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ArcWest Exploration Inc. — Management Reports 2024
Nov 29, 2024
46985_rns_2024-11-29_7d460622-de04-4fff-ad9d-726952717711.pdf
Management Reports
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ARCWEST EXPLORATION INC.
Management Discussion and Analysis
For the nine months ended September 30, 2024 and 2023
This management discussion and analysis of financial position and results of operations (“MD&A”) is prepared as at November 29, 2024 and should be read in conjunction with the unaudited interim financial statements for the nine months ended September 30, 2024 of ArcWest Explorations Inc. (the “Company” or “ArcWest”), together with the audited financial statements and related notes thereto of ArcWest Exploration Inc. (the “Company” or “ArcWest”) for the year ended December 31, 2023, as well as the accompanying MD&A for the year then ended (the “Annual MD&A”).
The referenced unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standards 34, “Interim Financial Reporting”, using accounting policies consistent with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee (“IFRIC”). All dollar amounts included therein and in the following MD&A are expressed in Canadian dollars except where noted.
The Company’s critical accounting estimates, significant accounting policies and risk factors as disclosed in the Annual MD&A have remained substantially unchanged and are still applicable to the Company unless otherwise indicated.
In this discussion, unless the context requires otherwise, references to “we” or “our” are references to ArcWest Exploration Inc.
Forward Looking Statements
This Management’s Discussion and Analysis (“MD&A”) contains certain statements, other than statements of historical fact that are forward-looking statements which reflect the current view of the Company with respect to future events including corporate developments, financial performance and general economic conditions which may affect the Company. The forward-looking statements in this MD&A include, but are not limited to: the exploration status of our Oweegee Dome, Todd Creek, Oxide Peak, Eagle, Rip, Teeta Creek, NVI and Sparrowhawk properties; related commitments and timelines for development of these properties; and future funding requirements for the Company. Forward-looking statements are included, but are not limited to, those statements set out in this MD&A under Description of Business and Overall Performance, Future Plans and Outlook, Future Changes in Accounting Policies and Risks and Uncertainties.
We have based these forward-looking statements largely on our current expectations, projections and assumptions made based on our experience, perception of historical trends, the current business and financial environment. Key assumptions upon which the forward-looking statements are based include the following:
a) If required, the Company will be able to secure additional financial resources;
b) Key personnel will continue their positions with the Company;
c) We will be able to enter into partnerships and/or complete exploration programs on our properties.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Risks that could cause actual results to differ from current expectations include: our ability to source new projects and properties; our ability to attract partners to conduct advanced exploration on our property portfolio; general economic and financial market conditions; inability to raise capital; and retaining key directors and management.
Additional information relating to our Company is available by accessing the SEDAR + website at www.sedarplus.ca.
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Description of Business
ArcWest was incorporated under the Business Corporations Act (British Columbia) on December 23, 2010, and trades on the TSX Venture Exchange under the stock symbol “AWX”. The registered and records office of the Company is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, V6C 2X8. The head office of the Company is located at 1000-355 Burrard Street, Vancouver, BC V6C 2G8.
ArcWest is engaged in mineral exploration utilizing a “prospect generator” business model initially focused on securing exploration properties of exceptional merit in the highly prospective Golden Triangle region of British Columbia (BC) and other proven mining districts throughout BC. ArcWest plans to provide geological expertise and funding to efficiently build value in these properties and use joint ventures to build resources through the more expensive drilling stages.
Future Plans and Outlook
ArcWest's plan is to become a pre-eminent North American project generator with an initial focus on British Columbia and its highly prospective Golden Triangle and other highly prospective porphyry copper - gold belts in BC. ArcWest believes its properties represent some of the most prospective targets available in BC and is in a position to deliver increased shareholder value by providing geological expertise and funding to advance current properties and acquire new projects.
Operations Review
ArcWest owns eight mineral exploration projects in British Columbia as follows:
Todd Creek
ArcWest’s 100% owned, 21-343-hectare Todd Creek project is located 30 km northeast of Stewart and 45 km southeast of the giant KSM-Iron Cap porphyry Cu-Au (Seabridge Gold) and Treaty Creek Au-Ag+/-Cu (Tudor) deposits in BC’s Golden Triangle. The project is also located 35 km southeast of Newmont Corporation’s (“Newmont”) Brucejack gold-silver mine (ArcWest’s and Newmont’s claims are contiguous) and is proximal to the Brucejack mine road. Collectively, the KSM-Iron Cap (Seabridge Gold), Treaty Creek (Tudor Gold-Teuton Resources-American Creek Resources) and Brucejack (Pretium /Newcrest) projects contain an estimated 199 million oz gold, 790 million oz silver and 51 billion lbs copper (Roulston, 2021).
