Starcore International Mines Ltd.
Condensed Interim Consolidated Financial Statements
For the three months ended July 31, 2022
(Unaudited)
1
NOTICE TO READER OF THE UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
The unaudited condensed interim consolidated financial statements for the three months ended July 31, 2022 have been prepared by and are the responsibility of the Company’s management. These financial statements have not been reviewed or audited by the Company’s auditors.
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
2
Starcore International Mines Ltd.
Condensed Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars) – (Unaudited)
| | | |
| | July 31, | April 30, |
As at | | 2022 | 2022 |
| | | |
Assets | | | |
| | | |
Current | | | |
Cash | | $9,457 | $8,818 |
Amounts receivable (note 3) | | 2,122 | 1,580 |
Inventory (note 4) | | 1,464 | 1,535 |
Prepaid expenses and advances | | 489 | 472 |
Investment (note 5) | | 390 | 492 |
| | | |
Total Current Assets | | 13,922 | 12,897 |
| | | |
Non-Current | | | |
Mining interest, plant and equipment (note 6) | | 29,006 | 29,820 |
Right-of-use assets (note 8) | | 709 | 894 |
Exploration and evaluation assets (note 7) | | 5,302 | 5,082 |
Deferred tax assets | | 3,180 | 3,348 |
| | | |
Total Non-Current Assets | | 38,197 | 39,144 |
| | | |
Total Assets | | $52,119 | $52,041 |
| | | |
Liabilities | | | |
| | | |
Current | | | |
Trade and other payables | | $2,732 | $3,126 |
Current portion of lease liability (note 8) | | 424 | 636 |
| | | |
Total Current Liabilities | | 3,156 | 3,762 |
| | | |
Non-Current | | | |
Rehabilitation and closure cost provision (note 9) | | 2,394 | 2,353 |
Lease liability (note 8) | | 318 | 262 |
Deferred tax liabilities | | 5,591 | 5,610 |
| | | |
Total Non-Current Liabilities | | 8,303 | 8,225 |
| | | |
Total Liabilities | | $11,459 | $ 11,987 |
| | | |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
3
Starcore International Mines Ltd.
Condensed Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars) – (Unaudited)
| | | |
| | July 31, | April 30, |
As at | | 2022 | 2022 |
| | | |
Equity | | | |
| | | |
Share capital (note 10) | | $51,878 | $50,725 |
Equity reserve | | 11,349 | 11,349 |
Foreign currency translation reserve | | 2,295 | 2,185 |
Accumulated deficit | | (24,862) | (24,205) |
| | | |
Total Equity | | 40,660 | 40,054 |
| | | |
Total Liabilities and Equity | | $52,119 | $52,041 |
Commitments (note 12)
Approved by the Directors:
“Robert Eadie” Director“Gary Arca” Director
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
4
Starcore International Mines Ltd.
Condensed Interim Consolidated Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars except per share amounts) – (Unaudited)
| | | |
For the three months ended July 31, | 2022 | 2021 | |
| | | |
Revenues | | | |
Mined ore | $6,750 | $6,161 | |
| | | |
Cost of Sales | | | |
Mined ore | (4,716) | (3,816) | |
Depreciation and depletion | (987) | (781) | |
| | | |
Total Cost of Sales | (5,703) | (4,597) | |
| | | |
Earnings from mining operations | 1,047 | 1,564 | |
| | | |
Financing costs | (49) | (44) | |
Foreign exchange gain (loss) | 29 | 462 | |
Management fees and salaries (note 12) | (624) | (457) | |
Office and administration | (248) | (228) | |
Professional and consulting fees (note 12) | (287) | (87) | |
Exploration expense | - | (10) | |
Shareholder relations | (224) | (126) | |
Transfer agent and regulatory fees | (32) | (20) | |
| | | |
Earnings before taxes and other income (loss) | (388) | 1,054 | |
| | | |
Other Income (Loss) | | | |
Unrealized loss on investment (Note 5) | (103) | (39) | |
Earnings (loss) before taxes | (491) | 1,015 | |
Income tax (expense) recovery | | | |
Deferred | (166) | (80) | |
| | | |
Earnings (loss) for the period | (657) | 935 | |
| | | |
Other comprehensive loss | | | |
Item that may subsequently be reclassified to income (loss) | | | |
Foreign currency translation differences | 110 | 51 | |
| | | |
Comprehensive income (loss) for the period | $(547) | $986 | |
| | | |
Basic earnings (loss) per share (note 14) | $(0.01) | $0.02 | |
| | | |
Diluted earnings (loss) per share (note 14) | $(0.01) | $0.02 | |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
5
Starcore International Mines Ltd.
