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Midnight Sun Mining Corp. Audit Report / Information 2024
46158_rns_2025-04-17_9085d07a-c3cd-473c-ab2e-1a15aefb5fdb.pdf
Audit Report / Information
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MIDNIGHT SUN
Midnight Sun Mining Corp.
Consolidated Financial Statements
For the year ended December 31, 2024
(Expressed in Canadian Dollars)
DAVIDSON & COMPANY LLP
Chartered Professional Accountants
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Midnight Sun Mining Corp.
Opinion
We have audited the accompanying consolidated financial statements of Midnight Sun Mining Corp. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2024 and 2023 and the consolidated statements of operations and comprehensive loss, changes in shareholders' equity, and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 of the consolidated financial statements, which indicates during the year ended December 31, 2024, and the year ended December 31, 2023, the Company experienced operating losses before income taxes and negative operating cash flows with the operations of the Company having been primarily funded by the issuance of share capital. As stated in Note 2, these events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our auditor's report.
Assessment of Impairment Indicators of Exploration and Evaluation Assets ("E&E Assets")
As described in Note 7 to the consolidated financial statements, the carrying amount of the Company's E&E Assets was $12,957,223 as of December 31, 2024. As more fully described in Notes 2 and 3 to the consolidated financial statements, management assesses E&E Assets for indicators of impairment at each reporting period.
A member of Nexia International
1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Davidson-co.com
The principal considerations for our determination that the assessment of impairment indicators of the E&E Assets is a key audit matter are that there was judgment by management when assessing whether there were indicators of impairment for the E&E Assets, specifically related to the assets' carrying amount which is impacted by the Company's intent and ability to continue to explore and evaluate these assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of indicators of impairment that could give rise to the requirement to prepare an estimate of the recoverable amount of the E&E Assets.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:
- Evaluating management's assessment of impairment indicators.
- Evaluating the intent for the E&E Assets through discussion and communication with management.
- Reviewing the Company's recent expenditure activity.
- Assessing compliance with agreements and expenditure requirements including reviewing earn-in agreements.
- Assessing the Company's right to explore E&E Assets.
- Obtaining, on a test basis, confirmation of title to ensure mineral rights underlying the E&E Assets are in good standing.
Other Information
Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Stephen Hawkshaw.
Vancouver, Canada
April 17, 2025
Chartered Professional Accountants
Midnight Sun Mining Corp.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
| As At | December 31, 2024 | December 31, 2023 |
|---|---|---|
| ASSETS | ||
| Current | ||
| Cash | $ 5,310,552 | $ 23,883 |
| Advances and deposits | 214,970 | 49,576 |
| Short-term investments (note 5) | 2,504,555 | - |
| Receivables | 11,028 | 31,214 |
| 8,041,105 | 104,673 | |
| Right-of-use asset (note 6) | 293,721 | 371,335 |
| Non-current investments (note 11) | 700,000 | 525,000 |
| Exploration and evaluation assets (note 7) | 12,957,223 | 12,957,223 |
| Total Assets | $ 21,992,049 | $ 13,958,231 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current | ||
| Accounts payable and accrued liabilities | $ 134,849 | $ 110,486 |
| Lease liabilities (note 8) | 69,783 | 62,185 |
| Due to related parties (note 11) | 6,963 | 81,383 |
| Loans payable (note 9) | - | 163,000 |
| 211,595 | 417,054 | |
| Non-current portion of lease liabilities (note 8) | 244,895 | 314,090 |
| Total Liabilities | 456,490 | 731,144 |
| Shareholders' Equity | ||
| Share capital (note 10) | 32,844,544 | 22,082,698 |
| Reserves – options (note 10) | 3,267,299 | 2,608,547 |
| Reserves – warrants (note 10) | 508,472 | 271,657 |
| Deficit | (17,119,442) | (13,770,501) |
| 19,500,873 | 11,192,401 | |
| Non-controlling interest (note 7) | 2,034,686 | 2,034,686 |
| Total Shareholders' Equity | 21,535,559 | 13,227,087 |
| Total Liabilities and Shareholders' Equity | $ 21,992,049 | $ 13,958,231 |
Nature of operations (note 1)
Commitments and contingencies (note 15)
Approved and authorized by the Board of Directors on April 17, 2025:
"Robert Sibthorpe" "Allan Fabbro"
Robert Sibthorpe, Director Allan Fabbro, Director
The accompanying notes are an integral part of these consolidated financial statements.
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Midnight Sun Mining Corp.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian Dollars)
| For the year ended December 31, | 2024 | 2023 |
|---|---|---|
| Expenses | ||
| Accounting and audit fees (note 11) | $ 162,289 | $ 131,451 |
| Accretion on lease liabilities (note 8) | 34,091 | 10,177 |
| Consulting fees (note 11) | 122,186 | 72,749 |
| Depreciation expense (note 6) | 78,325 | 37,389 |
| Exploration cost (note 7) | 723,014 | 279,367 |
| Foreign exchange loss (gain) | 17,183 | (4,111) |
| Investor and shareholder relations | 588,049 | 261,502 |
| Legal fees | 163,852 | 30,808 |
| Office services and miscellaneous | 62,248 | 71,566 |
| Regulatory and transfer agent fees | 37,618 | 45,214 |
| Share-based payments (notes 10 and 11) | 847,636 | 525,725 |
| Travel | 109,284 | 29,747 |
| Wages and benefits (note 11) | 782,237 | 394,239 |
| (3,728,012) | (1,885,823) | |
| Allowance for doubtful accounts (note 11) | (9,000) | 346,135 |
| Loan forgiven (note 9) | 10,000 | - |
| Unrealized gain on investments (note 11) | 175,000 | - |
| Interest income | 203,071 | 2,482 |
| Loss and comprehensive loss for the year | (3,348,941) | (1,537,206) |
| Loss attributable to: | ||
| Owners of the parent | (3,348,941) | (1,537,206) |
| Non-controlling interest | - | - |
| $ (3,348,941) | $ (1,537,206) | |
| Loss per share – basic and diluted | $ (0.02) | $ (0.01) |
| Weighted average number of common shares outstanding – basic and diluted | 147,916,571 | 118,341,568 |
The accompanying notes are an integral part of these consolidated financial statements.
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Midnight Sun Mining Corp.
