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Rokmaster Resources Corp. Management Reports 2020
46864_rns_2020-07-16_162b4214-68b6-4266-be27-48eb1e6b92d7.pdf
Management Reports
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ROKMASTER RESOURCES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three months ended March 31, 2020
Rokmaster Resources Corp.
Management Discussion and Analysis ("MD&A")
Set out below is a review of the activities, results of operations and financial condition of Rokmaster Resources Corp. (referred to herein together as the "Company" or "Rokmaster") for the three months ended March 31, 2020. The following information should be read in conjunction with the Company's audited consolidated financial statements and the notes related thereto for the year ended December 31, 2019 and the Company's unaudited interim consolidated financial statements of Rokmaster and the notes related thereto for the three months ended March 31, 2020.
This MD&A is prepared as of July 16, 2020 and all dollar amounts are stated in Canadian Dollars unless otherwise stated.
The Company is a reporting issuer in the Provinces of British Columbia, Alberta, Manitoba and Ontario in Canada. The Company's shares are listed on the TSX Venture Exchange ("TSXV") in Canada under the symbol "RKR," on the OTC Pink Sheets in the USA under the symbol "RKMSF" and on the Frankfurt Stock Exchange under the symbol "1RR."
Caution Forward Looking Information
The Company's audited consolidated financial statements for the three months ended March 31, 2020 and this accompanying MD&A contain certain statements that may be deemed "forward-looking statements." All statements in this document, other than statements of historical fact, that address events or developments that the Company expects to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by words "expects," "plans," "anticipates," "believes," "intends," "estimates," "projects," "potential," "interprets," and similar expressions, or that events or conditions "will," "would," "may," "could," or "should" occur. Forward-looking information in this document include statements regarding future exploration programs, liquidity and effects of accounting policy changes, risks and uncertainties relating to the Company being in the exploration stage, the possibility that future exploration and development results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters and surface access, labour disputes, the potential for delays in exploration activities, the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, failure to obtain adequate financing on a timely basis and other risks and uncertainties. In addition, forward-looking information are based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long-term price of commodities, that the Company will receive required permits, that the Company can access financing, appropriate equipment and sufficient labour and that the political environment within Canada and the various provinces in Canada will continue to support the development of environmentally safe mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forwardlooking statements.
Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change except as required by law.
Business Overview and Overall Performance
Business Overview
The Company is primarily engaged in the acquisition, exploration and development of precious, base and industrial mineral properties. The Company's principal exploration areas of interest are North America, Central America and South America. The Company currently has an option to acquire a 100% interest on the Revel Ridge Project (formerly the J&L Property) located approximately 45 kms by all-weather road from the City of Revelstoke in British Columbia, Canada and owns 100% of the Duncan Lake Zinc-Lead Property and a 55% interest in the Big Copper property both located in the Slocan Mining Division in southeast British Columbia, Canada.
In order to achieve its objective, the Company has assembled a mineral exploration and management team with extensive experience in exploring, developing and bringing mines into production.
Overall Performance
Highlights of the Company's activities during the three months ended March 31, 2020 and through to the date of this MD&A:
• Subsequent to March 31, 2020, the Company completed a non-brokered private placement for gross proceeds of \$2,000,000 in flow-through funds and \$2,515,000 in non-flow-through funds by issuing both flow-though and non-flow-through units.
Please refer to the Company's news releases dated May 25, 2020 and June 12, 2020 for further details about the completed private placements.
• In May 2020, the Company has opened up the road access to its Revel Ridge Project site to commence work on several fronts in connection to its Phase 1 Core Drilling preparations. The Company also provided a progress update on updating the Preliminary Economic Assessment on the Revel Ridge Project by Micon International Limited.
Please refer to the Company's news release dated May 29, 2020 for further details on the work started.
• In April 2020, the Company expanded the land package making up the Revel Ridge Project through the acquisition of mineral claims adjoining the eastern edge of the original Revel Ridge Property for \$25,000 with no royalties or additional commitments.
Exploration Properties
Revel Ridge Project, Canada
The Revel Ridge Project (the "Project") is located north of Revelstoke within the Selkirk Mountains near the north end of the Kootenay Arc, a complex sequence of east dipping Neoproterozoic to Lower Paleozoic metasedimentary and metavolcanic rocks. The belt is characterized by tight to isoclinal folds and generally west verging thrust faults and greenschist grade regional metamorphism.
The Project includes mineral claims, surface lands, crown grants, equipment (including underground mining equipment fleet and supplies), improvements (including >3 km of operational underground workings, 315 diamond drill holes with >41,000 m of drill core, fully functional 40 person all-weather camp, offices and maintenance shop) and all associated assets including a CP rail siding and concentrate loadout facility in the City of Revelstoke.
The Project has two known and significant precious and polymetallic mineral deposits. The Main Zone is a structurally controlled replacement deposit overprinting a pre-existing silver-lead-zinc deposit known as the Yellowjacket Zone. The Main Zone sheeted sulphide system is composed of banded massive and stringer arsenopyrite-pyrite-sphalerite-galena mineralization with appreciable content of gold and silver. The Main Zone has been traced on surface by geological mapping, prospecting, trenching and soil sampling for a strike length of over 3 km and traced by drilling for 1,500 meters in strike length and 800 meters down dip, generally dipping approximately 60 degrees to the northeast with an average true thickness of 2.5 metres, however, in places it reaches 15 metres in true thickness.
