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Cleghorn Minerals Ltd. — Management Reports 2021
Jul 13, 2021
46606_rns_2021-07-13_3fb0f082-de56-41a3-97b9-30a3068a9a21.pdf
Management Reports
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CLEGHORN MINERALS LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED
MARCH 31, 2021
DATED JULY 13, 2021
Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
SCOPE OF THIS MANAGEMENT’S DISCUSSION AND ANALYSIS AND NOTICE TO INVESTORS
This management’s discussion and analysis of financial position and results of operations ("MD&A"), is prepared as of July 13, 2021, and complements the audited financial statements of Cleghorn Minerals Ltd. ("Cleghorn" or the "Company"), for the year ended March 31, 2021, which are compared to the year ended March 31, 2020.
All financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") and all amounts are in Canadian dollars unless otherwise indicated. Additional information is provided in the Company's audited financial statements for the year ended March 31, 2021.
The audited financial statements and the MD&A have been reviewed by the audit committee and approved by the Company’s Board of Directors on July 13, 2021. These documents and more information about the Company are available on SEDAR at www.sedar.com.
The technical content in this Management’s Discussion & Analysis has been prepared under the supervision of Michael P. Rosatelli who is a “Qualified Person” as such term is defined in National Instrument 43-101 – standard of Disclosures for Mineral Projects.
FORWARD LOOKING STATEMENTS
Certain statements made in this MD&A are forward-looking statements or information. The Company is hereby providing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in the forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "may", "is expected to", "anticipates", "estimates", "intends", "plans", "projection", "could", "vision", "goals", "objective" and "outlook") are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. In making these forward-looking statements, the Company has assumed that the current market will continue and grow and that the risks listed below will not adversely impact the business of the Company. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes may not occur or may be delayed. The risks, uncertainties and other factors, many of which are beyond the control of the Company that could influence actual results are summarized below under the heading "Risks and Uncertainties".
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
Further, unless otherwise noted, any forward-looking statement speaks only as of the date of this MD&A, and, except as required by applicable law, the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors and to assess in advance the impact of each such factor on the business of the Company, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.
ABOUT CLEGHORN
Cleghorn Minerals Ltd., incorporated on February 16, 2010 under the Business Corporations Act of British Columbia (the "Company") is involved in the process of exploring, evaluating and promoting its mineral property and other projects. The head office of the Company is located at 152 Chemin de la Mine École, Val d'Or, Québec, Canada J9P 7B6. The Company also has exploration offices located at 2864 Chemin Sullivan, Val-D'Or, Quebec, J9P 0B9.
The Company's shares are listed on the TSX Venture Exchange under the trading symbol CZZ.
HIGHLIGHTS
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On April 8, 2020, the Company announced the issuance of the 1,500,000 units in connection with the acquisition of the Sprague and Odie prospects.
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On September 4, 2020, the Company granted a total of 1,220,000 stock options at a price of $0.10 per share, expiring on September 4, 2025 to its directors, officer and consultants.
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On September 29, 2020, a total of 1,000,000 stock options were exercised at an exercise price of $0.06 per share for total proceeds of $60,000.
MINERAL PROPERTY
Meech Lake – Matachewan Prospect
The Company owns a 100% interest in the Meech Lake – Matachewan Prospect situated in Argyle, Baden, McNeil and Robertson Townships. The property is located approximately 25 km northwest of Matachewan, in Northeastern Ontario, within the Abitibi Greenstone Belt. Following the MLAS claim to cell conversion process completed by Ontario’s Ministry of Northern Development and Mines (MNDM), the four (4) original legacy claims covering 656 ha were converted to 41 cells (36 single cells and 5 boundary cells) covering an area of 831.51 hectares.
On March 7, 2020, the Company signed a mineral claim purchase agreement for the acquisition of a 100% interest in 142 mineral claims known as the Sprague and Odie prospects in consideration of 1,500,000 units for a deemed value of $116,383. The Sprague Prospect is located directly adjacent to the northeast corner of the Meech Lake Matachewan prospect and the Odie Prospect is located directly adjacent to the southwest corner of the Meech Lake Matachewan Prospect. These two properties are considered to be an extension of the Meech Lake Matachewan prospect, and are together referred to herein as the Meech Lake Matachewan prospect.
Presently the property is comprised of 183 cells (178 single cells and 5 boundary cells) covering an area of 3,892.3 hectares.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
The three (3) original vendor property claims are subject to a 3% NSR on metals or minerals produced from the property. The Company shall be entitled to repurchase 0.5% of the NSR, by paying to the vendor $1,000,000, and an additional 1%, by paying the vendor an additional $3,000,000.
