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Tarku Resources Ltd. Audit Report / Information 2024
46971_rns_2025-01-28_60913335-5e9a-4af5-ab54-d4ced54148f4.pdf
Audit Report / Information
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TARKU
RESOURCES
Consolidated Financial Statements
September 30, 2024 and 2023
(Expressed in Canadian Dollars)
DAVIDSON & COMPANY LLP
Chartered Professional Accountants
To the Shareholders of
Tarku Resources Ltd.
Opinion
We have audited the accompanying consolidated financial statements of Tarku Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at September 30, 2024 and 2023, and the consolidated statements of loss and comprehensive loss, cash flows, and changes in equity for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 of the consolidated financial statements, which indicates that as of September 30, 2024, the Company had a working capital deficit of $810,877, and at that date, the Company had an accumulated deficit of $10,873,814 which has been funded primarily by the issuance of equity. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its general operating expenses and to continue to explore its mineral properties. As stated in Note 1, these events and conditions indicate that a material uncertainty exists that casts significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year ended. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our auditor’s report.
Assessment of Impairment Indicators of Exploration and Evaluation Assets (“E&E Assets”)
As described in Note 4 to the consolidated financial statements, the carrying amount of the Company’s E&E Assets was $3,485,916 as of September 30, 2024. As more fully described in Note 3 to the consolidated financial statements, management assesses E&E Assets for indicators of impairment at each reporting period.
A member of Nexia International
1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Davidson-co.com
The principal considerations for our determination that the assessment of impairment indicators of the E&E Assets is a key audit matter are that there was judgment made by management when assessing whether there were indicators of impairment for the E&E Assets, specifically relating to the assets' carrying amount which is impacted by the Company's intent and ability to continue to explore and evaluate these assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of indicators of impairment that could give rise to the requirement to prepare an estimate of the recoverable amount of the E&E Assets.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included, among others:
- Evaluating management's assessment of impairment indicators.
- Evaluating the intent for the E&E Assets through discussion and communication with management.
- Testing the Company's additions to E&E Assets for the period by evaluating a sample of recorded expenditures for consistency to underlying records, the capitalization requirements of the Company's accounting policy and the requirements of the accounting standard.
- Reviewing the Company's recent expenditure activity and expenditure budgets for future periods.
- Assessing compliance with agreements including reviewing option agreements.
- Obtaining, on a test basis, confirmation of title to ensure mineral rights underlying the E&E Assets are in good standing.
Other Information
Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year ended and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Glenn Parchomchuk.
Vancouver, Canada
January 28, 2025
Chartered Professional Accountants
Tarku Resources Ltd.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
| September 30, 2024 | September 30, 2023 | |
|---|---|---|
| Assets | ||
| Current | ||
| Cash | $ 104,756 | $ 41,324 |
| Trade and other receivables | 11,789 | 29,281 |
| Prepaid expenses | 14,024 | 12,544 |
| 130,569 | 83,149 | |
| Non-current | ||
| Exploration and evaluation assets (note 4) | 3,485,916 | 3,680,520 |
| Total assets | $ 3,616,485 | $ 3,763,669 |
| Liabilities | ||
| Current | ||
| Trade and other payables (note 4 and 8) | $ 941,446 | $ 555,712 |
| 941,446 | 555,712 | |
| Non-current | ||
| Convertible debenture (note 5) | 163,404 | 145,526 |
| Total Liabilities | 1,104,850 | 701,238 |
| Equity | ||
| Share capital (note 6) | 11,779,464 | 11,446,752 |
| Equity component of debenture (note 5) | 41,113 | 41,113 |
| Contributed surplus | 1,564,872 | 1,545,334 |
| Deficit | (10,873,814) | (9,970,768) |
| 2,511,635 | 3,062,431 | |
| Total liabilities and equity | $ 3,616,485 | $ 3,763,669 |
Nature of business and continuance of operations (note 1)
APPROVED ON BEHALF OF THE BOARD
"Julien Davy"
President, CEO & Director
"David Watkinson"
Director
The accompanying notes are an integral part of these consolidated financial statements.
Tarku Resources Ltd.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended September 30, 2024 and 2023
(Expressed in Canadian Dollars)
| 2024 | 2023 | |
|---|---|---|
| Expenses | ||
| Administrative expenses | $ 38 672 | $ 82,662 |
| Consulting fees (note 8) | 72,000 | 72,000 |
| Exploration costs (notes 4 and 8) | 447,543 | 935,502 |
| Investor relations expenses | 31,742 | 60,299 |
| Listing and filing fees | 35,174 | 54,846 |
| Professional fees | 56,582 | 84,032 |
| Share-based compensation (notes 6 and 8) | - | 340,011 |
| (681,712) | (1,629,352) | |
| Impairment of exploration and evaluation assets | (202,912) | - |
| Interest and accretion (note 5) | (17,878) | (37,274) |
| Gain (loss) on foreign exchange | (544) | 2,225 |
| Gain on settlement of flow through premium (note 6) | - | 303,731 |
| Loss and comprehensive loss for the year | $(903,046) | $(1,360,670) |
| Basic and diluted loss per common share | $(0.01) | $(0.01) |
Weighted average number of common shares outstanding - basic and diluted
123,500,883 102,921,876
The accompanying notes are an integral part of these consolidated financial statements.
