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EV Nickel Inc. — Management Reports 2023
Oct 31, 2023
48144_rns_2023-10-30_3756603e-8357-4d7c-b710-88bdca89c8e0.pdf
Management Reports
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EV NICKEL INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
This management’s discussion and analysis (“ MD&A ”) of EV Nickel Inc. is the responsibility of management and covers the year ended June 30, 2023. This MD&A has been prepared by management and takes into account information available up to October 30, 2023 and should be read together with the Company’s audited financial statements for the year ended June 30, 2023 filed on SEDAR+. No update is provided where an item is not material or where there has been no material change from the discussion in the aforementioned annual MD&A. Additional information relating to the Company is available on SEDAR+ at www.sedarplus.com.
Throughout this document the terms the “ Company ” and “ EVNi ” refer to EV Nickel Inc. All financial information in this document is prepared in accordance with International Financial Reporting Standards (“ IFRS ”) as issued by the International Accounting Standards Board (“ IASB ”) and interpretations of the IFRS Interpretations Committee (“ IFRIC ”) and is presented in Canadian Dollars unless otherwise indicated.
Description of Business
The Company is an independent, Canadian-based, nickel exploration focussed mining company with a goal to acquire, advance and develop mineral properties, with an emphasis on the Shaw Dome project located near Timmins, Ontario (the “ Shaw Dome Project ”). The Company was incorporated under the Business Corporations Act (Ontario) on January 28, 2021. The Company’s registered office and head office is located at 150 King Street West, Suite 200, Toronto, Ontario M5H 1J9.
EVNi acquired the Langmuir Project from Rogue Resources Inc. (“ Rogue ”) in March 2021 and in May 2021 the Company filed on SEDAR+ a technical report entitled “Independent NI 43-101 Technical Report on the Langmuir Nickel Project” (the “ Caracle Initial Technical Report ”), completed by Caracle Creek International Inc. Subsequent to the Caracle Initial Technical Report, Condor Consulting Inc. (“ Condor ”) completed a geophysics project to process and analyze airborne, ground and borehole transient electromagnetic data across the Langmuir Project.
On April 1, 2022, the Company acquired properties (the “Transaction”) within and to the south of the Shaw Dome, spread across 12 townships (the “Acquisition Package” or the “Shaw Dome Acquisition Properties”) incorporating 942 staked mining claims. The Acquisition Package was acquired from a privately held mineral exploration company that is arms length from EVNi (the “Vendor”). The purchase price for 100% ownership of the Acquisition Package was $350,000 cash (the “Cash Consideration”), $100,000 of which was paid to the Vendor pursuant to a letter of intent signed in 2021, plus 2.5 million EVNi shares (the “Consideration Shares”), which were issued at closing of the Transaction. In addition to the Cash Consideration and the Consideration Shares paid at closing, EVNi and the Vendor entered into a 2.75% net-smelter royalty agreement (the “Shaw Dome Royalty Agreement”) with respect to the Shaw Dome property group and a 2.75% net-smelter royalty agreement with respect to the Groves property group (the “Groves Royalty Agreement”, together with the Shaw Dome Royalty, the “Royalty Agreements”). Pursuant to the Royalty Agreements, EVNi may re-purchase 50% of the royalties granted thereunder for $1,850,000 in the case of the Shaw Dome Royalty Agreement and $1,500,000 in the case of the Groves Royalty Agreement.
For ease of reference, after the Transaction the Company began to refer to the Langmuir Project and the Shaw Dome Acquisition Properties in combination as the Shaw Dome Project. The Shaw Dome Project included the high-grade W4 (“ W4 Zone ”, part of the original Langmuir Project and the basis of a 2010 historical estimate of 677K tonnes @ 1.00% Ni, ~15M lbs of Class 1 Nickel) and the large-scale Carman-Langmuir (“ CarLang Area ”) in the northeast.
The Company is focused on a 2-track strategy to try and develop Clean Nickel™ (EVNi’s trademarked product name): Track 1- to produce High-Grade Clean Nickel™ (starting with the W4 Zone) and Track 2- an integrated Carbon Capture & Storage (“ CCS”) project with Large-Scale Clean Nickel™ production (starting with the CarLang Area).
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Exploration Summary
In May 2021, Condor completed its geophysics work. In June, after extensive outreach to the local First Nations, the Company was awarded a drilling permit from Ontario’s Ministry of Northern Development, Mines, Natural Resources and Forestry. The project team was hired in June and led a competitive process to choose the drilling contractor, Forage Fusion Drilling Limited of Hawkesbury. By June 30, 2021, 367m of drilling had been completed on the W4 Zone.
During the period ended September 30, 2021 the Company completed 3,825 more metres of drilling, bringing the total for drilling to 4,192 metres of drilling completed (the Company’s “ Phase 1 ” diamond drill hole program).
During the period ended December 31, 2021, no additional diamond drilling was completed by the Company. Exploration activities for the period included completion of the core logging of the Phase 1 core, as detailed in the Caracle Initial Technical Report and receipt of a total of 851 assay analyses. Results from Phase 1 were entered into the geological database and analyzed and interpreted by the exploration team. Preparations were initiated for the “ Phase 2 ” diamond drill hole program, as detailed in the Caracle Initial Technical Report including the drill hole location selection and the hiring of a drilling contactor, Missinaibi Drilling Services, after a competitive process.
