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BLACK GOLD EXPLORATION — Management Reports 2024
Nov 15, 2024
48490_rns_2024-11-14_c53f0e7b-2402-4596-b04b-b5a01061e150.pdf
Management Reports
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MANAGEMENT’S DISCUSSION AND ANALYSIS FOR BGX- BLACK GOLD EXPLORATION CORP. (FORMERLY 1280582 BC Ltd)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 Prepared as of November 14, 2024
Contact Information
BGX- Black Gold Exploration Corp.
Registered office:
6[th] Floor – 905 West Pender Street Vancouver, BC V6C 1L6
INTRODUCTION
The following Management Discussion and Analysis (“MD&A”) of BGX- Black Gold Exploration Corp. (formerly 1280582 BC Ltd.) (the “Company”) has been prepared by Management in accordance with the requirements of National Instrument 51-102. The information contained in this MD&A is not a substitute for detailed investigation or analysis on any particular issue. The information provided in this MD&A is not intended to be a comprehensive review of all matters and developments concerning the Company.
This MD&A should be read in conjunction with the condensed consolidated interim financial statements of BGXBlack Gold Exploration Corp. (formerly 1280582 BC Ltd.) (the “Company”) for the nine months ended September 30, 2024, which are prepared in in accordance with IAS 34, “Interim Financial Reporting of the International Financial Reporting Standards” (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), following the same accounting policies, including estimates and judgments and methods of application as those disclosed in the annual audited consolidated financial statements for the year ended December 31, 2023, except as described in the notes to the condensed consolidated interim financial statements. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements of the Company for the year ended December 31, 2023, which have been prepared in accordance with IFRS. All financial information in this MD&A has been prepared in accordance with IFRS and all dollar amounts are quoted in Canadian dollars, the reporting and functional currency of the Company, unless specifically noted.
CAUTIONARY STATEMENT ON FORWARD LOOKING INFORMATION
This MD&A contains “forward-looking information” and “forward-looking statements” (together, “forward looking statements”) within the meaning of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements also relate to the ability of the Company to obtain all government approvals, permits and third party consents in connection with the Company’s exploration and development activities; the Company’s future exploration and capital costs, including the costs and potential impact of complying with existing and proposed environmental laws and regulations; general business and economic conditions; analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the resources that will be encountered if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward looking statements. While the Company has based these forward-looking statements on its expectations about future events as at the date that such statements were prepared, the statements are not a guarantee of the Company’s future performance and are subject to risks, uncertainties, assumptions, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such factors and assumptions include, amongst others, the effects of general economic conditions, the supply and demand for oil and gas, the availability of financing to fund the Company’s ongoing and planned exploration and possible future operations on reasonable terms, changing foreign exchange rates and actions by government authorities, market competition, risks involved in processing, exploration and research and development activities, the political climate in Argentina, the Company’s ongoing relations with its employees and with local communities and local governments, and uncertainties associated with legal proceedings and negotiations and misjudgments in the course of preparing forward-looking statements. In addition, there are also known and unknown risk factors which may cause actual events or results to differ from those expressed or implied by the forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described in this MD&A under “Risk Factors”. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements.
Forward-looking statements are made based on management’s experience, beliefs, estimates and opinions on the date the statements are made, and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by law. Investors are cautioned against attributing undue certainty to forward-looking statements.
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OVERVIEW
BGX- Black Gold Exploration Corp. (formerly 1280582 BC Ltd.) (the “Company”) was incorporated on December 21, 2020 in the Province of British Columbia. On February 24, 2021, the name of the Company changed from 1280582 BC Ltd. to BGX - Black Gold Exploration Corp. The Company is engaged in oil and gas exploration in Argentina. The registered address of the Company is 6[th] Floor- 905 West Pender Street Vancouver, BC V6C 1L6.
On February 21, 2024, the Company listed on the Canadian Securities Exchange with a stock ticker BGX.
On March 7, 2024, the Company adopted an Equity Incentive Plan, a copy of which was previously provided to the Board (the “Equity Incentive Plan”). The Equity Incentive Plan is a 20% rolling plan that provides for the issuance of a number of different equity incentives (including Restricted Share Units, Deferred Share Units and Performance Share Units) and the Company must seek shareholder approval for any grant that is above 10% pending shareholder approval of the Equity Incentive plan.
