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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bacanora Lithium Plc | LSE:BCN | London | Ordinary Share | GB00BD20C246 | ORDS 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 67.00 | 67.00 | 67.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMBCN
RNS Number : 5700N
Bacanora Minerals Ltd
27 October 2016
Bacanora Minerals Ltd
("Bacanora" or the "Company")
Financial Results for the Year ended 30 June 2016
Bacanora, the Toronto and London listed (TSX-V: BCN and AIM: BCN) company focused on developing the Sonora Project ('Sonora' or 'the Project') in Mexico into a world class lithium carbonate operation, is pleased to announce its final audited results for the 12 months ended 30 June 2016. These results were prepared in line with International Financial Reporting Standards, and, unless otherwise specified, amounts are expressed in Canadian dollars ("CAD$"). Condensed consolidated financial statements are included further below.
The Company's Annual Report and Accounts and Management's Discussion and Analysis for the year ended 30 June 2016 are being printed and will be posted to shareholders in due course. Electronic copies of these documents are available on the Company's website at www.bacanoraminerals.com or on SEDAR at www.sedar.com.
FISCAL 2016 HIGHLIGHTS
Operational
-- The Company has successfully completed a 4,000 metre drilling programme at the Sonora Lithium Project, comprising 3,000 metres focused on upgrading a portion of the current mineral resource from the indicated to measured category, in conjunction with 1,000 metres for geotechnical and hydrological drilling for a Feasibility Study ("FS").
-- A total of 3,896 metres were drilled in 31 in-fill holes on La Ventana; along with 560 metres in 5 geotech holes. 16 more holes are programmed to complete the geotech study. Intercepts of the upper clay range from 6.1 to 49.2 metres in length with an average thickness of 30.8 metres and those for the lower clay range from 3.4 to 26.9 metres with an average thickness of 20.45 metres, these including all of the conducted drilling in this area.
-- This drilling will update the previously announced Indicated Mineral Resource of 259 Mt averaging 3,200 ppm Li for 4.5 Mt of lithium carbonate equivalent ("LCE"). SRK Consulting (UK) Limited ("SRK") has started to update the resource model and an updated Mineral Resource Estimate ("MRE") is anticipated to be published in calendar Q1 2017 sequential with the commencement of mine planning and open pit designs for the FS.
-- Battery grade lithium carbonate samples from the Company's pilot plant have been distributed to Japan for preliminary appraisal and testing by potential end-users.
-- On April 15, 2016, the Company filed on SEDAR the results of the Pre-Feasibility Study ("PFS") for the development of mine and lithium carbonate ("Li2CO3") processing facility at the Sonora Lithium Project ("Project"). The positive results estimate a pre-tax Internal Rate of Return ("IRR") of 29% and an associated pre-tax Net Present Value ("NPV") of US$776 million at an 8% discount rate. The PFS was prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"). In addition, the Company filed an amended Mineral Resource Estimate ("MRE") prepared in accordance with NI 43-101 for the Sonora Lithium Project.
-- The PFS highlighted the strong economic potential of producing up to 35,000 tonnes of battery grade Li2CO3, and up to 50,000 tonnes of potassium sulphate ("K2SO4") per year.
-- Working with the same consultants that prepared the PFS, the Company has commenced a FS for a two stage mine and processing facility to produce up to 35,000 tpa of lithium carbonate. As part of this study we have completed an infill reserve drilling program, provided lithium carbonate samples to potential end-users, appointed international engineering and technical consultants to undertake the geological resource modeling, metallurgical testwork, mine designs and process engineering, as well as recruited additional technical personnel with lithium development and operating expertise. Ausenco Limited ("Ausenco") has now completed approximately 35% of the FS and is scheduled to have the FS completed in late calendar Q1 2017. The Company is fully financed through to the FS, initial project development and the start of the construction stages.
Corporate
-- On August 4, 2016, the Company announced the sad passing of the Hon. Colin Orr-Ewing, the founder and Chairman of the Company, following a short illness. Mr. James Leahy was appointed to the position of interim non-executive Chairman.
-- During the fiscal year ended June 30, 2016, the Company experienced some changes to its board of directors. Mr. David Lenigas resigned from the board on December 21, 2015. Mr. Mark Hohnen was formally appointed to the board on 27 April, 2016. Mr. Hohnen brings with him experience in the Japanese, Chinese and Korean markets, all of which play a significant role in the production of lithium ion batteries and the development of electric vehicle technology. On October 17th, 2016, the Company also announced the appointment of Mr. Jamie Strauss (subject to completion of normal regulatory checks) as a non-executive independent director to strengthen the Board.
-- On September 28, 2016, the Company held its General and Special Annual Meeting, at which the shareholders voted amongst other resolutions, on the Company's previously announced plans to re-domicile its governing corporate jurisdiction from Canada to the UK by means of a Plan of Arrangement. All resolutions were dully passed with the exception of the re-domicile resolution. Accordingly, the proposed re-domicile did not proceed and the Company will remain a Canadian registered company and pursue its corporate objectives as such. The Company's common shares will continue to be traded on TSX-V and AIM stock exchanges.
-- On September 30, 2016, the Company announced that it has received an unsolicited non-binding indicative proposal (the "Proposal") from Rare Earth Minerals plc ("REM"), an AIM listed investment vehicle with a 19.1% shareholding in the Company, and the Company's 30% partner in its Mexilit and Megalit subsidiaries. The Proposal was for an all-share merger of Bacanora and REM with REM acting as the acquiring entity (via a reverse takeover) and issuing newly issued REM shares to Bacanora's shareholders. The merger exchange ratio proposed by REM was between 135 and 141 REM shares for each outstanding Bacanora share. The Board of Bacanora strongly rejected the Proposal, believing that it significantly undervalued the Company and jeopardized the development of the Company's Sonora Lithium Project.
Financial
-- During the quarter ended December 31, 2015, the Company completed a private placement financing of approximately $17.9 million (approximately GBP8.8 million) via the placing of 11,476,944 new common shares at a price of $1.51 (GBP0.77) per share. Through the financing, the Company secured its first major institutional shareholder, M&G Investments, as well as receiving support from existing shareholders.
-- During the quarter end June 30, 2016, the Company had raised approximately $14.7 million (approximately GBP7.7 million) via the placing of 9,750,000 units at a price of approximately $1.48 (GBP0.79) per unit with certain funds and accounts managed by BlackRock. Each unit was comprised of one new common share of the Company and 0.3 of one warrant, with each whole warrant being exercisable into one common share at a price of approximately $1.48 (GBP0.79) at any time subsequent to July 25, 2016, but on or before September 30, 2016. Accordingly, an aggregate of 9,750,000 common shares and 2,925,000 warrants were issued. On September 30, 2016, all of the 2,925,000 warrants were exercised into 2,925,000 new common shares, for total proceeds of approximately $3,938,200.