6
Tarku Resources Ltd.
Consolidated Statements of Cash Flows
For the years ended September 30, 2024 and 2023
(Expressed in Canadian Dollars)
| 2024 | 2023 | |
|---|---|---|
| Operating activities | ||
| Loss for the year | $ (903,046) | $ (1,360,670) |
| Adjustments: | ||
| Interest and accretion | 17,878 | 37,274 |
| Impairment of exploration and evaluation assets | 202,912 | |
| Gain on settlement of flow through premium | - | (303,731) |
| Share-based compensation | - | 340,011 |
| Changes in non-cash working capital items: | ||
| Prepaid expenses | (1,480) | 227 |
| Trade and other receivables | 17,492 | 7,459 |
| Trade and other payables | 385,734 | 218,179 |
| (280,510) | (1,061,251) | |
| Financing activities | ||
| Cash received from share issuance | 375,000 | 830,500 |
| Share issue costs | (22,750) | (6,355) |
| 352,250 | 824,145 | |
| Investing activities | ||
| Additions to exploration and evaluation assets, net of Income Tax Credits received | (8,308) | (256,947) |
| (8,308) | (256,947) | |
| Increase (decrease) in cash | 63,432 | (494,053) |
| Cash, beginning of year | 41,324 | 535,377 |
| Cash, end of year | $ 104,756 | $ 41,324 |
Supplemental cash flow information (Note 12)
The accompanying notes are an integral part of these consolidated financial statements.
Tarku Resources Ltd.
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
| Number of Shares | Share Capital | Equity component of debenture | Shares to be issued | Contributed Surplus | Deficit | Equity | |
|---|---|---|---|---|---|---|---|
| Balance, September 30, 2022 | 86,338,588 | $ 9,955,427 | $ 137,043 | $ 10,000 | $ 1,205,323 | $ (8,610,098) | $ 2,697,695 |
| Private placement | 17,900,000 | 840,500 | - | (10,000) | - | - | 830,500 |
| Property agreement | 4,000,000 | 280,000 | - | - | - | - | 280,000 |
| Share issue costs | - | (6,355) | - | - | - | - | (6,355) |
| Shares issued on conversion of debt | 3,500,000 | 377,180 | (95,930) | - | - | - | 281,250 |
| Share based compensation | - | - | - | - | 340,011 | - | 340,011 |
| Net loss and comprehensive loss | - | - | - | - | - | (1,360,670) | (1,360,670) |
| Balance, September 30, 2023 | 111,738,588 | $ 11,446,752 | $ 41,113 | $ - | $ 1,545,334 | $ (9,970,768) | $ 3,062,431 |
| Balance, September 30, 2023 | 111,738,588 | $ 11,446,752 | $ 41,113 | $ - | $ 1,545,334 | $ (9,970,768) | $ 3,062,431 |
| Private placement | 15,000,000 | 375,000 | - | - | - | - | 375,000 |
| Share issue costs | - | (42,288) | - | - | 19,538 | - | (22,750) |
| Net loss and comprehensive loss | - | - | - | - | - | (903,046) | (903,046) |
| Balance, September 30, 2024 | 126,738,588 | $ 11,779,464 | $ 41,113 | $ - | $ 1,564,872 | $ (10,873,814) | $ 2,511,635 |
The accompanying notes are an integral part of these consolidated financial statements.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
- Nature of business and continuance of operations
The principal business activity of Tarku Resources Ltd. (the "Company") is the exploration for mineral resources in Arizona, U.S.A, and the province of Quebec. The Company's corporate office is located at 4710 Saint-Ambroise, suite 309B, Montréal, Quebec, H4C 2C7. The Company shares are listed on the TSX Venture Exchange under the symbol TKU, the OTCQB under the symbol TRKUF and the Frankfurt stock exchange under the symbol 7TK.
These consolidated financial statements ("financial statements") have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its obligations in the normal course of operation. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to twelve months from the end of the reporting period. The use of these principles may not be appropriate. The Company has incurred losses since inception and expects to incur further losses in the development of its business and at September 30, 2024, the Company had a working capital deficit of $810,877 and at that date, the Company also had an accumulated deficit of $10,873,814 which has been funded primarily by the issuance of equity. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its general operating expenses and to continue to explore its mineral properties. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. These factors may cast significant doubt upon the Company's ability to continue as a going concern. These consolidated financial statements do not reflect the adjustments to the carrying values of the assets and liabilities, the reported expenses and the statements of financial position classifications that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
- Basis of preparation
(a) Statement of compliance
The Company's financial statements for the year ended September 30, 2024 are prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the IFRS Interpretations Committee ("IFRIC").
