(An exploration and development company)
INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
Dated: November 12, 2020
| Note 1 : Nature of operations | 7 |
| Note 2 : Basis of presentation | 8 |
| a) | Statement of compliance | 8 |
| b) | Basis of preparation and consolidation | 9
|
| c) | Critical accounting judgments and estimates | 9
|
| Note 3 : Mineral property interests | 10 |
| a) | Nunavut exploration projects | 10 |
| b) | Homestake Ridge | 10 |
| c) | Peruvian exploration projects | 10 |
| d) | Costs capitalized as mineral property interests | 13 |
| Note 4 : Flow-through share premium liability | 13 |
| Note 5 : Bridge loan | 13 |
| Note 6 : Provision for site reclamation and closure | 15 |
| Note 7 : Exploration and evaluation costs | 16 |
| Note 8 : Share capital | 17 |
| a) | Authorized | 17 |
| b) | Share issuances | 18 |
| c) | Share consolidation | 18 |
| Note 9 : Share option and warrant reserves | 19 |
| a) | Share-based payments | 19 |
| b) | Share purchase warrants | 20 |
| Note 10 : Related party balances and transactions | 20 |
| a) | Related parties | 21 |
| b) | Compensation of key management personnel | 21 |
| Note 11 : Supplemental cash flow information | 22 |
| Note 12 : Segmented information | 22 |
| Note 13 : Loss per share | 22 |
| Note 14 : Financial instruments | 23 |
| Note 15 : Subsequent events | 24 |
Fury Gold Mines Limited Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Fury Gold Mines Limited | | | | |
Condensed Consolidated Interim Statements of Financial Position |
| Unaudited (Expressed in thousands of Canadian dollars) |
| | | |
| | |
| Assets | | |
| Current assets: | | |
| Cash | $7,645 | $660 |
| Marketable securities | 385 | 346 |
| Amounts receivable | 779 | 55 |
| Prepaid expenses and deposits | 3,068 | 651 |
| | 11,877 | 1,712 |
| | | |
| Non-current assets: | | |
| Restricted cash | 115 | 115 |
| Prepaid expenses and deposits | 122 | 149 |
| Mineral property interests (Note 3) | 44,236 | 39,714 |
| Equipment | 1,087 | 1,272 |
| | 45,560 | 41,250 |
| Total assets | $57,437 | $42,962 |
| | | |
| | | |
| Liabilities and Equity | | |
| Liabilities | | |
| Current liabilities: | | |
| Accounts payable and accrued liabilities | $2,173 | $1,067 |
| Flow-through share premium liability (Note 4) | – | 7 |
| Bridge loan (Note 5) | – | 2,931 |
| | 2,173 | 4,005 |
| | | |
| Non-current liabilities: | | |
| Provision for site reclamation and closure (Note 6) | 2,298 | 2,134 |
| Total liabilities | $4,471 | $6,139 |
| | | |
| Equity: | | |
| Share capital | $155,582 | $129,413 |
| Share option and warrant reserve | 8,728 | 9,992 |
| Accumulated other comprehensive income | 207 | 22 |
| Deficit | (111,551) | (102,604) |
| Total equity | $52,966 | $36,823 |
| Total liabilities and equity | $57,437 | $42,962 |
Subsequent events (Note 1, Note 15)
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Fury Gold Mines Limited Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Fury Gold Mines Limited | | | | |
| Condensed Consolidated Interim Statements of Loss and Comprehensive Loss |
| Unaudited (Expressed in thousands of Canadian dollars, except per share amounts) |
| Three months ended September 30, | Nine months ended September 30, |
| | | | |
| Operating expenses | | | | |
| Exploration and evaluation costs (Note 7) | $2,164 | $3,335 | $3,989 | $6,535 |
| Fees, salaries and other employee benefits | 707 | 839 | 2,010 | 3,240 |
| Insurance | 103 | 76 | 266 | 229 |
| Legal and professional fees | 138 | 58 | 325 | 230 |
| Marketing and investor relations | 176 | 214 | 1,034 | 906 |
| Office and administration | 152 | 85 | 418 | 338 |
| Regulatory, transfer agent and shareholder information | 168 | 38 | 285 | 182 |
| | 3,608 | 4,645 | 8,327 | 11,660 |
| | | | | |
| Other expenses (income): | | | | |
| Project investigation costs | 16 | 18 | 172 | 104 |
| Accretion of provision for site reclamation and closure (Note 6) | 5 | 10 | 22 | 32 |
| Interest and other income | (14) | (14) | (65) | (34) |
| Finance expense related to loan | 10 | 26 | 259 | 26 |
| Amortization of flow-through share premium (Note 4) | – | (733) | (7) | (843) |
| Gain (loss) on marketable securities | 26 | 13 | (40) | (40) |
| Loss on conversion and amendment of bridge loan (Note 5) | 65 | – | 224 | – |
| Foreign exchange loss | 43 | 7 | 55 | 38 |
| | 151 | (673) | 620 | (717) |
| Net loss before income taxes | 3,759 | 3,972 | 8,947 | 10,943 |
| Deferred income tax recovery (Note 5) | 57 | (54) | – | (54) |
| Loss for the period | $3,816 | $3,918 | $8,947 | $10,889 |
| | | | | |
| Other comprehensive loss (income), net of tax |
| Items that may be reclassified subsequently to profit or loss: |
| Unrealized currency loss (gain) on translation of foreign operations | 19 | (47) | (185) | 121 |
| Other comprehensive loss (income) for the period | 19 | (47) | (185) | 121 |
| Total comprehensive loss for the period | $3,835 | $3,871 | $8,762 | $11,010 |
| Basic and diluted loss per share (Note 13) | $0.05 | $0.06 | $0.12 | $0.17 |
| Basic and diluted weighted average number of shares outstanding (Note 13) | 70,392,736 | 64,252,771 | 72,758,821 | 63,201,950 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Fury Gold Mines Limited Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Fury Gold Mines Limited | | | | | | |
| Condensed Consolidated Interim Statements of Equity |
| Unaudited (Expressed in thousands of Canadian dollars, except share amounts) |
| | | | Share option and warrant reserve | Accumulated other comprehensive income (loss) | | |
| Balance at December 31, 2018 | 61,068,264 | $121,988 | $6,937 | $225 | $(88,671) | $40,479 |
| | | | | | | |
Comprehensive loss for the period | – | – | – | (121) | (10,889) | (11,010) |
Shares issued pursuant to offering, net of share issue costs and flow-through liability | 2,646,902 | 6,350 | – | – | – | 6,350 |
Share options exercised (Note 8b) iv) | 592,439 | 959 | (457) | - | - | 502 |
Fair value of warrants issued, net of tax | - | - | 144 | - | - | 144 |
| – | – | 2,843 | – | – | 2,843 |
| 64,307,605 | $129,297 | $9,467 | $104 | $(99,560) | $39,308 |
| 64,340,963 | $129,413 | $9,992 | $22 | $(102,604) | $36,823 |
| – | – | – | 185 | (8,947) | (8,762) |
Shares issued pursuant to offering, net of share issue costs (Note 8b) iii) | 6,333,984 | 14,753 | – | – | – | 14,753 |
Shares issued upon conversion of Amended Bridge Loan (Note 8b) ii) | 1,318,877 | 3,334 | – | – | – | 3,334 |
Shares issued pursuant to Alturas option (Note 8b) i) | 743,187 | 3,036 | – | – | – | 3,036 |
Share options exercised (Note 8b) iv) | 1,428,525 | 5,046 | (1,917) | – | – | 3,129 |
Share-based compensation (Note 9a) | – | – | 653 | – | – | 653 |
Balance at September 30, 2020 | 74,165,536 | $155,582 | $8,728 | $207 | $(111,551) | $52,966 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Share information has been updated retroactively to reflect the share consolidation, see Note 8c.
