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Temas Resources Corp. — Management Reports 2025
Apr 28, 2025
47893_rns_2025-04-28_d2066263-0690-4acd-afa4-8b5d39f8cde1.pdf
Management Reports
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TEMAS RESOURCES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
The following Management Discussion & Analysis ("MD&A") is intended to assist in the understanding of the trends and significant changes in the financial condition and results of operations of Temas Resources Corp. (hereinafter "Temas" or the "Company") for the years ended December 31, 2024 and 2023 and the notes thereto. The MD&A should be read in conjunction with the audited financial statements for the year ended December 31, 2024. The MD&A has been prepared effective April 28, 2024.
SCOPE OF ANALYSIS
The following is a discussion and analysis of Temas Resources Corp. The Company reports its financial results in Canadian dollars and in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
FORWARD LOOKING STATEMENTS
The information set forth in this MD&A contains statements concerning future results, future performance, intentions, objectives, plans and expectations that are, or may be deemed to be, forward-looking statements. These statements concerning possible or assumed future results of operations of the Company are preceded by, followed by or include the words 'believes,' 'expects,' 'anticipates,' 'estimates,' 'intends,' 'plans,' 'forecasts,' or similar expressions. Forward-looking statements are not guaranteeing of future performance. These forward-looking statements are based on current expectations that involve numerous risks and uncertainties, including, but not limited to, those identified in the Risks Factors section. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. These factors should be considered carefully, and readers should not place undue reliance on forward-looking statements. The Company may not provide updates or revise any forward-looking statements, except those otherwise required under paragraph 5.8(2) of NI 51-102, whether written or oral that may be made by or on the Company's behalf.
TRENDS
Other than as disclosed in this MD&A, the Company is not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect on its revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
GENERAL BUSINESS AND DEVELOPMENT
Temas Resources Corp. (the "Company") was incorporated pursuant to the provisions of the British Columbia Business Corporations Act on June 25, 2018, under the name "Clean Earth Chemical Corp." On August 12, 2019, the Company changed its name to Temas Resources Corp. The Company is in the exploration stage with respect to its mineral property interest and has not yet achieved commercial production. The Company commenced trading on the Canadian Stock Exchange (CSE) on May 19, 2020, under the ticker TMAS and on OTCQB under the ticker TMASF on August 5, 2020.
The Company's head office and registered and records office is located at 309 – 2912 West Broadway, Vancouver, British Columbia, V6K 0E9.
The Company is a reporting issuer in the Province of British Columbia. All public filings for the Company can be found on the SEDAR website www.sedar.com.
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HIGHLIGHTS
La Blache Project
The Company filed its Preliminary Economic Assessment Report for the wholly-owned La Blache project March 2024. The Company raised $1,719,738 through a private placement at $0.20 per common share and raised an additional $234,735 through exercise of warrants.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2024, the Company has a cash balance of $76,562 compared to a cash balance of $271,236 at December 31, 2023. The Company had a working capital deficit of $1,350,973 as at December 31, 2024 (December 31, 2023 - $1,583,101).
The continuation of the Company as a going concern is dependent on its ability to raise additional capital or debt financing, including on reasonable terms, to meet business objectives toward achieving profitable business operations.
During the year 2024, the Company issued 1,564,900 common shares for gross proceeds of $234,735 in connection with the exercise of warrants at $0.15 per common share.
On May 10, 2024, the Company completed a non-brokered private placement whereby the Company issued 2,655,000 units at a price of $0.20 per unit for gross proceeds of $531,000. Each unit is comprised of one common share and one-half common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.40 expiring on May 10, 2026. Cash finder’s fee of $2,520 was paid. The Company also issued 12,600 agent warrants exercisable for 24 months at $0.40 per share.
On April 11, 2024, the Company issued 357,142 common shares in accordance with the La Blache option agreement dated March 27, 2024 ($75,000 fair value).
On April 5, 2024, the Company completed a non-brokered private placement whereby the Company issued 5,943,690 units at a price of $0.20 per unit for gross proceeds of $1,188,738. Each unit is comprised of one common share and one-half common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.40 expiring on April 5, 2026.
