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P2 Gold Inc. — Management Reports 2020
Apr 28, 2020
47643_rns_2020-04-27_06759499-ccfd-4067-9737-1f844bfc91dc.pdf
Management Reports
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Management’s Discussion and Analysis For the year ended December 31, 2019
Filed April 27, 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Management’s discussion and analysis (MD&A) is current to April 27,2020 and is management’s assessment of the operations and the financial results together with future prospects of Central Timmins Exploration Corp. (“CTEC” or the “Company”). This MD&A should be read in conjunction with the audited financial statements for December 31, 2019 and related notes, prepared in accordance with International Financial Reporting Standards (“IFRS”). All figures are in Canadian dollars unless stated otherwise. This discussion contains forward-looking statements that are not historical in nature and involves risks and uncertainties. Forwardlooking statements are not guarantees as to CTEC’s future results as there are inherent difficulties in predicting future results. Accordingly, actual results could differ materially from those expressed or implied in the forwardlooking statements. The Company has adopted National Instrument 51-102F1 as the guideline in presenting the MD&A.
This Management and Discussion and Analysis was authorized for issuance by the Board of Directors of the Company on April 27, 2020.
Description of Business
The Company is a junior mining, exploration and development company engaged in the acquisition, exploration and development of mineral resource properties in Canada. The Company was formed under the Business Corporations Act of Canada as Central Timmins Exploration Corp. on November 10, 2017 by articles of incorporation.
The business objective of the Company is acquiring land and exploring for base and precious metals deposits in the Porcupine Mining Camp of Northeastern Ontario.
On December 22, 2017 the Company entered into a definitive purchase and sale agreement (the "Agreement") to purchase the Timmins mineral exploration properties of Claim Post Resources Inc. ("Claim Post" or “CPS”), for a cash consideration payable at closing of $350,000 and a Net Smelter Returns Royalty (the "NSR") payable to Claim Post that varies from 1% to a maximum of 2%, depending upon the claims and the preexisting NSR burden. The NSR provides CTEC the option to buy Claim Post's NSR for cash consideration of $1,500,000 within 24 months of closing, and if the buyout is not fully exercised, the NSR payable to CTEC is capped at $5,000,000 total, proceeds net (excluding any buyout payments) to Claim Post. The transaction closed on January 8, 2018 and the $350,000 payment to Claim Post was made. The transaction was subject to regulatory and third-party approvals and customary conditions precedent. No finder's fees were payable in connection with the transaction.
The Company's initial focus was on closing the transaction with Claim Post. With successful completion in January 2018, CTEC engaged a consultant to complete a National Instrument 43-101 (“NI 43-101”) technical report for the acquired properties and has completed an Initial Public Offering to provide funding for working capital and initial exploration activities.
The Company does not hold any interests in producing or commercial mineral deposits. The Company has no production or other material revenue. There is no operating history upon which investors may rely. Commercial development of any kind will only occur in the event that sufficient quantities of mineral resources containing economic concentrations of minerals are discovered . If, in the future, a discovery is made, substantial financial resources will be required to establish mineral resources and/or mineral reserves. Additional substantial financial resources will be required to develop mining and processing facilities for any mineral resources and/or mineral reserves that may be discovered. If the Company is unable to finance the establishment of mineral reserves or the development of mining and processing facilities it may be required to sell all or a portion of its interest in such property to one or more parties capable of financing such development.
Additional information is accessible at the Company’s website www.centraltimmins.com or through the Company’s public filings at www.sedar.com .
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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As at April 27, 2020, the directors and officers of the Company are:
| Neville Dastoor | Chairman and Director |
|---|---|
| Joe Ovsenek | Director |
| Julian Kemp | Director |
| John Sullivan | Director |
| Wes Roberts | Director |
| Christopher Hopkins | Chief Financial Officer and Corporate Secretary |
During March 2018, the Company retained Roscoe Postle and Associates Inc. (“RPA”) to prepare an NI 43101 Report on the Timmins Area Project. Mr. Paul Chamois, M.Sc., P.Geo. was the independent Qualified Person on the file.
Overall Performance
The following paragraphs provide an analysis of the financial condition of the Company, results of operations, trends, events, uncertainties, and industry and economic factors that affect the Company’s performance for the year ended December 31, 2019.
Total exploration and evaluation costs were $1,223,863 for the year ended December 31, 2019 compared to $496,069 for the year ended December 31, 2018, to a cumulative total of $2,084,518 (2018 – $496,069).
As at December 31, 2019, the Company had 8,558,331 common shares outstanding.
As at December 31, 2019, the Company’s cash position was $570,337 (December 31, 2018 - $2,068,312). During the year ending December 31, 2018, the Company closed private placements of 5,191,666 shares for aggregate proceeds of $3,270,000. The Company will primarily rely on equity financing to raise capital in the future.
Recent Events
On July 2, 2019 Christopher Hopkins was appointed Chief Financial officer and Corporate Secretary.
On July 2, 2019, the Company issued 208,333 stock options to certain directors and officers of the Company at an exercise price of $0.30 expiring July 2, 2024.
On November 4, 2019 the Company completed the previously announced definitive agreement with Goldcorp Canada Limited and Goldcorp Inc. (the “Porcupine Joint Venture”) for the sale of certain of the Company’s non ‐ core mineral claims (the “Claims”) to the Porcupine Joint Venture for aggregate proceeds of $258,624. The Claims consist of nine patented mineral claims in Deloro Township, Timmins, Ontario with a total area of approximately 132 hectares.
On January 10, 2020 the Company announced that at the special meeting of shareholders held on January 9, 2020, a special resolution was passed by shareholders authorizing and approving an amendment to the Corporation's articles to affect a consolidation (the "Share Consolidation") of the issued and outstanding common shares of the Company. Subsequent to the special meeting, the Board of Directors elected to proceed with the Share Consolidation on the basis of one (1) post-consolidation Common Share for every six (6) pre-consolidation Common Shares. All references to the number of shares, option and warrants and per share amounts have been retroactively restated to reflect the consolidation.
