UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
OR
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SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report _____________
For the transition period from ___________ to ____________
Commission file number
STARCORE INTERNATIONAL MINES LTD.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of Class |
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.
(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’s classes of capital or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
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 ☐ 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. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
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☒ |
Emerging growth company
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.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
by the International Accounting Standards Board
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
☐ ITEM 17 ☐ ITEM 18
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. |
☐YES ☒ NO |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). |
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Auditor Firm Id: |
[ |
Auditor Name: |
[ |
Auditor Location: |
[ |
TABLE OF CONTENTS
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Material Modifications to the rights of Security Holders and Use of Proceeds |
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Purchase of Equity Securities by the Issuer and Affiliated Purchasers |
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68 |
CURRENCY AND MEASUREMENT
All currency amounts in this Annual Report are stated in Canadian Dollars unless otherwise indicated.
Approximate conversion of metric units into imperial equivalents is as follows:
Metric Units |
Multiply by |
Imperial Units |
hectares |
2.471 |
= acres |
meters |
3.281 |
= feet |
kilometers |
3281 |
= feet |
kilometers |
0.621 |
= miles |
grams |
0.032 |
= ounces (troy) |
tonnes |
1.102 |
= tons (short) (2,000 lbs) |
grams/tonne |
0.029 |
= ounces (troy)/ton |
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”, “project”, “believe”, “anticipate”, “intend”, “expect”, “predict”, “may”, “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, lack of commercially exploitable mineral reserves, future prices of precious metals and minerals, as well as those factors discussed in the section entitled “Risk Factors” beginning on page 7, below. 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. Except as required by applicable law, including the securities laws of the United States, we do 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.
As used in this Annual Report, the terms “we”, “us” and “our” mean Starcore International Mines Ltd. and all of our wholly owned subsidiaries, unless otherwise indicated.
STATUS AS AN EMERGING GROWTH COMPANY
Our Company is an "emerging growth company" as defined in section 3(a) of the Exchange Act, and we will continue to qualify as an "emerging growth company" until the earliest to occur of: (a) the last day of the fiscal year during which our Company has total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every 5 years by the SEC) or more; (b) the last day of our Company's fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective Registration Statement under the Securities Act; (c) the date on which our Company has, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which our Company is deemed to be a "large accelerated filer", as defined in Exchange Act Rule 12b–2. Therefore, we expect to continue to be an emerging growth company for the foreseeable future.
1
Generally, a company that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to companies that meet the definition of a “smaller reporting company” in Exchange Act Rule 12b-2, an auditor attestation report on management’s assessment of internal controls over financial reporting. However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report in our annual reports filed under the Exchange Act, even if we do not qualify as a “smaller reporting company”. In addition, auditors of an emerging growth company are exempt from the rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the registrant company (auditor discussion and analysis).
As a reporting issuer under the securities legislation of the Canadian provinces of Ontario, British Columbia, and Alberta, we are required to comply with all new or revised accounting standards that apply to Canadian public companies. Pursuant to Section 107(b) of the Jumpstart Our Business Startups Act (commonly referred to as the “JOBS Act”), an emerging growth company may elect to utilize an extended transition period for complying with new or revised accounting standards for public companies until such standards apply to private companies. We have elected to utilize this extended transition period. However, while we have elected to utilize this extended transition period, our audited consolidated financial statements as of April 30, 2018 reflect the adoption of all required accounting standards for Canadian public companies.
2
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. All such financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”).
In May 2016, our Board of Directors resolved to change our financial year end from July 31 to April 30, with the result that our transition financial year ended on April 30, 2016 covered a period of nine months. Our financial statements for the year ended April 30, 2022 have been reported on by
Item 1 |
Identity of Directors, Senior Management and Advisers |
Not Applicable for Annual Reports
Item 2 |
Offer Statistics and Expected Timetable |
Not Applicable for Annual Reports
3
Item 3 |
Key Information |
A.Selected Financial Data
The following tables summarize selected financial data for our Company for the year ended April 30, 2022 and the past four years before that. As indicated elsewhere in this Annual Report, in May 2016, our Board of Directors resolved to change our financial year end from July 31 to April 30. The information in the tables for the years ended April 30, 2022, April 30, 2021, April 30, 2020, April 30, 2019 and April 30, 2018 was extracted from the detailed audited financial statements and related notes included in this Annual Report and should be read in conjunction with those financial statements and the other information appearing under the heading “Item 5 – Operating and Financial Review and Prospects” beginning at page 40, below.
Selected Financial Data
(Stated in thousands of Canadian Dollars)
IFRS as issued by the IASB |
At April 30, 2018 |
|
At April 30, 2019 |
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At April 30, 2020 |
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At April 30, 2021 |
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At April 30, 2022 |
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|||||
Total Revenues |
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27,807 |
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32,795 |
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24,820 |
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26,799 |
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25,679 |
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Earnings from Mining Operations |
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(4,928 |
) |
|
36 |
|
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1,984 |
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6,402 |
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5,306 |
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Earnings for the Year |
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(12,000 |
) |
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(11,804 |
) |
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(3,629 |
) |
|
2,892 |
|
|
2,405 |
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Basic and Diluted Earnings per Share |
|
(0.24 |
) |
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(0.24 |
) |
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(0.07 |
) |
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0.06 |
|
|
0.05 |
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Total Assets |
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64,451 |
|
|
57,005 |
|
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54,413 |
|
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46,471 |
|
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52,041 |
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Total Liabilities |
|
15,383 |
|
|
17,969 |
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|
17,109 |
|
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10,191 |
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11,987 |
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Net Assets |
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49,068 |
|
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39,036 |
|
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37,304 |
|
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36,280 |
|
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40,054 |
|
Share Capital |
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50,725 |
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50,725 |
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50,725 |
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50,725 |
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50,725 |
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Common Stock |
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49,646,851 |
|
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49,646,851 |
|
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49,646,851 |
|
|
49,646,851 |
|
|
49,646,851 |
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Cash Dividends per Common Share |
NIL |
|
NIL |
|
NIL |
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NIL |
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NIL |
|
Disclosure of Exchange Rate History
On July 22, 2022 the noon rate of exchange as set forth in the H.10 statistical release of the Federal Reserve Board, for the conversion of United States dollars into Canadian dollars was US$1.00 = $1.2861.
The following table sets forth the high and low rates of exchange for the Canadian dollar, expressed as Canadian dollars per U.S. dollar, for each month during the previous six months:
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Exchange Rate U.S. Dollars into Canadian Dollars |
|
||||
Month Ended |
High |
|
Low |
|
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June 30, 2022 |
|
1.2433 |
|
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1.2356 |
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May 31, 2022 |
|
1.2089 |
|
|
1.2059 |
|
April 30, 2022 |
|
1.2322 |
|
|
1.2266 |
|
March 31, 2022 |
|
1.2628 |
|
|
1.2540 |
|
February 28, 2022 |
|
1.2702 |
|
|
1.2587 |
|
January 31, 2022 |
|
1.2874 |
|
|
1.2740 |
|
4
The following table sets forth the average rates of exchange for the Canadian dollar, expressed as Canadian dollars per U.S. dollar, during the year ended April 30, 2022 and during each of the preceding four financial years ended April 30, calculated by using the average of the exchange rates on the last day of each month during the period:
Year Ended |
Average Exchange Rate U.S. Dollars into Canadian Dollars |
|
|
April 30, 2022 |
1.2548 |
|
|
April 30, 2021 |
|
1.3088 |
|
April 30, 2020 |
|
1.3359 |
|
April 30, 2019 |
|
1.3179 |
|
April 30, 2018 |
|
1.2774 |
|
B.Capitalization and Indebtedness
Not Applicable for Annual Reports
C.Reasons for the Offer and Use of Proceeds
Not Applicable
D.Risk Factors
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 Report in evaluating our Company and our business before purchasing shares of our Company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are not the only ones facing our Company. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.
Risks Associated with our Mining Operations
Our operations are subject to risk. Our Company’s ability to generate sufficient cash flows to continue operations is dependent on many factors and cannot be assured.
During the year ended April 30, 2022, the cash flow generated from operating, investing and financing activities resulted in a net cash inflow of $4,205,000 (2021 - $2,651,000) bringing the Company’s cash balance to $8,818,000 (2021 – 4,392,000) with a working capital of $9,135,000 (2021- $5,829,000) and an accumulated deficit of $24,205,000 (2021 - $26,610,000).The ability of the Company to generate sufficient cash flows to continue operations is dependent upon many factors including, but not limited to, sufficient ore grade, ore production at the San Martin mine, control of mine production costs, administrative costs and tax costs and upon the market price of metals. Cash flows may also be affected by the ability of the Company to reduce capital expenditures, including mine development.
Exploration, development and mining involve a high degree of risk.
Our operations will be subject to all the hazards and risks normally encountered in the exploration, development and production of gold and other base or precious metals, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, pit-wall failures, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and legal liability. Milling operations are subject to various hazards, including, without limitation, equipment failure and failure of retaining dams around tailings disposal areas, which may result in environmental pollution and legal liability.
5
Mining risks.
The business of mining involves many risks and hazards, including environmental hazards, industrial accidents, labour force disruptions, the unavailability of materials and equipment, unusual or unexpected rock formations, pit slope failures, changes in the regulatory environment, weather conditions, cave-ins, rock bursts, water conditions and gold bullion losses. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. As a result, we may incur significant costs that could have a material adverse effect upon our financial performance, liquidity and results of operations.
Mine development is subject to a number of risks.
Our ability to sustain or increase our present levels of gold production is dependent upon the successful development of new producing mines and/or identification of additional reserves at existing mining operations. If we are unable to develop new ore bodies, we will not be able to sustain present production levels. Reduced production could have a material and adverse impact on future cash flows, results of operations and financial condition. Many factors are involved in the determination of the economic viability of a deposit, including the achievement of satisfactory mineral reserve estimates, the level of estimated metallurgical recoveries, capital and operating cost estimates and the estimate of future gold prices. Capital and operating cost estimates are based upon many factors, including anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, ground and mining conditions, expected recovery rates of the gold from the ore, and anticipated environmental and regulatory compliance costs. Each of these factors involves uncertainties and as a result, we cannot give any assurance that our exploration and development activities will result in economically viable deposits. If a deposit is developed, actual operating results may differ from those anticipated.
We may be adversely affected by fluctuations in gold prices.
The value and price of our securities, our financial results, and our exploration, development and mining activities may be significantly adversely affected by declines in the price of gold and other precious metals. Gold prices fluctuate widely and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of gold producing countries throughout the world. The price for gold fluctuates in response to many factors beyond anyone’s ability to predict. The prices used in making the resource estimates are disclosed and differ from daily prices quoted in the news media. The percentage change in the price of a metal cannot be directly related to the estimated resource quantities, which are affected by a number of additional factors. For example, a 10 percent change in price may have little impact on the estimated resource quantities and affect only the resultant positive cash flow, or it may result in a significant change in the amount of resources. Because mining occurs over a number of years, it may be prudent to continue mining for some periods during which cash flows are temporarily negative for a variety of reasons including a belief that the low price is temporary and/or the greater expense incurred is in closing a property permanently.
Mineralized material calculations and life-of-mine plans using significantly lower gold and precious metal prices could result in material write-downs of our investments in mining properties and increased amortization, reclamation and closure charges.
In addition to adversely affecting our mineralized material estimates and our financial condition, declining metal prices can impact operations by requiring a reassessment of the commercial feasibility of a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays in development or may interrupt operations, if any, until the reassessment can be completed.
Further, if revenue from gold sales declines, we may experience liquidity difficulties. This may reduce our ability to invest in exploration and development and making necessary capital expenditures, which would materially and adversely affect future production, earnings and our financial position.
6
Our estimates of future production may not be achieved.
We prepare internal estimates of future gold production for our operations. We cannot give any assurance that we will achieve our production estimates. Our failure to achieve our production estimates could have a material and adverse effect on any or all of our future cash flows, results of operations and financial condition. These production estimates are dependent on, among other things, the accuracy of mineral reserve estimates, the accuracy of assumptions regarding ore grades and recovery rates, ground conditions and physical characteristics of ores, such as hardness and the presence or absence of particular metallurgical characteristics, and the accuracy of estimated rates and costs of mining and processing.
Our actual production may vary from our estimates for a variety of reasons, including: actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors such as the need for sequential development of ore bodies and the processing of new or different ore grades from those planned; mine failures, slope failures or equipment failures; reduced metallurgical recovery rates, industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts, rock slides and earthquakes; encountering unusual or unexpected geological conditions; changes in power costs and potential power shortages; shortages of principal supplies needed for operation, including explosives, fuels, chemical reagents, water, equipment parts and lubricants; labour shortages or strikes; civil disobedience and protests; and restrictions or regulations imposed by government agencies or other changes in the regulatory environments. Such occurrences could result in damage to mineral properties, interruptions in production, injury or death to persons, damage to our property or others, monetary losses and legal liabilities. These factors may cause a mineral deposit that has been mined profitably in the past to become unprofitable, forcing us to cease production. Each of these factors also applies to our sites not yet in production and to operations that are to be expanded. In these cases, we do not have the benefit of actual experience in verifying its estimates, and there is a greater likelihood that actual production results will vary from the estimates.
Mineral reserves and resources estimates are subject to inherent uncertainty.
The figures presented for both mineral reserves and mineral resources herein are only estimates. The estimating of mineral reserves and mineral resources is a subjective process and the accuracy of reserve and resource estimates is a function of the quantity and quality of available data and the assumptions used and judgements made in interpreting engineering and geological information. There is significant uncertainty in any reserve or resource estimate, and the actual deposits encountered and the economic viability of mining a deposit may differ materially from our estimates. Estimated mineral reserves or mineral resources may have to be recalculated based on changes in gold prices, further exploration or development activity, actual production experience, other changes in the assumptions made in the estimation process, or changes in the estimation methodology. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence reserve or resource estimates. Market price fluctuations for gold, increased production costs or reduced recovery rates, or other factors may render our present proven and probable mineral reserves uneconomical or unprofitable to develop at a particular site or sites. A reduction in estimated reserves could require material write-downs in our investment in the affected mining properties and increased amortization, reclamation and closure charges.
We compete with other companies for mining claims and mining assets.
We compete with other mining companies and individuals for mining claims and leases on exploration properties and the acquisition of gold mining assets. Some of the companies with which we compete have significantly greater financial, management and technical resources than we do, and may use these resources to their advantage when competing with us for such opportunities. We cannot give any assurance that we will continue to be able to compete successfully with our competitors in acquiring attractive mineral properties and assets.
7
Our San Martin Mine is our primary source of operational cash flow. Accordingly, our ability to continue our operations, and our financial position, will be materially and adversely affected if we are limited by insufficient quantities of mineral reserves and resources, which is dependent on the success of our continuing exploration efforts.
Specifically, continued operations at the Mine are dependent on our ability to discover new mineral resources and to convert them into reserves in sufficient quantities to replace current production. However, mineral exploration is highly speculative in nature. Our exploration efforts involve many risks, and success in exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological expertise and availability of exploration capital. We cannot give any assurance that our exploration efforts will result in the discovery of additional mineral resources and their conversion into reserves. We cannot give any assurance that our exploration programs will be able to extend the life of our San Martin Mine, or result in the discovery of new producing mines.
We may have future capital requirements.
As of April 30, 2022, we had cash of approximately $8,818,000 (2021- $4,392,000) and working capital of approximately $9,135,000 (2021- $5,829,000). We intend to use our future cash flows to fund exploration and development work and for general corporate purposes. Capital expenditures and funds for exploration in financial year 2023 are expected to total approximately $4.8 millions. The primary expenditures are planned to be mine development and equipment purchases and replacement which are anticipated to be funded out of the mine’s cash flow. We may have further capital requirements to the extent we decide to develop other properties or to take advantage of opportunities for acquisitions, joint ventures or other business opportunities that may be presented to us. In addition, we may incur major unanticipated liabilities or expenses. Failure to make required capital expenditures may impact our financial results.
We may be required to obtain additional financing in the future to fund future exploration and development activities or acquisitions of additional properties or other interests that may be appropriate to enhance our financial or operating interests. We have historically raised capital through equity financing and in the future we may raise capital through equity or additional debt financing, joint ventures, production sharing arrangements or other means. There can be no assurance that we will be able to obtain necessary financing in a timely manner or on acceptable terms, if at all.
We may require further loans in the future.
Although we repaid all outstanding debt in 2020 (US$1,000,000 due on April 25, 2020 and Cdn$3,000,000 due June 18, 2020 (see press release of June 10, 2020), we may need to arrange additional loans in the future which may require scheduled payments. Our mining operations may not be able to generate sufficient cash to service such future indebtedness should we incur such debt, and we may be forced to take other actions to satisfy our obligations, which actions may not be successful.
Our ability to meet the repayment obligations on future indebtedness depends on our financial condition and operating performance, which is subject to, among other factors, prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may not be able to maintain a level of cash flow from our operating activities sufficient to permit us to pay the principal and the interest on our indebtedness.
Government regulation may adversely affect our business and planned operations.
We believe we currently comply with existing environmental and mining laws and regulations and that our proposed exploration programs will also meet those standards. Our mineral exploration and development activities, if any, are subject to various laws governing prospecting, mining, development, production, taxes, labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people and other matters. We can provide no assurance that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail our exploration, production or development activities. Amendments to current laws and regulations governing operations and
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activities of exploration, development mining and milling or more stringent implementation thereof could have a material adverse impact on our business and financial condition and cause increases in operating and exploration expenses, capital expenditures or production costs or reduction in levels of production or require abandonment or delays in development of new mining properties.
Government approvals and permits are currently, and may in the future be, required in connection with our operations. There can be no assurance that we will be able to obtain these permits in a timely manner.
Our Operations in Mexico are subject to Mexican Foreign Investment and Income Tax Laws
Under the Foreign Investment Law of Mexico, there is no limitation on foreign capital participation in mining operations; however, the applicable laws may change in a way which may adversely impact the Company and its ability to repatriate profits. Under Mexican Income Tax Law, dividends are subject to a withholding tax.
The VAT (IVA) is an indirect tax levied on the value added to goods and services, and it is imposed on carry out activities within Mexican territory.
In Mexico, the corporate tax rate is 30%, , a special mining royalty of 7.5% on the profits derived from the sale of minerals, and, an extraordinary mining royalty of 0.5% on the gross income derived from the sale of gold, silver and platinum. These may have a material impact on the Company’s future earnings and cash flows, and possibly on future capital investment decisions.
Our operations are subject to environmental risks.
All phases of our operations, if any, will be subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. We cannot be certain that future changes in environmental regulation, if any, will not adversely affect our operations, if any. Environmental hazards may exist on properties we hold that are unknown to us and that have been caused by previous or existing owners or operators of the properties.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.
We do not insure against all risks.
Our insurance will not cover all the potential risks associated with a mining company’s operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, we expect that insurance against risks such as environmental pollution or other hazards as a result of exploration and production may be prohibitively expensive to obtain for a company of our size and financial means. We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial condition and results of operations.
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Our directors and officers may have conflicts of interest.
Each of our directors and officers has served and continue to serve as officers and/or directors of other companies engaged in natural resource exploration and development and related industries. Consequently, there is a possibility that our directors and/or officers may be in a position of conflict now or in the future. For example, a conflict of interest might arise where one of our directors or officers becomes aware of a corporate opportunity that would be of interest not only to our Company, but also to another mining company of which he is also a director or officer; or it is foreseeable that our Company could become involved in a mineral property option or joint venture agreement in respect of a mineral exploration or mine development project in which such a company holds an interest. For a description of the directorships and/or offices held by our directors and officers in other companies engaged in natural resource exploration and development and related industries, please see “Item 6 - Directors, Senior Management and Employees - A. Directors and Senior Management – Director Interlocks.”
Title to our properties may be subject to challenge.
Acquisition of title to mineral properties in all jurisdictions is a very detailed and time-consuming process. We have acquired substantially all of our mineral properties through acquisitions. Although we have investigated title to all of our mineral properties, we cannot give any assurance that title to such properties will not be challenged or impugned. The properties may have been acquired in error from parties who did not possess transferable title, may be subject to prior unregistered agreements or transfers, and title may be affected by undetected defects or aboriginal, indigenous peoples or native land claims.
In Mexico, the site of the San Martin Mine, all mineral resources are owned by the state. Title to minerals can be held separately from title to the surface. Mining rights take precedence over surface rights. Rights to explore for and to extract minerals are granted by the state through issuance of mining concessions.
Mining operations are subject to reclamation costs, estimates of which may be uncertain.
In accordance with existing accounting standards, we have recognized a liability for future site closure and mine reclamation costs based on our estimate of the costs necessary to comply with existing reclamation standards. Site closure and mine reclamation costs for operating properties are reviewed annually. There can be no assurance that our reclamation and closure liabilities will be sufficient to cover all reclamation and closure costs. The costs of performing the decommissioning and reclamation must be funded by the Company’s operations. These costs can be significant and are subject to change. We cannot predict what level of decommissioning and reclamation may be required in the future by regulators. If we are required to comply with significant additional regulations or if the actual cost of future decommissioning and reclamation is significantly higher than current estimates, this could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.
We have an obligation to reclaim our properties after the minerals have been mined from the site, and have estimated the costs necessary to comply with existing reclamation standards. Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs, which will reflect the market condition at the time the rehabilitation costs are actually incurred. The final cost of the currently recognized rehabilitation provision may be higher or lower than currently provided for.
The inflation rate applied to estimated future rehabilitation and closure costs is 3.0% and the discount rate currently applied in the calculation of the net present value of the provision is 8.0%.
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We may be subject to unforeseen litigation.
All industries, including the mining industry, are subject to legal claims, with and without merit. Although we are not currently involved in any legal proceedings, and are not aware of any threatened or pending legal proceedings, there is no guarantee that we will not become subject to such proceedings in the future. There can be no guarantee of the outcome of any such claim. In addition, defense and settlement costs for any legal proceeding can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the resolution of any particular legal proceeding will not have a material effect on our financial position or results of operations.
Estimates and assumptions employed in the preparation of financial statements.
The preparation of our Company’s consolidated financial statements requires us to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenues and expenses. Our accounting policies and our critical accounting estimates and judgements are described in notes 3 and 4 respectively in our April 30, 2022 audited annual financial statements.
