Announcement
GENERAL: CRP: Chatham provides Quarterly Update
02:45pm
CRP
02/03/2021 14:45
GENERAL
NOT PRICE SENSITIVE
REL: 1445 HRS Chatham Rock Phosphate Limited
GENERAL: CRP: Chatham provides Quarterly Update
CHATHAM ROCK PHOSPHATE LIMITED ("CRP")
MANAGEMENT'S DISCUSSION & ANALYSIS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2020
(All amounts stated in Canadian dollars, unless otherwise indicated)
Attention is called to a caution in respect of Forward-Looking Statements -
included at page 25
CRP is Stock Exchange listed in Canada, New Zealand and Germany.
As a result, Chatham is positioned on the world stage to more effectively
raise funds from international investors. These funds are required to reapply
for the Marine Consent required to give effect to our granted mining permit.
Our overall objective is the mining of phosphate nodules on the Chatham Rise
(offshore New Zealand).
The TSX.V listing in Canada was achieved by means of a merger with dual
listed Antipodes Gold Limited ("Antipodes Gold"), which, having sold its
Coromandel based gold assets to Newmont New Zealand was a cashed-up shell.
Antipodes Gold consolidated its shares 1 for 10 and then made a one Antipodes
share for 65.59 Chatham shares offer. That process was complex, highly
regulated and took over a year to complete.
In parallel with that CRP undertook multiple investor roadshows in Europe and
Canada and continued to steadily raise working capital from investors there,
as well as in New Zealand and Asia. CRP has now raised more than $7.3 million
since the Marine Consent was declined in February 2015. During this period,
the market capitalisation has recovered from $2.4 million to over a peak of
$10 million and is presently around $7.4 million on the TSX.V and $7 million
on the NZX.
The cornerstone investors are based in Singapore, Germany and Switzerland and
together with the CRP management team hold, directly and indirectly,
approximately 26% of the company. The rest of the shares are held by more
than 3000 shareholders in nine countries.
CRP is expecting to raise the funds required to complete the Marine Consent
reapplication and to cover the costs of the Environmental Protection
Authority hearing to be held in 2022.
It is expected to take 15 months to complete the work required to submit the
re-application with a proposed submission date in Q1, 2022. This would lead
to an expected grant date of Q4, 2022 and eventual production in early 2025.
Chatham has been largely unaffected by COVID-19 and lock down restrictions.
Contents
INTRODUCTION 3
CORPORATE HISTORY AND NATURE OF THE BUSINESS 3
BOARD OF DIRECTORS 5
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS 5
Capital Transactions 5
Significant Events 5
CHATHAM ROCK PROJECT AND EXPLORATION 7
Summary of Quarterly Results 12
Significant Expenses of a Corporate Nature 12
Liquidity and Capital Resources 13
Related Party Transactions 13
SUBSEQUENT EVENTS 14
Use of Financial Instruments 14
Contractual Obligations and Commitments 14
Off-Balance Sheet Arrangements and Contingent Liabilities 14
Critical Accounting Policies and Estimates 14
Mineral Properties 15
OUTLOOK 15
RISKS, UNCERTAINTIES AND OTHER ISSUES 15
Risk Factors 15
SUPPLEMENTAL TO THE FINANCIAL STATEMENTS 24
Outstanding Share and Option Data 24
FORWARD-LOOKING STATEMENTS 25
INTRODUCTION
This discussion and analysis of the operating results and financial condition
of Chatham Rock Phosphate Limited ("Chatham Rock", or the "Company") for the
nine months ended December 31, 2020, as prepared on March 1, 2021 should be
read in conjunction with the unaudited consolidated financial statements and
related notes for the same period and is intended to provide the reader with
a review of the factors that affected the Company's performance during that
year and the factors reasonably expected to impact future operations and
results.
The unaudited consolidated financial statements and related notes of Chatham
Rock have been prepared in accordance with accounting principles that comply
with International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board. The financial statements and all
amounts in this report are expressed in Canadian dollars, except where
otherwise indicated.
CORPORATE HISTORY AND NATURE OF THE BUSINESS
Chatham Rock is incorporated under the Business Corporations Act (British
Columbia) and listed on the Toronto Stock Exchange's Venture Exchange
("TSX-V"). The Company is also registered under the New Zealand Companies Act
1993 and listed on the New Zealand Stock Exchange ("NZX").
A name change from Antipodes Gold Limited to Chatham Rock, in February 2017,
was undertaken at the same time as a reverse takeover arrangement for the
Company to acquire its main subsidiary, Chatham Rock Phosphate (NZ) Limited
("Chatham (NZ)") (which was incorporated in New Zealand under the Companies
Act 1993 on April 27, 2004).
Chatham (NZ)'s registered office and principal place of business is located
at Level 1, 93 The Terrace, Wellington 6011, New Zealand.
Significant Intercorporate Relationships
Chatham Rock Phosphate Limited (Chatham Rock)
Incorporated under the Business Corporations Act (British Columbia)
100%
Manmar Investments 106 (Proprietary) Limited
Incorporated under the laws of Namibia Chatham Rock Phosphate (NZ) Limited
Incorporated under the New Zealand Companies Act 1993
100%
Pacific Rare Earths Limited
Incorporated under the New Zealand Companies Act 1993
Chatham (NZ) is a junior mineral development company, focused on the
development of a marine phosphorite deposit off the coast of New Zealand. It
has not commenced mining operations or generated operating revenues to date.
Chatham (NZ) holds a Mining Permit over an area off the coast of New Zealand
with significant seabed deposits of rock phosphate, rare earths and other
potentially valuable minerals.
In 2007, Chatham (NZ) and an associate applied for a prospecting license over
an area covering a portion of a phosphorite deposit on the Chatham Rise,
being historically an intensively investigated area of the Chatham Rise for
potentially economic concentrations of rock phosphate.
In 2010, Chatham (NZ) (as to 90%) and its associate (as to 10%) were jointly
granted a prospecting licence, pursuant to the Crown Minerals Act 1991 of New
Zealand, covering 4,726 ?km?^2 of the Chatham Rise. Following the
prospecting licence being granted, Chatham (NZ) carried out significant
background work as part of the licence requirements to further characterize
the phosphorite resource and assess the potential environmental impacts of a
possible mining operation in a marine environment.
Since acquiring the original prospecting licence in 2010, Chatham (NZ) has
commissioned six cruises in two programs. The key objects of the cruises
were to corroborate the previous work conducted on the Chatham Rise and to
collect further geological, geotechnical, geophysical and environmental data.
For phosphorite grade corroboration purposes, the M.V. Tranquil Image cruise
collected 55 samples using a Van Veen grab. The R.V. Dorado Discovery
conducted four cruises out to the project area and collected 181 box core and
grab samples as well as environmental data.
The data collected by Chatham (NZ) allowed better delineation of the deposit.
The more recent work by Chatham (NZ) on investigating this resource
confirmed the general tenor of the phosphorite grades and location of
phosphorite in the area, advanced work aimed at investigating the feasibility
of mining the resource, and has provided valuable information to assess the
environmental effects of the proposed mining operations.
In early 2011, Chatham (NZ) commissioned independent studies for the design
of a system to recover phosphorite from the Chatham Rise seabed from three of
the largest dredging companies in the world. Boskalis Offshore Subsea
Contracting B.V ("Boskalis") was one of the participants and was selected by
Chatham (NZ) as its preferred technical partner for the Chatham Rise Project.
Chatham (NZ) divested some oil and gas related investments to its associate
in exchange for it transferring its 10% interest in the prospecting license
to Chatham (NZ), resulting in the project becoming wholly owned by Chatham
(NZ).
In September 2012, Chatham (NZ) applied for a Mining Permit in respect of a
part of the area covered by the Continental Shelf Licence. As part of that
application process and in anticipation of applying for the Marine Consent,
Chatham (NZ) consulted with a range of stakeholders. This has included the
local (Maori) Iwi, the Chatham Islands community, the Government, fishing
groups and a range of environmental groups. The purpose of this consultation
was to establish a relationship with these parties and to identify and
resolve issues associated with the mining proposal. As a result, the
Directors believe that the project is now well understood by a wide range of
stakeholders and in turn Chatham (NZ) has a better understanding of the views
and possible concerns of all parties whose interests are potentially affected
by the project.
The Mining Permit was granted on December 6, 2013.
In May 2014, Chatham (NZ) submitted to the (New Zealand) Environmental
Protection Authority ("EPA") a formal application for Marine Consents. The
application was declined on February 11, 2015.
Chatham (NZ) aims to pursue a re-submission of its Marine Consent application
and has been raising equity capital in preparation for this task.
BOARD OF DIRECTORS
Chris Castle President and CEO (New Zealand based);
Linda Sanders Non-executive Chairman (New Zealand based);
Robert Goodden Independent non-executive director (England based);
Jill Hatchwell Non-executive director (New Zealand based); and
Ryan Wong Non-executive director (Malaysia based)
CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS
Capital Transactions
Chatham (NZ) has continued to raise additional equity capital totalling
$2.45m in the twenty four months to December 31, 2020. These funds are being
applied to cover corporate overheads and to the preparatory work in
reapplying for the marine consent for the Chatham Rise project.
Avenir Makatea Acquisition
On December 21, 2020 the Company announced that it had concluded negotiations
to acquire French Polynesia-based Avenir Makatea Pty Limited. The merger was
negotiated at arm's length.
Avenir Makatea proposes, once fully permitted, to recover phosphate from the
island of Makatea in French Polynesia, to enable the rehabilitation of
previously mined parts of the island.
The purchase price is CAD $1,455,000 and will be settled through an issue of
shares. The acquisition is subject to certain conditions including TSX.V
approval. When the transaction is completed the vendors of Avenir Makatea
will hold approximately 28% of the enlarged capital of the Group.
Significant Events
Apart from progress in preparing for the marine consent reapplication, the
Company completed its reverse takeover merger with Antipodes Gold Limited on
24 February 2017.
This resulted in Chatham Rock gaining a listing on the Toronto Venture
Exchange (TSX.V Code "NZP"). Chatham Rock is now also quoted on the
Frankfurt Exchange.
On September 5, 2018 Chatham Rock announced that it had recently formed a
100% owned subsidiary Pacific Rare Earths Limited.
This company has been formed to project-manage a work programme aimed at
quantifying the extent, value and recoverability of Rare Earths Elements
(REE) and other potentially strategic or valuable minerals contained in the
rock phosphate nodules on the Chatham Rise.
In addition, the company will be investigating the existence and recovery
potential of rare earths and other valuable minerals in seafloor muds on the
Rise.
Rare Earths in phosphate
A recent study of marine phosphate nodules by the United States Geological
Survey reveals that there are significant quantities of REE contained within
the phosphate nodules on the Chatham Rise. Of the 17 recognised rare earths,
15 are present in Chatham Rise rock phosphate nodules, as well as varying
concentrations of other valuable minerals including nickel, cobalt, chromium,
vanadium, zirconium, fluorine and strontium. Collectively these minerals, if
they can be efficiently extracted as by-products, represent not only an
immensely strategic asset for New Zealand but could significantly improve the
already attractive forecast project economics.
The presence of these minerals within the phosphate rock is highly
significant because the contained value may be released onshore (if
extraction proves feasible and economically viable) without any change to the
proposed mining system, and without any additional environmental impacts in
the Project area.
Rare Earths in seafloor muds
Shareholders will recall that we established and announced some time ago that
there were significant quantities of rare earths and other valuable minerals
in the seafloor muds in our permit area. These include cerium, lanthanum,
neodymium, praseodymium, yttrium, cobalt, rubidium, cesium, germanium,
gallium, strontium, thallium and tungsten.
The primary challenge associated with the production of rare earths from the
muds is the extraction process, and the advancement of processing technology
that will be required in order to demonstrate the feasible and economically
viable separation of any of these minerals. In addition, recovery of rare
earths from muds will involve the development of a new marine mining system,
and therefore will be considered for development separately from the existing
CRP rock phosphate nodules project.
Further Independent Research
The information CRP already holds about REEs and other valuable minerals in
its permit areas was generated by independent organisations, with some of
this work undertaken up to a decade ago. The current knowledge confirms that
REEs occur over a wide area, and estimates of the average grades and
therefore the size of the potential deposits have been made at a conceptual
level. The current conceptual information, when assessed against current
price data, confirms the significance of potential value.
CRP has recently applied for NZ Government funding of a research project
proposed to be undertaken by a New Zealand university.The objectives of this
project are to further develop a better upstanding of the extraction and
recovery potential of the minerals.
CRP is excited to be engaging in the investigation of REE recovery, which is
a strategic priority of the New Zealand Government in relation to the mineral
sector, as stated by the Honourable Dr Megan Woods, Minister of Energy and
Resources.
The Chatham Rise rock phosphate and rare earths deposit has the potential to
contribute to the understanding of REE potential in New Zealand, given that
it is likely that there is more information already available about the REE
minerals in the Chatham Rise deposit than any other rare earths deposit in
New Zealand.
CHATHAM ROCK PROJECT AND EXPLORATION
CHATHAM RISE TECHNICAL REPORT
The summary below concerning Chatham's Chatham Rise Phosphorite Project (the
"Chatham Rise Project" or the "Project") is taken from the Chatham Rise
Technical Report dated April 24, 2015 and prepared by Rene Sterk, MSc MAIG
MAusIMM CP (Geo). For further detailed information concerning the Chatham
Rise Project, the reader is directed to read the full Chatham Rise Technical
Report.
