1)
NATURE OF OPERATIONS
Golden
Valley Mines and Royalties Ltd. (hereinafter “Golden Valley” or the “Company”) and its subsidiaries specialize
in identifying, acquiring and developing exploration and evaluation of mineral properties in Canada as well as acquiring royalties.
At
the Company’s Annual General and Special Meeting of Shareholders held on June 25, 2021, the shareholders passed a special resolution
to change the Company’s name to “Golden Valley Mines and Royalties Ltd”.
Golden
Valley was incorporated on August 15, 2000 under the Canada Business Corporations Act. Golden Valley has the following subsidiaries:
Abitibi Royalties Inc. (“Abitibi Royalties”) and Calone Mining Ltd (“Calone Mining”) both incorporated under
the British Columbia Business Corporations Act. Abitibi Royalties and Calone Mining were incorporated on February 18, 2010 and on February
23, 2010, respectively, pursuant to the British Columbia Business Corporations Act.
As
a result of the business combinations completed on November 5, 2021 (see Note 28 “Subsequent Events”), Golden Valley and
Abitibi Royalties became wholly-owned subsidiaries of Gold Royalty Corp. (“Gold Royalty”), a company incorporated and domiciled
in Canada with common shares and common share purchase warrants listed on the NYSE American under the symbols “GROY” and
“GROY.WS”, respectively. An application was made for Golden Valley and Abitibi Royalties to cease to be reporting issuers
under applicable Canadian securities laws and to otherwise terminate Golden Valley’s and Abitibi Royalties’ public reporting
requirements, which application was accepted on November 22, 2021. Furthermore, the location of the registered office of Golden Valley
and Abitibi Royalties changed to 1000 Cathedral Place, 925 West Georgia Street, Vancouver, British Columbia, V6C 3L2, Canada. Similarly,
the location of the principal address of Golden Valley and Abitibi Royalties changed to 1030 West Georgia Street, Suite 1830, Vancouver,
British Columbia, V6E 2Y3, Canada.
The
Company’s investments in associates include International Prospect Ventures Ltd. (“International Prospect”) and Val-d’Or
Mining Corporation (“Val-d’Or Mining”), which are involved in the process of exploring, evaluating and promoting its
mineral properties and other projects.
2)
BASIS OF PRESENTATION
a)
Statement of Compliance
These
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”) and have been prepared using the historical cost convention,
as modified by revaluation of certain financial instruments, which are measured in accordance with the policy described in note 4. Accounting
policies are consistently applied to all years presented, unless otherwise stated.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
2)
BASIS OF PRESENTATION (continued)
The
preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise judgment in applying the Company`s accounting policies. The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.
b)
Approval of Financial Statements
These
consolidated financial statements were approved for issuance by the Board of Directors on January 5, 2022.
c)
Basis of consolidation
Subsidiaries
Subsidiaries
are entities controlled by the Company. Control exists when an investor is exposed, or has rights, to variable returns from its involvement
with an investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the consolidated
financial statements from the date control is obtained until the date control ceases. Where the Company’s interest in a subsidiary
is less than 100%, the Company recognizes non-controlling interests. All intercompany balances, transactions, income, expenses, profits
and losses, including unrealized gains and losses have been eliminated on consolidation. When the Company ceases to have control; any
retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount
recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset.
For
Abitibi Royalties, the Company has control through its own percentage holdings in Abitibi Royalties combined with interest of certain
members of Golden Valley’s Board of Directors in Abitibi as well as its ability to appoint members of the Board of Directors and
key management who have the ability to direct its activities.
Associates
Associates
are entities, including unincorporated entities such as partnerships, over which the Company has significant influence and that are neither
subsidiaries nor interests in joint arrangements. Significant influence is the ability to participate in the financial and operating
policy decisions of the investee without having control or joint control over those policies. In general, significant influence is presumed
to exist when the Company has between 20% and 50% of voting power. Significant influence may also be evidenced by factors such as the
Company’s representation on the Board of Directors, participation in policy-making of the investee, material transactions with
the investee, interchange of managerial personnel, or the provision of essential technical information.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
2)
BASIS OF PRESENTATION (continued)
Associates
(continued)
Associates
are equity accounted for from the effective date of commencement of significant influence to the date that the Company ceases to have
significant influence. Results of associates are equity accounted for using the results of their most recent annual financial statements
or interim financial statements, as applicable. Losses from associates are recognized in the consolidated financial statements until
the interest in the associate is written down to nil. Thereafter, losses are recognized only to the extent that the Company is committed
to providing financial support to such associates.
The
carrying value of the investment in an associate represents the cost of the investment, including goodwill, a share of the post-acquisition
retained earnings and losses, accumulated other comprehensive income (“AOCI”) and any impairment losses. At the end of each
reporting period, the Company assesses whether there is any objective evidence that its investment in associate is impaired. No impairment
was required for the years ended December 31, 2020 and 2019.
The
significant subsidiaries and investments in associates of the Company are listed below. Principal activities of these entities, which
are all incorporated in Canada, are mineral exploration and acquisition of royalties and have a reporting date of December 31:
| | |
As at December 31, | |
| Percentage of ownership | |
2020 | | |
2019 | |
| Subsidiaries (consolidated) | |
| | | |
| | |
| Abitibi Royalties Inc. | |
| 44.93 | % | |
| 44.76 | % |
| Calone Mining Ltd. | |
| 100.00 | % | |
| 100.00 | % |
| Investment in associates (equity method) | |
| | | |
| | |
| International Prospect Ventures Ltd. | |
| 13.44 | % | |
| 16.50 | % |
| Val-d’Or Mining Corporation | |
| 39.57 | % | |
| 37.15 | % |
3)
NEW AND REVISED IFRS
Accounting
standards issued and in effect during the year
IAS
1 “Presentation of Financial Statements” (“IAS 1”)
IAS
1 sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their
content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. The standard
requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other
comprehensive income, a statement of changes in equity and a statement of cash flows.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
3)
NEW AND REVISED IFRS (continued)
IAS
1 “Presentation of Financial Statements” (“IAS 1”) (continued)
IAS
1 has been revised to incorporate a new definition of “material” and IAS 8 has been revised to refer to this new definition
in IAS 1. The amendments are effective for annual reporting periods beginning on or after January 1, 2020.
On
January 1, 2020, the Company has adopted IAS 1 and has concluded that, based on its current operations, the adoption of IAS 1 had no
significant impact on the Company’s financial statements.
IAS
8 “Accounting Policies, Changes in Accounting Estimates and Errors” (“IAS 8”)
IAS
8 is applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period
errors. The standard requires compliance with any specific IAS applying to a transaction, event or condition, and provides guidance on
developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and corrections
of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounted for on a prospective
basis. The amendment is effective for annual reporting periods beginning on or after January 1, 2020.
On
January 1, 2020, the Company has adopted IAS 8 and has concluded that, based on its current operations, the adoption of IAS 8 had no
significant impact on the Company’s financial statements.
Standards
and interpretations issued but not yet effective
At
the date of authorization of these financial statements, certain new standards, amendments and interpretations to existing standards
have been published but are not yet effective and have not been adopted early by the Company.
Management
anticipates that all of the pronouncements will be adopted in the Company’s accounting policy for the first period beginning after
the effective date of each pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant
to the Company’s financial statements is provided below. Certain other new standards and interpretations have been issued but are
not expected to have a material impact on the Company’s financial statements.
In
May 2020, the IASB issued a package of narrow-scope amendments to three standards (IFRS 3 “Business Combinations”, IAS 16
“Property, Plant and Equipment” and IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”) as well
as the IASB’s Annual Improvements to IFRS Standards 2018 - 2020. These amendments to existing IFRS standards are to clarify guidance
and wording, or to correct for relatively minor unintended consequences, conflicts or oversights. These amendments are effective for
annual periods beginning on or after January 1, 2022. The Company is assessing the potential impact of these narrow-scope amendments.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies that have been applied in the preparation of these consolidated financial statements are summarized below:
a)
Foreign Currency
Functional
and presentation
The
consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the parent company and
all subsidiaries.
Foreign
currency transactions are translated into the functional currency, using the exchange rates prevailing at the dates of the transactions
(spot exchange rates). Foreign exchange gains and losses resulting from the settlement of such transactions and from the premeasurement
of monetary items denominated in foreign currency at year-end exchange rates are recognized in profit or loss.
Non-monetary
items are not re-translated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date),
except for non-monetary items measured at fair value which are translated using the exchange rates at the dates when fair value was determined.
b)
Revenue recognition
Revenue
comprises the fair value of the consideration received or receivable arising from rendering of services, the use by others of the Company’s
assets yielding option income and royalties, and the results on investments in financial instruments which yield interest and dividends.
The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will
flow to the Company and when the specific criteria have been met for each of the Company’s activities as described below:
Royalties
Royalties
consist of revenues earned directly from royalty agreements. Revenue recognition generally occurs in the month of production from the
royalty property. Revenue is measured at fair value of the consideration received or receivable when management can reliably estimate
the amounts pursuant to the terms of the royalty agreement. In some instances, the Company will not have access to sufficient information
to make a reasonable estimate of revenue and accordingly, revenue recognition is deferred until management can make a reasonable estimate.
Differences between estimated and actual amounts are adjusted and recorded in the period that the actual amounts are known.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Dividends
Dividend
income from investments is recognized when the shareholder’s right to receive payment has been established (provided that it is
probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Option
income
Option
income is recognized on an accrual basis in accordance with the substance of the relevant agreements. Shares received under option agreements
are valued at fair value which is determined at quoted market prices if the shares are quoted on an active market. If the market for
the shares is not active, fair value is established by using a valuation technique. Option income is initially recorded as a credit against
the carrying costs of the mineral property and deferred exploration expenses until they are fully recovered.
Geological
fees
The
geological fees are measured by reference to the fair value of consideration received or receivable by the Company for services provided.
They are recognized when there is reasonable evidence that an agreement has occurred, that the services were rendered, that the amount
of the fees is fixed or measurable and that the collection is reasonably assured.
Interest
income
Interest
income is recorded on an accrual basis.
c)
Cash and cash equivalents
Cash
and cash equivalents comprise cash in bank and demand deposits, which are readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value. It also includes highly liquid short-term investments initially maturing within
three months of their acquisition date.
Restricted
cash relates to funds held as collateral on the put option contracts referred to in the derivative financial instruments section below.
The funds will become unrestricted once the put option contracts are exercised, repurchased or expired.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
Tax credit receivable
The
Company is entitled to a refundable tax credit on qualified exploration expenditures incurred and a refundable credit on duties for losses
under the Mining Tax Act. These tax credits are recognized against the exploration and evaluation expenditures incurred, based on estimates
made by management. The Company records these tax credits when there is reasonable assurance with regards to collections and assessments
and that the Company will comply with the conditions associated to them.
e)
Property and equipment
Property
and equipment are recognized at cost less accumulated depreciation. Cost includes all costs incurred initially to acquire or construct
an item of property and equipment, costs directly attributable to bringing the asset to the location and condition necessary for it to
be capable of operating in the manner intended by management and costs incurred subsequently to add to or replace part of it. Recognition
of costs in the carrying amount of an item of property and equipment ceases when the asset is in the location and condition necessary
for it to be capable of operating in the manner intended by management. Upon the transfer of exploration and evaluation assets to property
and equipment under mining assets under construction, all subsequent expenditures on the construction, installation or completion of
equipment and infrastructure facilities are capitalized within mining assets under construction. When development stage is completed,
all assets included in the mining assets under construction category are then transferred to mining assets.
Depreciation
is recognized on a straight-line basis to write down the cost to its estimated residual value, with a constant charge over the useful
life of the asset. The periods generally applicable are as follows:
| |
Useful
life |
| Office
furniture |
5
years |
| Computer
equipment |
3
years |
| Leasehold
improvement |
5
years |
| Exploration
and evaluation equipment |
3
years |
The
depreciation expense for each period is recognized in profit or loss except for certain items of property and equipment related to exploration
and evaluation activities where the depreciation expense is included in the carrying amount of an exploration and evaluation asset when
it relates to a specific exploration and evaluation project. The residual value, depreciation method and the useful life of each asset
are reviewed at least at each financial year-end.
The
carrying amount of an item of property and equipment is derecognized on disposal or when no future economic benefits are expected from
its use or disposal. The gain or loss arising from the derecognition of an item of property and equipment is included in profit or loss
when the item is derecognized.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f)
Exploration and evaluation expenditures and Exploration and evaluation assets
Exploration
and evaluation expenditures are costs incurred in the course of initial search for mineral resources before the technical feasibility
and commercial viability of extracting a mineral resource are demonstrable. Costs incurred before the legal right to undertake exploration
and evaluation activities are recognized in profit or loss when they are incurred.
Once
the legal right to undertake exploration and evaluation activities has been obtained, the costs of acquiring mineral rights, expenses
related to the exploration and evaluation of mining properties less refundable tax credits related to these expenses are recognized as
exploration and evaluation assets. Expenses related to exploration and evaluation include topographical, geological, geochemical and
geophysical studies, exploration drilling, trenching, sampling and other costs related to the evaluation of the technical feasibility
and commercial viability of extracting a mineral resource. The various costs are capitalized on a property-by-property basis pending
determination of the technical feasibility and commercial viability of extracting a mineral resource. These assets are recognized as
intangible assets and are carried at cost less any accumulated impairment losses. No depreciation expense is recognized for these assets
during the exploration and evaluation phase.
Whenever
a mining property is considered no longer viable, or is abandoned, the capitalized amounts are written down to their recoverable amounts;
the difference is then immediately recognized in profit or loss.
When
technical feasibility and commercial viability of extracting a mineral resource are demonstrable, exploration and evaluation assets related
to the mining property are transferred to property and equipment in mining assets under construction. Before the reclassification, exploration
and evaluation assets are tested for impairment and any impairment loss is recognized in profit or loss before reclassification. To date,
neither the technical feasibility nor the commercial viability of a mineral resource has been demonstrated.
