Northcliff Resources Ltd. — Interim / Quarterly Report 2020

Sep 15, 2020

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Northcliff Resources Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2020 AND 2019

(Unaudited – Expressed in Canadian Dollars)

NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51‐102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed consolidated interim financial statements they must be accompanied by a notice indicating that the condensed consolidated interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company's management.

Northcliff Resources Ltd.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited – Expressed in Canadian Dollars)

Northcliff Resources Ltd. Condensed Consolidated Interim Statements of Financial Position (Unaudited – Expressed in Canadian Dollars)	– $
Note	July 31, October 31, 2020 2019
ASSETS Non‐current assets Mineral property and equipment 3 Investment 4 Current assets Amounts receivable and prepaid expenses 6 Cash 5	26,423,644 $ 26,189,110 $ 18,916 15,133
	26,442,560 26,204,243
	13,654 54,549 1,334,263 1,139,475
	1,347,917 1,194,024
TOTAL ASSETS	27,790,477 $ 27,398,267 $
EQUITY Equity attributable to shareholders of the Company Share capital 8 Reserves 8(c) Accumulated deficit Non‐controlling interests TOTAL EQUITY LIABILITIES Current liabilities Amounts payable and other liabilities 7 Amounts payable to a related party 10(b)	58,901,466 $ 58,040,328 $ 4,392,531 4,235,711 (39,280,718) (38,382,172)
	24,013,279 23,893,867 3,161,828 3,045,608
	27,175,107 26,939,475
	163,371 202,247 451,999 256,545
	615,370 458,792
TOTAL EQUITY AND LIABILITIES	27,790,477 $ 27,398,267 $

Nature and continuance of operations (note 1)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

These condensed consolidated interim financial statements are approved for issuance on September 11, 2020 by the Audit and Risk Committee of the Company's Board of Directors and are signed on the Company's behalf by the following:

/s/ Peter Mitchell	/s/ Marchand Snyman
Peter Mitchell	Marchand Snyman
Director	Director

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Northcliff Resources Ltd.

Condensed Consolidated Interim Statements of Comprehensive Loss

(Unaudited – Expressed in Canadian Dollars, except for weighted average number of shares)

Note	Three months endedJuly 31, Nine months endedJuly 31,
	2020 2019 2020 2019
Expenses Project management and financing General and administration Equity‐settled share‐basedpayments 9	47,296 $ 112,120 $ 177,686 $ 299,944 $ 114,615 191,603 617,111 703,370 27,617 65,450 153,037 142,667
Loss from operations Interest income Foreign exchangegain	(189,528) (369,173) (947,834) (1,145,981) 2,646 9,176 15,033 33,571 (24) (3,411) 475 1,346
Loss before income tax Income tax	(186,906) (363,408) (932,326) (1,111,064) – – – –
Net loss	(186,906) $ (363,408) $ (932,326) $ (1,111,064) $
Other comprehensive income Items that may not be reclassified subsequently to net loss: Revaluation of marketable securities	7,566 – 3,783 3,783
Other comprehensive income	7,566 – 3,783 3,783
Total comprehensive loss	(179,340) $ (363,408) $ (928,543) $ (1,107,281) $
Net loss attributable to: Shareholders of the Company Non‐controllinginterests	(180,776) $ (351,722) $ (898,546) $ (1,067,827) $ (6,130) (11,686) (33,780) (43,237)
	(186,906) $ (363,408) $ (932,326) $ (1,111,064) $
Total comprehensive loss attributable to: Shareholders of the Company Non‐controllinginterests	(173,210) $ (351,722) $ (894,763) $ (1,064,044) $ (6,130) (11,686) (33,780) (43,237)
Total	(179,340) $ (363,408) $ (928,543) $ (1,107,281) $
Loss per share Basic and diluted loss per share attributable to shareholders of the Company	(0.00) $ (0.00) $ (0.00) $ (0.01) $
Weighted average number of common shares outstanding	191,131,829 173,756,229 185,487,930 173,756,229

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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Northcliff Resources Ltd.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited – Expressed in Canadian Dollars, except for share information)

