UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2020 and 2019
(Expressed in Canadian Dollars)
Notice to Readers of the Unaudited Condensed Consolidated Interim Financial Statements
for the three and six months ended December 31, 2020
The unaudited condensed consolidated interim financial statements of New Pacific Metals Corp. (the “Company”) for the three and six months ended December 31, 2020 (the “Financial Statements”) have been prepared by management and have not been reviewed by the Company’s independent auditors. The Financial Statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2020 which are available under the Company’s profile on SEDAR at www.sedar.com. The Financial Statements are stated in terms of Canadian dollars and are prepared in accordance with International Financial Reporting Standards.
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian dollars)
| | Notes | | December 31, 2020 | | | June 30, 2020 | |
| ASSETS | | | | | | | |
| Current Assets | | | | | | | |
| Cash and cash equivalents | | $ | 57,285,508 | | $ | 40,644,346 | |
| Short-term investments | 4 | | 6,197,708 | | | 20,633,772 | |
| Receivables | | | 321,864 | | | 413,594 | |
| Deposits and prepayments | | | 488,454 | | | 222,817 | |
| Assets held for distribution | 3 | | - | | | 11,849,971 | |
| | | | 64,293,534 | | | 73,764,500 | |
| Non-current Assets | | | | | | | |
| Other tax receivable | 5 | | 2,757,383 | | | 2,862,468 | |
| Equity investments | 6 | | 929,327 | | | 5,603,591 | |
| Plant and equipment | 8 | | 1,402,803 | | | 1,535,923 | |
| Mineral property interests | 9 | | 92,589,287 | | | 95,049,576 | |
| TOTAL ASSETS | | $ | 161,972,334 | | $ | 178,816,058 | |
| | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | |
| Current Liabilities | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 1,389,468 | | $ | 1,573,474 | |
| Payable for mineral property acquisition | | | - | | | 263,120 | |
| Due to a related party | 10 | | 113,309 | | | 84,742 | |
| Liabilities held for distribution | 3 | | - | | | 122,178 | |
| | | | 1,502,777 | | | 2,043,514 | |
| | | | | | | | |
| Equity | | | | | | | |
| Share capital | 11 | | 194,121,601 | | | 191,563,628 | |
| Share-based payment reserve | | | 21,691,350 | | | 22,057,385 | |
| Accumulated other comprehensive income | | | 785,762 | | | 6,599,738 | |
| Deficit | | | (56,082,172 | ) | | (43,398,714 | ) |
| Total equity attributable to the equity holders of the Company | | | 160,516,541 | | | 176,822,037 | |
| | | | | | | | |
| Non-controlling interests | 12 | | (46,984 | ) | | (49,493 | ) |
| Total Equity | | | 160,469,557 | | | 176,772,544 | |
| | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 161,972,334 | | $ | 178,816,058 | |
Approved on behalf of the Board:
(Signed) David Kong
Director
(Signed) Mark Cruise
Director
See accompanying notes to the unaudited condensed consolidated interim financial statements
Page | 1
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Income (Loss)
(Expressed in Canadian dollars)
| | | | Three Months Ended December 31, | | | Six Months Ended December 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Operating expense | | | | | | | | | | | | | |
| Project evaluation and corporate development | | $ | 302,758 | | $ | - | | $ | 482,168 | | $ | - | |
| Depreciation | | | 14,455 | | | 3,525 | | | 28,565 | | | 5,714 | |
| Filing and listing | | | 147,891 | | | 144,853 | | | 259,557 | | | 207,866 | |
| Investor relations | | | 75,156 | | | 162,263 | | | 213,826 | | | 440,573 | |
| Professional fees | | | 174,511 | | | 169,895 | | | 446,404 | | | 212,796 | |
| Salaries and benefits | | | 358,710 | | | 625,559 | | | 863,646 | | | 828,557 | |
| Office and administration | | | 164,477 | | | 225,882 | | | 446,070 | | | 349,486 | |
| Share-based compensation | 11(b) | | 389,283 | | | 293,156 | | | 914,406 | | | 589,081 | |
| | | | 1,627,241 | | | 1,625,133 | | | 3,654,642 | | | 2,634,073 | |
| Other income (expense) | | | | | | | | | | | | | |
| Income (loss) from investments | 7 | | (139,364 | ) | | 339,654 | | | 704,464 | | | 2,455,102 | |
| Loss on disposal of plant and equipment | 8 | | - | | | - | | | (2,479 | ) | | - | |
| Foreign exchange loss | | | (557,051 | ) | | (322,879 | ) | | (878,779 | ) | | (146,537 | ) |
| Other expense | | | (5 | ) | | - | | | (465 | ) | | - | |
| | | | (696,420 | ) | | 16,775 | | | (177,259 | ) | | 2,308,565 | |
| | | | | | | | | | | | | | |
| Net loss | | $ | (2,323,661 | ) | $ | (1,608,358 | ) | $ | (3,831,901 | ) | $ | (325,508 | ) |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (2,321,588 | ) | $ | (1,599,824 | ) | $ | (3,827,191 | ) | $ | (313,886 | ) |
| Non-controlling interests | 12 | | (2,073 | ) | | (8,534 | ) | | (4,710 | ) | | (11,622 | ) |
| Net loss | | $ | (2,323,661 | ) | $ | (1,608,358 | ) | $ | (3,831,901 | ) | $ | (325,508 | ) |
| | | | | | | | | | | | | | |
| Loss per share attributable to the equity holders of the Company | | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.00 | ) |
| Weighted average number of common shares - basic and diluted | | | 153,054,120 | | | 146,089,210 | | | 152,750,866 | | | 144,349,881 | |
See accompanying notes to the unaudited condensed consolidated interim financial statements
Page | 2
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(Expressed in Canadian dollars)
| | | | Three Months Ended December 31, | | | Six Months Ended December 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| | | | | | | | | | | | | | |
| Net loss | | $ | (2,323,661 | ) | $ | (1,608,358 | ) | $ | (3,831,901 | ) | $ | (325,508 | ) |
| Other comprehensive loss, net of taxes: | | | | | | | | | | | | | |
| Items that may subsequently be reclassified to net income or loss: | | | | | | | | | | | | | |
| Currency translation adjustment, net of tax of $nil | | | (4,017,389 | ) | | (1,592,934 | ) | | (5,806,757 | ) | | (820,958 | ) |
| Other comprehensive loss, net of taxes | | $ | (4,017,389 | ) | $ | (1,592,934 | ) | $ | (5,806,757 | ) | $ | (820,958 | ) |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (4,012,611 | ) | $ | (1,597,219 | ) | $ | (5,813,976 | ) | $ | (806,508 | ) |
