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Oregen Energy Corp. Management Reports 2021
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Management Reports
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(formerly Volt Energy Corp.)
Management's Discussion and Analysis
Year Ended December 31, 2020
(Expressed in Canadian Dollars)
Report Date – March 11, 2021
INTRODUCTION
The following Management's Discussion & Analysis ("MD&A") is intended to assist in the understanding of the trends and significant changes in the financial condition and results of operations of Supernova Metals Corp. (formerly Volt Energy Corp.) ("Supernova" or the "Company") for the year ended December 31, 2020. It should be read in conjunction with the audited annual financial statements for the year ended December 31, 2020 and the notes thereto.
The following information includes financial information derived from the financial statements of the Company, which have been prepared in accordance with International Financial Reporting Standards (IFRS). All financial results are reported in Canadian dollars.
The Company's head office is located at 1090 Hamilton Street, Vancouver, BC V6B 2R9. Additional information relating to the Company can also be found on the Company's website at www.supernovametals.com or on the SEDAR website at www.sedar.com.
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to as "forward-looking statements"). Often, but not always, forward-looking statements can be identified by the use of words such as "plans," "expects" or "does not expect," "is expected," "planned," "budget," "scheduled," "estimates," "continues," "forecasts," "projects," "predicts," "intends," "anticipates" or "does not anticipate," or "believes," or variations of such words and phrases, or statements that certain actions, events or results "may," "could," "would," "should," "might" or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any of our future results, performance or achievements expressed or implied by the forward-looking statements; consequently, undue reliance should not be placed on forward-looking statements.
Management believes the primary risk factors have been identified in the Risks and Uncertainties section of this document.
Forward-looking statements are based on a number of assumptions that may prove to be incorrect, including, but not limited to, assumptions about:
- general business and economic conditions;
- the potential mineralization and geological merits of the of the Cold Springs gold/silver property;
- the potential mineralization and geological merits of the of the Lac Saint Simon lithium property;
- the potential mineralization and geological merits of the of the Faraud and Lac Roy vanadium properties;
- the remaining reserves at the West Kingsford oil wells;
- the availability of equity and other financing on reasonable terms;
- our ability to procure equipment and operating supplies in sufficient quantities and on a timely basis;
- our ability to attract and retain skilled labour and staff; and
We caution you that the foregoing lists of important risk factors and assumptions are not exhaustive. Events or circumstances could cause our actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. We undertake no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of factors, whether as a result of new information or future events or otherwise, except as may be required under applicable laws.
DESCRIPTION OF BUSINESS
Supernova is a Canadian exploration company continued under the Business Corporations Act (British Columbia) on December 30, 2010, and its common shares are listed for trading on the TSX Venture Exchange (the "TSXV") under the symbol "SUPR". On September 2, 2020, the Company changed its name from Volt Energy Corp. to Supernova Metals Corp.
The Company is focused on adding, creating and increasing value through the acquisition and exploration of mineral resource properties as well as maintaining consistent cash flow from the development and production of traditional oil and gas assets in North America. The Company has a majority interest or an option to earn a majority interest in several exploration stage properties including the Lac Saint Simon lithium property, the Cold Springs gold/silver project, and the Lac Roy and Faraud vanadium properties. In addition, the Company currently holds several nonoperating oil interests in southeastern Saskatchewan which generate positive monthly cash flow.
LAC SAINT SIMON LITHIUM PROPERTY
In June 2017, the Company acquired the Lac Saint Simon Lithium property (the "LSS Property") located in westcentral Quebec from AgraFlora Organics International Inc. (CSE: AGRA). in exchange for 625,000 common shares of the Company.
About the LSS Property
The LSS Property is located approximately 2km from the boundary of Nemaska Lithium's (TSX:NMX) Whabouchi Project ("Whabouchi") and is roughly 480 hectares in size. According to Nemaska, Whabouchi is one of the most important spodumene lithium hard rock deposits in the world both in volume and grade. A Mineral Reserve estimate prepared by Met-Chem using the updated Mineral Resource block model suggests that Whabouchi hosts an estimated 20 million tonnes of Proven and Probable Reserves with a grade of 1.53% Li2O Open Pit and 7.3 million tonnes of Proven and Probable Reserves with a grade of 1.28% Li2O Underground. The mineralization hosted on the Whabouchi property is not necessarily indicative of the mineralization hosted on the Company's LSS Property. The bedrock geology of the LSS Property is composed primarily of pink granite with pegmatites and porphyritic granodiorite. Accessory amounts of amphibolite and diabase have been mapped on the LSS Property. All geological information is based on data available for download by the Quebec government and not by the Company.
