Western Copper and Gold Corporation
(An exploration stage company)
Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Responsibility for Financial Reporting
The accompanying consolidated financial statements of Western Copper and Gold Corporation (the
“Company”) have been prepared by management and are in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Management has developed and maintains a system of internal control to provide reasonable assurance
that assets are safeguarded and financial information is accurate and reliable. Further information on the
Company’s internal control over financial reporting and its disclosure controls is available in management’s
report on internal control, which follows.
The Board of Directors approves the consolidated financial statements and ensures that management
discharges its financial reporting responsibilities. The Board’s review is accomplished primarily through the
Audit Committee, which is composed of non-executive directors. The Audit Committee meets periodically
with management and the auditors to review financial reporting and control matters.
The Company’s independent auditors, PricewaterhouseCoopers LLP, have audited the Company’s
consolidated financial statements on behalf of the shareholders and their report follows.
/s/ Paul West-Sells
Paul West-Sells
President and Chief Executive Officer
/s/ Varun Prasad
Varun Prasad
Chief Financial Officer
March 18, 2020
Vancouver, Canada
- 2 -
Management’s Report on Internal Control over Financial Reporting
Management of Western Copper and Gold Corporation (the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting. The Securities and Exchange Act of 1934,
in Rule 13a-15(f) and 15d-15(f) thereunder, defines this as a process designed by, or under the supervision
of, the Company’s principal executive and principal financial officers and effected by the Company’s Board
of Directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, and includes those policies and procedures that:
Pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the
transactions of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board, and that receipts and expenditures of the Company are
made only in accordance with authorizations of management and directors of Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that may have a material effect on the Company’s consolidated
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all
misstatements on a timely basis. Also, projections of any evaluation of effectiveness of internal control
over financial reporting to future periods are subject to risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2019, based on the criteria established by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in its Internal Control - Integrated Framework (2013). Management
also assessed the effectiveness of its disclosure controls and procedures.
Based on these assessments, management concludes that the Company’s internal control over financial
reporting and its disclosure controls and procedures was not effective as of December 31, 2019 due to the
existence of a material weakness. A material weakness existed in the design of internal control over
financial reporting caused by a lack of adequate segregation of duties in the financial close process. The
Chief Financial Officer is responsible for preparing, authorizing, and reviewing information that is key to the
preparation of financial reports. He is also responsible for preparing and reviewing the resulting financial
reports. This weakness has the potential to result in material misstatements in the Company’s financial
statements and should also be considered a material weakness in its disclosure controls and procedures.
Management has concluded, and the Audit Committee has agreed, that taking into account the present
stage of Western Copper and Gold Corporation’s development, the Company does not have sufficient size
and scale to warrant the hiring of additional staff to correct the material weakness at this time.
/s/ Paul West-Sells
Paul West-Sells
President and Chief Executive Officer
/s/ Varun Prasad
Varun Prasad
Chief Financial Officer
March 18, 2020
Vancouver, Canada
- 3 -
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Western Copper and Gold Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Western Copper and Gold Corporation
and its subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related
consolidated statements of loss and comprehensive loss, cash flows and changes in shareholders' equity
for the years then ended, including the related notes (collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2019 and 2018, and its financial performance
and its cash flows for the years then ended in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
March 18, 2020
We have served as the Company's auditor since 2006.
