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Winshear Gold Corp. — Management Reports 2023
Jul 21, 2023
44877_rns_2023-07-20_1b116307-07fc-478c-abb8-6e6a051f2389.pdf
Management Reports
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MANAGEMENT’S DISCUSSION AND ANALYSIS
Year Ended March 31, 2023
Management’s Discussion and Analysis Year Ended March 31, 2023
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DATE OF THE REPORT: JULY 20, 2023
This Management’s Discussion and Analysis (“MD&A”) relates to the financial condition and results of operations of Winshear Gold Corp. (“Winshear” or the “Company”) together with its subsidiaries as of the date of the report. The MD&A is intended to supplement and complement the Company’s audited consolidated interim financial statements for the year ended March 31, 2023 (the “Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Readers are encouraged to consult the Company’s audited consolidated financial statements for the year ended March 31, 2023, and the corresponding notes to the financial statements, which are available on SEDAR at www.sedar.com. The information contained within this MD&A is current to the date of the report and all figures are stated in Canadian dollars unless otherwise noted.
OVERVIEW
The Company’s principal business activities include the identification, acquisition and exploration of mineral properties, with a current focus on gold and base metal properties in Peru.
In addition, the Company is pursuing an arbitration claim against the government of Tanzania with The International Centre for Settlement of Investment Disputes (the “ICSID”), a part of the World Bank group, concerning the expropriation of its properties in that country.
The Company’s outstanding common shares are listed on the Toronto Venture Stock Exchange (the “TSXV”) under the symbol “WINS-V”.
HIGHLIGHTS AND DEVELOPMENTS
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In June 2023, the Company elected to drop the Yang claim due to poor geological results
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On May 16, 2023, the Company announced that it had received authorization to initiate activities at the Gaban gold project in Peru
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On May 9 2023, the Company closed a private placement financing for gross proceeds of $585,000.
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During February 2023, the Company completed the evidentiary hearing for its arbitration case against the Republic of Tanzania in relation to the expropriation of its SMP Gold Project.
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During October 2022, the Company received its environmental permit, the Declaration de Impacto Ambiental (“DIA”) from the Ministry of Mines in Peru regarding its permit application to drill test the Coritiri gold target at the Gaban
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Management’s Discussion and Analysis Year Ended March 31, 2023
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project.
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On August 19, 2022, the Company closed a private placement financing for gross proceeds of $651,300.
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In May 2022, a 4,000-hectare claims block was separated from the Gaban Gold Project and renamed the Yang Gold Project,
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During 2022 mapping and sampling programs were carried out at the Gaban and Ica Projects in Peru.
PERU EXPLORATION FOCUS
On September 19, 2019, the Company acquired the Gaban gold project and the Tinka iron oxide copper-gold project, both located in Peru, from Palamina Corp. (“Palamina”). The Gaban project has since been split into two: Gaban and Yang, and the Tinka Project has been renamed to ICA. In exchange, the Company issued 5,000,000 common shares during the year ended March 31, 2020, and 5,000,000 common shares during the year ended March 31, 2021. The Company paid three annual royalty payments to Palamina, $25,000 USD each on September 19, 2020 and September 19, 2021 and $50,000 USD on August 25, 2022. The payment amounts double every two years until the Company has completed 5,000 metres (“m”) of drilling or has abandoned the properties.
For the $25,000 USD annual royalty payment due September 19, 2021 and other exploration costs payable of $8,700 USD for a total payable of $33,700 USD, the Company agreed to issue to Palamina 525,000 common shares at a price of $0.08 for total consideration of $42,000. These shares were issued October 8, 2021.
Palamina retains a 2% net smelter royalty (“NSR”) on each property. The Company has the right to purchase 50% of each royalty by making a cash payment of $1,000,000 USD to Palamina at any time prior to the commencement of commercial production.
GABAN GOLD PROJECT
Location
The Gaban Property currently covers an area of 15,629 hectares surrounding the town of San Gaban in the Puno orogenic gold belt. The town of San Gaban, sitting at an elevation of 550m above sea level, is served by excellent infrastructure; it is a four-hour drive via the Trans-Oceanic Highway to Puerto Maldonado airport and a nearby 206 megawatt hydro-electric dam provides power to the town.
During 2022, a block of 4,000 hectares of non-contiguous concessions to the south of the main Gaban project were moved into a separate project, the Yang Project (see below). In addition, about 1,200 hectares in three newly available concessions were acquired directly from the government of Peru and added to the Gaban project to strengthen the land position around existing targets.
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Management’s Discussion and Analysis Year Ended March 31, 2023
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Historical Work
Palamina completed an initial aeromagnetic survey and acquired the concessions in 2018. Palamina conducted geological mapping, stream sediment sampling, and bedrock sampling that defined coinciding aeromagnetic, stream sediment, and bedrock gold anomalies. Gold is hosted in auriferous quartz veins associated with shear zones in meta-sedimentary host rocks.
During 2019 – 2021, Winshear conducted multiple field programs which focused on confirming and defining the Coritiri bedrock gold anomaly. By March 31, 2022, a total of 1,120 channel samples were collected with highlights including 76 samples assaying between 0.50 and 32.5 grams per ton gold (“g/t Au”). Mineralized veins extend over an area of 900m by 2,200m, which is currently open, especially to the south and east. The mineralized area correlates strongly with an east-southeast trending aeromagnetic anomaly.