The most prospective geology appears to be pegmatites set within the pink granite. Generally, lithium mineralization in the region has been concentrated in pegmatites, with Whabouchi being the classic example. Historically, Tuscana Lithium completed a NI 43-101 technical report on their Abigail property, which covered a large land position in the belt that went as far north as the southern boundary of the LSS Property. More recently, AGRA conducted an initial exploration program on the LSS Property and is expecting completion of an updated NI 43-101 report in short order. The technical report encompasses the preliminary reconnaissance exploration program that was conducted, along with the recently completed unmanned aerial vehicle ("UAV") geophysical survey.
During the year ended December 31, 2018, the Company reviewed the carrying value of its exploration and evaluation assets and determined there were impairment indicators present. The Company was unable to raise sufficient capital with which to explore the properties and as a result was unable to advance the development of the properties in any meaningful way. Accordingly, the Company recorded an impairment loss of $327,240 to reduce the carrying value to a nominal amount of $1 on the statement of financial position.
In February 2021, the Company entered into an option agreement with 79 Resources Ltd. (the "Optionee") wherein the Optionee can acquire 100% of the LSS Property by making cash and share payments in addition to exploration expenditures over a three year period. (Refer to Subsequent Events)
COLD SPRINGS GOLD/SILVER PROPERTY
On September 1, 2020, the Company entered into an option agreement with Silver Range Resources Ltd. ("Silver Range") (TSXV:SNG) wherein the Company can acquire a 75% interest in the Cold Springs gold/silver project by paying Silver Range an aggregate of $300,000 in cash and performing a minimum of 2,000 meters of drilling on the Property over a three year period. The Property is subject to a 2.5% NSR that can be bought down to 1% in exchange for a cash payment of $1,250,000.
The Cold Springs property is located in the western Great Basin of Nevada and covers high-grade epithermal gold-silver mineralization. It lies approximately 80km east of Fallon and is accessible by road. It covers an approximately 800m by 350m hill-top exposure of altered and silicified rhyodacite breccia which hosts a series of northwest-striking, sub-parallel gold and silver-bearing quartz veins. The property consists of 22 Federal Lode Claims centered on a small hill along the range front.
Historic sampling by Silver Range and others has yielded values of up to 64.9 g/t gold and 1,770 g/t silver from vein material. Limited RC drilling on the property has not adequately tested the mineralized system.
Four large low sulphidation epithermal veins are exposed in a wider 500 x 200 metre area of silicification. Veins are up to 70 metres long and 2.0 metres thick. All indications are the exposed mineralization is on the periphery of a larger system. Prior geological mapping and drill results indicate that the host tuffs, the large silicified breccia and the high-grade veins dip towards the Cold Springs valley and are down-dropped beneath alluvium across a range front fault.
The mineralization exposed on the hill at Cold Springs appears to be merely the eastern periphery of a larger epithermal system. Geophysical surveys have identified a large resistivity low west of the range front fault and the exposed mineralization in basement rocks beneath alluvium. This is interpreted to be argillic alteration surrounding the core of the hydrothermal system.
Supernova has taken some additional samples on the property which has yielded values of up to 12.75 g/t gold and 709 g/t silver. In addition, a ground-based magnetic geophysical survey was completed over the Cold Springs property in October 2020. The immediate aim of the geophysical program is to verify and better delineate the location and orientation of the known structures associated with the mineralization found on the hillside and in the valley to the west. The information obtained has identified some additional anomalies on the hillside that were not previously tested and further support the theory that the geophysical anomaly in the valley to the west may be a source for the mineralization discovered in historical drill programs at Cold Springs.
In February 2021, the Company commenced a diamond drill program at Cold Spring wherein it intends to drill up to 2,000 metres (6,600 feet) to test two geophysical anomalies. Results will be released as they are available.