On March 7, 2024, a total of 186,667 stock options and 13,333 Performance Share Units were approved for issuance to the directors, officers, and consultants of the company. The stock options have an exercise price of $4.00, vesting over a period of 2 to 5 years, and expiry date of March 7, 2029. The CEO received 50,000 stock options, the CFO received 20,000 stock options, and the corporate secretary received 10,000 stock options, where 20% vest immediately and the rest annually over 4 years.
On March 7, 2024, the company performed a debt for common shares conversion where $67,948 was converted at $4.00 a share for 16,987 common shares.
On April 4, 2024 the company announced it has initiated the process of a comprehensive Environmental Impact Study for El Carmen oil and gas exploration project.
On April 22, 2024, the Company announced that it had entered in a Marketing Services Agreement (the “Marketing Agreement”) with CHero Enterprises Corp (“CHero”) for a two-month term. Following input from the Canadian Securities Exchange, the Company and CHero are amending the terms to exclude the issuance of any performance share units. The Company and CHero are currently negotiating the terms of a revised Marketing Agreement.
On July 5, 2024, the Company was listed on the Frankfurt Stock Exchange with a stock symbol of P30.
On September 12, 2024, The Company entered into and closed an Amended and Restated Share Purchase Agreement (“SPA”) to acquire 100% of the outstanding shares of Energy Holding Americas 1 Inc. (“EHA1”) in exchange for 480,000 common shares of the Company at a deemed price of $5.40 per share for a deemed value of $2,592,000. This acquisition was treated as an asset purchase transaction in accordance with IFRS 3. EHA1 holds a 30% ownership interest in a group of oil, gas and mineral leases located in Clay and Vigo County, Indiana (the “Leases”), as well as seismic data and other geological data related to the leases. The remaining 70% is owned by LGX Energy Corp. (“LGX”), an oil and gas producer and explorer in Indiana. EHA1 also holds a perpetual option to participate in new development and production on the Leases through contribution of 30% of the cost of such work.
EL CARMEN PROJECT SUMMARY
Introduction
The Company holds a 95% interest in the El Carmen hydrocarbon project (the “El Carmen Project”). The Mina El Carmen Block is located in the onshore portion of the Golfo San Jorge basin, Argentina. The basin covers approximately 200,000 km in the central Patagonia area (44 to 47, South Latitude), over the southern portion of the province of Chubut and the northern part of the province of Santa Cruz, extending offshore into Argentina’s continental shelf.
The Golfo San Jorge Basin was first drilled in 1907 and has a cumulative oil production to-date of over 3 billion barrels and is still producing about a third of the country’s total output. Tertiary and Cretaceous sediments are the main producing reservoirs, with mainly fault-associated structural and stratigraphic entrapment models. Development Rights
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The four contiguous El Carmen mine rights, covering 2,000 hectares, were originally acquired from the province at a tax sale in November of 2000. These mine rights were perfected in 1929/30 on the basis of oil and gas discoveries. The mines status of the property affords BGX - Black Gold Exploration Corp unique rights in that it owns outright title to all hydrocarbons vertically beneath the boundaries of the block of mine claims. Thus, the property is not subject to the federal hydrocarbon leasing program. The royalties for Oil and Gas production should be up to 8% of the weighted of the production. Prospects geologically similar to El Carmen in Alberta normally attract five-year Crown lease bonus payments of up to C$50 per hectare, and C$1.00 per hectare annually thereafter.
Geology
This intracratonic basin was born from the extensional forces that in late Jurassic times were associated to the Gondwana breakup. Rifting started the development of an E-W elongated depression lying between two relatively stable mega elements: the Patagonian Massif in the north (Chubut province) and the Deseado Massif in the south (Santa Cruz province). These two positive elements from the north and south acted as the source area into the tectonic trough defined by a down-to-the-basin faulting, in a step-like manner. Sediment thickness at depocenter is over 7000 meters. After the Andean orogeny, the easternmost part of the basin remained with its original style, while the central portion was affected by thrust that caused basin inversion.
