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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 : 9961X
Bacanora Minerals Ltd
28 February 2017
28 February 2017
Bacanora Minerals Ltd.
("Bacanora" or the "Company")
Interim Results for the six months ended 31 December 2016
Bacanora, the London and Canadian listed (AIM: BCN and TSX-V: BCN) lithium company which is developing the Sonora Lithium Project in northern Mexico, is pleased to provide its unaudited condensed consolidated interim results for the 6 month period ended 31 December 2016. These results were prepared in line with International Financial Reporting Standards, and, unless otherwise specified, amounts are expressed in Canadian dollars ('CAD$').
Highlights
Operational
-- Continued progress made with ongoing feasibility study ('FS') at the Company's Sonora lithium project ('Sonora') in Mexico - expected to be completed in late summer 2017
-- FS is focused on an operation at Sonora capable of initially delivering 17,500 tonnes per year of battery-grade lithium carbonate (Li(2) CO(3) ) for the first two years of operations, followed by 35,000 tonnes Li(2) CO(3) pa thereafter
-- Successfully completed a 4,000 metre infill drilling programme to upgrade a portion of the current Mineral Resource from the Indicated to Measured category, in conjunction with geotechnical and hydrological drilling for the FS
o Sonora currently has a large Indicated Resource currently comprised of 259 Mt averaging 3,200 ppm Li for 4.5 Mt of lithium carbonate equivalent ('LCE')
o Resource model currently being updated by SRK Exploration Ltd
-- Ongoing refinement and optimisation of the lithium carbonate flow sheet developed at the Pilot Plant operations in Hermosillo in line with strategic focus on the larger lithium carbonate supply chain in Asia, rather than the smaller lithium hydroxide market
-- The Pilot Plant continues to produce battery grade lithium carbonate samples which are being sent to potential off-takers and customers in Asia
o Discussions with potential off-take partners including site visits are ongoing
-- The Company is fully financed through to the completion of the FS
Post Period
-- Acquired 50% interest in, and joint operatorship of, the Zinnwald Lithium Project ('Zinnwald') in southern Saxony, Germany from SolarWorld AG ('SolarWorld'), the largest solar panel producer in Europe
-- Acquisition is in line with management's vision to become a global lithium operator focused on projects with significant value accretion potential and defined markets at both the product and geographic levels
-- Zinnwald, which reportedly produced lithium carbonate in the 1950s, provides Bacanora with a potential entry point into the thriving market for lithium in Germany and Europe, which is being driven by the automotive, renewable energy storage and chemicals industries
-- Bacanora will earn 50% of the project in return for a cash consideration of EUR5 million and the completion of a Feasibility Study which is anticipated to cost approximately EUR5 million and to take approximately 18-24 months to complete.
o The Company has an option to acquire the outstanding 50% held by SolarWorld within a 24 month period for EUR30 million
Corporate
-- Appointment of Mark Hohnen, Non-Executive Director of the Company, as Chairman of the Board
o James Leahy, interim Non-Executive Chairman, resumed his role as Non-Executive Director of the Company
-- Appointment of Ray Hodgkinson, who has substantial public company and natural resource experience, as a Canadian based Non-Executive Director of the Company - Mr Hodgkinson previously served on the Board between 2006 and 2013, prior to Bacanora's AIM listing
-- Subsequent to December 31, 2016, the Company issued 200,000 common shares as a result of 200,000 stock options exercised at a price of $0.30 each, for total proceeds of $60,000
Peter Secker, CEO of Bacanora, said, "Bacanora's strategy is to continue to build an international lithium company with a portfolio of projects producing high value lithium products for the electric vehicle and energy storage sectors. The full feasibility study at Sonora is well advanced and on course to be completed in the second half of the year. An infill drilling programme has been completed, the results of which will be included in an updated resource model. Our pilot plant has been running continuously since May 2016 producing battery grade lithium carbonate samples which provides the basis for our ongoing discussions with potential offtake partners. We are pleased with the progress being made and our target remains for production at Sonora to commence in early 2019.