Our accounting policies relating to mineral property and deferred exploration costs, asset retirement obligations, stock-based compensation and future amortization and depletion of mining interest, plant and equipment are critical accounting policies that are subject to estimates and assumptions. If these estimates or assumptions prove to be inaccurate, we could be required to change the recorded value of our assets and liabilities, which may reduce our earnings and working capital.
We record mineral property acquisition costs and mine development costs at cost. In accordance with IFRS, we capitalize preproduction expenditures net of revenues received, until the commencement of commercial production. A significant portion of our mining interest, plant and equipment will be depreciated and amortized on a unit-of-production basis. Under the unit-of-production method, the calculation of depreciation, depletion and amortization of mining interest, plant and equipment is based on the amount of proven and probable reserves and a portion of resources expected to be converted to reserves. If these estimates of reserves prove to be inaccurate, or if we revise our mining plan for a location, due to reductions in the price of gold or otherwise, to reduce the amount of reserves expected to be recovered, we could be required to write-down the recorded value of our mining interest, plant and equipment, or to increase the amount of future depreciation, depletion and amortization expense, both of which would reduce our earnings and net assets.
In addition, IFRS requires us to consider at the end of each accounting period whether or not there has been an impairment of the capitalized mining interest, plant and equipment. For producing properties, this assessment is based on expected future cash flows to be generated from the location. For non-producing properties, this assessment is based on whether factors that may indicate the need for a write-down are present. If we determine there has been an impairment because our prior estimates of future cash flows have proven to be inaccurate, due to reductions in the price of gold, increases in the costs of production, reductions in the amount of reserves expected to be recovered or otherwise, or because we have determined that the deferred costs of non-producing properties may not be recovered based on current economics or permitting considerations, we would be required to write-down the recorded value of our mining interest, plant and equipment, which would reduce our earnings and net assets.
Our operations are subject to risks associated with currency fluctuations.
Currency fluctuations may affect the costs that we incur at our operations. Gold is sold throughout the world based principally on a U.S. dollar price, but the majority of our operating expenses are incurred in non-U.S. dollar currencies. The appreciation of non-U.S. dollar currencies in those countries where we have mining operations against the U.S. dollar would increase the costs of gold production at such mining operations which could materially and adversely affect our earnings and financial condition.
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Our foreign investments and operations may be subject to political and other risks.
We conduct mining, development or exploration activities primarily in Mexico and exploration activities in the United States. Our foreign mining investments are subject to the risks normally associated with the conduct of business in foreign countries. The occurrence of one or more of these risks could have a material and adverse effect on our earnings or the viability of its affected foreign operations, which could have a material and adverse effect on our future cash flows, results of operations and financial condition.
Such risks may include, among others, labour disputes, invalidation of governmental orders and permits, corruption, uncertain political and economic environments, war, civil disturbances and terrorist actions, criminal and gang related activity, illegal mining and protests, arbitrary changes in laws or policies of particular countries, foreign taxation, delays in obtaining or the inability to obtain necessary governmental permits, opposition to mining from environmental or other non-governmental organizations, limitations on foreign ownership, limitations on the repatriation of earnings, limitations on gold exports and increased financing costs. These risks may limit or disrupt our projects, restrict the movement of funds or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation.
Certain of our projects are located in Mexico and are subject to country risks that may affect our ability to complete development work on or to operate our projects.
The Company’s primary mineral activities are conducted in Mexico and will be exposed to various levels of political, economic and other risks and uncertainties. These risks include but are not limited to, hostage taking, illegal mining, fluctuations in currency exchange rates, high rates of inflation, excessive import duties and taxes on the importation of equipment, expropriation and nationalization, possible future restrictions on foreign exchange and repatriation, changes in taxation, labour and mining regulations and policies, and changing political conditions, currency controls, and government regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ local citizens.
Changes, if any, in mining or investment policies, or shifts in political attitude in Mexico, may adversely affect the Company’s operations or profitability. Current activities and future operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety.
Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications, and tenure, could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
Mexico continues to undergo violent internal struggles between the government and organized crime with drug-cartel relations and other unlawful activities. The violence has increased since 2011 with the number of kidnappings throughout Mexico rising and continuing to be of particular concern. Militarized crime has not diminished, with ongoing confrontations between Mexican security forces and drug cartels. Shootouts, attacks and illegal roadblock may occur without warning. The majority of crimes include homicides, kidnapping and extortion with the most dangerous regions centralized in specific regions of Mexico: Chihuahua, Colima, Coahuila, Durango, Guerrero, Guanajuato, Highway 45 between Leon and Irapuato, the area south of and including Highway 45D between Irapuato and Celaya, Michoacán, Morelos - the Lagunas de Zempoala National Park, Nayarit - the area within 20 km of the border with Sinaloa and Durango, City of Tepic, Nuevo León, Sinaloa, Sonora, Tamaulipas and Zacatecas. Travel advisories continue to prohibit intercity travel at night in numerous areas due to kidnappings, car jackings and highway robberies. Queretaro for the most part remains largely unaffected and no travel advisory or restrictions are currently in effect. However small incidents still occur and although the Company is vigilant in taking additional measures to increase security and protect both personnel and property, there is no absolute guarantee that such measures will provide an adequate level of protection for the Company. The occurrence of these various factors and uncertainties cannot be accurately predicted, and could have an adverse effect on the Company’s operations or future profitability.
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COVID-19 Uncertainties
Although COVID-19 restrictions and protocols have eased recently, the precise impacts of the global emergence of Coronavirus disease (COVID-19) on the Company are currently unknown. The Company intends to conduct business as normal with modifications to personnel travel and work locations. In Mexico, there is uncertainty as to the continuing designation of mining operations as an essential service. The Company is also evaluating whether exploration work can continue at San Martin. Rules in all jurisdictions are changing rapidly and the Company will need to evaluate and evolve with measures as they are announced. Government restrictions on the movement of people and goods may cause operations, exploration work and analysis being done by the Company and its contractors to slow or cease temporarily or even permanently. Ceasing operations will have disastrous effects in all Company sectors, and may cause the Company to enact force majeure under one or more of its agreements. Such disruptions in work may cause severe negative impacts on the Company’s cash flow, on staffing and personnel, on actual or self-imposed deadlines and other adverse consequences and fiscal losses. In addition, the outbreak of COVID-19 has caused considerable disruption to the world economy and financial markets which could have a materially adverse impact on the ability of the Company to raise additional funding in the future and could negatively impact, among other factors, the Company’s share price.
There are risks associated with our acquisition strategy.
As part of our business strategy, the Company has made acquisitions in the past. The properties we acquired are primarily in the exploration stage. There is no assurance that a commercially viable mineral deposit exists on any of our other exploration properties and further exploration is required before we can evaluate whether any exist 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).
On March 26, 2018, the Company announced that it was narrowing its focus to production oriented assets in Mexico and was seeking the sale or joint venture of its non-core assets, comprised primarily of our exploration properties.
Although the Company has completed the sale of a number of its non-core assets in the year ended April 30, 2022, the Company cannot assure that it can complete any further sale or joint venture that it pursues, or is pursuing, on favourable terms, or that any of these business arrangements will ultimately benefit the Company. If not successful or if forced into “fire-sales” in disposing of its properties, these non-core assets acquired by the Company in prior years could have a material adverse effect on the Company’s results of operations and financial condition.
We are reliant on our current management team.
The success of our operations and activities is dependent to a significant extent on the efforts and abilities of our management including Robert Eadie, Chief Executive Officer, Pierre Alarie, President, Gary Arca, Chief Financial Officer and Salvador Garcia, Chief Operating Officer. Investors must be willing to rely to a significant extent on management’s discretion and judgment. We do not have in place formal programs for succession of management and training of management. We do not maintain key employee insurance on any of our employees. The loss of one or more of these key employees, if not replaced, could adversely affect our operations.
We compete for access to qualified employees and contractors.
At April 30, 2022, we employed or contracted the services of approximately 261 (244 in 2021), including staff at the minesite. We compete with other mining companies in connection with the recruitment and retention of qualified employees. At the present time, a sufficient supply of qualified workers is available for our operations. The continuation of such supply depends upon a number of factors, including, principally, the demand occasioned by other projects. There can be no assurance that we will continue to be able to retain or attract qualified employees. There is a risk that increased labour costs could have a material adverse effect on our operating costs.
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Dilution of Shareholders’ Interests as a Result of Issuances of Additional Shares
Depending on the outcome of the Company’s exploration programs and mining operations, the Company may issue additional shares to finance additional programs and mining operations or to acquire additional properties. In the event that the Company is required to issue additional shares or decides to enter into joint ventures with other parties in order to raise financing through the sale of equity securities, investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold.
Risks Related to Our Company
Our Articles of Incorporation indemnify our officers and directors against all costs, charges and expenses incurred by them.
Our Articles of Incorporation contain provisions limiting the liability of our officers and directors for their acts, receipts, negligence or defaults and for any other loss, damage or expense incurred by them which occurs during the execution of their duties as officers or directors of our Company, unless they failed to 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 have been of benefit to our Company and our shareholders.
Risks Relating to our Securities
The prior registration of our common stock under section 12(g) of the Securities Exchange Act of 1934 was revoked pursuant to section 12(j) of that Act due to our failure to comply with our reporting obligations. We have re-registered under the Act and our registration statement became effective on October 11, 2016. If, in the future, we fail to comply with the reporting requirements of the Exchange Act, the SEC could initiate proceedings to once again revoke our registration, and broker-dealers in the United States would thereafter be unable to effect transactions in our Company’s common shares.
Trading in our common shares on the Toronto Stock Exchange and the OTCQB 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 Toronto Stock Exchange under the symbol “SAM” and on the OTCQB under the symbol “SHVLF”. 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 companies 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’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.
We do not expect to declare or pay any dividends in the immediate future.
We do not anticipate paying any such dividends for the foreseeable future.
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U.S. investors may not be able to enforce their civil liabilities against us or our directors, controlling persons and officers.
It may be difficult to bring and enforce suits against us. Some of our directors and officers are residents of countries other than the United States. Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of any court of the United States.
Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations which may limit a stockholder’s ability to buy and sell our stock.
The U.S. Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) of less than US$5.00 per share or an exercise price of less than US$5.00 per share, subject to certain exceptions. Although the company meets the net tangible asset exception to the definition of a penny stock, many brokers nonetheless maintain that any stock under $5.00 and not trading on a national securities exchange are still considered penny stocks. Therefore, our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-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 US$5,000,000 or individuals with a net worth in excess of US$1,000,000 (exclusive of the value of a principal residence; and either individually or jointly with the individual’s spouse) or annual income exceeding US$200,000 in each of the two most recent years or US$300,000 jointly with their spouse for those years.
The penny stock rules require a broker-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-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-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-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-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 broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
Item 4 |
Information on our Company |
A. |
History and Development of our Company |
Our governing corporate legislation is the British Columbia Business Corporations Act (the “Act”). We incorporated under the former Company Act (British Columbia) on October 17, 1980, under the name Omnibus Resources Inc. On September 10, 1981, Omnibus Resources Inc. changed its name to Berle Oil Corporation. On May 31, 1983 Berle Oil Corporation changed its name to Berle Resources Ltd. On August 6, 1987 Berle Resources Ltd. changed its name to Eagle Pass Resources Ltd. On September 17, 1992 Eagle Pass Resources Ltd. changed its name to Starcore Resources Ltd. On February 2, 2004 Starcore Resources Ltd. changed its name to Starcore International Ventures Ltd. On February 1, 2008 Starcore International Ventures Ltd. changed its name to Starcore International Mines Ltd.
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Our principal place of business is located at Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6. Our telephone number at this address is: (604) 602-4935.
Our common shares are listed on the Toronto Stock Exchange under the symbol “SAM”, on the OTCQB under the symbol “SHVLF” and on the Frankfurt Stock Exchange under the symbol “V4JA”.
B. |
Our Business Overview |
We are in the mineral resource business. The mineral resource business generally consists of three stages: exploration, development and production. We are a mineral resource company with projects in various stages. Mineral resource companies that are engaged in the extraction of a known mineral resource are in the production stage. We fall in this category with our principal property, the San Martin Mine in Queretaro, Mexico, where we are engaged in extracting and processing gold and silver. The San Martin Mine is our primary source of operating cash flows.
In prior years, we were also engaged in acquiring exploration assets in North America directly and through corporate acquisitions. Some of our projects are in the exploration stage because our exploration activities on the project lands have not yet identified mineral resources in commercially exploitable quantities.
Sierra Rosario: Sinaloa.
Located within the historically productive Sierra Madre Occident geological province in the northern Mexican state of Sinaloa, the Sierra Rosario property consists of two large mineral exploration concessions totaling 978.57 hectares. In February 2018, the Company sold this property for US$100,000 and an additional 1% NSR.
Private Placement
On June 18, 2018, the Company announced that it had completed a private placement of secured bonds in the aggregate principal amount of CDN$3 million (the “Bonds”). The Bonds bore interest at 8% per annum, payable on maturity, and matured on June 18, 2020. The Bonds were secured by a charge over all of the Company’s and its subsidiaries’ assets.
Following conditional acceptance from the Toronto Stock Exchange, the Company issued 3,000,000 warrants to the bond holders, each warrant entitling the bond holders to acquire one share of Starcore at a price of $0.20, expiring on June 18, 2021.
The Bonds were sold pursuant to exemptions from the prospectus requirement of Canadian securities legislation and were subject to a statutory four month hold period which expired on October 19, 2018. The Bonds were not and will not be listed on any market or exchange. The Bonds have not been registered under the U.S. Securities Act of 1933, as amended, and were not offered or sold in the United States.
The proceeds from the sale of the Bonds were added to general working capital.
On June 10, 2020 the Company paid out the Bonds in the principal amount of Cdn$3 million, plus accrued interest of CAD$235,410, ahead of the Bonds’ June 18 , 2020, maturity date.
Salary Reductions
On May 16, 2019, the Company reported that Starcore management had agreed to take a 25% reduction in salary effective May 1, 2019. In April, 2022, the Board approved that management remuneration to the three executive officers be reinstated to their previous levels, and extended the management contracts to April 22, 2024. The Board thanked the executive officers for their voluntary reductions in their respective remuneration at a time when the Company was undergoing financial difficulties.
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43-101 Filing
On December 2, 2019, the Company filed a technical report authored by Erme Enriquez, C.P.G., B.Sc., M.Sc. entitled “Reserves and Resources in the San Martin Mine, Queretaro State, Mexico as of September 30, 2019” dated October 30, 2019 (the “Technical Report”).
Readers are cautioned that the SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the Exchange Act, effective February 25, 2019 (the “SEC Modernization Rules”). The SEC Modernization Rules are embodied in new subpart 1300 of Regulation S-K (“S-K 1300”), and replace the historical property disclosure requirements for mining registrants that were formerly included in SEC Industry Guide 7.
The SEC Modernization Rules include the adoption of definitions of terms which, although they are “substantially similar” to the corresponding terms under the 2014 CIM Standards (as used in the Technical Report), are nevertheless subject to certain material differences. The Company is no longer permitted to include in its filings with the SEC for fiscal periods beginning on or after January 31, 2021, any technical disclosure that does not comply with the SEC Modernization Rules. Accordingly, on June, 2022, the Company, engaged Erme Enriquez to prepare an independent technical summary on the San Martin Mine (the “Technical Report Summary”), to support the disclosure of estimates of Total Proven and Probable Mineral Reserves as of April 30, 2022 in this annual report.
The Technical Report Summary conforms to S-K 1300 and Item 601(b)(96) Technical Report Summary, and Erme Enriquez C.P.G., BSc, MSc is a qualified person for the purposes of S-K 1300. Mr. Enriquez is independent of the Company.
Revenues: See Item 5(A) “Operating Results”
Principal Market
Gold and silver doré in the form of bullion that is produced from our San Martin Mine is shipped primarily to a refinery in Europe. We also have a contract and the ability to ship to a refinery in the United States of America to mitigate the potential impact of unrelated problems that could arise using a lone refinery such as strikes or other issues. The terms of the refinery contracts provide for payment of 99.9% of the gold and 99.5% of the silver content with treatment charges of $0.30 to $0.75/troy oz of doré and refining charges of US$1.00/troy oz of gold. Payment is due 5 – 20 business days following receipt of the bullion at the refinery and based on the spot price when settled.
The San Martin doré is a clean product with few impurities. There are numerous refineries around the world available to refine the doré.
We have not yet identified any commercially viable mineral deposit on any of our exploration properties, and metal prices are currently not economically attractive for one of our projects nearing the development stage. We expect that the principal markets for any of these other properties - should they be successful and be put into production - would consist of metals refineries and base metal traders and dealers.
Seasonality of our Business
The San Martin Mine operates year-round. In general, the mine does not operate on Sundays although at times overtime is required in the mine to meet production targets. The mine operates with 3 shifts, 8 hours each, six days a week. Administration personnel at the mine work Monday to Friday.
Exploration activities at all of our properties can be conducted year-round.
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Patents and Licenses; Industrial, Commercial and Financial Contracts; and New Manufacturing Processes
We are not dependent on any patented or licensed processes or technology, or on any industrial, commercial or financial contract, or on any new manufacturing processes.
Competitive Conditions
We compete with other mining companies for the acquisition of mineral interests and for the recruitment and retention of qualified employees. Some of our competitors have greater financial resources and technical facilities than our Company. While we compete with these other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.
Governmental Regulations
Various levels of governmental controls and regulations address, among other things, the environmental impact of mineral exploration and mineral processing operations, and establish requirements for decommissioning of mineral exploration properties after operations have ceased. With respect to the regulation of mineral exploration and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards, and other design or operational requirements for various aspects of the operations, including health and safety standards. Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mineral exploration properties following the cessation of operations and may require that some former mineral properties be managed for long periods of time.
In North America, our production, processing and exploration activities are subject to various levels of federal and state laws and regulations in the countries where we have a presence. These laws and regulations relate to protection of the environment, including requirements for closure and reclamation of mineral exploration properties. In North America, these laws and regulations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act, the Federal Land Policy and Management Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act and the equivalents of these federal laws that have been adopted by the state of Nevada.
In addition, we are subject to Mexican mining laws and their laws protecting ecological balance and the environment.
18
C. Organizational Structure
The following table sets forth all of our material subsidiaries, their jurisdictions of incorporation and the percentage of voting securities beneficially owned or controlled by the Company.
Name of Subsidiary |
Jurisdiction of Incorporation |
Percentage Ownership |
Compañia Minera Peña de Bernal, S.A. de C.V.1 |
Mexico |
100%2 |
Creston Moly Corp. |
British Columbia |
100% |
American Consolidated Minerals Corp. |
British Columbia |
100% |
Cortez Gold Corp. |
British Columbia |
100% |
0993684 BC Ltd. |
British Columbia |
100% |
Tenajon Resources Corp. |
British Columbia |
100%3 |
Creston Mining Corporation |
Ontario |
100%3 |
Exploraciones Global S.A. de C.V. |
Mexico |
100%4 |
Arco Exploraciones S.A. de C.V. |
Mexico |
100%5 |
1. |
Bernal, a wholly-owned subsidiary of Starcore, holds the title to the San Martin Mine in Queretaro, Mexico. |
2. |
To comply with Mexican corporate legislation, one share of Bernal is held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore. All economic benefits of this share ownership accrue to Starcore. |
3. |
Tenajon Resources Corp. and Creston Mining Corporation are wholly-owned by Creston Moly Corp., which is a wholly-owned subsidiary of Starcore. |
4. |
Exploraciones Global S.A. de C.V. is a wholly-owned subsidiary of Creston Mining Corp. (Ontario). It holds the 100% interest in the El Creston molybdenum property located in the State of Sonora, Mexico. To comply with Mexican corporate legislation, four shares of Exploraciones are held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore. All economic benefits of this share ownership accrue to Starcore. |
5. |
Arco Exploraciones S.A. de C.V. is a wholly owned subsidiary of 0993684 BC Ltd. and is our leasing and projects company in Mexico. To comply with Mexican corporate legislation, one share of Arco is held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore. All economic benefits of this share ownership accrue to Starcore. |
19
20
D. |
Property, Plant and Equipment |
a. |
San Martin Mine, Queretaro, Mexico: Compañia Minera Peña de Bernal, S.A. de C.V., a wholly owned Starcore subsidiary, holds the mining concessions covering 12,991.78 ha (2021) - 5,588.5782 ha (2020) at the San Martin Project in the State of Querétaro. The mining concessions include seven underground mining units and four units under exploration. Luismin (now “Goldcorp Mexico”) operated the mine from 1993 to January, 2007 when it was purchased by our Company. We have been mining at San Martin at a rate of approximately 250,000 tonnes per year. We expect to continue to operate the mine as we convert resources to reserves. Historically, the mine has typically maintained at least two years of reserves for operations. |
b. |
Our executive office is located at Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6. We lease a 2,264 square foot office, with total rent and common costs for this space being $107,724.84 per year from May 2020 to April 2022, increasing to $110,102.04 per year from May 2022 to April 2024, and $112,429.24 for the year May 2024 to April 2025. The lease expires on April 30, 2025. This office space accommodates all of our executive and administrative personnel and we believe that it is adequate for our current needs. Should we require additional space, we believe that such space can be secured on commercially reasonable terms. See Item 5(F) for office lease obligations. |
Mineral Properties
San Martin Mine, Queretaro, Mexico
Except for production statistics updated to April 30, 2022, the following description of the San Martin Mine has been extracted from the Technical Report Summary entitled “S-K 1300 Technical Report Summary San Martin Mine” (the “Technical Report Summary”) issued on June 28, 2022. The Technical Report Summary was prepared for Starcore in accordance with S-K 1300 by Erme Enriquez C.P.G., B.Sc, M.Sc., who is independent. The Technical Report is effective as at April 30, 2022.
