AURANIA RESOURCES LTD. AURANIA RESOURCES LTD.
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
INDEX
PAGE(S) | |
Independent Auditor's Report | 2-5 |
Consolidated Statements of Financial Position | 6 |
Consolidated Statements of Changes in Shareholders' Equity (Deficiency) | 7 |
Consolidated Statements of Loss and Comprehensive Loss | 8 |
Consolidated Statements of Cash Flows | 9 |
Notes to the Consolidated Financial Statements | 10-36 |
Independent Auditor's Report
To the Shareholders of Aurania Resources Ltd.
Opinion
We have audited the consolidated financial statements of Aurania Resources Ltd. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of changes in equity (deficiency), consolidated statements of loss and comprehensive loss and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company has working capital deficiency and accumulated deficit as at December 31, 2023. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key audit matter | How our audit addressed the key audit |
matter | |
Discount rate and accounting for the promissory notes
The Company has received support from its primary shareholder by means Promissory Notes ("Notes") that bear an annual interest rate of 2%. This coupon rate is below the market rate of interest the Company would pay on a loan to an arm's length party. Management has estimated the fair market rate of interest to range from 15% to 20%, and
accordingly, the benefit received by the Company from the low coupon interest rate is recorded in equity as a shareholder contribution.
In evaluating the Notes, management has utilized the above estimated discount rate, which is established by reference to the Company's estimated incremental borrowing Rate and comparable companies. Determining which borrowing rates to apply in this assessment necessitates significant assumptions. As a result, we have classified the discount rate estimate as a key audit matter.
The disclosures related to the accounting for the Notes are provided in Notes 4 and 9.
In this regard, our audit procedures included:
- Review management's estimate of the market rate of interest and the related shareholder contribution.
- Conducted a search for comparable companies and instruments to assess the reasonableness of the interest rate used in the Notes.
- Verified that the terms of the debt financings and management's assumptions utilized in the calculation are properly disclosed in the notes to the financial statements.
- Examined the board of directors' authorization on the financings to ensure that they have been appropriately approved.
- Sent confirmations to the lender to verify the outstanding balances at the year-end.
Other information
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
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We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risks of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner of the audit resulting in this independent auditor's report is Jessica Di Rito.
McGovern Hurley LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
April 25, 2024
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AURANIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
AS AT DECEMBER 31, | 2023 | 2022 |
ASSETS | ||
Current assets | ||
Cash | $325,262 | $1,473,768 |
Prepaid expenses | 64,092 | 431,439 |
Receivables (notes 5 and 16) | 84,415 | 88,023 |
Total current assets | 473,769 | 1,993,230 |
Non-current asset | ||
Property and equipment (note 6) | 74,863 | 120,509 |
Right of use assets (note 7) | 161,376 | 239,761 |
TOTAL ASSETS | $710,008 | $2,353,500 |
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) | ||
LIABILITIES | ||
Current liabilities | ||
Accounts payable and accrued liabilities | $773,791 | $1,612,941 |
Current lease liabilities (note 10) | 55,281 | 56,470 |
Total current liabilities | 829,072 | 1,669,411 |
Long-term liabilities | ||
Promissory notes (note 9) | 9,926,970 | 7,514,229 |
Lease liabilities (note 10) | 126,359 | 202,116 |
TOTAL LIABILITIES | 10,882,401 | 9,385,756 |
SHAREHOLDERS' (DEFICIENCY) | ||
Share capital (note 11) | $675 | $582 |
Share premium (note 11) | 71,458,341 | 68,575,091 |
Share to be issued (note 12) | 872,528 | 979,814 |
Warrants (note 13) | 6,997,977 | 5,715,767 |
Contributed surplus and shareholder contribution (notes 9 and 12) | 9,269,256 | 9,217,439 |
Accumulated deficit | (98,771,170) | (91,520,949) |
Total shareholders' (deficiency) | (10,172,393) | (7,032,256) |
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) | $710,008 | $2,353,500 |
Nature of operations and business continuance (note 1)
Commitments and contingencies (notes 8 and 18)
Subsequent events (note 20)
APPROVED BY THE BOARD: | ||
Signed, | "Jonathan Kagan", | Director |
Signed, | "Keith M. Barron", | Director |
The accompanying notes are an integral part of these consolidated financial statements.
