UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2020 and 2019
(Expressed in Canadian Dollars)
New Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian dollars)
| | Notes | | March 31, 2020 | | | June 30, 2019 | |
| ASSETS | | | | | | | |
| Current Assets | | | | | | | |
| Cash and cash equivalents | | $ | 39,062,867 | | $ | 27,849,961 | |
| Bonds | 3 | | 2,016,853 | | | 10,942,898 | |
| Receivables | | | 398,889 | | | 259,600 | |
| Deposits and prepayments | | | 188,347 | | | 142,370 | |
| | | | 41,666,956 | | | 39,194,829 | |
| | | | | | | | |
| Non-current Assets | | | | | | | |
| Reclamation deposits | | | 15,075 | | | 15,075 | |
| Other tax receivable | 4 | | 2,946,050 | | | 1,800,713 | |
| Equity investments | 5 | | 4,898,718 | | | 5,110,893 | |
| Plant and equipment | 6 | | 1,499,632 | | | 1,310,803 | |
| Mineral property interests | 7 | | 96,953,417 | | | 76,816,082 | |
| TOTAL ASSETS | | $ | 147,979,848 | | $ | 124,248,395 | |
| | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | |
| Current Liabilities | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 1,619,015 | | $ | 1,621,403 | |
| Payable for mineral property acquisition | | | 263,120 | | | 394,680 | |
| Due to a related party | 8 | | 132,739 | | | 89,189 | |
| | | | 2,014,874 | | | 2,105,272 | |
| Non-current liabilities | | | | | | | |
| Payable for mineral property acquisition | | | - | | | 263,120 | |
| Total Liabilities | | | 2,014,874 | | | 2,368,392 | |
| | | | | | | | |
| Equity | | | | | | | |
| Share capital | | | 167,452,932 | | | 150,005,738 | |
| Share-based payment reserve | | | 21,598,857 | | | 19,978,062 | |
| Accumulated other comprehensive income | | | 10,311,996 | | | 3,264,901 | |
| Deficit | | | (53,378,032 | ) | | (51,331,013 | ) |
| Total equity attributable to the equity holders of the Company | | | 145,985,753 | | | 121,917,688 | |
| | | | | | | | |
| Non-controlling interests | 10 | | (20,779 | ) | | (37,685 | ) |
| Total Equity | | | 145,964,974 | | | 121,880,003 | |
| | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 147,979,848 | | $ | 124,248,395 | |
Approved on behalf of the Board:
(Signed) David Kong
Director
(Signed) Rui Feng
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 March 31, | | | Nine Months Ended March 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| | | | | | | | | | | | | | |
| Income (loss) from investments | | | | | | | | | | | | | |
| Gain (loss) on equity investments | 5 | $ | (1,424,696 | ) | $ | 464,481 | | $ | 901,109 | | $ | 250,049 | |
| Fair value change and interest earned on bonds | 3 | | (243,309 | ) | | 1,064,994 | | | (131,789 | ) | | 1,420,156 | |
| Dividend income | | | 68,255 | | | 14,160 | | | 68,255 | | | 41,466 | |
| Interest income | | | 4,794 | | | 8,811 | | | 22,571 | | | 23,898 | |
| | | | (1,594,956 | ) | | 1,552,446 | | | 860,146 | | | 1,735,569 | |
| | | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | |
| Depreciation | | | 3,412 | | | 3,025 | | | 9,126 | | | 9,077 | |
| Filing and listing | | | 30,352 | | | 21,278 | | | 238,218 | | | 106,392 | |
| Investor relations | | | 152,995 | | | 440,187 | | | 593,568 | | | 576,506 | |
| Professional fees | | | 69,360 | | | 71,944 | | | 282,156 | | | 143,598 | |
| Salaries and benefits | | | 396,764 | | | 252,113 | | | 1,225,321 | | | 711,777 | |
| Office and administration | | | 174,312 | | | 120,672 | | | 523,798 | | | 226,033 | |
| Share-based compensation | 9(b) | | 705,653 | | | 218,964 | | | 1,294,734 | | | 544,795 | |
| Loss before other income and expenses | | | (3,127,804 | ) | | 424,263 | | | (3,306,775 | ) | | (582,609 | ) |
| | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | |
| Foreign exchange gain (loss) | | | 1,390,100 | | | (431,492 | ) | | 1,243,563 | | | 288,945 | |
| Other income | | | - | | | 22 | | | - | | | 6,855 | |
| | | | 1,390,100 | | | (431,470 | ) | | 1,243,563 | | | 295,800 | |
| | | | | | | | | | | | | | |
| Net loss | | $ | (1,737,704 | ) | $ | (7,207 | ) | $ | (2,063,212 | ) | $ | (286,809 | ) |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | (1,733,133 | ) | $ | (359 | ) | $ | (2,047,019 | ) | $ | (279,104 | ) |
| Non-controlling interests | 10 | | (4,571 | ) | | (6,848 | ) | | (16,193 | ) | | (7,705 | ) |
| Net loss | | $ | (1,737,704 | ) | $ | (7,207 | ) | $ | (2,063,212 | ) | $ | (286,809 | ) |
| | | | | | | | | | | | | | |
| Loss per share attributable to the equity holders of the Company | | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) |
| Weighted average number of common shares - basic and diluted | | | 147,522,980 | | | 132,862,155 | | | 145,399,888 | | | 132,736,133 | |
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 March 31, | | | Nine Months Ended March 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| | | | | | | | | | | | | | |
| Net loss | | $ | (1,737,704 | ) | $ | (7,207 | ) | $ | (2,063,212 | ) | $ | (286,809 | ) |
| Other comprehensive income (loss), net of taxes: | | | | | | | | | | | | | |
| Items that may subsequently be reclassified to net income or loss: | | | | | | | | | | | | | |
| Currency translation adjustment, net of tax of $nil | | | 7,901,155 | | | (1,370,911 | ) | | 7,080,197 | | | 912,787 | |
| Other comprehensive income (loss), net of taxes | | $ | 7,901,155 | | $ | (1,370,911 | ) | $ | 7,080,197 | | $ | 912,787 | |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | 7,853,606 | | $ | (1,374,167 | ) | $ | 7,047,098 | | $ | 913,180 | |
| Non-controlling interests | 10 | | 47,549 | | | 3,256 | | | 33,099 | | | (393 | ) |
| | | | | | | | | | | | | | |
| | | $ | 7,901,155 | | $ | (1,370,911 | ) | $ | 7,080,197 | | $ | 912,787 | |
| | | | | | | | | | | | | | |
