were no warrants outstanding.
(c) Stock Option Plan
The Company has a stock option plan (“SOP”) providing for the issuance of options that cannot exceed
5,629,830 shares of common stock. The Company may grant options to directors, officers, employees, and
contractors, and other personnel of the Company or its subsidiaries. The exercise price of each option cannot be
lower than the market price of the shares being the closing price of the Company’s common shares on the
Toronto Stock Exchange the day before the grant date. Options generally vest ratably over an eighteen-
month period, beginning with the date of issuance and every 6 months thereafter, and expire in five years from
the date of grant as determined by the Board of Directors. Stock options when exercise will result in equity
contributions.
56 The following Table summarizes the Company’s stock option activity for the years ended December 31, 2019 and
December 31, 2020:
Outstanding as at December 31, 2018
Granted
Forfeited
Expired
Outstanding as at December 31, 2019
Granted
Forfeited
Exercised
Expired
Outstanding as at December 31, 2020
Number of Options Weighted Average
Exercise Price
3,252,500
1,175,000
(500,000)
(552,500)
3,375,000
700,000
(50,000)
(818,750)
(500,000)
2,706,250
C$0.81
C$0.19
C$0.77
C$1.05
C$0.56
C$0.08
C$0.55
C$0.22
C$0.89
C$0.48
2020
à On January 2, 2020, 200,000 stock options exercisable at C$1.05 expired.
à On January 2, 2020, the Company issued 275,000 options at C$0.07 under its stock option plan to persons
who are officers and employees of the Company.
à On March 27, 2020, 200,000 stock options exercisable at C$0.83 expired.
à On April 30, 2020, 50,000 stock options exercisable at C$0.55 were forfeited.
à On September 1, 2020, 100,000 stock options exercisable at C$0.70 expired.
à On September 21, 2020, the Company issued 425,000 options at C$0.09 under its stock option plan to
persons who are officers and employees of the Company.
à On December 31, 2020, 818,750 options were exercised [See footnote 6 (1) above].
2019
à On January 2, 2019, 222,500 stock options exercisable at C$0.75 expired.
à On January 2, 2019, the Company issued 250,000 options exercisable at C$0.28 under its SOP to persons who
are officers and employees of the Company.
à On February 19, 2019, 500,000 stock options were forfeited.
à On March 21, 2019, 330,000 options exercisable at C$1.25 expired.
à On June 6, 2019, the Company issued 925,000 options exercisable at C$0.17 under its SOP to persons who
are officers and employees of the Company.
The following assumptions were used in the Black Scholes option pricing model to fair value the stock
options granted during the years ended December 31, 2020 and 2019:
Expected lives
2020
2019
4.04-4.08 years
4.05 years
Expected volatilities (based on Company’s historical prices)
91.8%-95.7%
93.8%-96.1%
Expected dividend yield
Risk free rates
Weighted average fair value of option
0%
0%
0.22-1.63%
1.86-2.47%
$0.05
$0.13
57 The following table summarizes stock options outstanding as at December 31, 2020:
Options Outstanding
Options Exercisable
Exercise
Price (C$)
Number of
Outstanding
Options
Weighted
Average Exercise
Prices (C$)
Weighted
Average
Remaining
Contractual Life
(Years)
Number of
Exercisable
Options
Weighted
Average Exercise
Prices (C$)
Weighted
Average
Remaining
Contractual
Life (Years)
C$0.72
C$0.79
C$0.69
C$0.85
C$0.65
C$0.55
C$0.28
C$0.17
C$0.07
C$0.09
175,000
250,000
175,000
400,000
175,000
450,000
50,000
475,000
187,500
368,750
2,706,250
C$0.72
C$0.79
C$0.69
C$0.85
C$0.65
C$0.55
C$0.28
C$0.17
C$0.07
C$0.09
C$0.48
0.01
0.27
1.00
1.25
2.00
2.23
3.00
3.43
4.01
4.73
2.36
175,000
250,000
175,000
400,000
175,000
450,000
50,000
475,000
87,500
68,750
2,306,250
C$0.72
C$0.79
C$0.69
C$0.85
C$0.65
C$0.55
C$0.28
C$0.17
C$0.07
C$0.09
C$0.54
0.01
0.27
1.00
1.25
2.00
2.23
3.00
3.43
4.01
4.73
1.98
REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
58 7. INCOME TAXES
The recovery of income taxes varies from the amounts that would be computed by applying the Canadian
