Source - LSE Regulatory
RNS Number : 4747X
Thor Explorations Ltd
30 August 2022
 

THOR_EXPLORATIONS_FULLCLRLOGO_onwhite 

 

 

 


NEWS RELEASE

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR
DISTRIBUTION TO U.S. WIRE SERVICES

 

                                                                                                                                                     

August 30, 2022

 

TSXV/AIM: THX

                                                                                                                                                     

 

This Announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR"). Upon the publication of this Announcement, this inside information is now considered to be in the public domain.

 

 

THOR EXPLORATIONS ANNOUNCES SECOND QUARTER 2022 FINANCIAL AND OPERATING RESULTS, FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 2022

 

Thor Explorations Ltd. (TSXV / AIM: THX) ("Thor Explorations" or the "Company") is pleased to provide an operational and financial review for its mineral properties located in Nigeria, Senegal and Burkina Faso for the three ("Q2 2022" or the "Period") and six months to June 30, 2022 ("H1 2022").

 

The Company's Condensed Consolidated Interim Financial Statements together with the notes related thereto, as well as the Management's Discussion and Analysis for the three and six months ended June 30, 2022, are available on Thor Explorations' website https://thorexpl.com/investors/financials/

 

Operational Highlights of the Period and H1 2022

·      Achievement of commercial production with 23,785 oz of gold produced at Segilola in the Period (H1 2022: 45,128 oz)

Average mill feed grade during the Period was 3.66 grammes per tonne ("g/t") gold and recovery was 95.5%

The Company exported the gold regularly throughout the Period selling 22,172 oz (H1 2022: 38,830 oz) of gold and 1,351 oz (H1 2022: 2,273 oz) of silver in the Period

·      Gold dore inventory of 2,065 ounces on hand, with 6,069 ounces in transit as at the end of Q2 2022

·      Zero Lost Time Incidents during Q2 2022

·      The Company has funded a range of livelihood restoration programmes to aid the local community members who lost assets (crops and trees) and land within the mine's footprint

·      Community development included support for women's programmes, school scholarships for children from vulnerable families, road upgrades and construction of local market facilities

 

Financial Highlights of the Period and H1 2022

·      Net profit for the period US$6.163m

·      Gold sales in the Q2 2022 generating revenues of US$41,354,747 (H1 2022: US$66,220,229)

·      As at June 30, 2022, the Company had cash of US$5,055,930

·      Sales of 22,172 oz (H1 2022: 38,830 oz) at a cash operating cost of US$922 per oz (H1 2022: US$788 per oz)  sold and an all-in sustaining cost ("AISC") of US$956 per oz sold (H1 2022: US$852 per oz)

·      As at June 30, 2022, the Company had Net debt of US$37,306,971 (Q1 2022: US$50,463,920)

·      In the Period, the Company repaid US$14,461,938 million, principal and interest, of its Senior Secured Debt Facility with Africa Finance Corporation ("AFC")

·      Instalment payments on the AFC Senior Secured Debt Facility of US$9,740,959 are due by December 31, 2022. These will be paid from cashflows during the year

·      The payment of the final EPC invoices has been extended by the EPC Contractor following the delay in commercial production experienced in Q4 2021 and will be paid from cash flows during H2 2022

·      In Q1 2022, the Company changed its presentation currency to the United States dollar ("$"). This being the functional currency for the Company, and the currency of the primary economic environment in which the Company operates.

 

Post Period Highlights

Senior Management Appointments

 

The Company has confirmed the permanent appointment of Chris Omo-Osagie, as Chief Financial Officer effective immediately following his position over the last three months as Acting Chief Financial Officer. Chris will report directly to the CEO and is not joining the Company's board.

 

Chris (47 years old) has served in various senior executive roles across North America, Europe, the Caribbean and Africa with PricewaterhouseCoopers, Deloitte, Centrica, Molson Coors and more recently as Deputy Regional Chief Finance Officer for Dangote Cement Plc in Nigeria. Chris has led and sponsored numerous business transformational projects and has extensive experience in financial reporting, finance operations, mergers and acquisitions, controls and assurance, and treasury management and also financial advisory and corporate finance services to organizations, with transaction values from US$30 million to US$45 billion, including supporting new listings on the TSX.V (Toronto Stock Exchange) and the Irish Stock Exchange. Chris was a director of Autonomy Business Solutions Limited within the five years prior to his appointment. He is a Chartered Accountant and Fellow of the Institute of Chartered Accountants in England and Wales, and member of the Institute of Chartered Accountants of Ontario, Canada.

 

There is no further information required to be disclosed under Rule 17 or paragraph (g) of Schedule 2 of the AIM Rules for Companies.

 

 

Outlook

·      Further revision of 2022 production guidance to 90,000 to 100,000 oz of gold (previously 85,000 to 100,000 oz of gold) at an AISC of US$850-950 per oz

·      Continue to advance the Douta project to preliminary feasibility study ("PFS")

·      Advance exploration programmes across the portfolio, focusing on near mine and underground exploration at Segilola, extension drilling at Douta as well as accessing regional targets in Nigeria

 

Segun Lawson, President & CEO, stated:

"This has been a milestone quarter for the Company, generating a net profit of over US$6m for the period. We are pleased to have completed another strong quarter at the upper end of our guidance, improving on our performance in the first quarter of the year. Significantly, the Company repaid its largest scheduled debt repayment in the period reducing its facility by 29% in the first six months of commercial production.

"We have also continued to prioritise our Environmental, Social and Governance efforts in and around the local communities and have funded a range of projects as agreed in our Community Development Agreements. 

"This has been a very encouraging first six months of the year and, as such, we are pleased to narrow our full year production guidance for the second time to 90,000 to 100,000 ounces within a cost guidance of US$850 - US$950 per ounce."

 

 

 

Further details can be found on the Company's website: www.thorexpl.com

 

About Thor Explorations

 

Thor Explorations Ltd. is a mineral exploration company engaged in the acquisition, exploration, development and production of mineral properties located in Nigeria, Senegal and Burkina Faso. Thor Explorations holds a 100% interest in the Segilola Gold Project located in Osun State, Nigeria and has a 70% economic interest in the Douta Gold Project located in south-eastern Senegal. Thor Explorations trades on AIM and the TSX Venture Exchange under the symbol "THX".

 

THOR EXPLORATIONS LTD.

Segun Lawson

President & CEO

 

For further information please contact:

 

Thor Explorations Ltd

Email: info@thorexpl.com

 

Canaccord Genuity (Nominated Adviser & Broker)

Henry Fitzgerald-O'Connor / James Asensio / Thomas Diehl

 

Tel: +44 (0) 20 7523 8000

 

Hannam & Partners (Broker)

Andrew Chubb / Matt Hasson / Nilesh Patel / Franck Nganou

 

Tel: +44 (0) 20 7907 8500

 

Fig House Communications (Investor Relations)

Tel: +1 416 822 6483

Email: investor.relations@thorexpl.com

 

BlytheRay (Financial PR)                                      

Tim Blythe / Megan Ray / Rachael Brooks

Tel: +44 207 138 3203

 

 

 

 

Q2 2022 Operational Review

 

 

Segilola Project, Nigeria

 

During the Period, there continued to be global supply chain issues resulting in shortages and increased prices for a number of essential consumables and supplies such as ammonium nitrate, diesel and spare parts. The Company has mitigated these risks through the bulk purchase of most supply chain items and anticipates that its production guidance and costs for the year remain in line.

 

Gold Production

 

During the three months ended June 30, 2022 the Segilola Mine produced 23,785 ounces of gold (Q1: 21,343 ounces).

 

The Company exported the gold regularly throughout the period selling 22,172 ounces of gold and 1,351 ounces of silver in the period and had a further gold dore inventory of 2,065 ounces on hand, with 6,069 ounces in transit. These ounces have all been sold in the third quarter of 2022.

 

 

Mining

 

During the three months ended June 30, 2022, 4,031,584 tonnes of material was mined, equivalent to mining rates of 44,795 tonnes of material per day. In this period, 284,079 tonnes of ore were mined, equivalent to mining rates of 3,122 tonnes of ore per day, at an average grade of 3.63g/t.

 

The stockpile balance at the end of the period was 249,281 tonnes of ore at an average of 1.46g/t.

 

Processing

 

During the three months ended June 30, 2022, a total of 211,582 tonnes of ore, equivalent to a throughput rate of 2,351 tonnes per day, was processed.

 

The mill feed grade was 3.66g/t gold and recovery was 95.5% for a total of 23,785 ounces of gold produced. We continue to review the process plant to optimize throughput and recoveries.

 

For the month of June, the Segilola process plant continued to operate at a steady state, above design mill throughput, with 87,021 tonnes of ore processed at an average head grade of 3.88g/t and an overall gold recovery of 95.5% for a total of 10,363 ounces of gold produced.

 

All of the main operating units are performing as expected, and the plant is consistently operating above nameplate capacity. Optimization of the gold recovery process is ongoing, and the start-up issues encountered have been addressed.

 

 

 

Production Metrics

 

Units


Q2 2022

Q1 2022

Mining





Total Ore Mined

Tonnes


284,079

226,314

Ore Processed

Tonnes


211,582

221,900

Low Grade Ore Stockpiled

Tonnes


249,281

179,758

Waste Mined

Tonnes


3,747,504

3,533,610

Total Mined

Tonnes


4,031,584

3,759,524

Total Ore Mined Gold Grade

g/t Au


3.63

2.68

Ore Processed

g/t Au


3.66

3.18

Low Grade Ore Stockpiled

g/t Au


1.46

1.23






Processing





Ore Milled

tonnes


211,582

221,920

Daily Throughput Rate (average)

tpd


2,784

2,760

Daily Throughput / Nameplate Capacity

%


141%

128%






Ore Processed Gold Grade

g/t Au




Recovery

%


95.5

94.1

Gold Recovered

oz


23,785

21,343






 

 

 

 

Environment and Social Summary Q2 2022

 

The main achievements with respect to the Company's environment and social activities for Q2 2022 were focused on Thor Explorations' corporate governance aspects in finalising Thor policies (12 new and/or updated policies) and establishing an independent and free whistle blower hotline.  Thor's 2021 Sustainability Report was progressed and metrics devised for measuring implementation of key sustainability parameters across the material topics of Corporate Governance, People, Health and Safety, Social and Community Development, Cultural Governance and Environment. The report will be completed in early Q3 2022.

 

During Q2 2022, significant progress has been made on the Segilola Gold Mine Project's Greenhouse Gas ("GHG") Procedure and Tool. The Procedure sets out how carbon equivalent (CO2 e) calculations will be undertaken for the project and how they will be reported. This has involved back casting and forecasting for the Life of Mine ("LOM") within the GHG Tool (spreadsheet) which is updated monthly. The GHG Procedure and Tool is now signed off and was operational in Q2 2022. Monthly figures are being reported in SROL's monthly reports. A key milestone was also achieved in May 2022 when Segilola Mine Projects' power supply was switched over to compressed natural gas ("CNG"). The 6 MW CNG generators reduce GHG by 53% over that generated by diesel generators. This is a key step in SROL's reduction of its carbon footprint.

 

 

HSE statistics to end Q2 2022






Safety topic for the week: CLOSE CALLS

30-Jun

M-T-D

Y-T-D

P-T-D

HSE Statistics - Reactive (Lagging) Indicators

Number of Man Shifts Worked (Total)

826

22567

139,390

427,660

Man Hours

7450

216,054

1,258,103

3927506

Lost Time Injury (LTI) recorded

0

0

1

1

Fatality (FAT) recorded

0

0

0

1

Medical Treatment Case(MTC) reported

0

0

4

15

Near Miss (NM) reported

0

4

15

34

First Aid Case (FAC) reported

0

1

5

40

Property Damage (PD) reported

0

5

17

19

HSE Statistics - Proactive (Leading) Indicators

Number of Safety Inductions conducted

2

45

274

659

Toolbox Meeting conducted

10

274

1417

2,783

HSE Meetings conducted

0

7

38

84

HSE Inspections conducted

0

4

97

211

HSE Trainings conducted

1

10

35

344

Number of Unsafe Conditions reported

4

39

151

3,680

Number of Unsafe acts reported

5

65

299

3,288

 LTI Free Days

1

30

114







Celebrations were held at site in Q2 2022 to commemorate World Safety at Work Day. It was an occasion that celebrated SROL Safe Heroes and Departmental HSE Champions.

 

The ISO 45001 Health and Safety Certification process is ongoing with gap analysis and audit undertaken. The SROL Safety Committee across all Departments was inaugurated chaired by the Security Manager.

 

Additional water quality testing commenced south of the mining footprint to provide information on environmental issues triggered by illegal mining in a local community. SROL is part of the task force to address illegal mining issues in the locality.

 

An EIA for a helipad within the existing Segilola mine site is progressing and will be submitted to the Federal Ministry of Environment in Q3 2022.

 

Social and community development parameters for the Segilola Project were also progressed in Q2 2022. Of significance was detailed costings for seed funded livelihood restoration programmes to aid those local community members who lost assets (crops and trees) and land within the mine's footprint. Fish farms and  vegetable plots have been designed to be constructed on land surrounding the water storage dam and bill of quantities prepared. Land clearing has occurred and construction is slated to commence in Q3 through to Q4 2022. Commitments to livelihood programmes were outlined in SROL's Livelihood Restoration Plan. The programmes are expected to be self-sustaining within a two year period and operate beyond the lifetime of the mine. An agricultural expert has been seconded into the SROL team to assist in the development of the agricultural programmes. Through funding agreed via Community Development Agreements ("CDA") signed with the three communities surrounding the Segilola Mine, community programmes were progressed in Q2 2022. These included road upgrades (grading of local roads and reconstruction of one main road) and construction of local market facilities. Local employment targets were also set within with the CDAs and local employment makes up ~20% of Segilola's site employment component, exceeding the CDA target.   CSR programmes were also progressed in 2022 including the maiden edition of the Segilola football tournament held in May at Iperindo and Odo-Ijesha football fields.  The popular sporting event is aimed at promoting youth development and fostering unity amongst Host Communities and SROL.

