AI assistant
Evergold Corp. — Management Reports 2020
Apr 8, 2020
47813_rns_2020-04-08_b9c79816-e68e-4251-8060-5bb2ea36aa3b.pdf
Management Reports
Open in viewerOpens in your device viewer
Evergold Corp. Management’s Discussion and Analysis For the Years Ended December 31, 2019 and 2018
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Introduction
The following management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Evergold Corp. (“Evergold” or the “Company”) has been prepared by management as at March 31, 2020 and should be read in conjunction with the financial statements of the Company for the years ended December 31, 2019 and December 31, 2018 (the “Financial Statements”) and related notes. Additional information on the Company may be found at www.evergoldcorp.ca, or under the Company’s profile at www.sedar.com.
The Financial Statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All amounts are expressed in Canadian dollars unless otherwise stated. Other information contained in this document has also been prepared by management and is consistent with the data contained in the interim Financial Statements.
The Company’s certifying officers are responsible for ensuring that the Financial Statements and MD&A do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made. The Company’s certifying officers certify that the Financial Statements, together with the other financial information included in the filings, fairly present in all material respects the financial condition, financial performance, and cash flows of the Company as of the date of, and for the periods presented in, the filings.
The Company’s Audit Committee and the Board of Directors provide an oversight role with respect to all public financial disclosures by the Company. The Board of Directors approves the Financial Statements and MD&A after the completion of its review and recommendation for approval by the Audit Committee, which meets periodically to review all financial reports, prior to filing.
Forward-Looking Statements
Certain statements contained in this document constitute “forward-looking statements”. All statements other than statements of historical fact contained in this MD&A, including, without limitation, those regarding the Company’s future financial position and results of operations, strategy, proposed acquisitions, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words “believe”, “expect”, “aim”, “intend”, “plan”, “continue”, “will”, “may”, “would”, “anticipate”, “estimate”, “forecast”, “predict”, “project”, “seek”, “should” or similar expressions or the negative thereof, are forwardlooking statements. These statements are not historical facts but instead represent only the Company’s expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements.
Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to risks associated with: the highly uncertain nature of geology; limited operating history; business interruption due to global pandemic; inability to generate earnings or pay dividends for the foreseeable future; no current assets other than cash; uncertain ability to raise additional funds when required; reliance on a small number of key managers lacking backup; potential conflicts of interest among directors and officers of the Company; lack of liquidity for shareholders; ability to secure needed permits; ability to physically access and work the Company’s property assets due to poor weather or First Nations risks; a potential lack of key contract personnel and services providers needed to execute elements of the Company’s exploration plans; and market risk consisting of fluctuations in the Company’s share price, metal
2
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
prices, credit market conditions and investor appetite for early stage exploration companies. See “Risks and Uncertainties”.
The Company’s plans and operations may also be adversely affected by the sudden emergence of the COVID-19 virus pandemic. At the time of writing this pandemic has already resulted in international travel bans, interprovincial travel restrictions, the forced closure of most suppliers and businesses, the quarantining and self-isolation of those who have or may have contracted the virus, and the widespread adoption by the remainder of the population of physical / social distancing measures. Fear of contagion is widespread in many communities, in particular isolated northern communities where elders are vulnerable due to poor health and lack of ready access to medical care. Some of these communities are now preventing outsiders from entering. Should these conditions – travel bans, loss of suppliers, and lack of personnel due to illness - continue through a significant part of the new fiscal year, it is likely that the Company will not be able to execute its exploration plans, either in whole or in part. Moreover, the economic downturn that is underway in consequence of the pandemic and the resulting volatility in stock and financial markets may make it difficult or impossible for the Company to raise additional capital going forward.
Management provides forward-looking statements because they believe such statements deliver useful guidance and information to readers when considering their investment objectives. Though management believes such statements to be as accurate as possible in the context of the information available to management at the time in which they are made, management cautions readers that the guidance and information contained in such statements may rapidly be superseded by subsequent events. Consequently, all of the forward-looking statements made in this MD&A are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments suggested by such forward-looking statement will be realized or, even if substantially realized, that they will have the expected results, or effects upon, the Company. These forward-looking statements are made as of the date of this MD&A and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law.
Corporate History and Description of the Business
Evergold was incorporated as a privately held mineral exploration company in October 2015, to serve as a vehicle for the acquisition, exploration and development of mineral properties in Canada. The Company’s focus quickly turned to the province of British Columbia and the four 100%-owned property assets that now comprise its portfolio: Snoball , located in the heart of northwestern B.C.’s so-called “Golden Triangle”; Golden Lion , located well to the east of Snoball in similar Stikine terrane rocks, at the north end of the Toodoggone region and 70 kilometres northwest of the Kemess mine; Holy Cross , located in central B.C. 60 kilometres due north of New Gold’s Blackwater deposit; and Spanish Lake , located in the Cariboo region of central interior B.C., approximately 8 kilometres southeast of the Spanish Mountain gold deposit. Snoball, Golden Lion, and Holy Cross are interpreted as intrusion-related, precious and base metalsenriched systems. Each presents the potential for a variety of mineralization styles, including high-grade epithermal-style quartz-carbonate gold-silver veins, high-grade copper-gold-silver carbonate replacement/skarns, and bulk tonnage porphyry-style copper-gold-silver. Spanish Lake is a sedimenthosted vein gold prospect.
All four properties were acquired effective April 5, 2016, further to a Mineral Property Acquisition Agreement (the “Agreement”), between the Company and vendor C.J. Greig Holdings Ltd. of Penticton, B.C., a company controlled by Charles J. Greig. Charles J. Greig is as of the time of writing a special advisor, insider, and a principal shareholder of, Evergold Corp. There were no staged cash payment or work commitment elements in the Agreement. In addition, the Agreement called for a 0.5% Net Smelter Returns (“NSR”) Royalty on any future production from each of the four properties. There are no buy-back options on the NSRs.
3
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Through the course of 2017 and 2018, the Company largely lay dormant as management focused on other business interests. However, some key exploration work, consisting mainly of geochemical sampling and geophysical surveys, was carried out in both years on the Company’s flagship Snoball and Golden Lion properties, with encouraging results. Accordingly, in February 2019, management commenced a process to take the Company public through an Initial Public Offering (“IPO”) process on the TSX Venture Exchange (“TSXV”). Fundamental to this process was the preparation, by David W. Tupper, B.Sc., P.Geo., a Qualified Person as defined by National Instrument 43-101, of compliant Technical Reports for both the Snoball and Golden Lion properties. Copies of both these documents may be viewed on the Company’s website at www.evergoldcorp.ca and from its profile at www.sedar.com.
