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Tarachi Gold Corp. — Interim / Quarterly Report 2021
Jun 25, 2021
47572_rns_2021-06-25_6086bfcd-d48e-48be-88e1-6860a2ff1b81.pdf
Interim / Quarterly Report
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(formerly Kal Minerals Corp.)
_____________ Condensed Interim Financial Statements For the nine months ended April 30, 2021 and 2020 Presented in Canadian dollars
0
NOTICE TO READER
NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed interim financial statements of the Company have been prepared by, and are the responsibility of, the Company’s management. The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Professional Accountants for a review of interim financial statements.
1
TARACHI GOLD CORP.
(formerly Kal Minerals Corp.)
(An exploration stage company) Condensed Interim Statements of Financial Position (Expressed in Canadian Dollars)
| TARACHI GOLD CORP. (formerly Kal Minerals Corp.) (An exploration stage company) Condensed Interim Statements of Financial Position (Expressed in Canadian Dollars) |
|||
|---|---|---|---|
| April 30, 2021 | July 31, 2020 | ||
| ASSETS | |||
| Current assets | |||
| Cash | $ 3,029,302 | $ 2,568,358 |
|
| Accounts receivable | 1,376,080 | 12,251 | |
| Prepaid expenses | 396,325 | 171,069 | |
| 4,801,707 | 2,751,678 | ||
| Exploration and evaluation assets (Note 3) | 7,729,449 | 1,501,848 |
|
| $ | 12,531,156 | $4,253,526 |
|
| LIABILITIES | |||
| Current liabilities | |||
| Accounts payable and accrued liabilities (Note 7) | $ 54,142 | $ 66,432 | |
| Subscriptions received | - | 1,621,135 | |
| 54,142 | 1,687,567 | ||
| SHAREHOLDERS’ EQUITY | |||
| Share capital (Note 4) | 15,255,330 | 3,408,892 | |
| Contributed surplus (Note 4) | 2,518,080 | 932,379 | |
| Accumulated deficit | (5,296,396) | (1,775,312) | |
| 12,477,014 | 2,565,959 | ||
| $ | 12,531,156 | $4,253,526 |
Nature of Operations and Going Concern (Note 1)
Approved on behalf of the Board of Directors on June 25, 2021:
| “Michael Konnert” Michael Konnert, Chairman of the Board |
“Lorne Warner” |
|---|---|
| Lorne Warner, Director |
The accompanying Notes are an integral part of these Financial Statements
2
TARACHI GOLD CORP.
(formerly Kal Minerals Corp.) (An exploration stage company)
Condensed Interim Statements of Operations and Comprehensive Loss (Expressed in Canadian Dollars)
| Three Months | Three Months | Nine Months | Nine Months | |
|---|---|---|---|---|
| Ended | Ended | Ended | Ended | |
| April 30, | April 30, | April 30, | April 30, | |
| 2021 | 2020 | 2021 | 2020 | |
| EXPENSES | ||||
| Professional fees | $ 43,376 | $ 14,746 | $ 185,093 | $ 26,197 |
| Consulting fees (Note 7) | 125,365 | 19,079 | 700,532 | 31,579 |
| Transfer agent and filing fees | 6,299 | 5,778 | 34,392 | 15,469 |
| Stock-based compensation (Note 4) | 376,628 | - | 1,649,945 | 29,375 |
| General and administrative | 371,926 | 17,995 | 976,835 | 48,105 |
| Write-down of mineral properties | - | 248,724 | - | 248,724 |
| Loss before the undernoted | (907,462) | (306,322) | (3,546,797) | (399,449) |
| Other income (expenses) | ||||
| Foreign exchange gain/(loss) | 21,779 | - | 21,779 | - |
| Interest income | 1,845 | - | 3,934 | |
| NET and COMPREHENSIVE LOSS | $ (883,838) | $(306,322) | $ (3,521,084) | $(399,449) |
| LOSS PER SHARE(basic and diluted) | $ (0.01) | $ (0.01) | $ (0.06) | $ (0.01) |
| WEIGHTED AVERAGE NUMBER OF | ||||
| SHARES OUTSTANDING (basic and | ||||
| diluted) | 65,754,267 | 19,405,560 | 61,688,343 | 19,112,520 |
The accompanying Notes are an integral part of these Financial Statements
3
TARACHI GOLD CORP.
(formerly Kal Minerals Corp.)