Condensed Interim Consolidated Statements of Cash Flows
(in thousands of Canadian dollars) – (Unaudited)
| | | | |
| | |
For the three months ended July 31, | | | 2022 | 2021 |
| | | | |
Cash provided by | | | | |
Operating activities | | | | |
Earnings (loss) for the period | | | $(657) | $935 |
Items not involving cash: | | | | |
Depreciation and depletion (note 6) | | | 1,009 | 847 |
Unrealized loss on investment | | | 103 | - |
Deferred Income tax expense | | | 166 | 78 |
Lease accretion (note 8) | | | 17 | 35 |
Reclamation deposit write off | | | - | 31 |
Rehabilitation and closure cost accretion (note 9) | | | 47 | 39 |
Share-based payments (note 10) | | | 141 | 24 |
| | | | |
Cash inflow from operating activities
before working capital changes | | 826 | 1,989 |
| | | | |
Change in non-cash working capital items | | | | |
Amounts receivable | | | (539) | (346) |
Inventory | | | 74 | (333) |
Prepaid expenses and advances | | | (16) | (121) |
Trade and other payables | | | (546) | 64 |
| | | | |
Cash inflow (outflow) from operating activities | | | (201) | 1,253 |
| | | | |
Financing activities | | | | |
Lease payment and accretion (note 8) | | | (173) | (100) |
Share issuance (net)n (note 10) | | | 1,153 | - |
| | | | |
Cash inflow (outflow) from financing activities | | | 980 | (100) |
| | | | |
Investing activities | | | | |
Investment in exploration and evaluation assets (note 7) | | | (225) | (173) |
Proceeds from reclamation deposit | | | - | 134 |
Purchase of mining interest, plant and equipment (note 6) | | | (104) | (300) |
| | | | |
Cash outflow from investing activities | | | (329) | (339) |
| | | | |
Total increase in cash | | | 450 | 814 |
| | | | |
Effect of foreign exchange rate changes on cash | | | 189 | (292) |
| | | | |
Cash, beginning of period | | | 8,818 | 4,392 |
| | | | |
Cash, end of period | | | $9,457 | $4,914 |
| | | | |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
6
Starcore International Mines Ltd.
Condensed Interim Consolidated Statements of Changes in Equity for the periods ended July 31, 2022, 2021 and April 30, 2022
(In thousands of Canadian dollars except for number of shares) – (Unaudited)
| | | | | | |
| | | | Foreign | | |
| Number of | | | Currency | | |
| Shares | Share | Equity | Translation | Accumulated | |
| Outstanding | Capital | Reserve | Reserve | Deficit | Total |
| | | | | | |
Balance, April 30, 2021 | 49,646,851 | 50,725 | 11,349 | 816 | (26,610) | 36,280 |
| | | | | | |
Foreign currency translation differences | - | - | - | 51 | - | 51 |
Earnings for the period | - | - | - | - | 935 | 935 |
| | | | | | |
Balance, July 31, 2021 | 49,646,851 | 50,725 | 11,349 | 867 | (25,675) | 37,266 |
| | | | | | |
Foreign currency translation differences | - | - | - | 1,318 | - | 1,318 |
Earnings for the period | - | - | - | - | 1,470 | 1,470 |
| | | | | | |
Balance, April 30, 2022 | 49,646,851 | $50,725 | $11,349 | $2,185 | $(24,205) | $40,054 |
| | | | | | |
Private Placement at $0.20 per Unit (note 10) | 6,000,000 | 1,200 | - | - | - | 1,200 |
Share issue costs | - | (47) | - | - | - | (47) |
Foreign currency translation | - | - | - | 110 | - | 110 |
Loss for the period | - | - | - | - | (657) | (657) |
Balance, July 31, 2022
| 55,646,851 | 51,878 | 11,349 | 2,295 | (24,862) | 40,660 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
7
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2022
Starcore International Mines Ltd. is the parent company of its consolidated group (the “Company” or “Starcore”) and was incorporated in Canada with its head office located at Suite 750 – 580 Hornby Street, Vancouver, British Columbia, V6C 3B6.