The following table is a summary of mine production statistics for the San Martin mine for the years ended April 30, 2022 and 2021. Although the mine reduced operations to 627 tons per day, the continued strength of the US dollar has resulted in profitable operational results even with the recently declining mill head grade. Production for the year ended April 30, 2022 was 224,438 tonnes at an average head grade of 1.58 g/t gold and 22.99 g/t silver.
|
|
Unit of measure |
|
Actual results for period ended April 30, 2022 |
|
|
Actual results for period ended April 30, 2021 |
|
||
Mine production of gold in Doré |
|
ounces |
|
|
10,028 |
|
|
|
10,475 |
|
Mine production of silver in Doré |
|
ounces |
|
|
85,360 |
|
|
|
103,424 |
|
Total mine production – equivalent ounces |
|
ounces |
|
|
11,165 |
|
|
|
11,797 |
|
Silver to gold equivalency ratio |
|
|
|
|
75.04 |
|
|
|
78.28 |
|
Mine gold grade |
|
grams/tonne |
|
|
1.58 |
|
|
|
1.63 |
|
Mine silver grade |
|
grams/tonne |
|
|
22.99 |
|
|
|
24.7 |
|
Mine gold recovery |
|
percent |
|
|
88 |
|
|
|
88 |
|
Mine silver recovery |
|
percent |
|
|
51 |
|
|
|
57 |
|
Milled |
|
tonnes |
|
|
224,438 |
|
|
|
225,504 |
|
Mine development, preparation and exploration |
|
Meters |
|
|
7,474 |
|
|
|
7,426 |
|
Mine operating cash cost per tonne milled |
|
US dollars/tonne |
|
|
62 |
|
|
|
55 |
|
Mine operating cash cost per equivalent ounce |
|
US dollars/ounces |
|
|
1,239 |
|
|
|
1,056 |
|
Number of employees and contractors at minesite |
|
|
|
|
254 |
|
|
|
244 |
|
21
Property Description and Location
The San Martin mine is an underground gold-silver mining complex that has been in operation since 1993. It produces gold-silver by using the Merrill–Crowe Process technique for removing gold from the solution obtained by the cyanide leaching of gold and silver ores. The mine operates 365 days per year on a 24 hour per day schedule. Mining and ore processing operations are currently in production and the mine is considered a production stage property. The San Martin mine encompasses the San Jose, San Martin (SR), and Cuerpos 28 to 32 orebodies.
The San Martin mine is run by Compania Minera Bernal, SA de CV (CMPB) a wholly owned subsidiary of Starcore International Mines Ltd.
The San Martin mine is located 47 kilometres, in a straight line, northeast of Queretaro City, Queretaro State, on local road No.100 and about 250 kilometres NW of Mexico City, near the towns of Tequisquiapan and Ezequiel Montes. The San Martin Mine complex consists of 8 mining claims that cover 12,991.7805 hectares (2022) due to an application to reduce the surface area, application has since been withdrawn.
Location of the San Martin Mine, Queretaro State, Mexico
22
The following table summarizes the mining concessions comprising the San Martin Mine property.
No. on Map |
Concession Name |
Exp. |
Title |
Term of Concession
|
Hectares 2021 Annual Taxes (Pesos) |
|||
From |
To |
|
1st Sem |
2nd Sem |
||||
1 |
San Martin 2 |
321.1/6-72 |
191134 |
29/04/1991 |
28/04/2041 |
190.7972 |
$35,652 |
$35,652 |
2 |
San Martin |
321.1/6-71 |
191423 |
19/12/1991 |
18/12/2041 |
132.0818 |
$24,681 |
$24,681 |
3 |
La Trinidad |
6/1.3/276 |
204824 |
13/05/1997 |
13/05/2047 |
2,610.7224 |
$487,840 |
$487,840 |
4 |
San Martin Fracc. A. |
6/1.3/00409 |
215262 |
14/02/2002 |
13/02/2052 |
37.1099 |
$6,934 |
$6,934 |
5 |
San Martin Fracc. B. |
6/1.3/00411 |
215263 |
14/02/2002 |
13/02/2052 |
22.8901 |
$4,277 |
$4,277 |
6 |
San Martin Fracc. C.(1) |
6/1.3/00412 |
215264 |
14/02/2002 |
13/02/2052 |
3,182.5646 |
$594,694 |
$594,694 |
7 |
San Martin 3 |
6/1.3/00410 |
215301 |
14/02/2002 |
13/02/2052 |
60.0000 |
$11,212 |
$11,212 |
8 |
San Martín Cuatro.(1) |
065/15357 |
221844 |
02/04/2004 |
01/04/2054 |
6,755.6145 |
$1,262,391 |
$1,262,391 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
12,991.7805 |
$2,427,681.488 |
$2,427,681.48 |
San Martin Geology
The San Martín gold-silver district hosts classic, medium-grade gold-silver, epithermal vein deposits characterized by low sulphidation mineralization and adularia-sericite alteration. The San Martin veins are typical of most other epithermal silver-gold vein deposits in Mexico in that they are primarily hosted in the Upper Cretaceous black limestone and calcareous shales of the Soyatal-Mexcala Formation. Tertiary Lower Volcanic series of rhyolite flows, pyroclastics and epiclastics, overlain the sediments.
Mineralization at San Martín occurs in association with an epithermal low sulphidation, quartz-carbonate, fracture-filling vein hosted by a structure trending approximately N40°-60°E, dipping to the 50° to 90° to the southeast.
The San Martin structure has been known in distinct stages of exploration and has adopted several names, San José, San José II, San Martín, Cuerpo 28, Cuerpo 29, Cuerpo 30, Cuerpo 31, Cuerpo 32 and Cuerpo 33. The structure itself is offset by a series of faults of northeast trending that divides the oreshoots. The structure behaves vertical at the San José and San Martin areas (Tronco) and becomes flatter from Cuerpo 28 to 31 (Mantos), and mineralization follows the planes of the folded rocks.
23
The San Martin vein itself has been known underground traced for 2 km along trend, with widths between 1.5 to 10 metres and averages approximately 4.0 m. A secondary mineralized vein is located, both in the footwall and hangingwall, of the San Martin vein, on the western limb of the local fold that contains the mineralization. This structure is the Santa Elena and represents a good target for exploration to the NE and SE of San Martin.
Generalized Geological Map of the San Martin Property
Resources and Reserves
The mineral resource estimation for the San Martin Mine was completed following the requirements of Subpart 1300 of Regulation S-K (“Subpart 1300”) and align with Canada’s National Instrument 43-101 (“NI 43-101”) for which original estimates were prepared. The modeling and estimation of the mineral resources were completed on June 10, 2022, under the supervision of Erme Enriquez, qualified person with respect to mineral resource estimations under S-K 1300. The effective date of the resource estimate is April 30, 2022.
The San Martin resources are classified in order of increasing geological and quantitative confidence in Proven and Probable, Inferred and Indicated categories in accordance with the “CIM Definition Standards for Mineral Resources and Mineral Reserves” (2014) and therefore NI 43-101, as is the Inferred Resources category.
In the years prior to mining by CMPB reserve and resource estimates were based on the assumptions and subject to rules defined by Luismin many years ago. In recent years, with the involvement of various professionals, it was recognized that mining methodology was changing due to factors such as:
|
• |
A greater percentage of production coming from narrow to wide steeply dipping vein structures. |
24
|
|
• |
Sub-horizontal Mantos mineralized structures that were somewhat narrower than historical Mantos. |
|
• |
Reopening and scavenging of the footwall mineralization in old stopes, where lower grade mineralization was not mined during times of lower gold prices. |
Based on the above mining changes and incorporating mining experience over the last 8 years some of the original Luismin assumptions have been modified to improve tonnage and grade estimation for reserves. The assumptions used in this estimate are:
|
• |
A gold price of $1750 per ounce. |
|
• |
A silver price of $22.00 per ounce. |
|
• |
First quarters of 2022 operating costs of US$69.30 per metric dry tonne. |
|
• |
Average metallurgical recoveries of 86% for gold and 55% for silver. |
|
• |
Using the above price and cost assumptions the resultant calculated cutoff grade is approximately 1.41 g/t Au equivalent. |
|
• |
Specific gravity of 2.6 g/cm3 has been applied to all calculated mineralized volumes. |
|
• |
Mining dilution is applied to in situ mineralized zones, and recovery factors are applied to these diluted blocks using the following factors: |
|
• |
Mining dilution of 20% of zero grade in horizontal mineralized zones (Mantos) mined by room and pillar. |
|
• |
Mining dilution of 20% of zero grade in steeply dipping mineralized zones mined by cut and fill. This dilution factor is modified by first applying a minimum 2-meter mining width to narrow zones. |
|
• |
Remnant pillars left in room and pillar stopes are typically 20% of the total tonnage, i.e., 80% extraction. This recovery factor has been applied to sub horizontal mineralized zones. |
In addition to these factors reserve grades are lowered to reflect mined grades in ore blocks that have sufficient historical production to establish that mined grades are similar than estimated from exploration data. The reserves and resources estimated in this report are based on data available up until April 30, 2022.
The mineral resources reported here are classified as Measured, Indicated and Inferred according to CIM Definition Standards.
25
Total Indicated and Inferred Mineral Resources at the San Martin mine, estimated by SIM, are about 1,481,770 tonnes at a grade of 1.78 g Au/t and 14 g Ag/t. Inferred and Indicated Mineral Resources are not known to the same degree of certainty as Mineral Reserves and do not have demonstrated economic viability. A summary of resources is in the following table.
Compañía Minera Peña de Bernal, SA de CV Mineral Reserve and Resources, San Martin Mine (as of April 30, 2022)
Category |
Tonnes |
Grade |
Total Contained oz |
|||
(g Au/t) |
(g Ag/t) |
(oz Au) |
(oz Ag) |
(oz Au Eq) |
||
San Martin |
|
|
|
|
|
|
Indicated |
134,871 |
1.51 |
9 |
6542 |
37,847 |
7,018 |
|
|
|
|
|
|
|
Total Indicated |
134,871 |
1.51 |
9 |
6542 |
37,847 |
7,018 |
|
|
|
|
|
|
|
San Jose I and II |
||||||
Inferred |
93,220 |
1.15 |
5 |
3,455 |
16,303 |
3,660 |
San Martin |
||||||
Inferred |
1,131,706 |
1.81 |
12 |
65,831 |
426,610 |
71,194 |
Area 28 and 4700 |
||||||
Inferred |
121,974 |
2.34 |
42 |
9,171 |
162,985 |
11,220 |
Area 29 |
||||||
Inferred |
|
|
|
|
|
|
Total Inferred |
1,346,899 |
1.81 |
14 |
78,457 |
605,897 |
86,074 |
|
|
|
|
|
|
|
Totals I + I |
1,481,770 |
1.78 |
14 |
84,999 |
643,744 |
93,092 |
|
• |
Mineral resources have been classified into inferred and indicated in accordance with § 229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K). |
|
• |
Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
|
• |
Reserve and resource cut-off grades are based on a 1.41 g/t gold equivalent. |
|
• |
Metallurgical Recoveries were 86% gold and 55% silver. |
|
• |
Mining Recoveries of 90% were applied. |
|
• |
Minimum mining widths were 2.0 meters. |
|
• |
Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
|
• |
Gold equivalents are based on a 1:79.5 gold:silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
|
• |
Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
|
• |
Mineral resources are estimated exclusive of and in addition to mineral reserves. |
|
• |
Resources were estimated by SIM and reviewed by Erme Enriquez CPG. |
Mineral reserve estimates in this Report are reported following the requirements of Subpart 1300. Accordingly mineral resources in the Measured and Indicated categories have been converted to Proven and Probable mineral reserves respectively, by applying applicable modifying factors and are planned to be mined out under the LOM plan within the period of our existing rights to mine, or within the time of assured renewal periods of rights to mine.
26
Total Proven and Probable Mineral Reserves at the San Martin mine as of April 30, 2022, estimated by Geology staff and reviewed by QP, are 1,348,433 tonnes at a grade of 1.74 g Au/t and 13 g Ag/t. This total includes Proven reserves of 144,331 tonnes grading 1.79 g/t Au and 14 g/t Ag along with Probable reserves of 1,204,102 tonnes grading 1.73 g/t Au and 13 g/t Ag. Mineral reserves are shown in the following table:
Compañía Minera Peña de Bernal, SA de CV
San Martin Mine Project
Historical Production 1993-April 30, 2022
Year |
Tonnes |
Grade |
Production |
|||
Au (g/t) |
Ag (g/t) |
Oz Au |
Oz Ag |
Oz Au Eq. |
||
1993 |
28,267 |
2.53 |
60 |
1,387 |
24,463 |
1,707 |
1994 |
134,118 |
3.19 |
35 |
13,179 |
81,605 |
14,298 |
1995 |
146,774 |
3.40 |
38 |
16,172 |
180,459 |
17,068 |
1996 |
187,691 |
3.40 |
44 |
19,553 |
155,160 |
21,620 |
1997 |
219,827 |
3.27 |
43 |
22,016 |
174,013 |
24,570 |
1998 |
224,279 |
3.45 |
50 |
23,680 |
210,680 |
27,539 |
1999 |
242,295 |
3.46 |
46 |
25,852 |
194,110 |
29,624 |
2000 |
284,490 |
3.61 |
54 |
31,209 |
245,310 |
35,571 |
2001 |
287,520 |
3.76 |
65 |
32,773 |
330,217 |
38,068 |
2002 |
268,451 |
4.26 |
71 |
35,634 |
370,406 |
41,124 |
2003 |
276,481 |
4.29 |
82 |
36,438 |
464,947 |
42,692 |
2004 |
272,734 |
4.47 |
83 |
36,935 |
458,681 |
44,377 |
2005 |
282,392 |
3.92 |
65 |
32,814 |
349,071 |
38,543 |
2006 |
278,914 |
2.82 |
52 |
22,004 |
235,806 |
26,529 |
2007 |
252,400 |
3.34 |
49 |
25,232 |
224,714 |
29,606 |
2008 |
266,600 |
2.50 |
33 |
18,733 |
159,877 |
21,367 |
2009 |
272,856 |
2.43 |
33 |
19,171 |
167,827 |
21,696 |
2010 |
275,290 |
2.03 |
30 |
15,492 |
163,489 |
18,156 |
2011 |
296,845 |
2.14 |
39 |
17,694 |
267,237 |
23,736 |
2012 |
309,796 |
2.09 |
25 |
16,197 |
160,678 |
19,213 |
2013 |
306,941 |
2.66 |
24 |
22,247 |
129,861 |
24,425 |
2014 |
311,210 |
2.35 |
22 |
20,062 |
112,010 |
21,755 |
2015 |
309,565 |
2.09 |
20 |
17,903 |
104,767 |
19,319 |
2016 |
286,278 |
1.94 |
16 |
14,606 |
68,463 |
15,547 |
2017 |
259,709 |
1.69 |
13 |
11,563 |
54,287 |
12,246 |
April 30 2018 |
99,067 |
1.59 |
36 |
4,410.96 |
64,459.38 |
5,218.98 |
April 30, 2019 |
314,347 |
1.62 |
39 |
13,651 |
224,544 |
16,393 |
April 30, 2020 |
229,830 |
1.85 |
30 |
11,752 |
121,825 |
13,112 |
April 30, 2021 |
225,504 |
1.63 |
24.7 |
10,475 |
103,424 |
11,797 |
April 30, 2022 |
224,438 |
1.58 |
23 |
10,028 |
85,360 |
11,165 |
TOTALS |
7,060,562 |
|
|
598,862.96 |
5,687,750.38 |
688,081.98 |
□ |
Resources are valid as of April 30, 2022 as defined by end of month April 2021 topography. |
□ |
Measured, Indicated and Inferred resource cut-off grades were 1.66 g/t gold equivalent at San Martín. |
□ |
Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources estimated will be converted into mineral reserves. |
□ |
Metallurgical recoveries were 88% gold and 55% silver. |
□ |
Gold equivalents are based on a 1:79.50 gold: silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.50) |
□ |
Price assumptions are $1750 per ounce for gold and $22.00 per ounce for silver for resource cutoff calculations. |
□ |
Mineral resources are estimated exclusive of and in addition to mineral reserves. |
□ |
Resources are constrained by a conceptual underground mining using parameters summarized in section. |
□ |
Resources were estimated by Starcore and reviewed by Erme Enriquez CPG. |
□ |
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. |
27
The Total Proven and Probable Mineral Reserves at the San Martin mine as of April 30, 2022 estimated by Starcore and reviewed by Erme Enriquez are 1,348,433 tonnes at a grade of 1.74 g Au/t and 13 g Ag/t.
Compañía Minera Peña de Bernal, SA de CV Mineral Reserve San Martin Mine (as of April 30, 2022) |
||||||
Category |
Tonnes |
Grade |
Total Contained oz |
|||
(g Au/t) |
(g Ag/t) |
(oz Au) |
(oz Ag) |
(oz Au Eq) |
||
Proven |
144,331 |
1.79 |
14 |
8,283 |
61,278 |
9,079 |
|
|
|
|
|
|
|
Probable |
1,204,102 |
1.73 |
13 |
67,070 |
493,306 |
73,480 |
|
|
|
|
|
|
|
Total Reserves |
1,348,433 |
1.74 |
13 |
75,353 |
554,584 |
82,559 |
|
• |
Mineral Reserves estimates have been classified in accordance with probable and proven mineral reserves in accordance with § 229.1302(e)(2) (Item 1302(e)(2) of Regulation S-K. |
|
• |
Reserve cut-off grades are based on a 1.41 g/t gold equivalent. |
|
• |
Metallurgical Recoveries were 88% gold and 55% silver. |
|
• |
Mining Recoveries of 90% were applied. |
|
• |
Minimum mining widths were 2.0 meters. |
|
• |
Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
|
• |
Gold equivalents are based on a 1:79.5 gold - silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
|
• |
Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
|
• |
Mineral resources are estimated exclusive of and in addition to mineral reserves. |
|
• |
Resources were estimated by SIM staff and reviewed by Erme Enriquez C.P.G. |
|
• |
Reserves are exclusive of the indicated and measured resources. |
|
• |
Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
S-K 1300 Technical Report Summary San Martin Mine - see Exhibit 96.1
Exploration Update
This section has been prepared by Erme Enriquez, C.P.G, BSc, MSc, qualified person for the purposes of S-K 1300.
For the year ended April 30, 2022, the San Martin plant achieved 88 % recovery of gold and 57 % of silver from the 225,504 tonnes milled during the fiscal year. Head grades averaged 1.63 g/t gold and 24.7 g/t silver resulting in 11,797 equivalent gold ounces of production during the fiscal year. Equivalent gold ounce calculation is based on the actual daily average gold: silver ratio of 1 to 89.6 during the fiscal year.
For the period ended April 30, 2020, surface and underground exploration programs were conducted using both company and contractor drill rigs. Between May 1, 2021 until April 30, 2022, a total of 7,360.50 exploration meters were drilled using the company’s drill rigs.
The exploration highlights during the year at the San Martin mine include three positive drill holes in section 28 of the San Martin of the mine. There is a potential over 150,000 tonnes in the new discovery segment, which has been cut and thrown by multiple strong faults at the San Martin orebody. Three diamond drill holes have intercepted good values and there is still room to continue drilling following the extension of the oreshoot.
28
Results are shown in the following table. The figure below shows the area with the new discovery.
Starcore International Mines LTD
Compania Minera Pena de Bernal, SA de CV
San Martin Mine
Highlight Drilling Results
HOle ID |
True Width (m) |
Assays |
||
Au g/t |
Ag g/t |
|||
DCSM21-434 |
1.3 |
1.61 |
8 |
|
3.8 |
1.13 |
18 |
||
DCSM21-436 |
2.8 |
1.13 |
18 |
|
2.55 |
|
2.00 |
8 |
|
DCSM21-438 |
4.75 |
1.11 |
8 |
The San Martin orebody shows the new extension of mineralization and exploration.
29
In the 28 Area near surface a, a new 28 oreshoot of high grade has been drilled. From this high-grade pocket, it is contemplated to continue with explorations on the W edge of area 28, where today there is little exploration to continue finding economic zones of interest. Highlights of the drill holes are shown in the following table:
Starcore International Mines LTD
Compania Minera Pena de Bernal, SA de CV
Area 28 Oreshoot
Highlight Drilling Results
HOle ID |
True Width (m) |
Assays |
|
|
|
Au g/t |
Ag g/t |
DC2820 |
2.4 |
2.14 |
57 |
DC2820 |
2.95 |
2.42 |
21 |
DC2820 |
2.15 |
8.08 |
15 |
The 28 Area, 28 oreshoot extension drilled from underground. Drilling has discovered new ore in the area.
Other Mineral Properties
In addition to our principal property, the San Martin Mine, we have several other mineral interests in exploration properties, as summarized below, which we do not consider to be material to our operations at this time or have been sold or discontinued. These include three molybdenum-copper exploration projects that we acquired through our acquisition of Creston Moly Corp. (“Creston Moly”) from Deloitte Restructuring Inc., in its capacity as trustee in bankruptcy of Mercator Minerals Ltd., in February 2015 for a purchase price of Cdn$2 million – namely, the El Creston Project in Mexico, the Ajax Project in British Columbia and the Moly Brook Project in Newfoundland (abandoned in 2019).
Creston Moly, a British Columbia company, was formerly a wholly-owned subsidiary of Mercator Minerals, who acquired Creston Moly in 2011 in a cash-and-shares deal valuing Creston Moly at approximately Cdn$194 million.
|
o |
El Creston Project, Sonora, Mexico |
The El Creston molybdenum property is located in the State of Sonora, Mexico, 175 kilometres south of the US Border and 145 kilometers northeast of the city of Hermosillo. Creston Moly’s indirect wholly-owned subsidiary, Exploraciones Global S.A. de C.V. (“Exploraciones Global”), is the registered holder of the El
30
Creston property. Exploraciones Global purchased the claims comprising the El Creston property from the previous owners. The property is known to host several zones of porphyry-style molybdenum copper mineralization.
