UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 20182019
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _____________
Commission file number000-52326
GIGA METALS CORPORATION
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’sRegistrant's name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
203 –- 700 West Pender Street Vancouver, British Columbia, V6C 1G8 Canada
(Address of principal executive offices)
Copy of communications to:Bernard Pinsky, Esq.
Clark Wilson LLPMark Jarvis, Chief Executive OfficerBarristers and SolicitorsSuite 800 – 885203 - 700 West GeorgiaPender Street
Vancouver, British Columbia, Canada V6C 3H11G8
Telephone: 604-687-5700604-681-2300 Facsimile: 604-687-6314604-681-2310
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of | Name of each exchange on which registered |
Not Applicable | Not Applicable |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Not Applicable
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’sissuer's classes of capital or common stock as of the close of the period covered by the annual report.
43,149,01555,494,015 Common Shares without par value issued and outstanding as at December 31, 2018.2019.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES
[ ] YES [X] NO [X]
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
[ ] YES [X] NO
Note –- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ]X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer or an emerging growth company. See definition of “accelerated filer"accelerated filer", "large accelerated filer", and large accelerated filer”"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [X] |
Emerging growth company [X] |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
[ ] [ ] Accelerated filer [X] Non-accelerated filer
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP [ ] | ||
International Financial Reporting Standards as issued by the International | ||
| Accounting Standards Board [X] | Other [ ] |
If “Other”"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
[ ] ITEMItem 17 [X] ITEM[ ] Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b 2 of the Exchange Act).
[ ] YES [X] NO
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
[ ] YES [ ] NO
TABLE OF CONTENTS
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| Item 9 | The Offer and Listing | ||
| A. | Common Share Trading Information | ||
| B. | Plan of Distribution | ||
| C. | Markets | ||
| D. | Selling Shareholders | ||
| E. | Dilution | ||
FORWARD-LOOKING STATEMENTS
Except for the statements of historical fact contained herein, some information presented in this annual report constitutes forward-looking statements. When used in this annual report, the words “estimate”"estimate", “project”"project", “believe”"believe", “anticipate”"anticipate", “intend”"intend", “expect”"expect", “predict”"predict", “may”"may", “should”"should", the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, changes in project parameters as plans continue to be refined, future prices of nickel, as well as those factors discussed in the section entitled “Risk Factors”"Risk Factors" on page 8. Although our company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. The forward-looking statements in this annual report speak only as to the date hereof. Our company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
As used in this annual report, the terms “we”"we", “us”"us", “our”"our" and “Giga Metals”"Giga Metals" mean Giga Metals Corporation, unless otherwise indicated.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
Unless otherwise indicated, all mineral resource estimates included in this Annual Report on Form 20-F have been prepared in accordance with Canadian National Instrument 43-101 –- Standards of Disclosure for Mineral Projects (“("NI 43-101”43-101"), and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“("CIM Definition Standards”Standards"). NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 permits the disclosure of a historical estimate made prior to the adoption of NI 43-101 that does not comply with NI 43-101 using the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c) states whether the historical estimate uses categories other than those prescribed by NI 43-101 and, if so, includes an explanation of the differences; and (d) includes any more recent estimates or data available.
Canadian standards, including NI 43-101, differ significantly from the requirements of the Securities and Exchange Commission (the “SEC”"SEC"), and reserve and resource information contained in this Annual Report on Form 20-F may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource”"resource" does not equate to the term “reserves”"reserves". Under U.S. standards, mineralization may not be classified as a “reserve”"reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SEC’sSEC's disclosure standards normally do not permit the inclusion of information concerning “measured"measured mineral resources”resources", “indicated"indicated mineral resources”resources" or “inferred"inferred mineral resources”resources" or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves”"reserves" by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred"inferred mineral resources”resources" have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred"inferred mineral resource”resource" will ever be upgraded to a higher category. Under Canadian rules, estimated “inferred"inferred mineral resources”resources" may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “inferred"inferred mineral resource”resource" exists or is economically or legally mineable. Disclosure of “contained ounces”"contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves”"reserves" by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves”"reserves" are also not the same as those of the SEC, and reserves reported by our company in compliance with NI 43-101 may not qualify as “reserves”"reserves" under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.
PART I
FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES
The financial statements and summaries of financial information contained in this document are reported in Canadian dollars (“("$”") unless otherwise stated. A “tonne”"tonne" is one metric ton or 2,204.6 pounds.
FIRST TIME APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
Effective from January 1, 2010, the Company adopted International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. Unless otherwise stated, all information presented herein has been prepared in accordance with IFRS..
Item 1 Identity of Directors, Senior Management and Advisers
Not required.
Item 2 Offer Statistics and Expected Timetable
Not required.
Item 3 Key Information
A. Selected Financial Data
The following financial data summarizes selected financial data for our company prepared in accordance with International Financial Reporting Standards (“("IFRS”") as issued by the International Accounting Standards Board (“IASB”("IASB") for the threefive fiscal years ended December 31, 2019, 2018, 2017, 2016 and 2016.2015. The information presented below for the three year period ended December 31, 2018, 2017 and 2016 is derived from our financial statements which were examined by our independent auditors. The information set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report,Annual Report, and with the information appearing under the heading “Item"Item 5 –- Operating and Financial Review and Prospects”Prospects".
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||
| Net operating revenues | 0 | 0 | 0 | 0 | 0 | ||||||||||
| Loss from continued operations | 0 | 0 | 0 | 0 | 0 | ||||||||||
| Income from discontinued operations | N/a | N/a | N/a | N/a | N/a | ||||||||||
| Net income (loss) | (1,663,674 | ) | 1,150,637 | (683,299 | ) | (224,112 | ) | (10,230,524 | ) | ||||||
| Comprehensive income (loss) | (1,663,674 | ) | 1,150,637 | (683,299 | ) | (224,112 | ) | (10,230,524 | ) | ||||||
| Income (loss) per share from continued operations | (0.03 | ) | 0.03 | (0.03 | ) | (0.01 | ) | (1.13 | ) | ||||||
| Income per share from discontinued operations | N/a | N/a | N/a | N/a | N/a | ||||||||||
| Income per share after discontinued operations | N/a | N/a | N/a | N/a | N/a | ||||||||||
| Share capital | 55,091,542 | 53,870,374 | 53,218,158 | 48,887,797 | 48,642,413 | ||||||||||
| Common shares issued | 55,494,015 | 43,149,015 | 40,664,015 | 21,537,349 | 9,037,349 | ||||||||||
| Weighted average shares outstanding | 51,169,610 | 42,391,792 | 25,986,111 | 18,347,211 | 9,037,348 | ||||||||||
| Total assets | 7,739,500 | 7,109,786 | 4,656,028 | 302,889 | 239,665 | ||||||||||
| Net assets (liabilities) | 6,862,251 | 6,796,805 | 4,511,046 | 287,919 | 223,816 | ||||||||||
| Convertible debentures (current and long term portions) | N/a | N/a | N/a | N/a | N/a | ||||||||||
| Cash dividends declared per common share | 0 | 0 | 0 | 0 | 0 | ||||||||||
| Exchange rates (CAD$ to US$) period average | 1.3269 | 1.2957 | 1.2986 | 1.3248 | 1.2787 |
| Exchange rates (CAD$ to US$) for most recent six months | Period High | Period Low | ||||
| October 2019 | $ | 1.333 | 1.3056 | |||
| November 2019 | $ | 1.3307 | 1.3148 | |||
| December 2019 | $ | 1.3302 | 1.2988 | |||
| January 2020 | $ | 1.3233 | 1.2970 | |||
| February 2020 | $ | 1.3429 | 1.3224 | |||
| March 2020 | $ | 1.4496 | 1.3356 | |||
| Exchange rate (CAD$ to US$) April 27, 2020 | $ | 1.4203 | 1.3904 |
Giga Metals CorporationSelected Financial Data in accordance with IFRS for the years 2018, 2017 and 2016(Expressed in Canadian Dollars)
| 2018 | 2017 | 2016 | |||||||
| Net operating revenues | $ | 0 | 0 | 0 | |||||
| Loss from continued operations | $ | 0 | 0 | 0 | |||||
| Income from discontinued operations | $ | N/a | N/a | N/a | |||||
| Net income (loss) | $ | 1,150,637 | (683,299 | ) | (224,112 | ) | |||
| Comprehensive income (loss) | $ | 1,150,637 | (683,299 | ) | (224,112 | ) | |||
| Income (loss) per share from continued operations | $ | 0.03 | (0.03 | ) | (0.01 | ) | |||
| Income per share from discontinued operations | $ | N/a | N/a | N/a | |||||
| Income per share after discontinued operations | $ | N/a | N/a | N/a | |||||
| Share capital | $ | 53,870,374 | 53,218,158 | 48,887,797 | |||||
| Common shares issued | 43,149,015 | 40,664,015 | 21,537,349 | ||||||
| Weighted average shares outstanding | 42,391,792 | 25,986,111 | 18,347,211 | ||||||
| Total assets | $ | 7,109,786 | 4,656,028 | 302,889 | |||||
| Net assets (liabilities) | $ | 6,796,805 | 4,511,046 | 287,919 | |||||
| Convertible debentures (current and long term portions) | $ | N/a | N/a | N/a | |||||
| Cash dividends declared per common share | $ | 0 | 0 | 0 | |||||
| Exchange rates (CAD$ to US$) period average | $ | 1.2957 | 1.2986 | 1.3248 |
| Exchange rates (CAD$ to US$) for most recent six | ||||||
| months | Period High | Period Low | ||||
| October 2018 | $ | 1.3142 | 1.2803 | |||
| November 2018 | $ | 1.3302 | 1.3088 | |||
| December 2018 | $ | 1.3642 | 1.3191 | |||
| January 2019 | $ | 1.3600 | 1.3144 | |||
| February 2019 | $ | 1.3298 | 1.3095 | |||
| March 2019 | $ | 1.3438 | 1.3260 | |||
| Exchange rate (CAD$ to US$) April 23, 2019 | $ | 1.3421 | 1.3316 |
B. Capitalization and Indebtedness
On August 28, 2017, the Company consolidated its common shares on a basis of one (1) new common share for two (2) old common shares held. Reference to common shares, per share amounts and other securities have been retroactively restated.Not required.
C. Reasons for the Offer and Use of Proceeds
Not required.
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D.Risk Factors
This Annual Report contains forward-looking statements which relate to future events or our future performance, including our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”"may", “should”"should", “expects”"expects", “plans”"plans", “anticipates”"anticipates", “believes”"believes", “estimates”"estimates", “predicts”"predicts", or “potential”"potential" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in enumerated in this section entitled “Risk Factors”"Risk Factors", that may cause our company’scompany's or our industry’sindustry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this annual reportAnnual Report in evaluating our company and our business before purchasing shares of our company’scompany's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.
Subsequent to year-end, there was a global pandemic outbreak of COVID-19. The actual and threatened spread of the virus globally has had a material adverse effect on the global economy and; specifically, the regional economies in which the Company operates. The pandemic could continue to have a negative impact on the stock market, including trading prices of the Company's shares and its ability to raise new capital. These factors, among others, could have a significant impact on the Company's operations.
Risks Associated with Mining
The Company is engaged in the business of acquiring and exploring mineral properties in the expectation of locating mineral reserves. The Company’sCompany's property interests are in the exploration stage only and are without a known body of commercial ore. Accordingly, there is little likelihood that the Company will realize any profits in the short to medium term. Any profitability in the future from the Company’sCompany's business will be dependent upon locating mineral reserves, which itself is subject to numerous risk factors. If we do not discover any mineral resource in a commercially exploitable quantity, our business will fail and investors may lose all of their investment in our company.
The business of exploring for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing, profitable mines. In developing its mineral deposits, the Company will be subjected to an array of complex economic factors and accordingly there is no assurance that a positive feasibility study or any projected results contained in a feasibility study of a mineral deposit will be attained. Additional potential problems that may prevent us from discovering any reserves of minerals on our property include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. Most of these factors are beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.
If we are unable to establish the presence of commercially exploitable reserves of minerals on our property, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.
We face intense competition in the mineral exploration and exploitation industry and we compete with our competitors for financing, for new mineral resource properties and for qualified managerial and technical employees. If we are unable to obtain the financing, new mineral properties or qualified personnel that we require, then we will likely have to cease operations and investors will lose all of their investment in our company.
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Our competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may have to compete for financing and we may be unable to acquire financing on terms we consider acceptable. Our competition could adversely affect our ability to acquire suitable prospects for exploration in the future. We may also have to compete with the other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing, mineral properties or qualified employees, we will likely have to cease operations. If we are unable to successfully compete for the acquisition of suitable prospects or interest for exploration in the future, we will not acquire any interest in additional mineral resource properties and have no further chance of discovering minerals. The occurrence of any of these things would likely cause us to cease operations and investors would lose their entire investment in our company.
Because of the inherent dangers involved in mineral exploration and exploitation, there is a risk that we may incur liability or damages as we conduct our business. If we are liable to pay for any damages resulting from the conduct of our business, our financial position could be adversely affected and we may have to slow down or cease operations and investors could lose their investment in our company.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure against or which we may elect not to insure. At the present time we have no coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our financial position. If so, we may have to slow down or cease operations and investors could lose their investment in our company.
Mineral operations are subject to government regulations which could have the effect of preventing us from exploiting any possible mineral reserves on our properties. If this occurs, we may have to cease operations and investors could lose their investment in our company.
Exploration activities are subject to national and local laws and regulations governing prospects, taxes, labor standards, occupational health, land use, environmental protection, mine safety and others which may in the future have a substantial adverse impact on our company’scompany's prospects. In order to comply with applicable laws, we may be required to make capital expenditures until a particular problem is remedied. Existing and possible future environmental legislation, regulation and action could cause additional expense, capital expenditure, restriction and delay in the activities of our company, the extent of which cannot be reasonably predicted. If we violate any applicable law or regulation, we could be forced to stop work and we could be fined. If we are forced to suspend our activities or if we are required to pay a large fine for a violation of these applicable laws and regulations, our business could be adversely affected and investors could lose their investment in our company.
Our operations are subject to environmental regulations, which require us to obtain permits and pay bonds and may result in the imposition of fines and penalties. If we are unable to obtain the permits or pay the bonds that we require in the future, we will have to cease the exploration activity in question. Ceasing such exploration activities could reduce our chances of ever discovering mineral resources on our properties. Environmental fines or liability could cause expenses for us, reducing the funds we have for our exploration program and potentially causing us to cease operations. If this happens, investors may lose their entire investment in our company.
Our operations are subject to environmental regulations promulgated by government agencies. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. Environmental legislation is evolving in a manner which means stricter standards, and enforcement; fines and penalties for non-compliance may become more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. Prior to conducting exploration involving surface disturbance in British Columbia, we are required to obtain a Work Permit from the Ministry of Energy, Mines and Petroleum Resources. Where significant surface disturbance through road building and drill site preparation is planned, the Ministry requires a Reclamation Bond to cover the estimated reclamation costs if we fail to complete the reclamation. The cost of compliance with governmental regulations, permits and bond requirements has the potential to reduce the profitability of operations by curtailing our exploration activities.
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We are not aware of any existing environmental liability associated with any of our exploration properties but if such liability should arise, we may incur costs, which would reduce the amount of money we have available to spend on exploration and could cause our company to suspend operations. Our potential exposure to liability for environmental damage is high and we have no reserves established to pay for such liability. If we are found to be liable for a large amount of environmental damage, we are likely to cease operations. If that happens, investors are likely to lose all of their investment in our company.
Please see the section entitled “Governmental Regulations”"Governmental Regulations" on page •16 of this annual reportAnnual Report for more information.
Risks Related To Our Company
We have a limited operating history and have not generated any operating revenues since our incorporation. This raises substantial doubt about our ability to continue as a going concern anddoes not provide a meaningful basis for an evaluation of our prospects. If we are unable to generate revenue from our business, we may be forced to delay, scale back, or cease our exploration activities. If any of these actions were to become necessary, we may not be able to continue to explore our properties or operate our business and there is a substantial risk our business would fail, causing investors to lose all of their investment in our company.
We have not generated any operating revenues since our incorporation and we will, in all likelihood, continue to incur operating expenses without revenues until our mining properties are fully developed and in commercial production, which may never happen. As of December 31, 2018,2019, we had cash and cash equivalents in the amount of $405,849,$1,640,642, receivables of $1,090,803, marketable securities valued at $2,683,560$1,071,018 and prepaid expenses of $293,861. We estimate our average monthly operating expenses to be approximately $100,000.$64,365. We cannot provide assurances that we will be able to successfully explore and develop our mining properties or assure that viable mineral reserves exist on our properties for extraction. It is unlikely that we will generate any funds internally unless we discover commercially viable quantities of ore. If we are unable to generate revenue from our business, during the fiscal year 2019, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these actions were to become necessary, we may not be able to continue to explore our properties or operate our business and if either of those events happen, then there is a substantial risk our business would fail and investors would lose their investment in our company.
We have not generated any revenue from our business and we may need to raise additional funds in the future. If we are not able to obtain future financing when required, we might be forced to discontinue our business.
Because we have not generated any revenue from our business and we cannot anticipate when we will be able to generate revenue from our business, we will need to raise additional funds, if required, for the further exploration and future development of our mining claims and to respond to unanticipated requirements or expenses. We anticipate that we currently have sufficient funds to cover administrative expenses for the 12 month period ending December 31, 2019 and for continued exploration. During the year ended December 2018, the Company was able to raise enough money to advance the project without requiring a partner. Because of these additional funds, the Company is able to take the Turnagain project to the pre-feasibility level as well and has raised enough additional working capital through the issuance of shares and or debt to continue its business through the end of 2019. Although we have been successful in the past in obtaining financing through the sale of equity securities, it is possible that we will not be able to obtain adequate financing in the future or that the terms of such financing will be unfavorable and unacceptable to us. Failure to obtain such additional financing is likely to result in a delay or indefinite postponement of further exploration and development of our projects and possible loss of our properties, in which case our company’scompany's securities would never increase in value and investors would lose their entire investment.
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Our Articles of Incorporation indemnify our officers and directors against all costs, charges and expenses incurred by them, which may discourage suits against directors or officers for breaches of fiduciary duties even though such suits, if successful, could benefit our company and our shareholders.
Our Articles of Incorporation contain provisions limiting the liability of our officers and directors for their acts, receipts, neglects or defaults and for any other loss, damage or expense incurred by our company which occurs in the execution of the duties of such officers or directors, unless the officers or directors did not act honestly and in good faith with a view to the best interests of our company. Such limitations on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our shareholders from suing our officers and directors based upon breaches of their duties to our company, though such an action, if successful, might otherwise benefit our company and our shareholders.
Risks Relating to our Securities
Trading in our common shares on the Toronto Stock Venture Exchange is limited and sporadic, making it difficult for our shareholders to sell their shares or liquidate their investments.
Our common shares are currently listed on the TSX Venture Exchange under the symbol ‘GIGA'GIGA’'. The trading price of our common shares has been and may continue to be subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which are beyond our control. In addition, the stock market in general, and the market for base metal exploration companies, including companies exploring for nickel in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may adversely affect the market price of our shares, regardless of our operating performance. If you invest in our common shares, you could lose some or all of your investment.
In the past, following periods of volatility in the market price of a company’scompany's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management’smanagement's attention and resources.
Investors will suffer dilution in their net book value per share if we issue additional shares, raise funds through the sale of equity securities or issue employee/director or consultant options.
