GOLDQUEST MINING CORP. GOLDQUEST MINING CORP.
INTERIM MANAGEMENT'S DISCUSSION & ANALYSIS
QUARTERLY HIGHLIGHTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023
Table of Contents
NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INDICATED AND INFERRED RESOURCES ..... 3
FINANCIAL REPORTING AND DISCLOSURE DURING ECONOMIC UNCERTAINTY .................................. 4
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE ...................... 13
FORWARD-LOOKING INFORMATION .................................................................................................. 14
GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
INTRODUCTION
This Interim Management's Discussion and Analysis - Quarterly Highlights (the "Interim MD&A") has been prepared to provide material updates and analysis of the business operations, financial condition, financial performance, cash flows, liquidity, and capital resources of GoldQuest Mining Corp. and its subsidiaries ("GoldQuest" or the "Company").
Effective with the first interim quarter of the fiscal year ended December 31, 2019, the Company adopted the option under Section 2.2.1 of National Instrument 51-102F1 to provide the Interim MD&A disclosure under the "Quarterly
Highlights" regime set out in that section of the instrument.
The following Interim MD&A as of November 29, 2023, should be read in conjunction with the unaudited condensed consolidated interim financial statements of the Company and the notes relating thereto, for the nine months ended
September 30, 2023, which are prepared in accordance with international Financial Reporting Standards ("IFRS") and the annual management discussion and analysis for the year ended December 31, 2022. All financial amounts are stated in Canadian currency unless stated otherwise. Additional information relating to the Company is filed on SEDAR atwww.sedarplus.ca.
NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INDICATED AND INFERRED RESOURCES
The terms "Indicated" and "Inferred" Resources are used herein. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of a Mineral Resource is economically or legally mineable.
OVERVIEW
GoldQuest is a Canadian-based mineral exploration company with projects in the Dominican Republic. The Company's common shares trade on the TSX-V under the symbol GQC and in Frankfurt/Berlin under the symbol M1W. GoldQuest operates through its wholly-owned British Virgin Island subsidiary, GoldQuest Mining (BVI) Corp. and its wholly-owned subsidiary, GoldQuest Dominicana SRL, which is domiciled in the Dominican Republic. GoldQuest commenced exploration activities in the Dominican Republic in 2001 and has focused on its portfolio of gold-copper projects located within the Tireo Formation in the western portion of the Dominican Republic.
The Company holds 19 exploration permits (granted or under application) and one exploitation permit (under application) concessions in the Dominican Republic. These concessions are grouped into the following districts:
San Juan District, including Romero (exploitation permit under application), Jenigbre-II (Jenigbre), Valentin-II, Loma Los Comios (actual Loma Los Limones), Loma Cachimbo-II (Loma Viejo Pedro), Los Gajitos and Los Lechones (together actual Alto de Los Chivos), Descansadero (actual Gajo La Guama), Tocon de Pino-II, Las Tres Veredas (actual Palo de La rosa), Piedra Dura-II, Tachuela Fase-II (formerly La Fortuna), La Guinea, Toribio (actual Arroyo La
Vaca) concessions (collectively referred to as the "Tireo Property").
Jarabacoa District, including Monte Verraco (formerly Loma Oculta) and La Rabona concessions.
Regional Exploration, including Loma El Catey, Loma La Damajagua, Hoyo Prieto-II and Recodo concessions.
The Tireo Property in the San Juan District and the Monte Verraco Property (formerly Loma Oculta) in the Jarabacoa
District are the Company's material properties.
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
BUSINESS STRATEGY
GoldQuest seeks to become a gold-copper development company in the Dominican Republic and to evaluate opportunities in other countries. The Company aims to maximize long-term value for its shareholders by moving the Romero Project forward through to development while exploring for additional mineralization on its other properties.
The Company is committed to the exploration and development of all of its mineral properties in a socially and environmentally responsible manner that will be beneficial for all stakeholders. The Company's sustainable social
responsibility mandate aims to provide employment opportunities and social support for local communities, sustainable development of local infrastructure and follow leading environmental practices in the regions that GoldQuest operates in.