These financial statements were authorized for issue by the Board of Directors on January 27, 2025.
(b) Basis of consolidation
These financial statements include the financial statements of the Company and the entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intercompany transactions and balances have been eliminated on consolidation.
| Subsidiary name | Place of Incorporation | Ownership | Principal activity |
|---|---|---|---|
| Eureka Exploration Inc. ("Eureka") | Quebec | 100% | Exploration |
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
2. Basis of preparation (continued)
(c) Use of Estimates and Judgments
The preparation of financial statements in compliance with IFRS requires management to make certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates and assumptions.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are continuously evaluated and reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the revision affects both current and future periods.
Significant areas requiring the use of management estimates include amounts of provisions, if any, for impairment of exploration and evaluation assets, reclamation and environmental obligations, deferred income taxes, share-based payments, and contingencies reported in the notes to the financial statements.
Significant areas requiring the use of management judgments include recognition of impairment of exploration and evaluation assets, reclamation and environmental obligations, deferred income taxes, share-based payments, classification of financial instruments, assessment of the going concern assumption, and disclosure of contingencies reported in the notes to the financial statements.
(d) Basis of Measurement
These consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as fair value through profit or loss ("FVTPL") which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
These consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the Company and its subsidiary.
3. Material Accounting Policy Information
(a) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
(b) Exploration and evaluation assets
Exploration expenditures are expensed as incurred until an economic feasibility study has established the presence of proven and probable reserves and development of the project has commenced, at which time exploration and development expenditures incurred on the project thereafter are capitalized.
Costs incurred relating to the acquisition and claim maintenance of mineral properties, including option payments and annual fees to maintain the project in good standing, are capitalized and deferred by project until the project to which they relate is sold, abandoned, impaired or placed into production.
The Company assesses its capitalized mineral project costs for indications of impairment on a regular basis and when events and circumstances indicate a risk of impairment. A project is written down or written off when the Company determines that an impairment of value has occurred or when exploration results indicate that no further work is warranted.
Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers, or title may be affected by undetected defects.
(c) Mineral tax credit
Mining exploration tax credits for certain exploration expenditures in Quebec are treated as a reduction of the exploration costs. The amounts are accounted for on an accrual basis.
(d) Reclamation and environmental obligations
The Company recognizes liabilities for statutory, contractual or legal obligations associated with the reclamation of exploration and evaluation assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The Company records the present value of the estimated costs of legal and constructive obligations required to restore the exploration sites in the period in which the obligation is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of the related asset and the cost is amortized as an expense over the economic life of the asset using either the unit-of-production method or the straight-line method, as appropriate. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.
As at September 30, 2024 and 2023, the Company has no asset retirement obligations and accordingly, has not recorded an asset retirement obligation in the financial statements.
(e) Impairment of non-financial assets
At the end of each reporting period the carrying amounts of non-financial assets are reviewed to determine whether there is any indication that those assets are impaired. Impairment is recognized when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. The impairment loss is recognized in profit or loss for the period.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount had no impairment loss been recognized. A reversal of an impairment loss is recognized immediately in profit or loss.
(f) Income taxes
Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that they relate to a business combination or items recognized directly in equity or in other comprehensive income/loss.
Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years.
Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting period the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
(g) Share Capital
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company's common shares, flow-through shares, share warrants and options are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are recognized as a deduction from equity, net of tax.
Flow-through shares
Resource expenditure deductions for income tax purposes related to exploratory activities funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenses being renounced, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the Look-back Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is accrued until qualifying expenditures are incurred.
Valuation of equity units issued in private placements
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, was allocated to the attached warrants. Any fair value attributed to the warrants is recorded as contributed surplus. If the warrants expire unexercised, the value attributed to the warrants is transferred to deficit.
(h) Earnings (loss) per common share
Basic earnings/loss per share is computed by dividing the net income or loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period.
Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.
For the years ended September 30, 2024 and 2023, this calculation proved to be anti-dilutive.
(i) Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
The grant date fair value is recognized in profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management's best estimate, for the effects of nontransferability, exercise restrictions, and behavioural considerations.
All equity-settled share-based payments are reflected in share-based payment reserve of contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in share-based payment reserve of contributed surplus is credited to share capital, adjusted for any consideration paid.
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.
(j) Financial instruments
The Company classifies its financial instruments based on the purpose for which they were acquired, in one of the following categories: amortized cost; fair value through other comprehensive income (loss) ("FVOCI") or fair value through profit or loss ("FVTPL"). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured at FVTPL (an irrevocable election at the time of recognition). Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.