The Company was successful in qualifying for the Ontario Junior Exploration Program (“ OJEP ”) as of April 1, 2022. Through the OJEP program, the Company will receive funding of up to $200,000 for eligible exploration costs. The funding is provided in stages first in September 2022 ($60,000 received) and then in February 2023. The Company received the second and final distribution of $140,000 in the period.
Exploration activities for the period included completion of the core logging and analytical analysis with the submission of 2,451 samples of the “ Phase 3 ” diamond drill core (focussed on the CarLang “ A Zone ”) and receipt of 2,854 assays. As of December 31, 2022 a total of 2,451 assays were still pending analysis.
SGS Canada Inc. in Lakefield, Ontario continued the metallurgical test work on the W4 Zone. Results from the Phase 2 and Phase 3 were entered into the geological database and analyzed and interpreted by the exploration team.
The Company continued surface water baseline monitoring for the W4 Zone (to be used for permitting).
On January 4, 2023, the Company announced assay results from a surface stripping and sampling program on the Groves property, 80 km south of the Shaw Dome, outlining the confirmation of the Mathu Zone discovery.
Ongoing exploration results were reported for Phase 3, drilling the CarLang A Zone, as detailed in the press releases dated January 12 and February 6, 2023. Assay analyses of all 28 holes (including prior results released October 24, November 28 and December 7, 2022) confirmed that every hole intersected the targeted dunite unit containing significant mineralized nickel intercepts.
On February 9, 2023, the Company announced initiation of the Phase 4 drill program on the W4 Zone Extension. Among the objectives for Phase 4 included to test how far the mineralization stretched to the east. On February 16, 2023 the Company reported sulphides being intercepted in holes EV23-01 and EV23-02, confirming that the mineralization did stretch to the east.
On February 28, 2023, the Company announced its Maiden Resource for the CarLang A Zone, defining more than a 1 billion tonnes of Resource, with 2.41 million tonnes Contained Nickel. This becomes one of the largest undeveloped nickel deposits in the world and it represents only 20% of the potential of the CarLang Area trend.
On March 6, 2023 the Company announced that it had been awarded $500,000 of non-dilutive funding through the Critical Minerals Innovation Fund (“CMIF”), administered by the Ontario Ministry of Mines. CMIF is specifically funding two separate research and development project streams under EV Nickel’s Clean Nickel™ strategy. This includes work advancing “bioleaching”; a process through which bacteria erodes the rock around the critical mineral naturally and with zero carbon emissions. The second focuses on developing an integrated carbon capture and storage process, to earn carbon credits alongside the Clean Nickel™ production. It is anticipated that the Company will receive the contracted funding in the coming months.
On March 28, 2023, exploration results were reported for Phase 4, drilling on the W4 Zone Extension, as detailed in the press releases dated February 9, 2023. Assay analyses of four holes confirmed a continuation of the high-grade nickel sulphides 50 metres to the east of the 2022 drill program.
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On April 20, 2023, the Company reported that highly reactive, magnesium-rich minerals including brucite and hydrotalcite indicating the potential of the host ultramafic units to capture significant amounts of CO2 were identified in the host rocks to the CarLang A Deposit.
On May 3, 2023, the Company reported the results of the Technical Evaluation of Bioleaching Application on the W4 Sulphide Zone. Testing indicated that the good extraction rates for Ni and Co were very encouraging for the W4 sulphide mineralization regarding the bioleaching potential of the zone and that based on these results, the Company has engaged a research and engineering partner, EPCM Engineering of Oakville, Ontario to provide project management of a Bench Scale Bioleaching Optimization Test Program forming a key component of the Company’s Clean Nickel™ strategy.
On May 15, 2023, exploration results were reported for two holes completed as part of the 2023 Drill Program, within the upper portion of the W4 Zone. The holes were designed to provide a 1,000 kg composite sample to be used for the generation of a representative nickel concentrate sample to be used in the Clean Nickel™ Bioleaching Test Program, previously announced on May 3, 2023.
Below is a summary of each of the phases of the Company’s exploration program:
| Phase | Timing | Target | Metres | Outcome |
|---|---|---|---|---|
| 0 | 2007-2010 | W4 (above 200m) | 22,152 | 2010 Maiden Resource |
| 1 | Summer 2021 | W4 (up and down trend + Met holes) plus reconnaissance drilling |
4,192 | Confirmation of high nickel tenors and better definition of eastern and western boundaries |
| 2 | 1H 2022 | W4 (200-500m) | 6,597 | Discovery “W4 Extension” and indication of easterly plunge |
| 3 | Summer 2022 | CarLang A Zone | 8,295 | Maiden A Zone Resource |
| 4 | Winter 2022/2023 |
W4 (Eastern Flank + Met holes) |
3,300 Estimated |
Updated W4 Inferred Resource (anticipated in June) |
On June 12, 2023, the Company announced its Update Resource for the W4 Zone, defining more than 2 million tonnes of Resource with 43 million pounds Contained Nickel.