Due to the delay in receiving Presidential endorsement of the Exploitation License for the Company's Romero Project, the Company is seeking and evaluating opportunities with respect to mineral properties outside the Dominican Republic. The Company is monitoring the political situation in the Dominican Republic and any progress towards Presidential endorsement of the Exploitation License with interest as it evaluates other opportunities in mining friendly jurisdictions.
2023 HIGHLIGHTS
On March 1, 2023, the Ministry of Energy and Mines of the Dominican Republic granted a new Exploration License to the Company, Loma Cachimbo-II (Loma Viejo Pedro), which is located south of the Romero Project.
On March 6, 2023, the Company announced that it received the final report of a poll/survey commissioned to measure the social support within the San Juan provide to carry on with the EIA for its Romero Project. It shows 67.7% of the population of the San Juan province supports the EIA studies for the project. The survey was conducted by Gallup, a world-renowned polling consultant.
On May, 2023, the Ministry of Energy and Mines of the Dominican Republic granted a new Exploration License to the Company, Arroyo La Vaca (formerly Toribio), which is located south of the Romero Project.
On October, 2023, the Ministry of Energy and Mines of the Dominican Republic granted a new Exploration License to the Company, Tachuela Fase II (formerly La Fortuna), which is located south of the Romero Project.
FINANCIAL REPORTING AND DISCLOSURE DURING ECONOMIC UNCERTAINTY
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic; the Company has not been significantly impacted by the spread of COVID-19. However, the ongoing COVID-19 pandemic, inflationary pressures, rising interest rates, the global financial climate and the conflict in Ukraine are affecting current economic conditions and increasing economic uncertainty, which may impact the Company's operating performance, financial position and the Company's ability to raise funds as this time.
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
SELECTED INFORMATION
For the nine months ended | |||
September 30, 2023 $ | September 30, 2022 $ | September 30, 2021 $ | |
Operating expenses Interest and miscellaneous income Net loss for the period Comprehensive loss for the period Basic and diluted loss per share: | 2,415,633 213,841 ) | 1,870,097 114,157 (1,755,940) (1,767,940) | 1,816,281 40,882 (1,775,399) (1,821,899) |
213,841 (1,755,940) (1,767,940) | |||
‐ net loss | (0.01) | (0.01) | (0.01) |
As at | September 30, 2023 $ | December 31, 2022 $ | December 31, 2021 $ |
Working capital Total assets Total liabilities Share capital | 9,836,568 10,074,273 194,955 73,461,074 | 11,877,219 12,082,157 140,719 73,461,074 | 14,026,222 14,271,587 155,718 73,461,074 |
Deficit | 84,479,956 | 82,278,164 | 79,568,866 |
RESULT OF OPERATIONS
Three months ended | ||||
September 30, 2023 $ | June 30, 2023 $ | March 31, 2023 $ | December 31, 2022 $ | |
Interest income Net loss Comprehensive loss Basic and diluted loss per share | 49,138 (676,384) (627,246) (0.00) | 60,495 (694,377) (697,377) (0.00) | 104,208 (880,169) (521,122) (0.01) | 88,725 (953,358) (950,358) (0.00) |
Three months ended | ||||
September 30, 2022 $ | June 30, 2022 $ | March 31, 2022 $ | December 31, 2021 $ | |
Interest income Net loss Comprehensive loss Basic and diluted loss per share | 69,712 (635,890) (637,390) (0.00) | 30,750 (598,928) (615,428) | 13,695 (521,122) (515,122) | 12,796 (620,122) (614,122) (0.00) |
(0.00) | (0.00) |
Three Months Ended September 30, 2023 compared with the Three Months Ended September 30, 2022
The Company incurred a net loss of $627,246 for the three months ended September 30, 2023, representing a decrease of $8,644 when compared with $635,890 for the three months ended September 30, 2022. The decrease in net loss during the three months ended September 30, 2023 was primarily the result of lower cash and non-cash expenses (including consulting fees, general and administrative, management and directors' fees, salaries and wages,
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
and share-based payments.) that was partially offset by higher evaluation and exploration costs, foreign exchange loss, and rent.