On January 3, 2024, the Company issued 75,000 common shares for gross proceeds of $7,875 in connection with the exercise of options at $0.105 per common share.
On November 21, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,050,000 units at a price of $0.10 per unit for gross proceeds of $305,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on November 21, 2025. Cash finder’s fee of $2,100 was paid.
On October 23, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,180,000 units at a price of $0.10 per unit for gross proceeds of $318,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on October 23, 2025. Cash finder’s fee of $1,400 was paid. The Company also issued 14,000 agent warrants at $0.15.
On February 28, 2023, the Company issued 100,000 common shares at $0.225 for proceeds of $22,500 in connection with the Crescita Capital equity investment facility.
Equity Investment Facility
On November 18, 2020, the Company entered into a $5,000,000 equity investment facility with Crescita Capital. The Company can draw down funds from the $5,000,000 equity investment facility from time to time during the three-year term at the Company’s discretion by providing a drawdown notice to Crescita Capital, and in return for each drawdown notice funded by Crescita Capital, the Company will allot and issue fully paid common shares to Crescita Capital.
The shares issued in connection with any drawdown notice will be priced at the higher of (i) the floor price set by the Company and (ii) 90% of the average closing bid price resulting from the following ten days of trading after the drawdown notice ("Pricing Period"). The drawdown notice amount requested by the Company cannot exceed 700% of the average daily trading volume of the Pricing Period.
In connection with the equity investment facility, the Company paid a commitment fee. This fee consisted of a 3% commission to be paid in common shares, at a price of $2.25 per share (67,777 shares valued at $150,000), and warrants equal to 8% of the outstanding common shares of the Company (515,364 warrants valued at $2,560,331). The warrants have an exercise price of $2.25 per common share and expire three years from the grant date. The warrants were fair valued using the Black-Scholes Option Pricing Model using the following assumptions average risk-free interest rate - 0.29%; expected life - 3 years; expected volatility - 100.00%; forfeiture rate - Nil and expected dividends - Nil.
The value of the commitment fee was recorded as a deferred financing charge and is being amortized as share issue costs over the term of the equity investment facility, with amortization charges amounting to $821,762 for the year ended December 31, 2023 (2022 - $891,068). As at December 31, 2023, the carrying amount of the deferred financing charges was $Nil (December 31, 2022 - $821,762).
In November 2023, the three-year term with Crescita ended.
Liability and Income Tax Effect on Flow-through Shares
Funds raised through the issuance of flow-through common shares are expected to be expended on qualified Canadian mineral exploration expenditures, as defined pursuant to Canadian income tax legislation. The flow-through gross proceeds less the qualified expenditures made to date represent the funds received from flow-through share issuances that have not been spent and are held by the Company for such expenditures.
In December 2020, the Company issued 402,777 flow-through common shares at $9.00 per share for gross proceeds of $3,625,000 and recognized an initial liability for flow-through shares of $606,250. During the years ended December 31, 2021 and 2022, the Company has completed its flow-through spending obligations and has recognized a flow-through recovery of $606,250.
During the 2022 year, the Company issued 1,541,666 flow-through common shares at an average price of $0.72 for gross proceeds of $1,110,000 and recognized an initial liability for flow-through shares of $143,750. The $1,110,000 flow-through funds were required to be incurred by December 31, 2023. As at December 31, 2023, the Company had spent $405,185 of the $1,110,000 flow-through obligation leaving a shortfall of $704,815. The Company will incur income tax and penalties associated with this shortfall for itself and for investors. As at December 31, 2024, the Company has accrued $565,181 (December 31, 2023 - $671,869) in estimated taxes payable.
EXPLORATION AND PROPERTY
La Blache Property, Quebec, Canada
On September 23, 2020, the Company purchased a 100% interest in the La Blache property in Core-Nord, Quebec from Cloudbreak Discovery Corp. and Cronin Services Ltd. (collectively known as "Vendors") for an aggregate of 2,222,222 shares in the Company, $60,000 in cash payments and delivery of an NSR royalty of 2%, subject to the right of the Company to repurchase one-half of the NSR royalty (1%) for $2,500,000 at any time.