Exploration activities for the period included completion of the 2 diamond drill holes completed for a total of 261 metres designed to provide a 1,000 kg sample for metallurgical testing from the W4 Zone, core logging and analytical analysis with the submission of 281 samples of the “ Phase 4 ” diamond drill core (focussed on the W4 Zone) and receipt of 281 assays. As of June 30, 2023 no assays were pending analysis. Geological mapping and surface sampling was initiated on the 10 kilometre CarLang Trend focused on outcrop exposures within the favourable host units.
Research continued on the Bioleaching and Carbon Capture and Storage Programs during the period. Bioleaching work included the bulking up of bacteria and further adaptation test work. The Carbon Capture and Storage test work has been concluded and the Company is awaiting the delivery of the final report.
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Performance Summary
For the year ended June 30, 2023 and 2022
| For the year ended June 30, 2023 and 2022 | ||||||
|---|---|---|---|---|---|---|
| Years ended June | 30, | |||||
| Note | 2023 | 2022 | ||||
| Operating expenses | ||||||
| Exploration expenditures | 4, 7 | $ | 3,474,685 | $ | 4,090,160 | |
| General and administrative | 7 | 1,424,597 | 857,773 | |||
| Stock based compensation | 7, 8 | 249,368 | 53,627 | |||
| Operating loss | (5,148,650) | (5,001,560) | ||||
| Other income | ||||||
| Interest income | 7 | 20,692 | 4,950 | |||
| Flow through premium | 8 | 577,704 | 490,348 | |||
| Part XII.6 tax | (1,525) | - | ||||
| Government funding | 9 | 401,259 | - | |||
| Expense related to IPO listing | - | (726,693) | ||||
| Net loss and comprehensive loss | $ | (4,149,520) | $ | (5,232,955) | ||
| Weighted average number of shares, basic | 47,741,089 | 28,844,511 | ||||
| and diluted | ||||||
| Lossper share,basic and diluted | $ | (0.09) | $ | (0.18) | ||
| Statements of Financial Position | ||||||
| Total assets | $ | 478,345 | $ | 2,514,362 | ||
| Total non-current liabilities | - | 5,377 |
General and administrative costs (“G&A”)
These costs include general office expenses plus costs in relation to corporate governance requirements, including administration, consulting, professional fees, salary and general public company expenses. The Company incurred $1,424,597 in G&A costs in the year ended June 30, 2023, as compared to $857,773 for the year ended June 30, 2022. The increase was driven by higher legal, consulting and promotional fees.
Stock Based Compensation
On March 4, 2022, the Company entered into compensation security agreements with its directors and officers. One of the compensation security agreements included 650,000 restricted share units (“RSUs”) valued at $0.195 per unit vesting over three years. The compensation expense recorded for the year ended June 30, 2023, was $63,375. The other compensation security agreement granted 375,000 stock options at an exercise price of $0.195 per option, vesting over three years and expiring after five years. The compensation expense recorded for the year ended June 30, 2023 is $21,628.
On March 1, 2023, the Company entered into compensation security agreements with its directors and officers. One of the compensation security agreements included 1,800,000 RSUs valued at $0.12 per unit vesting over three years. The compensation expense recorded for the year ended June 30, 2023 related to these RSUs is $44,000. The other compensation security agreement granted 4,725,000 stock options at an exercise price of $0.12 per option, vesting over three years and expiring after five years. The compensation expense recorded for the year ended June 30, 2023 related to these stock options is $120,365.
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Summary of Quarterly Results
The following table sets forth selected quarterly financial information for each of the eight quarters since the Company's inception.
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Other Income Net Loss per Share
Period Quarter Ending (Expense) ($) Net Loss ($) ($)
Q4 – 2023 June 30, 2023 324,800 (1,224,673) (0.03)
Q3 – 2023 March 31, 2023 308,240 (881,247) (0.02)
Q2 – 2023 December 31, 2022 91,483 (803,324) (0.02)
Q1 – 2023 September 30, 2022 273,607 (1,240,276) (0.02)
Q4 – 2022 June 30, 2022 438,240 (3,337,513) (0.12)
Q3 – 2022 March 31, 2022 48,095 (649,711) (0.02)
Q2 – 2022 December 31, 2021 8,963 (334,410) (0.01)
Q1 – 2022 September 30, 2021 - (911,321) (0.03)
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Outstanding Share Data
The authorized capital of the Company consists of an unlimited number of Common Shares without par value. As of the date of this MD&A, there are 89,880,993 Common Shares outstanding, 53,929,777 share purchase warrants, 5,100,000 options and 2,233,333 RSUs.
At October 31, 2023, 7.4 million shares were held in escrow and will be released from escrow over the next two years.
On September 14, 2023, the Company closed a non-brokered private placement financing, issuing a total of 35,000,334 share units for gross proceeds of $2,018,000. Each Unit consists of one common share (“Common Share”) in the capital of the Company and one common share purchase warrant (each, a “Warrant”). Each Warrant will entitle the holder thereof to purchase one Common Share at an exercise price of C$0.09 for a period of 24 months following the respective Closing Date.
The Company will pay finder’s fees on portions of the Offering. These finder’s fees will total $88,761 in cash and 1,479,357 in common share purchase warrants (the “Broker Warrants”). Each Broker Warrant will entitle the holder thereof to purchase one Common Share at an exercise price of C$0.09 for a period of 24 months following the Closing Date. PowerOne Capital Markets Limited acted as a finder in connection with the Offering.