2022 Field Program
During 2022, field work an additional 89 samples were collected from previously unsampled areas of the Gaban project. The results were mostly negligible or low grade.
Additionally, topographic control was improved in the area of the Coritiri anomaly, where the planned drilling will occur, by establishing 3 well-surveyed primary geodesic points and 105 relative secondary points. These will assure that our drill collars are accurately located with respect to the previously mapped and sampled surface features which will be tested by the drill holes.
Drill Permit
During October 2022, the Company received its DIA from the Ministry of Mines in Peru, the suite of environmental and social studies required ahead of any drilling at the Gaban property. During May 2023, the Company received its authorization to initiate activities. The DIA allows for the construction of up to 40 drill pads and covers the 900m by 2,200m Coritiri target. The Cortiri target has never been drill tested. Winshear plans to carry out a heli-borne drill program to test the Cortiri target area. The Company is awaiting any judgement from its arbitration proceedings against the government of Tanzania prior to commencing a drill program.
YANG GOLD PROJECT
The Company separated 4 titled concessions encompassing 4,000 hectares from the Gaban project and renamed the area the Yang Gold Project. The Yang concessions are located roughly 5 kilometres (“km”) south of the main Gaban block adjacent to Palamina’s Yin concession. The Yang and Yin concessions completely cover an Artificial Intelligence (“AI”) target generated by Goldspot Discoveries for Palamina. The AI target covered by the Yang and Yin claims hosts the same structural and geological features and settings as a similar sized AI target covering the Mucumayo mine area to the southeast. Winshear agreed to waive its 2 km area of influence surrounding the Yang concessions to allow Palamina to stake the Yin claims.
Winshear and Palamina agreed to explore the Yang and Yin projects together, embarking on an initial
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Management’s Discussion and Analysis Year Ended March 31, 2023
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reconnaissance program to ground truth the AI anomaly, visit historic artisanal workings and map and sample areas of interest. During August 2022, an agreement was signed with the Icaco community to carry out an initial exploration program of the Yin and Yang claims. During October 2022, Palamina and the Company completed an initial visit to the Yin and Yang claims to investigate the AI target. The visit failed to generate any meaningful gold values on Winshear’s Yang concessions and these concessions were dropped in June 2023.
ICA I.O.C.G PROJECT
The Ica iron oxide-copper-gold project is an early-stage exploration target that covers an area of 2,933 hectares. It is located 45 km southeast of the town of Ica at an elevation of 2,000 m and is 300 km southeast of Lima along the Pan-American highway.
During 2022, the Company conducted an initial reconnaissance mapping and sampling program which delineated several laterally continuous copper-gold veins that are only shallowly oxidized. The Company intends to conduct a ground magnetic survey in the area of maximum vein abundance to assess the possibility of a significant magnetite-sulfide mineralized body at depth.
Current Peru Political Climate
On December 7, 2022 the former President of Peru Pedro Castillo was impeached. On the same day Dina Bouarte was sworn in as President of Peru. President Duarte formerly served as the vice president under Pedro Castillo. Since the transfer of power, civil unrest and protests have ensued demanding constitutional reforms and for a new election to be called. In some cases these protests have resulted in violent clashes where loss of life has been reported on the side of government and on the side of protestors. The Company’s projects are located in the south of Peru where protests continue mainly in the form of road blockades and protests outside government agencies. The Company cautions that access to its projects by road may be hampered in the short term and security issues with regards to personnel may affect Winshear’s ability to carry out field work.
TANZANIA ARBITRATION
SMP Project Background
From 2005 to 2017, the Company had acquired, explored, and owned a 100% interest in the Saza, Illunga, Gap and Kwaheri Retention Licenses, all within the Luna Goldfields in southwest Tanzania. The Tanzanian government has since expropriated all of the Retention Licenses through a series of actions between 2017 to late 2019. Consequently, Winshear has initiated international arbitration proceedings in accordance with the 2013 Agreement for the Promotion and Reciprocal Protection of Investments between Canada and Tanzania. The Company is seeking compensation for the value lost to Winshear as a result of the expropriation.
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Management’s Discussion and Analysis Year Ended March 31, 2023
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Funding for legal proceedings
On December 7, 2020, the Company secured litigation funding in an agreement with an affiliate of Delta Capital Management LLC (“Delta”), a US-based global private equity and advisory firm specializing in litigation and legal finance (the “Funding Agreement”). Under the Funding Agreement, the Company can draw funds from the financing facility to a maximum of US$3.3 million to meet all fees and expenses relating to the pursuit of certain claims against the Government of Tanzania. In exchange, Delta is entitled to a portion of any proceeds awarded to the Company. Should there be a change of control in the Company, there is a right to terminate the agreement with Delta which would result in the Company having to pay back fees owing to Delta.