On October 4, 2019, the Company successfully completed its IPO and attendant listing of its shares under the ticker “EVER” on the TSXV for gross proceeds of $3.45 million. The Company is now focused on using the IPO proceeds to advance the exploration of its property portfolio.
Property Assets and Exploration Activities
Snoball Property
A comprehensive NI 43-101 Technical Report is available for the Snoball property from the Company’s website at www.evergoldcorp.ca and from its profile at www.sedar.com.
The helicopter accessible, 3,545-hectare Snoball property is located in northwestern British Columbia, approximately 140 kilometres north-northwest of the village of Stewart, 25 kilometres northwest of the Bob Quinn Lake gravel airstrip, and 12 kilometres as the crow flies from highway 37. The property is situated within the traditional territory of the Tahltan First Nation, a forward-looking First Nation which has demonstrated itself to be strongly supportive of mineral exploration and development, where the related activities are conducted to high standards within areas specifically targeted for mineral exploration, and carried out in a manner respectful of the environment and traditional users of the affected areas. A 100% ownership interest in the property was acquired effective April 5, 2016, further to the Acquisition Agreement described above, details of which may be found in the Company’s prospectus dated September 16, 2019, copies of which are available from www.sedar.com. A 0.5% NSR royalty payable to the property vendor on any future production is the sole remaining corporate obligation in relation thereto.
The Snoball prospect is a precious metals-enriched, intrusion-related system, centred on a body of diorite emplaced along the northwest-trending, faulted contact between Stuhini Group sedimentary rocks to the west, and Hazelton Group volcanics to the east (the BC Geological Survey’s so-called “Red Line”). Known mineralization styles include 1) high-grade vein-hosted gold-silver, 2) carbonate replacement/skarn, and 3) disseminated bulk tonnage style gold-silver in hornfelsed sediments overlying the intrusion. Potential also exists for bulk-tonnage porphyry-style gold-silver-copper in the intrusion itself.
The property has seen several historical work programs, including gridded geochemical sampling of soils and rocks, mapping, trenching and geophysics, culminating with drilling by Noranda in 1992 (12 holes for 1,500 metres). The great bulk of this historical work, including all of the historical diamond drilling, took place at lower elevations on this rugged property.
Evergold’s initial evaluation of historical sampling results suggested the actual source of a strong multielement soil and rock anomaly developed by Noranda was up-slope to the north, at higher elevations well above the areas historically drilled. The Company’s own soil and rock sampling (2016, 2017, 2018) of areas up-slope strongly reinforced this hypothesis, and pointed to the principal source of the multi-element anomaly as lying along and below Snoball Ridge and Pyramid Peak, neither of which have ever been drilled.
4
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Recent Exploration Activities on the Property
The Company’s principal focus during the year ended December 31, 2019 was its initial public offering. Exploration activities on the Snoball property during the year were, in consequence, limited. Nonetheless, the Company completed the construction in August of two important drill pads, one located directly on top of Pyramid Peak, from which holes can be drilled to all azimuths, and the other along Snoball Ridge approximately one kilometre to the west. The work was carried out with helicopter support from a temporary camp at Burrage airstrip on nearby highway 37. The completion of these two key pads will allow for the prompt and efficient launch of the first-ever drilling of the Pyramid Peak and Snoball Ridge targets, at the Board’s discretion, in the pending 2020 field season. Initial environmental planning and preparation of an Archaeological Overview Assessment, was also carried out. The Company is in possession of a multi-year drill permit for the property.
During the year management also engaged in a concerted way with the Tahltan First Nation, within whose traditional territory the Snoball property is located. These efforts resulted in a positive working relationship and the signing, early in the new fiscal year, of a Communications and Engagement Agreement with the Tahltan Central Government.
Golden Lion Property
A comprehensive NI 43-101 Technical Report is available for the Golden Lion property from the Company’s website at www.evergoldcorp.ca and from its profile at www.sedar.com.
The helicopter accessible, 5,099-hectare Golden Lion property is located in the Toodoggone region of northcentral British Columbia, approximately 308 kilometres north of Smithers, 70 kilometres northwest of the Kemess copper-gold mine, and 24 kilometres north of the Lawyers (Baker-Cheni Mine) project. The property is situated within the traditional territory of the Kaska Dena Nation, and more particularly the Kwadacha and Tsay Keh Dene communities, located some 80 to 100 kilometres to the east. A 100% ownership interest in the property was acquired effective April 5, 2016, further to the Acquisition Agreement described above, details of which may be found in the Company’s prospectus dated September 16, 2019, copies of which are available at www.sedar.com. A 0.5% NSR royalty payable to the property vendor on any future production is the sole remaining corporate obligation in relation thereto.
The Golden Lion property exhibits high grades of gold, silver and copper in selected outcrop, and high values of a spectrum of indicator elements in soil sampling, across three broad priority target areas known, respectively, as “GL1”, “GL2” and “GL3”. Styles of mineralization identified to date on the property include high-grade vein-hosted epithermal gold-silver, copper-gold-silver carbonate replacement/skarn, and porphyry-style copper-gold-silver.
Evergold acquired the Golden Lion property in May, 2016 which at that time encompassed just 190 hectares overlying the historical Golden Lion showing area, now constituting the core of the GL1 target area. The Golden Lion showing was the focus of considerable work by Newmont in the period from 1982 to 1984, including sampling, mapping, trenching, and geophysics, and culminating in the drilling of 22 holes for 2,475 metres in 1984. Evergold added another 1,337 hectares of claims in May 2017, following which it carried out its first exploration program that summer, concentrating on the GL1 target area. A second field program was carried out in 2018, focused on the newly-acquired claims to the east and northeast underlying what are now the GL2 and GL3 target areas. The results of these programs were considered highly encouraging, in consequence of which the Company again expanded the property size early in 2019 with the staking of an additional 3,572 hectares.
