ESKAY MINING CORP.
CONDENSED INTERIM FINANCIAL STATEMENTS THREE MONTHS ENDED MAY 31, 2024 AND 2023 (EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED)
Notice to Reader
The accompanying unaudited condensed interim financial statements of Eskay Mining Corp. (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors.
Eskay Mining Corp.
Condensed Interim Statements of Financial Position (Expressed in Canadian Dollars)
(Unaudited)
As at | As at |
May 31, | February 29, |
2024 | 2024 |
ASSETS | ||||
Current assets | $ | 2,633,225 | ||
Cash and cash equivalents | $ | 2,839,947 | ||
Amounts receivable (note 6) | 1,017,315 | 977,571 | ||
Prepaid expenses and other deposits (note 3) | 45,852 | 25,530 | ||
Total current assets | 3,696,392 | 3,843,048 | ||
Non-current assets | 63,070 | |||
Deposits (note 4) | 99,503 | |||
Investment in associate (note 9) | 1,865,590 | 1,896,156 | ||
Equipment (note 5) | 202,967 | 213,649 | ||
Total assets | $ | 5,828,019 | $ | 6,052,356 |
SHAREHOLDERS' EQUITY AND LIABILITIES | ||||
Current liabilities | $ | 369,524 | ||
Amounts payable and other liabilities (note 8) | $ | 302,167 | ||
Total current liabilities | 369,524 | 302,167 | ||
Non-current liabilities | 78,091 | |||
Provision for reclamation (note 7) | 76,917 | |||
Total liabilities | 447,615 | 379,084 | ||
Shareholders' equity | 113,693,197 | |||
Share capital (note 10) | 113,693,197 | |||
Reserves (notes 11 & 12) | 14,994,473 | 14,728,845 | ||
Accumulated deficit | (123,307,266) | (122,748,770) | ||
Total shareholders' equity | 5,380,404 | 5,673,272 | ||
Total shareholders' equity and liabilities | $ | 5,828,019 | $ | 6,052,356 |
Nature of operations and going concern (note 1) | ||||
Commitments and contingencies (note 16) | ||||
Subsequent events (note 18) |
Approved on behalf of the Board of Directors:
"Hugh M. (Mac) Balkam", Director
"J. Gordon McMehen", Director
The accompanying notes to the financial statements are an integral part of these statements.
- 1 -
Eskay Mining Corp.
Condensed Interim Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars)
(Unaudited)
Three Months | ||||
Ended | ||||
May 31, | ||||
2024 | 2023 | |||
Operating expenses | $ | 55,657 | ||
Exploration and evaluation expenditures (note 4) | $ | 189,568 | ||
General and administrative (note 14) | 572,700 | 1,014,563 | ||
Total operating expenses | (628,357) | (1,204,131) | ||
Other items | 4,609 | |||
Interest income | 22,160 | |||
Amortization (note 5) | (10,682) | (8,752) | ||
Loss from investment in associate (note 9) | (30,566) | (44,684) | ||
Net loss and comprehensive loss for the period | $ | (664,996) | $ | (1,235,407) |
Net loss per share - Basic and Diluted (note 13) | $ | (0.00) | $ | (0.01) |
Weighted average number of common shares outstanding - Basic | ||||
and diluted (note 13) | 183,617,123 | 183,617,123 |
The accompanying notes to the financial statements are an integral part of these statements.
- 2 -
Eskay Mining Corp.
Condensed Interim Statements of Cash Flows (Expressed in Canadian Dollars)
(Unaudited)
Three Months | ||||
Ended | ||||
May 31, | ||||
2024 | 2023 | |||
Operating activities | $ | (664,996) | ||
Net loss for the period | $ | (1,235,407) | ||
Adjustments for: | 372,128 | |||
Share-based payments (note 11) | 738,971 | |||
Amortization (note 5) | 10,682 | 8,752 | ||
Accretion (notes 7) | 1,174 | 1,376 | ||
Loss from investment in associate (note 9) | 30,566 | 44,684 | ||
Changes in non-cash working capital items: | (39,744) | |||
Amounts receivable | 5,868 | |||
Prepaid expenses and other deposits | 16,111 | (195,716) | ||
Amounts payable and other liabilities | 67,357 | (55,212) | ||
Net cash used in operating activities | (206,722) | (686,684) | ||
Net change in cash and cash equivalents | (206,722) | (686,684) | ||
Cash and cash equivalents, beginning of period | 2,839,947 | 3,024,574 | ||
Cash and cash equivalents, end of period | $ | 2,633,225 | $ | 2,337,890 |
Cash and cash equivalents | $ | 533,225 | ||
Cash | $ | 2,237,890 | ||
GIC | $ | 2,100,000 | $ | 100,000 |
The accompanying notes to the financial statements are an integral part of these statements.
