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Wildsky Resources Inc. — Management Reports 2023
Feb 27, 2023
45990_rns_2023-02-27_7de22878-af54-4f9d-acb8-0b3ceb2cd799.pdf
Management Reports
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MANAGEMENT’S DISCUSSION AND ANALYSIS
The following Management’s Discussion and Analysis (“MD&A”) is dated February 27, 2023 and should be read in conjunction with the audited consolidated financial statements of Savannah Minerals Corp. (“Savannah” or the “Company”) for the year ended December 31, 2022 and the comparative year ended December 31, 2021. Savannah prepares its audited consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as set out in Part 1 of the Handbook of the Canadian Institute of Chartered Professional Accountants.
FORWARD-LOOKING INFORMATION
Certain statements in this MD&A that are not based on historical facts constitute forward-looking information. Forward-looking information is not a promise or guarantee of future performance but is only a prediction that relates to future events, conditions or circumstances or the Company’s future results, performance, achievements or developments and is subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause the Company’s actual results, performance, achievements or developments in its business or industry to differ materially from those expressed, anticipated or implied by such forward-looking information. Forward-looking statements include statements regarding the outlook for the Company’s future operations, plans and timing for the introduction or enhancement of its services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions, end customer demand conditions, channel inventory and sell through, revenue, gross margin, operating expenses, profits, forecasts of future costs and expenditures, and other expectations, intentions and plans that are not historical fact. The forward-looking statements in this MD&A are based on certain factors and assumptions regarding expected growth, results of operations, performance and business prospects and opportunities. Specifically, management has assumed that the Company’s performance will meet management’s internal projections. While management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Readers are also advised to consider such forward-looking statements in light of the risk factors and uncertainties that may affect the Company’s actual results, performance, achievements or developments.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Further information concerning risks and uncertainties associated with these forwardlooking statements and the Company’s business may be found in the Company’s other filings.
OVERVIEW
Savannah Minerals Corp. (the “Company”) was incorporated under the Business Corporations Act (British Columbia) in Canada. The Company is in the business of acquisition and exploration of mineral properties. The head office, records office, and principal address of the Company is Suite 1910 – 1030 West Georgia Street, Vancouver, British Columbia, V6E 2Y3.
In order to reduce risk, the Company intends to pursue targets related to acquisition and development of mineral properties.
OVERALL PERFORMANCE
Highlights and Notable Events
Proposed RTO Transaction with Canadian Towers and Fiber Optics Inc.
On March 28, 2022, the Company entered into a letter of intent (“LOI”) with Canadian Towers and Fiber Optics Inc. (“CT&FO”), which sets out certain terms and conditions pursuant to which the proposed Acquisition will be completed. The transaction terms outlined in the LOI are non-binding, and the Acquisition is subject to the parties successfully entering into a definitive agreement (the “Definitive Agreement”) in respect of the Acquisition by way of amended extensions on or before January 31, 2023, or such other date as the Company and CT&FO may mutually agree.
The Acquisition is expected to be structured as a three-cornered amalgamation whereby a newly incorporated subsidiary of the Company (“Fundco”) will amalgamate with CT&FO and: (i) each issued and outstanding common share in the capital of CT&FO will be exchanged for one common share in the capital of Savannah (each, a “Savannah Common Share”); (ii) each issued and outstanding common share in the capital of Fundco (each, a “Fundco Common Share”) not owned by the Company will be exchanged for one Savannah Common Share; and (iii) each outstanding common share purchase warrant of Fundco (each, a “Fundco Warrant”) will be exchanged for one Savannah Common Share purchase warrant (each a “Savannah Warrant”), with terms substantially similar to those of the Fundco Warrants subject to acceleration on terms to be mutually agreed upon by the Company and CT&FO. However, the final structure for the Acquisition may be amended if the parties mutually agree that such form would better satisfy their objective including but not limited to, tax efficiency to the parties. The deemed price per Savannah Common Share issued pursuant to the Acquisition will be $0.50.