4
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED BALANCE SHEETS
ASSETS
Cash and cash equivalents
Short-term investments
Marketable securities
Other assets
CURRENT ASSETS
Exploration and evaluation assets
ASSETS
LIABILITIES
Accounts payable and accrued liabilities
Flow-through premium liability
CURRENT LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Contributed surplus
Deficit
Note
December 31, 2019
$
December 31, 2018
$
4
5
6
7
8
1,641,721
-
160,500
281,517
2,083,738
3,026,385
1,505,161
252,200
159,188
4,942,934
48,375,025
41,946,079
50,458,763
46,889,013
372,790
89,775
602,206
462,565
602,206
116,908,713
33,942,501
(100,855,016)
111,891,213
33,484,162
(99,088,568)
SHAREHOLDERS’ EQUITY
49,996,198
46,286,807
LIABILITIES AND SHAREHOLDERS’ EQUITY
50,458,763
46,889,013
Commitments
Subsequent events
11
18
Approved by the Board of Directors
/s/ Robert Gayton Director /s/ Klaus Zeitler Director
The accompanying notes are an integral part of these consolidated financial statements
- 5 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
For the year ended December 31,
Filing and regulatory fees
Office and administration
Professional fees
Rent and utilities
Share-based payments
Shareholder communication and travel
Wages and benefits
Note
10, 12
12
2019
$
191,666
239,525
90,529
114,890
406,399
452,382
1,000,905
2018
$
206,506
262,325
90,921
112,626
574,974
561,067
1,093,404
CORPORATE EXPENSES
2,496,296
2,901,823
Foreign exchange loss
Interest income
Flow-through premium recovery
Unrealized loss on marketable securities
3,753
(57,866)
(767,435)
91,700
4,421
(83,584)
-
33,500
7
5
LOSS AND COMPREHENSIVE LOSS
1,766,448
2,856,160
Basic and diluted loss per share
0.02
0.03
Weighted average number of common shares outstanding
104,201,483
99,886,747
The accompanying notes are an integral part of these consolidated financial statements
- 6 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31,
Cash flows provided by (used in)
Note
2019
$
2018
$
OPERATING ACTIVITIES
Loss and comprehensive loss
ITEMS NOT AFFECTING CASH
Share-based payments
Unrealized loss on marketable securities
Flow-through premium recovery
(1,766,448)
(2,856,160)
406,399
91,700
(767,435)
(269,336)
574,974
33,500
-
608,474
Change in non-cash working capital items
13
(1,736)
120,156
OPERATING ACTIVITIES
FINANCING ACTIVITIES
Private placement proceeds
Private placement issuance costs
Exercise of stock options
(2,037,520)
(2,127,530)
8
8
9
3,354,300
(341,660)
72,000
3,340,826
(152,825)
732,500
FINANCING ACTIVITIES
3,084,640
3,920,501
INVESTING ACTIVITIES
Redemption of short-term investments
Mineral property expenditures
Acquisition of mineral claims
1,500,000
(3,892,871)
(38,913)
2,186,861
(1,348,817)
-
INVESTING ACTIVITIES
(2,431,784)
838,044
CHANGE IN CASH AND CASH EQUIVALENTS
(1,384,664)
2,631,015
Cash and cash equivalents – Beginning
3,026,385
395,370
CASH AND CASH EQUIVALENTS - ENDING
1,641,721
3,026,385
The accompanying notes are an integral part of these consolidated financial statements
- 7 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Number of
Shares
Share
Capital
$
Contributed
Surplus
$
Deficit
$
Shareholders’
Equity
$
DECEMBER 31, 2017
96,653,935
108,021,796
32,747,685
(96,232,408)
44,537,073
Private Placement (note 8c)
Gross proceeds
Issuance costs
Allocation of warrant value
Exercise of stock options
Transfer of stock option value
Share-based payments
Loss and comprehensive loss
2,905,066
-
-
1,225,000
-
-
-
3,340,826
(152,825)
(319,000)
732,500
267,916
-
-
-
-
319,000
-
(267,916)
685,393
-
-
-
-
-
-
-
(2,856,160)
3,340,826
(152,825)
-
732,500
-
685,393
(2,856,160)
DECEMBER 31, 2018
100,784,001
111,891,213
33,484,162
(99,088,568)
46,286,807
Shares issued – Acquisition of
mineral claims (note 8b)
Private Placement (note 8c)
Gross proceeds
Flow-through premium (note
7)
Issuance costs
Exercise of stock options
Transfer of stock option value
Share-based payments
Loss and comprehensive loss
3,000,000
2,760,000
3,727,000
-
3,354,300
(857,210)
-
-
-
-
-
-
-
125,000
-
-
-
(341,660)
72,000
30,070
-
-
-
-
(30,070)
488,409
-
-
-
-
-
(1,766,448)
2,760,000
3,354,300
(857,210)
(341,660)
72,000
-
488,409
(1,766,448)
DECEMBER 31, 2019
107,636,001
116,908,713
33,942,501
(100,855,016) 49,996,198
The accompanying notes are an integral part of these consolidated financial statements
- 8 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
1. NATURE OF OPERATIONS
Western Copper and Gold Corporation (together with its subsidiaries, “Western” or the “Company”) is an
exploration stage company that is directly engaged in exploration and development of the Casino mineral
property located in Yukon, Canada (the “Casino Project”).