Funding for the first phase of work on the property (locating and re-sampling the historical mineral showings) was received from the Ontario Exploration Corp. (OEC), through its prospector assistance program initiative via an initial $10,000 grant in exchange for a 0.5% royalty on the property. The royalty has a buyback clause which provides that the company can purchase one-half of the 0.5% royalty for a dollar value that increases over time, ranging from a purchase price of $15,000 before the second anniversary of the date of the agreement to a purchase price of $250,000 from the 11th anniversary of the agreement and beyond.
Project Exploration Program Update
During the year ended March 31, 2021, Cleghorn did not conduct any work on the property.
Exploration work conducted by Cleghorn on the property successfully identified and confirmed the presence of two separate mineralized systems on the property, previously documented in a series of pits and/or trenches. They are represented by the Kell’s Ni-Cu-PGE Showing (T-52) and the Waterhole Au-Ag-Zn Showing (T-1) .
2017-2019 Exploration Program Highlights:
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Selective assays results from the sampling program of the historical pits and/or trenches on the property included:
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8.31% Cu, 3.80% Ni, 13.5 g/t Pt, 60.4 g/t Pd & 1.89 g/t Au from the Kell’s Showing;
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7.01 g/t Au, 31.2 g/t Ag, 2.25% Zn from the Waterhole Showing
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Seventeen (17), widely-spaced drillholes, totalling 1,836-metres were completed. Drill highlights include:
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0.75% Ni, 1.29% Cu, 2.36 g/t Pd, 0.62 g/t Pt , 0.75 g/t Au & 6.64 g/t Ag over 6.30 metres, including 1.0% Ni, 1.97% Cu , 3.70 g/t Pd, 0.96 g/t Pt, 0.46 g/t Au & 7.49 g/t Ag over 3.25 metres intersected in ML-18-011 at the Kell’s Showing ;
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2.45 g/t Au, 16.70 g/t Ag & 1.58% Zn over 0.55 metres intersected in ML-18-003 and 1.52 g/t Ag & 0.99% Zn over 3.35 metres, including 2.06g/t Ag & 1.41% Zn over 2.30 metres, and 4.80g/t Ag & 2.04% Zn over 0.85 metres intersected in ML-18-005 at the Waterhole Showing ;
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1.62g/t Au, 7.87g/t Ag & 2.44% Zn over 2.15 metres, including 2.52 g/t Au, 5.60g/t Ag and 3.14% Zn over 1.05 metres intersected in ML-18-017, representing a potential new gold-silverzinc mineralized zone discovery on the property.
Please refer to the October 1, 2018, October 24, 2018 and March 21, 2019 press releases for details of these previously released drill results and link to the property Compilation – DDH Plan map for the drill-hole locations.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
2021 Proposed Exploration Program:
The primary exploration focus on the property will be to assess the immediate economic potential of the high-grade Pd-Pt mineralization characterized by surface and drill sampling results from the Kell’s Ni-CuPGE Showing.
A downhole and 3D IP (induced polarization) survey is planned to be completed over the 2021 winter field season, with the objective to aid in the tracking of the nickel-copper-PGE mineralization associated with the Kell’s Showing.
A follow-up program of detailed mapping and surface sampling is also recommended over the Kell’s Showing, Waterhole Showing, T25 Trench and Kell’s Cabin Showing in an effort to define and characterize the surface mineralization outlined in the 2018 surface stripping program.
Quality Assurance/Quality Control Protocol:
All diamond drilling sample batches (each individual hole), include 5% QA/QC samples consisting of blanks and certified standards (Natural Resources Canada - CANMET). All drillhole samples were submitted to ALS Minerals, an accredited mineral analysis laboratory. Sample preparation was completed in Val-d'Or, Québec and analyses in Vancouver, British Columbia. Nickel, copper, cobalt, zinc and silver values were determined by a 61 element, Four Acid / ICP-AES analysis and gold values were determined by a 30-gram fire assay and AAS finish. Platinum, palladium and gold values were determined by 30-gram fire assay with ICP finish. Samples, which received over-limit values, underwent further analysis using ALS Minerals assay procedure Ni-OG62 (for nickel), Cu-OG62 (for copper), Zn-OG62 (for zinc), and PGMICP27 (for gold, platinum and palladium). The reader is referred to: www.alsgobal.com for details of analytical procedures described above.
