General
We were incorporated under the laws of
The Company is engaged in the exploration, evaluation and development of our
Helmer-
Our principal executive office is located at Suite 880,
To date, we have not earned significant revenues from the operation of our Helmer-Bovill Property. Accordingly, we are dependent on debt and equity financing as our primary source of operating working capital. Our capital resources are largely determined by the strength of the junior resource markets and by the status of our projects in relation to these markets, and its ability to compete for investor support of its projects.
Discontinued Operations
On
Key Terms of the Transaction:
- Immediately prior to closing of the Transaction, the Company will contribute an
intercompany debt owed by i-minerals
approximately
indebtedness.
- At the closing of the Transaction, the Company will sell all of the shares of
Value").
- The Share Value will be satisfied by BV Lending on a non-cash basis by the set
off of an equal amount of debt owed by the Company to BV Lending (the "Set
Off").
- Immediately following the Set Off, BV Lending will transfer to the Company the
balance of the debt owed by the Company to BV Lending (which debt was
approximately
and
including all security granted thereunder, will be terminated and/or
discharged.
- The Company will be subject to non-competition and non-solicitation covenants
in favour of BV Lending for a period of five years commencing on closing of the
Transaction. 21
- The Transaction is subject to the approval of the Transaction by shareholders
of the Company (the "Shareholders") and the
payable by the Company as a result of the Transaction (approximately
issue a promissory note in favor of BV Lending for the amount of the taxes so
paid. The promissory note will be repaid out of any refund received by the
Company from the applicable government agency.
The Transaction is considered to be a discontinued operation for the Company and
accordingly, loss from discontinued operations is included in the consolidated
statements of loss for all periods presented. Included on the consolidated
balance sheets at
October 31, April 30, 2022 2022 $ $ Cash and cash equivalents 18,661 6,427 Prepaids 3,944 5,725 Equipment and right-of-use asset 64,445 18,242
Mineral property interest and deferred development costs 1,892,410 1,892,410 Deposits
29,208 29,208 Assets held-for-sale 2,008,668 1,952,012 Account payable and accrued liabilities 108,216 139,389 Lease liability 54,291 13,475 Liabilities held-for sale 162,507 152,864 Resignation ofMr. Ball
The Company also announces that in advance of the board of directors meeting to
consider and approve the Transaction,
Our Principal Projects
Our activities at the Helmer-Bovill Property are focused on developing the
The Bovill Project
Our lead project, the
Since 2010, our exploration work has focused diamond drilling on the
In
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The mineral resources stated in the 2016 FS remain current and have recently
been re-stated in a standalone technical report prepared by SRK Consulting
(
2020 Pre-Feasibility Study
The Company engaged MillCreek Engineering of
On
Highlights of the PFS include:
• 20% Pre-Tax IRR; 18% After Tax IRR •US$48.3 million Pre-Tax NPV;US$33.7 million After Tax NPV • Initial Capital Cost ofUS$48.3 million • Total Life of Operation Capital Costs ofUS$54.2 million • 25 year mine life with 1.04:1 strip ratio
The 2020 PFS is based on the production of two minerals, halloysite and
kaolinite. The halloysite is beneficiated into two mineral products; HalloPure
which is about 70% halloysite and 30% kaolinite and premium quality
Ultra-Hallopure which is greater than 90% halloysite with the balance kaolinite.
The quality of Bovill Halloysite is regarded as being exceptional and the
research on halloysite applications has dramatically increased over the past 5
years involving polymers, filtration, extruded polystyrene insulation, green
technology and life sciences. The kaolinite is flash calcined to produce
metakaolin, a Supplementary Cementitious Material ("SCM") and highly reactive
pozzolan that when added to concrete increases strength and durability, reduces
permeability, reduces the effect of alkali-silica reactivity and increases
resistance to chloride ingress and sulfate attack. By using metakaolin the
sustainability of the concrete is increased through longer service life and the
carbon footprint is reduced by lowering the quantity of
A conservative approach to the build-up of sales has been assumed with full production being achieved in the first quarter of the 5th year of operation as some product applications will require development. There is potential for full production to be achieved earlier which would have a corresponding positive effect on the NPV and IRR.