Memorial
On July 15, 2021, the Company filed its Memorial with the ICSID, outlining the nature and quantum of its claims against the Government of Tanzania for the expropriation of the Company’s retention licenses. The arbitration case was heard by a three-person tribunal in February 2023, after which a decision is expected within six months, however it could take longer. The Memorial provides the basis for compensation to Winshear in the amount of $124,781,945, including interest which continues to accrue. There is no guarantee of a positive outcome in favour of the Company.
PRIVATE PLACEMENT FINANCINGS
On August 19, 2022, the Company issued 10,855,000 units at a price of $0.06 per unit for gross proceeds of $651,300 under a private placement financing. Each unit comprised one common share and half a warrant. Each full warrant is convertible into one common share at an exercise price of $0.10 and expire August 19, 2024. Related parties subscribed for 2,350,000 units of the private placement financing including Palamina who subscribed for 1,550,000 units. Proceeds will be used for exploration and general working capital.
On May 9, 2023, the Company issued 5,850,000 units at a price of $0.10 per unit for gross proceeds of $585,000 under a private placement financing. Each unit comprised of one common share and half a warrant. Each full warrant is convertible into one common share at an exercise price of $0.10 and expire May 9, 2025. Related parties consisting of officers and directors subscribed for 200,000 units for gross proceeds of $20,000. Proceeds will be used for exploration and general working capital.
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Management’s Discussion and Analysis Year Ended March 31, 2023
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SUMMARY CONSOLIDATED FINANCIAL RESULTS
| Year Ended March 31,2023 |
Year Ended March 31,2022 |
|
|---|---|---|
| EXPENSES Exploration expenses $ Filing & transfer agent fees Foreign exchange loss Loss on investments General & administration Marketing Professional fees Provision for VAT receivable Salaries and consulting Share-based compensation Loss and comprehensive loss for the year $ Basic and diluted lossper share $ |
438,227 $ 19,614 8,271 13,500 94,961 46,453 155,623 17,976 130,859 48,273 (973,757) $ (0.01) $ |
617,836 19,019 17,634 7,500 45,839 33,527 151,387 49,494 161,273 34,576 |
| (1,138,085) (0.02) |
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| Cash Total assets |
During the year ended March 31, 2023, the Company incurred a $973,757 loss, which was lower than the loss incurred during the year ended March 31, 2022 mainly due to higher exploration costs incurred during the year ended March 31, 2021 for field exploration programs on the Gaban property.
QUARTERLY RESULTS
| Three Months Ended: | Mar. 31, 2023 Dec. 31, 2022 Sept. 30, 2022 June 30, 2022 |
|---|---|
| Exploration expenses Filing & transfer agent fees Foreign exchange loss (gain) (Gain) loss on investments General & administration Marketing Professional fees Provision for VAT receivable Salaries and consulting Share-based compensation |
$ 43,238$ 95,329$ 110,159$ 189,501 6,818 3,638 4,560 4,598 7,606 2,552 3,465 (5,350) (1,500) (3,000) 3,000 15,000 33,871 21,015 22,788 17,284 15,831 7,252 6,078 17,292 78,744 30,249 35,766 10,865 2,387 5,914 3,062 6,613 18,054 37,099 37,609 38,097 14,600 18,168 3,019 12,486 |
| Loss and comprehensive loss Basic and diluted loss per share Cash Total assets |
$ (219,649) $ (218,216) $ (229,506) $ (306,386) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ 137,046 $ 262,837 $ 521,004 $ 60,099 $ 236,262 $ 362,825 $ 608,440 $ 185,514 |
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Management’s Discussion and Analysis Year Ended March 31, 2023
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| Three Months Ended: | Mar. 31, 2022 Dec. 31, 2021 Sept. 30, 2021 June 30, 2021 |
|---|---|
| Exploration expenses $ Filing & transfer agent fees Foreign exchange (gain) loss General & administration Loss (gain) on investments Marketing Professional fees Provision for VAT receivable Salaries and consulting Share-based compensation Loss and comprehensive loss $ Basic and diluted loss per share $ Cash $ Total assets $ |
94,239$ 120,598$ 142,314$ 260,686 3,651 3,114 5,978 6,276 439 10,660 19,508 (12,975) 9,570 10,973 13,501 11,797 (4,500) (4,500) 6,000 10,500 1,808 19,109 8,527 4,083 53,608 30,164 32,960 34,655 8,240 12,155 11,539 17,560 39,321 42,066 39,463 40,423 12,348 12,622 9,605 - |
| (218,724) $ (256,961) $ (289,395) $ (373,005) (0.00) $ (0.00) $ (0.01) $ (0.01) 315,450$ 565,994 $ 171,326 $ 337,298 462,340$ 718,177 $ 221,866$ 424,739 |
During the three months ended March 31, 2023, the Company incurred a $219,649 loss, due to the Company’s administrative and exploration costs incurred during this period.
During the three months ended December 31, 2022, the Company incurred a $218,216 loss, which was mainly due to exploration expenses incurred for a visit to the Yang site of the Company’s Peru properties.
During the three months ended September 30, 2022, the Company incurred a $229,506 loss, which was mainly due to $64,685 in annual royalty payment to Palamina for its Peru properties.
During the three months ended June 30, 2022, the Company incurred a $306,386 loss, which was mainly due to $92,303 in annual mineral concession fees for its Peru properties.