The Todd Creek project hosts a 12 km N-S, variably Cu-Au mineralized gossan on the west side of Todd Creek valley that is prospective for KSM-Iron Cap-like porphyry Cu-Au systems. Multiple underexplored VMS occurrences on the east side of Todd Creek valley are prospective for Eskay Creek-like precious and base metal enriched VMS systems. An epithermal Au-Ag-Cu system, the South Zone, is present at low elevations on the west side of the Todd Creek valley. South Zone is host to a non-43-101 compliant historic resource calculated by Noranda Inc. (“Noranda”) totaling 207,000 tonnes grading 5.48 g/t Au (Hemlo Gold Mines, 1988 Annual Report). The South Zone is open in multiple directions. It should be noted that the historical estimates by Noranda were made by a source believed to be reliable. However, the estimates have not yet been independently verified according to The Canadian Institute of Mining, Metallurgy and Petroleum standards. The resource estimate is presented for historical purposes only. Therefore, the Company is not treating the estimate as a National Instrument 43-101 defined resource, and the historical estimate should not be relied upon.
On March 10, 2023, the Company announced that it had entered into an earn-in agreement with Freeport-McMoRan Mineral Properties Canada Inc. (“Freeport”) to advance the Todd Creek copper-gold project. Under the terms of the earn-in agreement, Freeport has a two-stage option to earn up to an 80% ownership interest over up to a 10-year period. To earn an initial 51% interest, Freeport is required to fund $20,000,000 of work expenditures over a 5-year period and make staged cash payments to ArcWest totaling $900,000. ArcWest will be the operator during the initial earn-in period with a 10% management fee. Upon Freeport earning such 51% interest, it can elect, at its sole discretion, to earn an additional 29% ownership interest (for a total 80% interest) by sole funding a further $30,000,000 of work expenditures within the following five years and make staged cash payments to ArcWest totaling $750,000. Once Freeport has finalized its earned ownership interest at either the 51% or 80% level, each party will be responsible for funding its pro rata share of project costs on a 51:49 or 80:20 basis.
On May 4, 2023, the Company entered into an option agreement with a confidential optionee (the "Optionee") to purchase certain mineral claims (the "Claims") within Todd Creek. Pursuant to the option agreement, the Company granted the Optionee the option to purchase the Claims for $500,000 on or before April 30, 2024. The Optionee exercised the option for purchase on April 30, 2024 and the Company received the $500,000. The claims were transferred to the Optionee on May 23, 2024. An advance payment of $50,000 for maintenance fees was received on May 10, 2023.
On July 26, 2023, the Company announced an approved expenditure of a $2,800,000 Todd Creek Copper-Gold Exploration Program to be funded by Freeport-McMoRan Mineral Properties Canada Inc as per an earn-in agreement.
On March 4, 2024, the Company provided an update on the 2023 Todd Creek exploration program. The 2023 program included a 3D IP survey, covering an area of 6 by 2-3 kilometres, which outlined three extensive zones of high chargeability, underlying or in proximity to areas of known Cu-Au mineralization on the property. Prospecting, mapping and sampling consisting of 2,021 geological stations, 256 rock samples and 458 soil and talus samples over a 4 by 12 kilometre area on the west side of Todd Creek, returned some of the highest grade samples found to date on the property, including 262 g/t Au and 2.46% Cu at the Ice Creek Zone and 1.15 g/t Au, 0.76% Cu and 80 parts per million molybdenum (Mo) at the Fall Creek Zone. South Ridge Zone, a new zone prospective for massive sulfides, was discovered over two km west of the South Zone in a previously unexplored area. Hyperspectral studies were completed on 676 rock samples and 458 soil sample pulps to determine alteration mineralogy and petrography was completed on 16 drill core samples from the South, Fall Creek and Orange Mountain Zones.
Oweegee Dome
ArcWest's 100% owned, 31,077-hectare Oweegee Dome porphyry Cu-Mo-Au ("Oweegee") project is located 45 km east of Seabridge Gold's supergiant KSM-Iron Cap porphyry Cu-Au project and 40 km east of Tudor Gold's Treaty Creek Au-Ag-Cu project. Oweegee is also situated 34 km northeast of Newcrest's high grade Brucejack gold-silver mine. The Oweegee project hosts multiple underexplored porphyry Cu-Au systems of significant size, including the large Delta and Skowill East gossans.