 

Compensation for the Segilola project footprint continued in Q2 2022.  The compensation budget for the Project sits at $3.8 million in line with the overall compensation budget for the Project. This provides compensation for 277 landowners and 1113 asset owners (June 2022). Additionally, compensation for temporary loss of assets and lands impacted by exploration activities (at 10 explorations sites across 3 states in Nigeria) stands at $297,000 for 445 asset and 7 landowners (as of June 2022).

 

Social listening continues (monitoring SROL and Thor mentions in Nigerian media) across electronic, TV and printed media and findings are shared with key departments in SROL. Most media coverage has been positive.

 

 

Exploration Activity Summary Q2 2022

 

Nigeria

 

Introduction

 

The high grade Segilola gold deposit is located on the major regional shear zone that extends for several hundred kilometres through the gold-bearing Ilesha schist belt (structural corridor) of Nigeria.

 

Thor's exploration tenure now comprises nine explorations licences and five joint venture partnership exploration licences.  Together with the mining lease over the Segilola Gold Deposit, Thor's total exploration tenure amounts to over 1,268 km2.

 

Exploration Activity

 

Exploration during the quarter comprised on-going regional stream sediment sampling, surface soil sampling, auger soil sampling, trench sampling and termite mound sampling in the exploration lease located both north and south of the Segilola Gold Deposit and reverse circulation drilling on two high priority targets within a 15 kilometre radius of the Segilola Mine.

 

 

 

Map Description automatically generated

 

Figure 1: Segilola Tenement Map showing Geochemical Sample Locations

 

 

Reverse circulation ("RC") and Diamond drilling commenced during the quarter. The main objectives of this programme are:

 

1.   To test the geochemical and structural targets generated by auger soil sampling and trenching in EL 20776 and EL23573.  The drilling was also targeting the occurrence of gold mined in shallow pits mined by artisanal miners.

2.   To test the gold-in soil anomalies generated by auger soil and trench sampling at Odo within EL19066, 3km north of Segilola deposit.

Assay results are pending for the majority of the drilled holes with no significant results received on assays received to date.

 

Post Period, the Exploration Lab arrived on site. The Lab is expected to be fully operational from September 1, 2022 and will allow the Company to fully implement its exploration drilling program and critically, will significantly reduce assay turnaround times.

 

 

 

 

Senegal

 

Introduction

 

The Douta Gold Project is a gold exploration permit, E02038, which covers an area of 58km2 and is located within the Kéniéba inlier, eastern Senegal. The northeast-trending licence (Figure 2) has an area of 58 km2. Thor, through its wholly-owned subsidiary African Star Resources Incorporated ("African Star"), has a 70% economic interest in partnership with the permit holder International Mining Company SARL ("IMC"). IMC has a 30% free carried interest in its development until the announcement by Thor of a Probable Reserve.

The Douta licence is strategically positioned 4km east of the Massawa North and Massawa Central deposits, which form part of the world-class Sabadola-Massawa Project owned by Endeavour Mining (Figure 2). The Makabingui deposit, belonging to Bassari Resources Ltd, is immediately located east of the northern portion of E02038.

 

The Douta Gold Project has an initial inferred resource estimate of 15 million tonnes ("Mt") grading 1.53g/t gold for 730,000 ounces gold. The resource encompasses the Makosa, Makosa North and Makosa Tail zones, which are collectively named the Makosa Resource.

 

 

Exploration Activity

 

Following a first phase ("Phase 1") of drilling to test the northern extension of the Makosa Resource, the focus of the quarter has been a 12,000 metre RC drilling programme.

 

The main objectives of this programme are :

-       to test infill, lateral and down-dip extension of gold mineralisation of the new Sambara target;

-       infill and upgrade the categorization of the Makosa and Makosa Tail discoveries; and

-       further test additional targets generated through the auger drilling programme.

 

Phase 1 RC drilling programme started on 7 March and finished on 15 April. A total of 122 holes were drilled for 8,083m comprising:

 

·      Sambara: 46 holes were drilled for 3,036m.

·      Makosa North 76 holes drilled for 5,047m.

 

 

Prospect

Number of Holes

Total Metres

Number of Samples

Makosa North

76

          5,047

                         545

Sambara

46

          3,036

                      5,935

Total

122

          8,083

                      9,509

 

 

Table 2.4: Douta RC Drilling Statistics

 

 

Map Description automatically generated with low confidence

 

Figure 2: Douta Project Location Map

 

Results

 

Makosa North Extension

Whilst the drilling programme shows the continuity of the gold-bearing structure along the Makosa corridor in the northern part (Figure 3), the low grade nature of the mineralisation resulted in focussing the Phase 2 drilling programme on upgrading high grade areas of Makosa and Makosa tail.

 

Sambara Target

Gold mineralisation is associated with greywacke with smoky quartz, disseminated pyrite, sericite and silica stockworks.

 

Significant  intersections received to date  are shown in Table 2.5.

The location of these results are shown in Figure 4.

 

A picture containing chart Description automatically generated

Figure 3: Makosa north drilling results showing the continuity of the gold-bearing.

 

Figure 4: Sambara prospect early drilling results demonstrating the presence of gold mineralisation

 

 

Douta RC Drilling Results

 

HOLE ID

Easting

Northing

Elevation

Length

Azimuth

Dip

From    (m)

To       (m)

Downhole Interval (m)

True Width (m)

Average Grade (Aug/t)