| Total comprehensive income (loss), net of taxes | | $ | 6,163,451 | | $ | (1,378,118 | ) | $ | 5,016,985 | | $ | 625,978 | |
| | | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | | |
| Equity holders of the Company | | $ | 6,120,473 | | $ | (1,374,526 | ) | $ | 5,000,079 | | $ | 634,076 | |
| Non-controlling interests | | | 42,978 | | | (3,592 | ) | | 16,906 | | | (8,098 | ) |
| Total comprehensive income (loss), net of taxes | | $ | 6,163,451 | | $ | (1,378,118 | ) | $ | 5,016,985 | | $ | 625,978 | |
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 March 31 | | | Nine Months Ended March 31, | |
| | Notes | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Operating activities | | | | | | | | | | | | | |
| Net loss | | $ | (1,737,704 | ) | $ | (7,207 | ) | $ | (2,063,212 | ) | $ | (286,809 | ) |
| Add (deduct) items not affecting cash: | | | | | | | | | | | | | |
| Loss (gain) on equity investments | 5 | | 1,424,696 | | | (464,481 | ) | | (901,109 | ) | | (250,049 | ) |
| Fair value change and interest earned on bonds | 3 | | 243,309 | | | (1,064,994 | ) | | 131,789 | | | (1,420,156 | ) |
| Interest income | | | (4,794 | ) | | (8,811 | ) | | (22,571 | ) | | (23,898 | ) |
| Depreciation | | | 3,412 | | | 3,025 | | | 9,126 | | | 9,077 | |
| Share-based compensation | 9(b) | | 705,653 | | | 218,964 | | | 1,294,734 | | | 544,795 | |
| Unrealized foreign exchange loss (gain) | | | (1,390,100 | ) | | 431,492 | | | (1,243,563 | ) | | (288,945 | ) |
| Interest received | | | 4,794 | | | 8,811 | | | 22,571 | | | 23,898 | |
| Changes in non-cash operating working capital | 14 | | (6,854 | ) | | (1,496,043 | ) | | (302,762 | ) | | (1,569,578 | ) |
| Net cash used in operating activities | | | (757,588 | ) | | (2,379,244 | ) | | (3,074,997 | ) | | (3,261,665 | ) |
| | | | | | | | | | | | | | |
| Investing activities | | | | | | | | | | | | | |
| Mineral property interest | | | | | | | | | | | | | |
| Capital expenditures | | | (1,999,153 | ) | | (1,027,386 | ) | | (10,097,546 | ) | | (7,552,434 | ) |
| Acquisition of mineral concession | | | - | | | - | | | (2,436,160 | ) | | (657,800 | ) |
| Plant and equipment | | | | | | | | | | | | | |
| Additions | | | (101,261 | ) | | (7,422 | ) | | (165,637 | ) | | (70,868 | ) |
| Bonds | | | | | | | | | | | | | |
| Proceeds on disposals | 3 | | 6,838,198 | | | 3,565,390 | | | 8,816,648 | | | 7,700,006 | |
| Coupon payments | 3 | | - | | | 286,857 | | | 333,208 | | | 853,076 | |
| Equity investments | | | | | | | | | | | | | |
| Acquisition | 5 | | (247,000 | ) | | - | | | (5,018,338 | ) | | - | |
| Proceeds on disposals | 5 | | 110,708 | | | 73,048 | | | 6,131,622 | | | 365,961 | |
| Changes in other tax receivable | | | (114,625 | ) | | (38,179 | ) | | (930,782 | ) | | (768,894 | ) |
| Net cash provided by (used in) investing activities | | | 4,486,867 | | | 2,852,308 | | | (3,366,985 | ) | | (130,953 | ) |
| | | | | | | | | | | | | | |
| Financing activities | | | | | | | | | | | | | |
| Proceeds from issuance of common shares | | | 517,052 | | | 9,333 | | | 16,588,486 | | | 157,534 | |
| Net cash provided by financing activities | | | 517,052 | | | 9,333 | | | 16,588,486 | | | 157,534 | |
| Effect of exchange rate changes on cash and cash equivalents | | | 1,196,274 | | | (107,061 | ) | | 1,066,402 | | | (29,366 | ) |
| | | | | | | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | 5,442,605 | | | 375,336 | | | 11,212,906 | | | (3,264,450 | ) |
| Cash and cash equivalents, beginning of the period | | | 33,620,262 | | | 10,964,327 | | | 27,849,961 | | | 14,604,113 | |
| Cash and cash equivalents, end of the period | | $ | 39,062,867 | | $ | 11,339,663 | | $ | 39,062,867 | | $ | 11,339,663 | |
| Supplementary cash flow information | 14 | | | | | | | | | | | | |
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, 2018 | | | 132,349,479 | | $ | 124,164,312 | | $ | 23,440,856 | | $ | 3,987,952 | | $ | (48,910,109 | ) | $ | 102,683,011 | | $ | 147,422 | | $ | 102,830,433 | |
| Options exercised | | | 273,333 | | | 231,168 | | | (73,634 | ) | | - | | | - | | | 157,534 | | | - | | | 157,534 | |
| Share-based compensation | | | - | | | - | | | 544,795 | | | - | | | - | | | 544,795 | | | - | | | 544,795 | |
| Common shares issued to acquire mineral property | | | | | | | | | | | | | | | | | | | | | | | | | |
| interest | | | 250,000 | | | 395,313 | | | 920,287 | | | - | | | - | | | 1,315,600 | | | - | | | 1,315,600 | |
| Net loss | | | - | | | - | | | - | | | - | | | (279,104 | ) | | (279,104 | ) | | (7,705 | ) | | (286,809 | ) |
| Currency translation adjustment | | | - | | | - | | | - | | | 913,180 | | | - | | | 913,180 | | | (393 | ) | | 912,787 | |
| Balance, March 31, 2019 | | | 132,872,812 | | $ | 124,790,793 | | $ | 24,832,304 | | $ | 4,901,132 | | $ | (49,189,213 | ) | $ | 105,335,016 | | $ | 139,324 | | $ | 105,474,340 | |
| Options exercised | | | 60,000 | | | 51,659 | | | (18,659 | ) | | - | | | - | | | 33,000 | | | - | | | 33,000 | |
| Warrants exercised | | | 9,500,000 | | | 25,163,286 | | | (5,213,286 | ) | | - | | | - | | | 19,950,000 | | | - | | | 19,950,000 | |
| Share-based compensation | | | - | | | - | | | 377,703 | | | - | | | - | | | 377,703 | | | - | | | 377,703 | |
| Net loss | | | - | | | - | | | - | | | - | | | (2,141,800 | ) | | (2,141,800 | ) | | (144,146 | ) | | (2,285,946 | ) |
| Currency translation adjustment | | | - | | | - | | | - | | | (1,636,231 | ) | | - | | | (1,636,231 | ) | | (32,863 | ) | | (1,669,094 | ) |
| Balance, June 30, 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 | 9(b) | | 724,539 | | | 1,153,517 | | | (398,564 | ) | | - | | | - | | | 754,953 | | | - | | | 754,953 | |