| Non-controlling interests | 12 | | (4,778 | ) | | 4,285 | | | 7,219 | | | (14,450 | ) |
| | | $ | (4,017,389 | ) | $ | (1,592,934 | ) | $ | (5,806,757 | ) | $ | (820,958 | ) |
| Total comprehensive loss, net of taxes | | $ | (6,341,050 | ) | $ | (3,201,292 | ) | $ | (9,638,658 | ) | $ | (1,146,466 | ) |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (6,334,199 | ) | $ | (3,197,043 | ) | $ | (9,641,167 | ) | $ | (1,120,394 | ) |
| Non-controlling interests | | | (6,851 | ) | | (4,249 | ) | | 2,509 | | | (26,072 | ) |
| Total comprehensive loss, net of taxes | | $ | (6,341,050 | ) | $ | (3,201,292 | ) | $ | (9,638,658 | ) | $ | (1,146,466 | ) |
See accompanying notes to the unaudited condensed consolidated interim financial statements
Page | 3
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)
| | | | Three Months Ended December 31, | | | Six Months Ended December 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Operating activities | | | | | | | | | | | | | |
| Net loss | | $ | (2,323,661 | ) | $ | (1,608,358 | ) | $ | (3,831,901 | ) | $ | (325,508 | ) |
| Add (deduct) items not affecting cash: | | | | | | | | | | | | | |
| Loss (income) from investments | | | 139,364 | | | (339,654 | ) | | (704,464 | ) | | (2,455,102 | ) |
| Dividends and interests received | | | 127,717 | | | 117,629 | | | 215,713 | | | 350,985 | |
| Depreciation | | | 14,455 | | | 3,525 | | | 28,565 | | | 5,714 | |
| Loss on disposal of plant and equipment | | | - | | | - | | | 2,479 | | | - | |
| Share-based compensation | 11(b) | | 414,077 | | | 293,156 | | | 959,692 | | | 589,081 | |
| Unrealized foreign exchange loss | | | 557,051 | | | 322,879 | | | 878,779 | | | 146,537 | |
| Changes in non-cash operating working capital | 16 | | 92,139 | | | (640,745 | ) | | (883,863 | ) | | (295,908 | ) |
| Net cash used in operating activities | | | (978,858 | ) | | (1,851,568 | ) | | (3,335,000 | ) | | (1,984,201 | ) |
| | | | | | | | | | | | | | |
| Investing activities | | | | | | | | | | | | | |
| Mineral property interest | | | | | | | | | | | | | |
| Capital expenditures | | | (1,122,934 | ) | | (3,315,584 | ) | | (2,876,227 | ) | | (8,098,393 | ) |
| Acquisition of mineral concession | | | - | | | (2,041,480 | ) | | - | | | (2,436,160 | ) |
| Plant and equipment | | | | | | | | | | | | | |
| Additions | | | (24,717 | ) | | (21,042 | ) | | (43,178 | ) | | (64,376 | ) |
| Proceeds on disposals | | | - | | | - | | | 1,808 | | | - | |
| Short-term investments | | | | | | | | | | | | | |
| Proceeds on disposals | | | 6,000,000 | | | - | | | 14,000,000 | | | 1,978,450 | |
| Equity investments | | | | | | | | | | | | | |
| Acquisition | 6 | | - | | | (4,771,338 | ) | | - | | | (4,771,338 | ) |
| Proceeds on disposals | 6 | | 5,572,409 | | | 787,780 | | | 5,572,409 | | | 6,020,914 | |
| Changes in other tax receivable | | | (34,190 | ) | | (284,777 | ) | | (86,009 | ) | | (816,157 | ) |
| Net cash provided by (used in) investing activities | | | 10,390,568 | | | (9,646,441 | ) | | 16,568,803 | | | (8,187,060 | ) |
| | | | | | | | | | | | | | |
| Financing activities | | | | | | | | | | | | | |
| Proceeds from issuance of common shares | | | 418,525 | | | 15,887,034 | | | 702,154 | | | 16,071,434 | |
| Net cash provided by financing activities | | | 418,525 | | | 15,887,034 | | | 702,154 | | | 16,071,434 | |
| Effect of exchange rate changes on cash and cash equivalents | | | 2,689,686 | | | (165,319 | ) | | 2,705,205 | | | (129,872 | ) |
| | | | | | | | | | | | | | |
| Increase in cash and cash equivalents | | | 12,519,921 | | | 4,223,706 | | | 16,641,162 | | | 5,770,301 | |
| Cash and cash equivalents, beginning of the period | | | 44,765,587 | | | 29,396,556 | | | 40,644,346 | | | 27,849,961 | |
| Cash and cash equivalents, end of the period | | $ | 57,285,508 | | $ | 33,620,262 | | $ | 57,285,508 | | $ | 33,620,262 | |
| Supplementary cash flow information | 16 | | | | | | | | | | | | |
See accompanying notes to the unaudited condensed consolidated interim financial statements
Page | 4
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Change in Equity
(Expressed in Canadian dollars, except for share figures)
| | | | Share capital | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | Total equity | | | | | | | |
| | | | Number of | | | | | | Share-based | | | other | | | | | | attributable to the | | | Non- | | | | |
| | | | common | | | | | | payment | | | comprehensive | | | | | | equity holders of | | | controlling | | | | |
| | Notes | | shares issued | | | Amount | | | reserve | | | income | | | Deficit | | | the Company | | | interests | | | Total equity | |
| Balance, July 1, 2019 | | | 142,432,812 | | $ | 150,005,738 | | $ | 19,978,062 | | $ | 3,264,901 | | $ | (51,331,013 | ) | $ | 121,917,688 | | $ | (37,685 | ) | $ | 121,880,003 | |
| Options exercised | | | 270,806 | | | 365,798 | | | (127,898 | ) | | - | | | - | | | 237,900 | | | - | | | 237,900 | |
| Common shares issued through bought deal | | | | | | | | | | | | | | | | | | | | | | | | | |
| financing | | | 4,312,500 | | | 15,833,533 | | | - | | | - | | | - | | | 15,833,533 | | | - | | | 15,833,533 | |
| Share-based compensation | | | - | | | - | | | 982,531 | | | - | | | - | | | 982,531 | | | - | | | 982,531 | |
| Common shares issued to acquire mineral property interest | | | 291,000 | | | 460,144 | | | (460,144 | ) | | - | | | - | | | - | | | - | | | - | |
| Net loss | | | - | | | - | | | - | | | - | | | (313,886 | ) | | (313,886 | ) | | (11,622 | ) | | (325,508 | ) |
| Currency translation adjustment | | | - | | | - | | | - | | | (806,508 | ) | | - | | | (806,508 | ) | | (14,450 | ) | | (820,958 | ) |
| Balance, December 31, 2019 | | | 147,307,118 | | $ | 166,665,213 | | $ | 20,372,551 | | $ | 2,458,393 | | $ | (51,644,899 | ) | $ | 137,851,258 | | $ | (63,757 | ) | $ | 137,787,501 | |
| Options exercised | | | 617,260 | | | 1,192,279 | | | (397,277 | ) | | - | | | - | | | 795,002 | | | - | | | 795,002 | |
| Restricted share units vested | | | 136,400 | | | 641,080 | | | (641,080 | ) | | - | | | - | | | - | | | - | | | - | |