The zinc-silver-lead-rich Yellowjacket Zone is considered to be an Irish type carbonate replacement deposit composed of multiple parallel siliceous sphalerite-galena bearing zones. The individual mineralized zones making up the Yellowjacket Zone occur as lenticular bodies each up to 8 metres thick at the contact between alternating units of volcanic rocks and limestone. The Yellowjacket Zone sub parallels and is in the immediate hanging wall of the Main Zone, and has higher silver, lead, and zinc grades than the Main Zone.
History of the Project
Numerous exploration companies including several major mining companies have explored and advanced the Property deposits since the Main Zone's discovery in 1912, including Selco - BP Exploration Canada Limited, Pan American Minerals Ltd., Equinox Resources Ltd., Cheni Gold Mines Inc., and Huakan (formerly known as Merit Mining Ltd. ("Merit")). At least 315 diamond drill holes have been completed on the Property since 1983, totaling 41,076 metres of drilling. 3.1 km of underground workings are present on the Property. The 1.4 km long 830 metre elevation track drift (2.4m x 2.4m profile) has exposed the Main Zone for approximately 800 metres in length. The 550-metre-long (5m x 5m profile) 832 metre elevation trackless drift installed by Merit in 2008, connects to the track drift and can provide underground access to the 830 drift. Five cross-cuts totaling 1.15 km provided access to drill stations that were utilized to drill-define the deposits. Several raises have aided in the extraction of various bulk samples.
In late 2010, Merit completed a 60-hole, 7,897 metre underground diamond drill program focused on the Main Zone with the objective of verifying historic drilling and sampling and infilling an 800-metre strike by 200 metre dip of the Main Zone on 30 metre drill centers. This program supported the first NI 43-101 compliant Mineral Resource Estimate in September 2011 by P&E Mining Consultants Inc. and a subsequent Preliminary Economic Assessment (the "PEA") NI 43-101 Technical Report dated April 24, 2012 by Micon International Limited. This was followed later in 2012 by a 450-metre drifting and 45-hole, 9,725 metre underground drill program to expand the Main Zone. The 2012 program was successful in more than doubling the Indicated Mineral resource tonnes of the Main Zone and for the first time produced an NI 43-101 compliant Mineral Resource Estimate on the Yellowjacket Zone in the NI 43-101 Technical Report, entitled, Updated Mineral Resource Estimate on the J&L Property by P&E Mining Consultants Inc., dated January 23, 2018. An updated PEA has not been completed to include the 2012 updated Mineral Resource nor the January 23, 2018, Updated Mineral Resource. No physical work has been done on the Property since 2012.
In connection with Rokmaster's submission to the TSX.V, an updated Mineral Resource Estimate for the Revel Ridge Project was prepared (effective date: January 29, 2020) for the Main and Hanging Wall Zones. Such zones are now estimated to contain 1,135,000 Measured and Indicated gold equivalent ounces ("AuEq"), with 1,012,000 Inferred gold equivalent ounces in the Main, Hanging Wall and Footwall Zones. The Indicated Mineral Resource Estimate for the separate Yellowjacket silver-zinc rich zone is now 771,000 tonnes containing 9.93% zinc, 2.6% lead and 62.6 grams per tonne silver. Please see the Table below:
| REVEL RIDGE 2020 MINERAL RESOURCE ESTIMATE(1-7) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Class | Tonnes (000's) |
Au (g/t) |
Au oz (000's) |
Ag (g/t) |
Ag oz (000's) |
Pb (%) |
Zn (%) |
AuEq (g/t) |
AuEq oz (000's) |
|
| Measured | 1,352 | 6.13 | 266 | 62.8 | 2,730 | 2.19 | 4.09 | 9.14 | 397 | |
| Main | Indicated | 2,848 | 5.33 | 488 | 49.0 | 4,487 | 1.72 | 3.11 | 7.56 | 692 |
| Zone | Measured & Indicated |
4,200 | 5.59 | 755 | 53.4 | 7,216 | 1.87 | 3.43 | 8.07 | 1,089 |
| Inferred | 4,562 | 4.36 | 639 | 61.8 | 9,064 | 1.88 | 2.59 | 6.55 | 961 | |
| Hanging | Indicated | 298 | 0.91 | 9 | 55.3 | 530 | 2.50 | 5.72 | 4.70 | 45 |
| Wall Zone |
Inferred | 38 | 0.22 | 0 | 75.0 | 92 | 3.08 | 5.44 | 4.34 | 5 |
| Footwall Zone |
Inferred | 341 | 3.91 | 43 | 25.3 | 277 | 0.53 | 0.48 | 4.20 | 46 |
| Yellow jacket |
Indicated | 771 | 0.09 | 2 | 62.6 | 1,552 | 2.60 | 9.93 | NA | NA |
| Zone | Inferred | 23 | 0.11 | 0 | 55.4 | 41 | 2.65 | 7.68 | NA | NA |
Note: k= thousands, koz = thousands of ounces
- 1) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
- 2) The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
- 3) The Mineral Resources in this estimate were calculated using the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM"), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.
- 4) The following parameters were used to derive the NSR block model cut-off values used to define the Mineral Resource:
- December 31, 2019 US\$ two-year trailing avg. metal prices: Pb \$0.96/lb, Zn \$1.24/lb, Au \$1,331.00/oz, Ag \$15.95/oz
- Exchange rate of US\$0.76 = CDN\$1.00
- Process recoveries of Pb 74%, Zn 75%, Au 91%, Ag 80%
- Smelter payables of Pb 95%, Zn 85%, Au 96%, Ag 91%
- Refining charges of Au US\$10/oz, Ag US\$0.50/oz
- Concentrate freight charges of C\$65/t and Smelter treatment charge of US185/t
- Mass pull of 5% and 8% concentrate moisture content
- 5) NSR cut-off of CDN\$110 pertonne was derived from \$75/t mining, \$25/t processing, \$10/t G&A.
