CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
For the three months ended March 31, 2024
(Expressed in United States dollars)
(Unaudited)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Expressed in thousands of United States dollars
(Unaudited)
As at | Note | March 31, 2024 | December 31, 2023 | ||||
ASSETS | |||||||
Current | |||||||
Cash and cash equivalents | $ | 4,523 | $ | 1,498 | |||
Receivables | 4 | 3,230 | 511 | ||||
Inventories | 5 | 16,168 | 13,849 | ||||
Gold stream derivative asset | 6 | 274 | 265 | ||||
Prepaid expenses, and other advances | 497 | 591 | |||||
Total current assets | 24,692 | 16,714 | |||||
Inventories | 5 | 4,136 | 4,274 | ||||
Advances and other prepaid expenses | 199 | 289 | |||||
Exploration and evaluation assets | 7 | 765 | 765 | ||||
Mineral property, plant and equipment | 8 | 20,278 | 19,767 | ||||
TOTAL ASSETS | $ | 50,070 | $ | 41,809 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | 9 | $ | 9,312 | $ | 6,506 | ||
Term loans and derivative liabilities | 10 | 3,277 | 3,152 | ||||
Total current liabilities | 12,589 | 9,658 | |||||
Accrued liabilities | 9 | 983 | 943 | ||||
Provision for reclamation and rehabilitation | 11 | 2,680 | 3,064 | ||||
Term loans and derivative liabilities | 10 | 4,856 | 7,516 | ||||
Total liabilities | 21,108 | 21,181 | |||||
Shareholders' equity | |||||||
Share capital | 12 | 88,723 | 87,869 | ||||
Contributed surplus | 12 | 14,648 | 12,552 | ||||
Accumulated other comprehensive income | 1,418 | 1,324 | |||||
Deficit | (75,827) | (81,117) | |||||
Total shareholders' equity | 28,962 | 20,628 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 50,070 | 41,809 | ||||
Approved by the Audit Committee of the Board of Directors on May 17, 2024 | |||||||
"John Hick", Audit Committee Chair | "Akiba Leisman", Director | ||||||
Events after the reporting period (Note 19)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Expressed in thousands of United States dollars, except per share amounts
(Unaudited)
For the three months ended | Note | March 31, 2024 | March 31, 2023 | ||
Revenue | $ | 19,162 | $ | 15,814 | |
Production services revenue | 6 & 13(d)(ii) | 49 | 102 | ||
19,211 | 15,916 | ||||
Cost of sales | |||||
Production costs | (7,950) | (6,911) | |||
Write-down of inventories | - | (816) | |||
Depreciation, depletion and amortization | (2,198) | (3,697) | |||
(10,148) | (11,424) | ||||
Mine operating profit | 9,063 | 4,492 | |||
Exploration and evaluation expenses | (696) | (692) | |||
General and administrative expenses | 16 | (1,794) | (1,491) | ||
Other income (expense) | |||||
Accretion and interest expense | 17 | (131) | (443) | ||
Change in provision for reclamation and rehabilitation | 11 | - | (4) | ||
Change in fair value of derivative liability | 10(b)(c) | (375) | (3) | ||
Gain (loss) on gold stream derivative asset | 6 | 10 | 38 | ||
Loss on settlement of reclamation liability | 11 (b) | (94) | - | ||
Foreign exchange gain (loss) | (87) | (13) | |||
Interest income | 13 | 2 | |||
Income before income taxes | 5,909 | 1,886 | |||
Income tax expense | (560) | (499) | |||
Income for the period | $ | 5,349 | $ | 1,387 | |
Other comprehensive income | |||||
Income for the period | 5,349 | 1,387 | |||
Items subject to reclassification into statement of income: | |||||
Foreign currency translation adjustment | 94 | 3 | |||
Other comprehensive income for the period | 94 | 3 | |||
Comprehensive income for the period | $ | 5,443 | $ | 1,390 | |
Basic and diluted income per common share | $ | 0.08 | $ | 0.02 | |
Weighted average common shares outstanding - basic (thousands) | 65,711 | 65,757 | |||
Weighted average common shares outstanding - diluted (thousands) | 67,010 | 65,885 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Expressed in thousands of United States dollars
(Unaudited)
Number of | Contributed | Accumulated | Deficit | ||||||||