Financial assets
The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, based on its business model for managing the financial asset and the financial asset's contractual cash flow characteristics. The three categories are defined as follows:
i) Amortized cost - a financial asset is measured at amortized cost if both of the following conditions are met:
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii) Fair value through other comprehensive income - financial assets are classified and measured at fair value through other comprehensive income if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
iii) Fair value through profit or loss - any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss.
When, and only when, the Company changes its business model for managing financial assets it must reclassify all affected financial assets.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
The Company's financial assets are comprised of cash and trade and other receivables. Cash, receivables and deposits are measured at amortized cost.
Financial liabilities
The Company's liabilities include trade and other payables and convertible debenture which are measured at amortized cost.
Impairment
The Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
(k) Accounting standards adopted:
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies – the amendments require that an entity discloses its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy.
Amendments to IAS 8 – Definition of Accounting Estimates – the amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments clarify that a change in accounting estimates that results from new information of new developments is not the correction of an error.
The Company concluded that the effect of such amendments did not have a material impact and therefore did not record any adjustments to the consolidated financial statements.
New standards, amendments and interpretations not yet adopted:
Amendment to IAS 12 – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction – This amendment requires entities to recognize deferred tax for transactions that result in equal taxable and deductible temporary differences (effective for annual periods beginning on or after January 1, 2024).
Amendment to IAS 1 – Classification of Non-Current Liabilities with Covenants
Clarifies how to classify liabilities with conditions that must be met within 12 months after the reporting period (effective for annual periods beginning on or after January 1, 2024).
Amendment to IFRS 16 – Leases on Sale and Leaseback
Adds requirements for accounting for sale-and-leaseback transactions where lease payments include variable components (effective for annual periods starting on or after January 1, 2024).
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
3. Material Accounting Policy Information (continued)
Amendment to IAS 7 and IFRS 7 – Supplier Finance Arrangements
Requires enhanced disclosures about the effects of supplier finance arrangements on an entity's liabilities and liquidity risks (effective for annual periods starting on or after January 1, 2024).
Amendments to IFRS 9 and IFRS 7 – Classification and Measurement of Financial Instruments
Introduces guidelines for assessing contingent cash flows, ESG-linked features, and updates disclosure requirements (effective for annual periods starting on or after January 1, 2025).
IFRS 18 – Presentation and disclose in financial statements, which will replace IAS 1
Aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss, in particular additional defined subtotals, disclosures about management defined performance measures and new principals for aggregation and disaggregation of information. IFR 18 is accompanied by limited amendments to the requirements in IAS 7 Statement of Cash Flows. IFRS 18 is effective from January 1, 2027.
None of the above are expected to have a material impact on the Company.
4. Exploration and evaluation assets
Silver Strike project, Arizona
On October 12, 2020, the Company signed an earn-in and joint venture agreement (the "First Agreement") with Mansfield Martin and associated parties (the "Vendors"), to earn up to a 75% interest over 3 years in the project by funding project expenditures of up to US$3,000,000 as follows:
- Tarku would acquire 25% of the Property after spending US$1,000,000 in exploration expenses within the first year of the earn-in period
- Tarku would acquire an additional 26% (total of 51%) of the Property after spending an additional US$1,000,000 in exploration expenses and the production of a NI 43-101 report on the Property within the first 2 years of the earn-in period
- Tarku would acquire an additional 24% (total of 75%) of the Property after spending an additional US$1,000,000 for a cumulative US$3,000,000 in exploration expenses within the first 3 years of the earn-in period.
In addition, in accordance with the First Agreement, on April 30, 2021, Tarku issued 3,000,000 common shares to the Vendors. The shares are subject to resale restrictions of 4 equal periods of 6 months each and a right of first refusal will allow Tarku the opportunity to place these shares with existent shareholders at prevailing market prices.
At each anniversary date over the 3 years, Tarku was to pay US$175,000 to the Vendors, of which a minimum of US$50,000 will be a cash payment and US$125,000 will be paid either in shares or in cash at the Company's discretion.
On February 1, 2022, EXLA Resources Ltd. ("EXLA") announced it had entered into a binding agreement to purchase the underlying interests in the Property from the Vendors. On February 23, 2022, the Company entered into a new agreement (the "Second Agreement") with EXLA which provided the Company with immediate 100% ownership of the Property from EXLA.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
4. Exploration and evaluation assets (continued)
The Second Agreement terminated the First Agreement and allowed Tarku to immediately acquire 100% of the 140 mining titles in Silver Strike, now held by EXLA, in return for the following consideration:
- 7,000,000 Tarku' Shares (the "First Tranche Shares") issued to EXLA (issued February 25, 2022), which will give EXLA a 9.65% interest in Tarku and
- Issued to EXLA debentures being comprised of an aggregate $500,000 principal amount of a 6% convertible unsecured subordinated debenture due in 5 years. Each debenture is convertible into shares of the Company at a price of $0.10.