On April 9, 2024, the Company entered into an option agreement to earn 100% interest in the La Blache Lake Extension Property. Pursuant to the option agreement, the Company must issue an aggregate of $275,000 in common shares, pay an aggregate of $350,000 in cash over a 48 month period and the delivery of an NSR royalty of 2%. The Company has the right to repurchase one-half of the NSR (1%) for $1,500,000 at any time. On April 11, 2024 the Company paid $50,000 in cash and issued 357,142 common shares with a fair value of $75,000.
DAB Property, Quebec, Canada
On January 15, 2020, the Company entered into an option agreement with Contigo Resources Ltd. ("Contigo") to acquire a 100% interest in the 124 claims comprising the DAB property. Under the terms of the option agreement, the Company made aggregate cash payments of $75,000 and issued 1,111,111 common shares of the Company to exercise its option.
Per the terms of the option agreement, Contigo retains a 2% NSR on the DAB property. The Company can purchase 50% of the NSR at any time for a cash payment of $1,500,000.
The DAB and La Blache properties were historically one project. As such, the Company operates and references to the two purchases as "La Blache".
Lac Brule, Quebec, Canada supplemental
To augment the Company's claims acquired through staking, on August 19, 2021, the Company had entered into a purchase agreement to acquire a 100% interest in an additional mineral claim comprising the Lac Brule property. Under the terms of the agreement, the Company made a cash payment of $10,000 and issued 5,555 common shares of the Company to the seller at a value of $19,000. Per the terms of the option agreement, the seller retains a 1% net smelter royalty ("NSR") on the additional mineral claim. The Company can purchase 50% of the NSR at any time for a cash payment of $500,000.
The carrying value of the Company's mineral properties is as follows:
| Lac Brule | La Blache | DAB | Total | |
|---|---|---|---|---|
| December 31, 2022 | $ 29,000 | $ 5,827,721 | $ 550,000 | $ 6,406,721 |
| Renew claims | - | 20,317 | - | 20,317 |
| December 31, 2023 | $ 29,000 | $ 5,848,038 | $ 550,000 | $ 6,427,038 |
| Renew claims | 22,850 | 1,977 | - | 24,827 |
| Acquisition costs | - | 125,000 | - | 125,000 |
| September 30, 2024 | $ 51,850 | $ 5,975,015 | $ 550,000 | $ 6,576,865 |
Title to exploration and evaluation assets involves certain inherent risks due to the difficulties of determining the validity of certain claims and problems arising from the frequently ambiguous conveyance history characteristic of many mineral properties. The Company has investigated the titles to its exploration and evaluation assets and, to the best of its knowledge, the titles to its property are in good standing.
Supplemental Information
Exploration Expenditures
| Year ended December 31, 2024 | Year ended December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| La Blache | Lac Brule | Total | La Blache | Lac Brule | Total | |
| Exporation Drilling (recovery) | - | - | -355,906 | - | -355,906 | |
| Assaying | - | - | 159,534 | - | 159,534 | |
| Technical Services | 175,790 | - | 175,790 | 263,421 | - | 263,421 |
| $ 175,790 | $ - | $ 175,790 | $ 67,049 | $ - | $ 67,049 |
INVESTMENTS
ORF Technologies
On March 26, 2021, the Company purchased a 50% interest in ORF Technologies Inc. ("ORF") for $600,000. ORF Technologies Inc. holds a portfolio of patents related to mineral extraction. The Company has accounted for the investment in ORF using the equity method of accounting.
Temas has finalized a 50% acquisition of ORF Technologies Inc. ORF has developed several patented, innovative leaching and solvent extraction processes. With the ORF transaction, in conjunction with MetaLeach™, Temas believes that these combined technologies will make a difference in helping to alleviate the significant environmental impact that results from present-day mineral processing.