Fury Gold Mines Limited | | | | |
| Condensed Consolidated Interim Statements of Cash Flows | |
| Unaudited (Expressed in thousands of Canadian dollars) |
| Three months ended September 30, | Nine months ended September 30, |
| | | | |
| Cash (used in) provided by: | | | | |
| Operating activities: | | | | |
| Loss for the period | $(3,816) | $(3,918) | $(8,947) | $(10,889) |
| Items not involving cash: | | | | |
| Interest and other income | (14) | (14) | (65) | (34) |
| Accretion of provision for site reclamation and closure (Note 6) | 5 | 10 | 22 | 32 |
| Finance expense related to loan | 10 | 26 | 259 | 26 |
| Gain (loss) on marketable securities | 26 | 13 | (40) | (40) |
| Loss on conversion and amendment of bridge loan (Note 5) | 65 | – | 224 | – |
| Amortization of flow-through share premium (Note 4) | – | (733) | (7) | (843) |
| Unrealized foreign exchange loss (gain) | 25 | – | 30 | (3) |
| Share-based compensation (Note 9a) | 116 | 744 | 653 | 2,843 |
| Depreciation of fixed assets | 61 | 62 | 185 | 189 |
| Deferred income tax recovery (Note 5) | 57 | (54) | – | (54) |
| Changes in non-cash working capital: | | | | |
| Amounts receivable | (520) | (52) | (722) | (85) |
| Prepaid expenses and deposits | (1,132) | (119) | (1,114) | (121) |
| Accounts payable and accrued liabilities | (184) | 623 | (161) | 784 |
| Cash used in operating activities | (5,301) | (3,412) | (9,683) | (8,195) |
| | | | | |
| Investing activities: | | | | |
| Interest received | 14 | 14 | 65 | 34 |
| Mineral property acquisition costs | (1,208) | (480) | (1,210) | (842) |
| Cash used in investing activities | (1,194) | (466) | (1,145) | (808) |
| | | | | |
| Financing activities: | | | | |
| Proceeds from issuance of common shares, | | | | |
| net of cash share issuance costs | (51) | 1,863 | 14,753 | 6,983 |
| Proceeds from loan, net of transaction costs | – | 2,979 | (5) | 2,979 |
| Interest paid | (64) | – | (64) | – |
| Proceeds from share option and warrant exercises (Note 8b) iv) | 2,957 | 17 | 3,129 | 502 |
| Cash provided by financing activities | 2,842 | 4,859 | 17,813 | 10,464 |
| Effect of foreign exchange rate changes on cash | (3) | 2 | - | (5) |
| Decrease (increase) in cash | (3,656) | 983 | 6,985 | 1,456 |
| Cash, beginning of the period | 11,301 | 2,126 | 660 | 1,653 |
| Cash, end of the period | $7,645 | $3,109 | $7,645 | $3,109 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Fury Gold Mines Limited Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Note 1: Nature of operations
Fury Gold Mines Limited (formerly Auryn Resources Inc.) (the “Company” or “Fury Gold”) is a Canadian-focused exploration and development company, positioned in three prolific gold mining regions. At the date of this document, the Company has three flagship projects: Eau Claire in Quebec, the Homestake Ridge in British Columbia, and the Committee Bay in Nunavut.
The Company was incorporated on June 9, 2008, under the British Columbia Business Corporations Act. The registered office is 1500-1055 West Georgia Street, Vancouver, BC V6E 4N7 and mailing address is 34 King Street East, Suite 601, Toronto, Ontario, M5C 2X8.
The Company is listed on the Toronto Stock Exchange and the NYSE-American, and its common shares trade under the symbol FURY, respectively. The Company’s principal business activity is the acquisition, exploration and development of resource properties in Canada and until recently, in Peru.
On July 29, 2020, the Company, together with Eastmain Resources Inc. (TSX: ER) (“Eastmain”) entered into a definitive agreement arrangement (the “Arrangement”) pursuant to which the Company would acquire all of the issued and outstanding shares of Eastmain. The Arrangement was contingent upon the completion of a corporate restructuring to be undertaken by the Company and described in its Information Circular dated September 3, 2020, the steps of which together referred to as the “Transaction”. Pursuant to the Arrangement, the Company:
■
transferred its Peruvian assets to two new companies, Tier One Metals Inc. and Sombrero Resources Inc. (collectively the “Spincos”) and distributed all the shares of the Spincos to the Company’s shareholders;
■
consolidated its shares by approximately 10:6.76 such that the 112,340,434 million shares then outstanding were consolidated to 75,900,000 shares;
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acquired Eastmain by issuing 34,100,000 shares of the Company to the Eastmain shareholders and the Company thereafter became Fury Gold;
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received net proceeds of $23 million subscription receipt financing which resulted in the issuance of a further 7,750,000 common shares of the Company, bringing the Fury Gold shares outstanding to 117,750,000 shares.
On October 5, 2020, the shareholders of both companies (Eastmain and the Company) approved the Transaction at respective shareholder special meetings. Court approval from the British Columbia Supreme Court and the Ontario Superior Court of Justice was received on October 7, 2020 and the transaction closed on October 9, 2020.
The Company, through its wholly owned subsidiaries, owns the mineral concessions comprising the Committee Bay and Gibson MacQuoid mineral properties both located in Nunavut, Canada, as well as the Homestake Ridge Project in northwestern British Columbia, Canada. Prior to October 9, 2020, the Company held secured rights to various mining concessions in southern Peru which included the Sombrero, Curibaya and Huilacollo projects. Following the completion of the Transaction on October 9, 2020, the Company’s Peruvian assets were held by Tier One Metals Inc. and Sombrero Resources Inc., and the shares of those companies had been distributed to the Company’s shareholders. Following that point in time, the Company’s assets included the Eastmain assets being primarily the Eau Claire gold project and the Eleonore South Joint Venture in Quebec, in addition to the Homestake Ridge and Committee Bay properties.