Peter Secker, CEO of Bacanora Minerals, said, "Bacanora continues to transition from an exploration company into a lithium development company. The Feasibility Study for the development of a two stage, 35,000 tonne per annum lithium carbonate producer is now well underway and operations at the Hermosillo pilot plant have produced battery grade material for trials in the Asian market. Bacanora is fully funded for this following successful placings which saw our project endorsed by some significant institutions. Given the lithium market fundamentals, and the advanced nature of our project, we believe we are well positioned to capitalise on the growing demand for this 21(st) century commodity."
For further information, please contact:
Hot Features
Premium
Bacanora Minerals Peter Secker, CEO info@bacanoraminerals.com
Ltd.
----------------------- ----------------------------- --------------------------
Cairn Financial
Advisers LLP, Sandy Jamieson/Liam +44 (0) 20
Nomad Murray 7213 0880
----------------------- ----------------------------- --------------------------
Numis Securities
Ltd, John Prior/James Black/Paul +44 (0) 20
Broker Gillam 7260 1000
----------------------- ----------------------------- --------------------------
St Brides Partners, Frank Buhagiar/ Elisabeth +44 (0) 20
Financial PR Adviser Cowell 7236 1177
----------------------- ----------------------------- --------------------------
Macquarie Capital
(Europe) Limited, +44 (0) 20
Corporate Adviser Raj Khatri 3037 2000
----------------------- ----------------------------- --------------------------
Consolidated Statements of Financial
Position
Expressed in Canadian dollars
-------------------------------------------------------------- --------------
As at June 30, June 30,
2016 2015
----------------------------------------------- ------------- --------------
Assets
Current
Cash $ 28,730,168 $ 9,820,069
Cash held in trust (Note
8(b)) - 170,968
Other receivables (Note
5(a)) 265,342 240,810
Deferred costs 102,607 18,506
Total current assets 29,098,117 10,250,353
----------------------------------------------- ------------- --------------
Non-current assets
Property and equipment (Note
7) 2,364,371 2,570,803
Exploration and evaluation
assets (Note 8) 17,816,713 11,907,427
----------------------------------------------- ------------- --------------
Total non-current assets 20,181,084 14,478,230
----------------------------------------------- ------------- --------------
Total assets 49,279,201 24,728,583
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable and accrued
liabilities (Note 14) 1,041,117 798,763
Warrant liability (Note
10(b)) 897,323 -
Total current liabilities 1,938,440 798,763
----------------------------------------------- ------------- --------------
Non-current liabilities
Rehabilitation provision
(Note 9) - 150,000
Deferred tax liability (Note
11) 135,000 135,000
Total non-current liabilities 135,000 285,000
----------------------------------------------- ------------- --------------
Total liabilities 2,073,440 1,083,763
Shareholders' Equity
Share capital (Note 10) 57,058,924 24,827,911
Contributed surplus (Note
10(e)) 3,528,990 657,254
Foreign currency translation
reserve 574,478 1,695,333
Deficit (13,150,873) (2,855,397)
----------------------------------------------- ------------- --------------
Attributed to Shareholders
of Bacanora Minerals Ltd. 48,011,519 24,325,101
Non-controlling interest (805,758) (680,281)
----------------------------------------------- ------------- --------------
Total shareholders' equity 47,205,761 23,644,820
----------------------------------------------- ------------- --------------
Total Liabilities and Shareholders'
Equity $ 49,279,201 $ 24,728,583
----------------------------------------------- ------------- --------------
Consolidated Statements of Comprehensive Loss
Expressed in Canadian dollars
---------------------------------------------------------------------------------
June 30, June 30,
For the years ended 2016 2015
Revenue
Interest income $ 114,079 $ 108,403
----------------------------------------------- ------------- --------------
Expenses
General and administrative (Note
12) 4,226,962 2,753,173
Warrant liability valuation 444,024 -
Depreciation (Note 7) 88,887 287,527
Stock-based compensation (Note
10(f)) 3,277,615 -
8,037,488 3,040,700
----------------------------------------------- ------------- --------------
Loss before other items (7,923,409) (2,932,297)
Foreign exchange (loss) gain (2,497,544) 191,133
Loss before tax (10,420,953) (2,741,164)
Deferred tax (Note 11) - (22,000)
----------------------------------------------- ------------- --------------
Loss for the year (10,420,953) (2,763,164)
Foreign currency translation
adjustment (1,120,855) 1,447,235
----------------------------------------------- ------------- --------------
Total comprehensive loss (11,541,808) $ (1,315,929)
----------------------------------------------- ------------- --------------
Loss attributable to shareholders
of Bacanora Minerals Ltd. (10,295,476) (2,740,297)
Loss attributable to non-controlling
interest (125,477) (22,867)
----------------------------------------------- ------------- --------------
(10,420,953) $ (2,763,164)
----------------------------------------------- ------------- --------------
Total comprehensive loss attributable
to shareholders of Bacanora
Minerals Ltd. (11,416,331) (1,293,062)
Total comprehensive loss attributable
to non-controlling interest (125,477) (22,867)
----------------------------------------------- ------------- --------------
(11,541,808) $(1,315,929)
----------------------------------------------- ------------- --------------
Net loss per share (basic and
diluted) $ (0.11) $ (0.03)
----------------------------------------------- ------------- --------------
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Changes in Shareholders' Equity
Expressed in Canadian dollars
Share Capital
-------------- --------------------------
Accumulated
other
Number of Contributed comprehensive Non-controlling
Shares Amount Surplus income Deficit interest Total
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2014 63,780,812 $13,713,743 $890,017 $248,098 $(1,750,287) $(657,414) $12,444,157
Brokered
placement 14,393,940 8,610,601 - - - - 8,610,601
Shares issued
as
broker's
compensation 90,909 141,115 - - - - 141,115
Share issue
costs - (2,009,435) 1,061,000 - - - (948,435)
Share issued
on exercise
of options 900,000 578,762 (232,763) - - - 345,999
Share issued
on exercise
of warrants 5,781,748 3,793,125 (1,061,000) - - - 2,732,125
Foreign
currency
translation
adjustment - - - 1,447,235 - - 1,447,235
Disposition
of interest
in
subsidiary - - - - 1,635,187 - 1,635,187
Loss for the
year - - - - (2,740,297) (22,867) (2,763,164)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2015 84,947,409 $24,827,911 $657,254 $1,695,333 $(2,855,397) $(680,281) $23,644,820
Brokered
placements 21,226,944 32,099,923 - - - - 32,099,923
Shares issued
on
exercise of
options 1,700,000 1,046,880 (405,879) - - - 641,001
Share issue
costs - (915,790) - - - - (915,790)
Stock-based
compensation
expense - - 3,277,615 - - - 3,277,615
Foreign
currency
translation
adjustment - - - (1,120,855) - - (1,509,101)
Loss for the
period - - - - (10,295,476) (125,477) (10,032,707)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Balance, June
30,
2016 107,874,353 $57,058,924 $3,528,990 $574,478 $(13,150,873) $(805,758) $47,205,761
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- -------------
Consolidated Statements of
Cash Flows
Expressed in Canadian dollars
---------------------------------------- --------------- --------------
June 30, June 30,
For the years ended 2016 2015
---------------------------------------- --------------- --------------
Cash provided by (used in)
Operating activities
Net loss $ (10,420,953) $ (2,763,164)
Depreciation 88,887 287,527
Stock-based compensation expense
(Note 10(f)) 3,277,615 -
Warrant liability revaluation 444,024
Deferred income tax (Note 11) - 22,000
(6,610,427) (2,453,637)
Changes in non-cash working
capital
Other receivables (24,533) 303,905
Prepaid (84,101) 9,158
Accounts payable and accrued
liabilities 242,355 474,049
(6,476,706) (1,666,525)
---------------------------------------- --------------- --------------
Financing activities
Issue of shares, net of expenses 31,637,432 7,803,281
Warrants proceeds - 2,732,733
Option proceeds 641,001 345,999
Mineral property deposit - (544,400)
Disposition of interest in
subsidiary - 1,635,187
----------------------------------------- --------------- --------------
32,278,433 11,972,800
---------------------------------------- --------------- --------------
Investing activities
Additions to mineral properties
(Note 8) (6,726,203) (1,941,318)
Reclamation costs (150,000) -
Additions to property and equipment
(Note 7) (186,393) (863,357)
(7,062,596) (2,804,675)
---------------------------------------- --------------- --------------
Increase in cash position 18,739,131 7,501,600
Cash and cash held in trust,
beginning of the year 9,991,037 2,489,437
----------------------------------------- --------------- --------------
Cash and cash held in trust,
end of the year $ 28,730,168 $ 9,991,037
----------------------------------------- --------------- --------------
See accompanying notes to the consolidated financial statements.