Prospect

DTRC369

178301

1439467

198

66

130

-50

NSR





Makosa North

DTRC370

178272

1439494

200

66

130

-50

NSR





Makosa North

DTRC371

178243

1439522

198

66

130

-50

NSR





Makosa North

DTRC372

178220

1439541

197

60

130

-50

37

38

1

0.8

0.51

Makosa North

DTRC373

178188

1439562

199

54

130

-50

30

35

5

4

1.13

Makosa North

DTRC374

178157

1439586

197

66

130

-50

NSR





Makosa North

DTRC375

178410

1439648

192

66

130

-50

NSR





Makosa North

DTRC376

178383

1439671

189

60

130

-50

NSR





Makosa North

DTRC377

178360

1439690

186

60

130

-50

NSR





Makosa North

DTRC378

178328

1439713

180

70

130

-50

NSR





Makosa North

DTRC379

178296

1439737

178

54

130

-50

38

44

6

4.8

0.63

Makosa North

DTRC380

178273

1439757

177

90

130

-50

78

89

11

8.8

0.85

Makosa North

DTRC381

178516

1439816

175

66

130

-50

NSR





Makosa North

DTRC382

178484

1439841

174

66

130

-50

NSR





Makosa North

DTRC383

178452

1439865

172

66

130

-50

21

23

2

1.6

0.53

Makosa North

DTRC384

178421

1439889

172

40

130

-50

NSR





Makosa North

DTRC385

178398

1439908

172

72

130

-50

66

67

1

0.8

0.71

Makosa North

DTRC386

178560

1440038

171

66

130

-50

2

3

1

0.8

1.24

Makosa North

and







52

53

1

0.8

0.65

Makosa North

DTRC387

178537

1440057

169

54

130

-50

32

33

1

0.8

0.77

Makosa North

DTRC388

178506

1440082

167

72

130

-50

NSR





Makosa North

DTRC389

178591

1440012

172

66

130

-50

NSR





Makosa North

DTRC390

178621

1439985

173

66

130

-50

NSR





Makosa North

DTRC391

178651

1439960

175

66

130

-50

NSR





Makosa North

DTRC392

178682

1439934

177

66

130

-50

NSR





Makosa North

DTRC393

178712

1439908

178

66

130

-50

NSR





Makosa North

DTRC394

178746

1440144

172

66

130

-50

NSR





Makosa North

DTRC395

178715

1440169

171

72

130

-50

NSR





Makosa North

DTRC396

178684

1440193

170

72

130

-50

NSR





Makosa North

DTRC397

178652

1440217

169

66

130

-50

NSR





Makosa North

DTRC398

178854

1440317

172

66

130

-50

NSR





Makosa North

DTRC399

178822

1440341

170

66

130

-50

20

22

2

1.6

0.53

Makosa North

and







37

38

1

0.8

1.18

Makosa North

DTRC400

178790

1440365

168

66

130

-50

NSR





Makosa North

DTRC401

178759

1440390

166

66

130

-50

NSR





Makosa North

DTRC402

178732

1440411

165

60

130

-50

NSR





Makosa North

DTRC403

178813

1440220

173

66

130

-50

NSR





Makosa North

DTRC404

178775

1440244

168

72

130

-50

6

9

3

2.4

0.58

Makosa North

and







69

70

1

0.8

0.62

Makosa North

DTRC405

178738

1440271

169

84

130

-50

67

69

2

1.6

0.66

Makosa North

DTRC406

178712

1440290

169

60

130

-50

NSR





Makosa North

DTRC407

187763

1451550

134

66

130

-50

NSR





Sambara

DTRC408

187734

1451577

133

66

130

-50

NSR





Sambara

DTRC409

187703

1451603

134

66

130

-50

NSR





Sambara

DTRC410

187672

1451628

136

66

130

-50

NSR





Sambara

DTRC411

187981

1451724

140

66

130

-50

2

3

1

0.8

3.12

Sambara

and







17

18

1

0.8

0.83

Sambara

DTRC412

187950

1451748

140

66

130

-50

21

22

1

0.8

0.88

Sambara

and







58

59

1

0.8

1.7

Sambara

and







64

66

2

1.6

1.49

Sambara

DTRC413

187919

1451773

138

66

130

-50

25

26

1

0.8

1.31

Sambara

DTRC414

187885

1451795

138

100

130

-50

71

72

1

0.8

1.44

Sambara

and







82

83

1

0.8

1.17

Sambara

and







94

95

1

0.8

0.7

Sambara

DTRC415

187854

1451819

141

66

130

-50

NSR





Sambara

DTRC416

187823

1451844

142

66

130

-50

NSR





Sambara

DTRC417

187792

1451870

143

78

130

-50

NSR





Sambara

DTRC418

187761

1451894

144

66

130

-50

NSR





Sambara

DTRC419

187730

1451918

146

66

130

-50

NSR





Sambara

DTRC420

187697

1451942

148

66

130

-50

NSR





Sambara

DTRC421

188401

1451404

144

34

130

-50

NSR





Sambara

DTRC422

188379

1451423

145

78

130

-50

NSR





Sambara

DTRC423

188089

1451888

153

66

130

-50

NSR





Sambara

DTRC424

188063

1451911

152

60

130

-50

NSR





Sambara

DTRC425

188029

1451931

147

72

130

-50

1

2

1

0.8

1.45

Sambara

and







19

20

1

0.8

0.5

Sambara

and







24

25

1

0.8

5.42

Sambara

DTRC426

187999

1451958

146

72

130

-50

29

30

1

0.8

0.62

Sambara

and







45

47

2

1.6

3.33

Sambara

incl







45

46

1

0.8

5.98

Sambara

and







56

57

1

0.8

1.63

Sambara

and







65

71

6

4.8

2.48

Sambara

incl







70

71

1

0.8

10.1

Sambara

DTRC427

187967

1451983

146

66

130

-50

NSR





Sambara

DTRC428

187935

1452008

146

66

130

-50

54

55

1

0.8

0.65

Sambara

DTRC429

187904

1452032

147

78

130

-50

NSR





Sambara

DTRC430

188196

1452051

149

66

130

-50

NSR





Sambara

DTRC431

188165

1452076

150

84

130

-50

1

4

3

2.4

1.39

Sambara

and







7

8

1

0.8

0.9

Sambara

and







12

18

6

4.8

3.6

Sambara

incl







15

16

1

0.8

9.03

Sambara

and







27

28

1

0.8

27

Sambara

DTRC432

188134

1452102

150

66

130

-50

NSR





Sambara

DTRC433

188104

1452127

150

72

130

-50

26

27

1

0.8

2.35

Sambara

DTRC434

188073

1452153

150

66

130

-50

NSR





Sambara

DTRC435

188042

1452178

150

66

130

-50

23

24

1

0.8

0.55

Sambara

DTRC436

188477

1452094

132

66

130

-50

NSR





Sambara

DTRC437

188445

1452118

132

66

130

-50

NSR





Sambara

DTRC438

188415

1452144

133

66

130

-50

NSR





Sambara

DTRC439

188382

1452166

134

66

130

-50

NSR





Sambara

DTRC440

188358

1452184

135

60

130

-50

NSR





Sambara

DTRC441

188333

1452198

138

50

130

-50

NSR





Sambara

DTRC442

188305

1452223

143

66

130

-50

NSR





Sambara

DTRC443

188461

1452361

145

78

130

-50

45

46

1

0.8

1.43

Sambara

DTRC444

188493

1452336

146

66

130

-50

NSR





Sambara

DTRC445

188429

1452385

144

78

130

-50

15

16

1

0.8

5.1

Sambara

DTRC446

188396

1452408

144

66

130

-50

NSR





Sambara

DTRC447

188366

1452435

145

66

130

-50

NSR





Sambara

DTRC448

188333

1452460

146

62

130

-50

NSR





Sambara

DTRC449

188302

1452483

147

66

130

-50

NSR





Sambara

DTRC450

188466

1451481

145

42

130

-50

NSR





Sambara

DTRC451

188417

1451390

144

24

130

-50

NSR





Sambara

DTRC452

188440

1451370

144

66

130

-50

NSR





Sambara

DTRC453

179030

1440426

184

66

130

-50

31

32

1

0.8

0.94

Makosa North

DTRC454

179001

1440453

182

66

130

-50

NSR





Makosa North

DTRC455

178972

1440480

177

66

130

-50

NSR





Makosa North

DTRC456

178943

1440507

172

66

130

-50

12

14

2

1.6

1.38

Makosa North

DTRC457

178915

1440535

171

66

130

-50

31

33

2

1.6

0.7

Makosa North

DTRC458

179305

1440728

180

66

130

-50

65

66

1

0.8

0.5

Makosa North

DTRC459

179272

1440751

177

66

130

-50

NSR





Makosa North

DTRC460

179239

1440777

174

66

130

-50

NSR





Makosa North

DTRC461

179210

1440799

169

66

130

-50

NSR





Makosa North

DTRC462

179177

1440822

167

90

130

-50

52

53

1

0.8

0.64

Makosa North

DTRC463

180427

1442136

163

66

130

-50

50

56

6

4.8

0.96

Makosa North

DTRC464

180395

1442160

162

66

130

-50

NSR





Makosa North

DTRC465

180366

1442187

160

66

130

-50

NSR





Makosa North

DTRC466

180331

1442213

160

66

130

-50

NSR





Makosa North

DTRC467

180297

1442239

160

66

130

-50

NSR





Makosa North

DTRC468

180267

1442261

165

66

130

-50

NSR





Makosa North

DTRC469

180761

1441379

167

66

130

-50

NSR





Makosa North

DTRC470

180729

1441402

168

66

130

-50

NSR





Makosa North

DTRC471

180699

1441425

168

66

130

-50

NSR





Makosa North

DTRC472

180216

1441793

173

66

130

-50

NSR





Makosa North

DTRC473

180186

1441819

171

66

130

-50

9

12

3

2.4

0.75

Makosa North

DTRC474

180153

1441843

169

66

130

-50

43

46

3

2.4

0.6

Makosa North

and







60

62

2

1.6

0.6

Makosa North

DTRC475

180122

1441868

168

66

130

-50

NSR





Makosa North

DTRC476

180092

1441890

167

66

130

-50

NSR





Makosa North

DTRC477

179971

1441479

172

66

130

-50

NSR





Makosa North

DTRC478

179939

1441503

171

66

130

-50

NSR





Makosa North

DTRC479

179910

1441530

168

66

130

-50

NSR





Makosa North

DTRC480

179878

1441554

167

66

130

-50

9

10

1

0.8

0.55

Makosa North

DTRC481

179850

1441575

166

78

130

-50

33

34

1

0.8

0.57

Makosa North

and







50

51

1

0.8

0.74

Makosa North

DTRC482

179728

1441156

188

66

130

-50

NSR





Makosa North

DTRC483

179699

1441184

186

71

130

-50

NSR





Makosa North

DTRC484

179668

1441209

182

66

130

-50

NSR





Makosa North

DTRC485

179637

1441233

178

66

130

-50

NSR





Makosa North

DTRC486

179605

1441257

179

66

130

-50

10

18

8

6.4

0.85

Makosa North

incl







15

18

3

2.4

1.1

Makosa North








25

26

1

0.8

0.56

Makosa North

DTRC487

179581

1441023

184

66

130

-50

NSR





Makosa North

DTRC488

179548

1441047

180

66

130

-50

NSR





Makosa North

DTRC489

179517

1441073

177

72

130

-50

NSR





Makosa North

DTRC490

179486

1441097

174

66

130

-50

7

8

1

0.8

0.52

Makosa North

and







13

14

1

0.8

0.54

Makosa North

 

 

COVID-19 Pandemic

The COVID-19 pandemic continued in 2022 and has had a significant impact on businesses through restrictions put in place by governments around the world including the jurisdictions in which we conduct our business. Over the last two years, aspects of the Company's operations have been impacted by COVID-19 for a variety of reasons, such as government and other restrictions on transportation and the mobility of personnel and mandatory quarantine periods and border closures.

 

As of the date of this MD&A, it is not possible to determine the extent of the impact that this pandemic will have on our activities as the impacts will depend on future developments which themselves are uncertain and cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, its extent and intensity, the duration of the outbreak, and possible government, societal, and individual responses to the situation.

 

Possible impacts of the continuing or worsening spread of COVID-19, including new variants of the virus, may include mandated or voluntary closures of operations, illness among the Company's workforce, restricted mobility of personnel, interruptions in the Company's logistics and supply chain, delay at or closure of the Company's refining and smelting service providers and global travel restrictions, all of which could disrupt the Company's operations and negatively impact its financial performance.

 

SUBSEQUENT EVENTS

There are no material subsequent events to report.

 

OUTLOOK AND UPCOMING MILESTONES

 

This Section 5 of the MD&A contains forward looking information as defined by National Instrument 51-102. Refer to Section 16 of this MD&A for further information on forward looking statements.

 

 

We are focussed on advancing the Company's strategic objectives and near-term milestones which include:

 

·      Maintain our rigorous health and safety protocols

·      2022 Operational Guidance and Outlook

Gold Production

oz

90,000-100,000

All-in Sustaining Cost ("AISC")

US$/oz Au sold

$850 - $950

Capital Expenditure

US$

9,243,000

Exploration Expenditure:



Nigeria

US$

4,200,000

Senegal

US$

2,000,000

 

·      The critical factors that influence whether Segilola can achieve these targets include:

Segilola's ability to maintain an adequate supply of consumables (in particular ammonium nitrate, flux and cyanide) and equipment, particularly if there is any resurgence in the COVID-19 pandemic

Fluctuations in the price of key consumables, in particular ammonium nitrate, and diesel

Segilola's workforce remaining healthy

Continuing to receive full and on-time payment for gold sales

Continuing to be able to make local and international payments in the ordinary course of business

 

·      Continue to advance the Douta project towards preliminary feasibility study ("PFS")

·      Continue to advance exploration programmes across the portfolio:

Segilola near mine exploration

Segilola underground project

Segilola regional exploration programme

Douta extension programme

Douta infill programme

Assess regional potential targets in Nigeria

 



 

SUMMARY OF QUARTERLY RESULTS

The table below sets forth selected results of operations for the Company's eight most recently completed quarters.

 

Summary of quarterly results

$

2022 Q2

Jun 30

2022 Q1

Mar 31

2021 Q4

Dec 31

2021 Q3

Sep 30

Revenues

66,220,229

24,865,482

6,205,345

-

Net profit/(loss) for period

6,305,101

200,473

2,665,653

460,745

Basic and fully diluted profit/(loss) per share (cents)

0.01

0.00

0.40

0.08

 

$

2021 Q2

Jun 30

2021 Q1

Mar 31

2020 Q4

Dec 31

2020 Q3

Sep 30

Revenues


-

-

-

Net profit/(loss) for period

(5,582,090)

(67,365)

(1,560,694)

(1,030,715)

Basic and fully diluted profit/(loss) per share (cents)

(0.90)

(0.05)

(0.25)

(0.17)

 

 

RESULTS FOR SIX MONTHS ENDED JUNE 30, 2022

The review of the results of operations should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto.

 

The Company reported a net profit of $6,305,101 ($0.01 profit per share) for the six months to June 30, 2022, as compared to a net (loss) of ($5,103,924($0.90 loss per share) for the six months ended June 30, 2021. The move to profit for the six months was largely due to:

·      sales in H1 2022 of $66,220,229 in H1 2021 (nil);

·      foreign exchange gains of $5,824,295 from loss of $2,372,083 in H1 2021

 

These were offset partially by:

·      Amortisation and depreciation of $13,027,616; and

·      Interest of $7,693,863

 

The Company recorded sales revenue of $66,220,229 for the six months ended June 30, 2022, and $nil for the six months to June 30,2021.  No interest was earned during the six months ended June 30, 2022, and 2021.

 

LIQUIDITY AND CAPITAL RESOURCES

As at June 30, 2022, the Company had cash of $5,055,930, 6,069 ounces of gold in transit and 2,066 ounces of gold dore in inventory to be sold, and a working capital deficit of ($28,790,194).

 

The increase in cash from December 31, 2021 (cash of $1,276,270) is due mainly to gold sales revenue of $66,220,299, offset by instalment payments on the loan facility of $14,461,938,  the purchase of property plant and equipment of $5,662,492 and operational costs and corporate overheads of $26,946,453. This cash expenditure was financed by operational cashflow and existing cash balances.

 

As previously announced, the EPC Contractor has confirmed that it will support the Company by extending the payment period of the final EPC invoices and has acknowledged that the Company will make payment of the final EPC invoices from available cashflow.

Unaudited Financial Statements

 

THOR EXPLORATIONS LTD.








CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION


In United States dollars (unaudited)






 June 30, 

 December 31,


Note

 2022
$

 2021
$



 

 

ASSETS


 

 

Current assets


 

 

Cash


                            5,055,930

        1,276,270

Restricted cash

6

                                        -  

        3,495,992

Inventory

7

                          24,046,025

      18,146,558

Amounts receivable

8

                               705,799

           237,651

Prepaid expenses, advances and deposits

9

                            1,961,307

           586,865

Total current assets


                          31,769,061

      23,743,336

Non-current assets


 


Deferred income tax assets


                                 79,771

             86,795

Prepaid expenses, advances and deposits

9

                               287,338

           105,683

Right-of-use assets

10

                          19,361,972

      20,843,612

Property, plant and equipment

15

                        141,445,926

    147,373,656

Intangible assets

16

                          15,497,414

      15,345,419

Total non-current assets


                        176,672,421

    183,755,165

TOTAL ASSETS


                        208,441,482

    207,498,501



 


LIABILITIES


 


Current liabilities


 


Accounts payable and accrued liabilities

17

                          39,128,410

      38,827,489

Deferred income

18

                          10,147,435

                -  

Lease liabilities

10

                            4,007,843

        4,849,088

Gold stream liability

11

                          11,753,417

      12,837,633

Loans and other borrowings

12

                          15,779,820

      27,984,078

Total current liabilities


                          80,816,925

      84,498,288

Non-current liabilities


 


Accounts payable and accrued liabilities

17

                               354,459

        1,564,191

Lease liabilities

10

                          13,135,582

      13,425,286

Gold stream liability

11

                          17,323,911

      17,424,646

Loans and other borrowings

12

                          26,207,109

      25,754,525

Provisions

14

                            5,358,322

        5,238,176

Total non-current liabilities


                          62,379,383

      63,406,824



 


SHAREHOLDERS' EQUITY


 


Common shares

19

                          79,949,297

      79,027,183

Option Reserve

19

                            3,455,454

        4,513,900

Currency translation reserve


                           (4,464,940)

       (2,889,510)

Retained earnings


                         (13,694,637)

     (21,058,184)

Total shareholders' equity


                          65,245,174

      59,593,389

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


                        208,441,482

    207,498,501









These consolidated financial statements were approved for issue by the
Board of Directors on August 29
, 2022, and are signed on its behalf by:









(Signed) "Adrian Coates"


(Signed) "Olusegun Lawson"


 Director


  Director






The accompanying notes are an integral part of these consolidated financial statements.

 

 

THOR EXPLORATIONS LTD.

 

 


 




 


 


CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

 


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022


 


In United States dollars (unaudited)


 


 




 

 



 Three Months Ended
June 30,

 Six Months Ended
June 30,


Note

2022

2021

2022

2021

Continuing operations


 


 




 


 


Revenue


 $ 41,354,747

 $             -  

 $ 66,220,229

 $              -  

 


 


 


Production costs

5

    24,262,437

                 -  

    37,649,096

                 -  

Transportation and refining


         604,991

                 -  

      1,107,213

                 -  

Royalties


         946,252

                 -  

      1,497,017

                 -  

Loss on forward sale of commodity contracts


       (471,403)

                 -  

       (176,480)

                 -  

Gross profit from operations


    16,012,470

                 -  

    26,143,383

                 -  



 


 


Amortisation and depreciation - owned assets

5

      5,789,009

            2,323

    10,793,626

            8,499

Amortisation and depreciation - right of use assets

5

      1,075,735

          11,164

      2,233,990

          22,517

Other administration expenses

5

      2,684,016

        735,778

      4,933,877

     1,460,836

Impairment of Exploration & Evaluation assets

16

            4,520

            1,373

            7,221

          97,847

Profit (loss) from operations


      6,459,190

       (750,637)

      8,174,669

    (1,589,698)



 


 


Interest expense


    (3,935,732)

             (195)

    (7,693,863)

             (521)

Foreign exchange gains


      3,640,484

    (3,527,676)

      5,824,295

    (2,372,083)

Extra-ordinary expenses


 

    (1,141,621)

 

    (1,141,621)

Net profit (loss) for the period


      6,163,942

    (5,420,131)

      6,305,101

    (5,103,924)

Attributable to:


 


 


Non-controlling interest


 


 


Equity shareholders of the Company


      6,163,942

    (5,420,131)

      6,305,101

    (5,103,924)

Net profit (loss) for the period


      6,163,942

    (5,420,131)

      6,305,101

    (5,103,924)



 


 


Other comprehensive profit (loss)


 


 


  Foreign currency translation loss attributed to
     equity shareholders of the company*


       (775,718)


    (1,575,430)


 


 


 


Total comprehensive income profit (loss) for the period


      5,388,224

    (5,420,131)

      4,729,671

    (5,103,924)



 


 




 


 


Net profit (loss) per share - basic and diluted

20

 $         0.010

 $     (0.009)

 $        0.010

 $     (0.008)



 


 


Weighted average number of common shares
   outstanding - basic and diluted


  637,605,227

  621,808,390

  636,603,895

  621,506,029



 


 




 


 


The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

 

 

 

 

THOR EXPLORATIONS LTD.