Although
the Company has taken steps to verify title to the mining properties in which it holds an interest, in accordance with industry practices
for the current stage of exploration and development of such properties, these procedures do not guarantee the validity of the Company’s
titles. Property titles may be subject to unregistered prior agreements and non-compliance with regulatory requirements.
g)
Disposal of interest in connection with option agreement
On
the disposal of interest in connection with an option agreement, the Company does not recognize expenses related to the exploration and
evaluation performed on the property by the acquirer. In addition, the cash or the share consideration received directly from the acquirer
is credited against the costs previously capitalized to the property, and the surplus is recognized as a gain on the disposal of exploration
and evaluation asset in Consolidated Statements of Net income and Comprehensive income.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h)
Royalty interests
Royalty
interests consists of acquired net smelter returns on exploration and evaluation stage properties. Royalty interests for exploration
and evaluation assets are recorded at cost and capitalized in accordance with IFRS 6 “Exploration for and Evaluation of Mineral
Resources” (“IFRS 6”). Acquisition costs of exploration and evaluation royalty interests are capitalized and are not
depleted until such time as revenue generating activities begin. Royalty interests for exploration and evaluation assets are assessed
for impairment in accordance with IFRS 6 and are measured for any impairment in accordance with IAS 36 “Impairment of Assets”
(“IAS 36”). An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable
amount, which is the higher of fair value less costs of disposal and value-in-use. An interest that has previously been classified as
exploration and evaluation is also assessed for impairment before reclassification to development or production, and the impairment loss,
if any, is recognized in net income.
i)
Leases
Leases
are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use. Each
lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease term
so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset
is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets
and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the interest
rate implicit in the lease. If that rate cannot be readily determined, the Company’s incremental borrowing rate is used, being
the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Payments
associated with short-term leases (12 months or less) and leases of low-value assets are recognized on a straight-line basis as an expense
in profit or loss.
j)
Impairment of exploration and evaluation assets
For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating
units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating unit level. Whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable, an asset or cash-generating unit is reviewed
for impairment. Impairment reviews for exploration and evaluation assets are carried out on a project-by-project basis with each project
representing a potential single cash generating unit.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j)
Impairment of exploration and evaluation assets (continued)
An
impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply:
| a) |
the
right to explore the area has expired or will expire in the near future with no expectation of renewal; |
| b) |
no
further exploration or evaluation expenditures in the area are planned or budgeted; |
| c) |
no
commercially viable deposits have been discovered, and the decision has been made to discontinue exploration in the area; |
| d) |
sufficient
work has been performed to indicate that the carrying amount of the expenditure carried as an asset will not be fully recovered. |
Additionally,
when technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the exploration and evaluation
assets of the related mining property are tested for impairment before these items are transferred to property and equipment. An impairment
loss is recognized in profit or loss for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less cost to sell
and its value in use. An impairment charge is reversed if the asset’s or cash-generating unit’s recoverable exceeds its carrying
amount. The amount of such reversal is limited to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss previously been recognized.
k)
Provisions
Provisions
are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company
and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Provisions are measured at the estimated
expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including
the risks and uncertainties associated with the present obligation. Provisions are discounted when the time value of money is significant.
The
Company’s operations are governed by government environment protection legislation. Environmental consequences are difficult to
identify in terms of amounts, timetable and impact. As of the reporting date, management believes that the Company’s operations
are in compliance with current laws and regulations. Site restoration costs currently incurred are negligible.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l)
Provisions (continued)
When
the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated, a restoration provision will
be recognized in the cost of the mining property when there is a constructive commitment that has resulted from past events, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can
be measured with sufficient reliability. In those cases where the possible outflow of economic resources as a result of present obligations
is considered improbable or remote, no liability is recognized, unless it was assumed in the course of a business combination. All provisions
are reviewed at each reporting date and adjusted to reflect the current best estimate. As at December 31, 2020 and 2019, there was no
provision recognized in the consolidated statement of financial position.
l)
Income taxes
Tax
expense recognized in profit or loss comprises the sum of deferred and current tax not recognized in other comprehensive loss or directly
in equity.
Current
tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting
periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and laws that have been enacted or substantively enacted by the end of the
reporting period. The Company periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred
taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their
tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is
a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries
and associates is not provided if reversal of these temporary differences can be controlled by the Company and it is probable that the
reversal will occur in the foreseeable future.
Deferred
tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of
realization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always
provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against
future taxable income.
Deferred
tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities from
the same taxation authority.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l)
Income taxes (continued)
Changes
in deferred tax assets or liabilities are recognized as deferred tax expense or recovery in profit or loss, except where they relate
to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized
in other comprehensive income or equity, respectively.
According
to the provisions of tax legislation relating to flow-through placements, the Company has to transfer its right to tax deductions for
expenses related to exploration activities to the benefit of the investors. When the Company has fulfilled its obligation to transfer
its right, which happens when the Company has incurred, eligible expenditures and has renounced (or has the intention to renounce) its
right to tax deductions, a deferred tax liability is recognized for taxable temporary difference that arises from the difference between
the carrying amount of eligible expenditures capitalized as an asset and its tax basis.
m)
Equity
Capital
stock
Capital
stock represents the amount received on the issue of shares, less issuance costs, net of any underlying income tax benefit from these
issuance costs. If shares are issued when stock options, warrants and conversion of convertible unsecured debenture are exercised, the
capital stock account also comprises the compensation costs and the fair value of the options, warrants and equity of convertible debenture
previously recorded as contributed surplus and warrants.
Unit
placements
Proceeds
from unit placements are allocated between shares and warrants issued using the residual method. Proceeds are first allocated to shares
according to the quoted price of existing shares at the time of issuance and any residual in the proceeds is allocated to warrants.
Flow-through
placements
Issuance
of flow-through shares units represents in substance an issue of common shares, warrants and the sale of a right to tax deduction to
the investors. When the flow-through share units are issued, the sale of the right to tax deductions is deferred and presented as other
liabilities in the consolidated statement of financial position.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m)
Equity (continued)
Flow-through
placements (continued)
The
proceeds received from flow-through unit placements are allocated between common shares, warrants and other liabilities using the residual
method. Proceeds are first allocated to shares according to the quoted price of existing shares at the time of issuance then to warrants
according to their fair value at the time of issuance and the residual proceeds are allocated to the other liabilities. The fair value
of warrants is determined using the Black-Scholes evaluation model. The other liabilities component recorded initially on the issuance
of shares is reversed on the renouncement or the intention of renouncement of the right to tax deductions to the investors and when eligible
expenses are incurred and recognized in profit or loss in reduction of deferred tax expense.
Other
elements of equity
Contributed
surplus includes charges related to stock options until such stock options are exercised.
Conversion
option of convertible unsecured debenture represent the equity component of convertible debenture. Retained earnings include all current
and prior period retained profits or losses.
n)
Equity-settled share-based payments
The
Company operates equity-settled share-based remuneration plans (stock options plans) for its eligible directors, officers, employees
and consultants. The Company’s plans do not feature any options for a cash settlement.
All
goods and services received in exchange for the grant of any share-based payments are measured at their fair values unless that fair
value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods or services received, the Company
measures their value indirectly by reference to the fair value of the equity instruments granted.
For
the transactions with employees and others providing similar services, the Company measures the fair value of the services received by
reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions.
All
equity-settled share-based payments (except compensation warrants) are ultimately recognized as an expense or capitalized as an exploration
and evaluation asset, depending on the nature of the payment with a corresponding credit to contributed surplus, in equity. Compensation
warrants, in respect of an equity financing, are recognized as shares issue expenses of the equity instruments with a corresponding credit
to warrants, in equity.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n)
Equity-settled share-based payments (continued)
If
vesting periods or other vesting conditions apply, the expense is allocated over the vesting year, based on the best available estimate
of the number of stock options expected to vest. Non-market vesting conditions are included in assumptions about the number of options
that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of stock options
expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No
adjustment is made to any expense recognized in prior period if stock options ultimately exercised are different to that estimated on
vesting.
o)
Segment reporting
The
Company presents and discloses segmented information based on information that is regularly reviewed by the Executive Chairman and the
Board of Directors. The Company has determined that it has only one operating segment, the sector of identifying, acquiring and developing
exploration and evaluation minerals and acquisition of royalties. The Company’s significant exploration and evaluation assets and
royalty projects are located in Canada.
p)
Basic and diluted earnings (loss) per share
Basic
earnings (loss) per share is calculated by dividing the net loss attributable to common equity holders of the Company by the weighted
average number of common shares outstanding during the reporting period. Diluted loss per share is calculated by adjusting the weighted
average number of shares outstanding to assume conversion of all potentially dilutive share equivalents, such as stock options and warrants.
When
a loss is incurred during a period, basic and diluted loss per share are the same because the exercise of share equivalents is then considered
to be anti-dilutive. To determine the dilutive impact of stock options, the Company uses the Treasury Stock Method which assumes that
any proceeds from the exercise of in-the-money stock options would be used to purchase the maximum number of common shares of the Company
at the average market price during the period. The assumption of exercise is not reflected in the calculation of earnings per share when
the exercise price of the share equivalents considered individually exceeds the average market price for the period.
q)
Financial Instruments
Financial
assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset
is derecognized when its contractual rights to the cash flows that compose the financial asset expire or substantially all the risks
and rewards of the asset are transferred.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q)
Financial Instruments (continued)
A
financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Gains and losses on
derecognition are recognized within financing income and financing expense, respectively. Financial assets and liabilities are offset
and the net amount is reported in the balance sheet when there is an unconditional and legally enforceable right to offset the recognized
amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Classification
Financial
Assets
|
|
Classification
|
Cash
and cash equivalents
|
|
Financial
Assets at amortized costs
|
Restricted
cash
|
|
Financial
Assets at amortized costs
|
Accounts
Receivable
|
|
Financial
Assets at amortized costs
|
Other
assets
|
|
FVTPL |
Royalty
receivable
|
|
Financial
Assets at amortized costs
|
Investments
|
|
FVTPL |
Financial
Liabilities
|
|
Classification
|
Accounts
payable and accrued liabilities
|
|
Financial
Liabilities at amortized costs
|
Derivative
financial instruments
|
|
Financial
Liabilities at FVTPL
|
Loans
|
|
Financial
Liabilities at amortized costs
|
The
Company determines the classification of financial assets at initial recognition. The classification of its instruments is driven by
the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments
that are held for trading (including all equity derivative instruments) are classified as fair value through profit and loss (“FVTPL”).
For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument
basis) to designate them at fair value through other comprehensive income (“FVTOCI”). Financial liabilities are measured
at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company
has opted to measure them at FVTPL.
Measurement
Financial
assets and liabilities at amortized cost
Financial
assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently
carried at amortized cost less any impairment.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
4)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q)
Financial Instruments (continued)
Financial
assets and liabilities at FVTPL
Financial
assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of
net income (loss). Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities
held at FVTPL are included in the statements of net income (loss) in the period in which they arise. Where Company has opted to recognize
a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in other comprehensive
income (loss).
Impairment
of financial assets at amortized cost
The
Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting
date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the
credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset
has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount
equal to twelve month expected credit losses. The Company recognizes an impairment gain or loss, the amount of expected credit losses
(or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
5)
JUDGMENTS, ESTIMATES AND ASSUMPTIONS
When
preparing the consolidated financial statements, management undertakes a number of judgments, estimates and assumptions about recognition
and measurement of assets, liabilities, income and expenses.
Significant
management judgments
The
following are significant management judgments in applying the accounting policies of the Company that have the most significant effect
on the consolidated financial statements.
Uncertainty
due to COVID-19
The
duration and full financial effect of the COVID-19 pandemic is unknown at this time, as are the measures taken by governments, companies,
and others to attempt to reduce the spread of COVID-19. Any estimate of the length and severity of these developments is therefore subject
to significant uncertainty, and accordingly estimates of the extent to which the COVID-19 may materially and adversely affect the Company’s
operations, financial results and condition in future periods are also subject to significant uncertainty.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
5)
JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Uncertainty
due to COVID-19 (continued)
In
properties where the Company holds royalty interests, there has been temporary operational restrictions due to the ongoing COVID-19 pandemic,
including operations being previously placed under care and maintenance and thereafter the resumption of mining activities.
In
the current environment, the assumptions and judgements made by the Company are subject to greater variability than normal, which could
in the future significantly affect judgments, estimates and assumptions made by management as they relate to potential impact of the
COVID-19 and could lead to a material adjustment to the carrying value of the assets or liabilities affected. The impact of current uncertainty
on judgments, estimates and assumptions extends, but is not limited to, the Company’s valuation of its long-term assets, including
the assessment for impairment and impairment reversal. Actual results may differ materially from these estimates.
Control
over Abitibi Royalties
As
described in note 2, Abitibi Royalties is accounted for as a subsidiary of the Company even though the Company only has a 44.93 % (2019
– 44.76%) ownership interest in Abitibi Royalties. The Company assessed whether or not the Company has control over Abitibi Royalties
based on whether the Company has the practical ability to direct the relevant activities of Abitibi Royalties unilaterally. In making
this judgment, the Company considers its own percentage holding in Abitibi Royalties combined with interest of certain members of its
Board of Directors as well as its ability to appoint members of the Board of Directors and key management who have the ability to direct
activities. The Company concluded that it has a sufficiently dominant voting interest to direct the relevant activities of Abitibi Royalties
and have de-facto control.
Significant
influence over International Prospect and Val-d’Or Mining
As
described in note 2, International Prospect and Val-d’Or Mining are associates of the Company although the Company only owns a
13.44% and 39.57% ownership interest in each of these companies, respectively.
The
Company has significant influence over International Prospect and Val-d’Or Mining by virtue of ownership interest, representation
on the board of directors, interchange of managerial personnel and intercompany transactions in each of these companies.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
5)
JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Classification
of financial instruments
All
financial assets are classified in one of the following categories: fair value through profit or loss or financial assets at amortized
cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification
of its financial assets upon initial recognition.
Recognition
of deferred tax assets and measurement of income tax expense
Management
continually evaluates the likelihood that its deferred tax assets could be realized. The assessment of availability of future taxable
profits involves significant judgment. A deferred tax asset is recognized to the extent that it is probable that taxable profits will
be available against which deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be
utilized. To date, management has not recognized any deferred tax assets in excess of existing temporary differences expected to reverse
within the carry-forward period.
Operating
segment
The
ability to aggregate the Company’s operating segments based on similar economic characteristics requires judgment to be applied
and is dependent on entity-specific facts and circumstances.
Estimation
uncertainty
Information
about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and
expenses is provided below. Actual results may be substantially different.
Impairment
of exploration and evaluation assets
Determining
if there are any facts and circumstances indicating impairment loss or reversal of impairment losses is a subjective process involving
judgment and a number of estimates and assumptions in many cases. When an indication of impairment loss or a reversal of an impairment
loss exists, the recoverable amount of the individual asset or the cash-generating units must be estimated.
In
assessing impairment, the Company must make some estimates and assumptions regarding future circumstances, in particular, whether an
economically viable extraction operation can be established, the probability that the expenses will be recovered from either exploitation
or sale when the activities have not reached a stage that permits a reasonable assessment of the existence of reserves, the Company’s
capacity to obtain financial resources necessary to complete the evaluation and development and to renew permits.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
5)
JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Impairment
of exploration and evaluation assets (continued)
Estimates
and assumptions may change if new information becomes available. If, after expenditure is capitalized, information becomes available
suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in profit or loss in the period when the
new information becomes available.