Consulting fees decreased by $12,000 to $6,000 for the three months ended September 30, 2023, compared to $18,000 for the three months ended September 30, 2022. This reduction is due to a scheduled decrease in monthly fees paid to a consultant.
Evaluation and exploration costs increased by $11,022 to $189,163 for the three months ended September 30, 2023, from $178,141 for the three months ended September 30, 2022. The increase is attributed to a higher level of field activities, including field technicians of $22,501.
Foreign exchange loss was $40,839 for the three months ended September 30, 2023 compared to a foreign exchange gain of $40,261 for the three months ended September 30, 2022. The foreign exchange gain was primarily a result of the retranslation of the Company's monetary assets and liabilities which is denominated in foreign currencies (US dollars and DOP) into Canadian dollars.
General and administrative was $43,821 for the three months ended September 30, 2023 compared to $47,789 for the three months ended September 30, 2022. The decrease is due to a slight reduction in office expenses incurred by the Company.
Management and directors' fees were $130,420 for the three months ended September 30, 2023 compared to $238,429 for the three months ended September 30, 2022. The net decrease is due to a one-time severance payout made to the former CEO in the prior period off-set by higher base-level CEO compensation in the current period.
Rent was $20,831 for the three months ended September 30, 2023 compared to $9,534 for the three months ended September 30, 2022. The increase is due to higher rent for the Company's new office space.
Salaries and wages were $61,881 for the three months ended September 30, 2023 compared to $63,355 for the three months ended September 30, 2022. The decrease is a result of a reduction in time worked by staff in Dominican Republic.
Share-based payments were $99,298 for the three months ended September 30, 2023 compared to $103,628 for the three months ended September 30, 2022. The decrease in share-based payments resulted from fewer options vesting and a corresponding reduction in the expense during the period.
Nine Months Ended September 30, 2023 compared with the Nine Months Ended September 30, 2022
The Company incurred a net loss of $2,201,792 for the nine months ended September 30, 2023, representing an increase of $445,852 when compared with $1,755,940 for the nine months ended September 30, 2022. The increase in net loss during the nine months ended September 30, 2023 was primarily the result of higher cash and non-cash compensation (including evaluation and exploration costs, foreign exchange loss, general and administrative, rent and salaries and wages) that was partially offset by lower professional fees and share-based payments.
Evaluation and exploration costs increased by $656,424 to $1,004,904 for the nine months ended September 30, 2023, from $348,480 for the nine months ended September 30, 2022. Evaluation and exploration costs mainly included the costs of maintaining the Tireo Property in the Dominican Republic to ensure the property remains in good standing as the Company was waiting for the Exploitation Permit. In addition, evaluation and exploration costs are also incurred for the public and community relation activities with the local communities, and engaging with the local government on various permitting required to move the Tireo property forward. During the nine months ended September 30, 2023, the Company engaged a consultant to complete a survey to measure the social support within the San Juan province to move forward with an Environmental Impact Assessments (the "EIA") for its Romero Project ($nil for nine months
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
ended September 30, 2022). In addition, the Company hired additional employees to work on reforestation programs within the local communities of San Juan. This resulted in additional field and field technician expenses during the nine months ended September 30, 2023 ($nil for the nine months ended September 30, 2022).
Foreign exchange loss was $98,471 for the nine months ended September 30, 2023 compared to a foreign exchange gain of $18,079 for the nine months ended September 30, 2022. The foreign exchange loss was primarily a result of the retranslation of the Company's monetary assets and liabilities which is denominated in foreign currencies (US dollars
and DOP) into Canadian dollars.
General and administrative was $184,186 for the nine months ended September 30, 2023 compared to $125,027 for the nine months ended September 30, 2022. The increase is due to higher insurance premiums and office related expenses incurred by the Company's subsidiary.
Rent was $65,084 for the nine months ended September 30, 2023 compared to $24,026 for the nine months ended September 30, 2022. The increase is due to higher rent for the Company's new office space.
Salaries and wages increased by $24,745 to $197,977 for the nine months ended September 30, 2023 compared to $173,232 for the nine months ended September 30, 2022 as time worked by staff in Dominican Republic in the current period was higher.