 


 




 


 


CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

 


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

 


 


In United States dollars (unaudited)


 


 




 

 



 Three Months Ended
June 30,

 Six Months Ended
June 30,


Note

2022

2021

2022

2021



 

 

 

 

Cash flows from (used in):


 

 

 

 



 

 

 

 

Operating activities


 

 

 

 

Net profit / (loss)


 $  6,163,942

$ (5,420,131)

$   6,305,101

$ (5,103,924)

Adjustments for:


 


 


Impairment of unproven mineral interest

16

              4,519

              1,373

              7,221

            97,847

Amortisation and depreciation


       6,864,744

            13,486

     13,027,616

            31,016

Loss on forward sale commodity contracts


         (471,403)

                    -  

         (176,480)

                    -  

Settlement of gold stream obligation


 

                    -  

 

                    -  

Foreign exchange (gain) loss


          837,517

           (52,668)

       1,552,511

          138,972

Interest income / expense


       3,935,732

                    -  

       7,693,863

                    -  

Net operating cash flows

 

     17,335,051

      (5,457,939)

     28,409,832

      (4,836,088)

 


 


 


Changes in non-cash working capital accounts


 


 


Restricted cash


                 464

                    -  

       3,467,617

                    -  

Receivables


         (517,146)

                    -  

         (475,996)

                    -  

Prepaid expenses and deposits


         (961,870)


      (1,312,037)


Deferred income


       3,910,703


     10,144,050


Inventory


      (7,485,612)


      (6,038,731)


Prepaids long term


         (240,767)


         (230,869)


Repayment of goldstream liabilities

 

      (2,997,495)


      (4,804,185)


Accounts payable and accrued liabilities


       7,422,248

                    -  

       1,065,330


Cash utilized in operations


     16,465,576

       1,685,810

     30,225,011

         (907,491)

 


 


 


Adjustment to net loss for cash items


 


 


Realized foreign exchange


         (320,849)

                    -  

         (170,769)

                    -  

Total operating

 

     16,144,727


     30,054,242


 


 


 


Investing


 


 


Purchase of intangible assets


                    -  

           (24,484)

                (169)

         (136,060)

Assets under construction expenditures


                    -  

    (22,061,396)

 

    (31,436,600)

Property, Plant & Equipment


      (1,247,464)

         (687,749)

      (7,808,673)

      (1,573,441)

Exploration & Evaluation assets expenditures


         (509,280)

         (662,470)

      (1,097,588)

      (1,249,946)

Total investing

 

      (1,756,744)

    (23,436,099)

      (8,906,430)

    (34,396,047)

 


 


 


Financing


 


 


Proceeds from issuance of equity securities


 

          284,585

 

          284,585

Share subscriptions received


              2,952


          922,114


 

(Repayment of)/Proceeds from loans and borrowings


    (13,440,749)

21,047,283 

    (15,424,675)

21,047,283 

Net proceeds from short term currency swaps


       594,748

     

       2,348,228

     

Interest paid


      (1,329,281)


      (2,543,868)


Payment of lease liabilities


      (1,365,480)

           (12,151)

      (2,579,159)

           (24,393)

Total Financing

 

    (15,537,810)

     21,319,717

    (17,277,360)

     21,307,475

 


 


 


Effect of exchange rates on cash


           (70,618)

         (927,151)

           (90,792)

         (620,686)



 


 


Net change in cash


$ (1,220,445)

$ (1,319,410)

$   3,779,660

$(14,924,072)



 


 


Cash, beginning of the period


$   6,276,375

$   8,760,354

$   1,276,270

$  22,365,016



 


 


Cash, end of the period


$   5,055,930

 $  7,440,944

$   5,055,930

$    7,440,944



 


 




 


 


The accompanying notes are an integral part of these condensed consolidated interim financial statements.



 


 


 


THOR EXPLORATIONS LTD.

 




 








 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY



In United States dollars (unaudited)



















Note

Common Shares

Option Reserve

Currency translation reserve

 Deficit

 Total shareholders' equity












Balance on December 31, 2020

 

 $  76,858,769

 $ 4,626,426

 $    (594,661)

 $(19,562,232)

 $   61,704,198



Reinstatement of warrants

19

                  -  

               -  

                 -  

         (45,899)

                   -  



Net loss for the period


                  -  

               -  

                 -  

         (67,364)

           (67,364)



Loss


                  -  

               -  

       (804,019)

                  -  

         (804,019)












Balance on June 30, 2021

 

 $  76,858,769

 $ 4,626,426

 $ (1,398,680)

 $(19,675,495)

 $   60,832,815



Exercise of warrants

19

      2,073,451

               -  

                 -  

         421,794

       2,073,451



Options exercised

19

           94,963

     (112,527)

                 -  

         112,527

            94,963



Net loss for the period


                  -  

               -  

                 -  

     (1,917,010)

      (1,917,010)



Comprehensive loss


                  -  

               -  

    (1,490,830)

                  -  

      (1,490,830)












Balance on December 31, 2021

 

 $  79,027,183

 $ 4,513,900

 $ (2,889,510)

 $(21,058,184)

 $   59,593,389



Share issuance costs

19

                  -  

               -  

                 -  

                  -  

                   -  



Issue of share options

19

                  -  

               -  

                 -  

                  -  

                   -  



Options exercised

19

         922,114

  (1,058,446)

                 -  

      1,058,446

          922,114



Net profit for the period


                  -  

               -  

                 -  

      6,305,101

       6,305,101



Comprehensive loss


                  -  

               -  

    (1,575,430)

                  -  

      (1,575,430)



Balance on June 30, 2022

 

 $  79,949,297

 $ 3,455,454

 $ (4,464,940)

 $(13,694,637)

 $   65,245,174



 


 

 

 

 

 



 









The accompanying notes are an integral part of these condensed consolidated interim financial statements.













THOR EXPLORATIONS LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022, AND 2021

In United States dollars, except where noted (unaudited)

 

1.   CORPORATE INFORMATION

Thor Explorations Ltd. is a West African focused gold producer and explorer, dually listed on the TSX-V (THX.V) and AIM Market of the London Stock Exchange (THX.L).

 

The Company was formed in 1968 and is organised under the BCBCA with its registered office at 550 Burrard St, Suite 2900 Vancouver, BC, CA, V6C 0A3. The Company evolved into its current form in August 2011 following a reverse takeover and completed the transformational acquisition of its flagship Segilola Gold Project in Nigeria in August 2016.

 

 

 

2.   BASIS OF PREPARATION

 

a)   Statement of compliance

 

These unaudited condensed consolidated interim financial statements, including comparatives, have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

 

b)   Basis of measurement

 

These unaudited condensed consolidated interim financial statements have been prepared on a historical cost basis and are presented in United States dollars, unless otherwise indicated.

 

The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. A precise determination of many assets and liabilities is dependent upon future events, the preparation of consolidated financial statements for a period involves the use of estimates, which have been made using careful judgment.  Actual results may differ from these estimates.  The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the unaudited condensed financial statements are discussed in Note 4.

 

c)   Nature of operations and going concern

 

As at June 30, 2022, the Company had cash of $5,055,930, and inventory of 2,275 ounces of gold to be sold, with 6,069 ounces in transit. During the six months period ended June 30, 2022, the Company produced 45,128 ounces of gold (Q2 2022: 23,785 ounces) and post period end, the Company has continued production from its Segilola Gold Mine. The Company sold 38,830 ounces of gold from 1 January 2022 to the end of Q2 2022.

 

The Board has reviewed the Group's cash flow forecasts for the twelve-month period from the date of this report including revised forecast production of 85,000 - 100,000 ounces of gold for 2022. The Board is satisfied that the Group will generate sufficient financial resources from its operational cash flow to meet commitments for at least the next twelve months.

 

The Board has considered the operational disruption that could be caused by factors such as interruptions to production at commercial levels, illness amongst workforce caused by global and regional pandemics, and potential disruptions to supply chains. The forecast cashflows are based on a gold price of US$1,836/oz and the all-in sustaining cost at Segilola of US$850 - $US950/oz during the period under review (Refer to section 3 of the Q2 2022, MD&A).

 

The final EPC invoices are recorded as due and payable and constitute a material amount of the net working capital deficit. The EPC Contractor has confirmed that it will support the Company by extending the payment period of the final EPC invoices and has acknowledged that the Company will make payment of the final EPC invoices from available cashflow.

 

As at June 30, 2022, the Group had a net working capital deficit of $28,790,194  which includes its Senior Secured Facility, Deferred Payment Facility (refer to note 12), Mining Contractor invoices which become due three months after being invoiced, final EPC invoices which became due post EPC handover, which occurred on January 31, 2022 and a Deferred Income component, less related inventory, which was earned in July 2022 (See note 18 for details). The working capital calculation excludes $11,753,417 of gold stream liabilities, and $4,854,968 in third party royalties included in current accounts payable, that are contingent upon revised gold sales forecast of 85,000-100,000 ounces for the year ending December 31, 2022.

 

In Q2, 2022, the Company made its second scheduled debt repayment to the Africa Finance Corporation of $14,461,938 consisting of principal and interest, in accordance with the terms of its Senior Secured Facility.

At June 30, 2022, total principal repayments and cancellations amount to $15,825,971, 29% of the original $54m Facility.

 

Having reviewed the cash flow forecast, the Board anticipates that continued production at expected levels from its Segilola Gold Mine will provide sufficient cash generation to enable the Group to service future debt repayment obligations.

 

 

 

 

3.   SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies described below have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements unless otherwise stated.

 

a)   Consolidation principles

 

Assets, liabilities, revenues and expenses of the subsidiaries are recognized in accordance with the Company's accounting policies. Intercompany transactions and balances are eliminated upon consolidation.

 

b)   Details of the group

 

In addition to the Company, these unaudited condensed consolidated interim financial statements include all subsidiaries of the Company. Subsidiaries are all corporations over which the Company has power over the Subsidiary and it is exposed to variable returns from the Subsidiary and it has the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The audited consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity, with Subsidiaries being fully consolidated from the date on which control is acquired by the Company. They are de-consolidated from the date that control by the Company ceases.

 

The subsidiaries of the Company are as follows:

Company

Location

Incorporated

Interest

Thor Investments (BVI) Ltd. ("Thor BVI")

British Virgin Islands

June 30, 2011

100%

African Star Resources Incorporated ("African Star")

British Virgin Islands

June 30, 2011

100%

Segilola Resources Incorporated ("SR BVI")

British Virgin Islands

March 10, 2020

100%

Thor Gold Ventures Ltd ("THX GV")

United Kingdom

February 11, 2022

100%

African Star Resources SARL ("African Star SARL")

Senegal

July 14, 2011

100%

Argento Exploration BF SARL

("Argento BF SARL")

Burkina Faso

September 15, 2010

100%

AFC Constelor Panafrican Resources SARL ("AFC Constelor SARL")

Burkina Faso

December 9, 2011

100%

Segilola Resources Operating Limited

("SROL")

Nigeria

August 18, 2016

100%

Segilola Gold Limited ("SGL")

Nigeria

August 18, 2016

100%

 

The only change to ownership interest from the previous year was the incorporation of Thor Gold Ventures Ltd in February 2022.

 

c)   Foreign currency translation

 

Functional and presentation currency

The Company's presentation currency is the United States dollar ("$"). The functional currency for the Company, being the currency of the primary economic environment in which the Company operates. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).

 

Exchange rates published by Oanda were used to translate the Thor BVI, African Star, SR BVI, African Star SARL, Argento BF SARL, AFC Constelor SARL, SROL and SGL's financial statements into the United States dollar in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This standard requires, on consolidation, that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e., the average rate for the period). The foreign exchange differences on translation of subsidiaries Thor GV, African Star, African Star SARL, Argento BF SARL, AFC Constelor SARL, SROL and SGL are recognized in other comprehensive income (loss). Exchange differences arising on the net investment in subsidiaries are recognised in other comprehensive income.

 

Foreign currency transactions

 
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. 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 recognised in profit and loss. Fluctuations in the value of the local currencies of our subsidiaries, with most notably the US dollar will result in foreign exchange gains and losses as assets and liabilities denominated in US dollar are revalued in the Subsidiary's local currency at reporting dates.

 

 

d)   Financial instruments

 

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

 

The effective interest method is a method of calculating the amortised cost of a financial asset/liability and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts/payments through the expected life of the financial asset/liability or, where appropriate, a shorter period. Costs directly relating to financing facilities are initially recognised against the loan balance, and subsequently released to the income statement over the term of the facility.

 

 

Derecognition of financial assets and liabilities

 

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

-     the rights to receive cash flows from the asset have expired;

-     the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through' arrangement; or

-     the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

 

 

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

 

Financial Assets

 

Under IFRS 9, the Group classifies its financial assets into the following categories: those to be held at amortised cost, and those to be measured subsequently at fair value through profit and loss.

 

Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Management determines the classification of financial assets at initial recognition. The Group's business model is primarily that of "hold to collect" (where assets are held in order to collect contractual cash flows).

 

Amortised cost: these assets arise principally from the provision of goods and services to customers, but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

Amounts receivables are measured at amortised cost using the effective interest rate method, less impairment.

 

Cash and cash equivalents

 

Cash and cash equivalents represent cash balances held at bank and on demand deposits. Cash and cash equivalents are measured at amortised cost.

 

Restricted cash represented cash balances held in bank accounts that are ring fenced to be applied to the construction costs at the Company's Segilola Gold Mine in Nigeria.

 

The Group does not hold any financial assets that meet conditions for subsequent recognition at fair value through other comprehensive income.