CLANTON HILLS SILVER PROPERTY
On August 31, 2020, the Company entered into an option agreement with Allegiant Gold Ltd. ("Allegiant") (TSXV:AUAU) wherein the Company can acquire up to a 50.1% interest, subject to a 2% NSR royalty, in the Clanton Hills silver project by issuing 2,000,000 common shares to Allegiant on execution of the agreement, paying an aggregate of US$550,000 in cash and common shares and incurring exploration expenditures of US$1,500,000 over a three year period. The Company can increase its ownership interest to 70% by paying Allegiant an additional US$3,000,000, 50% of which can be settled in common shares at the Company's election.
The Clanton Hills project, located 70 miles west of Phoenix, Arizona, consists of 32 wholly-owned mining claims, subject to underlying royalties. The claims are centered on an isolated, bedrock knob of silicified breccia measuring about 25 meters by 90 meters. The knob is completely surrounded by a pediment surface, where gravel cover is likely to be 5 to 20 meters thick.
CLANTON HILLS SILVER PROPERTY (continued)
In December 2020, the Company completed a five hole reverse circulation drill program totaling 1,000 metres on the Clanton Hills property. No significant assays were received from the samples recovered so the Company intends to abandon the property.
FARAUD AND LAC ROY VANADIUM PROPERTIES
On January 2, 2020, the Company acquired a 100% interest in the Lac Roy and Faraud vanadium properties located in Quebec in exchange for 3,000,000 common shares which were valued at $180,000.
Faraud
The Faraud Vanadium Showing ("Faraud") was initially discovered in 2001 by local prospectors. The geological assessment report disclosed the best grades on the property were received from samples near Lac des Ingénieurs. These samples had vanadium oxide (V2O5) values as high as 0.27%. A total of 28 grab samples were taken. A 3.5 metre trench was subsequently completed, and the best sample quoted and disclosed, GT-01-033C, is a selected sample and not necessarily representative of all mineralization hosted on the property. Faraud is comprised of twenty-four (24) claims totaling approximately 1,326 hectares in the Saguenay region of Quebec approximately 90 kilometres north of Chicoutimi-Jonquiere.
Lac Roy
The Lac Roy Showing ("Lac Roy") is also situated in the Saguenay – Côte Nord region. Lac Roy was discovered by local prospectors in 2001. The geological assessment report summarized work on the Lac Roy and the surrounding area highlighted significant vanadium values. The best vanadium oxide (V2O5) assay from this work program was 1,610 ppm (0.16%). A total of 15 grab samples were taken with a mean vanadium value of 195ppm. The best sample disclosed is a selected sample and not necessarily representative of all mineralization hosted on the property. Lac Roy is comprised of twenty-three (23) claims totaling approximately 1,278 hectares.
Both properties are road accessible and the bedrock geology is predominately composed of the Lac Saint Jean Anorthosite (LSJA). Vanadium mineralization is often associated with anorthositic complexes. The LSJA has been dated to be 1157 ±3Ma making it late Proterozoic in age. The LSJA is classified as an AMCG (Anorthosite–Mangerite–Charnockite– Granite) suites, which are characteristic of the Proterozoic. This suite includes anorthosite, leucogabbro, leuconorite, leucotroctolite and Nelsonite. An example of another of these complexes is the Rogaland Anorthositic Province in Norway.
OIL PROPERTIES
West Kingsford, Saskatchewan
On January 1, 2020, the Company executed an agreement to acquire certain non-operating oil interests in southeastern Saskatchewan in exchange for a cash payment of $5,000, and a contingent performance bonus of up to $40,000 payable after one year of production. In addition, the Company assumed the reclamation liability for its proportional interest in these wells which has been determined to be $71,202.
As at December 31, 2020, the Company had a working interest in the following oil properties in the West Kingsford area of Saskatchewan.
| Working | Net Revenue | |||
|---|---|---|---|---|
| Well# | Well Identifier | Interest(%) | Interest(%) | WellStatus |
| 1 | Kingsford 141/08-13-004-07 W2M | 45.90 | 39.02 | Active |
| 2 | Kingsford 91/06 HZ 1D08-13-1D06-18-04-06 W2M | 13.00 | 13.00 | Active |
| 3 | Kingsford 92/07 HZ 2C5-18-1D7-13-04-07 W2M | 45.90 | 39.02 | Shut-in |
| 4 | Kingsford 4D8-14/2A11-13-004-07 W2 | 10.50 | 8.93 | Active |
| 5 | Steelman 191/07-18-004-06W2 | 13.00 | 13.00 | Active |
Due to the fact that Well 2 is not generating positive cash flow and Well 3 has been shut in for an extended period of time, both wells were fully impaired during the year.