The Chatham Rise Technical Report has been compiled by RSC Consulting Ltd
("RSC") in compliance with Canadian National Instrument 43-101 Standards of
Disclosure for Mineral Projects ("NI 43-101") and Form 43-101F1. The Report
constitutes the supporting documentation for the estimate of a phosphorite
resource for the Chatham Rise Project. This resource estimate has previously
been the subject of a technical report compiled by RSC on behalf of Chatham
(NZ) (RSC, 2014), which was prepared in compliance with the 2012 edition of
the Joint Ore Reserves Committee (JORC). While the resource estimate
disclosed in the present Report has not changed and has an effective date of
March 3, 2014, this Report presents the estimate in compliance with NI
43-101, and also includes updated information on the Chatham Rise Project in
light of environmental permitting developments that have taken place since
the previous report (RSC, 2014) was published. The effective date of the
Report is July 6, 2015.
Property Description and Ownership
The Project covers an area of seabed phosphorite nodules that is situated
about 450 km offshore of the east coast of New Zealand at approximately 350
to 450 m water depth.
Chatham holds Mining Permit Number 55549 which was granted to Chatham (NZ) in
December 2013 ("Mining Permit"). The Mining Permit is not due to expire
until 2033 and, subject to the granting of a Marine Consent from the
Environmental Protection Authority ("EPA"), will allow Chatham (NZ) to
conduct mining operations.
Chatham previously held a Prospecting Licence (MPL 50270) which originally
expired on February 25, 2014. An application for an extension of a term for a
further four years was submitted to New Zealand Petroleum and Minerals
("NZPAM") in December 2013 and the licence was successfully renewed in August
2016, for a further 6 years from February 2014 to February 2020. At that time
the licence area was reduced from 3,905 square kilometres to 2,876 square
kilometres. On 29 August 2019 this prospecting permit was relinquished six
months prior to the end of its term. This has no impact on the mining permit
and the proposed mining programme.
A summary of these licence holdings and applications in shown at the table
below.
Chatham Licence Holdings and Applications
Asset Holder Interest (%) Status Licence Expiry Area (km2)
MP 55549
Mining Permit Chatham (NZ) 100 Exploration Dec. 5, 2033 820
Geology and Mineralization
The phosphorite deposit occurs as a thin surficial seafloor layer of
phosphorite-bearing glauconitic sand with thicknesses typically ranging from
0 to 1 m, at depths of 350 to 450 m below sea level. The sand layer consists
of mainly silt and sand-sized sediments, with phosphatised chalk nodules up
to 15 cm in diameter.
Exploration
Phosphorite nodules were first discovered on the Chatham Rise in the 1950s by
a New Zealand Government survey. During the 1960s to 1980s several private
and government sponsored cruises explored the Chatham Rise and surrounding
seafloor area. The most extensive surveys were conducted by an agreement
between the New Zealand Department of Scientific and Industrial Research and
the West German Government on cruises by the German research vessels R.V.
Valdivia in 1978 and R.V. Sonne in 1981.
The 1978 R.V. Valdivia cruise was the first intensive sampling and research
campaign to be conducted over the Chatham Rise; a total of 655 samples from
689 attempts were collected over a 300 km2 area in the west of the Project
area. The majority of the samples were collected using a large Van
Veen-style grab of 0.12 m3 volume, weighing approximately 400 kg.
The 1981 R.V. Sonne cruise was the most comprehensive exploration effort to
assess the Chatham Rise phosphorite deposit. In addition to oceanographic,
meteorological and geophysical data, the cruise collected 19 hours of video
recordings of the sea floor as well as 519 sediment samples taken by a
pneumatic grab-sampler. The seafloor sediment samples collected during this
cruise are the most representative sample data collected on the Chatham Rise
and are considered to be of a high enough quality to include in a resource
estimation.
Since acquiring the licence in 2010, Chatham (NZ) has conducted six cruises
in two programs in the Project area. The key task of the cruises was to
validate the previous work conducted on the Chatham Rise and collect further
geological, geotechnical, geophysical and environmental data. For
phosphorite grade estimation purposes the M.V. Tranquil Image cruise
collected 55 samples using a Van Veen grab. The R.V. Dorado Discovery
conducted four cruises to the Project area and collected 206 box core and
grab samples.
Sample quality and QA/QC measures varied considerably between the cruises and
within each cruise. A critical part of the assessment of the data collected
in the Project area was to determine what quality thresholds to use to allow
or disallow data to enter into the estimation process. As part of the data
verification process, the relative and absolute quality of the data was
assessed in as much detail as practically possible. In general, the best
samples were those that were collected using the pneumatic grab, sampled the
full sand horizon, had a small survey error and had no other apparent data
ambiguities. Samples collected from the R.V. Sonne are considered to
represent the better quality samples collected in the licence area, followed
by some of the R.V. Valdivia samples and then the box core samples from the
Dorado Discovery. Samples not included in the resource estimate are samples
that failed due to technical failure, samples collected but which have no
data recorded, samples with no location coordinates, non-validated data and
samples documented as washed or otherwise biased.
Mineral Resources
Definition of the domains used for modelling was based on seismic facies
delineated during the R.V. Sonne cruise. A 2D block model was constructed
based on 1 km by 1 km blocks that covers the main sampled area based on the
average data spacing in the main sample areas. A maximum search radius of
3,000 m was used based on variogram modelling.
Estimation was performed in each domain using ordinary kriging using the
accumulation method on the parameters Ph kg/ m2 (phosphorite grade), Depth
and Sample Quality Ranking ("SQR"). The grade (Ph kg/ m2) was then
calculated by dividing Ph kg/ m2 by the estimated Depth for each block.
A total of 80 million m2 at an average grade of 290 kg/ m2 is classified as a
global Inferred Mineral Resource at a cut-off grade of 100 kg/ m2 (table
below). There are no resources classified in indicated or measured
categories. As the Chatham Rise phosphorite resource is classified entirely
as an Inferred Mineral Resource it does not constitute a mineral reserve and
so does not have demonstrated economic viability. The specification of the
phosphorite (i.e. the phosphate content) has been studied by various
operators including Chatham (NZ), and, even though a representative average
grade cannot be determined for the Mineral Resource, the tenor of the
specification (in the order of 18-19% P2O5 of screened material) is suitable
to allow classification into the Inferred Mineral Resource category.
The average thickness of the resource is 0.20 m.
Statement of Mineral Resources (phosphorite) for Mining Permit 55549, Chatham
Rise. Estimates are rounded to reflect the level of confidence in these
resources at the present time.
Classification Volume (m3) Thickness (cm) Ph kg/m3
Inferred Mineral Resource 80,000,000 20 290
Notes:
The Mineral Resource is reported in accordance with CIM NI 43-101, 2011
edition
The Mineral Resource is contained within MP 55549
All resources have been rounded to the nearest 0.1 million tonnes
Ph kg/m3 is the weight of phosphorite per cubic metre
Even though a representative average grade for the specification (phosphate
grade) cannot be determined for the Mineral Resource, the tenor of the
specification (in the order of 18-19% P2O5 of screened material) is suitable
to allow classification into the Inferred Mineral Resource category
The Mineral Resource is reported at 100 kg/m3 phosphorite cut-off grade
The Mineral Resource is classified entirely as an Inferred Mineral Resource.
It does not constitute a mineral reserve and so does not have demonstrated
economic viability.
RSC's analysis to date indicates that a potentially economically extractable
Mineral Resource exists in the Project area. Several high-profile sampling
cruises, most independent from each other, have all identified grades of
economic interest within the same area. These cruises have been well
documented and specific knowledge on sampling systems has been retained and
included in this Report.
Recommendations
In addition to the Inferred Mineral Resource described above, in RSC's
opinion, there is significant exploration potential to extend the Mineral
Resource within the Mining Permit. Based on existing sampling data (that was
not included in the resource because of lower density of sampling or lower
SQR numbers), the exploration target would be in the order of 30,000,000 to
50,000,000 m3 at grades between 200 and 300 kg/m3 . The potential quantity
and grade of this global exploration target is conceptual in nature. There
has been insufficient exploration to define a Mineral Resource and it is
uncertain if further exploration will result in the target being delineated
as a Mineral Resource.
RSC recommends that further seafloor sampling is undertaken to both increase
the confidence in the established Mineral Resource as well as to extend the
boundaries of the resource, predominantly towards the west where currently
low-quality Valdivia data indicate an exploration target of at least 5 Mt
phosphorite. Increasing the confidence in the current Mineral Resource by
additional sampling will give Chatham (NZ) the grade and geological
confidence in the phosphorite deposit to allow them to further develop mining
plans and economic studies.
Outlook
Chatham (NZ) continues to progress the Chatham Rise Project towards mining
whilst also examining other high quality phosphate projects featuring strong
grades, meaningful size, mining-friendly locales near significant markets.
Chatham (NZ) remains confident that its phosphate deposit places it in a
strong position globally to deliver an essential ingredient to the
agriculture industry, where the demand for food remains a growth market in
turbulent economic times. Despite challenging market conditions, Chatham
(NZ) considers that the ongoing volatility in the major phosphate producing
regions (Middle East and North Africa) supports its conviction in the
importance of executing well-planned, efficient exploration and development
program designed to advance this high-quality phosphate project; and to
pursue other high -quality projects within our area of expertise.
The Chatham Rise phosphate has valuable attributes:
It is a reactive phosphate, of grades between 21-22% P205 that may be
directly applied to existing pastures, without the necessity of beneficiation
or upgrading.
It is low in deleterious metals (cadmium), and has other significant
environmental benefits over conventional imported phosphate products.
It is a key ingredient of New Zealand's major agriculture industry.
The project shows strong economic advantages over imported products where
production and delivery to market costs of the Chatham Rise product are
equivalent to transport costs to NZ of similar products.
There is significant upside exploration potential, with grab tests of
adjacent ground showing individual samples of economic grade, and much of the
highly prospective Chatham Rise is untested.
Chatham (NZ) is in the process of reapplying for a marine consent to mine
phosphate nodules on the Chatham Rise seabed. Mitigation of the effects of
mining on the corals by excluding known coral areas, adaptive management,
articulation of the clear economic benefits, and a better understanding of
modelling and risk management should ameliorate EPA concerns. Chatham (NZ)
remains confident that marine resource consents will be granted.
Current Work Program
Working closely with the various government organizations, significant work
is aimed at preparing re-application documents for the Marine Consent.
Additional field trials are being scoped to establish the suitability of the
Chatham phosphate for direct application in a range of New Zealand geographic
agricultural conditions.
Optimization of the current resources is being undertaken to establish
better mine plans that amongst a range of outcomes addresses the exclusion of
known coral thickets.
FINANCIAL COMMENTARY
The Company prepares and files its financial statements and related notes in
accordance with accounting principles that comply with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board.
Selected Annual Information
Year ended March 31
2020 2019 2018
$000s except for per share
Total revenue - - -
Net profit/(loss) (640) (912) (1,228)
Profit/(Loss) per share - basic and diluted (cents) (2.49) (4.55) (7.93)
Total assets 4,586 5,079 4,840
Total long-term liabilities - - -
Distribution or cash dividend declared per share - - -
Summary of Quarterly Results
Quarterly results for the past eight quarters ending December 31, 2020 are as
follows:
2021 2020 2019
$000s Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Cash 49 78 289 12 94 70 277 244
Working capital 68 193 337 (137) 140 143 281 303
Total assets 5,099 4,905 5,079 4,541 4,600 4,483 4,865 5,079
Profit/(Loss) for period (104) (129) (117) (256) (128) (102) (154) (293)
Profit/(Loss) per share (cents) (0.31) (0.39) (0.40) (.99) (0.50) (0.39)
(0.61) (1.43)
Mineral Project expenditures * (22) (18) (16) (21) (17) (23) (27) (28)
Cash flow from financing (net) 94 32 555 - 98 - 223 427
Weighted average shares (millions) 33 33 29 26 26 25 25 21
*In recent years, mineral project expenditures have been focussed on the
marine consent application and reapplication.
The Company records losses each quarter/year arising from the expensing of
its general and administration expenses. Periodic (at least annual) reviews
of capitalized exploration expenditures are undertaken and write-offs and
provisions are expensed to the Consolidated Statement of Comprehensive
Income.
Significant Expenses of a Corporate Nature
For the nine months ended December 31, 2020 the Group recorded a net loss
before income taxes of $104,000 (2019: net loss of $128,000).
Significant expense categories (apart from accumulated exploration write-offs
and provisions) for the period are discussed below:
Expenditure
2020 Note
2019
General and administration 42 1 87
Legal fees 13 7
Consulting fees 7 25
Marketing 38 -
Registry, Filing and Listing 5 5
Travel and accommodation - 5
Total 105 129
Note:
General and Administration costs includes management fees $16,000 (2019:
$30,000), accounting services $6,000 (2019: $3,000), insurance $5,000 (2019:
$3,000) and New Zealand office costs $8,000 (2019: $6,000).
Liquidity and Capital Resources
The Company's cash position as at December 31, 2020 was $49,000. Trade and
other payables total $133,000.
The Company's existing share, option and warrant capital structure is set out
at the end of this report under the heading of "Supplemental to the Financial
Statements".
Related Party Transactions
Related party transactions are in the normal course of business and are
measured at the exchange amount, which is the value as agreed between
management and the related parties.
Related party consultancy and management fees totalled $16,000 for the period
(2019: $48,000) and are set out in detail in the financial statements at Note
15.
Depending on the nature of the services and costs, certain amounts have been
capitalised to intangible assets as they are directly attributable to the
Chatham Rise Project.