 

As at June 30, 2022, the Company had $nil that is accounted for separately from cash and cash equivalents (December 31, 2021, $3.5 million). All the Company's cash is now freely available for the Company's use and is no longer classified as restricted cash. Refer to Note 6.

 

 

 

Impairment of Financial Assets

 

The Group recognizes a loss allowance for expected credit losses ("ECL") on financial assets that are measured at amortised cost which comprise mainly of receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. Impairment provisions for other receivables are recognised based on a forward-looking expected credit loss model.  The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset.  For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised.  For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised.  For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

 

Financial Liabilities

 

The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.

 

Financial liabilities are initially recorded on trade date, being the date on which the Group becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group's financial liabilities approximate to their fair values.

 

The Group's financial liabilities consist of financial liabilities measured at amortised cost. These comprise

Loans and borrowings, short term advances pursuant to outstanding settlement of currency exchange swaps undertaken in the normal course of operations, accounts payable, accrued liabilities and deferred payment. Loans and borrowings are initially recognised at fair value, net of transaction costs incurred. They are subsequently stated at amortised cost with any difference between the proceeds (net of transaction costs) and the redemption value recognised in the statement of comprehensive loss over the period of the loans and borrowings using the effective interest rate method. If estimates of future payments are revised, the carrying amount of the financial liability is adjusted to reflect actual and revised estimated cash flows.

 

Where financial liabilities are settled through the issue of shares, the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued, is recognised in profit or loss.

 

Fair Value measurement hierarchy

 

IFRS 13 "Fair Value Measurement" requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the input used in making the fair value measurement.

The fair value hierarchy has the following levels:

·      Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

·      Input other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived prices (level 2); and,

·      Inputs for the asset or liability that are not based on observable market data (unobservable input) (level 3).

 

The level in the fair value hierarchy within which the financial asset or financial liability is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels.

 

 

Gold Stream arrangement

 

On April 29, 2020, the Company announced the completion of financing requirements for the development of the Segilola Gold Project in Nigeria. The financing included a $21 million gold stream prepayment pursuant to a Gold Stream Arrangement ("GSA") entered in to with the Africa Finance Corporation ("AFC"). 

 

Under the terms of the GSA an advance payment of $21 million was received. Upon the commencement of production at Segilola the AFC had the right to receive 10.27% of gold produced from the Group's ML41 mining license. Once the initial liability has been repaid in full any further gold production will be delivered under the terms of the GSA up to the money multiple limit of 2.25 times the initial advance. The total maximum amount payable to the AFC under this agreement is $47.25m including the repayment of the initial US$21 million advance. The advanced payment has been recorded as a contract liability based on the facts and terms of the arrangement and own use exemptions considerations. 

 

The maximum $26.25 million payable after the initial $21 million has been settled has been identified as a significant financing component. The deemed interest rate is calculated at inception, using the production plan and gold price estimates and released over the term of the arrangement as interest expense in the income statement upon commencement of production. The deemed interest rate is recalculated at each reporting period and restated based on changes to the expected production profile and gold price estimates.

 

Revenue from the streaming arrangement was recognised under IFRS 15 when the customer obtained control of the gold and the Group satisfied its performance obligations. The revenue recognised reduced the contract liability balance.

 

In December 2021, the Group entered into a cash settlement agreement with the AFC where the gold sold to the AFC is settled in a net-cash sum payable to the AFC instead of delivery of bullion for repayment of the gold stream arrangement. This agreement triggered a modification to the contract liability, resulting in the liability to be accounted for in accordance with IFRS 9 whereby the liability is classified as a financial liability measured at fair value through profit or loss.

 

Capitalisation of borrowing costs

 

Interest on borrowings directly relating to the financing of qualifying capital projects under construction is

added to the capitalised cost of those projects during the construction phase, until such time as the assets

are substantially ready for their intended use or sale which, in the case of mining properties, is when they

are capable of commercial production. Where funds have been borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. Where the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognised in the income statement in the period in which they are incurred.

 

 

e)   Property, plant and equipment

 

Recognition and Measurement

On initial recognition, property, plant and equipment is valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions. Property, plant and equipment is subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses, with the exception of land which is not depreciated.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

 

Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

 

 

Gains and Losses

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognized net within other income in profit or loss.

 

 

Depreciation

Depreciation on property plant & equipment is recognised in profit or loss except where depreciation is directly attributable to mineral properties owned by the Group that are classified as either Exploration & Evaluation or Assets Under Construction ("AUC"). Depreciation in this instance is capitalised to the value of the mineral property asset (refer to Note 15).  Upon commencement of commercial production, the value of AUC will be reclassified as Mining and Plant assets (together "Mining Property") within Property, Plant & Equipment. Mining Property will be depreciated using the unit of production method based on proven and probable reserves. Units of production are significantly affected by resources, exploration potential and production estimates together with economic factors, commodity prices, foreign currency, exchange rates, estimates of costs to produce reserves and future capital expenditure. Refer to Note 3f for further analysis of classification of AUC for the year to December 31, 2021.

 

Depreciation of Mining and Other Equipment is provided on a straight-line basis over the estimated useful life of the assets as follows:

 

Description within Mining and Other Equipment

Rate

Motor vehicles

20-33%

Plant and machinery

20-25%

Office furniture

20-33%

 

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

 

 

f)    Assets under construction

 

Assets under construction comprise development projects and assets in the course of construction at both the mine development and production phases.

 

Development projects comprise interests in mining projects where the ore body is considered commercially recoverable, and the development activities are ongoing. Expenditure incurred on a development project is recorded at cost, less applicable accumulated impairment losses. Interest on borrowings, incurred for the purpose of the establishment of mining assets, is capitalised during the construction phase.

 

The cost of an asset in the course of construction comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use, at which point it is transferred from assets under construction to other relevant categories and depreciation commences. Assets under construction are not depreciated.

 

Upon commercial production being achieved on January 1, 2022, assets under construction were re-categorized as Mining Property. 

 

g)   Exploration and evaluation expenditures

 

Acquisition costs

The fair value of all consideration paid to acquire an unproven mineral interest is capitalized, including amounts due under option agreements. Consideration may include cash, loans or other financial liabilities, and equity instruments including common shares and share purchase warrants.

 

Exploration and evaluation expenditures

All costs incurred prior to legal title are expensed in the consolidated statement of comprehensive loss in the year in which they are incurred. Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation expenditures are recognized and capitalized, in addition to the acquisition costs.  These direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to contractors and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.

 

When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation assets in respect of that project are deemed to be impaired. As a result, those exploration and evaluation assets, in excess of estimated realisable value, are written off to the statement of comprehensive income (loss).

 

At such time as commercial feasibility is established, project finance has been raised, appropriate permits are in place and a development decision is reached, the costs associated with that property will be transferred to and re-categorised as Assets under construction.

 

Farm-in agreements

As is common practice in the mineral exploration industry, the Company may acquire or dispose of all, or a portion of, an exploration and evaluation asset under a farm-in agreement. Farm-in agreements typically call for the payment of cash, issue of shares and/or incurrence of exploration and evaluation costs over a period of time, often several years, entirely at the discretion of the party farming-in. The Company recognizes amounts payable under a farm-in agreement when the amount is due and when the Company has no contractual rights to avoid making the payment. The Company recognizes amounts receivable under a farm-in agreement only when the party farming-in has irrevocably committed to the transfer of economic resources to the Company, which often occurs only when the amount is received. Amounts received under farm-in agreements reduce the capitalized costs of the optioned unproven mineral interest to nil and are then recognized as income.

 

h)   Impairment of non-current assets

 

Impairment tests for non-current assets are performed when there is an indication of impairment. At each reporting date, an assessment is made to determine whether there are any indications of impairment. Prior to carrying out impairment reviews, the significant cash generating units are assessed to determine whether

they should be reviewed under the requirements of IAS 36 - Impairment of Assets for property plant and equipment, or IFRS 6 - Exploration for and Evaluation of Mineral Resources.

 

Impairment reviews performed under IAS 36 are carried out on a periodic basis to ensure that the value recognised on the Statement of Financial Position is not greater than the recoverable amount. Recoverable amount is defined as the higher of an asset's fair value less costs of disposal, and its value in use.

 

Impairment reviews performed under IFRS 6 are carried out on a project-by-project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise; typically, when one of the following circumstances applies:

(i)   sufficient data exists that render the resource uneconomic and unlikely to be developed

(ii)   title to the asset is compromised

(iii)  budgeted or planned expenditure is not expected in the foreseeable future

(iv)  insufficient discovery of commercially viable resources leading to the discontinuation of activities

 

If any indication of impairment exists, an estimate of the non-current asset's recoverable amount is calculated. The recoverable amount is determined as the higher of fair value less direct costs to sell and the asset's value in use. If the carrying value of a non-current asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the statement of comprehensive loss so as to reduce the carrying amount of the non-current asset to its recoverable amount.

 

 

i)    Income taxes

 

Income tax expense is comprised of current and deferred income taxes. Current and deferred income taxes are recognized in profit and loss, except for income taxes relating to items recognized directly in equity or other comprehensive income.

 

Current income tax, if any, is the expected amount payable or receivable on the taxable income or loss for the year, calculated in accordance with applicable taxation laws and regulations, using income tax rates enacted or substantively enacted at the end of the reporting period, and any adjustments to amounts payable or receivable relating to previous years.

 

Deferred income taxes are provided using the liability method based on temporary differences arising between the income tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using income tax rates and income tax laws and regulations that have been enacted or substantively enacted at the end of the reporting period 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 to the extent that it is probable that future taxable income will be available against which the temporary differences can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

 

The following temporary differences do not result in deferred tax assets or liabilities:

 

·      the initial recognition of assets or liabilities, not arising in a business combination, that do not affect accounting or taxable profit

·      goodwill

·      investments in subsidiaries, associates and jointly controlled entities where the timing of reversal of the temporary differences can be controlled and reversal in the foreseeable future is not probable.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

 

j)    Revenue recognition

 

The Group enters in to forward sales contracts for the sale of gold at a pre-determined and agreed price with an agent who remits the cash proceeds to the Group.

 

The Group recognises the sale upon delivery at which point control of the product has been transferred to the Customer Transfer of control generally takes place when refined gold is credited to the metals account at the refinery of the Customer who has sold the gold via forward sale. Revenue is measured based on the consideration to which the Group expects to be entitled under the terms of the Agreements with the Customer.

 

k)   Royalties

 

The Group has royalty payment obligations from production from its Segilola Gold Mine in Nigeria. A royalty is payable to the Nigerian government at a rate of 16,218 Nigerian Naira (March 31, 2022: 5,400 Nigerian Naira) per ounce produced. The royalty is paid before the Dore is exported from Nigeria for refining. Royalties paid to the Nigerian government are recognised as cost of sales in the Consolidated Statement of Comprehensive Loss at the point that the royalty payments are made.

 

The Group also has royalty obligations to three former owners of the Segilola Gold Project at rates of between 0.375% to 1.5% on the value of sales. Total royalties to the former owners ("third party royalties") are capped at $7.5 million. Royalties are calculated using the outturn date as reference point, whereby the number of ounces outturned are multiplied using the London Bullion Market Association ("LBMA") p.m. rate on the outturn date to establish a deemed sales value. The applicable royalty rate for each former owner is applied to the deemed sales value to determine the royalty payable.

 

Third party royalties have been assessed to be contingent consideration in the acquisition of the Segilola Gold Mine under IAS 3. In accordance with the Group's accounting policy the contingent consideration has been recognised as a financial liability at the point there was considered to be certainty over the payment arising (commencement of production). The royalties have been discounted using a rate of 4.7% and the discounted value of the third parties' royalties has been included in the value of Assets Under Construction and recognised as a financial liability in the Consolidated Statement of Financial Position. The discount will be unwound over the estimated time it will take to pay the entire $7.5 million obligation. The value of the royalties will be depreciated over the estimated life of the mine, and royalty payments will be applied in discharge of the financial liability. The financial liability was initially measured at fair value with subsequent fair value re-measurement to be recorded in the Consolidated Statement of Comprehensive Income/(Loss).

 

l)    Inventory

 

Stores and consumables are stated at the lower of cost and net realizable value. The cost of stores and consumables includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

 

Gold ore stockpiles are valued at the lower of weighted average cost and net realizable value. Cost includes direct materials, direct labour costs and production overheads.

 

Gold bullion and gold in process are stated at the lower of weighted average cost and net realizable value. Cost includes direct materials, direct labour costs and production overheads.

 

m)  Basic and diluted income or loss per share

 

Basic loss per share is computed by dividing the loss for the year by the weighted average number of commons shares outstanding during the year. Diluted income per share reflects the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. Fully diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts for the basic and diluted loss per share.

 

n)   Comprehensive income (loss)  

 

Comprehensive income (loss) is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income (loss) that are excluded from net earnings (loss). The main element of comprehensive income (loss) is the foreign exchange effect of translating the financial statements of the subsidiaries from local functional currencies into US dollars upon consolidation. Movements in the exchange rates of the Canadian Dollar, Pound Sterling, Nigerian Naira and West African Franc to the US dollar will affect the size of the comprehensive income (loss).

 

o)   Share-based payments

 

Where options are awarded for services the fair value, at the grant date, of equity-settled share awards is either charged to income or loss, or capitalized to assets under construction where the underlying personnel cost is also capitalized, over the period for which the benefits of employees and others providing similar services are expected to be received.  The corresponding accrued entitlement is recorded in the Options reserve.  The amount recognized as an expense is adjusted to reflect the number of share options expected to vest. Where warrants are awarded in connection with the issue of common shares the fair value, at the grant date, is transferred from common shares with the corresponding accrued entitlement recorded in the share purchase warrants reserve. The fair value of options and warrants awards is calculated using the Black-Scholes option pricing model which considers the following factors:

 

·      Exercise price

·      Current market price of the underlying shares

·      Expected life of the award

·      Risk-free interest rate

Expected volatility

 

 

 

When equity instruments are modified, if the modification increases the fair value of the award, the additional cost must be recognised over the period from the modification date until the vesting date of the modified award.