Cleghorn Minerals has applied a rigorous quality assurance/quality control program at the Meech Lake - Matachewan Project using industry practice. All core was logged and selected intervals sampled by a professional geoscientist. NQ drill core was sawn in half and each sample half was placed in a marked sample bag with its corresponding sample tag, then sealed. The remaining half core is retained in the original core boxes that are stored in a secure facility in Val-d’Or, Québec.
Additional Property Acquisitions:
Cleghorn is continuing due diligence on several property and/or transactional opportunities, in Canada and separately, located in International jurisdictions, and will provide additional information should the examinations lead to favourable conclusions and affordable transactions.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
SELECTED FINANCIAL INFORMATION
GOING CONCERN
Management of the Company believes that it has sufficient funds to pay its ongoing general and administrative expenses and to meet its liabilities, obligations and existing commitments for the ensuing twelve months as they fall due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. The Company’s ability to continue future operations beyond March 31, 2022 and fund its exploration and evaluation expenditures is dependent on management’s ability to secure additional financing in the future, which may be completed in a number of ways, including, but not limited to, the issuance of debt or equity instruments. Management will pursue such additional sources of financing when required, and while management has been successful in securing financing in the past, there can be no assurance it will be able to do so in the future or that these sources of funding or initiatives will be available for the Company or that they will be available on terms which are acceptable to the Company.
FINANCIAL POSITION ANALYSIS
| FINANCIALPOSITIONANALYSIS | |||
|---|---|---|---|
| March 31, 2021 | March 31, 2020 | March 31, 2019 | |
| $ | $ | $ | |
| Assets | 1,342,593 | 1,405,111 | 1,130,622 |
| Liabilities | 271 | 10,631 | 22,319 |
| Equity | 1,342,322 | 1,394,480 | 1,108,303 |
ASSETS
Total assets at March 31, 2021 were $1,342,593 compared to $1,405,111 at March 31, 2020, a decrease of $62,518 due to a decrease in cash of $66,212 which was offset by an increase in exploration and evaluation assets of $3,494.
LIABILITIES
Total liabilities at March 31, 2021 were $271 compared to $10,631 at March 31, 2020, a decrease of $10,360 in accounts payable and accrued liabilities.
EQUITY
Equity totalled $1,342,322 at March 31, 2021 compared to $1,394,480 at March 31, 2020, a decrease of $52,158 due to the period net loss of $212,874 which was offset by the recognition of a stock-based compensation of $105,377 and the exercise of 1,000,000 stock options for total net proceeds of $55,339.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
OPERATING RESULTS ANALYSIS
| Three-month period ended March 31, 2021 |
Three-month period ended March 31, 2020 |
Twelve-month period ended March 31, 2021 |
Twelve-month period ended March 31, 2020 |
|
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Revenue | - | - | - | - |
| Operatingexpenses | (14,754) | (17,091) | (212,874) | (164,493) |
| Net loss and comprehensive loss | (14,754) | (17,091) | (212,874) | (164,493) |
| Basic and diluted net lossper common share | (0.001) | (0.001) | (0.007) | (0.008) |
THREE-MONTH PERIOD ENDED MARCH 31, 2021 COMPARED TO THE THREE-MONTH PERIOD ENDED MARCH 31, 2020
The net loss for the three-month period ended March 31, 2021 was $14,754 or ($0.001) per share, compared to $17,091 or ($0.001) per share for the same period in 2020, a decrease of $2,337 mainly due to a decrease in regulatory and transfer agent fees ($1,189) and in legal fees ($3,744) which were offset by an increase in office expense and other ($2,220).
TWELVE-MONTH PERIOD ENDED MARCH 31, 2021 COMPARED TO THE TWELVE-MONTH PERIOD ENDED MARCH 31, 2020
The net loss for the twelve-month period ended March 31, 2021 was $212,874 or ($0.007) per share, compared to $164,493 or ($0.008) per share for the same period in 2020, an increase of $48,381 mainly due to an increase in stock-based compensation ($36,980), in office expense and other ($10,828), in audit fees ($2,704), in project development costs ($2,240) and in shareholder’s information fees ($857). These increases were however offset by a decrease in legal fees ($1,741), in travel and representation fees ($1,557), in bank charges ($1,299) and in regulatory and transfer agent fees ($631).