- 6) AuEq= Au g/t + (Ag g/t x 0.011) + (Pb % x 0.422) + (Zn % x 0.455). This formula incorporates Ag, Pb and Zn metallurgical recoveries, smelter payables and refining charges that were reflected in the 2012 Preliminary Economic Assessment
- 7) Above parameters derived from 2012 Preliminary Economic Assessment and other similar benchmarked projects
For additional information, please refer to the technical report titled: "Updated Technical Report on the Revel Ridge Property (Formerly J&L Property), Revelstoke Mining Division, British Columbia, Canada" dated February 25, 2020 with an effective date of January 29, 2020, which the Company has filed on SEDAR.
The technical information in this MD&A has been prepared in accordance with Canadian regulatory requirements as set out in National Instrument 43-101 and Eugene Puritch, P. Eng., FEC, CET, president of P&E Mining Consultants Inc., who is independent of Rokmaster, supervised the preparation of the information that forms the basis for the technical information on the Revel Ridge Project in this MD&A and has reviewed and approved its inclusion in this MD&A.
Exploration Program – Revel-Ridge Project
Phase 1 Core Drilling Preparation:
- Road cleanup to prepare for hauling of generators, fuel, underground equipment, compressors, fans and supplies.
- Permitting.
- Ongoing geological modelling and drill target selection by Rokmaster's geological consulting team (including Oliver Geoscience International Ltd. and Tripoint Geological Services Ltd.) for more than 5,000 meters of Phase 1 core drilling by Hy-Tech Drilling Ltd. of Smithers, B.C.
- Geotechnical and safety inspections of underground access and proposed drill stations.
- Environmental site inspection and inventory.
- Initiate rehabilitation of office, workshop, first aid facility, fuel, water and power systems.
- Initiate ground assessment of the 44 other known Au-Ag occurrences over the 7-8 km planer deformation structure hosting the Main Zone.
Duncan Lake Zinc-Lead-Silver Property, Canada
The Duncan Lake Zinc-Lead-Silver Property is located in the Slocan Mining Division, southeast British Columbia, Canada (the "Property" or "Duncan Lake") approximately 64 km north of Kaslo, British Columbia. The Property consists of 35 contiguous mineral claims covering 3,929 hectares along the strike extension of Teck Resources Ltd.'s ("Teck") historical Duncan Mine property and 148 km by road northeast of Teck's smelter in Trail, British Columbia.
History of the Property
Consolidated Mining and Smelting Company of Canada, Limited ("Cominco"), a predecessor of Teck, conducted four phases of exploration work on the Property from 1989 to 1997 included coring of 8,333.9 metres in 12 diamond drill holes. The drilling intersected significantly higher grade zinc-lead mineralization (see below Table of Selected Mineralized Drill Intersections) than was typically encountered at Duncan Mine. The work also confirmed that altered and mineralized carbonate strata extends from Duncan Mine northward for more than 2.3km and is open to the north, the west limb of Duncan Anticline and to depth on the Property. A further phase of drilling (8,800 metres in 8 holes) was recommended for 1998 but not conducted, possibly due to the steep decline in lead and zinc prices at the time and Teck's increasing involvement in Cominco which had begun in 1986.
| Hole ID | From (m) | To (m) | Core Length |
Estimated True |
Zn (%) | Pb (%) |
|---|---|---|---|---|---|---|
| (m) | Thickness (m) |
|||||
| C89-5 | 551.00 | 565.23 | 14.23 | 12.2 | 5.21 | 3.10 |
| and | 553.00 | 561.00 | 8.00 | 6.9 | 7.10 | 4.60 |
| and | 570.50 | 577.80 | 7.30 | 6.3 | 4.54 | 1.50 |
| including | 576.00 | 577.80 | 1.80 | 1.5 | 9.40 | 0.43 |
| C89-6 | 603.48 | 609.00 | 5.52 | 4.7 | 7.00 | 1.20 |
| including | 603.48 | 606.00 | 2.52 | 2.2 | 11.01 | 1.70 |
| and | 616.00 | 618.00 | 2.00 | 1.7 | 2.60 | 0.06 |
| C91-7 | 441.90 | 460.00 | 18.10 | 15.8 | 2.70 | 0.50 |
| including | 441.90 | 449.90 | 8.00 | 7.0 | 4.00 | 1.00 |
| and | 474.60 | 489.90 | 15.30 | 13.4 | 7.40 | 0.60 |
| including | 477.20 | 482.00 | 4.80 | 4.2 | 11.60 | 0.80 |
| and | 502.40 | 570.00 | 65.40 | 57.2 | 2.30 | 0.10 |
| C97-5A | 611.84 | 627.86 | 16.02 | 11.2 | 1.84 | 0.60 |
| C95-10 | 727.20 | 730.00 | 2.80 | 1.4 | 4.80 | 1.33 |
| and | 747.20 | 748.40 | 0.70 | 0.4 | 2.03 | 0.19 |
| C95-11 | 675.30 | 676.50 | 1.20 | 0.6 | 11.90 | 1.30 |
| and | 679.90 | 685.80 | 5.90 | 3.0 | 7.27 | 0.52 |
| including | 682.90 | 685.80 | 2.90 | 1.5 | 10.18 | 1.01 |
| and | 704.60 | 710.60 | 6.00 | 3.1 | 2.49 | 0.36 |
| C97-12 | 612.50 | 633.50 | 21.00 | 14.7 | 4.20 | 4.00 |
| including | 620.00 | 630.70 | 10.70 | 7.5 | 6.20 | 6.30 |
| C97-13 | no intersections | |||||
| C97-14 | no intersections | |||||
| C97-15 | 384.40 | 400.60 | 16.20 | 12.8 | 3.6 | 2.8 |
| including | 384.40 | 392.00 | 7.60 | 6.0 | 3.0 | 4.3 |
| including | 393.80 | 398.10 | 4.30 | 3.4 | 5.5 | 2.2 |
| and | 404.00 | 413.50 | 9.50 | 7.5 | 4.6 | 0.6 |
| and | 438.70 | 442.90 | 4.20 | 3.3 | 3.4 | 1.1 |