The Company signed a definitive earn-in agreement with Sanatana Resources Inc. ("Sanatana") whereby Sanatana can earn an initial 60% interest in the Oweegee Dome project.
On April 26, 2023, the Company announced initial drill results from 2022 drilling on its Oweegee project. Partner Sanatana completed a large program of mapping, rock and soil geochemical sampling, spectrographic, induced polarization ("IP") and diamond drilling at Oweegee in 2022, including 3679 meters of drilling in twelve drill holes.
On November 8, 2023, the Company announced the completion of the partner funded 2023 IP program at the Oweegee project. The 2023 IP program of 8.5 line kilometers expanded survey coverage over one kilometer to the east, augmenting previous surveys in 2021 and 2022. The 2023 program has outlined a 1 by 2 km chargeability anomaly (the "Junction" target), which provides a compelling untested drill target situated beneath the overlying, variably Cu-Au mineralized QSP-altered porphyries and associated breccias of the Delta Zone.
Oxide Peak
On March 4, 2024 the Company announced it had entered into a definitive agreement with TDG Gold Corp. with respect to the acquisition of 100% of the Oxide Peak property. The terms of agreement include TDG Gold making a cash payment of $100,000 (paid) and issuing 412,031 common shares (received). The Company will retain a 2% net smelter return royalty, which can be reduced to 1% for a cash payment to the Company of $2,000,000.
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Rip
The Rip Property is a copper molybdenum porphyry (“Cu-Mo-Au”) prospect located in the Skeena Arch approximately 60 km south of Houston, BC. The property is in a prospective part of the Skeena Arch, which includes the past producing Huckleberry, Silver Queen and Equity mines as well as projects with significant known mineral resources including Berg, Poplar and Seel/Ox.
On December 8, 2023 the Company entered into an agreement with Interra Copper Corp. (“Interra”). Under the terms of the agreement, Interra has a two-stage option to earn up to an 80% ownership interest in the Rip project over up to an 8-year period. To earn an initial 60% interest, Interra is required to fund $2,000,000 of work expenditures over a 4-year period and make staged cash and share payments to Company totaling $100,000 and 1,050,000 shares, respectively. Interra will issue 200,000 shares to the Company before December 4, 2023 (received). The Company will be the operator during the initial earn-in period. Upon Interra earning such 60% interest, it can elect, at its sole discretion, to earn an additional 20% ownership interest in the Rip project (for a total 80% interest) by, over a four year period, completing and delivering to the Company a Feasibility Study for the Property, in addition to making staged cash payments totaling $1,000,000 ($250,000 per year).
Eagle
ArcWest’s road accessible Eagle porphyry Cu-Au project is located approximately 90 kilometres northwest of Fort St. James. The project is situated midway between several significant Cu-Au deposits. Centerra Gold’s Mt. Milligan mine is located approximately 50 kilometres to the east. The advanced stage Kwanika porphyry Cu-Au deposit and the neighbouring Stardust carbonate replacement Cu-Au deposit (NorthWest Copper Corp.) are located approximately 50 km to the northwest.
ArcWest is currently seeking a new partner for the project. Discussions with multiple potential partners for the project are ongoing.
Sparrowhawk
ArcWest’s road accessible, 10,006 hectare Sparrowhawk project adjoins Glencore Canada's past producing Bell and Granisle open pit mines and extends to the north where it is contiguous with Pacific Booker’s advanced stage Morrison Cu-Au project. American Eagle Gold Corp.’s Nak Cu-Au project is situated 20 km to the north of Sparrowhawk. The Sparrowhawk project is contiguous with Amarc Resources’ Duke project, which Amarc is currently advancing in partnership with Boliden. Significant Cu-Au resources remain at Bell and Granisle open pits. At Bell alone, measured plus indicated resources total 257 million tonnes of 0.4% Cu and 0.2 g/t Au (Glencore Resources & Reserves as at December 31, 2021). The Sparrowhawk project is 11 kilometres southeast of the Morrison Cu deposit, which has a proven plus probable reserve of 224.25 Mt with an average grade of 0.33% Cu, 0.163 g/t Au and 0.004% Mo. In addition to containing multiple exploration targets for Bell-like porphyry Cu-Mo-Au systems, the Sparrowhawk property also underlies proposed sites for tailings and waste management facilities in the event of a Bell-Granisle restart. Source: Glencore Resources and Reserves, as at 31 December, 2021, pg 21.