Starcore is engaged in exploring, extracting and processing gold and silver through its wholly-owned subsidiary, Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which owns the San Martin mine in Queretaro, Mexico. The Company is also engaged in acquiring mining related operating assets and exploration assets in North America directly and through corporate acquisitions.
| a) | Statement of compliance |
These unaudited condensed interim consolidated financial statements for the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed interim consolidated financial statements, for the three month period ended July 31, 2022, have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, and do not include all the information required for full annual financial statement.
These condensed interim financial statements should be read in conjunction with the Company’s April 30, 2022 audited annual financial statements. The financial statements were authorized for issue by the Board of Directors on September 13, 2022.
The unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis, except certain financial instruments, which are measured at fair value, as explained in the Company’s accounting policies discussed in note 3 of the Company’s April 30, 2022 audited annual financial statements. These financial statements have been prepared using the accrual basis of accounting except for cash flow information. The unaudited condensed interim consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency, and all values are rounded to the nearest thousand dollars, unless otherwise indicated.
The preparation of unaudited condensed interim consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4 of the Company’s April 30, 2022 audited annual financial statements.
These unaudited condensed interim consolidated financial statements include the accounts of the Company and all of its subsidiaries, which are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from the entity’s activities. Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition up to the effective date of disposal or loss of control. The Company’s wholly-owned subsidiary Bernal, along with various other subsidiaries, carry out their operations in Mexico and in Canada.
All intra-group transactions, balances, income and expenses are eliminated, in full, on consolidation.
8
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
| | |
| July 31, 2022 | April 30,
2022 |
| | |
Taxes receivable | $1,128 | $1,113 |
Trades receivable | 817 | 315 |
Other | 177 | 152 |
| $2,122 | $1,580 |
| | |
| July 31, 2022 | April 30, 2022 |
| | |
Carrying value of inventory: | | |
Doré | $410 | $353 |
Goods in transit | 24 | 42 |
Work-in-process | 85 | 80 |
Stockpile | 4 | 14 |
Supplies | 941 | 1,046 |
| $1,464 | $1,535 |
Marketable securities at July 31, 2022 consists of a FVTPL investment in Westward Gold Inc. (“WG”). At July 31, 2022, the Company held 4,100,000 common shares valued at $0.095 for $390 representing a $103 unrealized loss for the period (April 30, 2022 - $492). The fair value of WG has been determined by reference to published price quotations in an active market.
While the Company will seek to maximize the proceeds it receives from the sale of its WG Shares, there is no assurance as to the timing of disposition or the amount that will be realized.
| 6. | Mining interest, plant and equipment |
| | | | |
| Mining Interest | Plant and Equipment Mining | Corporate Office Equipment | Total |
| | | | |
Cost | | | | |
| | | | |
Balance, April 30, 2021 | $ 65,501 | $ 23,957 | $ 725 | $ 90,183 |
Increase in ARO provision (note 9) | 195 | - | - | 195 |
Additions | 621 | 1,210 | 15 | 1,846 |
Effect of foreign exchange | 3,117 | 1,251 | - | 4,368 |
| | | | |
Balance, April 30, 2022 | 69,434 | 26,418 | 740 | 96,592 |
Additions | 137 | 48 | 76 | 261 |
Leases | (157) | - | - | (157) |
Effect of foreign exchange | (203) | (95) | - | (298) |
Balance, July 31, 2022 | $69,211 | $26,371 | $816 | $96,398 |
9
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
6.Mining interest, plant and equipment – (cont’d)
| | | | |
Depreciation | | | | |
| | | | |
Balance, April 30, 2021 | $ (42,664) | $ (17,407) | $ (708) | $ (60,779) |
Depreciation for the year | (1,063) | (1,750) | (10) | (2,823) |
Effect of foreign exchange | (2,298) | (872) | - | (3,170) |
| | | | |
Balance, April 30, 2022 | (46,025) | (20,029) | (718) | (66,772) |
Depreciation for the period | (332) | (491) | (2) | (825) |
Effect of foreign exchange | 146 | 59 | - | 205 |
Balance, July 31, 2022 | $(46,211) | $(20,461) | $(720) | $(67,392) |
Carrying amounts | | | | |
| | | | |
Balance, April 30, 2021 | $22,837 | $6,550 | $17 | $29,404 |
Balance, April 30, 2022 | $23,409 | $6,389 | $22 | $29,820 |
Balance, July 31, 2022 | $23,000 | $5,910 | $96 | $29,006 |
San Martin
The Company’s mining interest, plant and equipment pertain to gold and silver extraction and processing through its San Martin mine in Mexico.