- Granted EXLA a first right of refusal (ROFR) allowing EXLA the right to maintain its ownership position by participating in subsequent Tarku financings;
- Awarded EXLA a two percent (2%) NSR on the Property, one percent (1%) of which can be repurchased by Tarku for USD$1,000,000.
Tarku also has options to acquire an additional 33 patented claims in the historical area of Tombstone under agreements between third parties and the Vendors, namely the Rohe, Corkran, and Turner Options (the "Options"). These agreements are separate and independent from the First Agreement and Second Agreements. These Options require various cash payments with a total cost of US$700,000. The payments are spread out until October 2021 (completed) for the Corkran Option, July 2023 (paid) for the Turner Option, and July 2025 for the Rohe Option. Tarku also issued 50,000 shares for the Corkran Option. At the end of each Option acquisition, the patented claims will be added to the Property.
Max Lithium
On March 1, 2023, The Company acquired a 100% interest in 28 claims (19.25 km²) forming the MAX Lithium property in exchange for the issuance of 4,000,000 common shares of the Company. The property is located in Quebec, Canada.
Matagami Projects, Quebec
The Company owns 100% of the Apollo gold project located 50 kilometers east from Matagami, Quebec.
The Company owns 100% of the Admiral gold project located 25 kilometers east from Matagami, Quebec.
The Company owns 100% of the Atlas gold project located 50 kilometers east from Matagami, Quebec.
As at September 30, 2024, the Company recorded an impairment of $202,912 on the Admiral and Atlas projects in the amounts of $43,027 and $159,885, respectively.
The following is a summary of changes to exploration and evaluation assets for the year ended September 30, 2024 and the year ended September 30, 2023:
| Projects | Balance at September 30, 2023 | Acquisitions and renewals | Impairment and disposal | Balance at September 30, 2024 |
|---|---|---|---|---|
| Silver Strike | $ 3,021,351 | $ 8,308 | $ - | $ 3,029,659 |
| Max Lithium | 280,000 | - | - | 280,000 |
| Matagami | 379,169 | - | (202,912) | 176,257 |
| $ 3,680,520 | $ 8,308 | $ (202,912) | $ 3,485,916 |
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
- Exploration and evaluation assets (continued)
| Projects | Balance at September 30, 2022 | Acquisitions and renewals | Impairment and disposal | Balance at September 30, 2023 |
|---|---|---|---|---|
| Silver Strike | $ 2,722,857 | $ 298,494 | $ - | $ 3,021,351 |
| Max Lithium | - | 280,000 | - | 280,000 |
| Matagami | 379,169 | - | - | 379,169 |
| $ 3,102,027 | $ 578,494 | $ - | $ 3,680,520 |
The following is a summary of exploration and evaluation expenditures for the year ended September 30, 2024:
| Matagami | Max Lithium | Silver Strike | Total | |
|---|---|---|---|---|
| Data compilation and planning | $ 7,000 | $ 11,450 | $ - | $ 18,450 |
| Geological prospecting and survey | 3,363 | - | - | 3,363 |
| IP/Magnetic survey | 275,000 | - | - | 275,000 |
| Property costs | - | - | 1,812 | 1,812 |
| Project management | 76,000 | 58,000 | 10,000 | 144,000 |
| Other | 3,250 | 1,667 | - | 4,917 |
| Total exploration expenditures | $ 364,613 | $ 71,117 | $ 11,812 | $ 447,543 |
| Tax credits (i) | (134,850) | |||
| Tax credits payable (ii) | 134,850 | |||
| Total exploration expenditures | $ 447,543 |
(i) The Company received exploration input tax credits ("ITC") in the amount of $134,850, offsetting the total expenditures. ITCs are received from the Quebec government for qualifying exploration work. Expenditures incurred to satisfy flow through share issuance does not qualify for the ITC.
(ii) Subsequent review identified that certain historical flow-through obligations were not satisfied and as a result, an accrual was made for a repayment of these credits.
The following is a summary of exploration and evaluation expenditures for the year ended September 30, 2023:
| Matagami | Max Lithium | Silver Strike | Total | |
|---|---|---|---|---|
| Data compilation and planning | $ 2,625 | $ - | $ - | $ 2,625 |
| Drilling and field programs | 616,875 | - | - | 616,875 |
| Analysis | 145,176 | - | - | 145,176 |
| Geological consulting | 19,600 | 11,484 | 31,084 | |
| Geological prospecting and survey | 4,038 | 6,622 | - | 10,660 |
| IP/Magnetic survey | - | - | - | - |
| Property costs | 9,670 | 582 | 42,740 | 52,992 |
| Project management | 90,000 | 36,000 | 18,000 | 144,000 |
| Exploration input tax credit | (68,080) | - | - | (68,080) |
| Total exploration expenditures | $ 819,904 | $ 43,374 | $ 72,224 | $ 935,502 |
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
4. Exploration and evaluation assets (continued)
Exploration input tax credits ("ITC") are received from the Quebec government for qualifying exploration work. Expenditures incurred to satisfy flow through share issuance does not qualify for the ITC.