Impairment
of royalty interests
The
assessment of the fair values of royalty interests requires the use of estimates and assumptions for recoverable production, long-term
commodity prices, discount rates, mineral reserve/resource conversion, foreign exchange rates, future capital expansion plans and the
associated production implications. These estimates and assumptions are, by their very nature, subject to interpretation and uncertainty.
Changes in any of these estimates and assumptions, which certain estimates and assumptions are provided by the operators of the properties,
used in determining the fair value of the royalty interests could impact the impairment analysis.
Impairment
of investments in associates
The
Company follows the guidance of IAS 28 Investments in Associates and Joint Ventures to assess whether there are impairment indicators
which may lead to the recognition of an impairment loss with respect to its net investment in an associate. This determination requires
significant judgement in evaluating if a decline in fair value is significant or prolonged, which triggers a formal impairment test.
In making this judgement, the Company’s management evaluates, among other factors, the duration and extent to which the fair value
of an investment is less than its carrying amount, the volatility of the investment and the financial health and business outlook for
the investee, including factors such as the current and expected status of the investee’s exploration projects and changes in financing
cash flows.
Valuation
of investments in private entities
The
Company values its investments in private entities at fair value at each reporting date. When the fair values of these financial instruments
cannot be measured based upon quoted prices in active markets, their fair value is based on estimates made by management using valuation
techniques. The inputs to these valuation models are taken from observable market data where possible, including concurrent third-party
investments, but where this is not feasible, a degree of judgement is required in establishing fair value. Changes in assumptions related
to these inputs could affect the reported fair value of the financial instruments.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
5)
JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Share-based
payments
The
estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary
for the valuation model chosen. The Company has made estimates as to the volatility of its own shares, levels of forfeiture, the probable
life of share options and compensation warrants granted and the time of exercise of those share options and compensation warrants. The
model used by the Company is the Black-Scholes valuation model.
Tax
credits receivable
The
calculation of the Company’s refundable tax credit on qualified exploration expenditure incurred and refundable tax credit involves
a degree of estimation and judgment in respect of certain items whose tax treatment cannot be finally determined until a notice of assessment
has been issued by the relevant taxation authority and payment has been received. Difference arising between the actual results following
final resolution of some of these items and the assumptions made could necessitate adjustments to the refundable tax credit, exploration
and evaluation assets, and income tax expense in future periods.
6)
CASH AND CASH EQUIVALENTS
| | |
As at December 31, | |
| | |
2020 | | |
2019 | |
| Cash | |
$ | 13,102,329 | | |
$ | 2,573,894 | |
| Demand deposits, redeemable at any time | |
| 600,705 | | |
| 429,189 | |
| | |
$ | 13,703,034 | | |
$ | 3,003,083 | |
Demand
deposits represent money market mutual funds earning income at an annual rate of 0.30% (December 31, 2019 – 0.15%) that are cashable
at any time.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
7)
OTHER ASSETS
| | |
As at December 31, | | |
As at December 31, | |
| | |
2020 | | |
2019 | |
Marketable securities
| |
$ | 406,280 | | |
$ | 427,861 | |
Private company investments
| |
| 106,913 | | |
| 106,913 | |
Warrants (note 12)
| |
| 4,044 | | |
| - | |
Other assets
| |
| 517,237 | | |
| 534,774 | |
Less: current portion of Other assets
| |
| (406,280 | ) | |
| (534,774 | ) |
| Long-term portion of Other assets | |
$ | 110,957 | | |
$ | - | |
Marketable
securities of $406,280 (December 31, 2019 - $427,861) represent shares of publicly traded mining exploration companies and are recorded
at fair value using quoted market prices. Investment of $106,913 (December 31, 2019 - $106,913) represent shares in private companies
do not have a quoted market price in an active market. The Company has assessed a fair value on these shares based on techniques and
assumptions that emphasize both qualitative and quantitative information. Special warrants of $4,044 (December 31, 2019 - $nil) represents
80,880 special warrants received from a mining option agreement with Val-d’Or Mining as further described in note 12.
8)
PREPAIDS AND OTHER RECEIVABLES
| | |
As at December 31, | | |
As at December 31, | |
| | |
2020 | | |
2019 | |
| Prepaid expenses | |
$ | 102,427 | | |
$ | 22,299 | |
| Dividend receivable | |
| 70,361 | | |
| 44,729 | |
| Due from related party (note 20) | |
| 59,517 | | |
| 45,750 | |
| Sales taxes recoverable | |
| 31,757 | | |
| 21,570 | |
| Payroll levies receivable | |
| 26,133 | | |
| - | |
| Mining option receivable | |
| 25,000 | | |
| - | |
| Advances for claim management | |
| 20,521 | | |
| 10,768 | |
| | |
$ | 335,716 | | |
$ | 145,116 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
9)
INVESTMENTS
| | |
As at December 31, 2020 | | |
As at December 31, 2019 | |
| | |
Number of shares | | |
Fair value | | |
Number of shares | | |
Fair value | |
Yamana Gold Inc.
| |
| 2,105,895 | | |
$ | 15,309,857 | | |
| 3,443,895 | | |
$ | 17,701,620 | |
Agnico Eagle Mines Limited
| |
| 375,897 | | |
| 33,676,612 | | |
| 408,597 | | |
| 32,679,588 | |
| | |
| | | |
$ | 48,986,469 | | |
| | | |
$ | 50,381,208 | |
Other investments
| |
| | | |
| 515,447 | | |
| | | |
| 255,530 | |
| | |
| | | |
$ | 49,501,916 | | |
| | | |
$ | 50,636,738 | |
For
the year ended December 31, 2020, Abitibi Royalties was called to deliver 394,100 common shares of Agnico Eagle at share prices ranging
from US$42.00 to US$55.00 per share and received, net of commissions, $25,582,744 (or US$19,551,262). The Company was also called to
deliver 1,338,000 common shares of Yamana at share prices ranging from US$2.50 to US$5.00 per share and received, net of commissions,
$6,096,022 (or US$4,704,309). In addition, Abitibi Royalties was called to purchase 361,400 common shares of Agnico Eagle at a share
price of US$45.00 per share and paid, before commissions, $23,566,713 (or US$16,263,000).
For
the year ended December 31, 2019, Abitibi Royalties was called to deliver 6,000 common shares of Agnico Eagle (2,500 at US$43.00, 2,500
at US$47.00 and 1,000 at US$49.00) and received, net of commissions, $358,619 (or US$270,922). Abitibi Royalties was also called to deliver
105,800 common shares of Yamana (47,600 at US$2.50, 6,900 at US$3.00 and 51,300 at US$3.50) and received, net of commissions, $415,032
(or US$316,287).
Restricted
cash
Restricted
cash represents funds held as collateral on the put option contracts referred to in the Derivative financial instruments below. The funds
will become unrestricted once the put option contracts are exercised, repurchased or expired. Restricted cash of $385,415 (or US$302,405)
as at December 31, 2020 relates to funds held as collateral on the outstanding put option contracts of 99,300 shares of Agnico as at
December 31, 2020. No cash was restricted as at December 31, 2019 as there were no outstanding put option contracts.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
10)
INVESTMENTS IN SUBSIDIARIES
The
Company owns 5,605,246 (2019 -5,605,246 common shares) or 44.93% (44.76% in 2019) of Abitibi Royalties; the change in percentage of ownership
resulted in a decrease in interest of subsidiaries under non-controlling interest on the statement of changes in equity in the amount
of $1,610,793 (decrease of $889,850 in 2019).
| | |
As at December 31, | |
| Abitibi Royalties Inc. | |
2020 | | |
2019 | |
| Current assets | |
$ | 13,959,351 | | |
$ | 3,525,751 | |
| Non-current Assets | |
| 49,653,617 | | |
| 50,636,738 | |
| Current liabilities | |
| 7,436,084 | | |
| 9,340,361 | |
| Non-current liabilities | |
| 2,693,658 | | |
| 3,245,785 | |
| Total equity attributable to non-controlling interest | |
| 29,450,660 | | |
| 22,966,935 | |
| | |
For the year ended December 31, | |
| Abitibi Royalties Inc. | |
2020 | | |
2019 | |
| Net income and comprehensive income | |
$ | 14,681,567 | | |
$ | 11,259,593 | |
| Net income and comprehensive income attributable to non- | |
| | | |
| | |
| controlling interest | |
| 8,094,518 | | |
| 6,217,181 | |
| Cash flows from operating activities | |
$ | 2,481,780 | | |
$ | 382,565 | |
| Cash flows from investing activities | |
| 11,263,577 | | |
| 1,765,368 | |
| Cash flows used by financing activities | |
| (2,774,684 | ) | |
| (1,303,641 | ) |
Calone
Mining Ltd.
The
Company owns 10,000,001 common shares (2019 - 10,000,001 common shares) or 100% (100% in 2019) of Calone Mining. There are no significant
operations in Calone Mining.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
11)
INVESTMENTS IN ASSOCIATES
The
investments in associates relate to the Company’s investments in International Prospect and Val-d’Or Mining.
As
at December 31, 2020, the Company held 4,470,910 common shares (2019 - 4,470,910 common shares) or 13.44% (December 31, 2019 - 16.50%)
interest in International Prospect. The shares of International Prospect were trading at $0.105 per share on that date.
As
at December 31, 2020, the Company held 25,687,444 common shares (2019 -17,354,110 common shares) or 39.57% (December 31, 2019 –
37.15%) interest in Val-d’Or Mining. The shares of Val-d’Or Mining were trading at $0.18 per share on that date.
The
Company has no contingent liabilities relating to its interest in the associates.
The
following table summarizes the changes to investments in associates for the years ended December 31, 2020 and 2019:
| | |
International | | |
Val-d’Or | | |
| |
| | |
Prospect | | |
Mining | | |
Total | |
| As at January 1, 2020 | |
$ | 356,655 | | |
$ | 986,378 | | |
$ | 1,343,033 | |
| Shares from mining option agreement | |
| - | | |
| 1,291,667 | | |
| 1,291,667 | |
| Share of net loss from associates | |
| (52,015 | ) | |
| (455,254 | ) | |
| (507,269 | ) |
| As at December 31, 2020 | |
$ | 304,640 | | |
$ | 1,822,791 | | |
$ | 2,127,431 | |
| | |
International | | |
Val-d’Or | | |
| |
| | |
Prospect | | |
Mining | | |
Total | |
| As at January 1, 2019 | |
$ | 405,748 | | |
$ | 1,152,662 | | |
$ | 1,558,410 | |
| Shares for mining option agreement | |
| - | | |
| 250,000 | | |
| 250,000 | |
| Share of net loss from associates | |
| (49,093 | ) | |
| (416,284 | ) | |
| (465,377 | ) |
| As at December 31, 2019 | |
$ | 356,655 | | |
$ | 986,378 | | |
$ | 1,343,033 | |
Shares
for mining option agreement
For
fiscal year 2020, the Company received a total of 8,333,334 common shares, fair valued at $1,291,667, from Val-d’Or Mining in accordance
with the Amended Mining Option Agreement as described in note 12.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
11)
INVESTMENTS IN ASSOCIATES (continued)
Financial
information
The
following table summarizes financial information of International Prospect:
| | |
As at December 31, | |
| International Prospect Ventures Ltd | |
2020 | | |
2019 | |
| Current assets | |
$ | 485,932 | | |
$ | 362,821 | |
| Non-current Assets | |
| 625,780 | | |
| 552,303 | |
| Current liabilities | |
| 96,595 | | |
| 103,147 | |
| Total equity | |
| 1,015,045 | | |
| 811,977 | |
| | |
For the year ended December 31, | |
| International Prospect Ventures Ltd | |
2020 | | |
2019 | |
| Net loss and comprehensive loss | |
$ | 377,920 | | |
$ | 297,531 | |
| Cash flows used by operating activities | |
$ | (299,507 | ) | |
$ | (185,407 | ) |
| Cash flows used by investing activities | |
| (87,320 | ) | |
| (85,794 | ) |
| Cash flows from (used by) financing activities | |
| 518,140 | | |
| (9,169 | ) |
The
following table summarizes financial information of Val-d’Or Mining:
| | |
As at December 31, | |
| Val-d’Or Mining Corporation | |
2020 | | |
2019 | |
| Current assets | |
$ | 744,403 | | |
$ | 951,144 | |
| Non-current Assets | |
| 1,643,181 | | |
| 186,678 | |
| Current liabilities | |
| 210,586 | | |
| 85,776 | |
| Non-current liabilities | |
| 40,708 | | |
| 2,356 | |
| Total equity | |
| 2,136,290 | | |
| 1,049,690 | |
| | |
For the year ended December 31, | |
| Val-d’Or Mining Corporation | |
2020 | | |
2019 | |
| Net loss and comprehensive loss | |
| 1,190,209 | | |
| 1,167,616 | |
| Cash flows used by operating activities | |
$ | (413,576 | ) | |
$ | (419,392 | ) |
| Cash flows from (used by) investing activities | |
| 148,793 | | |
| (346,432 | ) |
| Cash flows from financing activities | |
| 873,672 | | |
| 168,982 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS
| | |
Balance at
January 1, | | |
| | |
| | |
| | |
Balance at
December 31, | |
| | |
2020 | | |
Additions | | |
Recovery | | |
Credits | | |
2020 | |
| Golden Valley Mines and Royalties Ltd. | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquisition and claims maintenance | |
$ | 3,312,610 | | |
| - | | |
| - | | |
| - | | |
$ | 3,312,610 | |
| Property option payments | |
| 312,500 | | |
| - | | |
| - | | |
| - | | |
| 312,500 | |
| Drilling, excavation and related costs | |
| 3,257,961 | | |
| - | | |
| - | | |
| - | | |
| 3,257,961 | |
| Technical and field staff | |
| 4,624,395 | | |
| - | | |
| - | | |
| - | | |
| 4,624,395 | |
| Airborne geophysics | |
| 791,822 | | |
| - | | |
| - | | |
| - | | |
| 791,822 | |
| Geophysics | |
| 2,319,401 | | |
| - | | |
| - | | |
| - | | |
| 2,319,401 | |
| Line cutting | |
| 1,108,235 | | |
| - | | |
| - | | |
| - | | |
| 1,108,235 | |
| Sampling and testing | |
| 744,773 | | |
| - | | |
| - | | |
| - | | |
| 744,773 | |
| Travel and transport | |
| 1,683,141 | | |