| 7. | Exploration and evaluation assets |
| a) | American Consolidated Minerals (“AJC”) properties |
Toiyabe, U.S.A
The Company had the rights to a 100% undivided interest in the Toiyabe Gold Project (“Toiyabe”), located in Lander County, Nevada, United States of America. During the year ended April 30, 2021, the Company entered into a binding agreement with WG for the assignment of the Company’s option to acquire a 100% interest in Toiyabe from the optionor. The Company transferred all of its rights and WG assumed all property claim and maintenance payments and all obligations under the current option agreement with the optionor. As consideration for the transfer, WG made payments of US$150,000 in cash and 4,100,000 common shares in the capital of WG. The WG shares were valued at fair market value at date of issue of $0.19 per share (see note 5) and are now free trading after a contractual escrow period of twelve (12) months.
The consideration received in cash and shares was valued at $966 and, as a result, the Company recorded a loss on Toiyabe of $1,116, in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ending April 30, 2021. During the year ended April 30, 2022, the Company realized a loss of $40 attributable to the disposal of a reclamation bond associated with Toiyabe.
10
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
7. | Exploration and evaluation assets – (cont’d) |
| b) | Creston Moly (“Creston”) properties |
The Company has acquired the rights to the following exploration properties:
| i) | El Creston Project, Mexico |
The Company acquired a 100% interest in mineral claims known as the El Creston molybdenum property located northeast of Hermosillo, State of Sonora, Mexico, which has completed a Preliminary Economic Assessment on the property based on zones of porphyry-style molybdenum (“Mo”)/copper (“Cu”) mineralization. The mineral concessions are subject to a 3% net profits interest.
During the year ended April 30, 2022, the Company acquired additional claims from Minera Teocuitla SA de CV of Hermosillo, Sonora, Mexico. The Teocuitla claims are located in Opodepe, Sonora, Mexico beside the El Creston claim in the northwest part of the El Creston property.
The Company acquired a 100% interest in mineral claims known as the Ajax molybdenum property located in B.C.
| iii) | Scottie Claims Royalty, Canada |
The Company acquired a 3% NSR in the Scottie gold claims located in B.C. During the year ended April 30, 2022, the Company sold its 3% NSR to Scottie Resources Corp. for $1,600. As the Scottie gold claims had a net book value of $nil, the full amount is shown as a gain on the consolidated statement of operations and comprehensive income (loss) for the year ended April 30, 2022.