As at December 31, 2019, the Company had 51,350,000 Common Shares issued and outstanding. Upon completion of the Share Consolidation, the number of post-consolidation Common Shares issued and outstanding was, 8,558,331 (on a non-diluted basis). Any fractional Common Share resulting from the Share Consolidation will be rounded down to the nearest whole number and any such fractional interest will be cancelled without consideration.
The Share Consolidation was approved by the TSX Venture Exchange on January 14, 2020, and the common shares started trading on the TSX Venture Exchange on a consolidated basis at the opening of trading on January 14, 2020, under the current symbol "CTEC".
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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On April 16, 2020 the Company announced the closing of a non-brokered private placement for aggregate gross proceeds of $500,000 (the “Offering”). The Offering consisted of the sale of 10,000,000 common shares of the Company (the "Shares") at a price of $0.05 per Share for aggregate gross proceeds of $500,000. All securities issued pursuant to the Offering are subject to a four month and one day hold period under applicable securities laws, expiring on August 16, 2020. Joseph Ovsenek, the newly appointed Company Board director participated in the Offering and will hold 10.8% of the Company's common shares outstanding after the close of this Offering. Ken McNaughton, the current Vice President and Chief Exploration Officer of Pretium Resources Inc., also participated in the Offering and will hold 10.8% of the Company's common shares outstanding after the closing of the Offering
Subsequent to the closing of the private placement, Joseph Ovsenek was appointed to the Board of Directors of the Company. Concurrently with this appointment, Mr. Charles Gryba has resigned as a director and President and Chief Executive Officer of CTEC. Mr. Gryba will continue his relationship with CTEC as a technical consultant. The Company is considering various options to bring on a new President and CEO.
Subsequent to year-end, financial markets have been negatively impacted by the novel Coronavirus or COVID-19, which was declared a pandemic by the World Health Organization on March 12, 2020. This has resulted in significant economic uncertainty and consequently, it is difficult to reliably measure the potential impact of this uncertainty on our future financial results.
Exploration and Development Summary
As at December 31, 2019, CTEC held a total of 653.5 (December 31, 2018 – 511) claim and patented units totalling approximately 14,000 ha in the Porcupine Mining District (“The Timmins Area Project”), of which 77 (December 31, 2018 – 89) are patented claims included in the Dayton Agreement, the Racetrack Agreement and the Goldstone Agreement, and 576.5 (December 31, 2018 – 422) are unpatented claim units.
With the introduction of computer staking in Ontario, CTEC continues to stake claim units mainly in Robb, Turnbull and Bonar townships covering ground that has good massive sulphide exploration potential for VMS type deposits. As at December 31, 2019 and December 31, 2018, the Company held the following unpatented claim units:
| As at, | December 31, 2019 December 31, 2018 |
|---|---|
| # of Claim Units # of Claim Units |
|
| Deloro Township Ogden Township Mountjoy Township Godfrey Township Jamieson Township Jessop Township Price Township Robb Township Turnbull Township Bonar Township Cote Township Massey Township Bristol Township Whitesides Township |
39.5 44 58 84 167 197 41.5 67 9 12 6 6 3.5 6 50 5 69 1 109 - 6 - 1 - 2 - 15 - |
| 576.5 422 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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On October 24, 2018 the Company announced that it engaged a drilling contractor in preparation for the Company’s initial 5,000-metre diamond drill program and provided an outline of its near-term exploration plan on its Timmins Project in Ontario, Canada.
CTEC has broken down the Timmins Project into four distinct township projects: Deloro and Ogden are located on the south side of the Porcupine Destor Fault Zone (“PDFZ”); and Mountjoy and the Four Corners Project on the north side of the PDFZ (covering areas in Godfrey, Robb, Jamieson and Turnbull townships).
Highlights
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In 2019, reinterpretation of 81 Kerr Addison reverse circulation drill holes plus the Osisko – CPS JV airborne electromagnetic (“EM”)/magnetic/radiometric survey indicate that Tisdale volcanics extend into Mounjoy Township. Ground induced polarization (“IP”) in Q4 of 2019 confirmed five airborne EM – Mobile Metal Ion (“MMI”) gold and base metal anomolies within the newly interpreted volcanics. Simiarly, an MMI-intrepreted porphyry on a trend SE of the Caron porphyry generated IP anomolies over a 1.5km strike length; the porphyry is also anomolus in gold and base metals. There are 25 permitted drill targets on CTEC land in Timmins plus Bonar Township, the latter located some distance west of the Porcupine Camp.
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Drilling Contract and Initial 2018 Drill Targets
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Signed a drilling contract for a 5,000-metre phased diamond drill program that was completed in Q4, 2018 and Q1, 2019.
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Drilling commenced in late October 2018 on the Deloro Project.
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Initial drilling focused on an area where drill hole DDH #5, completed to a depth of 220m by Dictore Porcupine Gold Mines Limited[(1)] in 1939, intersected a total of 45 metres of gold-mineralized core that averaged 2.7 g/t in three distinct zones, 2.2 g/t Au over 11m, 1.8 g/t Au over 12m and 3.3 g/t Au over 22m of core length. Each of the intersections also had one or more high-grade portions ranging from a low of 6.3 g/t Au to 21.9 g/t Au all with 1.5m sample core lengths.
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(1) Historic drill intercepts and mining data from the Dictore Property were sourced from historic files and assay logs - Assessment File 444 of Deloro Township; Timmins MNDM Office. QA/QC procedures were not found. Historical results are not necessarily indicative of future results. CTEC twinned the 1939 Dictore DDH #5 to confirm the accuracy of the 1939 assaying. The results are discussed below,
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MMI Geochemical Sampling in 2012 and 2018
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1,800 MMI samples in Deloro and Ogden Townships and check sampling of 200 MMI locations in Mountjoy Township and on the Four Corners project in 2018.
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Approximately 6,000 MMI samples taken to date on the four projects.
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SGS Lakefield completed MMI assaying for 53 elements, generating 300,000 individual assays.
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Serge Nadeau, PhD completed analysis of the entire 6,000 sample MMI data base; initially in 2012 then ongoing through 2018. Mr. Nadeau’s analysis generated 20 targets spread over the four Timmins Project areas.