(An exploration stage company) Condensed interim Statements of Cash Flows (Expressed in Canadian Dollars)
| Nine Months Ended | Nine Months Ended | Nine Months Ended | |
|---|---|---|---|
| April 30, | April 30, | ||
| 2021 | , 2020 | ||
| OPERATING ACTIVITIES | |||
| Net loss for the year | $ (3,521,084) | $ (399,449) | |
| Item not effecting cash: | |||
| Stock based compensation | 1,231,056 | 29,375 | |
| Write-down of mineral properties | 248,724 | ||
| Shares issued for services | 41,068 | - | |
| Changes in non-cash working capital items: | |||
| Change in accounts receivable and prepaid expenses | (1,589,085) | (3,094) | |
| Change in accountspayable and accrued liabilities | (12,290) | 76,495 | |
| (3,850,335) | (47,949) | ||
| INVESTING ACTIVITIES | |||
| Exploration and evaluation assets - acquisition | (2,388,359) | (35,299) | |
| Exploration and evaluation assets – expenditures | (1,056,152) | - | |
| (3,444,511) | (35,299) | ||
| FINANCING ACTIVITIES | |||
| Proceeds from issuance of shares, net of share issuance costs | 7,550,940 | - | |
| Proceeds from options and warrant exercise | 204,850 | - | |
| 7,755,790 | - | ||
| NET CHANGE IN CASH | 460,944 | (83,248) | |
| CASH, beginningofyear | 2,568,358 | 111,780 | |
| CASH,end of theperiod | $ | 3,029,302 | $28,532 |
| Non-cash Transaction | |||
| Shares issued for exploration and evaluation assets |
$ | 2,783,090 |
$ 350,000 |
The accompanying Notes are an integral part of these Financial Statements
4
TARACHI GOLD CORP.
(formerly Kal Minerals Corp.) (An exploration stage company) Condense Interim Statements of Changes in Equity (Expressed in Canadian Dollars)
| Number of | Contributed | Accumulated | |||
|---|---|---|---|---|---|
| Shares | Share Capital | Surplus | Deficit | Total | |
| Balance at July 31, 2019 | 18,966,000 | $ 637,065 | $ 4,695 | $ (312,110) | $ 329,650 |
| Shares issued – E&E asset (Notes 3 and 4) | 5,000,000 | 350,000 | - | - | 350,000 |
| Stock based compensation | - | - | 29,375 | - | 29,375 |
| Loss for theperiod | - | - | - | (399,449) | (399,449) |
| Balance at April 30, 2020 | 23,966,000 | $987,065 | $34,070 | $ (711,559) | $309,578 |
| Balance at July 31, 2020 | 37,094,664 | $ 3,408,892 | $ 932,379 | $ (1,775,312) | $ 2,565,959 |
| Shares issued – E&E asset (Notes 3 and 4) | 9,109,250 | 2,783,090 | - | - | 2,783,090 |
| Stock based compensation (Note 4) | - | - | 1,231,056 | 418,889 | 1,649,945 |
| Shares issued on private placement (Note 4) | 23,718,605 | 9,487,442 | - | - | 9,487,442 |
| Shares issued for services | 108,280 | 41,068 | - | - | 41,068 |
| Share issuance costs (Note 4) | - | (740,374) | 425,007 | - | (315,367) |
| Options exercised (Note 4) | 400,000 | 57,712 | (25,362) | - | 32,350 |
| Warrants exercised (Note 4) | 690,000 | 217,500 | (45,000) | 172,500 | |
| Loss for theperiod | - | - | - | (3,521,084) | (3,521,084) |
| Balance at April 30, 2021 | 71,120,799 | $15,255,330 | $2,518,080 | $ (4,877,507) | $12,895,903 |
The accompanying Notes are an integral part of these Financial Statements
5
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
1. Nature of Operations and Going Concern
Tarachi Gold Corp (formerly Kal Minerals Corp.) (the "Company") was incorporated under the Business Corporations Act in British Columbia on February 19, 2016. The Company has interests in exploration and evaluation assets in Mexico, and its principal business is the exploration and development of those assets. The head office, principal address, registered address, and records office of the Company are located at #700-1090 West Georgia Street, Vancouver, BC.
The Company is in the exploration stage with respect to its exploration and evaluation assets and has not yet determined whether those assets contain ore reserves that are economically recoverable. The carrying amount of these assets represents the total of net costs capitalized and is not intended to reflect either their present or future value. The recoverability of amounts shown for exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s legal interest in the assets, the ability of the Company to obtain the necessary financing to complete the development, and future profitable production or proceeds from the disposition of the assets.