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in Canadian Dollars)
| Attributable to owners of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Shares | Amount | Share subscriptions received in advance | Reserves – warrants | Reserves – options | Deficit | Total | Non-controlling interest | Total shareholders’ equity | |
| Balance, December 31, 2022 | 113,004,014 | $ 21,015,097 | $ 5,000 | $ 240,561 | $ 2,109,929 | $(12,233,295) | $ 11,137,292 | $ 2,034,686 | $ 13,171,978 |
| Private placement | 4,685,000 | 937,000 | (5,000) | - | - | - | 932,000 | - | 932,000 |
| Warrants exercised | 542,000 | 138,210 | - | (2,710) | - | - | 135,500 | - | 135,500 |
| Options exercised | 350,000 | 84,857 | - | - | (27,107) | - | 57,750 | - | 57,750 |
| Share issuance costs | - | (58,660) | - | - | - | - | (58,660) | - | (58,660) |
| Share issuance costs – finders' warrants | - | (33,806) | - | 33,806 | - | - | - | - | - |
| Share-based payments | - | - | - | - | 525,725 | - | 525,725 | - | 525,725 |
| Loss for the year | - | - | - | - | - | (1,537,206) | (1,537,206) | - | (1,537,206) |
| Balance, December 31, 2023 | 118,581,014 | 22,082,698 | - | 271,657 | 2,608,547 | (13,770,501) | 11,192,401 | 2,034,686 | 13,227,087 |
| Private placement | 45,454,544 | 10,000,000 | - | - | - | - | 10,000,000 | - | 10,000,000 |
| Options exercised | 1,255,000 | 438,934 | - | - | (188,884) | - | 250,050 | - | 250,050 |
| Warrants exercised | 3,557,233 | 1,207,142 | - | (167,041) | - | - | 1,040,101 | - | 1,040,101 |
| Share issuance costs | - | (480,374) | - | - | - | - | (480,374) | - | (480,374) |
| Share issuance costs – finders' warrants | - | (403,856) | - | 403,856 | - | - | - | - | - |
| Share-based payments | - | - | - | - | 847,636 | - | 847,636 | - | 847,636 |
| Loss for the year | - | - | - | - | - | (3,348,941) | (3,348,941) | - | (3,348,941) |
| Balance, December 31, 2024 | 168,847,791 | $ 32,844,544 | $ - | $ 508,472 | $ 3,267,299 | $(17,119,442) | $ 19,500,873 | $ 2,034,686 | $ 21,535,559 |
The accompanying notes are an integral part of these consolidated financial statements.
Midnight Sun Mining Corp.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
| For the year ended December 31, | 2024 | 2023 |
|---|---|---|
| Operating activities | ||
| Loss for the year | $ (3,348,941) | $ (1,537,206) |
| Items not affecting cash: | ||
| Depreciation | 78,325 | 37,389 |
| Accretion on lease liabilities | 34,091 | 10,177 |
| Allowance for doubtful accounts | 9,000 | (346,135) |
| Share-based payments | 847,636 | 525,725 |
| Unrealized foreign exchange | - | (1,966) |
| Loan forgiven | (10,000) | - |
| Unrealized gain on investments | (175,000) | - |
| Interest expense on loans payable | - | 10,000 |
| Interest accrued on short term investments | (134,883) | (2,482) |
| Changes in non-cash working capital items | ||
| Accounts payable and accrued liabilities | 24,363 | (232,622) |
| Due to related parties | (74,420) | (35,741) |
| Receivables | 11,186 | (19,397) |
| Advances and deposits | (165,394) | (30,518) |
| (2,904,037) | (1,622,776) | |
| Investing activities | ||
| Short-term investments redeemed | 5,130,328 | - |
| Short-term investments purchased | (7,500,000) | - |
| Loan payments received | - | 470,552 |
| (2,369,672) | 470,552 | |
| Financing activities | ||
| Proceeds from private placements | 10,000,000 | 932,000 |
| Proceeds from warrant exercises | 1,040,101 | 135,500 |
| Proceeds from option exercises | 250,050 | 57,750 |
| Proceeds from loans payable | 73,750 | 113,000 |
| Loan repayments made | (226,750) | - |
| Share issuance costs | (480,374) | (58,660) |
| Payments toward lease liabilities | (96,399) | (43,966) |
| 10,560,378 | 1,135,624 | |
| Net change in cash | 5,286,669 | (16,600) |
| Cash, beginning of year | 23,883 | 40,483 |
| Cash, end of year | $ 5,310,552 | $ 23,883 |
| SUPPLEMENTAL NON-CASH DISCLOSURES | ||
| Fair value of options reclassified to reserves on exercise | $ - | $ 27,107 |
| Adjustment to lease liabilities and right of use assets | $ 711 | $ 757 |
| Additions to lease liabilities and right of use assets | $ - | $ 390,878 |
| Valuation of finders' warrants included in share issuance costs | $ 403,856 | $ 33,806 |
| Fair value of warrants reclassified to reserves on exercise | $ - | $ 2,710 |
The accompanying notes are an integral part of these consolidated financial statements.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
1. Nature of Operations
Midnight Sun Mining Corp. (the “Company”) was incorporated on April 11, 2007 pursuant to the Business Corporations Act of British Columbia. The Company’s principal business activity is the acquisition and exploration of mineral property interests. The Company is in the exploration stage and substantially all the Company’s efforts are devoted to financing and exploring these property interests. There has been no determination whether the Company’s interests in unproven exploration and evaluation assets contain economically recoverable mineral resources.
The Company is listed for trading on the TSX Venture Exchange (“TSX-V”) under the symbol “MMA”, and its corporate head office is located at Suite 1205, 789 West Pender Street, Vancouver, BC.
2. Basis of Presentation
a) Statement of compliance
These consolidated financial statements, including comparatives, have been prepared in accordance with IFRS Accounting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). The material accounting policies, as disclosed, have been applied consistently to all periods presented in these consolidated financial statements.
These consolidated financial statements were authorized for issuance by the Board of Directors on April 17, 2025.
b) Going concern
These consolidated financial statements have been 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. If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying value of assets and liabilities, the reported revenues and expenses and the statement of financial position classifications used.
The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future. While the Company has been successful in the past at raising funds, there can be no assurance that it will be able to do so in the future.
During the year ended December 31, 2024, and the year ended December 31, 2023, the Company experienced operating losses before income taxes and negative operating cash flows with the operations of the Company having been primarily funded by the issuance of share capital. The Company expects to incur further losses in the development of its business. These material uncertainties may cast significant doubt about the Company’s ability to continue as a going concern.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
2. Basis of Presentation (continued)
b) Going concern (continued)
As at December 31, 2024, the Company had an accumulated deficit of $17,119,442 (2023 - $13,770,501) and had a working capital of $7,829,510 (2023 – working capital deficiency of $312,381). Management has estimated that the Company has adequate financing to complete all currently planned exploration programs. Continued operations are dependent on the Company's ability to complete public equity financing, secure project debt financing or generate profitable operations in the future.
