Exhibit 99.41

Aris Gold Corporation

Consolidated Financial Statements

For the years ended December 31, 2021 and 2020

(expressed in thousands of United States dollars)

KPMG LLP

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Canada

Telephone (604) 691-3000

Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Aris Gold Corporation

Opinion

We have audited the consolidated financial statements of Aris Gold Corporation (the Entity), which comprise:

 

•

the consolidated statements of financial position as at December 31, 2021 and December 31, 2020

 

•

the consolidated statements of income (loss) for the years ended December 31, 2021 and December 31, 2020

 

•

the consolidated statements of comprehensive income (loss) for the years ended December 31, 2021 and December 31, 2020

 

•

the consolidated statements of equity for the years ended December 31, 2021 and December 31, 2020

 

•

the consolidated statements of cash flows for the years ended December 31, 2021 and December 31, 2020

 

•

and notes to the consolidated financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

 

		© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.

Evaluation of certain assumptions used in measuring deferred revenue

Description of the matter

We draw attention to Notes 3, 4 and 15 to the financial statements. On April 15, 2021, the Entity received an initial deposit under a Precious Metals Purchase Agreement with Wheaton Precious Metals International Ltd. The Entity has recorded deferred revenue of $32,532 thousand and revenue of $48,849 thousand, which includes $2,231 thousand that was previously recorded as deferred revenue and a negative cumulative catch-up adjustment of $42 thousand.

The Entity accounts for upfront cash deposits received for streaming arrangements as contract liabilities (deferred revenue). As gold and silver deliveries are made, the Entity recognizes a portion of the deferred revenue as revenue, calculated on a per unit basis using the total number of gold and silver ounces expected to be delivered over the life of the mine. The consideration received from payments for deliveries made under streaming arrangements is considered variable, and changes are accounted for prospectively as a cumulative catch-up in revenue. Key inputs into the estimate of the amount of deferred revenue that should be recognized are life of mine production, timing of construction milestones, long-term commodity price curves and financing rate.

Why the matter is a key audit matter

We identified the evaluation of the life of mine production and long-term commodity price assumptions that are used in the measurement of deferred revenue as a key audit matter. This matter represented an area of significant risk of material misstatement as changes to the significant assumptions could have a significant impact on the measurement of deferred revenue. As a result, significant auditor judgment was required in evaluating the significant assumptions.

How the matter was addressed in the audit

The following are the primary procedures we performed to address this key audit matter. We compared the life of mine production estimates to the mineral reserves and resources of the Marmato Mine. We assessed the competence, capabilities and objectivity of the Entity’s personnel who prepared the mineral reserves and mineral resources estimate, including the industry and regulatory standards they applied. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the future gold prices used in the Entity’s assessment by comparing to third party estimates.

Other Information

Management is responsible for the other information. Other information comprises the information included in Management’s Discussion and Analysis filed with the relevant Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

 

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

 

•

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

 

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

 

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

•

Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

•

Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

•

Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Michael D. Woeller.

Vancouver, Canada

March 3, 2022

Consolidated Statements of Financial Position (Expressed in thousands of U.S. dollars)

 

 

				December 31,				December 31,
		Notes		2021				2020
ASSETS
Current
Cash and cash equivalents				$	138,008			$	32,007
Cash in escrow		6			3,995				142,096
Gold in trust		11			637				-
Accounts receivable		18b			4,249				2,207
Inventories		7			7,128				8,236
Prepaid expenses and deposits					333				66
					154,350				184,612
Non-current
Mining interests, plant and equipment		9			137,317				105,964
Other long-term receivables		18b			1,102				-
Other long-term assets					897				-
Total assets				$	293,666			$	290,576
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		10		$	13,234			$	13,231
Subscription receipts payable		12			-				92,626
Income tax payable					-				1,192
Current portion of long-term debt		11			6,510				1,516
Current portion of deferred revenue		15			2,117				-
Current portion of provision for decommissioning		14			425				281
Current portion of lease obligations		13			276				206
					22,562				109,052
Non-current
Long-term debt		11			79,614				81,742
Warrant liabilities		16c			26,954				26,298
Deferred revenue		15			30,415				-
Provision for decommissioning		14			2,813				4,121
Deferred income taxes		17			4,024				3,561
Lease obligations		13			299				212
Other long-term liabilities		16f			265				-
Total liabilities					166,946				224,986
Equity
Share capital		16b			239,626				165,532
Contributed surplus					5,383				4,057
Accumulated other comprehensive loss					(39,968)				(27,251)
Retained earnings (deficit)					(78,321)				(76,748)
Total equity					126,720				65,590
Total liabilities and shareholders’ equity				$	293,666			$	290,576

 

Commitments and contingencies		Note 18c
Subsequent events		Note 3, Note 11, Note 15, Note 16

Approved by the Board of Directors and authorized for issue on March 3, 2022:

/s/ Neil Woodyer                     Director                /s/ David Garofalo                     Director

See accompanying notes to the Consolidated Financial Statements.

 

Page | 2

Consolidated Statements of Income (Loss) (Expressed in thousands of U.S. dollars, except per share and share amounts)

 

				Year ended December 31,
		Notes		2021				2020
Revenue		19		$	48,849			$	42,790
Cost of sales		20			(40,915)				(33,568)
Depreciation and depletion					(2,006)				(1,152)
Materials and supplies inventory provision		7			(801)				-
Income from mining operations					5,127				8,070
Acquisition and restructuring costs		24			(12,750)				-
RTO Transaction expense		5			-				(16,700)
General and administrative					(7,655)				(3,984)
Share-based compensation		16g			(2,054)				(4,502)
Other expenses					(21)				-
Loss before finance income/(expenses) and income tax					(17,353)				(17,116)
Gain (loss) on financial instruments		22			18,068				(47,927)
Interest and accretion					(754)				(2,193)
Financing fees and expenses		21			(149)				(13,809)
Foreign exchange gain (loss)					227				490
Finance income					181				74
Earnings (loss) before income tax					220				(80,481)
Income tax (expense) recovery
Current		17			(815)				(2,699)
Deferred		17			(978)				66
Net loss				$	(1,573)			$	(83,114)
Basic and diluted loss per share				$	(0.01)			$	(1.25)
Weighted average number of outstanding common shares					134,282,133				66,368,185

See accompanying notes to the Consolidated Financial Statements.