These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and meet its obligations in the ordinary course of business. The Company incurred a net loss of $3,521,084 (April 30, 2020: $399,449) for the nine months ended April 30, 2021. At April 30, 2021, the Company had an accumulated deficit of $4,877,507 (April 30, 2020: $711,559), which has been funded primarily by the issuance of equity. The Company will need to raise new funds through the sale of shares to maintain operations. These factors together raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not reflect adjustments for the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Realization values may be substantially different from the carrying values as shown in these financial statements should the Company be unable to continue as a going concern.
On March 11 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. The duration and impact of COVID-19 is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial results and condition of the Company in future periods.
2. Significant Accounting Policies and Basis of preparation
(a) Statement of compliance
These condensed interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) have been omitted or condensed, and therefore these condensed interim financial statements should be read in conjunction with the Company’s July 31, 2020 audited annual financial statements and the notes to such financial statements.
These condensed interim financial statements are based on the IFRS issued and effective as of June 25, 2021, the date these condensed interim financial statements were authorized for issuance by the Company’s Board of Directors and follow the same accounting policies and methods of computation as the most recent annual financial statements.
6
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
2. Significant Accounting Policies and Basis of preparation, (continued)
(b) Basis of presentation
These financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The significant accounting policies, as disclosed, have been applied consistently to all periods presented in these financial statements.
(c) Accounting standards issued but not yet adopted
The new standards or amendments issued but not yet effective are either not applicable or not expected to have a significant impact on the Company’s condensed interim financial statements.
3. Exploration and evaluation asset
| 3. Exploration and evaluation | asset |
|---|---|
| CAD$ | |
| Acquisition Cost Share issued for the Project Cash acquisition costs Exploration Cost |
Balance as at July 31,2020 Cost incurred during period Balance as at April 30,2021 |
| 1,150,357 2,783,090 3,933,447 - 2,388,359 2,388,359 |
|
| 1,150,357 5,171,449 6,321,806 |
|
| Camp and support Aircraft and Helicopters Analysis Drilling and trenching Geological services Materials and supplies Recording and filing Travel Field costs Total |
64,574 128,733 193,307 - 15,985 15,985 22,324 79,775 102,099 - 571,630 571,630 56,993 135,629 192,622 34,728 9,300 44,028 172,872 - 172,872 - 77,023 77,023 - 38,077 38,077 |
| 351,491 1,056,152 1,407,643 |
|
| 1,501,848 6,227,601 7,729,449 |
7
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company)
Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
3. Exploration and evaluation asset (continued)
a) Juliana and Las Moritas Property
On September 3, 2020, the Company announced it entered into an agreement to acquire 100% of Juliana and Las Moritas concessions in Sonora, Mexico. The Company has the right to acquire the concessions by making aggregate cash payments of $2,130,000 USD to the optionor over the following 60 months, as well as through the issuance of 4,000,000 total common shares.
| Cash payments (USD) | Common shares | Date |
|---|---|---|
| $ 40,000 | 500,000 | Execution date (paid and issued) |
| $ 30,000 | Nil | Six months anniversary of the execution date (paid) |
| $ 30,000 | 1,000,000 | Twelve months anniversary of the execution date |
| $ 30,000 | Nil | Eighteen months anniversary of the execution date |
| $ 60,000 | 1,000,000 | Twenty-four months anniversary of the execution date |
| $ Nil | 1,500,000 | Twenty-six months anniversary of the execution date |
| $ 60,000 | Nil | Thirty months anniversary of the execution date |
| $ 150,000 | Nil | Thirty-six months anniversary of the execution date |
| $ 150,000 | Nil | Forty-two months anniversary of the execution date |
| $ 150,000 | Nil | Forty-eight months anniversary of the execution date |
| $ 700,000 | Nil | Fifty-four months anniversary of the execution date |
| $ 700,000 | Nil | Sixty months anniversary of the execution date |
| $2,130,000 | 4,000,000 |
b) Tarachi Project
On March 27, 2020, the Company entered into a letter agreement with the option to earn 100% interest in the Tarachi Project. The Company can earn 100% interest in the Property by making the following payments:
-
Making total cash payments of USD$5,000,000 as outlined below; and
-
• Issuing a total of 10,000,000 common shares as outlined below.
| • Issuing a t |
otal of 10,000,000 c | ommon shares as outlined below. |
|---|---|---|
| Cash payments (USD) | Common shares | Date |
| $ 25,000 | 2,500,000 | Upon signing of the Agreement (Issued and paid) |
| 5 days after closing the Company’s next financing | ||
| $ 75,000 | Nil | (Paid) |
| $ 100,000 | 2,500,000 | First anniversary |
| $ 100,000 | 2,500,000 | Second anniversary |
| $ 100,000 | 2,500,000 | Third anniversary |
| $ 4,600,000 | Nil | Fourth anniversary |
| $ 5,000,000 | 10,000,000 |
In addition, the Company paid a finder’s fee of 2,500,000 common shares with a fair value of $500,000 in connection with the option agreement.