"As we advance Sonora towards production, it is our intention to develop a pipeline of additional lithium projects with a strategic geographical focus. The recent acquisition of 50% of the Zinnwald lithium project in Germany is the next step down this path. Zinnwald provides Bacanora with a potential entry into the important European lithium market which we expect to complement the Company's existing exposure to the large Asian market that Sonora provides. We will continue to provide further updates on our progress, as we look to confirm Sonora's status as the next world class lithium deposit and commence a feasibility study at Zinnwald."
Chairman's Statement
The period saw the commencement of the FS at the Sonora Lithium Project in Mexico and since then significant progress has been made towards its completion. This process has been advanced in tandem with our discussions with potential off-take partners, which are progressing positively. This is my first statement as Chairman of Bacanora and I am pleased to be working with a project that has distinguished itself favourably in terms of grade, scale, and costs in comparison to its peers. With this in mind, we look forward to reiterating the attractive economics of this project via the FS and finalising our offtake discussions for the sale of lithium carbonate to the Asian market.
In terms of corporate strategy, Bacanora is focused on building an international, world class lithium company with assets positioned to benefit from the demand for lithium carbonate in multiple global markets. During the period, we advanced discussions regarding the Zinnwald Project in Germany and this culminated in the recent acquisition of a 50% interest of this prospective project in return for a cash consideration of EUR5 million and the completion of a feasibility study (which is anticipated to cost approximately EUR5 million). Zinnwald provides us with an ideal entry point to penetrate the European market for the product, which is used in the energy storage and electric vehicle industry. Zinnwald, which reportedly produced lithium carbonate in the 1950s, is located in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten and lithium over the past 300 years.
Although bringing Sonora into production in 2019 remains the Company's main focus, Zinnwald fits neatly with our timetable given that the FS in Germany is expected to take 18-24 months, so allowing the study to be completed almost concurrently with the commencement of the new planned operation start-up in Mexico. In addition, the Company also has an option to acquire the outstanding 50% held by SolarWorld within a 24 month period for EUR30 million. The Company's focus on the German market is based on the rate of growth of the electric vehicle market in Europe and the significant impact it will have on lithium demand over the next decade. For example, in late 2016 the Daimler/Mercedes Group announced that "their automotive group will invest up to $11 billion into at least 10 new electric vehicles plants by 2025".(1) In addition, the VW Group announced their "commitment to launching more than 30 million electric cars by 2025, and achieving annual sales of the zero-emission cars of between two and three million by the same date-equivalent to some 20 to 25 percent of the total unit sales expected at that time".(2) The above translates into a potential step up in demand for lithium batteries to power all these vehicles, and Bacanora intends to play its part by becoming a major regional supplier of lithium carbonate.
Regarding the ongoing FS at Sonora, this is focused on commissioning an operation capable of delivering 17,500 tonnes per year of battery-grade Li(2) CO(3) for the first two years, following which it anticipates expanding its operations to 35,000 tonnes Li(2) CO(3) per year. At the beginning of the period, the Company announced that it had appointed world class consultants with significant experience of lithium projects to oversee various elements of the FS. These include:
-- Ausenco Engineers to conduct the process engineering -- SRK Consulting Ltd to undertake a Mineral Resource Estimate -- International Mining Consultants to deliver the Mineral Reserve Estimate and mine planning
The FS activities have progressed well. We completed a 4,000 metre drill programme for our resource upgrade and mine planning work and the preliminary reserve model and mine plan, which are being prepared by International Mining Consultants, have progressed to schedule. SRK has now received the drilling data from the July 2016 infill drilling programme and will prepare an updated MRE for the FS. This updated MRE is currently scheduled for calendar Q1, 2017. We have also finalised the initial process flow sheet and are in negotiations with international vendors for larger equipment and machinery. Given the recent instruction to deliver a strategy to optimise Sonora's operating costs and energy requirements due to the continued strengthening in reagent input costs, during the period we announced that the results of the FS will not be published until the summer 2017, as the Company believes it will take longer than originally anticipated to ensure that the optimum energy supply for the kiln is selected. Rising costs are relevant to all Bacanora's peers, but importantly, these are being experienced in tandem
with a rise in lithium carbonate pricing. The Company has been working with the SignumBox Group in Santiago to develop long-term lithium pricing scenarios and supply-demand models. The FS is budgeted to cost approximately $7 million and we are fully funded for this.