| - | | |
| - | | |
| - | | |
| 1,683,141 | |
| Program management and consultants | |
| 441,560 | | |
| - | | |
| - | | |
| - | | |
| 441,560 | |
| Professional Fees | |
| 5,215 | | |
| - | | |
| - | | |
| - | | |
| 5,215 | |
| Depreciation, insurance and office expenses | |
| 581,588 | | |
| - | | |
| - | | |
| - | | |
| 581,588 | |
| Communications | |
| 45,897 | | |
| - | | |
| - | | |
| - | | |
| 45,897 | |
| Option payments received | |
| (1,971,145 | ) | |
| - | | |
| - | | |
| - | | |
| (1,971,145 | ) |
| Write-off of exploration and evaluation assets | |
| (4,213,235 | ) | |
| - | | |
| - | | |
| - | | |
| (4,213,235 | ) |
| Impairment of exploration and evaluation assets | |
| (7,525,064 | ) | |
| - | | |
| - | | |
| - | | |
| (7,525,064 | ) |
| Shares for mining rights | |
| (666,666 | ) | |
| - | | |
| 106,858 | | |
| (1,291,667 | ) | |
| (1,851,475 | ) |
| Government assistance | |
| (1,641,978 | ) | |
| - | | |
| - | | |
| - | | |
| (1,641,978 | ) |
| Net expenditures incurred during the period | |
| 3,211,010 | | |
| - | | |
| 106,858 | | |
| (1,291,667 | ) | |
| 2,026,201 | |
| Exploration and evaluation assets sold to third parties | |
| (1,713,840 | ) | |
| - | | |
| - | | |
| (633 | ) | |
| (1,714,473 | ) |
| Balance, end of the period | |
$ | 1,497,170 | | |
| - | | |
| 106,858 | | |
| (1,292,300 | ) | |
$ | 311,728 | |
| Abitibi Royalties Inc | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquisition and claims maintenance | |
$ | - | | |
| 241,959 | | |
| - | | |
| - | | |
$ | 241,959 | |
| Program management and consultants | |
| - | | |
| 8,558 | | |
| - | | |
| - | | |
| 8,558 | |
| Option payments received | |
| - | | |
| - | | |
| 48,684 | | |
| (147,500 | ) | |
| (98,816 | ) |
| | |
| - | | |
| 250,517 | | |
| 48,684 | | |
| (147,500 | ) | |
| 151,701 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| TOTAL | |
$ | 1,497,170 | | |
| 250,517 | | |
| 155,542 | | |
| (1,439,800 | ) | |
$ | 463,429 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
| | |
As at
January 1, | | |
| | |
| | |
| | |
Impairment | | |
As at
December 31, | |
| | |
2019 | | |
Additions | | |
Recoveries | | |
Credits | | |
Write-off | | |
2019 | |
| Golden Valley Mines and Royalties Ltd. | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquisition and claims maintenance | |
$ | 3,298,296 | | |
$ | 14,514 | | |
$ | (200 | ) | |
$ | - | | |
$ | - | | |
$ | 3,312,610 | |
| Property option payments | |
| 312,500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 312,500 | |
| Drilling, excavation and related costs | |
| 3,241,938 | | |
| 16,023 | | |
| - | | |
| - | | |
| - | | |
| 3,257,961 | |
| Technical and field staff | |
| 4,615,618 | | |
| 8,777 | | |
| - | | |
| - | | |
| - | | |
| 4,624,395 | |
| Airborne geophysics | |
| 791,822 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 791,822 | |
| Geophysics | |
| 2,319,401 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,319,401 | |
| Line cutting | |
| 1,108,235 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,108,235 | |
| Sampling and testing | |
| 823,818 | | |
| - | | |
| (79,045 | ) | |
| - | | |
| - | | |
| 744,773 | |
| Travel and transport | |
| 1,689,127 | | |
| 104 | | |
| (6,090 | ) | |
| - | | |
| - | | |
| 1,683,141 | |
| Program management and consultants | |
| 501,621 | | |
| 6,156 | | |
| (66,217 | ) | |
| - | | |
| - | | |
| 441,560 | |
| Professional Fees | |
| 5,215 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,215 | |
| Depreciation, insurance and office expenses | |
| 582,713 | | |
| - | | |
| (1,125 | ) | |
| | | |
| - | | |
| 581,588 | |
| Communications | |
| 45,897 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 45,897 | |
| Option payments received | |
| (1,963,650 | ) | |
| - | | |
| - | | |
| (7,495 | ) | |
| - | | |
| (1,971,145 | ) |
| Write-off of exploration and evaluation assets | |
| (4,213,235 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,213,235 | ) |
| Impairment of exploration and evaluation assets | |
| (7,265,328 | ) | |
| - | | |
| (89,038 | ) | |
| - | | |
| (170,698 | ) | |
| (7,525,064 | ) |
| Shares for mining rights | |
| (416,666 | ) | |
| - | | |
| - | | |
| (250,000 | ) | |
| - | | |
| (666,666 | ) |
| Government assistance | |
| (1,639,157 | ) | |
| - | | |
| - | | |
| (2,821 | ) | |
| - | | |
| (1,641,978 | ) |
| Net expenditures incurred during the year | |
| 3,838,165 | | |
| 45,574 | | |
| (241,715 | ) | |
| (260,316 | ) | |
| (170,698 | ) | |
| 3,211,010 | |
| Exploration and evaluation assets sold to third parties | |
| (1,606,927 | ) | |
| - | | |
| - | | |
| (106,913 | ) | |
| - | | |
| (1,713,840 | ) |
| Balance, end of the year | |
$ | 2,231,238 | | |
| 45,574 | | |
| (241,715 | ) | |
| (367,229 | ) | |
| (170,698 | ) | |
$ | 1,497,170 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
The
following table summarizes the carrying values of Exploration and Evaluations Assets by properties as at December 31, 2020 and 2019:
| | |
Properties
optioned to
Eldorado Gold | | |
Properties
optioned to
BonTerra
Resources | | |
Balance as at
December 31,
2020 | | |
Balance as at
December 31,
2019 | |
| Golden Valley Mines Properties | |
| | | |
| | | |
| | | |
| | |
| Abitibi Greenstone Belt (“AGB”) | |
| | | |
| | | |
| | | |
| | |
| Kirkland Lake / Matachewan (Ontario) | |
$ | 817,555 | | |
$ | - | | |
$ | 817,555 | | |
$ | 818,188 | |
| Lebel-sur-Quevillon (Québec) | |
| - | | |
| 359,496 | | |
| 359,496 | | |
| 366,017 | |
| Matachewan, Kirkland Lake (Ontario) | |
| - | | |
| - | | |
| - | | |
| 843,108 | |
| Val d’Or - Malartic (Québec) | |
| 143,181 | | |
| - | | |
| 143,181 | | |
| 354,017 | |
| Rouyn-Noranda-Cadillac (Québec) | |
| 168,405 | | |
| - | | |
| 168,405 | | |
| 168,405 | |
| Rouyn-Noranda-Cadillac (Québec) | |
| - | | |
| - | | |
| - | | |
| 45,544 | |
| Chibougamau (Québec) | |
| - | | |
| - | | |
| - | | |
| 65,671 | |
| Matagami (Québec) | |
| - | | |
| - | | |
| - | | |
| 13,129 | |
| Total AGB | |
| 1,129,141 | | |
| 359,496 | | |
| 1,488,637 | | |
| 2,674,079 | |
| Total other | |
| | | |
| | | |
| 22,069 | | |
| 22,069 | |
| Investment tax credit | |
| | | |
| | | |
| (1,198,978 | ) | |
| (1,198,978 | ) |
| Balance, end of the year | |
| | | |
| | | |
$ | 311,728 | | |
$ | 1,497,170 | |
| Abitibi Royalties Properties | |
| | | |
| | | |
| | | |
| | |
| Bathurst (Ontario) | |
| - | | |
| - | | |
| 75,000 | | |
| - | |
| Hees (Ontario) | |
| - | | |
| - | | |
| 75,000 | | |
| - | |
| Bullfrog South (Nevada, USA) | |
| - | | |
| - | | |
| 1,701 | | |
| - | |
| Balance, end of the year | |
| | | |
| | | |
$ | 463,429 | | |
$ | 1,497,170 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
GOLDEN
VALLEY PROPERTIES
a)
Mining Option Agreement with Val-d’Or Mining
On
April 18, 2017, the Company granted to Val-d’Or Mining an option to acquire a 100% interest in 61 of its grassroots properties.
On November 28, 2019, the Option agreement was amended to document, among other things, a waiver of expenditure requirements required
in order to maintain the option, acceleration of vesting of the option as well as changes to the buyback provisions of the royalty on
Net Smelter Returns granted to the Company. In accordance with the terms of the Amended Mining Option Agreement, Val-d’Or Mining
has agreed to issue to Golden Valley an aggregate 16,666,668 common shares of Val-d’Or Mining, issuable as to 25% on each of December
31, 2018, December 31, 2019, June 30, 2020 and December 31, 2020.
In
addition, the properties are subject to a royalty in favour of Golden Valley equal to 1.25% of net smelter returns, which is subject
to certain partial buyback provisions. he partial buyback right pertains to each individual property, whereby 1% may be bought for $500,000
on a property-by-property basis with a maximum total consideration of $5,000,000 at which point in time the NSR royalty on all the properties
would be reduced by 1.0%. Golden Valley will also receive 20% of the proceeds of all third-party transactions pertaining to the properties
that Val-d’Or Mining enters into and announces on or before December 31, 2022. On December 5, 2019, Val-d’Or Mining exercised
its option to acquire a 100% interest in the properties in accordance with the terms of the amended and restated mining option agreement
between Val-d’Or Mining and Golden Valley dated November 28, 2019.
On
October 6, 2020, Val-d’Or Mining entered into an agreement with respect to the sale of several properties referred to as the Ducros
Group of Properties. The purchaser of the property is privately-owned Québec Nickel Corp. (“QNC”). In consideration
for a 100% interest in the properties, QNC issued 3,589,341 special warrants, with a fair value of $179,467, to Val-d’Or Mining
(of which Golden Valley received 80,880 special warrants, with a fair value of $4,044 in accordance with the terms of an amended and
restated option agreement between d’Or Mining and Golden Valley dated November 28, 2019).
b)
Lac Barry Prospect - BonTerra Resources Inc. – Level-sur-Quevillon, Québec
On
March 16, 2016, the Company granted an option to BonTerra Resources Inc. (“BonTerra”) on the Lac Barry Prospect located in
the Abitibi Greenstone Belt, northeast of Val-d’Or, Québec. BonTerra issued to Golden Valley 519,480 common shares in the
capital of BonTerra having an aggregate value of $200,000, and incurred expenditures in an aggregate amount of $2,000,000 over a three-year
period. Upon BonTerra exercising the option on June 4, 2019, it earned an 85% interest in the property and, the Company retained a 15%
free carried interest and a 3% NSR, with 1% of the NSR being subject to a buyback in favour of BonTerra for $1.0 million payable by BonTerra
to Golden Valley.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
b)
Lac Barry Prospect - BonTerra Resources Inc. – Level-sur-Quevillon, Québec (continued)
The
Company is to enter into a joint venture agreement with BonTerra and therefore the Company is to retain its 15% free carried interest
and a 3% NSR, with 1% of the NSR being subject to a buyback as discussed above. For accounting purposes, no cost has been assigned to
the royalty, as the project is still at an early stage of exploration and future cash flow cannot be reliably estimated.
c)
Centremaque Prospect – Alexandria Minerals Corporation - Val-d’Or Québec
On
April 13, 2017, the Company entered into a mining option agreement with Alexandria Minerals Corporation (“Alexandria”) on
the Centremaque Prospect located in the AGB, northeast of Val-d’Or, Québec. In accordance with the option agreement, in
order to acquire an 80% interest in the property, Alexandria must: (i) issue, over a four year period from the date of signing, to Golden
Valley such number of common shares in its capital having an aggregate value of $250,000 based on the closing price of Alexandria’s
shares on the Exchange the day prior to the date of issuance of each tranche of payment shares, of which shares and/or cash in the amount
of $150,000 have been received to date;$50,000 on or before the third anniversary; and, $100,000 on or before the fourth anniversary;
and, (ii) incur exploration expenditures in an aggregate amount of $4,000,000 over the same four-year period. Once the option is exercised,
the Company will retain a 20% free carried interest and a 1.5% NSR, with 0.5% of the NSR being subject to a buyback in favour of Alexandria
for $1 million payable to Golden Valley.
In
accordance with the terms of the option agreement, Alexandria agreed to a $2,000,000 work commitment on or before April 20, 2020. On
April 3, 2020, O3 Mining provided a notice of force majeure and extension of delay as a result of the government of Québec’s
decision, relating to COVID-19, to close all non-essential businesses. On May 28, 2020, the option agreement with 03 Mining was amended
to provide that the payment date of the remaining cash consideration of $100,000 and the date to incur the remaining exploration expenditures
commitment of $3,250,000 have been extended to June 9, 2021.
On
February 7, 2021, the option agreement was further amended such that the remaining exploration expenditures commitment of $2,000,000
to be incurred on or before June 9, 2021 can also be satisfied through payment of shares in O3 Mining, provided that O3 Mining commits
to complete a drilling program of least 5,000 metres on the Centremaque Prospect in the winter of 2021.
Refer
to note 28 “Subsequent Events”).
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
d)
Sharks and Cheechoo Joint Venture - Sirios Resources Ltd. - - James Bay Northern Quebec
On
October 23, 2013, Golden Valley granted Sirios Resources Ltd. (“Sirios”) an option to acquire Golden Valley’s remaining
55% interest in the Cheechoo prospect. Sirios completed all its obligations under the agreement to earn a 100% interest in the Cheechoo
prospect and therefore holds 100% of the Cheechoo prospect. As additional consideration for the grant of the option, Sirios granted to
Golden Valley a royalty equal to 4% of the net returns from all mineral products mined or removed from the Cheechoo gold project. Notwithstanding
the foregoing, the royalty relevant to gold mineral products mined or removed from the Cheechoo gold prospect may vary between 2.5% and
3.5% depending on the market price of gold at the time of the payment. For accounting purposes, no cost has been assigned to the royalty,
as the project is still at an early stage of exploration and future cash flow cannot be reliably estimated.
e)
AGB Properties – Eldorado Gold Corporation – Québec and Ontario
On
December 8, 2008, the Company earned a 70% interest in the group of 9 properties (8 gold and 1 copper-zinc-silver) located in the AGB
(Québec and Ontario) and a 70:30 joint venture (the “GZZ-I JV”) was formed between Golden Valley and Eldorado Gold
Corporation (“Eldorado”), with the latter having acquired its interest through the acquisition of Integra Gold Corporation.
Golden Valley is the operator for the joint venture. The GZZ-I JV is subject to underlying royalties ranging between 3.0% and 3.5% in
favour of the original vendors, one of whom is a director and an officer of the Company.