5. Convertible debenture
On February 23, 2022, the Company issued a $500,000 convertible debenture in accordance with the EXLA Agreement (note 4). The debenture is convertible into common shares at a price of $0.10 per share, is unsecured, bears an annual interest rate of 6% and has a 5-year term.
The convertible debenture has been classified into its separate debenture liability and equity portions in the Company's consolidated financial statements by the fair value method using an effective interest of 12% when valuing the liability first. This resulted in an initial amount of $362,957 being allocated to the liability portion and $137,043 being allocated to the equity portion. The carrying value of the debenture will be accreted up to its face value over the term to maturity.
On April 19, 2023, $150,000 of the principal was converted into 1,500,000 common shares, and on June 28, 2023, $200,000 of the principal was converted into 2,000,000 common shares.
| September 30, 2024 | September 30, 2023 | |
|---|---|---|
| Opening balance | $ 145,526 | $ 389,502 |
| Conversion to shares – liability portion | - | (281,250) |
| Interest and accretion | 17,878 | 37,274 |
| $ 163,404 | $ 145,526 |
6. Share capital
(a) Authorized
Unlimited common shares with no par value
Issued
(i) On December 21, 2022, the Company closed a non-brokered private placement for gross proceeds of $550,000. The private placement consisted of 13,750,000 units at $0.04 per unit. Each unit is comprised of one common share and one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.08 for a period of 36 months. No value was attributed to the warrant component of the units sold.
(ii) On March 3, 2023, the Company closed a non-brokered private placement for gross proceeds of $290,500. The private placement consisted of 4,150,000 units at $0.07 per unit. Each unit is comprised of one common share and one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.12 for a period of 24 months. No value was attributed to the warrant component of the units sold.
(iii) On March 4, 2023, the Company issued 4,000,000 common shares for the acquisition of the Max Lithium project (note 4)
(iv) See note 5 for 3,500,000 common shares issued on conversion of debt.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
6. Share capital (continued)
(v) On December 18, 2023, the Company closed a non-brokered private placement for aggregate gross proceeds of $375,000. This Private Placement consisted of 15,000,000 Flow-Through Shares of the Company at a price of $0.025 per share. The Company paid finder's fees in a cash commission equal to 7% of aggregate proceeds from the sale of flow-through shares sourced by the finder totaling $22,750, as well as 910,000 finder's warrants. Each Finder's Warrant is exercisable to purchase one Common Share at an exercise price of $0.05 until December 18, 2025. The finder's warrants were attributed a value of $19,538 using the black scholes options pricing model. Assumptions used in the pricing model for the year are as follows: risk-free interest rate of 3.99%, expected life of 2 years, annualized volatility of 169%, and a dividend rate of nil.
(b) Stock option Plan
The Company has a stock option plan (the "Plan") whereby options to purchase common shares are granted by the board of directors to directors, officers, employees and consultants to the Company. Under the terms of the Plan, the Company has reserved an amount of common shares for options up to 10% of the issued and outstanding number of common shares. Options granted under the Plan are non-transferable; expire no later than the tenth anniversary of the date the option is granted and must comply with the requirements of the regulatory authorities. Options granted under the Plan are subject to vesting terms determined by the board.
A summary of the changes to outstanding and exercisable stock options during the year ended September 30, 2024 and the year ended September 30, 2023 is presented below.
| September 30, 2024 | September 30, 2023 | |||
|---|---|---|---|---|
| Options | Weighted Ave Price | Options | Weighted Ave Price | |
| Beginning of year | 9,826,922 | $ 0.12 | 5,886,922 | $ 0.14 |
| Options expired | (376,922) | $ 0.10 | - | - |
| Options granted | - | - | 3,940,000 | 0.10 |
| End of year | 9,450,000 | $ 0.12 | 9,826,922 | $ 0.12 |
On December 21, 2022, the board of directors of the Company approved the grant of 500,000 stock options, to a consultant of the Company. The options are exercisable at $0.10 per share, vest immediately and, if not exercised, expire December 21, 2027, subject to earlier expiration in accordance with the Plan and applicable policies of the TSX Venture Exchange.
On March 1, 2023, the board of directors of the Company approved the grant of 3,440,000 stock options, to directors, officers and consultants of the Company. The options are exercisable at $0.10 per share, vest immediately and, if not exercised, expire December 21, 2027, subject to earlier expiration in accordance with the Plan and applicable policies of the TSX Venture Exchange.