| and | 473.40 | 478.00 | 4.60 | 3.6 | 5.5 | 1.0 |
| and | 485.70 | 495.70 | 10.00 | 7.9 | 2.3 | 1.0 |
| C97-16 | 383.70 | 384.40 | 0.70 | 0.6 | 1.7 | 0.03 |
| and | 394.90 | 395.50 | 0.60 | 0.5 | 1.1 | 0.2 |
| and | 427.50 | 430.60 | 3.10 | 2.6 | 2.6 | 1.4 |
| and | 435.00 | 437.00 | 2.00 | 1.7 | 4.0 | 0.03 |
| and | 565.20 | 572.70 | 7.50 | 6.4 | 1.6 | 0.5 |
Table: Selected Mineralized Drill Intersections – Duncan Lake Project
A re-assessment of the current area covered by the Property north of Duncan Mine by Cominco geologists indicated that an additional "900 meters of strike length of the structure has the potential to host 5 MMT ("Million Metric Tonnes") of 11.5% Zn and 1% Pb in No. 7 Zone and 2 MMT of 7% Zn and 0.3% Pb in the No. 8 Zone. If the known mineralization is projected 2,100 meters north (in the persistent plunge direction) to Jubilee Point, there is room for 16 MMT at 10% Zn." (D.W. Moore (1997): "Duncan
Mine Property: Proposal to Test Attractive Zinc Potential Close to Trail"). It was also noted that the 7 degree northward plunge of the mineralized zone would be amendable to decline access and underground drilling as proven at the Duncan Mine. The potential quantity and grade stated above is conceptual in nature and there has been insufficient exploration to define a mineral resource. This represents a target for further exploration and it is uncertain if such further exploration will result in the target being delineated a mineral resource.
The scientific and technical information about the Property set out in this MD&A was obtained from a Technical Report for the Property dated December 13, 2016 and prepared for the Company, by R.A. (Bob) Lane, M.Sc., P. Geo. (the "Technical Report"). Mr. Lane advises that the geological data set out in the Technical Report was predominantly generated by Cominco during the 1989-1997 period and were recorded exploration assessment reports that were submitted to the British Columbia Ministry of Energy and Mines for property assessment credits. While Mr. Lane advises that he has made no attempt to verify the data, he states in the Technical Report that there is no reason to doubt its accuracy or veracity. Mr. Lane advises that he attempted to examine the drill core from 1989 to 1997 but advised that the observed racked or stacked core was quite disheveled. He stated that more than three-quarters of the core boxes could be recovered and re-racked and following that, the intact core could be verified. Mr. Lane advised that he collected some character core samples and had MS Analytical Laboratories in Langley, British Columbia, analyze the core. Mr. Lane advises that the historic drill data for the Property was adequate and that it provides a sound technical framework upon which future exploration programs could be built. Mr. Lane stated in the Technical Report that the level of QA/QC instituted by Cominco during its four phases of drilling was not known.
R.A. (Bob) Lane, M. Sc., P. Geo., a consulting geologist, is a Qualified Person as defined by National Instrument 43-101 Standards of Disclosure for Mining Projects and has reviewed and approved of the technical disclosure on the Duncan Lake Zinc-Lead-Silver Property in this MD&A.
Exploration Program – Duncan Lake Zinc-Lead Property
In 2018, the Company received an amended Mines Act Permit (the "Permit") from the British Columbia Ministry of Energy and Mines authorizing exploration activities including surface diamond drilling on a multi-year and multi-drill hole basis. The Permit expires in October 2022.
Also in 2018, the Company commenced a preliminary program consisting of further data collection and compilation. This work included recovery, re-organization and re-logging of selected historical drill core, analysis of selected core intervals for silver and gold and structural study to target initial drill holes.
A first phase of systematic soil and rock sampling was completed in July 2018 with a rock sample result returning 10.43% zinc and 0.14% lead from a new discovery showing referred to as the No, 2.5 Zone (see News Releases July 19, 2018 and August 21, 2018) of sub cropping dolomite in a new logging area near the southern end of the Duncan Project, centered 7 km southeast of the previously described 1989-1997 drilling.
In 2019, the Company carried out a geological mapping and sampling program on the south end of the Property under the leadership of Jim Oliver and Ted Muraro. Analytical results from 179 soil samples and 16 rock samples will be compiled with the geological mapping when received. (see Company news release dated October 21, 2019 for further details)
The initial start date planned for drilling has been pushed out indefinitely to provide for drill crew availability and contemplated financing.
Big Copper Property, Canada
The Big Copper Property ("Big Copper") is located in the Fort Steele and Slocan Mining Divisions, British Columbia, Canada and is approximately 45 kms by road west of Kimberly, British Columbia. The Company holds a 55% interest in Big Copper.