On
October 20, 2020, the Company and Eldorado entered into an agreement with Epica Gold Inc (“Epica”) in respect to the sale
of the Denovo property. Pursuant to the agreement, Company and Eldorado received cash consideration of $50,000 (of which Golden Valley
received $35,000) and share consideration of $150,000 (of which Golden Valley received 38,043 common shares) in the common shares of
HighGold Mining Inc (“HighGold”), the parent company of Epica, based on the volume weighted average trading price per share
of HighGold’s shares for the 20-day period ending on October 20, 2020. Pursuant to the agreement, Epica also granted a 3.5% NSR
on the property to an officer and a director of the Company on the portion of the property covered by legacy claims. For the year ended
December 31, 2020, the Company recognized a gain on sale of $139,367 relating to this transaction.
Refer
to note 28 “Subsequent Events”).
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
ABITIBI
ROYALTIES’ PROPERTIES
Bullfrog
South Project
On
September 17, 2020, Abitibi Royalties staked the Bullfrog South Project, located in Nevada’s Bullfrog Gold District.
On
December 9, 2020, Abitibi Royalties entered into a mining option agreement with Bullfrog Mines LLC (“Bullfrog”) on the Bullfrog
South property. In accordance with the option agreement, in order to acquire a 100% interest in the property, Bullfrog must: (i) issue
to Abitibi Royalties, over a two-year period, consideration of $175,000 in cash or share in its capital; reimburse mining claims fees
to be paid in 2021 and (ii) incur exploration expenditures in an aggregate amount of $550,000 over a three-year period, of which a minimum
of $25,000 is to be spent in the first year of the option agreement. Once the option is exercised, the Company will retain a 2.0% NSR
on the property, Bullfrog has the option to purchase 0.5% of the NSR for $500,000 on or before December 9, 2030.
For
the year ended December 31, 2020, Abitibi Royalties recognized a receivable of $25,000 relating to this mining option agreement. The
cash consideration has been recorded against the carrying value of the exploration and evaluation assets relating to the Bullfrog South
property.
Bathurst
property
On
November 9, 2020, Abitibi Royalties entered into an agreement with two arm’s length parties to acquire the Bathurst property, a
property consisting of 7 claims located in Ontario, for the purchase price of $75,000. Pursuant to the agreement, Abitibi Royalties also
granted a 0.5% NSR royalty on the property.
Subsequent
to year-end, on February 4, 2021, Abitibi Royalties signed an option agreement with Xplore Resources Corp. (“Xplore”) on
the property. Xplore may earn a 100% interest in the project by completing the following: (a) Execution of Letter of Intent (“LOI”):
Issue to Abitibi Royalties $62,500 in common shares of Xplore based on the daily volume weighted average (the “VWAP”) price
of Xplore’s shares for the 14-day period preceding the execution of the LOI; and, issuance to Abitibi Royalties $125,000 in common
shares of Xplore based on the VWAP price of Xplore’s shares for the 14-day period preceding the execution of the first anniversary
date and issuance to Abitibi Royalties $150,000 in common shares of Xplore based on the VWAP price of Xplore’s shares for the 14-day
period preceding the execution of the second anniversary date.
On
March 5, 2021, Abitibi Royalties received 1,096,491 common shares of Xplore, with a fair value of $62,500, relating to this mining option
agreement.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
12)
EXPLORATION AND EVALUATION ASSETS (continued)
Hees
Property
On
December 11, 2020, Abitibi Royalties entered into an agreement with two arm’s length parties to acquire the Hees property, a property
consisting of 30 claims located in Ontario, for the purchase price of $75,000. Pursuant to the agreement, Abitibi Royalties also granted
a 0.5% NSR royalty on the property.
Hammond
Reef South property
On
June 2, 2020, Abitibi Royalties entered into an agreement with two arm’s length parties to acquire the Hammond Reef property, a
property consisting of 49 claims located in Ontario, for the purchase price of $70,000. Pursuant to the agreement, the Company also granted
one of the parties a 0.5% NSR royalty on the property. The Company incurred claim and other fees of $3,816 on completion of the transaction.
On
July 27, 2020, Abitibi Royalties entered into a mining option agreement with Victory Resources Corporation (“Victory”) on
the Hammond Reef South property. In accordance with the option agreement, in order to acquire a 100% interest in the property, Victory
must: (i) issue to Abitibi Royalties, over a two-year period, cash consideration of $250,000 and share consideration of 2,750,000 common
shares in its capital; and (ii) incur exploration expenditures in an aggregate amount of $550,000 over a three-year period, of which
a minimum of $25,000 is to be spent in the first year of the option agreement. Once the option is exercised, the Company will retain
a 2.0% NSR on the property.
For
the year ended December 31, 2020, Abitibi Royalties received the cash consideration of $50,000 and share consideration of 500,000, with
a fair value of $84,000, in the common shares of Victory relating to this mining option agreement. Both cash and share considerations
have been recorded against the carrying value of the exploration and evaluation assets relating to the Hammond Reef South property,
with
the remaining difference of $48,684 being recognized as revenue. Refer to note 28 “Subsequent Events”).
As
Victory has not fulfilled its obligations in order to extend the option agreement, on August 24, 2021, the option agreement was terminated
with a final cash payment from Victory to the Company in the amount of $6,000.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
13)
ROYALTY INTERESTS OF ABITIBI ROYALTIES
Main
royalty interests
Malartic
CHL 3% Royalty - Malartic, Québec
The
area covered by the 3% net smelter royalty (“NSR”) is located immediately east of the current Canadian Malartic Mine open
pit operated by Canadian Malartic GP (50% owned by Agnico Eagle Mines Limited (“Agnico Eagle”) and Yamana Gold Inc. (“Yamana”).
The 3% NSR covers a number of known mineralized zones.
For
the year ended December 31, 2020, Abitibi Royalties earned royalties in the amount of $685,698 (or US$524,434) from this royalty interest,
of which $425,180 (or US$333,946), representing the royalties earned for the fourth quarter of 2020, is a receivable as at December 31,
2020.
For
the year ended December 31, 2019, Abitibi Royalties earned royalties in the amount of $3,307,260 (or US$2,315,090 from this royalty interest,
of which $999,252 (or US$769,366) remains outstanding as at December 31, 2019 and subsequently received on January 15, 2020.
Canadian
Malartic 2% Royalty - Malartic, Québec
The
area covered by the 2% NSR is on a single claim located just to the south of the Canadian Malartic open pit, and covers the eastern portion
of the Gouldie Zone and the historic Charlie Zone. Production on this 2% NSR area started in 2014 and stopped in 2015.
Other
royalty interests
On
May 23, 2020, Abitibi Royalties entered into a series of agreements to acquire, with a purchase price of $36,000, a package of royalties
south of the Canadian Malartic Mine and also southeast of the Agnico Eagle’s Goldex Mine. The agreements also entitled the Company
to 15% of the gross proceeds (cash and shares) should the underlying properties be sold or joint ventured. The royalties are located
immediately south of the Canadian Malartic Mine and approximately three kilometres southeast of the Goldex Mine. The projects are owned
and operated by Tamarack Gold Resources Inc. Abitibi Royalties incurred fees of $1,701 on completion of the transaction.
Abitibi
Royalties’ other royalty interest are as follows:
| ■ |
Revillard
Property 2% Royalty - Malartic, Québec |
| ■ |
15%
Net Profit Interest (“NPI”) in the vicinity of Canadian Malartic Mine -Malartic, Québec |
| ■ |
Midway Project 1.5% Royalty -Malartic, Québec
|
| ■ |
1.5% Royalty in the Abitibi region, Québec |
| ■ |
1.0%
NSR on the New Alger Project in the Abitibi region, Québec |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
14)
DERIVATIVE FINANCIAL INSTRUMENTS
Abitibi
Royalties’ total call options outstanding as at December 31, 2020 and 2019 are as follows:
| | |
Expiry
date | |
Number
of shares under option | |
Exercise
price range (USD) | |
Market
value as at December 31, 2020 |
| Calls | |
| |
| | | |
| | | |
| | |
| Yamana | |
January 15, 2021 | |
| 1,247,000 | | |
| $
3.00 to 7.00 | | |
$ | 1,574,731 | |
| Yamana | |
April 16, 2021 | |
| 320,000 | | |
| $
7.00 to 10.00 | | |
| 52,329 | |
| Yamana | |
July 16, 2021 | |
| 140,000 | | |
$ | 8.00 | | |
| 57,039 | |
| Yamana | |
January 21, 2022 | |
| 367,700 | | |
| $
4.50 to 10.00 | | |
| 522,730 | |
| Yamana | |
January 2, 2023 | |
| 2,100 | | |
$ | 10.00 | | |
| 3,208 | |
| Agnico | |
January 15, 2021 | |
| 118,300 | | |
| $
50.00 to 85.00 | | |
| 761,259 | |
| Agnico | |
February 19, 2021 | |
| 82,200 | | |
| $
85.00 to 100.00 | | |
| 53,360 | |
| Agnico | |
May 21, 2021 | |
| 57,400 | | |
| $
85.00 to 100.00 | | |
| 83,013 | |
| Agnico | |
January 21, 2022 | |
| 103,600 | | |
| $
60.00 to 100.00 | | |
| 929,767 | |
| Agnico | |
January 20, 2023 | |
| 8,000 | | |
| $
85.00 to 100.00 | | |
| 83,420 | |
| Puts | |
| |
| | | |
| | | |
| | |
| Agnico | |
February 19, 2021 | |
| 56,000 | | |
| $
40.00 to 45.00 | | |
| 22,217 | |
| Agnico | |
January 21, 2022 | |
| 43,300 | | |
| $
40.00 to 45.00 | | |
| 100,245 | |
| | |
| |
| 2,545,600 | | |
| | | |
$ | 4,243,318 | |
| | |
Expiry
date | |
Number
of shares under option | |
Exercise
price range (USD) | |
Market
value as at December 31, 2019 |
| Calls | |
| |
| | | |
| | | |
| | |
| Yamana | |
January
17, 2020 | |
| 2,220,300 | | |
$ | 2.50
to 4.00 | | |
$ | 1,048,113 | |
| Yamana | |
January
15, 2021 | |
| 1,165,800 | | |
| 3.00
to 5.00 | | |
| 1,135,729 | |
| Yamana | |
January
17, 2022 | |
| 57,700 | | |
| 4.50 | | |
| 71,194 | |
| Agnico | |
January
17, 2020 | |
| 350,800 | | |
| 43.00
to 55.00 | | |
| 5,528,316 | |
| Agnico | |
January
15, 2021 | |
| 57,700 | | |
| 42.00
to 50.00 | | |
| 1,195,695 | |
| | |
| |
| 3,852,300 | | |
| | | |
$ | 8,979,047 | |
For
fiscal year 2020, Abitibi Royalties sold 21,418 call contracts (3,701 calls on Agnico shares and 17,717 calls on Yamana shares) and 5,977
put contracts on Agnico shares for total proceeds of $3,582,525 (or US$2,665,886). In addition, 1,370 put contracts expired and 3,641
put contracts were exercised on Agnico shares. Furthermore, 7,050 contracts were repurchased before expiration (150 calls on Agnico and
6,900 calls on Yamana) for which the Company paid $53,116 (or US$40,740).
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
14)
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
For
fiscal year 2019, Abitibi Royalties sold 25,223 call contracts (1,573 calls on Agnico shares and 23,650 calls on Yamana Gold shares)
for total proceeds of $1,232,964 (or US$935,160). In addition, 1,887 call contracts expired (460 calls on Agnico and 1,427 calls on Yamana).
Furthermore, 19,600 contracts were repurchased before expiration (778 calls on Agnico and 18,822 calls on Yamana) for which the Company
paid $131,050 (or US$97,093).
The
liability associated with derivative financial instruments can be settled, if required, through the Abitibi Royalties’ investments
in the common shares of Agnico Eagle and Yamana.
Subsequent
to year end, the Company was called to deliver 37,700 common shares of Agnico Eagle at share prices ranging from US$50.00 to US$65.00
per share and received, net of commissions, $2,722,806 (or US$2,139,898) and 1,109,100 common shares of Yamana at share prices ranging
from US$3.00 to US$5.00 per share and received, net of commissions, $6,552,852 (or US$5,149,994).
15)
LONG-TERM LOAN
The
Company applied and received the $60,000 Canada Emergency Business Account loan which is an interest-free loan to cover operating costs.
Repaying the balance of the loan on or before December 31, 2022 will result in a loan forgiveness of $20,000.
16)
INCOME TAXES
Major
components of tax expense (recovery)
The
major components of tax expense (recovery) are outlined below:
| | |
For the year ended December 31, | |
| | |
2020 | | |
2019 | |
| Current tax expense | |
$ | 2,464,798 | | |
$ | - | |
| Deferred tax recovery | |
| | | |
| | |
| Origination and reversal of temporary differences | |
$ | (772,145 | ) | |
$ | 1,579,401 | |
| Deferred tax assets not recognized | |
| 220,018 | | |
| 233,919 | |
| | |
| (552,127 | ) | |
| 1,813,320 | |
| Total income tax expense | |
$ | 1,912,671 | | |
$ | 1,813,320 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
16)
INCOME TAXES (continued)
Relationship
between expected tax expense and accounting profit or loss
The
relationship between the expected tax expense based on the combined tax rate in Canada and the reported tax expense in the consolidated
statement of net loss and comprehensive loss can be reconciled as follows:
| | |
For
the year ended December 31, | |
| | |
2020 | | |
2019 | |
| Net
income for the year before income taxes | |
$ | 15,013,135 | | |
$ | 11,313,153 | |
Expected
tax expense calculated using the combined Federal and Provincial at combined statutory rate in Canada of 26.50% (26.60% in 2019)
| |
$ | 3,978,481 | | |
$ | 3,009,299 | |
Change
in tax rates
| |
| - | | |
| (1,036 | ) |
Change
in deferred tax assets not recognized
| |
| 231,575 | | |
| 233,919 | |
Share
of loss of associates
| |
| 135,082 | | |
| 123,790 | |
Non-taxable
dividends received
| |
| (169,584 | ) | |
| (116,353 | ) |
Share-based
payments
| |
| 67,815 | | |
| 110,582 | |
Non-taxable
portion of gain on investments
| |
| (2,325,282 | ) | |
| (1,554,992 | ) |
Other
| |
| (5,416 | ) | |
| 8,111 | |
Total
tax expense
| |
$ | 1,912,671 | | |
$ | 1,813,320 | |
The
statutory tax rate declined from 26.6% to 26.50% due to a reduction in the Québec general corporate tax rate on January 1, 2020.