In the event cash flow from operations, if any, together with the proceeds for any future financings are insufficient to meet the Company's operating expenses, the Company will be required to re-evaluate its planned expenditures and allocate its total resources in such a manner as the Board of Directors and management deem to be in the Company's best interest. This may result in a substantial reduction of the scope of existing and planned operations.
These consolidated financial statements do not give effect to adjustments, which could be material, to the carrying values and classification of assets and liabilities, which may be required should the Company be unable to continue as a going concern.
There are many external factors that can adversely affect general workforces, economies, and financial markets globally. It is not possible for the Company to predict the duration or magnitude of adverse results of such external factors and their effect on the Company's business or ability to raise funds.
c) Consolidation
These consolidated financial statements include the accounts of the Company and its controlled subsidiaries. Control exists when the Company possess power over an investee, has exposure to variable returns from the investee and the ability to use its power over the investee to affect its returns. All significant inter-company transactions have been eliminated upon consolidation. The Company's significant subsidiaries are as follows:
| Country of Incorporation | Effective Interest | |
|---|---|---|
| Midnight Sun Mining Zambia Limited (“MSM Zambia”) | Zambia | 100% |
| Midnight Sun (BVI) One Corp. | BVI | 100% |
| Midnight Sun (BVI) Two Corp. | BVI | 100% |
| Zambian High Light Mining Investment Limited (“ZHLMIL”) | Zambia | 84.30% |
| FAMS Mining Zambia Limited (“FAMS”) | Zambia | 100% |
d) Functional and presentation currency
The Company's reporting and functional currency is the Canadian dollar. The functional currency of MSM Zambia, Midnight Sun One Co., Midnight Sun Two Co., FAMS, and ZHLMIL is also the Canadian dollar. Monetary assets and liabilities of the Company are translated into Canadian dollars at the exchange rate in effect on the statement of financial position date while non-monetary assets and liabilities are translated at historical rates, and revenues and expenses are translated at the average rates over the reporting period. Gains and losses from these translations are included in the results from operations.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
2. Basis of Presentation (continued)
e) Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as financial instruments at fair value through profit or loss, which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cashflow information.
f) Estimates and judgments
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.
Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:
i. Asset carrying values and impairment charges.
At each reporting period, the Company reviews its non-current assets to determine whether there are any indications of impairment. Calculating the estimated recoverable amount of the cash generating unit for non-current asset impairment tests requires management to make estimates and assumptions with respect to estimated recoverable reserves, estimated future commodity prices, the expected future operating and capital costs and discount rates. Changes in any of these assumptions or estimates used in determining the recoverable amount could impact the impairment analysis.
ii. Recognition of deferred taxes
The determination of income tax expense and deferred income tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred income taxes or the timing of tax payments.
iii. Share-based payments
Estimating the fair value of granted stock options requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected rate of forfeitures and dividend yield and making assumptions about them.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
2. Basis of Presentation (continued)
f. Estimates and judgments (continued)
iv. Provision for environmental rehabilitation
The Company assesses its reclamation provisions at each reporting date. Significant estimates and assumptions are made in determining the provision for environmental rehabilitation as there are numerous factors that will affect the ultimate amount payable. These factors include estimates of the extent, cost, and timing of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rate, and changes in discount rates. These uncertainties may result in future expenditures differing from the amounts currently provided.
v. Functional currency
Management considers the determination of the functional currency of the Company a significant judgment. Management has used its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and considered various factors including the currency of historical and future expenditures and the currency in which funds from financing activities are generated. A Company's functional currency is only changed when there is a material change in the underlying transactions, events, and conditions.
vi. Investments
The fair value of financial instruments that are not traded in an active market is estimated on the basis of the price established in recent transactions involving similar instruments or, in the absence thereof, determined using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
vii. Loans receivable
The Company exercises judgment in identifying impaired loans receivable, the collection of which may be uncertain. In determining whether an impairment loss should be recorded in profit or loss, the Company considers whether there is any observable data indicating that an increase in the credit risk or a decrease in the estimated future cash flows from a loan has occurred. This evidence may include observable data indicating that there has been an adverse change in the payment status and days outstanding.
3. Material Accounting Policies
a) Exploration and evaluation assets
Exploration and evaluation expenditures are recognized in profit or loss. Costs incurred before the Company has obtained legal rights to explore areas of interest are also recognized in profit or loss. Expenditures incurred by the Company in connection with the development of mineral resources after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable are capitalized. Acquisition costs of mineral properties, such as cash and share consideration and option payments, are capitalized on an individual prospect basis. Amounts received for the sale of mineral properties and for option payments are treated as reductions of the cost of the property, with payments in excess of capitalized costs recognized in income.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
a) Exploration and evaluation assets (continued)
The recoverability of the amounts capitalized for the undeveloped mineral properties is dependent upon the determination of economically recoverable ore reserves, confirmation of the Company's interest in the underlying mineral claims, the ability to obtain the necessary financing to complete their development, and future profitable production or proceeds from the disposition thereof.
Subsequent recovery of the resulting carrying value depends on successful development or sale of the mineral property. If a mineral property does not prove viable, all unrecoverable costs associated with the project net of any impairment provisions are written off.
From time to time, the Company may acquire or dispose of properties pursuant to the terms of option agreements. Due to the fact that options are exercisable entirely at the discretion of the optionee, the amounts payable or receivable are not recorded. Option payments are recorded as mineral property costs or recoveries when the payments are made or received.
b) Share capital
Common shares issued are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity. Common shares issued for consideration other than cash are valued based on their market value at the date of the share issuance.
As part of its private placements, the Company has issued warrants and finder's warrants. Any warrants that expire or are exercised during the year are transferred back to share capital or deficit, if originally determined to have a value. The Company values warrants as part of a private placement offering under the residual value approach. Finder's warrants are valued using the Black-Scholes option pricing model.
c) Loss per share
The Company computes the dilutive effect of options, warrants and similar instruments on loss per common share from the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For the years presented, this calculation proved to be anti-dilutive. Basic loss per share is calculated using the weighted average number of common shares outstanding during the year.
d) Share-based payments
The Company grants stock options to acquire common shares of the Company to directors, officers, employees, and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee. The fair value of stock options is measured on the date of grant, using the Black-Scholes option pricing model, and is recognized over the vesting period. A corresponding increase in reserves is recorded when stock options are expensed. When stock options are exercised, share capital is credited by the sum of the consideration paid and the related portion of share-based payments previously recorded in reserves. Consideration paid for the shares on the exercise of stock options is credited to share capital.