 

Page | 3

Consolidated Statements of Comprehensive Income (Loss) (Expressed in thousands of U.S. dollars)

 

							Year ended December 31,
			Notes				2021				2020
Net loss						$	(1,573)			$	(83,114)
Other comprehensive earnings (loss):
Items that will not be reclassified to profit in subsequent periods:
Unrealized gain (loss) on Gold Notes due to change in credit risk ($nil tax effect)			11				(4,067)				579
Unrealized gain on GLN Subscription receipts due to change in credit risk ($nil tax effect)			11				-				(6,702)
Items that may be reclassified to profit in subsequent periods:
Foreign currency translation adjustment (net of tax effect)			17				(8,650)				342
Comprehensive earnings (loss)						$	(14,290)			$	(88,895)

See accompanying notes to the Consolidated Financial Statements.

 

Page | 4

Consolidated Statements of Equity (Expressed in thousands of U.S. dollars, except share amounts)

 

Year ended December 31, 2021		Share Capital -   Number				Common Shares   Amount				Contributed   surplus				Accumulated   OCI				Retained   earnings				Total   equity
At December 31, 2020			99,800,162			$	165,532			$	4,057			$	(27,251)			$	(76,748)			$	65,590
Stock options exercised (Note 16d)			255,000				507				(84)				-				-				423
Share-based compensation (Note 16g)			-				-				1,410				-				-				1,410
Shares issued on Aris Gold Subscription Receipt conversion (Note 12)			37,777,778				73,587				-				-				-				73,587
Comprehensive earnings (loss)			-				-				-				(12,717)				(1,573)				(14,290)
At December 31, 2021			137,832,940			$	239,626			$	5,383			$	(39,968)			$	(78,321)			$	126,720
Year ended December 31, 2020		Share Capital - Number				Common Shares Amount				Contributed surplus				Accumulated OCI				Retained earnings				Total equity
Balance - beginning of period, Bluenose - February 25, 2020			10,852,840			$	15,390			$	1,012			$	-			$	(16,496)			$	(94)
RTO adjustment (1)(2)			-				(15,390)				(1,012)				-				16,496				94
Acquisition of CG Panama (Note 5)			28,750,100				44,594				-				(21,470)				6,366				29,490
CFC Broker Warrants issued in CFC Private Placement (Note 16b)			-				-				161				-				-				161
Share-based RTO Transaction Costs (Note 5)			-				-				109				-				-				109
Share-based compensation (Note 16g)			-				-				3,821				-				-				3,821
Stock options exercised (Note 16d)			75,000				142				(25)				-				-				117
Fair value of RTO Transaction consideration (Note 5)			-				16,346				-				-				-				16,346
Financial advisory fee paid in shares (Note 16b)			100,000				151				-				-				-				151
Shares issued for CFC Private Placements (Note 16b)			10,792,500				8,994				-				-				-				8,994
Share issue costs related to CFC Private Placements (Note 16b)			-				(440)				-				-				-				(440)
Shares issued for GCM Mining SARC Private Placement (Note 24)			7,000,000				10,260				-				-				-				10,260
Share issue costs related to GCM Mining Private Placement			-				(28)				-				-				-				(28)
Shares issued in exchange for acquisition of SARC (Note 8)			20,000,000				39,962				-				-				-				39,962
Shares issued in exchange for Special Warrants (Note 16b)			22,222,222				45,535				-				-				-				45,535
Broker warrants exercised			7,500				16				(9)				-				-				7
Comprehensive earnings (loss)			-				-				-				(5,781)				(83,114)				(88,895)
At December 31, 2020			99,800,162			$	165,532			$	4,057			$	(27,251)			$	(76,748)			$	65,590

(1)

As described in Note 5, the Company, which was then named Bluenose Gold Corp. (“Bluenose”), completed the acquisition of Caldas Finance Corp. (“CFC”) on February 24, 2020 through a share exchange agreement (“RTO Transaction”) whereby the Company purchased all the issued and outstanding shares of CFC.

(2)	Effective February 21, 2020, immediately prior to the RTO Transaction, Bluenose consolidated its common shares on a one-for-10 basis. All historical references herein to common shares, stock options and per share amounts have been retroactively adjusted to reflect this share consolidation.

See accompanying notes to the Consolidated Financial Statements.

 

Page | 5

Consolidated Statements of Cash Flows (Expressed in thousands of U.S. dollars)

 

							Year ended December 31,
			Notes				2021				2020
Operating Activities
Net earnings (loss)						$	(1,573)			$	(83,114)
Adjusted for the following items:
Depreciation							2,006				1,152
Materials and supplies inventory provision							801				-
Share-based compensation			16g				2,054				4,502
RTO transaction costs			5				-				16,700
Financing fees and expenses			21				149				13,809
Interest and accretion							754				2,193
(Gain) loss on financial instruments			22				(18,068)				47,927
Amortization of deferred revenue			15				(4,828)				-
Foreign exchange gain							(280)				(490)
Current income tax expense			17				815				2,699
Deferred income tax expense (recovery)			17				978				(66)
Other items							39				(9)
Metal stream deposit received			15				34,000				-
Payment of rehabilitation obligations			14				(54)				-
DSUs exercised			16e				(647)				-
Changes in non-cash operating working capital items			23				(2,892)				2,974
Operating cash flows before taxes							13,254				8,277
Income taxes paid							(2,295)				(1,802)
Net cash provided by operating activities							10,959				6,475
Investing Activities
Additions to mining interests, plant and equipment (net)			9				(32,414)				(20,635)
Value added taxes paid							(1,168)				-
Additions to other long-term assets							(296)				-
Advance for acquisition of SARC			8				-				(9,961)
Net liabilities acquired in RTO Transaction			5				-				33
Net cash used in investing activities							(33,878)				(30,563)
Financing Activities
Release of cash in escrow from Subscription Receipts financing			12				66,284				4,730
Release of cash in escrow from GLN financing			6				65,073				-
Repayment of Gold Notes, including Gold Premium			11				(2,014)				-
Increase in Gold Trust Account			11				(635)				-
Aris Subscription Receipts financing fees and expenses			21				(149)				(2,363)
Wheaton stream financing fees and expenses			21				-				(1,805)
Proceeds from issuance of Special Warrants			16b				-				37,365
Special Warrants issue costs			21				-				(2,787)
GLN Subscription Receipts financing fees and expenses			11				-				(863)
Proceeds from CFC Private Placement			16b				-				19,730
Funding received from related party			24b				-				348
Financing fee paid			16b				-				(428)
Stock options and warrants exercised			16c,d				423				128
Payment of lease obligations			13				(346)				(123)
Net cash provided from financing activities							128,636				53,932
Impact of foreign exchange rate changes on cash and equivalents							284				(509)
Increase in cash and cash equivalents							106,001				29,335
Cash and cash equivalents, beginning of period							32,007				2,672
Cash and cash equivalents, end of period						$	138,008			$	32,007

See accompanying notes to the Consolidated Financial Statements.    