We are currently without a source of revenue and will most likely be required to issue additional shares to finance our operations and, depending on the outcome of our exploration programs, may issue additional shares to finance additional exploration programs of any or all of our projects or to acquire additional properties or through the exercise of options by our employees, directors and consultants. If we are required to issue additional shares to raise funds, our current shareholders’shareholders' interests in our company will be diluted and our current shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold. As at April 30,December 31, 2019, there were outstanding an aggregate number of common share purchase warrants and share purchase options as, upon exercise, would result in the issue of an additional 17,475,00017,405,000 of our common shares which, if exercised, would represent approximately 25%24% of our issued and outstanding common shares. If all of these share purchase warrants and share purchase options are exercised and these common shares are issued, such issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline in the market price of our common shares.
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We do not expect to declare or pay any dividends for the foreseeable future, so investors will realize a return on their investment only if the price of shares of our stock increases. There are no guarantees that this will ever happen and investors may lose their entire investment in our company.
We have not declared or paid any dividends on our Common Sharescommon shares since our inception, and we do not anticipate paying any such dividends for the foreseeable future. Therefore, investors will only realize a return on their investment if the price of our stockcommon shares increases. There are no guarantees that will ever happen and investors may never realize a return on their investment in our company and may lose their entire investment.
All of our directors, officers and control persons live outside of the U.S. and. investors may not be able to enforce their civil liabilities against us, our directors officers or control persons. Therefore, investors may be discouraged from bringing suits against our directors and officers or may be unsuccessful even if they bring such suits. Suits against directors or officers for breaches of fiduciary duties may be discouraged, even though such suits, if successful, could benefit our company and our shareholders.
It may be difficult to bring and enforce suits against us or our directors, officers and control persons. We were incorporated under theCompany Act (British Columbia) and transitioned under theBusiness Corporations Act (British Columbia) in June of 2004. All of our directors and officers are residents of countries other than the United States and all of our assets are located outside of the United States. Consequently, there is a risk that Canadian courts may not enforce the judgments of U.S. courts or enforce, in an original action, liabilities predicated on the U.S. federal laws directly.Therefore, investors may be discouraged from bringing suits or may be unsuccessful even if they do try.
Some of our directors and officers are employed elsewhere and their time and efforts will not be devoted to our company full-time.
Some of our directors and officers are employed in other positions with other companies. They will manage our company on a part-time basis. Because of this fact, the management of our company may suffer and our company could under-perform or fail. Martin Vydra, the President of our company, will devote approximately 50% of his working time to the management of the Company. Mark Jarvis, our CEO President and director, will devote approximately 75% of his working hourstime to the management of the Company, Matthew Anderson, our Chief Financial Officer, will devote approximately 15% of his working time to the management of our company. Lyle Davis, a director of our company, will devote approximately 10% of his working time to the management of our company. Phillip Robinson,Anthony Milewski, a director of our company, will spenddevote approximately 10% to the management of the Company. Martin Vydra, a director of our company, will spend approximately 10%his working time to the management of the Company. Robert Morris, a director of the company, will spenddevote approximately 10% of his working time to the management of the Company. Leslie Young, the Corporate Secretary of our company, will devote approximately 50% of her working hours,time to the management of our company.
Trading of our stock may be restricted by the SEC's penny stock regulations, which may limit a shareholder's ability to buy and sell our stock.
The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on brokers or dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker or dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker or dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker or dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker or dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of brokers or dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. This may limit your ability to buy and sell our stock and cause the price of the shares to decline
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NASD sales practice requirements may also limit a shareholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, the National Association of Securities Dealers (NASD) has adopted rules that require that in recommending an investment to a customer, a broker or dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, brokers or dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for brokers or dealers to recommend that their customers buy our common stock, which may prevent you from reselling your shares and may cause the price of the shares to decline.
U.S. investors could suffer adverse tax consequences if we are characterized as a passive foreign investment company.
We may be treated as a passive foreign investment company, or PFIC, for United States federal income tax purposes during the 2003 tax year or in subsequent years. We may be deemed a PFIC because previous financings combined with proceeds of future financings may produce, or be deemed to be held to produce, passive income. Additionally, U.S. citizens should review the section entitled “Taxation-U.S."Taxation-U.S. Federal Income Taxation - Passive Foreign Investment Companies”Companies" contained in this Annual Report for a more detailed description of the PFIC rules and how those rules may affect their ownership of our capital shares.
If we are or become a PFIC, our U.S. shareholders may be subject to the following adverse tax consequences:
• they will be taxed at the highest ordinary income tax rates in effect during their holding period on certain distributions on our capital shares, and gains from the sale or other disposition of our capital shares;
• they will be required to pay interest on taxes allocable to prior periods; and
• the tax basis of our capital shares will not be increased to fair market value at the date of their date.
Item 4 Information on our Company
A.History and Development of our Company
Name
The legal and commercial name of the company is Giga Metals Corporation.
Principal Office
We werehave our head office and principal place of business at Suite 203 - 700 West Pender Street, Vancouver, British Columbia V6C 1G8 Canada (Telephone: 604.681.2300). We do not have an agent in the United States.
Corporate Information and Important Events
The Company was originally incorporated in British Columbia Canada under theCompany Act (British Columbia) on January 17, 1983, under the name “Bren-Mar"Bren-Mar Resources Limited”,Limited" with an authorized capital of 50,000,000 Common Sharescommon shares without par value. On March 15, 2000, we changed our name to “Bren-Mar"Bren-Mar Minerals Ltd.” to reflect our change in business to strictly exploration mining and consolidated our then issued and outstanding common shares on the basis of 1 post-consolidation common share for 5 pre-consolidation common shares, and we increased our post-consolidation authorized capital to 50,000,000 common shares. There were no changes in our directors or management." On November 22, 2000, we changed our name to “Canadian"Canadian Metals Exploration Ltd.”" On June 25, 2004, we changed our name to reflect the Company’s focus on mineral exploration in Canada, there were no changes in directors or management."Hard Creek Nickel Corporation." On August 28, 2017, we changed our name to "Giga Metals Corporation."
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TheBusiness Corporations Act (British Columbia) came into force on March 29, 2004, repealing theCompany Act(British Columbia). Our company now operates under theBusiness Corporations Act (British Columbia).
We are a reporting issuer under the securities laws of the Provinces of British Columbia, Alberta and Ontario. Our common shares are listed on the TSX Venture Exchange under the symbol "GIGA".
On June 25, 2004, we changed our name to “Hard Creek Nickel Corporation” to reflect the primary type of mineral exploration the Company is engaged in, altered our authorized capital to comprise an unlimited number of common shares, and adopted our current Articles of Incorporation, which are attached as an exhibit to this form. The previous directorsAnnual Report, and management were replaced by Mark Jarvis as CEO, President and Director, Brian Fiddler as CFO, Leslie Young as Corporate Secretary, George Sookochoff as Director, Tom Milner as Director and Lyle Davis as Director. George Sookochoff resigned as a director in June, 2015.
On August 28, 2017, we changedincreased our nameauthorized capital to “Giga Metals Corporation” and closed a capital consolidation wherein two (2)an unlimited number of common shares of our company were exchanged for one (1) new common share. During the year ended December 31, 2017 Mr. Tom Milner resigned as a director and Dr. Jon Hykawy and Mr. Phillip Robinson joined the Board.
On April 16, 2018, the Company announced the passing of our CFO, Mr. Brian Fiddler. On April 23, 2018, the Company announced the appointment of Mr. Matthew Anderson as Chief Financial Officer.
We have our head office and principal place of business at Suite 203 – 700 West Pender Street, Vancouver, British Columbia V6C 1G8 Canada (Telephone: 604.681.2300) . We do not have an agent in the United States.
Our common shares are listed on the TSX Venture Exchange under the symbol “GIGA”.without par value.
Since inception, we have been engaged in natural resource exploration and development primarily in British Columbia and, since 1996, have focused on the Turnagain Property in the Liard Mining Division of northern British Columbia. We first acquired the mineral claims on the Turnagain Property in 1996 under an option agreement with John Schussler and Ernie Hatzl. The original option agreement gave us the right to earn a 100% interest in the mineral claims on the Turnagain Property in exchange for the issuance of 200,000 of our common shares and the expenditure of $1,000,000 on exploration of the property within 5 years of acquisition. We have now earned the 100% interest and it is subject to a 4% net smelter royalty (NSR) on possible future production from claim 511330. We have the right to pay outrepurchase the net smelter royalty by paying $1,000,000 for each 1% of the royalty. To pay outrepurchase the entire 4% royalty, we would be required to pay $4,000,000. On July 31, 2018, the Company closed the sale of a 2% NSR on all future metal production from the Turnagain Nickel-Cobalt Project to Cobalt 27 Capital Corp. for consideration of US$1,000,000 in cash (received) and 1,125,000 Cobalt 27 common shares (received) at $7.40 per share for a fair value of $8,325,000. The Company has the right to repurchase 0.5% of the 2% NSR (“Repurchase Option”) for US$20 million, which if exercised would result in a 1.5% remaining NSR. The one-time Repurchase Optionrepurchase option is only exercisable prior to the fifth anniversary of the NSR Agreement. Cobalt 27 will have a right of first refusal on any future sale by Giga Metals of a royalty or product stream or similar instrument. In 2019, Cobalt 27 was acquired by Pala Investments, which subsequently transferred the NSR Agreement to Conic Metals Corp. (formerly Nickel 28 Corp.).
On November 28, 2002, we entered into an agreement with John Schussler and Ernie Hatzl to acquire an additional 34 mineral claims, adjacent to the Turnagain Property, Laird Mining Division, British Columbia, in exchange for an aggregate total of 100,000 common shares.
Between November 2003 and March, 2005 weOctober 2019, addition claims were staked additional claims,at various time, some of which were subsequently forfeited, by way of the BC Ministry of Energy, Mines and Petroleum Resources' online map selection process, enlarging the Turnagain property from 3,700 haProperty to its current configuration of 71 claims covering approximately 27,500 ha. With claim conversions in April 2005 and November 2007, and additional staking in 2009, the Turnagain property now covers 32,75438,000 ha.
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Present Operations of Our CompanyCapital Expenditures
Turnagain Property Project
Our current mineral exploration activities on the Turnagain Property include core drilling, geological mapping, geochemical surveying, airborne geophysical survey, downhole geophysical surveying, baseline environmental and engineering studies, and metallurgical testing. From 2001 to December 31, 2017, we have drilled 273 core holes for a total depth of 76,367 m (250,548 feet).m. Approximate total exploration expenditures from January 1, 2014 to December 31, 2017 was $243,000. Approximate expenditure during the year ended December 31, 2018 were $5,003,000 as we drilled 40 core holes for a total depth of 10,835 m 35,550 feet).
As of December 31, 2018, we had $4,161,092 in working capital, which is sufficient to cover our operating costs for the next twelve months. If the Company is to carry out a 2019 exploration program, we may be required to obtain additional equity funding to provide funding to cover 100% of the anticipated costs.m.
The Company is planningconsidering a work program for the summer of 20192020 consisting mostly of geotechnical work including drilling in support of advancing the project to the pre-feasibility level. We are also planning a metallurgical program and updating our engineering studies. If the Company is to carry out a 2020 exploration program, we may be required to obtain additional equity funding to provide funding to cover 100% of the anticipated costs.
Takeover Offers
We are not aware of any indication of any public takeover offers by third parties in respect of our common shares during our last and current financial years.
The U.S. Securities and Exchange Commission (SEC) maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.
B. Business Overview
Nature of Operations and Principal Activities
We are in the mineral resource business. This business generally consists of three stages: exploration, development and production. We are a mineral resource company in the exploration stage because we have not yet found mineral resources in commercially exploitable quantities, and are engaged in exploring land in an effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral resource are in the production stage.
Mineral resource exploration can consist of several stages. The earliest stage usually consists of the identification of a potential prospect through either the discovery of a mineralized showing on that property or as the result of a property being in proximity to another property on which exploitable resources have been identified, whether or not they are or have in the past been extracted.
After the identification of a property as a potential prospect, the next stage would usually be the acquisition of a right to explore the area for mineral resources. This can consist of the outright acquisition of the land or the acquisition of specific, but limited, rights to the land (e.g., a license, lease or concession). After acquisition, exploration would probably begin with a surface examination by a prospector or professional geologist with the aim of identifying areas of potential mineralization, followed by detailed geological sampling and mapping of this showing with possible geophysical and geochemical grid surveys to establish whether a known trend of mineralization continues underground, possibly trenching in these covered areas to allow sampling of the underlying rock. Exploration also commonly includes systematic regularly spaced drilling in order to determine the extent and grade of the mineralized system at depth and over a given area, as well as gaining underground access by ramping or shafting in order to obtain bulk samples that would allow one to determine the ability to recover various commodities from the rock. If minerals are found, exploration might culminate in a feasibility study to ascertain if the mining of the minerals would be economic. A feasibility study is a study that reaches a conclusion with respect to the economics of bringing a mineral resource to the production stage.
Our primary natural resource property is the Turnagain Property, located in the Liard Mining Division of northern British Columbia. We have not identified the existence of any commercially viable mineral deposits at any of our mineral properties.
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Further exploration is required before we can evaluate whether there is a commercially viable mineral deposit that exists on any of our properties and, if so, whether it would be economically and legally feasible to develop or exploit those resources. Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute a reserve (a reserve is a commercially viable mineral deposit). Please refer to the section entitled “Risk Factors”"Risk Factors", beginning on page 118 of this annual reportAnnual Report for additional information about the risks of mineral exploration.
Revenues
To date we have not generated any revenues from any of our properties.
Principal Market and Revenues
We do not currently have any market, as we have not yet identified any mineral resource on any of our properties that is of a commercially exploitable quantity. If we succeed in identifying a mineral resource in commercially exploitable quantities, our principal markets would consist of metals refineries and base metal traders and dealers. To date we have not generated any revenues from any of our properties.
Seasonality of our Business
Our mineral exploration activities are subject to seasonal variation due to the winter season in northern British Columbia. Field work is best carried out between mid-May and late-November when day time temperatures average 10 to 15 degrees Celsius. Our other operations, such as metallurgical review and analysis of geochemical survey results, can be carried out all year round.
Sources and Availability of Raw Materials
Other than a paved highway and the small community of Dease Lake, located 70km west of the Turnagain property, there is no infrastructure close to the Turnagain property. A small amount of hydroelectric power is generated near Dease Lake, to supply the town, but there is little excess capacity. The closest suitable source of hydroelectric power for mine development is the completed Northwest Transmission Line at Bob Quinn Lake, 207 km south along the highway. If a mineral resource is found on our Turnagain property, on-site power generation may be required.
Marketing Channels
We do not currently have any market, as we have not yet identified any mineral resource on any of our properties that is of a commercially exploitable quantity, and therefore do not currently engage in marketing activities.
Patents and Licenses; Industrial, Commercial and Financial Contracts; and New Manufacturing Processes
In conducting our business operations, we are not dependent on any patented or license processes, technology, industrial, commercial or financial contract or new manufacturing processes.
Competitive Conditions
The mineral exploration industry is highly competitive. We compete with other mining companies, some of which have greater financial resources and technical facilities, for the acquisition of mineral interests, as well as for the recruitment and retention of qualified employees. We compete for qualified employees with Vancouver based companies, including Hunter Dickenson Inc., Equity Exploration and Ivanhoe Mines, and international mining companies, including Billiton-BHP, Rio Tinto and Anglo American, among others.exploration companies.
Governmental Regulations
Mining operations are subject to a wide range of national and provincial government regulations such as restrictions on production, price controls, tax increases, expropriation of property, environmental protection, and protection of agricultural territory or changes in conditions under which minerals may be marketed. Mining operations may also be affected by claims of native peoples,Aboriginal groups, any of which could have the effect of reducing or preventing us from exploiting any of our properties.
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Mineral claims in British Columbia are of two types. Cell mineral claims are established by electronically selecting the desired land on government claim maps, where the available land is displayed as a grid pattern of open cells, each of approximately 450-500 hectares. Payment of the required recording fees is also conducted electronically. This process for claim staking has been in effect since January, 2005, and is now the only way to stake claims in British Columbia. Prior to January, 2005, legacy claims were staked by walking the perimeter of the desired ground and erecting and marking posts at prescribed intervals. Legacy claims, staked before January, 2005, remain valid and may be converted into cell claims.
Cell mineral claims may be kept in good standing by incurring assessment work or by paying cash-in-lieu of assessment work. Assessment work requirements are $5.00 per hectare per year during the first 2 years following the location of the mineral claims, increasing to $10.00 per hectare in the third and fourth years, $15.00 per hectare in the fifth and sixth years and $20.00 per hectare for all succeeding years. Cash-in-lieu of exploration and development work is double the value of the corresponding assessment work requirement.
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the Province of British Columbia and in Canada generally. Under these laws, prior to production, we have the right to explore the property. We are required to file a “Notice"Notice of Work and Reclamation”Reclamation" with the British Columbia Ministry of Energy and Mines to conduct exploration works on mineral properties in British Columbia. To obtain a work permit, a company may be required to post a bond. In addition, the production of minerals in the Province of British Columbia requires prior regulatory approval.
Our mineral claims entitle our company to continue exploration activities on our properties, subject to our compliance with various Canadian federal and provincial laws governing land use, the protection of the environment and related matters.
If we locate a commercially viable mineral resource on any of our properties, we would be required to conduct extensive community consultations in northern British Columbia with both Aboriginal and non- Aboriginal groups, environmental surveys both on the property and along transportation corridors. We also would be required to develop a mining plan and a mine closure plan. These surveys and plans would be combined into a comprehensive Environmental Impact Statement and submitted to the British Columbia government for review and approval. Any development or exploitation of such a mineral resource would be subject to Canadian federal and provincial laws governing land use, protection of the environment, occupational health, waste disposal, toxic substances, mine safety and other matters. We had no material costs related to compliance and/or permits in recent years, and anticipate no material costs in the next year.
We will have to sustain the cost of reclamation and environmental mediation for all exploration work undertaken. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work programs. The Company has posted $232,000 in total reclamation bonds towards the reclamation of existing exploration drill sites and access roads on the Turnagain property. Permits and regulations will control all aspects of any production program if the project continues to that stage because of the potential impact on the environment.
Our operations are subject to environmental regulations promulgated by various levels of governments and their agencies. Existing environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as from disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. Prior to conducting exploration involving surface disturbance in British Columbia, we are required to obtain a Work Permit from the Ministry of Energy, Mines and Petroleum Resources. So far, we have obtained the permits we needed to conduct our exploration program but if we are unable to obtain the permits that we require in the future, we will have to cease the exploration activity in question. Ceasing such exploration activities could reduce our chances of ever discovering mineral resources on our properties.
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Where significant surface disturbance through road building and drill site preparation is planned, the Ministry of Energy, Mines and Petroleum Resources require a Reclamation Bond to cover the estimated reclamation costs if we fail to complete the reclamation. From 1996 to present, we have posted $232,000 in total reclamation bonds with the Ministry of Energy, Mines and Petroleum Resources.
WeOther than environmental liabilities to clean up our exploration camp and access roads, we are not aware of any existing environmental liability associated with any of our exploration properties but if such liability should arise, we may incur substantial costs, which would reduce the amount of money we have to spend on exploration and could cause us to cease operations. Our potential exposure to liability for environmental damage is high and we have no reserves established to pay for such liability.liability, other than a reclamation bond with the government for $232,000. If we are found to be liable for a large amount of environmental damage, we are likely to have to cease operations.