| Common shares issued through bought deal financing | | | 4,238,000 | | | 23,065,056 | | | - | | | - | | | - | | | 23,065,056 | | | - | | | 23,065,056 | |
| Share-based compensation | | | - | | | - | | | 2,723,191 | | | - | | | - | | | 2,723,191 | | | - | | | 2,723,191 | |
| Net income (loss) | | | - | | | - | | | - | | | - | | | 8,246,185 | | | 8,246,185 | | | (7,790 | ) | | 8,238,395 | |
| Currency translation adjustment | | | - | | | - | | | - | | | 4,141,345 | | | - | | | 4,141,345 | | | 22,054 | | | 4,163,399 | |
| Balance, June 30, 2020 | | | 152,298,778 | | $ | 191,563,628 | | $ | 22,057,385 | | $ | 6,599,738 | | $ | (43,398,714 | ) | $ | 176,822,037 | | $ | (49,493 | ) | $ | 176,772,544 | |
| Options exercised | 11(b) | | 656,766 | | | 1,049,024 | | | (346,870 | ) | | - | | | - | | | 702,154 | | | - | | | 702,154 | |
| Restricted share units vested | | | 223,150 | | | 1,048,805 | | | (1,048,805 | ) | | - | | | - | | | - | | | - | | | - | |
| Share-based compensation | 11(b) | | - | | | - | | | 1,489,784 | | | - | | | - | | | 1,489,784 | | | - | | | 1,489,784 | |
| Common shares issued to acquire mineral property interest | 11(c) | | 291,000 | | | 460,144 | | | (460,144 | ) | | - | | | - | | | - | | | - | | | - | |
| Spin-out distribution | 3 | | - | | | - | | | - | | | - | | | (8,856,267 | ) | | (8,856,267 | ) | | - | | | (8,856,267 | ) |
| Net income | | | - | | | - | | | - | | | - | | | (3,827,191 | ) | | (3,827,191 | ) | | (4,710 | ) | | (3,831,901 | ) |
| Currency translation adjustment | | | - | | | - | | | - | | | (5,813,976 | ) | | - | | | (5,813,976 | ) | | 7,219 | | | (5,806,757 | ) |
| Balance, December 31, 2020 | | | 153,469,694 | | $ | 194,121,601 | | $ | 21,691,350 | | $ | 785,762 | | $ | (56,082,172 | ) | $ | 160,516,541 | | $ | (46,984 | ) | $ | 160,469,557 | |
See accompanying notes to the unaudited condensed consolidated interim financial statements
Page | 5
1. CORPORATE INFORMATION
New Pacific Metals Corp. along with its subsidiaries (collectively, the “Company” or “New Pacific”) is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company is currently exploring and advancing development of its mineral properties and has not yet determined if they contain potentially recoverable mineral reserves. The underlying value and the recoverability of the amounts shown for mineral properties are entirely dependent upon the existence of recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral properties, and future profitable production or proceeds from the disposition of the mineral property interests.
The Company is publicly listed on the Toronto Stock Exchange (“TSX”) under the symbol “NUAG” and on the OTCQX Best Market in the United States under the symbol “NUPMF”. The head office and the registered and records offices of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance and Basis of Preparation
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2020. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies set out in Note 2 to the audited consolidated financial statements for the year ended June 30, 2020.
These unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
The unaudited condensed consolidated interim financial statements of the Company as at and for the three and six months ended December 31, 2020 was authorized for issue in accordance with a resolution of the Company’s board of directors (the “Board”) dated on February 11, 2021.
(b) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary, and has the ability to use its power to affect its returns. For non-wholly-owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statements of financial position. Net income for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
Page | 6
Balances, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
Details of the Company’s significant subsidiaries which are consolidated are as follows:
| | | Proportion of ownership interest held | |
| | Country of | December 31, | June 30, | Mineral |
Name of subsidiaries | Principal activity | incorporation | 2020 | 2020 | properties |
New Pacific Offshore Inc. | Holding company | BVI (i) | 100% | 100% | |
SKN Nickel & Platinum Ltd. | Holding company | BVI | 100% | 100% | |
Glory Metals Investment Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
New Pacific Investment Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
New Pacific Andes Corp. Limited | Holding company | Hong Kong | 100% | 100% | |
Fortress Mining Inc. | Holding company | BVI | 100% | 100% | |
Minera Alcira S.A. | Mining company | Bolivia | 100% | 100% | Silver Sand |
NPM Minerales S.A. | Mining company | Bolivia | 100% | 100% | |
Colquehuasi S.R.L. | Mining company | Bolivia | 100% | 100% | Silverstrike |
Qinghai Found Mining Co., Ltd. | Mining company | China | 82% | 82% | RZY |
Whitehorse Gold Corp. | Mining company | Canada | 0% | 100% | |
Tagish Lake Gold Corp. | Mining company | Canada | 0% | 100% | TLG |
(i) British Virgin Islands ("BVI") | | | | | |
3. WHITEHORSE GOLD CORP. SPIN-OUT TRANSACTION
During Fiscal 2020, the Company performed a strategic review on the Tagish Lake Gold Project (“TLG Project”) located in the Yukon Territory, Canada and established Whitehorse Gold Corp. (“Whitehorse Gold”) to acquire the TLG Project from the Company for a cash consideration of $3,000,000 plus 20,000,000 Whitehorse Gold common shares (“spin-out shares”).
On November 18, 2020, the Company distributed all of the spin-out shares held by it to the Company’s shareholders on a pro rata basis by way of a plan of arrangement under the Business Corporations Act (British Columbia). The spin-out shares were valued at $8,856,267 upon distribution. Assets and liabilities of Whitehorse Gold and TLG Project which were classified as held for distribution as at June 30, 2020 in the amount of $11,849,971 and $122,178, respectively, were disposed upon completion of the spin-out. On November 25, 2020, Whitehorse Gold’s common shares became listed for trading on the TSX Venture Exchange (“TSXV”) under the symbol “WHG”.
4. SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
| | | December 31, 2020 | | | June 30, 2020 | |
| Guaranteed Investment Certificates | $ | 6,032,885 | | $ | 20,003,028 | |
| Bonds | | 164,823 | | | 630,744 | |
| | $ | 6,197,708 | | $ | 20,633,772 | |
5. OTHER TAX RECEIVABLE
Other tax receivable is comprised of value-added tax (“VAT”) imposed by the Bolivian government. The Company had VAT outputs through its exploration costs and general expenses incurred in Bolivia. These VAT outputs are deductible against potential future VAT inputs that will be generated through mining production sales.
Page | 7
6. EQUITY INVESTMENTS
Equity investments represent equity interests of other publicly traded or privately-held companies that the Company has acquired on the open market or through private placements. These equity interests consist of common shares, preferred shares, and warrants. Equity investments are classified as FVTPL and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.
The equity investments are summarized as follows:
| | | December 31, 2020 | | | June 30, 2020 | |
| Common or preferred shares | | | | | | |
| Public companies | $ | 393,900 | | $ | 4,795,960 | |
| Warrants | | | | | | |
| Public companies | | 535,427 | | | 807,631 | |
| | $ | 929,327 | | $ | 5,603,591 | |
The fair value of the warrants was estimated using the Black Scholes options pricing model with the following assumptions:
| | | December 31, 2020 | | | June 30, 2020 | |
| Risk free interest rate | | 0.39% | | | 0.36% | |
| Expected volatility | | 119% | | | 122% | |
| Expected life of warrants in years | | 0.69 | | | 1.20 | |
The continuity of equity investments is summarized as follows:
| | | | | | Accumulated mark-to- | |
| | | | | | market gain included | |
| | | Fair value | | | in net income | |
| Balance, July 1, 2019 | $ | 5,110,893 | | $ | 3,035,483 | |
| Acquisition | | 5,018,338 | | | - | |
| Proceeds on disposal | | (6,131,622 | ) | | - | |
| Change in fair value | | 1,605,982 | | | 1,605,982 | |
| Balance, June 30, 2020 | $ | 5,603,591 | | $ | 4,641,465 | |
| Proceeds on disposal | | (5,572,409 | ) | | | |
| Change in fair value | | 898,145 | | | 898,145 | |
| Balance, December 31, 2020 | $ | 929,327 | | $ | 5,539,610 | |
Page | 8
7. INCOME (LOSS) FROM INVESTMENTS
Income (loss) from investments consist of:
| | | Three Months Ended December 31, | | | Six Months Ended December 31, | |
| | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Fair value change on equity investments | $ | 136,658 | | $ | 142,178 | | $ | 898,145 | | $ | 2,325,805 | |
| Fair value change on bonds | | (402,859 | ) | | 189,594 | | | (438,618 | ) | | 111,520 | |
| Dividend income | | 70,412 | | | - | | | 141,429 | | | - | |
| Interest income | | 56,425 | | | 7,882 | | | 103,508 | | | 17,777 | |
| Income (loss) from investments | $ | (139,364 | ) | $ | 339,654 | | $ | 704,464 | | $ | 2,455,102 | |
8. PLANT AND EQUIPMENT
| | | | | | | | | | | | Office | | | | | | | |
| | | Land and | | | | | | Motor | | | equipment and | | | Computer | | | | |
| Cost | | building | | | Machinery | | | vehicles | | | furniture | | | software | | | Total | |
| Balance, July 1, 2019 | $ | 1,715,235 | | $ | 1,381,268 | | $ | 350,934 | | $ | 229,366 | | $ | 126,257 | | $ | 3,803,060 | |
| Additions | | - | | | 52,734 | | | 40,296 | | | 77,566 | | | 137,696 | | | 308,292 | |
| Reclassified to assets held for distribution | | - | | | - | | | - | | | - | | | (13,883 | ) | | (13,883 | ) |
| Foreign currency translation impact | | 34,083 | | | 9,253 | | | 11,566 | | | 4,296 | | | 4 | | | 59,202 | |
| Balance, June 30, 2020 | $ | 1,749,318 | | $ | 1,443,255 | | $ | 402,796 | | $ | 311,228 | | $ | 250,074 | | $ | 4,156,671 | |
| Additions | | - | | | 2,941 | | | - | | | 40,237 | | | - | | | 43,178 | |
| Disposals | | - | | | - | | | - | | | (38,646 | ) | | - | | | (38,646 | ) |
| Foreign currency translation impact | | (56,448 | ) | | (17,426 | ) | | (20,345 | ) | | (8,126 | ) | | 4 | | | (102,341 | ) |
| Balance, December 31, 2020 | $ | 1,692,870 | | $ | 1,428,770 | | $ | 382,451 | | $ | 304,693 | | $ | 250,078 | | $ | 4,058,862 | |
| | | | | | | | | | | | | | | | | | | |
| Accumulated depreciation and amortization | |
| Balance, July 1, 2019 | $ | (890,754 | ) | $ | (1,149,255 | ) | $ | (141,238 | ) | $ | (184,800 | ) | $ | (126,210 | ) | $ | (2,492,257 | ) |
| Depreciation and amortization | | - | | $ | (30,607 | ) | $ | (54,118 | ) | $ | (35,093 | ) | $ | (1,941 | ) | $ | (121,759 | ) |
| Reclassified to assets held for distribution | | - | | $ | - | | $ | - | | $ | - | | $ | 46 | | $ | 46 | |
| Foreign currency translation impact | | - | | $ | (1,693 | ) | $ | (3,360 | ) | $ | (1,722 | ) | $ | (3 | ) | $ | (6,778 | ) |
| Balance, June 30, 2020 | $ | (890,754 | ) | $ | (1,181,555 | ) | $ | (198,716 | ) | $ | (221,615 | ) | $ | (128,108 | ) | $ | (2,620,748 | ) |
| Depreciation and amortization | | - | | | (16,283 | ) | | (30,435 | ) | | (23,907 | ) | | (15,240 | ) | | (85,865 | ) |
| Disposals | | - | | | | | | - | | | 34,359 | | | - | | | 34,359 | |
| Foreign currency translation impact | | - | | | 4,539 | | | 8,642 | | | 3,017 | | | (3 | ) | | 16,195 | |
| Balance, December 31, 2020 | $ | (890,754 | ) | $ | (1,193,299 | ) | $ | (220,509 | ) | $ | (208,146 | ) | $ | (143,351 | ) | $ | (2,656,059 | ) |
| | | | | | | | | | | | | | | | | | | |
| Carrying amount | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2020 | $ | 858,564 | | $ | 261,700 | | $ | 204,080 | | $ | 89,613 | | $ | 121,966 | | $ | 1,535,923 | |
| Balance, December 31, 2020 | $ | 802,116 | | $ | 235,471 | | $ | 161,942 | | $ | 96,547 | | $ | 106,727 | | $ | 1,402,803 | |
During the three and six months ended December 31, 2020, certain plant and equipment were disposed for proceeds of $nil and $1,808, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively) and loss of $nil and $2,479, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively).