During the year ended December 31, 2012, the Company and its consultants conducted preliminary soil and silt geochemical surveys and prospecting along with evaluating all private and public data to select potential future exploration targets.
The Company conducted minimal exploration work on Big Copper during the year ended December 31, 2013 and no material exploration work was done since.
Exploration Program - Big Copper
Results from that exploration work have been received and an assessment report, including recommendations for further work, has been completed and submitted.
Other than the assessment work required to maintain the claims, the Company has put exploration plans on Big Copper on standby pending improvements in the copper price.
Further information on the Company's projects can be found on its website at www.rokmaster.com
Significant Accounting Policies
The Company prepares its unaudited condensed interim consolidated financial statements in accordance with International Accounting Standards 34, Interim Financial Reporting ("IAS 34"), using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The accounting policies and methods of application applied by the Company in these condensed interim consolidated financial statements are the same as those applied in the Company's most recent annual consolidated financial statements as at and for the year ended December 31, 2019, except for those policies which have changed as a result of the adoption of new and amended IFRS pronouncements effective January 1, 2020.
New, Amended and Future IFRS Pronouncements
Effective January 1, 2020, the Company adopted new and amended IFRS pronouncements and have applied them in accordance with the transitional provisions outlined in the respective standards. The adoption of the new and amended IFRS pronouncements will result in enhanced financial statement disclosures in the Company's interim or annual consolidated financial statements or a change in financial statement presentation. These pronouncements did not affect financial results.
More detail on these new, amended and future IFRS pronouncements are provided in Note 3 of the interim consolidated financial statements for the three months ended March 31, 2020.
Critical Accounting Estimates and Judgments and Estimates
The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management's experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. There have been no significant changes to the Company's critical accounting estimates for the year ended December 31, 2019 from those disclosed in Note 4 of the audited consolidated financial statements for the year ended December 31, 2018.
Selected Annual Financial Information
| For the | For the | For the | |
|---|---|---|---|
| year ended | year ended | year ended | |
| December 31, 2019 | December 31, 2018 | December 31, 2017 | |
| Total revenue | \$ Nil |
\$ Nil |
\$ Nil |
| Net loss | \$ (427,027) |
\$ (569,399) |
\$ (1,077,175) |
| Comprehensive loss | \$ (427,027) |
\$ (569,399) |
\$ (1,083,175) |
| Basic loss per share | \$ (0.02) |
\$ (0.02) |
\$ (0.05) |
| Total assets | \$ 777,346 |
\$ 825,751 |
\$ 869,815 |
| Total current liabilities | \$ 1,064,524 |
\$ 831,789 |
\$ 656,958 |
| Total non-current liabilities | \$ Nil |
\$ Nil |
\$ Nil |
| Cash dividends | \$ Nil |
\$ Nil |
\$ Nil |
The table below sets forth selected financial data, in Canadian dollars, relating to the Company for the years ended December 31, 2019, 2018 and 2017:
The Company is in the exploration stage and therefore, does not have revenues from operations. The Company's operating activities are dependent on the Company's working capital.
The Company's net loss for the year ended December 31, 2019 decreased by \$142,372 when compared to the year ended December 31, 2018. The decrease was mainly due to a decrease in travel, public and shareholder relations and conferences expense of \$70,375 and a decrease in exploration and evaluation expenditures of \$25,667.
The Company's net loss for the year ended December 31, 2018 decreased by \$507,776 when compared to the year ended December 31, 2017. The decrease was mainly due to a decrease in share-based compensation expense of \$419,887.
Results of Operations
Rokmaster is an exploration stage company and its properties are in the early stages of exploration and none of the Company's properties are in production. Therefore, exploration and evaluation expenditures and administrative expenses relating to the operation of the Company's business are being expensed as incurred. Consequently, the Company's net loss is not a meaningful indicator of its performance or potential.
The key performance driver for the Company is the acquisition and development of prospective mineral properties. By acquiring and exploring projects of technical merit, the Company increases its chances of finding and developing an economic deposit.
At this time, the Company is not anticipating profit from operations in the near future. Until such time as the Company is able to realize profits from the production and marketing of commodities from its mineral interests, the Company will report an annual deficit and will rely on its ability to obtain equity or debt financing to fund on-going operations. Additional financing will be required for additional exploration and administration costs. Due to the inherent nature of the junior mineral exploration industry, the Company will have a continuous need to secure additional funds through the issuance of equity or debt in order to support its corporate and exploration activities.
For the three months ended March 31, 2020 compared to the three months ended March 31, 2019
The net loss for the three months ended March 31, 2020 (the "Current Quarter") was \$229,955, compared to a net loss for the three months ended March 31, 2019 (the "Comparative Quarter") of \$97,790. The increase in net loss of \$132,165 between the two quarters was largely due to the Company's efforts to close the acquisition of the option on the Revel Ridge Project which resulted in increased filings, consulting and legal fees. In addition, the Company's public and shareholder relations increased by \$8,777 which contributed to successfully completing the its financing.
Furthermore, the Company recorded stock-based compensation of \$70,145 during the Current Quarter compared to \$9,102 in the Comparative Quarter which contributed a total of \$61,043 in the overall increase in net loss.