Notes to the Consolidated Financial Statements
As at and for the years ended June 30, 2016 and 2015
Expressed in Canadian dollars
1. CORPORATE INFORMATION
Bacanora Minerals Ltd. (the "Company" or "Bacanora") was incorporated under the Business Corporations Act of Alberta on September 29, 2008. The Company is dually listed on the TSX Venture Exchange as a Tier 2 issuer and on the AIM Market of the London Stock Exchange, with its common shares trading under the symbol, "BCN" on both exchanges. The address of the Company is 2204 6 Avenue N.W. Calgary, AB T2N 0W9.
The Company is an exploration stage mining company engaged in the identification, acquisition, exploration and development of mineral properties located in Mexico. The Company has not yet determined whether its mineral properties contain economically recoverable reserves. The recoverability of amounts capitalized is dependent upon the discovery of economically recoverable reserves, securing and maintaining title in the properties and obtaining the necessary financing to complete the exploration and development of these projects and upon attainment of future profitable production. The amounts capitalized as mineral properties represent costs incurred to date, and do not necessarily represent present or future values.
2. BASIS OF PREPARATION a) Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The audited annual financial statements were authorized for issue by the Board of Directors on October 26, 2016. The Board of Directors has the power and authority to amend these financial statements after they have been issued.
b) Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.
These consolidated financial statements are presented in Canadian dollars. The functional currency of the Company is the British pound sterling ("GBP") and US dollar for its subsidiaries. The Company's functional currency for the consolidated financial statements was previously the Canadian dollar up until June 30, 2016. The functional currency was changed to GBP given that the Company's expenses and financings are now primarily denominated in this currency.
3. SIGNIFICANT ACCOUNTING POLICIES
The preparation of consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
a) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company, 70% of its subsidiary, Mexilit S.A. de C.V. ("Mexilit"), 70% of its subsidiary, Minera Megalit S.A de C.V. ("Megalit"), and through its wholly-owned subsidiary, Mineramex Limited, 99.9% of Minera Sonora Borax, S.A. de
C.V. ("MSB"), and 60% of Minerales Industriales Tubutama, S.A. de C.V. ("MIT"). Subsidiaries are consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany balances and transactions are eliminated in full. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
b) Foreign currency
(i) Transactions and balances:
Transactions in foreign currencies are initially recorded in the functional currency at the rate in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange in effect at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. All exchange differences are recorded in net income (loss) for the period.
(ii) Translation to presentation currency:
The results and balance sheet of the subsidiary are translated to the presentation currency as follows:
Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Share capital is translated using the exchange rate at the date of the transaction; revenue and expenses for each statement of comprehensive income (loss) are translated at average exchange rates; and all resulting exchange differences are recognized in other comprehensive income (loss) in the consolidated statements of comprehensive loss.
The Company treats specific inter-company loan balances, which are not intended to be repaid in the foreseeable future, as part of its net investment in a foreign operation and any resulting exchange difference on these balances is recorded in other comprehensive loss. When a foreign entity is sold, such exchange differences are reclassified to income (loss) in the consolidated statements of comprehensive income (loss) as part of the gain or loss on sale.
c) Cash and cash held in trust
Cash is comprised of cash held on deposit and other short-term, highly liquid investments with original maturities of three months or less with a Canadian chartered bank, UK bank and Mexican banks. These deposits and investments are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. Cash held in trust represents funds received as part of the Company's investment arrangements but not yet deposited in the Company's Canadian chartered bank account.
d) Exploration and evaluation assets
Costs incurred prior to acquiring the right to explore an area of interest are expensed as incurred.
Exploration and evaluation assets are intangible assets. Exploration and evaluation assets represent the costs incurred on the exploration and evaluation of potential mineral resources, and include costs such as exploratory drilling, sample testing, activities in relation to the evaluation of technical feasibility and commercial viability of extracting a mineral resource, and general & administrative costs directly relating to the support of exploration and evaluation activities. The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and value in use. Assets are allocated to cash generating units not larger than operating segments for impairment testing.
Purchased exploration and evaluation assets are recognized as assets at their cost of acquisition or at fair value if purchased as part of a business combination. They are subsequently stated at cost less accumulated impairment. Exploration and evaluation assets are not amortized. Where the Company's exploration commitments for a mineral property are performed under option agreements with a third party, the proceeds of option payments under such agreements are applied to the mineral property to the extent costs are incurred. The excess, if any, is recorded to the statement of loss. Asset swaps are recognized at the carrying amount of the asset being swapped when the fair value of the assets cannot be determined.
Once the work completed to date on an area of interest is sufficient such that the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development. Exploration and evaluation assets are tested for impairment before the assets are transferred to development property, capitalized expenditure is transferred to mine development assets or capital work in progress.
e) Property and equipment
Property and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property and equipment consists of the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Amortization is provided at rates calculated to expense the cost of property and equipment, less their estimated residual value, using the straight-line method over a five year period.