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
16)
INCOME TAXES (continued)
Deferred
tax assets (liabilities) and variation of recognized amounts
| | |
As at January 1, | |
Recognized in | |
As at December 31, |
| | |
2020 | |
profit or loss | |
2020 |
| Exploration and evaluation assets | |
$ | 687,841 | | |
$ | (367,828 | ) | |
$ | 320,013 | |
| Investments | |
| (6,047,641 | ) | |
| 2,465,445 | | |
| (3,582,196 | ) |
| Share issuance costs | |
| 8,389 | | |
| (2,103 | ) | |
| 6,286 | |
| Non-capital losses | |
| 915,903 | | |
| (915,903 | ) | |
| — | |
| Derivative financial instruments | |
| 1,189,723 | | |
| (627,484 | ) | |
| 562,239 | |
| | |
$ | (3,245,785 | ) | |
$ | 552,127 | | |
$ | (2,693,658 | ) |
| | |
As
at January
1,
2019 | | |
Recognized
in profit or loss | | |
As
at December 31, 2019 | |
Exploration
and evaluation assets
| |
$ | 687,695 | | |
$ | 146 | | |
$ | 687,841 | |
Investments
| |
| (3,898,056 | ) | |
| (2,149,585 | ) | |
| (6,047,641 | ) |
Share issuance costs
| |
| - | | |
| 8,389 | | |
| 8,389 | |
Non-capital
losses
| |
| 1,433,943 | | |
| (518,040 | ) | |
| 915,903 | |
Derivative
financial instruments
| |
| 343,953 | | |
| 845,770 | | |
| 1,189,723 | |
| | |
$ | (1,432,465 | ) | |
$ | (1,813,320 | ) | |
$ | (3,245,785 | ) |
As
at December 31, 2020 and 2019, the Company had deductible temporary differences which it did not record in deferred tax assets:
| | |
As at December 31, | |
| | |
2020 | | |
2019 | |
| Exploration and evaluation assets | |
$ | 4,079,730 | | |
$ | 2,835,206 | |
| Other assets | |
| 719,572 | | |
| 796,761 | |
| Property and equipments | |
| 425,805 | | |
| 424,778 | |
| Share issue costs | |
| 4,957 | | |
| 11,667 | |
| Capital losses | |
| 8,453 | | |
| 29,007 | |
| Loan | |
| 10,000 | | |
| - | |
| Non-capital losses | |
| 7,164,226 | | |
| 7,534,940 | |
| | |
$ | 12,412,743 | | |
$ | 11,632,359 | |
GOLDEN
VALLEY MINES AND ROYALTIES LTD.
(Formerly
Golden Valley Mines Ltd.)
Notes
to the consolidated financial statements
For
the years ended December 31, 2020 and 2019
(Expressed
in Canadian dollars unless otherwise noted)
16)
INCOME TAXES (continued)
The
Company has an amount of $319,859 in 2020 (2019 - $319,859) in investment tax credits that has not been recorded. These credits can be
used to reduce federal income tax and will expire between 2025 and 2033.
As
at December 31, 2020 and 2019, the Company has the following non-capital losses in Canada available to reduce future year’s taxable
income which expires as follows:
| | |
Federal | | |
Quebec | |
| 2029 | |
$ | 570,056 | | |
$ | 350,017 | |
| 2030 | |
| 1,389,166 | | |
| 1,368,264 | |
| 2031 | |
| 41,350 | | |
| 41,350 | |
| 2032 | |
| 1,090,175 | | |
| 1,079,112 | |
| 2033 | |
| 393,100 | | |
| 390,172 | |
| 2034 | |
| 378,137 | | |
| 373,289 | |
| 2035 | |
| 863,064 | | |
| 860,246 | |
| 2036 | |
| 476,992 | | |
| 450,305 | |
| 2037 | |
| 987,998 | | |
| 963,527 | |
| 2038 | |
| 842,706 | | |
| 842,706 | |
| 2039 | |
| 129,319 | | |
| 122,679 | |
| 2040 | |
| 2,163 | | |
| 2,163 | |
| | |
$ | 7,164,226 | | |
$ | 6,843,830 | |
17) CAPITAL STOCK
Capital
Stock
The
capital stock of the Company consists of fully paid common shares.
Authorized
Unlimited
number of common shares without par value. All shares are equally eligible to receive dividends and the repayment of capital and represent
one vote each at the shareholders’ meeting of the Company.
Unlimited
number of preferred shares, issuable in series with rights and restrictions to be determined by the directors.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
17)
CAPITAL STOCK (continued)
Share
consolidation
On
July 27, 2020, the Company received conditional approval from the TSX Venture Exchange regarding a security consolidation on the basis
of ten old shares for one new share. The common shares of Golden Valley have commenced trading on a consolidated basis at open of market
on July 31, 2020. Following the consolidation, a total of approximately 13,518,459 common shares of Golden Valley are issued and outstanding,
and incentive stock options to acquire an aggregate of approximately 1,423,691 common shares are outstanding. The number of common shares
entitled to be purchased pursuant to the terms of the outstanding options and the per share exercise price for such shares were adjusted
accordingly, in accordance with the terms of the respective options. All fractional common shares remaining as a result of the proposed
consolidation have been cancelled. All historical information presented in the financial statements has been adjusted to reflect the
share consolidation.
Issued
share capital
Refer
to “Share Consolidation” section of Note 17 “Capital Stock”.
The
change in issued share capital for the years ended December 31, 2020 and 2019 was as follows:
| | |
2020 | | |
2019 | |
| | |
Number | | |
Stated | | |
Number | | |
Stated | |
| | |
of shares | | |
Value | | |
of shares | | |
Value | |
| Balance, as at January 1, | |
| 13,434,760 | | |
$ | 28,420,603 | | |
| 13,391,858 | | |
$ | 28,289,902 | |
| Shares issued by exercise of stock options | |
| 83,700 | | |
| 215,582 | | |
| 42,903 | | |
| 133,429 | |
| Share issue expenses | |
| - | | |
| - | | |
| - | | |
| (2,728 | ) |
| Balance, as at December 31, | |
| 13,518,460 | | |
$ | 28,636,185 | | |
| 13,434,760 | | |
$ | 28,420,603 | |
Share
capital issued from exercise of incentive stock options
For
fiscal 2020, the Company issued 83,700 of its common shares from the exercise of incentive stock options of 83,700 at prices ranging
from $1.10 per share to $3.50 per share for a total consideration of $125,630.
For
fiscal, 2019, the Company issued 42,903 of its common shares from the exercise of incentive stock options of 37,903 at a price of $1.70
per share and of 5,000 at a price of $2.75 per share for a total consideration of $78,184.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
18) SHARE-BASED PAYMENTS
The
Company has a stock option incentive plan in place under which directors, officers, employees, and consultants are eligible to receive
incentive stock options for the purchase of common shares of the Company. Under the terms of the plan, the aggregate number of shares
issuable upon the exercise of options may not exceed 1,900,673, which represents 20% of the Company’s issued and outstanding common
shares on May 25, 2015, the date of adoption of the option plan by the Company’s Board of Directors. The option plan was approved
by the Company’s disinterested shareholders on June 25, 2015, and subsequently accepted by the TSX Venture Exchange.
The
exercise price of each option is fixed by the Board of Directors at the time of grant and shall not be less than the closing price of
the Company’s shares on the trading day immediately prior to the date of grant less any discount permitted by the TSX Venture Exchange;
if no sales were reported on such day, the exercise price shall be based on the closing sales price on the last trading day prior to
the time of determination on which sales were reported.
The
term of any options granted under the option plan will be fixed by the Board of Directors and may not exceed ten years and the vesting
period of options granted under the plan, if any, shall be determined by the Board of Directors at the time of grant. All options granted
under the option plan will be in accordance with the rules and regulations of the TSX Venture Exchange.
The
summary of changes in the number of incentive stock options issued by the Company for years ended December 31, 2020 and 2019 is presented
as follows:
| | |
2020 | | |
2019 | |
| | |
| | |
Weighted | | |
| | |
Weighted | |
| | |
Number of | | |
average | | |
Number of | | |
average | |
| | |
options | | |
exercise price | | |
options | | |
exercise price | |
| Outstanding, beginning of year | |
| 1,405,916 | | |
$ | 3.20 | | |
| 1,409,819 | | |
$ | 3.10 | |
| Granted | |
| 101,475 | | |
| 5.44 | | |
| 39,000 | | |
| 3.40 | |
| Expired | |
| (1,800 | ) | |
| 3.40 | | |
| - | | |
| - | |
| Exercised | |
| (83,700 | ) | |
| 1.50 | | |
| (42,903 | ) | |
| 1.70 | |
| Outstanding, end of year | |
| 1,421,891 | | |
$ | 3.43 | | |
| 1,405,916 | | |
$ | 3.20 | |
| Exercisable, end of year | |
| 1,415,225 | | |
$ | 3.43 | | |
| 1,317,583 | | |
$ | 3.20 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
18)
SHARE-BASED PAYMENTS (continued)
The
table below summarizes the information related to outstanding share options as at December 31, 2020:
| Outstanding options | |
| | |
| | |
| | |
Weighted | | |
| |
| | |
| | |
Weighted | | |
average | | |
| |
| |
Number of | | |
average exercise | | |
remaining contractual life | | |
Exercisable | |
| Expiry date | |
options | | |
price | | |
(years) | | |
options | |
| January 1, 2021 | |
| 10,000 | | |
| 1.00 | | |
| 0.00 | | |
| 10,000 | |
| June 27, 2021 | |
| 225,000 | | |
| 3.00 | | |
| 0.49 | | |
| 225,000 | |
| February 3, 2022 | |
| 10,000 | | |
| 4.65 | | |
| 1.09 | | |
| 10,000 | |
| June 21, 2023 | |
| 222,000 | | |
| 2.75 | | |
| 2.47 | | |
| 222,000 | |
| June 18, 2024 | |
| 31,500 | | |
| 3.40 | | |
| 3.47 | | |
| 24,833 | |
| March 3, 2025 | |
| 76,475 | | |
| 5.00 | | |
| 4.17 | | |
| 76,475 | |
| June 26, 2025 | |
| 25,000 | | |
| 6.80 | | |
| 4.49 | | |
| 25,000 | |
| September 30, 2026 | |
| 821,916 | | |
| 3.50 | | |
| 5.75 | | |
| 821,916 | |
| | |
| 1,421,891 | | |
$ | 3.43 | | |
| | | |
| 1,415,225 | |
The
table below summarizes the information related to outstanding share options as at December 31, 2019:
| Outstanding options | |
| | |
| | |
| | |
Weighted | | |
| |
| | |
| | |
Weighted | | |
average | | |
| |
| | |
Number of | | |
average exercise | | |
remaining contractual life | | |
Exercisable | |
| Expiry date | |
options | | |
price | | |
(years) | | |
options | |
| July 24, 2020 | |
| 67,500 | | |
| 1.10 | | |
| 0.56 | | |
| 67,500 | |
| January 1, 2021 | |
| 10,000 | | |
| 1.00 | | |
| 1.01 | | |
| 10,000 | |
| June 27, 2021 | |
| 230,000 | | |
| 3.00 | | |
| 1.49 | | |
| 230,000 | |
| February 3, 2022 | |
| 10,000 | | |
| 4.65 | | |
| 2.10 | | |
| 10,000 | |
| June 21, 2023 | |
| 225,000 | | |
| 2.75 | | |
| 3.47 | | |
| 150,000 | |
| June 18, 2024 | |
| 39,000 | | |
| 3.40 | | |
| 4.47 | | |
| 25,667 | |
| September 30, 2026 | |
| 824,416 | | |
| 3.50 | | |
| 6.75 | | |
| 824,416 | |
| | |
| 1,405,916 | | |
$ | 3.17 | | |
| | | |
| 1,317,583 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
18)
SHARE-BASED PAYMENTS (continued)
Share-based
compensation expense
Refer
to “Share Consolidation” section of Note 17 “Capital Stock”.
The
table below summarizes share-based compensation expense for the years ended December 31, 2020 and 2019:
| | |
For the year ended December 31, | |
| | |
2020 | | |
2019 | |
| Golden Valley | |
| | | |
| | |
| June 2020 option grant (a) | |
$ | 90,495 | | |
$ | - | |
| March 2020 option grant (b) | |
| 60,203 | | |
| - | |
| June 2019 option grant (c) | |
| 18,832 | | |
| 55,702 | |
| June 2018 option grant (d) | |
| 86,374 | | |
| 198,050 | |
| September 2016 option grant (e) | |
| - | | |
| 151,716 | |
| Share-based compensation expense | |
$ | 255,904 | | |
$ | 405,468 | |
| a) |
On
June 26, 2020, the Company granted to its officers, directors and consultants incentive stock options entitling the purchase of an
aggregate 25,000 common shares at an exercise price of $6.80 per share. The options are exercisable for a period of 5 years until
June 26, 2025, subject to earlier termination in accordance with the terms of the Company’s stock option plan. The options
vest immediately on date of grant. The fair value of the 25,000 stock options granted has been estimated using the Black-Scholes
option pricing model at $90,495. For the year ended December 31, 2020, an amount of $90,495 has been expensed relating to this incentive
stock option. |
| |
|
| b) |
On
March 3, 2020, the Company granted to its officers and directors incentive stock options entitling the purchase of an aggregate 76,475
common shares (22,500 to directors and 53,975 to officers, at an exercise price of $5.00 per share). The options are exercisable
for a period of 5 years until March 3, 2025, subject to earlier termination in accordance with the terms of the Company’s stock
option plan. The options vest immediately on date of grant. The fair value of the 22,500 stock options granted has been estimated
using the Black-Scholes option pricing model at $60,203. For the year ended December 31, 2020, an amount of $60,203 has been expensed
relating to this incentive stock options. The fair value of the 53,975 stock options granted has been determined to be $125,213,
representing share-based payment equating to the cash portion of the 2018 and 2019 performance bonus to officers. |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
18)
SHARE-BASED PAYMENTS (continued)
Share-based
compensation expense (continued)
| c) |
On
June 18, 2019, the Company granted to its officers, and consultants incentive stock options entitling the purchase of an aggregate
39,000 common shares at an exercise price of $3.40 per share. The options are exercisable for a period of 5 years until June 18,
2024, subject to earlier termination in accordance with the terms of the Company’s stock option plan. Except for 20,000 options
which vest over a period of 3 years unless there is a change of control event, in which case the options will vest immediately on
occurrence of the change of control, all of the other options vest immediately on grant. |
| |
|
| |
The
fair value of the 39,000 stock options granted has been estimated using the Black-Scholes option pricing model at $84,980 of which
to date $74,534 has been expensed. 5,700 incentive stock options have been exercised relating to this grant. For the year ended December
31, 2020, an amount of $18,832 (2019 -$55,702) has been expensed. |
| |
|
| d) |
On
June 21, 2018, the Company granted to its directors, officers, and consultants incentive stock options entitling the purchase of
an aggregate 230,000 common shares at an exercise price of $2.75 per share. The options are exercisable for a period of 5 years until
June 21, 2023, subject to earlier termination in accordance with the terms of the Company’s Stock Option Plan. All the options
vest equally over a period of 3 years unless there is a change of control event, in which case the options will vest immediately
on occurrence of the change of control. |
| |
|
| |
The
fair value of the stock options granted has been estimated using the Black-Scholes option-pricing model at $455,441 of which to date
$431,594 has been expensed. 8,000 incentive stock options have been exercised relating to this grant. For the year ended December
31, 2020, an amount of $86,374 (2019 -$198,050) has been expensed. |
| |
|
| e) |
On
September 30, 2016, the Company granted to its directors, officers, employees, and consultants incentive stock options entitling
the purchase of an aggregate 930,593 common shares at an exercise price of $3.50 per share. The options are exercisable for a period
of 10 years until September 30, 2026, subject to earlier termination in accordance with the terms of the Company’s Stock Option
Plan. All the options vest equally over a period of 3 years unless there is a change of control event, in which case the options
will vest immediately on occurrence of the change of control. |
| |
|
| |
The
fair value of the stock options granted has been estimated using the Black-Scholes option-pricing model at $2,427,448 of which to
date $2,393,622 has been expensed and $33,826 has been capitalized to exploration and evaluation assets. 106,177 incentive stock
options have been cancelled and 2,500 incentive stock options have been exercised relating to this grant. For the year ended December
31, no amount has been expensed as incentive stock options under this grant have fully vested in 2019. |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
18)
SHARE-BASED PAYMENTS (continued)
Fair
value of options granted
Refer
to “Share Consolidation” section of Note 17 “Capital Stock”.