COMMITMENTS
As at December 31, 2020 and the Report Date, the Company had no commitments.
RESULTS OF OPERATIONS
Three Month Period Ended December 31, 2020
The Company had oil sales, net of royalties, of $25,751 during the three month period ended December 31, 2020 ("Current Quarter") compared to $Nil during the three month period ended December 31, 2019 ("PY Quarter"). The Company only acquired its oil interests in the 2020 fiscal year so it had no oil income generating assets during the PY Quarter.
Expenses for the Current Quarter increased by $1,073,690 versus the PY Quarter due to an impairment recorded on the Clanton Hills property as well as increased professional and consulting fees associated with due diligence performed on new acquisition opportunities.
Year Ended December 31, 2020
The Company had oil sales, net of royalties, of $86,770 during the year ended December 31, 2020 ("Current Year") compared to $Nil during the year ended December 31, 2019 ("Prior Year"). The Company only acquired its oil interests in the Current Year and had no income generating assets during the Prior Year.
Expenses for the Current Year increased by $1,407,683 versus the Prior Year due to an impairment recorded on the Clanton Hills property as well as increased professional and consulting fees associated with due diligence performed on new acquisition opportunities.
SELECTED ANNUAL INFORMATION
The Company's functional and presentation currency is the Canadian Dollar for all years presented.
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| ($) | ($) | ($) | |
| Oilsales | (101,220) | - | 46,522 |
| Net loss | (1,576,165) | (214,346) | (1,171,060) |
| Comprehensive loss | (1,576,165) | (214,346) | (1,171,060) |
| Loss per share –basic and diluted | (0.05) | (0.02) | (0.11) |
| Total assets | 974,965 | 144,025 | 115,320 |
| Total long-term liabilities | 132,600 | - | - |
| Cash dividends | - | - | - |
SELECTED QUARTERLY INFORMATION
The following table summarized the results of operations for the eight most recent quarters.
| Three monthperiodended | ||||
|---|---|---|---|---|
| Dec 312020 | Sep 302020 | Jun 302020 | Mar 312020 | |
| ($) | ($) | ($) | ($) | |
| Oilsales, net of royalties | 22,825 | 25,785 | 14,326 | 23,834 |
| Expenses | 182,366 | 238,511 | 141,080 | 84,139 |
| Net income (loss) | (1,150,051) | (212,726) | (127,103) | (86,285) |
| Loss per share | (0.04) | (0.01) | (0.00) | (0.00) |
| Three month periodended | ||||
|---|---|---|---|---|
| Dec 312019 | Sep 302019 | Jun 302019 | Mar 312019 | |
| ($) | ($) | ($) | ($) | |
| Oilsales, netof royalties | - | - | - | - |
| Expenses | 84,609 | 20,871 | 116,096 | 34,512 |
| Net income (loss) | (84,609) | 20,871 | (116,096) | (34,512) |
| Loss per share | (0.01) | 0.00 | (0.01) | (0.00) |
Notes on Material Quarterly Variations:
December 31, 2020 – reported an increase in expenses due an impairment charge recorded against the Clanton Hills property.
March 31, 2020 – reported sales from newly acquired oil assets.
SUBSEQUENT EVENTS
Subsequent to December 31, 2020, the Company entered into an option agreement with 79 Resources Ltd. (the "Optionee"), a publicly traded company on the Canadian Securities Exchange, wherein the Optionee can acquire up to a 100% ownership interest in the Lac Saint Simon lithium project in stages over 36 months.
| Date | CommonShares | Cash | ExplorationExpenditures |
|---|---|---|---|
| ($) | ($) | ||
| Within 5 Days of the removal of the due diligence | |||
| provision (received) | 250,000 | 25,000 | Nil |
| On or before the first anniversary of the Exchange | |||
| Approval Date | 250,000 | 30,000 | 100,000 |
| On or before the second anniversary of the | |||
| Exchange Approval Date | 500,000 | 50,000 | 200,000 |
| On or before the third anniversary of the Exchange | |||
| Approval Date | 500,000 | 50,000 | 400,000 |
| Total | 1,500,000 | 155,000 | 700,000 |
The Company will retain a 2% NSR on the Property, subject to a buyback option wherein the Optionee can acquire one half of the NSR in exchange for a cash payment of $1,000,000.