federal and provincial statutory rate for 2020 of approximately 27% (2019: 27%) to loss before income taxes
as follows:
Loss for the year
Income tax rate
Expected income tax recovery
Foreign operation taxed at lower rates
Change in tax rate
Permanent differences
Change in benefits not recognized
Changes in estimate and foreign exchange
Provision for income taxes
December 31, 2020
December 31, 2019
($654,924)
($297,611)
27.00%
($176,829)
(2,911)
--
11,351
168,389
--
$ --
27.00%
($80,355)
(26,794)
(33,130)
56,427
29,089
54,763
$ --
As of December 31, 2020 the following deferred tax assets and liabilities have been recognized:
Property, Plant and Equipment
Exploration & Evaluation Assets
Deferred tax liabilities
Tax losses carried forward
Net deferred income tax asset recorded
December 31, 2020
($41,000)
(2,554,000)
(2,595,000)
2,595,000
$--
December 31, 2019
($50,000)
(2,410,000)
(2,460,000)
2,460,000
$--
As at December 31, 2020 the Company has unrecognized deductible temporary differences aggregating to
$12,345,000 (2019: $13,139,000), that are available to offset future taxable income.
However, these temporary differences relate to companies with a history of losses, and as a result are not
recognized.
Losses carried forward - Botswana
Losses carried forward - Canada
Other
December 31, 2020 December 31, 2019
$5,873,000
6,905,000
361,000
13,139,000
$ 4,500,000
7,458,000
387,000
$12,345,000
The Canadian tax losses of $7,458,000 (2019: $6,905,000) expire from 2025 through to 2040. The majority of
Botswana tax losses can be carried forward indefinitely with the remainder expiring within five years.
Total assessable tax losses relating to the
activity in Botswana
December 31, 2020 December 31, 2019
$16,667,000
$17,068,000
59 8. LOSS PER SHARE
Net loss per share was calculated based on the following:
Year ended December 31
Net loss for the year
Effect of Dilutive Securities
Stock options and warrants
Diluted net earnings (loss) for the year
2020
($654,924)
2019
($297,611)
--
--
($654,924)
($297,611)
The diluted loss per share is the same as the basic loss per share for the year ended December 31, 2020 and
2019 because the stock options and warrants were anti-dilutive and had no impact on the EPS calculation.
Weighted average shares used in the per share calculation were 45,347,310 (2019: 45,347,310) see note 6 above.
9. RELATED PARTY TRANSACTIONS
Remuneration of Key Management Personnel of the Company
Short term employee remuneration and benefits
Stock based compensation
2020
2019
$278,106
$291,312
38,521
102,016
Total compensation attributed to key management personnel
$316,627
$393,328
During the year an individual related to the CEO provided administrative and management services to the
Company and was remunerated in 2020 in the amount of $48,000 (2019: $41,000).
During the year, individuals related to key management personnel of the company received NIL in stock based
compensation during the year (2019: $5,536).
Board members were issued notes in the amount of $843,576 (2019: $721,803).
As at December 31, 2020, there was a total of $85,038 (2019: $56,935) payables to related parties included within
accounts payable and accrued liabilities.
There are no other related party transactions.
10. SEGMENTED INFORMATION
The Company is operating in one industry. As at December 31, 2020 the Company’s property, plant and
equipment in Botswana was $248,086 (2019: $312,897). No revenues were realized for exploration and evaluation
properties that are detailed in note 3 above. Segment long-term exploration and evaluations properties in
Botswana were $7,055,535 (2019: $7,383,643) and South Africa were $7,792 (2019: $8,122).
60 11. FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash, accounts receivable, accounts payable and accrued liabilities
and notes payable. The carrying values of these items as presented in the consolidated financial statements are
reasonable estimates of fair values due to the maturity and the terms of these instruments.