The Company is incorporated in British Columbia, Canada. Its head office is located at 15th Floor – 1040
West Georgia Street, Vancouver, British Columbia.
The Company will need to raise additional funds to complete the development of the Casino Project. While
Western has been successful in raising sufficient capital to fund its operations in the past, there can be no
assurance that it will be able to do so in the future. Refer to note 18 for more information.
2. BASIS OF PRESENTATION
a. Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial
statements are prepared under the historical cost convention.
These financial statements were approved for issue by the Company’s board of directors on March 18,
2020.
b. Accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to exercise
judgement in the process of applying its accounting policies and to make estimates that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities
at the date of the financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. Differences may be material.
Judgment is required in assessing whether certain factors would be considered an indicator of
impairment. We consider both internal and external information to determine whether there is an
indicator of impairment present and accordingly, whether impairment testing is required. Where an
impairment test is required, calculating the estimated recoverable amount of the cash generating units
for non-current asset impairment tests requires management to make estimates and assumptions with
respect to estimated recoverable reserves or resources, estimated future commodity prices, expected
future operating and capital costs, and discount rates. Changes in any of the assumptions or estimates
used in determining the recoverable amount could impact the impairment analysis.
- 9 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
3. ACCOUNTING POLICIES
a. Change in accounting policy
Effective January 1, 2019, the Company adopted IFRS 16 – Leases (IFRS 16). IFRS 16 replaces IAS 17
– Leases. Revised standard eliminates the classification of leases as either operating or finance leases
for a lessee. Instead all leases are capitalized by recognizing the present value of lease payments and
recognizing an asset and a financial liability representing an obligation to make future lease payments.
The principles in IFRS 16 provide a more consistent approach to acquiring the use of an asset whether
by leasing or purchasing an asset. The Company’s lease agreements are classified as short term due
to a termination clause, therefore having no impact on opening balances upon adoption. The lease
will continue to be recognised through the statement of loss and comprehensive loss.
b. Summary of significant accounting policies
The Company’s principal accounting policies are outlined below:
(i)
Basis of consolidation
The Company consolidates an entity when it has power over that entity, is exposed, or has rights,
to variable returns from its involvement with that entity and has the ability to affect those returns
through its power over that entity. The financial statements of other entities (e.g. subsidiaries)
are included in the consolidated financial statements from the date that control commences until
the date that control ceases. All significant intercompany transactions and balances are
eliminated.
The consolidated financial statements of the Company include Western Copper and Gold Corp.,
Casino Mining Corp., and Ravenwolf Resource Group Ltd.
(ii)
Presentation currency
The Company’s presentation currency is the Canadian dollar (“$”). The functional currency of
Western and its significant subsidiaries is the Canadian dollar.
(iii) Foreign currency translation
In preparing the financial statements of the individual entities, transactions in currencies other
than the entity’s functional currency (“foreign currencies”) are recorded at the rates of exchange
prevailing at the dates of the transactions. At each balance sheet date, monetary assets and
liabilities are translated using the period end foreign exchange rate. Non-monetary assets and
liabilities are translated using the historical rate on the date of the transaction. All gains and
losses on translation of these foreign currency transactions are included in the statement of loss.
- 10 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
(iv) Share-based payments
The Company grants stock options to buy common shares of the Company to directors, officers,
employees and consultants. The fair value of stock options granted by the Company is treated
as compensation costs in accordance with IFRS 2 - Share-based Payments. The fair value of
such awards is calculated using the Black-Scholes option pricing model. These costs are charged
to the statement of loss or, if appropriate, are capitalized to exploration and evaluation assets
over the stock option vesting period with an offsetting entry to contributed surplus. The
Company’s allocation of share-based payments is consistent with its treatment of other types of
compensation for each recipient.