https://www.glencore.com/.rest/api/v1/documents/fb0cafaa3ec10b90571130be41ba4270/2021-GLEN_Resources-and-Reserves-report.pdf
Teeta Creek
ArcWest’s 100% owned Teeta Creek porphyry Cu-Au-Mo project on Vancouver Island, is located 23 kilometres south of BHP-Billiton’s past producing Island Copper porphyry Cu-Mo-Au mine, and approximately 40 km south of NorthIsle Copper and Gold Inc.’s advanced stage Hushamu porphyry Cu-Au project. Historical drilling on the project intersected significant Cu mineralization in multiple holes.
On December 7, 2023 the Company announced it was commencing an induced polarization geophysical survey on its Teeta Creek property.
On January 16, 2024, the Company announced the results of the 3D IP survey on its Teeta Creek property. The 2023 survey has identified an areally extensive (approximately 1 square kilometre), greater than 40 mV/V chargeability anomaly at depth underlying Teeta Creek valley and its north and south slopes; the anomaly remains nearly untested by drilling. The IP anomaly is open to the north and south, with two prominent lobes situated at depth beneath the Teeta Creek porphyry Copper (Cu)-molybdenum (Mo)-gold (Au) system on the north and south slopes of Teeta Creek
valley. The lobes are connected by a roughly N-S striking, greater than 40 mV/V chargeability corridor, the top of which lies approximately 300 m beneath recently recognized, undrilled Cu-Mo-Au mineralized stockwork of the Gap zone.
North Vancouver Island ("NVI")
ArcWest's 100% owned, road accessible NVI porphyry Cu-Mo-Au project is located approximately 16 km southwest of BHP-Billiton's past producing Island Copper porphyry Cu-Mo-Au mine, and approximately 40 km south of NorthIsle Copper and Gold Inc.'s advanced stage Hushamu porphyry Cu-Au deposit. The 6,884-hectare NVI property was staked to cover a zone of porphyry Cu style veining discovered by ArcWest geologists on its west side (NVI showing; see ArcWest August 23 press release), multiple historic Cu occurrences on its east side, and a large belt of Miocene volcanic-intrusive centres that have recently been recognized as prospective for porphyry Cu-Au mineralization. Similarly aged centres in northern Vancouver Island are host to significant porphyry Cu-Mo-Au mineralization, including ArcWest's nearby Teeta Creek project.
ArcWest holds Net Smelter Return Royalties on two properties in British Columbia as follows:
Willoughby
The Willoughby project was sold during fiscal 2019 and ArcWest retains a 1.5% net smelter return royalty ("NSR") on the property, which can be reduced to 1% for an additional cash payment of $1,000,000.
Huckleberry
The Huckleberry project was sold during fiscal 2021 and ArcWest retains a 1.0% NSR on the property with no buydown provisions.
Oxide Peak
The Oxide peak property was sold during fiscal 2024 and ArcWest retains a 2% NSR, which can be reduced to 1% for a cash payment to the Company of $2,000,000.
References:
Roulston, L. (2021): Golden Triangle Update; Resource World, URL https://resourceworld.com/golden-triangle-update/ (September 2021)
Investors are cautioned that ArcWest has not verified the historical data from the any of the Todd Creek, Willoughby, Oweegee Dome, Oxide Peak, Eagle, Huckleberry, NVI, Rip, Sparrowhawk or Teeta Creek properties. The true widths of any of the properties' drill intersections are unknown at this time. Investors are cautioned that ArcWest has not verified the data from the Brucejack, KSM-Iron Cap, Treaty Creek, Mt. Milligan, Kwanika, Stardust, Baker, Shasta, Kemess, Bell, Granisle, Morrison, Island Copper and Hushamu deposits. Further, the presence and style of mineralization on these properties is not necessarily indicative of similar mineralization on the ArcWest property.
Historical assays have not been verified by ArcWest but have been cited from sources believed to be reliable. ArcWest's disclosure of a technical or scientific nature has been reviewed and approved by Nigel Luckman, PGeo, who serves as a Qualified Person under the definition of National Instrument 43-101.