Recent Exploration Activities on the Property
The Company’s principal focus during the year ended December 31, 2019 was its initial public offering. Exploration activities on the Golden Lion property during the year and quarter were, in consequence, limited. Nonetheless the Company completed in August a helicopter-supported program of rock and soil
5
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
geochemical sampling, geological mapping, and a test geophysical survey, basing from Black Lake Lodge, approximately 35 kms to the south. Initial environmental planning, including preparation of a Wildlife Management Plan and an Archaeological Overview Assessment, was also carried out. Assays from this program were released following year’s end (see news, February 10, 2020), and returned very strong values, including highs to 14.95 g/t gold in sequential soil samples, and 13,406 g/t silver and 15.9% copper in selected rock samples. Although restricted in budget and scope, the program was successful in both extending Au-Ag-Cu geochemical anomalies previously defined by the Company and discovering important new ones. The results further highlight the discovery potential at the GL1 and GL2 target areas, which the Company intends to drill, at the Board’s discretion, in the approaching 2020 field season. Post year end, the Company received a multi-year exploration and drilling permit for the Snoball property, and is now well positioned to execute its plans.
During the year management also engaged in a concerted way with the Tahltan and Kwadacha First Nations, within whose traditional territories the Golden Lion property is located. These efforts resulted in positive working relationships and, early in the new fiscal year, the signing of a Communications and Engagement Agreement with the Tahltan Central Government. Management also anticipates negotiating an Exploration Agreement with Kwadacha First Nation at some point in 2020.
Holy Cross Property
The road accessible, 1,872-hectare Holy Cross property is located in central British Columbia, Canada, approximately 30 kilometres south of the community of Fraser Lake, and north of the Blackwater gold deposit. A 100% ownership interest in the property was acquired effective April 5, 2016, further to the Acquisition Agreement described above, details of which may be found in the Company’s prospectus dated September 16, 2019, copies of which are available at www.sedar.com. A 0.5% NSR royalty payable to the property vendor on any future production is the sole remaining corporate obligation in relation thereto.
The primary target type on the Holy Cross property is high-grade and/or bulk-tonnage intrusion-related gold+/-silver+/-copper. The property is predominantly underlain by volcanic rocks of the Middle Jurassic to Eocene age Ootsa Group, which have been intruded by a large Jurassic age quartz monzonite stock on the northern portion of the tenures.
Historically mapped, trenched, sampled and surveyed by Noranda (1987-89) with encouraging results (e.g. 1 gram of gold per tonne (g/t Au) over 8.5 metres in chips, and 24.02 g/t Au and 20.8 g/t Ag from grabs), but never drilled, Holy Cross hosts a robust siliceous alteration system carrying locally elevated gold, copper and silver values over a large area, with attractive coincident geochemical-geophysical anomalies. Part of the property’s allure is the heavy glacial drift coverage, which has camouflaged the underlying bedrock.
Recent Exploration Activities on the Property
The Company’s principal focus during the year ended December 31, 2019 was its initial public offering. Nonetheless, in September the Company staked an additional 1,912 hectares of claims at Holy Cross, bringing the property total to 3,784 hectares, and also completed a helicopter magnetometer survey over the entire land package. Results of this work are being assessed and will be factored into future exploration planning.
Spanish Lake Property
The road accessible, 1,573-hectare Spanish Lake property is located in the Cariboo Mining District of central British Columbia, Canada, some 80 kilometres east-northeast of Williams Lake and approximately 8 kilometres southeast along strike from the > 5 million ounce Spanish Mountain gold deposit. A 100% ownership interest in the property was acquired effective April 5, 2016, further to the Acquisition Agreement described above, details of which may be found in the Company’s prospectus dated September 16, 2019, copies of which are available at www.sedar.com. A 0.5% NSR royalty payable to the property vendor on any future production is the sole remaining corporate obligation in relation thereto.
6
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
The Spanish Lake property has excellent potential to host a sediment-hosted vein gold system akin to that at the nearby Spanish Mountain deposit. Drilling by previous operator Dajin Resources in 2011 (12 NQ2 diametre core holes for 2,484 metres) intercepted long intervals of low-grade Spanish Mountain-style gold (i.e. sediment-hosted, with abundant microstructures and veining). Best results were achieved from the most southerly group of holes, with AD1-2011-7, 8, 11 and 12 each ending in mineralization, and the two southwestern-most holes AD1-2011-11 and 12 returning long intervals (92 and 85.2 metres respectively) of very low-grade gold mineralization. True thicknesses are not known. The results suggest that only the fringes of a newly discovered zone have been tested. Facing a major industry downturn, Dajin Resources walked away from the property without filing an assessment report. In 2016 Evergold acquired the property, expanded its size and, in 2017, completed a report on the 2011 work.
As grade and intersection lengths increase to the south and west in the southern 2011 drill pattern, a future program of IP and auger soil geochemical sampling target has been proposed to target this under-explored, till-covered area. If results of this work are found to be encouraging, drilling would follow.
Recent Exploration Activities on the Property
The Company’s principal focus during the year ended December 31, 2019 was its initial public offering. Nonetheless a small program of reconnaissance geochemical sampling was conducted on the Spanish Lake property during July. Results of this work are being assessed and will be factored into future exploration planning.
Marketing Activities
Following a successful IPO on October 4, 2019, management embarked upon a concerted effort to broaden awareness of the Company and its exploration plans. This involved the participation in selected industry investor shows, including the Vancouver Metals Investor Forum (November), the Vancouver Resource Investment Conference and Roundup events (January), the Toronto Metals Investor Forum (February), and PDAC in Toronto (early March), along with the production of investor-oriented videos and selected on-line and print advertising initiatives. In support of these marketing and promotional initiatives the Company retained Peak Investor Marketing Corp. of Vancouver. Management anticipates a continuing focus on marketing and promotion well into the new fiscal year, as it seeks to support the Company in the face of difficult market conditions, and broadens awareness of its plans and positive exploration prospects in the lead up to the launch of Phase 1 drilling programs on both the Snoball and Golden Lion properties.
Overall Performance and Outlook
The Company is a loss-making enterprise focused on the business of exploring its four early-stage properties for minerals, none of which yet host discoveries, NI 43-101 compliant mineral resources, nor any zones of mineralization that might potentially become economic to mine. As such, the Company has no prospect of generating revenues, and will continue to spend money to explore its property assets, and in consequence continue to generate losses, for the foreseeable future. While the exploration process is underway, the Company’s primary source of funds is and shall continue to be derived from the issuance of equity, in addition to whatever interest it may earn from cash balances and the investment of that portion of the proceeds of such equity issuances not otherwise immediately required for exploration purposes, in short-term investments and money market instruments.