8
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
3. Exploration and evaluation asset (continued)
c) Acquisition of Magistral del Oro mill and tailings project
On February 8, 2021, the Company announced signing of the purchase agreement with Manto Resources S.A. de C.V. (“Manto”) to acquire Magistral del Oro mill and tailings project (“Magistral”) and on March 18, 2021 the Company announced the closing for the purchase of Magistral. The mill and high-grade gold tailings, located in the State of Durango, provide the Company with a near-term pathway to gold production and the Project is expected to start generating positive cashflow in 2022.
Acquisition Terms
Final terms of the purchase agreement are in line with the original Letter of Intent dated October 9, 2020, with Manto:
-
Consideration for the acquisition will consist of issuing 4,000,000 common shares of Tarachi to Manto.
-
The Company will grant Manto a 15% net profits royalty on the estimated 1.3 million tonnes of tailings material expected to be processed and reimburse Manto for US$1,179,500 of cash outlays.
-
The Company will satisfy certain obligations of Manto by paying a total of approximately US$1,111,000 plus any Mexican value added tax (IVA) in cash or shares and issuing 1,019,250 common shares upon closing.
-
Manto will be entitled to the following staged bonus payments:
-
An additional 4,000,000 common shares 60 days after the closing date.
-
4,000,000 common shares 180 days after the closing date.
-
4,000,000 common shares 365 days after the closing date.
-
US$500,000 in cash following 6 months of commercial production at Magistral.
-
US$500,000 in cash following 12 months of commercial production at Magistral.
-
Upon the Company earning US$15,000,000 in revenue from Magistral, the Company will pay Manto US$1,000,000.
-
A finder's fee of 1,000,000 common shares will be issued to Spirit Exploration Corp.
4. Share capital
Authorized share capital:
Unlimited common shares without par value.
Issued and outstanding:
The Company had issued and outstanding 71,120,799 (July 31, 2020 – 37,094,664) common shares, of which 838,200 common shares are held in escrow (July 31, 2020 – 2,514,600).
Shares issued during the nine months ended January 31, 2021
On August 14, 2020, the Company closed a non-brokered private placement for gross proceeds of $9,487,442 through the issuance of 23,718,605 units at a price of $0.40 per unit. Each unit consists of one common share and one-half common share purchase warrant. Each warrant is exercisable at a price of $0.70 per share for a period of 24 months. The Company paid finder’s fees of $304,938, $10,429 of related costs and issued 755,610 finder’s warrants at the same terms as the warrants described above. The fair value of the finders’ warrants is $425,007.
9
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
4. Share capital (continued)
The Company issued 500,000 shares pursuant to the option agreement to acquire the Juliana and Las Moritas property, 2,500,000 shares pursuant to the option agreement to acquire the Tarachi property and 6,109,250 shares pursuant to the purchase agreement to acquire the Magistral project. The Company issued 108,280 shares pursuant to a geological consulting agreement during the period ended April 30, 2021.The Company issued 1,090,000 shares for options and warrants exercises during the period ended April 30, 2021, for total proceeds of $275,212.
Options
The Company has a stock option plan whereby a maximum of 10% of the issued and outstanding common shares of the Company may be reserved for issuance pursuant to the exercise of stock options. The terms of the granted options are fixed by the Board of Directors and are not to exceed ten years. The exercise price of options are determined by the Board of Directors, but shall not be less than the closing price of the Company’s common shares on the day preceding the day on which the options are granted, less any discount permitted by the TSX Venture Exchange (the “Exchange”).Options granted under the plan may vest immediately on grant, or over a period as determined by the Board of Directors or, in respect of options granted for investor relations services, as prescribed by the Exchange.