Updated Measured and Indicated Resource Estimate
• Measured Resources of 5.7 million tons containing 76.5% quartz/K-spar sand, 12.3% Kaolinite and 4.0% Halloysite. • Indicated Resources of 15.5 million tons containing 57.0% quartz/K-spar sand, 15.5% Kaolinite and 2.8% Halloysite. • 667,000 tons of contained halloysite, 3,119,000 tons of contained kaolinite and 13,235,000 tons of contained quartz/K-spar. 23 Updated Mineral Reserves Proven Probable Total P&P K Tons 1,310 1,868 3,178 Halloysite % 8.8 8.0 8.3 Halloysite K Tons 115 149 264 Kaolinite % 11.1 22.4 17.7 Kaolinite K Tons 145 418 563 NSR$ 109 $ 123 $ 117
* Notes on Mineral Reserves:
• Reserves are based on a
• Rounding of numbers in mineral reserves listed above may cause apparent inconsistencies.
• The reference point for Mineral Reserves is at the plant stockpile
The full 2020 PFS was filed on www.sedar.com on
Plan of Operation and Outlook
Refer to the subsequent event section of this Form 10-Q.
The Company is continuing to take a sequential approach to the development of
the
During 2021
Market development for halloysite is ongoing with cutting edge research in epoxy
coatings and new developments in wound care.
Given the Company's mineral leases were set to expire on
Rather than pursue the lease amendment process that would only result in an
additional 10 year term on the mineral leases, the Company elected to relinquish
the 10 year leases and apply for new 20 year mineral leases. In accordance with
IDL procedures the availability of the leases was advertised for 30 days. With
no competing bidders forthcoming, in
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The ORP, FS and FEED Study is forecasted to take a minimum of 6 months and a maximum of 12 months to complete. Estimated costs to complete is estimated as follows:
Feasibility Study and FEED Study$ 885,000 Mineral Marketing 420,000 General and administrative 650,000 Sub total 1,955,000 Contingency 105,000 Total$ 2,060,000
After completion of the proposed Transaction with BV Lending, the Company will
have disposed of substantially all of its assets, being the shares held in
i-minerals
Results of Operations
Three months ended
We recorded a net loss of
• Management and consulting fees of
fees to manage our Company. Approximately 75% of the fees to manage our Company
are charged to management and consulting fees and the other 25% is charged to
mineral property expenditures. • General and miscellaneous expenses of$14,183 (2021 -$41,059 ) are comprised of office and telephone expenses, payroll taxes, medical benefits, insurance premiums, travel expenses, promotional expenses, shareholder communication fees, transfer agent fees and filing fees. The decrease during the current period was due primarily to a decrease in office rent, insurance and transfer agent fees. • Professional fees of$102,861 (2021 -$44,861 ) include legal fees, audit fees
and financial consulting fees. The increase during the period was due to
higher accounting and legal fees. • Interest and penalty expense of$11,211 (2021 -$3,470 ) is from promissory
notes that bear interest at the rates of 12%-14% per year up to
and 0.13% per year effective
to the penalty and interest recorded on the unpaid withholding tax.
• Loss from discontinued operations of
included inI-Minerals USA which is treated as a discontinued operation due to the proposed Transaction. Included in the loss from discontinued operations are management and consulting fees of$24,750 (2021 -$24,750 ), mineral property expenditures of$160,357 (2021 -$148,559 ) general and miscellaneous expenses of$12,839 (2021 -$14,581 ) amongst other items.