Share capital | other | ||||||||||
shares | Total | ||||||||||
(000s) | surplus | comprehensive | |||||||||
income (loss) | |||||||||||
Balance at December 31, 2022 | 65,743 | $ | 88,021 | $ | 12,087 | $ | 1,402 | $ | (87,840) | $ | 13,670 |
Common shares issued on RSU vesting | 76 | 185 | (185) | - | - | - | |||||
Share-based compensation | - | - | 71 | - | - | 71 | |||||
Net loss | - | - | - | - | 1,387 | 1,387 | |||||
Other comprehensive loss | - | - | - | 3 | - | 3 | |||||
Balance at March 31, 2023 | 65,819 | $ | 88,206 | $ | 11,973 | $ | 1,405 | $ | (86,453) | $ | 15,131 |
Shares cancelled (NCIB) | (268) | (337) | - | - | (76) | (413) | |||||
Share-based compensation | - | - | 579 | - | - | 579 | |||||
Net income | - | - | - | - | 5,412 | 5,412 | |||||
Other comprehensive loss | - | - | - | (81) | - | (81) | |||||
Balance at December 31, 2023 | 65,551 | $ | 87,869 | $ | 12,552 | $ | 1,324 | $ | (81,117) | $ | 20,628 |
Shares cancelled (NCIB) | (118) | (152) | - | - | (59) | (211) | |||||
Shares issued on exercise of options | 287 | 472 | (127) | - | - | 345 | |||||
Common shares issued on RSU vesting | 30 | 74 | (74) | - | - | - | |||||
Common shares issued to settle | |||||||||||
reclamation liability | 297 | 460 | - | - | - | 460 | |||||
Capital contribution (Note 10 (a)) | - | - | 2,050 | - | - | 2,050 | |||||
Share-based compensation | - | - | 247 | - | - | 247 | |||||
Net income | - | - | - | - | 5,349 | 5,349 | |||||
Other comprehensive income | - | - | - | 94 | - | 94 | |||||
Balance at March 31, 2024 | 66,047 | $ | 88,723 | $ | 14,648 | $ | 1,418 | $ | (75,827) | $ | 28,962 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of United States dollars
(Unaudited)
For the three months ended | Note | March 31, 2024 | March 31, 2023 | |
Operating activities | ||||
Income (loss) for the period | $ | 5,349 | $ | 1,387 |
Interest received | ||||
Non-cash items: | ||||
Accretion and interest expense | 127 | 437 | ||
Depreciation, depletion and amortization | 2,241 | 3,740 | ||
Change in provision for reclamation and rehabilitation | - | 4 | ||
Writedown of inventory | - | 816 | ||
Lease interest | 4 | 5 | ||
Loss on settlement of liability | 94 | - | ||
Change in fair value of derivative liability | 375 | 3 | ||
Gain on gold stream derivative asset | (10) | 19 | ||
Share-based payments | 246 | 71 | ||
Unrealized foreign exchange loss | 93 | (4) | ||
$ | 8,519 | $ | 6,478 | |
Changes in non-cash working capital | 15 | (3,284) | (5,039) | |
Net cash provided by operating activities | 5,235 | 1,439 | ||
Investing activities | ||||
Expenditures on mineral property, plant and equipment | (989) | (365) | ||
Net cash used in investing activities | $ | (989) | $ | (365) |
Financing activities | ||||
Purchase of common shares - NCIB | (211) | - | ||
Common shares issued on exercise of options | 346 | - | ||
Repayment of Sailfish Silver Loan | (818) | - | ||
Repayment of Sailfish Loan Derivative Liability | - | (947) | ||
Payment to GR Silver on settlement of ARO | (500) | - | ||
Payments on lease liability | (25) | (24) | ||
Net cash used in financing activities | $ | (1,208) | $ | (971) |
Effect of foreign exchange on cash and cash equivalents | (13) | 15 | ||
Change in cash and cash equivalents | 3,025 | 118 | ||
Cash and cash equivalents, beginning of the period | 1,498 | 523 | ||
Cash and cash equivalents, end of period | $ | 4,523 | $ | 641 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
1. NATURE OF OPERATIONS
Mako Mining Corp. ("Mako" or the "Company") was incorporated on April 1, 2004, under the laws of the Yukon Territory and continued into British Columbia under the British Columbia Corporations Act. The Company is listed on the TSX Venture Exchange ("TSX-V") under the symbol MKO. The address of the Company's corporate office and principal place of business is Suite 700 - 838 West Hastings Street, Vancouver, BC, V6C 0A6, Canada.