 

p)   Decommissioning, site rehabilitation and environmental costs

 

The Group is required to restore mine and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities and consistent with the Group's environmental policies. The net present value of estimated future rehabilitation costs is provided for in the financial statements and capitalised within property, plant and equipment on initial recognition. The capitalised cost is amortised on a unit of production basis. Unwinding of the discount is recognised as finance cost in the statement of comprehensive income as it occurs. Changes in estimates are dealt with on a prospective basis as they arise. The costs of on-going programmes to prevent and control pollution and to rehabilitate the environment are charged to profit or loss as incurred.

 

 

q)   Leases

 

The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria:

·      There is an identified asset;

·      The Group obtains substantially all the economic benefits from use of the asset; and,

·      The Group has the right to direct use of the asset.

 

The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise from use of the asset. In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for what purpose the asset is used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16.

 

All leases are accounted for by recognizing a right-of-use asset and a lease liability except for:

·      Leases of low value assets; and

·      Leases with a duration of 12 months or less.

 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

 

On initial recognition, the carrying value of the lease liability also includes:

·      Amounts expected to be payable under any residual value guarantee;

·      The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and,

·      Any penalties payable for terminating the lease, if the term of the lease has been estimated based on termination option being exercised.

 

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

·      Lease payments made at or before commencement of the lease;

·      Initial direct costs incurred; and,

·      The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.

 

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

 

r)    Interest income

 

Interest income is recognized as earned, provided that collection is assessed as being reasonably assured.

 

s)   Provisions

 

Provisions are recognised when the Group has a present obligation, legal or constructive, resulting from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation.

 

t)    Contingent liabilities

 

Contingent liabilities are possible obligations whose existence will be confirmed by uncertain future events that are not wholly within the control of the Group.

 

Contingent liabilities also include obligations that are not recognised because their amount cannot be measured reliably or because settlement is not probable. Contingent liabilities do not include provisions for

which it is certain that the Group has a present obligation that is more likely than not to lead to an outflow of cash or other economic resources, even though the amount or timing is uncertain.

Unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes to the financial statements.

 

u)   Application of new and revised International Financial Reporting Standards

 

There were no new standards or interpretations effective for the first time for periods beginning on or after January 1, 2022, that had a significant effect on the Group's financial statements.

 

 

v)   Future accounting pronouncements

 

There are no standards issued by IASB, but not yet effective, that are expected to have a material impact

of the group.

 

4.   CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

 

The effect of a change in an accounting estimate is recognized prospectively by including it in net and/or comprehensive loss in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both.

 

a)   Critical accounting estimates

 

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the financial position reporting date, that could result in a material adjustment to the carrying amounts of assets and liabilities, relate to, but are not limited to, the following:

 

(i)   Accounting treatment of Gold Stream Liability

Determining the appropriate accounting treatment for the Gold Stream Liability is not an accounting policy choice, rather it is an assessment of the specific facts and circumstances and requires judgement. The Company has reviewed the terms of the Gold Sale Agreement and determined that it constitutes a commodity arrangement as it is an arrangement to deliver an amount of the commodity from the Group's own Segilola Gold Project operation and does not constitute a contract liability under IFRS 15.

 

In 2021 the arrangement was modified to allow the Group to settle the Gold Stream Liability in cash which led to the arrangement being reclassified as a financial liability.

 

The principal accounting estimates in calculating the value of the Gold Stream Liability are production plan, gold price, the implied interest rate and future repayment profile. The buy-out option contained in the Gold Sale Agreement has been estimated at nil.

 

In calculating the deemed interest rate for interest expense that will be released over the term of the Agreement, estimates of both the production plan and gold price will be the key variables. The deemed interest rate is calculated at each reporting period and restated based on changes to the expected

production profile and gold price estimates, which will result in a revision to estimated future payments. Any change in future payments will result in a revision of the deemed interest rate.

 

The period-end Gold Stream obligation uses forward curve information based on the period-end gold spot price, which was US$1,817 /oz at June 30, 2022. A 1% change in gold production estimates would result in an impact of less than $0.8 million on the Gold Stream liability.

 

(ii)   Restoration, site rehabilitation and environmental costs

The Group's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management's best estimate of the rehabilitation costs in the period in which they are incurred. This estimate includes judgements from management in respect of which costs are expected to be incurred in the future, the timing of these costs and their present value. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision. Such changes could similarly impact the useful lives of assets depreciated on a straight-line-basis, where those lives are limited to the life of mine. A 1% change in the discount rate on the Group's rehabilitation estimates would result in an impact of $0.25 million (2021: $0.25 million) on the provision for environmental and site restoration. The value of the period-end restoration provision is disclosed within note 14.

(iii)  Inventories

Expenditures incurred, and depreciation and amortisation of assets used in mining and processing activities are deferred and accumulated as the cost of ore in stockpiles, ore in mill, and finished gold dore inventories. These deferred amounts are carried at the lower of average cost or net realizable value.  

 

Their measurement involves the use of estimation to determine the tonnage, the attainable gold recovery, and the remaining costs of completion to bring inventory to its saleable form. Changes in these estimates can result in a change in mine operating costs of future periods and carrying amounts of inventories.

 

In determining the net realizable value of ore in stockpiles, ore in mill, and gold dore the Company estimates future metal selling prices, production forecasts, realized grades and recoveries, and timing of processing to convert the inventories into saleable form. Reductions in metal price forecasts, increases in estimated future production costs, reductions in the number of recoverable ounces, and a delay in timing of processing can result in a write down of the carrying amounts of the Company's ore in stockpiles, ore in mill and gold dore inventories.

 

 

b)   Critical accounting judgments

 

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are discussed below:

 

 

(i)  Impairment of exploration and evaluation assets

In accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources, management is required to assess impairment in respect of the intangible exploration and evaluation assets. In making

the assessment, management is required to make judgments on the status of each project and the future plans towards finding commercial reserves. The nature of exploration and evaluation activity is such that only a proportion of projects are ultimately successful and some assets are likely to become impaired in future periods.

 

Management has determined that it is appropriate to impair fully the value of the Central Houndé Project in Burkina Faso following the unsuccessful attempt by Barrick Gold to dispose of its 51% interest in the license. An impairment charge of $7,221 has been charged to the Consolidated Statement of Comprehensive Loss. There were no impairment indicators present in respect of any of the other exploration and evaluation assets and as such, no additional impairment test was performed.

 

(ii) Impairment of property, plant and equipment

The Company has determined that there were no impairment indicators present in respect of the Segilola Gold Mine in accordance with IAS 36 and determined that no impairment was required to be recognised.

 

(iii) Functional currency

 

An analysis of functional currency under IAS 21 was undertaken on Segilola Resources Operations Limited ("SROL") in order to determine if significant changes to operational activities provide indicators that the functional currency for IFRS purposes should be reviewed and changed. Under IAS 21 an entity's functional currency reflects the underlying transactions, events and conditions that are relevant to it. Accordingly, once determined, the functional currency is not changed unless there is a change in those underlying transactions, events and conditions.

 

The principal focus of the analysis was on the continuing applicability of the Nigerian Naira ("NGN") as the functional and reporting currency for SROL. Potential indicators of a change in functional currency for SROL were the commencement of the Mining Contract at Segilola and commencement of gold sales from Segilola, both denominated in US Dollars. The financial impact of a change in functional currency of SROL to US dollars was assessed at each of the dates where potential indicators of a change in functional currency could be considered to have been determined and it was concluded that a change in functional currency to US Dollars would best reflect the underlying transactions, events and conditions that are most relevant to the Company's operations.

 

(iv)        Commercial production

 

The Group achieved first gold sales from its Segilola Gold Mine ("Segilola") in Osun state, Nigeria in December 2021, with first production from the Mill occurring in October 2021. During Q4 2021 production from the Mill was intermittent and below operating capacity per its mine plan, while overall recovery was approximately 13% below capacity. The Group's focus during Q4 2021, was the ramp-up of production to mine plan level which was not achieved on a consistent basis prior to year-end. After careful consideration Management has determined that mining operations to December 31, 2021, were not at sustainable commercial levels and that the correct classification of Segilola was Assets under construction. Production and recovery rates reached levels closer to mine plan in January 2022, and as such Management has determined that commercial production was achieved from January 2022.

 

 

 

 

5.   PRODUCTION COSTS

 

 

 

 

Three Months Ended

June 30,

Six Months Ended

June 30,


Note

 

2022

 

2021

 

2022

 

2021

Mining contract

 

 

11,958,353

 

-

 

18,489,728

 

-

Contractors and consultants


 

564,202

 

-

 

767,096

 

-

Professional fees


 

449,926

 

-

 

587,110

 

-

Drilling and assays


 

2,129,020

 

-

 

2,733,071

 

         -

Salaries


 

1,466,417

 

-

 

2,702,176

 

-

Materials and consumables


 

34,565

 

-

 

55,566

 

-

Drilling operations


 

74,950

 

-

 

103,436

 

-

Movement in inventories


 

4,776,285

 

-

 

7,409,457

 

-

Maintenance


 

2,478,256

 

-

 

4,260,357

 

         -

Other


 

330,463

 

-

 

541,099

 

-

 

 

$

24,262,437

$

-

$

37,649,096

$

      -

 

 

5b. AMORTISATION AND DEPRECIATION

 


 

 

 


 

 

 

 

Three Months Ended

June 30,

Six Months Ended

June 30,


Note

 

2022

 

2021

 

2022

 

2021

Amortisation and depreciation - owned assets

 

 

5,789,009

 

2,323

 

10,793,626

 

8,499

Amortisation and depreciation - right-of-use assets


 

1,075,735

 

11,164

 

2,233,990

 

22,517

 

 

$

6,864,744

$

13,487

$

13,027,616

$

31,016  

 

 

 

5d. OTHER ADMINISTRATIVE EXPENSES

 

 

 

 

 

Three Months Ended

June 30,

Six Months Ended

June 30,


Note

 

2022

 

2021

 

2022

 

2021

Audit and legal

 

 

91,262

 

(9,300)

 

138,435

 

87,222

Bank charges


 

71,168

 

113,067

 

101,142

 

126,067

Consulting fees


 

685,745

 

73,917

 

1,010,099

 

142,563

Directors' fees

21

 

90,452

 

87,944

 

199,114

 

         175,920

Equipment hire


 

7

 

-

 

51,589

 

-

Investor relations and transfer agent


 

105,165

 

55,853

 

216,391

 

105,490

Listing and filing fees


 

13,448

 

17,863

 

19,004

 

           21,063

Mining property costs


 

927,727

 

-

 

1,294,192

 

-

Near mine exploration


 

455,467

 

-

 

762,614

 

-

Office and miscellaneous


 

(223,352)

 

58,691

 

140,851

 

123,384

Salaries and benefits


 

320,795

 

311,339

 

687,760

 

         629,627

Travel


 

146,132

 

26,404

 

312,686

 

49,500

 

 

$

2,684,016

$

735,778

$

4,933,877

$

1,460,836     

 

 

 

 

 

6.   RESTRICTED CASH

 

 

 

June 30,

2022

 

December 31, 2021


 

 

 


Restricted cash

$

-

$

3,495,992

 

On December 1, 2020, the Company announced that its subsidiary Segilola Resources Operating Limited ("SROL") had completed the financial closing of a $54 million project finance senior debt facility ("the Facility") from the Africa Finance Corporation for the construction of the Segilola Gold Project in Nigeria. The Facility can be drawn down at the Group's request in minimum disbursements of $5 million. As at June 30, 2022, SROL has received total disbursements of $52.6 million, with $nil drawn down during the period under review, and the remaining $1.35m of the facility was cancelled by the Company. Total disbursements received represent 97% of the facility. Under the terms of the facility, the Company was required to place a total of US$3.5 million into a cost overrun bank account that can only be used for expenditure on the development of the Segilola Gold Project in the event of construction costs exceeding budget.  Upon receipt of the Certificate of Completion on January 31, 2022, the cash ceased to be treated as restricted.

 

 

7.   INVENTORY

 

 

 

June 30, 2022

 

December 31, 2021

Plant spares and consumables

$

3,071,586

$

1,337,792

Gold ore in stockpile

 

9,728,233

 

8,663,728

Gold in CIL

 

2,457,696

1,614,267

Gold Dore

 

8,788,510

 

6,530,771

 

$

24,046,025

$

18,146,558

 

There were no write downs to reduce the carrying value of inventories to net realizable value during the period ended June 30, 2022.

 

 

 

8.   AMOUNTS RECEIVABLE

 

 

 

June 30, 2022

 

December 31, 2021

Accounts receivable

$

524,926

$

20,495

GST

 

15,671

 

3,715

Other receivables

 

165,202

 

213,441

 

$

705,799

$

237,651

 

The value of receivables recorded on the balance sheet is approximate to their recoverable value and there are no expected material credit losses.