SUBSEQUENT EVENTS
On January 18, 2021 the Company closed a non-brokered private placement of
10,000,000 common shares at a price of CAD$0.06 per share for gross proceeds
of CAD$600,000. Finders fees in the amount of CAD$3,360 were paid in
connection with the private placement. All securities issued pursuant to the
private placement are subject to a hold period and may not be traded until
May 16, 2021.
The current outbreak of COVID-19 and the subsequent quarantine measures
imposed by the New Zealand government as well as the travel restrictions
imposed by New Zealand and other countries in early 2020 have caused
disruption to businesses and economic activity. The Group considers this to
be a non-adjusting post balance sheet event.
The Group is committed to supporting government and community efforts to
limit the spread of the virus, and supporting business continuity with regard
to its employees and contractors.
There were no other material subsequent events up to the date of this report.
Use of Financial Instruments
For the period ended December 31, 2020 Chatham did not enter into any
specialized financial agreements to minimize its investment risk, currency
risk or commodity risk. The principal financial instruments affecting the
Company's financial condition and results of operations are currently its
cash, amounts receivable and prepayments, and accounts payable and accrued
liabilities.
Contractual Obligations and Commitments
At December 31, 2020 the Group had no capital commitments (December 31,
2019: Nil).
The Company has no commitments under the terms of non-cancellable operating
leases (December 31, 2019: Nil).
The Company has future multi-year work program obligations in order to
maintain tenure of its mineral permits. These obligations include: - permit
rentals, mapping, sampling, data compilation and modelling. These are set
out in detail in the financial statements at Note 17.
Off-Balance Sheet Arrangements and Contingent Liabilities
The Company has no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of any contingent assets and liabilities as at the date of the
financial statements, as well as the reported amounts of revenues earned and
expenses incurred during the period. These estimates are based on historical
experience and other assumptions that are believed to be reasonable under the
circumstances.
The Company's significant accounting policies are those that affect its
financial statements, and are summarized in Note 3 of the audited financial
statements for the year ended March 31, 2020.
Critical accounting policies and estimates in the year included
capitalization of the costs relating to the acquisition, exploration and
development of non-producing resource properties and the recognition of
impairment of those assets, the allocation of proceeds on the purchase or
sale of assets, the valuation of stock based compensation and tax accounts,
and contingent liabilities.
Actual results could differ from these estimates.
Mineral Properties
The decision to capitalize exploration expenditures, and the timing of the
recognition that capitalized exploration is unlikely to have future economic
benefits, can materially affect the reported earnings of the Company. In line
with accepted industry practice for exploration companies, the Company has
adopted the policy of deferring property specific acquisition, exploration
and development costs. Deferred costs relating to properties that are
relinquished, or where continued exploration is deemed inappropriate, are
written off in the year such assessment is made. If the Company adopted a
policy of expensing all exploration costs, the Company's asset base,
shareholders' equity, and loss from operations would be materially different.
These deferred costs will be amortized on the unit-of-production basis over
the estimated useful lives of the properties following the commencement of
production. The cost of mineral properties includes any cash consideration
paid, and the fair market value of shares issued on the acquisition of
property interests, if any. The recorded amounts represent actual
expenditures incurred and are not intended to reflect present or future
values.
The Company reviews capitalized costs on its property interests on a
periodic, or at least annual, basis and will recognize an impairment in value
based upon current exploration results and upon management's assessment of
the future probability of profitable revenues from the property or from the
sale of the property. Management's assessment of the property's estimated
current fair market value may also be based upon a review of other property
transactions that have occurred in the same geographic area as that of the
property under review.
OUTLOOK
During 2020 the Company proposes to raise sufficient equity finance to
commence the re-application process for the Marine Consent.
It is expected to take 15 months to complete the work required to submit the
re-application with a likely submission date in 2022. This would lead to an
expected grant date in 2023 and eventual production in 2025.
For additional information, please refer to the Company's website at
www.rockphosphate.co.nz and for regulatory filings, including news releases,
please refer to www.SEDAR.com.
RISKS, UNCERTAINTIES AND OTHER ISSUES
Risk Factors
Chatham (NZ)'s business of exploring and developing for mineral resources
involves a variety of operational, financial and regulatory risks that are
typical in the natural resource industry. Chatham (NZ) attempts to mitigate
these risks and minimize their effect on its financial performance, but there
is no guarantee that Chatham (NZ) will be profitable in the future. The
Company's common shares should be considered speculative. Investors should
carefully consider the following risk factors:
Marine Consent
Chatham (NZ) cannot commence mining operations without the Marine Consent.
Chatham (NZ) filed for the Marine Consent on May 14, 2014 but was declined on
February 11, 2015. While Chatham (NZ) considers that it has a good case to
receive the Marine Consent on re- application, there is no guarantee that the
Marine Consent will be granted. If Marine Consent is not granted or is
granted subject to economically unfeasible conditions, Chatham (NZ) will not
be able to proceed with mining operations in respect of the Mining Permit,
which could have a material adverse effect on the financial condition,
operations, and prospects of Chatham (NZ).
Recent revisions to the Exclusive Economic Zone ("EEZ") ACT mean that the
Marine Consent decision-making process will typically be completed within a
nine-month period, however, there is provision for timeframes to be extended
in certain circumstances. Any delay in the Marine Consent decision-making
process could delay the entering into of a mining contract and the
commencement of mining operations and production, which could have a material
adverse effect on the financial condition, operations, and prospects of
Chatham (NZ).
Uncertainty Relating to Mineral Resources
Resource estimates are a product of the skill, experience and judgements of
the person carrying out the resource estimation and no assurances can be
given that the estimated grade and tonnes will be realized or that Chatham
(NZ) will receive the prices assumed in determining its resources. Valid
estimates made at a given time may significantly change when new information
becomes available. While Chatham (NZ) believes that the resource estimates
included in this Document are reasonable, resource estimates by their nature
are imprecise and depend on the quality of the sampling data and to a certain
extent, upon statistical inferences that may ultimately prove unreliable.
All of Chatham (NZ)'s resources are reported as Inferred Mineral Resources.
Inferred Mineral Resources have a great deal of uncertainty associated with
them as to their existence (both quantity and ultimately recovered grade).
Generally, Inferred Mineral Resources cannot form the basis of a feasibility
study or bankable feasibility study. Owing to the nature of Chatham (NZ)'s
phosphate deposit, and its accessibility, it is not guaranteed that the
deposit will ever be converted to the measured and indicated resource
categories. As such, there can be no assurance that third parties will find
Chatham (NZ)'s resource categorization acceptable for future funding purposes
or capital investment decisions, which could have a material adverse effect
on the financial condition, operations, and prospects of Chatham (NZ).
Mining Contract and Mining Process Risk
The technical ability of Chatham (NZ) to extract phosphorite from the seabed
is unproven and will require the development of a novel mining technique in
order to accommodate the depth of the sea in the Chatham Rise area.
Therefore, there are no assurances that the proposed mining method will
perform at the necessary water depths as intended or at all.
Requirement for Future Funding
Chatham (NZ) is likely to require access to further funding in the future and
prior to commencement of production for a variety of reasons, including
working capital, expansion of the business, new developments relating to
existing operations or new acquisitions. General market conditions, volatile
phosphorite markets, the lack of any necessary permit or contract to mine, a
claim against Chatham (NZ) or other factors may make it difficult to secure
funding. There is no assurance that Chatham (NZ) will be successful in
obtaining required funding as and when needed on commercially acceptable
terms.
Work Program Commitments
The Mining Permit issued by the New Zealand Petroleum and Minerals ("NZPAM")
department, originally required that mining operations commence on or before
December 6, 2017 at a mining rate of not less than 800,000 tonnes of
phosphorite per annum. Chatham (NZ) has sought and already been granted
changes to the terms of the Mining Permit to reflect that mining operations
cannot commence before 2020. Further changes to the conditions of the mining
permit have subsequently been applied for to reflect ongoing delays in the
environmental permitting process that Chatham (NZ) must undertake. Chatham
(NZ) believes that the specified mining rate can be achieved with the
currently contemplated mining processes, but many of the steps needed to
reach commencement of mining are beyond the control of Chatham (NZ) and as
such there can be no guarantee that Chatham (NZ) will be able to meet this
target production within the required deadline or at all. There can be no
guarantee that Chatham (NZ) will receive Marine Consent and such other
permits as may be required for mining operations, nor that it will enter into
a mining contract should Marine Consent be granted or that a suitable mining
vessel will be available in the timescale required to allow Chatham (NZ) to
satisfy the Mining Permit requirements.
The failure of Chatham (NZ) to commence mining at a rate of not less than
800,000 tonnes of phosphorite per annum could result in a breach of the
Mining Permit and give rise to the power of the appropriate Minister, as
defined in the Crown Minerals Act 1991 of New Zealand, to revoke the Mining
Permit. Whilst Chatham (NZ) believes that the appropriate Minister would
likely amend the terms of the Mining Permit in such circumstances, provided
he or she was satisfied that Chatham (NZ) was making good progress to
commence mining operations as soon as practicable, there can be no assurance
that such discretion would be exercised and any such failing could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ).
The Mining Permit imposed other conditions upon Chatham (NZ) as well,
including the requirement to complete a study within 24 months of the permit
being granted (i.e. by 6 December 2017) in support of a final investment
decision. This deadline has been altered and is expected to be extended
again. However, no assurance can be given that NZPAM will accept Chatham
(NZ)'s revised timing in satisfaction of this condition, when completed and
presented. Any such failing could result in the termination or modification
of the Mining Permit, which could have a material adverse effect on the
financial condition, operations, and prospects of Chatham (NZ).
Chatham (NZ) was also expected to complete appropriate sampling, geophysical
and geotechnical surveys required to define mining blocks within 48 months of
the permit being granted (i.e. by 6 December 2017) and spend a minimum of
NZD2 million per annum (C$1.9m) in carrying out its activities. This
deadline has also been altered twice and is expected to be altered again.
However, failure to comply with this condition could result in the
termination or modification of the Mining Permit, which could have a material
adverse effect on the financial condition, operations, and prospects of
Chatham (NZ).
Market Risk
Whilst Chatham (NZ) has engaged in market research and identified a number of
potential buyers and markets in relation to the product to be mined from
Chatham Rise, Chatham (NZ) has not yet entered into any marketing, sales or
offtake agreements that are in markets considered material to Chatham (NZ).
In addition, Chatham (NZ) cannot be assured of the quality of product that it
intends to produce given the nature of Chatham (NZ)'s resource, which could
affect anticipated demand. Further, the market may develop and change prior
to the commencement of mining operations and impact negatively on anticipated
demand, whether as a result in a change in technology, a new source of
phosphate production or otherwise. There can be no assurance, therefore,
that Chatham (NZ) will be in a position to sell all of its mining output, if
any, at profitable prices, nor at all.
Mining Contract and Mining Process Risk
The technical ability of Chatham (NZ) to extract phosphorite from the seabed
is unproven and will require the development of a novel mining technique in
order to accommodate the depth of the sea in the Chatham Rise area. Chatham
(NZ) intends to use a vessel that is specially modified and equipped with a
trailing suction unit. Whilst this solution relies on existing, proven
technology, the compilation of those techniques is novel and the use of the
process in its proposed form and at the depths of the Chatham Rise area is
untried and may require further work. Therefore, there are no assurances
that the proposed mining method will perform at the necessary water depths as
intended or at all.
Modification of a vessel for such purpose will only take place if Chatham
(NZ) is granted the Marine Consent and enters into a mining contract. There
can be no assurance that Chatham (NZ) will be able to enter into such a
contract on acceptable terms, nor at all, and the failure to do so could
delay the development of Chatham (NZ)'s project, alter Chatham (NZ)'s mining
cost assumptions and impair the ability of Chatham (NZ) to carry out future
fund raises. Whilst the Directors believe that there is competition for the
award of the mining contract on competitive terms, there is no certainty that
any alternative contractors to Boskalis would be able to use the design work
completed by Boskalis, nor that any alternative contractor would be able to
provide an independently engineered processing solution on a timely basis and
at a similar anticipated cost.
Work on funding strategies for vessel modification or charter is currently
being considered by Chatham (NZ). The present idea (in conjunction with
project leader Boskalis) is to establish a special purpose vehicle to own the
vessel and to fund the modifications by way of a combination of debt and
equity. A consortium of investors would be sought by Boskalis to contribute
equity. There is a risk that the required funding may not be secured at all
or on terms unfavourable to Chatham (NZ), the special purpose vehicle, or the
mining operator. Subject to finalization of the financing strategy, Chatham
Rock may need to contribute equity into the special purpose vehicle which may
require that Chatham Rock secures further funds. It is not Chatham Rock's
intention to make a significant equity contribution. It is also possible,
however, that the vessel could be owned by a third party marine investor and
chartered.
Intellectual Property Risk
In addition to the above, while the proposed mining system comprises a
compilation of existing technology, freedom-to-operate searches have not been
undertaken. There is a remote possibility that some intellectual property
rights associated with the mining system design could be proprietary to other
parties. This could require licensing arrangements to be negotiated with
such parties or alternative designs to be developed (where any such
proprietary rights exist). There can be no assurance that such licensing
arrangements will be negotiated on terms favourable or acceptable to Chatham
(NZ) or at all.
Production Risks
The future development of any mineral deposit involves significant risks that
even a combination of careful evaluation, experience and knowledge may not
eliminate. This is particularly the case in an offshore deposit such as that
at Chatham Rise, which is subject to additional risks related to its marine
location. For example, production will be affected by weather patterns and
sustained periods of bad weather could adversely impact mining activity and
reduce tonnages of the rock phosphate mined. No assurance can be given that
Chatham (NZ) will meet its annual target production rates of 1.5Mt per annum
once production starts.