The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end, and adjusted prospectively if appropriate.
f) Rehabilitation provision
The Company recognizes provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests (exploration and evaluation assets) and plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognized at its present value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding provision is added to the carrying amount of the related asset and the cost is amortized as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discount rate, and amount or timing of the underlying cash flows needed to settle the obligation.
g) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.
Provisions are measured at management's best estimate of the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the obligation. The increase in any provision due to passage of time is recognized as accretion expense.
h) Interest income
Interest income is recorded on an accrual basis using the effective interest method.
i) Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are subsequently measured as described below.
(i) Financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition: loans and receivables; financial assets at fair value through profit or loss; held-to-maturity investments; and available-for-sale financial assets.
The category determines how the asset is subsequently measured and whether any resulting income or expense is recognized in profit or loss or in other comprehensive income.
All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are considered impaired when there is objective evidence that a financial asset or a group of financial assets has been impaired.
i. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortized cost using the effective interest method, less provision for impairment, if any.
Loans and receivables comprise cash, cash held in trust, and other receivable.
(ii) Financial liabilities
Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or
loss, that are carried subsequently at fair value with gains and losses recognized in profit or loss. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
The Company's financial liabilities measured at amortized cost include accounts payables and accrued liabilities and due to related parties. The Company's financial liabilities designated at fair value through profit or loss include warrant liability. The Company currently does not have any financial liabilities classified as held for trading.
j) Impairment of assets i) Financial assets
A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. The amount of the impairment loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss, unless the impairment relates to an equity investment.
ii) Non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent cash inflows, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized in profit or loss.
With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognized in profit or loss.
k) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in comprehensive loss.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognized on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, and on temporary differences relating to investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can be controlled by the Company and it is probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply when the assets are recovered and the liabilities settled, based on tax rates that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.
l) Earnings (loss) per share
Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Company by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares, which comprise of share options and warrants granted.
m) Stock-based payments i) Stock-based payment transactions
The Company grants stock options to acquire common shares to directors, officers and employees ("equity-settled transactions"). The Board of Directors determines the specific grant terms within the limits set by the Company's stock option plan. The Company's stock-based payment plan does not feature any option for a cash settlement.
ii) Equity-settled transactions
The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "vesting date"). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding amount is represented in share option reserve. No expense is recognized for awards that do not ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the stock-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of the options that will eventually vest.
Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued. Otherwise, stock-based payments to non-employees are measured at the fair value of the goods or services received.
Upon exercise of stock options, the proceeds received are allocated to share capital along with any value previously recorded in share option reserve relating to those options. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.
n) Segment reporting
The reportable segments identified make up all of the Company's activities and are based on the Company's management structures and the consequent reporting to the Chief Operating Decision Maker, the Board of Directors.
Non-current segment assets comprise the non-current assets used directly for segment operations, including intangible assets, property and equipment. Current segment assets comprise the current assets used directly for segment operations, including accounts receivable and deferred costs. Inter-company balances comprise transactions between operating segments making up the reportable segments. These balances are eliminated to arrive at the figures in the consolidated accounts.
o) Standards, amendments and interpretations not yet effective
At the date of authorization of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Company.
Management anticipates that all of the pronouncements will be adopted in the Company's accounting policy for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Company's financial statements are provided below.
-- IFRS 9, "Financial Instruments ("IFRS 9"). IFRS 9 provides a comprehensive new standard for accounting for all aspects of financial instruments. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, and replaces the multiple category and measurement models in IAS 39. The approach in IFRS 9 focuses on how an entity manages its financial instruments in the context of its business model, as well as the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods currently provided in IAS 39.
-- Although the classification criteria for financial liabilities did no change under IFRS 9, the fair value option requires different accounting for changes to the fair value of a financial liability resulting from changes to an entity's own credit risk.
The amendments to IFRS 9 are effective for annual periods beginning on or after January 1, 2018 and are available for earlier adoption. The Company is assessing the effect, if any, that the implementation of IFRS 9 may have on the Company's financial statements.
-- IFRS 15, "Revenue from Contracts with Customers" ("IFRS 15"). In May 2014, the IASB issued IFRS 15. IFRS 15 provides a single model to determine how and when an entity should recognize revenue, as well as requiring entities to provide more informative, relevant disclosures in respect to its revenue recognition criteria. IFRS 15 is to be applied prospectively and is effective for annual periods beginning on or after January 1, 2018, with earlier application permitted. The Company is in the process of evaluating the impact that IFRS 15 may have on the Company's financial statements.
-- The IASB has developed a new standard, IFRS 16 "Leases", which supersedes IAS 17 "Leases". The IASB worked jointly with the FASB on this project. IFRS 16 sets out principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). Lessee accounting will change substantially under this new standard while there is little change for the lessor. IFRS 16 eliminates the classification of leases as either operating leases or financing leases and, instead, introduces a single lessee accounting model. A lessee will be required to recognize assets and liabilities for all leases with a term of more than 12 months (unless the underlying asset is of low value) and will be required to present depreciation of leased assets separately from interest on lease liabilities in the statement of income (loss). A lessor will continue to classify its leases as operating leases or financing leases, and to account for those two types of leases separately.
IFRS 16 is effective for fiscal periods beginning on or after January 1, 2019. The Company is in the process of evaluating the impact that IFRS 16 may have on the Company's financial statements.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the Company's financial statements in accordance with IFRS requires management to make certain judgments, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. Information about the significant judgments, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below.
a) Exploration and evaluation assets
The Company is in the process of exploring its mineral properties and has not yet determined whether the properties contain economically recoverable mineral reserves. The recoverability of carrying values for mineral properties is dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to obtain the financing necessary to complete exploration and development, and the success of future operations.
The application of the Company's accounting policy for exploration and evaluation assets requires judgment in determining whether it is likely that costs incurred will be recovered through successful exploration and development or sale of the asset under review when assessing impairment. Furthermore, the assessment as to whether economically recoverable reserves exist is itself an estimation process. Estimates and assumptions made may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in the statement of comprehensive loss in the period when the new information becomes available. The carrying value of these assets is detailed in Note 8.
b) Title to mineral property interests
Although the Company has taken steps to verify the title to the exploration and evaluation assets in which it has an interest, in accordance with industry practices for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.
c) Rehabilitation provision
Rehabilitation or similar liabilities are estimated based on the Company's interpretation of current regulatory requirements, constructive obligations and are measured at fair value. Fair value is determined based on the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or similar liabilities that may occur upon decommissioning of the mine. Such estimates are subject to change based on changes in laws and regulations.
d) Functional currency
The Company transacts in multiple currencies. The assessment of the functional currency of each entity within the consolidated group involves the use of judgment in determining the primary economic environment each entity operates in. The Company first considers the currency that mainly influences sales prices for goods and services, and the currency that mainly influences labour, material and other costs of providing goods or services. In determining functional currency the Company also considers the currency from which funds from financing activities are generated, and the currency in which receipts from operating activities are usually retained. When there is a change in functional currency, the Company exercises judgment in determining the date of change.
e) Share-based payments
The Company utilizes the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted to directors, officers and employees. The use of the Black-Scholes Option Pricing Model requires management to make various estimates and assumptions that impact the value assigned to the stock options including the forecast future volatility of the stock price, the risk-free interest rate, dividend yield and the expected life of the stock options. Any changes in these assumptions could have a material impact on the share-based payment calculation value.