Results of Operations
The following table represents selected financial information for the Company's three and nine months ended September 30, 2024 and 2023:
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Selected Statement of Operations Data
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Comprehensive Income (loss) | (151,439) | 103,174 | (436,259) | (201,143) |
| Weighted Average Shares Outstanding | 82,977,957 | 82,977,957 | 82,977,957 | 82,977,957 |
| Loss per share | ($0.00) | $0.00 | ($0.00) | ($0.00) |
Three months ended September 30, 2024
The Company incurred a comprehensive loss of $151,439 ($0.00 per share) for the three months ended September 30, 2024 compared to a comprehensive income of $103,174 ($0.00 per share) for the three months ended September 30, 2023. The expenses with the greatest variances from the prior comparative period are discussed below:
Consulting fees - $nil (2023 - $17,549) – The decrease in consulting fees is due to the reduction of the former CFO’s invoices upon his resignation.
Professional fees - $41,750 (2023 - $26,263) – The increase in professional fees was due to increase in legal costs for general business matters, an increase in audit fees and the reclassification of the new CFO’s invoices.
Share-based payments - $28,454 (2023 - $nil) – The increase in the share-based payments was due to the vesting of previously granted options and the grant of new options.
Wages and Administrative - $81,212 (2023 - $61,139) – The wages & administrative costs have increased primarily due a lower allocation to the mineral properties and therefore disclosed as corporate expenses instead of being capitalized to mineral properties.
Management income - $49,154 (2023 - $229,588) – Operator’s cost income of $49,154 was charged by the Company to Freeport and Interra under the option agreement for administration, accounting and other services performed as the operator of the Todd Creek and Rip property exploration programs.
Nine months ended September 30, 2024
The Company incurred a comprehensive loss of $436,259 ($0.01 per share) for the nine months ended September 30, 2024 compared to a comprehensive loss of $201,143 ($0.00 per share) for the nine months ended September 30, 2023. The expenses with the greatest variances from the prior comparative period are discussed below:
Consulting fees - $nil (2023 - $52,547) – The decrease in consulting fees is due to the reduction of the former CFO’s invoices upon his resignation.
Professional fees - $136,540 (2023 - $100,529) – The increase in professional fees was due to increase in legal costs for general business matters, an increase in audit fees and the reclassification of the new CFO’s invoices.
Share-based payments - $93,743 (2023 - $246) – The increase in the share-based payments was due to the vesting of previously granted options and grant of new options.
Wages and Administrative - $236,219 (2023 - $159,810) – The wages & administrative costs have increased primarily due a lower allocation to mineral properties and therefore disclosed as corporate expenses instead of being capitalized to mineral properties.
Interest income - $64,349 (2023 - $40,759) – The increase in interest income was due to the favourable interest rates on the Company’s Guaranteed Investment Certificate (“GIC”) holdings during the nine months ended September 30, 2024.
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Management income - $81,746 (2023 - $229,588) – Operator's cost income of $81,746 was charged by the Company to Freeport and Interra under the option agreement for administration, accounting and other services performed as the operator of the Todd Creek and Rip property exploration programs.
Gain on disposal of property - $53,197 (2023 - $nil) – The increase in gain on disposal of property was the result of the sale of Oxide Peak property during the nine months ended September 30, 2024.
Selected Statement of Financial Position Data
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| Cash and cash equivalents | $2,606,981 | $1,934,230 |
| Net working capital | 2,378,820 | $2,091,492 |
| Total assets | 5,806,879 | $5,620,719 |
| Long term liabilities | $nil | $nil |
Quarterly Information
The following is selected financial data for the last eight quarters ending with the most recently completed quarter, being the three months ended September 30, 2024:
| (unaudited) | September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 |
|---|---|---|---|---|
| Total Revenue | $Nil | $Nil | $Nil | $Nil |
| Comprehensive loss for the period | (151,439) | ($156,204) | ($128,616) | ($140,994) |
| Loss per share | ($0.00) | ($0.00) | ($0.00) | ($0.00) |
| (unaudited) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 |
| Total Revenue | $Nil | $Nil | $Nil | $Nil |
| Comprehensive income (loss) for the period | $103,174 | ($143,440) | ($160,877) | $46,266 |
| Earnings (loss) per share | $0.00 | ($0.00) | ($0.00) | $0.00 |
Liquidity and Capital Resources
As at September 30, 2024, the Company had a cash and cash equivalents balance of $2,606,981, and a working capital position of $2,378,820 as compared to a cash balance of $1,934,230 and a working capital position of $2,091,492 as at December 31, 2023. The increase in cash and cash equivalents at September 30, 2024 compared to September 30, 2023 was primarily due to the following:
Operating activities – Cash provided by operating activities for the nine months ended September 30, 2024 was $57,992 (2023 – cash used in $7,453) after the change in working capital. The cash used in operating activities was the result of operating costs less non-cash items such as depreciation, share-based payments, gain on disposal of property, and unrealized loss on marketable securities.