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AURANIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY)
(Expressed in Canadian Dollars)
ISSUED CAPITAL | RESERVES | |||||||
Common | Share | Share | Shares to | Contributed | Accumulated | Total Equity | ||
Warrants | Surplus | |||||||
Shares # | Capital | Premium | be issued | Surplus | Deficit | |||
(Deficiency) | ||||||||
Balance - December 31, 2021 | 51,959,675 | $520 | $66,082,072 | $732,054 | $7,252,555 | $8,507,647 | $(82,884,639) | $(309,791) |
Shares issued for private placement - March 2022 (note 11 (ii)) | 1,996,653 | 20 | 1,397,637 | - | - | - | - | 1,397,657 |
Less share issue cost (note 11 (ii)) | - | - | (62,451) | - | (12,583) | - | - | (75,034) |
Shares issued for private placement - December 2022 (note 11 | 4,244,598 | 42 | 1,910,027 | - | - | - | - | 1,910,069 |
Less share issue cost (note 11 (iii)) | - | - | (22,575) | - | (7,810) | - | - | (30,385) |
Warrants issued for private placement - March 2022 (notes 13 and 11 (ii)) | - | - | (234,374) | - | 234,374 | - | - | - |
Warrants issued for private placement - December 2022 (notes 13 and 11 | - | - | (491,345) | - | 491,345 | - | - | - |
Shares issued from shares to be issued (notes 11 (ii) and 12) | (3,000) | - | (3,900) | 3,900 | - | - | - | - |
Shares issued for stock options (notes 11 (iv) and 12) | 20,000 | - | - | - | - | - | - | - |
Expiry of warrants (note 13) | - | - | - | - | (2,242,114) | - | 2,242,114 | - |
Expiry of stock options (note 12 (xi)) | - | - | - | - | - | (1,347,563) | 1,347,563 | - |
Restricted stock units "RSUs" forfeited (note 12) | - | - | - | - | - | (103,087) | 103,087 | - |
Shares to be issued for RSUs (note 12) | - | - | - | 243,860 | - | (243,860) | - | - |
Stock based compensation - RSUs compensation (note 12) | - | - | - | - | - | 213,189 | - | 213,189 |
Stock-based compensation - Option compensation (note 12 (xi)) | - | - | - | - | - | 790,846 | - | 790,846 |
Shareholder contribution (note 9) | - | - | - | - | - | 1,400,267 | - | 1,400,267 |
Net loss for the year | - | - | - | - | - | - | (12,329,074) | (12,329,074) |
Balance - December 31, 2022 | 58,217,926 | $582 | $68,575,091 | $979,814 | $5,715,767 | $9,217,439 | $(91,520,949) | $(7,032,256) |
Shares issued for private placements - March 2023 (note 11(i)) | 9,253,811 | 93 | 4,256,661 | - | - | - | - | 4,256,754 |
Less share issue cost (note 11(i)) | - | - | (63,289) | - | (27,912) | - | - | (91,201) |
Warrants issued for private placement - March 2023 (notes 13 and 11(i)) | - | - | (1,310,122) | - | 1,310,122 | - | - | - |
Expiry of stock options (note 12) | - | - | - | - | - | (2,486,710) | 2,486,710 | - |
Forfeiture of RSUs (note 12) | - | - | - | - | - | (72,660) | - | (72,660) |
Shares to be issued for RSUs (note 12) | - | - | - | 127,328 | - | (127,328) | - | - |
Shares to be issued expired (note 12) | - | - | - | (234,614) | - | - | 234,614 | - |
Stock-based compensation - RSUs compensation (note 12) | - | - | - | - | - | 42,658 | - | 42,658 |
Stock based compensation - Option compensation (note 12) | - | - | - | - | - | 583,226 | - | 583,226 |
Shareholder contribution (note 9) | - | - | - | - | - | 2,112,631 | - | 2,112,631 |
Net loss for the year | - | - | - | - | - | - | (9,971,545) | (9,971,545) |
Balance - December 31, 2023 | 67,471,737 | $675 | $71,458,341 | $872,528 | $6,997,977 | $9,269,256 | $(98,771,170) | $(10,172,393) |
The accompanying notes are an integral part of these consolidated financial statements.
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AURANIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
For the years ended December 31, | 2023 | 2022 |
Operating Expenses: | ||
Exploration expenditures (notes 8, 14, 15 and 16) | $5,862,786 | 6,812,030 |
Stock-based compensation (notes 12 and 14) | 553,224 | 1,004,035 |
Investor relations | 513,505 | 551,653 |
Office and general | 907,162 | 1,281,690 |
Management fees (note 14) | 152,284 | 746,709 |
Professional and administration fees | 152,565 | 233,836 |
Regulatory and transfer agent fees | 169,212 | 164,820 |
Director and advisor fees (note 14) | - | 30,000 |
Amortization (notes 6 and 7) | 97,901 | 79,339 |
Total expenses | $8,408,639 | $10,904,112 |
Other Expenses (Income) | ||
Loss on foreign exchange | (93,406) | 420,793 |
Interest income | (3,857) | (13,333) |
Accretion of shareholder contribution (note 9) | 1,660,169 | 1,017,502 |
Net loss and comprehensive loss for the year | 9,971,545 | $12,329,074 |
Basic and diluted loss per share | $0.15 | $0.23 |
Weighted average common shares outstanding - basic | ||
and diluted | 65,250,051 | 53,741,866 |
The accompanying notes are an integral part of these consolidated financial statements.