The same estimates are required for transactions with non-employees where the fair value of the goods or services received cannot be reliably determined and for the warrant derivative liability.
f) Income taxes
The Company is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. In the prior year these transactions included the transfer of properties between Mexican subsidiaries. Transactions between the Company's Mexican subsidiaries are required by Mexican tax rules to be recorded on an arms' length basis and the Company made estimates as to the measurement of these transactions. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company's current understanding of the tax law. Despite the Company's belief that its tax return positions are supportable, the Company acknowledges that certain positions may potentially be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretation of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities, and such differences will impact income tax expense in the period in which such determination is made.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized.
5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
This note presents information about the Company's exposure to credit, liquidity and market risks arising from its use of financial instruments and the Company's objectives, policies and processes for measuring and managing such risks.
a) Credit risk
Credit risk arises from the potential that a counter party will fail to perform its obligations. The Company's credit risk relates solely to Input Tax Credits ("ITC") receivables in Canada and Value Added Tax ("VAT") receivables in Mexico. Any changes in management's estimate of the recoverability of the amount due will be recognized in the period of determination and any adjustment may be significant. The carrying amount of other receivables represent the maximum credit exposure.
All of the other receivables represent amounts due from the Canadian and Mexican governments and accordingly the Company believes them to have minimal credit risk. The Company considers all of its other receivables fully collectible, and therefore has not provided an allowance against this balance nor reclassified the balance as a non-current asset.
The Company's cash is held in major Canadian, UK and Mexican banks, and as such the Company is exposed to the risks of those financial institutions. The Board of Directors monitors the exposure to credit risk on an ongoing basis and does not consider such risk significant at this time. The Company considers all of its accounts receivables fully collectible.
b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses. Liquidity risk arises primarily from accounts payable and accrued liabilities and commitments, all with maturities of one year or less.
c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the value of the Company's financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing long-term returns.
The Company conducts exploration projects in Mexico. As a result, a portion of the Company's expenditures, accounts receivables, accounts payables and accrued liabilities are denominated in US dollars and Mexican pesos and are therefore subject to fluctuation in exchange rates. As at June 30, 2016, a 5% change in the exchange rate between GBP and US dollar would have an approximate $2,353,000 (2015 - $545,000) change to the Company's total comprehensive loss.
d) Fair values
The carrying value approximates the fair value of the financial instruments due to the short term nature of the instruments.
6. CAPITAL MANAGEMENT
The Company's objectives in managing capital are to safeguard its ability to operate as a going concern while pursuing exploration and development and opportunities for growth through identifying and evaluating potential acquisitions or businesses. The Company defines capital as the Company's shareholders equity excluding contributed surplus, of $44,482,529 at June 30, 2016 (2015 - $23,667,847). The Company sets the amount of capital in proportion to risk and corporate growth objectives. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company is not subject to any externally imposed capital requirements.
7. PROPERTY AND EQUIPMENT
Office
Building furniture Computer Transportation
Cost and equipment and equipment equipment equipment Total
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2014 $ 1,640,127 $ 3,147 $ 7,992 $ 132,939 $ 1,784,205
Additions 1,291,927 - 3,472 13,457 1,308,856
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2015 $ 2,932,054 $ 3,147 $ 11,464 $ 146,396 $ 3,093,061
Additions 108,777 - 17,840 59,776 186,393
Foreign exchange (267,264) - (18,765) (17,909) (303,938)
------------------ --------------- --------------- ----------- --------------- ------------
Balance,
June 30,
2016 $ 2,773,567 $ 3,147 $ 10,539 $ 188,263 $ 2,975,516
------------------ --------------- --------------- ----------- --------------- ------------
Office
Accumulated Building furniture Computer Transportation
depreciation and equipment and equipment equipment equipment Total
--------------- --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2014 $ 133,512 $ 2,432 $ 6,513 $ 92,274 $ 234,731
Additions 278,524 715 1,330 6,958 287,527
--------------- --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2015 $ 412,036 $ 3,147 $ 7,843 $ 99,232 $ 522,258
Additions 80,591 - 2,696 5,600 88,887
--------------- --------------- --------------- ----------- --------------- ----------
Balance,
June 30,
2016 $ 492,627 $ 3,147 $ 10,539 $ 104,832 $ 611,145
--------------- --------------- --------------- ----------- --------------- ----------
Office
Carrying Building furniture Computer Transportation
amounts and equipment and equipment equipment equipment Total
------------- --------------- --------------- ----------- --------------- ------------
At June 30,
2015 $ 2,520,018 $ - $ 3,621 $ 47,164 $ 2,570,803
At June 30,
2016 $ 2,280,940 $ - $ - $ 83,431 $ 2,364,371
------------- --------------- --------------- ----------- --------------- ------------
8. EXPLORATION AND EVALUATION ASSETS
The Company's mining claims consist of mining concessions located in the State of Sonora, Mexico. The specific descriptions of such properties are as follows:
a) Magdalena Borate property
Originally referred to as San Francisco and El Represo projects, Magdalena Borate project consists of eight concessions, with a total area of 7,105 hectares. The concessions are 100% owned by MSB. The Magdalena property is subject to a 3% gross overriding royalty payable to Minera Santa Margarita S.A. de C.V., a subsidiary of Rio Tinto PLC, and a 3% gross overriding royalty payable to the estate of the past Chairman of the Company on sales of borate produced from this property.
b) Sonora Lithium property
The Sonora Lithium Project consists of ten contiguous mineral concessions. The Company through its wholly-owned Mexican subsidiary, MSB, has a 100% interest in two of these concessions: La Ventana and La Ventana 1, covering 1,820 hectares. Of the remaining concessions, five are owned 100% by Mexilit, El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 covering 6,334 hectares. Mexilit is owned 70% by Bacanora and 30% by Rare Earth Minerals PLC ("REM"). In 2014, REM made payment of USD$2,250,000 (CAD$2,384,775) to acquire the 30% interest in Mexilit of which USD$500,000 (CAD$500,000) was received in the year ended June 30, 2013 and was recorded as mineral property deposit. Of the total amount received, USD$1,500,000 (CAD$1,500,000) was restricted for expenditures on Mexilit concessions and spent in fiscal 2015.