| Common shares issued through bought deal financing | 9(e) | | 4,312,500 | | | 15,833,533 | | | - | | | - | | | - | | | 15,833,533 | | | - | | | 15,833,533 | |
| Share-based compensation | 9(b) | | - | | | - | | | 2,479,503 | | | - | | | - | | | 2,479,503 | | | - | | | 2,479,503 | |
| Common shares issued to acquire mineral property interest | 9(c) | | 291,000 | | | 460,144 | | | (460,144 | ) | | - | | | - | | | - | | | - | | | - | |
| Net loss | | | - | | | - | | | - | | | - | | | (2,047,019 | ) | | (2,047,019 | ) | | (16,193 | ) | | (2,063,212 | ) |
| Currency translation adjustment | | | - | | | - | | | - | | | 7,047,095 | | | - | | | 7,047,095 | | | 33,099 | | | 7,080,194 | |
| Balance, March 31, 2020 | | | 147,760,851 | | $ | 167,452,932 | | $ | 21,598,857 | | $ | 10,311,996 | | $ | (53,378,032 | ) | $ | 145,985,753 | | $ | (20,779 | ) | $ | 145,964,974 | |
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 and Canada. The Company is in the stage of exploring and developing its mineral properties and has not yet determined whether its mineral property interests contain economically recoverable mineral reserves. The underlying value and the recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral property interests, and future profitable production or proceeds from the disposition of the mineral property interests.
The Company is publicly listed on the TSX Venture Exchange (“TSX-V”) under the symbol “NUAG” and on the OTCQX Best Market in the United States under the symbol “NUPMF”. The head office, 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 IAS 34 – Interim Financial Reporting. 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, 2019. 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, 2019.
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 nine months ended March 31, 2020 were authorized for issue in accordance with a resolution of the Company’s board of directors (the “Board”) dated on May 24, 2020.
(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 | March 31, | June 30, | Mineral |
Name of subsidiaries | Principal activity | incorporation | 2020 | 2019 | 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 | 100% | N/A | |
Tagish Lake Gold Corp. | Mining company | Canada | 100% | 100% | TLG |
(i) British Virgin Islands ("BVI") | | | | | |
3. BONDS
The Company acquired bonds issued by other companies from various industries through the open market. These bonds were held to receive coupon interest payments as well as to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for operational or investment needs. The Company accounts for the bonds at fair value at each reporting date.
The continuity of bonds is summarized as follows:
| | | Amount | |
| Balance, July 1, 2018 | $ | 18,114,026 | |
| Interest earned | | 882,960 | |
| Gain on fair value change | | 631,809 | |
| Coupon payment | | (853,076 | ) |
| Disposition | | (7,700,006 | ) |
| Foreign currency translation impact | | (132,815 | ) |
| Balance, June 30, 2019 | $ | 10,942,898 | |
| Interest earned | | 349,281 | |
| Loss on fair value change | | (481,070 | ) |
| Coupon payment | | (333,208 | ) |
| Disposition | | (8,816,648 | ) |
| Foreign currency translation impact | | 355,600 | |
| Balance, March 31, 2020 | $ | 2,016,853 | |
Subsequent to March 31, 2020, certain bonds were disposed for proceeds of $1,463,879.
4. OTHER TAX RECEIVABLE
Other tax receivable composed 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 future VAT inputs that will be generated through sales.
Page | 7
5. EQUITY INVESTMENTS
Equity investments represent equity interests of other publicly traded or privately-held companies that the Company has acquired through 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:
| | | March 31, 2020 | | | June 30, 2019 | |
| Common or preferred shares | | | | | | |
| Public companies | $ | 4,118,520 | | $ | 4,443,963 | |
| Private companies | | 354,675 | | | 327,175 | |
| Warrants | | | | | | |
| Public companies | | 425,523 | | | 339,755 | |
| | $ | 4,898,718 | | $ | 5,110,893 | |
The fair values of the warrants were estimated using the Black Scholes options pricing model with the following assumptions:
| | | March 31, 2020 | | | June 30, 2019 | |
| Risk free interest rate | | 0.60% | | | 1.39% | |
| Expected volatility | | 124% | | | 130% | |
| Expected life of warrants in years | | 1.45 | | | 2.19 | |
The continuity of equity investments is summarized as follows:
| | | | | | Accumulated mark-to- | |
| | | | | | market gain included in net | |
| | | Fair value | | | income | |
| Balance, July 1, 2018 | $ | 5,758,627 | | $ | 3,112,656 | |
| Proceeds on disposal | | (570,561 | ) | | - | |
| Change in fair value | | (77,173 | ) | | (77,173 | ) |
| Balance, June 30, 2019 | $ | 5,110,893 | | $ | 3,035,483 | |
| Acquisition | | 5,018,338 | | | - | |
| Proceeds on disposal | | (6,131,622 | ) | | - | |
| Change in fair value | | 901,109 | | | 901,109 | |
| Balance, March 31, 2020 | $ | 4,898,718 | | $ | 3,936,592 | |
Page | 8
6. PLANT AND EQUIPMENT
| | | | | | | | | | | | Office | | | | | | | |
| | | Land and | | | | | | Motor | | | equipment and | | | Computer | | | | |
| Cost | | building | | | Machinery | | | vehicles | | | furniture | | | software | | | Total | |
| Balance, July 1, 2018 | $ | 890,754 | | $ | 1,316,781 | | $ | 238,827 | | $ | 188,342 | | $ | 126,272 | | $ | 2,760,976 | |
| Additions | | 833,931 | | | 68,060 | | | 115,041 | | | 44,382 | | | - | | | 1,061,414 | |
| Foreign currency translation impact | | (9,450 | ) | | (3,573 | ) | | (2,934 | ) | | (3,358 | ) | | (15 | ) | | (19,330 | ) |
| Balance, June 30, 2019 | $ | 1,715,235 | | $ | 1,381,268 | | $ | 350,934 | | $ | 229,366 | | $ | 126,257 | | $ | 3,803,060 | |
| Additions | | - | | | 52,173 | | | 39,870 | | | 73,594 | | | - | | | 165,637 | |