Prior to closing of the Acquisition, Fundco will complete: (i) a private placement for gross proceeds of approximately $500,000; and (ii) a private placement of approximately 10,000,000 units at a price of $0.50 per unit, with each unit consisting of one Fundco Common Share and one Fundco Warrant, which will entitle the holder thereof to acquire one Fundco Common Share at a price of $0.75 per Fundco Common Share for a period of 12 months following the Acquisition (collectively, the “Concurrent Financings”).
With the Concurrent Financings, the Company expects to issue approximately 40,131,746 Savannah Common Shares and 10,000,000 Savannah Warrants upon closing of the Acquisition. Certain of the Savannah Common Shares issuable pursuant to the Acquisition may be subject to the escrow requirements of the CSE and to hold periods as required by applicable securities laws.
The LOI also contemplates other material conditions precedent to the closing of the Acquisition, including customary due diligence, receipt of all necessary regulatory, corporate and third party approvals and compliance with all applicable regulatory requirements.
The acquisition of CT&FO will constitute a change of business for the Company, and consequently (i) it will seek to delist from the NEX Exchange (“Exchange”) and make application to re-list on the Canadian Stock Exchange (“CSE”), and (ii) it has requested that trading of its common shares on the Exchange be halted. Unless the transaction with CT&FO fails to close, the Company does not expect its shares will resume trading again until listing has been accepted by the CSE.
As the Acquisition will not constitute a Related Party Transaction, as defined in the policies of the Exchange, and the Company is listed on the NEX board of the Exchange, the Company expects that approval of the Acquisition by the shareholders of the Company will not be required.
Subsequent to year-end, the LOI was terminated.
During the year, the Company advanced CT&FO $97,000 for general purposes. Subsequent to year end, CT&FO repaid $90,000 of these advances.
During the year, the Company collected $90,000 as part of a share offering. Upon termination of the LOI with CT&FO, the subscribers have requested these funds be advanced to CT&FO. On January 24, 2023, the funds were returned to the subscribers.
Key Performance Indicators
| Key Performance Indicators | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Revenue | $ | -. | $ | -. | $ | -. |
| Net loss | $ | (241,380) | $ | (113,160) | $ | (234,629) |
| Loss per share | $ | (0.05) | $ | (0.02) | $ | (0.05) |
| Total assets | $ | 113,319. | $ | 24,749. | $ | 105,605. |
Net loss increased by $128,220 to $241,380 for the year-ended December 31, 2022 compared to $113,160 for the year-ended December 31, 2021. The increase in net loss is attributed to an increase in accounting and audit of $16,101 due to the high costs associated with the preparation of the quarterly and annual filings, and increase in legal fees of $143,618 due to the costs associated with the LOI with CT&FO and the delisting application. This was offset by a reduction of management and consulting fees of $24,000 due to new management in the year and a reduction of office and administration of $7,596 primarily due to reduction of rent costs. Net loss decreased by $121,469 to $113,160 for the year ended December 31, 2021 from $234,629 for the year ended December 31, 2020. The decrease in the loss for the year is attributed to the decrease in investor relation costs associated with website development and marketing purposes, decrease in legal fees resulting in reduced general matters, and a reduction in accounting and audit along with management and consulting fees due to the change in executive management. Total assets decreased $80,856, resulting from the cash operating losses. Total assets increased due to the receipt of the subscription advances.
Results of Operations
| Results of Operations | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Accountingand audit | $ | 37,000 | $ | 20,899 |
During the year ended December 31, 2022, the Company incurred $37,000 of accounting and audit fees compared to $20,899 for the year ended December 31, 2021, representing an increase of $16,101. The increase is related to the increase in fees from related party consultants for accounting and reporting purposes.
| 2022 | 2021 | |||
|---|---|---|---|---|
| Management and consultingfees | $ | 24,000 | $ | 48,000 |
During the year ended December 31, 2022, the Company incurred $24,000 of management and consulting fees compared to $48,000 for the year ended December 31, 2021, representing a decrease of $24,000. The decrease is related to decrease in fees from related party consultants for management of the Company’s operations due to change in executive management in the prior year.