Historic drilling
The drilling in the Mina El Carmen Block started in 1928 with the drilling of C-1 well and finished in 1944 when the wells C-11 and C-12 were drilled. No tested or produced hydrocarbons were recorded within the block. Gas shows were indicated on the lithological logs in C-4 and C-5 wells in the Glauconitico zone, and water with gas was mentioned in the well C-1 in San Diego zone. Also, in the C-12 well, log interpretation showed the potential presence of oil in Mina El Carmen zone.
The only well tested within the Mina El Carmen Block was C-11, in which every sandy interval was perforated with no hydrocarbon flow reported. The C-12 well was cored in each sand (except in the Mina El Carmen zone), but no hydrocarbons were present in the core. As a result, the drilling was abandoned in the block, although there was a production from the Glauconitico zone in the Mina Salamanca gas field located about six kilometers to the southwest of the Mina El Carmen Block.
Prospective Resources
| Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources | Prospective Resources |
|---|---|---|---|---|---|---|---|---|
| Company Interest Low, Best, and High Estimates of Undiscovered PIIP and Prospective Resources (Unrisked and Risked for GCoS) in Mina El Carmen Block, Argentina(as ofJuly 15, 2023) |
||||||||
| Company GrossVolumes(95% WI) | ||||||||
| Prospect | Fluid Type(7,8) | Undiscovered Petroleum Initially-In-Place (UPIIP) (9) |
Prospective Resources (4) | |||||
| Unrisked | Unrisked | Risked for GCoS(5,6) |
||||||
| Low(1) | Best(2) | High(3) | Low(1) | Best(2) | High(3) | Best(2) | ||
| Prospect 1 | RawGas(MMcf) | 454.4 | 1,322.4 | 2483.3 | 334.3 | 992.2 | 1,883.2 | 208.3 |
| Prospect 2 | RawGas(MMcf) | 750.8 | 1,453.2 | 2,323.0 | 553.2 | 1090.0 | 1,766.3 | 229.0 |
| Prospect 3 | RawGas(MMcf) | 100.5 | 496.5 | 1,093.6 | 74.6 | 372.7 | 817.0 | 78.3 |
| Prospect 4 | RawGas(MMcf) | 590.3 | 1,438.6 | 2,539.6 | 439.1 | 1,079.0 | 1,909 | 226.6 |
| Prospects 5 | Oil(Mbbl) | 628.8 | 2,757.1 | 5,878.0 | 100.2 | 496.6 | 1,063.8 | 104.3 |
| Prospects 6 | Oil(Mbbl) | 566.6 | 2,012.9 | 4,050.8 | 90.0 | 362.8 | 746.7 | 76.2 |
| **Probabilistically ** | AggregatedCompany GrossVolumes(95% WI) | |||||||
| Prospects | Fluid Type(7,8) | Undiscovered Petroleum Initially-In-Place (UPIIP) (9) |
Prospective Resources (4) | |||||
| Unrisked | Unrisked | Risked for GCoS(6) |
||||||
| Low(1) | Best(2) | High(3) | Low(1) | Best(2) | High(3) | Best(2) | ||
| Prospect 1, 2, 3, 4 | Raw Gas(MMcf) | 2,981.2 | 4,677.8 | 6,677.5 | 2,216.1 | 3,513.1 | 5,024.5 | 737.8 |
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Prospect 5, 6 Oil (Mbbl) 1,789.5 4,709.2 8,627.0 287.6 846.5 1,605.1 177.7
(1) Low represents the P90 volume estimate
(2) Best represents the mean volume estimate
(3) High represents the P10 volume estimate
(4) Prospective Resources are sub-classified as Prospective - Prospects (Risked = Best*21%)
(5) It is mathematically invalid to determine a risked success-case distribution for any probability level other than the mean itself by multiplying an unrisked success case by the geological chance of success
(6) Risked: A 21 percent geological chance of success (79 percent chance of no discovery)
(7) Oil resources are presented in thousands of barrels
(8) Gas (raw) resources are presented in millions of cubic feet before processing (i.e., shrinkage and natural gas liquid recovery)
(9) UPIIP represents that quantity of petroleum that is estimated, as of July 15, 2023, to be contained in accumulations yet to be discovered
Commerciality Prospective Resources
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023)
| Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