| Foreign currency translation impact | | 69,297 | | | 20,948 | | | 25,443 | | | 11,214 | | | 17 | | | 126,919 | |
| Balance, March 31, 2020 | $ | 1,784,532 | | $ | 1,454,389 | | $ | 416,247 | | $ | 314,174 | | $ | 126,274 | | $ | 4,095,616 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Accumulated depreciation and amortization | | | | | | | | | | | | | | | | | | |
| Balance as at July 1, 2018 | $ | (890,754 | ) | $ | (1,132,264 | ) | $ | (104,390 | ) | $ | (161,759 | ) | $ | (126,223 | ) | $ | (2,415,390 | ) |
| Depreciation and amortization | | - | | | (17,400 | ) | | (37,728 | ) | | (25,465 | ) | | - | | | (80,593 | ) |
| Foreign currency translation impact | | - | | | 409 | | | 880 | | | 2,424 | | | 13 | | | 3,726 | |
| Balance, June 30, 2019 | $ | (890,754 | ) | $ | (1,149,255 | ) | $ | (141,238 | ) | $ | (184,800 | ) | $ | (126,210 | ) | $ | (2,492,257 | ) |
| Depreciation and amortization | | - | | | (22,241 | ) | | (39,855 | ) | | (24,164 | ) | | - | | | (86,260 | ) |
| Foreign currency translation impact | | - | | | (4,106 | ) | | (8,085 | ) | | (5,262 | ) | | (14 | ) | | (17,467 | ) |
| Balance, March 31, 2020 | $ | (890,754 | ) | $ | (1,175,602 | ) | $ | (189,178 | ) | $ | (214,226 | ) | $ | (126,224 | ) | $ | (2,595,984 | ) |
| | | | | | | | | | | | | | | | | | | |
| Carrying amount | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2019 | $ | 824,481 | | $ | 232,013 | | $ | 209,696 | | $ | 44,566 | | $ | 47 | | $ | 1,310,803 | |
| Balance, March 31, 2020 | $ | 893,778 | | $ | 278,787 | | $ | 227,069 | | $ | 99,948 | | $ | 50 | | $ | 1,499,632 | |
7. 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 PotosíDepartment, in Southwestern Bolivia, 25 kilometres (“km”) northeast of Potosí City, the department capital. The Silver Sand Project covers an area of approximately 3.17 km2 at an elevation of 4,072 metres (“m”).
The Company has carried out extensive exploration and resource definition drill programs on its Silver Sand Project since acquisition in 2017. During the 2017-2018 discovery exploration drill campaign, a total of 195 holes in 55,012m of drilling were completed. During the 2019 resource definition drill campaign, a total of 191 drill holes in 42,607m of drilling were completed. In total since project inception, the Company completed 97,619m of drilling in 386 drill holes. On April 14, 2020, the Company released the inaugural independent National Instrument 43-101 (“NI 43-101”) Mineral Resource estimate for its 100% owned Silver Sand Project. Using a 45 g/t silver cut-off-grade the estimate reported Measured & Indicated tonnes of 35.39 Mt @ 137 g/t Ag for 155.86 Moz and Inferred tonnes of 9.84 Mt @ 112 g/t Ag for 35.55 Moz., or approximately 70% of the resource estimate.
For the three and nine months ended March 31, 2020, total expenditures of $2,395,286 and $10,932,321, respectively (three and nine months ended March 31, 2019 - $1,040,108 and $7,634,047, respectively) were capitalized under the project for expenditures related to the 2019 drill campaign, site and camp service and construction, and maintaining a regional office in La Paz, a management team, and workforce for the project.
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As part of the Silver Sand Project’s expansion plan, the Company entered into a mining production contract (the “MPC”) in January 2019 with Corporación Minera de Bolivia (“COMIBOL”) to explore and potentially develop and mine the area adjoining the Silver Sand Project. The MPC remains subject to ratification by the Plurinational Legislative Assembly of Bolivia. As of the date of these unaudited condensed consolidated interim financial statements, the MPC has not been ratified nor approved by the Plurinational Legislative Assembly of Bolivia. Given the political instability and social unrest in Bolivia following the general elections held on October 20, 2019, there is no assurance that the Company will be successful in obtaining ratification of the MPC in a timely manner or at all, or that they will be obtained on reasonable terms. The Company cannot predict the government’s positions on foreign investment, mining concessions, land tenure, environmental regulation, community relations, or taxation. A change in government positions on these issues could adversely affect the ratification of the MPC and the Company’s business.
In July 2018, the Company entered into an agreement with third party private owners to acquire their 100% interest in certain mineral concessions located subjacent to the Silver Sand Project by cash payments of $1,315,600 (US$1,000,000) and issuance of 832,000 common shares (see note 9 (c)). During Fiscal 2019, cash payments of $657,800 (US$500,000) were paid and 250,000 common shares were issued to the vendors. During the nine months ended March 31, 2020, cash payments of $394,680 (US$300,000) were paid and 291,000 common shares were issued to the vendors. Future cash payments of $263,120 (US$200,000) were accrued as payable for mineral property acquisition as at March 31, 2020.
In December 2019, the Company further expanded its Silver Sand land package by acquiring a 100% interest in a Special Temporary Authorization (“ATE”) located immediately to the north of the project by making a one-time cash payment of $267,720 (US$200,000) to arm’s length private owners. This newly acquired ATE currently consists of six hectares but will total approximately 0.50 km2 once it has been consolidated to concessions called “Cuadriculas” and converted to Mining Administrative Contract with Bolivia’s Jurisdictional Mining Administrative Authority (Autoridad Jurisdiccional Administrativa Minera or “AJAM”).