The
fair value of the granted options was determined using the Black-Scholes option pricing model and based on the following assumptions:
| Date of Grant | |
June 26, 2020 | | |
March 3, 2020 | | |
June 18, 2019 | | |
June 21, 2018 | | |
September 30, 2016 | |
| Share price at date of grant | |
$ | 6.80 | | |
$ | 5.00 | | |
$ | 3.40 | | |
$ | 2.75 | | |
$ | 3.50 | |
| Expected dividends yield | |
| 0% | | |
| 0% | | |
| 0% | | |
| 0% | | |
| 0% | |
| Expected weighted volatility | |
| 70.44% | | |
| 69.59% | | |
| 79.95% | | |
| 105.67% | | |
| 125.00% | |
| Risk-free interest average rate | |
| 0.31% | | |
| 1.10% | | |
| 1.33% | | |
| 2.00% | | |
| 1.00% | |
| Expected average life | |
| 5 years | | |
| 5 years | | |
| 5 years | | |
| 5 years | | |
| 10 years | |
| Exercise price at date of grant | |
$ | 6.80 | | |
$ | 5.00 | | |
$ | 3.40 | | |
$ | 2.75 | | |
$ | 3.50 | |
19) GENERAL AND ADMINISTRATIVE EXPENSES
The
following table summarizes general and administrative expenses:
| | |
For the year ended | |
| | |
December 31, | |
| | |
2020 | | |
2019 | |
| Office expenses | |
$ | 167,659 | | |
$ | 109,486 | |
| Advertising and exhibitions | |
| 154,434 | | |
| 81,390 | |
| Travelling and other | |
| 71,432 | | |
| 77,614 | |
| | |
$ | 393,525 | | |
$ | 268,490 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
20) EQUITY TRANSACTIONS OF ABITIBI ROYALTIES
Dividends
paid
On
January 20, 2020, Abitibi Royalties’ Board of Directors approved a 25% dividend increase from $0.12 to $0.15 per common share on
an annualized basis. The payment of dividends also changed from quarterly to monthly. The increased dividend amount and the payment of
dividends from quarterly to monthly began in April 2020. On December 7, 2020, Abitibi Royalties’ Board of Directors further approved
a 20% dividend increase from $0.15 to $0.18 per common share on an annualized basis.
For
the year ended December 31, 2020, Golden Valley earned dividends of $798,748 (2019 - $336,315) from Abitibi Royalties. As at December
31, 2020, Golden Valley holds 5,605,246 common shares in Abitibi Royalties.
Normal
Course Issuer Bid
On
September 23, 2019, Abitibi Royalties announced it received conditional acceptance to renew its NCIB for another year until October 5,
2020. This new approval allows the Company to purchase up to 626,695 (representing 5% of the Company’s total issued and outstanding
common shares) of its common shares.
On
September 24, 2020, Abitibi Royalties announced it received conditional acceptance to renew its NCIB for another year until October 5,
2021. This new approval allowed the Company to purchase up to 624,145 (representing 5% of the Company’s total issued and outstanding
common shares) of its common shares.
For
fiscal year 2020, Abitibi Royalties repurchased and cancelled 48,100 shares at prices varying from $15.14 to $26.00 per share for a total
of $994,051. For fiscal year 2019, Abitibi Royalties repurchased and cancelled 61,100 of its common shares at prices varying from $9.40
to $16.15 for a total of $778,649.
Incentive
stock option
Abitibi
Royalties adopted a 20% fixed option plan in 2013. Pursuant to the fixed option plan, options, for an aggregate total of 1,740,200 common
shares, may be granted to its directors, officers, employees, consultants, or management companies employees from time to time. Abitibi
Royalties has not renewed its stock option plan and has not granted stock options under the current plan since 2014. There are no stock
options available under the plan.
For
the year ended December 31, 2019, Abitibi Royalties issued 81,171 of its common shares for a total consideration of $226,713 from the
exercise of stock options at prices varying from $2.18 per share (47,733 stock options), $3.62 per share (13,438 stock options) and $3.70
per share (20,000 stock options).
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
21) FAIR VALUE MEASUREMENT
Fair
value measurement of financial instrument
Financial
assets and liabilities measured at fair value in the statement of financial position are grouped into three levels of fair value hierarchy.
The three levels are defined based on the observability of the significant inputs to the measurement, as follows:
| ▪ |
Level
1: |
quoted prices (unadjusted) in active markets for identical assets or liabilities |
| ▪ |
Level
2: |
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
and |
| ▪ |
Level
3: |
inputs for the assets or liabilities that are not based on observable market data. |
The
level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the
fair value measurement.
Cash
and cash equivalent (Level 1), accounts receivable (Level 3), royalty receivable (Level 3), other assets (Level 3) and accounts payable
and accrued liabilities (Level 3) are carried at amortized costs which approximate their fair value due to their short-term nature.
Short-term
other assets consisting of money-market investment funds and marketable securities in the consolidated statement of financial position
at December 31, 2020 and 2019 are classified in Level 1 and are recorded at fair value by reference to their quoted prices at the reporting
date. The Company’s short-term other assets relating to the investments in the common shares of a private company do not have a
quoted market price in an active market and the Company has assessed a fair value of the investment based on their unobservable net assets.
As a result, the fair value is classified within Level 3 of the fair value hierarchy. The process of estimating the fair value of these
investments is based on inherent measurement uncertainties and is based on techniques and assumptions that emphasize both qualitative
and quantitative information. There is no reasonable quantitative basis to estimate the potential effect of changing the assumptions
to reasonably possible alternative assumptions on the estimated fair value of these investments.
Investments
relating to the common shares of Agnico Eagle and Yamana held by Abitibi Royalties and the liability relating to the derivative financial
instruments are classified as Level 1.
The
method and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting periods.
There has been no movement between levels during the year.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
21)
FAIR VALUE MEASUREMENT (continued)
The
carrying amounts and fair value of financial instruments presented in the statement of financial position are as follows:
| | |
December 31, 2020 | | |
December 31, 2019 | |
| | |
Carrying | | |
| | |
Carrying | | |
| |
| | |
amount | | |
Fair value | | |
amount | | |
Fair value | |
| | |
| | |
| | |
| | |
| |
| Financial assets | |
| | | |
| | | |
| | | |
| | |
| Financial Assets at amortized costs | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 13,703,034 | | |
$ | 13,703,034 | | |
$ | 3,003,083 | | |
$ | 3,003,083 | |
| Restricted cash | |
| 385,415 | | |
| 385,415 | | |
| - | | |
| - | |
| Account receivables | |
| - | | |
| - | | |
| 268,195 | | |
| 268,195 | |
| Royalty receivables | |
| 425,180 | | |
| 425,180 | | |
| 999,252 | | |
| 999,252 | |
| Dividend receivable | |
| 70,361 | | |
| 70,361 | | |
| 44,729 | | |
| 44,729 | |
| Other receivables | |
| 51,133 | | |
| 51,133 | | |
| - | | |
| - | |
| Due from related parties | |
| 59,517 | | |
| 59,517 | | |
| 45,750 | | |
| 45,750 | |
| Financial assets at fair value through | |
| | | |
| | | |
| | | |
| | |
| profit and loss | |
| | | |
| | | |
| | | |
| | |
| Short-term-term financial assets | |
| 406,280 | | |
| 406,280 | | |
| 534,774 | | |
| 534,774 | |
| Investments | |
| 49,501,916 | | |
| 49,501,916 | | |
| 50,636,738 | | |
| 50,636,738 | |
| | |
$ | 64,602,836 | | |
$ | 64,602,836 | | |
$ | 55,532,521 | | |
$ | 55,532,521 | |
| Financial liabilities | |
| | | |
| | | |
| | | |
| | |
| Financial liabilities measured at | |
| | | |
| | | |
| | | |
| | |
| amortized cost | |
| | | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 890,496 | | |
| 890,496 | | |
$ | 727,745 | | |
| 727,745 | |
| Financial liabilities measured at fair | |
| | | |
| | | |
| | | |
| | |
| value through profit and loss | |
| | | |
| | | |
| | | |
| | |
Derivatives financial instruments
(level 1) | |
| 4,243,318 | | |
| 4,243,318 | | |
| 8,979,047 | | |
| 8,979,047 | |
| | |
$ | 5,133,814 | | |
$ | 5,133,814 | | |
$ | 9,706,792 | | |
$ | 9,706,792 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
22) EARNINGS PER SHARE
Refer
to “Share Consolidation” section of Note 17 “Capital Stock”.
Both
the basic and diluted earnings per share have been calculated using the net income attributable to owners of the Company as the numerator,
i.e., no adjustment to the net income were necessary in either years ended December 31, 2020 and 2019.
| | |
For the year ended December 31, | |
| | |
2020 | | |
2019 | |
| Net income attributable to shareholders of Golden Valley Mines Ltd. | |
$ | 5,005,946 | | |
$ | 3,282,652 | |
| Weighted average number of shares in circulation - basic | |
| 13,494,205 | | |
| 13,415,455 | |
| Dilutive effect of stock options and warrants | |
| 774,889 | | |
| 169,530 | |
| Weighted average number of shares | |
| 14,269,094 | | |
| 13,584,985 | |
| Basic earnings per share | |
$ | 0.371 | | |
$ | 0.245 | |
| Diluted earnings per share | |
$ | 0.351 | | |
$ | 0.245 | |
For
the year ended December 31, 2020, no stock options (10,000 stock options in 2019) were excluded from the calculation of diluted earnings
per share attributable to shareholders of the Company as their exercise price was higher than the Company’s average share price
for the respective periods.
23) COMMITMENTS AND CONTINGENCIES
The
Company has entered into agreements with officers and consultants that include termination and change of control clauses. In the case
of termination, the officers and consultants are entitled to an amount equal to a multiple (ranging from one to two times) the annual
base fee payable. In the case of a change of control, the officers and consultants are entitled to an amount equal to a multiple (ranging
from one to three times) the sum of the annual base fee. As at December 31, 2020, the total annual base fee of the officers and consultants
under the agreements is $765,000. As a triggering event has not taken place, the contingent payments have not been reflected in the consolidated
financial statements.
24) RELATED PARTY TRANSACTIONS
The
Company’s related parties comprise of its joint key management and related companies, as described below. Unless otherwise stated,
none of the transactions incorporated special terms and conditions and no guarantees were given or received. Outstanding balances are
usually settled in cash. Other than the related party transactions disclosed below, there were no other direct transactions with related
parties other than routine payments for management and exploration services and grants of stock options.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
24)
RELATED PARTY TRANSACTIONS (continued)
For
the year ended December 31, 2020 and 2019, the compensation paid to key management for employee and consulting services for Golden Valley
and its subsidiaries is presented below:
| | |
For the year ended | |
| | |
December 31, | |
| | |
2020 | | |
2019 | |
Short-term employee benefits
| |
| | | |
| | |
Salaries and bonuses (1)
| |
$ | 1,501,458 | | |
$ | 1,179,719 | |
Directors’ fees
| |
| 280,000 | | |
| 280,000 | |
Benefits
| |
| 160,133 | | |
| 154,371 | |
| Total short-term employee benefits | |
| 1,941,591 | | |
| 1,614,090 | |
| Other transactions with key management | |
| | | |
| | |
| Rent(2) | |
| 16,362 | | |
| 8,196 | |
| Management fees(3) | |
| 166,200 | | |
| 166,200 | |
| Legal fees(4) | |
| - | | |
| 13,851 | |
| Fees relating to exploration and evaluation activities(5) | |
| 72,190 | | |
| 69,958 | |
| Total other transactions with key management | |
| 254,752 | | |
| 258,205 | |
| Share-based payments(6) | |
| 234,187 | | |
| 367,723 | |
| Total remuneration | |
$ | 2,430,530 | | |
$ | 2,240,018 | |
| 1) |
Salaries
and bonuses for the year ended December 31, 2020 include (a) fiscal year 2020 performance-based bonuses of $77,500 (2019 - $58,275)
for the Company’s officers, (b) fiscal year 2020 performance-based bonuses of $311,600 (2019 - $241,525) for Abitibi Royalties’
Chairman of the Board, the President and Chief Executive Officer, and the Chief Financial, (b) long-term incentive share purchase
special allocations of $170,000 (December 31, 2019 - $nil) for Abitibi Royalties’ Board of directors, the President and Chief
Executive Officer, and the Chief Financial Officer, of which the after-tax proceeds will be used by the recipients to purchase shares
of Abitibi Royalties in the secondary market and are to retain such shares while serving as directors and officers of Abitibi Royalties.
|
| |
|
| |
Salaries
and bonuses for the year ended December 31, 2019 include cash performance bonus of $299,800 of which $241,525 and $58,275 were declared
by Abitibi Royalties and the Company, respectively; and 2018 bonuses of $66,938 and 2019 bonuses of $58,275 to officers settled by
the Company through the issuance of 539,750 incentive stock options. |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
24)
RELATED PARTY TRANSACTIONS (continued)
| 2) |
For
the year ended December 31, 2020, rent of $7,362 (2019 -$8,196) was paid by Abitibi Royalties to its President for use of Toronto
Property as an office for Abitibi Royalties and rent of $9,000 (2019 -$nil) was paid to 2973090 Canada Inc., a company controlled
by an officer and a director of the Company. |
| |
|
| 3) |
Management
fees paid by Golden Valley to 2973090 Canada Inc. a company controlled by an officer and a director of the Company. |
| |
|
| 4) |
Legal
fees paid to a company with one of its principals being also a director of Golden Valley relating to claim and settlement in favour
of the Company. |
| |
|
| 5) |
For
the year ended December 31, 2020, fees relating to exploration and evaluation activities include $58,800 (2019 -$58,800) paid to
2973090 Canada Inc and of $13,390 (2019 -$11,158) paid to Rosatelli Exploration Services, a company controlled by an officer of the
Company. 4)Share-based compensation relating to the incentive stock option program for officers and directors of the Company. |
| |
|
| 6) |
Share-based
compensation relating to the incentive stock option program for officers and directors of the Company. |
At
the end of the year, some of the salaries, meeting fees and bonuses disclosed above had not been paid and were included in current liabilities.