Note	Attributable to shareholders of the Company Share capital Reserves Number of shares Amount Equity‐settled share‐based payments Revaluation Deficit Total equity attributable to shareholders of the Company Non‐ controlling interests Total equity	Attributable to shareholders of the Company Share capital Reserves Number of shares Amount Equity‐settled share‐based payments Revaluation Deficit Total equity attributable to shareholders of the Company Non‐ controlling interests Total equity
	Share capital Number of shares Amount
Balance at November 1, 2018 Effect of change in accounting policyfor IFRS 9	173,756,229 58,040,328 $ – –	4,283,805 $ 1,891 $ (37,217,663) $ 25,108,361 $ 2,974,840 $ 28,083,201 $ – (236,758) 236,758 – – –
Balance at November 1, 2018 – restated Net Loss Other comprehensive loss	173,756,229 58,040,328 – – – –	4,283,805 (234,867) (36,980,905) 25,108,361 2,974,840 28,083,201 – – (1,067,827) (1,067,827) (43,237) (1,111,064) – 3,783 – 3,783 – 3,783
Total comprehensive loss Capital contributions from non‐controlling interests Equity‐settled share‐based payments 9	– – – – – –	– 3,783 (1,067,827) (1,064,044) (43,237) (1,107,281) – – – – 57,500 57,500 142,667 – – 142,667 – 142,667
Balance at July 31, 2019	173,756,229 58,040,328 $	4,426,472 $ (231,084) $ (38,048,732) $ 24,186,984 $ 2,989,103 $ 27,176,087 $
Balance at November 1, 2019 Net Loss Other comprehensive loss	173,756,229 58,040,328 $ – – – –	4,470,578 $ (234,867) $ (38,382,172) $ 23,893,867 $ 3,045,608 $ 26,939,475 $ – – (898,546) (898,546) (33,780) (932,326) – 3,783 – 3,783 – 3,783
Total comprehensive loss Capital contributions from non‐controlling interests Equity‐settled share‐based payments 9 Issuance of common shares pursuant to private placements 8	– – – – – – 17,375,600 861,138	– 3,783 (898,546) (894,763) (33,780) (928,543) – – – – 150,000 150,000 153,037 – – 153,037 – 153,037 – – – 861,138 – 861,138
Balance atJuly 31, 2020	191,131,829 58,901,466 $	4,623,615 $ (231,084) $ (39,280,718) $ 24,013,279 $ 3,161,828 $ 27,175,107 $

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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Northcliff Resources Ltd.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited – Expressed in Canadian Dollars)

Note	Nine months endedJuly 31,
	2020 2019
Operating activities Net loss Adjustments for: Amortization 3 Equity‐settled share‐based payments 9 Interest income Foreign exchange loss Changes in non‐cash operating working capital: Amounts receivable and prepaid expenses Amounts payable and other liabilities Amountspayable to a relatedparty	(932,326) $ (1,111,064) $ 536 536 153,037 142,667 (2,646) (33,571) (474) 1,346 40,895 22,177 11,059 (17,406) 195,454 (37,946)
Cash used in operating activities	(534,465) (1,033,261)
Investing activities Deferred mineral development costs 3 Interest received	(285,005) (507,862) 2,646 33,571
Cash used in investing activities	(282,359) (474,291)
Financing activities Net proceeds from private placement 8 (b) Capital contributions from non‐controllinginterests	861,138 – 150,000 57,500
Cashprovided by financing activities	1,011,138 57,500
Increase (decrease) in cash Foreign exchange translation difference on cash held Cash,beginningbalance	194,314 (1,450,052) 474 (1,346) 1,139,475 2,713,463
Cash, ending balance 5	1,334,263 $ 1,262,065 $

Supplementary cash flow information: (Note 5)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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Northcliff Resources Ltd. Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

1. NATURE AND CONTINUANCE OF OPERATIONS

Northcliff Resources Ltd. (“Northcliff” or the "Company") is a public company listed on the Toronto Stock Exchange under the symbol “NCF” and was incorporated on May 18, 2010 under the laws of the Province of British Columbia, Canada. The address of the Company's corporate office is 15th Floor, 1040 West Georgia Street, Vancouver, BC, V6E 4H1.

The Company is primarily engaged in the acquisition and development of mineral properties. The Company holds an 88.5% economic interest in the Sisson Tungsten and Molybdenum Project (the “Sisson Project” or the “Property”), located in New Brunswick, Canada. Todd Minerals Ltd. (the “Todd Group”) holds the remaining 11.5% interest in the Sisson Project.