(b) Silverstrike Project
In December 2019, the Company announced the acquisition of a 98% interest in the Silverstrike Project from an arm’s length private Bolivian corporation (the “Vendor”) by making a one-time cash payment of $1,782,270 (US$1,350,000). Under the agreement signed between the Company’s wholly-owned subsidiary and the Vendor, the Company will cover 100% of the future expenditures of exploration, mining, development and production activities. The agreement has a term of 30 years and renewable for another 15 years without any payment and is subject to approval by AJAM.
The Silverstrike Project, at an elevation of 4,000 to 4,500m, is located approximately 140 km southwest of La Paz, Bolivia. The Silverstrike Project consists of nine ATEs with an area of approximately 13km² currently in the process of conversion to Mining Administrative Contracts before AJAM. The Vendor has also applied for exploration rights over areas surrounding the Silverstrike Project as part of the transaction.
For the three and nine months ended March 31, 2020, total expenditures of $421,925 and $427,127, respectively (three and nine months ended March 31, 2019 - $nil and $nil, respectively) were capitalized under the project for expenditures related to camp service and maintaining a management team and workforce for the project.
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(c) Tagish Lake Gold Project
The Tagish Lake Gold Project, covering an area of 166 km2, is located in Yukon Territory, Canada, and consists of 1,051 mining claims with three identified gold and gold-silver mineral deposits: Skukum Creek, Goddell Gully and Mount Skukum.
(d) RZY Project
The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project, situated on a high plateau with an average elevation of 5,000m above sea level. The RZY Project is located approximately 237 km via paved and gravel roads from the city of Yushu Tibetan Autonomous Prefecture, or 820 km via paved highway 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 the nine months ended March 31, 2020, the Company’s subsidiary, Qinghai Found, reached a compensation agreement (the “Agreement”) with the Qinghai Government for the RZY Project. Pursuant to the Agreement, Qinghai Found will surrender its title of 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 March 31, 2020, the Company completed the reclamation works for a cost of approximately $200,000, and they are currently under review and subject to approval by the Qinghai Government.
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, 2018 | $ | 60,374,656 | | $ | - | | $ | - | | $ | 4,488,108 | | $ | 64,862,764 | |
| Capitalized exploration expenditures | | | | | | | | | | | | | | | |
| Drilling and assaying | | 6,978,112 | | | - | | | - | | | - | | | 6,978,112 | |
| Project management and support | | 2,980,841 | | | - | | | - | | | - | | | 2,980,841 | |
| Camp service | | 742,163 | | | - | | | - | | | - | | | 742,163 | |
| Geological surveys | | 4,170 | | | - | | | - | | | - | | | 4,170 | |
| Permitting | | 7,401 | | | - | | | - | | | - | | | 7,401 | |
| Acquisition of mineral concessions | | 2,631,200 | | | - | | | - | | | - | | | 2,631,200 | |
| Other | | 13,237 | | | - | | | - | | | - | | | 13,237 | |
| Impairment | | - | | | - | | | - | | | (779,823 | ) | | (779,823 | ) |
| Foreign currency impact | | (450,362 | ) | | - | | | - | | | (173,621 | ) | | (623,983 | ) |
| Balance, June 30, 2019 | $ | 73,281,418 | | $ | - | | $ | - | | $ | 3,534,664 | | $ | 76,816,082 | |
| Capitalized exploration expenditures | | | | | | | | | | | | | | | |
| Reporting and assessment | | 493,948 | | | 974 | | | - | | | - | | | 494,922 | |
| Drilling and assaying | | 6,433,060 | | | - | | | - | | | - | | | 6,433,060 | |
| Project management and support | | 3,311,015 | | | 403,082 | | | - | | | - | | | 3,714,097 | |
| Camp service | | 594,415 | | | 23,072 | | | - | | | - | | | 617,487 | |
| Camp construction | | 32,064 | | | - | | | - | | | - | | | 32,064 | |
| Permitting | | 41,249 | | | - | | | - | | | - | | | 41,249 | |
| Acquisition of Silverstrike Project | | - | | | 1,782,270 | | | - | | | - | | | 1,782,270 | |
| Acquisition of mineral concessions | | 276,020 | | | - | | | - | | | - | | | 276,020 | |
| Other | | 26,570 | | | - | | | - | | | - | | | 26,570 | |
| Foreign currency impact | | 6,404,513 | | | 137,051 | | | - | | | 178,032 | | | 6,719,596 | |
| Balance, March 31, 2020 | $ | 90,894,272 | | $ | 2,346,449 | | $ | - | | $ | 3,712,696 | | $ | 96,953,417 | |
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8. RELATED PARTY TRANSACTIONS
Related party transactions are made on terms agreed upon by 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 | | March 31, 2020 | | | June 30, 2019 | |
| Silvercorp Metals Inc. | $ | 132,739 | | $ | 89,189 | |
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 nine months ended March 31, 2020, the Company were $151,288 and $575,635, respectively (three and nine months ended March 31, 2019 - $93,204 and $221,463, respectively).
9. SHARE CAPITAL
(a) Share Capital - authorized share capital
Unlimited number of common shares without par value.
(b) Share-based compensation
The Company has a share-based compensation plan (the “Plan”) which consists of stock options, restricted share units (the “RSUs”) and performance share units (the “PSUs”). The Plan allows for the maximum number of common shares to be reserved for issuance on any share-based compensation to be a rolling 10% of the issued and outstanding common shares from time to time. Furthermore, no more than 3,500,000 shares may be granted in the form of RSUs and no more than 780,000 shares may be granted in the form of PSUs.
For the three and nine months ended March 31, 2020, a total of $705,653 and $1,294,734, respectively (three and nine months ended March 31, 2019 - $218,964 and $544,795, respectively) were recorded as share-based compensation expense. For the three and nine months ended March 31, 2020, a total of $791,318 and $1,184,768, respectively (three and nine months ended March 31, 2019 - $nil and $nil, respectively) were capitalized under mineral property interests.
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(i) Stock Options
The continuity schedule of stock options, as at March 31, 2020, is as follows:
| | | | | | Weighted average | |
| | | Number of options | | | exercise price | |
| Balance, July 1, 2018 | | 4,145,000 | | | 0.87 | |
| Options granted | | 2,155,000 | | | 2.16 | |
| Options exercised | | (333,333 | ) | | 0.57 | |
| Options cancelled | | (11,667 | ) | | 0.89 | |
| Options expired | | (50,000 | ) | | 0.57 | |
| Balance, June 30, 2019 | | 5,905,000 | | | 1.36 | |
| Options exercised | | (724,539 | ) | | 1.04 | |
| Options cancelled | | (237,500 | ) | | 2.01 | |
| Balance, March 31, 2020 | | 4,942,961 | | | 1.38 | |
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-V.