| 2022 | 2021 | |||
|---|---|---|---|---|
| Legal fees | $ | 163,499 | $ | 19,881 |
During the year ended December 31, 2022, the Company incurred legal fees of $163,499 compared to $19,881 for the comparative period. The increase in the expense is the result of the LOI signed with CT&FO, the delisting application processed with the TSX-V, and the listing application drafted for the CSE.
| 2022 | 2021 | |||
|---|---|---|---|---|
| Transfer agent and filingfees | $ | 15,256 | $ | 13,414 |
During the year ended December 31, 2022, the Company incurred transfer agent and filing fees of $15,256 compared to $13,414 for the comparative period. The increase in the expense is the result of the increase in charges from the transfer agent.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Management has determined that cash flows for operating, clinical study expenses, and general and administrative expenses will be funded by Savannah’s existing cash on hand. Any expected short fall of cash required for these expenses will be funded by the issuance of common shares through private placements.
Cash Flow Summary
| 2022 | 2021 | |||
|---|---|---|---|---|
| Cash on hand, January 1 | $ | 18,916. | $ | 92,320. |
| Net loss | (241,380) | (113,160) | ||
| Changes in non-cash working capital | 221,422. | 39,756 | ||
| Cash flow used in financing activities | 110,000. | -. | ||
| Cash flow used in investing activities | (97,000). | -. | ||
| Cash on hand,December 31 | $ | 11,958. | $ | 18,916. |
Net loss in 2022 was $241,380, an increased of $128,220 from $113,160 in 2021. The increase in net loss is primarily due to the increase in the operating loss for the year, as discussed above. In addition, fluctuations from non-cash working capital resulted in cash inflow of $221,422 for the year ended December 31, 2022 compared to $39,756 for the year ended December 31, 2021, resulting from the increase in accounts payable resulting from the operating loss.
During the year-ended December 31, 2022, Savannah had cash flow from financing activities of $110,000 compared to nil for the year-ended December 31, 2021. During the year, the Company received a shortterm loan of $20,000 and had received $90,000 on an advance of a share subscription.
During the year-ended December 31, 2022, the Company had cash used in investing activities of $97,000 resulting from the advance made to CT&FO. The Company did not have any investing activities in 2021.
The following table represents the net capital of the Company:
| 2022 | 2021 | |||
|---|---|---|---|---|
| Shareholders’equity | $ | (308,716) | $ | (67,336) |
| Net capital | $ | (308,716) | $ | (67,336) |
Savannah uses net working capital to monitor leverage. The decrease in net capital is the result of the operating loss incurred during the year by the Company.
Working Capital
The Company has a working capital deficiency of $308,717 as at December 31, 2022 compared to $67,337 as at December 31, 2021 representing a decrease of $241,380. The decrease in working capital is comprised of an increase in current assets of $88,570 and an increase in current liabilities of $329,950.
The increase in current assets was due to the advance of funds to CT&FO of $97,000 offset by a decrease of cash of $6,958, resulting from payment of operating expenses and a decrease in goods and services tax receivable of $1,472.
The increase in current liabilities is the result of the increase in accounts payable of $219,950 resulting from the timing of vendor payments, the receipt of a short-term loan of $20,000 and the receipt of $90,000 from the advance on share subscriptions.
Contractual Obligations
There are no outstanding contractual obligations.
Contingencies
Contingent liabilities
The Company does not have any contingent liabilities.
Contingent assets
The Company does not have any contingent assets.
SELECTED QUARTERLY FINANCIAL INFORMATION
| Dec 31, 2022 | Sept 30, 2022 Jun 30, 2022 Mar 31, 2022 |
|---|---|
| Revenue $ -. Net loss (71,769) Lossper share (0.01) |
$ -. $ -. $ -. (133,528) (14,154) (21,929) (0.03) (0.00) (0.01) |
| Dec 31, 2021 | Sept 30, 2021 Jun 30, 2021 Mar 31, 2021 |
| Revenue $ -. Net loss (39,628) Lossper share (0.01) |
$ -. $ -. $ -. (22,134) (23,242) (28,156) (0.00) (0.00) (0.01) |
For the quarter ended December 31, 2022, the Company incurred a net loss of $71,769 resulting from the increase in legal fees for general purposes and the costs associated with the preparation of the year-end filing requirements.