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A summary of the Company’s warrant activity for the fiscal years ended June 30, 2023 and 2022 is as follows:
| Weighted Average | ||
|---|---|---|
| Exercise Price ($) | Warrants | |
| Balance, June 30, 2021 | 0.30 | 2,000,002 |
| Broker Offered Warrants | 0.75 | 468,728 |
| Additional broker offered warrants | 0.75 | 840,000 |
| Warrants | 1.05 | 5,600,000 |
| Balance, June 30, 2022 | 0.84 | 8,908,730 |
| Warrants | 0.25 | 5,575,920 |
| Finders’ Warrants | 0.16 | 754,964 |
| Warrants | 0.21 | 3,694,714 |
| Finders’ Warrants | 0.14 | 515,760 |
| Warrants expired | 0.30 | (2,000,002) |
| Balance, June 30, 2023 | 0.47 | 17,450,086 |
As at June 30, 2023, the weighted average remaining contractual life of the Company’s share purchase warrants is 1.00 years and the weighted average exercise price is $0.47.
On April 15, 2023 2,000,002 share purchase warrants expired. A summary of the Company’s warrants outstanding as at June 30, 2023 is as follows:
| Expiry Date | Exercise Price ($) | Warrants |
|---|---|---|
| December 2, 2023 | 0.75 | 1,308,728 |
| December 2, 2023 | 1.05 | 5,600,000 |
| July 7, 2024 | 0.25 | 5,575,920 |
| July 7, 2024 | 0.16 | 754,964 |
| December 21, 2024 | 0.21 | 3,694,714 |
| December 21, 2024 | 0.14 | 515,760 |
| Balance, June 30, 2023 | 17,450,086 |
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The following table summarizes the assumptions used in the Black-Scholes valuation model for the determination of the cost of warrants and stock options issued during the year ended June 30, 2023.
| December 21, | March 1, | ||||
|---|---|---|---|---|---|
| July 7, 2022 | December | 2022 | 2023 | ||
| July 7, 2022 | Finders’ | 21, 2022 | Finders’ | Stock | |
| Warrants | Warrants | Warrants | Warrants | Options | |
| Risk free interest rate | 3.30% | 3.30% | 3.72% | 3.72% | 3.59% |
| Expected life (years) | 2 | 2 | 2 | 2 | 5 |
| Volatility | 99% | 99% | 103% | 103% | 97% |
| Expected dividends | 0% | 0% | 0% | 0% | 0% |
| Forfeiture rate | 0% | 0% | 0% | 0% | 0% |
| Fair value of warrants or | |||||
| options issued | $ 0.033 | $ 0.026 | $ 0.016 | $ 0.020 | $ 0.125 |
A summary of the Company’s RSU activity for the fiscal years ended June 30, 2023 and 2022 is as follows:
| Grant Price ($) | RSUs | |
|---|---|---|
| Balance, June 30, 2021 | - | - |
| Granted | 0.195 | 650,000 |
| Balance, June 30, 2022 | 0.195 | 650,000 |
| Granted | 0.120 | 1,800,000 |
| Vested | 0.195 | (216,667) |
| Balance, June 30, 2023 | 0.135 | 2,233,333 |
As at June 30, 2023, the weighted average exercise price is $0.135.
A summary of the Company’s stock option activity for the fiscal years ended June 30, 2023 and 2022 is as follows:
| Grant Price ($) | Options | |
|---|---|---|
| Balance, June 30, 2021 | - | - |
| Granted | 0.195 | 375,000 |
| Balance, June 30, 2022 | 0.195 | 375,000 |
| Granted | 0.120 | 4,725,000 |
| Balance, June 30, 2023 | 0.126 | 5,100,000 |
As at June 30, 2023, the weighted average remaining contractual life of the Company’s stock options is 4.6 years and the weighted average exercise price is $0.126.
Use of Proceeds from Financings
During the quarter ended December 31, 2021, the Company completed its initial public offering for gross proceeds of $5,440,292, which included a partial exercise of the over-allotment option by the syndicate of agents.
As disclosed in the final long form prospectus dated November 19, 2021, the Company estimated the net proceeds to be received by the Company in respect of the initial public offering to be $3,467,500 to $4,085,528. The actual net proceeds equaled $ 4,323,822. The following table illustrates the intended use of the net proceeds of the initial public offering, adjusted for the actual net proceeds of the Initial Public Offering:
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Completion of Phase 1 of the recommended exploration program $199,116
as outlined in the Caracle Initial Technical Report
Completion of Phase 2 of the recommended exploration program $1,350,900
as outlined in the Caracle Initial Technical Report
Estimated general and administrative expenses for 12 months $500,000
Working Capital and General Corporate Purposes $2,273,806
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On June 15, 2022, the Company announced a flow through and charity flow through financing that closed on July 7, 2022, raising a total of $2,206,831. All of the proceeds of the June 15, 2022 financing qualified as Canadian Exploration Expenditures (“CEE”) and included the Phase 3 diamond drill hole program, metallurgical test work, geophysical interpretation and other exploration activities. The following table illustrates the intended use of the net proceeds of the June 15, 2022 Flow Through Financing with additional funding coming from the Company’s working capital:
| Completion of Phase 3 exploration program on the CarLang Target as outlined in the Press Release dated June 27, 2022. |
$2,125,000 |
|---|---|
| Completion of Metallurgical and Geophysical Studies on the Shaw Dome Project |
$150,000 |
On December 21, 2022, the Company issued 7,389,429 flow through units (each a “Unit”) of the Company at a price of $0.14 per Unit for gross proceeds of $1,034,520. On September 14, 2023, the Company closed a non-brokered private placement financing, issuing a total of 35,000,334 share units for gross proceeds of $2,018,000. These financing will be used for working capital and to support the continued exploration efforts across the Shaw Dome Project, following up on the two new nickel discoveries from 2022: the W4 Extension and the CarLang A Zone.