In terms of our offtake discussions, the expanded Pilot Plant has been operating since May 2016, producing battery grade samples of lithium carbonate for delivery to potential off-takers in Asia and Europe. We are delighted to have hosted several site visits with various interested international lithium trading companies and mining companies during the period. Negotiations in respect to offtake agreements with these potential partners are ongoing and will continue in tandem with the preparation of the FS.
The continuous running of the Pilot Plant has also benefitted the Company in other ways, allowing us to develop and optimise the flow sheet for lithium recoveries and reagent consumption. Some of the specific achievements over the last twelve months are:
-- Ore-to-product metallurgical test work on bulk samples taken from trenches on the clay units from the planned mining areas within the 100% owned La Ventana concession is in progress
-- Upgrading of concentrate and pre-concentrate front-end processes to optimise lithium recovery
-- Hydrometallurgical recoveries have been improved by the addition of gas-fired stationary calcining units for continuous roasting of the lithium concentrate
-- Optimisation of gypsum consumption and evaporation and crystallisation parameters
-- Increased capacity in the Pregnant Liquor Solution circuits to allow continuous leaching operations
-- Installation of additional resin columns in the lithium carbonate recovery circuit for the refining of the product to battery-grade lithium carbonate
In addition to the significant flow sheet development and optimisation being undertaken at the Pilot Plant, all of the flow sheet development is being audited by independent consultants supervised by Ausenco, as part of the ongoing FS process.
The continuous running of the Pilot Plant also means that we have been training employees, of which there are approximately 20 now employed. Training and quality control processes are in full swing to negate risk associated with execution of commissioning and operational phases after construction of the Stage 1, 17,500 tpa plant and to ensure accelerated commissioning schedules in terms of operations and quality control. This is expected to de-risk operations significantly. Over the next 18 months the Company will continue a recruitment campaign of engineers and operators in order to maintain the plant in continuous operation and to gain expertise in those processes that require supervision and monitoring for optimisation and quality control.
Corporate
During the period, we made some changes to the Board. I took the position of Chairman meaning that James Leahy, interim Non-Executive Chairman, resumed his role as Non-Executive Director of the Company. The appointment of Ray Hodgkinson as a Canadian based Non-Executive Director of the Company, replacing Shane Shircliff, was also announced. He has substantial public company and natural resource experience and is very familiar with Bacanora, having been on its board between 2006 and 2013, prior to its AIM listing.
On 23 November 2016, the Company announced that the financing condition in the conditional lithium hydroxide supply agreement, previously announced on 28 August 2015, had not been met under the terms of the agreement. The Company advised that it had extensive discussions with the customer as to the feasibility of securing project specific financing pursuant to the terms and conditions of the agreement, that those discussions have now concluded, and therefore we are discontinuing further efforts to secure project specific financing pursuant to the agreement. This development was in line with Bacanora's strategy to focus on the production of lithium carbonate to service the rapidly growing Asian and European markets for electric vehicles and energy storage.
Financial
The Company is fully financed with approximately $24 million in the bank and is therefore fully funded through to the completion of the Feasibility Study.
In order to meet the Company's planned growth and development activities, the Company budgets to spend an aggregate of approximately $17 million over the next 12 months, with approximately $7 million on the Feasibility Study and related expenditures, and approximately $2 million on Pilot Plant related capital expenditures.
Outlook
Bacanora's activities during the period have been aligned with our commitment to delivering high quality and competitive lithium production projects which are ideally positioned to service growing demand for lithium carbonate globally. Our decision to dig deeper into the implications of the rise in reagent prices despite the delays this would ensue is testament to this. Our recent acquisition in Germany means that we are now an international lithium development company and we will continue to build on this proposition through further appropriate acquisitions which demonstrate the potential for excellence. News will be forthcoming in respect to the commencement of our FS at Zinnwald and in respect to Sonora, we will publish an updated resource, provide an update on our offtake discussions, and of course, publish the FS.
I would like to thank our shareholders, management, employees and advisors for their support during the period and look forward to providing updates in the near term.