| | | | |
| | El Creston Project | AJAX Project | Total |
Acquisition costs: | | | | |
Balance, April 30, 2021, April 30, 2022, and July 31, 2022 | | $2,001 | - | $2,001 |
Exploration costs: | | | | |
Balance, April 30, 2021 | | 2,087 | - | 2,087 |
Maintenance | | 491 | - | 491 |
Drilling costs | | 353 | - | 353 |
Foreign exchange | | 89 | 61 | 150 |
Balance, April 30, 2022 | | 3,020 | 61 | 3,081 |
Maintenance | | 170 | 9 | 179 |
Drilling costs | | 45 | - | 45 |
Foreign exchange | | (4) | - | (4) |
Balance, July 31, 2022 | | $3,231 | 70 | $3,301 |
Total Exploration and evaluation assets | | | | |
Balance, April 30, 2022 | | $5,021 | $61 | $5,082 |
Balance, July 31, 2022 | | $5,232 | $70 | $5,302 |
| | | | |
11
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
Lease liabilities have been measured by discounting future lease payments at the incremental borrowing rate of 8% per annum and represents the Company's best estimate of the rate of interest that it would expect to pay to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in the current economic environment. The Company recognized lease liabilities in relation its head office in Canada and machinery in Mexico. The following is a reconciliation of the changes in the lease liabilities and assets:
| | | |
| Starcore | Bernal | Total |
Opening balance, April 30, 2021 | $223 | $724 | $947 |
Lease accretion | 16 | 65 | 81 |
Lease additions | - | 440 | 440 |
Payments | (66) | (545) | (611) |
Foreign exchange | - | 41 | 41 |
Lease liabilities, April 30, 2022 | 173 | 725 | 898 |
Lease accretion | 3 | 14 | 17 |
Payments | (16) | (156) | (172) |
Foreign exchange | - | (1) | (1) |
Lease liabilities, July 31, 2022 | $160 | $582 | $742 |
| | | |
| Office | Mining Equipment | Total |
Lease asset, April 30, 2021 | $208 | $771 | $979 |
Amortization | (52) | (595) | (647) |
Additions | - | 518 | 518 |
Foreign exchange | - | 44 | 44 |
Lease asset, April 30, 2022 | 156 | 738 | 894 |
Amortization | (13) | (171) | (184) |
Foreign exchange | - | (1) | (1) |
Lease asset, July 31, 2022 | $143 | $566 | $709 |
| 9. | Rehabilitation and closure cost provision |
The Company’s asset retirement obligations consist of reclamation and closure costs for the mine. At July 31, 2022, the present value of obligations is estimated at $2,394 (April 30, 2022 - $2,353) based on expected undiscounted cash-flows at the end of the mine life of $4,019 (April 30, 2022 - $2,652), which is calculated annually over 5 to 10 years. Such liability was determined using a discount rate of 10% (April 30, 2022 – 10%) and an inflation rate of 7.65% (April 30, 2022 – 7.65%).
Significant reclamation and closure activities include land rehabilitation, demolition of buildings and mine facilities, closing portals to underground mining areas and other costs. Changes to the reclamation and closure cost balance during the period are as follows:
12
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
9.Rehabilitation and closure cost provision – (cont’d)
| | |
| July 31, 2022 | April 30, 2022 |
| | |
Balance, beginning of period | $2,353 | $1,952 |
Accretion expense | 47 | 160 |
Increase in provision | - | 195 |
Foreign exchange fluctuation | (6) | 46 |
| | |
| $2,394 | $2,353 |
The Company is authorized to issue an unlimited number of common shares, issuable in series. The holders of common shares are entitled to one vote per share at meetings of the Company and to receive dividends, which may be declared from time-to-time. All shares are ranked equally with regard to the Company’s residual assets.
During the period ending July 31, 2022, the Company completed a non-brokered private placement for $1,200,000 upon the issuance of 6,000,000 units (the “Units”) at a price of $0.20 per Unit. Each Unit is comprised of one common share of the Company and one-half of one transferable common share purchase warrant (the “Warrants”), each whole Warrant exercisable for a period of four years from the date of issue to purchase one common share of the Company at a price of $0.30 per share, provided that, if after the expiry of all resale restrictions, the closing price of the Company’s shares is equal to or greater than $0.40 per share for 20 consecutive trading days, the Company may, by notice to the Warrant holders reduce the remaining exercise period of the Warrants to not less than 30 days following the date of such notice.
The Company paid $47,000 as a finder’s fee for the portion of the financing attributable to the finder’s efforts. All of the securities issued pursuant to this private placement will have a hold period expiring four months plus one day after the closing date.