During the three months ended March 31, 2022, the Company incurred a $218,724 loss, which was mainly due to $94,239 in exploration expenses for a bedrock sampling program at the Gaban Property and $20,000 in year-end audit fees.
During the three months ended December 31, 2021, the Company incurred a $256,961 loss, which was mainly due to $120,598 in exploration expenses for a bedrock sampling program at the Gaban Property.
During the three months ended September 30, 2021, the Company incurred a $289,395 loss, which was mainly due to $142,314 in exploration expenses for a bedrock sampling program at the Gaban Property.
During the three months ended June 30, 2021, the Company incurred a $373,005 loss, which was mainly due to annual mineral concession fees of $81,918 for its Peru properties.
Cash and total assets decreased September 30, 2021 from December 31, 2020 due to the Company’s administrative and exploration costs incurred during this period.
Cash and total assets increased December 31, 2021 from September 30, 2021 due to the Company completing a private placement financing and raising gross proceeds of $753,600.
Cash and total assets decreased June 30, 2022 from December 31, 2021, due to the Company’s
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Management’s Discussion and Analysis Year Ended March 31, 2023
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administrative and exploration costs incurred during this period.
Cash and total assets increased September 30, 2022 from June 30, 2022 due to the Company completing a private placement financing and raising gross proceeds of $651,300.
Cash and total assets decreased through March 31, 2023 from September 30, 2022 due to the Company's administrative and exploration costs incurred during this period.
Details of the Company’s exploration and evaluation expenditures are as follows:
| Peru: Gaban | Peru: Yang | Peru: ICA | For the year ended March 31, 2023 |
|
| Field expenses & consumables Geochemical analysis License fees Royalties Salaries & wages Transportation & travel Exploration office expenses |
$ 37,813 12,163 82,555 16,171 45,920 15,036 117,086 |
$ 16,134 - 15,896 16,171 - - 13,769 |
$ - - 6,702 32,343 - - 10,468 |
$ 53,947 12,163 105,153 64,685 45,920 15,036 141,323 |
| Total | $ 326,744 | $ 61,970 | $ 49,513 | $ 438,227 |
| Peru: Gaban | Peru: Yang and ICA | Tanzania | For the year ended March 31, 2022 |
|
| Field expenses & consumables Geochemical analysis Geological consulting License fees Royalties Salaries & wages Transportation & travel Exploration office expenses |
$ 102,711 21,120 2,300 93,384 31,225 170,377 34,711 143,126 |
$ - - - - - - - |
$ - - - - - - 18,882 |
$ 102,711 21,120 2,300 93,384 31,225 170,377 34,711 162,008 |
| Total | $ 598,954 | $ - | $ 18,882 | $ 617,836 |
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Management’s Discussion and Analysis Year Ended March 31, 2023
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LIQUIDITY AND CAPITAL RESOURCES
Summary of cash position and changes in cash
| Year ended March31,2023 |
Year ended March31,2022 |
|
|---|---|---|
| Cash flow used in operating activities $ Cash flow from financingactivities Net change Cash– beginning of year |
(800,108)$ 621,704 (178,404) 315,450 |
(1,079,554) 704,856 |
| (374,698) 690,148 |
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| Cash — end ofyear $ |
137,046 $ | 315,450 |
As of March 31, 2023, the Company had a working capital of $49,382 compared to working capital of $353,162 as of March 31, 2022. The decrease in working capital resulted from administrative and exploration costs incurred during the year.
Cash flow used in operations was lower during the year ended March 31, 2023 compared to 2022 due lower exploration expenditures incurred during the year.
Cash flow from financing activities during each of the years ending March 31, 2023 and 2022 was a result from private placement financings.
Going concern
The Financial Statements and financial results discussed herein of the Company were prepared assuming Winshear will continue on a going concern basis. The Company has incurred losses since its inception and the ability of the Company to continue as a going concern depends upon its ability to raise adequate financing and to develop profitable operations. The Financial Statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations. As a result of limited working capital of $49,382 as of March 31, 2023 (March 31, 2022 - $353,162) and continuing losses, there are material uncertainties which exist and that cast significant doubt on the Company’s ability to continue as a going concern.
Capital Management
The Company manages its capital structure based on the funds available to the Company in order to support the acquisition and exploration of exploration and evaluation assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The Company defines capital that it manages as components of shareholders’ equity.
The properties in which the Company currently has an interest are in the exploration stage and are not generating positive cash flow; as such, the Company has historically relied on the equity markets to fund its activities.
Management reviews its capital management approach on an ongoing basis and believes that this
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Management’s Discussion and Analysis Year Ended March 31, 2023
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approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions.
There has been no significant change in the Company's objectives, policies, and processes for managing its capital during the year ended March 31, 2023.
SHAREHOLDER'S EQUITY
The Company is authorized to issue an unlimited number of common shares without par value. As of March 31, 2023 the Company had 72,490,318 common shares outstanding. As of the Date of this Report, the Company had 78,340,318 common shares outstanding.