- 3 -
Eskay Mining Corp.
Condensed Interim Statements of Changes in Shareholders' Equity (Expressed in Canadian Dollars)
(Unaudited)
Equity attributable to shareholders | ||||||
Share | Accumulated | |||||
capital | Reserves | deficit | Total | |||
Balance, February 28, 2023 | $113,693,197 | $ | 14,900,884 | $ (122,757,263) | $ | 5,836,818 |
Share-based payments (note 11) | - | 738,971 | - | 738,971 | ||
Net loss for the period | - | - | (1,235,407) | (1,235,407) | ||
Balance, May 31, 2023 | $113,693,197 | $ | 15,639,855 | $ (123,992,670) | $ | 5,340,382 |
Balance, February 29, 2024 | $113,693,197 | $ | 14,728,845 | $(122,748,770) | $ | 5,673,272 |
Expiry of stock options | - | (106,500) | 106,500 | - | ||
Share-based payments (note 11) | - | 372,128 | - | 372,128 | ||
Net loss for the period | - | - | (664,996) | (664,996) | ||
Balance, May 31, 2024 | $113,693,197 | $ | 14,994,473 | $ (123,307,266) | $ | 5,380,404 |
The accompanying notes to the financial statements are an integral part of these statements.
- 4 -
Eskay Mining Corp.
Notes to Condensed Interim Financial Statements Three Months Ended May 31, 2024 (Expressed in Canadian Dollars)
(Unaudited)
1. Nature of operations and going concern
Eskay Mining Corp. (the "Company" or "Eskay") is a Canadian company incorporated in British Columbia and listed for trading on the TSX Venture Exchange ("TSXV"), the Frankfurt Stock Exchange and the OTCQB Venture Market in the United States. The Company is primarily engaged in the acquisition and exploration of mineral properties. The primary office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, M5C 1P1.
These unaudited condensed interim financial statements were approved by the board of directors on July 30, 2024.
These unaudited condensed interim financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. The Company has incurred losses in prior periods, and had a net loss of $664,996 during the three months ended May 31, 2024 (three months ended May 31, 2023 - net loss of $1,235,407), has an accumulated deficit of $123,307,266 (February 29, 2024 - $122,748,770). These conditions indicate that material uncertainties exist that cast significant doubt on the Company's ability to continue as a going concern.
The Company's ability to continue to meet its obligations and carry out its planned exploration activities is uncertain and dependent upon the continued financial support of its shareholders and securing additional financing. While the Company has been successful in securing financing in the past, there is no assurance that it will be able to do so in the future. If the going concern assumption was not used, then the adjustments required to report the Company's assets and liabilities on a liquidation basis could be material to these unaudited condensed interim financial statements.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to social and government licensing requirements or regulations, unregistered prior agreements, unregistered claims, aboriginal claims, and non- compliance with regulatory and environmental requirements. The Company's mineral exploration property interests may also be subject to increases in taxes and royalties, renegotiation of contracts, and political uncertainty.
2. Significant accounting policies
- Statement of compliance
The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements.
The policies applied in these unaudited condensed interim financial statements are based on IFRSs issued and outstanding as of July 30, 2024, the date the Board of Directors approved these unaudited condensed interim financial statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim financial statements as compared with the most recent annual financial statements as at and for the year ended February 29, 2024, except as noted below. Any subsequent changes to IFRS that are given effect in the Company's annual financial statements for the year ending February 28, 2025 could result in restatement of these unaudited condensed interim financial statements.
- 5 -
Eskay Mining Corp.