Mark Hohnen
27 February 2017
Condensed Consolidated Statements of Financial Position
Unaudited
Expressed in Canadian Dollars
Hot Features
Premium
As at December 31,
2016 June 30, 2016
--------------------------------------------- ------------- --------------
Assets
Current
Cash $ 23,797,353 $ 28,730,168
Other receivables (Note 4a) 454,892 265,342
Deferred costs 147,631 102,607
Total current assets 24,399,876 29,098,117
--------------------------------------------- ------------- --------------
Non-current assets
Property and equipment (Note 6) 1,966,207 2,364,371
Exploration and evaluation assets (Note
7) 23,902,448 17,816,713
--------------------------------------------- ------------- --------------
Total non-current assets 25,868,655 20,181,084
--------------------------------------------- ------------- --------------
Total assets 50,268,531 49,279,201
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities 643,626 1,041,117
Warrant liability (Note 8(b)) - 897,323
Total current liabilities 643,626 1,938,440
--------------------------------------------- ------------- --------------
Non-current liabilities
Deferred tax liability 135,000 135,000
Total non-current liabilities 135,000 135,000
--------------------------------------------- ------------- --------------
Total liabilities 778,626 2,073,440
Shareholders' Equity
Share capital (Note 8) 61,433,516 57,058,924
Contributed surplus (Note 8(e)) 4,910,372 3,528,990
Foreign currency translation reserve 1,526,065 574,478
Deficit (17,177,857) (13,150,873)
--------------------------------------------- ------------- --------------
Attributed to Shareholders of Bacanora
Minerals Ltd. 50,692,096 48,011,519
Non-controlling interest (1,202,191) (805,758)
--------------------------------------------- ------------- --------------
Total shareholders' equity 49,489,905 47,205,761
--------------------------------------------- ------------- --------------
Total Liabilities and Shareholders'
Equity $ 50,268,531 $ 49,279,201
--------------------------------------------- ------------- --------------
Condensed Consolidated Statements of Comprehensive Loss
Unaudited
Expressed in Canadian Dollars
Three months ended Six months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2016 2015 2016 2015
Revenue
Interest income $ 23,238 $ 20,519 $ 62,238 $ 44,629
Expenses
General and administrative
(Note 9) 1,222,280 909,254 2,505,369 1,432,617
Depreciation (Note 6) 3,136 27,369 42,831 61,379
Stock-based compensation (Note
8(f)) 596,639 1,375,332 1,381,382 1,375,332
1,822,055 2,311,955 3,929,582 2,869,328
Loss before other items (1,798,817) (2,291,436) (3,867,344) (2,824,699)
Foreign exchange loss (457,612) (175,356) (1,304,192) (1,131,733)
Warrant liability valuation - - 348,964 -
Loss (2,256,429) (2,466,792) (4,822,572) (3,956,432)
Foreign currency translation
adjustment 1,463,914 (369,798) 950,587 580,492
Total comprehensive loss (792,515) $ (2,836,590) (3,871,985) $(3,375,940)
Loss attributable to shareholders
of Bacanora Minerals Ltd. (1,822,078) (2,391,865) (4,026,984) (3,768,138)
Loss attributable to non-controlling
interest (434,071) (74,927) (795,588) (188,294)
(2,256,149) $ (2,466,792) (4,822,571) (3,956,432)
Total comprehensive loss attributable
to shareholders of Bacanora
Minerals Ltd. (358,164) (2,761,663) (3,076,397) (3,187,646)
Total comprehensive loss attributable
to non-controlling interest (434,071) (74,927) (795,588) (188,294)
(792,235) (2,836,590) (3,871,985) (3,375,940)
Net loss per share (basic
and diluted) $ (0.02) $ (0.03) $ (0.05) $ (0.04)
Condensed Consolidated Statements of Changes in Shareholders' Equity
Unaudited
Expressed in Canadian Dollars
Share Capital
-------------- --------------------------
Accumulated
other
Number of Contributed comprehensive Non-controlling
Shares Amount Surplus income Deficit interest Total
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
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 11,476,944 17,461,167 - - - - 17,461,167
Shares issued
on exercise
of options 850,000 302,840 (86,840) - - - 216,000
Stock-based
compensation
expense - - 1,375,332 - - - 1,375,332
Foreign
currency
translation
adjustment - - - 576,514 - - 576,515
Loss for the
period - - - - (3,712,049) (244,383) (3,956,432)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
Balance,
December 31,
2015 97,274,353 $42,591,918 $1,945,746 $2,271,847 $(6,567,446) (924,664) $39,317,401
Brokered
placements 9,750,000 14,228,359 - - - - 14,228,359
Shares issued
on exercise
of options 850,000 845,820 (360,819) - - - 485,001