Investing activities – Cash provided by investing activities for the nine months ended September 30, 2024 was $614,759 (2023 – $209,271). For the nine months ended September 30, 2024, this is comprised of $600,000 cash proceeds from earn-in agreements offset with $2,200 in finders fee and cash proceeds of $100,000 from the sale of the Oxide Peak property offset by $83,041 incurred on exploration and evaluation expenditures. For the prior year nine months ended September 30, 2023 the cash used was comprised of $150,000 from earn-in agreements, $114,689 in exploration and evaluation expenditures and proceeds of $173,960 received from the sale of marketable securities.
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Related Party Transactions
Key management personnel are the persons responsible for the planning, directing, and controlling the activities of the Company. The Company's key management personnel include all directors, officers and companies associated with them.
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| $ | $ | $ | $ | |
| Director fees | 4,353 | 5,776 | 13,080 | 16,195 |
| Professional fees | 12,270 | - | 35,882 | - |
| Share based compensation | 10,734 | - | 47,812 | 246 |
| Wages and administrative – Statement of comprehensive loss | 55,469 | 53,063 | 156,375 | 141,997 |
| Wages and salaries– Exploration and evaluation asset | 7,031 | 9,437 | 31,125 | 80,500 |
| 89,857 | 68,276 | 284,274 | 238,938 |
As at September 30, 2024 a total of $1,353 (December 31, 2023 - $17,015) was owed to related parties and included in accounts payable.
Financial Instruments
As at September 30, 2024, the Company's financial instruments are comprised of cash and cash equivalents, marketable securities, receivables, and accounts payable. The fair value of these financial instruments approximates their carrying value, unless otherwise noted. The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include foreign currency risk, interest rate risk, credit risk, and liquidity risk. Where material, these risks are reviewed and monitored by the Board of Directors. There have been no changes in any risk management policies since December 31, 2023.
Capital management
Capital is comprised of the Company's shareholders' equity and any debt that it may issue. As at September 30, 2024, the Company's shareholders' equity was $5,091,633 and it had $715,246 in current liabilities. The Company's objectives when managing capital are to maintain financial strength and to protect its ability to meet its on-going liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. The Company is not subject to any externally imposed capital requirements.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Investor Relations
The Company has no investor relations agreements.
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Outstanding Share Data
As of the date of this MD&A the Company had the following outstanding:
Shares Outstanding:
- Class: Common Shares
- Authorized: Unlimited, without par value
- Issued and outstanding: 82,977,957
Warrants outstanding:
The Company had no warrants outstanding.
Options Outstanding:
| Number of Options | Exercise Price | Expiry Date |
|---|---|---|
| 1,565,000 | $0.105 | January 13, 2026 |
| 500,000 | $0.15 | October 13, 2026 |
| 150,000 | $0.105 | October 13, 2026 |
| 4,050,000 | $0.10 | October 23, 2028 |
| 430,000 | $0.12 | September 19, 2029 |
| 6,695,000 |
Disclosure Controls and Procedures
Disclosure controls and procedures are intended to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported within the time periods specified by securities regulations and that the information required to be disclosed is accumulated and communicated to management. Internal controls over financial reporting are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. In connection with National Instrument 52-109 (Certificate of Disclosure in Issuer’s Annual and Interim Filings) (“NI 52-109”), the Chief Executive Officer and Chief Financial Officer of the Company have filed a Venture Issuer Basic Certificate with respect to the financial information contained in the, condensed interim financial statements for the three and nine months ended September 30, 2024 and this accompanying MD&A (together, the “Interim Filings”).
In contrast to the full certificate under NI 52-109, the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109. For further information the reader should refer to the Venture Issuer Basic Certificates filed by the Company with the Interim and Annual Filings on SEDAR+ at www.sedarplus.ca.