Company Interest Estimates of Risked for the Chance of Commerciality Prospective Resources in Mina El Carmen Block, Argentina (as of July 15, 2023) |
|---|---|---|---|---|---|---|---|---|---|
| Prospect | Fluid Type(8,9) | Undiscovered Petroleum Initially-In-Place (UPIIP)(10) |
Prospective Resources(4) | ||||||
| Unrisked | Unrisked | Risked(5,6) for GCoS |
Risked(7) for CoC |
||||||
| Low(1) | Best(2) | High(3) | Low(1) | Best(2) | High(3) | Best(2) | Best(2) | ||
| Prospect 1 | Raw Gas (MMsf) | 454.4 | 1,322.4 | 2,483.3 | 334.3 | 992.2 | 1,883.2 | 208.3 | 35.6 |
| Prospect 2 | Raw Gas (MMcf) | 750.8 | 1,453.2 | 2,323.0 | 553.2 | 1,090.0 | 1,766.3 | 229.0 | 39.1 |
| Prospect 3 | Raw Gas (MMcf) | 100.5 | 496.5 | 1,093.6 | 74.6 | 372.7 | 817.0 | 78.3 | 13.4 |
| Prospect 4 | Raw Gas (MMcf) | 590.3 | 1,438.6 | 2,539.6 | 439.1 | 1,079.0 | 1,909.0 | 226.6 | 38.8 |
| Probabilistically Aggregated Prospects 1, 2, 3, 4 |
Raw Gas (MMcf) |
2,981.2 | 4,677.8 | 6,677.5 | 2,216.1 | 3,513.1 | 5,024.5 | 737.8 | 126.2 |
| Prospect 5 | Oil (Mbbl) | 628.8 | 2,757.1 | 5,878.0 | 100.2 | 496.6 | 1,063.8 | 104.3 | 17.9 |
| Prospects 6 | Oil(Mbbl) | 566.6 | 2,012.9 | 4,050.8 | 90.0 | 362.8 | 746.7 | 76.2 | 13.0 |
| Probabilistically Aggregated Prospects 5, 6 |
Oil (Mbbl) | 1,789.5 | 4,709.2 | 8,627.0 | 287.6 | 846.5 | 1,605.1 | 177.7 | 30.4 |
(1) Low represents the P90 volume estimate
(2) Best represents the mean volume estimate
(3) High represents the P10 volume estimate
(4) Prospective Resources are sub-classified as Prospective - Prospects (Risked = Best*21%)
(5) It is mathematically invalid to determine a risked success-case distribution for any probability level other than the mean itself by multiplying an unrisked success case by the geological chance of success
(6) Risked for GCoS: A 21 percent geological chance of success (79 percent chance of no discovery)
(7) Risked for CoC: A 3.6 percent chance of commerciality (combined geological chance of success and chance of development; CoC=GCoSCoD or 21%17.1%=3.6%)
(8) Oil resources are presented in thousands of barrels
(9) Gas (raw) resources are presented in millions of cubic feet before processing (i.e., shrinkage and natural gas liquid recovery)
- (10) UPIIP represents that quantity of petroleum that is estimated, as of July 15, 2023, to be contained in accumulations yet to be discovered
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These resources have not yet been discovered and there is no certainty that any portion will be discovered. Even if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Current Development
The Company is in the process of conducting an Environmental Impact Study at the El Carmen Project. The Company will survey the area using modern geodesic systems. The Environmental Impact Study will include an environmental physical survey and a review of the project to determine if there are any existing environmental liabilities.
INDIANA PROJECT SUMMARY
Introduction
The Company owns a 30% ownership interest in a group of oil, gas and mineral leases located in Clay and Vigo County, Indiana (the “Leases”), as well as seismic data and other geological data related to the leases, through Energy Holdings America 1 Inc. (EHA1). The remaining 70% is owned by LGX Energy Corp. (“LGX”), an oil and gas producer and explorer in Indiana. EHA1 also holds a perpetual option to participate in new development and production on the Leases through contribution of 30% of the cost of such work. The Company holds a right to participate for 30% of the working interest, with a net revenue interest of 80% after royalties. The Leases cover lands of Clay and Vigo County, Indiana approximately 911.9 acres.