CASH FLOW ANALYSIS
| Three-month period ended March 31, 2021 |
Three-month period ended March 31, 2020 |
Twelve-month period ended March 31, 2021 |
Twelve-month period ended March 31, 2020 |
|
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Operatingactivities | (16,525) | (5,896) | (121,512) | (86,575) |
| Investingactivities | - | (2,063) | (39) | (26,514) |
| Financingactivities | - | 268,139 | 55,339 | 268,139 |
THREE-MONTH PERIOD ENDED MARCH 31, 2021 COMPARED TO THE THREE-MONTH PERIOD ENDED MARCH 31,
2020
OPERATING ACTIVITIES
Operating activities required cash flows of $16,525 compared to $5,896 in 2020. This increase in the use of cash flows is mainly due to the non-cash working capital items which used cash flows of $1,771 compared
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
to generated cash flows of $11,195 in 2020. However, this increase was offset by a decrease in the net loss after adjustments for items not affecting cash which went from $17,091 in 2020 to $14,754 in 2021.
INVESTING ACTIVITIES
Investing activities required no cash flows compared to $2,063 in 2020. These outflows were related to the exploration and evaluation expenditures incurred on the Meech Lake - Matachewan Prospect.
FINANCING ACTIVITIES
Financing activities generated no cash flows compared to $268,139 in 2020. These cash flows were related to the issuance of units under a private placement.
TWELVE-MONTH PERIOD ENDED MARCH 31, 2021 COMPARED TO THE TWELVE-MONTH PERIOD ENDED MARCH 31, 2020
OPERATING ACTIVITIES
Operating activities required cash flows of $121,512 compared to $86 575 in 2020. This increase in the use of cash flows is mainly due to the non-cash working capital items which used cash flows of $10,560 compared to generated cash flows of $12 976 in 2020 and to an increase in the net loss after adjustments for items not affecting cash which went from $99 551 in 2020 to $110,952 in 2021.
INVESTING ACTIVITIES
Investing activities required cash flows of $39 compared to $26 514 in 2020. These outflows are related to the exploration and evaluation expenditures incurred on the Meech Lake - Matachewan Prospect.
FINANCING ACTIVITIES
Financing activities generated cash flows of $55,339 compared to $268 139 in 2020. The 2021 cash flows are related to the exercise of 1,000,000 stock options while those of 2020 are related to the issuance of units under a private placement.
QUARTERLY RESULT TRENDS (IN THOUSANDS OF $)
The operating results for each of the last eight quarters are presented in the following table. Management considers that the information for each of those quarters was determined in the same way as for our audited financial statements for the year ended March 31, 2021.
| Mar 31, 2021 |
Dec 31, 2020 |
Sept 30, 2020 |
Jun 30, 2020 |
Mar 31, 2020 |
Dec 31, 2019 |
Sept 30, 2019 |
Jun 30, 2019 |
|
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Revenue | - | - | - | - | - | - | - | - |
| Net loss and comprehensive loss | (15) | (21) | (141) | (35) | (17) | (15) | (97) | (35) |
| Basic and diluted net loss per common share |
(0.001) | (0.001) | (0.005) | (0.001) | (0.001) | (0.001) | (0.005) | (0.002) |
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
LIQUIDITY, CAPITAL RESOURCES AND SOURCES OF FINANCING
As of March 31, 2021, the Company had a cash position of $228,297 and a working capital of $238,528.
The Company manages its capital structure and brings about adjustments related to changes in the economic environment and underlying risks of its assets. To preserve or modify its capital structure and to carry on the development of its mining properties, the Company may issue additional common shares or negotiate new loans.
Management believes that the current liquidity will be sufficient to support the Corporation's needs for cash beyond March 31, 2022.
Readers are invited to refer to the Risk and Uncertainties section for more information.
INFORMATION ON OUTSTANDING SECURITIES
The following table sets out the number of common shares, warrants and options outstanding as of the date hereof:
| Common shares outstanding: Stock options exercisable: Average exercise price of: |
29,408,618 1,590,861 $ 0.09 |
|---|---|
| Expiry date | Number of stock options exercisable Exercise price |
| September 2024 September 2025 Warrants outstanding: Average exercise price of: |
$ 370,861 0.06 1,220,000 0.10 1,590,861 0.09 12,631,674 $ 0.11 |
| Expiry date | Number of warrant outstanding Exercise price |
|---|---|
| August 2021 August 2021 April 2022 March 2023 Fully diluted shares |
$ 4,550,000 0.12 1,631,674 0.15 750,000 0.10 5,700,000 0.10 12,631,674 0.11 43,631,153 |
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
RELATED PARTY TRANSACTIONS
Please refer to Note 14 of the audited financial statements for key management transactions. The Company has not entered into any other related party transaction.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
ACCOUNTING POLICIES
The preparation of financial statements in conformity with IFRS requires management to apply accounting policies and make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. There is full disclosure of the Company’s critical accounting policies and accounting estimates in Note 3 of the audited financial statements for the year ended March 31, 2021.