| Completion of Phase 4 exploration program on the W4 Target as outlined in the Press Release dated February 9, 2023. |
$800,000 |
|---|---|
| Completion of Metallurgical and Geophysical Studies on the Shaw Dome Project. |
$300,000 |
As of the date of this MD&A, the above exploration programs have been completed and the flow through obligations related to the July 7, 2022 and December 21, 2022 flow through financings have been met.
Liquidity and Capital Resources
As at June 30, 2023, the Company had current liabilities of $1,112,993 due within 12 months, cash of $142,748 and a working capital deficit of ($704,579).
The Company’s cash flows from operations are negative as it is an exploration stage company. The Company’s net cash used in operating activities for the year ended June 30, 2023 was ($4,659,398) compared to the Company’s net cash used in operating activities for the year ended June 30, 2022 which was ($4,025,406). Operating activities relate to the Company’s exploration on the Shaw Dome Project.
For the year ended June 30, 2023, the Company spent $34,221 for investing activities compared to $42,322 for the year ended June 30, 2022.
For the year ended June 30, 2023, the Company had net cash provided by financing activities of $3,306,626 compared to $4,222,964 for the year ended June 30, 2022. The expenses incurred during the year ended June 30, 2023 were legal, accounting and banking expenses relating to the two private placements, while in the comparable period, expenses incurred were for a private placement, the Company’s IPO and a concurrent financing.
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The net cash was constituted in full by the proceeds from the issuance of Common Shares pursuant to the various private placement financing and the Company’s IPO.
The Company does not generate revenue from the Shaw Dome Project, as further exploration activities are necessary to determine whether commercially profitable quantities of minerals exist on the property. The Company completed a non-brokered private placement for aggregate gross proceeds of approximately $2,044,040 on March 31, 2021 and completed its Initial Public Offering for gross proceeds of approximately $5,440,292 on December 2, 2021. In the current year, the Company closed its oversubscribed, non-brokered, private placement financing for gross proceeds of $2,206,831 on July 7, 2022, and on December 21, 2022, closed a second oversubscribed, non-brokered, private placement financing for gross proceeds of $1,034,520. On September 14, 2023, the Company closed a non-brokered private placement financing, issuing a total of 35,000,334 share units for gross proceeds of $2,018,000.
Liquidity Outlook
The Company’s cash position is highly dependent on its ability to raise cash through financings.
The Company will need to complete additional external financings either through equity, debt or other forms of financing in order to fund operations; however, the Company believes it has sufficient cash resources to fund operations and commitments over the next 12 months.
At present, the Company’s operations do not generate cash inflows and its financial success is dependent on management’s ability to discover economically viable mineral deposits. The mineral exploration process can take many years and is subject to factors that are beyond the Company’s control.
In order to finance the Company’s future exploration programs and to cover administrative and overhead expenses, the Company will need to raise funds through equity sales, from the exercise of convertible securities, debt or other forms of raising capital. Many factors influence the Company’s ability to raise funds, including the health of the resource market, the climate for mineral exploration investment, the Company’s track record, and the experience and calibre of its management. Actual funding requirements may vary from those planned due to a number of factors, including the progress of exploration activities. Management believes it will be able to raise equity capital as required in the short and long term, but recognizes that there will be risks involved which may be beyond its control.
Going Concern
The Company’s Financial Statements are prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at the date of this MD&A, the Company has not yet achieved profitable operations. This condition indicates the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. The continuing operations of the Company are dependent upon obtaining necessary financing to meet the Company’s commitments as they come due and to finance future exploration and development of potential business acquisitions, economically recoverable reserves, securing and maintaining title and beneficial interest in its project and any future projects and upon future profitable production. Failure to continue as a going concern would require that assets and liabilities be recorded at their liquidation values, which might differ significantly from their carrying values.
Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
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The Company’s key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and consist of its directors, President and Chief Executive Officer (the “CEO”), Chief Financial Officer and Vice President, Exploration. Compensation of the directors, officers and/or companies controlled by these individuals for the years ended June 30, 2023, and 2022, were as follows:
| Key management compensation | 2023 | 2022 | ||
|---|---|---|---|---|
| Exploration expenditures | $ | 170,482 | $ | 99,000 |
| General and administrative | 278,925 | 220,313 | ||
| Stock based compensation | 194,803 | 43,245 | ||
| Total compensation of key management personnel | $ | 644,211 | $ | 362,558 |
In the year ended June 30, 2022, the Company loaned $340,000 to Rogue, a related company, as part of an agreed advance against the EV Resource Payment (Note 4). This advance carries an interest rate of 6% and will be settled by the deadline for payment of the EV Resource Payment.