In recent years, a New Zealand company called Rocket Lab has commenced
launching satellites from the Mahia Peninsula, about 500 km west of the
project area. There is a risk that jettisoned rocket components could damage
the dredging vessel and/or impede the phosphate recovery operations.
Chatham (NZ) has no operating history upon which to base estimates of future
cash flow. Chatham (NZ)'s estimates of resources and cash operating costs
are, to a large extent, based upon geological, engineering and market
analyses. Estimates of capital and operating costs are necessarily
preliminary at this stage of Chatham (NZ)'s development. It is possible that
actual costs and economic returns may differ materially from Chatham (NZ)'s
best estimates. It is not unusual in the mining industry for new mining
operations to experience unexpected problems during the pre-production phase,
take much longer than originally anticipated to bring into a producing phase,
and to require more capital than anticipated.
Changes in Law and Policy
The laws, regulations, and authorities governing Chatham (NZ) and its
operations may change, and may result in additional material expenditures or
time delays. Exploration and mining permits may be susceptible to revision
or cancellation by new laws or changes in direction by the government of the
day. In addition, the Exclusive Economic Zone and Continental Shelf
(Environmental Effects) Act 2012 has in recent years been subject to varying
and conflicting interpretation by the Courts which is expected to be resolved
by a recent application by another marine mining project. Until then there
will continue to be uncertainty as to its interpretation or application.
Whilst the Directors believe that the Government and population of New
Zealand generally support the development of natural resources in the manner
contemplated by Chatham (NZ), there is no assurance that future political and
economic conditions will not result in the adoption of different policies or
attitudes affecting ownership of assets, land tenure and mineral concessions,
taxation, royalties, environmental protection, labour relations and return of
capital. This may affect Chatham (NZ)'s ability to undertake exploration,
development and mining activities on its projects.
Regulatory Compliance Risks
Chatham (NZ)'s future expected mining operations and exploration activities,
as well as the transportation and handling of any products mined, are or will
be subject to extensive regulations and laws. Such regulations relate to
production, development, exploration, exports, imports, taxes and royalties,
labour standards, occupational health, waste disposal, protection and
remediation of the environment, decommissioning and reclamation, toxic
substances, transportation safety and emergency response, and other matters.
Compliance with such regulations and laws increases the costs of Chatham
(NZ)'s operations.
It is possible that, in the future, the costs, delays and other effects
associated with such laws and regulations may impact Chatham (NZ)'s decision
as to whether to operate existing projects, or, with respect to exploration
and development properties, whether to proceed with exploration or
development, or that such laws and regulations may result in Chatham (NZ)
incurring significant costs to remediate or decommission properties that do
not comply with applicable environmental standards at such time.
Chatham (NZ) expends significant financial and managerial resources to comply
with such laws and regulations and anticipates the need for even greater
resources if production is commenced. Because legal requirements are subject
to change and to interpretation, Chatham (NZ) is unable to predict the
ultimate cost of compliance with these requirements or their effect on
operations. Furthermore, future changes in governments, regulations and
policies, such as those affecting Chatham (NZ)'s mining operations and
phosphorite transport, could materially and adversely affect Chatham (NZ)'s
results of operations and financial condition in a particular period or its
long term business prospects.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions. These actions may result in
orders issued by regulatory or judicial authorities causing operations to
cease or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment or remedial actions.
Chatham (NZ) may be required to compensate others who suffer loss or damage
by reason of its activities and may have civil or criminal fines or penalties
imposed for violations of applicable laws or regulations.
Reliance on Key Equipment
The ability of Chatham (NZ) to extract the phosphorite from the seabed will
be dependent on unique mining equipment, including a specialized vessel and
trailing suction unit. Should this unique equipment become unavailable once
commissioned, Chatham (NZ) will likely have no alternative access to its
Mineral Resource. The equipment may become temporarily or permanently
unavailable to Chatham (NZ) due to factors beyond Chatham (NZ)'s control,
including adverse weather conditions, labour stoppages, rocket strike,
technical failures, government regulations, failure to secure any necessary
intellectual property licenses or decisions of the equipment operator. The
unavailability of such equipment could have a material adverse effect on the
financial condition, operations, and prospects of Chatham (NZ).
Phosphate Demand and Pricing
The profitability of Chatham Rock's group operations, and its ordinary Share
price, will be highly dependent upon the market price of phosphate rock.
Chatham (NZ)'s net earnings and operating cash flow will be closely related
and sensitive to fluctuations in the long and short term market price of
phosphorite. Commodity prices fluctuate widely and are affected by numerous
factors beyond the control of Chatham (NZ). The world supply of and demand
for fertilizers and the stability of exchange rates can all cause significant
fluctuations in prices. These factors cannot be accurately predicted. The
price of fertilizers has fluctuated widely in recent years and future price
declines could cause commercial production to be impracticable, which could
have a material adverse effect on the financial condition, operations, and
prospects of Chatham (NZ).
Reliance on Key Personnel
Chatham (NZ)'s success will largely depend on the efforts and abilities of
certain senior officers and key personnel. Chatham (NZ) is committed to
providing attractive working conditions to assist in retaining its key senior
management personnel. However, there can be no assurance Chatham (NZ) will
be able to retain these key personnel. Furthermore, the number of
individuals with relevant mining and operational experience in this industry
is small. The loss of key personnel or the inability to recruit and retain
high-calibre staff could have a material adverse effect on Chatham (NZ). The
addition of new personnel or employees and the departure of existing
contractors, particularly in key positions, can be disruptive and may have a
material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ).
Personnel requirements of Chatham (NZ) will also change. At present, Chatham
(NZ) has a particular need for scientific and communications expertise as it
pursues the Marine Consent. If granted, those needs will reduce and there
will be increased need for engineering and sales and marketing capabilities.
There can be no assurance that additional personnel with such capabilities,
fit for Chatham (NZ)'s purpose, will be secured.
Property Title Risk
The Mining Permit covers an offshore area in the EEZ of New Zealand. The
Mining Permit and Marine Consent (if issued) can be considered utilization
rights to that offshore area. These rights may be subject to defects or
challenges. If such defects or challenges cover a material portion of
Chatham (NZ)'s offshore area, they could materially and adversely affect
Chatham (NZ)'s reported Mineral Resources or its long term business
prospects. As well, any prolonged challenge to Chatham (NZ)'s rights could
result in substantial delays in its development timetable, which could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ). Ambiguity can arise in the interpretation of mining
legislation regulations, permits and policy, including whether or not
conditions have or have not been satisfied (either at the time of
satisfaction or subsequent thereto). For example, the precise form of study
that is required to be delivered in support of a decision to mine and in
satisfaction of Mining Permit is not subject to any further detailed guidance
or definition. Interpretations, whether at the relevant time or subsequent
thereto, could result in claims or losses that have a material adverse impact
on the business, operations, assets or prospects of Chatham (NZ).
Maori customary rights, as well as requirements to consult with Maori under
applicable New Zealand law, are relevant to Chatham (NZ)'s rights. Managing
relations with local Maori communities is a matter of paramount importance to
Chatham (NZ). Notwithstanding that Maori interests do not carry with them a
form of "veto" or similar right in relation to the Mining Permit or the
potential grant of the Marine Consent, there can be no assurance that
customary rights claims, as well as related consultation issues, will not
arise on or with respect to Chatham (NZ)'s rights and impact on Chatham
(NZ)'s exploration, development and mining activities, which could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ).
Environmental Risk
Chatham (NZ)'s New Zealand projects are subject to New Zealand environmental
laws. These laws include laws generally applying to the protection of the
environment, as well as specific regulation relating to areas in which
Chatham operates. Exploration and mining projects can cause a variety of
environmental impacts and Chatham (NZ) is conscious of a number of potential
impacts in respect of its proposed mining operations, including:
impact on fish stocks on the Chatham Rise;
pollution risks from the vessel (e.g. oil spills);
impact on benthic communities; and
effects of plume (where silt and seabed materials are separated from the
rock phosphate and returned to the ocean floor, but do not settle on the
seabed immediately and then go into the lower levels of the water column).
Chatham (NZ) has collected and analyzed extensive data on these potential
effects to develop and mitigation strategies, as well as contracted
scientific organizations in New Zealand and The Netherlands (including NIWA
and Deltares) to assess the environmental impacts of its operations. This
information comprises a significant part of the Marine Consent application.
Chatham (NZ) intends to carry out its operations in compliance with all
applicable environmental laws and in compliance with any conditions imposed
upon it, as well as in a responsible manner. In the event that Chatham (NZ)
does not operate in compliance with all applicable laws and conditions there
is a risk that the Mining Permit and/or Marine Consent, if granted, could be
forfeited or other adverse consequences could arise.
NGO Risk
Mining companies are often the target of actions by non-governmental
organizations and environmental groups in the countries in which they
operate. Such organizations and groups may take actions that are illegal,
unauthorized or dangerous, without the support of government, to disrupt
commercial operations. There can be no guarantee that any future action will
not be taken by any non-governmental organization or environmental group to
disrupt Chatham (NZ)'s mining operations. They may also apply pressure to
local, regional and national government officials, or local iwi groups, to
take actions that are adverse to Chatham (NZ)'s operations. Such actions
could have an adverse effect on Chatham (NZ)'s ability to produce and sell
its products, which could have a material adverse effect on the financial
condition, operations, and prospects of Chatham (NZ).
Profitability and Operating History
Chatham (NZ) has no history or earning revenue or profits and no assurance
can be given by Chatham (NZ) that it will have future revenues or profits,
since these are dependent on the future development and success of any mining
operation. Chatham (NZ) has no history of mining operations and is in a
pre-revenue stage of development. As such, Chatham (NZ) is subject to many
risks common to such enterprises, including under-capitalization, cash
shortages, limitations with respect to personnel, financial and other
resources and the lack of revenue. There is no assurance that Chatham (NZ)
will be successful in achieving a return on Shareholders' investment.
Competition and Customer Strength
The fertilizer and mining industries are intensely competitive in all phases
of exploration, development and production. Competition in the mining
industry is primarily for properties that can be developed and produced
economically; technical and commercial expertise; and capital. Many
competitors not only explore for and mine phosphate rock, but conduct
beneficiation and marketing operations on a global basis. Such competition
may result in embedded relationships with customers that make it difficult
for Chatham (NZ) to negotiate offtake or other supply arrangements. As well,
many potential phosphate customers are better capitalized than Chatham (NZ)
and may engage in tactical order delays and other behaviour that could cause
Chatham (NZ) to suffer cash flow difficulties and induce it to execute
transactions that do not reflect market conditions, which could have a
material adverse effect on the financial condition, operations, and prospects
of Chatham (NZ).
Conflicts of Interest
Certain of Chatham (NZ)'s directors, officers and significant shareholders
are or may become shareholders, directors and/or officers of other natural
resource companies, and, to the extent that such other companies may
participate in ventures with Chatham (NZ), these individuals may have a
conflict of interest in negotiating and concluding terms respecting the
extent of such participation.
In the event that such a conflict of interest arises at a meeting of the
directors, a director who has such a conflict will abstain from voting for or
against the approval of such participation or of its terms. In appropriate
cases Chatham (NZ) will establish a special committee of independent
directors to review a matter in which one or more directors or officers may
have a conflict.
From time to time, Chatham (NZ), together with other companies, may be
involved in a joint venture opportunity where several companies participate
in the acquisition, exploration and development of natural resource
properties, thereby permitting Chatham (NZ) to be involved in a greater
number of larger projects with an associated reduction of financial exposure
in any given project. Chatham (NZ) may also assign all or a portion of its
interest in a particular project to any of these companies due to the
financial position of the other Company or companies.
In accordance with the laws of the province of British Columbia, the
directors are required to act honestly and in good faith with a view to
furthering the best interest of Chatham (NZ). In determining whether or not
Chatham (NZ) will participate in a particular program or transaction and the
terms of such participation, the directors will primarily consider the
potential benefits to Chatham (NZ), the degree of risk to which Chatham (NZ)
may be exposed and its financial position at that time. Other than as
indicated, Chatham (NZ) has no procedures or mechanisms to deal with
conflicts of interest.
Dependence on General Economic Conditions
The operating and financial performance of Chatham (NZ) is influenced by a
variety of general economic and business conditions, including levels of
consumer spending, inflation, interest rates and exchange rates, access to
debt and capital markets, and government fiscal, monetary and regulatory
policies. Prolonged deterioration in general economic conditions, including
an increase in interest rates or a decrease in consumer and business demand,
could have a material adverse effect on Chatham (NZ)'s business and financial
condition.
Exchange Rates
Chatham (NZ) is exposed to movements in exchange rates. Chatham (NZ)'s
historical (New Zealand) financial statements are expressed and maintained in
New Zealand dollars. Exchange rate movements between New Zealand and other
countries may impact the profit and loss account or assets and liabilities of
Chatham (NZ), to the extent the foreign exchange rate risk is not hedged or
not appropriately hedged.
Insurance Risk
Although Chatham (NZ) may obtain insurance to cover some of these risks and
hazards in amounts it believes to be reasonable, such insurance may not
provide adequate coverage in the event of certain circumstances. No
assurance can be given that such insurance will continue to be available or
that it will be available at economically feasible premiums or that it will
provide sufficient coverage for losses related to these or other risks and
hazards. Furthermore, there are risks that Chatham (NZ) cannot insure
against, or may elect not to insure against, any such risks and hazards and
Chatham (NZ) may be subject to liability or sustain loss in such
circumstances, which could have a material adverse effect on the financial
condition, operations, and prospects of Chatham (NZ).