Risk Exposure and Management
The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this
exposure. These risks include liquidity risk, credit risk, foreign exchange risk, and interest rate risk. Where
material these risks are reviewed and monitored by the Board of Directors.
(a) Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a
going concern in order to pursue the development and exploration of its mineral properties and to maintain a
flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Company depends on external financing to fund its activities. The capital structure of the Company
currently consists of common shares and stock options. The Company manages the capital structure and
makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, acquire or
dispose of assets or adjust the amount of cash on hand. No equity capital was raised in 2019. See note 3 for a
description of royalty interests sold which provided $500,000 in cash to be used in further exploration and
evaluation.
In order to facilitate the management of its capital requirements, the Company prepares annual expenditure
budgets, which are approved by the Board of Directors and updated as necessary depending on various
factors, including capital deployment and general industry conditions.
The Company anticipates continuing to access equity markets to fund continued exploration of its mineral
properties and the future growth of the business. However, there is no guarantee that such financing will be
available when required.
There has been no change in the Company’s approach to capital management during 2020. The Company is not
subject to externally imposed capital requirements.
61 (b)Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company is considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in
order to continue its exploration programs. Despite previous success in acquiring these financings, there is no
guarantee of obtaining future financings. The Company has a working capital deficiency of $1,811,417 at
December 31, 2020.
(c)Credit Risk
Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to
meet it contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets
including cash and accounts receivable. The Company limits exposure to credit risk on liquid financial assets
through maintaining its cash with high-credit quality financial institutions. The majority of the Company’s cash
is held with a major Canadian based financial institution.
There are no allowances for doubtful accounts required.
(d)Interest Rate Risk
The Company’s exposure to interest rate risk arises from the interest rate impact on its cash. Because the cash
is held on deposit at financial institutions and may be withdrawn at any time, and because the notes payable
have fixed interest rates, the Company’s exposure to interest rate risk is not significant.
(e)Foreign Exchange Risk
The Company is exposed to currency risks on its Pula denominated working capital balances due to changes in
the USD/BWP exchange rate. Based on the net Pula denominated asset and liability exposures as at
December 31, 2020, a ten percentage change in the exchange rate would result in a $104,030 (2019: $90,959)
impact to the Company’s net comprehensive income/(loss).
The Company issues equity in Canadian dollars and the majority of its expenditures are in U.S. dollars. The
Company purchases U.S. dollars based on its near term forecast expenditures and does not hedge its exposure
to currency fluctuations.
62 12. COMMITMENTS AND CONTINGENCIES
Prospecting Licenses
The Company holds prospecting licenses which require the Company to spend a proposed minimum amount on
prospecting over the period of the licenses as outlined in note 3.
Lease & Service Commitments
Currently, the aggregate minimum payments are as follows:
Year
2021
2021
2021
2021
Facility
Term
BWP
Hangar Maun1
Shakawe Plot2
Gaborone 3
2/01/2016 – 12/31/2026
1/01/2021 – 12/31/2025
2/01/2021 – 1/31/2022
Letlhakane Plot4 2/21/2018 – 12/31/2068
Total
Yearly Rental Services
21,395
-
98,000
-
141,056
77,040
-
29,998
248,094
119,395
Total
162,451
77,040
98,000
29,998
367,489
USD*
$15,241
7,228
9,194
2,814
$34,477
* aggregate costs converted at January 1 of the current calendar year
1Newdico purchased the hangar facility from Commercial Holdings (Pty) Ltd. (CHPT) in February 2016. The hangar facility resides
on a commercial plot located at the Maun International Airport rented by CHPT from Civil Aviation Authority of Botswana
(CAAB). The purchase agreement called for a transfer of the CPHT/CAAB lease to Newdico upon purchase of the hangar facility.
The parties all agree to the transfer to take place but to date, the lease transfer has not occurred. Newdico has withheld lease
payments until such time that the lease is transferred. The lease has an effective date of January 1, 2016 and continues for
10 years at 8% escalation annually which may be reviewed very three (3) years at market and commercial rates. The initial
monthly lease payment is 8,000 BWP / month in addition to a fee of 15% of monthly rental for security and general maintenance
at the airport complex.