A summary of the Company’s outstanding share purchase warrants at July 31, 2022 and April 30, 2022 and the changes during the period ended is presented below:
| | |
| Number of warrants | Weighted average exercise price |
| | |
Outstanding at April 30, 2021 | 3,250,000 | $0.21 |
Expired | (3,250,000) | 0.21 |
Outstanding at April 30, 2022 | - | - |
Granted | 3,000,000 | 0.30 |
| | |
Outstanding at July 31, 2022 | 3,000,000 | $ 0.30 |
During the year ending April 30, 2022, no new warrants were issued and 3,250,000 warrants expired unexercised. During the period ending July 31, 2022, 3,000,000 warrants were issued.
13
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
10. | Share capital – (cont’d) |
The Company, in accordance with the policies of the Toronto Stock Exchange (“TSX”), was previously authorized to grant options to directors, officers, and employees to acquire up to 20% of the amount of stock outstanding. In January 2014, the Company’s shareholders voted to cancel the Company’s option plan and, as a result, the Company’s Board of Directors have not grant further options and there were no options outstanding, for the periods ending July 31 2022, April 30, 2022 and April 30, 2021.
Effective August 1, 2016, The Board of Directors approved the adoption of a Restricted Share Unit and Deferred Share Unit Plan (the “RSU/DSU Plan”). Although the RSU/DSU Plan is share-based, all vested RSUs and DSUs will be settled in cash. No common shares will be issued. The Company may issue no more than the equivalent of 20% of its issued and outstanding common shares as RSU/DSU share incentives.
| d) | Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”) |
RSU
The RSU plan is for eligible members of the Board of Directors, eligible employees and eligible contractors. The RSUs vest over a period of three years from the date of grant, vesting as to one-third each year from date of grant. In addition to the vesting period, the Company has also set Performance Conditions that will accompany vested RSUs. The Performance Conditions to be met are established by the Board at the time of grant of the RSU. RSUs that are permitted to be carried over to the succeeding years shall expire no later than the third calendar year after the year in which the RSUs have been granted and will be terminated to the extent the performance objectives or other vesting criteria have not been met. The RSU share plan transactions during the year were as follows:
| |
| Units |
Outstanding at April 30, 2021 | - |
Granted | 1,655,000 |
Outstanding at April 30, 2022 and July 31, 2022 | 1,655,000 |
1,655,000 RSU’s were granted in the year ended April 30, 2022. The RSU’s have been valued at fair value of $0.24 per share as at July 31, 2022, and the total fair value of this liability is recorded at $91 (April 30, 2022 - $53) under Trades and Other Payables on the Statements of Financial Position.
DSU
The Company introduced a DSU plan for eligible directors. The DSUs are paid in full in the form of a lump sum payment no later than December 31st of the calendar year immediately following the calendar year of termination of service. DSU Awards going forward will vest on each anniversary date of the grant over a period of 3 years. The DSU share plan transactions during the period were as follows:
| |
| Units |
Outstanding at April 30, 2021 Granted | 800,000 1,725,000 |
Outstanding at April 30, 2022 and July 31, 2022 | 2,525,000 |
Based on the fair value at July 31, 2022 of $0.24 (2022 - $0.21) per share, the Company has recorded a liability of $382 (April 30, 2022 - $279) under Trades and Other Payable on the Statement of Financial Position. 1,725,000 DSU’s were granted in the year ended April 30, 2022.
14
Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Cash and investments are carried at fair value. There are no material differences between the carrying values and the fair values of any other financial assets or liabilities due to their short term nature. In the normal course of business, the Company’s assets, liabilities and future transactions are impacted by various market risks, including currency risks associated with inventory, revenues, cost of sales, capital expenditures, interest earned on cash and the interest rate risk associated with floating rate debt.
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
A 10% increase or decrease in the US dollar exchange may increase or decrease comprehensive income (loss) by approximately $263. A 10% increase or decrease in the MXN$ exchange rate will decrease or increase comprehensive income (loss) by approximately $103.
The Company’s cash earns interest at variable interest rates. While fluctuations in market rates do not have a material impact on the fair value of the Company’s cash flows, future cash flows may be affected by interest rate fluctuations. The Company is not significantly exposed to interest rate fluctuations and interest rate risk consists of two components:
| i) | To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. |
| ii) | To the extent that changes in prevailing market interest rates differ from the interest rates in the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk. |
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s maximum exposure to credit risk is with respect to its cash and account receivable, the balance of which at July 31, 2022 is $11,579 (April 30, 2022 - $10,398).