The Company’s ability to successfully attract investors and raise money for its plans is predicated upon a combination of factors, including: 1) having strong properties with significant discovery potential that appeal to investors, 2) having management with a track record of success who can effectively promote those properties to the market, 3) having a sound capital structure, 4) offering specific terms on particular financings that are reasonable and offer investors reasonable prospects for gain, and 5) the absence of major economic calamity, reasonably strong metal prices, and a generally positive risk appetite in broader markets at the time the Company seeks to raise additional funds.
7
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Notwithstanding the varied challenges, the Company has to date been successful in its efforts to raise capital, most recently with the closing of its $3.45 million IPO (Oct. 4, 2019), one of the larger IPOs in Canada in 2019, and believes it can continue to successfully raise capital in the future. The money raised since the Company was incorporated in 2015 has been carefully spent on exploration activities designed to add value to its properties. This added value has come in the form of the development of multiple drillready targets on its properties, each supported by strong geochemistry indicative of metal in the ground, targets that for the most part did not exist before and, with reference in particular to the Snoball and Golden Lion properties, are believed to offer strong, near-term discovery potential.
Overall performance to date is therefore considered robust: capital raised in the past as a private company has been largely deployed into the ground, to good effect in terms of generating specific, new, drill-ready targets. Largely predicated on the merit of these targets, the Company achieved a successful IPO in
October, 2019. In the few short months following closing of the IPO, marketing has also proven effective. Liquidity in the Company’s stock has improved markedly, with attendant gains in daily traded volumes and number of trades, and generally positive momentum in the share price.
Selected Annual Financial Information
The following is a summary of exploration expenditures by property during 2019:
| Expense Category | Snoball | Golden Lion | Holy Cross | Spanish Mountain |
Total $ |
|---|---|---|---|---|---|
| $ | $ | $ | $ | ||
| Geochemical | 316 | 17,153 | 4,480 | 10,876 | 32,825 |
| Geological | 23,929 | 64,280 | 5,772 | 5,510 | 99,491 |
| Environmental | 14,774 | 14,990 | 1,841 | - | 31,605 |
| Camp & lodging | 8,877 | 18,752 | 1,469 | 2,676 | 31,774 |
| Aircraft | 57,810 | 62,837 | 29,335 | - | 149,982 |
| Permitting | - | 72 | 195 | - | 267 |
| Drilling | 57,225 | 375 | - | - | 57,600 |
| Geophysical | - | 56,414 | 11,000 | - | 67,414 |
| Vehicles & transport | 3,499 | 842 | 215 | 1,450 | 6,006 |
| Fuel | 1,262 | 171 | 132 | 579 | 2,144 |
| Field travel | - | 15,710 | - | - | 15,710 |
| Miscellaneous | 41,243 | 37,521 | 4,439 | 704 | 83,927 |
| Total | 208,955 | 289,117 |
58,878 | 21,795 | 578,745 |
The following is a summary of exploration expenditures by property during 2018:
| Expense Category | Snoball | Golden Lion | Holy Cross |
Spanish Mountain |
Total $ |
|---|---|---|---|---|---|
| $ | $ |
$ |
$ |
||
| Geochemical | 3,820 | 38,410 |
- | - | 42,230 |
| Geological | 18,988 | 27,900 |
4,400 |
- | 51,287 |
| Aircraft | 7,501 | 10,857 | - | 18,358 | |
| Miscellaneous | - | 550 | - |
69 | 619 |
| Total | 30,309 | 77,717 |
4,400 |
69 |
112,494 |
8
Evergold Corp. Management’s Discussion and Analysis
==> picture [167 x 43] intentionally omitted <==
Years Ended December 31, 2019 and 2018
| Fiscal Year | For the year and as at | For the year and as at |
|---|---|---|
December 31, 2019 |
December 31, 2018 |
|
| $ | $ | |
| Operatingexpenses | 1,203,266 | 134,662 |
| Loss from operations | 1,203,266 | 134,662 |
| Net loss for theperiod | 1,203,266 | 134,662 |
| Lossper share – basic and diluted | 0.08 | 0.01 |
| Total assets | 2,417,476 | 339,030 |
| Total liabilities | 87,595 | 52,645 |
Results of Operations
| Results of Operations | ||||
|---|---|---|---|---|
| Three months ended December 31 |
Years ended December 31 |
|||
| 2019 | 2018 | 2019 | 2018 | |
| $ | $ | $ | $ | |
| Operating expenses | ||||
| Exploration expenditures | 75,068 | 35,698 |
578,745 | 112,494 |
| Management and consultingfees | 51,000 | 3,000 |
184,488 |
3,000 |
| Share-based compensation | 123,231 | - |
123,231 | - |
| Professional fees | 7,255 | 3,750 |
142,952 |
15,000 |
| General and administrative | 86,067 | 844 |
173,850 |
4,168 |
| Loss from operations | (342,621) | (43,292) | (1,203,266) | (134,662) |
| Interest income | - | - | - | - |
| Income before taxes | (342,621) | (43,292) | (1,203,266) |
(134,662) |
| Tax expense | - | - | - | - |
| Loss and comprehensive loss for the period |
(342,621) | (43,292) | (1,203,266) |
(134,662) |
Total operating expenses and net loss were $1,203,266 for the year ended December 31, 2019 compared to $134,662 in the comparative period in 2018, an increase of $1,068,604. All categories of operating expenses saw increases resulting from a combination of heightened exploration activity, and the Company’s drive to prepare for and complete (October 4, 2019) its initial public offering.
Exploration expenses totaled $578,745 for the year ended December 31, 2019, compared to $112,494 in the prior year period. Exploration expenditures on the Company’s Snoball property totaled $208,955 for 2019 and included $14,774 spent on environmental and permitting (2018 - $nil), $23,929 spent on geological (2018 - $18,988), $57,225 spent on drilling (construction of drill pads) (2018 - $nil), and $57,810 spent on aircraft used in support of the drill pad construction (2018 - $7,501). Expenditures on the Golden Lion property totaled $289,117 for 2019 (2018 - $77,717) and included $14,990 (2018 - $nil) spent on environmental and permitting, $64,280 (2018 - $27,900) spent on geological expenses (primarily field program planning, management, mapping, and data interpretation and evaluation), $62,837 spent on aircraft used in support of field operations (2018 - $10,857), $18,752 spent on camp and lodging (2018 – $nil), and $56,414 spent on geophysical (2018 - $nil). Exploration expenditures on the Company’s Holy Cross property were $58,878 for 2019 (2018 - $4,400), reflecting $11,000 spent on a geophysical (aeromagnetic) survey (2018 – $nil) and an associated $29,335 (2018 - $nil) spent on aircraft (helicopter) utilized for that survey. Spanish Lake expenditures were $21,795 for 2019 compared to $69 in the prior year.