 

Page | 6

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

1.	Nature of Operations

Aris Gold Corporation (the “Company” or “Aris Gold”), is a company incorporated under the laws of the Province of British Columbia, Canada. The address of the Company’s registered and records office is 2900 – 550 Burrard Street, Vancouver, British Columbia, V6C 0A3. The Company graduated its listing to the Toronto Stock Exchange (“TSX”) on February 12, 2021 and trades under the symbol “ARIS”. The Company also trades on the OTCQX under the symbol “ALLXF”.

Aris Gold is primarily engaged in the acquisition, exploration, development and operation of gold properties in Colombia and Canada, with its principal operations located in the Zona Baja mining license area in the Department of Caldas, Colombia (the “Marmato Mine”), this is comprised of the Upper Mine, currently in production and the Lower Mine which is a new underground development. The Company also owns the Juby Project, an advanced exploration-stage gold project located within the Shining Tree area in the southern part of the Abitibi greenstone belt south-southeast of the Timmins gold camp.

As described in Note 5, the Company, which was then named Bluenose Gold Corp. (“Bluenose”), completed the acquisition of Caldas Finance Corp. (“CFC”) on February 24, 2020 through a share exchange agreement (“RTO Transaction”) whereby the Company purchased all of the issued and outstanding shares of CFC. CFC was incorporated in British Columbia, Canada on November 4, 2019 by GCM Mining (“GCM”) (formally Gran Colombia Gold Corp.) for the transfer of GCM’s Marmato Mine to the Company. References to Bluenose Gold Corp. prior to the RTO Transaction herein are referred to as “Bluenose”.

 

2.	Basis of Presentation

These Consolidated Financial Statements, as approved by its Board of Directors on March 3, 2022, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

As outlined in Note 1, the RTO Transaction was accounted for as a reverse acquisition of Bluenose by CFC for accounting purposes. As a result, for accounting purposes, CFC has been identified as the accounting acquirer of Bluenose and, therefore, the historical financial statements are those of CFC for the period to February 24, 2020.

The financial statements have been prepared under the historical cost basis, except for certain financial assets and liabilities which are measured at fair value, and are presented in U.S. dollars. They have been prepared on a going concern basis assuming that the Company will be able to realize its assets and discharge its liabilities in the normal course of business as they come due for the foreseeable future.

 

3.	Summary of Significant Accounting Policies

The significant accounting policies applied in preparing these Consolidated Financial Statements are as follows:

Consolidation

These financial statements comprise the financial results of the Company and its subsidiaries. Details regarding the Company and its principal subsidiaries as of December 31, 2021 are as follows:

 

Page | 7

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

Entity		Property/function		Registered		Functional currency (1)
Aris Gold Corporation(2)		Corporate		Canada		USD
Aris Gold Acquisition Corp.		Corporate		Canada		USD
Caldas Gold Colombia Inc. (“CG Panama”)		Corporate		Panama		USD
Caldas Gold Marmato S.A.S. (“CG Marmato”)		Marmato Mine		Colombia		COP

 

(1)	“USD” = U.S. dollar; “COP” = Colombian peso.

(2)

On January 1, 2021, the Company completed a vertical short form amalgamation with South American Resource Corporation (“SARC”) pursuant to which all of the issued and outstanding shares of SARC were cancelled and SARC ceased to exist. SARC’s interest in the Juby Project and 25% joint venture interest in certain claims adjoining the Juby Project are now held directly by the Company.

(3)	On February 2, 2022 the Company completed the incorporation of Aris Gold Switzerland SA, a wholly-owned subsidiary of Aris Gold Acquisition Corp.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Accounting policies of subsidiaries have been aligned where necessary to ensure consistency with the policies adopted by the Company.

Foreign currency translation

 

a)	Functional and presentation currencies

Items included in the financial statements of each entity consolidated by the Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of the Company’s principal subsidiaries are disclosed in the table under “Consolidation” above.

 

b)	Transactions and balances

Foreign currency transactions are translated into the functional currency of the entity using the exchange rates prevailing at the dates of the transactions or revaluation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of income and loss in “foreign exchange gain (loss)”.

 

c)	Group companies

The results and financial position of CG Marmato, which has a functional currency different from the presentation currency, are translated into the presentation currency as follows:

 

i)

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

ii)

income and expenses for each consolidated statement of operations and cash flows for the periods presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions);

iii)

components of equity are translated at the exchange rates at the dates of the relevant transactions or at average exchange rates where this is a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, and are not re-translated; and

iv)

all resulting exchange differences are recognized in other comprehensive income and loss.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the consolidated statement of operations as part of the gain or loss on sale.

Segment reporting

Reportable segments are those whose operating results are reviewed by the chief operating decision-maker, identified as the Board of Directors, which is responsible for allocating resources and assessing performance.

 

Page | 8

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

The Company has three reportable segments, the first being the exploration, development and operation of the Marmato gold properties in Colombia, the second being the advanced exploration-stage property Juby in Ontario, Canada and the third being the corporate administration office in Vancouver responsible for oversight and financing for the group. Refer to Note 26 for additional information.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, term deposits and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in liabilities as bank indebtedness.

Gold in Trust

The Gold Trust Account represents the physical gold the Company has deposited in accordance with the terms of the 7.5% Gold-Linked Notes (“Gold Notes”) (Note 11) to satisfy its quarterly principal repayment obligations. At the end of each reporting period, the balance of gold ounces accumulated in the Gold Trust Account is valued at the lower of cost or net realizable value (“NRV”). NRV is the estimated sale price of the gold, generally determined based on the spot price at the period end.

Inventories

Mineral inventories are valued at the lower of average production cost and net realizable value (“NRV”). The cost of mineral inventories includes all costs related to bringing the inventory to its current condition, including mining and processing costs, labour costs, materials and supplies, direct and allocated indirect operating overhead and depreciation expense. Materials and supplies inventories are valued at the lower of cost and NRV, where cost is calculated on a weighted average basis. NRV is the estimated selling price less estimated costs to complete and applicable selling expenses.

Financial instruments

Financial assets are classified according to their contractual cash flow characteristics and the business models under which they are held. On initial recognition, a financial asset is classified as: amortized cost, fair value through profit and loss (“FVTPL”) or fair value through other comprehensive income (“FVOCI”).

Financial assets are measured at amortized cost if both of the following criteria are met and the financial assets are not designated as at FVTPL: 1) the objective of the Company’s business model is to collect the contractual cash flows; and 2) the asset’s contractual cash flows represent solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to measure the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized permanently in other comprehensive income with no reclassification to profit and loss. The election is made on an investment-by-investment basis.