These condensed consolidated interim financial statements (the “Financial Statements”) are comprised of the Company and its subsidiaries (together referred to as the "Group"). Northcliff is the ultimate parent entity of the Group.

The Group is in the process of advancing and developing the Sisson Project. The Group’s continuing operations and the underlying value and recoverability of the amount shown for the mineral property interest, consisting entirely of the Sisson Project, is dependent upon the ability of the Group to obtain the necessary financing to complete the development and construction of the Sisson Project, obtaining the necessary permits to mine, and the future profitable production from the mine or proceeds from the disposition of its mineral property interest.

These Financial Statements are prepared on the basis that the Group will continue as a going concern which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Group’s current sources of funding consist of proceeds from the issuance of common shares of the Company as well as contributions by the Todd Group to the Sisson Project Limited Partnership (the “Partnership”) to be used to develop the Sisson Project.

Any change in the commitment or timing of debt and equity funding from existing or new shareholders of Northcliff, alternative capital providers, or existing or new limited partners to the Partnership may require Northcliff and the Partnership to curtail planned development activities or seek alternative sources of funding. The recoverability of the carrying value of its mineral property interest is dependent on ongoing access to financing and the successful development and commercial exploitation, or alternatively, the sale of the Sisson Project or the Company’s interest in the Partnership. As such, there is material uncertainty that casts significant doubt on the Company’s ability to continue as a going concern. Management has concluded that presentation as a going concern is appropriate in these Financial Statements based on the Company’s current financial position, and current plans for the Sisson Project for 2020.

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Northcliff Resources Ltd. Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance

These Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting (“IAS 34”), as issued by the International Accounting Standards Board (“IASB”). These Financial Statements do not include all of the information and footnotes required by International Financial Reporting Standards (“IFRS”) for complete financial statements for year‐end reporting purposes. These Financial Statements should be read in conjunction with the Group’s consolidated financial statements as at and for the year ended October 31, 2019. Results for the interim reporting period are not necessarily indicative of future results. The accounting policies and methods of computation applied by the Group in these Financial Statements are the same as those applied by the Group in its most recent annual consolidated financial statements which are filed under the Company’s profile on SEDAR at www.sedar.com.

(b) Basis of Presentation and Consolidation

These Financial Statements have been prepared on a historical cost basis, except for marketable securities which are stated at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information.

Intercompany balances and transactions, including any unrealized income and expenses arising from intercompany transactions, are eliminated in full on consolidation. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

There was no change in the composition of the Group during the current fiscal quarter.

(c) Significant Accounting Estimates and Judgements

The critical judgements and estimates applied in the preparation of these Financial Statements are consistent with those applied in the Group’s audited consolidated financial statements as at and for the year ended October 31, 2019.

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Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

Northcliff Resources Ltd.

3. MINERAL PROPERTY AND EQUIPMENT

Nine months ended July 31, 2020

Nine months ended July 31, 2020
	Mineral property
		acquisition and
	development costs			Equipment		Total
Cost
Balance at November 1, 2019	$	26,187,523	$	46,287	$	26,233,810
Additions duringtheperiod		235,070		–		235,070
Balance atJuly31, 2020	$	26,422,593	$	46,287	$	26,468,880
Accumulated amortization
Balance at November 1, 2019	$	–	$	44,700	$	44,700
Amortization for theperiod		–		536		536
Balance at July31, 2020	$	–	$	45,236	$	45,236
Carrying amount
Net carryingamount atJuly31,2020	$	26,422,593	$	1,051	$	26,423,644

The Company’s mineral property interest on the consolidated statement of financial position represents the 100% economic interest in the Sisson Project, located in New Brunswick, Canada.

The following deferred mineral development costs were recorded by the Group as additions to mineral property interest:

to mineral property interest:
	Three months ended July31, Nine months ended July31,
	2020 2019 2020 2019
Engineering and design Environmental and permitting Communityand sustainability	9,330 $ 13,111 $ 31,311 $ 55,837 $ 450 34,334 59,725 158,384 49,447 65,387 144,034 214,108
Total	59,227 $ 112,832 $ 235,070 $ 428,329 $

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Northcliff Resources Ltd.

Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

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4. INVESTMENT

The Group’s available‐for‐sale financial asset is comprised of an investment in Minfocus Exploration Corp. (“Minfocus”), a publicly listed company on the TSX Venture Exchange.

5. CASH

		July 31,		October 31,
		2020		2019
Bank demand deposits	$	1,334,263	$	1,139,475
Cash held in the Partnership included in the total cash balance above:
Cash available for use by the Partnership	$	107,616	$	324,490
Cash held as collateral against standbyletter of credit		874,000		185,000
Total cash held in the Partnership	$	981,616	$	509,490

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Northcliff Resources Ltd. Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

6. AMOUNTS RECEIVABLE AND PREPAID EXPENSES

		July 31,		October 31,
		2020		2019
Prepaid expenses	$	7,928	$	19,872
Sales tax receivable		5,726		34,677
Total	$	13,654	$	54,549

7. AMOUNTS PAYABLE AND OTHER LIABILITIES

Due within 12 months		July 31,		October 31,
		2020		2019
Amounts payable	$	33,797	$	170,289
Accrued liabilities		128,156		29,389
Sales taxpayable		1,418		2,569
Total	$	163,371	$	202,247

8. SHARE CAPITAL

(a) Authorized share capital

As at July 31, 2020 and October 31, 2019, the authorized share capital was comprised of an unlimited number of common shares (“Common Shares”) without par value. All issued shares are fully paid.

(b) Issued share capital

At July 31, 2020, there were 191,131,829 Common Shares outstanding (October 31, 2019 – 173,756,229).

On January 29, 2020, the Company announced that it has closed a private placement of 17,375,600 Common Shares at a price of $0.05 per Common Share with the Todd Group for gross proceeds to the Company of $868,780. The net amount of the private placement recorded in equity after deducting regulatory costs was $861,138.

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Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

Northcliff Resources Ltd.

(c) Reserves

Equity‐settled share‐based payments reserve

The equity‐settled share‐based payments reserve relates to equity‐settled share‐based payments described in Note 9.

Revaluation reserve

The investment revaluation reserve represents the cumulative gains and losses arising on the revaluation of the marketable securities (note 4) that have been recognized in other comprehensive income.

9. EQUITY‐SETTLED SHARE‐BASED PAYMENTS

The share‐based payment expense recorded in the Statement of Comprehensive Loss included the following:

included the following:
	Three months ended July31, Nine months ended July31,
	2020 2019 2020 2019
Option‐based award (note 9(a)) Share‐based award – Restricted Share Units (note 9(b)) Share‐based award – Deferred Share Units(note 9(c))	14,091 $ 26,048 $ 67,198 $ 26,048 $ 13,526 20,512 51,339 56,667 – 18,890 34,500 59,952
	27,617 $ 65,450 $ 153,037 $ 142,667 $

(a) Share purchase options (the “Options”)

The following summarizes the changes in the Options:

Continuity of Options	Nine months ended July 31, 2020 Nine months ended July 31, 2019
	Weighted Weighted Number of average Number of average Options exercise price Options exercise price
Outstanding – beginning balance Cancelled	5,700,800 $ 0.08 3,569,700 $ 0.16 (45,000) $ 0.07 – –
Outstanding– endingbalance	5,655,800 $ 0.08 3,569,700 $ 0.08
Exercisable – endingbalance	4,475,471 $ 0.09 2,114,800 $ 0.11

Awards vest in several tranches ranging from 6 months to 18 months.

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Northcliff Resources Ltd.

Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

The following table summarizes information on the Options outstanding as at the following reporting dates:

Options outstanding Exercise price	July 31, 2020 October 31, 2019
	Weighted average Weighted average Number of remaining Number of remaining Options contractual life Options contractual life outstanding (years) outstanding (years)
$ 0.07 $ 0.09 $ 0.12	3,541,000 2.78 3,586,000 3.52 650,000 0.45 650,000 1.20 1,464,800 0.03 1,464,800 0.78
Total	5,655,800 1.80 5,700,800 2.55