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On January 21, 2019 the Company announced the results of the late-2018 four-diamond drill hole program to confirm the geology of Dictore Porcupine’s DDH #5 in Deloro Township. Gold assays ranged from 0.10 g/t to 3.94 g/t over narrow core widths. The best assay in CTEC's DDH #1 was from a pyritic zone, which assayed 3.94 g/t Au over a 0.5m core width from 222.8m to 223.3m down the hole.
CTEC holes DDH #2 and DDH #3 were drilled at right angles to DDH #1 and intersected anomalous Au ranging from 10 ppb to 300 ppb. The wide IP and strong magnetic responses seen were due to considerable widths of 2% to 3% sulphides and up to three parallel iron formations, each with various percentages of pyrrhotite mineralization.
DDH #4 tested a similar IP, magnetic and Very Low Frequency (“VLF”) electromagnetic target 200m to the southwest of DDH #1. Iron formations of varying widths and pyrrhotite content explained the geophysical responses.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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CTEC DDH #5 was drilled in February 2019 to check an IP and MMI anomaly in Deloro Township along Pine Street South just south of the PDFZ and about 2km west of DDH’s #1 to #4. DDH #5 hole had assays in the ppb-Au range and the bottom half of the hole was in diorite. A review of the data from San Gold historic drilling and CTEC holes #1 to #5 indicates that the diorite maps as a magnetic low, an IP high-resistivity anomaly and low-chargeability anomaly. Gold values appear to be near the edges of the diorite contact.
The Company completed a 10km line cutting and IP program in Deloro Township covering the area between CTEC’s DDH #1 to #5 and the previous historical drilling of 20 holes on the Dayton Gold Zone. The Dayton Zone, which is a gold mineralized iron formation, has been geologically modelled and several fold nose features have been identified. Gold mineralization is higher grade in the fold locations.
A geophysical consultant was retained by CTEC to review and consolidate the four types of ground and airborne geophysics that have been covered the Company’s and predecessors’ properties over the past 20 years and reinterpret the geology of the area to identify new drill targets. The entire Deloro land package is now permitted for drilling as the City of Timmins has granted approval for CTEC to drill on the Deloro patented surface rights owned by the City of Timmins where CTEC owns the patented mineral rights.
In the 2019 winter drill program north of the PDFZ, three targets were tested. DDH #6 tested an MMI anomaly along the south boundary of Mountjoy Township. The hole intersected barren sediments prior to being lost in a major fault zone. Due to slow drilling progress a second drilling contractor was retained. The initial contractor moved to Godfrey Township and the Caron claims and the second contractor mobilized to a VMS-modelled MMI anomaly in the central part of Mountjoy Township. Three holes were drilled at both locations.
Godfrey Township holes #7, #8 and #9 each intersected 50m to 100m of altered porphyry with frequent highlycontorted quartz veining, occasional tourmaline and generally fine-grained pyrite. The best assay was 2.46 g/t Au over a 0.6m core width hosted by porphyry from 233.3 to 223.9m in DDH #8. Geological modelling of CTEC DDHs #7, #8 and #9 along with four 1936 – 1938 drill holes indicates that the porphyry is at least 500m long, is more than 50m thick and is open below a 300m depth. Narrow Intersections of +1.00 g/t Au plus wide areas of 100 to 300 ppb Au have been intersected along 400m of porphyry strike length.
The geological implications of the Caron porphyry system are encouraging as it is the first confirmed goldbearing porphyry drilled on the east side of the Montreal River fault. The Explor Resources Inc. (“Explor” now Galleon Gold) porphyry-hosted gold system located 3km south of the Caron porphyry is on the west side of the Montreal River fault and mineralization stops abruptly at the fault. Explor has identified potential open pit gold mineralization over a 3km strike length on the west side of the fault according to Explor information posted to SEDAR.
CTEC entered into a four-year option agreement on April 30, 2019 to acquire 93ha of patented mineral rights in Mountjoy Township on strike to the east of the Caron porphyry system. Three lines of IP, carried out by the property owner, indicate that the porphyry horizon could extend for several kilometres to the NE. There could also be a number of porphyries in this part of Mountjoy Township as CTEC MMI surveying indicates several other possible porphyry targets with anomalous gold values. Several drill targets have been permitted.
Mountjoy Township holes #10, #11 and #12 tested a copper-modelled portion of an MMI VMS target accompanied by several airborne EM anomalies and pulse electromagnetic (“PEM”) ground survey responses. There were 15 scattered locations where chalcopyrite mineralization was noted within sediments, some possibly related to diabase dykes. Hole #10 intersected 188 ppm Cu over a 2m core width from 33m to 35m, 121 ppm from 60m to 62m depth and 1,020 ppm Zn over a 0.5m core width from 286.5 to 287.0m. An IP survey was completed over the zinc portion of the MMI anomaly.
In parallel with the drilling, CTEC management and consultants continued to outline and rank 25 potential drill targets as hard data from the 2018 and 2019 exploration holes was compiled, and further IP surveying was completed. There are now at least 10 drill targets in Deloro and Ogden townships on the south side of the PDFZ and 15 in Mountjoy and Godfrey townships north of the PDFZ. The assaying of the Faymar Mine crown pillar geotechnical holes confirmed the historical 6 g/t Au vein grade and the Faymar patents merit further evaluation.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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CTEC 2019 Summer Drill Program
A four-hole summer drilling program was planned to test targets both north and south of the PDFZ. Drilling began on July 11[th] and was completed on July 24, 2019. On the Four Corners property a hole tested the eastern extension of narrow high-grade silver, lead, zinc veins plus gold values intersected in 2010. The CTEC hole intersected a combination of sediments and porphyries over a 50m width. No significant gold or base metal values were intersected.
The drill was then moved to Mountjoy Townshiip to drill a porphry/gold target. Three attemps were made with the hole being stopped at 70m after going through 60m of fine sand then into coarse gravel. The drill was then moved 2km north to test the strongest Caron property IP anomaly. The hole intersected graphitic sediments, which explained the IP anomaly. A third more southerly Mountjoy Township hole planned to test the porphyry zones to the southeast was deferred to a future winter program at the request of the patented surface rights owner.