All financial assets not measured at amortized cost or FVOCI, including derivative financial assets, are measured at FVTPL. On initial recognition, a financial asset that otherwise meets the requirements to be measured at amortized cost or FVOCI may be irrevocably designated as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial liabilities are subsequently measured and classified as amortized cost or as FVTPL. Derivative financial liabilities are measured at FVTPL. The Company, at initial recognition, may designate a hybrid financial liability that contains embedded derivative financial instruments, at FVTPL. For such financial liabilities recorded at FVTPL, the change in fair value due to changes in the Company’s credit risk is recorded in other comprehensive income, with the remainder of the change in fair value recorded in profit and loss.

Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classified as FVTPL, directly attributable transaction costs. Measurement of financial assets in subsequent periods depends on whether the financial asset has been classified as amortized cost, FVTPL or FVOCI. The carrying amount of financial liabilities after initial recognition depends on whether they are classified as amortized cost or FVTPL.

 

Page | 9

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

Financial assets and financial liabilities classified as amortized cost are accounted for subsequent to initial recognition using the effective interest method.

Loss allowances for “expected credit losses” are recognized on financial assets measured at amortized cost, contract assets and investments in debt instruments measured at FVOCI, but not on equity investments. A loss event is not required to have occurred before a credit loss is recognized.

The Company has assessed the classification and measurement of its financial assets and financial liabilities as follows:

 

		Classification category
Cash and cash equivalents		Amortized cost
Cash in escrow		Amortized cost
Accounts receivable		Amortized cost
Other long term receivables		Amortized cost
Accounts payable and accrued liabilities		Amortized cost
DSU liability		FVTPL
PSU liability		FVTPL
Gold Notes		FVTPL
Warrant liabilities		FVTPL
Subscription Receipts payable		FVTPL

Fair value hierarchy

The Company classifies financial assets and liabilities that are recognized in the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels in the hierarchy are:

 

•

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 (that is, as prices) or indirectly (that is, derived from prices); and

•

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

With the availability of quoted prices in an active market, the Listed Warrants, Subscription Receipts payable and DSU

& PSU liabilities are classified as Level 1 in the fair value hierarchy. The Gold Notes and Unlisted Warrants are classified as Level 2 in the fair value hierarchy as the fair values have been determined based on inputs, including volatility factors, risk-free rate, stock price and credit spread, which can be substantially observed or corroborated in the marketplace.

Mining interests, plant and equipment

a)     Exploration and evaluation (“E&E”) assets

The Company’s principal exploration and evaluation mining interests is the Juby Project. Exploration and evaluation activities involve the search for minerals, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation expenditures are capitalized. Exploration and evaluation expenditures include costs which are directly attributable to:

 

•

researching and analyzing existing exploration data;

•

conducting geological studies, exploratory drilling and sampling;

•

examining and testing extraction and treatment methods;

•

completing pre-feasibility and feasibility studies; and

•

costs incurred in acquiring mineral rights.

An impairment review of exploration and evaluation assets is performed, either individually or at the cash-generating unit (“CGU”) level, when there are indicators that the carrying amount of the assets may exceed their recoverable amounts. Indicators of impairment for exploration and evaluation assets are not identified provided that at least one of the conditions below is met:

 

Page | 10

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

•

such costs are expected to be recouped in full through successful development and exploration of the area of interest or alternatively, by its sale; or

•

exploration and evaluation activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing, or planned for the future.

To the extent that indicators of impairment are identified occurs, an impairment charge is recognized in the consolidated statement of income (loss) for the amount by which the asset or CGU’s carrying amount exceeds its recoverable amount.

Where a project is determined to be technically feasible and commercially viable and a decision has been made to proceed with development with respect to a particular area of interest, the relevant exploration and evaluation asset is first tested for impairment and then the balance is reclassified as a development project in mining interests, plant and equipment.

 

b)	Plant and equipment

Plant and equipment is recorded at cost less accumulated depreciation, amortization and impairment charges, if any. Cost includes expenditures that are directly attributable to the acquisition and are recorded as part of the development and construction of the asset. Costs to acquire mineral properties are capitalized and represent the property’s fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of a replaced part is derecognized. All other repairs and maintenance costs are charged to the consolidated statements of income and loss during the financial period in which they are incurred.

The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant components and depreciates each component separately. The residual values and useful lives of the assets are reviewed and adjusted, if appropriate, at the end of each reporting period.

Depletion of capitalized costs related to mineral properties will be charged to cost of sales on a unit-of-production basis based upon proven and probable reserves and estimated mineable mineral resources until the properties are abandoned, sold or considered to be impaired in value. Mineral properties are tested for impairment in accordance with the policy for impairment of non-financial assets as set out below. Land is not depreciated.

Depreciation of plant and equipment and other assets is calculated using the straight-line method to allocate their cost to their residual values over the shorter of the life of mine or their estimated useful lives, as follows:

 

Machinery and equipment		10 years
Transportation equipment		5 years
Office and other equipment		4 to 10 years
Buildings and improvements		20 years

Impairment

Financial assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired using an expected credit loss impairment model. If such evidence exists, the Company recognizes an impairment loss. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.

 

Page | 11

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

Non-financial assets

Assets that are subject to depreciation and E&E assets are reviewed for impairment, or reversal of impairment, as the case may be, whenever events or changes in circumstances indicate there is a change in the recoverability of the carrying amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash inflows (cash generating units or “CGUs”), which are typically individual mining projects. The estimates used for impairment reviews are based on detailed mine plans and operating budgets, modified as appropriate to meet the requirements of IAS 36, Impairment of Assets.

Value in use is determined based on discounted cash flow models taking into consideration estimates of the quantities of the reserves and mineral resources, future production levels, future gold and silver prices, and future cash costs of production, capital expenditure, shutdown, restoration and environmental clean-up, excluding future expansions or development projects. Assumptions used are specific to the Company and the discount rate applied in the value in use test is based on the Company’s estimated pre-tax weighted average cost of capital with appropriate adjustment for the risks associated with the relevant cash flows, to the extent that such risks are not reflected in the forecasted cash flows.

When evaluating fair value less costs of disposal, fair value is determined based on the amount that could be obtained in an arm’s length transaction and generally uses a discounted cash flow model based on the present value of estimated future cash flows, including future expansions or development projects. In a fair value less costs of disposal analysis the assumptions used are those that a market participant would be expected to apply.

An impairment charge is recognized in the consolidated statement of income (loss) for the amount by which the asset’s carrying amount exceeds its recoverable amount. Non-financial assets, other than goodwill, that were previously impaired are reviewed for possible reversal of the impairment at each reporting date when an event warrants such consideration. The reversal is limited to the carrying amount that would have been determined, net of any applicable depreciation, had no impairment charge been recognized in prior years.