The following table summarizes information about stock options outstanding as at March 31, 2020:
| | Number of options | Weighted | Number of options | Weighted |
| Exercise | outstanding as at | average remaining | exercisable as at | average |
| prices | 3/31/2020 | contractual life (years) | 3/31/2020 | exercise price |
$ | 0.55 | 1,414,600 | 1.59 | 1,414,600 | $0.55 |
| 1.15 | 1,421,667 | 2.33 | 1,129,166 | $1.15 |
| 1.57 | 200,000 | 2.69 | 133,333 | $1.57 |
| 2.15 | 1,906,694 | 3.90 | 603,357 | $2.15 |
| 0.55 - 2.15 | 4,942,961 | 2.74 | 3,280,456 | $1.09 |
Subsequent to March 31, 2020, a total of 123,527 options with exercise price from $0.55 to $2.15 were exercised for proceeds of $240,283.
(ii) RSUs
The continuity schedule of RSUs, as at March 31, 2020, is as follows:
| | | Number of shares | | | Weighted average
grant date closing
price per share $CAD | |
| Balance, July 1, 2019 | | - | | $ | - | |
| Granted | | 1,064,600 | | | 4.70 | |
| Balance, March 31, 2020 | | 1,064,600 | | $ | 4.70 | |
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During the nine months ended March 31, 2020, a total of 1,064,600 RSUs were granted to directors, officers, employees, and consultants of the Company at grant date closing price of CAD$4.70 per share subject to a vesting schedule over a two-year term with 25% of the RSUs vesting every six months from the date of grant.
(c) Common Shares Issued for Mineral Property Interest
As part of the consideration given to acquire certain mineral concessions located adjacent to the Silver Sand Property (see note 7(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 nine months ended March 31, 2020, 291,000 common shares valued at $460,144 (nine months ended March 31, 2019 – 250,000 common shares valued at $395,313) were issued and recorded under share capital. The future issuance of 291,000 shares valued at $460,143 has been recorded under share-based payment reserve.
(e) Bought Deal Financing
On October 25, 2019, the Company successfully closed a bought deal financing underwritten by BMO Capital Markets (“BMO”) to issue a total of 4,312,500 common shares at a price of $4.00 per common share for gross proceeds of $17,250,000. The underwriter’s fee and other issuance costs for the transaction were $1,416,467.
Subsequent to March 31, 2020, on May 19, 2020, the Company announced that it has entered into an agreement with BMO as sole underwriter to issue a total of 4,238,000 common shares at a price of $5.90 per common share for estimated gross proceeds of $25 million (the “Offering”). The Company has granted BMO an option, exercisable at the offering price for a period of 30 days following the closing of the Offering, to purchase up to an additional 15% of the Offering to cover over-allotments, if any. The Offering is expected to close on or about June 9, 2020.
10. NON-CONTROLLING INTEREST
| | | Qinghai Found | |
| Balance, July 1, 2018 | $ | 147,422 | |
| Share of net loss | | (151,851 | ) |
| Share of other comprehensive loss | | (33,256 | ) |
| Balance, June 30, 2019 | $ | (37,685 | ) |
| Share of net loss | | (16,193 | ) |
| Share of other comprehensive income | | 33,099 | |
| Balance, March 31, 2020 | $ | (20,779 | ) |
As at March 31, 2020 and June 30, 2019, the non-controlling interest in the Company’s subsidiary Qinghai Found Mining Co., Ltd. was 18%.
11. 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.
Page | 14
(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 7 – Financial Instruments: Disclosures (“IFRS 7”).
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.
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 March 31, 2020 and June 30, 2019 that are not otherwise disclosed. As required by IFRS 7, 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 March 31, 2020 | |
| Recurring measurements | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Financial Assets | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 39,062,867 | | $ | - | | $ | - | | $ | 39,062,867 | |
| Bonds | | 2,016,853 | | | - | | | - | | | 2,016,853 | |
| Common or preferred shares(1) | | 4,118,520 | | | - | | | 354,675 | | | 4,473,195 | |
| Warrants | | - | | | 425,523 | | | - | | | 425,523 | |
(1) Common shares in private companies are Level 3 financial instruments
| | | Fair value as at June 30, 2019 | |
| Recurring measurements | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Financial Assets | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 27,849,961 | | $ | - | | $ | - | | $ | 27,849,961 | |
| Bonds | | 10,942,898 | | | - | | | - | | | 10,942,898 | |
| Common shares(1) | | 4,443,963 | | | - | | | 327,175 | | | 4,771,138 | |
| Preferred shares | | - | | | - | | | - | | | - | |
| Warrants | | - | | | 339,755 | | | - | | | 339,755 | |
(1) Common shares in private companies are Level 3 financial instruments
Fair value of other financial instruments excluded from the table above approximates their carrying amount as of March 31, 2020 and June 30, 2019, respectively.
There were no transfers into or out of Level 3 during the period.
Page | 15
(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 March 31, 2020, the Company had a working capital position of $39,652,082 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:
| | | March 31, 2020 | | | June 30, 2019 | |
| | | Due within a year | | | Total | | | Total | |
| Trade and other payables | $ | 1,619,015 | | $ | 1,619,015 | | $ | 1,621,403 | |
| Due to a related party | | 132,739 | | | 132,739 | | | 89,189 | |
| Payable for mineral property acquisition | | 263,120 | | | 263,120 | | | 657,800 | |
| | $ | 2,014,874 | | $ | 2,014,874 | | $ | 2,368,392 | |
(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 currently does not engage in foreign exchange currency hedging. The Company’s exposure to foreign exchange risk is summarized as follows:
| The amounts are expressed in CAD equivalents | | March 31, 2020 | | | June 30, 2019 | |
| United States dollars | $ | 16,929,666 | | $ | 17,615,304 | |
| Bolivianos | | 564,872 | | | 191,204 | |
| Chinese RMB | | 246,339 | | | 191,645 | |
| Financial assets in foreign currency | $ | 17,740,877 | | $ | 17,998,153 | |
| | | | | | | |
| United States dollars | $ | 774,422 | | $ | 1,330,481 | |
| Chinese RMB | | 144,746 | | | 4,258 | |
| Financial liabilities in foreign currency | $ | 919,168 | | $ | 1,334,739 | |
As at March 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 $161,500.