Dividends
There can be no assurance as to the level of future dividends. The
declaration, payment and amount of any future dividends of Chatham (NZ) are
subject to the discretion of the Shareholders or, in the case of interim
dividends to the discretion of the directors, and will depend upon, amongst
other things, Chatham (NZ)'s earnings, financial position, cash requirements,
availability of profits, as well as provisions for relevant laws or generally
accepted accounting principles from time to time.
Under New Zealand law the board of directors may declare dividends from time
to time from distributable profits provided that the board of directors first
resolves and certifies that following the dividend being paid, Chatham (NZ)
will satisfy the solvency test under the Companies Act 1993. This solvency
test requires that the board of directors believes on reasonable grounds that
Chatham (NZ) will be able to meet its debts as they fall due and that its
assets exceed liabilities, including contingent liabilities.
Taxation
The tax rules, including stamp duty provisions and their interpretation,
relating to an investment in Chatham (NZ) may change during the life of
Chatham Rise project. The levels of, and reliefs from, taxation may also
change and vary in respect of a given investor's circumstances.
Dual Regulation
Chatham Rock's New Zealand subsidiary, Chatham Rock Phosphate (NZ) Limited is
primarily regulated by the Companies Act 1993. As a company listed on the
NZX, Chatham Rock has the Toronto Venture Exchange as its home exchange, with
a copy of each document filed in Canada, to also be filed with the NZX.
SUPPLEMENTAL TO THE FINANCIAL STATEMENTS
Outstanding Share and Option Data
Chatham Rock's shares trade on the TSX Venture Exchange (ticker code NZP),
the New Zealand Exchange (ticker code CRP) and the Frankfurt Stock Exchange
(ticker code 3GRE). The Company is authorized to issue an unlimited number of
common shares without par value.
As at December 31, 2020, 33,699,154 common shares were issued and
outstanding. No shares are subject to TSX Venture escrow provisions.
On May 5, 2020 the Company closed a non-brokered private placement of
5,029,820 units at a price of CAD$0.08 per Unit for gross proceeds of
CAD$402,386. Each unit consists of one common share and one transferable
share purchase warrant. Each whole warrant entitles the holder to purchase
one common share at a price of CAD$0.45 per share any time prior to the date
that is five years from the date of issuance. In the event that the common
shares of the Company trade on the TSX Venture Exchange at a closing price of
greater than CAD$0.60 per common share for a period of 20 consecutive trading
days at any time after four months and one day after the closing date of the
private placement, the Company may accelerate the expiry date of the Warrants
by giving notice to the holders thereof by way of a news release and in such
case the Warrants will expire on the 30th day after the date of dissemination
of the news release.
On June 23, 2020 the Company closed a non-brokered private placement of
2,365,894 units at a price of CAD$0.08 per Unit for gross proceeds of
CAD$189,272. Each unit consists of one common share and one transferable
share purchase warrant. Each whole warrant entitles the holder to purchase
one common share at a price of CAD$0.45 per share any time prior to the date
that is five years from the date of issuance. In the event that the common
shares of the Company trade on the TSX Venture Exchange at a closing price of
greater than CAD$0.60 per common share for a period of 20 consecutive trading
days at any time after four months and one day after the closing date of the
private placement, the Company may accelerate the expiry date of the Warrants
by giving notice to the holders thereof by way of a news release and in such
case the Warrants will expire on the 30th day after the date of dissemination
of the news release.
FORWARD-LOOKING STATEMENTS
These audited consolidated financial statements and this Management's
Discussion and Analysis, contains certain "Forward-Looking Statements" that
are prospective and reflect management's expectations regarding Chatham Rock
Phosphate Limited's ("Chatham Rock" or "Company") future growth, results of
operations, performance and business prospects and opportunities.
Forward-looking information can often be identified by forward-looking words
such as "anticipate", "believe", "expect", "goal", "plan", "intend",
"estimate", "may" and "will" or similar words suggesting future outcomes, or
other expectations, beliefs, plans, objectives, assumptions, intentions or
statements about future events or performance.
All statements, other than statements of historical fact, included herein,
including without limitation, statements regarding potential mineralization
and reserves, estimates of future production, unit costs, costs of capital
projects and timing of commencement of operations, exploration results and
future plans and objectives of the Company are forward-looking statements
that involve various risks and uncertainties. There can be no assurance that
such statements will prove to be accurate, and actual results and future
events could differ materially from those anticipated in such statements.
Important factors that could cause actual results to differ materially from
Company's expectations are disclosed in its documents filed from time to time
with the TSX Venture Exchange and other regulatory authorities and include,
but are not limited to, failure to establish estimated resources and
reserves, the grade and recovery of ore to be mined varying from estimates,
capital and operating costs varying significantly from estimates, delays in
obtaining or failure to obtain required governmental, environmental or other
project approvals, inflation, changes in exchange rates, fluctuations in
commodity prices, delays in the development of projects and other factors.
Shareholders and prospective investors should be aware that these statements
are subject to known and unknown risks, uncertainties and other factors that
could cause actual results to differ materially from those suggested by the
forward-looking statements. Readers are cautioned not to place undue reliance
on forward-looking information. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties, both general
and specific, that contribute to the possibility that the predictions,
forecasts, projections and various future events will not occur.
Chatham Rock undertakes no obligation to update publicly or otherwise revise
any forward-looking information whether as a result of new information,
future events or other such factors which affect this information, except as
required by law.
Consolidated Financial Statements
(Expressed in Canadian dollars)
CHATHAM ROCK PHOSPHATE LIMITED
For the nine months ended December 31, 2020 and 2019
CONTENTS
Consolidated Statement of Financial Position 2
Consolidated Statement of Operations and Comprehensive (Loss)/Income 3
Consolidated Statement of Changes in Equity 4
Consolidated Statement of Cash Flows 5
Notes to the Consolidated Financial Statements 6-32
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statement of Financial Position
(Expressed in Canadian dollars)
December 31, March 31,
Notes 2020 2020
Assets
Current assets:
Cash and cash equivalents $ 49,001 $ 12,352
Accounts receivable and other receivables 6,982 8,218
Current tax assets - -
Other current assets 5 144,834 50,754
200,817 71,324
Non-current assets:
Property, plant and equipment - -
NZX Bond 13,818 12,762
Mineral property interest 6 4,883,959 4,456,736
4,897,777 4,469,498
Total assets $ 5,098,594 $ 4,540,822
Liabilities and Shareholders' Equity
Current liabilities:
Trade and other payables 7 $ 132,908 $ 208,222
132,908 208,222
Total liabilities 132,908 208,222
Shareholders' equity:
Share capital 8 35,695,190 35,108,126
Warrants reserve 230,186 230,186
Foreign currency translation reserve 40,849 (355,961)
Employee share option reserve 214,381 214,381
Accumulated deficit (31,214,920) (30,864,132)
Total shareholders' equity 4,965,686 4,332,600
Total liabilities and shareholders' equity $ 5,098,594 $ 4,540,822
Going concern (note 1)
Commitments and contingencies (note 17)
The accompanying notes form an integral part of these consolidated financial
statements.
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Operations and Comprehensive (Loss)/ Income
(Expressed in Canadian dollars)
For the three and nine months ended December 31, 2020 and 2019
Notes Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Revenue $ 1,340 $ 1,254 $ 3,840 $ 3,825
Finance income - (17) - 2,353
Finance expense (378) - (3,410) -
Net finance income/(expense)
11 (378) (17) (3,410) 2,353
Expenses
General and administrative expenses 12 (105,366) (128,887) (351,218)
(389,341)
Expenses (105,366) (128,887) (351,218) (389,341)
Loss before income tax (continuing operations) (104,404) (127,650)
(350,788) (383,163)
Income tax expense
-
-
-
-
Net loss for the period from continuing operations (104,404)
(127,650) (350,788) (383,163)
Other Comprehensive Income
Foreign currency translation** 198,630 258,863 396,810 (182,448)
Total comprehensive (loss)/profit for the period $ 94,226 $
131,213 $46,022 $(565,611)
Basic shareholders' loss per share (Canadian cents)
$ (0.31)
$ (0.50)
$ (1.09)
$ (1.50)
Diluted shareholders' loss per share (Canadian cents)
$ (0.31)
$ (0.50)
$ (1.09)
$ (1.50)
Weighted average number of common shares outstanding
33,699,154
25,712,744
32,299,742
25,561,568
**Items which can subsequently be reclassified to profit or loss
The accompanying notes form an integral part of these consolidated financial
statements.
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statement of Changes in Equity
(Expressed in Canadian dollars, except number of common shares)
For the nine months ended December 31, 2020 and 2019
Number of common shares Number of warrants Share capital Warrants reserve
Foreign currency translation Employee share option reserve Accumulated
deficit Shareholders' equity
Balance, April 1, 2019 24,303,754 4,243,402 35,068,781 - - 230,787
(30,302,781) 4,996,787
Issue of shares, net of costs, and discretionary warrants 1,999,686 1,323,657
246,722 22,809 - - - 269,531
Transfer of cost of warrants - - (207,377) 207,377 - - - -
Expiry of discretionary warrants - (3,413) - - - - - -
Cancellation of options - - - - - (55,506) 55,506 -
Share-based payments - - - - - 39,100 - 39,100
Transactions with owners 39,345 230,186 - (16,406) 55,506 308,631
Transfer - - - - (23,439) - 23,439 -
Loss for the period - - - - - - (383,163) (383,163)
Currency Translation Loss - - - - (182,448) - - (182,448)
Total comprehensive income for the period - - (205,887) - (359,724)
(565,611)
Balance, December 31, 2019 26,303,440 5,563,646 35,108,126 230,186 (205,887)
214,381 (30,606,999) 4,739,807
Loss for the period - - - - - - (257,133) (257,133)
Currency Translation Loss - - - - (150,074) - - (150,074)
Total comprehensive income for the period - - (150,074) - (257,133)
(407,207)
Balance, March 31, 2020 26,303,440 5,563,646 35,108,126 230,186 (355,961)
214,381 (30,864,132) 4,332,600
Issue of shares, net of costs, and discretionary warrants 7,395,714 7,395,714
587,064 - - - - 587,064
Transactions with owners 587,064 - - - - 587,064
Loss for the period - - - - - - (350,788) (350,788)
Currency Translation Loss - - - - 396,810 - - 396,810
Total comprehensive income for the period - - 396,810 - (350,788) 46,022
Balance, December 31, 2020 33,699,154 12,959,360 35,695,190 230,186 40,849
214,381 (31,214,920) 4,965,686
The accompanying notes form an integral part of these consolidated financial
statements.
CHATHAM ROCK PHOSPHATE LIMITED
Consolidated Statements of Cash flows
(Expressed in Canadian dollars)
For the three and nine months ended December 31, 2020 and 2019
Notes Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Cash flows from operating activities:
Net interest received $ - $ (40) $ - $
1,945
Cash received from suppliers 1,340 1,254 3,840 3,825
Cash paid to suppliers (117,855) - (597,682) -
Interest paid (378) (91,907) (1,687) (468,897)
Tax refund received - - - 2,055
Net cash (used in) operating activities 16 (116,893) (90,693) (595,529)
(461,072)
Cash flows from investing activities:
Payments in respect of exploration and evaluation (6,357) - (72,492) -
Net cash (used in) investing activities (6,357) - (72,492) -
Cash flows from financing activities:
Proceeds received in advance of private placement (January 2021) 93,699 -
93,699 -
Proceeds from issue of share capital, net of issue costs - 97,144 587,064
320,532
Net cash from financing activities 93,699 97,144 680,763 320,532
Net increase/(decrease) in cash and cash equivalents (29,551) 6,451 12,742
(140,540)
Cash and cash equivalents, beginning of period 78,166 69,834 12,352 243,615
Effect of foreign exchange rate fluctuations on cash held 386 17,230 23,907
(9,560)
Cash and cash equivalents, end of period $ 49,001 $ 93,515 $
49,001 $ 93,515
The accompanying notes form an integral part of these consolidated financial
statements.
1. Nature of business and going concern
Chatham Rock Phosphate Limited (the "Group" or "CRP") is a development-stage
Group incorporated under the Business Corporations Act (British Columbia) and
listed on the Toronto Stock Exchange's Venture Exchange ("TSX-V"). The Group
is also registered on the overseas company register under the New Zealand
Companies Act 1993 and listed on the New Zealand Stock Exchange ("NZX"). The
Group is an FMC reporting entity under part 7 of the Financial Markets
Conduct Act 2013 (New Zealand).
The Group comprises the parent Group and its wholly owned subsidiaries. The
financial statements are presented for the consolidated group.
Chatham Rock Phosphate Limited's focus is the development and exploitation of
the Chatham Rise rock phosphate deposit offshore New Zealand and potential
overseas phosphate projects.
The Group's registered offices are:
o 3200 - 650 West Georgia Street, Vancouver, B.C., Canada V6B 4P7
o Level 1, 93 The Terrace, Wellington 6011, New Zealand
Accordingly, the Group has reporting obligations in both the Canadian and New
Zealand jurisdictions.
2. Basis of preparation
(a) Statement of compliance:
These consolidated financial statements have been prepared in accordance with
the principles of the International Financial Reporting Standards ("IFRS") as
issued by the International Accounting Standards Board ("IASB").