Risks and Uncertainties
Exploration and Development Risk
The Company’s properties are in early exploration stages and are without a known body of commercial ore. Exploration for mineral resources involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. Discovery of mineral deposits is dependent upon a number of factors, not the least of which are the technical skills of the exploration personnel involved and the capital required for the programs. The cost of conducting mineral exploration programs may be substantial and the likelihood of success is difficult to assess. There is no assurance that the Company’s mineral exploration activities will result in any discoveries of new bodies of commercial ore. There is also no assurance that even if commercial quantities of ore are discovered that an ore body would be developed and brought into commercial production. The commercial viability of a mineral deposit once discovered is also dependent upon a number of factors, some of which are the particular attributes of the deposit such as size, grade and proximity to infrastructure, commodity prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. Most of the above factors cannot be predicted and are beyond the control of the Company. The Company attempts to mitigate its exploration risk by maintaining a diversified portfolio of projects that includes exposure to a variety of gold and
copper targets in a number of geologic environments. Management also balances exploration risks through earn-in option agreements with other companies.
Financial Markets
Presently, the Company strives to obtain the majority of its working capital from other companies that are funding exploration on ArcWest projects in order to earn an interest in the mineral rights. However, the Company will also be dependent on the equity markets as a source of operating working capital and funding for any advanced exploration and development activities that may be needed on its projects. The Company’s capital resources are largely determined by the strength of the resource markets and by the status of the Company’s projects in relation to these markets, and its ability to compete for investor support of its projects. Consequently, there can be no assurance that equity financing will be available to the Company in the amount required at any time or for any period or if available, that it can be obtained on terms satisfactory to the Company.
Metal Prices
The prices of gold and copper are affected by numerous factors including central bank sales, producer hedging activities, the relative exchange rate of the U.S. dollar with other major currencies, supply and demand, political, economic conditions and production levels. In addition, the prices of gold and copper have been volatile over short periods of time due to speculative activities. The price of other metals and mineral products that the Company may be exploring for, all have the same or similar price risk factors. The prevailing price of metals and speculation on future price of metals by the investing public can have strong impacts on the share prices of exploration companies such as ArcWest.
Cash Flows
The Company currently has no revenue from its exploration operations. However, it does generate revenues from time to time on management fees charged to third parties where the Company is retained for project exploration or development work. Additionally, sources of capital currently available to the Company are the sale of its marketable securities, equity capital or the offering of an interest in its projects to another party.
Market Volatility for Marketable Securities
The Company’s marketable securities consist of shares of exploration companies that are historically very volatile. There is no assurance that the Company will be able to recover the current fair market value of those shares. The Company also may not be able to sell the shares it holds in other companies in an illiquid market.
Possible Dilution to Present and Prospective Shareholders
The Company’s plan of operation, in part, contemplates the financing of its business by the issuance of securities and possibly incurring debt. Any transaction involving the issuance of previously authorized but unissued shares of common stock, or securities convertible into common stock, would result in dilution, possibly substantial, to present and prospective holders of common stock. The Company usually seeks earn-in option agreement partners to fund in whole or in part exploration projects. This dilutes the Company’s interest in properties. This dilution is undertaken to spread or minimize the risk and to expose the Company to more exploration opportunities. However, it means that any increased market capitalization or profit that might result from a possible discovery would be shared with the option agreement partner. There is no guarantee that the Company can find a third party to enter an earn-in agreement for any property.
Share Trading Volume
The relatively low trading volume of the Company’s shares reduces the liquidity of an investment in its shares. Trading volumes fluctuate with market conditions and seasons. The Company attempts to reduce this risk by having multiple projects that are continually generating news and therefore investor interest and trading volume.
Volatility of Share Price
Market prices for shares of early stage companies are often volatile. Factors such as announcements of mineral discoveries or discouraging exploration results, changes in financial results, and other factors could have a significant effect on share price.
Competition
There is aggressive competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. The Company competes with other exploration and mining companies, many of which have greater financial resources than the Company, for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel.
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Dependence on Management
The Company depends heavily on the business expertise of its management. There is risk to the Company’s ability to execute its business plans if some or all of the current management team were to suddenly leave the Company or become incapable of performing their individual and collective responsibilities. The Company has mitigated the risk of its managers leaving for other companies through competitive compensation, cash bonuses and by providing options to purchase ArcWest stock. Some of the senior managers hold substantial share positions in ArcWest and are motivated to remain with the Company. Despite the mitigation measures, the Company still depends heavily on its current management.
Title Risk
Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee a clear title. Property title may be subject to unregistered prior agreements and regulatory requirements. The Company is not aware of any disputed claims of title.