On January 11, 2022, the CEO sold equipment to the Company for total cash consideration of $22,600. On January 24, 2023, the Company entered into short-term lease transactions for two additional vehicles with the CEO which were subsequently purchased by the Company for total cash consideration of $34,221. All sales were transacted at fair market value.
Amounts due to related parties amounted to $8,997 as at June 30, 2023 (June 30, 2022 - $68,540). Amounts due to related parties are unsecured, non-interest bearing and have no specific repayment terms.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements as at June 30, 2023 or at the date of this MD&A.
Proposed Transactions
The Company has no undisclosed proposed transactions as at June 30, 2023 or at the date of this MD&A.
Capital Resources
Except as described in “Performance Summary” relating to the ongoing commitments related to the continued exploration and development of the Shaw Dome Project and in the Financial Statements the Company has no other commitments for capital expenditures at the date of this MD&A.
The Company will continue to seek capital. In the past the Company has raised capital through the issuance of Common Shares pursuant to private placements. 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 does not presently utilize any quantitative measures to monitor its capital and is not subject to externally imposed capital requirements.
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Contractual Obligations
As of June 30, 2023, the Company had successfully met 100% of its flow through commitment related to its July 7, 2022 financing and approximately 64% of its December 21, 2022 financing.
As at June 30, 2023, the Company had entered into three equipment lease agreement to lease three vehicles for the exploration site. The final lease ends December 2023 (fiscal 2024). The commitments for these leases (including HST) are as follows:
| Fiscal year | Amount | |
|---|---|---|
| 2024 | $ | 3,100 |
| $ | 3,100 |
Financial Instruments
The Company has not entered into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk. As of the date hereof, the Company has full exposure to commodity risk, both upside and downside.
Fair value hierarchy
Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The hierarchy is summarized as follows:
Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 Inputs that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from observable market data.
Level 3 Inputs for assets and liabilities not based upon observable market data.
Additional Disclosure for Venture Issuers without Significant Revenue
Additional disclosure concerning the Company’s general and administrative expenses and costs relating to the Shaw Dome Project is provided in the Financial Statements and related notes.
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Significant Accounting Policies
The preparation of financial statements requires management to establish accounting policies, estimates and assumptions that affect the timing and reported amounts of assets, liabilities, revenues and expenses. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances and require judgment on matters which are inherently uncertain. Details of the Company’s significant accounting policies can be found in note 2 of the Company’s audited financial statements for the fiscal year ended June 30, 2022.
Risk Factors
The Company is subject to a number of risks and uncertainties, each of which could have an adverse effect on its results, business prospects or financial position. The Company’s securities should be considered a highly speculative investment and investors should carefully consider all of the information disclosed in the Company’s regulatory filings prior to making an investment in the Company. For a comprehensive list of the risks and uncertainties applicable to the Company, please refer to the final long form prospectus dated November 19, 2021.
A few of the primary risk factors affecting the Company are set forth below.
Currency risk
Currency risk is the risk that fluctuations in the rates of exchange on foreign currencies would impact the Company’s future cash flows. The Company is currently not exposed to the foreign exchange market.
Interest rate risk
The Company does not believe it is exposed to any significant risk related to the movements in interest rates.
Price risk
Price risk is the risk of a decline in the value of a security or an investment portfolio due to multiple factors. The Company doesn’t own any marketable securities.
Credit risk
The Company is not exposed to any significant concentration of credit risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.
The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Senior management is also actively involved in the review and approval of planned expenditures.
Insufficient Capital
The Company does not currently have any revenue producing operations and may, from time to time, report a working capital deficit. To maintain its activities, the Company will require additional funds which may be obtained either by the sale of equity capital or by entering into an option or joint venture agreement with a third party providing such funding. There is no assurance that the Company will be successful in obtaining such additional financing. Failure to do so could result in the loss of the Company’s interest in the Shaw Dome Project.
Limited Operating History and Negative Operating Cash Flow
The Company has no history of earnings and, due to the nature of its business, there can be no assurance that the Company will be profitable. The Company has paid no dividends on its Common Shares since incorporation and does not anticipate doing so. Although the Company has confirmed significant indicated and inferred resources at the Shaw Dome Project, it has not completed a feasibility study and therefore cannot yet confirm it has commercial quantities of mineral reserves.
The purpose of the financings has been to raise funds to carry out exploration and development on the Shaw Dome Project. To the extent that the Company has a negative operating cash flow in future periods, the Company may need to allocate a portion of its cash reserves to fund such negative operating cash flow. The Company may also be required
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to raise additional funds through the issuance of equity or debt securities. The only present source of funds available to the Company is through the sale of its securities. Even if the results of exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists on the Shaw Dome Project. While the Company may generate additional working capital through further equity offerings, there is no assurance that any such funds will be available on terms acceptable to the Company, or at all. If available, future equity financing may result in substantial dilution to holders of Common Shares. At present it is impossible to determine what amounts of additional funds, if any, may be required.
If the Company is unable to generate revenues or obtain such additional financing, any investment in the Company may be lost. In such event, the probability of resale of the Common Shares purchased would be diminished.