The final two holes were drilled to test the 14m wide quartz breccia close to the historical Dayton Porcupine gold zone in Deloro Township. See CTEC press release dated September 26, 2019. Both CTEC holes intersected quartz breccia and sulphide mineralization over similar widths, with Hole D-19-06 intersecting 3.29 g/t Au over an estimated true width of 4.93m and Hole D-19-07 intersecting 1.51 g/t Au over an estimated true width of 3.44m. CTEC’s core logging protocol includes the use of oriented core technology. While this slows the logging process somewhat, it provides much more accurate vein orientation and other structural data.
As discussed in Highlights above, CTEC consultants and geologists have completed the reinterpretation of Mountjoy Township geology using historical diamond drilling, Kerr Addison’s 81-hole sonic drill program and Noranda diamond drilling combined with approximately 4,000 MMI samples plus the Osisko 2010 airborne survey. The Tisdale Volcanics appear to extend west-SW about 5km into Mountjoy Township. To confirm the Mountjoy geology and ground truth airborne EM anomalies, five IP and magnetic grids were surveyed to confirm drill target locations in the newly-interpreted volcanic areas. Three down-the-hole Mis-a-la-Masse surveys were also completed, two in Deloro Township and one at Four Corners to confirm the strike direction and strength of gold intersections and/or mineralized veining identified in the Claim Post historic drill holes and the Company’s 2019 drilling.
As part of the fall 2019 program CTEC has identified two possible kimberlite pipes in Bonar Township, 160km west of Timmins. They present as strong magnetic anomalies, are each approximately 12ha in size and alternatively may represent rare earth-bearing carbonatites. Between 2007 and 2011 then-owner Claim Post focused on two strong magnetic anomalies identified in a 2002 government aeromag survey and confirmed by a detailed 2003 helicopter magnetic survey. In addition G9 and G10 indicator mineral garnets were found down ice from the anomalies in a 2001 regional government geochem survey. Claim Post carried out an MMI survey and found that one of the anomalies has a unique, very strong MMI rare earth rim and a core that has the same MMI signature as that developed by SGS Laboratories based on a study of the C14 Kimberlite pipe discovered 20km NE of Kirkland Lake, Ontario. This pipe produced five diamonds.
Mr. John Sullivan, B.Sc., P.Geo., independent director of CTEC, has acted as the Qualified Person, as defined in NI 43-101, with respect to the disclosure of the scientific and technical information relating to exploration results and future plans contained in this management discussion and analysis.
Trends
Current stock market conditions for public junior resource companies are not supportive of funding grassroots exploration or even advancing resource projects due to low metal prices and other factors. Given the difficulties in raising new capital through the equity markets, such companies are seeking out alternative sources of capital such as joint ventures with strategic partners, raising capital with financial partner equity groups, and investment from royalty-streaming investment groups. It is uncertain how long this trend will continue. Otherwise there are no unusual trends, events or uncertainties presently known or identifiable to management that are reasonably expected to have a material effect on the Company’s business, financial condition or results of operations. The nature of the Company’s business is demanding of capital for property acquisition costs, exploration and holding costs. The Company may stake ground as it becomes available for exploration and will drop claims from time to time if claims are deemed to have low potential for discovery. The Company intends to utilize cash on hand to meet its obligations and will continue to raise funds primarily by equity financings as necessary to augment this cash position as it does not have any operating cash flow.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Flow-Through Expenditure Commitment
As of December 31, 2019, the Company’s remaining obligation for flow-through expenditures was $nil (2018 - $1,000,000).
Management and Consulting Fee Commitment
The Company is committed to monthly payments under the terms of operating agreements for management and consulting fees. The aggregate remaining payments per year are as follows:
2020 $ 198,000 2021 $ 67,000
Use of Funds
The Company will spend its available funds to further its stated business objectives. Specifically, the available funds will be spent to explore and develop the Timmins Area Project. There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for the Company to achieve its stated business objectives.
Industry Risks
The Company is subject to numerous risk factors that may affect its business prospects in the future. These include risks inherent to exploration, development and operating companies, dependence on key personnel, commodity prices, and availability of capital, environmental and permitting risks, acquisition risks, competition and potential risks relating to land titles.
There are certain risk factors that could have material effects on the Company that are not quantifiable at present due to the nature of the Company’s industry segment and other considerations.
Additional Capital
The exploration and development activities of the Company may require substantial additional financing. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration and development of any of the Company’s properties. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financings will be favourable to the Company. In addition, low commodity prices may affect the Company’s ability to obtain financing.
Exploration Development and Operating Risk
Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration and development, any of which could result in work stoppages, damage to property, and possible environmental damage. None of the properties in which the Company has an interest have a known body of commercial ore. Development of the Company’s mineral properties will follow upon obtaining satisfactory exploration results. Mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of commercially viable bodies of ore. The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish mineral resources and reserves through drilling, to develop process flow sheets, to extract the metal from the resources and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis.
Business Risk
The success of the operations and activities of CTEC is dependent to a significant extent on the efforts and abilities of its management, outside contractors, experts and other advisors. Investors must be willing to rely to a significant degree on management’s discretion and judgment, as well as the expertise and competence of the outside contractors, experts and other advisors. The Company does not have a formal program in place for succession of management and training of management. The loss of one or more of the key employees or contractors, if not replaced on a timely basis, could adversely affect the Company’s operations and financial performance.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Commodity Prices
The price of the Company’s common shares, its financial results, and exploration and development activities have been, or may in the future be, adversely affected by declines in the price of gold and/or other metals. Gold prices fluctuate widely and are affected by numerous factors beyond the Company’s control such as the sale or purchase of commodities by various central banks, financial institutions, expectations of inflation or deflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, international supply and demand, speculative activities and increased production due to new project developments, improved production methods and international economic and political trends. The Company’s revenues, if any, are expected to be in large part derived from mining, precious and base metals or interests related thereto. The effect of these factors on the price of metals, and therefore the economic viability of any of the Company’s exploration projects, cannot accurately be predicted.