9
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
The Company’s drive toward and successful emergence as a public issuer resulted in increases including $184,488 spent in 2019 on management and consulting fees (2018 - $3,000) (CEO and CFO combined), $142,952 spent in 2019 on professional fees (2018 - $15,000) (primarily reflecting an increase in IPO-related legal expenses ($119,793 spent in 2019 versus $nil in 2018)), and $173,850 spent in 2019 on general and administrative expenses (2018 - $4,168) (primarily reflecting increased marketing and promotional expenses ($96,028 spent in 2019 versus $nil in 2018), stock exchange fees ($48,474 in 2019 versus $nil in 2018) and transfer agent fees ($11,920 in 2019 versus $4,160 in 2018)). Operating expenses also included non-cash expenditures of $123,231 (2018 - $nil) related to share-based compensation as a result of the issuance of stock options to directors, officers, and consultants.
The following table sets out selected quarterly results of the Company for the eight quarters prior to the effective date of this report. The information contained herein is drawn from the unaudited interim financial statements of the Company.
| Calendar Year | 2019 | 2019 | 2019 | 2019 |
|---|---|---|---|---|
| Quarter | December 31 | September 30 | June 30 | March 31 |
| Revenue | $nil | $nil | $nil | $nil |
| Workingcapital | 2,272,881 | (559,260) | 4,484 | 210,697 |
| Operatingexpenses | 342,621 | 603,744 | 181,213 | 75,688 |
| Net loss | 342,621 | 603,744 | 181,213 | 75,688 |
| Net lossper share(1) | 0.01 | 0.06 | 0.02 | 0.01 |
| Calendar Year | 2018 | 2018 | 2018 | 2018 |
| Quarter | December 31 | September 30 | June 30 | March 31 |
| Revenue | $nil | $nil | $nil | $nil |
| Workingcapital | 286,385 | 329,677 | 385,806 | 415,485 |
| Operatingexpenses | 43,292 | 56,129 | 29,680 | 5,561 |
| Net loss | 43,292 | 56,129 | 29,680 | 5,561 |
| Net lossper share(1) | 0.00 | 0.01 | 0.00 | 0.00 |
Notes:
(1) Net loss per share on a diluted basis is the same as basic net loss per share as all factors which were considered in the calculation are anti-dilutive.
Operations to date have established and/or enhanced the technical foundation for the proposed exploration programs for the Snoball and Golden Lion properties by defining, through geological, geochemical, and geophysical studies, specific drill targets and allowing for a scoping of metrics in terms of the potential number of holes and metres to be drilled. To date, the Company has spent $488,316 on the Snoball property, and $478,368 on the Golden Lion property to prepare for the initial drill programs on each.
10
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Related Party Transactions
Evergold has entered into the following transactions with related parties:
| For the years ended Amount payable as at |
||
| December 31, December 31, December 31, |
December 31, | |
| 2019 2018 2019 |
2018 |
|
| $ $ $ |
$ |
|
| Consulting fees paid or accrued to the Company’s Chief Executive Officer |
||
| 137,500 - 14,125 |
702 |
|
| Exploration expenses paid or accrued to C.J. Greig & Associates Ltd., an exploration services company controlled by a former Director or spouse of a current Director(1) |
||
| 236,378 76,696 15,227 |
32,604 |
|
| Consulting fees paid or accrued to the Company’s Chief Financial Officer |
||
| 46,500 3,000 5,085 |
3,390 |
|
| Totals | ||
| 420,378 79,696 34,437 |
36,696 |
During the year ended December 31, 2019, the Company expensed $113,915 in share-based compensation for related to options granted to Officers and Directors of the Company.
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 directors (executive or non-executive) of the Company.
- (1) As described in Note 5 to the Financial Statements, the 2016 Agreement to acquire the Company’s four exploration properties was entered into with C.J. Greig Holdings Ltd., a company owned and controlled by a then-director and officer of the Company, C.J. (“Charlie”) Greig. Charlie Greig stepped down as a director of the Company on June 25, 2019, but continues to serve as senior technical advisor to the Company, and his spouse Bernice Greig as a Company director. C.J. Greig Holdings Ltd. continues to hold four 0.5% NSRs, one for each of the Company’s four mineral properties, that resulted from the Agreement. C.J. Greig & Associates Ltd. continues to provide under contract the services of multiple geologists to the Company, including the Company’s Vice President, Exploration, Andrew Mitchell.
Liquidity, Capital Resources, and Outlook
The Company is an exploration-stage company and does not generate revenues. As such, it finances all of its operations and the exploration of its mineral properties entirely through the issuance of share capital. Although Evergold has to date been successful in its attempts to raise capital, there can be no assurance that its future efforts will likewise be successful. The mineral exploration business is high risk and the vast majority of exploration projects on which capital is spent will not result in producing mines. The success of future financings will depend on a variety of factors including geological success – i.e. obtaining superior results from exploration; a positive investment climate encompassing strong metal prices, solid stock market conditions, and a “risk-on” appetite among investors; and the Company’s track record and its management’s ability and experience. If such financing is unavailable, Evergold may be unable to retain its mineral interests and execute its business plans.
11
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
As at December 31, 2019, the Company had working capital of $2,272,881 compared to $286,385 at December 31, 2018. Based on the scale of currently anticipated exploration programs and ability to execute, both of which may change, the Company’s management believes it has sufficient resources to maintain operations for 18 months.
On October 4, 2019, the Company closed its Initial Public Offering (IPO) of 17,250,000 units at a purchase price of $0.20 per unit for gross proceeds of $3,450,000. Each unit consisted of one common share of the Company and one half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share for a period of 24 months from closing at a price of $0.25. In connection with the offering, the Company paid the agents a commission of $241,500 equal to 7% of the gross proceeds of the offering, and issued to the agents 1,207,500 common share purchase warrants entitling the agents to purchase one common share at a price of $0.20 per common share until October 4, 2021.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as at December 31, 2019.