Pursuant to the Acquisition, Temas acquired 50% of the outstanding shares of ORF in exchange for a cash payment of $600,000. In closing, the parties entered into a shareholders’ agreement governing their rights and obligations going forward, including development and dividend policies, and pre-emptive rights to existing shareholders to acquire positions of other existing shareholders. With the 50% acquisition of ORF, Temas’ objectives are to achieve and provide the lowest cost processing alternative for specialty, strategic and rare earth metals producers.
Transaction Highlights:
- COST-EFFICIENCIES: TiO₂ technology developed by ORF proved 144.8% more cost-efficient than conventional processes. The Company anticipates comparable cost efficiencies in the production of nickel, iron, gold, rare earth metals and many more.
- MORE ENVIRONMENTALLY FRIENDLY: The Recovery Technologies offer a significant reduction in carbon footprint when compared to conventional processing methods.
- COMPLEMENTARY ACQUISITIONS: ORF provides a suite of technologies that will complement and work alongside the licensing agreement with Metaleach™. The ORF technology suite is also capable of supporting Temas Resources’ internal La Blache projects as well as unrelated third-party mining projects.
The Company structured the acquisition to ensure the existing principals responsible for developing the technologies at ORF would have a significant vested interest in the ongoing commercial success of the technologies. ORF was established as a holding company for intellectual property developed by Process Research Ortech (“PRO”), a company established in 1990 during the privatization of the Ontario Research Foundation’s (“ONT”) metallurgical testing facilities. ONT was created as an independent corporation by a provincial Act in 1928.
For the year ended December 31, 2024, the Company recorded an equity loss of $Nil (2023 - $8,635) and a loan advanced of $12,087 (2023 - $Nil) relating to its investment in ORF. Due to minimal activity and the lack of necessary cash flow, the Company recorded an impairment of $12,087 (2023 - $563,116) during the year.
SHARE CAPITAL AND OUTSTANDING SHARE DATA
Common Shares
Authorized
The Company’s authorized share capital consisted of an unlimited number of common shares without par value. As at December 31, 2024, the Company had 26,658,118 (16,062,386 - December 31, 2023) common shares outstanding.
During the year 2024, the Company issued 1,564,900 common shares for gross proceeds of $234,735 in connection with the exercise of warrants at $0.15 per common share.
On May 10, 2024, the Company completed a non-brokered private placement whereby the Company issued 2,655,000 units at a price of $0.20 per unit for gross proceeds of $531,000. Each unit is comprised of one common share and one-half common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.40 expiring on May 10, 2026. Cash finder’s fee of $2,520 was paid. The Company also issued 12,600 agent warrants exercisable for 24 months at $0.40 per share.
On April 11, 2024, the Company issued 357,142 common shares in accordance with the La Blache option agreement dated March 27, 2024 ($75,000 fair value).
On April 5, 2024, the Company completed a non-brokered private placement whereby the Company issued 5,943,690 units at a price of $0.20 per unit for gross proceeds of $1,188,738. Each unit is comprised of one common
share and one-half common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.40 expiring on April 5, 2026.
On January 3, 2024, the Company issued 75,000 common shares for gross proceeds of $7,875 in connection with the exercise of options at $0.105 per common share.
On November 21, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,050,000 units at a price of $0.10 per unit for gross proceeds of $305,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on November 21, 2025. Cash finder's fee of $2,100 was paid.
On October 23, 2023, the Company completed a non-brokered private placement whereby the Company issued 3,180,000 units at a price of $0.10 per unit for gross proceeds of $318,000. Each unit is comprised of one common share and one common share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.15 expiring on October 23, 2025. Cash finder's fee of $1,400 was paid. The Company also issued 14,000 agent warrants at $0.15 per share.
On March 27, 2023, the Company settled outstanding fees of $25,000 for 55,555 common shares with an issue price of $0.45.
On February 28, 2023, the Company issued 100,000 common shares at $0.225 for proceeds of $22,500 in connection with the Crescita Capital equity investment facility.