Environmental and Permitting
All phases of the Company’s operations are subject to environmental regulation in the various jurisdictions in which it operates. These regulations, among other things, mandate the maintenance of air and water quality standards, land reclamation, transportation, storage and disposal of hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors, and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations.
To the Company’s knowledge, there are no liabilities to date which relate to environmental risks or hazards.
Risks Related to Environmental, Mining and Other Regulations
CTEC and its prospective customers are subject to extensive environmental, health and safety regulations that impose, and will continue to impose, significant costs and liabilities. In addition, future regulations, or more stringent enforcement of existing regulations, could increase those costs and liabilities, which could adversely affect the Company’s results of operations.
Acquisition
The Company uses its best judgment to acquire mineral properties for exploration and development. In pursuit of such opportunities, the Company may fail to select appropriate acquisition candidates or negotiate acceptable agreements, including arrangements to finance the acquisitions and development, or integrate such opportunity and their personnel with the Company. CTEC cannot assure that it can complete any acquisition that it pursues, or is currently pursuing, on favourable terms, or that any acquisition completed will ultimately benefit the Company. The Company’s management and directors have experience globally, thus, potential acquisitions may be outside of Canada.
Competition
The mining industry is intensely competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical facilities than itself. Competition in the mining business could adversely affect the Company’s ability to acquire suitable producing properties or prospective properties for mineral exploration and development in the future.
Land Title
The Company has not sought formal title opinions on its mineral property interests. Any of the Company’s properties may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by undetected defects. The Company has no present knowledge of any material defect in the title of any of the properties in which the Company has or may acquire an interest.
Review of Operations
Three Months Ended December 31, 2019 and 2018
The Company had a net loss of $122,012 or $0.014 per share for the three months ended December 31, 2019, compared to $548,227 or $0.11 per share for the three months ended December 31, 2018.
Professional fees were $116,351 for the three months ended December 31, 2019 compared to $200,320 for the three months ended December 31, 2018. Fees were lower in the current period due to legal fees and consulting fees incurred. These fees were routine professional services such as legal advice audit fees and
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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contracting fees. These expenses will increase on a going forward basis as the Company becomes more active and starts to raise additional funds.
General and administrative costs were $27,010 for the three months ended December 31, 2019 compared to $41,013 for the three months ended December 31, 2018. These expenses decreased from the previous year due to the reclassification of the office lease and an increase in accounting fees in the current year. These expenses will increase on a going forward basis as the Company becomes more active and starts to incur increased operating costs.
Shareholder information costs were $9,856 for the three months ended December 31, 2019 compared to $57,035 for the three months ended December 31, 2018. Fees are higher in the previous period due to filing fees incurred and news releases. These expenses will increase on a going forward basis as the Company becomes more active and starts to incur increased disclosure and filing costs.
Investor relations and travel costs were $3,910 for the three months ended December 31, 2019 compared to $13,746 for the three months ended December 31, 2018. The decrease is due reduce travel expenses the the current year period.
Total exploration and evaluation costs were $153,585 for the three months ended December 31, 2019 compared to $223,336 for the three months ended December 31, 2018, to a cumulative total of $2,084,518. The increase is due to geophysical surveying and diamond drilling completed on the Timmins Area Properties in the current period.
Year Ended December 31, 2019 and 2018
The Company had a net loss of $1,304,631 or $0.15 per share for the year ended December 31, 2019, compared to $904,336 or $0.18 per share for the year ended December 31, 2018.
Professional fees were $303,614 for the year ended December 31, 2019 compared to $327,995 for the year ended December 31, 2018. Fees were higher in the lower period due to legal fees and consulting fees incurred. These fees were routine professional services such as legal advice, audit fees and contractor fees. These expenses will increase on a going forward basis as the Company becomes more active and starts to raise additional funds.
General and administrative costs were $72,243 for the year ended December 31, 2019 compared to $80,274 for the year ended December 31, 2018. These expenses decreased from the previous year due to the reclassification of the office lease and an increase in accounting fees in the current year These expenses will increase on a going forward basis as the Company becomes more active and starts to incur increased operating costs.
Shareholder information costs were $44,270 for the year ended December 31, 2019 compared to $70,610 for the year ended December 31, 2018. Fees are higher in the previous period due to fees incurred for filing fees and new releases. These expenses will increase on a going forward basis as the Company becomes more active and starts to incur increased disclosure and filing costs.
Investor relations and travel costs were $83,657 for the year ended December 31, 2019 compared to $24,584 for the year ended December 31, 2018. The increase in the current period is due to fees paid to an investor relations consultant and travel costs to attend conferences.
Total exploration and evaluation costs were $1,223,863 for the year ended December 31, 2019 compared to $496,069 for the year ended December 31, 2018, to a cumulative total of $2,084,518. The increase is due to geophysical surveying and diamond drilling completed on the Timmins Area Properties in the current period.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Selected Quarterly Financial Data
| Income( | loss) | |||
|---|---|---|---|---|
| Total Revenue | Total | Per Share | Total Assets | |
| Three Months Ended | ($) | ($) | ($) | ($) |
| December 31, 2019 | - | (122,012) | (0.014) | 664,435 |
| September 30, 2019 | - | (335,363) | (0.042) | 726,710 |
| June 30, 2019 | - | (385,360) | (0.042) | 1,129,290 |
| March 31, 2019 | - | (461,896) | (0.054) | 1,843,541 |
| December 31, 2018 | - | (549,088) | (0.108) | 2,157,417 |
| September 30, 2018 | - | (172,485) | (0.036) | 209,796 |
| June 30, 2018 | - | (207,227) | (0.042) | 431,805 |
| March 31, 2018 | - | 23,603 | 0.006 | 568,436 |
| Date of Incorporation | ||||
| November 10, 2017 to | ||||
| _December 31,_2017 | - | (475,582) | (0.288) | 499,977 |
Liquidity and Capital Resources
The mineral properties of the Company are in the exploration and development stage and, as a result, the Company has no source of operating cash flow. The exploration and development of the Company’s properties depends on the ability of the Company to obtain financing.