El Creston Project, Sonora, Mexico |
|||||||||
Tenure Number |
Claim Name |
Owner/ |
Underlying Royalty |
Tenure Type/ Type |
Area (ha) |
Issue Date/ Expiry Date |
Required Holding Expenses |
Property Surface Rights |
Ownership |
219813 |
Meztli |
Exploraciones Global/ |
3% NSR |
Concession/ |
89 |
16/04/2003 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
4,529 hectares 100% Owned acquired through purchase from local landowners and Ejido. 573 hectares leased for 30 years with exclusive option to purchase |
Ejido and local landowners |
220332 |
Meztli 1 |
Exploraciones Global/ |
3% NSR |
Concession/ |
8 |
16/07/2003 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
222321 |
Lorenia |
Exploraciones Global/ |
3% NSR |
Concession/ |
138 |
25/06/2004 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
222700 |
Alma |
Exploraciones Global/ |
3% NSR |
Concession/ |
359 |
13/08/2004 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
223111 |
Letty |
Exploraciones Global/ |
3% NSR |
Concession/ |
391.5093 |
15/10/2004 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
225638 |
Meztli 2 |
Exploraciones Global/ |
3% NSR |
Concession/ |
1455.9816 |
30/09/2005 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
229984 |
Meztli 6 |
Exploraciones Global/ |
3% NSR |
Concession/ |
0.0032 |
04/07/2007 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
243807 |
Meztli 4 Reduc-cion |
Exploraciones Global/ |
3% NSR |
Concession/ |
8465.044 |
05/12/2014 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
31
El Creston Project, Sonora, Mexico |
|||||||||
Tenure Number |
Claim Name |
Owner/ |
Underlying Royalty |
Tenure Type/ Type |
Area (ha) |
Issue Date/ Expiry Date |
Required Holding Expenses |
Property Surface Rights |
Ownership |
231151 |
Meztli 3 |
Exploraciones Global/ |
3% NSR |
Concession/ |
457.0564 |
18/01/2008 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
234415 |
Teocuitla |
Exploraciones Global/ |
2% NSR |
Concession/ |
1,476.1874 |
26/06/2009 25/06/2059 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
234546 |
Teocuitla 2 |
Exploraciones Global/ |
2% NSR |
Concession/ |
925.9102 |
10/07/2009 09/07/2059 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
238172 |
Angel |
Exploraciones Global/ |
2% NSR |
Concession/ |
185.6715 |
09/08/2011 08/09/2061 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
240226 |
Tlaloc 2 |
Exploraciones Global/ |
2% NSR |
Concession/ |
500.00 |
27/04/2012 26/04/2062 |
Taxes to be paid semi-annually. Notice of Work form filed by May 30th |
Part of above |
As above |
In August, 2021, after conducting a six-month exploration plan which included more than 1600 samples taken in the outcrops of nine new discovered veins in certain claims beside the El Creston Meztli 4 claims in the northwest part of Starcore’s property, the Company announced it acquired 3087.7691 hectares, more commonly known as the Teocuitla claims in Opodepe, Sonora State, Mexico. The Company took an expanded view of El Creston, looking at the project in three different ways: one as a moly deposit; another as a property with gold showings; and thirdly, as a project with the potential for copper porphyry at depth. The initial results of the exploration program are outlined below:
32
Table 1: Assay Results of the samples taken
from MEZTLI4 and TEOCUITLA Claims
# Targets |
Target |
Claim |
Recognized surface length (mt) |
Economic length (mt) Surface |
Economic width (mt) Surface |
Au g/t |
Ag g/t |
1 |
Mana System |
Meztli 4 |
2100 |
300 |
1.07 |
0.52 |
250 |
2 |
Karla System NW |
1815 |
280 |
0.53 |
3.52 |
13 |
|
3 |
Karla System SW |
480 |
190 |
0.61 |
1.53 |
64 |
|
4 |
El Guerigo Breccia |
1800 |
110 |
0.98 |
0.11 |
162 |
|
5 |
San Gerónimo |
Stockpile Samples |
0.40 |
214 |
|||
6 |
Midas Vein |
New claims acquired |
580 |
190 |
0.73 |
0.09 |
147 |
7 |
La Aurora – La Espinada Vein |
Stockpile Samples |
0.21 |
241 |
|||
8 |
La Última |
Old mining non visited |
|||||
9 |
El Oro |
Other claim |
500 |
70 |
0.53 |
10.30 |
5 |
Opodepe Project in Sonora, Mexico
A total of 3,289.6 m has been drilled in 25 short holes. The first stage of drilling focused on the upper part of the veins of the zone and has been considered as recognition drilling. However, in this year 2022, the drilling is focused on the zone of the veins which the geologists have considered as favorable zones to find economic reserves. These holes will be longer than the first stage including two new veins, MIDAS and El ORO, both in the Teocuitla concession recently acquired by Starcore. See Figure 3.
DRILLING HIGHLIGHTS
#1 – OPDS-21-001; 6.73 m @ |
4.79 g/t AuEq |
#7– OPDS-21-018; 1.91 m @ |
2.30 g/t AuEq |
#15 – OPDS-21-022; 2.19 m @ |
1.96 g/t AuEq |
33
See Figure 4.
Fig. 3 MAP SHOWING THE EXPLORED VEINS AND THE TWO NEW VEINS
|
o |
Sierra Rosario: Sinaloa. |
Located within the historically productive Sierra Madre Occident geological province in the northern Mexican state of Sinaloa, the Sierra Rosario property consists of two large mineral exploration concessions totalling 978.57 hectares. On February 2018, the Company sold this property for US$100,000 and an additional 1% NSR.
34
|
o |
Ajax Project, British Columbia. |
The Ajax molybdenum property is comprised of 1,718 hectares and is located 13 km north of Alice Arm, British Columbia. The Ajax property, one of North America's largest undeveloped molybdenum deposits occupying a surface area of approximately 600 by 650 metres, is in the advanced stage of exploration.
Creston Moly’s wholly-owned subsidiary, Tenajon Resources Corp. (“Tenajon Resources”), is the registered holder of the Ajax property. Tenajon Resources acquired all but one of the claims comprising the Ajax property through on line staking; the final claim, identified by tenure number 511540, was acquired by way of a claim conversion (that is, a procedure for converting manually-staked claims to computerized-staked claims).
Ajax Molybdenum Property, British Columbia, Canada |
|||||||||
Tenure Number |
Claim Name |
Owner/ |
Underlying Royalty |
Tenure Type/ |
Area (ha) |
Issue Date/ Expiry Date |
Required Holding Expenses |
Property Surface Rights |
Ownership |
501393 |
mq2 |
Tenajon Resources Corp./ |
NONE |
Claim/ |
402.28 |
12/01/2005 |
No work required until 2024. No gov't fees |
None |
Government |
504775 |
mq3 |
Tenajon Resources Corp/ |
NONE |
Claim/ |
255.99 |
25/01/2005 |
No work required until 2024. No gov't fees |
None |
Government |
504776 |
mq3 |
Tenajon Resources Corp/ |
NONE |
Claim/ |
292.7 |
25/01/2005 |
No work required until 2024. No gov't fees |
None |
Government |
504782 |
mq-5 |
Tenajon Resources Corp/ |
NONE |
Claim/ |
146.22 |
25/01/2005 |
No work required until 2024. No gov't fees |
None |
Government |
505618 |
mq5 |
Tenajon Resources Corp/ |
NONE |
Claim/ |
256.00 |
02/02/2005 |
No work required until 2024. No gov't fees |
None |
Government |
511540 |
|
Tenajon Resources Corp/ |
NONE |
Claim/ |
365.67 |
22/04/2005 |
No work required until 2024. No gov't fees |
None |
Government |
|
|
|
|
Total |
1718.86 |
|
|
|
|
|
o |
Moly Brook Project, Newfoundland. |
Creston’s Moly Brook molybdenum property located on the south coast of Newfoundland is centered 2.5 km from the outport of Grey River less than 4 kilometres from a deep water, ice free navigable fjord. During the year ended April 30, 2019, the Company decided to abandon the property and all costs associated with this property have been written off in the Consolidated Statements of Operations and Comprehensive Income.
35
|
o |
American Consolidated Minerals Corp. |
On November 20, 2014, the Company announced the approval of the proposed acquisition of American Consolidated Minerals Corp (“AJC”) pursuant to a plan of arrangement (the “Transaction”) by the AJC shareholders. The Transaction was completed on December 1, 2014 upon the satisfaction of all of the conditions set out in the arrangement agreement entered into by AJC and the Company on October 1, 2014, including approval by the Supreme Court of British Columbia.
|
o |
Toiyabe Property, Nevada, USA |
Pursuant to the acquisition of AJC, the Company acquired the right to a 100% undivided interest, subject to a 3% NSR, in 165 mining claims located in Lander County, Nevada, United States of America (“Toiyabe”) from MinQuest Inc. (“Minquest”)
Consideration to be paid for the interest is USD$900,000 (payable over 5 years commencing October 19, 2018) and the Company must incur total exploration expenditures of USD$1,025,000 on the property (which expenses have been incurred) as agreed by MinQuest. Annual payments commencing October 19, 2018 are $60,000 (paid), $80,000 (paid), $100,000 (deferred to May 31, 2021, (See below) by amending the agreement with Minquest), $120,000, $140,000 and $400,000.
In summary, to complete the acquisition of a 100% interest in Toiyabe (subject to a 3% royalty), there are remaining property payments to be made of US$760,000 over a period of 3 years to October 2023. (See news release dated July 7, 2020)
The optionor has also granted the Company the right to purchase up to one-half of the NSR (or 1.5%) on the basis of US$2 million per each 1% of the royalty.
On May 18, 2018 Starcore filed an updated National Instrument (“NI 43-101”) “Technical Report for the Toiyabe Gold Project in Lander County, Nevada”, prepared by Paul D. Noland CPG dated May 11, 2018.
Highlights from the Technical Report include:
|
- |
Summary results from three drilling programs completed since the last report (2009, 2010, 2016) |
|
- |
In all three drilling campaigns since the 2009 report and resource estimate, the near-surface ‘Courtney’ resource was expanded and enhanced. |
|
- |
Drilling since the previous report has focused largely on structurally controlled, deeper and higher-grade mineralization not included in the 2009 resource estimate. |
|
- |
Wider spread drilling, outside known resource areas has allowed a better understanding of the structural setting of the project. |
Readers are cautioned that the SEC has adopted the SEC Modernization Rules as new subpart 1300 of Regulation S-K, which include definitions of terms that, although they are “substantially similar” to the corresponding terms under the 2014 CIM Standards (as used in the technical report in relation to the Toiyabe Property), are nevertheless subject to certain material differences. The Company is no longer permitted to include in its filings with the SEC for fiscal periods beginning on or after January 31, 2021, any technical disclosure that does not comply with the SEC Modernization Rules.
On March 2021, the Company and Westward Gold Inc. (formerly IM Exploration Inc.) (“IM”) announced that that they had entered into a binding agreement (the “Term Sheet”), which set forth the terms for the assignment of Starcore’s option to acquire a 100% interest (the “Transaction”) in the Toiyabe Gold Project in Lander County, Nevada (the “Project”) from Minquest Ltd. (“Minquest” or the “Optionor”). On April 22, 2021, Starcore announced it had formalized the Transaction, through an assignment and assumption agreement with IM.
36
Transaction Details
As consideration for the assignment of Starcore’s right to acquire a 100% interest in the Project, IM has issued Starcore 4,100,000 common shares in the capital of IM (the “Consideration Shares”) at a fair value at date of issuance price of $0.19 per Consideration Shares. The Consideration Shares will be subject to a contractual escrow period of twelve (12) months following the date of issuance, with 25% being released every three (3) months, with the first release occurring no later than 3 months after the closing of the Transaction and a cash payment paid to Starcore in the amount of US$150,000.
As of April 30, 2022, a total of 3,075,000 Consideration Shares have been released from escrow, leaving 1,025,000 Consideration Shares in escrow. As of April 30, 2022, the market value of the Consideration Shares was $492,000
Subsequent to the closing of the Transaction, in consideration of US$100,000, IM also acquired Golden Oasis Exploration, the Company’s wholly-owned subsidiary in Nevada, which held the bond lodged with the Bureau of Land Management in respect of the Toiyabe property.
|
o |
Lone Ranch: Washington State, USA |
The Company acquired the right to a 100% undivided interest, subject to a 3% net smelter royalty (“NSR”), in 73 mining claims located in Ferry County, Washington State, United States of America (“Lone Ranch”) from MinQuest Inc. (“MinQuest”). During the period ending October 31, 2018, the Company decided to abandon the property and all costs associated with this property have been written off in the Consolidated Statements of Operations and Comprehensive Income.
There is no assurance that a commercially viable mineral deposit exists on any of our exploration properties, or that we will be able to identify any mineral resource on any of these properties that can be developed profitably. Even if we do discover commercially exploitable levels of mineral resources on any of our properties, which is unlikely, there can be no assurance that we will be able to enter into commercial production of our mineral properties.
Sale of Altiplano Plant, Matehuala, Mexico
The Altiplano plant was the principal asset of Cortez Gold Corp., a wholly-owned Starcore subsidiary that held title to the land, equipment and permits for the operation of a processing plant situated on 20 hectares of land in Matehuala, Mexico. The land and the plant and equipment were owned by Altiplano Goldsilver, S.A. de C.V., a wholly-owned subsidiary of Cortez Gold. The facility is located within a historic mining district, in an area that is home to numerous medium-sized mining operations. The Altiplano Plant was designed to employ the dissolution treatment production process to recover precious metals from flotation concentrates. When compared to the alternative pyrometallurgical foundries, it is a cleaner process and more economical, enabling the facility to offer lower processing rates than those currently available to concentrate producers in the area. Commencement of commercial production began on November 1, 2016.
In November 2018, management announced that the capital requirements of the Altiplano facility for inventory and operations, despite improving cash flow to a small profit in the prior quarter, did not justify the continuation of these operations. The operations were placed on a maintenance status in the quarter and remaining inventories were processed and sold accordingly. After assessing the best use of the assets of Altiplano, management deemed the sale of the facility to be the best course of action for the Company.
The Company accepted an offer on July 5, 2019, to purchase 100% of the shares of Altiplano for US$1.6 million. Terms of the transaction were filed on July 31, 2019. The stock purchase agreement requires the payment of the US$1.6 million in instalments as to US$0.5 million on closing (received), US$0.5 million on August 31, 2019 (received), and US$0.2 million each 3 months from November 30, 2019 to May 31, 2020. (All payments received.) The sale of Altiplano is now complete.
37
Item 5 |
Operating and Financial Review and Prospects |
The following discussion and analysis of our financial condition and results of operations for the fiscal period ended April 30, 2022 should be read in conjunction with our financial statements and related notes included in this Annual Report. Our financial statements included in this Annual Report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
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, including political, social, financial and economic stability, the availability of capital, technology, workers, engineers and management, geology and weather conditions, may also affect our results of operations. As a result of the economic and competitive factors discussed above, our results of operations may vary significantly from period to period. Except where otherwise noted, financial results are rounded to the nearest $1,000 and are expressed in Canadian currency.
38
Year Ended April 30, 2022, April 30, 2021 and April 30, 2020 (in thousands of audited)
|
|
Twelve-Month Year Ended April 30, 2022 |
|
|
Twelve-Month Year Ended April 30, 2021 |
|
|
Twelve-Month Year Ended April 30, 2020 |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Mined ore |
|
$ |
25,679 |
|
|
$ |
26,799 |
|
|
$ |
24,820 |
|
Total Revenues |
|
|
25,679 |
|
|
|
26,799 |
|
|
|
24,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Mined ore |
|
|
(16,960 |
) |
|
|
(16,038 |
) |
|
|
(19,150 |
) |
Depreciation and depletion |
|
|
(3,413 |
) |
|
|
(4,359 |
) |
|
|
(3,686 |
) |
Total Cost of Sales |
|
|
(20,373 |
) |
|
|
(20,397 |
) |
|
|
(22,836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from mining operations |
|
|
5,306 |
|
|
|
6,402 |
|
|
|
1,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing costs |
|
|
(181 |
) |
|
|
(148 |
) |
|
|
(554 |
) |
Foreign exchange |
|
|
85 |
|
|
|
(697 |
) |
|
|
(369 |
) |
Management fees and salaries |
|
|
(1,271 |
) |
|
|
(1,283 |
) |
|
|
(1,151 |
) |
Office and administration |
|
|
(913 |
) |
|
|
(598 |
) |
|
|
(942 |
) |
Professional and consulting fees |
|
|
(835 |
) |
|
|
(738 |
) |
|
|
(1,000 |
) |
Pre- exploration costs |
|
|
(31 |
) |
|
|
(47 |
) |
|
|
- |
|
Shareholder relations |
|
|
(644 |
) |
|
|
(220 |
) |
|
|
(297 |
) |
Transfer agent and regulatory fees |
|
|
(88 |
) |
|
|
(112 |
) |
|
|
(83 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes and other losses |
|
|
1,428 |
|
|
|
2,559 |
|
|
|
(2,412 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Losses |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of Toiyabe |
|
|
(40 |
) |
|
|
(1,116 |
) |
|
|
— |
|
Unrealized loss on investment |
|
|
(287 |
) |
|
|
— |
|
|
|
— |
|
Sale of royalties |
|
|
1,600 |
|
|
|
— |
|
|
|
— |
|
Impairment of Mining Interest, Plant and Equipment |
|
|
— |
|
|
|
— |
|
|
|
(39 |
) |
Total Other Losses |
|
|
1,273 |
|
|
|
(1,116 |
) |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes |
|
|
2,701 |
|
|
|
1,443 |
|
|
|
(2,451 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recovery/ (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
(296 |
) |
|
|
1,449 |
|
|
|
(1,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) for the year |
|
|
2,405 |
|
|
|
2,892 |
|
|
|
(3,629 |
) |
Comparison April 30, 2022 to April 30, 2021
Overall, revenue from mining operations decreased by $1,120 for the year ended April 30, 2022 compared to the comparative year ended April 30, 2021, due mainly to lower metal production from a combination of lower ore grade and recovery in the current year compared to the prior comparable year.
Sales of metals for mining operations for the year ended April 30, 2022 approximated 9,846 ounces of gold and 86,919 ounces of silver sold at average prices in the year of US$1,838 and US$24.52 per ounce, respectively. This is a decrease in sale of gold and silver ounces when compared to the prior comparable year ended April 30, 2021 where sales of metal approximated 10,161 ounces of gold and 94,218 ounces of silver, sold at lower average prices of US$1,825 per ounce for gold and higher average prices of US$25.38 per ounce for silver.
The total cost of sales above includes non-cash expenses for depreciation and depletion of $3,413 compared to $4,359 in the prior comparable year ending April 30, 2021, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation
39
is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management. The decrease is largely due to higher amortization costs in the prior year of the leases on mobile equipment in accordance with the change to IFRS 16, and the higher production tonnage calculated over the total resource in the prior year.
For the year ending April 30, 2022, the Company had gross profit of $5,306 from mine operations compared to gross profit of $6,402 for the year ended April 30, 2021. The lower gross profit was due to lower production of metal resulting from, as stated previously, the lower tonnes processed, the lower grades and recovery for metal and the higher mine operating costs per tonne during this year.
Other Items
Changes in other items for the year ended April 30, 2022, resulted in the following significant changes from the year ended April 30, 2021:
|
• |
Management fees and salaries decreased by $12 despite the addition of the president in the 4th quarter due to previous reductions in salaries and lower share based compensation costs; |
|
• |
Foreign exchange gain increased by $782 for the year ended April 30, 2022. The increase relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations, and may be realized or unrealized at the year end; |
|
• |
Professional and consulting fees increased by $97 to $835 for the year ended April 30, 2022. Professional fees relate primarily to charges in relations to legal, tax and audit fees and increased mainly due to the sale of Scottie NSR and the acquisition of the Opodepe Project; |
|
• |
Shareholder relations increased by $424 in the current year due to an increase in marketing expenses associated with European markets; |
|
• |
Deferred Income Tax (“DIT”) expense increased by $1,745 due mainly to the difference in asset base of the underlying amounts that determine the temporary differences from year to year and utilization of losses in the current year against taxable income. |
Comparison April 30, 2021 to April 30, 2020
Overall, revenue from mining operations increased by $1,979 for the year ended April 30, 2021 compared to the comparative year ended April 30, 2020, due mainly to higher gold and silver prices, partially offset by lower metal production and ore grade processed in the current year compared to the prior comparable year.
Sales of metals for mining operations for the year ended April 30, 2021 approximated 10,161 ounces of gold and 94,218 ounces of silver sold at average prices in the year of US$1,825 and US$25.38 per ounce, respectively. This is a decrease in sale of gold and silver ounces when compared to the prior comparable year ended April 30, 2020 where sales of metal approximated 11,357 ounces of gold and 117,148 ounces of silver, however, sold at much lower average prices of US$1,491 per ounce for gold and US$16.61 per ounce for silver.
The total cost of sales above includes non-cash expenses for depreciation and depletion of $4,359 compared to $3,686 in the prior comparable year ending April 30, 2020, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management. The increase is largely due to an increase in amortization of the leases on mobile equipment in accordance with the change to IFRS 16, offset partially by the reduction of production tonnage calculated over the total resource.
For the year ending April 30, 2021, the Company had gross profit of $6,402 from mine and concentrate operations compared to gross profit of $1,984 for the year ended April 30, 2020. The higher gross profit was due mainly to the cost savings measure taken in the first two quarters of the prior year, as discussed previously, whereby the Company reduced its staff by 32% at the San Martin Mine incurring severance costs of approximately US$600,000 related to the staff reduction. The lower tonnes processed, the higher recovery for gold, the higher overall metal prices during this period combined with the planned lower overall mine processing costs resulted in much higher gross profit from mined ore.
40
Other Items
Changes in other items for the year ended April 30, 2021, resulted in the following significant changes from the year ended April 30, 2020:
|
• |
Financing costs during the year decreased by $406 primarily due to repayment of the US$1,000 loan in the prior year fourth quarter and the repayment of the $3,000 principal of Bonds outstanding in June of this year; |
|
• |
Office and administration decreased by $344 due to lower corporate costs relating to general regulatory administration in the current year and due to the sale of Altiplano; |
|
• |
Management fees and salaries increased by $132 mainly due to the increase in RSU/ DSU liability accrued based on the increased price of the Company’s shares on the TSX; |
|
• |
Foreign exchange loss increased by $328 for the year ended April 30, 2021. The increase relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations, and may be realized or unrealized at the period end; |
|
• |
Professional and consulting fees decreased by $262 to $738 for the year ended April 30, 2021. Professional fees relate primarily to charges in relations to legal, tax and audit fees and decreased mainly due to costs related to the sale of Altiplano in the prior year; |
|
• |
Deferred Income Tax (“DIT”) decreased by $2,627 due mainly to the difference in asset base of the underlying amounts that determine the temporary differences from year to year. |
Comparison April 30, 2020 to April 30, 2019
Overall, revenue from mining operations decreased by $7,975 for the year ended April 30, 2020 compared to the comparative year ended April 30, 2019, due mainly to lower metal production from lower tonnage processed in the current year compared to the prior comparable year, partially offset by higher gold and silver prices accounting for a total of $2,233 of the decrease. The remaining difference is due to the loss of purchased concentrate revenue, from the amount of $5,742 in the prior year, due to the suspension and subsequent sale of the Altiplano concentrate processing plant as well as decreased carbon concentrate processed at the San Martin mine (see - Sale of Altiplano Processing Plant, Matehuala, Mexico).