Page | 9
9. MINERAL PROPERTY INTERESTS
(a) Silver Sand Project
On July 20, 2017, the Company acquired the Silver Sand Project. The Silver Sand Project is located in the Colavi District of the Potosí Department, in Southwestern Bolivia, 25 kilometres (“km”) northwest of Potosí City, the department capital. The Silver Sand Project covers an area of approximately 5.42 km2 at an elevation of 4,072 metres (“m”) above sea level.
The Company has carried out extensive exploration and resource definition drill programs on the Project since its acquisition in 2017. From 2017 to 2019, the Company completed a total of 97,619 m of drilling in 386 diamond core drillholes – one of the largest greenfield discovery drill programs in South America during this period.
Advanced studies have commenced on the Project, and the Company selected CSA Global Consultants Canada Ltd. (an ERM Group company), Knight Piésold Consultores S.A., and Wood plc to lead the Preliminary Economic Assessment, Environmental baseline study, and Social baseline studies, respectively.
For the three and six months ended December 31, 2020, total expenditures of $872,520 and $1,781,938, respectively (three and six months ended December 31, 2019 - $3,697,610 and $8,537,035, respectively) were capitalized under the Silver Sand Project.
In July 2018, the Company entered into an agreement with third party private vendors to acquire their 100% interest in ATEs located north to the Silver Sand Project by cash payments of $1,315,600 (US$1,000,000) and issuance of 832,000 common shares to the vendors (see note 11(c)). During Fiscal 2019 and Fiscal 2020, cash payments of $1,052,480 (US$800,000) were paid and 541,000 common shares were issued to the vendors. During the six months ended December 31, 2020, the final payment of $263,120 (US$200,000) cash and 291,000 common shares were paid and issued to the vendors.
(b) Silverstrike Project
In December 2019, the Company acquired a 98% interest in the Silverstrike Project from an arm’s length private Bolivian corporation by making a one-time cash payment of $1,782,270 (US$1,350,000).
The Silverstrike Project covers an area of approximately 13 km2 and is located approximately 140 km southwest of La Paz, Bolivia. The Silverstrike Project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district – the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver rich occurrences associated with sercitic alteration and the area is largely underexplored with limited modern exploration applied.
For the three and six months ended December 31, 2020, total expenditures of $731,181 and $1,281,677, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively) were capitalized under the Silverstrike Project.
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(c) Tagish Lake Gold Project
The TLG Project, covering an area of approximately 170 km2, is located in Yukon Territory, Canada, and consists of 1,051 mining claims hosting three identified gold and gold-silver mineral deposits: Skukum Creek, Goddell Gully and Mount Skukum. On November 18, 2020, the Whitehorse Gold spin-out transaction was completed and, as a result, the Company no longer holds an interest in the TLG Project (see note 3).
For the three and six months ended December 31, 2020, total expenditures of $nil and $400,838, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively) were capitalized under the TLG Project.
The project’s carrying value of $12,220,838 (including $11,820,000 classified as part of the assets held for distribution balance as at June 30, 2020) was disposed upon the completion of the Whitehorse Gold spin- out transaction.
(d) RZY Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu Tibetan Autonomous Prefecture, or 820 km from Qinghai Province’s capital city of Xining. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY Project, and classified the region as a National Nature Reserve Area.
During Fiscal 2020, the Company’s subsidiary, Qinghai Found Mining Co., Ltd. (“Qinghai Found”), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $3.8 million (RMB ¥20 million). As of December 31, 2020, the process was under review and subject to approval by the Qinghai Government.
Page | 11
The continuity schedule of mineral property acquisition costs and deferred exploration and development costs are summarized as follows:
| Cost | | Silver Sand | | | Silverstrike | | | Tagish Lake | | | RZY Project | | | Total | |
| Balance, July 1, 2019 | $ | 73,281,418 | | $ | - | | $ | - | | $ | 3,534,664 | | $ | 76,816,082 | |
| Capitalized exploration expenditures | | | | | | | | | | | | | | | |
| Reporting and assessment | | 601,466 | | | 976 | | | - | | | - | | | 602,442 | |
| Drilling and assaying | | 6,521,210 | | | 2,237 | | | - | | | - | | | 6,523,447 | |
| Project management and support | | 4,546,717 | | | 586,052 | | | - | | | - | | | 5,132,769 | |
| Camp service | | 661,514 | | | 50,837 | | | - | | | - | | | 712,351 | |
| Camp construction | | 32,406 | | | - | | | - | | | - | | | 32,406 | |
| Permitting | | 51,358 | | | - | | | 105,056 | | | - | | | 156,414 | |
| Acquisition of Silverstrike Project | | - | | | 1,782,270 | | | - | | | - | | | 1,782,270 | |
| Acquisition of mineral concessions | | 290,220 | | | - | | | - | | | - | | | 290,220 | |
| Other | | 26,854 | | | - | | | - | | | - | | | 26,854 | |
| Impairment recovery | | - | | | - | | | 11,714,944 | | | - | | | 11,714,944 | |
| Reclassified to assets held for distribution | | - | | | - | | | (11,820,000 | ) | | - | | | (11,820,000 | ) |
| Foreign currency impact | | 2,979,031 | | | 59,546 | | | - | | | 40,800 | | | 3,079,377 | |
| Balance, June 30, 2020 | $ | 88,992,194 | | $ | 2,481,918 | | $ | - | | $ | 3,575,464 | | $ | 95,049,576 | |
| Capitalized exploration expenditures | | | | | | | | | | | | | | | |
| Reporting and assessment | | 286,693 | | | 306 | | | 60,959 | | | - | | | 347,958 | |
| Drilling and assaying | | 56,121 | | | 221,576 | | | - | | | - | | | 277,697 | |
| Project management and support | | 1,265,463 | | | 948,374 | | | - | | | - | | | 2,213,837 | |
| Camp service | | 145,664 | | | 108,752 | | | - | | | - | | | 254,416 | |
| Camp construction | | 21,427 | | | - | | | 275,999 | | | - | | | 297,426 | |
| Permitting | | 6,570 | | | 2,669 | | | 63,880 | | | - | | | 73,119 | |
| Disposal upon spin-out distribution | | - | | | - | | | (400,838 | ) | | | | | (400,838 | ) |
| Foreign currency impact | | (5,418,061 | ) | | (144,787 | ) | | - | | | 38,944 | | | (5,523,904 | ) |
| Balance, December 31, 2020 | $ | 85,356,071 | | $ | 3,618,808 | | $ | - | | $ | 3,614,408 | | $ | 92,589,287 | |
10. RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon with the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the condensed consolidated interim financial statements are as follows:
| Due to a related party | | December 31, 2020 | | | June 30, 2020 | |
| Silvercorp Metals Inc. | $ | 113,309 | | $ | 84,742 | |
Silvercorp Metals Inc. (“Silvercorp”) has two directors and one officer in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. Expenses in services rendered and incurred by Silvercorp on behalf of the Company for the three and six months ended December 31, 2020 were $175,853 and $396,415, respectively (three and six months ended December 31, 2019 - $235,710 and $424,347, respectively).