Response to COVID-19
On March 15, 2020 the Peruvian government mandated a 15-day lockdown in Peru, which was subsequently extended, in response to the COVID-19 pandemic. As a result, the Company had recalled all personnel from the field. After receiving approval from the Peruvian government, on June 17, 2020, the Company resumed operations after receiving approval from the Peruvian government.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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With respect to the Company’s Canadian operations, employees have been working remotely since March 18, 2020. Due to travel restrictions into Nunavut and in respect of local community concerns regarding COVID-19, the Company will not conduct field operations in Nunavut in 2020. All reporting and expenditure requirements at Committee Bay and Gibson MacQuoid have been extended for one year under the Nunavut COVID-19 relief program. At Homestake, all reporting and expenditure requirements have been extended until December 31, 2020 under section 66 of the Mineral Tenure Act.
Note 2: Basis of presentation
a)
Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee (“IFRIC”). The accounting policies followed in these condensed consolidated interim financial statements are the same as those applied in the Company’s most recent audited consolidated financial statements for the year ended December 31, 2019, except as follows:
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Amendments to IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors
The amendments are intended to clarify the definition of material in IAS 1 and not intended to alter the underlying concept of materiality in IFRS standards. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition. The threshold for materiality influencing users has been changed from “could influence” to “could reasonably be expected to influence”.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term “material” to ensure consistency.
The Company adopted the amendments to IAS 1 and IAS 8 effective January 1, 2020, which did not have a material impact on the Company’s interim financial statements.
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Amendments to IFRS 3 - Business Combinations
In October 2018 the IASB issued narrow-scope amendments to IFRS 3 to help entities determine whether an acquired set of activities and assets is a business or not. The amendments, which are effective for annual reporting periods beginning on or after January 1, 2020, clarify the minimum requirements to be a business, remove the assessment of a market participant’s ability to replace missing elements, narrow the definition of outputs, add guidance to assess whether an acquired process is substantive and introduce an optional concentration test to permit a simplified assessment. The adoption of the amended standard did not have an immediate impact on the Company’s interim financial statements but will be applied in assessing any future business combination and asset acquisition scenarios.
These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019, which were filed under the Company’s profile on SEDAR at www.sedar.com.
These condensed consolidated interim financial statements were approved and authorized for issuance by the Board of Directors of the Company on November 12, 2020.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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b)
Basis of preparation and consolidation
These condensed consolidated interim financial statements have been prepared on a historical cost basis except for marketable securities that have been measured at fair value. The presentation currency is the Canadian dollar; all tabular amounts, with the exception of per share amounts, are presented in thousands of Canadian dollars unless otherwise noted.
These condensed consolidated interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control exists when the Company has power over an investee, exposure or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the Company’s returns.
As at, and for the periods ending September 30, 2020, the Company had the following subsidiaries:
Subsidiary | Place of incorporation | Functional Currency | Beneficial Interest |
| North Country Gold Corp. (“North Country”) | BC, Canada | CAD | 100% |
| Homestake Resource Corporation (“Homestake”) | BC, Canada | CAD | 100% |
| Corisur Peru, S.A.C. (“Corisur”) | Peru | USD | 100% |
| Sombrero Minerales, S.A.C. (“Sombrero”) | Peru | USD | 100% |
| Magma Minerals S.A.C. (“Magma”) | Peru | USD | 100% |
| Homestake Royalty Corporation (inactive) | BC, Canada | CAD | 100% |
| Tier One Metals Inc. (shell company) | BC, Canada | CAD | 100% |
| Sombrero Resources Inc. (shell company) | BC, Canada | CAD | 100% |
After the Transaction, Eastmain and its 100% owned subsidiary, Eastmain Mines Inc., were added while the investments in Corisur, Sombrero and Magma were transferred under Tier One Metals Inc. and Sombrero Resources Inc. and distributed to shareholders of the Company, as described above.
All intercompany balances and transactions have been eliminated.
c)
Critical accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires management to select accounting policies and make estimates and judgments that may have a significant impact on the consolidated financial statements. Estimates are continuously evaluated and are based on management’s experience and expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from these estimates. The Company’s critical accounting judgements and estimates were presented in Note 2 of the audited annual consolidated financial statements for the year ended December 31, 2019 and have been consistently applied in the preparation of these consolidated interim financial statements. No new estimates and judgements were applied for the periods ended September 30, 2020 and 2019 except as discussed below.
Financial instruments
Financial instruments are assessed upon initial recognition to determine whether they meet the definition of a financial asset, financial liability or equity instrument depending on the substance of the contractual arrangement. Judgement is required in making this determination as the substance of a transaction may differ from its legal form. Once a determination is made, IFRS requires that financial instruments be measured at fair value on initial recognition. For financial instruments that do not have quoted market prices or observable inputs, judgements are made in determining what are appropriate inputs and assumptions to use in calculating the fair value.
IFRS also requires that an exchange between an existing borrower and lender of debt instruments with substantially different terms, or a substantial modification of the terms of an existing financial liability or a part of it, be treated for as an extinguishment of the original financial liability and the recognition of a new financial liability, and as such, judgment is applied in determining whether a modification is substantial.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Upon initial recognition of the Bridge Loan (Note 5) and then again on the initial recognition of the Amended Bridge Loan, management had to estimate the Company’s effective interest rate which was needed in order to fair value the debt component and determine the residual amount to be allocated to the equity component. As a result of the Bridge Loan Amendment, management had to make an assessment of whether the modification was substantial and thus be treated for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Held for Distribution
The Peru assets held by the Company as at September 30, 2020, were subsequently distributed to the shareholders of the Company via a spin-out arrangement to new companies that completed on October 9, 2020. IFRS requires that assets and liabilities subsequently disposed by distribution should be presented separately in the balance sheet when the sale is “highly probable”. It has been assessed that as at September 30, 2020, the distribution of the Peru assets did not meet this criterion.
Note 3 : Mineral property interests
The Company’s principal resource properties are located in Canada and until recently, in Peru. As part of the Transaction that closed on October 9, 2020, the Peruvian projects were spun out into two independent companies: Sombrero Resources Inc., consisting of the Sombrero project, and Tier One Metals Inc. consisting of the Curibaya and Huilacollo projects.
a)
Nunavut exploration projects
Committee Bay
The Company, through its wholly owned subsidiary North Country, owns a 100% interest in the Committee Bay project located in Nunavut, Canada. The Committee Bay project includes approximately 280,000 hectares situated along the Committee Bay Greenstone Belt located within the Western Churchill Province of Nunavut. The Committee Bay project is subject to a 1% NSR on gold production, with certain portions subject to an additional 1.5% NSR. The 1.5% NSR is payable on only 7,596 hectares and can be purchased by the Company within two years of commencement of commercial production for $2.0 million for each one-third of the 1.5% NSR.
Gibson MacQuoid
In 2017, the Company acquired a number of prospecting permits and mineral claims along the Gibson MacQuoid greenstone belt in Nunavut, Canada. In 2019, the Company staked additional claims, which overlapped the Company’s prospecting claims that expired in February 2020, to maintain a contiguous land package over the Company’s current areas of interest. The Company’s claims, which are located between the Meliadine deposit and Meadowbank mine, cover approximately 120 km of strike length of the prospective greenstone belt and total 74,000 hectares collectively.