Fluctuating Mineral Prices
The viability and potential success of EVNi lies in its ability to seek out and acquire interests in mineral deposits owned and operated by unrelated third parties. EVNi’s revenues are dependent on the operators’ success. Further, revenues, profitability, and cash flow from any future operation involving EVNi will be influenced by commodity prices, which are beyond the Company’s control. Metal prices have fluctuated widely, particularly in recent years. Consequently, the economic viability of any of the Company’s exploration projects cannot be accurately predicted and may be adversely affected by fluctuations in mineral prices. In addition, currency fluctuations may affect the cash flow which the Company may realize from its operations, since most mineral commodities are sold in the world market in United States dollars.
Price Volatility of Publicly Traded Securities
In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur. It may be anticipated that any quoted market for the Common Shares will be subject to market trends generally, notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. The value of Common Shares issued upon the deemed exercise of the Founder’s Warrants will be affected by such volatility.
Resale of Common Shares
The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. There can be no assurance that any such revenues can be generated or that other financing can be obtained. If the Company is unable to generate such revenues or obtain such additional financing, any investment in the Company may be lost. In such event, the probability of resale of the Common Shares purchased would be diminished.
Shortages of Critical parts, Equipment and Skilled Labour
Our ability to acquire critical resources such as input commodities, drilling equipment, tires and skilled labour due to increased worldwide demand, may cause unanticipated cost increases and delays in delivery times, thereby impacting operating costs, capital expenditures and development schedules.
Conflicts of Interest
Directors of the Company are and may become directors of other reporting companies or have significant shareholdings in other mineral resource companies and, to the extent that such companies may participate in ventures in which the Company may participate, the directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. The Company and its directors will attempt to minimize such conflicts. In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. Conflicts, if any, will be subject to the procedures and remedies as provided under the OBCA, as the case may be. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest.
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The Shaw Dome Project
The Shaw Dome Project is currently the only significant project for EVNi. As new assets are acquired or move into production, the materiality of each of the Company’s assets will be reconsidered. Any adverse development affecting the development or operation of, production from or recoverability of Mineral Reserves from the Shaw Dome Project or any other significant property in the asset portfolio from time to time, such as, but not limited to, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, pit wall failures, tailings dam failures, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage, or the inability to hire suitable personnel and engineering contractors or secure supply agreements on commercially suitable terms, may have a material adverse effect on EVNi’s profitability, results of operations and financial condition and the trading price of its securities.
Title to Assets
Searches of mining records are carried out in accordance with mining industry practices to confirm satisfactory title to properties in which the Company holds or intends to acquire an interest, but the Company does not obtain title insurance with respect to such properties. The possibility exists that title to one or more of the properties, particularly title to undeveloped properties, might be defective because of errors or omissions in the chain of title, including defects in conveyances and defects in locating or maintaining such claims or concessions. The ownership and validity of mining claims and concessions are often uncertain and may be contested.
The Company has taken and will continue to take all reasonable steps, in accordance with the laws and regulations of the jurisdictions in which their properties are located, to ensure proper title to its properties and to properties it may acquire in the future, either at the time of acquisition or prior to any major expenditures thereon. This, however, should not be construed as a guarantee of title. There are no assurances that the Company will obtain title. Both presently owned and after-acquired properties may be subject to prior unregistered agreements, transfers, land claims or other claims or interests. In addition, third parties may dispute the rights of the Company to its respective mining and other interests. The Company will attempt to clear title and obtain legal opinions commensurate to the intended level of expenditures required on areas that show promise. There can be no assurance, however, that it will be successful in doing so.
Exploration and Development
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production. The Shaw Dome Project is considered to be in the early exploration and development stage. To date, no compliant mineral resources have been identified at the Shaw Dome Project. There is no certainty that further exploration and development will result in the identification of indicated, or measured resources, or probable or proven reserves, at the Shaw Dome Project, or that if any mineral resources or reserves are defined at the Shaw Dome Project that that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized.
The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.
There is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of commercial bodies of minerals on the Shaw Dome Project or elsewhere. The long-term profitability of the Company’s operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.
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Uninsurable Risks
In the course of exploration, development and production of mineral properties, certain risks may occur, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. These risks include environmental hazards, industrial accidents, explosions and third-party accidents, the encountering of unusual or unexpected geological formations, ground falls and cave-ins, mechanical failure, unforeseen metallurgical difficulties, power interruptions, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in environmental damage and liabilities, work stoppages, delayed production and resultant losses, increased production costs, damage to, or destruction of, mineral properties or production facilities and resultant losses, personal injury or death and resultant losses, asset write downs, monetary losses, claims for compensation of loss of life and/or damages by third parties in connection with accidents (for loss of life and/or damages and related pain and suffering) that occur on company property, and punitive awards in connection with those claims and other liabilities. It is not always possible to fully insure against such risks and the Company may decide not to take out insurance against such risks as a result of high premiums or other reasons. Liabilities that we incur may exceed the policy limits of insurance coverage or may not be covered by insurance, in which event we could incur significant costs that could adversely impact our business, operations, potential profitability or value. Despite efforts to attract and retain qualified personnel, as well as the retention of qualified consultants, to manage our interests, even when those efforts are successful, people are fallible and human error could result in significant uninsured losses to us. These could include loss or forfeiture of mineral interests or other assets for nonpayment of fees or taxes, significant tax liabilities in connection with any tax planning effort we might undertake and legal claims for errors or mistakes by our personnel Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the Common Shares.