11. SHARE CAPITAL
(a) Share Capital - authorized share capital
The Company’s authorized share capital consists of an unlimited number of common shares without par value.
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(b) Share-based compensation
The Company has a share-based compensation plan (the “Plan”) which consists of stock options and restricted share units (“RSUs”). The maximum number of common shares to be reserved for issuance on any share-based compensation under the Plan is a rolling 10% of the issued and outstanding common shares from time to time.
For the three and six months ended December 31, 2020, a total of $389,283 and $914,406, respectively (three and six months ended December 31, 2019 - $293,156 and $589,081, respectively) were recorded as share-based compensation expense.
For the three and six months ended December 31, 2020, a total of $24,794 and $45,286, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively) were included in the project evaluation and corporate development expense.
For the three and six months ended December 31, 2020, a total of $260,870 and $530,092, respectively (three and six months ended December 31, 2019 - $nil and $nil, respectively) were capitalized under mineral property interests.
(i) Stock Options
The continuity schedule of stock options, as at December 31, 2020, is as follows:
| | | | | | Weighted average | |
| | | Number of options | | | exercise price | |
| Balance, July 1, 2019 | | 5,905,000 | | | 1.36 | |
| Options exercised | | (888,066 | ) | | 1.16 | |
| Options cancelled | | (354,167 | ) | | 1.91 | |
| Balance, June 30, 2020 | | 4,662,767 | | | 1.36 | |
| Options exercised | | (656,766 | ) | | 1.07 | |
| Options cancelled | | (25,000 | ) | | 2.15 | |
| Balance, December 31, 2020 | | 3,981,001 | | | 1.40 | |
Option pricing model requires the input of subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate and therefore, the existing models do not necessarily provide a reliable estimate of the fair value of the Company’s stock options. The Company’s expected volatility is based on the historical volatility of the Company’s share price on the TSX.
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The following table summarizes information about stock options outstanding as at December 31, 2020:
| | Number of options | Weighted average | Number of options | Weighted |
| Exercise | outstanding as at | remaining life | exercisable as at | average |
| prices | 12/31/2020 | (years) | 12/31/2020 | exercise price |
$ | 0.55 | 1,065,000 | 0.83 | 1,065,000 | $0.55 |
| 1.15 | 1,147,500 | 1.58 | 1,147,500 | $1.15 |
| 1.57 | 200,000 | 1.93 | 200,000 | $1.57 |
| 2.15 | 1,568,501 | 3.14 | 666,001 | $2.15 |
| 0.55 - 2.15 | 3,981,001 | 2.01 | 3,078,501 | $1.19 |
Subsequent to December 31, 2020, a total of 68,000 stock options with exercising price between $1.15 and $2.15 were exercised for proceeds of $103,700.
(ii) RSUs
The continuity schedule of RSUs, as at December 31, 2020, is as follows:
| | | | | | Weighted average | |
| | | | | | grant date closing | |
| | | Number of shares | | | price per share $CAD | |
| Balance, July 1, 2019 | | - | | $ | - | |
| Granted | | 1,064,600 | | | 4.70 | |
| Cancelled | | (3,000 | ) | | - | |
| Distributed | | (136,400 | ) | | - | |
| Balance, June 30, 2020 | | 925,200 | | $ | 4.70 | |
| Granted | | 35,000 | | | 5.94 | |
| Cancelled | | (9,750 | ) | | - | |
| Distributed | | (223,150 | ) | | - | |
| Balance, December 31, 2020 | | 727,300 | | $ | 4.74 | |
Subsequent to December 31, 2020, a total of 15,000 RSUs with grant price of $4.70 were vested and issued.
(c) Common Shares Issued for Mineral Property Interest
As partial consideration for the acquisition of ATEs located north to the Silver Sand Property (see note 9(a)), the Company agreed to issue a total of 832,000 common shares to the vendors valued at $1,315,600 (US$1,000,000) in the year ended June 30, 2019. During the six months ended December 31, 2020, 291,000 common shares valued at $460,144 (six months ended December 31, 2019 – 291,000 common shares valued at $460,144) were issued and recorded under share capital.
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12. NON-CONTROLLING INTEREST
| | | Qinghai Found | |
| Balance, July 1, 2019 | $ | (37,685 | ) |
| Share of net loss | | (19,412 | ) |
| Share of other comprehensive income | | 7,604 | |
| Balance, June 30, 2020 | $ | (49,493 | ) |
| Share of net loss | | (4,710 | ) |
| Share of other comprehensive income | | 7,219 | |
| Balance, December 31, 2020 | $ | (46,984 | ) |
As at December 31, 2020 and June 30, 2020, the non-controlling interest in the Company’s subsidiary Qinghai Found was 18%.
13. FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. The Board has overall responsibility for the establishment and oversight of the Company’s risk management framework and reviews the Company’s policies on an ongoing basis.
(a) Fair Value
The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 – Fair Value Measurement (“IFRS 13”).
Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs which are supported by little or no market activity.
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The following table sets forth the Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at December 31, 2020 and June 30, 2020 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| | | Fair value as at December 31, 2020 | |
| Recurring measurements | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Financial Assets | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 57,285,508 | | $ | - | | $ | - | | $ | 57,285,508 | |
| Short-term investments - bonds | | 164,823 | | | - | | | - | | | 164,823 | |
| Common or preferred shares | | 393,900 | | | - | | | - | | | 393,900 | |
| Warrants | | - | | | 535,427 | | | - | | | 535,427 | |
| | | | |
| | | Fair value as at June 30, 2020 | |
| Recurring measurements | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Financial Assets | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 40,644,346 | | $ | - | | $ | - | | $ | 40,644,346 | |
| Short-term investments - bonds | | 630,744 | | | - | | | - | | | 630,744 | |
| Common or preferred shares | | 4,795,960 | | | - | | | - | | | 4,795,960 | |
| Warrants | | - | | | 807,631 | | | - | | | 807,631 | |
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of December 31, 2020 and June 30, 2020, respectively.
There were no transfers into or out of Level 3 during the three and six months ended December 31, 2020.