C. Organizational Structure
We have one wholly-owned subsidiary, Canadian Metals Exploration Ltd., incorporated under theCanada Business Corporation Act (Canada) on July 14, 2004. This wholly-owned subsidiary is currently inactive.
D. Property, Plant and Equipment
This section summarizes the assets of the company including its executive office in Vancouver, B.C., sample storage warehouse near Vancouver and its most important assets, mineral exploration properties.
The Turnagain is presently the only material exploration property and is described below.
Our executive office is located at 203 –- 700 West Pender Street, Vancouver, British Columbia V6C 1G8, Canada. The Company subleased approximately 1,750 square feet of space for $53,159 per year expiring on March 31, 2019. We sublease 50% of this space resulting in approximately $2,600 per month in office rent. Effective April 1, 2019, we signed a new lease for gross 2,209 square feet for $57,434 per year plus operating expenses & taxes for year one ($59,645 year two; $61,852 year three and $$64,060 year four) expiring on March 31, 2023. Of this space we sublease a total of 1,334 square feet for $2,632.15 per month. This space accommodates all of our executive and administrative offices. We believe that this existing space is adequate for our current needs. Should we require additional space, we believe that such space can be secured on commercially reasonable terms.
The companyCompany has rented a warehouse near Vancouver, British Columbia in which to store drill core samples and to prepare composite samples for metallurgical test-work. We rent this facility for $1,500 per month on a month-to-month basis. The Company owns office, vehicle, and exploration equipment with a value of approximately $25,000 located at our Vancouver Office and our camp at the Turnagain property.
Our material mineral property, the Turnagain Property, is described more fully below:
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The Turnagain Property
This section provides a summary of the geology and exploration activities on the Turnagain Property.
Exploration data collected during the 2003 to 2017 exploration programs was completed under the supervision of Tony Hitchins, M.Sc., an employee of Giga Metals Corporation. Exploration data collected during the 20182018-2019 exploration programprograms was completed under the supervision of Greg Ross, P.Geo., an employee of Giga Metals Corporation.
Location and Accessibility
The Turnagain Property consists of 7271 contiguous mineral claims situated in the Liard Mining Division of northern British Columbia, 7065 km east of Dease Lake and 1,350 km north-northwest of Vancouver. The mapsmap above indicateindicates where the property is located inwithin the province of British Columbia, Canada. The mineral claims collectively cover an area of 40,017approximately 38,000 ha. The Turnagain Property is situated in the Stikine Ranges of the Cassiar Mountains. Elevations range from about 1,000 m above sea level along the Turnagain River, in the central claim area, to 2,200 m at an unnamed summit in the north central property area.
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The Turnagain Property straddles the Turnagain River near where it is joined by Hard and Flat Creeks. The community of Dease Lake, on the Stewart-Cassiar Highway (BC Highway 37) some 400 km north of the port of Stewart, is 7065 km west of the property. Helicopter or fixed wing access from Dease Lake involvesis approximately a 20 minute20-minute flight. A secondary roadAn exploration trail extending easterly from Dease Lake has been used by large, articulated 4- and 6-wheel drive vehicles to convey large jade boulders from the Kutcho Creek area and to supply placer gold operations at Wheaton Creek over the past number of years. A branch of this roadtrail network extends into the Turnagain Property with roadtotal trail distance to Dease Lake of about 10086 km.
A dirt airstrip, measuring approximately 930 m, long, constructed in the 1960s and upgraded in early 2007, is situated within the claims on the northwest side of the Turnagain River and can accommodate small fixed wing aircraft. This airstrip is immediately adjacent to our current camp facility and core storage. Previous explorationExploration programs haveprior to 2002 made use of camp facilities at Wheaton Creek (Boulder Camp), which is about 15 km by roadexploration trail west of the Turnagain Property.
The communities of Terrace and Smithers, both several hundred kmkilometres south, offer a range of services and supplies which can be trucked to Dease Lake via the Stewart-Cassiar Highway. The city of Whitehorse, Yukon Territory, offers a similar range of services several hundred kmkilometres to the northwest via the Stewart-Cassiar Highway and the Alaska Highway (Yukon Highway 1).
The area between Dease Lake and the Turnagain Property features maturely dissected mountains rising to elevations of between 2,000 and 2,425 m above sea level and separated by wide, drift-filled valleys in which elevations average 1,000 m. Forest cover, present in valley areas, is replaced by typical alpine flora above 1,500 m. Bedrock is reasonably well exposed in the areas above tree line and along drainages.
Description of Claims
The Turnagain Property consists of 7271 contiguous mineral claims situated in the Liard Mining Division of northern British Columbia, 7065 km east of Dease Lake and 1,350 km north-northwest of Vancouver. The mineral claims collectively cover an area of 40,017approximately 38,000 ha. The Turnagain Property is situated in the Stikine Ranges of the Cassiar Mountains. Elevations range from about 1,000 m above sea level along the Turnagain River, in the central claim area, to 2,200 m at an unnamed summit in the north central property area. The Turnagain Property straddles the Turnagain River near where it is joined by Hard and Flat Creeks. The Company owns a 100% interest in all of these mineral claims subject to a 4% net smelter royalty (NSR) on possible future production on one mineral claim (Tenure No. 511330). The Turnagain Project is also subject to a buyout clause of $4 million.2% NSR on all future metal production, payable to Conic Metals Corp. The following table summarizes the claim name, size, and expiry date for the 7271 claims in the Turnagain Property as of April 30, 201927, 2020.
The following table shows details relating to Giga Metals Corporation’sCorporation's Turnagain Project claims and the expiry dates of those claims:
Tenure Number | Claim Name | Area (ha) | Issue Date | Expiry Date |
Legacy Mineral Claim |
|
|
| |
407627 | PUP 4 | 500.0 | 2004-01-01 | 2029-12-01 |
|
|
|
|
|
|
|
|
|
|
Converted Legacy to On-line Cell Mineral Claims | ||||
503365 | Hard 2 | 793.3 | 2005-02-14 | 2027-05-01 |
510889 | Flat 10, 13, 15 | 1627.9 | 2005-04-18 | 2027-05-01 |
510892 | Flat 2, 6 | 1219.3 | 2005-04-18 | 2029-12-01 |
510910 | Flat 9, 12, 14 | 1424.3 | 2005-04-18 | 2028-12-01 |
510911 | Flat 1, 5 | 1066.9 | 2005-04-18 | 2029-12-01 |
510912 | Flat 8, 11 | 779.9 | 2005-04-18 | 2027-05-01 |
511214 | Hard 4, 6 | 979.9 | 2005-04-20 | 2027-05-01 |
511226 | Hill 1, 2 | 1216.1 | 2005-04-20 | 2027-05-01 |
511227 | Hill 3 | 506.7 | 2005-04-20 | 2027-05-01 |
511230 | Hill 4, 5 | 760.5 | 2005-04-20 | 2027-05-01 |
511234 | Hill 6 | 185.9 | 2005-04-20 | 2027-05-01 |
511244 | Hard 5,7 | 489.9 | 2005-04-20 | 2027-05-01 |
511251 | Hard 8 | 473.4 | 2005-04-20 | 2027-05-01 |
511257 | Hill 9, 10 | 1014.4 | 2005-04-20 | 2029-12-01 |
511279 | Hard 9, 10 | 896.7 | 2005-04-20 | 2029-12-01 |
511304 | Hill 7, 8 | 1149.7 | 2005-04-21 | 2029-09-01 |
511305 | Hound 3 | 271 | 2005-04-21 | 2029-12-01 |
511306 | Turn 2, Flat 7 | 881.2 | 2005-04-21 | 2029-12-01 |
511329 | Hound 1, 2 | 1015.4 | 2005-04-21 | 2029-02-01 |
511330 | Cub | 592.6 | 2005-04-21 | 2029-10-01 |
511337 | Cub 10, 18, Pup 1 | 1065.8 | 2005-04-21 | 2029-10-01 |
511340 | Cub 17 | 253.9 | 2005-04-21 | 2029-12-01 |
511344 | Turn 1, Bear 2 | 271 | 2005-04-21 | 2029-12-01 |
511347 | Flat 3, 4 | 474.3 | 2005-04-21 | 2029-12-01 |
511348 | Cub 2 | 389.4 | 2005-04-21 | 2029-10-01 |
511586 | Pup 2 | 236.9 | 2005-04-25 | 2029-12-01 |
511593 | Pup 3 | 101.5 | 2005-04-25 | 2029-10-01 |
511627 | Cub 11 | 592.1 | 2005-04-25 | 2029-12-01 |
511628 | Hard 1 | 709 | 2005-04-25 | 2027-05-01 |
511629 | Hard 3 | 472.9 | 2005-04-25 | 2027-05-01 |
| Converted Legacy to On-line Cell Mineral Claims (April 2005 and November 2007) | ||||
| 503365 | Hard 2 | 793.3 | 2005-02-14 | 2027-05-01 |
| 510889 | Flat 10, 13, 15 | 1627.9 | 2005-04-18 | 2027-05-01 |
| 510892 | Flat 2, 6 | 1219.3 | 2005-04-18 | 2029-12-01 |
| 510910 | Flat 9, 12, 14 | 1424.3 | 2005-04-18 | 2028-12-01 |
| 510911 | Flat 1, 5 | 1066.9 | 2005-04-18 | 2029-12-01 |
| 510912 | Flat 8, 11 | 779.9 | 2005-04-18 | 2027-05-01 |
| 511214 | Hard 4, 6 | 979.9 | 2005-04-20 | 2027-05-01 |
| 511226 | Hill 1, 2 | 1216.1 | 2005-04-20 | 2027-05-01 |
| 511227 | Hill 3 | 506.7 | 2005-04-20 | 2027-05-01 |
| 511230 | Hill 4, 5 | 760.5 | 2005-04-20 | 2027-05-01 |
22
570454 | Bear 1 | 456.8 | 2007-11-22 | 2029-12-01 |
570455 | Bear 19, Bear 21 to 28 | 237 | 2007-11-22 | 2029-12-01 |
570456 | Bear 3 to 18 | 220.2 | 2007-11-22 | 2029-12-01 |
570457 | Bear 20 | 16.9 | 2007-11-22 | 2029-12-01 |
On-line Cell Mineral Claims | ||||
501131 | Drift 1 | 422 | 2005-01-12 | 2027-05-01 |
501168 | Drift 2 | 421.8 | 2005-01-12 | 2027-05-01 |
501234 | Drift 3 | 421.7 | 2005-01-12 | 2027-05-01 |
501298 | Drift 4 | 421.8 | 2005-01-12 | 2027-05-01 |
508218 | Dinah 1 | 407.2 | 2005-03-03 | 2027-05-01 |
508219 | Dinah 2 | 407.1 | 2005-03-03 | 2027-05-01 |
508221 | Dinah 3 | 406.9 | 2005-03-03 | 2027-05-01 |
508222 | Dinah 4 | 406 | 2005-03-03 | 2027-05-01 |
508223 | Dinah 5 | 407.1 | 2005-03-03 | 2027-05-01 |
508225 | Dinah 6 | 407.1 | 2005-03-03 | 2027-05-01 |
508226 | Dinah 7 | 254.6 | 2005-03-03 | 2027-05-01 |
508227 | Dinah 8 | 407.3 | 2005-03-03 | 2027-05-01 |
508228 | Dinah 9 | 135.5 | 2005-03-03 | 2027-05-01 |
508229 | Dinah 10 | 203.4 | 2005-03-03 | 2027-05-01 |
528780 | T1 | 67.7 | 2006-02-23 | 2028-12-01 |
528781 | T2 | 203.3 | 2006-02-23 | 2028-12-01 |
528782 | T3 | 152.6 | 2006-02-23 | 2028-05-01 |
528784 | T4 | 288.3 | 2006-02-23 | 2028-05-01 |
528787 | T5 | 169.6 | 2006-02-23 | 2027-05-01 |
528788 | T6 | 270.2 | 2006-02-23 | 2027-05-01 |
528789 | T7 | 422.5 | 2006-02-23 | 2027-05-01 |
528790 | T8 | 253.6 | 2006-02-23 | 2028-05-01 |
609390 | FLAT 7 | 254.6 | 2009-07-21 | 2027-05-01 |
609394 | FLAT 6 | 407.4 | 2009-07-21 | 2027-05-01 |
609396 | FLAT 8 | 203.8 | 2009-07-21 | 2027-05-01 |
609397 | FLAT 5 | 407.4 | 2009-07-21 | 2027-05-01 |
609398 | FLAT 4 | 407.4 | 2009-07-21 | 2027-05-01 |
609403 | FLAT 3 | 407.3 | 2009-07-21 | 2027-05-01 |
609423 | FLAT 2 | 407.3 | 2009-07-21 | 2027-05-01 |
609424 | FLAT 1 | 424.2 | 2009-07-21 | 2027-05-01 |
1057716 | NWMAG | 741.9 | 2018-01-16 | 2023-08-01 |
1071609 | BLICK 1 | 560.3 | 2019-10-04 | 2020-10-04 |
1071610 | BLICK 2 | 900.1 | 2019-10-04 | 2020-10-04 |
1071612 | FAULKNER 1 | 897.5 | 2019-10-04 | 2020-10-04 |
1071613 | FAULKNER 2 | 627.0 | 2019-10-04 | 2020-10-04 |
1071615 | FAULKNER 3 | 1032.1 | 2019-10-04 | 2020-10-04 |
23
The following figure shows the claims for the Turnagain property listed above.
Exploration History
Nickel and copper sulphides were discovered withinfirst recognized in rusty weathering exposures at the current Turnagain property area in a bedrock exposure alongDiscovery zone on the Turnagain River in about 1956. Mineral claims covering the area where these sulphides were found as well as other traces of sulphides were acquired by Falconbridge Nickel Mines LimitedLtd. (Falconbridge) acquired the property in 1966.
Falconbridge Nickel Mines Limited also1966 and, during the period 1966-1973, completed work over the following seven years, including surface andan airborne geophysical survey, ground geophysical surveys, geological mapping, geochemical surveys, and 2,895 m28 wide-spaced diamond holes (2,895 m). The work identified several sulphide showings. The exploration program tested many of conventional andthe mineralized outcrops by packsack diamond drilling in 40 widely spaced drill holes.drilling; the Discovery outcrop was not successfully drilled.
Our Turnagain Property represents a unique style of sulphide mineralization associatedDuring the early 1970s, adjacent claims were investigated with a zoned, ultramafic complex (a suitegeochemical survey by Union Minière Exploration and Mining Corporation Ltd. (UMEX). Once the Falconbridge and UMEX claims expired, several of rocks high in ironthe showings were re-staked and magnesium but low in silica.) Iron and nickel sulphides are widespread in dunite (ultramafic rock comprising more than 90% olivine) and wehrlite (ultramafic rock comprising less than 90% olivine and >10% pyroxene) near dunite-wehrlite contacts. Explorationtested with short, small diameter core holes by an unnamed party. Three EX-sized core holes, totaling 56 m, were drilled on the west bank of the Turnagain Property between 1967River in 1977. No significant intersections were reported, and 2002 was sporadicthe collars have not been located. In 1979, S. Bridcut drilled a single drill hole (17 m) near the east bank of the Turnagain River and was concentratedintersected unmineralized quartz diorite.
The commodity of focus for exploration shifted to platinum group elements (PGEs) in the Horsetrail area or near other small exposures of net-textured sulphides. We acquiredmid-1980s. A geochemical survey for PGEs was conducted for Equinox Resources Ltd. in 1986, and Bridcut re-sampled the propertyFalconbridge core in 1996.1988.
Work Completed by the Registrant
We acquired the Turnagain Property in 1996 and our exploration work that year included 400 line400-line km of airborne magnetic surveys and 795.5796 m of diamond drilling in 5 holes. Additional diamond drilling completed by our company in 1997 and 1998 amounted to 3,123m in 14 holes. Related work included 18 line18-line km of surface magnetic surveys covering two areas of the property, bore hole pulse-electromagnetic surveys in four of the 1997-1998 drill holes and preliminary metallurgical test work on drill core composites.
In 2002 we performed ground magnetic and induced polarization geophysical surveys over part of the claim area and completed 1,687m of diamond drilling in 7 holes. Exploratory work in 2003 included geological mapping and prospecting with bedrock, stream sediment and limited soil sampling and 8,669 m of diamond drilling in 22 holes, including the deepening of one hole started in 2002. Preliminary metallurgical test work was conducted on composite 2002-2003 core samples.
In 2004 we conducted a comprehensive exploration program that included a helicopter borne magnetic and electromagnetic survey covering 1,866 line km, 14 km of ground magnetic and electromagnetic surveys, 1:20,000 scale aerial photography of the entire property, the collection of more than 3,000 geochemical soil samples, geological mapping, and 7522 m of diamond drilling in 49 holes. We analyzed the approximately 4,000 core samples for 30 elements including nickel, copper, cobalt, sulphur and often platinum and palladium. Extensive metallurgical test work has been completed on 2003-2004 composite core samples and also on 2005-2006 composite core samples.
OurIn 2005 our exploration program consisted of geological mapping, bedrock and soil sampling, and 7,143 m of diamond drilling in 37 holes. We also undertook various mineralogical, environmental baseline surveys, engineering, metallurgical and analytical studies on the property.
OurIn 2006 our exploration program was completed by early November and included 19,111 m of diamond drilling in 68 holes, surface mapping and sampling in several areas and continuation of fish habitat surveys and water sampling. Metallurgical test-work on composite samples from our 2005 and 2006 drill core was also completed during 2007.
OurIn 2007 our exploration program was completed by early November and included 24,325 m of diamond drilling in 72 holes, surface mapping and sampling in several areas and continuation of fish habitat surveys and water sampling. Metallurgical test-work was directed towards further definition of the reagent scheme and nickel flotation kinetics for future pilot plant testing.
OurIn 2008 our exploration program was completed by early September and included 4,105 m of diamond drilling in 15 holes, surface mapping and sampling in several areas and continuation of fish habitat surveys and water sampling. Metallurgical test-work continued towards further definition of the reagent scheme and nickel flotation kinetics for future pilot plant testing.
In 2009 we developed an extensive electronic relational drill hole database, initiated metal leaching tests on site, and continued with baseline water sampling. Metallurgical test-work continued towards further definition of the reagent scheme and nickel flotation kinetics for future pilot plant testing. A small pilot plant test was conducted and a range of concentrates collected to develop potential hydrometallurgical refining processes. These concentrates were used for completion of amenability testing of the Activox® process in Perth Australia and the Outotec Nickel Chloride Leach in Pori Finland.
In 2010 the focus was primarily on the geological and mineralization model refinement and metallurgical test-work rather than the traditional field work exploration programs.
In December 2011, the Company received the Turnagain Project Preliminary Economic Assessment (“PEA”("PEA") prepared by AMC Mining Consultants (Canada) Ltd. The complete PEA was filed on SEDAR on December 5, 2011, this technical report is also available on the Company's website www.gigametals.com under the heading "Projects".2011.
During the years ended December 31, 2012 - 2017,2012-2017, the Company focused on finding a partner to take the Turnagain project to the feasibility level, reviewed possible opportunities for reducing the overall project capital costs and identified a PGE exploration program on the Turnagain property. During 2017, the Company was able to raise enough money to advance the project without requiring a partner.
OurIn 2018 an exploration and infill program was completed by early October and included 10,835 m (35,550 feet) of diamond drilling in 40 holes. The program was primarily designed to increase sample densities to allow for a reclassification of those portions of the deposit currentlydeposits categorized as “inferred resources”Inferred Resources to “indicated resources,”Indicated Resources, and to collect representative material of appropriate characteristics for metallurgical testing in 2019.