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AURANIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian dollars)
For the years ended December 31, | 2023 | 2022 |
Cash flows from the following activities: | ||
Operating activities: | ||
Net loss for the year | $(9,971,545) | $(12,329,074) |
Adjustment for: | ||
Amortization (notes 6 and 7) | 97,901 | 79,339 |
Stock-based compensation (notes 12 and 14) | 553,224 | 1,004,035 |
Accretion of shareholder contribution (note 9) | 1,660,169 | 1,017,502 |
Foreign exchange loss (gain) | (134,797) | 346,422 |
Net change in non-cash working capital: | ||
Prepaid expenses and receivables | 370,955 | (255,322) |
Accounts payable and accrued liabilities | (839,150) | 393,577 |
Net cash used in operating activities | (8,263,243) | (9,743,521) |
Financing activities: | ||
Shares issued for private placement (note 11) | 4,256,754 | 3,307,726 |
Less share issue costs (note 11) | (91,201) | (105,419) |
Issuance of promissory notes (note 9) | 3,000,000 | 3,510,500 |
Principal payments on lease liabilities (note 10) | (50,816) | (18,175) |
Net cash provided by financing activities | 7,114,737 | 6,694,632 |
(Decrease) in cash | (1,148,506) | (3,048,889) |
Cash - beginning of year | 1,473,768 | 4,522,657 |
Cash - end of year | $325,262 | $1,473,768 |
Supplemental cash flow information | ||
Interest paid | 12,552 | - |
Non-cash items: | ||
Shareholder contribution | 2,112,631 | 1,399,900 |
Lease cancellations | 26,130 | - |
Non-cash share issuance costs | 7,354 | 232 |
The accompanying notes are an integral part of these consolidated financial statements.
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AURANIA RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS AND BUSINESS CONTINUANCE
Aurania Resources Ltd. (the "Company") was incorporated under the laws of Bermuda on June 26, 2007 pursuant to the provisions of The Companies Act 1981 (Bermuda). On February 18, 2011, the Company registered extra-provincially in the Province of Ontario, Canada. The registered head office of the Company is located at 31 Victoria Street, Hamilton, HM10, Bermuda. The corporate office is located at Ste. 1800 - 8 King Street East, Toronto, ON M5C 1B5.
The Company is a junior exploration mining company engaged in the identification, evaluation, acquisition and exploration of mineral property interests, with a focus on precious metals. On May 26, 2017, the Company acquired EcuaSolidus, S.A. ("ESA"), a private Ecuador-based company, owned by the principal shareholder of the Company, in order to acquire all the rights, title and interest in 42 mineral exploration licenses in Ecuador (the "Lost Cities - Cutucu Project" or the "Project"). See note 8 - Mineral Property Interests.
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that the current exploration program will result in profitable mining operations. The recoverability of the amounts expended on mineral property interests and the carrying value of property and equipment and the Company's continued existence is dependent upon the preservation of its interest in recoverable reserves, the achievement of profitable operations, maintenance of concessions and, the ability of the Company to raise necessary financing to complete its planned exploration program.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration activities and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, unregistered claims and noncompliance with regulatory and environmental requirements. See note 8 - Mineral Property Interests regarding the current status of the Company's permits and licenses. The Company's assets are located in Ecuador and Peru and are subject to the risk of foreign investment, including increases in taxes and royalties, renegotiation of contracts, currency exchange fluctuations and restrictions and political uncertainty.
During 2023, the geo-political situation in Ecuador hindered the Company from obtaining the funding required to further its exploration projects as planned and may have an impact on the Company's ability to secure future funding. Should these risks and factors materialize into actual events or circumstances, the Company's operations could be materially and adversely affected, the share price of the Company's securities could decline, and investors may lose all or part of their investment.
As at December 31, 2023, the Company had current assets $473,769 (December 31, 2022 - $1,993,230) to fund current liabilities of $829,072 (December 31, 2022 - $1,669,411), and long-term liabilities of $10,053,329 (December 31, 2022 - $7,716,345). Further, the Company had an accumulated deficit of $98,771,170 (December 31, 2022 - $91,520,949) and working capital deficiency of $355,303 (December 31, 2022 - surplus $323,819).
The Company's ability to continue operations and fund its future exploration property expenditures is highly dependent on Management's ability to secure additional financing. Management acknowledges that while it has been successful in raising sufficient capital in the past, there can be no assurance it will be able to do so in the future. As a result, there is material uncertainty that results in significant doubt about the Company´s ability to continue as a going concern. These consolidated financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
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Aurania Resources Ltd. published this content on 26 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 April 2024 00:01:11 UTC.