In the third quartered ended September 30, 2022, the Company incurred a net loss of $133,528. The loss was attributed to general operating costs including transfer agent fees and management and consulting fees. In addition, the Company incurred increased accounting costs for the preparation of the filings and legal fees for the proposed transaction.
For the second quarter ended June 30, 2022, the Company incurred a net loss of $14,154, resulting from the management and consulting fees of $6,000 for the day-to-day management of the Company, transfer agent and filing fees of $2,097 for trust services and audit fees of $6,000 resulting from the quarterly filings and day-to-day management.
For the first quarter ended March 31, 2022, the Company incurred a net loss of $21,929, resulting from the management and consulting fees of $6,000 for the day-to-day management of the Company, transfer agent and filing fees of $5,922 for trust services, legal fees of $2,612 regarding general corporate matters, and accounting and audit fees of $6,000 resulting from the quarterly filings and day-to-day management.
For the fourth quarter ended December 31, 2021, the Company incurred a net loss of $39,628, resulting from accounting and audit fees of $15,500 due to the charges for the annual audit, management and consulting fees of $3,000 for the day to day management of the operations, and legal fees of $17,120 due to general corporate matters including the annual shareholder meeting.
For the third quarter ended September 30, 2021, the Company incurred a net loss of $22,134 resulting from consulting and management fees of $15,000 and accounting and audit fees of $1,799 for the general management of the Company, in addition to rent of $3,000 and transfer agent and filing fees of $2,185.
For the second quarter ended June 30, 2021, the Company incurred a net loss of $23,242, resulting from the expenses related to the management and consulting fee of $15,000, office and administration expenses mainly being rent of $3,000, and transfer agent and filing fees of $3,373 resulting from charges for the transfer agent services and sustaining fees. In addition, the Company had $1,800 of accounting and audit costs for the preparation of the quarterly filings.
In the first quarter ended March 31, 2021, the Company incurred a net loss of $28,156, resulting from the increase in management and consulting fees and accounting and audit due to general operating items. In addition, the Company had an increase in office and administration expenses due to increased rent and incurred higher transfer agent and filing fees due to charges from the transfer agent. This was offset by a decrease in legal fees due to reduced amount of general corporate matters.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Exploration and evaluation assets
The Company has acquired exploration and evaluation assets, which consists of mineral claims, for use in its business activities. Amortization is recognized using the unit of production basis, once available for use, based upon management’s estimate of the useful life.
Taxes
The determination of taxes is inherently complex and requires making certain estimates and assumptions about future events. While income tax filings are subject to audits and reassessments, the Company has adequately provided for all income tax obligations. However, changes in facts and circumstances as a result of income tax audits, reassessments, jurisprudence and any new legislation may result in an increase or decrease in our provision for taxes. The value of deferred tax assets is evaluated based on the probability of realization; the Company has assessed that it is improbable that such assets will be realized and has accordingly not recognized a value for deferred taxes.
Share-based payments
Share-based compensation amounts are determined based on compensation plans in effect and are subject to estimated fair values, volatility, expected life, discount rate, forfeiture rates and the Company’s share price using the Black-Scholes option pricing model. The Company estimates volatility based on the historical volatility of similar entities following a comparable period in their lives.
Going concern
The assessment of the Company’s ability to execute its strategy by funding future working capital involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstance. There is a material uncertainty regarding the Company’s ability to continue as a going concern. The Company’s principal source of cash is from private placements. The Company is dependent on raising funds in order to have sufficient capital to be able to identify, evaluate and then acquire an interest in assets or a business.
Impairment of non-current assets
To determine the recoverable amount, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. Actual results may vary and may cause significant adjustments to the Company’s assets within the next financial year.