Stock Options
The Company has adopted a stock option plan (the “Stock Option Plan”). The Company may grant share options to eligible employees, officers, directors and consultants at an exercise price, expiry date, and vesting conditions to be determined by the Company’s board of directors. The maximum expiry date is ten years from the grant date. The Stock Option Plan permits the issuance of stock options which may not exceed 10% of the Company’s issued common shares as at the date of grant.
On July 22, 2021, the Company granted 800,000 stock options to officers of the Company. Each stock option has an exercise price of $0.15 per share and vested on July 22, 2022. The stock options expire July 22, 2026.
On October 21, 2022, the Company granted 2,000,000 stock options to employees and consultants. Each stock option has an exercise price of $0.10 and will vest on a quarterly basis until October 21, 2023. The stock options expire October 21, 2027.
A summary of the Company’s stock options and the changes during the period are as follows:
| Number of options | Weighted-average exercise price ($) | |
|---|---|---|
| Balance — March 31, 2021 Issued Balance — March 31, 2022 Issued Expired Balance — March 31, 2023 and Date of Report |
2,250,000 800,000 3,050,000 2,000,000 (250,000) 4,800,000 |
0.20 0.15 0.19 0.10 0.20 0.15 |
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Management’s Discussion and Analysis Year Ended March 31, 2023
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A summary of the Company’s stock options as of March 31, 2023 is as follows:
| Number of options | Vested Exercise price $ Expiry Date |
|---|---|
| 2,000,000 800,000 2,000,000 4,800,000 |
2,000,000 0.20 October 24, 2024 800,000 0.15 July 22, 2026 500,000 0.10 October 21, 2027 3,300,000 |
A summary of the Company’s stock options as of Date of this Report is as follows:
| Number of options | Vested Exercise price $ Expiry Date |
|---|---|
| 2,000,000 800,000 2,000,000 4,800,000 |
2,000,000 0.20 October 24, 2024 800,000 0.15 July 22, 2026 1,000,000 0.10 October 21, 2027 3,800,000 |
Share Purchase Warrants
A summary of the Company’s warrants and the changes during the period are as follows:
| Number of warrants | Shares to be issued upon exercise of the warrants |
Weighted-average exercise price ($) | |
|---|---|---|---|
| Balance — March 31, 2021 Issued Balance — March 31, 2022 Issued Exercised Expired Balance – March 31, 2023 |
5,500,000 3,768,000 9,268,000 5,427,500 (50,000) (5,500,000) 9,145,500 |
5,500,000 3,768,000 9,268,000 5,427,500 (50,000) (5,500,000) 9,145,500 |
0.18 0.20 |
| 0.19 0.10 0.10 0.18 |
|||
| 0.14 |
A summary of the Company’s warrants as of March 31, 2023 is as follows:
| Number of warrants | Exercise price $ | Expiry Date |
|---|---|---|
| 3,768,000 | 0.20 | December 1, 2024 |
| 5,377,500 | 0.10 | August 19, 2024 |
| 9,145,500 |
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Management’s Discussion and Analysis Year Ended March 31, 2023
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A summary of the Company’s warrants as of Date of this Report is as follows:
| Number of warrants | Exercise price $ | Expiry Date |
|---|---|---|
| 3,768,000 | 0.20 | December 1, 2024 |
| 5,377,500 | 0.10 | August 19, 2024 |
| 2,925,000 | 0.10 | May 9, 2025 |
| 12,070,500 |
Related Party Transactions
The Company's related parties include its subsidiaries and key management personnel which include officers, directors, or companies with common directors of the Company. Transactions with related parties for goods and services are made on normal commercial terms and are considered to be at arm's length.
The Company incurred the following expenses with key management personnel as follows:
| Year ended March 31, 2023 | Year ended March 31, 2023 | Year ended March 31, 2022 | Year ended March 31, 2022 | |
|---|---|---|---|---|
| Salaries and benefits | $ | 222,617 | $ | 221,710 |
| Share based compensation | 41,719 | 34,576 | ||
| Exploration costs – field work1 | 43,671 | 73,005 | ||
| Exploration costs – acquisition payments1 | 64,685 | 31,225 | ||
| Professional fees2 | 32,979 | 55,446 |
1. The Company paid Palamina for property acquisition payments and exploration services. Palamina’s Chief Executive Officer is Andrew Thomson, who is also a director of Winshear.
2. The Company paid Bennett Jones LLP for legal services. Stewart Lockwood is a partner of Bennett Jones LLP, who is also Corporate Secretary of Winshear.
Exploration costs
As a result of acquiring the Gaban and Tinka mineral properties from Palamina and having directors in common with the Company, Palamina became a related party. As of March 31, 2023, the Company owed Palamina $7,570 (March 31, 2022 - $28,411) as reimbursement for exploration expenditures incurred on the Gaban and Tinka mineral properties. The amounts due are non-interest bearing, unsecured, and due on demand.
Salary and benefits
During the years ended March 31, 2022 and March 31, 2023, in order to assist the Company, an officer deferred receiving payment of their salary. As of March 31, 2023, the Company owed $84,000 (March 31, 2022 - $12,000) to this related party for accrued salary. The amounts due are non-interest bearing and unsecured. As of March 31, 2023, the Company owed $18,000 (March 31, 2022 - $nil) to a related party for monthly service fees under their management contract. The amounts due are
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Management’s Discussion and Analysis Year Ended March 31, 2023
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non-interest bearing, unsecured, and due on demand.