Sales of metals for mining operations for the year ended April 30, 2020 approximated 11,357 ounces of gold and 117,148 ounces of silver sold at average prices in the year of US$1,491 and US$16.61 per ounce, respectively. This is a decrease in sale of gold ounces and in silver ounces when compared to the prior comparable year ended April 30, 2019 where sales of metal approximated 13,852 ounces of gold and 229,982 ounces of silver, sold at lower average prices of US$1,280 per ounce for gold and US$14.89 per ounce for silver.
The total cost of sales above includes non-cash expenses for depreciation and depletion of $3,686 compared to $3,893 in the prior comparable year, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management. The decrease is largely due to the reduction of production tonnage calculated over the total resource, offset partially by an increase in amortization of the leases on mobile equipment in accordance with the change to IFRS 16.
For the year ending April 30, 2020, the Company had gross profit of $1,984 in from mine and concentrate operations compared to gross profit of $36 for the year ended April 30, 2019. The higher gross profit was due to the cost savings measure taken in the first two quarters as discussed previously. The combination of lower tonnes processed and higher recovery for gold during this year resulted in relatively better metal production and, therefore, gross profit from mined ore as compared to the prior comparable year despite lower gross revenues.
Costs per ounce for the year ended April 30, 2020 was US$1,149/EqOz, which is slightly higher than the average operating cash cost of US$1,061/EqOz. during the comparable year ended April 30, 2019.
Other Items
41
Changes in other items for the year ended April 30, 2020, resulted in the following significant changes from the year ended April 30, 2019:
|
• |
Financing costs during the year increased by $243 primarily due to amortization of the warrants and San Pedrito interest income received in the previous comparable year; |
|
• |
Office and administration decreased by $308 due to lower corporate costs relating to general regulatory administration in the current year and due to the sale of Altiplano; |
|
• |
Management fees and salaries decreased by $254 due to reduction in salaries of executive officers; |
|
• |
Foreign exchange loss increased by $244 for the year ended 30 April, 2020. The increase relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations; |
|
• |
Professional and consulting fees increased by $219 to $1,000 for the year ended April 30, 2020. Professional fees relate primarily to charges in relations to legal, tax and audit fees and increased mainly due to costs related to the sale of Altiplano; |
|
• |
Property investigation costs of $54 were incurred during the prior year to perform the necessary due diligence on new projects; |
|
• |
Deferred Income Tax (“DIT”) decreased by $1,051 due mainly to a recovery of special mining tax and to the difference in asset base of the underlying amounts that determine the temporary differences from year to year. |
B. |
Liquidity and Capital Resources |
Liquidity risk arises from the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company accomplishes this by achieving profitable operations and maintaining sufficient cash reserves. As at April 30, 2022, the Company was holding cash of $8,818,000 (2021 - $4,392,000).
Obligations due within twelve months of April 30, |
|
2022 |
|
|
2022 |
|
|
2024 |
|
|
2025 and beyond |
|
||||
Trade and other payables |
|
$ |
3,126 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Reclamation and closure obligations |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,011 |
|
Leases Liability |
|
$ |
497 |
|
|
$ |
230 |
|
|
$ |
135 |
|
|
$ |
6 |
|
The Company’s trade and other payables are due in the short term. Long-term obligations include the Company’s reclamation and closure cost obligations, other long-term liabilities and deferred income taxes. Management believes that profits generated from the mine will be sufficient to meet its financial obligations and therefore has sufficient working capital.
The Company has several sources of cash flow which includes raising cash through debt, issuance of shares and from operating a profitable mine.
1. |
On June 18, 2018, the Company completed a private placement of secured bonds in the aggregate principal amount of $3,000 (the “Bonds”) less structuring and finder’s fees of $60 cash and $171 attributed to finders warrants, totaling $231 (the “Discount”). The Bonds bore interest at 8% per annum, payable on maturity on June 18, 2020. The Bonds were secured by a charge over the Company’s and its subsidiaries assets. On June 10, 2020, the Company paid out the Bonds plus accrued interest of Cdn$235,410 ahead of the maturity date. The payments were made from the Company’s cash flow generated from mine operations and prior asset sales. |
2. |
During the year ended April 30, 2018 the Company secured an additional $1,283 (USD1,000) loan with a lender. The loan was secured against certain assets of the Company and bore interest at 8% per annum. The full principal plus accrued interest on the loan was to be repaid to the lender on October 25, 2019. The |
42
Company paid the interest on the loan on October 25, 2019 and the lender agreed to extend the loan for an additional 6 months to April 25, 2020. The loan was repaid in full on the due date. |
As at June 10, 2020, the Company is debt free
3. |
The Company has no contractual commitments for capital expenditures and has disclosed all material commitments under Section F (“Tabular disclosure of contractual obligations”). The Company does have budgeted capital expenditures to be incurred in the normal operation of the San Martin Mine and for exploration of properties, which are expected to approximate $2.0 million in fiscal 2021. |
C. |
Research and Development, Patents and Licenses, etc. |
We do not currently, and did not previously, have research and development policies in place.
D. |
Trend Information |
There have been no significant recent trends in production, sales and inventory, the state of the order book and costs and selling prices in our business since the end of the latest financial year, nor are there any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Although there are significant uncertainties in respect of market prices for minerals and, accordingly, the availability of equity financing for the purposes of mineral exploration and development, we do not believe that the fluctuations in market price are predictable. The price of minerals has fluctuated widely in recent years and wide fluctuations are expected to continue.
E. |
Off-Balance Sheet Arrangements |
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resource that is material to investors. We have optioned its mineral properties from a private company controlled by an officer and director of our Company.
43
F. |
Tabular Disclosure of Contractual Obligations |
Obligations due within twelve months of the year ended, |
|
Total |
|
Less than 1 year |
|
1-3 years |
|
3-5 years |
|
More than 5 years |
(in thousands of Canadian dollars) |
||||||||||
Trade and other payables |
|
2,213 |
|
2,213 |
|
- |
|
- |
|
- |
Loan payable – current portion |
|
- |
|
- |
|
- |
|
- |
|
- |
Rehabilitation and closure cost provision |
|
2,545 |
|
- |
|
- |
|
- |
|
2,545 |
Executive employment agreement obligation |
|
686 |
|
450 |
|
- |
|
- |
|
- |
Explorations and evaluation asset |
|
1,000 |
|
200 |
|
600 |
|
200 |
|
- |
Land lease obligation |
|
132 |
|
132 |
|
- |
|
- |
|
- |
Equipment lease obligation |
|
574 |
|
359 |
|
215 |
|
- |
|
- |
Office lease obligation |
|
274 |
|
66 |
|
208 |
|
- |
|
- |
G. |
Safe harbor. |
Statements in Item 5.E and Item 5.F of this Annual Report on Form 20-F that are not statements of historical fact, constitute “forward-looking statements.” See “Forward-Looking Statements” on page 3 of this Annual Report. Our Company is relying on the safe harbor provided in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in making such forward-looking statements.
44
Item 6 |
Directors, Senior Management and Employees |
A. |
Directors and Senior Management |
The following table sets forth the names, age, business experience and functions and areas of experience in our Company of each of our directors and officers:
Name |
Area of Experience and Functions in Our Company |
Robert Eadie |
As our Chief Executive Officer, Mr. Eadie is responsible for strategic planning and operations, as well as managing our relations with our lawyers, regulatory authorities and investor community; as a director, Mr. Eadie participates in management oversight and helps to ensure compliance with our corporate governance policies and standards. Mr. Eadie was one of the founders of our Company. |
Pierre Alarie President & Director Age: |
As President, Mr. Alarie reports to the CEO and is responsible for overseeing the Company’s executive officers and employees and ensuring corporate goals are met through established strategies. Mr. Alarie participates in management oversight and helps to ensure compliance with our corporate governance policies and standards. |
Gary Arca |
As Chief Financial Officer, Mr. Arca is responsible for the management and supervision of all the financial aspects of our business; as a director, Mr. Arca participates in management oversight. |
Salvador Garcia |
As our Chief Operating Officer, Mr. Garcia is responsible for our exploration, development and mining operations and for management of our Mexican operations; as a director, Mr. Garcia participates in management oversight and helps to ensure compliance with our corporate governance policies and standards. |
Cory Kent |
As Corporate Secretary, Mr. Kent is responsible for ensuring that the board of directors has the proper advice and resources to fulfill their duties to shareholders. Mr. Kent’s duties include compliance with statutory and regulatory requirements. |
Jordan Estra |
As an independent director, Mr. Estra provides oversight to management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards. Mr. Estra is a member of the Audit Committee. |
Federico Villaseñor |
As an independent director, Mr. Villaseñor provides oversight to management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards. Mr. Villaseñor is a member of the Audit Committee. |
Tanya Lutzke |
As an independent director, Ms. Lutzke provides oversight for management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards. Ms. Lutzke is a member of the Audit Committee. Her membership in the Board of Directors also confirms management’s compliance with gender diversity in its Board. |
45
Robert Eadie – Chief Executive Officer and Director
Mr. Eadie has been our Chief Executive Officer, and a director of our Company since October 2003. Mr. Eadie is a self-employed business owner and has many years of experience in working with and helping build start-up companies. He began his career as a corporate investor and public relations consultant and went on to establish his own investor relations consulting business. He has since become an executive, officer or director of a number of junior public companies, primarily in the natural resource sector. In the past 20 years, Mr. Eadie has been actively involved in public resource companies raising over $100 million dollars for various exploration and development projects around the world.
Pierre Alarie – President and Director
Mr. Alarie has been our President, and a director of our Company since January 2022. Mr. Alarie’s distinguished career covers over 30 years of executive positions in Canadian and Latin American companies, with experience in business development, acquisitions, team management and structured financial transactions. Most recently as Managing Director of ATCO, Latin America from September 2019 to December 2021, Mr. Alarie served as the Ambassador of Canada to Mexico from 2015 to 2019 when he worked to facilitate relations between the two countries across various sectors, including the aerospace, auto and mining industries. His business development and operational experience in commercial and banking corporations, coupled with developing and managing long-cycle projects in both international and national environments brings a valuable dimension to management and the Board of Directors.
Gary Arca – Chief Financial Officer and Director
Mr. Arca has been our Chief Financial Officer and a director of our Company since January 2006. Mr. Arca has over 37 years of financial management experience. He is a Chartered Professional Accountant (CPA) and has been a member of the Canadian Institute of Chartered Professional Accountants and British Columbia Institute of Chartered Professional Accountants since 1980. He was a partner with public accounting firms, Amisano Hanson from 2002 to 2005 and Driver Anderson from 1996 to 2001.
Mr. Arca has provided auditing, consulting, taxation, accounting and litigation support services to various clients. Mr. Arca has extensive experience dealing with public companies and start-ups both from the perspective of management and as a consultant, and has served as a director of various publicly traded resource companies.
Mr. Arca is Chair of the Corporate Governance Committee.
Salvador Garcia – COO & Director
Mr. Garcia has been our Chief Operating Officer since August 2017 and a Director of the Company since October 2017. With over 39 years of progressive experience in the mining industry in Mexico. his extensive experience encompasses mine development and production including open pit and underground operations.
Prior to Starcore, Mr. García was the Country Manager in Mexico for First Majestic Silver Corp, serving in that company since 2013. Previously, Mr. Garcia collaborated with Luismin (purchased by Goldcorp (TSX:G)(NYSE:GG) for a period of 25 years holding several positions from General Manager to Operations Director and later promoted to the senior management team of Goldcorp as Vice President for Mexico. During his tenure at Goldcorp, he was in charge of the operations at the Tayoltita and San Antonio mines and was involved in the development, construction and operation of the Los Filos, El Sauzal and Peñasquito mines.
Mr. García holds a BSc. degree in Mining Engineering from the Guanajuato University School of Mines in Mexico. In addition, Mr. García is the President of the Mining Cluster of Sonora State, member of the CAMIMEX (Mexican Mining Chamber) Advisor Board, Member of the Mining Cluster of Zacatecas State, Member of the Mining Advisor Board of San Luis Potosi State.
46
Cory Kent LLB – Corporate Secretary
Mr. Kent is a Partner at McMillan LLP and was the Executive of the Securities Law Section of the Canadian Bar Association from 2002 - 2004. With a practice focused on corporate securities law and related technology, natural resources and commercial matters, Mr. Kent possesses a strong and varied legal background suited to the junior mining sector.
Mr. Jordan Estra – Director
Mr. Estra has been a director of our Company since March 2010. He joined Boustead Securities, LLC, a full service investment banking firm headquartered in Irvine, California as Managing Director in 2019 and is the Head of the Mining & Metals Investment Banking Practice. Mr. Estra is also currently President and Chief Executive Officer of Ophir Brasil Mineracao, Ltda., a privately owned gold mining company in Brazil, and President and Chief Executive Officer of Ophir Consulting Group, Inc., a privately owned mining consulting company. His background includes experience as a leading research analyst for a number of international investment banks.
Mr. Estra graduated with High Distinction from Babson College (International Economics) and with Honors from the Columbia University Graduate School of Business (Finance). He served in the United States Army (Medical Corps) and has been a member of the American Institute of Mining, Metallurgical and Petroleum Engineers, the Foreign Policy Associate, the New York Society of Security Analysts and the Stock & Bond Club of South Florida. He holds Series 6, 7, 24, 57 and 58 securities licenses.
Mr. Estra is a member of the Audit Committee and the Corporate Governance Committee.
Mr. Federico Villaseñor – Director
Mr. Villasenor has been a director of our Company since February, 2007. He is currently a consultant to various mining companies. From 2007 to 2014, he served as the Business Development Director for Goldcorp Mexico, a subsidiary of Goldcorp Inc., a leading global gold producer engaged in the acquisition, exploration, development and operation of gold properties in Canada, the United States and Latin America. He obtained a BSc. in Mining Engineering from the University of Guanajuato in 1972, a Master of Science from Columbia University of New York City in 1976 and a Finance Degree from the Instituto Tecnológico Autónomo de México.in 1985. Mr. Villaseñor has been a member of the Mexican Mining Chamber Board.
Mr. Villaseñor is a member of the Audit Committee and the Compensation Committee.
Ms. Tanya Lutzke – Director
Ms. Lutzke has been a director of our Company since October, 2016 and has over 10 years’ experience in financial services, the banking industry and law enforcement. A native of Vancouver, B.C., Ms. Lutzke attended the University of British Columbia and obtained her Financial Planning and Canadian Securities Institute designations.
Ms. Lutzke sits on the Audit Committee.
Director Interlocks
Each of our directors and officers has served and continue to serve as officers and/or directors of other companies engaged in natural resource exploration and development and related industries.
Messrs. Robert Eadie and Gary Arca (who are, respectively, the Chief Executive Officer and Chief Financial Officer of our Company), in addition to serving on our Board of Directors, are also executive officers and/or directors of Hemp for Health Inc. and Bond Resources Inc. which are junior companies listed on the Canadian Securities Exchange. Mr. Arca is also an executive officer of iMining Technologies Inc.
Tanya Lutzke, a member of our Board of Directors, also serves as a director of Hemp for Health Inc.
Mr. Federico Villaseñor, a member of our Board of Directors, is also a director of Santacruz Silver Mining, Ltd., a
47
company listed on the TSX Venture Exchange whose operations include the Rosario silver mine near the town of Charcas, in the state of San Luis Potosi, Mexico.
Mr. Jordan Estra, a member of our Board of Directors, is also a director of Searchlight Minerals Corp., a junior mineral exploration company quoted on the OTCQB with a slag reprocessing project in Arizona.
B. |
Compensation |
Executive Compensation
The following table contains information about the compensation paid for services in all capacities to us, including compensation paid to or earned by (a) our Chief Executive Officer (or an individual who acted in a similar capacity); (b) our Chief Financial Officer (or an individual who acted in a similar capacity); (c) each of the three most highly compensated executive officers, other than the Chief Executive Officer and Chief Financial Officer, who were serving as executive officers as at April 30, 2022 and whose total salary and bonus exceeds $150,000 during the period ended April 30, 2022; and (d) any additional individuals for whom disclosure would have been provided under (c) except that the individual was not serving as an officer of our Company as of April 30, 2022.
Summary Compensation Table
The compensation paid to the Named Executive Officers during the Company’s most recently completed financial year ended April 30, 2022 is as set out below and expressed in Canadian dollars unless otherwise noted:
Name and principal position |
Year ended April 30, 2022 |
Salary(1) |
Share-based awards(4) |
Option-based awards |
Non-equity incentive plan compensation(2) |
Pension value |
All other compen-sation(3) |
Total compen-sation |
|
|
|
Annual incen-tive plans |
Long-term |
|
|||||
Robert Eadie |
2022 |
370,000 |
20,570 |
- |
- |
- |
- |
12,000 |
402,570 |
Pierre Alarie President |
2022 |
169,016 |
41,139 |
- |
- |
- |
- |
- |
210,155 |
Gary Arca |
2022 |
212,000 |
16,456 |
- |
- |
- |
- |
12,000 |
240,456 |
Salvador Garcia |
2022 |
297,675 |
20,570 |
- |
- |
- |
- |
- |
318,245 |
Cory Kent Corporate Secretary |
2022 |
- |
1,601 |
- |
- |
- |
- |
- |
1,601 |
(1) |
Includes the dollar value of cash and non-cash base salary earned during a financial year covered. Pursuant to their executive employment agreements amended August 2015 and subsequently amended effective May 1, 2019, Messrs. Eadie and Arca are entitled to be paid annual salaries of $270,000 and $180,000, respectively. Mr. Garcia is paid annual fees in the amount of US$236,250. On May 16, 2019, the Company reported that Starcore management had agreed to take a 25% reduction in salary effective May 1, 2019. In April, 2022, the Board approved that management remuneration to the three executive officers be reinstated to their previous levels, and extended the management contracts to April 22, 2024. For additional details please refer to the discussion below under the heading, “Directors, Senior Management and Employees – Board Practices – Executive Employment Agreements”. |
(2) |
These amounts include annual non-equity incentive plan compensation, such as bonuses and discretionary amounts for the year ended April 30, 2022. |
(3) |
All other compensation includes $12,000 paid to each of Mr. Eadie and Mr. Arca as directors’ fees for 2022. |
48
(4) |
Share based awards are based on RSU/DSU options vested which are calculated at the volume weighted average (“VWAP”) of the trading price per common share on the Toronto Stock Exchange (“TSX”) for the last ten (10) trading days ending on that date. |
Long Term Incentive Plan (LTIP) Awards
We do not have any long term incentive plans except as disclosed above.
An LTIP is “any plan providing compensation intended to motivate performance over a period longer than one fiscal year but does not include option or stock appreciation rights plans or plans for compensation through shares or units that are subject to restrictions on resale”.
Option and Stock Appreciation Rights (SARs)
The Company currently has no outstanding stock options. The Company does not currently have an active plan as shareholders rejected the Company’s share option plan dated for reference January 17, 2011 (the “Plan”) at its annual general meeting which was held on January 28, 2014.
Option/SAR Grants During the Most Recently Completed Financial Year
During the most recently completed financial year ended April 30, 2021 and subsequent thereto, no stock options were granted. See “Options and Stock Appreciation Rights.”
Aggregated Option/SAR Exercises During the Most Recently Completed Financial Year and Financial Year-End Option/SAR Values
There were no outstanding stock options as at April 30, 2022. Any unexercised options expired on January 15, 2019 and no values can be attributed as there were no unexercised in the money options as at that date.
Option and SAR Repricings
All unexercised options expired on January 15, 2019.
Defined Benefit or Actuarial Plan
We do not have a defined benefit or actuarial plan.
Compensation of Directors
The compensation provided to the directors, excluding the three officers named in the foregoing, for the Company’s most recently completed financial year of April 30, 2022, is as follows:
Name(1)
|
Fees earned(1) |
Share-based |
Option-based awards |
Non-equity incentive plan compensation |
Pension value |
All other compen-sation(3) |
Total |
Jordan Estra |
- |
8,794 |
- |
- |
- |
- |
8,794 |
Federico Villaseñor |
15,000 |
8,794 |
- |
- |
- |
- |
23,794 |
Tanya Lutzke |
14,500 |
8,794 |
- |
- |
- |
- |
23,294 |
(1) |
Includes all fees awarded, earned, paid or payable in cash for services as a director, including annual retainer fees, committee, chair and meeting fees. |
(2) |
Includes share based awards granted during the year that vested during the year. Share based awards are based on RSU/DSU options vested and paid calculated at and the volume weighted average (“VWAP”) of the trading price per common share on the Toronto Stock Exchange (“TSX”) for the last ten (10) trading days ending on that date. |
49
Outstanding Share-based Awards and Option-based Awards
The following table sets out all share-based awards and option-based awards outstanding as at April 30, 2022, for each director, excluding a director who is already set out in disclosure for a Named Executive Officer for the Company:
|
Option-based Awards |
Share-based Awards |
||||
Name |
Number of securities underlying unexercised options |
Option exercise price ($) |
Option expiration date |
Value of unexercised in-the-money options(1) |
Number of shares or units of shares that have not vested |
Market or payout value of share-based awards that have not vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jordan Estra |
Nil |
n/a |
n/a |
n/a |
175,000 |
36,750 |
Federico Villaseñor |
Nil |
n/a |
n/a |
n/a |
175,000 |
36,750 |
Tanya Lutzke |
Nil |
n/a |
n/a |
n/a |
175,000 |
36,750 |
(1) |
The market price of the Company’s common shares as reported on the TSX on April 30, 2022 was $0.21 per share. |
Incentive Plan Awards – Value Vested or Earned During the Year
The following table sets out all incentive plans (value vested or earned) during the year ended April 30, 2022, for each director who was not a Named Executive Officer
Name
|
Option-based awards – Value vested during the year |
Share-based awards – Value vested during the year |
Non-equity incentive plan compensation – Value earned during the year |
Jordan Estra |
Nil |
Nil |
Nil |
Federico Villaseñor |
Nil |
Nil |
Nil |
Tanya Lutzke |
Nil |
Nil |
Nil |
50
C. |
Board Practices |
Each director of our Company is elected annually and holds office until the next annual general meeting of the shareholders unless that person ceases to be a director before then. Our last annual general meeting of the shareholders was held on November 16, 2021.