In 2019 samples were collected from existing drill core for geochemical characterization, and geotechnical test pits were dug and logged, for stockpile and waste dump engineering studies in support of a future pre-feasibility study. Also, during 2019 mine engineering studies were conducted in support of an updated PEA expected in second quarter of 2020.
Item 4A Unresolved Staff Comments
Not applicable.
Item 5 Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included herein (see also "Selected Financial Data"). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).IFRS.
A.Operating Results
Our results of operations have been, and may continue to be, affected by many factors of a global nature, including economic and market conditions, the availability of capital, the level and volatility of prices and interest rates, currency values, commodities prices and other market indices, technological changes, the availability of credit, inflation and legislative and regulatory developments. Factors of a local nature, which include the political, social, financial and economic stability, the availability of capital, technology, workers, engineers and management, geological factors and weather conditions, also affect our results of operations. See “Key"Key Information –- Risk Factors”Factors". As a result of the economic and competitive factors discussed above, our results of operations may vary significantly from period to period.
Year Ended December 31, 20182019 Compared to Year Ended December 31, 20172018
Other items –- During the year ended December 31, 2018 (“2018”2019 ("2019"), the Company recorded a loss of $1,663,674 as compared to income of $1,150,637 as comparedduring the year ended December 31, 2018 ("2018"). Included in loss in the 2019 period was the impact of the change in value of Cobalt 27 shares. During 2019, the Cobalt 27 shares increased in value from $3.30 per share (as of December 31, 2018) to an average price on date of sale of $4.14 per share resulting in the Company recognizing a change in fair value gain of $3,334,120. The Company sold 813,200 shares during 2019 for net proceeds of $3,335,330 resulting in a realized loss of $683,299 for$2,682,350. Excluding the comparative 2017 year. loss on sale of marketable securities and the unrealized gain on the change in fair market value of marketable securities, the Company had an adjusted loss(1) of $2,315,444.
The 2018 period income iswas from the sale of a 2% NSR on the Turnagain project, resulting in a gain of $7,067,703. The Company received shares of Cobalt 27 as part of the proceeds from the sale of the 2% NSR. SinceFrom the date of acquisition of the shares up to the end ofDecember 31, 2018, the Company sold 311,800fair value of the shares for net proceeds of $1,438,980 resulting in a realized loss of $868,340. The remaining 813,200 common shares of Cobalt 27 had an unrealized loss ofdecreased by $3,334,120. Excluding the gain on sale of the NSR the loss on sale of marketable securities,and the unrealized loss on the change in fair market value of marketable securities, the Company had an adjusted loss(1) of $1,714,606 for 2018.$1,714,606.
General and Administrative - During 2018,2019, the Company incurred an adjusted loss(1) of $2,315,444 ($0.05 per share) compared to an adjusted loss(1) of $1,714,606 ($0.04 per share) during 2018. The administrative expenses for 2019 were $2,346,165, up from $1,750,556 from 2018. Total administrative expenses include two non-cash expenses, amortization and stock-based compensation. These amounts were $79,923 (2018: $11,383) and $515,620 (2018: $500,742) in 2019, respectively. Excluding non-cash expenses, the 2019 administrative expenses were $1,750,622 up from $1,238,431 in 2018 due primarily to an increase in consulting fees and corporate communications and investor relations expenses. Consulting fees were $400,317 (2018: $174,200), an increase of $226,117 due to fees associated with analyzing the nickel market. Corporate communications and investor relations expenses in 2019 were $572,810 (2018: $376,076), an increase of $196,734. Legal, accounting and audit expenses in 2019 were $170,315 (2018: $138,024) an increase of $32,291 due to $18,575 of 2018 CFO fees included in management fees. Management and directors' fees in 2019 were $240,412 up $64,311 from the $176,101 incurred in 2018. Office and general expenses in 2019 were $280,796 (2018: $291,963), a decrease of $11,167. Travel and accommodation expenses were $85,972 compared to $82,067 in 2018. Excluding amortization and stock-based compensation, the total general and administrative expenses for 2019 were approximately $146,000 per month compared to $103,000 per month in 2018. During 2019, the Company earned $15,995 from interest income compared to $35,950 for 2018.
Exploration - During 2019, the Company incurred expenditures on exploration and evaluation assets of $1,965,269 including $40,236 on assaying and testing, $143,935 on environmental studies, $903,283 on geological and engineering services and $437,133 on metallurgy relating to the Turnagain Project. The Company also paid $71,645 in advances and had $303,418 of survey, mapping, camp and transportation expenses.
Note:
(1)Adjusted loss for the year or period is not a term recognized under IFRS.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
General and Administrative - During the year ended December 31, 2018 ("2018"), the Company recorded income of $1,150,637 ($0.03 per share) compared to a net loss of $683,299 ($0.03 per share) during the year endedending December 31, 2017 (“2017”).2017. The administrative expenses for 2018 were $1,750,556, up from $637,610 from 2017. Total administrative expenses includeincluded two non-cash expenses, amortization and stock-based compensation. Thesecompensation, these amounts were $11,383 (2017: $1,713) and $500,742 (2017: $360,493) in 2018, respectively. Excluding non-cashamortization and stock-based compensation expenses, the 2018 administrative expenses were $1,238,431 up from $275,404 in 2017 due primarily to an increase2017. Office and general expenses in activities. Consulting fees2018 were $174,200$291,963 (2017: $44,141)$123,067), an increase of $130,059.$168,896. Corporate communications and investor relations expenses in 2018 were $376,076 (2017: $33,429), an increase of $342,647. Legal,$342,647, legal, accounting and audit expenses in 2018 were $138,024 (2017: $21,167) an increase of $116,857. Management fees in 2018 were $176,101, up $122,501 from the $53,600 incurred in 2017. Office and general expenses in 2018 were $291,963 (2017: $115,079), an increase of $176,884. Travel and accommodation expenses were $82,067 compared to $7,988 in 2017. Excluding amortization and stock-based compensation, the total general and administrative expenses for 2018 were approximately $103,000 per month compared to $23,000$22,950 per month in 2017. During 2018, the Company earned $35,950 from interest income compared to $6,275 for 2017. The increase in expenditures during 2018 was due to increased business activity after completion of financing activities from August 2017 to January 2018.
26
Exploration - During 2018, the Company incurred expenditures on exploration and evaluation assets of $5,002,519 including $1,854,312 on drilling, $772,235 on geological and engineering services and $945,758 on survey, mapping and camp relating to the Turnagain Project. The Company conducted a drill program in the summer of 2018 including 10,835 metres of drilling in 40 holes. Earlier in 2018, the Company was re-evaluating and updating the engineering on the project and planning a program of metallurgical and comminution test work.
Note:(1) Adjusted loss for the year or period is not a term recognized under IFRS.
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
General and Administrative - During the year ended December 31, 2017 (“2017”), the Company incurred a net loss of $683,299 ($0.03 per share) compared to a net loss of $224,112 ($0.01 per share) during the year ending December 31, 2016. The administrative expenses for 2017 were $637,610, up from $196,321 from 2016. Total administrative expenses included two non-cash expenses, amortization and stock-based compensation, these amounts were $1,713 (2016: $2,968) and $360,493 (2016: $42,831) in 2017, respectively. Excluding amortization and stock-based compensation expenses, the 2017 administrative expenses were $275,404 up from $150,522 in 2016. Office and general expenses in 2017 were $123,067 (2016: $101,804), an increase of $21,263. Investor relations in 2017 were $33,429 (2016: $12,540), an increase of $20,889, legal and audit in 2017 were $21,167 (2016: $18,178) an increase of $2,989. Management fees in 2017 were $53,600, up $35,600 from the $18,000 incurred in 2016. Excluding amortization and stock-based compensation, the total general and administrative expenses for 2017 were approximately $22,950 per month compared to $12,550 per month in 2016.
At December 31, 20172018 the Company impaireddid not impair the Turnagain mineral claims byAt December 31, 2017 an impairment of $51,964 (2016: $29,093)was recorded to carry the Turnagain mineral claims at $1 based on the then current nickel prices, the global over-supply of nickel held in inventories and the weaker than expected Chinese and European demand. During 2017,2018, the Company earned $6,275$35,950 from interest income compared to $1,302$6,275 for 2016.2017.
Exploration - During the year ended December 31, 2017,2018, the Company incurred expenditures on exploration and evaluation assets of $51,964 (2016: $29,093)$5,002,519 (2017: $51,964). The exploration expenditures for 20172018 were approximately $4,330$416,875 per month compared to $2,425$4,330 per month in 2016.2017.
B. Liquidity and Capital Resources
SinceAt December 31, 2019, the Company is organized in Canada, the Company’s December 31, 2018 consolidated financial statements have been prepared in accordance with IFRS.
Ashad working capital of $2,316,170 compared to working capital of $4,161,092 as at December 31, 2018,2018. Accounts payable and accrued liabilities at December 31, 2019 were $383,785 and the current portion of the office lease obligation was $76,070. As of December 31, 2019, the Company did not have sufficient working capital to continue operations for at least 12 months and to conduct an exploration program on the Turnagain project as $1,007,373 of working capital is a receivable from the government for the British Columbia mining tax credit. The Company will require additional capital to meet current and future obligations.
Our ability to continue as a going concern is dependent upon our company had accumulated losses totaling $54,329,010. ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We have financed our operations to date through the issuance of equity. The continued volatility in the financial equity markets may make it difficult to continue to raise funds by equity private placements. There is no assurance that we will be successful with our financing ventures.
The Company does not currently have any sourceborrowings and has not made any material commitments for capital expenditures as of external liquidity such as bank loans or linesthe end of credit to draw upon and relies on private placement funding and the exercise of share purchase warrants to fund ongoing operations and exploration programs.its latest financial year.
As at December 31, 2018 the Company had cash and cash equivalents of $405,849 and working capital of $4,161,092.
As of April 30, 2019, we had sufficient working capital to cover our 2019 operating costs and our 2019 exploration program.
The Company’s treasury policies are to receive cash in advance of any issuance of commons shares through private placements or the exercise of share purchase warrants or stock options, issue the common shares in a timely manner and invest any excess cash in an interest bearing redeemable term deposit. These treasury policies are controlled by the board of directors and reviewed by the audit committee on an annual basis.
27
All cash and cash equivalents are held in Canadian dollars.
C.Research and Development, Patents and Licenses, etc.
Not applicable.
D.Trend Information
Since the company is a mineral exploration company, we do not currently know of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
E.Off-Balance Sheet Arrangements
Not applicable.None.
F. Tabular Disclosure of Contractual Obligations
Not applicable.
Critical Accounting Policies and Estimates
Basis of preparation and accounting policies
The consolidated financial statements of the Company comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
There were no changes to the accounting policies applied by our company to each of the 2018 quarterly unaudited interim consolidated financial statements, to those applied to the consolidated financial statements for the year ended December 31, 2018.
Critical Accounting Estimates
As at December 31, 2018, the Company’s financial statements reflect “Exploration and evaluation assets” with a balance of $2,333,269. The recoverability of this amount is dependent upon the discovery of economically recoverable reserves, and the ability to attain future profitable production from those reserves, or from their successful disposition. The Company has not determined if its properties contain ore reserves that are economically recoverable.
Income taxes
Preparation of the consolidated financial statements involves determining an estimate of, or provision for, income taxes. The process also involves making an estimate of taxes currently payable and taxes expected to be payable or recoverable in future periods, referred to as deferred taxes. Deferred taxes result from the effects of temporary differences due to items that are treated differently for tax and accounting purposes. The tax effects of these differences are reflected in the consolidated balance sheet as deferred tax assets and liabilities. An assessment must also be made to determine the likelihood that the Company’s future taxable income will be sufficient to permit the recovery of deferred tax assets. To the extent that such recovery is not probable, recognized deferred tax assets must be reduced to the recoverable amount. Judgement is required in determining the provision for income taxes and recognition of deferred tax assets and liabilities. Management must also exercise judgement in its assessment of continually changing tax interpretations, regulations and legislation, to ensure deferred tax assets and liabilities are complete and fairly presented. The effects of differing assessments and applications could be material.
28
Future Accounting Changes
IFRS 16, Leases
The new standard eliminates the classification of leases as either operating or finance leases for a lessee. Instead all leases are capitalized by recognizing the present value of lease payments and recognizing an asset and a financial liability representing an obligation to make future lease payments. The principles in IFRS 16 provide a more consistent approach to acquiring the use of an asset whether by leasing or purchasing an asset. The new leasing standard is applicable to all entities and will supersede current lease accounting standards under IFRS. IFRS 16 is mandatory for annual periods beginning on or after January 1, 2019. The Company has assessed the expected impact of IFRS 16 on its financial statements and has concluded that there will be an increase in assets and liabilities.
Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
| Payments due by period | |||||||||||||||
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5years | More than 5 years | ||||||||||
| Long-Term Debt Obligations | - | - | - | - | - | ||||||||||
| Capital Lease Obligations | - | - | - | - | - | ||||||||||
| Operating Lease Obligation | 355,733 | 106,846 | 220,836 | 28,051 | - | ||||||||||
| Purchase Obligations | - | - | - | - | - | ||||||||||
| Other Long-Term Liabilities | 200,000 | - | - | - | 200,000 | ||||||||||
| 555,733 | 106,846 | 220,836 | 28,051 | 200,000 | |||||||||||
Item 6 Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth the names, business experience and function/areas of expertise of each of our directors and officers:
Name |
|
Mark Jarvis | Mr. Jarvis has been a director of our company and our Chief Executive Officer since January of 2004. As Chief Executive Officer, Mr. Jarvis is responsible for the development of our strategic direction and the management and supervision of our overall business. As director, Mr. Jarvis is responsible for the corporate governance of our company. |
Martin Vydra Director and President Age: 55 | Mr. Vydra was appointed as our President in December 2019 and as a director of our company in November 2018. As a director of the company, Mr. Vydra is responsible for the corporate governance of our company. |
Lyle Davis | Mr. Davis was a director of our company in November of 2003 for a short period of time. He was later elected again as a director of our company in June of 2004. In July 2008, Mr. Davis became Chairman of the Board, responsible for the management and supervision of our board of directors. As director, Mr. Davis is responsible for the corporate governance of our company. |
Robert Morris Director Age: |
|
company, Mr. | |
Anthony Milewski Director Age: 39 | Mr. Milewski was appointed as a director of the company on April 29, 2019. As a director of the Company, Mr. Milewski is responsible for the corporate governance of the company. |
Matthew Anderson Chief Financial Officer Age: | Mr. Anderson has served as our Controller and Chief Financial Officer since April of 2018. As Controller and Chief Financial Officer, Mr. Anderson is responsible for the financial and corporate management and supervision of the affairs and the business of our company. |
29
| |
| |
| Leslie Young Corporate Secretary Age: | Ms. Young was appointed as our corporate secretary in June of 2004. As Corporate Secretary, Ms. Young is responsible for the internal accounting and record keeping, general administration, and making all necessary filings and financial reporting for our company. |
|
Mark Jarvis –- Director and Chief Executive Officer
Mr. Jarvis has considerable experience in the financing and operations of public companies, primarily in exploration and production of mining and oil and gas projects. After a career in financing exploration projects as a stockbroker, Mr. Jarvis moved to the corporate side of the business by joining the Board of Ultra Petroleum, at the time a small oil and gas exploration and development company, in 1996. As Director responsible for Corporate Finance, he raised the equity capital necessary for proof of concept and to establish enough production to leverage further growth through debt financing. Ultra’sUltra's Pinedale Anticline project ultimately grew to three (3) trillion cu. ft. of proved gas reserves. Mr. Jarvis has held the position of CEO and President of Giga Metals Corporation (formerlyHard Creek Nickel Corporation) since January 7th 2004. During his tenure the Company has drilled a very large nickel/cobalt deposit, worked out a reliable metallurgical circuit and published a 43-101 compliant Preliminary Economic Assessment.
Martin Vydra - President and Director
Mr. Vydra was appointed President of our company in December 2019 and a director of our company in November 2018. Mr. Vydra is an independent director of the Company and after a 31 year career with Sherritt International Corporation, a leader in the mining, processing and refining of lateritic nickel and cobalt with operations in Canada, Cuba and Madagascar, he took on the role of Head of Strategy at Conic Metals Corp. (formerly Cobalt 27 Capital Corp.). Mr. Vydra is widely recognized as an expert in nickel and cobalt extraction, processing and refining including the development and application of advanced technologies to maximize the recovery of valuable metals such as nickel and cobalt from a variety of feeds. Most recently, Mr. Vydra served as Sherritt's Senior Vice President, Commercial and Technologies, where he had oversight for the sales and marketing of nickel and cobalt, and marketing and commercialization of Sherritt's proprietary technologies.
Lyle Davis - Director
Mr. Davis was a director of our company in November of 2003 for a short period of time. He was elected as a director of our company in June of 2004. Mr. Davis has an M.B.A. from the University of British Columbia with a major in finance, a Bachelor of Applied Science in Civil Engineering from Queen’sQueen's University, and is a member of the Association of Professional Engineers and Geoscientists of Alberta. Mr. Davis is the President and CEO of Condor Resources Inc. (since 2013) and is a director of Earl Resources Limited. From 1999 until 2008, Mr. Davis was the President of Ellardee Group Capital Inc. a firm providing business consulting services, primarily for public companies. He previously worked in the corporate finance practices of Ernst & Young, an accountancy firm, and in a similar capacity at C.M. Oliver, a brokerage firm. Before that, Mr. Davis was with the Vancouver Stock Exchange where he was responsible for trading operations during the transition from floor based to screen based trading, prior to which he was a senior member of the VSE’sVSE's corporate finance division.
Phillip Robinson – Director
Mr. Robinson was appointed director of our company in October 2017. Mr. Robinson is a member of the Investment Team at Pala Investments, a Swiss based mining focused multi-strategy investment firm, and is focused on New Energy Metals investing. He was integral to the development of Pala's battery metal raw materials strategy and has in-depth knowledge of the electric vehicle and energy storage markets. He also worked on the recent IPO of Cobalt 27 Capital Corp. on the TSX-V.
Martin Vydra – Director
Mr. Vydra was appointed director of our company in November 2018. Mr. Vydra is an independent director of the Company and after a 31 year career with Sherritt International Corporation, a leader in the mining, processing and refining of lateritic nickel and cobalt with operations in Canada, Cuba and Madagascar, he took on the role of Head of Strategy at Cobalt 27 Capital Corp.. Mr. Vydra is widely recognized as an expert in nickel and cobalt extraction, processing and refining including the development and application of advanced technologies to maximize the recovery of valuable metals such as nickel and cobalt from a variety of feeds. Most recently, Mr. Vydra served as Sherritt's Senior Vice President, Commercial and Technologies, where he had oversight for the sales and marketing of nickel and cobalt, and marketing and commercialization of Sherritt's proprietary technologies.
30
Robert Morris –- Director
Mr. Morris was appointed director of our company in January 2019. Mr. Morris is a former senior executive with Vale S.A., the largest nickel producer in the world, and most recently as Executive Vice President with global accountability for sales and marketing of Vale's base metals portfolio, including Nickel, Copper, Cobalt and Precious Metals. He was an officer of the companyVale and member of the senior management committee. Mr. Morris previously served as President and Representative Director of Vale Japan Limited, where he managed assets with an annual turnover of U.S. $850 million. Prior to joining Vale, he was Managing Director, Greater China for Umicore Marketing Services, accountable for the company's regional business development, trading, distribution and agency activities. He also worked directly with Umicore Business Units on M&A activities in the region.