Professional fees
The Company incurs legal fees with Bennett Jones LLP, a related party. As of March 31, 2023, the Company owed this related party $6,597 (March 31, 2022 - $nil). The amounts due are non-interest bearing, unsecured, and due on demand.
FINANCIAL INSTRUMENTS
Financial Assets and Liabilities
The Company’s financial assets are classified as follows:
Cash: Amortized cost Receivables: Amortized cost Investments: FVTPL
The Company’s financial liabilities, which consist of trade and other payables, are classified as amortized cost.
Fair Value Hierarchy
Financial instruments measured at fair value are classified into one of three levels in fair value hierarchy according to the relative reliability of inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
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Level 1: Unadjusted quote prices in active markets for identical assets or liabilities
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Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly
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Level 3: Inputs that are not based on observable market data
The Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s financial instruments consist of cash, accounts receivable, investments, and trade and other payables. The fair value of investments is measured on the statement of financial position using Level 1 of the fair value hierarchy. The fair value of cash, receivables and trade and other payables approximate their book values due to the short-term nature of these instruments.
Credit risk
The Company is exposed to industry credit risks arising from its cash and receivables. The Company manages credit risk by holding the majority of its cash with major Canadian financial institutions. The
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Management’s Discussion and Analysis Year Ended March 31, 2023
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Company’s receivables are due from the Federal Government of Canada and Peru. Management believes that credit risk related to these amounts is nominal.
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient funds to meet its financial obligations when they are due. To manage liquidity risk, the Company has in place a planning and budgeting process to help determine the funds required to support the Company’s operating requirements on an ongoing basis and assess available and required sources of additional capital and financing. As of March 31, 2023, the Company has working capital of $49,382 and negative cash flow from operations for the year then ended of $800,108 indicating a high liquidity risk.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as it does not have any significant financial instruments with interest rates, with the exception of cash. Interest earned on cash is based on prevailing bank account interest rates, which may fluctuate. A 10% change in interest rates would result in a nominal difference for the year ended March 31, 2023.
Foreign currency risk
The Company is exposed to foreign currency risk on fluctuations related to cash and trade and other payables that are denominated in United States Dollars. Amounts subject to currency risk are primarily cash and receivables denominated in foreign currencies, which are offset by the trade and other payables denominated in that foreign currency.
Price risk
The Company has exposure to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings or valuation of its investments due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company monitors the price of precious metals.
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Management’s Discussion and Analysis Year Ended March 31, 2023
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RISKS TO WINSHEAR
The primary risk factors affecting the Company are set forth below.
Exploration Stage Company
The Company is an exploration stage company and cannot give assurance that a commercially viable deposit, or "reserve," exists on any properties for which the Company currently has or may have (through potential future joint venture agreements or acquisitions) an interest. Therefore, the determination of the existence of a reserve depends on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If the Company fails to find a commercially viable deposit on any of its properties, its financial condition and results of operations will be materially adversely affected.
Mineral Exploration and Development
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of processing facilities, mineral markets and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.
There is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of commercial bodies of ore. The long-term profitability of the Company’s operations will in part, be directly related to the costs and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.
Substantial expenditures are required to establish ore reserves through exploration and drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition,
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Management’s Discussion and Analysis Year Ended March 31, 2023
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the grade of ore ultimately mined may differ from that indicated by drilling results.
Short term factors relating to reserves, such as the need for the orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.
Competition and Mineral Exploration
The mineral exploration industry is intensely competitive in all of its phases, and the Company must compete in all aspects of its operations with a substantial number of large established mining companies with greater liquidity, greater access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or greater ability than the Company to withstand losses. The Company’s competitors may be able to respond more quickly to new laws or regulations or emerging technologies or devote greater resources to the expansion of their operations than the Company can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Competition could adversely affect the Company’s ability to acquire suitable new producing properties or prospects for exploration in the future. Competition could also affect the Company’s ability to raise financing to fund the exploration and development of its properties or to hire qualified personnel. The Company may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on the Company’s business, financial condition or results of operations.
Limited Operating History
The Company has a limited operating history, and its mineral properties are exploration stage properties. As such, the Company will be subject to all of the business risks and uncertainties associated with any new business enterprise, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. The current state of the Company’s mineral properties requires significant additional expenditures before any cash flow may be generated. Although the Company possesses an experienced management team, there is no assurance that the Company will be successful in achieving a return on shareholders’ investment, and the likelihood of success of the Company must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any business. There is no assurance that the Company can generate revenues, operate profitably, or provide a return on investment, or that it will successfully implement its plans.
Negative Cash Flow from Operating Activities
The Company has no history of earnings and had negative cash flow from operating activities since inception. The Company’s mineral properties are in the exploration stage, and there are no known mineral resources or reserves and the proposed exploration programs on the Company’s mineral properties are exploratory in nature. Significant capital investment will be required to achieve commercial production from the Company’s existing projects. There is no assurance that any of the Company’s mineral properties will generate earnings, operate profitably or provide a return on
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Management’s Discussion and Analysis Year Ended March 31, 2023
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investment in the future. Accordingly, the Company will be required to obtain additional financing to meet its future cash commitments.