Name and Position with the Company |
Director/Officer Since |
Robert Eadie |
October 24, 2003 |
Pierre Alarie |
January 1, 2022 |
Salvador Garcia |
August 23, 2017(COO) October 24, 2017 (Director) |
Gary Arca |
January 25, 2006 |
Federico Villaseñor |
February 1, 2007 |
Jordan Estra |
March 26, 2010 |
Tanya Lutzke |
October 28, 2016 |
1. Executive Employment Agreements
Pursuant to an executive employment agreement amended with effect as of August 1, 2015, and further amendments of May 1, 2019 and April 22, 2022, Robert Eadie is paid a base salary of Cdn$360,000 per annum, for acting as Chief Executive Officer of the Company. The agreement expires on April 22, 2024 and may be terminated upon notice in writing and payment of 24 months salary. In addition, the agreement provides that, for a period of 30 days after a “change of control”, Mr. Eadie may, by notice in writing to the Company, deem the agreement to be terminated, in which case Mr. Eadie will receive a lump sum payment of $720,000. A change of control (a “Change of Control”) is deemed to occur when (i) there is a sale of all or substantially all of the assets of the Company, (ii) there is a merger of the Company whereby shareholders of the Company hold less than 50% of the shares in the surviving entity, (iii) there is a change in ownership of voting securities of the Company sufficient to permit any person to elect or appoint a majority of the Board of Directors, (iv) any person or persons acting jointly or in concert acquire greater than 50% of the outstanding voting securities of the Company, or (v) there is a change in the composition of the Board of Directors of the Company as a result of a proposal by a shareholder group not supported by management resulting in current members of the Board of Directors representing less than 51% of the members of the Board of Directors. In addition to his base salary, Mr. Eadie received fees for his services as a director in the amount of $$12,000 for the year ended April 30, 2022.
Pursuant to an executive consulting agreement dated January 1, 2022, Pierre Alarie is paid a base fee of US$400,000 for acting as President of the Company. The agreement expires on December 31st, 2023 and may be terminated upon 90 days written notice and payment of 3 months of the base fee. The agreement may be renewed for a further period of up to three years if agreed to by both parties. Upon the occurrence of a Change of Control, Mr. Alarie may provide notice of termination in which case he will receive a lump sum payment of US$200,000.
Pursuant to an executive employment agreement amended with effect as of August 1, 2015, and further amendments of May 1, 2019 and April 22, 2022, Gary Arca is paid a base salary of $240,000 per annum, for acting as Chief Financial Officer of the Company. The agreement expires on April 22, 2024 and may be terminated upon notice in writing and payment of 24 months salary. In addition, the agreement provides that, for a period of 30 days after a Change of Control, Mr. Arca may, by notice in writing to the Company, deem the agreement to be terminated, in which case Mr. Arca will receive a lump sum payment of $480,000. In addition to his base salary, Mr. Arca received fees for his services as a director in the amount of $12,000 for the year ended April 30, 2022.
51
Pursuant to his employment agreement, Salvador Garcia is paid a base fee of US$315,000 for acting as Chief Operating Officer of the Company. The Agreement expires on April 22, 2024, with similar Change of Control provisions, whereby Mr. Garcia will receive, upon his providing a notice of termination, a lump sum of 6months; salary plus two months’ salary for every year of employment.
2. Committee
The members of our Company’s audit committee include Jordan Estra (Chairman), Tanya Lutzke and Federico Villaseñor. The audit committee is directly responsible for overseeing the work of the external auditors in preparing or issuing the auditor’s report, including the resolution of disagreements between management and the external auditors regarding financial reporting and audit scope or procedures. The audit committee also considers whether adequate controls are in place over annual and interim financial reporting as well as controls over assets, transactions and the creation of obligations, commitments and liabilities of our Company. The audit committee also reviews the financial statements and financial information prior to its release to the public.
D. |
Employees |
The San Martin mine operates with a combination of contractors and employees. Most of the hourly workers are contracted through the union or syndicate. The mine has a good relationship with the union and has seen significantly fewer labour issues than most other mines in Mexico.
As at April 30, 2022, we had the following employees and contractors:
Location |
Full-Time Salaried |
Hourly (Union) |
Contractors |
|
|
|
|
|
|
San Martin Mine |
61 |
153 |
40 |
254 |
Vancouver Office |
7 |
|
|
7 |
Total |
|
|
|
261 |
As at April 30, 2021, we had the following employees and contractors:
Location |
Full-Time Salaried |
Hourly (Union) |
Contractors |
|
|
|
|
|
|
San Martin Mine |
58 |
132 |
54 |
244 |
Vancouver Office |
6 |
1 |
1 |
8 |
Total |
64 |
133 |
55 |
252 |
As at April 30, 2020, we had the following employees and contractors:
Location |
Full-Time Salaried |
Hourly (Union) |
Contractors |
|
|
|
|
|
|
San Martin Mine |
54 |
136 |
57 |
247 |
Vancouver Office |
6 |
1 |
1 |
8 |
Total |
60 |
137 |
58 |
255 |
52
E. |
Share Ownership |
There were 49,646,851 common shares issued and outstanding as of April 30th, 2022. 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, 2022:
Name |
Number of Common Shares |
Percentage |
Robert Eadie |
3,817,117 |
7.68% |
Gary Arca |
549,189 |
1.10% |
Salvador Garcia |
500,000 |
1.00% |
Cory Kent |
103,500 |
0.20% |
The voting rights attached to the common shares owned by our officers and directors do not differ from those voting rights attached to shares owned by people who are not officers or directors of our Company.
For information concerning options held by our officers and directors, please see “Compensation”.
Stock Option Plan
The Company does not currently have any equity compensation arrangements in place under which directors, officers or employees can be granted an equity interest in the Company. The Company previously had an incentive stock option plan in place (the “Plan”) pursuant to which the Board had the ability to grant options to purchase common shares (“Options”) to directors, officers, employees and consultants to the Company. The Plan was subject to shareholder approval, which was not received at the Company’s January 28, 2014 annual general meeting. Options granted under the Plan prior to January 28, 2014 have expired. As at the April 30, 2022, no Options to purchase common shares remain outstanding under the Plan.
Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”)
Effective August 1, 2016, The Board of Directors approved the adoption of a Restricted Share Unit and Deferred Share Unit Plan (the “RSU/DSU Plan”) as part of the Company’s compensation arrangements for directors, officers, employees or consultants of the Company or a related entity of the Company. Although the RSU/DSU Plan is share-based, all vested RSUs and DSUs will be settled in cash. No common shares will be issued.
RSU
The RSU plan was for eligible members of the Board of Directors, eligible employees and eligible contractors. All outstanding RSUs as of December 31, 2020 were paid out. Effective November 1, 2021, the Company granted an aggregate of 645,000 RSUs under the Plan allocated to certain employees and an aggregate of 1,010,000 RSUs to certain consultants. All RSUs vest as to one-third annually with performance conditions to apply. The liability portion for the year ended April 30, 2022 is $53,098 (April 30, 2021 - Nil).
DSU
The Company introduced a DSU plan for eligible directors. The DSUs are paid in full in the form of a lump sum payment no later than August 1st of the calendar year immediately following the calendar year of termination of service. DSU Awards going forward will vest on each anniversary date of the grant over a period of 3 years. The DSU share plan transactions during the period were as follows:
|
|
Units |
|
Outstanding at April 30, 2019 & 2020 Paid out in 2020 Allocated on November 1, 2021 |
|
1,010,000 (210,000) 1,725,000 |
|
Total at April 30, 2022 |
|
2,525,000 |
53
Based on the fair value of $0.24 per share, the Company has recorded a liability in its financial statements of $278,688 (April 30, 2021 - $192) under Trades and Other Payable on the Statement of Financial Position.
Treatment of Dividends
If the Company pays a cash dividend on its shares, the RSUs held by an RSU Grantee will be increased by (i) multiplying the amount of the dividend per share by the aggregate number of Restricted Share Units that were credited to the Eligible Person’s account as of the record date for such dividend, and (ii) dividing that amount by the fair market value on the date on which the dividend is paid.
Termination and Change of Control
RSUs will remain outstanding and vest in accordance with their terms, unless the RSU Grantee is terminated by the Company with cause, in which case all RSUs held by the RSU Grantee, whether vested or unvested will be forfeited and cancelled without payment. In the event of a change of control of the Company and the subsequent termination of the RSU Grantee, or a decrease or diminishment of the RSU Grantee’s duties, the RSUs will immediately vest and be paid out. Upon resignation of a participant, all unvested RSUs will be automatically cancelled and all rights in respect thereof will be forfeited for no consideration.
Item 7 |
Major Shareholders and Related Party Transactions |
A. |
Major Shareholders |
The following table sets forth, as of April 30, 2022, the persons known to us to be the beneficial owner of more than five percent (5%) of our common shares:
Name of Shareholder |
No. of Common Shares Beneficially Owned |
Percentage of Shares |
Percentage of Shares(1) |
2176423 Ontario Ltd. (a private company controlled by Eric S. Sprott) Toronto, Ontario |
6,163,193(2) |
12.41% |
12.41% |
Italpreziosi S P A |
3,787,135 |
7.63% |
7.63% |
Robert Eadie |
3,817,117 |
7.68% |
7.68% |
|
(1) |
Based on 49,646,851 common shares issued and outstanding as at April 30, 2022. |
|
(2) |
The information is at April 30, 2022, as derived from SEDI, the electronic filing system for Insider Reporting. The voting rights of our major shareholders do not differ from the voting rights of holders of our common shares who are not major shareholders. |
As at June 30, 2022, the registrar and transfer agent for our Company reported that there were 49,646,851 common shares of our Company issued and outstanding. Of these, 44,036,225 were registered to Canadian residents (245 shareholders), 1,299,476 were registered to residents of the United States (92 shareholders) and 4,311,150 were registered to residents of other foreign countries (11 shareholders).
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.
54
B. |
Related Party Transactions |
Other than compensation paid to our directors and officers in such capacities, and except as disclosed below, to the best of our knowledge, since the formation of our Company:
|
• |
there have been no material transactions to which we were or are a party and in which any of our directors or officers, any relative or spouse of any director or officer, or any individual owning, directly or indirectly, an interest in our voting power that gives it significant influence over us, has or will have a direct or indirect material interest; and |
|
• |
none of our directors or officers, nor any relatives or spouses of such directors or officers, nor any individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, were indebted to us. |
C. |
Interests of experts and counsel |
Not Applicable
Item 8 |
Financial Information |
A. |
Consolidated Statements and Other Financial Information |
Item 18 of this Annual Report contains our financial statements as at and for the year ended April 30, 2022. Our financial statements are stated in Canadian dollars and have been prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Export Sales
(All dollar figures are in ‘000s)
Export sales constituted 100 percent of our Company’s total sales volume during the fiscal years disclosed in the following table:
Year |
Sales |
Export Sales (%) |
2022 |
$25,679 |
100% |
2021 |
$26,799 |
100% |
2020 |
$24,820 |
100% |
2019 |
$32,795 |
100% |
2018 |
$27,807 |
100% |
2017 |
$27,228 |
100% |
Legal Proceedings
There are no legal proceedings to which our Company is a party and, to our knowledge, no such proceedings are pending.
On December 22, 2015, the SEC initiated proceedings under Section 12(j) of the Securities Exchange Act of 1934 for our Company’s failure to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder because it had not filed any periodic reports with the Commission since the period ended April 30, 2004. On January 25, 2016, the Company executed an Offer of Settlement presented by the SEC to settle the proceedings. The SEC issued its Final Order on February 1, 2016.
Dividend Policy
Our Company does not have a formal dividend policy.
Our Company paid our shareholders dividends in September, 2014. Any future payment of dividends or distributions will be determined by the board of directors of our Company on the basis of our Company's earnings, financial
55
requirements and other relevant factors. Successful operation of our business is subject to a number of risks and uncertainties, including those described under the heading “Risk Factors” appearing on page 5, above.
B. |
Significant Changes |
Not Applicable
Item 9 |
The Offer and Listing |
A. |
Offer and Listing Details |
Not Applicable
B. |
Plan of Distribution |
Not Applicable
C. |
Markets |
Our common shares trade on the TSX Exchange (Toronto Stock Exchange) with symbol “SAM” and our CUSIP number is 85525T202. Our common shares also trade on the Frankfurt Stock Exchange with symbol V4JA and the OTCQB with symbol SHVLF
D. |
Selling shareholders |
Not Applicable
E. |
Dilution |
Not Applicable
F. |
Expenses of the issue |
Not Applicable
Item 10 |
Additional Information |
A. |
Share capital. |
Not applicable for annual reports
B. |
Memorandum and articles of association. |
This information is included in the 20F Registration Statement filed on August 12, 2016 and has not changed, except for the amendment to the Articles of the Company providing for the Direct Registration System (“DRS”) of the Company’s securities and to allow meeting of Shareholders by Telephone or other Electronic Means. See Exhibit 1.2
C. |
Material Contracts |
With the exception of the contracts listed below and the executive employment agreements described under the heading “Directors, Senior Management and Employees -Board Practices – Executive Employment Agreements” above, we have not entered into any material contracts during the last twenty-four months that were outside those entered into in the ordinary course of business.
56
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” below.
Except as provided in the Investment Canada Act (Canada), which has rules regarding certain acquisitions of shares by non-residents, there is no limitation imposed by Canadian law or by our charter or other constituent documents on the right of a non-resident to hold or vote our common shares. The Investment Canada Act is a Canadian federal statute of broad application regulating the establishment and acquisition of Canadian businesses by non-Canadians, including individuals, governments or agencies thereof, corporations, partnerships, trusts or joint ventures. Investments by non-Canadians to acquire control over existing Canadian businesses or to establish new ones are either reviewable or notifiable under the Investment Canada Act. If an investment by a non-Canadian to acquire control over an existing Canadian business is reviewable under the Investment Canada Act, the Investment Canada Act generally prohibits implementation of the investment unless, after review, the Minister of Industry is satisfied that the investment is likely to be of net benefit to Canada.
E. |
Taxation |
Canadian Federal Income Taxation
We consider that the following summary fairly describes the principal Canadian federal income tax consequences applicable to a holder of our common shares who at all material times deals at arm's length with our Company, who holds all common shares as capital property, who is resident in the United States, who is not a resident of Canada and who does not use or hold, and is not deemed to use or hold, his common shares of our Company in connection with carrying on a business in Canada (a “non-resident holder”). It is assumed that the common shares will at all material times be listed on a stock exchange that is prescribed for purposes of the Income Tax Act (Canada) (the “ITA”) and regulations thereunder. Investors should be aware that the Canadian federal income tax consequences applicable to holders of our common shares will change if, for any reason, we cease to be listed on a prescribed stock exchange. Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors with respect to the income tax consequences of them purchasing, owning and disposing of our common shares should we cease to be listed on a prescribed stock exchange.
This summary is based upon the current provisions of the ITA, the regulations thereunder, the Canada-United States Tax Convention as amended by the Protocols thereto (the “Treaty”) as at the date of the Annual Report and the currently publicly announced administrative and assessing policies of the Canada Revenue Agency (the “CRA”). This summary does not take into account Canadian provincial income tax consequences. This description is not exhaustive of all possible Canadian federal income tax consequences and does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action. This summary does, however, take into account all specific proposals to amend the ITA and regulations thereunder, publicly announced by the Government of Canada to the date hereof.
This summary does not address potential tax effects relevant to our Company or those tax considerations that depend upon circumstances specific to each investor. Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors with respect to the income tax consequences to them of purchasing, owning and disposing of common shares in our Company.
Dividends
The ITA provides that dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident corporation (such as our Company) to a non-resident of Canada shall be subject to a non-resident withholding tax equal to 25% of the gross amount of the dividend of deemed dividend. Provisions in the ITA relating to dividend and deemed dividend payments to and gains realized by non-residents of Canada, who are residents of the United States, are subject to the Treaty. The Treaty may reduce the withholding tax rate on dividends as discussed below.
57
Article X of the Treaty as amended by the US-Canada Protocol ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or deemed dividends paid to a United States corporation which beneficially owns at least 10% of the voting stock of the company paying the dividend. In cases where dividends or deemed dividends are paid to a United States resident (other than a corporation) or a United States corporation which beneficially owns less than 10% of the voting stock of a company, a withholding tax of 15% is imposed on the gross amount of the dividend or deemed dividend paid. We would be required to withhold any such tax from the dividend and remit the tax directly to the CRA for the account of the investor.
The reduction in withholding tax from 25%, pursuant to the Treaty, will not be available:
|
(a) |
if the shares in respect of which the dividends are paid formed part of the business property or were otherwise effectively connected with a permanent establishment or fixed base that the holder has or had in Canada within the 12 months preceding the disposition, or |
(b)the holder is a U.S. LLC which is not subject to tax in the U.S.
The Treaty generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization exclusively administering a pension, retirement or employee benefit fund or plan, if the organization is resident in the U.S. and is exempt from income tax under the laws of the U.S.
Capital Gains
A non-resident holder is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of one of our shares unless the share represents “taxable Canadian property” to the holder thereof. Our common shares will be considered taxable Canadian property to a non-resident holder only if-.
(a)the non-resident holder;
(b)persons with whom the non-resident holder did not deal at arm's length- or
(c)the non-resident holder and persons with whom he did not deal at arm's length,
owned not less than 25% of the issued shares of any class or series of our Company at any time during the five year period preceding the disposition. In the case of a non-resident holder to whom shares of our Company represent taxable Canadian property and who is resident in the United States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless:
|
(a) |
the value of such shares is derived principally from real property (including resource property) situated in Canada, |
|
(b) |
the holder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he ceased to be a resident of Canada, |
|
(c) |
they formed part of the business property or were otherwise effectively connected with a permanent establishment or fixed base that the holder has or had in Canada within the 12 months preceding the disposition, or |
|
(d) |
the holder is a U.S. LLC which is not subject to tax in the U.S. |
If subject to Canadian tax on such a disposition, the taxpayer's capital gain (or capital loss) from a disposition is the amount by which the taxpayer’s proceeds of disposition exceed (or are exceeded by) the aggregate of the taxpayer's adjusted cost base of the shares and reasonable expenses of disposition. For Canadian income tax purposes, the “taxable capital gain” is equal to one-half of the capital gain.
58
United States Federal Income Taxation
The following is a discussion of the material United States Federal income tax consequences, under current law, applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local, or foreign tax consequences. (See “Canadian Federal Income Tax Consequences” above.)
The following discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.
The discussion below does not address potential tax effects relevant to our Company or those tax considerations that depend upon circumstances specific to each investor. In addition, this discussion does not address the tax consequences that may be relevant to particular investors subject to special treatment under certain U.S. Federal income tax laws, such as dealers in securities, tax-exempt entities, banks, insurance companies and non-U.S. Holders. Purchasers of shares of our common stock should therefore satisfy themselves as to the overall tax consequences of their ownership of our common stock, including the State, local and foreign tax consequences thereof (which are not reviewed herein), and should consult their own tax advisors with respect to their particular circumstances.
U.S. Holders
As used herein, a “U.S. Holder” includes a beneficial holder of common shares of our Company who is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof, any trust if a US court is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust, any entity created or organized in the United States which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of common shares of our Company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.
Dividend Distribution on Shares of our Company
U.S. Holders receiving dividend distributions (including constructive dividends) with respect to the common shares of our Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that we have current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be deducted or may be credited against actual tax payable, subject to certain limitations and other complex rules, against the U.S. Holder's United States Federal taxable income. See “Foreign Tax Credit” below. To the extent that distributions exceed our current or accumulated earnings and profits, they will be treated first as a return of capital to the extent of the shareholder's basis in the common shares of our Company and thereafter as gain from the sale or exchange of the common shares of our Company. Preferential tax rates for net long term capital gains may be applicable to a U.S. Holder which is an individual, estate or trust.
In general, dividends paid on our common shares will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.
59
Foreign Tax Credit
A U.S. Holder who pays (or who has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the election of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign source income bears to his or its world-wide taxable income. In determining the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income” and certain other classifications of income. A U.S. Holder who is treated as a domestic U.S. corporation owning 10% or more of our voting stock is also entitled to a deemed paid foreign tax credit in certain circumstances for the underlying foreign tax of our Company related to dividends received or Subpart F income received from us. (See the discussion below of Controlled Foreign Corporations). The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.
Disposition of Common Shares
If a U.S. Holder is holding shares as a capital asset, a gain or loss realized on a sale of our common shares will generally be a capital gain or loss, and will be long-term if the shareholder has a holding period of more than one year. However, gains realized upon sale of our common shares may, under certain circumstances, be treated as ordinary income, if we were determined to be a “collapsible corporation” within the meaning of Code Section 341 based on the facts in existence on the date of the sale (See below for definition of “collapsible corporation”). The amount of gain or loss recognized by a selling U.S. Holder will be measured by the difference between (i) the amount realized on the sale and (ii) his tax basis in our common shares. Capital losses are deductible only to the extent of capital gains. However, in the case of taxpayers other than corporations (U.S.) $3,000 ($1,500 for married individuals filing separately) of capital losses are deductible against ordinary income annually. In the case of individuals and other non-corporate taxpayers, capital losses that are not currently deductible may be carried forward to other years. In the case of corporations, capital losses that are not currently deductible are carried back to each of the three years preceding the loss year and forward to each of the five years succeeding the loss year.
A “collapsible corporation” is a corporation that is formed or availed principally to manufacture, construct, produce, or purchase prescribed types or property that the corporation holds for less than three years and that generally would produce ordinary income on its disposition, with a view to the stockholders selling or exchanging their stock and thus realizing gain before the corporation realizes two thirds of the taxable income to be derived from prescribed property. Prescribed property includes: stock in trade and inventory; property held primarily for sale to customers in the ordinary course of business; unrealized receivables or fees, consisting of rights to payment for non-capital assets delivered or to be delivered, or services rendered or to be rendered to the extent not previously included in income, but excluding receivables from selling property that is not prescribed; and property gain on the sale of which is subject to the capital gain/ordinary loss rule. Generally, a shareholder who owns directly or indirectly 5 percent or less of the outstanding stock of the corporation may treat gain on the sale of his shares as capital gain.