A continuity schedule of the Company’s outstanding stock options for the nine months ended April 30, 2021 and 2020 are as follows:
| 2021 and 2020 are as follows: | |||||||
|---|---|---|---|---|---|---|---|
| April 30, | 2021 | April | 30, 2020 | ||||
| Weighted | Weighted | ||||||
| average | average | ||||||
| Number | exercise | Number | exercise | ||||
| outstanding | price | outstanding |
price | ||||
| Outstanding, beginning of year | 3,535,000 |
$ | 0.31 | - |
$ |
- | |
| Granted | 4,885,000 | 0.40 | 700,000 | 0.075 | |||
| Expired | (1,165,000) | 0.43 | (200,000) | 0.075 | |||
| Exercised | (400,000) | 0.08 | - | - | |||
| Outstanding and exercisable, | |||||||
| end of the period | 6,855,000 | $ | 0.37 | 350,000 | $ | 0.075 |
10
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company)
Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
4. Share capital (continued)
Options, continued
At April 30, 2020, the Company had outstanding stock options exercisable to acquire common shares of the Company as follows:
| Weighted average remaining | |||
|---|---|---|---|
| Expiry date | Options outstanding | Exercise price |
contractual life (in years) |
| September 12, 2021 | 100,000 |
$ 0. 08 | 0.37 |
| June 18, 2025 | 1,950,000 | $ 0. 31 | 4.14 |
| July 20, 2025 | 300,000 | $ 0. 66 | 4.22 |
| August 26, 2024 | 1,000,000 | $ 0. 69 | 3.33 |
| July 15, 2021 | 350,000 | $ 0. 39 | 0.21 |
| January 21, 2026 | 1,408,000 | $ 0. 28 | 4.73 |
| February 08, 2026 | 380,000 | $ 0. 29 | 4.78 |
| March 17, 2026 | 167,000 | $ 0. 30 | 4.88 |
| April 27, 2026 | 1,200,000 | $ 0. 27 | 4.99 |
| 5,958,000 | 3.94 |
The fair value of the options granted was calculated using the Black-Scholes option pricing model with the following assumptions:
| Risk Free Interest Rate | 0.19%-0.34% |
|---|---|
| Expected Dividend Yield | - |
| Expected Volatility | 160%-184% |
| Expected Term in Years | 1-5 years |
The Company recorded total fair value of $1,649,945 as share based compensation for the nine months ended April 30, 2021 (April 30, 2020 - $29,375).
11
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
4. Share capital (continued)
Warrants (continued)
Warrants
A continuity schedule of the Company’s outstanding common share purchase warrants for the nine months ended April 30, 2021 and 2020 is as follows:
| April 30, | 2021 | April 30, 2020 | April 30, 2020 | |||
|---|---|---|---|---|---|---|
| Weighted | ||||||
| Weighted | average | |||||
| Number | average | Number | exercise | |||
| outstanding | exercise price | outstanding |
price | |||
| Outstanding, beginning of year | 13,569,897 | $ | 0.12 | - |
$ |
- |
| Issued | 12,671,163 | 0.70 | 125,000 |
0.05 | ||
| Exercised | (410,000) | 0.25 | - |
- | ||
| Expired | - | - | - | - | ||
| Outstanding, end of theperiod | 25,831,060 | $ | 0.47 | 125,000 |
$ |
0.05 |
At April 30, 2021, the Company had outstanding warrants exercisable to acquire common shares of the Company as follows:
| Weighted average remaining | |||
|---|---|---|---|
| Expiry date | Warrants outstanding | Exercise price | contractual life (in years) |
| May 22, 2022 | 12,393,664 | $ 0. 25 | 0.51 |
| May 22, 2022 | 486,233 | $ 0. 25 | 0.02 |
| August 14, 2022 | 11,859,303 |
$ 0. 70 | 0.60 |
| August 14, 2022 | 755,610 |
$ 0. 70 | 0.04 |
| August 14, 2021 | 56,250 |
$ 0. 40 | 0.01 |
| 26,831,060 | $0. 47 | 1.17 |
The fair value of the warrants granted was calculated as of the grant date using the Black-Scholes option pricing model with the following assumptions:
Risk Free Interest Rate 0.27% Expected Dividend Yield Expected Volatility 164% Expected Term in Years 2 years
During the nine months period ended April 30, 2021 and 2020, the Company recorded fair value of $425,007 (October 31, 2019 - $Nil) against reserves.
12
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
5. Management of capital
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to continue its business and maintain a flexible capital structure, which optimizes the costs of capital at an acceptable risk. The Company’s capital includes the components of its shareholders’ equity. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue new debt, acquire or dispose of assets, or adjust the amount of cash. In order to preserve cash, the Company does not pay any dividends.