Geology
The Project Area is geologically favorable for pools of oil reserves in multiple formations down to 4,000 feet. LGX has oil drilling prospects in the Project Area generated from 2-dimensional seismic data, indicating size and reserve potential from the Devonian Limestone are comparable to the nearby Staunton Field, which has been in production since the 1950’s and is still producing oil from several wells. The Staunton Field, in Clay County, Indiana, has produced over 500,000 barrels of oil to-date per the Indiana Department of Natural Resources official website.
The Devonian Limestone formation is a primary target at a depth of less than 2,000 feet, and the risk of finding oil in this horizon is low. Offset to, and in the entire Project Area surrounding the Staunton Field, we expect similar results to the Staunton Field.
SUMMARY OF QUARTERLY RESULTS
The following is selected financial information as prepared in Canadian dollars under International Financial Reporting Standards derived from the Company’s most recently completed fiscal quarters since inception:
| September 30, 2024 $ |
June 30, 2023 $ |
March 31, 2023 $ |
December 31, 2023 $ |
|
|---|---|---|---|---|
| Total Assets | 5,316,319 | 2,831,877 | 2,997,162 | 3,110,670 |
| Working Capital | 536,726 | 659,892 | 849,164 | 234,286 |
| Revenue | - | - | - | - |
| Net Loss | (114,874) | (245,808) | (317,360) | (149,962) |
| Loss per Share | (0.02) | (0.05) | (0.06) | (0.03) |
| September 30, 2023 $ |
June 30, 2023 $ |
March 31, 2022 $ |
December 31, 2022 $ |
|
| Total Assets | 3,231,381 | 1,186,209 | 1,204,096 | 1,232,233 |
| Working Capital | 377,275 | 326,886 | 364,449 | 392,927 |
| Revenue | - | - | - | - |
| Net Loss | (103,905) | (37,563) | (28,478) | (3,296) |
| Lossper Share | (0.02) | (0.01) | (0.01) | (0.00) |
Factors causing significant variations in quarterly results are as follows:
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During the three months ended December 31, 2022, the Company earned revenue of $nil, and incurred operating expenses of $3,296, comprised of general administration expense.
During the three months ended March 31, 2023, the Company earned revenue of $nil, and incurred operation expenses of $28,478 comprised mainly of professional fees of $20,000, travel expense of $7,947, general administration expenses of $331 and regulatory fees of $200.
During the three months ended June 30, 2023, the Company earned revenue of $nil, and incurred operating expenses of $37,563 comprised mainly of professional fees of $18,000, audit fees of $7,000, legal fees of $12,506, general administration expenses of $35 and regulatory fees of $22.
During the three months ended September 30, 2023, the Company earned revenue of $nil, and incurred operating expenses of $103,905 comprised mainly of consulting fees of $42,867, professional fees of $12,000, legal fees of $38,618, general administration expenses of $197 and regulatory fees of $10,223.
During the three months ended December 31, 2023, the Company earned revenue of $nil, and incurred operating expenses of $149,962, comprised mainly of professional fees of $35,704, consulting fees of $73,809, audit fees of $11,750, legal fees of $15,048, regulatory fees of $12,290 and general admin of $1,316.
During the three months ended March 31, 2024, the Company earned revenue of $nil, and incurred operating expenses of $324,211, comprised mainly of consulting fees of $20,000, management fees of $15,000, regulatory fees of 19,243, legal fees of $40,928, professional fees of $46,633 and share-based compensation of $179,558 with the balance made of other categories that are not as significant.
During the three months ended June 30, 2024, the Company earned revenue of $nil, and incurred operating expenses of $255,578, comprised of consulting fees of $68,739, management fees of $15,000, audit fees of $6,250, general administration expense of $3,080, legal fees of $19,869, regulatory fees of $5,746, share-based compensation of $59,893 and professional fees of $77,001.
During the three months ended September 30, 2024, the Company earned revenue of $nil, and incurred operating expenses of $126,574, comprised of consulting fees of $38,508, management fees of $15,000, audit fees of $2,000, general administration expense of $4,636, legal fees of $10,425, regulatory fees of $2,740, share-based compensation of $931 and professional fees of $52,334.