Critical Accounting Estimates and Policies
The Company’s significant accounting policies and the adoption of new accounting policies are disclosed in Note 3 to the interim financial statements prepared for the year ended December 31, 2019.
Critical accounting estimates used in the preparation of the financial statements include the Company’s estimate of the recoverable value of its mineral exploration properties and related deferred exploration and evaluation expenditures, as well as the value of stock-based compensation. These estimates involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control.
The factors affecting stock-based compensation include estimates of when stock options and compensation warrants might be exercised and stock price volatility. The timing of exercise of options is out of the Company’s control and will depend on a variety of factors, including the market value of the Company’s shares and the financial objectives of the share-based instrument holders. The Company used historical data to determine volatility in accordance with the Black-Scholes option pricing model. However, the future volatility is uncertain and the model has its limitations.
The recoverability of the recorded value of the Company’s mineral exploration properties and associated deferred exploration and evaluation expenses is based on current market conditions for metals and minerals, underlying mineral resources associated with the properties, and future costs that may be required for the ultimate realization of value through mining operations or by sale. The Company operates in an industry that is dependent upon and subject to an array of factors and risks including environmental, legal and political risks, the existence of economically recoverable reserves, and the ability of the Company to obtain necessary financing to complete exploration and development, and/or achieve profitable production, or realize value through the disposition of property assets.
12
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Commitments and Contingencies
Environmental Contingencies
The Company’s exploration activities are subject to various provincial and federal laws and regulations governing the protection of archaeological heritage and the environment. Prior to the execution of any exploration programs involving site disturbance, such as on-site camps and drilling operations, application must be made to the appropriate B.C. government ministries for an exploration permit. Permit applications must provide specific detail with regard to the Company’s plans including, among other things, the nature and estimated total area of surface disturbance, impacts on wildlife, surveys for cultural artifacts, plans for waste disposal, and use of locally-sourced water, etc. Prior to the start of work, reclamation bonds must be posted with the B.C. Government to cover remediation of disturbed sites following program completion. As of the date of writing the Company has posted a $25,000 reclamation bond covering anticipated work on the Snoball property, a $27,000 reclamation bond covering anticipated work on the Golden Lion property, and a $5,000 reclamation bond covering anticipated work on the Holy Cross property, for a combined total of $57,000.
Management Contract
The Company has entered into an agreement (the “Agreement”) with Kevin Keough (the “Executive”) to provide services to the Company in the general capacity of President and CEO and to undertake the duties and exercise the powers associated with this role. Under the terms of the Agreement, the Executive is contracted by the Company for an indefinite term, commencing as of February 1, 2019. The Company will pay the Executive $150,000 per annum. Upon the occurrence of a change of control or termination without cause, the Agreement requires additional contingent payments equal to 12 months of salary. As a triggering event has not taken place, the contingent payments have not been reflected in these financial statements.
Financial Instruments & Risks
The Company’s financial instruments consist of cash, other receivables, reclamation bonds, trade and other payables, accrued liabilities and amounts due to related parties.
The Company’s activities expose it to a variety of financial risks: liquidity risk, market risk (including interest rate, foreign exchange rate and price risk) and credit risk.
Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.
Credit Risk
The Company's credit risk is primarily attributable to cash and cash equivalents and receivables included in amounts receivable and prepaid expenses. The Company has no significant concentration of credit risk arising from operations. Financial instruments included in amounts receivable and prepaid expenses consist of goods and services tax due from the Federal Government of Canada. Accordingly, management believes that the credit risk associated with these financial instruments is low.
13
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Liquidity Risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient capital on hand to meet liabilities when due. The Company's financial liabilities generally have contractual maturities of less than 30 days and are subject to normal trade terms. As at December 31, 2019, the Company had a cash and cash equivalents balance of $2,247,406 (December 31, 2018 - $176,394) to settle current liabilities of $87,594 (December 31, 2018 - $52,645). On October 4, 2019, the Company completed its planned initial public offering for gross proceeds of $3.45 million, which has provided funds for the execution of Evergold’s business plan as detailed in its IPO prospectus, which is largely focused on the drilling of both the Snoball and Golden Lion properties in 2020. The Company’s ability to continue as a going concern beyond the 2020 field season will be dependent upon the success of the anticipated Snoball and Golden Lion drill programs and, building off any such success, the Company’s ability to raise additional capital from investors. Based on the scale of currently anticipated exploration programs and ability to execute, both of which may change, the Company’s management believes it has sufficient resources to maintain operations for 18 months.
Interest Rate Risk
The Company has cash, cash equivalents and short-term investment balances subject to interest. Management does not believe the Company is exposed to significant interest rate risk.
Foreign Currency Risk
The Company's functional currency is the Canadian dollar and virtually all purchases are transacted in Canadian dollars. The Company is therefore not exposed to foreign exchange risk.
Price Risk
Though not generally impacting day-to-day operations, the Company is exposed to price risk arising from fluctuating commodity prices, with lower metal prices in particular having the potential to negatively impact the prospect for successful future financings and the viability of proposed projects. Under strong economic conditions, price inflation can also negatively impact the viability of planned exploration programs and project development plans. Accordingly, the Company monitors commodity prices, economic conditions and rates of inflation on a regular basis, to keep appraised of trends.
14
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Capital Management
When managing capital, the Company’s foremost objective is to generate optimal returns for shareholders. This requires first ensuring that Evergold continues as a going concern and, second, that capital resources are deployed cost-effectively into only those properties and those specific exploration targets and activities, which management believes have the greatest potential to generate positive returns for shareholders. As the Company is essentially a capital pool established to carry out high-risk / potential high reward exploration, with no short or medium-term prospect whatsoever of generating revenues or profits, management seeks instead to deliver positive returns for shareholders through the share price appreciation and capital gains opportunities that usually go hand-in-hand with significant new mineral discoveries, and the further advancement of those discoveries. Management seeks to have sufficient capital on hand to achieve its near-term exploration objectives and to advance discoveries when achieved, as expeditiously as possible. In doing so, it seeks a balance between minimizing shareholder dilution and maintaining an attractive capital structure on the one hand, and the need to achieve and advance discoveries of merit on the other. Management cannot deliver sustainable shareholder returns, in the absence of discoveries of merit.