The Company is not subject to any externally imposed capital requirements. The Company did not change its capital management approach during the nine months ended April 30, 2021. The Company’s ability to continue its operations is dependent on its success in raising equity through share issuances, suitable debt financing and/or other financing arrangements.
6. Financial instruments
a) Categories of financial instruments and fair value measurements
The Company’s financial assets and liabilities are classified as follows:
| April 30, 2021 | July31,2020 | |
|---|---|---|
| Financial assets: | ||
| Fair value through profit and loss | ||
| Cash | $ 3,029,302 | $ 2,568,358 |
| Receivables | 17,882 | - |
| Prepaid expenses | 396,325 | - |
| 3,443,509 | 2,568,358 | |
| Financial liabilities: | ||
| Other financial liabilities | ||
| Accountspayable and accrued liabilities | $54,142 | $66,432 |
The accounts payable and accrued liabilities includes amounts due to related parties (Note 07).
b) Fair value information
The Company’s accounts payable and accrued liabilities are carried at amortized cost. The fair value approximates the carrying amount due to the short-term nature of this instrument.
IFRS 7 Financial Instruments: Disclosures establishes a fair value hierarchy that reflects the significance of inputs used in measuring fair value as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). At April 30, 2021 and 2020, the Company had no financial assets measured and recognized on the statement of financial position at fair value belonging in Level 2 or Level 3 of the fair value hierarchy.
13
TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
6. Financial instruments
c) Management of financial risks
The Company’s financial instruments expose the Company to certain financial risks, including credit risk, liquidity risk, interest rate risk and foreign currency 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. At April 30, 2021, the Company was exposed to credit risk on its cash.
The Company’s cash is held with a high credit quality financial institution in Canada and as at April 30, 2021.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company manages liquidity risk by maintaining adequate cash and managing its capital and expenditures.
At April 30, 2021, the Company had cash of $3,029,302 (July 31, 2020 - $2,568,358) and accounts payable and accrued liabilities of $54,142 (July 31, 2020 - $66,432) with contractual maturities of less than one year. The Company has sufficient cash to meet its current liabilities as at April 30, 2021. The Company assessed its liquidity risk as low at April 30, 2021.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates.
The Company’s financial assets and financial liabilities are not exposed to interest rate risk due to their short-term nature and maturity. The Company is not exposed to interest rate risk as at April 30, 2021.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that it has monetary assets and liabilities denominated in foreign currencies.
As at April 30, 2021, the Company had limited exposure to foreign currency risk, as the majority of balances are denominated in Canadian dollars. The Company assessed its financial currency risk as low as at April 30, 2021.
Price risk
This risk relates to fluctuations in commodity and equity prices. The Company closely monitors commodity prices of precious and base metals, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company. Fluctuations in pricing may be significant.
The Company does not currently use financial instruments designed to hedge these market risks.
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TARACHI GOLD CORP. (formerly Kal Minerals Corp.)
(An exploration stage company) Notes to Consolidation Interim Financial Statements for the nine months ended April 30, 2021 and 2020 (Expressed in Canadian Dollars)
7. Related party transactions
Unless otherwise noted, related party transactions were incurred in the normal course of operations and are measured at the exchange amount, being the amount established and agreed upon by the related parties.
The Company’s key management personnel consist of directors and executives and companies owned, directly or indirectly, by key management personnel of the Company.
| Name | Nature of Transactions |
|---|---|
| Lorne Warner, former CEO | Consulting |
| Martin Bajic, former CFO | Consulting |
| Michael Konnert, Chairman, Director | Consulting |
| Mahesh Liyanage, CFO | Consulting |
| Inventa Capital Corp. | rent and general and administrative expenses |
As at April 30, 2021, the Company has amounts due to related parties totaling $Nil (July 31, 2020: $5,250).
The Company’s key management compensation and related party transactions for the three and nine months ended April 30, 2021 and 2020 is as follows:
| For the three | months ended | For the nine | months ended | |
|---|---|---|---|---|
| April 30, 2021 | April 30, 2020 | April 30, 2021 | April 30, 2020 |
|
| Consulting | $ 85,500 | $ 12,600 | $ 169,000 | $ 25,100 |
| Rent and general and administration |
45,000 | 15,000 | 135,000 | 45,000 |
| Stock based compensation | 252,348 | - | 1,377,639 | - |
| Total | $ 382,848 | $ 27,600 |
$ 1,681,639 |
$99,475 |
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