Summary of Quarterly Results
The table below summarizes selected financial data, in Canadian dollars, of the Company for the three months ended March 31, 2020, and the previous seven quarters.
| March 31, 2020 |
December 31, 2019 |
September 30, 2019 |
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
|
|---|---|---|---|---|---|---|---|---|
| Total Revenue | \$Nil | \$Nil | \$Nil | \$Nil | \$Nil | \$Nil | \$Nil | \$Nil |
| Net Loss | \$(229,955) | \$(160,911) | \$(97,315) | \$(71,011) | \$(97,790) | \$(160,358) | \$(140,895) | \$(144,461) |
| Basic loss per share |
\$(0.00) | \$(0.01) | \$(0.00) | \$(0.00) | \$(0.00) | \$(0.01) | \$(0.01) | \$(0.01) |
| Total Assets | \$1,257,648 | \$777,346 | \$850,948 | \$784,717 | \$807,123 | \$825,751 | \$910,022 | \$982,071 |
| Mineral Interests | \$915,500 | \$715,500 | \$715,500 | \$715,500 | \$715,500 | \$715,500 | \$715,500 | \$715,500 |
Liquidity and Capital Resources
As of March 31, 2020, the Company had \$233,577 in cash. The Company does not have any cash flow from operations due to the fact that it is an exploration stage company and therefore financings have been the sole source of funds.
At March 31, 2020, the Company had a working capital deficiency of \$724,628. The Company's current assets are not sufficient to support the Company's general administrative and corporate operating requirements on an ongoing basis for the foreseeable future. Accordingly, further financing will be required and the Company will have to raise additional funds to continue its operations. Please see Overall Performance section of this MD&A with respect to the Company's financing efforts.
Liquidity Outlook
The Company's cash position is highly dependent on its ability to raise cash through financings.
Based on the Company's financial position as at March 31, 2020, the Company will need to complete additional external financing either through equity, debt or other forms of financing. As other opportunities become available to the Company and subject to exploration work on the Company's projects and results from such exploration programs are determined, management may be required to complete additional financing.
This outlook is based on the Company's current financial position and is subject to change if opportunities become available based on exploration program results and/or external opportunities. At present, the Company's operations do not generate cash inflows and its financial success is dependent on management's ability to discover economically viable mineral deposits. The mineral exploration process can take many years and is subject to factors that are beyond the Company's control.
In order to finance the Company's future exploration programs and to cover administrative and overhead expenses, the Company will need to raise funds through equity sales, from the exercise of convertible securities, debt, deferral of payments to related parties, or other forms of raising capital. Many factors
influence the Company's ability to raise funds, including the health of the resource market, the climate for mineral exploration investment, the Company's track record, and the experience and calibre of its management. Actual funding requirements may vary from those planned due to a number of factors, including the progress of exploration activities. Management believes it will be able to raise equity capital as required in the short and long term, but recognizes that there will be risks involved which may be beyond its control.
Subsequent to March 31, 2019, the Company completed a non-brokered private placement for aggregate gross proceeds of \$4,515,000 consisting of \$2,000,000 in flow-through funds and \$2,515,000 in non-flowthrough funds.
Going Concern
Rokmaster's consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its commitments, continue operations, and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception, has no recurring source of revenue, has an accumulated deficit of \$11,056,314 and a working capital deficiency of \$724,628 at March 31, 2020. These material uncertainties cast significant doubt upon the Company's ability to continue as a going concern.
The Company will need to raise sufficient funds as the Company's current assets are not sufficient to finance its operations and administrative expenses. The Company is evaluating financing options including, but not limited to, the issuance of additional equity and debt. The Company has no assurance that such financing will be available or be available on favourable terms. Factors that could affect the availability of financing include the Company's performance (as measured by numerous factors including the progress and results of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global financial and metals markets. In addition to evaluating financing options, the Company implemented cost savings measures and deferred payments owed to related parties.
These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption inappropriate, and these adjustments could be material.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as at March 31, 2020 or as at the date hereof.
Transactions with Related Parties
As at March 31, 2020, the Company's related parties consist of the Company's directors and companies controlled by executive officers and directors of the Company.
| Name / Personal Corporation | Relationship | Nature of Transaction |
|---|---|---|
| Canam Mining Corporation ("Canam") |
A private company controlled by John Mirko – President, CEO and Director |
Management and geological consulting fees |
| 0909074 B.C. Ltd. ("0909074") | A private company controlled by Dennis Cojuco – CFO |
Management consulting fees |
The Company incurred fees and expenses in the normal course of operations in connection with the companies controlled by key management and directors. Details are as follows:
| Notes | For the three months ended March 31, 2020 |
For the three months ended March 31, 2019 |
|||
|---|---|---|---|---|---|
| Consulting fees | (i) | \$ 48,000 |
\$ | 48,000 | |
| Geological consulting fees included in exploration and evaluation expenditures |
(ii) | - | - | ||
| \$ 48,000 |
\$ | 48,000 |
- (i) During the three months ended March 31, 2020, the Company paid or accrued management consulting fees \$30,000 (March 31, 2019 - \$30,000) to John Mirko, and management and financial consulting fees of \$18,000 (March 31, 2019 - \$18,000) to 0909074.
- (ii) During the three months ended March 31, 2020, the Company paid or accrued geological consulting fees of \$nil (March 31, 2019 - \$nil) to John Mirko.
Included in accounts payable and accrued liabilities as at March 31, 2020 are:
- \$81,428 (December 31, 2019 \$81,428) owing to Canam for management and geological consulting fees;
- \$357,829 (December 31, 2019 \$354,829) owing to the Company's CEO for reimbursable expenses and management and geological consulting fees; and
- \$178,900 (December 31, 2019 \$172,600) owing to 0909074 for management and financial consulting fees.