(b) Approval of the financial statements:
The consolidated financial statements for the period ended December 31, 2020
were reviewed by the Audit Committee and approved and authorized for issue by
the Board of Directors on March 01, 2021.
(c) Basis of measurement:
These consolidated financial statements have been prepared on the historical
cost basis, utilising the accrual method of accounting unless otherwise
described in the following notes.
2. Basis of preparation (continued)
(d) Going concern:
These consolidated financial statements have been prepared on a going concern
basis, which assumes that the Group has the ability and intention to continue
operations for a period of at least 12 months from the date of the financial
statements. The following conditions indicate the existence of a material
uncertainty that may cast significant doubt on the validity of this
assumption.
Marine consent re-application
The Group requires a marine consent in order to undertake its proposed
operations. On February 11, 2015, the Group was refused Marine Consent by an
Independent Decision Making Committee (DMC) convened by the Environmental
Protection Authority (EPA), New Zealand's environmental regulator on grounds
which the Group disputes. The Directors plan is to re-submit its Marine
Consent application with the EPA once additional funding (see below) has been
secured. Management has conducted an independent review of the marine consent
application and the EPA judgement and has identified the areas where their
application was deficient. These deficiencies are to be addressed and
communicated as part of the re-submission. The outcome of the re-submission
is uncertain.
Avenir Makatea Acquisition
On December 21, 2020 the Company announced that it had concluded negotiations
to acquire French Polynesia-based Avenir Makatea Pty Limited. The merger was
negotiated at arm's length.
Avenir Makatea proposes, once fully permitted, to recover phosphate from the
island of Makatea in French Polynesia, which will also enable the
rehabilitation of previously mined parts of the island.
The purchase price is CAD $1,455,000 and will be settled through an issue of
shares. The acquisition is subject to certain conditions including TSX.V
approval. When the transaction is completed the vendors of Avenir Makatea
will hold approximately 28% of the enlarged capital of the Group.
Additional funding
The Group incurred a net loss of $104,404 during the three months ended
December 31, 2020 (2019: $127,650 net loss) and as of that date the Group's
current assets exceed its current liabilities by $67,909 (March 31, 2020:
current liabilities exceed current assets by $136,898). During the period the
Group had operating cash outflows of $116,893 (2019: $90,693 operating cash
outflows) and had a cash balance of $49,001 (March 31, 2020: $12,352).
The Directors forecast they have sufficient cash to continue to fund
operations for at least 12 months from the date the financial statements are
signed. While management do not currently have committed funding to fund
operations beyond this point, or to fully fund the marine consent
re-application in its entirety, it has a history of raising additional funds
and therefore expects to continue to meet its obligations for the foreseeable
future, and to raise funding to complete the marine consent re-application.
2. Basis of preparation (continued)
(d) Going concern (continued):
Management's cash flow forecasts include the following assumptions:
o The Group continues to manage its corporate costs appropriately within
existing available funds.
o The Directors will continue to raise further capital as required by one of
a combination of the following: placement of shares; pro-rata issue to
shareholders; and/or further issue of shares to the public.
o Expenditure is scalable such that the Group can continue to operate
depending on funding obtained. This includes continuing to operate for a
period of 12 months from the date of the financial statements in the event to
further funding is obtained during that period.
o The Directors plan to evolve the company from a single project focus into a
more diversified company, principally involving other phosphate assets.
The Group has obligations under the Minimum Work Programme for its existing
mining permit as disclosed in Note 19. The work programme commitments have
been met to date. If sufficient funding is not received the Group has the
ability to apply to defer and reduce planned expenditure, similar to what the
Group has done in the past.
In preparing these consolidated financial statements, the Directors have
considered the above material uncertainties. They believe that the plans they
have implemented to address the uncertainties are feasible. In reaching this
assessment, the Directors have considered:
o the independent review of its marine consent application including the
identified areas of deficiency and its assessment of further study of how
these deficiencies can be addressed;
o the Group's past success in managing costs to meet available funding; and
o the Group's previous ability to raise equity funding.
On this basis, the Directors believe that the Group has the ability to
generate sufficient funding to continue operations for at least the next 12
months from the date of authorising the financial statements. Hence, they
consider the use of the going concern basis is appropriate.
These financial statements do not include any adjustments that may be made to
reflect that situation should the Group be unable to continue as a going
concern, which means it may not be able to realise its assets or settle its
liabilities in the normal course of business. Such adjustments may include
realising assets at amounts other than those recorded in the financial
statements, in particular the Mineral property interest of $4,883,959. In
addition, the Group may have to:
o provide for further liabilities that may arise;
o reclassify certain non-current assets and liabilities as current.
2. Basis of preparation (continued)
(e) Functional and presentation currency:
These consolidated financial statements are presented in Canadian dollars ($)
as the Group's primary listing is on the Toronto Stock Exchange's Venture
Exchange. The functional currency of the parent company is Canadian Dollars
and the functional currency of Chatham Rock Phosphate (NZ) Limited, the
subsidiary company, is New Zealand dollars (NZD), the currency of the primary
economic environment in which it operates.
(f) Significant accounting judgements, estimates and assumptions:
The preparation of the consolidated financial statements requires management
to make judgements, estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities affected
in future periods.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the financial statements were
prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising beyond the
control of the Company. Such changes are reflected in the assumptions when
they occur.
In the process of applying the Group's accounting policies, management has
made the following judgements, which have the most significant effect on
amounts recognised in the consolidated financial statements:
Share-based payment transactions
The Group measures the cost of equity-settled transactions by reference to
the fair value of the equity instruments at the date at which they are
granted. The Company includes an estimate of forfeitures, share price
volatility, expected life of awards, and risk-free interest rates in the
calculation of the expense related to certain long-term employee incentive
plans. These estimates are based on previous experience and may change
throughout the life of an incentive plan. Such changes could impact the
share-based payments reserve.
Exploration and evaluation costs
Significant judgement is required in determining whether it is likely that
future economic benefits will be derived from the capitalised exploration and
evaluation expenditure. In the judgement of the Directors, at March 31, 2020
exploration activities in each area of interest where amounts remain
capitalised have not yet reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable
reserves. Active and significant operations in relation to each of those
areas of interest are planned and nothing has come to the attention of the
Directors to indicate future economic benefits will not be achieved.
2. Basis of preparation (continued)
(f) Significant accounting judgements, estimates and assumptions (continued):
The Group cannot commence mining operations without the Marine Consent. The
Group filed for the Marine Consent on May 14, 2014 but was declined on
February 11, 2015. While the Group considers that it has a good case to
receive the Marine Consent on re- application, there is no guarantee that the
Marine Consent will be granted. If the Marine Consent is not granted or is
granted subject to economically unfeasible conditions, the Group will not be
able to proceed with mining operations in respect of the Mining Permit, which
could have a material adverse effect on the financial condition, operations,
and prospects of the Group.
In the event where ongoing committed activities cannot be funded by existing
financial resources, the Group will either need to raise additional capital,
or meet its obligations either by farm-out or partial sale of the Group's
exploration interests, or subject to negotiation and approval, vary the
minimum work requirements. The Directors are continually monitoring those
areas of interest and are exploring alternatives for funding the development
of those areas of interest when economically recoverable reserves are
confirmed. If new information becomes available that suggests the recovery of
expenditure is unlikely, the amounts capitalised will need to be reassessed
at that time.
COVID-19
The current outbreak of COVID-19 and the subsequent quarantine measures
imposed by the New Zealand government as well as the travel restrictions
imposed by New Zealand and other countries in early 2020 have caused
disruption to businesses and economic activity.
The Group has considered the nature of the event and concluded that the
impact on the Group's current activities to be minimal.
(g) New accounting standards:
(i) New IFRS standards and interpretations adopted
There are no other relevant standards and revisions to standards that have
been published and are mandatory for the Company's accounting periods
beginning on or after 1 April 2020.
(ii) New IFRS standards and interpretations issued but not yet adopted
The standards below have been issued but not early adopted by the Group. It
is expected that these will be adopted from the first period beginning on or
after the effective date of the pronouncement.
3. Significant accounting policies
The accounting policies set out below have been applied consistently for all
periods presented in these consolidated financial statements.
(a) Basis of consolidation:
Business combinations are accounted for using the acquisition method as at
the acquisition date, which is the date on which control is transferred to
the Group. Control is the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In
assessing control, the Group takes into consideration potential voting rights
that currently are exercisable.
Transactions costs, other than those associated with the issue of debt or
equity securities, that the Group incurs in connection with a business
combination are expensed as incurred. Any contingent consideration payable
is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not re-measured and
settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss. The Group recognises the fair
value of all identifiable assets, liabilities and contingent liabilities of
the acquired business.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control ceases.
Transactions eliminated on consolidation
Intra-group balances are eliminated in preparing the consolidated financial
statements.
These consolidated financial statements include the accounts of the Group and
its subsidiaries. All inter-Group transactions and balances are eliminated on
consolidation.
Significant subsidiaries of the Group are as follows:
Country of Effective
Name incorporation interest
Chatham Rock Phosphate (NZ) Limited New Zealand 100
Manmar Investments One Hundred and
Nine (Proprietary) Limited
Namibia
100
Pacific Rare Earths Limited New Zealand 100
All of the subsidiaries have a March, 31 balance date.
Manmar Investments One Hundred and Nine (Proprietary) Limited and Pacific
Rare Earths Limited both did not have any transactions during the years
ending March 31, 2020 and 2019.
3. Significant accounting policies (continued)
(b) Currency translation:
Transactions in currencies other than the functional currency are recorded at
the rate of exchange prevailing on the date of the transaction. Monetary
assets and liabilities are translated at the exchange rate in place on the
reporting date. Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate on the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date the fair value was determined.
Foreign currency translation differences are recognised in profit or loss.
For consolidation purposes, Chatham Rock Phosphate (NZ) Limited is translated
into the Group's presentation currency of Canadian dollars. Assets and
liabilities are translated using the exchange rate prevailing at the end of
the reporting period. Income and expense items are translated at the average
exchange rate for the relevant period. Translation differences are recognised
in other comprehensive income (loss) and are accumulated within equity in the
currency translation reserve.
(c) Share capital:
Common shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised
as a deduction from equity.
(d) Share purchase warrants:
The Group issues transferrable share purchase warrants as part of their
common share capital offering. The warrants are classified as an equity
instrument as it only allows the holder to purchase one common share at a
fixed price and is a non-derivative contract.
The consideration received on the sale of share and share purchase warrant is
allocated using the residual method. The allocated amounts are presented
respectively as share capital and warrants reserve account, within the
Statement of Changes in equity.
Any re-measurement adjustment, as a result of a subsequent modification of
the terms of warrants, is not recognised within equity.
(e) Share-based payments:
The Company has a share option plan, under which the fair value of all
share-based awards as estimated using the Black-Scholes Option Pricing Model
at the grant date and amortized over the vesting periods. An individual is
classified as an employee when the individual is an employee for legal or tax
purposes (direct employee) or provides services similar to those performed by
a direct employee, including directors of the Company. The amount recognized
as an expense is adjusted to reflect the number of awards expected to vest.
The offset is credited to share-based payments reserve.
3. Significant accounting policies (continued)
(e) Share-based payments (continued):
Upon exercise of the share purchase options, consideration paid together with
the amount previously recognized in share-based payment reserve is recorded
as an increase to share capital. Charges for share purchase options that are
forfeited before vesting are reversed from the share-based payments reserves.
For those share purchase options that expire or are forfeited after vesting,
the amount previously recorded in share-based payments reserve is transferred
to accumulated deficit.
(f) Impairment:
Non-financial assets other than indefinite life intangibles are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
The Group conducts an annual internal review of asset values, which is used
as a source of information to assess any indicators for impairment. If any
impairment exists, an estimate of the asset's recoverable amount is
calculated. Refer to factors considered in identifying whether the mineral
asset may be impaired in Note (h).
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. Recoverable amount is the higher of an
assets fair value less costs of disposal and value in use. Non-financial
assets that have suffered an impairment are tested for possible reversal of
the impairment whenever events or changes in circumstances indicate that the
impairment may have reversed.
(g) Mineral property interest:
Exploration and evaluation costs, including the costs of applying and
acquiring licences, are capitalised as intangible assets on an area of
interest basis. Costs incurred before the Group has obtained the legal rights
to explore an area are recognised in the Statement of Comprehensive Income.
Exploration and evaluation assets are classified as intangible assets and are
measured at cost less any accumulated amortisation and impairment losses.
Amortisation will commence once the Group has commenced mining operations and
will be recognised on a unit of production basis.
Exploration and evaluation assets are recognised and carried forward if the
rights of the area of interest are current and either:
(i) The expenditures are expected to be recouped through successful
development and exploitation of the area of interest; or
(ii) Activities in the area of interest have not at the reporting date,
reached a stage which permits a reasonable assessment of the existence or
other wise of economically recoverable reserves and active and significant
operations in, or in relation to, the area of interest are continuing.
3. Significant accounting policies (continued)
(g) Mineral property interest (continued):
Ultimate recoupment of costs is dependent on successful development and
commercial exploration or alternatively sale of respective areas. Costs are
written off as soon as an area has been abandoned or considered to be
non-commercial.
Exploration and evaluation assets are assessed for impairment when facts of
circumstances suggest that the carrying amount of the exploration and
evaluation assets may exceed its recoverable amount. The below facts and
circumstances indicate that an entity should test exploration and evaluation
assets for impairment (the list is not exhaustive):
(a) the period for which the entity has the right to explore in the specific
area has expired during the period or will expire in the near future, and is
not expected to be renewed.