13 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
d) Share-based payments (continued)
Where equity instruments are issued to non-employees and some or all the goods and services received by the Company as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise share-based payments are measured at the fair value of the goods and services received. On expiry or cancellation, the value of stock options remains in reserves.
e) Income taxes
Income tax on the profit or loss for the years presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is recorded using the statement of financial position asset and liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable loss; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
f) Provision for environmental rehabilitation
The Company recognizes liabilities for statutory, contractual, constructive, or legal obligations associated with the retirement of exploration and evaluation assets and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to the production assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is amortized on the same basis as mining assets.
14 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
f) Provision for environmental rehabilitation (continued)
The Company's estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mining assets with a corresponding entry to the rehabilitation provision. The Company's estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company's estimates of reclamation costs, are charged to profit and loss for the period.
As at December 31, 2024 and 2023, the Company had no provisions for environmental rehabilitation.
g) Leases
At inception of a contract, we assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We assess whether the contract involves the use of an identified asset, whether we have the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement and if we have the right to direct the use of the asset.
As a lessee, we recognize a right-of-use asset, and a lease liability at the commencement date of a lease. The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.
The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain measurements of the lease liability.
A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of:
- fixed payments, including in-substance fixed payments, less any lease incentives receivable;
- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
- amounts expected to be payable under a residual value guarantee;
- exercise prices of purchase options if we are reasonably certain to exercise that option; and
- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in our estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option. Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit.
15 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
h) Financial Instruments
Financial assets
The Company classified its financial assets in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income ("FVTOCI"), or at amortized cost. The determination of the classification of financial assets is made at initial recognition. Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVTPL; for other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. The Company's accounting policy for each of the categories is as follows:
Financial assets at FVTPL: Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statement of operations and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of financial assets held at FVTPL are included in the statement of operations and comprehensive loss in the period.
Financial assets at FVTOCI: Financial assets carried at FVTOCI are recorded at fair value and transaction costs are expensed in the statement of operations and comprehensive loss. Realized and unrealized gains and losses arising from changes in fair value of the financial assets held at FVTOCI are included in other comprehensive (loss) income in the period.
Financial assets at FVTOCI: Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive (loss) income as the investments arise.
Financial assets at amortized cost: A financial asset is measured at amortized cost if the objective of the business model is to hold the financial asset for the collection of contractual cash flows, and the asset's contractual cash flows are comprised solely of payments of principal and interest. They are classified as current assets or non-current assets based on their maturity date and are initially recognized at fair value and subsequently carried at amortized cost less any impairment.
Impairment of financial assets at amortized cost: The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.
The following table shows the classification of the Company's financial assets under IFRS 9:
| Financial asset | IFRS 9 Classification |
|---|---|
| Cash | Amortized cost |
| Advances and deposits | Amortized cost |
| Short-term investments | Amortized cost |
| Investments | FVTPL |
| Loans receivable | Amortized cost |
| Receivables | Amortized cost |
Financial liabilities
The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was incurred. The Company's accounting policy for each category is as follows:
Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
h) Financial Instruments (continued)
Fair value through profit or loss – This category comprises derivatives or liabilities acquired or incurred principally for the purpose of selling or repurchasing in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of operations and comprehensive loss.
Other financial liabilities - This category includes accounts payable and accrued liabilities which are recognized at amortized cost using the effective interest method.
Transaction costs in respect of financial instruments at fair value through profit or loss are recognized in the statement of operations and comprehensive loss immediately, while transaction costs associated with all other financial instruments are included in the initial measurement of the financial instrument.
The following table shows the classification of the Company's financial liabilities under IFRS 9:
| Financial liability | IFRS 9 Classification |
|---|---|
| Accounts payable and accrued liabilities | Other financial liabilities |
| Due to related parties | Other financial liabilities |
| Lease liabilities | Other financial liabilities |
| Loans payable | Other financial liabilities |
i) New and amended IFRS standards
New standards adopted
In the current year, the Company has applied the below amendment to IFRS Standards and Interpretations issued by the IASB that was effective for annual periods that begin on or after January 1, 2024.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgments—Disclosure of Accounting Policies
The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term "significant accounting policies" with "material accounting policy information." Accounting policy information is material if, when considered together with other information included in an entity's financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed.
Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material. The International Accounting Standards Board ("IASB") has also developed guidance and examples to explain and demonstrate the application of the 'four-step materiality process' described in IFRS Practice Statement 2.
17 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
3. Material Accounting Policies (continued)
i) New and amended IFRS standards (continued)
The amendment was applied effective January 1, 2024 and did not have a material impact on the Company's financial statements.
New accounting standards issued but not yet effective:
IFRS 18, Presentation and Disclosure in Financial Statements ("IFRS 18"), which will replace IAS 1, Presentation of Financial Statements aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statements of loss and comprehensive loss, in particular additional defined subtotals, disclosures about management-defined performance measures and new principles for aggregation and disaggregation of information. IFRS 18 is effective from January 1, 2027. Companies are permitted to apply IFRS 18 before that date. The Company has not yet determined the impact of this amendment on its financial statements
4. Management of Financial Risk
Fair value measurement disclosure includes classification of financial instrument fair values in a hierarchy comprising three levels reflecting the significance of the inputs used in making the measurements, described as follows:
- Level 1: Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or liabilities, other than Level 1 prices such as quoted interest or currency exchange rates; and
- Level 3: Valuations based on significant inputs that are not derived from observable market data, such as discounted cash flow methodologies based on internal cash flow forecasts.
The Company has designated its non-current investments at level 2 (note 11).
The Company's financial instruments are exposed to certain financial risks. The risk exposures and the impact on the Company's financial instruments are summarized as follows.
a. Fair value
The carrying value of receivables, loan receivable, short-term investments, accounts payable and accrued liabilities, loan payable, lease liabilities, and amounts due to related parties approximated their fair value because of the short-term nature of these instruments.
b. Interest rate risk
The Company has non-material exposure at December 31, 2024 and December 31, 2023, to interest rate risk through its financial instruments.
Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
4. Management of Financial Risk (continued)
c. Currency risk
Throughout the year ended December 31, 2024, and the year ended December 31, 2023, the majority of the Company's cash was held in Canadian dollars, the Company's functional and reporting currency. The Company is exposed to currency risk due to accounts payable denominated in US Dollars. A 1% change in the foreign exchange rate between the Canadian and US Dollar would not result in a material fluctuation in the loss for the period.
d. Credit risk
The Company has some cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by Canadian financial institutions with which it keeps its bank accounts and management believes the risk of loss to be remote. At December 31, 2024, the Company had a $2,500,000 six-month locked guaranteed interest certificate with a major Canadian financial institution recognized within short-term investments and valued at $2,504,555 inclusive of accrued interest, for which Management believes the risk of loss to be remote. The Company also has $58,430 held with a major financial institution in Zambia. Management believes the risk of loss to be remote.