The Company, through its wholly owned subsidiary Homestake, owns a 100% interest in the Homestake Ridge project subject to various royalty interests held by third parties not exceeding 2%. The project covers approximately 7,500 hectares and is located in the Iskut-Stewart-Kisault gold belt in northwestern British Columbia.
c)
Peruvian exploration projects
Sombrero
The Sombrero copper-gold project, located in southern Peru, covers approximately 130,000 hectares acquired through a combination of staking and option agreements which are outlined below.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Alturas Option
On June 28, 2016, the Company entered into a letter agreement with Alturas Minerals Corp (“Alturas”) which outlined the general terms of the option granted to Auryn to acquire an 80% or 100% interest in the Sombrero concessions held by Alturas.
On September 3, 2020, the Company announced it had amended the agreement with Alturas to remove the requirements for exercise of the Alturas Option and acquired the remaining 20% interest with the final option payment being reduced to US$3.0 million. Payment was made through the issuance of 743,187 (1,100,000 pre-consolidation) common shares of Auryn at $4.29 ($2.90 pre-consolidation) per share and $625,000 in cash. The difference of $154,000 between the fair value per share of $2.76 and the agreed upon issue price of $2.90, is included in the cost of the mineral interest addition.
Mollecruz Option
On June 22, 2018 the Company entered into an option agreement (the “Mollecruz Option”) giving the Company the right to acquire a 100% interest in the Mollecruz concessions which are located in the northern area of the Sombrero project. Under the Mollecruz Option, the Company may acquire a 100% interest, subject to a 0.5% Net Smelter Royalty (“NSR”), through a combination of work expenditures and cash payments as detailed below.
Due Dates | Payment & Work Expenditure Status | Property Payments (in ‘000 US$) | Work Expenditures (in ‘000 US$) |
| Effective Date (June 22, 2018) | Completed | 50 | - |
| June 22, 2019* | Deferred* | 50 | 150 |
| June 22, 2020* | Deferred* | 100 | 150 |
| June 22, 2021* | | 200 | 500 |
| June 22, 2022* | | 300 | 700 |
| June 22, 2023* | | 900 | 1,500 |
| Total | | 1,600 | 3,000 |
* Effective May 20, 2019, the Company formally declared the existence of a force majeure event under the Mollecruz Option, thereby deferring the Company’s obligation to make the June 22, 2019 and 2020 property payments and any subsequent property payments and work expenditures for a maximum of 24 months from the declaration date. To date, the Company has not been able to reach an access agreement with the local community in order to commence work in the region but has continued to negotiate in good faith to obtain access to the property and have open communications with the community.
Aceros Option
On December 13, 2018, the Company entered a series of agreements (the “Aceros Option”) with Corporacion Aceros Arequipa S.A. (“Aceros”) giving the Company the right to option three key mineral concessions located within the Company’s Sombrero project. If the Aceros Option is exercised, a joint venture would be formed in which the Company would hold an 80% interest (Aceros – 20%). The joint venture would combine the 530 hectare Aceros concessions plus 4,600 hectares of Auryn’s Sombrero land position. Below is a schedule of work expenditures and cash payments required under the agreement of which US$0.4 million in work expenditures has been completed to date.
Due Dates | Payment & Work Expenditure Status | Property Payments (in ‘000 US$) | Work Expenditures (in ‘000 US$) |
| Effective Date (December 13, 2018) | Completed | 140 | - |
| December 13, 2019 | Completed | 60 | 150 |
| December 13, 2020 | | 250 | 500 |
| December 13, 2021 | | 350 | 1,500 |
| December 13, 2022 | | - | 3,000 |
| Total | | 800 | 5,150 |
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Curibaya
On August 2, 2019, the Company acquired the rights to the Sambalay and Salvador mineral concessions adjacent to its wholly owned Curibaya property in southern Peru. Collectively, the Curibaya project now covers approximately 11,000 hectares and is located 53 km from the provincial capital, Tacna, and 11 km from the regional Incapuquio geological fault.
Under the terms of the mining concession transfer agreement with Wild Acre Metals (Peru) S.A.C., the Company paid US$0.25 million on transfer of the concessions in favour of Corisur. The Sambalay concessions are subject to a combined 3% NSR royalty, 0.5% of which is buyable for US$1.0 million. The Salvador concessions are subject to a 2% NSR royalty and a US$2.0 million production payment, payable at the time a production decision is made, and to secure payment of such consideration a legal mortgage is recorded in the registry files of the Salvador concessions.
Huilacollo
On June 2, 2016, the Company acquired the rights to the Huilacollo epithermal property in the Tacna province of southern Peru, which is comprised of 2,000 hectares of hydrothermal alteration. The rights were acquired through an option agreement (the “Huilacollo Option”) with a local Peruvian company, Inversiones Sol S.A.C., under which the Company may acquire 100% interest (subject to a 1.5% NSR on precious metals buyable for US$2.5 million and a 2.5% NSR on base metals buyable for US$7.0 million) through a combination of work expenditures and cash payments as outlined in the table below. As of May 11, 2019, the Company had completed US$4.5 million of work expenditures under the Huilacollo Option and thus did not satisfy the accumulated work expenditure requirement of US$5.0 million at that date. As permitted by the Huilacollo Option, the Company instead made a cash payment of US$0.3 million equal to 50% of the shortfall at the due date to keep the option in good standing.
Due Dates | Payment & Work Expenditure Status | Property Payments (in ‘000 US$) | Work Expenditures (in ‘000 US$) |
| Effective Date (May 11, 2016) | Completed | 250 | - |
| May 11, 2018 | Completed | 500 | 2,000 |
| May 11, 2019 | Completed | - | 3,000 |
| May 11, 2020 | Completed | 250 | - |
| May 11, 2021 | | 250 | 2,000 |
| May 11, 2022 | | 7,500 | - |
| Total | | 8,750 | 7,000 |
Effective April 3, 2020, the Company declared force majeure under its Huilacollo option as a result of the COVID-19 shutdown in Peru which allowed the Company to defer the option payment that was due May 11, 2020. Force Majeure was lifted on June 5, 2020, due to the Peruvian Government easing COVID-19 restrictions. As a result, the option payment became due in July 2020 and together with the finder’s fee was paid in the quarter ended September 30, 2020.