(b) substantive expenditure on further exploration for and evaluation of
mineral resources in the specific area is neither budgeted nor planned.
(c) exploration for and evaluation of mineral resources in the specific area
have not led to the discovery of commercially viable quantities of mineral
resources and the entity has decided to discontinue such activities in the
specific area.
(d) sufficient data exist to indicate that, although a development in the
specific area is likely to proceed, the carrying amount of the exploration
and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
Once the technical feasibility and commercial viability of the extraction of
mineral resources in an area of interest are demonstrable, exploration and
evaluation assets attributable to that area of interest are first tested for
impairment and then reclassified from intangible assets to mining property
and development assets within property, plant and equipment.
(h) Finance income and expenses:
Finance income comprises interest income on bank deposits and foreign
currency gains that are recognised in the Statement of Comprehensive Income.
Interest income is recognised as it accrues, using the effective interest
method.
Finance expenses comprise interest expense and foreign currency losses, are
recognised in the Statement of Comprehensive Income. All borrowing costs are
recognised in the Statement of Comprehensive Income using the effective
interest method.
(i) Income tax:
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in the Statement of Comprehensive Income except to the extent that
it relates to items recognised directly in equity, in which case it is
recognised in equity.
3. Significant accounting policies (continued)
(i) Income tax (continued)
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when
they reverse, based on the laws that have been enacted or substantively
enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that
future taxable profits will be available against which temporary differences
can be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
(j) Financial assets:
Financial asset are measured at:
(I) Amortized cost;
(ii) Fair Value in Other Comprehensive Income ("FVOCI") - debt investment;
(iii) FVOCI - equity investment; and
(iv) Fair Value Through Profit or Loss ("FVTPL").
The classification depends on the business model in which the financial asset
is managed and its contractual cash flow characteristics. Derivatives
embedded in contracts where the host is a financial asset in the scope of
IFRS 9, Financial Instruments, are never separated. Instead, the hybrid
financial instrument as a whole is assessed for classification. The Group
does not have any FVOCI instruments.
A financial asset is measured at amortized cost if it meets both of the
following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold assets to
collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount
outstanding.
A financial asset (unless it is a trade receivable without a significant
financing component that is initially measured at the transaction price) is
initially measured at fair value plus, for an item not at FVTPL, transaction
costs that are directly attributable to its acquisition.
3. Significant accounting policies (continued)
(j) Financial assets (continued)
The following accounting policies apply to the subsequent measurement of
financial assets:
Financial assets at FVTPL These assets are subsequently measured at fair
value. Net gains and losses, including any interest or dividend income, are
recognized in profit or loss.
Financial assets at amortized cost These assets are subsequently measured at
amortized cost using the effective interest method. The amortized cost is
reduced by impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognized in profit or loss. Any gain or loss on
derecognition is recognized in profit or loss.
Impairment of financial assets
Financial assets measured at amortized cost, contract assets, and debt
investments in FVOCI, but not investments in equity instruments, are assessed
for credit impairment under the expected credit loss ("ECL") model of
impairment. This impairment model applies to lease receivables, loan
commitments, and financial guarantee contracts; the Company has no such
items. The financial assets at amortized cost consist of accounts
receivables, cash and cash equivalents.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Company expects to receive). ECLs are discounted at
the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried
at amortized cost and debt securities at FVOCI are credit-impaired. A
financial asset is 'credit-impaired' when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset
have occurred.
Presentation of impairment
Loss allowances for financial assets measured at amortized cost are deducted
from the gross carrying amount of the assets. Impairment losses related to
accounts and other receivables are presented separately in the statement of
profit or loss and OCI. Impairment losses on other financial assets are
presented under 'finance costs', and not presented separately in the
statement of profit or loss and OCI due to materiality considerations.
3. Significant accounting policies (continued)
(k) Financial liabilities:
Financial liabilities are classified as either financial liabilities at fair
value through profit or loss or financial liabilities at amortized cost.
Financial liabilities
Financial liabilities at amortized cost are initially measured at fair value,
net of transaction costs incurred and subsequently measured at amortized
cost. Any difference between the amounts originally received, net of
transaction costs, and the redemption value is recognized in profit or loss
over the period to maturity using the effective interest method.
Financial liabilities are classified as current or non-current based on their
maturity dates. The Company has classified accounts payable and other
liabilities as liabilities at amortized cost.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
(l) Earnings per share:
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Group by the weighted average
number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential ordinary shares, which
comprise share warrants and options.
4. Segment reporting
The Group conducts its business as a single reportable operating segment,
being the development of a defined rock phosphate deposit.
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segment, has been
identified as the Board. The Board manages development activity through
review and approval of contracts and other operational information.
The Group operates in the minerals exploration industry within New Zealand
and has commenced due diligence activities on phosphate assets overseas.
However, as the overseas activities have not been significant to date, the
Chief Operating Decision Maker, which is the CEO, does not analyze the
overseas activities separately. The overseas license are subject to a
moratorium therefore limiting the Group's activities.
5. Other current assets
December 31, March 31,
2020 2020
Prepayments $ 144,834 $ 50,754
$ 144,834 $ 50,754
6. Mineral property interest
Exploration and evaluation on Chatham Rise Project
December 31, March 31,
2020 2020
Opening balance $ 4,456,736 $ 4,680,435
Exploration costs capitalised 55,681 87,574
Foreign exchange fluctuation 371,542 (311,273)
Net book value $ 4,883,959 $ 4,456,736
Cost $ 22,143,712 $ 20,397,463
Impairment (17,259,753) (15,940,727)
Net book value $ 4,883,959 $ 4,456,736
The recoverability of the carrying amounts of exploration and evaluation
assets is dependent on the Group gaining a Marine Consent for the project to
be commercially successful. Commitments and tenure of the permit is included
in Note 19.
The Group was granted a Minerals Prospecting Licence ("MPL") 50270 under the
Continental Shelf Act 1964 on February 25, 2010 for a period of four years.
The licence was extended for a further nine years and due to expire on 24
February 2020. The Group relinquished the permit early on August 29, 2019.
The licence covered 2887km2 of the Chatham Rise and was located approximately
450 kilometres east of Christchurch.
The Group was granted a Minerals Mining Permit 55549 on December 6, 2013. The
Minerals Mining Permit covers 820 sq km within the MPL 50270 area. The Mining
Permit is for twenty years (expiry 2033) and subject to the granting of a
Marine Consent from the Environmental Protection Authority ("EPA"), will
allow the Group to conduct mining operations. The relinquishment of MPL
50270 has no impact on the mining permit and the proposed mining programme.
On February 11, 2015, the Group was refused Marine Consent by an Independent
Decision Making Committee (DMC) convened by the Environmental Protection
Authority (EPA), New Zealand's environmental regulator on grounds which the
Group disputes. Subsequently, the Directors impaired the carrying value of
the capitalised costs to represent their best estimate of the recoverability
as the Group reconsiders the re-submission of the Marine Consent with the
EPA.
On April 27, 2017 and December 8, 2017 the Group was granted a change of
conditions in the permit to further defer the minimum work programme
commitments. All work commitments have been met to date.
6. Mineral property interest (continued)
The Group has considered whether there are any facts or circumstances that
would indicate that the mineral property interest should be assessed for
impairment and noted the following:
o The Group's tenure to the mining permit over the area is current and is not
to expire in the near future;
o Substantive expenditure on further exploration for and evaluation of
mineral resources is still planned;
o Relevant studies suggest that the phosphate within the area remains
commercially viable and once the exploration begins the carrying amount of
the asset is likely to be recovered.
The above factors are unchanged and it was concluded that no further
impairment is required (March 31, 2020: no impairment).
In December 2012, the Group applied for five prospecting licences offshore
Namibia. The prospecting regime is currently subject to a moratorium. It
remains the intention of the Directors to pursue these licences.
7. Trade other payables
December 31, March 31,
2020 2020
Trade and other payables due to related parties $ 12,816 $ 11,837
Other trade payables 119,199 151,102
Accrued expenses 893 45,283
$ 132,908 $ 208,222
8. Share capital
(a) Authorised:
The Group's share capital consists of an unlimited number of common shares
without par value.
The holders of ordinary shares are entitled to receive dividends and are
entitled to one vote per share at meetings of the Group, to the extent to
which they have been paid up. All shares rank equally with regard to the
Group's residual assets.
8. Share capital (continued)
(b) Issued and outstanding:
Number
of shares Amount
Balance, April, 1, 2019 24,303,754 35,068,781
Transfers of share capital costs during the year - (207,377)
Issued during the year:
Shares issued net of costs 1,999,686 246,722
Balance, March 31, 2020 26,303,440 35,108,126
Issued during the year:
Shares issued net of costs 7,395,714 587,064
Balance, December 31, 2020 33,699,154 $ 35,695,190
(c) On May 5, 2020 the Company closed a non-brokered private placement of
5,029,820 units at a price of CAD$0.08 per Unit for gross proceeds of
CAD$402,386. Each unit consists of one common share and one transferable
share purchase warrant. Each whole warrant entitles the holder to purchase
one common share at a price of CAD$0.45 per share any time prior to the date
that is five years from the date of issuance.
On June 23, 2020 the Company closed a non-brokered private placement of
2,365,894 units at a price of CAD$0.08 per Unit for gross proceeds of
CAD$189,272. Each unit consists of one common share and one transferable
share purchase warrant. Each whole warrant entitles the holder to purchase
one common share at a price of CAD$0.45 per share any time prior to the date
that is five years from the date of issuance.
(d) Warrants:
Original Grant Date
Modified Grant Date Original Expiry Date Modified Expiry Date
December 27, 2017 February 18, 2019 December 27, 2019 December 27, 2022
January 24, 2018 February 18, 2019 January 24, 2020 January 24, 2023
December 13, 2018 February 18, 2019 December 13, 2020 December 13, 2023
August 25, 2018 February 18, 2019 August 25, 2020 August 25, 2023
March 26, 2019 - March 26, 2024 -
April 23, 2019 - April 23, 2024 -
December 23, 2019 - December 23, 2024 -
May 5, 2020 - May 5, 2025 -
June 23, 2020 - June 23, 2025 -
8. Share capital (continued)
(e) Warrants (continued):
Expiry Date Exercise prices Balance
March 31,
2020 Issued Exercised Expired/
cancelled/
forfeited Balance
December 31, 2020
December 27, 2022 $0.45 442,293 - - - 442,293
January 24, 2023 $0.45 486,368 - - - 486,368
December 13, 2023 $0.45 1,172,885 - - - 1,172,885
August 25, 2023 $0.45 381,780 - - - 381,780
March 26, 2024 $0.45 1,756,663 - - - 1,756,663
April 23, 2024 $0.45 676,026 - - - 676,026
Dec 23, 2024 $0.45 647,631 - - - 647,631
May 5, 2025 $0.45 - 5,029,820 - - 5,029,820
June 23, 2025 $0.45 - 2,365,894 - - 2,365,894
5,563,646 7,395,714 - - 12,959,360
Weighted average
exercise price
$0.45
$0.45
-
-
$0.45
Weighted average
remaining life (years)
3.60
4.44
-
-
3.76
On May 5, 2020 as part of a Share Purchase Plan the Company issued 5,029,820
non-transferable share purchase warrants. Each warrant entitles the holder to
purchase one common share at a price of CAD$0.45 per share any time prior to
May 5, 2025.
On June 23, 2020 as part of a Share Purchase Plan the Company issued
2,365,894 non-transferable share purchase warrants. Each warrant entitles the
holder to purchase one common share at a price of CAD$0.45 per share any time
prior to June 23, 2025.
Using the residual approach, the warrants issued in May and June 2020 were
valued at $nil. These are deemed Level 2 fair values as it is in reference to
the quoted price of the shares at issuance date.
During the year ended March 31, 2020, the cost allocated to the share
purchase warrants issued in prior years were transferred from Share capital
to the Warrants reserve account. As this was merely a reclassification within
equity accounts, this was not considered to materially impact the financial
statements and therefore the reclassification was effected in the year ended
March 31, 2020 and not treated as a prior year adjustment.
8. Share capital (continued)
On February 18, 2019 the Company announced that all issued 2017 warrants
would be reduced in price from CAD $1.00 per common share to CAD $0.45 per
share and that it was going to extend the expiry date from two years to five
years from the date of issuance. None of the 2017 warrants have to date been
exercised.
It was also announced that the December 2018 and August 2018 options would
also be extended to five years from the date of issuance. None of the
December 2018 or August 2018 warrants have to date been exercised.
The warrant terms were changed in order to ensure that they can be exercised
after the achievement of key future milestones including the grant of the
environmental permit and the commencement of the dredging operations.
9. Share based payments
(a) Recognised share-based payment expenses
The purpose of the share-based payments is to reward key consultants and
cornerstone investors in a manner that aligns remuneration with the creation
of shareholder wealth. As the Company's activities have been predominantly
developing an already defined mineral deposit, shareholder wealth is
dependent, for the foreseeable future, on development success rather than an
improvement in the Company's earnings.
The Company grants share purchase options pursuant to the policies of the
TSX-Venture Exchange with respect to eligible persons, exercise price,
maximum term, vesting, maximum options per person and termination of eligible
person status. These are treated as equity-settled share based payments.
During the year ended March 31, 2019 the Company granted 1,690,000 share
options under the share option plan of May 8, 2018. The options expire on May
8, 2023 and are exercisable at $0.29 per share. 1,580,000 options fully
vested on May 8, 2018 and 110,000 options will vest upon a performance hurdle
being achieved. The performance hurdle is gaining the Marine Consent.