If the Company’s exploration programs are successful, additional funds will be required to develop the Company’s properties and to place them into commercial production. The only source of future funds presently available to the Company is through the issuance of share capital, or by the sale of an interest in any of its properties in whole or in part. The ability of the Company to arrange such financing or sale of an interest in the future will depend in part upon the prevailing market conditions as well as the business performance of the Company. There can be no assurance that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company. If additional financing is raised through the issuance of shares, control of the Company may change and shareholders may experience dilution. If adequate financing is not available, the Company may be required to delay, reduce the scope of, or eliminate one or more exploration activities or relinquish rights to certain of its interests. Failure to obtain additional financing on a timely basis could cause the Company to forfeit its interests in some or all of its properties and reduce or terminate its operations.
As at December 31, 2019, the Company had cash of $570,337 (2018 - $2,068,312) to settle current liabilities of $144,126 (2018 - $504,953). All of the Company’s financial trade liabilities have contractual maturities of less than one year and are subject to normal trade terms.
As at December 31, 2019, the Company had working capital of $476,119 (2018 - $1,652,464). In order to meet its longer-term working capital needs and property exploration expenditures, the Company intends on securing additional financing to ensure that those obligations are properly discharged. As such, management believes that the Company will then have sufficient working capital to discharge its current and anticipated obligations for a minimum of one year. There can be no assurance that CTEC will be successful in its efforts to arrange additional financing on terms satisfactory to the Company. If additional financing is raised through the issuance of shares from the treasury of the Company, control of CTEC may change and shareholders may experience additional dilution. If adequate financing is not available or cannot be obtained on a timely basis, the Company may be required to delay, reduce the scope of, or eliminate one or more of its exploration activities or relinquish some or all of its rights to certain of its interests in mineral properties.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Capital Stock
As at December 31, 2019, the Company’s authorized number of common shares was unlimited and without par value.
| Number of Shares* | Amount | |
|---|---|---|
| Balance at December 31, 2017 | 2,500,000 | $ 150,000 |
| Private placement | 5,191,666 | 3,270,000 |
| Debt conversion | 816,666 | 245,000 |
| Shares issued for property payment | 33,333 | 20,000 |
| Shares issued for MOU agreement | 16,666 | 12,000 |
| Share issue costs - legal | - | (129,177) |
| Share issue costs – cash | - | (177,400) |
| Reserve on issuance of warrants | - | (122,779) |
| Premium liability on flow-through shares | - | (475,000) |
| Balance at December 31, 2018 and December 31, 2019 | **8,558,331 ** | $ 2,792,644 |
*On January 9, 2020 the Company consolidated its outstanding common shares on a 6:1 basis. All references to the number of shares and per share amounts have been retroactively restated to reflect the consolidation.
Warrants
As of December 31, 2019, the following share purchase warrants were outstanding:
| Year ending | |||||||
|---|---|---|---|---|---|---|---|
| December 31, | December 31, | ||||||
| 2018 | Issued | (Exercised) | Expired | 2019 | Terms | ||
| 258,333 | - | - | - | 258,333 | Exercisable at $0.10 until October 16, 2020 | ||
| 16,666 | - | 16,666 | Exercisable at $0.10 until October 16, 2023 | ||||
| 26,250 | - | - | - | 26,250 | Exercisable at $0.10 until November 16, 2020 | ||
| 301,249 | - | - | - | 301,249 |
*On January 9, 2020 the Company consolidated its outstanding common shares on a 6:1 basis. All references to the number of shares and per share amounts have been retroactively restated to reflect the consolidation.
Options
Details of the options outstanding as at December 31, 2019 and 2018 are as follows:
| As at | December 31, 2019 | December 31, 2019 | December 31, 2018 | December 31, 2018 |
|---|---|---|---|---|
| Weighted | Weighted | |||
| Average | Average | |||
| Exercise | Number of | Exercise | Number | |
| of | ||||
| Price | Options | Price | Options | |
| Outstanding at beginning of year | $ 0.60 | 566,666 | $ - | - |
| Transactions during the year: | ||||
| Granted | 0.30 | 208,333 | 0.60 | 533,333 |
| Granted | 0.60 | 25,000 | 0.72 | 33,333 |
| Outstanding at end ofyear | 0.527 | 799,999 | 0.60 | 566,666 |
| Exercisable at end ofyear | $0.527 | **341,667 ** | $0.60 | 141,666 |
*On January 9, 2020 the Company consolidated its outstanding common shares on a 6:1 basis. All references to the number of shares and per share amounts have been retroactively restated to reflect the consolidation.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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As at the date of this report the Company had common shares outstanding of 8,558,331, options outstanding 799,999 and warrants outstanding of 301,249.
Transactions with Related Parties
As at December 31, 2019, the trade and other payables balance includes related party amounts of $8,204 (2018 - $4,962). The related parties are directors and officers of the Company, an individual who is related to the President and CEO of the Company and entities over which executive management and directors have control or significant influence. The amounts are for services rendered during the year and arose as a result of transactions entered into with the related parties in the ordinary course of business.
On February 26, 2018 the Company entered into a Conversion Agreement with each of its Promissory Note holders to which the parties agreed to convert $350,000 of debt for 816,666 commons shares. The commons shares were valued at a fair value of $0.30 per share for a total of $245,000. The remaining $105,000 was recorded as a gain on debt forgiveness in the interim condensed statement of income and comprehensive income. The accrued interest amount of $8,438 was forgiven by the Promissory Note holders at the time of conversion was recorded as a gain on debt forgiveness in the interim condensed statement of income and comprehensive income.