Borrowing costs

The Company does not capitalize borrowing costs related to exploration and evaluation assets. All borrowing costs related to exploration and evaluation assets are recognized as interest and accretion in the consolidated statement of income (loss) in the period in which they are incurred.

Once the Company has established that exploration and evaluation assets have reached technical feasibility and commercial viability, they are reclassified to development projects. Borrowing costs incurred that are attributable to qualifying assets under development will be capitalized and included in the carrying amounts during the development period until the assets are ready for their intended use. In the case of mining properties, the mining property is ready for its intended use when it commences commercial production. Capitalization will commence on the date that expenditures for the qualifying asset are incurred, borrowing costs are being incurred by the Company and activities that are necessary to prepare the qualifying asset for its intended use are being undertaken.

For funds obtained from general borrowing, the amount capitalized will be calculated using a weighted average of rates applicable to the borrowings during the period. For funds borrowed specifically for the purpose of obtaining or developing a qualifying asset, the amount capitalized will represent the actual borrowing costs incurred on the specific borrowings less any investment income earned on the temporary investment of those borrowings.

Current and deferred income tax

The provision for income tax comprises current and deferred income tax. Income tax is recognized in the consolidated statement of income (loss), except to the extent that it relates to items recognized in other comprehensive income (loss) or directly in equity. In this case the tax is also recognized in other comprehensive income (loss) or directly in equity, respectively.

Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

 

Page | 12

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

Deferred income tax is recognized using the asset and liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined on a non-discounted basis using tax rates (and laws) that have been enacted or substantively enacted by the consolidated statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Provisions for other liabilities and charges

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Provisions are based on management’s best estimate of the expenditure required to settle the obligation and are generally measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as accretion expense.

Deferred Revenue

Upfront cash deposits received for streaming arrangements are accounted for as contract liabilities (deferred revenue) in accordance with IFRS 15, Revenue from contracts with customers (“IFRS 15”). Deferred revenue consists of payments received by the Company in consideration for future commitments to deliver gold and silver produced at the Marmato Mine. As gold and silver deliveries are made, the Company recognizes a portion of the deferred revenue as revenue, calculated on a per unit basis using the total number of gold and silver ounces expected to be delivered over the life of the mine. The current portion of deferred revenue is based on deliveries anticipated over the next twelve months.

A financing charge on deferred revenue is recognized when the Company identifies a significant financing component related to its streaming arrangements, resulting from a difference in the timing of the up-front consideration received and delivery of the gold and silver ounces. The interest rate is determined based on the rate implicit in each streaming arrangement at the date of initial recognition. Financing components that are attributable to qualifying assets under development will be capitalized and included in the carrying amounts during the development period until the assets are ready for their intended use, in accordance with the Company’s borrowing costs policy.

The consideration received from payments for deliveries made under streaming arrangements is considered variable, subject to changes in the total estimated gold and silver ounces to be delivered and gold and silver prices. Changes to variable consideration are accounted for prospectively as a cumulative catch-up and are recorded in revenue in the consolidated statement of income (loss).

Provision for Decommissioning

The provision for decommissioning arises from the development, construction and normal operation of mining property, plant and equipment as mining activities are subject to various laws and regulations governing the protection

 

Page | 13

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

of the environment. In general, these laws and regulations are continually changing, and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations.

The estimated present value of reclamation liabilities is recorded in the period in which the liabilities are incurred. A corresponding change to the carrying amount of the related asset is recorded and depreciated on a unit-of-production basis. The liability will be increased each period to reflect the interest element and will also be adjusted for changes in the discount rates and in the estimates of the amount, timing and cost of the work to be carried out.

Future remediation costs are determined based on management’s best estimate at the end of each period of the undiscounted cash costs expected to be incurred at each site. Changes in estimates are reflected by adjusting the provision for decommissioning and the related asset in the period during which an estimate is revised. Accounting for reclamation and remediation obligations requires management to make estimates of the future costs they will incur to complete the reclamation and remediation work required to comply with existing laws and regulations at each mining operation. The estimates are dependent on labour costs, known environmental impacts, the effectiveness of remedial and restoration measures, inflation rates and pre-tax interest rates that reflect current market assessment of time value of money. The Company also estimates the timing of the outlays, which is subject to change depending on continued exploration and newly discovered mineral reserves.

Actual costs incurred may differ from those estimated amounts. Also, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required to be performed by the Company. Increases in future costs could materially impact the amounts charged to operations for reclamation and remediation.

Revenue recognition

Revenue from the sale of gold and silver is recognized when control has been transferred to the customer, which is considered to occur when products have been delivered to the location specified by the customer and the risks of loss have been passed to the customer. Revenue is measured based on the spot price agreed to between the Company and the customer prior to each delivery, in accordance with the contract, which does not include any provisional pricing arrangements.

Share-based payments

The Company has equity-settled and cash-settled share-based compensation plans under which it issues either equity instruments or makes cash payments based on the value of the underlying equity instrument of the Company. The Company’s share-based compensation plans are comprised of the following:

 

a)	Stock option plan

The Company records equity-settled share-based payments under which the entity receives services from employees and consultants as consideration for stock options granted by the Company. For employees and others providing similar services, the total amount to be expensed is based on the fair value of the options granted. The fair value is determined using the Black-Scholes model on grant date. Measurement inputs include share price on measurement date, exercise price, expected volatility, expected life, expected dividends, expected forfeiture rate and the risk-free interest rate.

The compensation expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest. It recognizes the impact of the revision to original estimates, if any, in the consolidated statement of income (loss) with a corresponding adjustment to equity.

 

b)	Deferred share units (“DSUs”)

DSUs were adopted by the Company in 2020 as the equity-based instrument under the long-term incentive plan (“LTIP”) for its non-executive directors. Each DSU represents the right for a non-executive director to receive a cash payment (subject to withholdings) when they cease to be a director of the Company. The cash payment is equal to the product of (i) the vested number of DSUs held and (ii) the volume-weighted average market price of the Company’s common shares for the five business days preceding such date.

 

Page | 14

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

The DSUs represent a financial liability as they can only be settled in cash upon the departure of the directors. As such, the DSUs granted and vested are initially recognized at their fair value as share-based compensation with a corresponding amount recorded in accounts payable and accrued liabilities on the statement of financial position. The DSU liability is subsequently remeasured to its fair value at each period end with the change in fair value during the period recognized as share-based compensation. Unvested DSUs are recognized as share-based compensation over the vesting period using the straight-line method.