At December 31, 2020, $669,100 (2019 - $619,786) was included in account payables and accrued liabilities.
Transactions
with related companies
Effective
July 1, 2020, the Company entered into a Cost Sharing Arrangement (the “Sharing Arrangement”) with companies related by common
management, pursuant to which Golden Valley will provide certain management and financial services such as office space and administrative
support relating to the exploration offices located at 2864 Chemin Sullivan, Val-d’Or, Québec, J9P 0B9, in consideration
of $71,348 per year (the “reimbursement”), payable on a monthly basis. The Sharing Arrangement provides for the reimbursement
to be reviewed on an annual basis. For the year ended December 31, 2020, reimbursement of $29,409 was received from related companies
relating to this Sharing Agreement,
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
24)
RELATED PARTY TRANSACTIONS (continued)
Val-d’Or
Mining
For
the year ended December 31, 2020, Golden Valley also recharged general and administrative expenses to Val-d’Or Mining, a company
related by common management, for a total amount of $9,907.
For
the year ended December 31, 2020, no consultant (2019 - $15,000) was recharged to Val-d’Or Mining relating to the services of the
Company’s CFO.
For
efficiency reasons, where the Company and Val-d’Or Mining are dealing with the same suppliers one may pay for both and be reimbursed
by the other. As at December 31, 2020, the Company had a net payable of $6,064 (December 31, 2019 -$21,687) due from Val-d’Or Mining,
which is netted of due from related parties.
International
Prospect
For
the year ended December 31, 2020, no consulting fees (2019 - $75,000) was recharged to International Prospect for the services provided
by the Company’s President and no consultant fees (2019 -$12,000) was recharged to International Prospect relating to the services
of the Company’s CFO.
As
at December 31, 2020, Golden Valley has a receivable of $65,782 (December 31, 2019 -$68,520) with International Prospect relating to
consulting fees recharged to International Prospect for the services provided by the Company’s President in 2019.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
25) ADDITIONAL INFORMATION - CASH FLOWS
Cash
transactions
| | |
For the year ended December 31, | |
| | |
2020 | | |
2019 | |
| Interest received related to operating activities | |
$ | 71,375 | | |
$ | 10,189 | |
| Dividends received related to investing activities | |
| 615,525 | | |
| 416,339 | |
| Royalties received related to operating activities | |
| 1,259,770 | | |
| 2,052,918 | |
Changes
in non-cash working capital items
| | |
For
the year ended December 31, | |
| | |
2020 | | |
2019 | |
Royalty
receivable
| |
$ | 574,072 | | |
$ | (985,147 | ) |
Accounts
receivable
| |
| 268,195 | | |
| (42,260 | ) |
Prepaids
and other receivables
| |
| (165,600 | ) | |
| (154 | ) |
Accounts
payable and accrued liabilities
| |
| 287,963 | | |
| 105,908 | |
Income
taxes payable
| |
| 2,464,798 | | |
| - | |
| | |
$ | 3,429,428 | | |
$ | (921,653 | ) |
Non-cash
transactions
Non-cash
transactions included in the statement of financial position are as follows:
| | |
For the year ended | |
| | |
December 31, | |
| | |
2020 | | |
2019 | |
| Options on exploration and evaluation assets received as shares of quoted mining
exploration companies included in short-term other assets | |
$ | 72,500 | | |
$ | 67,505 | |
| Common shares received in Exploration and evaluation assets | |
| 1,291,667 | | |
| 356,913 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
26) FINANCIAL INSTRUMENTS
The
Company is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity
risk. The Company focuses on actively securing short-to medium-term cash flows by minimizing the exposure to financial markets. The most
significant financial risks to which the Company is exposed are described below.
a)
Market risk
Market
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Company is exposed to the following two types of market risk: foreign currency risk and other price risk.
Foreign
currency risk sensitivity
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. Most of the Company’s transactions are carried out in Canadian dollars. Currency risk arises from the Company’s cash,
dividends, and royalty revenues in foreign currency, which are primarily denominated in U.S. dollars. The Company does not enter into
arrangements to hedge its foreign exchange risk. As at December 31, 2020 and 2019, foreign currency denominated financial assets and
liabilities in U.S. dollars and which expose the Company to the currency risk are as follows:
| | |
As at December 31, | |
| | |
2020 | | |
2019 | |
| Cash and cash equivalents | |
$ | 7,125,721 | | |
| 1,737,268 | |
| Restricted cash | |
| 302,405 | | |
| - | |
| Royalty receivable | |
| 333,946 | | |
| 769,366 | |
| Dividends receivable | |
| 54,251 | | |
| 35,497 | |
| Accounts payable and accrued liabilities | |
| (3,040 | ) | |
| - | |
| Derivative financial instruments | |
| (3,332,798 | ) | |
| (6,913,341 | ) |
| | |
$ | 4,480,485 | | |
| (4,371,210 | ) |
A
1% change in the Canadian /U.S. exchange rate as at December 31, 2020 would have had an impact of $57,046 (2019- $56,774) on net income
and comprehensive income of the year.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
26)
FINANCIAL INSTRUMENTS (continued)
Other
price risk sensitivity
The
Company is exposed to fluctuations in the market prices of its investments in quoted mining companies, derivative financial instrument,
marketable securities in quoted mining exploration companies. The fair value of these financial instruments represents the maximum exposure
to price risk.
If
the quoted price of these instruments had changed by 1% as at December 31, 2020 (1% as at December 31, 2019), net income and comprehensive
income for the year would have changed by $489,865 (2019 - $421,925).
b)
Credit risk
Credit
risk is the risk that another party to a financial instrument fails to discharge its obligation and, thus, leads the Company
to incur a financial loss. The Company’s maximum exposure to credit risk is limited to
the carrying amount of financial assets at the reporting date, as summarized below:
| | |
As at December 31. | |
| | |
2020 | | |
2019 | |
| Cash and cash equivalents | |
$ | 13,703,034 | | |
$ | 3,003,083 | |
| Restricted cash | |
| 385,415 | | |
| - | |
| Account receivables | |
| - | | |
| 268,195 | |
| Royalty receivables | |
| 425,180 | | |
| 999,252 | |
| Prepaids and other receivables | |
| 303,959 | | |
| 123,546 | |
| Carrying amounts | |
$ | 14,817,588 | | |
$ | 4,394,076 | |
The
risk related to cash and restricted cash is considered negligible as the Company is dealing with a reputable financial institution whose
credit rating is excellent. The Company’s management considers that the above financial asset is of good credit quality. The credit
risk exposure for the Company’s accounts, royalty and dividends receivables and other assets is considered minimal as these receivables
have since been received subsequent to year-end. The Company continuously monitors defaults of counterparties. No impairment loss has
been recognized in the years presented.
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
26)
FINANCIAL INSTRUMENTS (continued)
c)
Liquidity risk
Liquidity
risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled
by delivering cash or another financial asset. Liquidity risk management serves to maintain a sufficient amount of cash and cash equivalents
and to ensure that the Company has financing sources such as private and public investments for a sufficient amount. Over the past years,
the Company has financed its exploration and evaluation programs, its working capital requirements and acquisitions of mining properties
through private and flow-through placements and through dividends received from the shares it holds on Abitibi Royalties.
The
Company’s objective is to maintain cash and cash equivalents and short-term investments to meet its liquidity requirements. This
objective was met for the reporting periods. The Company considers cash flows from financial assets in assessing and managing liquidity
risk, in particular its cash and cash equivalents and short-term investments. The Company’s existing cash and cash equivalents
and short-term investments significantly exceeds the current cash outflow requirements.
The
following table presents contractual maturities (including interest payments where applicable) of the Company’s liabilities:
| | |
As at December 31. | |
| | |
2020 | | |
2019 | |
| Within 3 months | |
| | |
| |
| Accounts payable and accrued liabilities | |
$ | 890,496 | | |
$ | 727,745 | |
| Income taxes payable | |
| 2,464,798 | | |
| - | |
| Derivative financial instruments | |
| 2,411,567 | | |
| 6,576,429 | |
| | |
$ | 5,766,861 | | |
$ | 7,304,174 | |
| 3 to 12 months | |
| | | |
| | |
| Derivative financial instruments | |
$ | 135,341 | | |
$ | - | |
| | |
$ | 135,341 | | |
$ | - | |
| 12 to 36 months | |
| | | |
| | |
| Derivative financial instruments | |
$ | 1,696,410 | | |
$ | 2,402,618 | |
| | |
$ | 1,696,410 | | |
$ | 2,402,618 | |
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
27) CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The
Company’s capital management objectives are: to ensure the Company’s ability to continue as a going concern; to increase
the value of the assets of the business; and to provide an adequate return to owners.
These
objectives will be achieved by identifying the right exploration projects, adding value to these projects and ultimately taking them
through to production or sale and cash flow, either with partners or by the Company’s own means and by identifying and acquiring
the right potential royalty rights. The Company monitors capital on the basis of the carrying amount of equity. Capital for the reporting
periods under review is comprised of share capital, warrants and contributed surplus. The Company is not exposed to any externally imposed
capital requirements as at December 31, 2020 and 2019. The Company sets the amount of capital in proportion to its overall financing
structure, i.e. equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure,
the Company may return capital to shareholders, issue new shares, or sell assets to reduce payables. When financing conditions are not
optimal, the Company may enter into option agreements or other solutions to continue its exploration and evaluation activities or may
slow its activities until conditions improve. No changes were made in the objectives, policies and processes for managing capital during
the year.
28) SUBSEQUENT EVENTS
Acquisition
of Golden Valley and Abitibi Royalties by Gold Royalty Corp.
On
September 7, 2021, Golden Valley, Abitibi Royalties and Gold Royalty announced that they entered into definitive agreements dated September
6, 2021, pursuant to which Gold Royalty acquired all of the issued and outstanding common shares of each of Golden Valley and Abitibi
Royalties by way of statutory plans of arrangement (the “Arrangements”). The Arrangements were completed on November 5, 2021
whereby Gold Royalty issued 2.1417 of its shares to Golden Valley shareholders for each Golden Valley common share; and Gold Royalty
issued 4.6119 of its shares to Abitibi Royalties shareholders for each Abitibi Royalties common share. Additionally, pursuant to the
Golden Valley Arrangement, each of its 1,166,389 options that were outstanding immediately prior to the business combination were exchanged
for 2,498,045 options to purchase Gold Royalty shares.
Derivative
financial instruments
Subsequent
to year end, Abitibi Royalties was called to deliver 37,700 common shares of Agnico Eagle at share prices ranging from US$50.00 to US$65.00
per share and received, net of commissions, $2,722,806 (or US$2,139,898) and 1,026,000 common shares of Yamana at share prices ranging
from US$3.00 to US$5.00 per share and received, net of commissions, $6,971,111 (or US$5,484,388).
GOLDEN VALLEY MINES AND ROYALTIES LTD.
(Formerly Golden Valley Mines Ltd.)
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted)
28)
SUBSEQUENT EVENTS (continued)
Mining
option agreement on the Centremaque Prospect
On
September 9, 2021, the Company was informed by Alexandria, that it was exercising its option to acquire an 80% interest in the Centremaque
property pursuant to the terms of a mining option agreement between Golden Valley and Alexandria dated April 20, 2017, as amended. Upon
the exercise of the option by Alexandria, Golden Valley and Alexandria will form a joint venture to further explore, and if warranted,
develop the property. Golden Valley will have a 20% free-carried interest in the property, such that Golden Valley will not be responsible
for any project costs, including without limitation, construction costs, exploration costs, mine costs and operating costs on the property,
until the commencement of commercial production. In addition, Golden Valley retains a 1.5% royalty on Net Smelter Returns, of which a
0.5% royalty on Net Smelter Returns may be purchased by Alexandria for $1,000,000.
Mining
option agreement on the AGB Properties
On
October 8, 2021, the Company entered into an option agreement (the “Option Agreement”) with Eldorado, enabling Eldorado to
earn up to an additional 50% interest in the Claw Lake Gold Prospect, the Cook Lake Prospect, the Murdock Creek Prospect, all located
in Ontario and the Perestroika Prospect, located in Québec (the “Properties”). Under the new Option Agreement, GZZ-I
JV will be terminated upon the satisfaction of certain conditions precedent (including the amendment of certain historical royalty agreements
pertaining to the Properties), which were satisfied concurrently with the execution of the Option Agreement. Furthermore, Golden Valley
has the option to be assigned, from Eldorado for nominal consideration, all of the right, title and interest of Eldorado in and to five
of the remaining Existing Properties (Munro Prospect, Recession Larder Prospect, Matachewan Prospect all in Ontario, and the Bogside
Prospect in Quebec; Denovo Prospect in Ontario was previously dealt with in a transaction with Highgold Mining Inc.), other than the
Properties.
Eldorado
may earn an additional 40% in the Properties (the “40% Option”) by funding expenditures on the Properties for a minimum of
$10,500,000 over a period of 5 years from the termination of the GZZ-I JV and making annual payments to $50,000 per annum to Golden Valley
(“Annual Payment”) with the first Annual Payment being made on termination of the GZZ-I JV and each subsequent Annual Payment
being made on the anniversary thereof until Eldorado exercises the 40% Option. Upon exercise of the 40% Option by Eldorado, the parties
will be deemed to have formed a joint venture in accordance with the terms set out in the Option Agreement and will use commercially
reasonable efforts to enter into a formal joint venture agreement within 60 business days of the exercise of the 40% Option.
In
order to earn and acquire an additional 10% undivided interest in the Properties (the “Additional Option”), Eldorado will
contribute all joint venture expenditures on behalf of the parties, and deliver to Golden Valley, a preliminary economic assessment (PEA)
report in respect of the Properties. Upon the exercise of the Additional Option by Eldorado, Golden Valley will have a 20% undivided
beneficial interest in the Properties and Eldorado will have an 80% undivided beneficial interest in the Properties.