Going Concern Risk
The Financial Statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Company’s future operations are dependent upon the identification and successful completion of equity or debt financings and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Company will be successful in completing equity or debt financings or in achieving profitability. The Financial Statements do not give effect to any adjustments relating to the carrying values and classifications of assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
As a result of limited working capital of $49,382 as of March 31, 2023 (March 31, 2022 - $353,162) and continuing losses, there are material uncertainties which exist and that cast significant doubt on the Company’s ability to continue as a going concern.
Additional Funding
The exploration and development of the Company’s mineral properties will require substantial additional capital. When such additional capital is required, the Company will need to pursue various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. Additional financing may not be available when needed or, if available, the terms of such financing might not be favourable to the Company and might involve substantial dilution to existing shareholders. The Company may not be successful in locating suitable financing transactions in the time period required or at all. A failure to raise capital when needed would have a material adverse effect on the Company’s business, financial condition and results of operations. Any future issuance of securities to raise required capital will likely be dilutive to existing shareholders. In addition, debt and other debt financings may involve a pledge of assets and may be senior to interests of equity holders. The Company may incur substantial costs in pursuing future capital requirements, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. The ability to obtain needed financing may be impaired by such factors as the capital markets (both generally and in the gold and copper industries in particular), the Company’s status as a new enterprise with a limited history, the location of the Company’s mineral properties, the price of commodities and/or the loss of key management personnel.
Government or Regulatory Approvals
Exploration and development activities are dependent upon the grant of appropriate licenses, concessions, leases, permits and regulatory consents, which may be withdrawn or made subject to limitations. There is no guarantee that, upon completion of any exploration, a mining license will be granted with respect to exploration territory. There can also be no assurance that any exploration license will be renewed, or if so, on what terms. These licenses place a range of past, current and future obligations on the Company. In some cases, there could be adverse consequences for breach of these
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Management’s Discussion and Analysis Year Ended March 31, 2023
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obligations, ranging from penalties to, in extreme cases, suspension or termination of the relevant license or related contract.
Permits and Government Regulation
The future operations of the Company may require permits from various federal, state, provincial and local governmental authorities and will be governed by laws and regulations governing prospecting, development, mining, production, export, taxes, labour standards, occupational health, waste disposal, land use, environmental protection, mine safety and other matters. Although Peru currently has a favourable legal and fiscal regime for exploration and mining, possible future government legislation, policies and controls relating to prospecting, development, production, government royalties, environmental protection, mining taxes and labour standards could cause additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Before development and production can commence on any properties, the Company must obtain regulatory and environmental approvals. There is no assurance that such approvals can be obtained on a timely basis or at all. The cost of compliance, with changes in governmental regulations, has the potential to reduce the profitability of operations. The Company is currently in compliance with all material regulations applicable to its exploration activities.
Laws and Regulation
The Company’s exploration activities are subject to extensive federal, state, provincial and local laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters in all the jurisdictions in which it operates. These laws and regulations are subject to change, can become more stringent, and compliance can, therefore, become more costly. The Company applies the expertise of its management, advisors, employees and contractors to ensure compliance with current laws.
COVID-19 Coronavirus Outbreak
The current global uncertainty with respect to the spread of the COVID-19 coronavirus (“COVID-19”), the rapidly evolving nature of the pandemic and local and international developments related thereto and its effect on the broader global economy and capital markets may have a negative effect on the Company and its ability to continue exploration activities at its properties. While the precise impact of the COVID-19 outbreak on the Company remains unknown, rapid spread of COVID-19 and declaration of the outbreak as a global pandemic has resulted in travel advisories and restrictions, certain restrictions on business operations, social distancing precautions and restrictions on group gatherings which are having direct impacts on businesses in Canada and around the world and could result in travel bans, post-travel quarantines, closure of assay labs, work delays, difficulties for contractors and employees getting to site, and diversion of management attention all of which in turn could have a negative impact on the Company. In particular, the current pandemic spread of the COVID-19 virus and the current review of closing cross-country border crossings and the reduction in available international commercial flights has increased mobility and infrastructure risks for the Company to send its
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Management’s Discussion and Analysis Year Ended March 31, 2023
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employees abroad to conduct exploration work. The Company may need to rely entirely on foreign contractors to complete the remaining exploration programs and meet minimum exploration expenditures, which may result in higher costs. The spread of COVID-19 may also have a material adverse effect on global economic activity and could result in volatility and disruption to global supply chains and the financial and capital markets, which could affect the business, financial condition, results of operations and other factors relevant to the Company, including its ability to raise additional financing.
Political Risk
Numerous governments around the world are looking at ways to secure additional benefits from mining companies, an approach recognized as “Resource Nationalism”. Mechanisms used by governments include increases to royalty rates and corporate tax rates, implementation of windfall or super taxes, and rewriting mining laws retroactively to significantly reduce or eliminate the rights of mining companies, including by adding carried or free-carried interests to the benefit of the state. Extreme cases in Tanzania have resulted in the expropriation of active mining interests and exploration licenses. Such changes are viewed negatively by the investment community and can lead to share price erosion and difficulty accessing capital to advance projects.