Stock Options
As at the date of this MD&A the Company had 3,111,500, and at December 31, 2024, the Company had 2,011,500 stock options respectively (December 31, 2023: 1,478,167) outstanding with 1,167,375 stock options exercisable.
| Number of Options | Weighted Average Exercise Price | Remaining Life (In Years) | Expiry Date |
|---|---|---|---|
| 535,000 | $ 0.11 | 1.59 | August 2, 2026 |
| 300,000 | $ 0.13 | 3.89 | November 21, 2028 |
| 401,500 | $ 0.20 | 3.92 | November 29, 2028 |
| 125,000 | $ 0.29 | 3.45 | June 13, 2028 |
| 150,000 | $ 0.09 | 2.94 | December 9, 2027 |
| 200,000 | $ 0.09 | 3.94 | December 9, 2028 |
| 300,000 | $ 0.09 | 4.94 | December 9, 2029 |
| 2,011,500 | $ 0.13 | 3.35 |
On December 9, 2024, the Company granted 650,000 stock options to directors and consultants of the Company exercisable at $0.09 per option for a periods ranging from 3 to 5 years. The options vest over one year from issuance (fully vested by December 9, 2025). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 2.82%; expected life – 3 to 5 years; expected volatility – 100.00%; forfeiture rate - Nil and expected dividends – Nil.
On June 13, 2024, the Company granted 125,000 stock options to a director of the Company exercisable at $0.29 per option for a period of 4 years. The options vest semi-annually over two years from issuance (fully vested by June 13, 2026). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 3.16%; expected life – 4 years; expected volatility – 100.00%; forfeiture rate - Nil and expected dividends – Nil.
On January 3, 2024, the Company issued 75,000 common shares for gross proceeds of $7,875 in connection with the exercise of options at $0.105 per common share.
On November 29, 2023, the Company granted 401,500 stock options to the CEO of the Company exercisable at $0.20 per option for a period of 4 years. The options vest over two years from issuance (fully vested by May 29, 2025). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 3.60%; expected life – 5 years; expected volatility – 182.93%; forfeiture rate - Nil and expected dividends – Nil.
On November 21, 2023, the Company granted 300,000 stock options to a consultant of the Company exercisable at $0.125 per option for a period of 5 years. The options vest over one year from issuance (fully vested by November 21, 2024). The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 3.74%; expected life – 5 years; expected volatility – 183.46%; forfeiture rate - Nil and expected dividends – Nil.
On August 2, 2023, the Company granted 760,000 stock options to consultants, directors and officers of the Company exercisable at $0.105 per option for a period of three years. The options are vested immediately. The options were fair valued using Black-Scholes Option Pricing Model using the following assumptions: average risk-free rate – 4.43%; expected life – 3 years; expected volatility – 187.79%; forfeiture rate - Nil and expected dividends – Nil.
Share Purchase Warrants
As at the date of this MD&A the Company had 16,882,992 warrants outstanding and at December 31, 2024, the total share purchase warrants outstanding are as follows:
| Number | Weighted Average Exercise Price | |
|---|---|---|
| Balance at December 31, 2022 | 1,447,170 | $ 1.42 |
| Issued | 6,244,000 | $ 0.15 |
| Expired/Cancelled | (543,142) | $ 2.28 |
| Balance at December 31, 2023 | 7,148,028 | $ 0.24 |
| Issued | 4,311,945 | $ 0.40 |
| Exercised | (1,564,900) | $ 0.15 |
| Expired/Cancelled | (18,750) | $ 0.90 |
| Balance at December 31, 2024 | 9,876,323 | $ 0.33 |
RESULTS OF OPERATIONS
SELECT FINANCIAL INFORMATION
During the year ended December 31, 2024, the Company incurred a net loss of $1,752,535 (2023 - $2,233,150 net loss). Included in the year ended December 31, 2024 loss was share-based payments of $99,672 (2023 - $91,370) for the issuance of options to management and consultants and $743,603 (2023 - $515,889) for consulting fees which increased as the Company became more active during the year. Investor relation fees of $515,128 were also incurred (2023 - $95,267), which increased as the company raised more capital in the current year.