Anthony Milewski –- Director
Mr. Milewski was appointed director of the company on April 29, 2019. Mr. Milewski is the founder, Chairman and CEO of Conic Metals Corp. (formerly Cobalt 27 Capital Corp.). He has served as a member of the LME Cobalt Committee and has deep experience in the mining industry as a director, advisor, founder and investor. Mr. Milewski previously worked at Renaissance Capital and Skadden, Arps, Slate, Meagher & Flom LLP in Moscow.Moscow where he focused on advisory and transactional work in metals & mining and oil & gas sectors. Mr. Milewski holds a B.A. in Russian history from Brigham Young University, an M.A. in Russian and Central Asian Studies from the University of Washington, and a J.D. from the University of Washington. He holds an LLM from the Russian Academy of Sciences.
Matthew Anderson –- Chief Financial Officer
Mr. Anderson has served as our Controller and Chief Financial Officer since April 2018. Mr. Anderson completed his bachelors of commerce degree at McGill University in Montreal. He earned his CPA, CA accreditation in 2008 after which he began providing accounting and CFO services to junior public companies primarily involved in the natural resource sector. He has extensive experience in financial and accounting related functions based on his experience working with a number of junior public companies. His business experience includes mining, oil and gas and technology. He is a member in good standing of the Chartered Professional Accountants’ AssociationAccountants of British Columbia.
Leslie Young –- Corporate Secretary
Ms. Young was appointed as our corporate secretary in June of 2004. Ms. Young has previous experience working in brokerage firms, beginning with C.M. Oliver and most recently with Raymond James from 1999 to 2004. She has had experience in operations and executive administration.
There are no family relationships between any of our executive officers or directors of our company. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or executive officer.
B. Compensation
The following table sets out the compensation provided to our directors and senior management for performance of their duties during the fiscal year ended December 31, 2018:2019:
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| SUMMARY COMPENSATION TABLE | |||||||||
Name and principal position | Year | Salary ($) | Share- based awards ($) | Option- based awards ($) | Non-equity incentive compensation plan compensation ($) | Pension value ($) | All other Compen -sation ($) | Total Compen -sation ($) | |
| Annual incentve plans | Long- term incentive plans | ||||||||
| Mark Jarvis Director and Chief Executive Officer | 2018 | 96,000 | Nil | 77,480 | Nil | Nil | Nil | Nil | 173,480 |
| Matthew Anderson Chief Financial Officer | 2018 | 28,709 | Nil | 24,263 | Nil | Nil | Nil | Nil | 52,972 |
| Lyle Davis Director | 2018 | Nil | Nil | 41,086 | Nil | Nil | Nil | Nil | 41,086 |
| Dr. Jon Hykawy Director | 2018 | Nil | Nil | 41,086 | Nil | Nil | Nil | Nil | 41,086 |
| Phillip Robinson Director | 2018 | Nil | Nil | 41,086 | Nil | Nil | Nil | Nil | 41,086 |
| Martin Vydra Director | 2018 | Nil | Nil | 56.308 | Nil | Nil | Nil | Nil | 56,308 |
| Brian Fiddler Former Controller and Chief Financial Officer | 2018 | 17,461 | Nil | 12,131 | Nil | Nil | Nil | Nil | 29,592 |
| Leslie Young Corporate Secretary | 2018 | 47,850 | Nil | 12,131 | Nil | Nil | Nil | Nil | 59,981 |
SUMMARY COMPENSATION TABLE | |||||||||
Name and principal position | Year | Salary | Share- | Option- | Non-equity | Pension | All | Total | |
Annual incentive | Long- | ||||||||
Mark Jarvis | 2019 | 96,000 | Nil | Nil | Nil | Nil | Nil | Nil | 96,000 |
Martin Vydra President and Director | 2019 | 6,500 | Nil | 197,555 | Nil | Nil | Nil | 5,500 | 209,555 |
Lyle Davis | 2019 | Nil | Nil | Nil | Nil | Nil | Nil | 6,000 | 6,000 |
Robert Morris Director | 2019 | Nil | Nil | 68,857 | Nil | Nil | Nil | 5,622 | 74,479 |
Anthony Milewski | 2019 | Nil | Nil | 88,921 | Nil | Nil | Nil | 52,427 | 141,348 |
Matthew Anderson Chief Financial Officer | 2019 | Nil | Nil | Nil | Nil | Nil | Nil | 31,132 | 31,132 |
Leslie Young | 2019 | 58,000 | Nil | Nil | Nil | Nil | Nil | Nil | 58,000 |
Dr. Jon Hykawy Former Director | 2019 | Nil | Nil | Nil | Nil | Nil | Nil | 378 | 378 |
Philip Robinson Former Director | 2019 | Nil | Nil | Nil | Nil | Nil | Nil | 1,500 | 1,500 |
Our company does not have any pension or retirement plans, nor does our company compensate its directors and officers by way of any material bonus or profit sharing plans. Directors, officers, employees and other key personnel of our company may be compensated by way of stock options.options at the discretion of the board of directors.
C. Board Practices
The election and retirement of directors are provided for in our Articles. An election of directors shall take place at each annual meeting of shareholders and all the directors then in office shall retire but, if qualified, shall be eligible for re-election. A director shall retain office only until the election of his successor. The number of directors to be elected at such meeting shall be the number of directors then in office unless the directors or the shareholders otherwise determine. The election shall be by ordinary resolution of shareholders. If an election of directors is not held at the proper time, the incumbent directors shall continue in office until their successors are elected.
Our Articles also permit the directors to addappoint additional directors to the board between annual general meetings so long as the number appointed does not exceed more than one-third of the number of directors elected at the last annual general meeting. Individuals appointed as directors to fill casual vacancies created on the board or added as additional directors hold office like any other director until the next annual general meeting at which time they may be re-elected or replaced.
32None of our directors have service contracts with our company or any of its subsidiaries providing for benefits upon termination of employment.
The members of our company’scompany's audit committee include Mark Jarvis, Lyle Davis and Martin Vydra. Robert Morris.
The audit committee reviews and approves the scope of the audit procedures employed by our independent auditors, reviews the results of the auditor’sauditor's examination, the scope of audits, the auditor’sauditor's opinion on the adequacy of internal controls and quality of financial reporting, if applicable, and our accounting and reporting principles, policies and practices, as well as our accounting, financial and operating controls. The audit committee also reports to the board of directors with respect to such matters and recommends the selection of independent auditors. Before financial statements that are to be submitted to the shareholders at an annual general meeting are considered by the board of directors, such financial statements are submitted to the audit committee for review with the independent auditors, following which the report of the audit committee on the financial statements is submitted to the board of directors.
Members of the Compensation Committee consist of Lyle Davis, Robert Morris and Robert Morris.Anthony Milewski. The Compensation Committee reviews and approves the compensation paid to the Chief Executive Officer.
D. Employees
As of December 31, 2018,2019, we had onetwo full time employee and fourfive part-time employees, including two of our officers. We do not have any relationship with any labor unions.
E. Share Ownership
There were 53,774,01555,494,015 Common Shares issued and outstanding as of April 30, 2019.27, 2020. Of the shares issued and outstanding, warrants held and stock options granted, our directors and officers owned the following Common Shares as of April 30, 2019:27, 2020:
| Number of Common Shares |
|
Mark Jarvis | 5,145,415(2) | 7.1% |
Lyle Davis | 345,000 (3) | 0.5% |
Matthew Anderson | 100,000 | 0.1% |
Leslie Young | 131,380 | 0.2% |
Martin Vydra | 1,290,000 | 1.5% |
Robert Morris | 335,000 | 0.5% |
Anthony Milewski | 3,950,000 | 5.4% |
(1) | Based on | |
(2) | Includes stock options to purchase up to 350,000 of our Common Shares at an exercise price of $0.10 - $0.55 per share expiring up to November 21, 2023 | |
(3) | Includes stock options to purchase up to | |
(4) |
| |
| ||
Includes stock options to purchase up to 100,000 of our Common Shares at an exercise price of $0.55 - $0.60 per share expiring up to April 20, |
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(5) | Includes stock options to purchase up to | |
(6) | Includes stock | |
(7) | Includes stock option to purchase up to 300,000 of our Common Shares at an exercise price of $0.35 per share expiring up to January 23, 2024. | |
(8) | Includes stock option to purchase up to 500,000 of our Common Shares at an exercise price of $0.20 per share expiring on April 30, |
A totalStock Option Plan
The only security based compensation arrangement which we in place is the amended and restated stock option plan (the "Plan"), which was approved by the Company's shareholders at our annual general and special meeting held on June 27, 2008. The Company amended and restated its previous stock option plan (approved by shareholders at the Company's 2004 annual general meeting) (the "2004 Plan") to meet the requirements of the policies of the TSX Venture Exchange (the "TSX-V") as set out in the TSX-V Company Manual (the "Manual"). The Company also made certain amendments to the 2004 Plan, to allow for beneficial tax treatment of incentive stock options by certain eligible persons who are subject to tax in the United States.
The purpose of the Plan is to advance the interests of the Company by encouraging our directors, officers, employees, consultants and management company employees to acquire Common Shares in the Company, thereby increasing their proprietary interest in the Company, encouraging them to remain associated with the Company and furnishing them with additional incentive in their efforts on behalf of the Company in the conduct of their affairs.
The rules of the TSX-V provide that all unallocated options issuable under a "rolling" stock option plan must be approved our shareholders every year after the institution of the stock option plan.
Eligible Participants
Stock options ("Options") to purchase Common Shares may be granted to the following persons under the Plan:
a) Eligible Employees (as defined in the Plan);
b) Service Providers (as defined in Section 613(b) of the Manual):
c) directors;
d) consultants; and
e) such other persons as the plan administrator will select, subject to applicable laws.
Securities Available for Issuance under the Plan
Subject to adjustment as provided in Section 13 of the Plan, the Options to be offered under the Plan consist of authorized but unissued Shares of the Company. The aggregate number of shares to be delivered upon the exercise of all Options granted under the Plan cannot exceed an amount equal to 10% of the issued shares of the Company at the time of any granting of Options (on a non-diluted basis).
Issuances to Insiders
The Plan limits the number of Options which may be granted under the Plan to Insiders (as defined under applicable laws) as follows:
a) the number of Common Shares reserved for issuance with respect to options granted to Insiders cannot exceed ten percent (10%) of the common sharesissued and outstanding Common Shares on the grant date;
b) the issuance to Insiders, within a one year period, cannot result in a number of our company,Common Shares issued to Insiders exceeding ten percent (10%) of the issued and outstanding from time to time, are reserved forCommon Shares; and
c) the issuance of Common Shares to any one Insider, within a one year period, cannot exceed five percent (5%) of the issued and outstanding Common Shares.
Issuances to Individuals
The Plan limits the number of Options which may be granted under the Plan to any individual. No person is eligible to receive Options to purchase more than 5% of the issued and outstanding Common Shares (subject to adjustment as set forth in the Plan). Additionally, the number of Options granted to persons employed in investor relations activities and to consultants is limited to 2% of the issued and outstanding Common Shares.
Option Price
The exercise price of each Option is determined by the plan administrator in accordance with applicable laws, including the Manual and, for certain Options, the United States Internal Revenue Code of 1986. The exercise price per Common Share cannot be less than the closing trading price of the Common Shares on the TSX-V on the last trading day preceding the date on which the Option is granted (or if the Common Shares are not then listed and posted for trading on the TSX-V, on such other stock options pursuantexchange or quotation system on which the Common Shares are listed and posted for trading). In the event that the Common Shares are not listed and posted for trading on any stock exchange or other quotation system, the exercise price will be the fair market value of the Common Shares as determined by the plan administrator. Additional restrictions on the exercise price of Options are stated in the Plan.
Vesting
The Plan provides that no Option will be exercisable until it has vested. The plan administrator may, in its sole discretion, determine the time during which Options will vest and the method of vesting or that no vesting restriction will exist. The vesting of one or more outstanding Options may be accelerated by the plan administrator at such times and in such amounts as it will determine in its sole discretion.
Term
Except as otherwise provided in the Plan, the term of each Option is a period of time fixed by the plan administrator, not to our company’s Incentive Stockexceed the maximum period permitted by any stock exchange or quotation system on which the Common Shares are then listed or other regulatory body having jurisdiction.
Termination
The Plan provides that, if an Optionee ceases to be a director, officer, employee or consultant, as the case may be, of the Company for any reason (other than death), that person may, but only within 90 days next succeeding his ceasing to be a director, officer, employee or consultant, exercise his Option to the extent that he was entitled to exercise it at the date of such cessation provided that, in the case of such person who is engaged in investor relations activity on behalf of the Company, the 90 day period will be shortened to 30 days. In the case of termination of employment or contractual relationship with the Company or its subsidiaries for cause (as determined in the sole discretion of the plan administrator), the Options will terminate immediately.
In the event of the death of an Option holder, the Option previously granted to him is exercisable only within the 12 months next succeeding such death and then only:
a) by the person or persons to whom the Option holder's rights under the Option will pass by the Option holder's will or the laws of descent and distribution of the Option holder's domicile at the time of death; and
b) if and to the extent that he was entitled to exercise the Option at the date of his death.
Transferability
All benefits, rights and Options accruing to the Option holder in accordance with the terms and conditions of the Plan are not transferable or assignable unless specifically provided for by the Plan.
Amendment
The plan administrator may, at any time, suspend or terminate the Plan. The board may, subject to such approvals as may be required under the rules of any stock exchange or which the Shares are then listed, or other regulatory body having jurisdiction or any applicable securities laws, also at any time amend or revise the terms of the Plan, provided that no such amendment or revision will alter the terms of any Options granted under the Plan prior to such amendment or revision.
Notwithstanding the foregoing, the events triggering acceleration of vesting of outstanding Options may be modified, expanded or eliminated without the consent of Option holders and the plan administrator may modify grants to persons who are eligible to receive Options under this Plan who are foreign nationals or employed outside Canada and the United States to recognize differences in local law, tax policy or custom.
So long as it remains a policy of the TSX-V, or such other stock exchange or quotation system on which the Company's Common Shares are listed and posted for trading, the Company will obtain disinterested shareholder approval for any reduction in the exercise price of the Option if the Option holder is an Insider of the Company at the time of the proposed amendment.
Item 7 Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth, as of April 30, 2019,27, 2020, the only person known to us to be the beneficial owner of more than five (5%) of our Common Shares:
|
| Percentage of |
Brian Usher-Jones | 5,097,395 | 9.2% |
Mark Jarvis | 4,795,415 (2) | 8.6% |
Conic Metals Corp. (formerly Cobalt 27 Capital Corp.) | 3,980,000 | 7.2% |
(1) | Based on |
(2) | Does not include stock options to purchase up to |
|
During 2019, Conic Metals Corp. increased their shareholdings and became beneficial owners of more than five (5%) of our Common Shares.
To the best of our knowledge, our company is not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person.
There are no arrangements known to us, the operation of which may at a subsequent date result in a change in the control of our company.
B. Related Party Transactions
The following sets forth all material transactions and loans from January 1, 2017 to the current date between our company and: (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, our company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of our company that gives them significant influence over our company and close members of any such individuals’individuals' families; (d) key management personnel of our company, including directors and senior management of our company and close members of such individuals’individuals' families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. For the purposes of this section, shareholders beneficially owning a 10% interest in the voting power of our company are presumed to have a significant influence:
34
Related party transactions
The Company incurred the following transactions with directors, officers and companies that are controlled by directors of the Company.Company during the years ended December 31, 2019, 2018 and 2017.
| Year ended | 2019 $ | 2018 $ | 2017 $ | ||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2018 | 2017 | ||||||||||||||
| $ | $ | ||||||||||||||
| Consulting fees | 28,709 | 2,500 | |||||||||||||
| Accounting fees | 31,132 | 28,709 | - | ||||||||||||
| Directors fees | 71,427 | - | - | ||||||||||||
| Interest expense | Nil | 551 | - | - | 551 | ||||||||||
| Management fees | 163,819 | 53,600 | 160,500 | 163,819 | 56,100 | ||||||||||
| Stock-based compensation | 283,194 | 41,163 | 355,333 | 283,194 | 41,163 | ||||||||||
| 475,722 | 97,814 | 618,392 | 475,722 | 97,814 | |||||||||||
C. Interests of Experts and Counsel
Not required.
Item 8 Financial Information
A.Consolidated Financial Statements and Other Financial Information
See Item 18Our financial statements are stated in Canadian dollars and ourare prepared in accordance with IFRS as issued by the IASB. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars.
The audited consolidated financial statements for the years ended December 31, 2019 and accompanying notes.2018 can be found under "Item 18 Financial Statements".
Legal Proceedings
There are no legal or arbitration proceedings which may have, or have had in the recent past, a significant effect on our financial position or profitability.
Dividend Distributions
Holders of our common shares are entitled to receive such dividends as may be declared from time to time by our board of directors, in its discretion, out of funds legally available for that purpose. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.
B. Significant Changes
Our company is not aware of any significant change since December 31, 20182019 that is not otherwise reported in this filing.
Item 9 The Offer and Listing
A.Common Share Trading Information
Price History
Full Financial Years (five most recent financial years)
The annual high and low market prices for the five most recent full financial years (years ended December 31, 2014 through to December 31, 2018) on the TSX Venture Exchange prior to September 19, 2008, and the TSX Venture Exchange September 19, 2008 and afterwards were as follows:
| Year Ended | High | Low |
| 31-Dec-14 | $0.65 | $0.10 |
| 31-Dec-15 | $0.25 | $0.02 |
| 31-Dec-16 | $0.09 | $0.02 |
| 31-Dec-17 | $0.90 | $0.05 |
| 31-Dec-18 | $0.77 | $0.15 |
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Full Financial Quarters (two most recent financial years)
The high and low market prices for each full financial quarters for the two most recent full fiscal years on the TSX Venture Exchange were as follows:
| Quarter Ended | High | Low |
| 31-Mar-17 | $0.21 | $0.05 |
| 30-Jun-17 | $0.12 | $0.06 |
| 30-Sep-17 | $0.38 | $0.05 |
| 31-Dec-17 | $0.91 | $0.29 |
| 31-Mar-18 | $0.81 | $0.26 |
| 30-Jun-18 | $0.39 | $0.15 |
| 30-Sep-18 | $0.37 | $0.20 |
| 31-Dec-18 | $0.28 | $0.16 |
The high and low market prices for the most recent six months on the TSX Venture Exchange is as follows:
| Month Ended | High | Low |
| 31-Oct-18 | $0.26 | $0.16 |
| 30-Nov-18 | $0.28 | $0.17 |
| 31-Dec-18 | $0.24 | $0.16 |
| 31-Jan-19 | $0.29 | $0.21 |
| 28-Feb-19 | $0.28 | $0.22 |
| 31-Mar-19 | $0.27 | $0.185 |
We have no principle trading market outside of our host market, the TSX Venture Exchange.
B. Plan of Distribution
Not Applicable.
C. Markets
Our common shares trade on the Toronto Stock Exchange. Our symbol is “GIGA”"GIGA" and our CUSIP number is 37518K102. We are also listed on the OTCBQ.
D. Selling ShareholdersA.Offer and Listing Details
Our Common Shares currently trade on the TSX Venture Exchange under the symbol "GIGA". Our Common Shares commenced trading on the TSX Venture Exchange in August 2002. On September 19, 2008, we voluntarily de-listed our Common Shares from the TSX Venture Exchange, and commenced trading of our Common Shares on the Toronto Stock Exchange. On October 17, 2014, we voluntarily de-listed from the Toronto Stock Exchange and re-commenced trading on the TSX Venture Exchange.