Professional fees decreased by $42,734 to $143,898 for the nine months September 30, 2023 compared to $186,632 for the nine months ended September 30, 2022. The change in professional fees period over period depends on the level of business activities occurring during a period. Further, during the nine months ended September 30, 2022, the Company engaged a consultant to provide advisory services on corporate matters such as public relations in DR. No such fees were paid during the nine months ended September 30, 2023.
Share-based payments were $144,172 for the nine months ended September 30, 2023 compared to $449,567 for the nine months ended September 30, 2022. The decrease in share-based payments resulted from a decrease in the number of options vesting and a corresponding decrease in recognition of expense during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2023, the Company had working capital of $9,836,568 (December 31, 2022 - $11,877,219) including cash and cash equivalents of $9,818,919 (December 31, 2022 - $11,796,562).
The Company expects to obtain financing in the future primarily through further equity financings, if and as required.
At present, the Company has no operations that generate cash flow and its financial success is dependent on management's ability to discover economically viable mineral deposits, arrange required funding through future equity
issuances, asset sales or a combination thereof. The mineral exploration process can take many years and is subject to factors that are beyond the Company's control. The Company relies on equity financings and the exercise of options and warrants to fund its exploration activities and its corporate and overhead expenses. Many factors influence the
Company's ability to raise funds, including the health of the resource market, the climate for mineral exploration investment, the Company's track record, and the experience and caliber of its management. Actual funding
requirements may vary from those planned due to a number of factors, including the progress of exploration activities.
The Company's operations to date have been financed by issuing common shares. The Company's ability to continue as a going concern is dependent upon its ability to obtain additional financing to meet its obligations as they come due. If the Company was to become unable to continue as a going concern, then significant adjustments would be required to the carrying value of assets and liabilities, and to the balance sheet classifications currently used.
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
There is no guarantee that the Company will be able to secure additional financings in the future at terms that are favorable. To date, the Company has not used debt or other means of financing to further its exploration programs, and the Company has no plans to use debt financing at the present time. Based on the current working capital as of the date of this MD&A, it is expected that the current cash position will be sufficient to fund the Company's needs for at least next twelve months.
Due to the delay in receiving Presidential endorsement of the Exploitation License for the Company's Romero Project, the Company is taking steps towards a cash conservation policy as discussed above.
OUTSTANDING SHARE DATA
At September 30, 2023 and December 31, 2022, the Company had 259,442,384 common shares issued and outstanding with a value of $73,461,074.
During the nine months ended September 30, 2023:
No share capital transactions occurred.
On September 18, 2023, the Company granted 5,000,000 options with an exercise price of $0.11 to the directors, officers and employees of the Company. The options are exercisable for a period of five years. One-third vest on date of grant and one-third will vest every six months thereafter.
632,500 options expired, unexercised.
As at the date of this MD&A, the Company had the following common shares and options issued and outstanding:
• 259,442,384 common shares;
• 24,870,000 stock options with exercise prices ranging from $0.15 to $0.36 per share.
COMMITMENTS
The Company is a party to certain management contracts. These contracts contain clauses requiring that approximately $924,000 be paid to certain management personnel upon a change of control of the Company. As the likelihood of these events taking place is not determinable, the contingent payments have not been reflected in the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2023.
CONTINGENCIES
The Company's exploration activities are subject to various federal, provincial and international laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.
The Company is, from time to time, involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any pending or threatened proceedings related to any matter, or any amount which it may be required to pay damages in any form by reason thereof, will have a material effect on the financial condition or future results of operations of the Company.
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
FINANCIAL INSTRUMENTS
In the normal course of business, the Company is inherently exposed to certain financial risks, including market risk, credit risk and liquidity risk, through the use of financial instruments. The timeframe and manner in which the
Company manages these risks varies based upon management's assessment of the risk and available alternatives for mitigating the risk. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. All transactions undertaken are to support the Company's operations. These financial risks and the Company's exposure to these risks are provided in various tables in note 15 of our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2023 and note 15 of our audited consolidated financial statements for the year ended December 31, 2022. For a discussion on the significant assumptions made in determining the fair value of financial instruments, refer also to note 2 of the consolidated financial statements for the year ended December 31, 2022.