(b) Liquidity Risk
The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at December 31, 2020, the Company had a working capital position of $62,790,757 and sufficient cash resources to meet the Company’s short-term financial liabilities and its planned exploration expenditures on the Silver Sand and Silverstrike Projects for, but not limited to, the next 12 months.
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company’s financial liabilities:
| | | December 31, 2020 | | | June 30, 2020 | |
| | | Due within a year | | | Total | | | Total | |
| Trade and other payables | $ | 1,389,468 | | $ | 1,389,468 | | $ | 1,573,474 | |
| Due to a related party | | 113,309 | | | 113,309 | | | 84,742 | |
| Payable for mineral property acquisition | | - | | | - | | | 263,120 | |
| | $ | 1,502,777 | | $ | 1,502,777 | | $ | 1,921,336 | |
(c) Foreign Exchange Risk
The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The Company’s functional currency is the Canadian dollar. The Company currently does not engage in foreign exchange currency hedging. The Company’s exposure to foreign exchange risk is summarized as follows:
Page | 16
| The amounts are expressed in CAD equivalents | | December 31, 2020 | | | June 30, 2020 | |
| United States dollars | $ | 16,687,988 | | $ | 15,206,715 | |
| Bolivianos | | 583,033 | | | 404,952 | |
| Chinese RMB | | 296,171 | | | 218,216 | |
| Financial assets in foreign currency | $ | 17,567,192 | | $ | 15,829,883 | |
| | | | | | | |
| United States dollars | $ | 513,268 | | $ | 589,986 | |
| Chinese RMB | | 236,648 | | | 137,725 | |
| Financial liabilities in foreign currency | $ | 749,916 | | $ | 727,711 | |
As at December 31, 2020, with other variables unchanged, a 1% strengthening (weakening) of the US dollar against the CAD would have increased (decreased) net income by approximately $162,000.
As at December 31, 2020, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the CAD would have increased (decreased) net income by approximately $6,000.
As at December 31, 2020, with other variables unchanged, a 1% strengthening (weakening) of the Chinese RMB against the CAD would have increased (decreased) net income by approximately $1,000.
(d) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company’s cash and cash equivalents primarily include highly liquid investments that earn interest at market rates that are fixed to maturity. The Company also holds a portion of cash and cash equivalents in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of December 31, 2020. The Company also owns GICs and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond’s fair value. An increase in market interest rates will generally reduce bond’s fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
(e) Credit Risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure to credit risk is primarily associated with cash and cash equivalents, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash equivalents that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as majority of its cash and cash equivalents are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at December 31, 2020, the Company had a receivables balance of $321,864 (June 30, 2020 - $413,594).
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(f) Equity Price Risk
The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company’s portfolio at December 31, 2020, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $93,000.
14. CAPITAL MANAGEMENT
The objectives of the capital management policy are to safeguard the Company’s ability to support exploration and operating requirements on an ongoing basis, continue the investment in high quality assets along with safeguarding the value of its mineral properties, and support any expansionary plans.
The capital of the Company consists of the items included in equity less cash and cash equivalents and bonds. Risk and capital management are primarily the responsibility of the Company’s corporate finance function and is monitored by the Board. The Company manages the capital structure and makes adjustments depending on economic conditions. Significant risks are monitored and actions are taken, when necessary, according to the Company’s approved policies.
In addition, the current outbreak of COVID-19 has caused significant disruption to global economic conditions which may adversely impact the Company’s results.
15. SEGMENTED INFORMATION
The Company operates in four reportable operating segments, one being the corporate segment; the others being the exploration and development segments focused on safeguarding the value of its mineral properties in relevant geographical jurisdictions. These reporting segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer, the chief operating decision maker.
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(a) Segment information for assets and liabilities are as follows:
| | | | December 31, 2020 | |
| | | | Corporate | | | Exploration and Development | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Cash and cash equivalents | | $ | 56,426,891 | | $ | 759,726 | | $ | - | | $ | 98,891 | | $ | 57,285,508 | |
| Short-term investments | | | 6,197,708 | | | - | | | - | | | - | | | 6,197,708 | |
| Equity investments | | | 929,327 | | | - | | | - | | | - | | | 929,327 | |
| Plant and equipment | | | 168,699 | | | 1,215,478 | | | - | | | 18,626 | | | 1,402,803 | |
| Mineral property interests | | | - | | | 88,974,879 | | | - | | | 3,614,408 | | | 92,589,287 | |
| Other assets | | | 346,151 | | | 3,015,786 | | | - | | | 205,764 | | | 3,567,701 | |
| Total Assets | | $ | 64,068,776 | | $ | 93,965,869 | | $ | - | | $ | 3,937,689 | | $ | 161,972,334 | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | $ | (752,861 | ) | $ | (513,268 | ) | $ | - | | $ | (236,648 | ) | $ | (1,502,777 | ) |
| | | | June 30, 2020 | |
| | | | Corporate | | | Exploration and Development | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Cash and cash equivalents | | $ | 40,007,801 | | $ | 180,406 | | $ | 419,860 | | $ | 36,279 | | $ | 40,644,346 | |
| Short-term investments | | | 20,633,772 | | | - | | | - | | | - | | | 20,633,772 | |
| Equity investments | | | 5,603,591 | | | - | | | - | | | - | | | 5,603,591 | |
| Plant and equipment | | | 187,979 | | | 1,325,228 | | | - | | | 22,716 | | | 1,535,923 | |
| Mineral property interests | | | - | | | 91,474,112 | | | - | | | 3,575,464 | | | 95,049,576 | |
| Assets held for distribution | | | - | | | - | | | 11,849,971 | | | - | | | 11,849,971 | |