During 2017, the Company acquired the rights to certain mineral claims adjacent to the Huilacollo property known as Andamarca claims and Tacora claims. Under the terms of the acquisition agreements, the Company paid US$0.65 million on transfer of the concessions in favour of Corisur. The Andamarca concession is subject to a 1.5% NSR of which 50% is buyable for US$2.5 million and the Tacora concession is subject to a 0.5% NSR of which 50% is buyable for US$0.5 million.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
12
d)
Costs capitalized as mineral property interests
The following is a continuity of the Company’s mineral property acquisition costs:
$’000 | Committee Bay & Gibson MacQuoid | Homestake Ridge | Peru1 | Total |
| Balance at December 31, 2018 | $ 18,871 | $ 16,060 | $ 4,141 | $ 39,072 |
| Additions | 11 | - | 949 | 960 |
| Impairment of mineral property interests | - | - | (337) | (337) |
Change in estimate of provision for site reclamation and closure (Note 6) | 203 | - | - | 203 |
| Currency translation adjustment | - | - | (184) | (184) |
| Balance at December 31, 2019 | $ 19,085 | $ 16,060 | $ 4,569 | $ 39,714 |
| Additions | - | - | 4,246 | 4,246 |
Change in estimate of provision for site reclamation and closure (Note 6) | 142 | - | - | 142 |
| Currency translation adjustment | - | - | 134 | 134 |
| Balance at September 30, 2020 | $ 19,227 | $ 16,060 | $ 8,949 | $ 44,236 |
1 On October 9, 2020, the Peruvian operations were spun out to two new entities, Sombrero Resources Inc. and Tier One Metals Inc. and the shares of those entities were distributed to the Company’s shareholders as part of the Transaction.
Note 4: Flow-through share premium liability
Flow-through shares are issued at a premium, calculated as the difference between the price of a flow-through share and the price of a common share at that date, as tax deductions generated by the eligible expenditures are passed through to the shareholders of the flow-through shares once the eligible expenditures are incurred and renounced.
The following table is a continuity of the flow-through share funding and expenditures along with the corresponding impact on the flow-through share premium liability:
$’000 | Flow-through funding and expenditures | Flow-through premium liability |
| | BC | Nunavut | Total |
| Balance at December 31, 2018 | $ 737 | $ 433 | $ 1,170 | $ 317 |
| Flow-through funds raised | - | 1,900 | 1,900 | 557 |
| Flow-through eligible expenditures | (737) | (2,309) | (3,046) | (867) |
| Balance at December 31, 2019 | $ - | $ 24 | $ 24 | $ 7 |
| Flow-through eligible expenditures | - | (24) | (24) | (7) |
| Balance at September 30, 2020 | $ - | $ - | $ - | $ - |
Note 5: Bridge loan
In 2019, the Company entered a bridge loan facility (the “Bridge Loan”) for $3.0 million with a private lender (the “Lender”). The Bridge Loan originally bore interest at 10%, payable annually or on repayment of the principal, and had a term of one year from the date of advancement (the “Maturity Date”). The Bridge Loan was secured by a first charge general security agreement over all of the Company’s present and future assets.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
13
Concurrent with the closing of the first tranche of the February 2020 Offering (see Note 8b), on February 5, 2020, the Company entered a loan amendment (“Bridge Loan Amendment”) which provided mutual conversion rights to the Lender and the Company, and also reduced the annual interest rate from 10% to 5% from the date of amendment. Under the terms of the Bridge Loan Amendment, the Lender had the right to convert the $3,000,000 of principal that had been advanced to-date, and $123,000 of interest that had accrued (the “Amended Bridge Loan”), into common shares at the price of $2.37 ($1.60 pre-consolidation).
In accordance with IFRS 9, the Company derecognizes a financial liability when, and only when, its obligations are discharged, cancelled or have expired, and at that time recognizes a gain or loss through the consolidated statement of loss and comprehensive loss, calculated as the difference between the carrying amount of the financial liability derecognized and the consideration paid. The exchange with the existing lender of one debt instrument for another debt instrument with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, if a substantial modification was made to the terms of an existing liability or part of it, such modification is also treated as an extinguishment of the original financial liability and the recognition of a new liability. The Company assessed the Bridge Loan Amendment and determined that it resulted in a substantial modification, being that there was a conversion feature for the full amount of the Amended Bridge Loan. As a result, it was necessary to derecognize the Bridge Loan and record the Amended Bridge Loan.
Consistent with the original accounting for the Bridge Loan, the Amended Bridge Loan was identified as a compound instrument with separate components, being the debt and the conversion feature, which were classified as a financial liability and an equity instrument, respectively. Again the Company used the residual method to determine the allocation of the Amended Bridge Loan between the liability and equity component, by first determining the fair value of the debt, discounted at an effective interest rate of 18%, and allocating the residual value, net of deferred taxes, to the equity component.
The following table reflects the carrying values of the liability and equity components of the Amended Bridge Loan on initial recognition.
$’000 | Liability Component | Equity Component | Total |
| Amended Bridge Loan | $ 2,912 | $ 211 | $ 3,123 |
| Deferred tax impact | - | (57) | (57) |
| Impact on statement of financial position | $ 2,912 | $ 154 | $ 3,066 |
In relation to the derecognition of the Bridge Loan and the recording of the Amended Bridge Loan, a loss was recorded through the consolidated statement of loss and comprehensive loss calculated as follows:
| Carrying value of Bridge Loan to be derecognized | $ 2,981 |
| Amended Bridge Loan assumed, including transaction costs incurred | $ 3,140 |
| Loss on derecognition of Bridge Loan | $ 159 |
On July 7, 2020, the Amended Bridge Loan was converted to 1,318,877 (1,952,084 pre-consolidation) common shares at a price of $2.37 ($1.60 pre-consolidation) per share. Of the aggregate shares issued, 1,266,797 (1,875,000 pre-consolidation) of the shares were issued for the $3,000,000 principal loan and 52,080 (77,084 pre-consolidation) were issued in satisfaction of the $123,000 of interest that accrued at a rate of 10% per annum up to the date of the loan amendment. The balance of the interest on the loan, that accrued at a rate of 5% per annum, was then settled in cash to the Lender.
| Fair value of Amended Bridge Loan on initial recognition | $ 2,912 |
| Finance expense | 209 |
| Finance expense paid in cash | (64) |
| Closing balance at July 7, 2020 | $ 3,057 |
In relation to the derecognition of the Amended Bridge Loan as a result of conversion, a loss was recorded through the consolidated statement of loss and comprehensive loss calculated as follows:
| Carrying value of Bridge Loan to be derecognized | $ 3,057 |
| Loss on extinguishment of Amended Bridge Loan | $ 65 |
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
14
Note 6: Provision for site reclamation and closure
The Company recognizes a provision for site reclamation and closure, which reflects the present value of the estimated amount of cash flows required to satisfy the asset retirement obligation in respect of the Committee Bay property. The components of this obligation are the removal of equipment currently being used at the site as well as costs associated with the reclamation of the camp housing and work sites on the property. The estimate of future asset retirement obligations is subject to change based on amendments to applicable laws, management’s intentions, and mining lease renewals.