The fair value of options issued on December 21, 2022 and March 1, 2023, using the Black-Scholes option pricing model, was $340,011 which was allocated to the share-based compensation expense with a corresponding increase in contributed surplus. Assumptions used in the pricing model for the year are as follows: risk-free interest rate of 3.07%, expected life of 5 years, annualized volatility of 148%, and a dividend rate of nil.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
6. Share capital (continued)
At September 30, 2024, the following table summarizes information about options outstanding:
| Grant date | Number of options | Expiry date | Exercise price | Exercisable |
|---|---|---|---|---|
| July 30, 2020 | 810,000 | July 30, 2025 | $ 0.11 | 810,000 |
| November 11, 2020 | 3,200,000 | November 11, 2025 | $ 0.17 | 3,200,000 |
| February 18, 2022 | 1,500,000 | February 16, 2027 | $ 0.10 | 1,500,000 |
| December 21, 2022 | 500,000 | December 21, 2027 | $ 0.10 | 500,000 |
| March 1, 2023 | 3,440,000 | March 1, 2028 | $ 0.10 | 3,440,000 |
| 9,450,000 | 9,450,000 |
The weighted average remaining life of the opitons is 2.24 years. The weighted average exercise price is $0.12.
(c) Warrants
During the year ended September 30, 2024 and the year ended September 30, 2023, the Company had the following warrant activities:
| Number of Warrants | Exercise Price | Weighted Average Exercise Price | |
|---|---|---|---|
| Balance, September 30, 2022 | 35,723,775 | $ 0.12 | |
| Expired | (385,000) | $ 0.15 | |
| Issued | 910,000 | $ 0.05 | |
| Balance, September 30, 2023 | 36,248,775 | $ 0.12 | |
| Expired | (17,004,775) | $ 0.15 | |
| Balance, September 30, 2024 | 18,810,000 | $ 0.09 |
At September 30, 2024, the following table summarizes information about warrants outstanding:
| Total issued and outstanding | Warrants Outstanding | Expiry Date | Exercise Price |
|---|---|---|---|
| 13,750,000 | December 21, 2025 | $0.08 | |
| 4,250,000 | March 3, 2025 | $0.12 | |
| 910,000 | December 18, 2025 | $0.05 | |
| Balance, September 30, 2024 | 18,810,000 | $0.09 |
The weighted average remaining life of the warrants is 1.05 years.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
6. Share capital (continued)
(d) Other income on settlement of flow-through premium liability
During the year ended September 30, 2022, the Company closed a flow-through financing and recorded a total premium received on flow-through shares in the amount of $370,000, which was recorded as a liability to be reversed to profit and loss as the eligible expenditures were incurred. As at September 30, 2022, the Company had reduced the liability (based on expenditures incurred) to $303,731 and accordingly, had recorded other income of $66,269. During the year ended September 30, 2023, the $303,731 liability was reduced and recorded as other income.
The total premium received on flow through shares issued during the year ended September 30, 2024 was $nil.
7. Commitments and contingencies
The Company renounced $375,000 of qualifying exploration expenditures to the shareholders effective December 31, 2023. Under the "look back" provision governing flow-through shares, the $375,000 of the amount has to be spent by December 31, 2024.
8. Related party transactions
The Company had the following related party transactions during the years ended September 30, 2024 and September 30, 2023:
(a) The Chief Executive Officer (the "CEO") and director of the Company provided consulting services to the Company. Fees incurred during the period were $168,000 (2023 - $168,000). At September 30, 2024, $409,448 (September 30, 2023 - $241,448) is recorded in trade and other payables. Included in trade and other payables is also $nil (2023 - $55,580) for expenses paid by the CEO on behalf of the Company.
(b) The Chief Financial Officer and director of the Company provided consulting services to the Company. Fees incurred during the period were $48,000 (2023 - $48,000). At September 30, 2024, $96,080 (September 30, 2023 - $63,080) is recorded in trade and other payables.
Key Management Compensation:
| 2024 | 2023 | |
|---|---|---|
| Consulting fees | $ 72,000 | $ 72,000 |
| Exploration expense | 144,000 | 144,000 |
| Share-based compensation to directors and officers | - | 190,804 |
| $ 216,000 | $ 406,804 |
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
9. Segmented information
The Company operates in one operating segment, being the exploration of mineral properties. The Company's exploration and evaluation assets by geographic location are as follows:
| September 30, 2024 | September 30, 2023 | |
|---|---|---|
| Arizona, U.S.A | $ 3,029,658 | $ 3,021,350 |
| Quebec, Canada | 456,258 | 659,170 |
| $ 3,485,916 | $ 3,680,520 |
10. Capital management
The Company includes cash and equity, comprising of issued common shares, contributed surplus and 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. The Board of Directors does not establish quantitative return on capital criteria for management but relies on the expertise of the Company's management to sustain future development of the business.