As at March 31, 2020, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the CAD would have increased (decreased) net income by approximately $5,650.
As at March 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.
Page | 16
(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 March 31, 2020. The Company also owns bonds that earn coupon 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 meets 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 March 31, 2020, the Company had a receivables balance of $398,889 (June 30, 2019 - $259,600).
(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 March 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 $490,000.
12. CAPITAL MANAGEMENT
The Company’s objectives of capital management are intended to safeguard the entity’s ability to support the Company’s normal exploration and operating requirement on an ongoing basis, continue the investment in high quality assets along with safeguarding the value of its development and exploration 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 of Directors. 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.
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In addition, the current outbreak of COVID-19 has caused significant disruption to global economic conditions which may adversely impact the Company’s results. Moreover, COVID-19 has also negatively impacted on the stock markets which could adversely impact the Company’s ability to raise capital.
13. SEGMENTED INFORMATION
The Company operates in four reportable operating segments, one being the corporate segment; the others being the mining segments focused on safeguarding the value of its exploration and development mineral properties in Bolivia, Canada, and China. 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.
(a) Segment information for assets and liabilities are as follows:
| | | | March 31, 2020 | |
| | | | Corporate | | | Mining | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Cash and cash equivalents | | $ | 37,692,384 | | $ | 800,717 | | $ | 512,349 | | $ | 57,417 | | $ | 39,062,867 | |
| Bonds | | | 2,016,853 | | | - | | | - | | | - | | | 2,016,853 | |
| Equity investments | | | 4,898,718 | | | - | | | - | | | - | | | 4,898,718 | |
| Plant and equipment | | | 71,100 | | | 1,404,944 | | | - | | | 23,588 | | | 1,499,632 | |
| Mineral property interests | | | - | | | 93,240,721 | | | - | | | 3,712,696 | | | 96,953,417 | |
| Other assets | | | 96,193 | | | 3,238,690 | | | 15,833 | | | 197,645 | | | 3,548,361 | |
| Total Assets | | $ | 44,775,248 | | $ | 98,685,072 | | $ | 528,182 | | $ | 3,991,346 | | $ | 147,979,848 | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | $ | (944,395 | ) | $ | (797,373 | ) | $ | (128,361 | ) | $ | (144,745 | ) | $ | (2,014,874 | ) |
| | | | June 30, 2019 | |
| | | | Corporate | | | Mining | | | | |
| | | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Cash and cash equivalents | | $ | 27,372,635 | | $ | 384,332 | | $ | 29,886 | | $ | 63,108 | | $ | 27,849,961 | |
| Bonds | | | 10,942,898 | | | - | | | - | | | - | | | 10,942,898 | |
| Equity investments | | | 5,110,893 | | | - | | | - | | | - | | | 5,110,893 | |
| Plant and equipment | | | 32,714 | | | 1,255,631 | | | - | | | 22,458 | | | 1,310,803 | |
| Mineral property interests | | | - | | | 73,281,417 | | | - | | | 3,534,665 | | | 76,816,082 | |
| Other assets | | | 66,138 | | | 1,999,715 | | | 15,199 | | | 136,706 | | | 2,217,758 | |
| Total Assets | | $ | 43,525,278 | | $ | 76,921,095 | | $ | 45,085 | | $ | 3,756,937 | | $ | 124,248,395 | |
| | | | | | | | | | | | | | | | | |
| Total Liabilities | | $ | (921,806 | ) | $ | (1,330,481 | ) | $ | (111,847 | ) | $ | (4,258 | ) | $ | (2,368,392 | ) |
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(b) Segment information for operating results are as follows:
| | | Three months ended March 31, 2020 | |
| | | | | | Mining | | | | |
| | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Loss on equity investments | $ | (1,424,696 | ) | $ | - | | $ | - | | $ | - | | $ | (1,424,696 | ) |
| Fair value change and interest earned on bonds | | (243,309 | ) | | - | | | - | | | - | | | (243,309 | ) |
| Dividend income | | 68,255 | | | - | | | - | | | - | | | 68,255 | |
| Interest income | | 4,748 | | | - | | | - | | | 46 | | | 4,794 | |
| | | (1,595,002 | ) | | - | | | - | | | 46 | | | (1,594,956 | ) |
| Salaries and benefits | | 365,257 | | | - | | | 14,676 | | | 16,831 | | | 396,764 | |
| Share-based compensation | | 705,653 | | | - | | | - | | | - | | | 705,653 | |
| Other operating expenses | | 406,596 | | | - | | | 15,226 | | | 8,609 | | | 430,431 | |
| Loss before other income and expenses | | (3,072,508 | ) | | - | | | (29,902 | ) | | (25,394 | ) | | (3,127,804 | ) |
| | | | | | | | | | | | | | | | |
| Foreign exchange gain | | 1,390,043 | | | - | | | 56 | | | 1 | | | 1,390,100 | |
| Other income (expense) | | 15,000 | | | - | | | (15,000 | ) | | - | | | - | |
| Net loss | $ | (1,667,465 | ) | $ | - | | $ | (44,846 | ) | $ | (25,393 | ) | $ | (1,737,704 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | (1,667,465 | ) | $ | - | | $ | (44,846 | ) | $ | (20,822 | ) | $ | (1,733,133 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (4,571 | ) | | (4,571 | ) |
| Net loss | $ | (1,667,465 | ) | $ | - | | $ | (44,846 | ) | $ | (25,393 | ) | $ | (1,737,704 | ) |
| | | Three months ended March 31, 2019 | |
| | | Corporate | | | Mining | | | | |
| | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Gain on equity investments | $ | 464,481 | | $ | - | | $ | - | | $ | - | | $ | 464,481 | |
| Fair value change and interest earned on bonds | | 1,064,994 | | | - | | | - | | | - | | | 1,064,994 | |
| Dividend income | | 14,160 | | | - | | | - | | | - | | | 14,160 | |
| Interest income | | 8,742 | | | - | | | - | | | 69 | | | 8,811 | |
| | | 1,552,377 | | | - | | | - | | | 69 | | | 1,552,446 | |
| Salaries and benefits | | 232,950 | | | - | | | - | | | 19,163 | | | 252,113 | |
| Share-based compensation | | 218,964 | | | - | | | - | | | - | | | 218,964 | |
| Other operating expenses | | 595,030 | | | 7,899 | | | 35,190 | | | 18,987 | | | 657,106 | |
| Income (Loss) before other income and expenses | | 505,433 | | | (7,899 | ) | | (35,190 | ) | | (38,081 | ) | | 424,263 | |
| | | | | | | | | | | | | | | | |
| Foreign exchange (loss) gain | | (431,530 | ) | | 1 | | | - | | | 37 | | | (431,492 | ) |
| Other income (expense) | | 15,000 | | | 22 | | | (15,000 | ) | | - | | | 22 | |
| Net income (loss) | $ | 88,903 | | $ | (7,876 | ) | $ | (50,190 | ) | $ | (38,044 | ) | $ | (7,207 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | 88,903 | | $ | (7,876 | ) | $ | (50,190 | ) | $ | (31,196 | ) | $ | (359 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (6,848 | ) | | (6,848 | ) |
| Net income (loss) | $ | 88,903 | | $ | (7,876 | ) | $ | (50,190 | ) | $ | (38,044 | ) | $ | (7,207 | ) |
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| | | Nine months ended March 31, 2020 | |
| | | Corporate | | | Mining | | | | |
| | | Canada and BVI | | | Bolivia | | | Canada | | | China | | | Total | |
| Gain on equity investments | $ | 901,109 | | $ | - | | $ | - | | $ | - | | $ | 901,109 | |
| Fair value change and interest earned on bonds | | (131,789 | ) | | - | | | - | | | - | | | (131,789 | ) |
| Dividend income | | 68,255 | | | - | | | - | | | - | | | 68,255 | |
| Interest income | | 22,393 | | | - | | | - | | | 178 | | | 22,571 | |
| | | 859,968 | | | - | | | - | | | 178 | | | 860,146 | |
| | | | | | | | | | | | | | | | |
| Salaries and benefits | | 1,160,595 | | | - | | | 14,676 | | | 50,050 | | | 1,225,321 | |
| Share-based compensation | | 1,294,734 | | | - | | | - | | | - | | | 1,294,734 | |
| Other operating expenses | | 1,479,191 | | | - | | | 127,456 | | | 40,219 | | | 1,646,866 | |
| Loss before other income and expenses | | (3,074,552 | ) | | - | | | (142,132 | ) | | (90,091 | ) | | (3,306,775 | ) |
| | | | | | | | | | | | | | | | |
| Foreign exchange gain | | 1,243,374 | | | - | | | 56 | | | 133 | | | 1,243,563 | |
| Other income (expense) | | 45,000 | | | - | | | (45,000 | ) | | - | | | - | |
| Net loss | $ | (1,786,178 | ) | $ | - | | $ | (187,076 | ) | $ | (89,958 | ) | $ | (2,063,212 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | (1,786,178 | ) | $ | - | | $ | (187,076 | ) | $ | (73,765 | ) | $ | (2,047,019 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (16,193 | ) | | (16,193 | ) |
| Net loss | $ | (1,786,178 | ) | $ | - | | $ | (187,076 | ) | $ | (89,958 | ) | $ | (2,063,212 | ) |
| | | Nine months ended March 31, 2019 | |
| | | Corporate | | | Mining | | | | |
| | | Canada | | | Bolivia | | | Canada | | | China | | | Total | |
| Gain on equity investments | $ | 250,049 | | $ | - | | $ | - | | $ | - | | $ | 250,049 | |
| Fair value change and interest earned on bonds | | 1,420,156 | | | - | | | - | | | - | | $ | 1,420,156 | |
| Dividend income | | 41,466 | | | - | | | - | | | - | | $ | 41,466 | |
| Interest income | | 23,713 | | | - | | | - | | | 185 | | $ | 23,898 | |
| | | 1,735,384 | | | - | | | - | | | 185 | | | 1,735,569 | |
| | | | | | | | | | | | | | | | |
| Salaries and benefits | | 660,694 | | | - | | | - | | | 51,083 | | | 711,777 | |
| Share-based compensation | | 544,795 | | | - | | | - | | | - | | | 544,795 | |
| Other operating expenses (income) | | 892,648 | | | 31,601 | | | 141,687 | | | (4,330 | ) | | 1,061,606 | |
| Loss before other income and expenses | | (362,753 | ) | | (31,601 | ) | | (141,687 | ) | | (46,568 | ) | | (582,609 | ) |
| | | | | | | | | | | | | | | | |
| Foreign exchange gain | | 285,179 | | | - | | | - | | | 3,766 | | | 288,945 | |
| Other income (expense) | | 45,000 | | | 5,474 | | | (43,619 | ) | | - | | | 6,855 | |
| Net loss | $ | (32,574 | ) | $ | (26,127 | ) | $ | (185,306 | ) | $ | (42,802 | ) | $ | (286,809 | ) |
| | | | | | | | | | | | | | | | |
| Attributed to: | | | | | | | | | | | | | | | |
| Equity holders of the Company | $ | (32,574 | ) | $ | (26,127 | ) | $ | (185,306 | ) | $ | (35,097 | ) | $ | (279,104 | ) |
| Non-controlling interests | | - | | | - | | | - | | | (7,705 | ) | $ | (7,705 | ) |
| Net loss | $ | (32,574 | ) | $ | (26,127 | ) | $ | (185,306 | ) | $ | (42,802 | ) | $ | (286,809 | ) |
14. SUPPLEMENTARY CASH FLOW INFORMATION
| Changes in non-cash operating working capital: | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Receivables | $ | 7,695 | | $ | (68,699 | ) | $ | (117,160 | ) | $ | (134,477 | ) |
| Deposits and prepayments | | 20,668 | | | 16,886 | | | (36,691 | ) | | (81,222 | ) |
| Accounts payable and accrued liabilities | | (43,924 | ) | | (1,434,910 | ) | | (192,461 | ) | | (1,373,927 | ) |
| Due to a related party | | 8,707 | | | (9,320 | ) | | 43,550 | | | 20,048 | |
| | $ | (6,854 | ) | $ | (1,496,043 | ) | $ | (302,762 | ) | $ | (1,569,578 | ) |
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