In addition, when determining the applicable discount rate, estimation is involved in determining the appropriate adjustments to market risk and asset-specific risk factors.
As at December 31, 2022, the Company has accumulated impairment losses of $126,799 (2021 - $126,799) on its exploration and evaluation asset due to the impairment of mineral property.
Decommissioning and restoration provision
The decommissioning and restoration provision is based on future cost estimates using information available at the reporting date. The decommissioning and restoration provision is adjusted at each reporting period for changes to factors such as the expected amount of cash flows required to discharge the liability, the timing of such cash flows, and the discount rate. The decommissioning and restoration provision requires other significant estimates and assumptions such as requirements of the relevant legal and regulatory framework, and the timing, extent, and costs of required decommissioning and restoration activities. Actual costs may differ from these estimates. As at December 31, 2022 and 2021, the Company has no material decommissioning and restoration provision
NEW ACCOUNTING PRONOUNCEMENTS
There are no new accounting pronouncements.
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Risk is inherent in all business activities and cannot be eliminated. However, shareholder value can be maintained and enhanced by identifying, mitigating, and where possible, insuring against these risks. The following section addresses some, but not all, risk factors that could affect Savannah’s future results, as well as activities used to mitigate such risks. These risks do not occur in isolation but must be considered in conjunction with each other.
The Board of Directors have overall responsibility for the establishment and oversight of Savannah’s risk management framework. The Board is responsible for developing and monitoring Savannah’s compliance with risk management policies and procedures.
Savannah’s risk management policies are established to identify and analyze the risks faced by Savannah, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Savannah’s activities.
Financial risks and financial instruments
Cash is carried at fair value using a level 1 fair value measurement. The carrying value of cash and accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments.
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
There has been no changes from the prior year.
The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
Credit risk
Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to
meet its contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets including cash. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash with high-credit quality financial institutions.
Liquidity risk
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2022, the Company had a cash balance of $11,958 (2021 - $18,916) to settle current liabilities of $422,035 (2021 - $92,085). All of the Company’s accounts payable and accrued liabilities have contractual maturities of 30 days or due on demand and are subject to normal trade terms. To maintain liquidity, the Company is currently investigating financing opportunities.
Mark Price risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. The Company does not have a practice of trading derivatives.
Interest rate risk
The Company’s financial assets exposed to interest rate risk consist of cash balances. The Company’s current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks. As at December 31, 2022 and 2021, the Company did not have any investments in investment-grade short-term deposit certificates.
Foreign currency risk
The Company is exposed to foreign currency risk to the extent expenditures incurred or funds received and balances maintained by the Company are denominated in currencies other than Canadian dollars. As at December 31, 2022 and 2021, the Company did not have foreign currency risk.
Commodity price risk
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. The ability of the Company to develop its mineral properties and the future profitability of the Company are directly related to the market price of gold. The Company has not hedged any of its future gold sales. The Company’s input costs are also affected by the price of fuel. The Company closely monitors gold and fuel prices to determine the appropriate course of action to be taken from interest rate risk or foreign currency risk. The Company is not exposed to significant other price risk
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2022, the Company paid to a company wholly-owned by the Chief Executive Officer and director $24,000 (2021 – $3,000) for management and consulting services, and to a company wholly-owned by the Chief Financial Officer $24,000 (2021 – $6,300) for accounting services. As at December 31, 2022 $63,204 (2021 - $9,553) were owed to related parties for the above services.
During the year ended December 31, 2022, the Company accrued legal fees $160,063 (2021 – $12,720) to a legal firm of which a director is a partner. As at December 31, 2022, there is $207,971 (2021 - $44,582) in accounts payable and accrued liabilities.
During the year ended December 31, 2022, the Company paid to a company wholly-owned by the former Chief Executive Officer and director Nil (2021 - $45,000) for management and consulting services and nil
(2021 – $9,000) for rent which is included in office and administrative fees. As at December 31, 2022 $18,900 (2021 - $22,346) were owed to the related party for the above services.