Other Considerations for U.S. Holders
In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Registrant.
Foreign Personal Holding Company
If at any time during a taxable year more than 50% of the total combined voting power or the total value of our outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% or more of our gross income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), we would be treated as a “foreign personal holding company.” In that event, U.S. Holders that hold common shares in our capital would be required to include in income for such year their allocable portion of our passive income which would have been treated as a dividend had that passive income actually been distributed.
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Foreign Investment Company
If 50% or more of the combined voting power or total value of our outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and we are found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that we might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging our common shares to be treated as ordinary income rather than capital gains.
Passive Foreign Investment Company
A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a passive foreign investment company (“PFIC”) is subject to U.S. federal income taxation of that foreign corporation under one of two alternative tax methods at the election of each such U.S. Holder.
Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income,” which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by value (or, if the company is a controlled foreign corporation or makes an election, adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. For taxable years of U.S. persons beginning after December 31, 1997, and for tax years of foreign corporations ending with or within such tax years, the Taxpayer Relief Act of 1997 provides that publicly traded corporations must apply this test on a fair market value basis only.
As a PFIC, each U.S. Holder must determine under which of the alternative tax methods it wishes to be taxed. Under one method, a U.S. Holder who elects in a timely manner to treat the Registrant as a Qualified Electing Fund (“QEF”), as defined in the Code, (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which we qualify as a PFIC on his pro-rata share of our (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the U.S. Holder's taxable year in which (or with which) our taxable year ends, regardless of whether such amounts are actually distributed. Such an election, once made shall apply to all subsequent years unless revoked with the consent of the IRS.
A QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his common shares (or deemed to be realized on the pledge of his common shares) as capital gain; (ii) treat his share of our net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether (see discussion of interest charge below), or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of our annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is an individual, such an interest charge would be not deductible.
The procedure a U.S. Holder must comply with in making a timely QEF election will depend on whether the year of the election is the first year in the U.S. Holder's holding period in which we are a PFIC. If the U.S. Holder makes a QEF election in such first year, (sometimes referred to as a “Pedigreed QEF Election”), then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files their tax return for such first year. If, however, we qualified as a PFIC in a prior year, then the U.S. Holder may make an “Unpedigreed QEF Election” by recognizing as an “excess distribution” (i) under the rules of Section 1291 (discussed below), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date (Deemed Sale Election) or (ii) if we are a controlled foreign corporation (“CFC”), the Holder's pro rata share of the corporation's earnings and profits (Deemed Dividend Election) but see (“Elimination of Overlap Between Subpart F Rules and PFIC Provisions”). The effect of either the deemed sale election or the deemed dividend election is to pay all prior deferred tax, to pay interest on the tax deferral and to be treated thereafter as a Pedigreed QEF as discussed in the prior paragraph. With respect to a situation in which a Pedigreed QEF election is made, if we no longer qualify as a PFIC in a subsequent year, normal Code rules and not the PFIC rules will apply.
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If a U.S. Holder has not made a QEF Election at any time (a “Non-electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reason of a pledge) of his common shares and (ii) certain “excess distributions”, as specially defined, by our Company. An “excess distribution” is any current-year distribution in respect of PFIC stock that represents a rateable portion of the total distributions in respect of the stock during the year that exceed 125 percent of the average amount of distributions in respect of the stock during the three preceding years.
A Non-electing U.S. Holder generally would be required to pro-rate all gains realized on the disposition of his common shares and all excess distributions over the entire holding period for the common shares. All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to our first taxable year during such U.S. Holder's holding period and beginning after January, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Holder would also be liable for interest on the deferred tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing U.S. Holder that is an individual is not allowed a deduction for interest on the deferred tax liability. The portions of gains and distributions that are not characterized as “excess distributions” are subject to tax in the current year under the normal tax rules of the Internal Revenue Code.
If we are a PFIC for any taxable year during which a Non-electing U.S. Holder holds common shares, then we will continue to be treated as a PFIC with respect to such common Shares, even if our Company is no longer by definition a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which we were a PFIC.
Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. If a U.S. Holder makes a QEF Election that is not a Pedigreed Election (i.e., it is made after the first year during which we are a PFIC and the U.S. Holder holds our shares) (a “Unpedigreed Election”), the QEF rules apply prospectively but do not apply to years prior to the year in which the QEF first becomes effective. U.S. Holders should consult their tax advisors regarding the specific consequences of making a Non-Pedigreed QEF Election.
Certain special, generally adverse, rules will apply with respect to the common shares while we are a PFIC whether or not it is treated as a QEF. For example under Section 1297(b)(6) of the Code (as in effect prior to the Taxpayer Relief Act of 1997), a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock.
The foregoing discussion is based on currently effective provisions of the Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change. Any such change could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance that any of these proposals will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. Holders of our common shares are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in our Company. For a discussion of the impact of the Taxpayer Relief Act of 1997 on a U.S. Holder of a PFIC, see “Mark-to-Market Election For PFIC Stock Under the Taxpayer Relief Act of 1997” and “Elimination of Overlap Between Subpart F Rules and PFIC Provisions” below.
Mark-to-Market Election for PFIC Stock Under the Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 provides that a U.S. Holder of a PFIC may make a mark-to-market election with respect to the stock of the PFIC if such stock is marketable as defined below. This provision is designed to provide a current inclusion provision for persons that are Non-Electing Holders. Under the election, any excess of the fair market value of the PFIC stock at the close of the tax year over the Holder's adjusted basis in the stock is included in the Holder's income. The Holder may deduct any excess of the adjusted basis of the PFIC stock over its fair market value at the close of the tax year. However, deductions are limited to the net mark-to-market gains on the stock that the Holder included in income in prior tax years, or so called “unreversed inclusions.” For purposes of the election, PFIC stock is marketable if it is regularly traded on (i) a national securities exchange that is registered with the SEC, (ii) the national market system established under Section II A of the Securities Exchange Act of 1934, or (iii) an
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exchange or market that the IRS determines has rules sufficient to ensure that the market price represents legitimate and sound fair market value.
A Holder's adjusted basis of PFIC stock is increased by the income recognized under the mark-to-market election and decreased by the deductions allowed under the election. If a U.S. Holder owns PFIC stock indirectly through a foreign entity, the basis adjustments apply to the basis of the PFIC stock in the hands of the foreign entity for the purpose of applying the PFIC rules to the tax treatment of the U.S. owner. Similar basis adjustments are made to the basis of the property through which the U.S. persons hold the PFIC stock.
Income recognized under the mark-to-market election and gain on the sale of PFIC stock with respect to which an election is made is treated as ordinary income. Deductions allowed under the election and loss on the sale of PFIC with respect to which an election is made, to the extent that the amount of loss does not exceed the net mark-to-market gains previously included, are treated as ordinary losses. The U.S. or foreign source of any income or losses is determined as if the amount were a gain or loss from the sale of stock in the PFIC.
If PFIC stock is owned by a CFC (discussed below), the CFC is treated as a U.S. person that may make the mark-to-market election. Amounts includible in the CFC's income under the election are treated as foreign personal holding company income, and deductions are allocable to foreign personal holding company income.
The above provisions apply to tax years of U.S. persons beginning after December 31, 1997, and to tax years of foreign corporations ending with or within such tax years of U.S. persons.
The rules of Code Section 1291 applicable to nonqualified funds as discussed above generally do not apply to a U.S. Holder for tax years for which a mark-to-market election is in effect. If Code Section 1291 is applied and a mark-to-market election was in effect for any prior tax year, the U.S. Holder's holding period for the PFIC stock is treated as beginning immediately after the last tax year of the election. However, if a taxpayer makes a mark-to-market election for PFIC stock that is a nonqualified fund after the beginning of a taxpayer's holding period for such stock, a co-ordination rule applies to ensure that the taxpayer does not avoid the interest charge with respect to amounts attributable to periods before the election.
Controlled Foreign Corporation Status
If more than 50% of the voting power of all classes of stock or the total value of the stock of our Company is owned, directly or indirectly, by U.S. Holders, each of whom own after applying rules of attribution 10% or more of the total combined voting power of all classes of stock of our Company, we would be treated as a “controlled foreign corporation” or “CFC” under Subpart F of the Code. This classification would bring into effect many complex results including the required inclusion by such 10% U.S. Holders in income of their pro rata shares of “Subpart F income” (as defined by the Code) of our Company and our earnings invested in “U.S. property” (as defined by Section 956 of the Code). In addition, under Section 1248 of the Code if we are considered a CFC at any time during the five year period ending with the sale or exchange of its stock, gain from the sale or exchange of common shares of our Company by such a 10% U.S. Holder of our common stock at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of our earnings and profits attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because we may never be a CFC, a more detailed review of these rules is beyond the scope of this discussion.
Elimination of Overlap Between Subpart F Rules and PFIC Provisions
Under the Taxpayer Relief Act of 1997, a PFIC that is also a CFC will not be treated as a PFIC with respect to certain 10% U.S. Holders. For the exception to apply, (i) the corporation must be a CFC within the meaning of section 957(a) of the Code and (ii) the U.S. Holder must be subject to the current inclusion rules of Subpart F with respect to such corporation (i.e., the U.S. Holder is a “United States Shareholder,” see “Controlled Foreign Corporation,” above). The exception only applies to that portion of a U.S. Holder's holding period beginning after December 31, 1997. For that portion of a United States Holder before January 1, 1998, the ordinary PFIC and QEF rules continue to apply.
As a result of this new provision, if we were ever to become a CFC, U.S. Holders who are currently taxed on their pro rata shares of Subpart F income of a PFIC which is also a CFC will not be subject to the PFIC provisions with respect to the same stock if they have previously made a Pedigreed QEF Election. The PFIC provisions will however continue to apply to U.S Holders for any periods in which Subpart F does not apply (for example he is no longer a
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10% Holder or we are no longer a CFC) and to U.S. Holders that did not make a Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on the PFIC shares held in our Company as if those shares had been sold.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES OF OUR COMPANY.
F. |
Dividends and Paying Agents |
Not applicable for Annual Reports
G. |
Statement by Experts |
Not applicable for Annual Reports
H. |
Documents on Display |
Upon the effectiveness of this filing, we will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and we will thereafter file reports and other information with the SEC electronically. You may read and copy any of our reports and other information at the SEC’s web site at http://www.sec.gov.
The documents concerning our Company referred to in this Annual Report may also be viewed at our principal executive offices, Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6 (Telephone: (604) 602-4935), during normal business hours.
I. |
Subsidiary Information |
See Item 4(C) for the Company’s active subsidiaries as at the date of this Annual Report.
Item 11 |
Quantitative and Qualitative Disclosures About Market Risk |
As a Canadian company, our cash balances are kept in U.S. and Canadian funds. Therefore, we may become exposed to some exchange, interest rate and other risks as listed below. We consider the amount of risk to be manageable and do not currently, nor will we likely in the foreseeable future, conduct hedging to reduce our market risks.
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i.) |
Currency Risk - Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. |
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ii.) |
Interest rate risk - The Company’s cash earns interest at variable interest rates. While fluctuations in market rates do not have a material impact on the fair value of the Company’s cash flows, future cash flows may be affected by interest rate fluctuations. The Company is not significantly exposed to interest rate fluctuations. |
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iii.) |
Credit risk - Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is exposed to credit risk with respect to its cash and short-term investments. |
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iv.) |
Liquidity risk - Liquidity risk arises from the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company accomplishes this by achieving profitable operations and maintaining sufficient cash reserves. |
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v.) |
Commodity Risk - Mineral prices and marketability fluctuate and any decline in mineral prices may have a negative effect on the Company. Mineral prices, particularly gold and silver prices, have fluctuated widely in recent years. The marketability and price of minerals which may be produced and sold by the Company will be affected by numerous factors beyond the control of the Company. These |
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other factors include delivery uncertainties related to the proximity of its resources to processing facilities and extensive government regulations related to price, taxes, royalties, allowable production land tenure, the import and export of minerals and many other aspects of the mining business. |
Item 12 |
Description of Securities Other than Equity Securities |
Not applicable
Item 13 |
Defaults, Dividend Arrearages and Delinquencies |
None
Item 14 |
Material Modifications to the rights of Security Holders and Use of Proceeds |
Not Applicable
Item 15 |
Controls and Procedures |
Not Applicable
Item 16 |
[RESERVED] |
Item 16A |
Audit Committee Financial Expert |
The Company’s board of directors has determined that it has two audit committee financial experts serving on its audit committee. Jordan Estra and Federico Villaseñor have been determined to be such audit committee financial experts and are independent, as that term is defined by the Toronto Stock Exchange’s listing standards applicable to the Company. The SEC has indicated that the designation of Messrs. Estra and Villaseñor as audit committee financial experts does not make either of them an “expert” for any purpose, impose any duties, obligations or liability on either of them that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation or affect the duties, obligations or liability of any other member of the audit committee or board of directors.
Item 16B |
Code of Ethics |
The Company has not adopted a written code of ethics applicable to officers and directors of the Company. The Board has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual director’s participation in decisions of the Board in which the director has an interest have been sufficient to ensure that the Board operated independently of management and in the best interests of the Company.
Item 16C |
Principal Accountant Fees and Services |
Audit Fees. This category includes the fees for the audit of our financial statements and the quarterly reviews of interim financial statements. This category also includes advice on audit and accounting matters that arose during or as a result of the audit or the review of interim financial statements and services in connection with Securities and Exchange Commission filings.
Audit-Related Fees. This category includes assurance and related services that are reasonably related to the performance of the audit or review of the financial statements that are not reported under Audit Fees, and describes the nature of the services comprising the fees disclosed under this category.
Tax Fees. This category includes the fees for professional services rendered for tax compliance, tax advice and tax planning, and describes the nature of the services comprising the fees disclosed under this category.
All Other Fees. This category includes products and services provided by the principal accountant, other than the services reported under Audit Fees, Audit-Related Fees or Tax Fees.
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Our current independent public accountants provided audit and other services during the fiscal year ended April 30, 2022 and April 30, 2021:
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April 30, 2021 |
April 30, 2022 |
Audit Fees |
92,500 |
150,000 |
Audit-Related Fees |
30,000 |
Nil |
Tax Fees |
Nil |
Nil |
All Other Fees |
Nil |
Nil |
Total Fees |
122,500 |
150,000 |
Pre-Approval Policies and Procedures
Our audit committee pre-approves all services provided by our independent auditors. All of the services and fees described under the categories of “Audit Fees”, “Audit Related Fees”, “Tax Fees” and “All Other Fees” were reviewed and approved by the audit committee before the respective services were rendered. We are not relying upon a waiver pursuant to the provisions of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
The audit committee has considered the nature and amount of the fees billed by Davidson & Company LLP, Chartered Professional Accountants, and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Davidson & Company LLP, Chartered Professional Accountants.
Item 16D |
Exemptions from Listing Standards for Audit Committees |
Not Applicable
Item 16E |
Purchase of Equity Securities by the Issuer and Affiliated Purchasers |
There have been no purchases of the Company's common shares by the Company or affiliated purchasers during the period covered by this report.
Item 16F |
Change in Registrant’s Certifying Accountant |
Since May 2016, Davidson & Company LLP, Chartered Professional Accountants have been the Company’s independent accountants.
Item 16G |
Corporate Governance |
Not Applicable
Item 16H |
Mine Safety Disclosure |
Not Applicable
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PART II
Item 17 |
Financial Statements |
Not Applicable
Item 18 |
Financial Statements |
The following financial statements and notes thereto are filed with and incorporated herein as part of this Annual Report as Exhibit F-1:
Audited financial statements of the Company for the year ended April 30, 2022, including consolidated statements of financial position, consolidated statements of operations and comprehensive income, consolidated statements of changes in equity, consolidated statements of cash flows, and notes to the consolidated financial statements.
The Company’s Financial Statements are stated in Canadian Dollars and are prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
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Item 19 |
Exhibits |
Exhibits Required by Form 20-F
Exhibit |
Description |
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1. |
Articles of Incorporation |
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1.1 |
Notice of Articles of Starcore International Mines Ltd. dated November 1, 2017.1 |
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1.2 |
Amended Articles of Starcore International Mines Ltd. dated October 24, 2017.1 |
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1.3 |
Notice of Change of Directors dated November 1, 2017. 1 |
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1.4 |
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1.5 |
Amended Articles of Starcore International Mines Ltd. dated November 17, 2020.2 |
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1.6 |
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8. |
List of Subsidiaries |
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8.1 |
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12. |
Certifications |
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12.1 |
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12.2 |
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13.1 |
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13.2 |
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96. |
Technical Report Summary |
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96.1 |
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96.2 |
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F-1 |
Financial Statements |
Notes:
1. |
Incorporated by reference from the Company’s Annual report on Form 20-F, as filed with the Securities exchange Commission on July 30, 2018. |
2. |
Incorporated by reference from the Company’s Annual report on Form 20-F, as filed with the Securities exchange Commission on July 29, 2021. |
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SIGNATURES
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 registration statement [annual report] on its behalf.
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Starcore International Mines Ltd. |
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Date: July 29, 2022 |
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By: |
/s/ Robert Eadie |
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Name: Robert Eadie |
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Title: CEO |
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Starcore International Mines Ltd.
Consolidated Financial Statements
For the years ended April 30, 2022 and April 30, 2021
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors of
Starcore International Mines Ltd.
Opinion on the consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Starcore International Mines Ltd. (the “Company”), as of April 30, 2022 and 2021, and the related consolidated statements of operations and comprehensive income (loss), cash flows, and changes in equity for the years ended April 30, 2022, 2021, and 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for the years ended April 30, 2022, 2021, and 2020 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
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’s consolidated financial statements based on our audits. 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 audits 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. As part of our audits 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.
Our audits included performing procedures to assess the risks of material misstatements of the 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 audits 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 audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Assessment of impairment indicators of Mining interest, plant and equipment
As described in Note 8 to the consolidated financial statements, the carrying amount of the Company’s mining interest, plant and equipment was $29,820,000 as at April 30, 2022.
The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators of mining interest, plant and equipment is a critical audit matter are that there was judgment by management when assessing whether there were indicators of impairment for these capital assets, specifically related to assessing: (i) technological obsolescence of the mining interest, plant and equipment; (ii) significant adverse changes in the business climate or legal factors including changes in gold and silver prices; and iii) internal reporting regarding the economic performance of the mining interest, plant and equipment and comparison to historical operations. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of indicators of impairment that could give rise to the requirement to conduct a formal impairment test.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:
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• |
evaluating management’s assessment of indicators of impairment; |
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• |
assessing the condition and potential obsolescence of the mining interest, plant and equipment; |
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• |
assessing significant changes in the expected operating costs, current period cash flow and operating income in comparison to historical operations; |
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• |
considering current and forecasted gold and silver prices through review of external market and industry data; |
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• |
assessing the completeness of external or internal factors that could be considered as indicators of impairment; and |
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• |
assessing the adequacy of the associated disclosures in the financial statements. |
Accounting for income taxes
As described in Note 19 to the consolidated financial statements, the carrying amount of the Company’s deferred tax assets is $3,348,000 and deferred tax liabilities is $5,610,000.
The principal considerations for our determination that performing procedures relating to the assessment of deferred tax assets and liabilities is a critical audit matter are that there was judgment by management when assessing: (i) material foreign and domestic tax provisions; and (ii) complex tax regulations relating to multiple jurisdictions. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of these elements.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:
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• |
evaluating the appropriateness and accuracy of the gross deferred tax assets and deferred tax liabilities by assessing significant changes by nature of the tax item; |
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• |
utilizing personnel with specialized knowledge and skill in domestic and international tax to assist in analyzing management’s assessment of domestic and foreign tax laws and the application to the Company’s tax provision; and |
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• |
assessing the adequacy of the associated disclosures in the financial statements. |
We have served as the Company’s auditor since 2016.
Vancouver, CanadaChartered Professional Accountants
July 28, 2022
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Starcore International Mines Ltd.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
|
|
April 30, |
|
|
April 30, |
|
||
As at |
|
2022 |
|
|
2021 |
|
||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
|
$ |
|
|
Amounts receivable (note 5) |
|
|
|
|
|
|
|
|
Inventory (note 6) |
|
|
|
|
|
|
|
|
Prepaid expenses and advances |
|
|
|
|
|
|
|
|
Investment (note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
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|
|
|
|
|
|
|
|
|
|
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|
Non-Current |
|
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|
|
|
|
Mining interest, plant and equipment (note 8) |
|
|
|
|
|
|
|
|
Right-of-use assets (note 10) |
|
|
|
|
|
|
|
|
Exploration and evaluation assets (note 9) |
|
|
|
|
|
|
|
|
Reclamation deposits |
|
|
— |
|
|
|
|
|
Deferred tax assets (note 19) |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Assets |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
|
|
|
$ |
|
|
Current portion of lease liability (note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current |
|
|
|
|
|
|
|
|
Rehabilitation and closure cost provision (note 12) |
|
|
|
|
|
|
|
|
Lease liability (note 10) |
|
|
|
|
|
|
|
|
Deferred tax liabilities (note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
|
|
|
$ |
|
|
The accompanying notes form an integral part of these consolidated financial statements.
73
Starcore International Mines Ltd.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
|
|
April 30, |
|
|
April 30, |
|
||
As at |
|
2022 |
|
|
2021 |
|
||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 13) |
|
$ |
|
|
|
$ |
|
|
Equity reserve |
|
|
|
|
|
|
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
|
|
|
$ |
|
|
Commitments (note 15)
Subsequent Events (notes 11 and 13)
Approved by the Directors:
“Robert Eadie” |
Director |
|
“Gary Arca” |
Director |
The accompanying notes form an integral part of these consolidated financial statements.
74
Starcore International Mines Ltd.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands of Canadian dollars except per share amounts)
For the year ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Mined ore |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total Revenues (note 18) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Mined ore |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and depletion (notes 8 and 10) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Cost of Sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from mining operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing costs (note 11) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign exchange |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Management fees and salaries (note 15) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Office and administration |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Professional and consulting fees (note 15) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Pre- exploration costs |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
Shareholder relations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transfer agent and regulatory fees |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes and other losses |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Losses |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of Toiyabe (note 9) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Unrealized loss on investement (note 7) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Sale of royalties (note 9) |
|
|
|
|
|
|
— |
|
|
|
— |
|
Impairment of Mining Interest, Plant and Equipment (note 8) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Total Other Losses |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recovery/ (expense) (note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) for the year |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss for the year |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share (Note 17) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share (Note 17) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
The accompanying notes form an integral part of these consolidated financial statements.