Environmental
The Company’s exploration and development activities are subject to extensive laws and regulations governing environment protection. The Company is also subject to various reclamation related conditions. Although the Company closely follows and believes it is operating in compliance with all applicable environmental regulations, there can be no assurance that all future requirements will be obtainable on reasonable terms. Failure to comply may result in enforcement actions causing operations to cease or be curtailed and may include corrective measures requiring capital expenditures. Intense lobbying over environmental concerns by non-governmental organizations has caused some governments to cancel or restrict development of mining projects. Current publicized concern over climate change may lead to carbon taxes, requirements for carbon offset purchases or new regulation. The costs or likelihood of such potential issues to the Company cannot be estimated at this time.
Laws and Regulations
The Company’s exploration activities are subject to extensive federal, provincial and local laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters in all the jurisdictions in which it operates. These laws and regulations are subject to change, can become more stringent and compliance can therefore become more costly. The Company applies the expertise of its management, advisors, employees and contractors to ensure compliance with current laws.
Local Resident & First Nations Concerns
The exploration, development and mining of the Company’s projects could be subject to claims and/or involvement from local residents and First Nations that could either prevent or delay exploration and development of the Property.
Litigation
In the course of conducting its business and operations, the Company or its directors may be subject to a variety of civil or other legal proceedings, with or without merit.
Management’s Responsibility for Financial Statements
The Company’s management is responsible for presentation and preparation of the financial statements and the MD&A. The MD&A have been prepared in accordance with the requirements of securities regulators, including National Instrument 51-102 of the Canadian Securities Administrators.
The financial statements and information in the MD&A necessarily include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the financial information, we must interpret the requirements described above, make determinations as to the relevancy of information included, and make estimates and assumptions that affect reported information.
The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as anticipated.
Additional Disclosure for Venture Issuers Without Significant Revenue – Exploration and Evaluation Asset Expenditures
As at September 30, 2024 and December 31, 2023, the Company has capitalized the following acquisition and exploration costs:
| Oweegee | Todd Creek | Oxide Peak | Eagle | Rip | Teeta Creek | Sparrowhawk | Northern Vancouver Island | Total | |
|---|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |
| Balance, December 31, 2022 | 1,126,534 | 1,179,518 | 83,186 | 134,281 | 372,325 | 190,980 | 224,668 | 3,955 | 3,315,447 |
| Field support | 423 | 923 | 262 | - | - | 298 | - | 111 | 2,017 |
| Geochemistry and geology | 7,448 | 3,430 | 2,100 | 1,470 | - | 114,050 | 1,995 | - | 130,493 |
| Travel and accommodation | - | - | - | - | - | 6,588 | - | - | 6,588 |
| Wages and salaries (Note 10) | 23,251 | 23,063 | 18,625 | 4,188 | - | 22,173 | 10,063 | 3,030 | 104,393 |
| 1,157,656 | 1,206,934 | 104,173 | 139,939 | 372,325 | 334,089 | 236,726 | 7,096 | 3,558,938 | |
| Option payments received | (145,000) | (150,000) | - | - | (55,000) | - | - | - | (350,000) |
| BC Mining Exploration Tax Credit refund | (13,563) | (12,658) | (6,900) | (8,549) | (1,568) | (35,553) | (8,113) | (447) | (87,351) |
| Balance, December 31, 2023 | 999,093 | 1,044,276 | 97,273 | 131,390 | 315,757 | 298,536 | 228,613 | 6,649 | 3,121,587 |
| Field support | - | - | - | 517 | - | 3,750 | 8,160 | - | 12,427 |
| Geochemistry and geology | 451 | - | - | 770 | 2,955 | 15,080 | 6,791 | - | 26,047 |
| Travel and accommodation | - | - | - | - | - | 2,955 | 5,806 | - | 8,761 |
| Wages and salaries (Note 10) | 4,375 | - | 3,094 | 3,532 | - | 13,031 | 10,680 | 1,094 | 35,806 |
| 1,003,919 | 1,044,276 | 100,367 | 136,209 | 318,712 | 333,352 | 260,050 | 7,743 | 3,204,628 | |
| Option payments (received) | - | (600,000) | - | - | 2,200 | - | - | - | (597,800) |
| Proceeds from sale of property | - | - | (153,564) | - | - | - | - | - | (153,564) |
| Gain on disposal of property | - | - | 53,197 | - | - | - | - | - | 53,197 |
| Balance, September 30, 2024 | 1,003,919 | 444,276 | - | 136,209 | 320,912 | 333,352 | 260,050 | 7,743 | 2,506,461 |
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