Notes to Condensed Interim Financial Statements Three Months Ended May 31, 2024 (Expressed in Canadian Dollars)
(Unaudited)
2. Significant accounting policies (continued)
- New accounting policies
IAS 1 Classification of Liabilities as Current or Non-Current (Amendment)
The IASB has published Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) which clarifies the guidance on whether a liability should be classified as either current or non-current. The amendments:
- clarify that the classification of liabilities as current or non-current should only be based on rights that are in place "at the end of the reporting period"
- clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability
- make clear that settlement includes transfers to the counterparty of cash, equity instruments, other assets or services that result in extinguishment of the liability.
This amendment was adopted March 1, 2024 and there was no impact on the adoption of this amendment.
3. Prepaid expenses and other deposits
As at | As at | |||
May 31, | February 29, | |||
2024 | 2024 | |||
Prepaid expenses (1) | $ | 45,852 | $ | 25,530 |
$ | 45,852 | $ | 25,530 |
- As at May 31, 2024, included in prepaid expenses are $2,063 (February 29, 2024 - $2,063), for an advance to the CEO of the Company.
4. Exploration and evaluation expenditures
Three Months | ||||
Ended | ||||
May 31, | ||||
2024 | 2023 | |||
ESKAY-Corey | $ | 15,336 | ||
Surveying, sampling and analysis | $ | 18,635 | ||
Geological and consulting | 36,687 | 158,225 | ||
Camping procurement and expediting | 100 | 11,011 | ||
Claims | 360 | - | ||
Transportation | 2,000 | 321 | ||
Accretion (note 7) | 1,174 | 1,376 | ||
Total exploration and evaluation expenditures | $ | 55,657 | $ | 189,568 |
- 6 -
Eskay Mining Corp.
Notes to Condensed Interim Financial Statements Three Months Ended May 31, 2024 (Expressed in Canadian Dollars)
(Unaudited)
4. Exploration and evaluation expenditures (continued) ESKAY-Corey
The ESKAY-Corey property is comprised of the following:
St. Andrew (SIB)
Pursuant to an option agreement dated May 7, 2008 and amending option agreement dated January 17, 2013 with St. Andrew Goldfields Ltd., the Company earned an 80% interest in the SIB Property at Eskay Creek, British Columbia (the "Property") by expending an aggregate of $3.98 million on exploration of the Property and issuing further 265,000 common shares. On January 26, 2016, Kirkland Lake Gold Inc. ("Kirkland Lake") announced it completed the acquisition of St. Andrew. St. Andrew is a wholly-owned subsidiary of Kirkland Lake and continued to hold a 20% interest in the SIB Property. St. Andrew and the Company entered into an agreement with an effective date of November 25, 2016 for the further exploration and development of the Property. Pursuant to a Royalty Agreement dated March 8, 2021, the Company acquired the remaining 20% interest in SIB from Kirkland Lake, to hold a 100% working interest, in consideration for the granting of a 2% Net Smelter Returns Royalty on the SIB in favour of Kirkland Lake.
Corey claim
In September 1990, the Company acquired a 100% interest in mineral tenures located in the Skeena Mining Division, Province of British Columbia for $30,000 cash and a royalty of 5% of net profits from these claims to a maximum of $250,000.
These mineral exploration properties are located in northwestern British Columbia, 70 km northwest of Stewart. The Company holds a 100% interest in these mineral tenures subject to a 2% net smelter royalty.
On July 7, 2023, the Company sold 5 mining claims in the Golden Triangle area of BC to Skeena Resources Limited ("Skeena") in consideration for aggregate cash payments of $4 million. The initial consideration of $2 million was paid to the Company on closing, a further $1 million was paid on October 31, 2023 and the final $1 million payment was paid on December 31, 2023. Eskay retains a 2% net smelter royalty ("Royalty") in the Claims. Skeena can purchase 50% of the Royalty at any time for $2 million. In addition, Eskay will not be required to pay any road use fees to Skeena for its use of the Eskay Creed Road for the five year period ending December 31, 2027, provided that its road use those years is consistent with its road use in 2022. Four of the claims are north and west of the Skeena Eskay Creek Project and one of the Claims is adjacent to the west side of the Skeena Eskay Creek Project.