Given the nature of the business, the Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management team to generate discoveries and attendant share price appreciation. The Company considers its capital to be equity, which is comprised of capital stock, share purchase warrants, broker compensation warrants, contributed surplus and deficit.
The Company’s four properties are all in the exploration stage and the Company has neither revenues nor profits. As such the Company is wholly dependent upon external financing to fund its planned exploration programs and administration costs. The Company will therefore spend its existing working capital and raise additional amounts when conditions permit it to do so.
Management has chosen to mitigate the risk and uncertainty associated with raising additional capital in current economic conditions by:
-
(i) ensuring cost-effective deployment of existing funds, generally through competitive bidding;
-
(ii) avoiding project “overstretch” – i.e. too many properties and projects, and too many commitments; (iii) minimizing discretionary disbursements;
-
(iv) reducing or eliminating exploration expenditures that are of limited value;
-
(v) maintaining a liquidity cushion in order to address any potential disruptions or industry downturns; and
-
(vi) exploring alternative sources of liquidity.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is appropriate. The Company is not presently subject to any capital requirements imposed by a regulator or lending institution body.
Disclosure of Outstanding Share Data (as at March 31, 2020)
On October 4, 2019, the Company closed its Initial Public Offering (IPO) of 17,250,000 units at a purchase price of $0.20 per unit for gross proceeds of $3,450,000. Each unit consisted of one common share of the Company and one half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share for a period of 24 months from closing at a price of $0.25. In connection with the offering, the Company paid the agents a commission of $241,500 equal to 7% of the gross proceeds of the offering, and issued to the agents 1,207,500 common share purchase warrants entitling the agents to purchase one common share at a price of $0.20 per common share until October 4, 2021.
15
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
The Company has adopted a stock option plan (the “Option Plan”) for directors, officers, employees and consultants of the Company. Under the Option Plan, the Company may grant non-transferable options to purchase common shares of the Company for a period of up to ten years from the date of grant. The maximum number of common shares reserved for issuance under the Option Plan together with any common shares reserved for issuance pursuant to any other stock options may not exceed 10% of the issued and outstanding common shares of the Company.
The exercise price of options is determined by the Board of Directors at the time of grant and cannot be less than the price permitted by any exchange on which the Company’s common shares are listed or any regulatory body having jurisdiction. Currently, the TSX Venture Exchange (the “TSX-V”) requires that the exercise price of the options must be equal to or greater than the Discounted Market Price (as defined in the policies of the TSX-V). The exercise price of options is solely payable in cash. The Board of Directors has the discretion to determine the term and vesting provisions of any options granted under the Option Plan at the time of grant subject to the policies of the TSX-V.
Concurrent with the closing of the IPO, the Company granted a total of 2,380,000 options to directors, officers and consultants, to purchase common shares of the Company.
The following is a description of the outstanding equity securities and convertible securities issued by the Company:
Common Shares
Authorized: Unlimited number of common shares. Outstanding: 27,637,814 common shares.
Warrants
A summary of the Company’s warrants outstanding and exercisable at March 31, 2020 is presented below:
| Exercise price | Warrants outstanding | Warrants exercisable | Expiry date |
|---|---|---|---|
| $0.12 | 2,047,075 | 2,047,075 | May 1, 2022 |
| $0.18 | 1,099,500 | 1,099,500 | July 12, 2021 |
| $0.20 | 1,191,153 | 1,191,153 | October 4, 2021 |
| $0.25 | 8,625,000 | 8,625,000 | October 4, 2021 |
| Total | 12,962,728 | 12,962,728 |
Stock Options
A summary of the Company’s stock options outstanding and exercisable at March 31, 2020 is presented below:
| Exercise price | Options | outstanding | Options exercisable | Expiry date |
|---|---|---|---|---|
| $0.20 | 859,997 | 759,997 | October 4, 2024 | |
| $0.25 | 760,000 | - | October 4, 2025 | |
| $0.30 | 760,003 | - | October 4, 2026 | |
| Total | 2,380,000 | 759,997 |
16
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Risks and Uncertainties
The Company’s securities should be considered high risk and highly speculative due to the nature of its business.
Capitalization and Commercial Viability Risks
The Company will require additional funds to further explore and, conditional upon exploration success, potentially develop and mine its properties. The Company has limited financial resources, and there is no assurance that additional funding will be available to it to carry out the completion of all proposed activities, for additional exploration, or for financing the high-cost development typically required to place a property into commercial production. Although the Company has in the past been successful in obtaining financing through the sale of equity securities, there can be no assurance that it will in the future be able to obtain adequate financing on acceptable terms. Failure to obtain additional financing could result in the delay or indefinite postponement of further exploration and development of its properties, and the loss of part or all of its ownership position in its properties.
Global Financial Condition Risks
Global financial conditions have in recent years been, and continue to be, subject to heightened instability and increased volatility. Access to public capital markets for junior exploration companies has at times been restricted and/or nearly non-existent. These factors could continue to negatively impact the ability of the Company to in future obtain equity or debt financing on terms favourable to the Company, if at all.
Exploration and Development Risks
Mineral exploration and development entails a very high degree of risk. Very few properties which are explored, ultimately develop into producing mines.
The Company’s properties do not presently contain mineral “resources” or “reserves”, as those terms are defined in National Instrument 43-101, nor is there any guarantee that they ever shall. The process of confirming, or alternatively disproving, the presence of resources or reserves on the Company’s properties will require following an exploration and development pathway comprised of sequential steps, the execution of each of which is fraught with risk and predicated on successful results from the step immediately prior to it. Failure at any step generally, though not always, puts an end to exploration or development activities. As the exploration and development pathway is followed, the metal or mineral content of the area under exploration is quantified and assessed to an increasing degree of certainty, generally by increasing the density of drilling and the amount of sampling and assaying, coupled with volume and grade modelling. With increasing certainty comes, initially, “Inferred” level resources, followed by resources in the “Indicated” and “Measured” categories, none of which have demonstrated economic viability. Only through the later application of technical (metallurgical, mining, processing, environmental etc.) and economic parameters appropriate to the resources under study, and the completion of pre-feasibility and ultimately, feasibility studies by qualified geologists, engineers and geoscientists, can resources potentially be converted to “reserves” (“ore”), which by definition would be potentially economic to mine and process, under the technical and economic criteria utilized in the feasibility study or studies applied to them. These steps and activities are costly.