Share issue
costs - (915,790) - - - - (915,790)
Stock-based
compensation
expense - - 1,944,063 - - - 1,944,063
Foreign
currency
translation
adjustment - - - (1,697,369) - - (1,697,369)
Loss for the
period - - - - (6,583,427) 118,906 (6,702,333)
Balance, June
30, 2016 107,874,353 $57,058,924 $3,528,990 $574,478 $(13,150,873) $(805,758) $47,205,761
Shares issued
on exercise
of warrants 2,925,000 4,486,570 - - - - 4,486,570
Share issue
costs - (111,978) - - - - (111,978)
Stock-based
compensation
expense - - 1,381,382 - - - 1,381,382
Foreign
currency
translation
adjustment - - - 950,587 - - 950,587
Loss for the
period - - - - (4,026,984) (396,433) (4,423,417)
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
Balance,
December 31,
2016 110,799,353 $61,433,516 $4,910,372 $1,526,065 $(17,177,857) $(1,202,191) $49,489,905
-------------- ------------ ------------ ------------ -------------- -------------- ---------------- ------------
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
Unaudited
Expressed in Canadian Dollars
Three months ended
September 30, Six months ended
Dec. 31, Dec. 31,
Dec. 31, Dec. 31,
2016 2015 2016 2015
-------------------------------------- -------------- -------------- -------------- --------------
Cash provided by (used in)
Operating activities
Net loss $ (2,256,148) $ (2,466,792) $ (4,822,571) $ (3,956,432)
Depreciation 3,136 27,369 42,831 61,379
Warrant liability revaluation - (369,798) (348,964) -
Unrealized foreign exchange
adjustment - 1,375,332 - 580,492
Share based compensation 596,639 (1,433,889) 1,381,382 1,375,332
(1,656,373) (805,609) (3,747,322) (1,939,229)
Changes in non-cash working
capital
Other receivables (135,192) (189,550)
Prepaid (29,661) (45,026)
Accounts payable and accrued
liabilities (610,707) (725,123)
-------------------------------------- -------------- -------------- -------------- --------------
(2,431,934) (4,707,021) (2,475,578)
-------------------------------------- -------------- -------------- -------------- --------------
Financing activities
Issue of shares, net of expenses - 17,461,167 - 17,461,167
Related party (payments)/advances - (139,366) - 32,873
Options exercise proceeds - 156,000 - 216,000
Warrant exercise proceeds,
net of expenses 3,693,563 - 3,739,315 -
3,693,563 17,477,801 3,739,315 17,710,040
-------------------------------------- -------------- -------------- -------------- --------------
Investing activities
Additions to mineral properties
(Note 7) (1,767,083) (738,187) (3,749,398) (2,112,329)
Additions to property and
equipment (Note 6) (531,044) 95,980 (215,711) 116,843
(2,298,125) (642,207) (3,965,109) (1,995,486)
-------------------------------------- -------------- -------------- -------------- --------------
Increase in cash position (1,036,496) 14,596,096 (4,932,815) 13,238,976
Cash, beginning of the period 24,833,849 8,633,917 28,730,168 9,991,037
-------------------------------------- -------------- -------------- -------------- --------------
Cash, end of the period $ 23,797,353 $ 23,230,013 $ 23,797,353 $ 23,230,013
-------------------------------------- -------------- -------------- -------------- --------------
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 dual 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 condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended June 30, 2016, which have been prepared in accordance with IFRS as issued by the IASB.
The Company uses the same accounting policies and methods of computation as in the audited annual consolidated financial statements for the year ended June 30, 2016.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on February 27, 2017. The Board of Directors has the power and authority to amend these financial statements after they have been issued.
b) Basis of measurement
These condensed consolidated interim 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 previously was the Canadian dollar up until June 30, 2016.
c) New standards and interpretations not yet adopted
A number of new IFRS standards, and amendments to standards and interpretations, are not yet effective for the period ended December 31, 2016, and have not been applied in preparing these condensed consolidated interim financial statements. None of these standards are expected to have a significant effect on the condensed consolidated interim financial statements of the Company.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the Company's condensed consolidated interim 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 7.