2The lease has an effective date of January 1, 2021 and is renewable at the company’s option for an additional 6 years
expiring on December 31, 2025. The monthly lease payment is 6,420 BWP increasing 420 BWP annually in each successive year.
3The twelve month service agreement has an effective date of February 1, 2021 and is renewable at the company’s option for an
additional year expiring January 31, 2022. The monthly lease payment is 8,000 BWP/month.
4The lease term has an effective date of February 2018. Newdico’s obligations under the lease are effective as of October 1, 2020. The
lease cost is 29,998 BWP per annum which may be reviewed every five (5) years at market and commercial rates. The lease has a term
of fifty (50) years cancelable by either party on six (6) months notice.
13. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2020
December 31, 2019
Net change in non-cash working capital balances:
(Increase) decrease in accounts receivable and prepaid expenses
Increase (decrease) in accounts payable and accrued liabilities
Increase in notes payable for operating activities
Total
Non-cash Financing and Investing Activities
Issuance of common shares for accounts payable and accrued liabilities
Issuance of commons shares for notes payable
Reclassification of accounts payable to notes payable
($28,598)
242,421
196,988
$14,298
78,733
429,742
$410,811
$522,773
$30,816
110,94
(192,043)
--
--
--
63 14. SUBSEQUENT EVENTS
· On January 1, 2021, the Company granted 275,000 options at C$0.47 under its stock option plan to persons
who are officers and employees of the Company.
· On January 4, 2021, 175,000 stock options at C$0.72 expired.
· On January 25, 2021, the Company closed the first tranche of a private placement financing (the "Financing")
for gross proceeds of C$1,343,019. Pursuant to the Financing, the Company issued 2,686,038 units of securities
of the Company (the "Units") at a subscription price of C$0.50 per Unit. Each Unit is comprised of one common
share in the capital of the Company ("Common Share") and one common share purchase warrant ("Warrant").
Each Warrant entitles the holder thereof to purchase one Common Share for a period of 24 months from the
date of issuance at an exercise price of USD$0.55.
· On February 10, 2021, the Company closed the second and final tranche of the Financing for gross proceeds
of C$150,000. Pursuant to the Financing, the Company issued 300,000 units of securities of the Company at a
subscription price of C$0.50 per Unit. Each Unit is comprised of one common share in the capital of the
Company ("Common Share") and one common share purchase warrant. Each Warrant entitles the holder thereof
to purchase one Common Share for a period of 24 months from the date of issuance at an exercise price of
USD$0.55.
· On March 4, 2021, the Company’s stock began trading on the US OTCQB Venture Market under the symbol
"TSDRF".
· On April 8, 2021, 250,000 stock options at C$0.79 expired.
64 Corporate Information
DIRECTORS
James M. Bruchs, Chairman
McLean, Virginia
Appointed as director in 2002
Jonathan R. Kelafant
Arlington, Virginia
Appointed as director in 2007
Thomas S. Bruington
Vancouver, British Columbia
Appointed as director in 2013
Mark Scowcroft
Victoria, Seychelles
Appointed as director in 2015
Blackie Marole
Gaborone, Botswana
Appointed as director in 2017
OFFICERS
James M. Bruchs, B.Sc., J.D.
Chairman and Chief Executive Officer
Appointed in 2002
Gary A. Bojes, CPA, Ph.D.
Chief Financial Officer
Appointed in 2007
CORPORATE HEAD OFFICE
TD Canada Trust Tower
Suite 2700
161 Bay Street, Box 508
Toronto, Ontario M5J 2S1
Telephone: (416) 572-2033
Facsimile: (416) 987-4369
Website: www.TsodiloResources.com
E-Mail: info@TsodiloResources.com
AUDITORS
Crowe Mackay LLP
Vancouver, Canada
LEGAL COUNSEL
Norton Rose Fulbright, LLP
Toronto, Ontario
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
Toronto, Ontario
STOCK EXCHANGE LISTING
TSX Venture Exchange
Trading Symbol: TSD
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