Compensation of key management personnel of the Company The remuneration of directors and other members of key management personnel during the year ended December 31, 2019 and 2018 were as follows:
| For year | ended | ||
|---|---|---|---|
| December 31, | December 31, | ||
| 2019 | 2018 | ||
| Management and consulting fees | $ 140,000 | $ | 87,000 |
| Exploration and evaluation expenditures | 72,000 | - | |
| Share-based compensation | 141,820 | 101,656 |
Other Information
Additional Disclosure for Venture Companies without Significant Revenue
The following is additional financial information for the period regarding the Company as required by National Instrument 51-102 – Continuous Disclosure Obligations, for TSX-V issuers.
| December 31, | December 31, | |
|---|---|---|
| 2019 | 2018 | |
| Exploration and evaluation expenditures | $ 1,223,863 |
$ 496,069 |
| Administrative expenses | $ 714,613 | $ 621,705 |
| Total assets | $ 664,435 | $ 2,157,417 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
| For the year ended | For the year ended | For the year ended | |
|---|---|---|---|
| December 31, 2019 | December 31, 2018 | ||
| Exploration and evaluation expenditures | Expensed | Expensed | |
| Acquisition costs | $ 43,866 | $ 42,933 | |
| Assays | 49,641 | 6,997 | |
| Drilling | 484,752 | 108,870 | |
| Geophysical and MMI Surveys | 271,203 | 219,788 | |
| Technical Report (43-101) | - | 58,728 | |
| Consulting | 209,236 | 25,600 | |
| Other exploration and evaluation expenditures | 165,165 | 33,153 | |
| Total exploration and evaluation expenditures | $ 1,223,863 | $ 496,069 | |
| Administrative Expenses | For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
|
| Interest income | $ (9,727) | $ - | |
| General and administrative | 72,243 | 80,274 | |
| Depreciation | 47,931 | - | |
| Share-based payments | 162,080 | 112,776 | |
| Part XII.6 tax | 4,364 | - | |
| Interest expense | 6,181 | - | |
| Interest on related party loans | - | 5,466 | |
| Professional fees | 303,614 | 327,995 | |
| Shareholder information | 44,270 | 70,610 | |
| Investor relations and travel | 83,657 | 24,584 | |
| $ 714,613 | $ 621,705 | ||
| As at December 31, | As at December 31, | ||
| Outstanding share data | 2019 | 2018 | |
| Issued and outstanding common shares | 8,558,331 | 5,800,000 |
*On January 9, 2020 the Company consolidated its outstanding common shares on a 6:1 basis. All references to the number of shares and per share amounts have been retroactively restated to reflect the consolidation.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Significant Accounting Policies
Adoption of new and revised standards and interpretations
Adoption of new and revised standards and interpretations
- IFRS 16 – Leases – In January 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"), replacing IAS 17 - Leases. IFRS 16 provides a single lessee accounting model and requires the lessee to recognize assets and liabilities for all leases on its statement of financial position, providing the reader with greater transparency of an entity’s lease obligations.
The Company elected the modified retrospective transition approach, which provides lessees a method for recording existing leases at adoption with no restatement of prior period financial information. Under this approach, a lease liability was recognized at January 1, 2019 in respect of leases previously classified as operating leases, measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at transition. The associated right-of-use assets were measured at amounts equal to the respective lease liabilities, subject to certain adjustments allowed under IFRS 16.
Adoption of the new standard at January 1, 2019 resulted in the recording of additional right-ofuse assets and lease liabilities of $61,964, related to an office space.
-
All leases are accounted for by recognizing a right-of-use asset and a lease liability except for: • Leases of low value assets; and
-
Leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
-
Amounts expected to be payable under any residual value guarantee;
-
The exercise price of any purchase option granted if it is reasonably certain to assess that option;
-
Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
-
Lease payments made at or before commencement of the lease;
-
Initial direct costs incurred; and
-
The amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset.
Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.
When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Dividends
The Company has neither declared nor paid any dividends on its common shares. The Company intends to retain its earnings, if any, to finance growth and expand its operations and does not anticipate paying any dividends on its common shares in the foreseeable future.
Assessment of Recoverability of Future Income Tax Assets
In preparing the financial statements, the Company is required to estimate its income tax obligations. This process involves estimating the actual tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The Company assesses, based on all available evidence, the likelihood that the future income tax assets will be recovered from future taxable income and, to the extent that recovery cannot be considered “more likely than not,” a valuation allowance is established. If the valuation allowance is changed in a period, an expense or benefit must be included within the tax provision on the income statement.
Assessment of Recoverability of HST Recoverable
The carrying amount of HST Recoverable is considered representative of its values. The Company assesses the likelihood that HST will be recovered and, to the extent that recovery is considered doubtful, a provision for doubtful accounts is recorded.
Critical Accounting Policies
Going Concern
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of interest in mineral properties and the Company's continued existence is dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable mineral resources and reserves, the achievement of profitable operations, or the ability of the Company to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. Changes in future conditions could require material write-downs to the carrying values. The Company has historically relied on equity financing to raise capital and future raises may be impacted by the current global situation and economic uncertainties. Management has considered how these conditions may impact the Company’s viability given its current capital structure and considers that until the outcome of financing activities is known there is significant doubt about the Company’s ability to continue as a going concern.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements, aboriginal claims, unregistered claims, and non-compliance with regulatory and environmental requirements.
Management plans to secure the necessary financing through the issuance of new equity or debt instruments, and/or by entering into joint venture arrangements. Nevertheless, there is no guarantee that these initiatives will be successful.
The Company will require substantial additional funds to further explore and, if warranted, develop its exploration properties. The Company has limited financial resources and no current source of recurring revenue, and there is no assurance that additional funding will be available to the Company to carry out the completion of its planned exploration activities. There can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further exploration and property development. The terms of any additional financing obtained by the Company could result in substantial dilution to the shareholders of the Company.
Income Tax
The Company accounts for income taxes in accordance with the asset and liability method. The determination of future income tax assets and liabilities is based on the differences between the financial statement and the income tax bases of assets and liabilities, using substantively enacted tax rates in effect for the period in which the differences are expected to reverse. Future income tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, it is more likely than not that they will be realized.
Cash
Cash consists of cash held with a Canadian chartered bank.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Loss per Share
Basic loss per share is determined by dividing the net loss by the weighted average number of ordinary shares outstanding during the financial period. Diluted loss per share is calculated using the treasury stock method. The amount is the same as basic loss per share as the effect of including potential issues of shares under option or from warrant exercises would be anti-dilutive.
Capital Management
The Company includes shareholders equity (deficit) in the definition of capital.
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties and to ensure it continues as a going concern. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.