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
Income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Amounts accrued for income tax expense in one interim period may have to be adjusted in a subsequent interim period of that financial year if the estimate of the annual income tax rate changes.
4. 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.
5. 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 $45,781,724 at December 31, 2016 (June 30, 2016 - $44,482,529). 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.
6. PROPERTY AND EQUIPMENT
Office
Building furniture Computer Transportation
Cost and equipment and equipment equipment equipment Total
----------------- --------------- ---------------- ----------- --------------- ------------
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
Additions 215,711 - - - 215,711
Foreign exchange (571,044) - - - (571,044)
----------------- --------------- ---------------- ----------- --------------- ------------
Balance, Dec.
31, 2016 $ 2,418,234 $ 3,147 $ 10,539 $ 188,263 $ 2,620,183
----------------- --------------- ---------------- ----------- --------------- ------------
Office
Accumulated Building furniture Computer Transportation
depreciation and equipment and equipment equipment equipment Total
----------------- --------------- ---------------- ----------- --------------- ------------
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
Additions 42,831 - - - $ 42,831
Balance, Dec.
31, 2016 $ 535,458 $ 3,147 $ 10,539 $ 104,832 $ 653,976
----------------- --------------- ---------------- ----------- --------------- ------------
Office
Carrying Building furniture Computer Transportation
amounts and equipment and equipment equipment equipment Total
----------------- --------------- ---------------- ----------- --------------- ---------------
At June 30,
2016 $ 2,280,940 $ - $ - $ 83,431 $ 2,364,371
At Dec. 31,
2016 $ 1,882,776 $ - $ - $ 83,431 $ 1,966,207
----------------- --------------- ---------------- ----------- --------------- ---------------
7. 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 late 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").
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. Under the agreement, Megalit is owned 70% by Bacanora and 30% by REM. As at December 31, 2016, Buenavista and San Gabriel concessions were transferred from MSB to Megalit, while the Megalit concession was in the process of being transferred to Minera Megalit S.A. de C.V..
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 late Chairman of the Company.
The balance of investment in mining claims as of September 30, 2016 and June 30, 2016 corresponds to concession payments to the federal government, and costs of exploration, and consists of the following:
Magdalena La Ventana Mexilit Megalit
Borate Lithium Lithium Lithium Total
------------------- ------------ ------------- ------------ ----------- -------------
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
Additions 10,061 3,713,930 14,302 11,105 3,749,398
Foreign exchange 794,530 1,135,426 319,874 86,507 2,336,337
Balance, Dec. 31,
2016 $ 8,529,332 $ 11,226,844 $ 3,317,758 $ 828,514 $ 23,902,448
------------------- ------------ ------------- ------------ ----------- -------------
8. 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, 2015 84,947,409 $ 24,827,911
Shares issued on exercise of options 850,000 355,410
Shares issued in private placement for
cash(1) 11,476,944 17,871,564
Shares issued on exercise of options 850,000 691,470
Shares issued in private placement for
cash(2) 9,750,000 14,228,359
Share issue costs - (915,790)
---------------------------------------- ------------ -------------
Balance, June 30, 2016 107,874,353 $ 57,058,924
Shares issued on exercise of warrants 2,925,000 4,486,570
Share issue costs - (111,978)
---------------------------------------- ------------ -------------
Balance, December 31, 2016 110,799,353 $ 61,433,516
---------------------------------------- ------------ -------------
(1) 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.
(2) 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"). The Company paid commission of $440,500 and other share issue expenses of $64,893. 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.
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 period ended December 31, 2016.
Number Weighted Number
outstanding average remaining exercisable
at Dec. Exercise contractual at Dec.