The remaining three concessions, Buenavista, Megalit and San Gabriel, cover 89,235 hectares, and are subject to a separate agreement between the Company and REM. As at June 30, 2016, Buenavista and San Gabriel concessions were transferred from MSB to Megalit, while the Megalit concession was in the process of being transferred to Megalit. At June 30, 2014, REM owned 10% of Megalit for a payment of USD$750,000 (CAD$829,350). In fiscal 2015 REM increased its holdings of Megalit to 30% of the common shares with a payment of USD$1,500,000 (CAD$1,635,187) of which USD$500,000 (CAD$544,400) was received in fiscal 2014 and was presented as mineral property deposit as at June 30, 2014. USD$1,500,000 (CAD$1,635,187) of the funds received were required to be used only for expenditures in the Megalit concession. As at June 30, 2016, $1,048,780 (2015 - $170,968) of the Company's cash is restricted to be spent on Megalit.
The change in ownership interest of Mexilit and Megalit in the prior year did not result of a loss of control and as such have been accounted for as equity transactions.
The Sonora Lithium property is subject to a 3% gross overriding royalty on production from certain concessions within the Sonora Lithium property payable to the estate of the past Chairman of the Company.
The balance of investment in mining claims as of June 30, 2016 and June 30, 2015 corresponds to concession payments to the federal government, deferred costs of exploration and paid salaries, and consists of the following:
Magdalena La Ventana Mexilit Megalit
Borate Lithium Lithium Lithium Total
------------------ ------------ ------------ ------------ ----------- -------------
Balance, June
30, 2014 $ 6,179,591 $ 610,661 $ 2,051,522 $ - $ 8,841,774
Additions 1,066,567 1,321,176 40,005 637,905 3,065,653
Balance, June
30, 2015 $ 7,246,158 $ 1,931,837 $ 2,091,527 $ 637,905 $ 11,907,427
Additions: 1,015,692 4,505,946 1,078,990 125,575 6,726,203
Foreign exchange (537,109) (60,295) (186,935) (32,578) (816,917)
Balance, June
30, 2016 $ 7,724,741 $ 6,377,488 $ 2,983,582 $ 730,902 $ 17,816,713
------------------ ------------ ------------ ------------ ----------- -------------
9. REHABILITATION PROVISION
The Company records a liability for the estimated site rehabilitation costs, discounted to net present value. The net present value is determined using the liability-specific risk-free interest rate. The site rehabilitation costs consists of slope stabilization, re-contouring and seeding waste piles, and stabilizing and monitoring tailings disposal sites. During the year ended June 30, 2016, the Company completed the rehabilitation on the one concession for which it was required. The present value of the obligation was estimated at approximately $Nil (2015 - $150,000).
10. SHARE CAPITAL a) Authorized
The authorized share capital of the Company consists of an unlimited number of voting common shares without nominal or par value.
b) Common Shares Issued
Shares Amount
------------------------------------- ------------ -------------
Balance, June 30, 2014 63,780,812 $ 13,713,743
Shares issued in Brokered placement
issued for cash(1) 14,393,940 8,610,601
Shares issued for share issuance 90,909 141,115
Share issue costs - (2,009,435)
Shares issued on exercise of
warrants 5,781,748 3,793,125
Shares issued on exercise of
options 900,000 578,762
------------------------------------- ------------ -------------
Balance, June 30, 2015 84,947,409 $ 24,827,911
Shares issued on exercise of
options 850,000 355,410
Shares issued in private placement
for cash(2) 11,476,944 17,871,564
Shares issued on exercise of
options 850,000 691,470
Shares issued in private placement
for cash(3) 9,750,000 14,228,359
Share issue costs - (915,790)
------------------------------------- ------------ -------------
Balance, June 30, 2016 107,874,353 $ 57,058,924
------------------------------------- ------------ -------------
(1) On July 25, 2014, the Company completed a brokered financing of 14,393,940 common shares at a price of $0.60 (GBP0.33) per share for aggregate gross proceeds of $8,610,601 (GBP4,750,000). Upon completion of this offering, the Company paid cash commissions to its broker, in the amount of $366,153 (GBP200,500) and issued 90,909 common shares at a price $0.60 (GBP0.33) per share and 390,874 non-transferrable warrants ("Broker Warrants"). In addition, the Company paid its Nominated Advisor, a corporate finance fee in the amount of $146,096 (GBP80,000) and issued 390,874 Broker Warrants. Each Broker Warrant entitles the holder to purchase one common share at a price of $0.60 (GBP0.33) until July 25, 2019. Included in the share issue costs are a total of $1,061,000 relating to the issuance of 781,748 warrants to the Company's brokers, all of which were exercised during the year. In relation to the private placement, the Company issued 90,909 shares to its advisor which were valued at $141,115 and included in share issue costs. The Company also had $295,071 of share issue costs relating to legal matters involved with the Company's private placement.
(2) On November 13, 2015, the Company completed a private financing of 11,476,944 common shares at a price of $1.56 (GBP0.77) per share for aggregate gross proceeds of $17,871,564 (GBP8,837,247). The Company paid commission of $354,280 and other share issue expenses of $56,117. As part of the financing, 1,973,407 common shares were acquired by REM, a company that is a significant shareholder and has a position in the Company's Board of Directors.
(3) On May 20, 2016, the Company completed a private financing that raised approximately $14,681,700 (GBP7,702,500) via the placing of 9,750,000 units (the "Placing Units") at a price of approximately $1.48 (GBP0.79) per Placing Unit (the "Placing"). Each Placing Unit is comprised of one new common share of the Company (a "Placing Share") and 0.3 of one common share purchase warrant, with each whole warrant (a "Placing Warrant") being exercisable into one common share at a price of approximately $1.48 (GBP0.79) at any time subsequent to July 25, 2016, but on or before September 30, 2016. Accordingly, an aggregate of 9,750,000 Placing Shares and 2,925,000 Placing Warrants were issued under this Placing $64,940.
The Placing Warrants are denominated in a currency different than the functional currency and are recorded as warrant liability of $453,299, which was measured using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate: 0.39%; expected volatility: 38%; expected life: 4 months; fair value per warrant: $0.15.
The fair value of the warrant liability was re-measured as at June 30, 2016 to be $897,323 using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate: 0.25%; expected volatility: 44%; expected life: 3 months; fair value per warrant: $0.31.
c) Stock options
The following tables summarize the activities and status of the Company's stock option plan as at and during the year ended June 30, 2016.
Number of Weighted average
options exercise price
------------------------ ------------ -----------------
Balance, June 30, 2014 3,425,000 $ 0.35
Exercised (900,000) 0.38
Expired (50,000) 0.25
------------------------ ------------ -----------------
Balance, June 30, 2015 2,475,000 $ 0.38
Exercised (1,700,000) 0.33
Expired (50,000) 1.58
Issued 4,250,000 1.75
------------------------ ------------ -----------------
Balance, June 30, 2016 4,975,000 $ 1.52
------------------------ ------------ -----------------
Weighted
Number average Number
outstanding remaining exercisable
at June Exercise contractual Expiry at June
Grant date 30, 2016 price life (Years) date 30, 2016
------------- ------------- --------- -------------- ---------- -------------
September Sept.