Compensation of Key Management Personnel
Key management personnel are those persons that have authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly, and by definition include the directors of the Company.
The remuneration of the Company's key management personnel for the three months ended March 31, 2020 and 2019 are as follows:
| Notes | March 31, 2020 |
March 31, 2019 |
|
|---|---|---|---|
| Management, director and geological consulting fees |
(i) | \$ 48,000 |
\$ 48,000 |
| Share-based Compensation | (ii) | 38,969 | 9,102 |
| Total | \$ 86,969 |
\$ 57,102 |
(i) Management and geological consulting fees include those disclosed in the table above.
(ii) Share-based payments are the fair value of options granted and vested to key management.
Key management personnel were not entitled to post-employment, termination or other long-term benefits during the period ended March 31, 2020 and 2019. The above transactions occurred in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.
Financial Instruments and Other Instruments
The Company classifies its cash, amounts receivable (excluding sales tax receivable) and reclamation bonds as financial assets measured at amortized costs and its marketable securities as financial assets measured at fair value through profit or loss ("FVTPL"). Accounts payable and accrued liabilities and loans payable are classified as other financial liabilities measured at amortized cost.
As of December 31, 2019, the statement of financial position carrying amounts of these financial instruments closely approximate their fair values, except for accounts payable and accrued liabilities, and loans payable where the fair value may be less than carrying amounts due to liquidity risks.
The Company classifies financial instruments recognized at fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following provides the valuation method of the Company's financial instruments as March 31, 2020 and December 31, 2019:
| As at | As at | ||||
|---|---|---|---|---|---|
| Level | March 31, 2020 | December 31, 2019 | |||
| Financial assets at amortized cost | 1 | \$ | 247,077 | \$ | 34,375 |
| Other financial liabilities at amortized cost | 1 | \$ | 1,053,276 | \$ | 1,064,524 |
Financial Risk Management
The Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk.
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments that potentially subject the Company to credit risk consist of cash, short-term investment, reclamation bonds and amounts receivable. The carrying amount of financial assets recorded in the consolidated financial statements, net of any allowances for losses, represents the maximum exposure to credit risk. The Company deposits its cash and short-term investment with a high credit quality major Canadian financial institution as determined by ratings agencies. The Company does not invest in asset-backed deposits or investments and does not expect any credit losses. To reduce credit risk, the Company regularly reviews the collectability of its amounts receivable and establishes an allowance based on its best estimate of potentially uncollectible amounts. The Company historically has not had difficulty collecting its amounts receivable.
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company attempts to manage liquidity risk by maintaining a sufficient cash balance. As of March 31, 2020, the Company had cash of \$233,577 to settle current liabilities of \$1,053,276. Further information relating to liquidity risk is disclosed in the "Liquidity Outlook" section of this MD&A.
Market Risks
The significant market risks to which the Company is exposed are currency and interest rate risks.
The operating results and financial position of the Company are reported in Canadian dollars. As the Company conducts exploration and property examinations primarily in Canada and may from time to time conduct property examinations in other countries outside of Canada, some of the Company's transactions are denominated in currencies other than the Canadian dollar. The results of the Company's operations are subject to currency transaction and translation risks. The Company has not entered into any agreements or purchased any foreign currency hedging arrangements to hedge possible currency risks at this time. Management believes the foreign exchange risk derived from currency conversions for property examinations incurred in other countries outside of Canada is not significant and therefore does not hedge its foreign exchange risk.
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Cash is not subject to interest rate risk since it does not bear interest.
Capital Management
The Company primarily considers shareholders' equity in the management of its capital. The Company manages its capital structure and makes adjustments to it based on funds available to the Company, in order to support exploration and development of mineral properties. The Board of Directors has not established quantitative capital structure criteria management, but will review on a regular basis the capital structure of the Company to ensure its appropriateness to the stage of development of the business.
The Company's objectives when managing capital are:
- To maintain and safeguard its accumulated capital in order to provide an adequate return to shareholders by maintaining sufficient level of funds, to support continued evaluation and maintenance of the Company's existing properties, and to acquire, explore and develop other precious metals, base metals and industrial mineral deposits;
- To invest cash on hand in highly liquid and highly rated financial instruments with high credit quality issuers, thereby minimizing the risk and loss of principal; and
- To obtain the necessary financing if and when it is required.
The properties in which the Company currently holds an interest in are in the exploration stage and the Company is dependent on external financing to fund its activities. In order to carry out planned exploration and development and pay for administrative costs, the Company will spend its existing working capital and attempt to raise additional amounts as needed.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. In order to facilitate the management of capital and development of its mineral properties, the Company's management informs the Board of Directors as to the quantum of expenditures for review and approval prior to commencement of work. In addition, the Company may issue new equity, incur additional debt, enter into joint venture agreements or dispose of certain assets. When applicable, the Company's investment policy is to hold cash in interest bearing accounts at high credit quality financial institutions to maximize liquidity. In order to maximize
ongoing development efforts, the Company does not pay dividends. The Company expects to continue to raise funds, from time to time, to continue meeting its capital management objectives.
There were no changes in the Company's approach to capital management during the year ended December 31, 2019 compared to the year ended to December 31, 2019. The Company is not subject to externally imposed capital requirements.
Proposed Transactions
At the present time and other than those already discussed in this MD&A, there are no other proposed transactions.
Risks and Uncertainties
The risks and uncertainties faced by the Company are substantially unchanged from those disclosed in the Company's Annual MD&A dated June 15, 2020.