All of the properties in which the Company currently has an interest are in the exploration stage with no operating revenues; as such, the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if management feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.
Recent market conditions have and are expected to continue to have an adverse impact on the ability of junior mining exploration companies to secure equity funding. The Company relies on equity financing to raise capital and will continue its attempts to do so. Although CTEC was successful in securing debt and equity financing in the current and recent periods, there is no guarantee that future fund-raising attempts will be equally successful.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
The Company classifies 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.
Cash is classified as level 1.
Financial Risk Factors
Financial Instruments
On July 24, 2014, the IASB issued the completed IFRS 9 – Financial Instruments (“IFRS 9”) to come into effect on January 1, 2018 with early adoption permitted.
IFRS 9 includes finalized guidance on the classification and measurement of financial assets. Under IFRS 9, financial assets are classified and measured either at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 largely retains the existing requirements in IAS 39 – Financial Instruments: Recognition and Measurement (“IAS 39”), for the classification and measurement of financial liabilities.
The Company adopted IFRS 9 in its financial statements on January 1, 2018. Due to the nature of its financial instruments, the adoption of IFRS 9 had no impact on the opening accumulated deficit balance on January 1, 2018. The impact on the classification and measurement of its financial instruments is set out below.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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All financial assets not classified at amortized cost or FVOCI are measured at FVTPL. On initial recognition, the Company can irrevocably designate a financial asset at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at FVTPL:
-
It is held within a business model whose objective is to hold the financial asset to collect the contractual cash flows associated with the financial asset instead of selling the financial asset for a profit or loss;
-
Its contractual terms give rise to cash flows that are solely payments or principal and interest.
All financial instruments are initially recognized at fair value on the statement of financial position. Subsequent measurement of financial instruments is based on their classification. Financial assets and liabilities classified at FVTPL are measured at fair value with changes in those fair values recognized in the statement of loss and comprehensive loss for the period. Financial assets are classified at amortized cost and financial liabilities are measured at amortized cost using the effective interest method.
The following table summarizes the classification and measurement under IFRS 9 for each financial instrument:
| Classification | IFRS 9 |
|---|---|
| Cash | FVTPL |
| Trade and otherpayables | Amortized Cost |
The original carrying value of the Company’s financial instruments under IAS 39 has not changed under IFRS 9.
Risks
A summary of the Company's risk exposures as it relates to financial instruments are reflected below:
- (i) Credit Risk
Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment. The Company's credit risk is primarily attributable to cash and receivables and other assets included in current assets. The Company has no material concentration of credit risk arising from operations. Cash consists of bank deposits, which are held by a Canadian chartered bank, and management believes the risk of loss is remote. The Company’s receivables and other assets are normally collected within a 60-90 day period. The Company has not experienced any significant collection issues to December 31, 2019.
The Company’s maximum exposure to credit risk as at December 31, 2019 is the carrying value of cash.
(ii) Liquidity Risk
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due and ensuring an adequate supply of funds to enable the Company to carry out its intended programs. As at December 31, 2019, the Company had a cash balance of $570,337 (2018 - $2,068,312) to settle current liabilities of $144,126 (2018 - $504,953). All of the Company’s financial trade liabilities have contractual maturities of less than one year and are subject to normal trade terms.
As at December 31, 2019, the Company had working capital of $476,119 (2108 - $1,652,464). In order to meet its longer-term working capital needs and property exploration expenditures, the Company intends on securing additional financing to ensure that those obligations are properly discharged. As such, management believes that the Company will then have sufficient working capital to discharge its current and anticipated obligations for a minimum of one year. There can be no assurance that CTEC will be successful in its efforts to arrange additional financing on terms satisfactory to the Company. If additional financing is raised through the issuance of shares from the treasury of the Company, control of CTEC may change and shareholders may experience additional
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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dilution. If adequate financing is not available or cannot be obtained on a timely basis, the Company may be required to delay, reduce the scope of, or eliminate one or more of its exploration activities or relinquish some or all of its rights to certain of its interests in mineral properties.
(iii) Interest Rate Risk
The Company’s interest rate risk related to interest-bearing obligations and deposits is as follows:
The Company is subject to interest charges of 10% on related party loans payable (Note 13).
Additional Capital
The continued exploration by the Company will require substantial additional financing. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financings will be favorable to the Company. In addition, low commodity prices may affect the Company’s ability to obtain financing since the equity investment that constitutes the primary asset of the Company is linked to such prices.
Critical Accounting Estimates
The preparation of financial statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions.
The most significant estimates and judgments relate to, but are not limited to, the following:
-
determination of the flow-through share premium requires the use of estimates when calculating the premium associated with the issuance of flow-through shares compared with common shares;
-
the calculation of the fair value of share ‐ based payments requires the use of estimates of inputs in the Black-Scholes option pricing valuation model;
-
accounting policy for exploration and evaluation expenditures as an expense;
-
ownership and control of property requires the use of judgment;
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incremental borrowing rate to obtain an asset of similar value to the right-of-use asset;
-
provisions for income taxes expected to be paid based on a qualitative assessment of relevant factors; and
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assessment of the going concern assumption as detailed in Note 1 to the financial statements.
Forward-looking Statements
This Management’s Discussion and Analysis includes "forward-looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of Management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Such risks and uncertainties include, but are not limited to, risks associated with the mining industry (including operational risks in exploration, development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of mineral resources and reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of CTEC to obtain all permits, consents or authorizations required for its operations and activities; and health safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the ability of CTEC to fund the capital and operating expenses necessary to
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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achieve the business objectives of CTEC, the uncertainty associated with commercial negotiations and negotiating with foreign governments and risks associated with international business activities, as well as those risks described in public disclosure documents filed by CTEC. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of CTEC should not place undue reliance on these forward-looking statements. Statements in relation to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably exploited in the future.
Readers are cautioned that the foregoing lists of risks, uncertainties and other factors are not exhaustive. The forward-looking statements contained in this document are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or in any other documents filed with Canadian securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements are expressly qualified by this cautionary statement.
Dated April 27, 2020
“Neville Dastoor” Interim President and CEO, Chairman
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