 

 

 

 

 

 

 

 

9.   PREPAID EXPENSES, ADVANCES AND DEPOSITS

 

 

 

June 30,

2022

 

December 31, 2021

Current:

 

 

 

 

Insurance

$

106,154

$

53,985

Gold Stream liability arrangement fees

 

38,508


38,829

Advance deposits to vendors

 

1,585,480


235,408

Other prepayments

 

231,165


258,643


$

1,961,307


586,865

Non-current:

 

 



Gold Stream liability arrangement fees

$

67,389

$

87,310

Other prepayments

 

219,949


18,373

 

$

287,338

$

105,683

 

 

10.  LEASES

 

The Group accounts for leases in accordance with IFRS 16. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019. The Group has elected not to recognise right-of-use assets and lease liabilities for leases which have low value, or short-term leases with a duration of 12 months or less. The payments associated with such leases are charged directly to the income statement on a straight-line basis over the lease term. There were no such leases for the period ended June 30, 2022.

 

The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position for the period ended June 30, 2022, were as follows:

 




Right of use asset

 


Lease liability

 


Income statement

 

Carrying value December 31, 2021


$

20,843,612

$

(18,274,374)

$

-









New leases entered in to during the period



726,019


(674,187)


-

Depreciation



  (2,233,990)


-


(2,233,990)

Interest



-


(750,355)


(750,355)

Lease payments



-


2,579,159


-

Foreign exchange movement



26,331


(23,668)


(2,663)









Carrying value at June 30, 2022


$

19,361,972

$

(17,143,425)

$

(2,987,008)

 

Total depreciation charged to the Statement of Comprehensive Income for the period under IFRS 16 was $2.233,990.

 

The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position for the year ended December 31, 2021, were as follows:

 

 



 

 


Right-of- use asset

 


Lease liability

 


Income statement

 

Carrying value December 31, 2020



$

69,066

$

(30,648)

$

-










New leases entered in to during the year




22,612,362


(19,668,810)


-

Depreciation




(2,355,674)


-


(41,106)

Interest




-


(782,088)


(563)

Lease payments




-


2,800,407


-

Foreign exchange movement




517,858


(593,235)


(75,743)










Carrying value at December 31, 2021



$

20,843,612

$

(18,274,374)

$

(117,412)

 

 

11.  GOLD STREAM LIABILITY

 

Gold stream liability



June 30, 2022

Total

 

December 31, 2021

Total

Balance at Beginning of period

$

30,262,279

$

24,708,573

   Interest at the effective interest rate


3,228,128


6,562,830

   Repayments


(4,804,185)


(443,915)

   Foreign exchange movement


391,106


(565,209)

Balance at End of period

$

29,077,328

$

30,262,279

Current liability


11,753,417


12,837,633

Non-current liability


17,323,911


17,424,646

 

On April 29, 2020, the Company announced the closing of project financing for its flagship Segilola Gold Project ("Segilola") in Osun State, Nigeria. The financing included a $21 million gold stream upfront deposit ("the Prepayment") over future gold production at Segilola under the terms of a Gold Purchase and Sale Agreement ("GSA") entered in to between the Company's wholly owned subsidiary SROL and the AFC. The Prepayment is secured over the shares in SROL as well as over SROL's assets and is not subject to interest. The initial term of the GSA is for ten years with an automatic extension of a further ten years. The AFC will receive 10.27% of gold production from the Segilola ML41 mining license until the $21 million Prepayment has been repaid in full. Thereafter the AFC will continue to receive 10.27% of gold production from material mined within the ML41 mining license until a further $26.25 million is received, representing a total money multiple of 2.25 times the value of the Prepayment, at which point the GSA will terminate. The AFC are not entitled to receive an allocation of gold production from material mined from any of the Group's other gold tenements under the terms of the GSA.

 

The $26.25 million represented interest on the Prepayment. A calculation of the implied interest rate was made as at drawdown date with interest being apportioned over the expected life of the Stream Facility. The principal input variables used in calculating the implied interest rate and repayment profile were production profile and gold price. The future gold price estimates were based on market forecast reports for the years 2021 to 2025 and, the production profile was based on the latest life of mine plan model. The liability was to be re-estimated on a periodic basis to include changes to the production profile, any extension to the life of mine plan and movement in the gold price. Upon commencement of production, any change to the implied interest rate would be expensed through the Consolidated Statement of Income (Loss).

 

Interest expense of $3,228,128 was recognised for the six months ended June 30, 2022 and has been expensed to the Consolidated Statement of Income. Prior to the commencement of commercial production on January 1, 2022, interest was capitalized and included in the value of the Segilola Gold Mine (Refer to Note 15). A cumulative total of $12,889,773 has been capitalized prior to commercial production and included in the value of the Segilola Gold Mine.

 

In December 2021, the Group entered into a cash settlement agreement with the AFC where the gold sold to the AFC is settled in a net-cash sum payable to the AFC instead of delivery of bullion in repayment of the gold stream arrangement. Refer to note 3d for further information on the accounting treatment of the gold stream liability.

 

The following table represents the Group's loans and borrowings measured and recognised at fair value.

 



Level 1

Level 2

Level 3

Total







Financial liability at fair value through profit or loss

$

-

29,077,328

-

29,077,328

 

The liabilities included in the above table are carried at fair value through profit and loss.

 

 

12.  LOANS AND BORROWINGS

 

 

 

June 30,

2022

 

December 31, 2021

Current liabilities:

 

 

 

 

Loans payable to the Africa Finance Corporation less than 1 year

$

10,301,628

$

24,192,518

Deferred element of EPC contract

 

3,129,964


3,122,990

Short term advances

 

2,348,228


668,570


$

15,779,820


27,984,078

Non-current liabilities:

 

 



Loans payable to the Africa Finance Corporation more than 1 year

$

23,131,927

$

22,667,448

Deferred element of EPC contract

 

3,075,182


3,087,077

 

$

26,207,109

$

25,754,525

 

 

Loans from the Africa Finance Corporation

 



June 30,

2022

Total

 

December 31, 2021

Total

Balance at Beginning of period

$

46,859,966

$

14,267,114

   Drawdown


-


31,153,833

   Repayments


(14,479,808)


-

   Arrangement fees


-


(508,856)

   Unwinding of interest in the period


875,396


1,714,041

   Foreign exchange movement


178,001


233,834

Balance at End of period

$

33,433,555

$

46,859,966

Current liability


10,301,628


24,192,518

Non-current liability


23,131,927


22,667,448

 

On December 1, 2020, the Company announced that its subsidiary Segilola Resources Operating Limited ("SROL") had completed the financial closing of a $54 million project finance senior debt facility ("the Facility") from the Africa Finance Corporation ("AFC") for the construction of the Segilola Gold Project in Nigeria. The Facility can be drawn down at the Group's request in minimum disbursements of $5 million. As at June 30, 2022, SROL has received total disbursements of $52.6 million, with $nil drawn down and the remaining $1.35m undrawn facility cancelled by the Company during the period under review. Total disbursements received represent 97% of the Facility. The Facility is secured over the share capital of SROL and its assets, with repayments commencing in March 2022 and to conclude in March 2025.

 

Repayment of the aggregate Facility will be made in instalments over a 36-month period by repaying an amount on a series of repayment dates, as set out in the Facility Agreement, which reduces the amount of the outstanding aggregate Facility by the amount equal to the relevant percentage of Loans borrowed as at the close of business in London on the date of Financial Close.

 

Interest accrues at LIBOR plus 9% and is payable on a quarterly basis in arrears. The Facility also is subject to a Commitment Fee of 2.5% per annum on the Facility with the Commitment Fee being payable on a quarterly basis in arrears.

 

In conjunction with the granting of the Facility, Thor issued 33,329,480 bonus shares to the AFC. Thor also incurred transaction costs of $4,663,652 in relation to the loan facility. The fair value of the liability was determined at $45,822,943 taking into account the transaction costs and equity component and recognised at amortised cost using an effective rate of interest, with the fair value of the shares issued in April 2020 of $5,666,011 recognised within equity.

 

Interest paid during the year ended December 31, 2021, of $3,667,835 has been capitalised to the cost of the Segilola Gold Mine. (Refer to Note 15).  

 

The loan from the AFC has financial and non-financial covenants. These covenants were triggered upon the first repayment obligation which took place in March 2022.

 

Deferred payment facility on EPC contract for the construction of the Segilola Gold Mine

 

The Company is constructing its Segilola Gold Mine through an engineering, procurement, and construction contract ("EPC Contract") signed with Norinco International Cooperation Limited. The EPC Contract has been agreed on a lump sum turnkey basis which provides Thor with a fixed price of $67.5 million for the full delivery of design, engineering, procurement, construction, and commissioning of the proposed 715,000 ton per annum gold ore processing plant.

 

The EPC Contract includes a deferred element ("the Deferred Payment Facility") of 10% of the fixed price. As at June 30, 2022, a total of $6,205,146 (December 31, 2021: $6,210,090) was deferred under the facility. The 10% deferred element is repayable in instalments over a 36-month period by repaying an amount on a series of repayment dates, as set out in the Deferred Payment Facility. Repayments are due to commence in March 2022 and conclude in 2025. Interest on this element of the EPC deferred facility accrues at 8% per annum from the time the Facility taking-over Certificate is issued. 

 

 



June 30, 2022

Total

 

December 31, 2021

Total

Deferred payment facility

$

6,205,146

$

6,210,067

Balance period end

$

6,205,146

$

6,210,067

 

Short term advances

 



June 30,

2022

Total

 

December 31, 2021

Total

Balance at beginning of period

$

668,570

$

-

   Drawdowns

 

8,295,747

 

678,935

 Repayments

(6,611,245)


-

 Foreign exchange movement

(4,844)


(10,365)

Balance period end

$

2,348,228

$

668,570

 

 

The Company enters into currency swap agreements with third parties. As at June 30, 2022, the currency being purchased was received before reporting date and the currency being sold was paid to the third party and settled in full after reporting date, on July 1, 2022. The advance outstanding at reporting date did not incur any interest.

 

 

 

 

 

 

 

 

 

 

 

13.  RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

 

June 30, 2022

 

Gold stream liability

Short term advance

AFC loan

EPC deferred facility

Total

January 1, 2022

$

30,262,279

668,570

46,859,966

6,210,067

84,000,882

Cash flows:







   Drawdowns


-

8,295,747

-

-

8,295,747

   Repayments


(4,804,185)

(6,611,245)

(14,479,808)

(281,141)

(26,176,379)

Non-cash changes:







   Unwinding of interest in the year


3,228,128

-

875,396

222,960

4,326,484

   Foreign exchange movements


391,106

(4,844)

178,001

7,120

571,383

   Offset against EPC payment


-

-

-

46,140

46,140

June 30, 2022

$

29,077,328

2,348,228

33,433,555

6,205,146

71,064,257

 

December 31, 2021

 

Gold stream liability

Short term advance

AFC loan

EPC deferred facility

Total

January 1, 2021

$

24,708,573

-

14,267,114

1,934,275

40,909,962

Cash flows:







   Drawdowns


-

678,935

31,153,833

-

31,832,768

   Repayments


(443,915)

-

-

-

(443,915)

   Transaction costs


-


(508,856)

-

(508,856)

Non-cash changes:







   Unwinding of interest in the year


6,562,830

-

1,714,041

250,402

8,527,273

   Foreign exchange movements


(565,209)

(10,365)

233,834

25,575

(316,165)

   Offset against EPC payment


-

-

-

3,999,815

3,999,815

December 31, 2021

$

30,262,279

668,570

46,859,966

6,210,067

84,000,882

 

14.  PROVISIONS

 

June 30, 2022

 

 

 

Other

 

Fleet demobilisation costs


 

Restoration costs

 

 

 

Total

Balance at Beginning of period

$

-

$

173,241

$

5,064,935

$

5,238,176

   Initial recognition of provision

18,222

-

-

18,222

Unwinding of discount

-

-

6,480

6,480

Foreign exchange movements

-

440

95,004

95,444

Balance at period end

$

18,222

$

173,681

$

5,166,419

$

5,358,322

Current liability


-


-


-


-

Non-current liability


18,222


173,681


5,166,419


5,358,322

 

 

 

December 31, 2021

 

Fleet demobilisation costs


 

Restoration costs

 

 

 

Total

Balance at Beginning of year

$

-

$

486,500

$

486,500

   Initial recognition of provision

173,241

-

173,241

Increase in provision

-

4,628,124

4,628,124

Foreign exchange movements

-

(49,689)

(49,689)

Balance at year end

$

173,241

$

5,064,935

$

5,238,176

Current liability


-


-


-

Non-current liability


173,241


5,064,935


5,238,176

 

The restoration costs provision is for the site restoration at Segilola Gold Project in Osun State Nigeria. The fair value of the above provision is measured by unwinding the discount on expected future cash flows using a discount factor that reflects the credit-adjusted risk-free rate of interest. It is expected that the restoration costs will be paid in US dollars, and as such the 2021 US inflation rate of 4.7% and the interest rate of 1.263% on 5-year US bonds were used to calculate the expected future cash flows. The provision represents the net present value of the best estimate of the expenditure required to settle the obligation to rehabilitate environmental disturbances caused by mining operations at mine closure.

 

The fleet demobilization costs provision is the value of the cost to demobilize the mining fleet upon closure of the mine.

 

 

15.  PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

A summary of depreciation capitalized is as follows:

 



Three months ended June 30,

 

Six months ended June 30,

Total depreciation

Capitalized



 

2022

 

 

2021

 

 

2022

 

 

2021

 

June 30, 2022

 

December 31, 2021














Exploration expenditures


37,306


1,732


60,724


3,461


657,840


597,117

Total

$

37,306

$

1,732

$

60,724

$

3,461

$

657,840

$

597,117

 

a)   Segilola Project, Osun Nigeria: 

 

Classification of Expenditure on the Segilola Gold Project

 

On January 1, 2022, the Company achieved commercial production at the Segilola Gold Project in Nigeria ("the Project") Upon achieving commercial production the Assets under Construction was reclassified within Property, Plant and Equipment, and transferred to Mining Asset, Processing Plant and Decommissioning Asset.