OUTSTANDING SHARE DATA
As at December 31, 2020 and the Report Date, the Company had 42,467,712 common shares outstanding.
As at December 31, 2020 and the Report Date, the Company had warrants outstanding as follows:
| Expiry Date | Number ofWarrants | ExercisePrice |
|---|---|---|
| ($) | ||
| September 4, 2021 | 312,900 | 0.20 |
| June 4, 2022 | 1,000,000 | 0.07 |
| 1,312,900 | 0.10 |
As at December 31, 2020 and the Report Date, the Company had stock options outstanding as follows:
| Expiry Date | Number ofOptions | ExercisePrice |
|---|---|---|
| ($) | ||
| December 3, 2022 | 250,000 | 0.17 |
| May 2, 2024 | 300,000 | 0.07 |
| October10, 2024 | 125,000 | 0.05 |
| June 2, 2025 | 100,000 | 0.05 |
| 775,000 | 0.10 |
RELATED PARTIES TRANSACTIONS
Key management includes the Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), directors and companies controlled by them. The Company incurred the following transactions with key management of the Company during the years ended December 31, 2020 and 2019.
| 2020 | 2019 | |
|---|---|---|
| ($) | ($) | |
| Share-based compensation in the form of vested stock options | ||
| issued to directors of the Company | 26,739 | 90,400 |
| Director feesand mineral royalties paid or accrued to J. Lewis | ||
| Dillman, a director of the Company | 13,058 | 12,000 |
| Interest on notes payable owing to a Corporation controlled by | ||
| Sean McGrath, CEO of the Company | 111 | - |
| Professional and director fees paid or accrued to the CEO of the | ||
| Company or a corporation controlled by the CEOof the | ||
| Company | 132,000 | 69,500 |
| Geological and director fees paid or accrued to Roger March, a | ||
| director of the Company | 13,432 | - |
| Director fees recovered from former directors of the Company | - | (10,000) |
| Consulting and director fees paid or accrued to Ken Brophy, a | ||
| director of the Company, or a corporation controlled by Ken | ||
| Brophy | 89,500 | 16,500 |
| 274,840 | 178,400 |
As at December 31, 2020, a total of $44,004 (2019 - $41,150) was included in accounts payable and accrued liabilities owing to the directors of the Company. The debts were non-interest bearing and had no specific terms of repayment.
LIQUIDITY
The Company's cash position increased to $527,607 on December 31, 2020 from $129,492 on December 31, 2019. In addition, working capital increased to $490,263 from $76,374 on December 31, 2019. These increases were primarily the result of equity financings completed in June and September 2020. While the Company was able to acquire some cash generating assets at a very reasonable price, these assets are not able to cover monthly operating costs and corporate overhead. The situation was temporarily worsened by the collapse in the price of oil price which occurred in the second quarter of 2020. However, the price of oil has since recovered and stabilized around US$50/bbl.
CAPITAL MANAGEMENT
The Company's policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of the components of shareholders' equity.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may attempt to issue new shares, issue debt and acquire or dispose of assets.
The Company is not subject to any externally imposed capital requirements. There have been no changes to the Company's approach to capital management during the year ended December 31, 2020.
OFF-BALANCE SHEET ARRANGEMENTS
The Company did not enter into any off-balance sheet arrangements during the year ended December 31, 2020.
RISKS AND UNCERTAINTIES
The Company is in the energy exploration and development business and as such is exposed to a number of risks and uncertainties that are not uncommon to other companies in the same business. Exploration for and development of mineral properties involves a high degree of risk, and the cost of conducting programs may be substantial and the likelihood of success is difficult to assess.
Beyond exploration risk, management is faced with other possible risks which include the following:
Financial Market Risk
The Company is in part dependent on the equity markets as a source of capital for making acquisitions or completing exploration programs. Accordingly, the Company's capital resources and ability to make acquisitions or incur exploration expenditures are largely determined by the strength of the resource markets and by the status of the Company's projects in relation to these markets, and its ability to compete for the investor support of its projects.
Title Risk
The Company has investigated its right to explore and exploit its properties and, to the best of its knowledge, there are no known encumbrances. However, the results of the Company's investigations should not be construed as a guarantee of title.