If the stock options are exercised, the value attributable to the stock options is transferred to
share capital.
(v)
Income taxes
Income tax expense consists of current and deferred tax expense. Income tax expense is
recognized in the statement of loss.
Current tax expense is the expected tax payable on the taxable income for the period, using tax
rates enacted or substantively enacted at year end, adjusted for amendments to tax payable
with regards to the previous year.
Deferred taxes are recorded using the liability method. Under the liability method, deferred tax
assets and liabilities are recognized for future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases (i.e. timing differences). Deferred tax assets and liabilities are measured
using the enacted or substantively enacted tax rates expected to apply when the asset is realized
or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the statement of loss in the period that the substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will
be available against which the asset can be utilized.
(vi) Flow-through shares
Canadian income tax legislation permits an enterprise to issue securities, referred to as flow-
through shares, whereby the investor can claim the tax deductions arising from the renunciation
of the related qualifying resource expenditures. The Company accounts for flow-through shares
whereby the premium paid for the flow-through shares in excess of the market value of the
shares without flow-through features is credited to other liabilities and included in other income
at the same time the qualifying expenditures are made.
- 11 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
(vii) Loss per share
Basic loss per share is computed by dividing the net loss available to common shareholders by
the weighted average number of shares outstanding during the reporting period. Diluted loss
per share is computed in the same way as basic loss per share except that the weighted average
number of shares outstanding is increased to include additional shares for the assumed exercise
of all stock options and warrants, if dilutive.
(viii) Long-lived assets
1. Exploration and evaluation assets
Direct costs related to the acquisition and exploration of mineral properties held or controlled
by the Company are capitalized on an individual property basis until the property is put into
production, sold, abandoned, or determined to be impaired. Administration costs and
general exploration costs are expensed as incurred. When a property is placed into
commercial production, deferred costs will be depleted using the units-of-production method.
The Company classifies its mineral properties as exploration and evaluation assets until
technical feasibility and commercial viability of extracting a mineral resource are
demonstrable. At this point, the exploration and evaluation assets are transferred to property
and equipment. The establishment of technical feasibility and commercial viability of a
mineral property is assessed based on a combination of factors, such as the extent of
established mineral reserves, the results of feasibility and technical evaluations, and the
status of mining leases or permits.
Proceeds received from the sale of royalties, tax credits, or government assistance programs
are recognized as a reduction in the carrying value of the related asset when the money is
more likely than not to be received. If the applicable property has been written-off, the
amount received is recorded as a credit in the statement of loss in the period in which the
payment is more likely than not to be received.
Although the Company has taken steps to verify title to mineral properties in which it has an
interest, these procedures do not guarantee the Company’s title. Such properties may be
subject to prior agreements or transfers, or title may be affected by undetected defects.
2. Impairment
The Company’s assets are reviewed for indication of impairment at each balance sheet date
in accordance with IFRS 6 – Exploration for and evaluation of mineral resources. If any such
indication exists, an estimate of the recoverable amount is undertaken, being the higher of
an asset’s fair value less costs of disposal and value in use (“VIU”). If the asset’s carrying
amount exceeds its recoverable amount then an impairment loss is recognized in the
statement of loss.
- 12 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The fair value
of mineral assets is generally determined as the present value of the estimated future cash
flows expected to arise from the continued use of the asset, including any expansion
prospects.
VIU is determined as the present value of the estimated future cash flows expected to arise
from the continued use of the asset in its present form and from its ultimate disposal.
Impairment is normally assessed at the level of cash-generating units, which are identified
as the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets.
3. Reversal of impairment
An impairment loss is reversed if there is an indication that there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss had been recognized.
(ix) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid
investments with an original maturity of three months or less.
(x)
Short-term investments
Short-term investments are investments with an original maturity date greater than three
months, but no more than one year from the date of acquisition.
(xi) Financial instruments
1. Classification and measurement
Financial instruments are recognized when the Company becomes party to a contractual
obligation. At initial recognition, the Company classifies its financial instruments as one the
following categories: at fair value through profit and loss (“FVTPL”), at fair value through
other comprehensive income (“FVTOCI”), or at amortized cost according to the financial
instruments’ contractual cash flow characteristics and the business models under which they
are held.