Mako is a gold mining and exploration company. The Company's primary asset is the San Albino mine, an open pit mine located in Nicaragua, which commenced commercial production on July 1, 2021. In addition to its mining operation, Mako continues to explore its other concessions in Nicaragua.
2. BASIS OF PRESENTATION
- Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"), as applicable to the preparation of interim financial statements including International Accounting Standard ("IAS") 34, Interim Financial Reporting. Accordingly, they do not include all the information and notes to the consolidated financial statements required by IFRS Accounting Standards for annual financial statements and should be read in conjunction with the Company's most recent audited consolidated financial statements for the year ended December 31, 2023.
These condensed interim consolidated financial statements were approved for issuance by the Board of Directors on May 17, 2024.
(b) Basis of presentation
The accounting policies and methods used in the preparation of these condensed interim consolidated financial statements are the same as those applied in the Company's most recent audited consolidated financial statements for the year ended December 31, 2023 except for:
Amendments to IAS 1 - Presentation of Financial Statements
In October 2022, the IASB issued amendments to IAS 1 titled Non-currentLiabilities with Covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override and incorporate the previous amendments, Classification of Liabilities as Current or Non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective for annual periods beginning on or after January 1, 2024, and the adoption of these amendments did not have an effect on our financial statements.
These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at fair value.
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
- Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances, revenues and expenses have been eliminated upon consolidation.
Subsidiaries are included in the condensed interim consolidated financial statements from the date of acquisition or control until the date of disposition or until control ceases. Control exists when the Company has exposure or rights to variable returns from its involvement with an entity, and the ability to affect those returns through its power over the entity.
The condensed interim consolidated financial statements of the Company include the following subsidiaries:
Referred | Place of | Ownership | ||
Subsidiary | to as | incorporation | interest | Principal activity |
Gold Belt, S.A. | "Gold Belt" | Nicaragua | 100% | Holds mineral interest in Nicaragua, exploration |
activities. | ||||
Nicoz Resources, S.A. | "Nicoz" | Nicaragua | 100% | Holds mineral interest in Nicaragua, San Albino |
mine and exploration activities. | ||||
Mako US Corp. | "Mako US" | United States | 100% | Incorporated on June 19, 2019, service company |
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of these condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Outlined below are the key areas which require management to make significant judgements, estimates and assumptions in determining carrying values.
(a) Estimated mineral resources
Mineral resources are estimates of the amount of metal that can be extracted from the Company's properties, considering both economic and legal factors. The Company estimates the quantity and/or grade of its mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires judgments to interpret the complex geological data. Calculating mineral resources is based upon factors such as estimates of metallurgical recoveries along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the mineral resources may affect the Company's financial position in a number of ways, including:
- asset carrying values may be affected due to changes in estimated future cash flows;
- depreciation charges in the Company's consolidated statement of comprehensive income (loss) may change when such charges are determined by the unit-of-production basis, or when the useful lives of assets change; and
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
- provision for reclamation liabilities balances may be affected as the estimated timing of reclamation activities is adjusted for changes in the estimated mine life as determined by the available mineral resources.
- Silver obligations
The carrying value of the Sailfish Silver Loan represents management's best estimate of the fair value of the arrangement. The fair value incorporates estimates of silver prices and discount rates. Judgment was made in determining that it is a derivative. (Refer to note 12(c)).
(c) Wexford Loan
The Wexford Loan is measured at amortized cost and will be accreted to maturity over the term using the effective interest method. The Company used an effective interest rate of 18%, the estimated market interest rate for non- related parties based on comparable debt, when valuing the Revised Wexford Loan upon initial recognition.
(d) Deferred income taxes
The determination of income tax expense and deferred income tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretation of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred income taxes or the timing of tax payments.
(e) Impairment of non-current assets
Management applies significant judgment in its assessment and evaluation of asset or cash generating units at each reporting date to determine whether there are any indications of impairment. The Company considers both internal and external sources of information when making the assessment of whether there are indications of impairment for the Company's mineral properties, plant and equipment. External sources of information considered are changes in the Company's economic, legal and regulatory environment, which it does not control, but affect the recoverability of its mining assets. Internal sources of information the Company considers include the manner in which mining properties and plant and equipment are being used or are expected to be used and indications of economic performance of the assets. Calculating the fair value less costs of disposal of cash generating units for impairment tests requires management to make estimates and assumptions with respect to future production levels, operating, capital and closure costs, future metal prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis.