The key assumptions on which the present value of the future estimated cash flows is based are:
■
Undiscounted cash flow obligation for site reclamation of $2,619,000 (December 31, 2019 - $2,658,000)
■
Expected timing of future cash flows is based on mining leases expiration, which is between the years 2026 and 2035
■
Annual inflation rate of 2% (December 31, 2019 - 2%)
■
Risk-free interest rate of 1.11% (December 31, 2019 - 1.76%)
The present value of the liability for the site reclamation and closure provision at Committee Bay project is as follows:
$’000 | September 30, 2020 | December 31, 2019 |
| Opening balance | $ 2,134 | $ 1,891 |
| Accretion | 22 | 40 |
| Change in estimate | 142 | 203 |
| Closing balance | $ 2,298 | $ 2,134 |
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
15
Note 7 : Exploration and evaluation costs
For the three months ended September 30, 2020, the Company’s exploration and evaluation costs are detailed as follows:
$’000 | Committee Bay & Gibson MacQuoid | Homestake Ridge | Peru1 | Total |
| Assaying | $ 87 | $ 8 | $ 6 | $ 101 |
| Camp cost, equipment and field supplies | 71 | 8 | 248 | 327 |
| Geological consulting services | - | 20 | 198 | 218 |
| Geophysical analysis | - | - | 174 | 174 |
| Permitting, environmental and community costs | 13 | 12 | 1,063 | 1,088 |
| Expediting and mobilization | - | - | 5 | 5 |
| Salaries and wages | 87 | 25 | 89 | 201 |
| Fuel and consumables | - | - | 7 | 7 |
| Aircraft and travel | - | - | 4 | 4 |
| Share based compensation | 7 | 2 | 30 | 39 |
| Total for the three months ended September 30, 2020 | $ 265 | $ 75 | $ 1,824 | $ 2,164 |
For the three months ended September 30, 2019, the Company’s exploration and evaluation costs are detailed as follows:
$’000 | Committee Bay & Gibson MacQuoid | Homestake Ridge | Peru1 | Total |
| Assaying | $ 134 | $ 32 | $ 17 | $ 183 |
| Exploration drilling | 232 | - | - | 232 |
| Camp cost, equipment and field supplies | 141 | 126 | 59 | 326 |
| Geological consulting services | 113 | 67 | 59 | 239 |
| Geophysical analysis | 143 | 169 | - | 312 |
| Permitting, environmental and community costs | 43 | 5 | 196 | 244 |
| Expediting and mobilization | 90 | 24 | 5 | 119 |
| Salaries and wages | 387 | 83 | 67 | 537 |
| Fuel and consumables | 29 | 40 | 5 | 74 |
| Aircraft and travel | 638 | 182 | 18 | 838 |
| Share based compensation | 80 | 38 | 113 | 231 |
| Total for the three months ended September 30, 2019 | $ 2,030 | 766 | $ 539 | $ 3,335 |
1 On October 9, 2020, the Peruvian operations were spun out to two new entities, Sombrero Resources Inc. and Tier One Metals Inc. as part of the Transaction.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
16
For the nine months ended September 30, 2020, the Company’s exploration and evaluation costs are detailed as follows:
$’000 | Committee Bay & Gibson MacQuoid | Homestake Ridge | Peru1 | Total |
| Assaying | $ 107 | $ 24 | $ 16 | $ 147 |
| Exploration Drilling | 26 | - | - | 26 |
| Camp cost, equipment and field supplies | 194 | 24 | 340 | 558 |
| Geological consulting services | 2 | 193 | 291 | 486 |
| Geological analysis | - | - | 174 | 174 |
| Permitting, environmental and community costs | 38 | 19 | 1,372 | 1,429 |
| Expediting and mobilization | 5 | - | 10 | 15 |
| Salaries and wages | 282 | 106 | 465 | 853 |
| Fuel and consumables | - | - | 9 | 9 |
| Aircraft and travel | - | 2 | 53 | 55 |
| Share based compensation | 45 | 18 | 174 | 237 |
| Total for the nine months ended September 30, 2020 | $ 699 | $ 386 | $ 2,904 | $ 3,989 |
For the nine months ended September 30, 2019 the Company’s exploration and evaluation costs are detailed as follows:
$’000 | Committee Bay & Gibson MacQuoid | Homestake Ridge | Peru | Total |
| Assaying | $ 154 | $ 43 | $ 66 | 263 |
| Exploration drilling | 353 | - | - | 353 |
| Camp cost, equipment and field supplies | 273 | 136 | 223 | 632 |
| Geological consulting services | 144 | 79 | 479 | 702 |
| Geophysical analysis | 143 | 169 | - | 312 |
| Permitting, environmental and community costs | 52 | 9 | 1,069 | 1,130 |
| Expediting and mobilization | 102 | 26 | 24 | 152 |
| Salaries and wages | 576 | 146 | 299 | 1,021 |
| Fuel and consumables | 36 | 40 | 20 | 96 |
| Aircraft and travel | 701 | 186 | 91 | 978 |
| Share based compensation | 201 | 100 | 595 | 896 |
| Total for the nine months ended September 30, 2019 | $ 2,735 | $ 934 | $ 2,866 | $ 6,535 |
1 On October 9, 2020, the Peruvian operations were spun out to two new entities, Sombrero Resources Inc. and Tier One Metals Inc. as part of the Transaction.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
17
Note 8: Share capital
Unlimited common shares without par value.
Unlimited preferred shares - nil issued and outstanding.
i.
On September 9, 2020, the Company issued 743,187 (1,100,000 pre-consolidation) common shares at a price of $4.29 ($2.90 pre-consolidation) per share as part of the consideration made for the purchase of the Alturas concessions in Sombrero (Note 3c)).
ii.
On July 7, 2020, the Company converted the Amended Bridge Loan (Note 5) to 1,318,877 (1,952,084 pre- consolidation) common shares at a price of $2.37 ($1.60 pre-consolidation) per share. Of the aggregate shares issues, 1,266,797 (1,875,000 pre-consolidation) were issued for the $3,000,000 principal loan and 52,080 (77,084 pre-consolidation) were issued in satisfaction of $123,000 of interest that accrued at a rate of 10% per annum up to the date of the loan amendment.
iii.
On February 6, 2020, the Company closed a non-brokered private equity placement for gross proceeds of $15.0 million (“February 2020 Offering”) which was closed in two tranches and consisted of 6,333,984 (9,375,000 pre-share consolidation) common shares priced at $2.37 ($1.60 pre-consolidation) per share.
Share issue costs related to the February 2020 Offering totaled $247,000, which included $59,000 in commissions, and $188,000 in other issuance costs. A reconciliation of the impact of the February 2020 Offering on share capital is as follows:
| | Number of common shares | Impact on share capital |
| Common shares issued at $2.37 per share | | 6,333,984 | $ 15,000 |
| Cash share issue costs | | - | (247) |
| Proceeds net of share issue costs | | 6,333,984 | $ 14,753 |
iv.
During the nine months ended September 30, 2020, 1,428,525 (2,114,375 pre-consolidation) shares were issued as a result of share options being exercised with a weighted average exercise price of approximately $2.19 ($1.48 pre- consolidation) for gross proceeds of $3,128,438. An amount of $1,916,955 attributed to these share options was transferred from the equity reserves and recorded against share capital.