Financial assets are measured at amortized cost if they are held for the collection of
contractual cash flows where those cash flows solely represent payments of principal and
interest. The Company’s intent is to hold these financial assets in order to collect contractual
cash flows and the contractual terms give rise to cash flows on specified dates that are solely
payments of principal and interest on the principal amount outstanding.
- 13 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Financial assets are measured at FVTOCI if they are held for the collection of contractual
cash flows and for selling the financial assets, where the assets’ cash flows represent solely
payments of principal and interest. The Company initially recognizes these financial assets
at their fair value with subsequent changes to fair values recognized in OCI. When the
financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to the statement of loss.
Financial assets are measured at FVTPL if they do not qualify as financial assets at amortized
cost or FVTOCI. The Company initially recognizes these financial assets at their fair value
with subsequent changes to fair values recognized in the statement of loss.
Financial liabilities are measured at amortised cost unless they are required to be measured
at FVTPL.
The Company classifies its financial instruments as follows:
Financial assets/liabilities
Cash and cash equivalents
Short-term investments
Marketable securities
Other assets
Accounts payable and accrued liabilities
Classification
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
2. Impairment of financial assets
At each reporting date, the Company assesses the expected credit loss associated with its
financial assets carried at amortized cost and FVTOCI. The impairment methodology applied
depends on whether there has been a significant increase in credit risk. Allowances are
recognized as impairment gains or losses on the statement of loss.
3. Derecognition
Financial assets are derecognized when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Company has transferred substantially
all the risks and rewards of ownership. Financial liabilities are derecognized when, and only
when, the Company’s obligations are discharged, cancelled or they expire.
(xii) Provisions
Provisions are recorded when a present legal or constructive obligation exists as a result of past
events where it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate of the amount of the obligation can be
made.
The amount recognized as a provision is the best estimate of the consideration required to settle
the present obligation at the balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows.
- 14 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
4. SHORT-TERM INVESTMENTS
As at December 31, 2019, the Company had $nil (December 31, 2018 - $1,505,161) invested in Canadian
dollar denominated guaranteed investment certificates, including accrued interest of $nil (December 31,
2018 - $5,161).
5. MARKETABLE SECURITIES
As at December 31, 2019, the Company held marketable securities with an aggregate market value of
$160,500 (December 31, 2018 - $252,200), consisting of 2.5 million common shares of NorthIsle Copper
and Gold Inc. with a market value of $150,000 (December 31, 2018 - $237,500) and 420,000 common
shares of Copper North Mining Corp. with a market value of $10,500 (December 31, 2018 - $14,700). For
the year ended December 31, 2019, the Company recognized an unrealized loss on marketable securities
totalling $91,700 (December 31, 2018 - $33,500).
6. EXPLORATION AND EVALUATION ASSETS
a. Casino (100% - Yukon, Canada)
The Casino Project is a copper-gold porphyry deposit located in Yukon, Canada.
All claims comprising the Casino Project are subject to a 2.75% net smelter returns royalty on the
future sale of any metals and minerals derived therefrom.
As part of a separate agreement, Western is required to make a payment of $1 million upon making a
production decision on the Casino Project.
b. Canadian Creek (100% - Yukon, Canada)
On August 28, 2019, the Company acquired the mineral claims that comprise the Canadian Creek
Property from Cariboo Rose Resources Ltd (“Cariboo Rose”). The Canadian Creek Property lies directly
adjacent to the Casino Project.
The total consideration paid to Cariboo Rose consists of 3 million common shares of the Company with
a fair value of $2,760,000. The Company also incurred $38,913 in closing costs.