The following table summarizes information on the Options exercisable as at the following reporting dates:

reporting dates:
Options exercisable Exercise price	July 31, 2020 October 31, 2019
	Weighted average Weighted average Number of remaining Number of remaining Options contractual life Options contractual life exercisable (years) exercisable (years)
$ 0.07 $ 0.09 $ 0.12	2,360,671 2.78 3,586,000 3.52 650,000 0.45 650,000 1.20 1,464,800 0.03 1,464,800 0.78
Total	4,475,471 1.54 5,700,800 2.55

(b) Restricted Share Units (“RSU”)

The following summarizes the changes in the Company’s RSUs:

Number of RSUs	Nine months ended July31,
	2020 2019
Outstanding – beginning balance Granted	2,710,565 1,566,528 678,686 866,004
Outstanding– endingbalance	3,389,251 2,432,532
Vested – endingbalance	– –

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Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

Northcliff Resources Ltd.

(c) Deferred Share Units (“DSU”)

The following summarizes the changes in the Company’s DSUs:

Number of DSUs	Nine months ended July31,
	2020 2019
Outstanding – beginning balance Granted	2,307,940 1,701,169 619,230 914,803
Outstanding– endingbalance	2,927,170 2,615,972
Vested – endingbalance	2,927,170 2,615,972

10. RELATED PARTY TRANSACTIONS

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation.

Details of transactions with and amounts due to related parties are discussed below:

(a) Transactions with Key Management Personnel

Key management personnel (“KMP”) are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly, and by definition include the directors of the Company.

Transactions with KMP were as follows:

Transactions with KMP were as follows:
	Three months ended July31, Nine months ended July31,
	2020 2019 2020 2019
Remuneration for services of KMP employed under contract with HDSI(i) Remuneration of KMP directly paid by the Group(ii) Share‐based compensation	39,000 $ 136,000 $ 287,000 $ 457,000 $ – 24,000 21,000 72,000 19,526 65,000 117,526 142,000
Total	58,526 $ 225,000 $ 425,526 $ 671,000 $

(i) Certain of the Company's executive directors and senior management are employed by the Company under contract with Hunter Dickinson Services Inc. ("HDSI").

(ii) These payments represent fees paid to independent directors.

(b) Balances and transactions with related entities

Certain directors and employees of Hunter Dickinson Services Inc. ("HDSI") are KMP of the Company. Pursuant to certain services agreements between the Company and HDSI, the Group receives geological, engineering, corporate development, administrative, management and shareholder communication services from HDSI. The Group determines the nature, timing and extent of services received from HDSI. HDSI also incurs third party costs on behalf of the Group that are reimbursed by the Group at cost with no markup.

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Notes to the Condensed Consolidated Interim Financial Statements For the three and nine months ended July 31, 2020 and 2019 (Unaudited – Expressed in Canadian Dollars, unless otherwise stated)

Northcliff Resources Ltd.

The following is a summary of transactions with HDSI:

	Three months ended July31, Nine months ended July31,
	2020 2019 2020 2019
Services requested from HDSI and received based on annually set rates: Accounting, legal and administration Corporate communications and stakeholder affairs Corporate development Engineering Geology Management and directors’ fees	40,000 $ 39,000 $ 152,000 $ 131,000 $ 1,000 2,000 4,000 6,000 9,000 22,000 41,000 74,000 7,000 50,000 99,000 142,000 400 3,000 1,400 13,000 15,000 71,800 107,000 251,000
	72,400 187,800 404,400 617,000
Reimbursement of thirdpartycosts incurred byHDSI on behalf of the Group	20,000 $ 30,000 $ 73,000 $ 84,000 $

At July 31, 2020, the Group owed $ 451,999 to HDSI on account of services rendered and third party costs paid by HDSI (October 31, 2019 – $256,545).

11. EMPLOYMENT COSTS

Employees’ salaries[(i)] and benefits, included in various expenses were as follows:

Employees’ salaries(i)and benefits, included in	various expenses were as follows:
	Three months ended July31, Nine months ended July31,
	2020 2019 2020 2019
Project management and financing General and administration expenses Equity‐settled share‐basedpayments	47,296 $ 78,491 $ 175,823 $ 266,315 $ 67,387 133,509 355,297 423,685 27,617 65,450 153,037 142,667
	142,300 $ 277,450 $ 684,157 $ 832,667 $

(i) Salaries include remuneration of KMPs and amounts paid to HDSI for services (note 10(a)).

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