On October 9, 2020, as part of the Transaction, the Company consolidated the 112,340,434 common shares outstanding as of that date to 75,900,000 common shares in accordance with the terms of the Transaction. Shares reserved under the Company’s equity incentive plans and bonus warrants outstanding were adjusted to reflect the share consolidation. The Company then issued 34,100,000 common shares to the Eastmain shareholders to acquire Eastmain (Note 15). All shares and per share data presented in the Company’s consolidated financial statements have been retroactively adjusted to reflect the share consolidation unless otherwise noted.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
18
Note 9: Share option and warrant reserves
The Company maintains a Rolling Share Option Plan providing for the issuance of share options up to 10% of the Company’s issued and outstanding common shares at the time of the grant. The Company may grant share options from time to time to its directors, officers, employees and other service providers. The share options vest as to 25% on the date of the grant and 12.5% every three months thereafter for a total vesting period of 18 months.
The continuity of the number of share options issued and outstanding and the weighted average exercise price, adjusted for the share consolidation which occurred on October 9, 2020, was as follows:
| Number of share options | Weighted average exercise price |
| Outstanding, December 31, 2018 | 4,192,253 | $ 2.74 |
| Granted | 2,226,184 | 2.83 |
| Exercised | (625,798) | 0.92 |
| Expired | (155,394) | 3.45 |
| Forfeited | (34,626) | 2.80 |
| Outstanding, December 31, 2019 | 5,602,619 | $ 2.96 |
| Granted | 50,672 | 2.71 |
| Exercised | (1,428,525) | 2.19 |
| Expired | (20,269) | 2.90 |
| Forfeited | (8,868) | 2.90 |
| Outstanding, September 30, 2020 | 4,195,629 | $ 3.27 |
As at September 30, 2020, the number of share options outstanding and exercisable and the exercise price, adjusted for the share consolidation which occurred on October 9, 2020, was as follows:
| Outstanding | Exercisable |
| Expiry date | Number of options | Exercise price | Remaining contractual life (years) | Number of options | Exercise price | Remaining contractual life (years) |
| June 20, 2021 | 1,398,544 | $3.89 | 0.72 | 1,398,544 | $3.89 | 0.72 |
| Jan 10, 2022 | 297,275 | 4.77 | 1.28 | 297,275 | 4.77 | 1.28 |
| June 20, 2023 | 292,553 | 2.10 | 2.72 | 292,553 | 2.10 | 2.72 |
| June 26, 2023 | 405,375 | 2.10 | 2.74 | 405,375 | 2.10 | 2.74 |
| Feb 7, 2024 | 124,991 | 2.01 | 3.36 | 124,991 | 2.01 | 3.36 |
| Apr 9, 2024 | 1,621,500 | 2.90 | 3.53 | 1,397,699 | 2.90 | 3.53 |
| Aug 21, 2024 | 47,294 | 2.69 | 3.89 | 35,470 | 2.69 | 3.89 |
| Nov 20, 2024 | 57,428 | 2.69 | 4.14 | 14,357 | 2.69 | 4.14 |
| June 1, 2025 | 50,672 | 2.71 | 4.67 | 19,002 | 2.71 | 4.67 |
| | 4,195,632 | $ 3.21 | 2.34 | 3,885,266 | $ 3.24 | 2.23 |
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
19
The Company uses the fair value method of accounting for all share-based payments to directors, officers, employees and other service providers. During the three and nine months ended September 30, 2020 and 2019 the Company recognized share-based compensation expense as follows:
$’000 | Three months ended September 30, | Nine months ended September 30, |
| | | | | |
| Recognized in net loss and included in : | | | | |
| Exploration and evaluation costs | $39 | $231 | $237 | $896 |
| Fees, salaries and other employee benefits | 73 | 504 | 397 | 1,900 |
| Project investigation costs | 4 | 9 | 19 | 47 |
| | $116 | $744 | $653 | $2,843 |
During the three and nine months ended September 30, 2020, the Company granted nil and 50,672 (75,000 pre-share consolidation) share options, respectively, to directors, officers, employees and other service providers. The weighted average fair value per option of these share options was calculated as $1.33 ($0.90 pre-consolidation) using the Black-Scholes option valuation model at the grant date.
During the three and nine months ended September 30, 2019, the Company granted 47,294 (70,000 pre-consolidation) and 2,070,790 (3,065,000 pre-consolidation) share options, respectively, to directors, officers, employees and other service providers. The weighted average fair value per option of these share options was calculated as $.092 ($0.62 pre-consolidation) and $1.72 ($1.16 pre-consolidation), respectively, using the Black-Scholes option valuation model at the grant date.
The fair value of the share-based options granted during the three and nine months ended September 30, 2020 and 2019 were estimated using the Black-Scholes option valuation model with the following weighted average assumptions:
| | Three months ended September 30, | Nine months ended September 30, |
| | | | | |
| Risk-free interest rate | - | 1.35% | 0.39% | 1.60% |
| Expected dividend yield | Nil | Nil | Nil | Nil |
| Share price volatility | - | 53% | 58% | 62% |
| Expected forfeiture rate | - | 0% | 0% | 0% |
| Expected life in years | - | 3.30 | 4.90 | 4.32 |
The risk-free interest rate assumption is based on the Government of Canada benchmark bond yields and treasury bills with a remaining term that approximates the expected life of the share-based options. The expected volatility assumption is based on the historical and implied volatility of the Company’s common shares. The expected forfeiture rate and the expected life in years are based on historical trends.
b)
Share purchase warrants
On September 12, 2019, the Company issued 337,813 (500,000 pre-consolidation) warrants in connection with the Bridge Loan (Note 5). The warrants have a term of three years from the date of issue and each warrant is exercisable into one common share of the Company at a price of $2.96 ($2.00 pre-consolidation) per common share but could not be exercised until after the Maturity Date of September 12, 2020. As the Bridge Loan was identified as a compound instrument with debt and equity components, the fair value of the share purchase warrants was determined as the residual value net of deferred taxes after the fair value of the debt component was determined.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
20
Note 10: Related party balances and transactions
All transactions with related parties have occurred in the normal course of operations. All amounts are unsecured, non-interest bearing and have no specific terms of settlement, unless otherwise noted.
$’000 | Three months ended September 30, | Nine months ended September 30, |
| | | | | |
| Universal Mineral Services Ltd. | | | | |
| Exploration and evaluation costs: | | | | |
| Committee Bay and Gibson MacQuoid | $69 | $97 | $186 | $264 |
| Homestake | 34 | 71 | 98 | 124 |
| Peru | 54 | 34 | 146 | 163 |
| Fees, salaries and other employee benefits | 55 | 63 | 188 | 254 |
| Legal and professional fees | 1 | - | 12 | - |
| Marketing and investor relations | 31 | 21 | 92 | 61 |
| Office and administration | 116 | 65 | 303 | 265 |
| Project investigation costs | 135 | 7 | 170 | 22 |
| Total transactions for the period | $495 | $358 | $1,195 | $1,153 |
Universal Mineral Services Ltd., (“UMS”) is a private company with a director in common with Fury Gold. Pursuant to an agreement dated March 30, 2012, and as amended on December 30, 2015, UMS provides geological, financial and transactional advisory services as well as administrative services to the Company on an ongoing, cost recovery basis. The agreement has an indefinite term and can be terminated by either party upon providing due notice.