| Other assets | | | 161,893 | | | 3,146,646 | | | - | | | 190,340 | | | 3,498,879 | |
| Total Assets | | $ | 66,595,036 | | $ | 96,126,392 | | $ | 12,269,831 | | $ | 3,824,799 | | $ | 178,816,058 | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | $ | (1,193,625 | ) | $ | (589,987 | ) | $ | (122,178 | ) | $ | (137,724 | ) | $ | (2,043,514 | ) |
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(b) Segment information for operating results are as follows:
| | | | Three months ended December 31, 2020 | |
| | | | | | | Exploration and Development | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Project evaluation and corporate development | | $ | 35,846 | | $ | 266,912 | | $ | - | | $ | - | | $ | 302,758 | |
| Salaries and benefits | | | 347,685 | | | - | | | - | | | 11,025 | | | 358,710 | |
| Share-based compensation | | | 389,283 | | | - | | | - | | | - | | | 389,283 | |
| Other operating expenses | | | 574,946 | | | 1,038 | | | - | | | 506 | | | 576,490 | |
| Total operating expense | | | 1,347,760 | | | 267,950 | | | - | | | 11,531 | | | 1,627,241 | |
| | | | | | | | | | | | | | | | | |
| Loss from investments | | | (139,409 | ) | | - | | | - | | | 45 | | | (139,364 | ) |
| Foreign exchange loss | | | (557,051 | ) | | - | | | - | | | - | | | (557,051 | ) |
| Other expense | | | - | | | - | | | - | | | (5 | ) | | (5 | ) |
| Net loss | | $ | (2,044,220 | ) | $ | (267,950 | ) | $ | - | | $ | (11,491 | ) | $ | (2,323,661 | ) |
| | | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (2,044,220 | ) | $ | (267,950 | ) | $ | - | | $ | (9,418 | ) | $ | (2,321,588 | ) |
| Non-controlling interests | | | - | | | - | | | - | | | (2,073 | ) | | (2,073 | ) |
| Net loss | | $ | (2,044,220 | ) | $ | (267,950 | ) | $ | - | | $ | (11,491 | ) | $ | (2,323,661 | ) |
| | | | Three months ended December 31, 2019 | |
| | | | Corporate | | | Exploration and Development | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Salaries and benefits | | $ | 608,990 | | $ | - | | $ | - | | $ | 16,569 | | $ | 625,559 | |
| Share-based compensation | | | 293,156 | | | - | | | - | | | - | | | 293,156 | |
| Other operating expenses | | | 567,336 | | | - | | | 108,045 | | | 31,037 | | | 706,418 | |
| Total operating expense | | | 1,469,482 | | | - | | | 108,045 | | | 47,606 | | | 1,625,133 | |
| | | | | | | | | | | | | | | | | |
| Income from investments | | | 339,589 | | | - | | | - | | | 65 | | | 339,654 | |
| Foreign exchange (loss) gain | | | (323,013 | ) | | - | | | - | | | 134 | | | (322,879 | ) |
| Other income (expense) | | | 15,000 | | | - | | | (15,000 | ) | | - | | | - | |
| Net loss | | $ | (1,437,906 | ) | $ | - | | $ | (123,045 | ) | $ | (47,407 | ) | $ | (1,608,358 | ) |
| | | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (1,437,906 | ) | $ | - | | $ | (123,045 | ) | $ | (38,873 | ) | $ | (1,599,824 | ) |
| Non-controlling interests | | | - | | | - | | | - | | | (8,534 | ) | | (8,534 | ) |
| Net loss | | $ | (1,437,906 | ) | $ | - | | $ | (123,045 | ) | $ | (47,407 | ) | $ | (1,608,358 | ) |
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| | | Six months ended December 31, 2020 | |
| | | Corporate | | | Exploration and Development | | | | |
| | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Project evaluation and corporate development | $ | 64,270 | | $ | 417,898 | | $ | - | | $ | - | | $ | 482,168 | |
| Salaries and benefits | | 926,542 | | | - | | | (84,600 | ) | | 21,704 | | | 863,646 | |
| Share-based compensation | | 914,406 | | | - | | | - | | | - | | | 914,406 | |
| Other operating expenses | | 1,711,291 | | | 1,038 | | | (319,461 | ) | | 1,554 | | | 1,394,422 | |
| Total operating expense | | 3,616,509 | | | 418,936 | | | (404,061 | ) | | 23,258 | | | 3,654,642 | |
| | | | | | | | | | | | | | | | |
| Income from investments | | 704,401 | | | - | | | - | | | 63 | | | 704,464 | |
| Loss on disposal of plant and equipment | | - | | | - | | | - | | | (2,479 | ) | | (2,479 | ) |
| Foreign exchange loss | | (878,388 | ) | | - | | | (391 | ) | | - | | | (878,779 | ) |
| Other expense | | - | | | - | | | - | | | (465 | ) | | (465 | ) |
| Net loss | $ | (3,790,496 | ) | $ | (418,936 | ) | $ | 403,670 | | $ | (26,139 | ) | $ | (3,831,901 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | (3,790,496 | ) | $ | (418,936 | ) | $ | 403,670 | | $ | (21,429 | ) | $ | (3,827,191 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (4,710 | ) | | (4,710 | ) |
| Net loss | $ | (3,790,496 | ) | $ | (418,936 | ) | $ | 403,670 | | $ | (26,139 | ) | $ | (3,831,901 | ) |
| | | Six months ended December 31, 2019 | |
| | | Corporate | | | Exploration and Development | | | | |
| | | Canada | | | Bolivia | | | Canada | | | China | | | Total | |
| Salaries and benefits | $ | 795,338 | | $ | - | | $ | - | | $ | 33,219 | | $ | 828,557 | |
| Share-based compensation | | 589,081 | | | - | | | - | | | - | | | 589,081 | |
| Other operating expenses | | 1,072,595 | | | - | | | 112,230 | | | 31,610 | | | 1,216,435 | |
| Total operating expense | | 2,457,014 | | | - | | | 112,230 | | | 64,829 | | | 2,634,073 | |
| | | | | | | | | | | | | | | | |
| Income from investments | | 2,454,970 | | | - | | | - | | | 132 | | | 2,455,102 | |
| Foreign exchange gain (loss) | | (146,669 | ) | | - | | | - | | | 132 | | | (146,537 | ) |
| Other income (expense) | | 30,000 | | | - | | | (30,000 | ) | | - | | | - | |
| Net loss | $ | (118,713 | ) | $ | - | | $ | (142,230 | ) | $ | (64,565 | ) | $ | (325,508 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | (118,713 | ) | $ | - | | $ | (142,230 | ) | $ | (52,943 | ) | $ | (313,886 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (11,622 | ) | $ | (11,622 | ) |
| Net loss | $ | (118,713 | ) | $ | - | | $ | (142,230 | ) | $ | (64,565 | ) | $ | (325,508 | ) |
16. SUPPLEMENTARY CASH FLOW INFORMATION
| Changes in non-cash operating working capital: | | Three Months Ended December 31, | | | Six Months Ended December 31, | |
| | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Receivables | $ | 75,396 | | $ | (11,360 | ) | $ | 87,763 | | $ | (124,855 | ) |
| Deposits and prepayments | | 376,690 | | | 159,408 | | | (278,016 | ) | | (57,359 | ) |
| Accounts payable and accrued liabilities | | (400,573 | ) | | (812,931 | ) | | (722,177 | ) | | (148,537 | ) |
| Due to a related party | | 40,626 | | | 24,138 | | | 28,567 | | | 34,843 | |
| | $ | 92,139 | | $ | (640,745 | ) | $ | (883,863 | ) | $ | (295,908 | ) |
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