CASH AND WORKING CAPITAL
As at September 30, 2024, the Company had working capital of $536,726. The Company has not pledged any of its assets as security for loans, or otherwise and is not subject to any debt covenants. The Company requires to pay $64,031 its liability. Since the Company will not be able to generate cash from its operations in the near-term future, the Company will have to rely on the funding through equity issuances and through short-term borrowing in order to fund ongoing operations and to meet its obligations. The ability of the Company to raise capital in future will depend on market conditions and it may not be possible for the Company to issue shares on acceptable terms or at all.
LIQUIDITY
As at September 30, 2024, the Company held assets totaling $5,316,319 consisting of $31,631 in cash, $533,000 in short term investment in a guaranteed investment certificate, $28,397 in receivables and $7,729 in deposits and prepaids. As at September 30, 2024, the Company had total liabilities of $64,031 comprised of accounts payable and accrued liabilities.
Readers are cautioned that a number of factors beyond the control of the Company could result in the Company not being able to sustain its current position. Such factors could include adverse economic conditions, political and regulatory concerns and key individual staffing problems amongst others.
CAPITAL RESOURCES
Cash used in operating activities during the nine months ended September 30, 2024 totaled $388,867 (2023 – $122,811), which was attributed to the loss during the nine months ended September 30, 2024 of $678,050 (2023 –
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$151,592) and the changes in the non-cash working capital items comprising of a decrease in accounts receivable of $16,168 (2023 – a decrease of $10,409), and an increase in accounts payable and accrued liabilities of $51,317 (2023 – $47,745).
Net cash provided by investing activities during the nine months ended September 30, 2024 totaled $398,891 (2023 – a use of $1,102,542), which was attributable to the net proceeds of $413,605 (2023 – a decrease of $1,102,542), and a decrease in cashflow because of exploration and evaluation expenditures of $14,714.
The Company defines capital as the components of shareholders’ equity. The Company’s objectives when managing capital are to support further advancement of the Company’s business objectives, as well as to ensure that the Company is able to meet its financial obligations as they come due. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company relies on the expertise of the Company’s management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the nine months ended September 30, 2024, the Company is not subject to externally imposed capital requirements.
The Company has not issued dividends to date and has no plans to pay dividends in the foreseeable future.
TRANSACTIONS WITH RELATED PARTIES
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.
During the three and nine months ended September 30, 2024, the Company incurred $15,000 and $45,000 (September 30, 2023 - $ nil and $ nil) in management fees to Francisco Gulisano, a director and CEO of the Company, respectively. As at September 30, 2024, $23,000 (December 31, 2023 - $28,809) was included in accounts payable and accrued liabilities for management fees due to Francisco Gulisano. On March 14, 2024, the Company issued 9,531 common shares at $4.00 per share to settle an aggregate outstanding debt of $38,124 owed to Francisco Gulisano, a director and CEO of the Company.
On March 7, 2024, the Company granted 100,000 stock options to the directors and officers of the Company with an exercise price of $4.00 expiring on March 7, 2029. The options vest is accordance with terms between 2 to 5 years. During the three and nine months ended September 30, 2024, $31,897 and $125,229 was the stock option expense related to the officers and directors of the company (September 30, 2023 - $Nil and $Nil) respectively.
On September 12, 2024, the Company issued 10,000 restricted share units (“RSUs”) to Daniel Buffone, President of Spinell S.A. that vest as follows: (i) 25% to vest four (4) months from issuance; (ii) 25% to vest seven (7) months from issuance; (iii) 25% to vest ten (10) months from issuance; and (iv) 25% to vest thirteen (13) months from issuance. During the three months ended September 30, 2024, the Company incurred an expense of $4,555.
OUTSTANDING SHARE DATA
As of September 30, 2024 and November 14, 2024 the Company has 5,708,863 common shares outstanding.
As of September 30, 2024 and November 14, 2024 the Company has 3,098,543 share purchase warrants.
As of September 30, 2024 and November 14, 2024 the Company has 41,667 and 20,000 stock options outstanding that can be exercised, respectively.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that would require disclosure.