- 15 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
c. Exploration and evaluation expenditures
Casino
$
Canadian
Creek
$
Total
$
DECEMBER 31, 2017
40,650,547
Claims maintenance
Engineering
Permitting
Salary and wages
Share-based payments
11,445
213,630
594,423
365,615
110,419
DECEMBER 31, 2018
41,946,079
-
-
-
-
-
-
-
-
Acquisition costs
Claims maintenance
Engineering
Exploration and camp support
Permitting
Salary and wages
Share-based payments
-
4,963
93,307
3,003,005
185,845
260,903
82,010
2,798,913
-
-
-
-
-
-
40,650,547
11,445
213,630
594,423
365,615
110,419
41,946,079
2,798,913
4,963
93,307
3,003,005
185,845
260,903
82,010
DECEMBER 31, 2019
45,576,112
2,798,913
48,375,025
7. FLOW THROUGH PREMIUM LIABILITY
The flow-through premium liability balance as at December 31, 2019 of $89,775 (December 31, 2018
- Nil) arose in connection with the flow-through share offering the Company completed on May 17,
2019. The reported amount is the remaining balance of the premium from issuing the flow-through
shares. The flow-through premium liability will be derecognized with a recovery in the statement of
loss pro-rata with the amount of qualifying flow-through expenditures that are incurred by the
Company.
The Company is committed to incurring on or before December 31, 2020 qualifying Canadian
exploration expenses as defined under the Income Act, Canada ("Qualifying CEE") in the amount of
$3,354,300 with respect to the flow-through share financing completed on May 17, 2019. None of the
Qualifying CEE will be available to the Company for future deduction from taxable income.
As at December 31, 2019, the Company had incurred approximately $3,009,300 of Qualifying CEE and
accordingly, recognized flow-through premium recoveries of $767,435 during the year ended December
31, 2019 (2018 - Nil).
- 16 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
8. SHARE CAPITAL
a. Authorized share capital
The Company is authorized to issue an unlimited number of common shares without par value and an
unlimited number of preferred shares without par value.
b. Acquisition of mineral claims
On August 28, 2019, Western acquired the 311 mineral claims that comprise the Canadian Creek
Property from Cariboo Rose. The Company issued 3 million common shares to Cariboo Rose valued at
$0.92 per common share for an aggregate value of $2,760,000.
c. Financing
On May 17, 2019, Western completed a brokered private placement of flow-through common shares
(the “FT Shares”). The Company issued a total of 3,727,000 FT Shares, comprised of (i) 3,333,333 FT
Shares pursuant to the base offering and (ii) 393,667 FT Shares pursuant to the agent’s exercise of its
option, at a price of $0.90 per FT Share for aggregate gross proceeds of $3,354,300. Issuance costs
related to the private placement totaled $341,660. A flow-through premium liability was recorded in
the amount of $857,210 (note 7).
On February 8, 2018, Western issued 2,905,066 units at a price of $1.15 per unit for aggregate gross
proceeds of $3,340,826. Each unit consisted of one common share and half of a non-transferable
warrant. Each whole warrant entitles the holder to purchase one additional common share at a price
of $1.75 until February 8, 2020. Issuance costs related to the financing totaled $152,825.
The fair value assigned to the warrants was calculated using the Black-Scholes option pricing model
and the following inputs and assumptions:
Warrants issued
Exercise price
Market price
Expected term (years)
Expected share price volatility
Average risk-free interest rate
Expected dividend yield
1,452,533
$1.75
$1.10
2.0
63.8%
1.83%
-
FAIR VALUE ASSIGNED
$319,000
- 17 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
9. WARRANTS AND STOCK OPTIONS
a. Warrants
The Company issued 1,452,533 warrants on February 8, 2018. All outstanding warrants have an
exercise price of $1.75 and a remaining contractual life of 0.11 years.
DECEMBER 31, 2018
1,452,533
Number of
warrants
Weighted average
exercise price
$
1.75
Issued
-
DECEMBER 31, 2019*
1,452,533
-
1.75
*Above warrants expired subsequent to December 31, 2019.
b. Stock options
Based on the Company’s stock option plan, most recently approved by the Company’s shareholders at
the annual general meeting held on May 30, 2018, Western may issue stock options for the purchase
of up to 10% of issued capital. The exercise price of the stock options must be greater than, or equal
to, the market value of the Company’s common shares on the last trading day immediately preceding
the date of grant. Stock options vest over a two year period from the date of grant unless otherwise
determined by the directors. The maximum stock option term is 10 years. At December 31, 2019, the
Company could issue an additional 4,613,599 stock options under the terms of the stock option plan.