Grant date 31, 2016 price life (Years) Expiry date 31, 2016
------------------ ------------- --------- ------------------- ------------- -------------
September 28, Sept. 28,
2012 50,000 0.25 1.1 2017 50,000
September 11, Sept. 11,
2013 725,000 0.30 1.8 2018 725,000
December 2, 2015 1,200,000 1.58 4.0 Dec. 2, 2020 1,200,000
Jan. 22,
January 22, 2016 1,000,000 1.56(1) 1.2 2018 1,000,000
April 27, 2016 2,000,000 1.94(2) 2.5 May 27, 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 following tables summarize the activities and status of the Company's warrants as at and during the period ended December 31, 2016.
Weighted
Remaining Average
Number contractual Exercise
of warrants life (Years) Expiry date price
------------------------ ------------- -------------- --------------- ----------
Balance, June 30, 2015 833,333 2.8 March 26, 2018 $ 0.45
September 30,
Issued 2,925,000 0.3 2016 $ 1.51
------------------------ ------------- -------------- --------------- ----------
Balance, June 30, 2016 3,758,333 - - $ 1.27
Exercised (2,925,000) - - 1.35
------------------------ ------------- -------------- --------------- ----------
Balance, December 31,
2016 833,333 1.4 $ 0.45
------------------------ ------------- -------------- --------------- ----------
Number Weighted average
outstanding remaining
at Dec. Exercise contractual Financing
Grant date 31, 2016 price life (Years) Expiry date warrants
------------------- ------------- --------- ----------------- ------------ ----------
March 26,
March 26, 2013 833,333 $ 0.45 2.8 2018 833,333
December 31, 2016 833,333 - - - 833,333
------------------- ------------- --------- ----------------- ------------ ----------
e) Contributed surplus
The following table presents changes in the Company's contributed surplus.
December 31,
2016 June 30, 2016
---------------------------------- ------------- --------------
Balance, beginning of the period $ 3,528,990 $ 657,254
Exercise of stock options - (405,879)
Stock-based compensation expense 1,381,382 3,277,615
Balance, end of the period $ 4,910,372 $ 3,528,990
---------------------------------- ------------- --------------
f) Stock-based compensation expense
During the period ended December 31, 2016, the Company recognized $1,381,382 (2015 - $Nil) of stock-based compensation expense for options granted under the Company's stock option plan. The fair value of stock options granted during the period ended December 31, 2016 was estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions, risk-free interest rate of 0.73%, expected volatility of 138%, and expected life of 3 years. The fair value of each stock option was $1.21. Expected volatility is based on historical volatility of the Company's stock prices and comparable peers.
g) Per share amounts
Basic loss per share is calculated using the weighted average number of shares of 110,799,353 for the three month period ended December 31, 2016 and 109,336,853 for the six month period ended December 31, 2016 (2015 - 91,347,336 and 88,247,373 respectively). Options and warrants were excluded from the dilution calculation as they were anti-dilutive.
9. GENERAL AND ADMINISTRATIVE EXPENSES
Three months ended Six months ended
--------------------------- ------------------------ --------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2016 2015 2016 2015
Management fees (Note
14) $ 209,047 $ 357,161 $ 773,363 $ 587,732
Legal and accounting
fees 591,244 172,460 1,001,401 290,144
Investor relations 208,689 149,937 283,630 226,668
Office expenses 56,881 151,461 181,701 188,195
Travel and other expenses 156,419 78,235 265,274 139,878
--------------------------- ------------ ---------- ------------ ------------
Total $ 1,222,280 $ 909,254 $ 2,505,369 $ 1,432,617
--------------------------- ------------ ---------- ------------ ------------
10. 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 operating segment. Summary of the identifiable assets by the operating segment is as follows:
Exploration and Evaluation
Activities Consolidated
---------------------------- ----------------------------- ----------------------------
June 30, Dec. 31, June 30,
Dec. 31, 2016 2016 2016 2016
---------------------------- -------------- ------------- ------------- -------------
Property and equipment $ 1,966,207 $ 2,364,371 $ 1,966,207 $ 2,364,371
Exploration and evaluation
assets $ 23,902,448 $ 17,816,713 $ 23,902,448 $ 17,816,713
---------------------------- -------------- ------------- ------------- -------------
11. 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 three and six months ended December 31, 2016, directors and management fees in the amount of $368,014 and $715,636 respectively (2015 - $331,242 and 597,655 respectively) were paid to directors and officers of the Company. All of these costs were recorded as general and administrative. Of the total amount incurred as directors and management fees, $126,877 (June 30, 2016 - $38,075) remains in accounts payables and accrued liabilities on December 31, 2016.