Environmental Risks
The Company’s exploration and/or development activities are subject to extensive laws and regulations governing environmental protection. The Company is also subject to various reclamation related conditions. Although the Company closely follows and believes it is operating in compliance with all applicable environmental regulations, there can be no assurance that all future requirements will be deliverable for reasonable terms. Failure to comply may result in enforcement actions causing operations to cease or be curtailed and may include corrective measures requiring capital expenditures. Intense lobbying over environmental concerns by non-governmental organizations has caused some governments to cancel or restrict the development of mining projects. Current publicized concern over climate change may lead to carbon taxes, requirements for carbon offset purchases or new regulation. The costs or likelihood of such potential issues to the Company cannot be estimated at this time.
The legal framework governing this area is constantly developing; therefore the Company is unable to fully ascertain any future liability that may arise from the implementation of any new laws or regulations, although such laws and regulations are typically strict and may impose severe penalties (financial or otherwise). The proposed activities of the Company, as with any exploration, may have an environmental impact, which may result in unbudgeted delays, damage, loss and other costs and obligations including, without limitation, rehabilitation and/or compensation. There is also a risk that the Company’s operations and financial position may be adversely affected by the actions of environmental groups or any other group or person opposed in general to the Company’s activities and, in particular, the proposed exploration and mining by the Company within Peru.
Dependence on Management and Key Personnel
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Management’s Discussion and Analysis Year Ended March 31, 2023
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The success of the Company is currently largely dependent on the performance of its directors and officers. The loss of the services of any of these persons could have a materially adverse effect on the Company’s business and prospects. There is no assurance the Company can maintain the services of its directors, officers or other qualified personnel required to operate its business. As the Company’s business activity grows, the Company will require additional key financial, administrative and mining personnel as well as additional operations staff. There can be no assurance that these efforts will be successful in attracting, training and retaining qualified personnel as competition for persons with these skill sets increase. If the Company is not successful in attracting, training and retaining qualified personnel, the efficiency of its operations could be impaired, which could have an adverse impact on the Company’s operations and financial condition.
Material Contract Obligations
The agreements pursuant to which the Company acquired its interest in its properties provide that the Company must make a variety of payments in cash over certain time periods and maintain the properties in good standing. If the Company fails to make such payments or expenditures in a timely fashion, the Company may lose its interest in one or more of the properties.
ADDITIONAL INFORMATION
Additional information relating to the Company is available on the SEDAR website at www.sedar.com and the Company's website at www.winshear.com.
CAUTIONARY STATEMENTS
Forward-looking Information
All statements in this MD&A, other than statements of historical fact, are "forward-looking statements" or "forward looking information" with respect to Tectonic within the meaning of applicable securities laws, including statements that address the impact of general business and economic conditions, the use of proceeds of any financings, and timing of exploration and development plans. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "planned", "expect", "project", "predict", "potential", "targeting", "intends", "believe", and similar expressions, or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "should", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management at the date the statements are made including, among others, assumptions regarding timing of exploration and development plans at the Company's mineral projects; timing and completion of proposed financings; the release of an initial resource report on any of our properties; assumptions about future prices of gold, copper, silver, and other metal prices; currency exchange rates and interest rates; metallurgical recoveries; favourable operating conditions; political stability; obtaining governmental approvals and financing on time; obtaining renewals for
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Management’s Discussion and Analysis Year Ended March 31, 2023
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existing licenses and permits and obtaining required licenses and permits; labour stability; stability in market conditions; availability of equipment; accuracy of historical information; successful resolution of disputes and anticipated costs and expenditures. Many assumptions are based on factors and events that are not within the control of the Company, and there is no assurance they will prove to be correct.
Such forward-looking information involves known and unknown risks, which may cause the actual results to be materially different from any future results expressed or implied by such forward-looking information, including, but not limited to, the cost, timing and success of exploration activities generally, including the development of new deposits; possible variations in grade or recovery rates; failure of equipment or processes to operate as anticipated; the failure of contracted parties to perform; uses of funds in general including future capital expenditures, exploration expenditures and other expenses for specific operations; the timing, timeline and possible outcome of permitting or license renewal applications; government regulation of exploration and mining operations; environmental risks; the uncertainty of negotiating with foreign governments; expropriation or nationalization of property without fair compensation; adverse determination or rulings by governmental authorities; delays in obtaining governmental approvals; possible claims against the Company; the impact of archaeological, cultural or environmental studies within property areas; title disputes or claims; limitations on insurance coverage; the interpretation and actual results of historical operators at certain of our exploration properties; changes in project parameters as plans continue to be refined; current economic conditions; future prices of commodities; and delays in obtaining financing. The Company's forward-looking information reflect the beliefs, opinions and projections on the date the statements are made. The Company assumes no obligation to update forward-looking information or beliefs, opinions, projections, or other factors, should they change, except as required by law.
Scientific and Technical Information
Scientific and technical information presented in this MD&A above has been approved by Richard D. Williams, M.Sc., P. Geo., Winshear’s CEO and a qualified person who by reason of education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, fulfills the requirements of a Qualified Person as defined in NI 43-101.
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