Deposits and Exploration Advances
As at May 31, 2024, the Company had $63,070 (February 29, 2024 - $99,503) of deposits and exploration advances held by the provincial government of British Columbia. Such deposits were required by the B.C Ministry of Energy and Mines in order to permit the Company to conduct exploration and evaluation activities in that province.
5. | Equipment | ||
Cost | |||
Balance, February 28, 2023 | $ | 224,497 | |
Addition | 77,513 | ||
Balance, February 29, 2024 and May 31, 2024 | $ | 302,010 |
- 7 -
Eskay Mining Corp.
Notes to Condensed Interim Financial Statements Three Months Ended May 31, 2024 (Expressed in Canadian Dollars)
(Unaudited)
5. Equipment (continued)
Accumulated amortization
Balance, February 28, 2023 | $ | 49,482 | |||
Amortization | 38,879 | ||||
Balance, February 29, 2024 | $ | 88,361 | |||
Amortization | 10,682 | ||||
Balance, May 31, 2024 | $ | 99,043 | |||
Carrying amounts | |||||
At February 29, 2024 | $ | 213,649 | |||
At May 31, 2024 | $ | 202,967 | |||
6. | Amounts receivable | ||||
May 31, | February 29, | ||||
2024 | 2024 | ||||
Sales tax recoverable - (Canada) | $ | 156,634 | $ | 153,323 | |
Provincial sales tax - BC | 216 | 216 | |||
B.C. Mining tax credit receivable | 860,465 | 824,032 | |||
$ | 1,017,315 | $ | 977,571 |
7. Provision for reclamation
The Company's provision for reclamation costs is based on management's estimated costs to dismantle and remove its facilities as well as an estimate of the future timing of the costs to be incurred. The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the provision for closure and reclamation associated with the dismantling and removal of the Company's camp:
Balance at February 29, 2024 | $ | 76,917 |
Accretion | 1,174 | |
Balance at May 31, 2024 | $ | 78,091 |
The Company has estimated its total provision for reclamation to be $78,091 at May 31, 2024 (February 29, 2024 - $76,917) based on an estimated total future liability of approximately $131,152 and an inflation rate of 2.60% (February 29, 2024 - 2.6%) and a discount rate of 3.49% (February 29, 2024 - 3.49%).
- 8 -
Eskay Mining Corp.
Notes to Condensed Interim Financial Statements Three Months Ended May 31, 2024 (Expressed in Canadian Dollars)
(Unaudited)
8. Amounts payable and other liabilities
Amounts payable and other liabilities of the Company are principally comprised of amounts outstanding for purchases relating to exploration and evaluation expenditures and general operating and administrative activities:
May 31, | February 29, | |||
2024 | 2024 | |||
Accounts payable | $ | 237,678 | $ | 211,791 |
Accruals and others | 131,846 | 90,376 | ||
Total amounts payable and other liabilities | $ | 369,524 | $ | 302,167 |
The following is an aged analysis of amounts payable and other liabilities: | May 31, | February 29, | ||
2024 | 2024 | |||
Less than 1 month | $ | 210,859 | $ | 250,590 |
1 to 3 months | 1,974 | 55,717 | ||
Greater than 3 months | 156,691 | (4,140) | ||
Total amounts payable and other liabilities | $ | 369,524 | $ | 302,167 |
9. Investment in associate
An associate is an entity over which the Company has significant influence, and is not a subsidiary or joint venture. Significant influence is presumed to exist when the Company has the power to be actively involved and influential in financial and operating policy decisions of the associate.
The Company accounts for its investment in an associate using the equity method. Under the equity method, the Company's investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share of profit and loss of the associate and for impairment losses after the initial recognition date. The Company's share of comprehensive earnings or losses of associates is recognized in comprehensive income (loss) during the period. Distributions received from an associate are accounted for as a reduction in the carrying amount of the Company's investment.
For the three months ended May 31, 2024, the Company recognized its share of Garibaldi Resources Corp. ("GGI") loss of $30,566 (three months ended May 31, 2023 - $44,684), using the equity method.
As at May 31, 2024, the Company has a total ownership of 17.25%.
- 9 -