A summary of the Company’s stock options outstanding and the changes for the years then ended, is
presented below:
Number of
stock options
DECEMBER 31, 2017
4,283,335
Granted
Exercised
Forfeited
2,325,000
(1,225,000)
(183,334)
DECEMBER 31, 2018
5,200,001
Granted
Exercised
Expired
Forfeited
2,075,000
(125,000)
(850,000)
(150,000)
DECEMBER 31, 2019
6,150,001
Weighted average
exercise price
$
0.76
1.20
0.60
1.16
0.98
0.87
0.58
0.90
1.20
0.96
- 18 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Stock options outstanding are as follows:
Stock options outstanding,
by exercise price
Number of
Stock options
Weighted average
exercise price
$0.50 – 0.67
0.75
0.90
$0.96
$1.20
716,667
400,000
1,675,000
1,333,334
2,025,000
DECEMBER 31, 2019
6,150,001
$
0.52
0.75
0.90
0.96
1.20
0.96
Average
remaining
contractual life
years
0.55
4.31
4.47
1.70
3.14
2.96
Of the total stock options outstanding, 3,400,001 were vested and exercisable at December 31, 2019.
The weighted average exercise price of vested stock options is $0.96 and the average remaining
contractual life is 2.03 years.
10. SHARE-BASED PAYMENTS
The following is a summary of stock options granted by the Company in 2019 and 2018 and fair value
assigned to each grant. The fair value was calculated at the time of grant using the Black-Scholes option
pricing model and the following inputs and assumptions.
Inputs and assumptions
June 18,
2019
April 23,
2019
February 21,
2018
Stock options granted
Exercise price
1,675,000
$0.90
400,000
$0.75
2,325,000
$1.20
Market price
Expected option term (years)
Expected stock price volatility
Average risk-free interest rate
Expected forfeiture rate
Expected dividend yield
$0.78
3.0
51.8%
1.36%
-
-
$0.72
3.0
51.6%
1.56%
-
-
$1.13
3.0
59.9%
1.94%
-
-
FAIR VALUE ASSIGNED
$409,000
$100,000 $1,038,000
11. COMMITMENTS
The Company must spend approximately $345,000 on qualifying Canadian exploration expenditures by
December 31, 2020. Otherwise, Western is required to pay the investors who purchased flow-through
shares the difference between the amount of tax they would have realized had the Company incurred all
expenditures renounced in March 2020 by December 31, 2020, and the amount that the investors actually
realized.
- 19 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
12. KEY MANAGEMENT COMPENSATION
The Company’s related parties include its directors and officers, who are the key management of the
Company. The remuneration of key management was as follows:
For the year ended December 31,
Salaries and director fees
Share-based payments
2019
$
832,566
367,133
2018
$
830,698
501,900
KEY MANAGEMENT COMPENSATION
1,199,699
1,332,598
Share-based payments represent the fair value of stock options previously granted to directors and officers
that was recognized in the Company’s consolidated financial statements during the years presented above.
13. SUPPLEMENTAL CASH FLOW INFORMATION
a. Non-cash working capital items
For the year ended December 31,
Change in other assets
Change in accrued interest
Change in accounts payable and accrued liabilities related to operations
2019
$
(3,298)
5,161
(3,599)
2018
$
6,069
12,109
101,978
CHANGE IN NON-CASH WORKING CAPITAL ITEMS
(1,736)
120,156
b. Non-cash investing activities
The Company issued 3 million common shares with a fair value of $2,760,000 with respect to its
acquisition of the Canadian Creek property.
14. SEGMENTED INFORMATION
The Company’s operations are in one segment: the acquisition, exploration, and future development of
mineral resource properties. All interest income is earned in Canada and all assets are held in Canada.