28, 2012 50,000 0.25 1.5 28, 2017 50,000
September Sept.
11, 2013 725,000 0.30 2.2 11, 2018 725,000
December 2, Dec. 2,
2015 1,200,000 1.58 4.4 2020 1,200,000
January 22, Jan. 22,
2016 1,000,000 1.56(1) 1.6 2018 1,000,000
April 27, May 27,
2016 2,000,000 1.94(2) 2.9 2019 -
4,975,000 2,975,000
------------- ------------- --------- -------------- ---------- -------------
(1) Exercise price of GBP0.77 per share
(2) Exercise price of GBP0.96 per share
d) Warrants
The fair value of broker warrants were determined at the date of grant using the Black-Scholes option pricing model with the following assumptions:
June 30, June 30,
2016 2015
------------------------- ---------- ---------
Risk-free interest rate - 1.91%
Expected volatility - 109%
Expected life - 5 years
Fair value per option - $1.36
------------------------- ---------- ---------
The following tables summarize the activities and status of the Company's warrants as at and during the year ended June 30, 2016.
Weighted
Remaining average
Number contractual exercise
of warrants life (Years) Expiry date price
--------------- ------------- -------------- ------------ ----------
Balance, June March 26,
30, 2014 5,833,333 2.8 2018 $ 0.45
July 25,
Issued 781,748 4.1 2019 $ 0.61
Exercised (5,781,748) - - $ 0.47
Balance, June March 26,
30, 2015 833,333 2.8 2018 $ 0.45
September
Issued 2,925,000 0.3 30, 2016 $ 1.51
Balance, June
30, 2016 3,758,333 $ 1.27
--------------- ------------- -------------- ------------ ----------
Weighted
average
Number remaining
outstanding contractual
at June Exercise life Financing
Grant date 30, 2015 price (Years) Expiry date warrants
--------------- ------------- ---------- ------------- ------------ ----------
March 26, March 26,
2013 833,333 $ 0.45 2.8 2018 833,333
September
May 20, 2016 2,925,000 $ 1.51(1) 0.3 30, 2016 2,925,000
--------------- ------------- ---------- ------------- ------------ ----------
June 30, 2016 3,758,333 - - - 3,758,333
--------------- ------------- ---------- ------------- ------------ ----------
(1) Exercise price of GBP0.79 per warrant
e) Contributed surplus
The following table presents changes in the Company's contributed surplus.
June 30, June 30,
2016 2015
---------------------------------- ------------ ------------
Balance, beginning of year $ 657,254 $ 890,017
Granting of warrants - 1,061,000
Exercise of warrants - (1,061,000)
Exercise of stock options (405,879) (232,763)
Stock-based compensation expense 3,277,615 -
Balance, end of year $ 3,528,990 $ 657,254
---------------------------------- ------------ ------------
f) Stock-based compensation expense
During the year ended June 30, 2016, the Company recognized $3,277,615 (2015 - $Nil) of stock-based compensation expense. The fair value of the stock-based compensation was estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
June 30, June 30,
2016 2015
-------------------- --------- ---------
Risk-free interest 0.45%
rate - 0.89% -
123% -
Expected volatility 139% -
2 - 5
Expected life years -
Fair value $1.02
per option - $1.35 -
-------------------- --------- ---------
Expected volatility is based on historical volatility of the Company's stock prices.
g) Per share amounts
Basic loss per share is calculated using the weighted average number of shares of 102,255,672 for the year ended June 30, 2016 (2015 - 81,969,138). Options and warrants were excluded from the dilution calculation as they were anti-dilutive.
11. INCOME TAXES
The income tax provision differs from income taxes which would result from applying the expected tax rate to net loss before income taxes. The differences between the expected income tax expenses and the actual income tax provision are summarized as follows:
June 30, 2016 2015 ------------------------------------ --------------- -------------- Loss before tax $ (10,420,953) $ (2,741,164) -------------------------------------- --------------- -------------- Expected income tax recovery at 27% (2014 - 25%) (2,813,657) (689,358) Non-deductible expenses and others 1,085,040 - Foreign exchange 203,786 Difference from foreign operations 34,735 (31,349) Rate changes - (130,759) Change in deferred tax asset not recognized 1,490,096 873,466 -------------------------------------- --------------- -------------- Total income taxes - $ 22,000 -------------------------------------- --------------- --------------
The components of the Company's net future income tax asset (liability) are as follows:
June 30, 2016 2015 ----------------------------------- ------------ ------------ Canada Share issuance costs $ 374,838 $ 243,083 Unrealized foreign exchange 253,880 64,425 Non-capital losses available for future periods 2,798,090 1,640,729 Unrecognized deferred tax asset (3,426,808) (1,948,237) ------------------------------------- ------------ ------------ Canada net deferred income tax asset - $ - ----------------------------------- ------------ ------------ Mexico Property and equipment $ (183,944) $ (145,567) Exploration and evaluation assets (1,415,757) (863,970) Unrealized foreign exchange (28,731) (32,723) Non-capital losses available for future periods 1,767,372 1,169,675 Unrecognized deferred tax asset (273,940) (262,415) ------------------------------------- ------------ ------------ Mexico net deferred tax liability (135,000) (135,000) ------------------------------------- ------------ ------------ Total net deferred tax asset (liability) $ (135,000) $ (135,000) ------------------------------------- ------------ ------------
As at June 30, 2016, the Company has, for tax purposes, non-capital losses available to carry forward to future years as follows: Canada - $10,363,297 (2015 - $6,202,000) expiring from 2027 to 2036 and Mexico - $5,891,242 (2015 - $3,899,000) expiring from 2020 to 2026.
12. GENERAL AND ADMINISTRATIVE EXPENSES
The Company's general and administrative expenses include the following:
June 30,
For the year ended, June 30, 2016 2015
Management fees (Note
14) $ 1,861,713 $ 705,084
Legal and accounting
fees 1,248,410 1,041,619
Investor relations 434,753 427,862
Office expenses 317,977 177,495
Travel and other expenses 364,109 401,113
---------------------------- -------------- ------------
Total $ 4,226,962 $ 2,753,173
---------------------------- -------------- ------------
13. SEGMENTED INFORMATION
The Company currently operates in one operating segment, the exploration and development of mineral properties in Mexico. The Company has an office in Calgary, and London but it does not generate any revenues or hold any non-current assets at these locations. Management of the Company makes decisions about allocating resources based on the one geographic operating segment. A geographic summary of the identifiable assets by country is as follows:
Exploration and
Evaluation Activities Consolidated
------------------------ --------------------------- --------------------------
June 30, June 30, June 30, June 30,
2016 2015 2016 2015
------------------------ ------------- ------------ ------------ ------------
Property and equipment $ 2,364,371 $ 2,570,803 $ 2,364,371 $ 2,570,803
Exploration and
evaluation assets $ 17,816,713 $11,907,427 $17,816,713 $11,907,427
------------------------ ------------- ------------ ------------ ------------
14. RELATED PARTY TRANSACTIONS
a. Related party expenses
The Company's related parties include directors and officers and companies which have directors in common. Transactions made with related parties are made in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
During the year ended June 30, 2016, directors and management fees in the amount of $1,801,511 (2015 - $705,084) were paid to directors and officers of the Company. Of this amount, $Nil (2015 - $157,353) was capitalized to exploration and evaluation assets, and $1,801,511 (2015 - $547,731) was expensed as general and administrative costs. Of the total amount incurred as directors and management fees, $38,075 (2015 - $58,706) remains in accounts payables and accrued liabilities on June 30, 2016.