ESTIMATES, JUDGMENTS AND ASSUMPTIONS
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Significant changes in the underlying assumptions could result in significant changes to these estimates. Consequently, management reviews these estimates on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about these significant judgments, assumptions and estimates that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are disclosed in Note 5 of the audited financial statements for the year ended March 31, 2021.
RISKS RELATED TO FINANCIAL INSTRUMENTS
Readers are invited to refer to Note 13 of the audited financial statements for the year ended March 31, 2021, for a full description of these risks.
RISKS AND UNCERTAINTIES
An investment in the common shares of the Company involves a high degree of risk and must be considered highly speculative due to the financial and operational risks inherent to the nature of the Company's business and the present stage of exploration and development of its mineral resource properties. These risks may affect the Company’s eventual profitability and level of operating cash flow. Prospective buyers of the common shares of the Company should consider the following risk factors:
- Investment of Speculative Nature
Investing in the Company, at this early stage of its development, is of a highly speculative nature.
- Nature of Mineral Exploration and Mining
There is no known mineral resource on the Company’s properties. Mineral exploration and development involves a high degree of risk, requires substantial expenditures and few properties that are explored are ultimately developed into producing mines.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
- Exploration and Development Risks
Resource exploration and development is a speculative business, involving considerable financial and technical risks, including the failure to discover mineral deposits, market fluctuations and government regulations, which are beyond the control of the Company.
- Additional Financing
Future exploration and development activities will require additional equity and debt financing. Failure to obtain such additional financing could result in delay or indefinite postponement of exploration and development of the property interests of the Company.
- Stress in the Global Economy and Financial Condition
The adverse effects on the capital markets generally make the raising of capital by equity or debt financing much more difficult and the Company is dependent upon the capital markets to raise financing.
- Permits and Licenses
There can be no assurances that the Company will be able to obtain all necessary licenses and permits required to carry out exploration, development and mining operations for its proposed projects.
- Competition
The mineral exploration and mining business is competitive in all of its phases. There is no assurance that the Company will be able to compete successfully with the competition in acquiring suitable properties or prospects for mineral exploration.
- No Assurance of Title to Property
The Company’s claims may be subject to prior unregistered agreements or transfers or third party and native land claims and title may be affected by undetected defects.
- Dependence on Key Individuals
The Company is dependent on a relatively small number of key personnel, the loss of any one of whom could have an adverse effect on the Company.
- Environmental Risks for Current and Past Activities and other Regulatory Requirements
The Company may be liable for environmental contamination and natural resource damages relating to properties that it currently owns, operates or have an interest in, or at which environmental contamination occurred while or before it owned, operated or acquired an interest in the properties. No assurance can be given that potential liabilities for such contamination or damages caused by past activities at these properties do not exist.
Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company.
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Cleghorn Minerals Ltd. Management’s discussion and analysis for the year ended March 31, 2021
- Political Regulatory Risks
Any changes in government policy may result in changes to laws affecting the Company’s ability to undertake exploration and development activities in respect of present and future properties.
• Conflicts of Interest
The directors and officers of the Company are also directors and officers of other companies, some of which are in the same business as the Company. This situation may result in conflicting legal obligations which may expose the Company to liability to others and impair its ability to achieve its business objectives.
• Insurance
The Company will remain at risk and will be potentially subject to liability for hazards associated with mineral exploration which it cannot insure against or which it has elected not to insure against because of premium costs or other reasons.
- Influence of Third-Party Stakeholders
Claims by third parties on the lands in which the Company hold interests, or the exploration equipment and road or other means of access which the Company intend to utilize in carrying out work programs or general exploration mandates, even if not meritorious, may create delays resulting in significant financial loss and loss of opportunity for the Company.
• Fluctuation in Market Value of Shares
The market price of a publicly-traded stock is affected by many variables not directly related to the corporate performance of the entity. The future effect of these and other factors on the market price of Company’s shares on the Exchange cannot be predicted.
• Climate Change
The Company’s operations may be subject to regulatory changes in Ontario, where its current property is located, in response to the potential impact of climate change, such as regulation relating to emission levels. If the current regulatory trend continues, this may result in increased costs directly or indirectly affecting the Company. In addition, the physical effect of climate change, such as extreme weather conditions, natural disasters, resource shortages, changing sea levels and changing temperatures, could have an adverse financial impact on operations located in the regions where these conditions occur and where the Company’s properties are or may be located, directly or indirectly impacting the business of the Company.
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