During the three and six months ended December 31, 2016, the Company paid $Nil (2015 - $35,297 and $53,559 respectively) to a daughter of the late Chairman of the Company. These services were incurred in the normal course of operations for office administrative services. As of December 31, 2016, $Nil (June 30, 2016 - $Nil) remains in accounts payables and accrued liabilities.
During the three and six months ended December 31, 2016, the Company paid $270,823 and $528,477 respectively (2015 - $260,533 and $496,074 respectively) 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 December 31, 2016, $104,957 (June 30, 2016 - $77,416) 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:
Three months ended Six months ended
--------------------------------- ---------------------- ------------------------
Dec. 31, Dec. 31,
Dec. 31, Dec. 31,
2016 2015 2016 2015
Directors' fees:
Colin Orr-Ewing $ - $ 34,245 $ 10,056 $ 49,245
James Leahy 12,400 5,000 25,263 10,000
Shane Shircliff 2,916 4,375 6,462 8,750
Derek Batorowski - 4,375 - 8,750
Kiran Morzaria 4,375 4,294 8,749 8,044
Jamie Straus 2,916 - 2,916
Ray Hodgkinson 1,250 - -1,250
--------------------------------- ---------- ---------- ------------ ----------
Total directors' fees: $ 23,857 $ 59,289 $ 54,696 $ 84,789
--------------------------------- ---------- ---------- ------------ ----------
Management and consulting
fees:
Peter Secker $ 104,536 $ 127,583 $ 211,653 255,967
Martin Vidal 75,164 63,495 133,853 125,677
Derek Batorowski 84,017 56,875 147,142 97,222
Mark Hohnen 84,606 34,000 172,458 34,000
Total management and consulting
fees $ 348,323 $ 281,953 $ 665,106 $ 512,866
--------------------------------- ---------- ---------- ------------ ----------
Employee's salary:
--------------------------------- ---------- ---------- ------------ ----------
Cordelia Orr-Ewing $ - $ 35,297 $ - $ 53,559
--------------------------------- ---------- ---------- ------------ ----------
Total employee's salary $ - $ 35,297 $ - $ 53,559
--------------------------------- ---------- ---------- ------------ ----------
Total director's, management's,
consultant's and employee's
salaries and fees $ 372,180 $ 404,539 $ 719,802 $ 704,773
--------------------------------- ---------- ---------- ------------ ----------
Operational consulting
fees:
Groupo Ornelas Vidal S.A.
de C.V. $ 270,823 $ 260,533 $ 528,477 $ 496,074
--------------------------------- ---------- ---------- ------------ ----------
Stock-based compensation $ 638,837 $ 577,658 $ 1,244,113 $ 577,658
--------------------------------- ---------- ---------- ------------ ----------
12. COMMITMENTS AND CONTINGENCIES
The Company has commitments for lease payments for field offices with no specific expiry dates. The total annual financial commitments 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.
13. SUBSEQUENT EVENTS
Subsequent to December 31, 2016, the Company issued 200,000 common shares as a result of 200,000 stock options exercised at a price of $0.30 each, for total proceeds of $60,000.
On February 21, 2017, the Company announced the acquisition of a 50% interest in, and joint operational control of, the Zinnwald Lithium Project ("Zinnwald") in southern Saxony, Germany from SolarWorld AG ("SolarWorld"). The Company will earn 50% of the project in return for a cash consideration of EUR5 million and the completion of a Feasibility Study on Zinnwald, anticipated to cost approximately EUR5 million and to take approximately 18-24 months to complete. The Company also has an option to acquire outstanding 50% held by SolarWorld within a 24 month period for EUR30 million.
Sources
1 See https://ca.finance.yahoo.com/news/daimler-says-sticking-diesel-vehicles-u-144809109--finance.html.
2 See http://www.motorauthority.com/news/1104514_vw-commits-to-30-electric-cars-by-2025-in-new-strategy.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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February 28, 2017 02:02 ET (07:02 GMT)
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