Dividends
Rokmaster has no earnings or dividend record and is unlikely to pay any dividends in the foreseeable future as it intends to employ available funds for mineral exploration and development. Any future determination to pay dividends will be at the discretion of the Board of Directors of Rokmaster and will depend on Rokmaster's financial condition, results of operations, capital requirements and such other factors as the Board of Directors of Rokmaster deem relevant.
Nature of the Securities
The purchase of the Company's securities involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks. The Company's securities should not be purchased by persons who cannot afford the possibility of the loss of their entire investment. Furthermore, an investment in the Company's securities should not constitute a major portion of an investor's portfolio.
Additional Disclosure for Venture Issuers Without Significant Revenue
Additional disclosure concerning Rokmaster's general and administrative expenses and resource property exploration expenses is provided in the Company's Consolidated Statement of Loss and Comprehensive Loss and Shareholders' Equity (Deficiency) contained in its audited consolidated financial statements for the years ended December 31, 2019 and 2018 which is available on the Company's profile on SEDAR at www.sedar.com.
Outstanding Share Data
Rokmaster's authorized capital is unlimited common shares without par value. As at July 16, 2020, the following common shares, agent warrants, finders' warrants and incentive stock options were outstanding:
| # of Shares | Exercise Price | Expiry Date | |
|---|---|---|---|
| Issued and Outstanding Common Shares | 60,637,037 | N/A | N/A |
| Share Purchase Warrants | 750,000 | \$0.07 | July 16, 2020 |
| Share Purchase Warrants | 2,225,000 | \$0.07 | August 21, 2020 |
| Share Purchase Warrants | 2,600,000 | \$0.10 | October 25, 2020 |
| Share Purchase Warrants | 4,950,000 | \$0.10 | January 28, 2022 |
| Share Purchase Warrants | 6,666,667 | \$0.10 | March 4, 2022 |
| Share Purchase Warrants | 19,552,526 | \$0.30 | May 22, 2023 |
| Share Purchase Warrants | 768,182 | \$0.30 | June 11, 2023 |
| Special Warrants – Series A | 2,400,000(1)(4) | N/A | January 17, 2027 |
| Special Warrants – Series B | 2,400,000(2)(4) | N/A | January 17, 2032 |
| Special Warrants – Series C | 2,400,000(3)(4) | N/A | January 17, 2037 |
| Incentive Stock Options | 1,360,000 | \$0.30 | January 30, 2022 |
| Incentive Stock Options | 600,000 | \$0.20 | June 12, 2023 |
| Incentive Stock Options | 250,000 | \$0.06 | March 25, 2024 |
| Incentive Stock Options | 1,450,000 | \$0.15 | April 20, 2025 |
| Incentive Stock Options | 900,000 | \$0.08 | January 2, 2030 |
| Finders' Options | 356,000 | \$0.06/\$0.10 | January 28, 2021 |
| Finders' Options | 388,000 | \$0.06/\$0.10 | March 4, 2021 |
| Finders' Options | 833,964 | \$0.22/\$0.30 | May 22, 2023 |
| Finders' Options | 711,111 | \$0.225/\$0.30 | May 22, 2023 |
| Finders' Options | 40,800 | \$0.22/\$0.30 | June 11, 2023 |
| Fully Diluted | 112,239,287 |
(1) Part of the consideration of the Duncan Lake acquisition and exercisability is based on reaching a milestone as follows: upon the Company receiving a technical report identifying a mineral resource or mineral reserve estimate totalling a minimum of 3 million tonnes of 6% combined lead and zinc equivalent.
(2) Part of the consideration of the Duncan Lake acquisition and exercisability is based on reaching a milestone as follows: upon the Company receiving a technical report identifying a mineral resource or mineral reserve estimate totalling a minimum of 6 million tonnes of 6% combined lead and zinc equivalent.
(3) Part of the consideration of the Duncan Lake acquisition and exercisability is based on reaching a milestone as follows: once Duncan Lake commences commercial production.
(4) All of the aforementioned Special Warrants (the "Special Warrants") are subject to an accelerated exercise provision. Please see Note 8c of the Company's consolidated financial statements for the year ended December 31, 2017 for details.
Recent Developments and Outlook
The Company expects to obtain financing in the future primarily through further equity and debt financing. There can be no assurance that the Company will succeed in obtaining additional financing, now or in the future. Failure to raise additional financing on a timely basis could cause the Company to suspend its operations and eventually to forfeit or sell its interest in its resource properties.
Subsequent Events
Please see Overall Performance section of this MD&A.
Controls and procedures
Internal Control Over Financial Reporting - The Company's management is responsible for establishing adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The Company's management has evaluated the effectiveness of the design and operation of the Company's internal control over financial reporting as of the period covered by this report. Based on the result of the assessment, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's internal controls over financial reporting are effective.
Disclosure Controls and Procedures - Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as appropriate in order to permit timely decisions regarding public disclosure.
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuer's Annual and Interim Filings, are effective to ensure that information required to be disclosed in reports that are filed or submitted under Canadian securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.
Corporate Governance
Composition of the Board of Directors - The Board of Directors of Rokmaster is at present comprised of three directors, two of whom are considered to be independent.
Approval
The Board of Directors of Rokmaster Resources Corp. has approved the disclosure contained in this MD&A. A copy of this MD&A will be provided to anyone who requests it.
Additional Information
Additional information relating to Rokmaster can be obtained on the SEDAR website at www.sedar.com, on the Company's website at www.rokmaster.com or by contacting the Company at 1150 – 625 Howe Street, Vancouver, BC Canada V6C 2T6 or at Tel: (604)290-4647 or via email: [email protected]