The properties in which the Company currently has an interest are in the exploration stage; as such the Company is dependent upon external financings to fund activities. In order to carry out planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the year ended September 30, 2024. The Company was not subject to any externally imposed capital requirements.
11. Financial risk management
The Company is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses on preservation of capital and protecting current and future Company assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.
The types of risk exposure and the way in which such exposures are managed are as follows:
Credit Risk - The Company's credit risk is primarily attributable to its liquid financial assets. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash and cash equivalents with high-credit quality financial institutions. The Company does not have financial assets that are invested in asset backed commercial paper.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
11. Financial risk management (continued)
Liquidity Risk – The Company ensures that there is sufficient capital in order to meet short term business requirements. Currently there is insufficient capital to meet short-term business obligations, after taking into account cash flow requirements from operations, and the Company's cash position as at September 30, 2024. The Company is currently experiencing a significant liquidity shortfall and does not anticipate material cash flows from its products and services in the near term. The Company is actively pursuing financing options or sales and options on properties. However, there is no assurance that these efforts will be successful, or that financing will be sufficient, meet timelines, or be available on acceptable terms, if at all. Failure to secure financing or improve liquidity may impair the Company's ability to fund ongoing operations and cover corporate administrative costs.
Interest rate risk – In respect to the Company's financial assets, the interest rate risk mainly arises from the interest rate impact on cash and convertible debentures. For the year ended September 30, 2024, every 1% fluctuation in interest rates up or down would have had little impact on net loss.
Commodity price risk – The value of the Company's mineral resource properties is related to the price of various commodities and the outlook for them. Commodity prices have historically fluctuated widely and are affected by numerous factors outside of the Company's control, including, but not limited to, industrial retail demand, central bank lending, forward sales by producers and speculators, level of worldwide production and short-term changes in supply and demand.
Fair Value – The Company has various financial instruments comprised of cash, trade and other receivables and trade and other payables.
For disclosure purposes, all financial instruments measured at fair value are categorized into one of three hierarchy levels, described below. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:
Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
12. Supplemental cash flow information
Non-cash investing and financing activities
During the year ended September 30, 2023,
- The Company issued 3,500,000 common shares with a value of $350,000 upon the conversion of $350,000 of debt. $95,930 of the amount was allocated against the equity component of the debt.
- The Company issued 4,000,000 shares in accordance with the Max Lithium property agreement with a fair value of $280,000.
During the year ended September 30, 2024, there were no non-cash investing and financing activities.
Tarku Resources Ltd.
Notes to the Consolidated Financial Statements
For the years ended September 30, 2024 and 2023
(Expressed in Canadian dollars)
13. Income taxes
(a) For the years ended September 30, 2024 and 2023, a reconciliation of income taxes at statutory rates with reported taxes is as follows:
| 2024 | 2023 | |
|---|---|---|
| Loss before income taxes for the year | $ (903,046) | $ (1,360,670) |
| Statutory tax rate | 26.5% | 26.5% |
| Income tax recovery | (239,000) | (361,000) |
| Change in statutory and other | - | (6,000) |
| Permanent differences | (36,000) | 10,000 |
| Impact of flow through share | 151,000 | 196,000 |
| Share issue costs | (6,000) | (1,000) |
| Adjustment to prior years provision versus statutory tax returns and expiry of non-capital losses | 47,000 | 37,000 |
| Unrecognized deductible temporary differences | 83,000 | 125,000 |
| Deferred income tax expense (recovery) | $ - | $ - |
(b) The component of the Company's deferred income tax asset is a result of the origination and reversal of temporary differences and is comprised of the following:
| September 30, 2024 | September 30, 2023 | |
|---|---|---|
| Exploration and evaluation assets | $ 646,000 | $ 726,000 |
| Debt with accretion | 4,000 | - |
| Share issue costs | 23,000 | 32,000 |
| Non-capital losses carried forward | 1,477,000 | 1,309,000 |
| Deferred tax assets | 2,150,000 | 2,067,000 |
| Unrecognized deferred tax assets | (2,150,000) | (2,067,000) |
| Net deferred tax assets | $ - | $ - |
The significant components of the Company's temporary differences, unused tax credits and unused tax losses that have not been included on the statement of financial position are as follows:
| 2024 | Expiry Date Range | 2023 | Expiry Date Range | |
|---|---|---|---|---|
| Temporary Differences | ||||
| Share issue costs | $ 86,000 | 2040 to 2048 | $ 121,000 | 2040 to 2047 |
| Exploration and evaluation assets | $ 2,438,000 | No expiry date | $ 2,741,000 | No expiry date |
| Non-Capital losses | $ 5,577,000 | 2031 to 2044 | $ 4,941,000 | 2031 to 2043 |
Tax attributes are subject to review, and potential adjustment, by tax authorities.