CRITICAL ACCOUNTING ESTIMATES
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The Company’s critical accounting estimates include impairment of assets, measurement of share-based payments, and deferred income tax asset valuation allowances. Estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
CHANGES IN ACCOUNTING POLICIES
The Company has adopted the IFRS accounting standards and prepared financial statements to comply with IFRS as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). Significant accounting policies disclosed in note 3 of the attached financial statements.
Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.
FINANCIAL AND OTHER INSTRUMENTS
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company's risk management activities include the preservation of its capital by minimizing risk related to its cash. The Company does not trade financial instruments for speculative purposes. The Company does not have a risk management committee nor written risk management policies. The Company is exposed in varying degrees to a variety of financial instrument and related risks. Those risks and management’s approach to mitigating those risks are as follows:
- (a) Fair Values
Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s consolidated statement of financial position as at September 30, 2024, as follows:
| Fair Value Measurements Using Quoted prices in active markets for identical instruments (Level 1) $ Significant other observable inputs (Level 2) $ Significant unobservable inputs (Level 3) $ Balance, September 30, 2024 $ |
|
|---|---|
| Cash | 31,631 – – 31,631 |
The fair values of other financial instruments, which include accounts receivable, short-term investment, accounts payable, notes payable, and amounts due to related parties, approximate their carrying values due to the relatively short-term maturity of these instruments.
(b) Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and accounts receivable. The Company limits exposure to credit loss by placing its cash with high credit quality financial institutions. The Company performs ongoing credit evaluations, does not require collateral and establishes an allowance for doubtful accounts based on the age of the receivable and the specific identification of receivables the Company considers at risk. The carrying amount of financial assets represents the maximum credit exposure.
(c) Foreign Exchange Rate Risk
Foreign exchange rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has exposure to currency risk from assets and liabilities denominated in US dollars and ARG peso. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management believes that the risk from fluctuations in foreign exchange rates is not significant.
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(d) 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 currently settles its financial obligations with cash. The ability to do this relies on the Company raising debt or equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. Liquidity risk is assessed as high.
- (e) Classification of financial instruments
Financial assets and liabilities included in the consolidated statement of financial position are as follows:
| September 30,2024 | December 31,2023 | |
|---|---|---|
| $ | $ | |
| Financial assets classified as fair value through profit or loss: | ||
| Cash | 31,631 | 21,607 |
| Deposit and prepaid | 7,729 | - |
| Loans and receivables: | ||
| Receivables | 28,397 | 12,229 |
| Investment GIC | 533,000 | 967,986 |
| Non-derivative financial liabilities: | ||
| Accounts payables and accrued liabilities | 64,031 | 80,662 |
| Subscriptions received in advance | - | 686,874 |
COMMITMENTS AND CONTINGENCIES
As at September 30, 2024, the Company had no commitments and contingent liabilities.
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE
During the nine months ended September 30, 2024, the Company generated no revenue (September 30, 2024 - $nil).
During the nine months ended September 30, 2024, the Company incurred consulting fees of $122,247 (September 30, 2023 - $ nil), management fees of $45,000 (September 30, 2023 - $ nil), professional fees of $175,968 (September 30, 2023 - $80,867), audit fees of $11,250 (September 30, 2023 - $19,000), legal fees of $70,592 (September 30, 2023 - $51,124), regulatory fees of $27,729 (September 30, 2023 - $10,445), share-based compensation of $240,382 (September 30, 2023 - $ nil) and general administration costs of $8,195 (September 30, 2023 - $563).
During the nine months ended September 30, 2024, the Company capitalized $14,714 of exploration and evaluation expenses on the El Carmen property (September 30, 2023 - $nil).
DISCLOSURE OF INTERNAL CONTROLS
In connection with National Instrument (“NI”) 52-109 (Certification of Disclosure in Issuer’s Annual and Interim Filings) adopted in December 2008 by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the audited consolidated financial statements and respective accompanying Management’s Discussion and Analysis. The Venture Issuer Basic Certification 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.
RISK FACTORS
The risk factors disclosed in the annual MD&A for the year ended December 31, 2023 have not changed and apply to the nine months ended September 30, 2024.
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