Should ore reserves ultimately be demonstrated to exist on the Company’s properties, a positive decision to take the ore reserves thus demonstrated to commercial production would not be a given. In addition to the steps and studies detailed above, a positive production decision would require environmental approvals, the securing of various permits, and consideration and evaluation of additional factors including, but not limited to: (1) the cost of construction of production facilities; (2) the availability and cost of financing; (3) anticipated ongoing costs of production; (4) market prices for the minerals to be produced; (5) environmental compliance regulations and restraints (including potential environmental liabilities associated with historical exploration activities); and (6) the political climate and/or governmental regulation
17
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
and control.
The ability of the Company to profit from the sale of any eventual production from any of the Company’s properties, or the sale of the Company at any stage preceding production, will be subject to the prevailing
conditions in the marketplace at the time of sale. Many of these factors are beyond the control of the Company and therefore represent a market risk which could impact the long-term viability of the Company and its operations.
Title Risks
While the Company has performed its own due diligence with respect to title of its four properties, this should not be construed as a guarantee of title. The properties may be subject to prior unregistered agreements, and title may be affected by undetected defects. Until any such competing interests have been determined, there can be no assurance as to the validity of title of the properties.
First Nation Risks
The nature and extent of First Nation rights and title remains the subject of active debate, claims, litigation and uncertainty in Canada including with respect to relations between First Nation authorities and federal, provincial and territorial authorities. There can be no guarantee that such claims and uncertainties will not cause permitting delays, unexpected interruptions or additional costs for the Company’s projects.
Infrastructure Risks
Exploration, development, mining and processing activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supplies are important determinants which affect access to properties; the efficiency, timeliness and type of exploration activities carried out; the ability to develop prospects, development capital costs, and ongoing operating expenses. The Company’s properties lie in remote areas with limited infrastructure. In addition, weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the Company’s operations, financial condition and results.
Competition Risks
The exploration and mining industry is highly competitive, both for mineral properties and key personnel. Many of the Company’s competitors for the acquisition, exploration and development of mineral properties, and for capital to finance such activities, will have greater financial and personnel resources available to them than the Company.
Environmental Risks
All phases of the exploration and mining business present environmental risks and hazards and are subject to environmental regulation pursuant to provincial, federal and, on occasion, municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with exploration and mining operations. The legislation also requires that exploration and mine sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner resulting in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations.
18
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, 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 exploration and mining operations may be required to compensate those suffering loss or damage by reason of the exploration and mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
Amendments to current laws, regulations and permits governing operations and activities of mineral resource companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at any future producing properties or require abandonment or delays in the development of new mining properties.
Reliance on Key Employee Risks
The success of the Company will be largely dependent upon the performance of its management and key employees. Potential investors should realize that they are relying upon the continued good health, experience, judgment, discretion, integrity and good faith of the management of the Company. The Company has no backup for any of its key people, the loss of any one of whom, whether due to poor health or loss to competitors, could adversely affect the Company’s ability to execute its business plans. The Company does not maintain life insurance policies in respect of its key personnel.
Permitting and Licensing Risks
The exploration operations of the Company require licenses and permits from government authorities which are granted subject to various conditions and must be renewed from time to time. There can be no assurance that the Company will be able to obtain, or once obtained renew, the licenses and permits required to carry out exploration, development and mining operations at its projects.
No History of Earnings Risks
The Company has no history of earnings, and there is no assurance that any of its mineral properties will generate earnings or provide a return on investment in the future. The Company expects to incur losses and negative operating cash flow for the foreseeable future as it conducts its exploration activities on its properties. The Company has not paid dividends in the past and has no plans to pay dividends for the foreseeable future.
Negative Operating Cash Flow Risks
Since inception, the Company has had negative operating cash flow and incurred losses. The negative operating cash flow and losses are expected to continue for the foreseeable future. The Company may never achieve positive operating cash flow.
Uninsurable Risks
In the course of exploration and development of mineral properties, several risks and, in particular, unexpected or unusual geological or operating conditions, may occur. It is often not possible to insure against such risks and, even where coverage for particular risks is available, the Company may decide not to take out insurance against such risks because of high premiums or for other reasons. Should liabilities arise in consequence of such uninsured risks, they could potentially reduce or eliminate any future profitability and result in an increase in costs and a decline in the value of the Company’s securities.
The Company is not insured against most environmental risks. Insurance against environmental risks (including potential liability for pollution or other hazards resulting from exploration and production) has not
19
Evergold Corp. Management’s Discussion and Analysis Years Ended December 31, 2019 and 2018
==> picture [167 x 43] intentionally omitted <==
been generally available to companies within the industry. Should the Company become subject to environmental liabilities, the payment of such liabilities could reduce or eliminate its available funds or result in bankruptcy.
Litigation Risks
Litigation risks to the Company may include, but are not limited to, contesting exploration, development or regulatory approvals, traditional title claims, land tenure disputes, environmental claims, and occupational health and safety claims.
Contractual Risks
The Company will become a party to various contracts and it is always possible that contracts to which it is a party will not be adequately or fully performed by other contracting parties.
Novel Coronavirus (“COVID-19”)
The Company’s plans and operations may be adversely affected by the sudden emergence of the COVID19 virus pandemic. At the time of writing this pandemic has already resulted in international travel bans, interprovincial travel restrictions, the forced closure of most suppliers and businesses, the quarantining and self-isolation of those who have or may have contracted the virus, and the widespread adoption by the remainder of the population of physical / social distancing measures. Fear of contagion is widespread in many communities, in particular isolated northern communities where elders are vulnerable due to poor health and lack of ready access to medical care. Some of these communities are now preventing outsiders from entering. Should these conditions – travel bans, loss of suppliers, and lack of personnel due to illness - continue through a significant part of the new fiscal year, it is likely that the Company will not be able to execute its exploration plans, either in whole or in part. Moreover, the economic downturn that is underway in consequence of the pandemic and the resulting volatility in stock and financial markets may make it difficult or impossible for the Company to raise additional capital going forward.
Disclosure of Internal Controls
Management has established processes to provide them with sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the financial statements and (ii) the financial statements fairly present in all material respects the financial condition, results of operations and cash flow of the Company, as of the date of and for the periods presented.
Additional Information
Additional information relating to the Company may be obtained from www.evergoldcorp.ca or the Company profile at www.sedar.com.
20