During the year ended December 31, 2022, a Company wholly-owned by the Chief Financial Officer advanced the Company $25,000 under the share subscriptions received in advance.
SUBSEQUENT EVENTS
There have been no subsequent events.
OTHER INFORMATION
Outstanding share data:
| Issued and outstanding shares at December 31, 2021 | 4,911,869. |
|---|---|
| Issued and outstandingshares at February27,2023 | 4,911,869. |
INDUSTRY RISKS
The Company’s principal business activities are the acquisition, exploration, and definition of potentially economically viable mineral resource deposits on mineral properties, which, by nature, are speculative. Companies in this industry are subject to many and varied kinds of risks, including but not limited to; environmental, fluctuating commodity prices, social, political, financial and economics. Additionally, few exploration projects successfully achieve development due to factors that cannot be predicted or foreseen. While risk management cannot eliminate the impact of all potential risks, the Company strives to manage such risks to the extent possible and practicable. Due to the high-risk nature of the Company’s business and the present stage of the Company’s various mineral properties, an investment in the Company’s common shares should be considered a highly speculative investment that involves significant financial risks, and prospective investors should carefully consider all of the information disclosed in this MD&A, the risk factors discussed below, and the Company’s other public disclosures, including the risks described in the “Risk Factors” section of the Company’s MD&A for the years ended December 31, 2022 and 2021, prior to making any investment in the Company’s common shares.
The risk factors described below do not necessarily comprise all of the risks and uncertainties that the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also adversely affect the Company’s business, results of operations, financial results, prospects and price of common shares. These risk factors could materially affect the Company’s future operating results and could cause actual events to differ materially from those described in forward ‐ looking statements relating to the Company.
Mineral property exploration and mining risk
Mineral exploration and development are highly speculative and are characterized by a number of significant inherent risks, which may result in the inability to successfully develop a project for commercial, technical, political, regulatory or financial reasons, or if successfully developed, may not remain economically viable for their mine life owing to any of the foregoing reasons.
The Company’s ability to identify Mineral Resources in sufficient quantity and quality to justify development activities and/or its ability to commence and complete development work and/or commence and/or sustain commercial mining operations at any of its projects will depend upon numerous factors, many of which are beyond its control, including exploration success, the obtaining of funding for all phases of exploration, development and commercial mining, the adequacy of infrastructure, geological characteristics, metallurgical characteristics of any deposit, the availability of processing and smelting capacity, the
availability of storage capacity, the supply of and demand for silver and other metals, the availability of equipment and facilities necessary to commence and complete development, the cost of consumables and mining and processing equipment, technological and engineering problems, accidents or acts of sabotage or terrorism, civil unrest and protests, currency fluctuations, changes in regulations, the availability of water, the availability and productivity of skilled labour, the receipt of necessary consents, permits and licenses (including mining licenses), and political factors, including unexpected changes in governments or governmental policies towards exploration, development and commercial mining activities.
Furthermore, cost over-runs or unexpected changes in commodity prices in any future development could make the projects uneconomic, even if previously determined to be economic under feasibility studies. Accordingly, notwithstanding the positive results of one or more feasibility studies on the projects, there is a risk that the Company would be unable to complete development and commence commercial mining operations at one or more of the mineral properties which would have a material adverse effect on the Company’s business, financial condition, results of operations and prospects.
Key management
The success of the Company is dependent upon the ability, expertise, judgment, discretion, and good faith of its senior management. While employment agreements are customarily used as a primary method of retaining the services of key employees, these agreements cannot assure the continued services of such employees. Any loss of the services of such individuals could have a material adverse effect on the Company’s business, operating results, or financial condition.
Limited operating history
The Company has no present prospect of generating revenue from the sale of products. The Company is therefore subject to many of the risks common to early-stage enterprises, including undercapitalization, cash shortages, limitations with respect to personnel, financial, and other resources, and lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered considering the early stage of operations.
Ability to continue as a going concern
The Company’s auditors’ opinion on its December 31, 2022 financial statements includes an explanatory paragraph in respect of there being substantial doubt about its ability to continue as a going concern.