Commodity risk
Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for gold, silver and petroleum are impacted by world economic events that dictate the levels of supply and demand. The Company had no hedging contracts in place as at or during the year ended December 31, 2020.
Environmental Risk
The Company seeks to operate within environmental protection standards that meet or exceed existing requirements in the country in which the Company operates. Present or future laws and regulations, however, may affect the Company's operations. Future environmental costs may increase due to changing requirements or costs associated with exploration and the developing, operating and reclamation of mineral properties. Programs may also be delayed or prohibited in some areas.
Value Risk
There is no material risk as the Company has already previously impaired much of the value of its exploration and evaluations projects.
Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, then actual results may vary materially from those described on forward-looking statements.
OUTLOOK
The Company currently generates positive cash flow from is southeastern Saskatchewan oil interests and maintains a lean budget for overhead costs. The Company made two exploration stage precious metal property acquisitions in August 2020. The Cold Springs project is currently being drill tested and the Company expects to have results in March 2021. The Clanton Hills did not prove to be a successful target and will be abandoned. In addition, the Company has optioned its Lac Saint Simon lithium project which will allow the property to be further explored and developed without the need for additional dilution of the Company.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The information provided in this report, including the financial statements, is the responsibility of management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company's financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
The following areas required a significant degree of estimation:
Recoverability of exploration and evaluation assets
Management has determined that exploration, evaluation and related costs incurred which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including geologic and other technical information, history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, scoping and feasibility studies, accessible facilities and existing permits.
Recoverability of oil properties
The oil and gas properties are depreciated on a unit of production ("UOP") basis at a rate calculated by reference to proved reserves determined in accordance with National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" and incorporate the estimated future cost of developing and extracting those reserves. Proved reserves are determined using estimates of oil in place, recovery factors and future prices. Future development costs are estimated using assumptions as to the number of wells required to produce the reserves, the cost of such wells and associated production facilities and other capital costs. Proved reserves are estimated using independent reserve engineer reports and represent the estimated quantities of oil which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable.
CRITICAL ACCOUNTING ESTIMATES (continued)
Share-based compensation
The fair value of stock options issued are subject to the limitation of the Black-Scholes option pricing model, which incorporates market data and involves uncertainty in estimates used by management in the assumptions. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of share prices, and, as a result, changes in subjective input assumptions can materially affect the fair value estimate.
Decommissioning provisions
Restoration costs will be incurred by the Company in connection with certain exploration activities conducted on exploration and evaluation assets and oil properties. The Company estimates abandonment and reclamation costs based on a combination of publicly available industry benchmarks and internal site-specific information. The ultimate restoration liability is uncertain and can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques, experience at other sites, or changes in the risk-free discount rate. The expected timing and amount of expenditure can also change in response to changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the provisions established which would affect future financial results.
Income taxes
The calculation of income taxes requires judgment in applying tax laws and regulations, estimating the timing of the reversals of temporary differences, and estimating the reliability of deferred tax assets. These estimates impact current and deferred income tax assets and liabilities, and current and deferred income tax expense (recovery).
ADDITIONAL INFORMATION
On September 3, 2020, the Company announced the appointment of Roger March appointed to the board of directors of the Company and Lindsay Hamelin as corporate secretary.
On January 5, 2021, the Company announced the appointment of Dr Kent Ausburn, PhD, PG to the board of directors to replace J. Lewis Dillman.
The Company held its annual general meeting of shareholders on October 19, 2020. All of managements' resolutions received overwhelming approval.
Additional information concerning the Company can be accessed on the Company's website at www.supernovametals.com or on SEDAR at www.sedar.com.
CORPORATE INFORMATION
| Directors: | Sean McGrathKen BrophyRoger MarchDr. Kent Ausburn |
|---|---|
| Officers: | Sean McGrath–CEO and CFOLindsay Hamelin –Corporate Secretary |
| Auditor: | Davidson and CompanyLLPSuite 1200 –609 GranvilleStreetVancouver, BC, V7Y 1G6 |
| Legal Counsel: | DuMoulin Black LLP1000 –595 Howe StreetVancouver, BC, V6C 2T5 |
| Transfer Agent: | Computersharend Floor –2510 Burrard StreetVancouver, BC,V6C 3B9 |