 

c)	Preferred share units (“PSUs”)

The Company established a PSU plan in 2021 as part of its compensation program for employees. Each PSU represents the right for an employee to receive a cash payment (subject to withholding) when the PSUs have vested. PSU grants have three-year vesting, with vesting contingent on performance at the end of the three-year performance period. The performance factor will be based on the cumulative three-year Total Shareholder Return (“TSR”) compared to the S&P/TSX Global Gold Index. If performance is between threshold and maximum, vesting will be determined on a straight-line basis between 50% and 200% of target.

PSUs are cash-settled in accordance with their terms at the prevailing market price (the five-day volume weighted average price) of the shares immediately before the last day of the performance period of the shares. The performance thresholds are as follows:

 

Performance		Comparative three-year TSR versus S&P/TSX Global Gold  Index		Vesting (% of grant)
Below threshold		More than 25% points below index		0%
Threshold		25% points below index		50%
Target		Matches index		100%
Maximum		50% points above index		200%

The PSUs represent a financial liability as they can only be settled in cash once they have vested. As such, the PSU compensation expense is recognized at fair value over the vesting period with a corresponding amount recorded in other long-term liabilities on the statement of financial position. The PSU liability is remeasured to its fair value at each period end with the change in fair value during the period recognized as share-based compensation.

Loss (earnings) per share

Basic (loss) earnings per share is computed by dividing net (loss) income for the period by the weighted average number of common shares outstanding during the period.

Provided that they are not anti-dilutive, diluted earnings per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury stock method. This method assumes that proceeds received from the exercise of stock options and warrants and any unamortized share-based compensation amounts are used to repurchase common shares at the prevailing market rate.

Leases

The Company recognizes a lease liability with a corresponding right-of-use (“ROU”) asset on the date at which the leased asset is available for use by the Company. The lease liability is initially measured at the present value of the lease payments outstanding at the commencement date, discounted using the interest rate implicit in the lease. If the implicit rate cannot be readily determined, the Company’s incremental borrowing rate is used, being the rate that it would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost and decreased by lease payments made over the lease period. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the Company’s estimate of any residual amount payable, or if applicable, the Company changes its assessment of whether it will exercise a purchase, extension, or termination option.

 

Page | 15

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

The ROU asset is depreciated using the straight-line method from the recognition date to the earlier of the end of the useful life of the asset or the end of the lease term.

Payments associated with short-term leases and leases of low-value assets are expensed as they are incurred in profit or loss. Short-term leases have a lease term of 12 months or less.

New accounting standards issued but not effective

IAS 16 – Property, Plant and Equipment

The IASB issued an amendment to IAS 16, Property, Plant and Equipment to prohibit the deducting from property, plant and equipment amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and its related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The amendment will be adopted on January 1, 2022 and there is no anticipated impact to the Company on adoption.

IFRS 3 – Business Combinations

The IASB has issued an amendment to IFRS 3, Business Combinations adding an exception to its requirement for an entity to refer to the Conceptual Framework to determine what constitutes an asset or a liability. This exception specifies that for some assets and liabilities, an entity applying IFRS 3 should instead refer to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

The amendment is effective for annual periods beginning on or after January 1, 2022, with early adoption permitted. The amendment will be adopted on January 1, 2022 and there is no anticipated impact to the Company.

IFRS 9 – Financial Instruments

The IASB has issued an amendment to IFRS 9, Financial Instruments clarifying which fees to include in the test in assessing whether to derecognize a financial liability. Only those fees paid or received between the borrower and the lender, including fees paid or received by either the entity or the lender on the other’s behalf are included.

The amendment is effective for annual periods beginning on or after January 1, 2022 with early adoption permitted. The amendment will be adopted on January 1, 2022 and there is no anticipated impact to the Company.

IAS 37 – Provisions, contingent liabilities and contingent assets

The IASB has issued an amendment to IAS 37, Provisions, contingent liabilities and contingent assets to IAS 37 does not specify which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The IASB’s amendments address this issue by clarifying that the ‘costs of fulfilling a contract’ comprise both:

 

•

the incremental costs – e.g. direct labour and materials; and

•

an allocation of other direct costs – e.g. an allocation of the depreciation charge for an item of PPE used in fulfilling the contract.

The amendments are effective for annual periods beginning on or after January 1, 2022, with early adoption permitted. The amendment will be adopted on January 1, 2022 and there is no anticipated impact to the Company.

IAS 1 – Presentation of Financial Statements

The IASB has issued an amendment to IAS 1, Presentation of Financial Statements providing a more general approach to the classification of liabilities. The amendment clarifies that the classification of liabilities as current or non-current depends on the rights existing at the end of the reporting period as opposed to the expectations of exercising the right for settlement of the liability. The amendments further clarify that settlement refers to the transfer of cash, equity instruments, other assets, or services to the counterparty.

 

Page | 16

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

The amendments are effective for annual periods beginning no earlier than January 1, 2024 and are to be applied retrospectively. The extent of the impact of adoption of this standard has not yet been determined.

IAS 8 – Definition of Accountings Estimates

The IASB has issued an amendment to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy.

The amendments are effective for annual periods beginning on or after January 1, 2023, with early adoption permitted. The extent of the impact of adoption of this standard has not yet been determined.

IAS 12 – Income Taxes

The IASB has issued an amendment to IAS 12 – Income Taxes to narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences.

The amendments are effective for annual periods beginning on or after January 1, 2023, with early adoption permitted. The extent of the impact of adoption of this standard has not yet been determined.

 

4.	Significant Accounting Judgements, Estimates and Assumptions

Judgments, estimates and assumptions are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The preparation of financial statements in conformity with IFRS requires management to use judgment in applying its accounting policies and estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Judgments and estimates are continuously evaluated and are based on management’s best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ significantly from the amounts included in the financial statements.

 

a)	Significant judgments in the application of accounting policies

Areas of judgment that have the most significant effect on the amounts recognized in the financial statements are as follows:

Income taxes

The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the consolidated provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for potential tax exposures based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made.

At each reporting date, the Company evaluates the likelihood of whether some portion of the deferred tax assets will not be realized. Once the evaluation is completed, if the Company believes that it is probable that some portion of the deferred tax assets will fail to be realized, the Company records only the remaining portion for which it is probable that there will be available future taxable profit against which the temporary differences can be utilized. Assessing the recoverability of deferred income tax assets requires management to make significant judgments.

Asset acquisitions

The Company applies judgment in determining whether the exploration and evaluation assets it acquires are considered to be asset acquisitions or business combinations. Key factors in this determination are whether reserves have been

 

Page | 17

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

established; whether the project is capable of being managed as a business by a market participant, and the nature of the additional work to convert resources into reserves.