Since June 7, 2019 our Common Shares have been listed on the OTCQB Venture Market under the symbol "HNCKF". Our Common Shares are also listed on the Frankfurt Stock Exchange under the symbol "BRR2."
The trading price and volume of the Company's Common Shares has been and may continue to be subject to wide fluctuations. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with little or no current business operations. Because our Common Shares are only sporadically traded on the TSX Venture Exchange, the OTCQB and the Frankfurt Stock Exchange, shareholders may find it difficult to liquidate their Common Shares, or purchase new Common Shares, at certain times.
B. Plan of Distribution
Not Applicable.required.
E. DilutionC. Markets
Since October 17, 2014, our Common Shares have been listed on the TSX Venture Exchange under the symbol "GIGA." Since June 7, 2019 our Common Shares have been listed on the OTCQB Venture Market under the symbol "HNCKF". Our Common Shares are also listed on the Frankfurt Stock Exchange under the symbol "BRR2." Our common shares are not currently listed for trading on any other market or quotation system.
D. Selling Shareholders
Not Applicable.required.
36E. Dilution
Not required.
F. Expenses of the IssuerIssue
Not Applicable.required.
Item 10 Additional Information
A. Share Capital
Not required.
B.ArticlesMemorandum and articles of Incorporation and By-lawsassociation
Incorporation
We were incorporated under theCompany Act(British Columbia) on January 17, 1983. TheCompany Act(British Columbia) was repealed on March 29, 2004 when theBusiness Corporations Act (British Columbia) came into force. Accordingly, on June 15, 2004 we filed a transition application under theBusiness Corporations Act (British Columbia) and received the incorporation number 259067. We filed our Notice of Articles, which replaced our Memorandum of Incorporation, with the Registrar of Companies of British Columbia together with our transition application. A copy of our Notice of Articles may be obtained from the Registrar of Companies of British Columbia or from our corporate solicitors, Clark Wilson LLP, Suite 800 –900 - 885 West Georgia Street, Vancouver, B.C. V6C 3H1. On June 25, 2004, we adopted our current Articles of Incorporation and a copy of which may be obtained from our corporate solicitors, Clark Wilson LLP, Suite 800 –900 - 885 West Georgia Street, Vancouver, B.C. V6C 3H1.
Objects and Purposes of the Company
Our Notice of Articles and Articles of Incorporation place no restrictions upon our objects and purposes.
Directors’Directors' Powers
Our Articles of Incorporation do not contain any special provision with respect to a director’sdirector's power to vote on a proposal, arrangement or contract in which the director is materially interested. Such power of directors will be exercised by our directors in accordance with Sections 147 to 153 of theBusiness Corporations Act (British Columbia), which provides in part that a director who is a party to, or who is also a director or officer of or has a material interest in any person who is a party to, a material contract or proposed material contract with us shall disclose the nature and extent of his interest at the time and in the manner provided by theBusiness Corporations Act (British Columbia). TheBusiness Corporations Act (British Columbia) also provides that any such contract or proposed contract shall be referred to the board or shareholders for approval and a director whose interest in a contract is so referred to the board shall not vote on any resolution to approve the same.
Section 10.6 of our Articles of Incorporation provides that the directors shall be paid such remuneration for their services as the board may from time to time determine. The directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the board or any committee thereof. No independent quorum is required when the board is making decisions on directors’directors' remuneration.
Section 6.1 of our Articles of Incorporation provides that our directors may from time to time on behalf of the Company:
37
(a) | borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate, | |
(b) | issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person, | |
(c) | guarantee the repayment of money by any other person or the performance of any obligation of any other person, and | |
(d) | mortgage or charge, whether by way of specific or floating charge, or give other security on the whole or any part of the present and future undertaking of the Company. |
Qualifications of Directors
Section 10.4 of our Articles of Incorporation provides that a director is not required to hold a share in the capital of our Company as qualification for his or her office but must be qualified as required by theBusiness Corporations Act(British Columbia)to become, act or continue to act as a director.
There is no provision in our Notice of Articles or Articles of Incorporation imposing a requirement for retirement or non-retirement of directors under an age limit requirement.
Share Rights
Our authorized capital consists of an unlimited number of Common Shares without par value. Each of our Common Shares entitles the holder thereof to notice and to attend and to cast 1 vote for each matter to be decided at a general meeting of our company. Our issued shares are not subject to call or assessment rights. There are no provisions for redemption, purchase for cancellation, surrender or purchase funds.
Procedures to Change the Rights of Shareholders
Our Articles of Incorporation do not contain any special provision with respect to actions necessary to change the rights of our shareholders. The rights of our shareholders may be changed by altering our Notice of Articles and Articles of Incorporation in accordance with procedures set out in Sections 256 to 265 of theBusiness Corporations Act (British Columbia).
Summary of Sections 256 to 265 of the Business Corporations Act (British Columbia).
In British Columbia, the statute that used to apply to the creation, amendment, maintenance and operations of corporations and their corporate documents has been repealed and replaced by theBusiness Corporations Act. Under the former act, a company could be created through the signature of a memorandum or articles of incorporation. We were incorporated under the former act, using articles of incorporation.
Section 256 sets out the sections of the Act that are available to a company for a change in its memorandum or articles of incorporation.
Section 257 sets out the sections of the act that describe the circumstances under which a company may alter its notice of articles and the sections of the act that provide for the process.
Section 258 informs companies how and when they may withdraw their notice of alteration of notice of articles before the alteration takes effect.
38
Section 259 explains that a company may resolve to alter its articles of incorporation by the type of resolution specified in the Act or, if not specified, by the resolution described in the articles or, if not in the articles, by a special resolution.
A special resolution is a resolution passed by being consented to in writing by all of the shareholders holding shares that carry the right to vote at general meetings or a resolution passed at a general meeting under the following circumstances:
(i) notice of the meeting specifying the intention to propose the resolution as a special resolution is sent to all shareholders holding shares that carry the right to vote at general meetings at least the prescribed number of days before the meeting;
(ii) the majority of the votes cast by shareholders voting shares that carry the right to vote at general meetings is cast in favor of the resolution; and
(iii) the majority of votes cast in favor of the resolution constitutes at least a special majority.
According to our articles of incorporation, the majority of votes required to pass a special resolution at a meeting of our shareholders is two-thirds of the votes cast on the resolution.
Also under section 259, a company may alter its articles to specify or change the majority of votes that is required to pass a special resolution, which majority must be at least 2/3 and not more than 3/4 of the votes cast on the resolution, if the shareholders resolve, by a special resolution, to make the alteration. A company may also alter its articles to specify or change the majority of votes that is required for shareholders holding shares of a class or series of shares to pass a special separate resolution, which majority must be at least 2/3 and not more than 3/4 of the votes cast on the resolution, if the shareholders resolve, by a special resolution, to make the alteration, and shareholders holding shares of that class or series of shares consent by a special separate resolution of those shareholders.
Section 259 also covers the transition period for changes to the articles and how to create and file a resolution to ensure that any information in the notice of articles or special rights or restrictions attached to shares are not rendered false or altered by the change in articles. Section 259 also covers the effective dates of changes to the articles and that a court order may be used by the Court to effect a change in the articles of incorporation of a company.
Section 260 states that any shareholder of a company may send a notice of dissent to the company in respect of any resolution to change the articles of incorporation to alter any restrictions on the powers of the company or on the business it is permitted to carry on.
Section 261 describes how changes may be made by amendment to a regulation to a pre-written form of articles, known as Table 1 articles, that companies may adopt. We do not have these Table 1 articles.
Section 262 states that after an alteration to the articles of a company takes effect, the company must not issue a copy of the articles unless the copy of the articles reflects the alteration, or there is attached, to the copy of the articles, a copy of each resolution, court order or other record by which the articles being issued were altered.
Section 263 provides the process for changing a company’scompany's name.
Section 264 covers exceptional resolutions and resolutions respecting unalterable provisions. It states that a company may specify, by a provision in its articles, that a provision of its notice of articles may not be altered unless:
39
1. the resolution to authorize the alteration to the notice of articles is passed as an exceptional resolution;
2, a provision of its articles may not be altered unless the resolution to alter the company's articles is passed as an exceptional resolution, or,
3. an action may not be taken by the company or the directors unless the resolution to authorize or effect the taking of the action is passed as an exceptional resolution.
Furthermore, this section states that a company may not vary or delete an exceptional resolution provision unless the variation or deletion is authorized by an exceptional resolution.
If a company existed before theBusiness Corporations Act (British Columbia) but it has made the transition to become a “"Business Corporations Act (British Columbia)”" as described in the Act and its articles include a provision that was not capable of alteration under the old act that governed the company, that company must not alter that provision unless the alteration is ordered by the court, or authorized by a unanimous resolution by vote of every shareholder.
Under section 265, where under our articles or theBusiness Corporations Act (British Columbia), we are allowed or required to pass a shareholders resolution or a directors’directors' resolution, and there is a conflict between our articles of incorporation and theBusiness Corporations Act (British Columbia) regarding the majority of votes that is required to pass the resolution, we must, in order to pass the resolution, obtain the greater of the majority of votes required by our articles and the majority of votes required by theBusiness Corporations Act (British Columbia).
Meetings
Section 7.1 of our Articles of Incorporation provides that, unless an annual general meeting is deferred or waived in accordance with section 182(2)(a) or (c) of theBusiness Corporations Act, we must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual general meeting. The percentage vote required to pass an ordinary resolution at a shareholder meeting is a simple majority, which is any amount greater than 50%.
According to Section 7.4 of our Articles of Incorporation, notice of the time and place of each meeting of shareholders shall be given not less than 21 days before the date of the meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of the shareholders called for any purpose other than consideration of the financial statements and auditor’sauditor's report, election of directors and re-appointment of incumbent auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall attach to it a copy of the document to be considered, approved, ratified, adopted or authorized at the meeting or state that a copy of the document will be available for inspection by the shareholders at the company’scompany's records office or such other reasonably accessible location in British Columbia. A shareholder may in any manner waive notice of or otherwise consent to a meeting of shareholders.
The number of shareholders that must be present at a meeting to constitute a quorum is 2 persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 1/20 of the issued shares entitled to be voted at the meeting. If there is only one shareholder entitled to vote at a meeting of shareholders, then the quorum is one person.
Limitations on Ownership of Securities
There are no limitations on the right to own securities of our company by non-resident or foreign shareholders imposed either by theBusiness Corporations Act (British Columbia), our Notice of Articles or Articles of Incorporation.
40
There are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights.
Except as provided in theInvestment Canada Act (Canada), there are no limitations under the applicable laws of Canada or by our charter or our other constituent documents on the right of foreigners to hold or vote common shares or other securities of our company.
TheInvestment Canada Act (Canada) will prohibit implementation, or if necessary, require divestiture of an investment deemed “reviewable”"reviewable" under theInvestment Canada Act (Canada) by an investor that is not a “Canadian”"Canadian" as defined in theInvestment Canada Act (Canada) (a “non-Canadian”"non-Canadian"), unless after review the Minister responsible for theInvestment Canada Act (Canada) (“("the Minister”Minister") is satisfied that the “reviewable”"reviewable" investment is likely to be of net benefit to Canada. An investment in our Common Shares by a non-Canadian, who is not a resident of a World Trade Organization member, would be reviewable under theInvestment Canada Act (Canada) if it was an investment to acquire control of our company and the value of the assets of our company was $5 million or more. An investment in our common shares by WTO Investors would be reviewable only if it was an investment to acquire control of our company and the value of the assets of our company was equal to or greater than a specified amount (the “Review Threshold”"Review Threshold"), which is published by the Minister after its determination for any particular year.
A non-Canadian would be deemed to acquire control of our company for the purposes of theInvestment Canada Act (Canada) if the non-Canadian acquired a majority of our outstanding common shares (or less than a majority but controlled our company in fact through the ownership of one-third or more of our outstanding common shares) unless it could be established that, on the acquisition, we were not controlled in fact by the acquirer through the ownership of such common shares. Certain transactions in relation to our common shares would be exempt from review under theInvestment Canada Act (Canada), including, among others, the following:
1. acquisition of common shares by a person in the ordinary course of that person’sperson's business as a trader or dealer in securities;
2. acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of theInvestment Canada Act (Canada); and
3. acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of our company, through the ownership of voting interests, remains unchanged.
Change in Control
There are no provisions in our articles or our bylaws that would have the effect of delaying, deferring or preventing a change in control of our company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving our company.
TheBusiness Corporations Act (British Columbia) does not contain any provisions that would have the effect of delaying, deferring or preventing a change of control of our company. Generally, there are no significant differences between Canadian and United States law in this regard, as many state corporation statutes also do not contain such provisions and only empower our board of directors to adopt such provisions.
Ownership Threshold
There are no provisions in our articles or our bylaws or in theBusiness Corporations Act(British Columbia) governing the threshold above which shareholder ownership must be disclosed. TheSecuritiesAct (British Columbia) requires us to disclose, in our annual general meeting proxy statement, holders who beneficially own more than 10% of our issued and outstanding shares. Most state corporation statutes do not contain provisions governing the threshold above which shareholder ownership must be disclosed.
41
United States federal securities laws require us to disclose, in our Annual Report on Form 20-F, holders who own more than 5% of our issued and outstanding shares.
Changes in the Capital of the Company
There are no conditions imposed by our articles or our bylaws which are more stringent than those required by theBusiness Corporations Act(British Columbia).
C. Material Contracts
During the fiscal year ended December 31, 2018, we entered into a contract for the sale of a Net Smelter Royalty(“NSR”).
Sale of Royalty
On July 31, 2018, the Company closed the sale of a 2% NSR on all future metal production from the Turnagain Nickel-Cobalt Project to Cobalt 27 Capital Corp. for consideration of US$1,000,000 in cash and 1,125,000 Cobalt 27 common shares at $7.40 per share for a fair value of $8,325,000. The Company paid a finders’finders' fee of US$600,000 to a third party.
Under the terms of the NSR Agreement, 75% of the proceeds are to be used by the Company to complete the work required to advance the Turnagain Project through to Pre-feasibility and for exploration at Turnagain. Within one year of the signing (July 11, 2018) of the NSR Agreement, Cobalt 27 has the right to appoint one member to the Company’sCompany's board of directors. The Company has the right to repurchase 0.5% of the 2% NSR for US$20 million, which if exercised would result in a 1.5% remaining NSR. The one-time Repurchase Option is only exercisable prior to the fifth anniversary of the NSR Agreement. Cobalt 27 will have a right of first refusal on any future sale by Giga Metals of a royalty or product stream or similar instrument.
Other than the sale of the 2% NSR as discussed above, we have not entered into any material contracts outside the normal course of business to which we are a party during the fiscal year ending December 31, 2018, the two fiscal years preceding or the current fiscal year up to and including the date of this annual report.Annual Report.
D. Exchange Controls
There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or which affect the remittance of dividends, interest or other payments to non-resident holders of our common shares. Any remittances of dividends to United States residents and to other non-residents are, however, subject to withholding tax. See “Taxation”"Taxation" below.
There are no limitations imposed by the laws of Canada, the laws of Alberta or by the charter or other governing documents of the Company on the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Investment Canada Act (the “Investment Act”"Investment Act") and the potential requirement for a review under the Competition Act (Canada) (a "Competition Act Review.Review").
The following summarizes the principal features of the Investment Act and the Competition Act Review for a non-resident who proposes to acquire common shares. This summary is of a general nature only and is not intended to be, nor is it, a substitute for independent advice from an investor’sinvestor's own advisor. This summary does not anticipate statutory or regulatory amendments.
42
The Canadian Investment Act
The Canadian Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian”"Canadian" as defined in the Investment Act (a “non-Canadian”"non-Canadian"), unless, after review, the minister responsible for the Investment Act (the “Minister”"Minister") is satisfied that the investment is likely to be of a net benefit to Canada. Under the Investment Act, a United States citizen qualifies as a “World"World Trade Organization Investor.”" Subject to the restrictions noted below, an investment in a Canadian business by a World Trade Organization Investor would be reviewable under the Investment Act only if it is an investment to acquire control of such Canadian business and the value of the assets of the Canadian business as shown on its financial statements is not less than a specified amount, which for 1999 was $184 million. An investment in the shares of a Canadian business by a non-Canadian other than a “World"World Trade Organization Investor”Investor" when the Company is not controlled by a World Trade Organization Investor, would be reviewable under the Investment Act if it is an investment to acquire control of the Canadian business and the value of the assets of the Canadian business as shown on its financial statements is $5 million or more, or if an order for review is made by the federal cabinet on the grounds that the investment relates to Canada’sCanada's cultural heritage or national identity.
The acquisition by a World Trade Organization Investor of control of a Canadian business in any of the following sectors is also subject to review if the value of the assets of the Canadian business exceeds $5 million (as shown on its financial statements): uranium, financial services (except insurance), transportation services and cultural businesses, which include broadcast media (publication, distribution or sale of books, magazines, periodicals, newspapers, music, film and video products and the exhibition of film and video products), television and radio services. As the Company’sCompany's business does not fall under any of the aforementioned categories, the acquisition of control of the Company, in excess of the $5 million threshold, by a World Trade Organization Investor would not be subject to such review.
A non-Canadian would acquire control of the Company for purposes of the Investment Act if the non-Canadian acquired a majority of the common shares.
The acquisition of less than a majority but one-third or more of the common sharesCommon Shares would be presumed to be an acquisition of control of the Company unless it could be established that, on acquisition, the Company was not controlled in fact by the acquirer through the ownership of common shares.Common Shares. Notwithstanding the review provisions, any transaction involving the acquisition of control of a Canadian business or the establishment of a new business in Canada by a non-Canadian is a notifiable transaction and must be reported to Industry Canada by the non-Canadian making the investment either before or within thirty days after the investment.
Certain transactions relating to common shares are exempt from the Investment Act, including:
• | an acquisition of common shares by a person in the ordinary course of that person's business as a trader or dealer in securities; | |
• | an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and |
an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of common shares, remained unchanged.
Canadian Competition Act Review
Investments giving rise to the acquisition or establishment, directly or indirectly, by one or more persons of control over, or a significant interest in the whole or part of a business of a competitor, supplier, customer or other person are subject to substantive review by Canada’sCanada's Competition Law Authority, the Director of Investigation and Research (the “Director”"Director"). If or when the Director concludes that a merger, whether by purchase or lease of shares or assets, by amalgamation or by combination, or otherwise, prevents or lessens, or is likely to prevent or lessen competition substantially, he may apply as may be necessary to eliminate the substantial lessening or prevention of competition. Such substantive merger review power applies to all mergers, whether or not they meet limits for pre-notification under the Competition Act.
43
In addition to substantive merger review, the Competition Act provides for a pre-notification regime respecting mergers of a certain size. The regime applies in respect of share acquisitions, asset acquisitions, amalgamations and combinations. For ease of reference, this filing refers specifically to share acquisition, although the pre-notification regime applies, with the appropriate modification, to other types of acquisition of control as well.