During the year ended June 30, 2016, the Company paid $44,147 (2015 - $67,723) to a daughter of the past Chairman of the Company. These services were incurred in the normal course of operations for office administrative services. As of June 30, 2016, $Nil (2015 - $Nil) remains in due to this related party.
During the year ended June 30, 2016, the Company paid $856,061 (2015 - $978,946) to Grupo Ornelas Vidal S.A. de C.V., a consulting firm of which Martin Vidal, director of the Company and president of MSB, is a partner. These services were incurred in the normal course of operations for geological exploration and pilot plant operation. As of June 30, 2016, $77,416 (2015 - $80,080) remains in accounts payable and accrued liabilities.
b. Key management personnel compensation
Key management of the Company are directors and officers of the Company and their remuneration includes the following:
For the year ended, June 30, 2016 June 30, 2015 Directors' fees: Colin Orr-Ewing $ 59,706 $ 60,000 James Leahy 28,011 20,000 Guy Walker 4,396 19,389 Shane Shircliff 16,671 17,500 Derek Batorowski 16,671 17,500 Kiran Morzaria 16,794 12,072 Mark Hohnen 224,058 - ----------------------------- -------------- -------------- Total directors' fees: $ 366,307 $ 146,461 ------------------------------ -------------- -------------- Management and consulting fees: Paul Conroy(1) $ - $ 50,000 Peter Secker 972,418 76,442 Martin Vidal 240,336 222,706 Shane Shircliff - 77,000 Derek Batorowski 222,450 132,475 Total management and consulting fees $ 1,435,204 $ 558,623 ------------------------------ -------------- -------------- Employee's salary:
----------------------------- -------------- -------------- Cordelia Orr-Ewing $ 44,147 $ 67,723 ------------------------------ -------------- -------------- Total employee's salaries $ 44,147 $ 67,723 ------------------------------ -------------- -------------- Total director's, management's, consultant's and employee's salaries and fees $ 1,845,658 $ 772,807 ------------------------------ -------------- -------------- Operational consulting fees: Groupo Ornelas Vidal SA CV $ 856,061 $ 978,946 ------------------------------ -------------- -------------- Stock-based compensation $ 2,020,881 $ - ------------------------------ -------------- --------------
(1) Mr. Conroy resigned his positions as Director and VP, Special Projects on June 20, 2014. He remained with the Company as a consultant until October 31, 2014.
As at June 30, 2016, the following options were held by directors of the Company:
Number of
Date of grant Exercise price options
------------------ --------------- --------------- -----------
September
11, 2013 $0.30 200,000
December 2,
Shane Shircliff 2015 $1.58 175,000
------------------ --------------- --------------- -----------
September
11, 2013 $0.30 200,000
December 2,
Martin Vidal 2015 $1.58 175,000
------------------ --------------- --------------- -----------
September
11, 2013 $0.30 200,000
December 2,
Derek Batorowski 2015 $1.58 175,000
------------------ --------------- --------------- -----------
December 2,
2015 $1.58 1,000,000
January 22,
Mark Hohnen 2016 $1.94 2,000,000
------------------ --------------- --------------- -----------
15. COMMITMENTS AND CONTINGENCIES
The Company has commitments for lease payments for field offices with no specific expiry dates. The total annual financial commitment resulting from these agreements is $10,735. Additionally, the Company has commitments for lease payments for its UK office in the amount of $49,000 per year until July, 2018.
The properties in Mexico are subject to spending requirements in order to maintain title of the concessions. The capital spending requirement for 2017 is $333,180. The properties are also subject to semi-annual payments to the Mexican government for concession taxes.
16. SUBSEQUENT EVENTS
On September 30, 2016, 2,925,000 warrants at a price of approximately $1.35 (GBP0.79) were exercised into 2,925,000 new common shares, for total proceeds of approximately $3,938,200 (GBP2,310,750).
17. NON-CONTROLLING INTERESTS
The summary financial information for the Company's Mexican subsidiaries MIT, Mexilit, and Megalit is as follows.
MIT
June 30, June 30,
2016 2015
------------------------------ ------------ ----------
Current assets $ 43,357 $ 56,610
Non-current assets 700 700
Current liabilities - -
Non-current liabilities 773,854 1,645,924
Accumulated non-controlling
interest 182,996 635,326
Loss (income) for the year - (50,101)
Net cash flow from operating
activities - (171)
Net cash flow from financing
activities - -
Net cash flow from investing
activities - -
Net change in cash - (171)
Cash beginning of year - 171
------------------------------ ------------ ----------
Cash end of year - -
------------------------------ ------------ ----------
Mexilit
June 30, June 30,
2016 2015
------------------------------ ---------- ------------
Current assets $ 262,744 $ 1,001,481
Non-current assets 3,754,053 2,616,908
Current liabilities 11,010 -
Non-current liabilities 2,391,348 3,540,378
Accumulated non-controlling
interest (127,322) 17,120
Loss (income) for the year (625,914) 411,656
Net cash flow from operating
activities (772,931) (53,382)
Net cash flow from financing
activities 615,147 597,564
Net cash flow from investing
activities (598,484) (358,652)
Net change in cash (756,268) 185,530
Cash beginning of year 977,548 792,018
------------------------------ ---------- ------------
Cash end of year 221,280 977,548
------------------------------ ---------- ------------
Megalit
June 30, June 30,
2016 2015
------------------------------ ---------- ----------
Current assets $ 231,931 $ 287,806
Non-current assets 608,095 563,027
Current liabilities 197 19,299
Non-current liabilities 515,635 935,369
Accumulated non-controlling
interest 86,678 45,565
Loss (income) for the year (95,931) (75,787)
Net cash flow from operating
activities 572,329 (65,239)
Net cash flow from financing
activities (570,641) 935,370
Net cash flow from investing
activities (45,068) (639,721)
Net change in cash (43,380) 230,410
Cash beginning of year 230,410 -
------------------------------ ---------- ----------
Cash end of year 187,030 230,410
------------------------------ ---------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FEFEDMFMSESS
(END) Dow Jones Newswires
October 27, 2016 02:00 ET (06:00 GMT)
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