Receivables consist of goods and services tax due from the Government of Canada in the amount of $11,028. The Company considers credit risk associated with these amounts to be low.
e. Liquidity risk
The Company attempts to manage liquidity risk by maintaining sufficient cash balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short-term obligations. As at December 31, 2024, the Company had $5,310,552 cash (2023 - $23,883) and current liabilities of $211,595 (2023 - $417,054).
f. Price risk
The Company is exposed to price risk with respect to commodity prices. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company.
5. Short-term Investments
During year ended December 31, 2024, the Company purchased and redeemed a series of Guaranteed Interest Certificates ("GICs") from the government of Canada. The GICs each had a life of 180-days and were not eligible for early redemption. A continuity of short-term investments for the year ended December 31, 2024 is as follows:
| December 31, 2024 | |
|---|---|
| Opening Balance | $ - |
| Investments purchased | 7,500,000 |
| Interest recognized | 134,883 |
| Investments redeemed | (5,130,328) |
| Closing balance | $ 2,504,555 |
19 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
6. Right-of-Use Asset
| Cost | |
|---|---|
| Balance, December 31, 2022 | $ 51,087 |
| Adjustment to lease liabilities (note 8) | 757 |
| Termination of lease liabilities (note 8) | (51,844) |
| Additions to lease liabilities (note 8) | 390,878 |
| Balance, December 31, 2023 | 390,878 |
| Adjustment to lease liabilities (note 8) | 711 |
| Balance, December 31, 2024 | $ 391,589 |
| Accumulated Depreciation | |
| Balance, December 31, 2022 | $ 33,998 |
| Depreciation | 37,389 |
| Termination of lease liabilities (note 8) | (51,844) |
| Balance, December 31, 2023 | 19,543 |
| Depreciation | 78,325 |
| Balance, December 31, 2024 | $ 97,868 |
| Carrying Values | |
| December 31, 2023 | $ 371,335 |
| December 31, 2024 | $ 293,721 |
7. Exploration and Evaluation Assets
| Solwezi | |
|---|---|
| Balance, December 31, 2022, 2023, and 2024 | $ 12,957,223 |
Solwezi property
Pursuant to an option agreement, the Company acquired a 60% interest in two Zambian mineral property licences (the "Solwezi Licences") during the year ended December 31, 2019. The licences are held by a Zambian registered company, ZHLMIL, of which Midnight Sun acquired an initial 60% shareholding from Kam Chuen who retained the remaining 40%. The Company holds its interest in ZHLMIL through the Company's wholly owned subsidiary, Midnight Sun (BVI) Two Corp. The share transfer from Kam Chuen to Midnight Sun (BVI) Two Corp. occurred on October 20, 2019 and was registered in Zambia with the Patents and Companies Registration Agency. The acquisition was accounted for as an asset acquisition.
On March 1, 2017, the Acting Chief Registrar of Mining Rights issued the licence 21509-HQ-LEL which was in effect for a period of 4 years with the option for future renewals providing the licence is maintained in accordance with the contained terms and the Mines and Minerals Development Act, 2015. On February 28, 2021, licence 21509-HQ-LEL was renewed for a further 3-year period and during the year ended December 31, 2024, the Company applied for an extension on 21509-HQ-LEL. On January 2, 2025, Zambian Mining Licensing Committee issued an update that the license has been approved. In renewing the claim in February 2021, the Company was required to relinquish 50% of the licence area. The relinquished 50% was granted to Rio Tinto Exploration Zambia Limited as licence 28816-HQ-LEL and was held on behalf of the Company as per the terms of the Earn-In and Joint Venture Agreement between Rio Tinto Mining and Exploration Limited ("Rio Tinto") and Midnight Sun. During the year ended December 31, 2024, the licence was transferred from Rio Tinto to the Company's wholly-owned subsidiary, FAMS.
20 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
7. Exploration and Evaluation Assets (continued)
Solwezi property (continued)
On November 30, 2018, the Zambian Mining Cadastre issued a renewal of prospecting licence 12124-HQ-LPL as large-scale exploration licence, 12124-HQ-LEL, having an expiration date of December 23, 2021. This renewal was the final renewal period available to ZHLMIL. In accordance with the Mines and Minerals Development Act, 2015, for a period of 12 months, ZHLMIL is precluded from owning the same licence area which expired. In order to preserve the licence area, Rio Tinto formed a new corporation, Solwezi Metals Exploration Ltd., to apply for a new licence over the same area. The relationship between Solwezi Metals Exploration Ltd. and Midnight Sun is governed by the terms of the Earn-In and Joint Venture Agreement between Rio Tinto and Midnight Sun. Solwezi Metals Exploration Ltd.'s application was accepted by the Zambian Mining Cadastre on November 23, 2021, and licence 30678-HQ-LEL was granted on March 27, 2023. During the year ended December 31, 2024, 30678-HQ-LEL was transferred from Solwezi Metal Exploration Ltd. to the Company's wholly-owned subsidiary, FAMS.
On September 22, 2020, the Company increased its ownership share in ZHLMIL to 80.65% by participating in an issuance of 16,022 ZHLMIL ordinary shares at a price of $618.52 with a total value of $9,909,927. Of the total subscription, 5,756 ZHLMIL ordinary shares were fully paid up based on previous expenditures incurred by the Company in the amount of $3,560,020. The remaining 10,266 ZHLMIL ordinary shares in the amount of $6,349,726 were fully paid up by way of exploration expenditures made on behalf of ZHLMIL by the Company or the Company's former earn-in partner, Rio Tinto during the year ended December 31, 2020. On the acquisition of the additional 20.65% interest in the ZHLMIL, the Company recognized a decrease to the non-controlling interest of $2,676,818 with a corresponding reduction in deficit.
On December 7, 2022, the Company increased its ownership share in ZHLMIL to 84.30% by participating in an issuance of 7,187 ZHLMIL ordinary shares at a price of $618.52 with a total value of $4,445,303. The remaining ordinary shares in the amount were fully paid up by way of exploration expenditures made on behalf of ZHLMIL by the Company or the Company's earn-in partner, Rio Tinto. On the acquisition of the additional 3.64% interest in the ZHLMIL, the Company recognized a decrease to the non-controlling interest of $471,385 with a corresponding reduction in deficit.
As at December 31, 2024, the only asset held by ZHLMIL is the Solwezi exploration and evaluation asset. There were no operations within ZHLMIL for the year ended December 31, 2024, and accordingly no loss attributed to the NCI.