In order for a share acquisition transaction to be pre-notifiable, the parties to the transaction (being the person or persons who proposed to acquire shares, and the corporation the shares of which are to be acquired), together with their affiliates (being all firms with a 50% or more voting shares linkage up and down the chain) must have:
(i) | aggregate gross assets in Canada that exceed $400,000,000 in value, as shown on their audited financial statements for the most recently completed fiscal year (which must be within the last fifteen (15) months); or | |
(ii) | aggregate gross revenue from sales in, from or into Canada that exceed $400,000,000 for the most recently completed fiscal year shown on the said financial statements; and |
(iii) | the party being acquired or corporations controlled by that party must have gross assets in Canada, or gross revenues from sales in or from Canada, exceeding $35,000,000 as shown on the said financial statements. Acquisition of shares carrying up to 20% of the votes of a publicly-traded corporation, or 35% of the votes in a private corporation, will not be subject to pre-notification, regardless of the above thresholds. However, exceeding the 20% or the 35% threshold, and again exceeding the 50% threshold, gives rise to an obligation of notification if the size threshold is met. |
If a transaction is pre-notifiable, a filing must be made with the Director containing the prescribed information with respect to the parties, and a waiting period (either seven or twenty-one days, depending on whether a long or short form filing is chosen) must expire prior to closing.
As an alternative to pre-notification, the Director may grant an Advance Ruling Certificate, which exempts the transaction from pre-notification. Advance Ruling Certificates are granted where the Director concludes, based on the information provided to him, that he would not have sufficient grounds on which to apply to the Competition Tribunal to challenge the Merger.
E. Taxation
This summary is of a general nature only and is not intended to be, and should not be interpreted as, legal or tax advice to any prospective purchaser or holder of the Company’sCompany's shares and no representation with respect to the Canadian federal income tax consequences to any such prospective purchaser is made. Accordingly, prospective purchasers of the Company’sCompany's shares should consult with their own tax advisors with respect to their individual circumstances.
The following summary describes the principal Canadian federal income tax considerations generally applicable to a holder of the Company’sCompany's shares who, for purposes of the Income Tax Act (Canada) (the “Canadian"Canadian Income Tax Act”Act") and the Canada-United States Income Tax Convention, 1980 (the “Convention”"Convention") and at all relevant times is resident in the United States and not resident in Canada, deals at arm’sarm's length with the Company, holds the Company’sCompany's shares as capital property, and does not use or hold and is not deemed to use or hold the Company’sCompany's shares in or in the course of carrying on business in Canada (a “United"United States Holder”Holder").
This following summary is based upon the current provisions of the Canadian Income Tax Act, the regulations thereunder, all specific proposals to amend the Canadian Income Tax Act and the regulations announced by the Minister of Finance (Canada) prior to the date hereof and the Company’sCompany's understanding of the published administrative practices of the Canada Customs and Revenue Agency (formerly Revenue Canada, Customs, Excise and Taxation). This summary does not take into account or anticipate any other changes in the governing law, whether by judicial, governmental or legislative decision or action, nor does it take into account the tax legislation or considerations of any province, territory or non-Canadian jurisdiction (including the United States), which legislation or considerations may differ significantly from those described herein.
44
Disposition of the Company’sCompany's Shares
In general, a United States shareholder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company’sCompany's shares, unless such shares are “taxable"taxable Canadian property”property" within the meaning of the Canadian Income Tax Act and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a non-resident if at any time during the five-year period immediately preceding a disposition by the non-resident of such shares, not less than 25% of the issued shares of any class or series of all classes of shares of the Company belonged to the non-resident, to persons with whom the non-resident did not deal at arm’sarm's length, or to the non-resident and persons with whom the non-resident did not deal at arm’sarm's length for purposes of the Canadian Income Tax Act. For this purpose, issued shares include options to acquire such shares (including conversion rights) held by such persons. Under the Convention, a capital gain realized by a resident of the United States will not be subject to Canadian tax unless the value of the shares of the Company is derived principally from real estate (as defined in the Convention) situated in Canada.
F.Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not required.
H. Documents on Display
The documents concerning our company may be viewed at the offices of our corporate solicitor, Clark Wilson LLP, Suite 800900 - 885 West Georgia Street, Vancouver, British Columbia, V6C 3H1, during normal business hours.
I.Subsidiary Information
As at the date of this annual report,Annual Report, we have one wholly-owned subsidiary, Canadian Metals Exploration Limited.
Item 11 Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 12 Description of Securities Other than Equity Securities
Not required.
45
PART II
Item 13 Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not Applicable
Item 15 Controls and Procedures
A.Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our Chief Executive Officer and our Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our company.
Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018,2019, pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended. As part of such evaluation, our Chief Executive Officer and our Chief Financial Officer considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation, our company’scompany's Chief Executive Officer and Chief Financial Officer have concluded that our company’scompany's disclosure controls and procedures were effective as of December 31, 2018.2019.
ManagementB.Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) Securities Exchange Act of 1934, as amended. Management (under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer) assessed the effectiveness of our internal control over financial reporting as of December 31, 2018.2019. In making this assessment, management used the framework set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management of our company conducted an assessment of the effectiveness of our company’scompany's internal controls over financial reporting as of December 31, 2018.2019. Based on its assessment as per the standards of the Public Company Accounting Oversight Board, we concluded that our company’scompany's internal controls over financial reporting were effective as of December 31, 2018.2019.
C.Attestation Report of the Registered Public Accounting Firm
Not required.
This annual report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Our management's report was not subject to attestation by our company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only the management’s report in this annual report.
D.Changes in Internal Control over Financial Reporting
There were no changes during the period covered by this Annual Report in our company’scompany's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect our company’scompany's internal control over financial reporting.
46
Item 16 [Reserved] [Reserved]
Item 16A. Audit Committee Financial Expert
The Board of Directors has determined that the Company has at least one independent audit committee financial expert serving on its audit committee, this person being Lyle Davis, our Chairman and who also serves as Chair of the Audit Committee. Please refer to Item 6.A for Mr. Davis' relevant experience.
Item 16B. Code of Ethics
The Board has adopted a Code of Ethics and Insider Trading Policy which has been distributed to its directors, officers, employees and consultants. A copy of the Code is available from the Company on written request or may be viewed on the Company’sCompany's website at www.gigametals.com.
Item 16C. Principal Accountant Fees and Services
Audit Fees Billed
Fiscal Year 2019: $25,305 Fiscal Year 2018: $22,000
Audit-Related Fees Billed
Fiscal Year 2019: $Nil Fiscal Year 2018: $Nil
Tax Fees Billed
Fiscal Year 2019: $Nil Fiscal Year 2018: $Nil
All Other Fees Billed
Fiscal Year 2019: $Nil Fiscal Year 2018: $Nil
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not Applicable
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not Applicable
Item 16F. Change in Registrant's Certifying Accountant
Effective October 28, 2019, we changed our principal accountant to Crowe MacKay LLP and received the resignation of our former accountant, Dale Matheson Carr-Hilton LaBonte LLP. The principal accountant's report on the financial statements for either of the past two years did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. The decision to change our principal accountant was approved by our Audit Committee and our Board of Directors.
During the two most recent fiscal years and any interim period preceding the resignation, there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of the former accountant, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report.
Item 16G. Corporate Governance
Not Applicable
47Item 16H. Mine Safety Disclosure
Not Applicable
PART III
Item 17 Financial Statements
Not applicable. See “Item"Item 18. Financial Statements”Statements" below.
Item 18 Financial Statements
The financial statements and notes thereto as required by Item 18 are attached hereto and found immediately after the text of this Annual Statement. The auditors’auditor’s report of Dale Matheson Carr-Hilton LaBonteCrowe MacKay LLP, independent registered public accountants, on the audited consolidated financial statements and notes thereto is included immediately preceding the audited consolidated financial statements.
Independent Auditor’s Report.
Consolidated Statements of Financial Position as at December 31, 2019, and 2018.
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018.
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018.
Item 19 Exhibits
Exhibits Required by Form 20-F
48
*Filed herewith.
| |
| |
|
(1) Previously submitted with our Registration Statement on Form 20-F filed on November 17, 2006.
(2) Previously submitted with our Annual Report Form 20-F filed on July 1, 2010.
(3) Previously submitted with our Annual Report Form 20-F filed on April 30, 2018
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual reportAnnual Report on its behalf.
GIGA METALS CORPORATION
"Matthew Anderson"
“Matthew Anderson”_____________________________________
Matthew Anderson
Chief Financial Officer
Date: April 30, 201928, 2020
Consolidated Financial Statements
Years Ended December 31, 20182019 and 2017
2018
Expressed in Canadian Dollars
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Giga Metals Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statementsstatement of financial position of Giga Metals Corporation (the "Company") as ofat December 31, 20182019 and 2017, the related consolidated statements of comprehensive income (loss), changes in equity and cash flows for the yearsyear then ended, and the related notes (collectively referred to as the "financial"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 20182019, and 2017, and its consolidated financial performance and its consolidated cash flows for the yearsyear then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going ConcernWe draw attention to
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, which indicates that as at December 31, 2018 the Company's accruedCompany has a working capital deficit was $54,329,010. As stated in Note 1, these events orand has suffered recurring losses from operations. These conditions along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significantraise substantial doubt onabout the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified in respect of this matter.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'sthese consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB.reporting. As part of our auditsaudit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.opinion.
Our auditsaudit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditsaudit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our auditsaudit provide a reasonable basis for our opinion.
/s/ Crowe MacKay LLP
Chartered Professional Accountants
We have served as the Company's auditor since 2019.
Vancouver, Canada
April 27, 2020
Giga Metals Corporation
Consolidated Statements of Financial Position
As at December 31, 20182019 and 20172018
(Expressed in Canadian Dollars)
| 2018 | 2017 | |||||||||||||||
| Notes | $ | $ | ||||||||||||||
| Notes | 2019 $ | 2018 $ | ||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 405,849 | 4,066,588 | 1,640,642 | 405,849 | ||||||||||||
| Receivables | 4 | 1,090,803 | 30,651 | 4 | 1,071,018 | 1,090,803 | ||||||||||
| Marketable securities | 5 | 2,683,560 | - | 5 | - | 2,683,560 | ||||||||||
| Prepaid expenses | 293,861 | 361,425 | ||||||||||||||
| Prepaid expenses and deposits | 64,365 | 293,861 | ||||||||||||||
| 4,474,073 | 4,458,664 | 2,776,025 | 4,474,073 | |||||||||||||
| Non-current assets | ||||||||||||||||
| Reclamation deposits | 232,000 | 187,900 | 232,000 | 232,000 | ||||||||||||
| Equipment | 6 | 70,444 | 9,463 | |||||||||||||
| Equipment and right of use assets | 6 | 341,163 | 70,444 | |||||||||||||
| Exploration and evaluation assets | 7 | 2,333,269 | 1 | 7 | 4,390,312 | 2,333,269 | ||||||||||
| 2,635,713 | 197,364 | 4,963,475 | 2,635,713 | |||||||||||||
| TOTAL ASSETS | 7,109,786 | 4,656,028 | 7,739,500 | 7,109,786 | ||||||||||||
| LIABILITIES | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Trade payables and accrued liabilities | 8 | 312,981 | 144,982 | 8 | 383,785 | 312,981 | ||||||||||
| Lease obligation - short-term | 9 | 76,070 | - | |||||||||||||
| 459,855 | 312,981 | |||||||||||||||
| Non-current liabilities | ||||||||||||||||
| Lease obligation - long-term | 9 | 217,394 | - | |||||||||||||
| Asset retirement obligations | 2 | 200,000 | - | |||||||||||||
| 417,394 | - | |||||||||||||||
| TOTAL LIABILITIES | 312,981 | 144,982 | 877,249 | 312,981 | ||||||||||||
| EQUITY | ||||||||||||||||
| Share capital | 11 | 53,870,374 | 53,218,158 | 11 | 55,091,542 | 53,870,374 | ||||||||||
| Share-based payment reserve | 12 | 7,255,441 | 6,745,535 | 12 | 7,763,393 | 7,255,441 | ||||||||||
| Subscriptions received | 11 | - | 27,000 | |||||||||||||
| Deficit | (54,329,010 | ) | (55,479,647 | ) | (55,992,684 | ) | (54,329,010 | ) | ||||||||
| TOTAL EQUITY | 6,796,805 | 4,511,046 | 6,862,251 | 6,796,805 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | 7,109,786 | 4,656,028 | 7,739,500 | 7,109,786 | ||||||||||||
| Nature and continuance of operations (Note 1) | ||||||||||||||||
| Commitments (Note 9) | ||||||||||||||||
| Subsequent events (Notes 11 and 18) | ||||||||||||||||
Nature and continuance of operations (Note 1)
Commitments (Note 9)
7
Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in future accounting periods include the useful lives of equipment, the recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and share-based payments, the recoverability and measurement of deferred tax assets, provisions for restoration and environmental obligations and contingent liabilities.
Significant judgments
The preparation of financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’sCompany's financial statements include:
| ||
| ||
|
- The assessment of the Company's ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;
- the classification / allocation of expenditures as exploration and evaluation expenditures or operating expenses; and
- the classification of financial instruments.
Cash and cash equivalents
Cash and cash equivalents include cash and highly liquid investments held in the form of money market investments and certificates of deposit with investment terms that allow for penalty free redemption after one month.
Exploration and evaluation expenditures
Costs incurred before the Company has obtained the legal rights to explore an area are expensed as incurred.
Exploration and evaluation expenditures include the costs of acquiring licenses and costs associated with exploration and evaluation activity. Option payments are considered acquisition costs provided that the Company has the intention of exercising the underlying option.
Property option agreements are exercisable entirely at the option of the optionee. Therefore, option payments (or recoveries) are recorded when payment is made (or received) and are not accrued.
Exploration and evaluation expenditures are capitalized. The Company capitalizes costs to specific blocks of claims or areas of geological interest. Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.property on an accrual basis.
Exploration and evaluation assets are tested for impairment if facts or circumstances indicate that impairment exists. Examples of such facts and circumstances are as follows:
- the period for which the Company 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;
- substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;
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| ||
- 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; and
- 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.
8
After technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the Company stops capitalizing expenditures for the applicable block of claims or geological area of interest and tests the asset for impairment. The capitalized balance, net of any impairment recognized, is then reclassified to either tangible or intangible mine development assets according to the nature of the asset.
Share-based payments
The Company operates an employee stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the share-based payment reserve. The fair value of options is determined using the Black–ScholesBlack-Scholes option pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.
LossEarnings (loss) per share
Basic lossearnings (loss) per share is calculated by dividing the lossincome (loss) attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the lossincome (loss) attributable to common shareholders equals the reported lossincome (loss) attributable to owners of the Company. Diluted lossearnings (loss) per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted lossearnings per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercises of options and warrants that would be anti-dilutive.
Giga Metals Corporation |
Recognition of Financial Instruments
The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes a party to the contractual provisions of the financial instrument.
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”("FVTPL"), at fair value through other comprehensive income (loss) (“FVTOCI”("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’sCompany's business model for managing the financial assets and their contractual cash flow characteristics.
Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.
Financial assets at FVTOCI
Investments in equity instruments designated at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with both realized and unrealized gains and losses recognized in other comprehensive income (loss) in the period in which they arise.
9
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in profit or loss in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’sCompany's own credit risk will be recognized in other comprehensive income (loss).
Impairment of financial assets at amortized cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.
At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
Derecognition of financial assets and liabilities
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in profit or loss in the period in which they arise. However, gains and losses on derecognition of financial assets designated as FVTOCI are recorded in other comprehensive income (loss) in the period in which they arise. Cumulative gains and losses on derecognized financial assets designated as FVTOCI are reclassified from accumulated other comprehensive income (loss) to deficit.
Giga Metals Corporation |
The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
Impairment of assets
The carrying amount of the Company’sCompany's assets (which include equipment and exploration and evaluation assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive income (loss).
10
The recoverable amount of assets is the greater of an asset’sasset's fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Any reversal of impairment cannot increase the carrying value of the asset to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
Income taxes
Current income tax:
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax:
Deferred income tax is recognized, using the asset and liability method, on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Giga Metals Corporation |
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Flow-through shares:
On the issuance of flow-through shares, any premium received in excess of the market price of the Company’sCompany's common shares is initially recorded as a liability (“("flow-through tax liability”liability"). Provided that the Company has renounced the related expenditures, or that there is a reasonable expectation that it will do so, the flow-through tax liability is reduced on a pro-rata basis as the expenditures are incurred. If such expenditures are capitalized, a deferred tax liability is recognized.
11
To the extent that the Company has suitable unrecognized deductible temporary differences, an offsetting recovery of deferred income taxes would be recorded.
Restoration and environmental obligations
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to the related asset along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value.
The Company’sCompany's estimates of restoration costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to the related asset with a corresponding entry to the restoration provision. The Company’sCompany's estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.
Changes in the net present value, excluding changes in the Company’sCompany's estimates of restoration costs, are charged to the statement of comprehensive loss for the period.
The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to the statement of comprehensive loss in the period incurred.
The costs of restoration projects that were included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’sCompany's accounting policy for exploration and evaluation assets.
At December 31, 20182019, the Company estimated that the fair value of the restoration obligations were $200,000. The fair value of the liability was determined to be equal to the estimated remediation costs. Due to the early stages of the project, and 2017,that extractive activities have not yet begun, the Company is unable to predict with any precision the timing of the cash flow related to the reclamation activities.
At December 31, 2018, the Company had no materialnot recorded any restoration and environmental obligations.
Giga Metals Corporation |
Equipment and right of use assets
Equipment isand right of use assets are stated at historical cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are included in the asset’sasset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive income (loss) during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of comprehensive income (loss).
Amortization is calculated on a declining balance method to write off the cost of the assets to their residual values over their estimated useful lives.lives, except for right of use assets that use the straight line method. The amortization rates applicable to each category of equipment and right of use assets are as follows:
ClassAmortization rate
Motor vehicles 30% declining balance
Computer equipment 30% declining balance
Exploration and office equipment 20% declining balance
Right of use asset – office lease 4 years straight line
Share capital
Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares are recognized as a deduction from equity.
The Company has adopted a residual method with respect to the measurement of shares and warrants issued as units. The residual method first allocates fair value to the component with the best evidence of fair value and then the residual value, if any, to the less easily measurable component. The fair value of the common shares issued was determined to be the component with the best evidence of fair value. The remaining balance, if any, was allocated to the attached warrants.
3.Adoption of new accounting standards
IFRS 16, Leases
The Company adopted all of the requirements of IFRS 16 Leases ("IFRS 16") as of January 1, 2019. IFRS 16 replaces IAS 17 Leases ("IAS 17"). IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. The Company has adopted IFRS 16 using the modified retrospective application method, where the 2018 comparatives are not restated and a cumulative catch up adjustment is recorded on January 1, 2019 for any differences identified, including adjustments to the opening deficit balance.
The Company analyzed its contracts to identify whether they contain a lease arrangement for the application of IFRS 16. On the date of transition, the Company did not have any leases with lease terms in excess of 12 months. Accordingly, the Company did not record any transition adjustments on January 1, 2019.