Financing and share price fluctuation risk
The Company has no source of operating cash flow and has no assurance that additional funding will be available to it for further exploration and development of its mineral properties. Future exploration and development of the Company’s mineral properties may be dependent upon the Company’s ability to obtain financing through equity, debt or other means. There can be no assurance that needed financing will be available in a timely or economically advantageous manner, or at all. Failure to obtain sufficient financing could result in delay or indefinite postponement of further exploration and development of on any or all of its mineral properties which could result in the loss of its property, in which case, the Company’s ability to operate would be adversely affected. To obtain substantial additional financing, the Company may have to sell additional securities including, but not limited to, its Common Shares or some form of convertible securities, the effect of which may result in substantial dilution of the present equity interests of the Company’s shareholders.
Securities markets have at times in the past experienced a high degree of price and volume volatility, and the market price of securities of many companies, particularly those considered to be exploration stage companies such as the Company, have experienced wide fluctuations in share prices which have not necessarily been related to their operating performance, underlying asset values or prospects. There can
be no assurance that these kinds of share price fluctuations will not occur in the future, and if they do occur, how severe the impact may be on the Company’s ability to raise additional funds through equity issues.
Commodity prices risk
The Company, along with all mineral exploration and development companies, is exposed to commodity price risk. A decline in the market price of gold, silver, base metals and other minerals may adversely affect the Company’s ability to raise capital in order to fund its ongoing operations. Commodity price declines could also reduce the amount the Company would receive on the disposition of its mineral property to a third party.
Title risk
Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history of many mining properties. The Company has diligently investigated and continues to diligently investigate and validate title to its mineral claims; however, this should not be construed as a guarantee of title. The Company cannot give any assurance that title to properties it acquired will not be challenged or impugned and cannot guarantee that the Company will have or acquire valid title to these mineral properties
Insured and uninsurable risks
In the course of exploration, development and production of mineral properties, the Company is subject to a number of hazards and risks in general, including adverse environmental conditions, operational accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods, and earthquakes. Such occurrences could result in damage to the Company’s properties or facilities and equipment, personal injury or death, environmental damage to properties of the Company or others, delays, monetary losses and possible legal liability.
Although the Company maintains insurance to protect against certain risks in such amounts as it considers reasonable, its insurance may not cover all the potential risks associated with its operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums or for other reasons. Should such liabilities arise, they could reduce or eliminate future profitability and result in increased costs, have a material adverse effect on the Company’s results and could cause a decline in the value of the securities of the Company.
Competition risk
Significant and increasing competition exists in the mining and mineral exploration industry. The Company faces strong competition from other mining and exploration companies in connection with the acquisition of properties producing, or capable of producing, minerals. Many of these companies are larger, more established, and have greater financial resources, operational experience and technical capabilities than the Company and make it difficult to compete for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. As a result of this competition, the Company may be unable to acquire additional attractive mining or exploration properties on terms it considers acceptable or at all. Consequently, the Company’s business, results of operation, financial conditions and prospects could be adversely affected
Government regulations
Exploration and evaluation companies operate in a high-risk regulatory environment. The mining activities is governed by numerous statutes and regulations in the United States, Canada, and other countries where
Savannah intends to market its products. The subject matter of such legislation includes approval of mining facilities and environmental regulations.
The process of completing exploration and evaluation activities and obtaining required approvals is likely to take several years and require the expenditure of substantial resources. Furthermore, there can be no assurance that the regulators will not require modification to any submissions which may result in delays or failure to obtain regulatory approvals. Any delay or failure to obtain regulatory approvals could adversely affect the ability of Savannah to utilize its assets, thereby adversely affecting operations. Further, there can be no assurance that Savannah’s properties will achieve levels of sensitivity and specificity sufficient for regulatory approval or market acceptance. There is no assurance that Savannah will be able to timely and profitably produce its products while complying with all the applicable regulatory requirements. Foreign markets, other than the United States and Canada, generally impose similar restrictions.