 

Decommissioning Asset

 

The decommissioning asset relates to estimated restoration costs at the Group's Segilola Gold Mine as at June 30, 2022. Refer to Note 14 for further detail.

 

16.  INTANGIBLE ASSETS

 

The Company's exploration and evaluation assets costs are as follows:

 

  

 

 

Classification of Expenditure on the Segilola Gold Project

 

Refer to note 14 for details on classification.

 

a)   Douta Gold Project, Senegal:

 

The Douta Gold Project consists of an early-stage gold exploration license located in southeastern Senegal, approximately 700km east of the capital city Dakar.

 

The Company is party to an option agreement (the "Option Agreement") with International Mining Company ("IMC"), by which the Company has acquired a 70% interest in the Douta Gold Project located in southeast Senegal held through African Star SARL. 

 

Effective February 24, 2012, the Company exercised its option to acquire a 70% interest in the Douta Gold Project pursuant to the terms of the Option Agreement between the Company and IMC. As consideration for the exercise of the option, the Company issued to IMC 11,646,663 common shares, based on a VWAP for the 20 trading days preceding the option exercise date of $0.2014 (or US$0.2018) per share, valued at $2,678,732 based on the Company's closing share price on February 24, 2012. The share payment includes consideration paid to IMC for extending the time period for exercise of the option.

    

Pursuant to the terms of the Option Agreement, IMC's 30% interest will be a "free carry" interest until such time as the Company announces probable reserves on the Douta Gold Project (the "Free Carry Period").  Following the Free Carry Period, IMC must either elect to sell its 30% interest to African Star at a purchase price determined by an independent valuer commissioned by African Star or fund its 30% share of the exploration and operating expenses.

 

b)   Central Houndé Project, Burkina Faso: 

 

(i)     Bongui and Legue gold permits, Burkina Faso:  

 

AFC Constelor SARL held a 100% interest in the Bongui and Legue gold permits covering an area of approximately 233 km2 located within the Houndé belt, 260 km southwest of the capital Ouagadougou, in western Burkina Faso.

 

(ii)    Ouere Permit, Central Houndé Project, Burkina Faso:

 

Argento BF SARL held a 100% interest in the Ouere gold permit, covering an area of approximately 241 km2 located within the Houndé belt.

 

The three permits together cover a total area of 474km2 over the Houndé Belt which form the Central Houndé Project.

 

 

(iii)   Barrick Option Agreement, Central Houndé Project, Burkina Faso:

 

On April 8, 2015, the Company entered into the Acacia Option Agreement with Acacia Mining plc ("Acacia"), whereby Acacia will have the exclusive option to earn up to a 51% interest in Central Houndé Project by satisfying certain conditions over a specified 4-year period and then the right to acquire an additional 29%, for an aggregate 80% interest in the Central Houndé Project, upon declaration of a Pre-Feasibility Study. Acacia met the minimum spending requirement for the Phase 1

Earn-in in September 2018. As a result, Acacia earned a 51% interest in the Central Houndé Project. The Group currently holds a 49% interest in the Central Houndé Project.

 

In 2019, Barrick Gold Corporation ("Barrick") completed an acquisition of Acacia through the purchase of the ordinary share capital of Acacia that Barrick did not already own. The acquisition did not affect work undertaken at the Central Houndé Gold Project in Burkina Faso where Barrick continued its

exploration work as per its Joint Operation with Thor.

 

In April 2021, Thor re-acquired Barrick's 51% ownership of the Project in exchange for a 1% Net Smelter Royalty. Thor now holds 100% of the Central Houndé Project.

 

Following the unsuccessful attempt by Barrick Gold to dispose of its 51% interest in the licenses, the Company carried out an impairment assessment at December 31, 2020, and determined that the unsuccessful sale attempt was an indication for impairment. It is the Company's intention to focus on Segilola development and Douta exploration in the short term, and it does not plan to undertake significant work on the license areas in the near future. As a result, the decision was taken to impair fully the value of the Central Houndé Project, and for the three months to June 30, 2021, recognize an impairment charge of $121,909 through the Condensed Consolidated Statement of Comprehensive Loss.

 

c)  Exploration Licenses, Nigeria

 

The high grade Segilola gold deposit is located on the major regional shear zone that extends for several hundred kilometres through the gold-bearing Ilesha schist belt (structural corridor) of Nigeria. Thor's exploration tenure currently comprises nine exploration licenses and five joint venture partnership exploration licenses. Together with the mining lease over the Segilola Gold Deposit, Thor's total exploration tenure amounts to 1,268 km². The Company's exploration strategy includes further expansion of its Nigerian land package as and when attractive new licenses become available.

 

 

17.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 



June 30,

2022


December 31,

2021

Trade payables

$

29,112,284

$

32,222,580

Accrued liabilities

 

5,102,660


3,058,121

Other payables

 

5,209,427


5,110,979


$

39,424,371

$

40,391,680

Current liability

 

39,069,912


38,827,489

Non-current liability

 

354,459


1,564,191

 

Accounts payable and accrued liabilities are classified as financial liabilities and approximate their fair values.

 

Included in trade payables is a total of $5,209,427 that relates to third party royalties that will become payable upon future gold sales. $4,854,967 of this royalties' creditors is included in current liabilities, and $354,460 is included in non-current liabilities (refer to note 3k for further detail).

 

 

18.  DEFFERED INCOME

 


 


June 30,

2022

 

December 31, 2021


 


 



Deferred income


$

10,147,435

$

-


 


 



 

Deferred income liability was recorded upon receipt of funds for a gold shipment with a delivery date of July 4, 2022, post reporting date. In accordance with the Group's Revenue Recognition accounting policy (See note 3j for further detail), revenue is deemed to arise at the point of delivery. This liability will be transferred and recognised as sales revenue in Q3 2022. The value of the gold shipment of 6,069 ounces was recognised as Gold Dore inventory at June 30, 2022 at a cost of $1,081/oz and measured in accordance with the Group's inventory accounting policy (refer to note 3l for further detail).

 

 

 

 

19.  CAPITAL AND RESERVES

 

a)  Authorized

 

Unlimited common shares without par value.

 

b)   Issued

 


June 30,

2022

Number


June 30,

2022

December 31,

2021

Number


December 31,

2021

As at start of the year

632,358,009

$

79,027,183

621,405,975

$

76,858,769

Issue of new shares:







   - Share options exercised i

9,539,000


922,114

-


-

   - Share warrants exercised ii

-


-

9,952,034


2,073,450

   - Share options exercised iii

-


-

1,000,000


94,964


641,897,009

$

79,949,297

632,358,009

$

79,027,183

 

i  Value of 9,250,000 options exercised on January 19, 2022, at a price of CAD$0.12 per share, and 289,000 options exercised at a price of CAD$0.145 per share.

ii Value of 1,664,534 warrants exercised on June 8, 2021, at a price of CAD$0.18 per share, and 8,287,500 warrants exercised on August 31, 2021, at a price of CAD$0.28 per share.

iii Value of 1,000,000 options exercised at a price of CAD$0.12 per share.

 

 

c)   Share-based compensation

 

The Company has granted directors, officers and consultants share purchase options. These options were granted pursuant to the Company's stock option plan.

 

Under the current Share Option Plan, 44,900,000 common shares of the Company are reserved for issuance upon exercise of options.

·      On January 16, 2020, 14,250,000 stock options were granted at an exercise price of C$0.20 per share for a period of five years. The options vested immediately.

·      On October 5, 2018, 750,000 stock options were granted at an exercise price of C$0.14 per share for a period of five years.

·      On March 12, 2018, 12,800,000 stock options were granted at an exercise price of C$0.145 per share for a period of five years.

·     

All of the stock options were vested as at the balance sheet date. These options did not contain any market conditions and the fair value of the options were charged to the statement of comprehensive loss or capitalized as to assets under construction in the period where granted to personnel's whose cost is capitalized on the same basis. The assumptions inherent in the use of these models are as follows:

Vesting period (years)

 First vesting date

 Expected remaining life (years)

 Risk free rate

 Exercise price

 Volatility of share price

 Fair value

 Options vested

 Options granted

 Expiry

                     5

03/12/2018

0.95

2.00%

$0.145

105.09%

$0.14

    12,800,000

    12,800,000

03/12/2023

                     5

10/05/2018

1.52

2.43%

$0.14

100.69%

$0.14

          750,000

          750,000

10/05/2023

                     5

01/16/2020

2.80

1.49%

$0.20

66.84%

$0.07

    14,250,000

    14,250,000

01/16/2025

In Canadian Dollars

 

 

The Company has elected to measure volatility by calculating the average volatility of a collection of three peer companies historical share prices for the exercising period of each parcel of options. Management believes that given the transformational change that the Company has undergone since the acquisition of the Segilola Gold Project in August 2016, the Company's historical share price is not reflective of the current stage of development of the Company, and that adopting the volatility of peer companies who have advanced from exploration to development is a more accurate measure of share price volatility for the purpose of options valuation. 

 

`


The following is a summary of changes in options from January 1, 2022, to June 30, 2022, and the outstanding and exercisable options at June 30, 2022:

 

 

 

 

 

Contractual Lives

January 1,

2022

During the period

 

June 30,

2022

June 30, 2022

Number of Options

Grant

Date

Expiry

Date

 

Exercise

Price

Remaining (Years)

Opening

Balance

Granted

Exercised

Expired / Forfeited

Closing

Balance

Vested and Exercisable

Unvested













16-Jan-2017

16-Jan-2022


$0.12

               -  

        9,250,000

                   -  

     (9,250,000)

                  -  

                            -  

                     -  

                      -  

12-Mar-2018

12-Mar-2023


$0.145

            0.70

      12,800,000

                   -  

        (289,000)

                  -  

               12,511,000

       12,511,000

                      -  

5-Oct-2018

5-Oct-2023


$0.14

            1.27

           750,000

                   -  

                  -  

                  -  

                    750,000

            750,000

                      -  

16-Jan-2020

16-Jan-2025


$0.20

            2.55

      14,040,000

                   -  

                  -  

                  -  

               14,040,000

       14,040,000

                      -  













Totals

 

 

 

            1.67

      36,840,000

                   -  

     (9,539,000)

                  -  

               27,301,000

       27,301,000

                      -  

Weighted Average Exercise Price

 

 

 

$0.160

$0.000

$0.121

                  -  

$0.173

$0.173

                      -  

























In Canadian Dollars

 

The following is a summary of changes in options from January 1, 2020, to December 31, 2021, and the outstanding and exercisable options at December 31, 2021:

 

In Canadian Dollars

 

 

 

i On July 5, 2019, the Company announced an extension of the expiry date from January 16, 2020, to January 16, 2022. All other conditions of the options remain the same.

 

ii On July 5, 2019, the Company announced an extension of the expiry date from May 7, 2020, to May 7, 2022. All other conditions of the options remain the same.


     

 

d)         Nature and purpose of equity and reserves

 

The reserves recorded in equity on the Company's statement of financial position include 'Reserves', 'Currency translation reserve', and 'Deficit'.

 

'Option reserve' is used to recognize the value of stock option grants prior to exercise or forfeiture.

 

'Currency translation reserve' is used to recognize the exchange differences arising on translation of the assets and liabilities of foreign branches and subsidiaries with functional currencies other than Canadian dollars.

 

'Deficit' is used to record the Company's accumulated deficit.

 

20.  EARNINGS PER SHARE

 

Basic and diluted profit (loss) per share is calculated by dividing the profit (attributed to shareholders for the six months to June 30, 2022, of  $6,305,101 (June 30, 2021: loss ($5,103,924)) by the weighted average number of shares of 636,603,895  (June 30, 2021: 621,405,975) in issue during the period.

 

 

21.  RELATED PARTY DISCLOSURES

 

A number of key management personnel, or their related parties, hold or held positions in other entities that result in them having control or significant influence over the financial or operating policies of the entities outlined below.

 

 

a)   Trading transactions

 

 

The Africa Finance Corporation ("AFC") is deemed to be a related party given the size of its shareholding in the Company. There have been no other transactions with the AFC other than the Gold Stream liability as disclosed in Note 11, and the secured loan as disclosed in Note 12.

 

b)   Compensation of key management personnel

 

The remuneration of directors and other members of key management during the three and six months ended June 30, 2022, and 2021 were as follows:

 


 

Three months ended June 30,

Six months ended June 30,


 


2022

 

2021

 

2022

 

2021

Salaries

 


 







   Current directors and officers

(i) (ii)

$

163,566

$

95,725

$

331,995

$

193,548

   Former directors and officers

 


34,739


38,890


71,557


78,366


 


 




 



Directors' fees

 


 




 



   Current directors and officers

(i) (ii)


90,452


87,944


199,114


175,920


 


 




 



Share-based payments

 


 




 



   Current directors and officers

 


-


-


-


-


 

$

288,757

$

222,559

$

602,666

$

447,0834

 

 

(i)   Key management personnel were not paid post-employment benefits, termination benefits, or other long-term benefits during the three months ended June 30, 2022, and 2021.

 

(ii)  The Company paid consulting and director fees to both individuals and private companies controlled by directors and officers of the Company for services. Accounts payable and accrued liabilities at June 30, 2022, include $169,695 (December 31, 2021 - $346,275) due to directors or private companies controlled by an officer and director of the Company. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.

 

22.  SUPPLEMENTAL CASH FLOW INFORMATION

 

a)   Changes in non-cash working capital are as follows:

 



Three months ended June 30,


Six months ended June 30,



2022


2021


2022


2021

Amounts receivable

$

(517,146)

$

1,527,925

$

(475,996)

$

(2,531,421)

Inventory

 

(7,485,612)

 

-

 

(6,038,731)