Exploration and evaluation assets

Management is required to apply judgment in determining whether technical feasibility and commercial viability can be demonstrated for mineral properties. The technical feasibility and commercial viability is based on management’s evaluation of the geological properties of an ore body based on information obtained through evaluation activities, including metallurgical testing, resource and reserve estimates and economic assessment of whether the ore body can be mined economically. Once technical feasibility and commercial viability of a mineral property can be demonstrated, exploration costs will be assessed for impairment and reclassified to development projects within mineral properties.

 

b)	Significant accounting estimates and assumptions

The areas which require management to make significant estimates and assumptions in determining carrying values include:

Depreciation

Significant judgment is involved in the determination of useful lives and residual values for the computation of depreciation and no assurance can be given that actual useful lives and residual values will not differ significantly from current assumptions.

Valuation of long-lived assets

The carrying amounts of property, plant and equipment, E&E assets, development assets and operating assets are assessed for any impairment indicators such as events or changes in circumstances which indicate that the carrying value may not be recoverable. If there are indicators of impairment, an exercise is undertaken to determine whether the carrying amounts are in excess of their recoverable amount.

The Company considers both internal and external sources of information in assessing whether there are any indications that long-lived assets are impaired. External sources of information the Company considers include changes in the market, economic and legal environment in which the Company operates that are not within its control and affect the recoverable amount of its long-lived assets. Internal sources of information the Company considers include the manner in which property, plant and equipment are being used or are expected to be used, and in respect of long-lived assets, the right to explore in the specific area has or will expire in the future and is not expected to be renewed, substantive expenditures are neither budgeted or planned, exploration has not led to the discovery of commercially viable quantities of mineral resources or sufficient data exists that although development of a specific area is likely to proceed, the carrying amount of the assets is unlikely to be recovered.

If any such indication exists, the Company estimates the recoverable amount of the asset to determine the extent of the impairment. Where it is not possible to estimate the recoverable amount of an individual asset, an estimate of the recoverable amount of the cash generating unit to which the asset belongs is used. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If it is estimated that the recoverable amount of an asset is less than its carrying amount, impairment loss is recognized in profit or loss for the period. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. Reversals of impairment are recognized immediately in profit or loss.

Provision for decommissioning

The Company assesses its provision for decommissioning when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing, and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for reclamation and remediation obligations

 

Page | 18

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

requires management to make estimates of the future costs the Company will incur to complete the decommissioning work required to comply with existing laws and regulations at each mining operation. Actual costs incurred may differ from those amounts estimated. Future changes to environmental laws and regulations could also change the extent of reclamation and remediation work required to be performed by the Company. Changes in future costs could materially impact the amounts charged to operations for such obligations and to mineral properties. The provision represents management’s best estimate of the present value of the future decommissioning obligation. Actual future expenditures may differ from the amounts currently provided.

Fair values of financial liabilities

The Gold Notes, warrant liabilities, and the subscription receipts are recorded at FVTPL. Fair values of Gold Notes, warrant liabilities and subscription receipts have been determined based on a valuation methodology that captures all of the features in a set of partial differential equations that are then solved numerically to arrive at the value of these financial instruments. The fair value estimates are based on numerous assumptions including, but not limited to, commodity prices, time value, volatility factors, risk-free rates and credit spreads. The fair value estimates may differ from actual fair values and these differences may be significant and could have a material impact on the Company’s financial position and results of operations. The fair value of the listed warrants are determined using quoted prices in an active market.

Deferred Revenue

Judgment was required in determining the accounting for the Company’s Precious Metals Purchase Agreement (the “PMPA”) with Wheaton Precious Metals International Ltd. (“WPM”) which has been reported as deferred revenue.

Upfront cash deposits received for streaming arrangements are accounted for as contract liabilities (deferred revenue) in accordance with IFRS 15. These contracts are not financial instruments because they will be satisfied through the delivery of non-financial items (i.e. delivery of gold and silver ounces), rather than cash or financial assets. Under the PMPA, the Company is required to satisfy the performance obligations through Marmato mine’s production, and revenue will be recognised over the duration of the contract as the Company satisfies its obligation to deliver gold and silver ounces.

The advance received from WPM has been recognised on the statement of financial position as deferred revenue. The deferred revenue will be recognised as revenue in profit or loss proportionally based on the metal ounces delivered in relation to the expected total metal ounces to be delivered over the life of the Marmato mine.

Each period management estimates the cumulative amount of the deferred revenue obligation that has been satisfied and, therefore, recognized as revenue. Any changes in the estimates are accounted for prospectively as a cumulative catch-up in the year that the estimates above change. Key inputs into the estimate of the amount of deferred revenue that should be recognized are as follows:

 

		Valuation Inputs		Description
		Financing Rate		IFRS 15 requires the Company to recognise a notional financing charge due to the significant time delay between receiving the upfront streaming payment and satisfying the related performance obligations.
		Long-term commodities price curves		Estimates of the long-term commodities prices are estimated in order to calculate the expected revenue value per ounce to be recognized from deferred revenue for each delivery to WPM.
		Life of Mine Production		Life of mine production is estimated giving consideration to IFRS 15 requirements constraining estimates of variable consideration and therefore is based on the approved life of mine for the Marmato mine and the portion of mineral resources anticipated to be converted to mineral reserves and mined.
		Timing of construction milestones		The expected timing for when the Company will achieve the construction milestone requirements for the additional funding from WPM have been estimated based on the prefeasibility study.

 

Page | 19

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

5.	RTO Transaction

On February 24, 2020, the Company acquired all of the issued and outstanding shares of CFC, a subsidiary of GCM, in an RTO Transaction in exchange for the issuance of 39,542,600 common shares of the Company. The Company then issued, in exchange for the 10,852,840 outstanding share purchase warrants and 125,550 broker warrants (Note 16c) issued prior to the RTO Transaction, the same number of replacement warrants and broker warrants with equivalent terms.

In accounting for the reverse takeover, the RTO Transaction consideration was determined by reference to the fair value of the number of shares the legal subsidiary, being CFC, would have issued to the legal parent entity, being the Company, to obtain the same percentage ownership interest of 21.5% in the combined entity. As a result, the consideration was measured at the value of the 10,852,840 shares that would have been issued by CFC if it were the legal parent and acquirer.

The excess of the fair value of the RTO Transaction consideration to the Company over the fair value of the assets and liabilities of the Company acquired by CFC on February 24, 2020 was as follows:

 

Fair value of RTO Transaction consideration for 10,852,840 common shares		$	16,346
Fair value of assets and liabilities acquired
Cash and cash equivalents			33
Accounts receivable			8
Accounts payable and accrued liabilities			(135)
Net liability assumed			(94)
Excess of RTO Transaction consideration over net liability assumed		$	16,440

The $16.4 million excess of the RTO Transaction consideration over the net liability assumed and the RTO Transaction costs of $0.3 million, including a financial advisory fee (Note 16b) and the fair value of stock options honoured (Note 16d), were expensed in the statement of operations during the year ended December 31, 2020.