Six months ended
We recorded a net loss of
• Management and consulting fees of
fees to manage our Company. Approximately 75% of the fees to manage our Company are charged to management and consulting fees and the other 25% is charged to mineral property expenditures. 25
• General and miscellaneous expenses of
office and telephone expenses, payroll taxes, medical benefits, insurance premiums, travel expenses, promotional expenses, shareholder communication fees, transfer agent fees and filing fees. The decrease during the current period was due primarily to a decrease in office rent, insurance and transfer agent fees. • Professional fees of$161,888 (2021 -$143,681 ) include legal fees, audit fees
and financial consulting fees. The increase during the period was due to
higher accounting and legal fees. • Interest and penalty expense of$204,011 (2021 -$63,470 ) is from promissory
notes that bear interest at the rates of 12%-14% per year up to
and 0.13% per year effective
to the penalty and interest recorded on the unpaid withholding tax.
• Loss from discontinued operations of
included inI-Minerals USA which is treated as a discontinued operation due to the proposed Transaction. Included in the loss from discontinued operations are management and consulting fees of$49,500 (2021 -$49,500 ), mineral property expenditures of$291,402 (2021 -$284,650 ) general and miscellaneous expenses of$27,796 (2021 -$29,885 ) amongst other items.
Liquidity and Capital Resources
Our aggregate operating, investing and financing activities during the six
months ended
During the six months ended
We have been financed by advances pursuant to promissory notes advanced by
As at
We have not as yet put into commercial production any mineral properties and as such have no operating revenues. Accordingly, we are dependent on debt and equity financing as its primary source of operating working capital. Our capital resources are largely determined by the strength of the junior resource markets and by the status of our projects in relation to these markets, and our ability to compete for investor support of our projects.
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We remain dependent on additional financing to fund development requirements on
the Helmer-
We do not have the ability to internally generate sufficient cash flows to support our operations for the next twelve months. We have been receiving funds from a company controlled by a former director of the Company through promissory notes. We have no formal plan in place to address this going concern issue but consider that we will be able to obtain additional funds by equity financing and/or debt financing; however, there is no assurance of additional funding being available. As a result, there is substantial doubt about the Company's ability to continue as a going concern.
After completion of the proposed Transaction with BV Lending, the Company will be required to undertake an equity financing to fund review of asset opportunities.
During 2020, 2021 and 2022, there was an outbreak of COVID-19 that has impacted the economic environment and the capital markets. As the Company is at the stage of exploration and evaluation and is looking to fund mine development leading to production, the impacts of COVID-19 are not determinable at this date. COVID-19 however, could have a material impact on the Company's financial position, results of operation and cash flows. The Company's liquidity and its ability to continue as a going concern may also be impacted.
Critical Accounting Policies Measurement Uncertainty
The preparation of these consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to the useful life and recoverability of long lived assets, stock-based compensation, valuation of convertible debentures and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to our condensed consolidated financial statements relate to the determination of fair values of derivative liabilities and stock-based transactions.
Mineral Property Acquisition and Exploration Costs
Mineral property acquisition costs are capitalized when incurred. Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral property claims.
Costs related to the development of our mineral reserves are capitalized when it has been determined an ore body can be economically developed. The development stage begins when an ore body is determined to be economically recoverable based on proven and probable reserves and appropriate permits are in place, and ends when the production stage or exploitation of reserves begins. Major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, tailings impoundment, development of water supply and infrastructure developments.
Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, or (b) at undeveloped concessions. Pre-development activities involve costs incurred in the exploration stage that may ultimately benefit production that are expensed due to the lack of evidence of economic development, which is necessary to demonstrate future recoverability of these expenses. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.
Once production has commenced, capitalized costs will be depleted using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to the Consolidated Statements of Loss in that period.
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We assess the carrying cost of our mineral properties for impairment whenever information or circumstances indicate the potential for impairment. Such evaluations compare estimated future net cash flows with our carrying costs and future obligations on an undiscounted basis. If it is determined that the future undiscounted cash flows are less than the carrying value of the property, a write down to the estimated fair value is charged to the Consolidated Statements of Loss for the period. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses if the carrying value can be recovered.
For significant exploration and development projects, interest is capitalized as part of the historical cost of developing and constructing assets in accordance with ASC 835-20. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on general debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depletion or impairment.
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