- 20 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
15. INCOME TAXES
a. Rate reconciliation
The income tax expense or recovery reported by the Company differs from the amounts obtained by
applying statutory rates to the loss and comprehensive loss. A reconciliation of the income tax provision
computed at statutory rates to the reported income tax provision is provided below:
For the year ended December 31,
2019
2018
Statutory tax rate
Loss before taxes
27.00%
27.00%
1,766,447
2,856,161
Income tax recovery calculated at statutory rate
476,941
771,163
Non-deductible expenditures
Flow-through premium
Other
Unrecognized tax benefit
INCOME TAX
299,464
(207,207)
26,702
(595,900)
(200,062)
-
8,253
(579,354)
-
-
b. Unrecognized deferred income tax asset
Future potential tax deductions that are not used to offset deferred income tax liabilities are considered
to be unrecognized deferred income tax assets. The significant components of the Company’s
unrecognized deferred income tax asset are as follows:
As at December 31,
Mineral property interests
Non-capital losses
Property and equipment
Other items
2019
$
400,811
5,437,407
189,043
245,740
2018
$
1,212,247
4,848,123
187,968
180,194
UNRECOGNIZED DEFERRED INCOME TAX ASSET
6,273,001
6,428,532
The Company estimates that the realization of income tax benefits related to these deferred income
tax assets is uncertain and cannot be considered to be probable. Accordingly, no deferred income tax
asset has been recorded.
c. Non-capital losses
The Company has incurred non-capital losses that may be carried forward and used to reduce taxable
income of future years. These losses totaled $20.1 million as at December 31, 2019 (2018 - $18.0
million) and will expire between 2030 and 2039.
The Company has $34.8 million in Canadian exploration and development expenditures (2018 - $34.2
million), and cumulative eligible capital and undepreciated capital cost balances totaling $1.25 million
(2018 - $1.24 million). These amounts are available to reduce future taxable income and do not
expire.
- 21 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
16. CAPITAL MANAGEMENT
The Company considers capital to be equity attributable to common shareholders, comprised of share
capital, contributed surplus, and deficit. It is the Company’s objective to safeguard its ability to continue
as a going concern so that it can continue to explore and develop mineral resource properties.
The Company monitors its cash position and its short-term investments on a regular basis to determine
whether sufficient funds are available to meet its short-term and long-term corporate objectives, and makes
adjustments to its plans for changes in economic conditions, capital markets and the risk characteristics of
the underlying assets.
To maintain its objectives, the Company may attempt to issue new shares, seek debt financing, acquire or
dispose of assets or change the timing of its planned exploration and development projects. There is no
assurance that these initiatives will be successful.
There was no change in the Company’s approach to capital management during the year. Western has no
debt and does not pay dividends. The Company is not subject to any externally imposed capital.
17. FINANCIAL INSTRUMENT RISK
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework. The Company has exposure to liquidity, credit, and market risk from the use of
financial instruments. Financial instruments consist of cash and cash equivalents, short-term investments,
marketable securities, certain other assets, and accounts payable and accrued liabilities.
a. Liquidity risk
Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they come
due. The Company uses cash forecasts to ensure that there is sufficient cash on hand to meet short-
term business requirements. Cash is invested in highly liquid investments which are available to
discharge obligations when they come due. The Company does not maintain a line of credit.
b. Credit risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and
cash equivalents and short-term investments. These financial instruments are at risk to the extent that
the institutions issuing or holding them cannot redeem amounts when they are due or requested. To
limit its credit risk, the Company uses a restrictive investment policy. It deposits cash and cash
equivalents in Canadian chartered banks and purchases short-term investments that are guaranteed
by Canadian governments or by Canadian chartered banks. The carrying amount of financial assets
recorded in the financial statements, net of any allowance for losses, represents Western’s maximum
exposure to credit risk.
c. Market risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded
marketable securities. The Company has no control over these fluctuations and does not hedge its
investments. Marketable securities are adjusted to fair value at each balance sheet date.
- 22 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
18. SUBSEQUENT EVENTS
On February 28, 2020, the Company issued 3 million units at a price of $0.65 per unit for gross proceeds
of $1.95 million. Each unit consisted of one common share of the Company and half of one non-transferable
warrant. Each whole warrant entitles the holder to purchase one common share of the Company at a price
of $0.85 until February 28, 2025.
- 23 -