Cash of $665 (April 30, 2022 - $1,105) are held at a Mexican financial institution, cash of $6,261 (April 30, 2022 – $5,490) is held in US dollars at Canadian financial institutions and the remainder of $2,542 (April 30, 2022 - $2,223) are held at chartered Canadian financial institutions; the Company is exposed to the risks of those financial institutions. The taxes receivable are comprised of Mexican VAT taxes receivable of $1,101 (April 30, 2022 - $1,085) and GST receivable of $27 (April 30, 2022 - $28), which are subject to review by the respective tax authority. Trade receivables include $817 due from one customer.
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Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
11. | Financial instruments – (cont’d) |
Liquidity risk arises from the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company accomplishes this by achieving profitable operations and maintaining sufficient cash reserves. As at July 31, 2022, the Company was holding cash of $9,457 (April 30, 2022- $8,818).
| | | | |
Obligations due within twelve months of July 31, | 2022 | 2023 | 2024 | 2025 and beyond |
Trade and other payables | $2,732 | $- | $- | $ - |
Reclamation and closure obligations | $- | $- | $- | $4,019 |
Leases liability | $412 | $220 | $110 | $- |
The Company’s trade and other payables are due in the short term. Long-term obligations include the Company’s reclamation and closure cost obligations, other long-term liabilities and deferred income taxes. Management believes that profits generated from the mine and periodic financing will be sufficient to meet its financial obligations.
Mineral prices and marketability fluctuate and any decline in mineral prices may have a negative effect on the Company. Mineral prices, particularly gold and silver prices, have fluctuated widely in recent years. The marketability and price of minerals which may be produced and sold by the Company will be affected by numerous factors beyond the control of the Company. These other factors include delivery uncertainties related to the proximity of its resources to processing facilities and extensive government regulations related to price, taxes, royalties, allowable production land tenure, the import and export of minerals and many other aspects of the mining business. Declines in mineral prices may have a negative effect on the Company. A 10% decrease or increase in metal prices may result in a decrease or increase of $675 in revenue.
12. | Commitments and related party transactions |
Except as disclosed elsewhere in these consolidated financial statements, the Company has the following commitments outstanding at July 31, 2022:
| a. | The Company has a land rental commitment with respect to the land at the mine site, for $132 per year which is currently being renegotiated. The Company also has ongoing concession commitments on the mine site and on exploration and evaluation assets of approximately $750 per year. |
| b. | The Company has management contracts to officers and directors totaling $600 and US$315 per year, payable monthly, expiring in April 2024 and US$400 per year until December 2023. |
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Starcore International Mines Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated) - Unaudited
July 31, 2022
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company considers the items included in the consolidated statements of changes in equity as capital. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, sell assets to reduce debt or return capital to shareholders. The Company is not subject to externally imposed capital requirements and there were no changes to the capital management in the period ended July 31, 2022.
The Company calculates the basic and diluted income per common share using the weighted average number of common shares outstanding during each period and the diluted income per share assumes that the outstanding vested stock options and share purchase warrants had been exercised at the beginning of the period. As at July 31, 2022 and 2021, all warrants outstanding were excluded in the dilutive weighted average shares outstanding as they were anti-dilutive. The denominator for the calculation of income per share, being the weighted average number of common shares, is calculated as follows:
| | |
For the period ended July 31, | 2022 | 2021 |
| | |
Issued common share, beginning of period | 49,646,851 | 49,646,851 |
Weighted average issuances | 1,043,478 | - |
Diluted weighted average common shares | 50,690,329 | 49,646,851 |
During the period ended July 31, 2022, the Company earned all of its revenues from one customer. As at July 31, 2022, the Company does not consider itself to be economically dependent on this customer as transactions with this party can be easily replaced by transactions with other parties on similar terms and conditions. The balance owing from this customer on July 31, 2022 was $817 (April 30, 2022 - $315). The Company operates in one segment, the revenue is from gold and silver mining generated in Mexico.
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