Following the resignation of two directors, 380,000 options have been
forfeited.
During the year ended March 31, 2020 500,000 share options were granted under
the share option plan of May 8, 2018. The options expire on October 8, 2029
are exercisable at $0.11 per share. 500,000 options fully vested on October
8, 2019.
The share-based payment expense of $39,100 (2019: $231,787) was estimated
using the Black-Scholes Option Pricing model assuming a risk free rate of 1%
(2019: 2.16%), a volatility of 65%, an expected dividend rate of nil and an
expected life of 10 years (2019: 5 years). The shares in the Company traded
at CAD $0.11 (2019: CAD$0.27) on the grant date.
9. Share based payments (continued)
The continuity of outstanding share based options for the three months ended
December 31, 2020, is as follows:
Expiry Date Exercise prices Balance
March 31
2020 Issued Exercised Expired/
cancelled/
forfeited Balance
December 31, 2020
May 8, 2023, $0.29 1,310,000 - - - 1,310,000
October 8, 2029 $0.11 500,000 - - - 500,000
1,810,000 - - - 1,810,000
Weighted average
exercise price
$0.24
-
-
-
$0.24
Weighted average
remaining life (years)
4.86
-
-
-
4.10
(b) Equity-settled transactions
Share-based payments of C$nil (December, 31 2019: C$nil) were settled by the
issue of nil (December, 31 2019: nil) ordinary shares in the Company.
10. Earnings per share
The earnings and weighted average number of outstanding shares used in the
calculation of basic and diluted earnings per share are as follows:
Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Loss used in the calculation of basic EPS $ (104,404) $ (127,650)
$ (350,788) $ (383,163)
Weighted average number of outstanding shares for the purpose of basic EPS
33,699,154
25,712,744
32,299,742
25,561,568
Effect of dilution, weighted number of mandatory warrants - - - -
Weighted average number of outstanding shares used in the calculation of
diluted EPS 33,699,154 25,712,744 32,299,742 25,561,568
Basic loss per share (Canadian cents) (0.31) (0.50)
(1.09) (1.50)
Diluted loss per share (Canadian cents) (0.31) (0.50) (1.09) (1.50)
No dilution effect on diluted EPS as the company was operating at a net loss
for the period.
11. Finance income and expenses
Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Interest income on bank deposits - (17) - 1,968
Net foreign exchange gains - - - 385
Finance income - (17) - 2,353
Interest expense (378) - (1,687) -
Net foreign exchange losses - - (1,723) -
Finance expense (378) - (3,410) -
Net finance income and expenses (378) (17) (3,410) 2,353
12. General and administrative expenses
The following items of expenditure are included in administrative expenses:
Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Accountancy fees $ 5,754 $ 3,236 $ 10,970 $ 12,680
Consultancy fees 7,372 24,812 7,372 77,026
Directors fees - - - -
Insurance 5,000 2,797 15,000 10,389
Legal fees 12,569 7,255 56,824 44,945
Management fees 16,092 30,085 47,390 91,789
Marketing 38,400 - 148,400 -
Registry fees 2,727 2,239 12,101 8,414
Rent 4,913 4,596 14,078 14,023
Share-based payments - 39,100 - 39,100
Travel 239 5,262 2,701 31,980
The Board has agreed to forfeit directors fees for the year ended March 31,
2020 (beyond the amount charged). Some directors are remunerated for their
services through consultancy fees.
Refer to Note 15 for discussion on consultancy fees, which are charged by
related parties.
13. Financial instruments
Exposure to credit, market, foreign currency, equity prices and liquidity
risks arise in the normal course of the Group's business.
Financial instruments are comprised of accounts receivable and other
receivables, cash and cash equivalents, other financial assets, trade
creditors and other payables, and other financial liabilities.
Recognition and de-recognition of financial assets and liabilities
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are recognised initially at fair
value plus transaction costs
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or if the Group transfers the
financial asset to another party without retaining control or substantial all
risks and rewards of the asset.
A financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
Subsequent measurement of financial assets
All financial assets held by the Group in the years reported have been
designated into one classification, "loans and receivables", being
non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. After initial recognition these are measured
at amortised cost using the effective interest method, less provision for
impairment. Discounting is omitted where the effect of discounting is
immaterial.
All financial assets are subject to review for impairment at least once each
reporting date. Accounts receivable are reviewed for impairment when accounts
are past due or when other objective evidence is received that a specific
counterparty will default.
Subsequent measurement of financial liabilities
Trade payables and other borrowings are subsequently measured at amortised
cost using the effective interest method.
Sensitivity analysis
In managing currency risks the Group aims to reduce the impact of short-term
fluctuations on the Group's earnings. Over the longer-term, however,
permanent changes in foreign exchange will have an impact on profit.
It is estimated that a general increase of one percentage point in the value
of the New Zealand dollar against other foreign currencies would have
decreased the Group's profit before income tax by an immaterial amount for
the period ended December 31, 2020 (2019: an immaterial amount). As a
purchaser of foreign currency, the Group's risk is that the NZD depreciates.
13. Financial instruments (continued)
Credit risk:
The Group incurs credit risk from financial instruments when a counter party
fails to meet its contractual obligations. Credit risk arises on cash and
other receivables. The Group does not have a significant concentration of
credit risk with any single party.
Market risk:
Market risk is that changes in market prices, such as foreign exchange rates
and interest rates will affect the Group's income or the value of it's
holding of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimising the return.
Foreign currency risk:
The Group is exposed to foreign currency risk on purchases that are
denominated in a currency other than the Group's functional currency, New
Zealand dollars (NZD). It is the Group's policy not to hedge foreign currency
risks.
At December 31, 2020, the Group is exposed to currency risk through the
following assets and liabilities denominated in Canadian dollars:
December 31, March 31,
2020 2020
Cash and cash equivalents 1,342 3,808
Other current assets - 816
Accounts payable (67,965) (111,949)
(66,623) (107,325)
Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Group's cash and cash equivalents attract interest at floating rates and
have maturities of 90 days or less. The interest is typical of New Zealand
banking rates, which are at present historically low; however, the Group's
conservative investment strategy mitigates the risk of deterioration to
capital invested. A change of 100 basis points in the interest rate would
not be material to the consolidated financial statements.
13. Financial instruments (continued)
Liquidity risk:
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk framework for the
management of the Group's short, medium and longer term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining
adequate cash balances through monitoring of future rolling cash flow
forecasts of its operations and equity raising, which reflect management's
expectations of the settlement of financial assets and liabilities.
The only financial liabilities are trade and other payables. At December 31,
2020, the Group had $132,908 (March 31, 2020 $208,222) in trade and other
payables including accrued liabilities. Trade payables are non-interest
bearing and have a contractual maturity of less than 31 days.
(a) Financial assets and liabilities:
As at December 31, 2020, the carrying and fair values of our financial
instruments by category are as follows:
Amortised cost Fair value through profit and loss Total carrying amount
Less than 1 year 1 to 3 years
$ $ $ $ $
Financial assets
Cash and cash equivalent 49,001
- 49,001 49,001 -
Trade and other receivables - - - - -
NZX Bond 13,818 - 13,818 13,818 -
Total financial assets 62,819 - 62,819 62,819 -
Financial liabilities
Trade and other payables - 132,908 132,908 132,908 -
Total financial liabilities - 132,908 132,908 132,908 -
13. Financial instruments (continued)
(b) Fair value:
All financial instruments measured at fair value are categorized into one of
three hierarchy levels, described below, for disclosure purposes. Each level
is based on the transparency of the inputs used to measure the fair values of
assets and liabilities:
o Level 1 - Values based on unadjusted quoted prices in active markets that
are accessible at the measurement date for identical assets and liabilities.
o Level 2 - Values based on quoted prices in markets that are not active or
model inputs that are observable either directly or indirectly for
substantially the full contractual term of the asset or liability.
o Level 3 - Values based on prices or valuation techniques that require
inputs that are both unobservable and significant to the overall fair value
measurement.
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities approximate their respective fair
values due to the short-term nature of these instruments. The carrying value
of the bank term loan approximates its fair value due to the existence of
floating market-based interest rates.
The Group has no financial assets or liabilities included in Level 1, 2 or 3
of the fair value hierarchy.
14. Capital management
The Group defines the capital that it manages as its shareholder equity.
The Group's objectives with respect to managing capital are to safeguard the
Group's ability to continue as a going concern so that it can provide future
returns to shareholders and benefits for other stakeholders.
The Group's capital structure reflects a Group focused on mineral exploration
and financing both internal and external growth opportunities. The
exploration for and development of mineral deposits involves significant risk
which even a combination of careful evaluation, experience and knowledge may
not adequately mitigate.
In order to maintain or adjust its capital structure, the Group may issue new
shares or sell assets to fund ongoing operations.
The Group manages its capital structure by performing the following:
o Preparing budgets and cash-flow forecasts which are reviewed and approved
by the Board of Directors;
o Regular internal reporting and Board of Directors meetings to review actual
versus budgeted spending and cash-flows; and
o Detailed project analysis to assess and determine new funding requirements.
There were no changes in the Group's approach to capital management during
the period. The Group is not subject to externally imposed capital
requirements.
15. Related party transactions
(a) Balances receivable and payable:
The amounts due to related parties and included in accounts payable, are
non-interest bearing, unsecured and due on demand, and comprise the
following:
December
31, 2020 March 31, 2020
Due to directors $ 12,816 $ 11,837
Due to executive officers - -
$ 12,816 $ 11,837
(b) Key management personnel:
Key management personnel includes the consulting and management fees paid
and/or accrued to the Group's senior officers and directors as follows:
Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Consultancy fees $ - $ 18,329 $ - $ 24,242
Management fees 16,092 30,085 47,390 91,789
Share-based payments - - - -
$ 16,092 $ 48,414 $ 47,390 $ 116,031
Depending on the nature of services and costs, certain amounts have been
capitalized to intangible assets as they are directly attributable to the
Chatham Rise project.
16. Reconciliation of the loss for the period with the net cash from
operating activities
Three months ended Dec
31, 2020 Three months ended Dec
31, 2019 Nine months ended Dec
31, 2020 Nine months ended Dec
31, 2019
Profit/(loss) for the period $(104,404) $ (127,650) $ (350,788) $
(383,163)
Adjustments for:
Depreciation - - - -
Expenses (non-cash) - 39,100 - 34,635
Change in trade and other receivables (2,854) (3,670) 1,236 3,767
Change in other current assets (16,411) 20,501 (75,985) 20,810
Change in current tax assets - (58) - 2,055
Change in trade and other payables 6,776 10,642 (169,992) (61,641)
Change in exploration expenditure - (29,558) - (77,535)
Net cash from operating activities (116,893) $ (90,693) (595,529) $
(461,072)
17. Commitments and contingencies
Licence work commitments
The Group has the following indicative expenditure commitments at balance
date (being minimum work requirements under its minerals mining permit and
minerals prospecting licence). The Company is dependent on certain factors to
be able to meet these minimum work requirements. They are set out in Note
2(d).
2020 2019
NZD NZD
Within one year $ - $ -
After one year but not more than five years $ 6,000,000 $ 6,000,000
$ 6,000,000 $ 6,000,000
17. Commitments and contingencies (continued)
Minerals Mining Permit 55549
The Minerals Mining Permit was granted on December 6, 2013. On November 7,
2019 the Company was granted a change of conditions in the permit to defer
the minimum work programme commitments. To date all minimum work commitments
have been completed. The minimum work programme includes:
Within 96 months of the commencement date of the permit, the permit holder
shall:
o Complete and submit a sufficiently detailed engineering study and
feasibility study, which (without limitation) is at the level of detail to
reach a decision-to-mine milestone; and
o Submit a detailed timeline for the construction/refit of a selected vessel
including (without limitation) the detail timing of the commissioning and
mobilisation to the Chatham Rise; and
o Complete and submit a marine operations risk review report that includes
(without limitation) a HAZID Risk Assessment Matrix, risk review of on-board
processing and risk review of planned and unplanned maintenance in various
weather scenarios; and
o Either commit by notice in writing to the Chief Executive to carry out the
work programme obligations set out for the following 24 months and to
commence production within 60 months of the commencement date of the permit
or surrender the permit.
Within 120 months of the commencement date of the permit, the permit holder
must spend on average $2 million per annum completing appropriate sampling,
geophysical and geotechnical surveys and data analysis (without limitation)
in respect of the mining blocks identified for the first five years of
production. For the remainder of the term the Company must spend $2 million
per annum on carrying out further specified work programme commitments.
18. Subsequent events
On January 18, 2021 the Company closed a non-brokered private placement of
10,000,000 common shares at a price of CAD$0.06 per share for gross proceeds
of CAD$600,000. Finders fees in the amount of CAD$3,360 were paid in
connection with the private placement. All securities issued pursuant to the
private placement are subject to a hold period and may not be traded until
May 16, 2021.
The current outbreak of COVID-19 and the subsequent quarantine measures
imposed by the New Zealand government as well as the travel restrictions
imposed by New Zealand and other countries in early 2020 have caused
disruption to businesses and economic activity. The Group considers this to
be a non-adjusting post balance sheet event.
The Group is committed to supporting government and community efforts to
limit the spread of the virus, and supporting business continuity with regard
to its employees and contractors.
There were no other material subsequent events up to the date of the
financial statements.
End CA:00368487 For:CRP Type:GENERAL Time:2021-03-02 14:45:55
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