The outstanding balance owing at September 30, 2020, was $265,000 (December 31, 2019 – $235,000) and is included in accounts payable. In addition, the Company had $150,000 on deposit with UMS as at September 30, 2020 (December 31, 2019 - $150,000) and is included in prepaid expenses and deposits.
b)
Compensation of key management personnel
During the period, compensation to key management personnel, being the Company’s seven executives (six in 2019) and five non-executive directors, was as follows:
$’000 | Three months ended September 30, | Nine months ended September 30, |
| | | | | |
| Short-term benefits provided to executives | $248 | $259 | $1,571 | $1,177 |
| Directors fees paid to non-executive directors | 196 | 36 | 269 | 119 |
| Share-based payments | 64 | 440 | 444 | 1,908 |
| | $508 | $735 | $2,284 | $3,204 |
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
21
Note 11: Supplemental cash flow information
$’000 | Three months ended September 30, | Nine months ended September 30, |
| | | | | |
| Increase (decrease) in cash related to: | | | | |
| Share issue costs in accounts payable | $- | $76 | $- | $76 |
| Deferred acquisition costs included in accounts payable | 1,310 | (11) | 1,310 | - |
Note 12: Segmented information
The Company operates in one reportable operating segment, being the acquisition, exploration and development of mineral resource properties.
Geographic segmentation of non-current assets is as follows:
September 30, 2020 | Canada | Peru1 | Total |
| Restricted cash and cash equivalents | $ 115 | $ - | $ 115 |
| Prepaid expenses and deposits, non-current | - | 122 | 122 |
| Equipment, net | 1,053 | 34 | 1,087 |
| Mineral property interests | 35,287 | 8,949 | 44,236 |
| | $ 36,455 | $ 9,105 | $ 45,560 |
December 31, 2019 | Canada | Peru | Total |
| Restricted cash and cash equivalents | $ 115 | $ - | $ 115 |
| Prepaid expenses and deposits, non-current | - | 149 | 149 |
| Equipment, net | 1,202 | 70 | 1,272 |
| Mineral property interests | 35,145 | 4,569 | 39,714 |
| | $ 36,462 | $ 4,788 | $ 41,250 |
1 On October 9, 2020, the Peruvian operations were spun out to two new entities, Sombrero Resources Inc. and Tier One Metals Inc. and the shares of those entities were distributed by the Company to its shareholders as part of the Transaction.
Note 13: Loss per share
For the three and nine months ended September 30, 2020 and 2019, the weighted average number of shares outstanding and loss per share, adjusted for the share consolidation which occurred on October 9, 2020, was as follows:
$’000 | Three months ended September 30, | Nine months ended September 30, |
| | 2020 | 2019 | 2020 | 2019 |
| Net loss | $ 3,816 | $ 3,918 | $ 8,947 | $ 10,889 |
Weighted average number of shares outstanding | 70,392,736 | 64,252,771 | 72,758,821 | 63,201,950 |
| Basic and diluted loss per share | $ 0.05 | $ 0.06 | $ 0.12 | $ 0.17 |
All of the outstanding share options and share purchase warrants at September 30, 2020 and 2019 were anti-dilutive for the periods then ended as the Company was in a loss position.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
22
Note 14: Financial instruments
The Company’s financial instruments consist of cash, marketable securities, amounts receivable, deposits, accounts payable and accrued liabilities. The fair values of these financial instruments approximate their carrying values, unless otherwise noted.
The following summarizes fair value hierarchy under which the Company’s financial instruments are valued:
Level 1 – fair values based on unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – fair values based on inputs that are observable for the asset or liability, either directly or indirectly; and
Level 3 – fair values based on inputs for the asset or liability that are not based on observable market data.
As at September 30, 2020 and 2019 the only financial instruments measured at fair value were the Company’s marketable securities, which were classified under level 1 of the fair value hierarchy. The Bridge Loan and then the Amended Bridge Loan, on initial recognition, were measured at fair value under level 2 of the fair value hierarchy and subsequently measured at amortized cost until extinguishment. No transfer occurred between the levels during the period.
The Company’s financial instruments are exposed to credit risk, liquidity risk, and market risks, which include currency risk and interest rate risk. As at September 30, 2020 the primary risks were as follows:
Market risk
This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Significant market risks to which the Company is exposed are as follows:
The Company is exposed to currency risk by having balances and transactions in currencies that are different from its functional currency (the Canadian dollar). As at September 30, 2020 and December 31, 2019, the Company’s foreign currency exposure related to its financial assets and liabilities held in US dollars as follows:
$’000 | September 30, 2020 | December 31, 2019 |
| Financial assets denominated in foreign currencies | $ 34 | $ 55 |
| Financial liabilities denominated in foreign currencies | (20) | (80) |
| Net exposure | $ (14) | $ (25) |
A 10% increase or decrease in the US dollar exchange rate would not have a material impact on the Company’s net loss.
Other price risk is the risk arising from the effect of changes in market conditions on the Company’s marketable securities. The Company is exposed to other price risk through its investment in Bravada Gold Corporation (“BVA”), which is listed on the TSX Venture Exchange.
A 10% increase or decrease in the BVA share price would not have a material impact on the Company’s net loss.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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Note 15: Subsequent events
a)
As described under Note 1, on October 9, 2020, the Company completed various steps as part of the Transaction. The Company:
i.
transferred its Peruvian assets to two newly incorporated subsidiary companies, Tier One Metals and Sombrero Resources Inc. (collectively the “Spincos”) and distributed the shares of the Spincos to the Company’s shareholders;
ii.
consolidated its shares by approximately 10:6.76 such that the 112,340,434 million shares then outstanding were consolidated to 75,900,000 shares;
iii.
acquired Eastmain by issuing 34,100,000 shares of the Company to the Eastmain shareholders and the Company thereafter became Fury Gold (the continuance of the formerly named public company Auryn Resources Inc.);
iv.
received net proceeds of $23 million subscription receipt financing which resulted in the issuance of a further 7,750,000 common shares of the Company, bringing the Fury Gold shares outstanding to 117,750,000 shares. The proceeds from the financing had been conditional upon the successful shareholder approval of the Transaction and were held in escrow until completion. Of the subscription receipts sold, 5,000,000 were flow-through at a price of $3.50 each and therefore the common shares issued are designated as “flow-through shares” creating a flow through obligation for the Company on this date.
b)
After the quarter end, and up to the date of releasing these financial statements, the Company issued 1,799,657 common shares as a result of share option exercises.
Fury Gold Mines Limited Notes to the Condensed Consolidated Interim Financial Statements Unaudited (tabular amounts expressed in thousands of Canadian dollars, except per share amounts) Three and nine months ended September 30, 2020 and 2019 | |
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