Governmental and Environmental Regulations, Permits and Licenses
The future operations of the Company may require permits from various governmental and non-governmental authorities and will be governed by laws and regulations governing prospecting, development, mining, production, export, taxes, labour standards, occupational health, waste disposal, land use, environmental protections, mine safety and other matters. There can be no guarantee that the Company will be able to obtain all necessary permits and approvals that may be required to undertake exploration activity or commence construction or operation of mine facilities on the Shaw Dome Project. The Company currently does not have any such permits in place.
The Company's operations are also subject to various laws, regulations, and permitting requirements governing the protection of the environment. Such environmental and other regulatory requirements affect the current and future operations of the Company, including exploration and development activities. Such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. In addition, certain types of operations may require the submission and approval of environmental impact assessments to be conducted before permits can be obtained and there can be no assurances that the Company will be able to obtain or maintain all necessary permits that may be required for operations to be conducted at economically justifiable costs. The cost of compliance has the potential to reduce the profitability of operations by increasing costs and delaying production.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
There is no assurance that future changes to existing laws and regulations will not impact the Company. Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have material adverse impact on the Company and cause increases in capital expenditures or require abandonment or delays in development of new mining properties.
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Environmental Hazards
All phases of our operations with respect to the Shaw Dome Project will be subject to environmental regulation. Environmental legislation involves strict standards and may entail increased scrutiny, fines and penalties for noncompliance, stringent environmental assessments of proposed projects and a high degree of responsibility for companies and their officers, directors and employees. Changes in environmental regulation, if any, may adversely impact our operations and future potential profitability. In addition, environmental hazards may exist on the Project which is currently unknown. We may be liable for losses associated with such hazards, or may be forced to undertake extensive remedial cleanup action or to pay for governmental remedial cleanup actions, even in cases where such hazards have been caused by previous or existing owners or operators of the property, or by the past or present owners of adjacent properties or by natural conditions. The costs of such cleanup actions may have a material adverse impact on our operations and future potential profitability.
Competition
The mining industry is intensely competitive in all its phases and the Company competes with other companies that have greater financial resources and technical facilities. Competition could adversely affect the Company’s ability to acquire suitable properties or prospects in the future and to engage qualified personnel to explore and develop the Shaw Dome Project.
Claims and Legal Proceedings
The Company may be subject to claims or legal proceedings covering a wide range of matters that arise in the ordinary course of business activities, including claims relating to ex-employees. These matters may give rise to legal uncertainties or have unfavourable results. The Company carries liability insurance coverage and mitigates risks that can be reasonably estimated. In addition, we may be involved in disputes with other parties in the future that may result in litigation or unfavourable resolution which could materially adversely impact our financial position, cash flow and results of operations.
Risks Relating to our Shares, market Price of Shares and Volatility
Securities of microcap and small-cap companies have experienced substantial volatility in the past, often based on factors unrelated to the companies’ financial performance or prospects. These factors include macroeconomic developments in North America and globally and market perceptions of the attractiveness of particular industries. The price of the Common Shares is also likely to be significantly affected by short-term changes in mineral prices or in our financial condition or results of operations. Other factors unrelated to our performance that may affect the price of the Common Shares include the following: the extent of analytical coverage available to investors concerning our business may be limited if investment banks with research capabilities do not follow the Company; lessening in trading volume and general market interest in the Common Shares may affect an investor’s ability to trade significant numbers of Common Shares; the size of our public float may limit the ability of some institutions to invest in Common Shares; and a substantial decline in the price of the Common Shares that persists for a significant period of time could cause the Common Shares to be delisted from an exchange, further reducing market liquidity. As a result of any of these factors, the market price of the Common Shares at any given point in time may not accurately reflect our long-term value. Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management’s attention and resources. The market price of the Common Shares is affected by many other variables which are not directly related to our success and are, therefore, not within our control. These include other developments that affect the market for all resource sector securities, the breadth of the public market for our Common Shares and the attractiveness of alternative investments. The effect of these and other factors on the market price of the Common Shares is expected to make the Common Share price volatile in the future, which may result in losses to investors.
Personnel
The Company has a small management team and the loss of any key individual could affect the Company’s business. Additionally, the Company will be required to secure other personnel to facilitate its exploration program on the Project. Any inability to secure and/or retain appropriate personnel may have a materially adverse impact on the business and operations of the Company.
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Reliance on Third Parties
EVNi relies on public information and reporting from third parties. The accuracy of the reporting can have an adverse effect on the Company’s interpretation of future opportunities.
Qualified Person
The Company’s Projects are under the direct technical supervision of Paul Davis, P.Geo., and Vice-President of the Company. Mr. Davis is a Qualified Person as defined by NI 43-101. He has reviewed and approved the technical information in this MD&A. There are no known factors that could materially affect the reliability of the information verified by Mr. Davis
Changes in Accounting Policies including Initial Adoption
From the date of incorporation, the Company has not made any changes in accounting policy.
Note Regarding Forward-Looking Statements
This MD&A may contain forward-looking statements. These forward-looking statements may include statements regarding perceived project timelines, strategic plans, completion of transactions, market prices for metals or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
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, identified by words or phrases such as “expects”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors.
The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date of this MD&A, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
More information about the Company including the Financial Statements is available on SEDAR+ at www.sedarplus.com.
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