Conflicts of interest risk
Certain of the Company’s directors and officers do, and may in the future, serve as directors, officers, promoters and members of management of other mineral exploration and development companies and, therefore, it is possible that a conflict may arise between their duties as a director, officer, promoter or member of the Company’s management team and their duties as a director, officer, promoter or member of management of such other companies. The Company’s directors and officers are aware of the laws establishing the fiduciary duties of directors and officers including the requirement that directors act honestly and in good faith with a view to the best interests of the Company and to disclose any interest which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in a conflict is required under the Business Corporations Act (British Columbia) to disclose their interest.
Environmental risk
All phases of the Company’s operations are subject to extensive environmental regulations. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation, mitigation of impact of activities to wildlife and plant life, and provide for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry activities and operations. They also set forth limitations on the generation, transportation, storage and disposal of hazardous waste. A breach of these regulations may result in the imposition of fines and penalties. In addition, certain types of mining operations require the submission and approval of environmental-related permits and/or environmental impact assessments. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non ‐ compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. The cost of compliance with changes in governmental regulations has a potential to impact the timing of execution of work pans and reduce the viability or profitability of operations. Environmental hazards may exist on the properties in which the Company holds its interests or on properties that will be acquired which are unknown to the Company at present and which have been caused by previous or existing owners or operators of those properties.
Community relations risk
The Company’s relationships with the communities in which it operates, and other stakeholders are critical to ensure the future success of the development of its properties. There is an increasing level of public concern relating to the perceived effect of mining activities on the environment and on communities impacted by such activities. Publicity adverse to the Company, its operations or extractive industries generally, could have an adverse effect on the Company and may impact relationships with the communities in which the Company operates and other stakeholders. While the Company is committed to
operating in a socially responsible manner, there can be no assurance that its efforts in this respect will mitigate this potential risk. Further, damage to the Company’s reputation can be the result of the perceived or actual occurrence of any number of events, and could include any negative publicity, whether true or not. ‐ The increased usage of social media and other web based tools used to generate, publish and discuss user ‐ generated content and to connect with other users has made it increasingly easier for
individuals and groups to communicate and share opinions and views in regard to the Company and its activities, whether true or not. While the Company strives to uphold and maintain a positive image and reputation, the Company does not ultimately have control over how it is perceived by others. Reputation loss may lead to increased challenges in developing, maintaining community relations and advancing its projects and decreased investor confidence, all of which may have a material adverse impact on the financial performance and growth of the Company.
Litigation risk
All industries, including the mining industry, may be made subject to legal claims and proceedings, with and without merit. Defence and settlement costs can be substantial, even with respect to claims that have no merit. The Company may also in the future become the subject of a legal claim or proceeding at any time, and without advance notice of the commencement of the proceeding. To the extent the Company becomes subject to any such claim or proceeding, it may materially impact management’s time and the Company’s financial resources to defend, even if it is without merit. As well, due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding could have a material adverse effect on the Company’s business, results of operations, financial condition (including its cash position) and prospects.
Climate change risk
The potential physical impacts of climate change on the Company’s exploration projects is highly uncertain and are particular to the geographic circumstances. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. The Company’s future exploration programs in the United States may require water and a lack of necessary water could disrupt exploration programs and adversely impact future development and mining activities. Climate change is an international concern and as a result poses the risk of changes in government policy including introducing climate change legislation and treaties at all levels of government that could result in increased costs. The trend towards more stringent regulations and carbon-pricing mechanisms aimed at reducing the effects of climate change could impact the Company’s decision to pursue future opportunities, or maintain our existing exploration programs, which could have an adverse effect on our business.
No Anticipated Dividends
The Company does not intend to pay dividends on any investment in the shares of stock of the Company. The Company has never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that the Company requires additional funding currently not provided for in its financing plan, its funding sources may prohibit the payment of a dividend. Because the Company does not intend to declare dividends, any gain on an investment in the Company will need to come through an increase in the stock’s price. This may never happen, and investors may lose all their investment in the Company.