12
Giga Metals Corporation |
Notes to the Consolidated Financial Statements |
Expressed in Canadian Dollars |
For the years ended December 31, |
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The following is the Company's new accounting policy for leases under IFRS 16: Leases At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases of right-of-use assets are recognized at the lease commencement date at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, and otherwise at the Company's incremental borrowing rate. At the commencement date, a right-of-use asset is measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received. Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term, except where the lease contains a bargain purchase option a right-of-use asset is depreciated over the asset's useful life. 4.Receivables
5.Marketable securities | |||||||||||||||||||||||||||||||||||||||||||
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| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| $ | $ | ||||||
| Goods and Service sales tax | 189,475 | 5,177 | |||||
| British Columbia mining tax credits | 899,147 | 20,264 | |||||
| Interest receivable and other receivables | 2,181 | 5,210 | |||||
| 1,090,803 | 30,651 |
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Marketable securities are classified as FVTPL financial instruments and, as a result, are measured at fair market value each reporting period with any change in fair value recognized through the statement of comprehensive income (loss). |
13
On July 31, 2018, the Company received 1,125,000 common shares of Cobalt 27 Capital Corp. (“("Cobalt 27”27") (Note 7). The 1,125,000 common shares are subject to the following trading restrictions: one-third of the common shares have a statutory hold period of 4 months (November 28, 2018); one-third have a hold period of 8 months (March 28, 2019); and one-third have a hold period of 12 months (July 28, 2019).
| Value | |||||||
| # of shares | $ | ||||||
| Marketable securities at December 31, 2017 | - | - | |||||
| Received on sale of net smelter return royalty (Note 7) | 1,125,000 | 8,325,000 | |||||
| Sale of securities | (311,800 | ) | (2,307,320 | ) | |||
| Fair market value adjustment | - | (3,334,120 | ) | ||||
| Marketable securities at December 31, 2018 | 813,200 | 2,683,560 |
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| Exploration | |||||||||||||
| Motor | Computer | and office | |||||||||||
| Vehicles | equipment | equipment | Total | ||||||||||
| $ | $ | $ | $ | ||||||||||
| Cost: | |||||||||||||
| At December 31, 2016 | 20,330 | 28,809 | 61,984 | 111,123 | |||||||||
| Additions | - | 856 | - | 856 | |||||||||
| At December 31, 2017 | 20,330 | 29,665 | 61,984 | 111,979 | |||||||||
| Additions | 25,322 | 46,542 | 500 | 72,364 | |||||||||
| At December 31, 2018 | 45,652 | 76,207 | 62,484 | 184,343 | |||||||||
| Depreciation: | |||||||||||||
| At December 31, 2016 | 19,694 | 27,279 | 53,830 | 100,803 | |||||||||
| Charge for the year | 144 | 348 | 1,221 | 1,713 | |||||||||
| At December 31, 2017 | 19,838 | 27,627 | 55,051 | 102,516 | |||||||||
| Charge for the year | 3,980 | 5,638 | 1,765 | 11,383 | |||||||||
| At December 31, 2018 | 23,818 | 33,265 | 56,816 | 113,899 | |||||||||
| Net book value: | |||||||||||||
| At December 31, 2017 | 492 | 2,038 | 6,933 | 9,463 | |||||||||
| At December 31, 2018 | 21,834 | 42,942 | 5,668 | 70,444 |
14
| Giga Metals Corporation |
Notes to the Consolidated Financial Statements |
Expressed in Canadian Dollars |
For the years ended December 31, |
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| Balance, | Change | Balance, | Change | Balance, | ||||||||||||
| December | in year | December | in year | December | ||||||||||||
| 31, 2016 | 2017 | 31, 2017 | 2018 | 31, 2018 | ||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||
| Mineral property interests | 179,500 | - | 179,500 | - | 179,500 | |||||||||||
| Assays and testing | 2,052,292 | - | 2,052,292 | 247,222 | 2,299,514 | |||||||||||
| Claims renewal / staking | 459,261 | - | 459,261 | 12,383 | 471,644 | |||||||||||
| Drilling | 12,488,967 | - | 12,488,967 | 1,854,312 | 14,343,279 | |||||||||||
| Environmental studies | 1,256,621 | - | 1,256,621 | 415,065 | 1,671,686 | |||||||||||
| Exploration data management | 917,422 | - | 917,422 | 37,656 | 955,078 | |||||||||||
| First Nations | 166,444 | - | 166,444 | 54,580 | 221,024 | |||||||||||
| Geochemistry | 111,066 | - | 111,066 | - | 111,066 | |||||||||||
| Geological and engineering services | 8,779,898 | 54,358 | 8,834,256 | 772,235 | 9,606,491 | |||||||||||
| Geophysical services | 743,515 | - | 743,515 | 58,128 | 801,643 | |||||||||||
| Metallurgy | 3,792,672 | - | 3,792,672 | 331,978 | 4,124,650 | |||||||||||
| Petrographic work | 43,957 | - | 43,957 | - | 43,957 | |||||||||||
| Project management | 106,015 | - | 106,015 | - | 106,015 | |||||||||||
| Survey, mapping and camp | 1,617,850 | 10,597 | 1,628,447 | 945,758 | 2,574,205 | |||||||||||
| Transportation | 2,604,549 | - | 2,604,549 | 273,202 | 2,877,751 | |||||||||||
| Cost recovery | (56,480 | ) | - | (56,480 | ) | - | (56,480 | ) | ||||||||
| Property impairments | (33,006,960 | ) | (51,964 | ) | (33,058,924 | ) | - | (33,058,924 | ) | |||||||
| BC refundable mining tax credits | (2,195,403 | ) | (12,991 | ) | (2,208,394 | ) | (891,874 | ) | (3,100,268 | ) | ||||||
| Federal non-refundable mining tax credits, net | ||||||||||||||||
| of valuation allowance | (61,185 | ) | - | (61,185 | ) | - | (61,185 | ) | ||||||||
| Book value at date of sale of net smelter royalty | - | - | - | (1,777,377 | ) | (1,777,377 | ) | |||||||||
| 1 | - | 1 | 2,333,268 | 2,333,269 |
| # of shares | Value $ | |||||
| Marketable securities at December 31, 2017 | - | - | ||||
| Received on sale of net smelter return royalty (Note 7) | 1,125,000 | 8,325,000 | ||||
| Sale of securities | (311,800 | ) | (2,307,320 | ) | ||
| Fair market value adjustment | - | (3,334,120 | ) | |||
| Marketable securities at December 31, 2018 | 813,200 | 2,683,560 | ||||
| Sale of securities | (813,200 | ) | (6,017,680 | ) | ||
| Fair market value adjustment | - | 3,334,120 | ||||
| Marketable securities at December 31, 2019 | - | - |
15During the year ended December 31, 2019, the Company sold 813,200 common shares (2018 - 311,800) for net proceeds of $3,335,330 (2018 - $1,438,980) and accordingly, the Company recorded a realized loss of $2,682,350 (2018 - $868,340).
6.Equipment and right of use assets
| Right of use assets - leases $ | Motor Vehicles $ | Computer equipment $ | Exploration and office equipment $ | Total $ | |||||||||||
| Cost: | |||||||||||||||
| At December 31, 2017 | - | 20,330 | 29,665 | 61,984 | 111,979 | ||||||||||
| Additions | - | 25,322 | 46,542 | 500 | 72,364 | ||||||||||
| At December 31, 2018 | - | 45,652 | 76,207 | 62,484 | 184,343 | ||||||||||
| Additions | 347,048 | - | 2,087 | 1,507 | 350,642 | ||||||||||
| At December 31, 2019 | 347,048 | 45,652 | 78,294 | 63,991 | 534,985 | ||||||||||
| Depreciation: | |||||||||||||||
| At December 31, 2017 | - | 19,838 | 27,627 | 55,051 | 102,516 | ||||||||||
| Charge for the year | - | 3,980 | 5,638 | 1,765 | 11,383 | ||||||||||
| At December 31, 2018 | - | 23,818 | 33,265 | 56,816 | 113,899 | ||||||||||
| Charge for the year | 65,073 | 6,548 | 7,020 | 1,282 | 79,923 | ||||||||||
| At December 31, 2019 | 65,073 | 30,366 | 40,285 | 58,098 | 193,822 | ||||||||||
| Net book value: | |||||||||||||||
| At December 31, 2018 | - | 21,834 | 42,942 | 5,668 | 70,444 | ||||||||||
| At December 31, 2019 | 281,975 | 15,286 | 38,009 | 5,893 | 341,163 |
Giga Metals Corporation |
Notes to the Consolidated Financial Statements |
Expressed in Canadian Dollars |
For the years ended December 31, 2019 and 2018 |
7.Exploration and evaluation assets
The Company's deferred exploration costs are as follows:
| Balance, December 31, | Change in year | Balance, December 31, | Change in year | Balance, December 31, | |||||||||||
| 2017 $ | 2018 $ | 2018 $ | 2019 $ | 2019 $ | |||||||||||
| Mineral property interests | 179,500 | - | 179,500 | - | 179,500 | ||||||||||
| Assays and testing | 2,052,292 | 247,222 | 2,299,514 | 40,236 | 2,339,750 | ||||||||||
| Claims renewal / staking | 459,261 | 12,383 | 471,644 | 7,555 | 479,199 | ||||||||||
| Drilling | 12,488,967 | 1,854,312 | 14,343,279 | 18,478 | 14,361,757 | ||||||||||
| Environmental studies | 1,256,621 | 415,065 | 1,671,686 | 143,935 | 1,815,621 | ||||||||||
| Exploration data management | 917,422 | 37,656 | 955,078 | 10,142 | 965,220 | ||||||||||
| First Nations | 166,444 | 54,580 | 221,024 | 29,444 | 250,468 | ||||||||||
| Geochemistry | 111,066 | - | 111,066 | - | 111,066 | ||||||||||
| Geological and engineering services | 8,834,256 | 772,235 | 9,606,491 | 903,283 | 10,509,774 | ||||||||||
| Geophysical services | 743,515 | 58,128 | 801,643 | - | 801,643 | ||||||||||
| Metallurgy | 3,792,672 | 331,978 | 4,124,650 | 437,133 | 4,561,783 | ||||||||||
| Petrographic work | 43,957 | - | 43,957 | - | 43,957 | ||||||||||
| Project management | 106,015 | - | 106,015 | - | 106,015 | ||||||||||
| Survey, mapping and camp | 1,628,447 | 945,758 | 2,574,205 | 196,228 | 2,770,433 | ||||||||||
| Transportation | 2,604,549 | 273,202 | 2,877,751 | 107,190 | 2,984,941 | ||||||||||
| Advances | - | - | - | 71,645 | 71,645 | ||||||||||
| Cost recovery | (56,480 | ) | - | (56,480 | ) | - | (56,480 | ) | |||||||
| Asset retirement obligations | - | - | - | 200,000 | 200,000 | ||||||||||
| Property impairments | (33,058,924 | ) | - | (33,058,924 | ) | - | (33,058,924 | ) | |||||||
| BC refundable mining tax credits | (2,208,394 | ) | (891,874 | ) | (3,100,268 | ) | (108,226 | ) | (3,208,494 | ) | |||||
| Federal non-refundable mining tax credits, net of valuation allowance | (61,185 | ) | - | (61,185 | ) | - | (61,185 | ) | |||||||
| Book value at date of sale of net smelter royalty | - | (1,777,377 | ) | (1,777,377 | ) | - | (1,777,377 | ) | |||||||
| 1 | 2,333,268 | 2,333,269 | 2,057,043 | 4,390,312 |
Giga Metals Corporation |
The Company has a 100% interest in certain mineral claims, located along the Turnagain River in British Columbia, Canada. One claim is subject to a 4% net smelter return royalty (“NSR”("NSR"). The Company has the option to purchase all or part of the NSR within four years of commercial production for a price of $1,000,000 per 1% NSR. In July 2018, the Company sold a 2% NSR.
Sale of Royalty
On July 31, 2018, the Company closed the sale of a 2% NSR on all future metal production from the Turnagain Nickel-Cobalt Project to Cobalt 27 for consideration of US$1,000,000 in cash (received) and 1,125,000 Cobalt 27 common shares (received) at $7.40 per share for a fair value of $8,325,000. The Company paid a finders’finders' fee of US$600,000 to a third party.
| Proceeds of sale of 2% NSR | $ | |||
| Cash | 1,300,200 | |||
| 1,125,000 common shares of Cobalt 27 | 8,325,000 | |||
| Total proceeds of sale of 2% NSR | 9,625,200 | |||
| Less: book value of Turnagain Nickel-Cobalt Project at date of sale | (1,777,377 | ) | ||
| Less: 6% | (780,120 | ) | ||
| Gain on sale of net smelter return royalty | 7,067,703 |
In accordance with IFRS, the net proceeds on the sale of the NSR are considered as a cost recovery of exploration and evaluation assets, with any excess recorded to the statement of comprehensive income (loss).
Under the terms of the NSR Agreement, 75% of the cash proceeds are to be used by the Company to complete the work required to advance the Turnagain Project through to Pre-feasibility and for exploration at Turnagain. Within one year of the signing (July 11, 2018) of the NSR Agreement, Cobalt 27 has the right to appoint one member to the Company's board of directors. The Company has the right to repurchase 0.5% of the 2% NSR ("Repurchase Option") for US$20 million, which if exercised would result in a 1.5% remaining NSR. The one-time Repurchase Option is only exercisable prior to the fifth anniversary of the NSR Agreement. Cobalt 27 will have a right of first refusal on any future sale by Giga Metals of a royalty or product stream or similar instrument.
8.Trade payables and accrued liabilities
| December 31, 2019 $ | December 31, 2018 $ | |||||
| Trade payables | 235,421 | 229,422 | ||||
| Accrued liabilities | 148,364 | 83,559 | ||||
| 383,785 | 312,981 |
9.Lease obligations
The Company entered into an office lease in April 1, 2019 and the Company recognized a lease obligation with respect to the lease. The terms and the outstanding balances as at December 31, 2019 and 2018 are as follows:
| |
| |
| |
|
| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| $ | $ | ||||||
| Trade payables | 229,422 | 134,982 | |||||
| Accrued liabilities | 83,559 | 10,000 | |||||
| 312,981 | 144,982 |
16
| Giga Metals Corporation |
Notes to the Consolidated Financial Statements |
Expressed in Canadian Dollars |
For the years ended December 31, 2019 and 2018 |
| 2019 $ | 2018 $ | |||||
| Right-of-use asset from office lease repayable in monthly instalments of $8,755 and an interest rate of 12.5% per annum and an end date of March 31, 2023 | 293,464 | - | ||||
| Less: current portion | (76,070 | ) | - | |||
| Non-current portion | 217,394 | - |
The following is a schedule of the Company's future minimum lease payments related to the office lease obligation:
| December 31, 2019 $ | |||
| 2020 | 106,846 | ||
| 2021 | 109,227 | ||
| 2022 | 111,609 | ||
| 2023 | 28,051 | ||
| 2024 | - | ||
| Total minimum lease payments | 355,733 | ||
| Less: imputed interest | (62,269 | ) | |
| Total present value of minimum lease payments | 293,464 | ||
| Less: current portion | (76,070 | ) | |
| Non-current portion | 217,394 |
The Company subleases part of their office space to other companies. One sublease with a related party (Note 13) is month to month lease at a rate of $2,346 per month and one sublease is for a period of four years at $1,303 per month. The total lease income from the subleasing of the office for the year ended December 31, 2019 was $39,937.
10.Income taxes and mining tax credits
The actual income tax provision differs from the expected amounts calculated by applying the Canadian combined statutory federal and provincial corporate income tax rates to the Company's loss before income taxes. The components of the Company's income tax recovery are as follows:
| Year ended December 31, 2019 $ | Year ended December 31, 2018 $ | |||||
| (Loss) income before income taxes | (1,663,674 | ) | 1,150,637 | |||
| Statutory tax rate | 27% | 27% | ||||
| Expected income tax (recovery) expense at the statutory tax rate | (449,192 | ) | 310,672 | |||
| Items not deductible for tax and other | 52,943 | 618,099 | ||||
| True-up | (287,716 | ) | - | |||
| Change in unrecognized tax benefits | 683,965 | (928,771 | ) | |||
| Income tax recovery | - | - |
| |
|
| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| $ | $ | ||||||
| Payable not later than one year | 80,359 | 53,159 | |||||
| Payable later than one year and not later than five years | 301,955 | 13,290 | |||||
| 382,314 | 66,449 |
| |
|
| Year ended | Year ended | ||||||
| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| $ | $ | ||||||
| Income (loss) before income taxes | 1,150,637 | (683,299 | ) | ||||
| Statutory tax rate | 27% | 26% | |||||
| Expected income tax expense (recovery) at the statutory | |||||||
| tax rate | 310,672 | (177,658 | ) | ||||
| Items not deductible for tax and other | 618,099 | 110,724 | |||||
| Change in valuation allowance | (928,771 | ) | 199,596 | ||||
| Income tax recovery | - | - |
The Company has the following deferred tax assets and liabilities:
| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| $ | $ | ||||||
| Federal investment tax credits | 654,183 | 663,144 | |||||
| Exploration and evaluation assets | 1,832,035 | 3,804,616 | |||||
| Non-capital loss carryforwards | 4,742,207 | 4,126,349 | |||||
| Marketable securities | 450,106 | - | |||||
| Other | 71,906 | 85,439 | |||||
| Valuation allowance | (7,750,437 | ) | (8,679,208 | ) | |||
| - | - |
17
| December 31, 2019 $ | December 31, 2018 $ | |||||
| Federal investment tax credits | 654,183 | 654,183 | ||||
| Exploration and evaluation assets | 3,309,945 | 1,832,035 | ||||
| Marketable securities | - | 450,106 | ||||
| Reclamation obligation | 54,000 | - | ||||
| Non-capital loss carryforwards | 3,804,719 | 4,742,207 | ||||
| Other | 611,555 | 71,906 | ||||
| Unrecognized deferred tax assets | (8,434,402 | ) | (7,750,437 | ) | ||
| - | - |
The tax pools relating to these deferred tax assets expire as follows:
| Canadian federal | |||||||||||||
| Canadian | investment tax credit | ||||||||||||
| resource pools | Non-capital losses | Other | losses | ||||||||||
| $ | $ | $ | $ | ||||||||||
| 2025 | - | - | - | 25,187 | |||||||||
| 2026 | - | 1,664,306 | - | 92,277 | |||||||||
| 2027 | - | 3,323,364 | - | 58,467 | |||||||||
| 2028 | - | 2,559,941 | - | 237,882 | |||||||||
| 2029 | - | 2,621,029 | - | 249,331 | |||||||||
| 2030 | - | 2,388,895 | - | - | |||||||||
| 2031 | - | 1,392,745 | - | - | |||||||||
| 2032 | - | 818,329 | - | - | |||||||||
| 2033 | - | 202,411 | - | - | |||||||||
| 2034 | - | 266,149 | - | - | |||||||||
| 2035 | - | 173,814 | - | - | |||||||||
| 2036 | - | 152,243 | - | - | |||||||||
| 2037 | - | 307,139 | - | - | |||||||||
| 2038 | - | 1,693,154 | - | - | |||||||||
| No expiry | 9,118,585 | - | 336,763 | - | |||||||||
| 9,118,585 | 17,560,841 | 336,763 | 663,144 |
11.Share capital Authorized share capital Unlimited number of common shares without par value. Issued share capital At December 31, 2019, there were 55,494,015 issued and fully paid common shares (2018 - 43,149,015). Financings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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During the year ended December 31, 2019, the Company did not complete any equity financings.
Basic and diluted The following table reconciles our basic and diluted (loss) income
Stock options The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees and technical consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the
On exercise, each option allows the holder to purchase one common share of the Company. The changes in options during the years ended December 31,
The weighted average share price on the date of option exercise during the year ended December 31, Details of options outstanding as at December 31,
Stock-based compensation During the year ended December 31,
During the year ended December 31, Warrants On exercise, each warrant allows the holder to purchase one common share of the Company. The changes in warrants outstanding during the years ended December 31,
Details of warrants outstanding as at December 31,
13.Related party transactions
There was
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