RELATED PARTIES
Total compensation of key company personnel for the nine months ended September 30, 2023 and 2022 is as follows:
For the nine months ended
September 30, 2023
September 30, 2022
$ | $ | |
Directors' fees | 90,000 | 90,000 |
Management remuneration | 324,580 | 334,429 |
Salaries and wages | 105,966 | 104,553 |
Share-based compensation | 125,565 | 429,615 |
646,111 | 958,597 |
During nine months ended September 30, 2023, the Company paid professional fees of $60,000 (September 30, 2022 - $59,418) to Quantum Advisory Partners LLP, a partnership in which the CFO is an incorporated partner, for professional services including accounting, corporate secretarial, transaction support and tax compliance.
The balances due to the Company's directors and officer included in accounts payables and accrued liabilities were $27,068 as at September 30, 2023 (December 31, 2022 - $9,000). These amounts are unsecured, non-interest bearing and payable on demand.
Conflicts of Interest
GoldQuest's directors and officers may serve as directors or officers, or may be associated with, other reporting companies, or have significant shareholdings in other public companies. To the extent that such other companies may participate in business or asset acquisitions, dispositions, or ventures in which GoldQuest may participate, the directors and officers of GoldQuest may have a conflict of interest in negotiating and concluding on terms with respect to the transaction. If a conflict of interest arises, GoldQuest will follow the provisions of the Business Corporations Act (BC)
("Corporations Act") dealing with conflict of interest. These provisions state that where a director has such a conflict, that director must, at a meeting of GoldQuest's directors, disclose his or her interest and refrain from voting on the matter unless otherwise permitted by the Corporations Act. In accordance with the laws of the Province of British Columbia, the directors and officers of GoldQuest are required to act honestly, in good faith, and in the best interest of GoldQuest.
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GoldQuest Mining Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS - QUARTERLY HIGHLIGHTS For the Nine Months Ended September 30, 2023
(Expressed in Canadian Dollars)
CRITICAL ACCOUNTING ESTIMATES
The preparation of our unaudited condensed consolidated interim financial statements requires management to use judgment and make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amount of expenses during the period. Actual results could materially differ from these estimates. Refer to note 2 of our annual audited consolidated financial statements for the year ended December 31, 2022 for a more detailed discussion of the critical accounting estimates and judgments.
ADOPTION OF NEW AND AMENDED IFRS PRONOUNCEMENTS
There were no new or amended IFRS pronouncements effective January 1, 2023 that impacted these condensed consolidated interim financial statements.
OFF-BALANCE SHEET FINANCING ARRANGEMENTS
As of September 30, 2023, and the date of this MD&A, the Company did not have any off-balance sheet financing arrangements.
PROPOSED TRANSACTIONS
No transactions are proposed.
RISKS AND UNCERTAINTIES
The Company is in the business of acquiring and exploring gold and base metal properties. It is exposed to a number of risks and uncertainties that are common to other mineral exploration companies in the same business. The industry is capital intensive at all stages and is subjected to variations in commodity prices, market sentiment, exchange rates for currency, inflations and other risks. The Company currently has no source of revenue other than interest income. The Company will rely mainly on equity financing to fund exploration activities on its mineral properties.
The risks and uncertainties described in this section are considered by management to be the most important in the context of the Company's business. The risks and uncertainties below are not inclusive of all the risks and uncertainties the Company may be subject to and other risks may apply.
Permits and Licenses
The operations of the Company may require licenses and permits from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.
Operations in Foreign Countries and Regulatory Requirements
The Company's principal properties are located in the Dominican Republic and mineral exploration and mining activities may be affected in varying degrees by changes in political, social and financial stability, inflation and changes in government regulations relating to the mining industry. Any changes in regulations or shifts in political, social or financial conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and opposition to mining from environmental or other non-governmental organizations. The Dominican Republic's status as a developing country may make it more difficult for the Company to obtain any financing required for the exploration and development of its properties due to real or perceived increased investment risk.
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Goldquest Mining Corporation published this content on 25 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 March 2024 17:38:05 UTC.