KoBold Metals Company Joint-Venture
During the year ended December 31, 2024, the Company entered into an earn-in agreement (the "Agreement") with KoBold Metals Company ("KoBold"), whereby KoBold can earn a 75% interest in specific areas (the "Dumbwa Target") within its mineral licence 30678-HQ-LEL by incurring US$15,000,000 in exploration expenditures and making cumulative cash payments to the Company of US$500,000 over 4.5 years.
Commencement of the earn-in is subject to a number of conditions, including the reassignment of the licence within which the Dumbwa Target is located to FAMS. The Agreement provides that if the conditions are not satisfied by June 1, 2024, the Agreement will terminate. During the year ended December 31, 2024, the Company entered into an amendment whereby the termination date was removed and any party could proceed to terminate the agreement with written notice. As at December 31, 2024, satisfaction of the conditions had not been met and subsequent to December 31, 2024, the earn-in agreement with KoBold was terminated.
21 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
7. Exploration and Evaluation Assets (continued)
As at December 31, 2024 and 2023, the Company had funded the following cumulative exploration expenditures on the Solwezi Licences:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Site and project expenditures: | ||
| Acquisition costs | $ 12,957,223 | $ 12,957,223 |
| Assays | 396,631 | 340,681 |
| Drilling | 4,301,444 | 4,029,417 |
| Field expenses | 1,354,087 | 1,341,175 |
| General and administrative | 1,037,891 | 960,558 |
| Geological consulting | 2,072,567 | 1,811,195 |
| Licence | 281,968 | 268,870 |
| Travel and accommodation | 819,642 | 789,320 |
| Total operations funded | $ 23,221,453 | $ 22,498,439 |
The following table presents the Company's exploration expenditures on the Solwezi Licences for the year ended December 31, 2024, and 2023:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Site and project expenditures: | ||
| Assays | $ 55,950 | $ 5,918 |
| Drilling | 272,027 | 34,142 |
| Field expenses | 12,912 | 22,198 |
| General and administrative | 77,333 | 52,872 |
| Geological consulting | 261,372 | 134,435 |
| Licences | 13,098 | - |
| Travel & accommodation | 30,322 | 29,802 |
| Exploration cost | $ 723,014 | $ 279,367 |
8. Lease Liabilities
During the year ended December 31, 2021, the Company renewed its office lease for a term of 24 months from September 1, 2021, with expected total payments of $55,626. Using an annual discount rate of 10%, the Company recognized a lease liability and corresponding right-of-use asset (note 6) of $50,200 during the year ended December 31, 2021. During the year ended December 31, 2023, because of an amendment to the lease payment schedule, the Company recognized an adjustment to lease liabilities and right-of-use asset (note 6) of $757. During the year ended December 31, 2023, the lease term expired and was not renewed by the Company.
During the year end ended December 31, 2023, the Company entered into a new office lease for a term of five years from October 1, 2023, with expected total payments of $496,018. Using an annual discount rate of 10%, the Company recognized a lease liability and corresponding right-of-use asset (note 6) of $390,878. During the year ended December 31, 2024, the Company recognized an adjustment to lease liabilities and right-of-use asset (note 6) of $711 due to amendments to the lease payment schedule.
22 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
8. Lease Liabilities (continued)
The following is a reconciliation of the changes in the lease liabilities for the years ended December 31, 2024 and 2023.
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Opening Balance | $ 376,275 | $ 18,429 |
| Adjustment | 711 | 757 |
| Additions to lease liabilities | - | 390,878 |
| Payments | (96,399) | (43,966) |
| Lease accretion | 34,091 | 10,177 |
| 314,678 | 376,275 | |
| Lease liabilities, current portion | (69,783) | (62,185) |
| Lease liabilities, non-current portion | $ 244,895 | $ 314,090 |
The following summarizes the undiscounted minimum lease payments under the lease liabilities:
| Fiscal Year | Payment |
|---|---|
| 2025 | $ 97,334 |
| 2026 | 100,139 |
| 2027 | 101,074 |
| 2028 | 77,907 |
| Amount representing future lease accretion | (61,776) |
| Lease liabilities | $ 314,678 |
9. Loans Payable
CEBA loan
As part of the Government of Canada's response to the COVID-19 global pandemic, certain businesses were eligible to apply for the Canada Emergency Business Account (the "CEBA"). The CEBA provided companies with a $40,000 interest free loan to be used to cover non-deferrable operating expenses during the period where operations had been temporarily reduced due to the economic impacts of the COVID-19 virus. During the year ended December 31, 2020, the Company applied for the CEBA and received the $40,000 loan. The CEBA remained interest free until January 18, 2024, and had no fixed repayment schedule during that time. If $30,000 was repaid on or before January 18, 2024, the remaining $10,000 would be forgiven. If, at January 18, 2024, any amount remained unpaid, the Company would enter into an extension agreement whereby it would accrue interest at a rate of 5% per annum, with a repayment schedule to be determined at that time. During the year ended December 31, 2024, the Company repaid $30,000 and the remaining $10,000 loan was forgiven.
23 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
9. Loans Payable (continued)
Promissory note
During the year ended December 31, 2023, the Company issued a promissory note to an arm's-length party in the amount of $100,000. The note is unsecured, matures on June 4, 2024, and bears interest of $10,000, recognizable immediately. If not repaid by maturity, a penalty of $10,000 will be applied to the loan balance. During the year ended December 31, 2024, the loan was repaid in full.
Related party loans
During the year ended December 31, 2023, the Company received an aggregate of $13,000 in unsecured loans from two officers of the Company (note 11). The loans are non-interest bearing and are repayable on demand. During the year ended December 31, 2024, the Company received additional $73,750 from the two officers under the same terms. During the year ended December 31, 2024, the loans were repaid in full.
A reconciliation of loans payable for the year ended December 31, 2024, and the year ended December 31, 2023 is as follows:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Opening balance | $ 163,000 | $ 40,000 |
| Additions | 73,750 | 113,000 |
| Interest accrued | - | 10,000 |
| Repayments | (226,750) | - |
| Loan forgiven | (10,000) | - |
| - | 163,000 | |
| Current portion of loans payable | - | (163,000) |
| Non-current portion of loans payable | $ - | $ - |
10. Share Capital and Reserves
a. Authorised
Unlimited number of common shares authorised, without par value.
24 | Page
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
10. Share Capital and Reserves (continued)
b. Share issuances
At December 31, 2024, the Company had 168,847,791 common shares (2023 – 118,581,014) issued and outstanding.