During the year ended December 31, 2024, the Company also incurred exploration expenditures of $175,790 (2023 - $422,982) as the drafting of the PEA was finalized during the beginning of the year and there was minimal work done on the properties during the remainder of 2024.
The Company's investment in and loan to ORF Technologies was impaired during the year causing a $12,087 write down (2023 - $621,875 write down).
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SUMMARY OF FINANCIAL RESULTS FOR MOST RECENTLY COMPLETED PERIODS
The following table summarizes the financial results of operations for the period ended December 31, 2024 and 2023:
| | December 31, 2024
$ | December 31, 2023
$ |
| --- | --- | --- |
| Expenses | (1,752,535) | (2,233,150) |
| Net loss | (1,752,535) | (2,233,150) |
| Loss per share - basic & diluted | (0.07) | (0.21) |
RELATED PARTY TRANSACTIONS
Key management personnel at the Company are the directors and officers of the Company.
During the year ended December 31, 2024, the Company incurred:
- Consulting fees of $192,800 (2023 - $270,000) to a company owned by a director of the Company
- Exploration technical services of $44,650 (2023 - $22,000) to a company owned by a former director of the Company
- Exploration technical services of $41,608 (2023 - $Nil) to a company owned by the COO
- Consulting fees of $Nil (2023 - $3,000) to a former CFO
- Consulting fees of $124,999 (2023 - $12,097) to a company owned by the CEO
- Share-based payments of $63,546 (2023 - $91,370) to officers and directors of the Company.
As of December 31, 2024, deposits and payables include:
- $67,500 (December 31, 2023 - $67,500) prepaid deposit paid to a company owned by a director of the Company
- $277,250 (December 31, 2023 – $476,007) payable to a company owned by a director of the Company
- $209 (December 31, 2023 - $209) payable to a company owned by a former director of the Company
- $112,875 (December 31, 2023 – Nil) payable to a company owned by the CEO of the Company
On July 14, 2023, the Company entered a $140,000 secured loan agreement (“Secured Loan”) with a company controlled by a director of the Company. The Secured Loan carries an interest rate of 12% per annum, paid in advance quarterly with a maturity date of July 13, 2024, and secured by the assets of the Company. During the year ended December 31, 2024, the Company accrued interest of $4,331 (2023 - $6,406) and the Secured Loan was paid off on April 5, 2024.
All loans except for the loan from the Secured Loan are non-interest bearing and due on demand. All related party transactions are in the normal course of operations and have been measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
SUBSEQUENT EVENTS
On March 24, 2025, the Company completed a non-brokered private placement whereby the Company issued 7,006,669 units at a price of $0.075 per unit for gross proceeds of $525,500. Each unit is comprised of one common share and one share purchase warrant. Each warrant will be exercisable into one common share at an exercise price of $0.18.
On March 31, 2025, the Company granted 1,400,000 stock options to its directors, officers and consultants exercisable at $0.08 per option. Of the stock options granted, 100,000 are exercisable for a period of three years from the date of grant and the remaining options are exercisable for a period of five years and all stock options vest immediately.
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CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES
Basis of Measurement
These financial statements have been prepared on a historical cost basis, except for financial instruments classified in accordance with measurement standards under IFRS. All dollar amounts presented are in Canadian dollars unless otherwise specified. The condensed interim financial statements have been prepared using IFRS principles applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due.
Income Taxes
Income tax is recognized in profit or loss except to the extent that it relates to items recognized in other comprehensive income of loss or directly in equity, in which case it is recognized in other comprehensive income or loss or equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period applicable to the period of expected realization or settlement. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the assets and liabilities on a net basis. Deferred tax assets and liabilities are offset when there is a legally right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same tax authority and the group intends to settle its current tax assets and liabilities on a net basis.