(f) Reclamation and remediation provisions
Reclamation and remediation provisions represent the present value of estimated future costs for the reclamation of the Company's mines and properties. These estimates include assumptions as to the cost of services, timing of the reclamation work to be performed, inflation rates, foreign exchange rates and interest rates. The reclamation and closure estimates are more uncertain the further into the future the activities are to be performed.
The actual cost to reclaim a mine may vary from the estimated amounts because there are uncertainties in factors used to estimate the cost and potential changes in regulations or laws governing the reclamation of a mine. Management periodically reviews the reclamation requirements as new information becomes available and will assess the impact of new regulations and laws as they are enacted. Any changes to assumptions will result in an
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
adjustment to the provision which affects the Company's liabilities and either its mineral property, plant and equipment or statement of income.
(g) Depreciation, depletion and amortization
The Company uses the units of production method to deplete mineral properties and the straight-line method to amortize plant and equipment. The calculation of the unit of production rate and the useful life and residual values of plant and equipment, and therefore the annual depletion and depreciation expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of changes in the Company's mine plans, changes in the estimation of mineral resources and changes in the estimated remaining life or residual value of plant and equipment.
(h) Stockpiled ore and ore in-circuit net realizable value
Management applies significant judgment in developing the NRV of stockpiled ore and ore in-circuit inventory, including assumptions related to estimated recoverable ounces of gold within stockpiled ore and ore in-circuit inventory, the estimated forecasted gold price per ounce, estimated costs of completion and selling expenses.
4. RECEIVABLES
As at | March 31, 2024 | December 31, 2023 | |||
Trade receivable | $ | 2,984 | $ | 304 | |
Other | 246 | 207 | |||
$ | 3,230 | $ | 511 | ||
5. INVENTORIES | |||||
As at | March 31, 2024 | December 31, 2023 | |||
Stockpiled ore | $ | 10,466 | $ | 9,265 | |
Ore in-circuit | 1,595 | 1,232 | |||
Finished metal | 401 | 278 | |||
Supplies and spare parts | 3,706 | 3,074 | |||
Disclosed as non-current: | 16,168 | 13,849 | |||
Stockpiled ore | 4,136 | 4,274 | |||
$ | 20,304 | $ | 18,123 |
As at March 31, 2024, ore in-circuit, finished metal and stockpiled ore was recorded at cost. As at December 31, 2023, ore in-circuit and finished metal were recorded at cost, and stockpiled ore was recorded at NRV. During the three months ended March 31, 2023, stockpiled ore was written down by $816,000.
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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024
All tabular amounts are in thousands of United States dollars unless otherwise stated (Unaudited)
-
GOLD STREAM DERIVATIVE ASSET
Gold stream derivative asset arises from the amended gold stream agreement the Company entered into with Sailfish Royalty Corp ("Sailfish") (also refer to note 13(c)) in November 2018 whereby the Company received $1,096,051 (the "Gold Stream Advance") which was recorded as a credit to the mineral property. At that time, it was determined to be a disposition of mineral interest. In return for the Gold Stream Advance, the Company is required to deliver 4% of gold production to Sailfish and is to receive a payment at 25% of the market price of the gold delivered. Effectively the Company sold 4% of the gold mineralization relating to the mineral property and is being paid for services relating to the processes required to obtain the finished metal. As the price of gold is not closely related to the price of the services being provided, the contract to provide these services contains an embedded derivative that requires separation from the host contract.
The contract to deliver to Sailfish its 4% of gold production, in return for 25% of the market value of the gold delivered, contains an embedded derivative that was previously of minimal value. This derivative consists of a "swap" of the variable payment based on the price of gold for the fixed price implied by the contract. As at March 31, 2024, this derivative was determined to be an asset of $274,484 (December 31, 2023 - $264,900) based on current spot and future gold prices, and projected deliveries under the contract, all of which is disclosed as a current asset in the statement of financial position.
For the three months ended March 31, 2024, the Company delivered a total of 91 (2023 -338) ounces of gold to Sailfish, pursuant to this agreement. In exchange the Company received $48,509 (2023 - $159,691) and there was a change in fair value on the derivative of $9,584 for the three months ended March 31, 2024 (2023 - $37,737). - EXPLORATION AND EVALUATION ASSETS
The following exploration and evaluation assets (acquisition costs) are located in Nicaragua:
Potrerillos | El Jicaro | Total | ||||
Balance, March 31, 2024 and December 31, 2023 | $ | 645 | $ | 120 | $ | 765 |
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Mako Mining Corp. published this content on 21 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 May 2024 11:33:10 UTC.