2024 share issuances
During the year ended December 31, 2024, the Company closed a non-brokered private placement by issuing 45,454,544 units at a price of $0.22 per unit for gross proceeds of $10,000,000. Each unit consists of one common share of the Company and one common share purchase warrant, entitling the holder to purchase one additional common share of the Company at a price of $0.33 per common share for a period of 36 months. The Company paid finders' fees of $431,529, issued 1,374,337 finders' warrants with a life of 36-months and exercise price of $0.33, and issued 588,193 finders' warrants with a life of 36-months and exercise price of $0.22. The finders' warrants were valued at $403,856 using the following weighted average Black-Scholes assumptions: risk-free rate of 4.05%, expected life of 3 years, and volatility of 94.76%. In connection with the financing, the Company incurred additional closing costs of $48,845.
2023 share issuances
During the year ended December 31, 2023, the Company closed a non-brokered private placement by issuing 4,685,000 common share units at a price of $0.20 per unit for gross proceeds of $937,000, of which $5,000 had been received at December 31, 2022. Each unit consists of one common share and one common share purchase warrant exercisable for a period of two years at a price of $0.30 per common share. The Company paid finder's fees of $58,660 and issued 292,800 finder's warrants exercisable for a period of two years at a price of $0.30 per common share. The finder's warrants were valued at $33,806 using the following Black-Scholes assumptions: risk-free rate of 4.03%, expected life of 2 years, and volatility of 92.74%.
c. Stock options
The Company has a stock option plan (the "Plan") whereby the maximum number of shares reserved for issue under the plan shall not exceed 10% of the outstanding common shares of the Company, as at the date of the grant. Options granted must be exercised no later than ten years from the date of grant or such lesser period as determined by the Company's Board of Directors. The exercise price of an option may not be less than the closing price on the TSX-V on the last trading day preceding the grant date. Options granted to directors, officers, employees, and consultants vest upon grant. Options granted in relation to investor relation services vest in equal quarterly intervals over a term of 12 months.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
10. Share Capital and Reserves (continued)
c. Stock options (continued)
Stock options outstanding and exercisable are summarized as follows:
| Number of stock options outstanding | Weighted average exercise price | |
|---|---|---|
| Balance, December 31, 2022 | 7,825,000 | $ 0.21 |
| Granted | 3,300,000 | 0.21 |
| Exercised | (350,000) | 0.165 |
| Expired/Cancelled | (2,050,000) | 0.35 |
| Balance, December 31, 2023 | 8,725,000 | $ 0.18 |
| Granted | 5,150,000 | 0.24 |
| Exercised | (1,255,000) | 0.20 |
| Expired/Cancelled | (225,000) | 0.16 |
| Balance, December 31, 2024 | 12,395,000 | $ 0.20 |
| Exercisable, December 31, 2024 | 12,095,000 | $ 0.20 |
During the year ended December 31, 2024, the Company granted 5,150,000 stock options (2023 - 3,300,000) with a weighted average fair value of $0.17 (2023 - $0.16) per option. Total share-based payments recognized for the year ended December 31, 2024, was $847,636 (2023 - $525,725) for incentive options granted and vested. The fair value of options at the date of grant was estimated using the Black-Scholes Option Pricing Model using the following weighted average assumptions:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Weighted average share price on date of grant | 0.24 | $ 0.21 |
| Risk-free interest rate | 3.71% | 3.19% |
| Expected life of option | 4.53 years | 5 years |
| Expected annualized volatility | 95.59% | 98.12% |
| Expected dividend rate | 0% | 0% |
At December 31, 2024, the Company has the following stock options outstanding:
| Expiry date | Exercise price | Number of stock options outstanding | Weighted average years to expiry | |
|---|---|---|---|---|
| May 6, 2025 | $ | 0.135 | 1,830,000 | 0.35 |
| April 28, 2026 | $ | 0.31 | 200,000 | 1.32 |
| August 12, 2027 | $ | 0.165 | 2,950,000 | 2.61 |
| March 10, 2028 | $ | 0.21 | 2,265,000 | 3.19 |
| May 9, 2029 | $ | 0.225 | 4,000,000 | 4.36 |
| May 9, 2025¹ | $ | 0.225 | 600,000 | 0.35 |
| June 19, 2029 | $ | 0.33 | 550,000 | 4.47 |
| 12,395,000 | 2.90 |
- Subsequent to the year ended December 31, 2024, 350,000 of these options were exercised for proceeds of $78,750.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
10. Share Capital and Reserves (continued)
d. Warrants
Share purchase warrants outstanding and exercisable are summarized as follows:
| Warrants outstanding | Weighted average exercise price | |
|---|---|---|
| Balance, December 31, 2022 | 13,718,719 | $ 0.36 |
| Granted | 4,977,800 | 0.30 |
| Exercised | (542,000) | 0.25 |
| Expired | (7,557,005) | 0.26 |
| Balance, December 31, 2023 | 10,597,514 | 0.41 |
| Granted | 47,417,074 | 0.33 |
| Exercised | (3,557,233) | 0.29 |
| Balance, December 31, 2024 | 54,457,355 | $ 0.35 |
As at December 31, 2024, the Company had the following warrants outstanding:
| Expiry date | Exercise price | Number of warrants outstanding | Weighted average years to expiry |
|---|---|---|---|
| July 2, 2025^{1,2} | $ 0.50 | 5,619,714 | 0.50 |
| January 5, 2025^{3} | $ 0.30 | 2,675,000 | 0.01 |
| May 22, 2027^{4} | $ 0.33 | 44,796,904 | 2.39 |
| May 22, 2027^{5} | $ 0.33 | 1,365,737 | 2.39 |
| 54,457,355 | 2.08 |
- During the year ended December 31, 2024, the expiration date of these warrants was extended from July 2, 2024, to July 2, 2025.
- Subsequent to the year ended December 31, 2024, 1,482,000 of these warrants were exercised for proceeds of $741,000.
- Subsequent to the year ended December 31, 2024, all of these warrants were exercised for proceeds of $802,500.
- Subsequent to the year ended December 31, 2024, 2,363,450 of these warrants were exercised for proceeds of $779,939.
- Subsequent to the year ended December 31, 2024, 21,915 of these warrants were exercised for proceeds of $7,232.