Significant Accounting Judgments and Estimates
The preparation of these financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Certain of the Company's accounting policies and disclosures require key assumptions concerning the future and other estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities or disclosures within the next fiscal year. Where applicable, further information about the assumptions made is disclosed in the notes specific to that asset or liability. The critical accounting estimates and judgments set out below have been applied consistently to all periods presented in these financial statements.
a) Ability to continue as a going concern – evaluation of the ability of the Company to realize its strategy for funding its future needs for working capital involves making judgments.
b) Investment in associate – determination of ORF as an associate of the Company requires making judgments about ownership and control.
c) Impairment – an evaluation of whether or not an asset is impaired involves consideration of whether indicators of impairment exist. Factors which could indicate impairment exists include: significant underperformance of an asset relative to historical or projected operating results, significant changes in the manner in which an asset is used or in the Company's overall business strategy, the carrying amount of the net assets of the Company being more than its market capitalization or significant negative industry or economic trends. In some cases, these events are clear. However, in many cases, a clearly identifiable event indicating possible impairment does not occur. Instead, a series of individually insignificant events occur over a period of time leading to an indication that an asset may be impaired. Events can occur in these situations that may not be known until a date subsequent to their occurrence. When there is an indicator of impairment, the recoverable amount of the asset is estimated to determine the amount of impairment, if any. If indicators conclude that the asset is no longer impaired, the Company will reverse impairment losses on assets only to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Similar to determining if an impairment exists, judgment is required in assessing if a reversal of an impairment loss is required.
Investment in Associate
Investments in which the Company has the ability to exert significant influence, but does not have control, are accounted for using the equity method of accounting whereby the original cost of the investment is adjusted each reporting period for the Associate's share of earnings, losses, dividends and other changes to the investment's capital structure during the current reporting period.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Set out below is a comparison, by category, of the carrying amounts and fair values of all of the Company's financial instruments that are carried in the condensed interim financial statements and how the fair value of financial instruments is measured.
Financial and Capital Risk Management
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are described below.
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 - inputs that are not based on observable market data.
The Company enters financial instruments to finance its operations in the normal course of business.
The Company has no financial instruments carried at fair value. The Company's cash, accounts receivable, loan receivable, accounts payable and accrued liabilities and loan payable are recorded at fair value and subsequently measured at amortized cost.
The Company is exposed to varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes. The type of risk exposure and the way in way in which such exposure in managed is provided as follows:
Foreign exchange risk
The Company's functional and reporting currency is the Canadian dollar and major purchases are transacted in Canadian dollars. As a result, the Company's exposure to foreign currency risk is minimal.
Credit risk
The Company's cash is largely held in large Canadian financial institutions. The Company does not have any asset-backed commercial paper. The Company maintains cash deposits with Schedule A financial institution, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk.
Interest rate risk
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates, but it does not believe it is currently subject to any significant interest rate risk.
Liquidity risk
The Company's ability to continue as a going concern is dependent on management's ability to raise the required funding through future equity issuances and through short-term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and
the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments.
Price risk
The ability of the Company to explore its mineral properties and the future profitability of the Company are directly related to the market price of precious metals. The Company monitors precious metals prices to determine the appropriate course of action to be taken by the Company.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
MANAGEMENT'S RESPONSIBILITY
Management is responsible for all information contained in this report. The December 31, 2023 financial statements have been prepared in accordance with IFRS and include amounts based on management's informed judgments and estimates.
RISKS AND UNCERTAINTIES
An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Only investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment should undertake such investment. Prospective investors should carefully consider the risk and uncertainties that have affected, and which in the future are reasonably expected to affect, the Company and its financial position.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this discussion, including information as to future activities, events and financial or operating performance of the Company and its projects, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated activities, events or results implied or expressed in such forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.
Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", "believes", or variations of such words and phrases. Forward-looking information may also be identified in statements where certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made.
Many factors could cause actual activities and events and the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. These include metal prices, exploitation and exploration successes, continued availability of capital and financing and general economic, market or business conditions.
These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise. Investors are cautioned that forward-looking statements are not guarantees of future performance and accordingly investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein.
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OTHER INFORMATION
Additional information on the Company is available on SEDAR at www.sedar.com.