 

6.	Cash in Escrow

 

		December 31, 2021				December 31,   2020
Gold Notes – interest payments for Jan 2022 to Aug 2022 (Note 11)		$	3,995			$	10,215
Gold Notes - other proceeds (Note 11)			-				65,073
Aris Subscription Receipts (Note 12)			-				66,808
Total		$	3,995			$	142,096

On February 3, 2021, the escrow release conditions for the Gold Notes were met and the $65.1 million of proceeds held in escrow were released to the Company. The balance of the Gold Notes proceeds held in escrow, which amounted to $4.0 million at December 31, 2021, will be used to fund the monthly interest payments on the Gold Notes from January 2022 through August 2022.

On February 4, 2021, the escrow release conditions for the Aris Subscription Receipts were met and the $66.3 million (C$85.0 million) of proceeds held in escrow (equivalent to $66.8 million at December 31, 2020) were released to the Company.

 

Page | 20

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

7.	Inventories

 

			December 31, 2021				December 31,   2020
Finished goods		$	1,954				$        2,470
Metal in circuit			254				-
Ore stockpiles			107				273
Materials and supplies			4,813				5,493
Total		$	7,128				$        8,236

During the year ended December 31, 2021, the total cost of inventories recognized in the statement of operations amounted to $40.9 million (December 31, 2020 - $33.6 million).

During the year ended December 31, 2021, a provision for obsolescence of $0.8 million was recorded against materials and supplies inventory (December 31, 2020 - nil).

 

8.	Acquisition of South American Resources Corp. (“SARC”)

On July 2, 2020, the Company completed the acquisition of all of the issued and outstanding shares of SARC by way of an amalgamation agreement (the “Amalgamation Agreement”) effecting a three-cornered amalgamation between the Company, SARC and 1241868 B.C. Ltd., a wholly-owned subsidiary of the Company. SARC is the holder of certain advanced exploration-stage mining assets in Northeastern Ontario, including a 100% interest in the Juby Project and a 25% interest in certain claims adjoining the Juby Project.

Pursuant to the terms of the Amalgamation Agreement, the Company issued 20,000,000 common shares (the “SARC Consideration Shares”) to the shareholders of SARC and, through a $10.0 million promissory note (Note 16b) advanced to SARC on June 30, 2020, partially funded SARC’s acquisition of the Juby Project and adjoining claims. Certain shareholders of SARC have entered into voluntary lock-up agreements with the Company pursuant to which such security holders, holding approximately 17.4 million or 87% of the SARC Consideration Shares, have agreed to not sell their SARC Consideration Shares for a period of two years from the closing date of the transaction. No insiders of the Company or GCM received any of the SARC Consideration Shares.

The acquisition has been accounted for as an asset acquisition as the Company has determined that SARC does not constitute a business as defined by IFRS. The acquisition cost, consisting of the fair value of the Consideration Shares and the promissory note, totalled $50.3 million and has been allocated to the acquired identifiable assets and liabilities of SARC.

The consideration paid and the allocation of the fair value to the assets and liabilities of SARC acquired by the Company on July 2, 2020 is summarized as follows:

 

Consideration paid
Promissory note (Note 16b)			$        10,000
Fair value of 20,000,000 common shares issued to SARC shareholders (Note 16b)			39,962
Acquisition costs			381
Total consideration paid			$        50,343
Fair value of assets and liabilities acquired at assigned values
Cash and cash equivalents			$            420
Accounts receivable			11
E&E assets			50,021
Accounts payable and accrued liabilities			(109)
Net assets acquired			$        50,343

 

Page | 21

Notes to the Consolidated Financial Statements Years ended December 31, 2021 and 2020 (Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

 

 

9.	Mining Interests, Plant & Equipment

 

						Mineral Properties
						Depletable				Non-depletable
		Plant and equipment				Operations				Development projects				Exploration projects				Total
Cost
Balance at December 31, 2020		$	26,879			$	-			$	-			$	89,382			$	116,261
Additions			7,856				1,894				21,383				2,756				33,889
Disposals			(411)				-				-				-				(411)
Change in decommissioning liability			-				(713)				-				-				(713)
Transfers			-				3,836				35,895				(39,731)				-
Capitalized borrowing costs (Note 11, 15)			-				-				9,712				-				9,712
Exchange difference			(4,115)				(583)				(5,427)				(764)				(10,889)
Balance at December 31, 2021		$	30,209			$	4,434			$	61,563			$	51,643			$	147,849
Accumulated Depreciation
Balance at December 31, 2020		$	(10,297)			$	-			$	-			$	-			$	(10,297)
Depreciation			(1,739)				(294)				-				-				(2,033)
Disposals			281				-				-				-				281
Exchange difference			1,500				17				-				-				1,517
Balance at December 31, 2021		$	(10,255)			$	(277)			$	-			$	-			$	(10,532)
Net book value at December 31, 2020		$	16,582			$	-			$	-			$	89,382			$	105,964
Net book value at December 31, 2021		$	19,954			$	4,157			$	61,563			$	51,643			$	137,317

Exploration projects of $39.7 million were transferred to development projects and depletable operations starting February 2021 when the Marmato mining license extension was granted and management determined that the assets had reached technical feasibility and commercial viability.

Plant and equipment as of December 31, 2021 includes ROU assets with a net book value of $0.6 million (December 31, 2020 - $0.4 million).

 

						Mineral properties
						Depletable				Non-depletable
		Plant and equipment				Operations				Development projects				Exploration projects				Total
Cost
Balance at December 31, 2019		$	19,341			$	-			$	-			$	21,058			$	40,399
Acquisition of South American Resources			-				-				-				50,021				50,021
Change in decommissioning liability			-				-				-				3,674				3,674
Additions			7,825				-				-				14,488				22,313
Exchange difference			(287)				-				-				141				(146)
Balance at December 31, 2020		$	26,879			$	-			$	-			$	89,382			$	116,261
Accumulated Depreciation
Balance at December 31, 2019		$	(9,429)			$	-			$	-			$	-			$	(9,429)
Depreciation expense			(1,203)				-				-				-				(1,203)
Disposals			-				-				-				-				-
Exchange difference			335				-				-				-				335
Balance at December 31, 2020		$	(10,297)			$	-			$	-			$	-			$	(10,297)
Net book value at December 31, 2019		$	9,912			$	-			$	-			$	21,058			$	30,970
Net book value at December 31, 2020		$	16,582			$	-			$	-			$	89,382			$	105,964

 

Page | 22