11. Related Party Transactions and Key Management Compensation
The Company's related parties at December 31, 2024, consist of 7 officers and directors (and their related companies), as follows:
| Name of Related Party | Position | Nature of transaction |
|---|---|---|
| Allan J. Fabbro | Director & CEO | Director |
| Mathew Mackenzie | Secretary | Corporate secretary |
| Richard J. Mazur | Director | Director |
| Wayne Moorhouse | Director | Director |
| Brett Richards | Director | Director |
| Robert A. Sibthorpe | VP Exploration & Director | Management services |
| Alastair Brownlow / Red Fern Consulting Ltd. | CFO | Management services |
Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
11. Related Party Transactions and Key Management Compensation (continued)
Compensation paid or accrued to key management and/or their related companies during the year ended December 31, 2024, and 2023 was as follows:
| Nature of expenditure | For the year ended December 31, | |
|---|---|---|
| 2024 | 2023 | |
| Wages and benefits | $ 601,250 | $ 314,000 |
| Consulting fees | 51,909 | 58,249 |
| Accounting fees | 103,000 | 78,000 |
| Share-based payments | 393,710 | 392,989 |
| $ 1,149,869 | $ 843,238 |
Key management consists of those individuals having authority and responsibility for, directly or indirectly, planning, directing, and controlling the activities of the Company.
As at December 31, 2024, $6,963 (2023 - $81,383) is due to officers, directors, or companies with a director in common for cash advances, unpaid geological consulting fees, unpaid wages and bonuses and unpaid expenses.
During the year ended December 31, 2024, the Company charged rent of $36,000 (2023 - $18,000) to a company (2023 – two companies) related by common directors and officers. During the year ended December 31, 2024, the Company recognized an allowance for doubtful accounts of $9,000 related to rent recognized during the year ended December 31, 2023. As at December 31, 2024, $nil (2023 - $12,600) is included within receivables from related parties.
Non-current Investments
During the year ended December 31, 2020, the Company purchased 2,500,000 common shares of Red Sea Resources Ltd. ("Red Sea") at a price of $0.01 per common share for a total of $25,000. Red Sea, a private company, has common officers and directors as the Company and is in the process of identifying and acquiring exploration and evaluation properties in Egypt. During the year ended December 31, 2020, the Company was granted an additional 800,000 common shares of Red Sea valued at $0.05 per share for a total of 40,000 as a financing fee on the issuance of a USD $650,000 loan. During the year ended December 31, 2021, the Company was granted an additional 200,000 common shares of Red Sea, valued at $0.10 per common share on the advance of an additional USD $100,000 loan.
As at December 31, 2024, the investments were valued at $0.20 (2023 - $0.15) per common share for a total value of $700,000 (2023 - $525,000), based on the valuation of recently closed private placements by Red Sea. During the year ended December 31, 2024, the Company recognized an unrealized gain on investments of $175,000 (2023 - $nil).
Loans and Debenture Receivable
During the year ended December 31, 2020, the Company issued a promissory note to Red Sea in the amount of USD 650,000 without interest, payable on demand. During the year ended December 31, 2021, the Company extended an additional USD 108,990 to Red Sea, resulting in a total loan of USD 758,990 outstanding ($962,248).
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
11. Related Party Transactions and Key Management Compensation (continued)
During the year ended December 31, 2022, the Company entered into an agreement whereby it increased the amount advanced to $1,331,129 and renegotiated the instrument as a convertible debenture denominated in Canadian dollars, maturing on January 11, 2023, and convertible at $0.15 per common share. The convertible debenture includes interest of $63,030 owing at the time of repayment.
As at December 31, 2024, the Company had taken an allowance for doubtful accounts of $981,129 (2023 - $981,129) on the Red Sea loans. During the year ended December 31, 2024, a total of $nil (2023 - $350,000) was repaid on the loans and reversed against the allowance for doubtful accounts. As at December 31, 2024, a total of $981,129 (2023 - $981,129) was owing.
During the year ended December 31, 2021, the Company issued loans to officers of the Company in the amount of $173,333. The loans are unsecured, bear interest at 3% per annum, and mature on February 9, 2022. During the year ended December 31, 2022, the Company entered into an amending agreement to extend the maturity of these loans to December 31, 2022. During the year ended December 31, 2023, the Company recognized interest income of $2,482 on the loans and received repayments of $120,552.
A reconciliation of the Company's loans and debentures receivable as at December 31, 2024, and December 31, 2023:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Opening balance | $ - | $ 119,969 |
| Interest accrued | - | 2,482 |
| Repayments | - | (470,552) |
| Change in allowance for doubtful accounts | - | 346,135 |
| Foreign exchange | - | 1,966 |
| $ - | $ - |
12. Segmented Information
The Company has one reportable operating segment, being the acquisition and exploration of mineral properties. As at December 31, 2024, the Company's exploration and evaluation assets are located in Zambia, Africa and the Company's right-of-use assets are located in Canada.
13. Capital Management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to pursue the acquisition and exploration of its exploration and evaluation assets and to maintain a flexible capital structure for its projects for the benefit of its stakeholders. As the Company is in the exploration stage, its principal source of funds is from the issuance of common shares. Further information relating to liquidity risk is disclosed in note 4.
In the management of capital, the Company includes the components of shareholders' equity. The Company manages the capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may issue new shares, enter into joint venture property arrangements, acquire or dispose of assets or adjust the amount of cash and cash equivalents and investments.
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Midnight Sun Mining Corp.
Notes to the Consolidated Financial Statements
December 31, 2024
(Expressed in Canadian dollars)
13. Capital Management (continued)
In order to facilitate the management of its capital requirements, the Company prepares budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The budgets are approved by the Board of Directors. The Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital. There was no change to the Company's capital management approach during the year ended December 31, 2024.
14. Income Taxes
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
| Year ended December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Loss for the year | $ (3,348,941) | $ (1,537,206) |
| Expected income tax (recovery) | $ (904,000) | $ (415,000) |
| Change in statutory, foreign tax, foreign exchange rates and other | (69,000) | (9,000) |
| Permanent difference | 248,000 | 95,000 |
| Share issue cost | (130,000) | (16,000) |
| Change in unrecognized deductible temporary differences | 855,000 | 345,000 |
| Total income tax expense | $ - | $ - |
The significant components of the Company's unrecognized temporary difference and tax losses are as follows:
| December 31, 2024 | December 31, 2023 | Expiry Range | |
|---|---|---|---|
| Temporary Differences | |||
| Share issue costs | $ 435,000 | $ 91,000 | 2041-2046 |
| Exploration and evaluation assets | $ 6,704,000 | $ 6,035,000 | N/A |
| Non-capital losses available for future periods | $ 10,294,000 | $ 7,639,000 | 2026-2044 |
Tax attributes are subject to review, and potential adjustment, by tax authorities. The Company's non-capital losses are predominantly in Canada.
15. Commitments and Contingencies
During the year ended December 31, 2022, the Company's Joint Venture Partners brought an action in Zambia objecting to the Earn-In Agreement, on the basis that the Company has acted in a manner oppressive to the Joint Venture Partner's interest in ZHLMIL. The Company is of the view that the action is without merit and is vigorously defending the action and accordingly, no provision has been recorded in relation to the legal proceedings.
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