75
Starcore International Mines Ltd.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
For the years ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Cash provided by |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) for the year |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
Items not involving cash: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion (note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
Discount on long-term debt (note 11) |
|
|
— |
|
|
|
|
|
|
|
|
|
Interest on long-term debt (note 11) |
|
|
— |
|
|
|
|
|
|
|
|
|
Income tax recovery |
|
|
|
|
|
|
( |
) |
|
|
|
|
Sale of royalty (note 9) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Lease accretion (note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of Toiyabe (note 9) |
|
|
|
|
|
|
|
|
|
|
— |
|
Sale of Altiplano (note 8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Rehabilitation and closure cost accretion (note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments (note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investment (note 7) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash generated by operating activities before working capital changes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in non-cash working capital items |
|
|
|
|
|
|
|
|
|
|
|
|
Amounts receivable |
|
|
( |
) |
|
|
|
|
|
|
|
|
Inventory |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and advances |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash inflow from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Loan payment (note 11) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Interest paid (note 11) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Lease payments (note 10) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflow from financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in exploration and evaluation assets (note 9) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of mining interest, plant and equipment (note 8) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Sale of royalty (note 9) |
|
|
|
|
|
|
— |
|
|
|
— |
|
Proceeds from sale of Altiplano (note 8) |
|
|
— |
|
|
|
|
|
|
|
|
|
Cash on sale of Toiyabe (note 9) |
|
|
— |
|
|
|
|
|
|
|
— |
|
Cash received from reclamation deposit |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflow from investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease) in cash |
|
|
|
|
|
|
|
|
|
|
( |
) |
Effect of foreign exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
|
|
|
|
Cash, beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Non-cash transactions for year ended April 30, 2022:
|
a) |
The Company accrued $nil (2021 - $nil; 2020 - $ |
|
b) |
Capitalized $ |
|
c) |
Capitalized $ |
|
d) |
The Company paid $nil (2021 - $nil; 2020 -$nil) in taxes, |
The accompanying notes form an integral part of these consolidated financial statements.
76
Starcore International Mines Ltd.
Consolidated Statements of Changes in Equity for the years ended April 30, 2021, 2020 and 2019
(in thousands of Canadian dollars except for number of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Currency |
|
|
|
|
|
|
|
|
|
||
|
|
Shares |
|
|
Share |
|
|
Equity |
|
|
Translation |
|
|
Accumulated |
|
|
|
|
|
|||||
|
|
Outstanding |
|
|
Capital |
|
|
Reserve |
|
|
Reserve |
|
|
Deficit |
|
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Loss for the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Earnings for the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Earnings for the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Balance, April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
The accompanying notes form an integral part of these consolidated financial statements.
77
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
1. |
Corporate information |
Starcore is engaged in exploring, extracting and processing gold and silver through its wholly-owned subsidiary, Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which owns the San Martin mine in Queretaro, Mexico. In May of 2020, the Company completed the sale of Altiplano GoldSilver S.A. de C.V (“Altiplano”), which owns the gold and silver concentrate processing plant in Matehuala, Mexico (see note 8).
The Company is also engaged in acquiring mining related operating assets and exploration assets in North America directly and through corporate acquisitions. In management’s judgment, the Company has adequate working capital and cash for the upcoming twelve months. See Note 20- Subsequent Event- Private Placement.
2. |
Basis of preparation |
|
a) |
Statement of compliance |
These consolidated financial statements for the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements were authorized for issue by the Board of Directors on July 27, 2022.
|
b) |
Basis of measurement |
The preparation of consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
|
c) |
Basis of consolidation |
These consolidated financial statements include the accounts of the Company and all of its subsidiaries, which are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from the entity’s activities. Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition up to the effective date of disposal or loss of control. The Company’s wholly-owned subsidiary Bernal, along with various other subsidiaries, carry out their operations in Mexico, U.S.A. and in Canada.
All intra-group transactions, balances, income and expenses are eliminated, in full, on consolidation.
78
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies |
The accounting policies set out below were applied consistently to all periods presented in these consolidated financial statements, unless otherwise indicated.
|
a) |
Foreign Currency Translation |
The functional currency of Starcore, the parent, is the Canadian dollar (“CAD”) and the functional currency of its subsidiaries is the United States dollar (“USD”) (collectively “Functional Currency”). Foreign currency accounts are translated into the Functional Currency as follows:
|
• |
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into the Functional Currency by the use of the exchange rate in effect at that date. At the period end date, unsettled monetary assets and liabilities are translated into the Functional Currency by using the exchange rate in effect at the period end. |
Foreign exchange gains and losses are recognized in net earnings and presented in the Consolidated Statement of Operations and Comprehensive Income (Loss) in accordance with the nature of the transactions to which the foreign currency gains and losses relate, except for foreign exchange gains and losses from translating investments and marketable securities which are recognized in other comprehensive income as part of the total change in fair values of the securities. Unrealized foreign exchange gains and losses on cash balances denominated in foreign currencies are disclosed separately in the Consolidated Statements of Cash Flows.
|
b) |
Foreign Operations |
The assets and liabilities of foreign operations with Functional Currencies differing from the presentation currency, including fair value adjustments arising on acquisition, are translated to CAD at exchange rates in effect at the reporting date. The income and expenses of foreign operations with Functional Currencies differing from the presentation currency are translated into CAD at the year-to-date average exchange rates.
The Company’s foreign currency differences are recognised and presented in other comprehensive income as a foreign currency translation reserve (“Foreign Currency Translation Reserve”), a component of equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
|
c) |
Cash and cash equivalents |
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of
79
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
d) |
Revenue Recognition |
Revenue from the sale of metals is recognized when the significant risks and rewards of ownership have passed to the buyer, it is probable that economic benefits associated with the transaction will flow to the Company, the sale price can be measured reliably, the Company has no significant continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenues from metal sales are subject to adjustment upon final settlement of metal prices, weights, and assays as of a date that may be up to two weeks after the shipment date. The Company records adjustments to revenues monthly based on quoted forward prices for the expected settlement period. Adjustments for weights and assays are recorded when results are determinable or on final settlement. Accounts receivable for metal sales are therefore measured at fair value.
|
e) |
Inventory |
Finished goods and work-in-process are measured at the lower of average cost and net realizable value. Net realizable value is calculated as the estimated price at the time of sale based on prevailing and long-term metal prices less estimated future costs to convert the inventories into saleable form and estimated costs to sell.
Ore extracted from the mines is processed into finished goods (gold and by-products in doré). Costs are included in work-in-process inventory based on current costs incurred up to the point prior to the refining process, including applicable depreciation and depletion of mining interests, and removed at the average cost per recoverable ounce of gold. The average costs of finished goods represent the average costs of work-in-process inventories incurred prior to the refining process, plus applicable refining costs.
Supplies are measured at average cost. In the event that the net realizable value of the finished product, the production of which the supplies are held for use in, is lower than the expected cost of the finished product, the supplies are written down to net realizable value. Replacement costs of supplies are generally used as the best estimate of net realizable value. The costs of inventories sold during the year are presented in the Company’s profit and loss.
|
f) |
Mining Interest, Plant and Equipment |
Mining interests represent capitalized expenditures related to the development of mining properties and related plant and equipment.
Recognition and Measurement
On initial recognition, equipment is valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
80
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
f) |
Mining Interest, Plant and Equipment – (cont’d) |
Recognition and Measurement – (cont’d)
Mining expenditures incurred either to develop new ore bodies or to develop mine areas in advance of current production are capitalized. Mine development costs incurred to maintain current production are included in the consolidated statement of operations and comprehensive income (loss). Exploration costs relating to the current mine in production are expensed to net income as incurred due to the immediate exploitation of these areas or an immediate determination that they are not exploitable.
Borrowing costs that are directly attributable to the acquisition and preparation for use, are capitalized. Capitalization of borrowing costs begins when expenditures are incurred and activities are undertaken to prepare the asset for its intended use. The amount of borrowing costs capitalized cannot exceed the actual amount of borrowing costs incurred during the period. All other borrowing costs are expensed as incurred.
The capitalization of borrowing costs is discontinued when substantially all of the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Capitalized borrowing costs are amortized over the useful life of the related asset.
Major Maintenance and Repairs
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Company’s profit or loss during the financial year in which they are incurred.
Subsequent Costs
The cost of replacing part of an item of equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its costs can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of equipment are recognized in the Company’s profit or loss as incurred
Leased Equipment
Leases are recognized as a right-to-use asset with a corresponding liability at the date at which the leased asset is available for use. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Company’s incremental borrowing rate is used, being the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
81
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
f) |
Mining Interest, Plant and Equipment – (cont’d) |
Depreciation and Impairment
Mining interest, plant and equipment are subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses, with the exception of land which is not depreciated. Depletion of mine properties is charged on a unit-of-production basis over proven and probable reserves and resources expected to be converted to reserves. Currently the depletion base is approximately
The Company reviews and evaluates its mining interests, plant and equipment for impairment at least annually or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if the recoverable value of a cash generating unit is less than the carrying amount of the assets. An impairment loss is measured and recorded based on the greater of the cash generating unit’s fair value less cost to sell or its value in use versus its carrying value. In assessing value in use, future cash flows are estimated based on expected future production, commodity prices, operating costs and capital costs discounted to their present value.
Mining interests, plant and equipment that have been impaired in prior periods are tested for possible reversal of impairment whenever events or changes in circumstances indicate that the impairment has reversed. If the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount but not beyond the carrying amount that would have been determined had
|
g) |
Rehabilitation and Closure Cost Provision |
The Company records a provision for the estimated future costs of rehabilitation and closure of operating and inactive mines and development projects, which are discounted to net present value using the risk- free interest rates applicable to the future cash outflows. Estimates of future costs represent management’s best estimates which incorporate assumptions on the effects of inflation, movements in foreign exchange rates and the effects of country and other specific risks associated with the related liabilities. The provision for the Company’s rehabilitation and closure cost obligations is accreted over time to reflect the unwinding of the discount with the accretion expense included in finance costs in the Consolidated Statement of Operations and Comprehensive Loss. The provision for rehabilitation and closure cost obligations is re-measured at the end of each reporting period for changes in estimates and circumstances. Changes in estimates and circumstances include changes in legal or regulatory requirements, increased obligations arising from additional mining and exploration activities, changes to cost estimates and changes to risk free interest rates.
82
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
g) |
Rehabilitation and Closure Cost Provision – (cont’d) |
Rehabilitation and closure cost obligations relating to operating mines and development projects are initially recorded with a corresponding increase to the carrying amounts of related mining properties. Changes to the obligations are also accounted for as changes in the carrying amounts of related mining properties, except where a reduction in the obligation is greater than the capitalized rehabilitation and closure costs, in which case, the capitalized rehabilitation and closure costs is reduced to nil and the remaining adjustment is included in production costs in the Consolidated Statement of Operations and Comprehensive Loss. Rehabilitation and closure cost obligations related to inactive mines are included in production costs in the Consolidated Statement of Operations and Comprehensive Income (Loss) on initial recognition and subsequently when re-measured.
|
h) |
Exploration and Evaluation Expenditures |
Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation (“E&E”) expenditures are recognized and capitalized, in addition to the acquisition costs. These direct expenditures include such costs as materials used, surveying and sampling costs, drilling costs, payments made to contractors, geologists, consultants, and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to E&E activities, including general and administrative overhead costs, are expensed in the period in which they occur.
When a project is determined to no longer have commercially viable prospects to the Company, E&E expenditures in respect of that project are deemed to be impaired. As a result, those E&E expenditures, in excess of estimated recoveries, are written off to the Company’s profit or loss.
The Company assesses E&E assets for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development and is classified as “mines under construction”. E&E assets are tested for impairment before the assets are transferred to development properties.
Any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.
|
i) |
Financial Instruments |
Recognition
The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value and are derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged, cancelled or expired.
83
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
i) |
Financial Instruments – (cont’d) |
A write-off of a financial asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has no reasonable expectations of recovering the contractual cash flows on a financial asset.
All of the Company’s financial instruments are classified into one of the following categories based upon the purpose for which the instrument was acquired or issued. All transactions related to financial instruments are recorded on a trade date basis. The Company’s accounting policy for each category is as follows:
Classification and Measurement
The Company determines the classification of its financial instruments at initial recognition. Financial assets are classified according to the following measurement categories:
|
i) |
those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and, |
|
ii) |
those to be measured subsequently at amortized cost. |
The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).
After initial recognition at fair value, financial liabilities are classified and measured at either:
|
i) |
amortized cost; or |
|
ii) |
FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives) |
The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.
The Company’s financial assets consist of cash and investments, which are classified and measured at FVTPL, with realized and unrealized gains or losses related to changes in fair value reported in profit or loss, and amounts receivable, which is classified at amortized cost. The Company’s financial liabilities consist of trade and other payables and loans payable, which are classified and measured at amortized cost using the effective interest method. Interest expense is reported in profit or loss.
84
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
i) |
Financial Instruments – (cont’d) |
Impairment
The Company assesses all information available, including on a forward-looking basis, the expected credit losses associated with any financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportive forward-looking information.
Fair value hierarchy
Financial instruments recognized at fair value on the consolidated balance sheets must be classified into one of the three following fair value hierarchy levels:
Level 1 – measurement based on quoted prices (unadjusted observed in active markets) for identical assets or liabilities;
Level 2 – measurement based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability;
Level 3 – measurement based on inputs that are not observable (supported by little or no market activity) for the asset or liability.
|
j) |
Income Taxes |
Current tax and deferred taxes are recognized in the Company’s profit or loss, except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.
Current income taxes are recognized for the estimated taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the period end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilised. At the end of each reporting period, the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
85
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
k) |
Share Capital |
Financial instruments issued by the Company are classified as equity, only to the extent that they do not meet the definition of a financial liability or asset. The Company’s common shares, share warrants and share options are classified as equity instruments.
Incremental costs, directly attributable to the issue of new shares, warrants or options, are shown in equity as a deduction, net of tax, from proceeds.
|
l) |
Profit or Loss per Share |
Basic profit or loss per share is computed by dividing the Company’s profit or loss applicable to common shares by the weighted average number of common shares outstanding for the relevant period.
Diluted profit or loss per share is computed by dividing the Company’s profit or loss applicable to common shares, by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive instruments were converted at the beginning of the period.
|
m) |
Share-based Payments |
Where equity-settled share options are awarded to employees or non-employees, the fair value of the options at the date of grant is charged to the Company’s profit or loss over the vesting period. The number of equity instruments expected to vest at each reporting date, are taken into account so that the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
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 modifications, is charged to the Company’s profit or loss over the remaining vesting period.
Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in the Company’s profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the Company’s profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.
When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for effects of non-transferability, exercise restrictions and behavioural considerations. All equity-settled share based payments are reflected in equity reserve, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in equity reserve is credited to share capital, adjusted for any consideration paid.
86
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
3. |
Summary of significant accounting policies – (cont’d) |
|
m) |
Share-based Payments – (cont’d) |
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and immediately 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 that the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.
Where vesting conditions are not satisfied and options are forfeited, the Company reverses the fair value amount of the unvested options which had been recognized over the vesting period.
|
n) |
New and Revised Accounting Standards |
The following accounting standards have been issued or amended but are not yet effective. The Company has not early adopted these new and amended standards. The Company continues to evaluate the new standards but currently no material impact is expected as a result of the adoptions of these new and amended standards:
|
• |
IAS 1 “Presentation of Financial Statements” |
|
• |
IAS 16 “Property, Plant and Equipment” |
4. |
Critical accounting estimates and judgments |
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s profit or loss in the period of the change, if it affects that period only, or in the period of the change and future periods, if the change affects both.
Information about critical estimates and judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements within the next financial year are discussed below:
87
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
4. |
Critical accounting estimates and judgments – (cont’d) |
Estimates
|
a) |
Economic Recoverability and Profitability of Future Economic Benefits of Mining Interests |
Management has determined that mining interests, evaluation, development and related costs incurred which have been capitalized are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geologic and metallurgic information, history of conversion of mineral deposits to proven and probable reserves, scoping and feasibility studies, accessible facilities, existing permits and life of mine plans.
|
b) |
Units of Production Depletion and Depreciation |
Estimated recoverable reserves are used in determining the depreciation of mine specific assets. This results in depreciation charges proportional to the depletion of the anticipated remaining life of mine production. Each item’s life, which is assessed annually, has regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumption, including the amount of recoverable reserves and estimate of future capital expenditure. Changes are accounted for prospectively.
|
c) |
Rehabilitation Provisions |
Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs, which will reflect the market condition at the time that the rehabilitation costs are actually incurred. The final cost of the currently recognized rehabilitation provision may be higher or lower than currently provided.
The inflation rate applied to estimated future rehabilitation and closure costs is
|
d) |
Mineral Reserves and Mineral Resource Estimates |
Mineral reserves are estimates of the amount of ore that can be economically and legally extracted from the Company’s mining properties. The Company estimates its mineral reserve and mineral resources based on information compiled by Qualified Persons as defined by Canadian Securities Administrators National Instrument 43-101 Standards for Disclosure of Mineral Projects. Such information includes geological data on the size, depth and shape of the mineral deposit, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade that comprise the mineral reserves. Changes in the mining reserve or mineral resource estimates may impact the carrying value of mineral properties and deferred development costs, property, plant and equipment, provision for site reclamation and closure, recognition of deferred income tax assets and depreciation and amortization charges.
88
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
4. |
Critical accounting estimates and judgments – (cont’d) |
Judgments
|
a) |
Impairments |
The Company assesses its mining interest, plant and equipment assets annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance.
|
b) |
Income Taxes |
Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recuperated.
5. |
Amounts receivable |
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
||
Taxes receivable |
|
$ |
|
|
|
$ |
|
|
Trades receivable |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
89
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
6. |
Inventory |
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
||
Carrying value of inventory: |
|
|
|
|
|
|
|
|
Doré |
|
$ |
|
|
|
$ |
|
|
Goods in transit |
|
|
|
|
|
|
— |
|
Work-in-process |
|
|
|
|
|
|
|
|
Stockpile |
|
|
|
|
|
|
|
|
Supplies |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
7. |
Investment |
Marketable securities at April 30, 2022 consists of a FVTPL investment in Westward Gold Inc. (formerly IM Exploration Inc.) (“WG”). At April 30, 2022, the Company held
While the Company will seek to maximize the proceeds it receives from the sale of its WG Shares, there is no assurance as to the timing of disposition or the amount that will be realized.
8. |
Mining interest, plant and equipment |
|
|
Mining Interest |
|
|
Plant and Equipment |
Corporate Equipment |
|
|
Total |
|
||||||
|
|
|
|
|
|
Mining Altiplano |
|
|
|
|
|
|
|
|||
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Increase in ARO provision (note 12) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Effect of foreign exchange |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in ARO provision (note 12) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance, April 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Depreciation for the year |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of foreign exchange |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance, April 30, 2021 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation for the year |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of foreign exchange |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, April 30, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Balance, April 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
90
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
8. |
Mining interest, plant and equipment – (cont’d) |
San Martin
The Company’s mining interest, plant and equipment pertain to gold and silver extraction and processing through its San Martin mine.
Sale of Altiplano Facility
In August, 2015, the Company acquired Cortez Gold Corp. in an all-share transaction completed pursuant to a court approved Plan of Arrangement under the Business Corporations Act (British Columbia), which owned Altiplano and its facility, a third party gold and silver concentrate processing plant in Matehuala, Mexico. The Company accepted an offer on July 5, 2019, to sell
9. |
Exploration and evaluation assets |
|
a) |
American Consolidated Minerals (“AJC”) properties |
Toiyabe, U.S.A
The Company has the rights to a
During the year ended April 30, 2021, the Company entered into a binding agreement with WG for the assignment of the Company’s option to acquire a
91
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
9.Exploration and evaluation assets – (cont’d)
The consideration received in cash and shares was valued at $
|
b) |
Creston Moly (“Creston”) properties |
The Company has acquired the rights to the following exploration properties:
i)El Creston Project, Mexico
The Company acquired a
During the year ended April 30, 2022, the Company acquired additional claims from Minera Teocuitla SA de CV of Hermosillo, Sonora, Mexico. The Teocuitla claims are located in Opodepe, Sonora, Mexico beside the El Creston claim in the northwest part of the El Creston property.
ii)Ajax Project, Canada
The Company acquired a
92
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
9.Exploration and evaluation assets – (cont’d)
|
iii) |
Scottie Claims Royalty, Canada |
The Company acquired a
|
|
AJC Properties |
|
|
Creston Properties |
|
|
AJC X Properties |
|
|
Total |
|
||||
Acquisition costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Property disposition |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance, April 30, 2021 and April 30, 2022 |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Exploration costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Maintenance |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Property disposition |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Foreign exchange |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, April 30, 2021 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Drilling costs |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign exchange |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2022 |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total Exploration and evaluation assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2021 |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Balance, April 30, 2022 |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
93
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
10. |
Leases |
Lease liabilities have been measured by discounting future lease payments at the incremental borrowing rate of
|
|
Starcore |
|
|
Bernal |
|
|
Total |
|
|||
Lease balance, April 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Lease accretion |
|
|
|
|
|
|
|
|
|
|
|
|
Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign exchange |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Long term lease liabilities, April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Lease accretion |
|
|
|
|
|
|
|
|
|
|
|
|
Lease additions |
|
|
— |
|
|
|
|
|
|
|
|
|
Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign exchange |
|
|
— |
|
|
|
|
|
|
|
|
|
Long term lease liabilities, April 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
||
Current |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Non-Current |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Office |
|
|
Mining Equipment |
|
|
Total |
|
|||
Lease asset, April 30, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign exchange |
|
$ |
— |
|
|
|
( |
) |
|
|
( |
) |
Lease asset, April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Additions |
|
|
— |
|
|
|
|
|
|
|
|
|
Foreign exchange |
|
|
— |
|
|
|
|
|
|
|
|
|
Lease asset, April 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
94
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
11. |
Loans payable |
On June 10, 2020, the Company repaid secured bonds, due
|
|
Principal |
|
|
Interest |
|
|
Discount |
|
|
Total |
|
||||
Balance, April 30, 2020 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Discount |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Loan repayment |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Interest paid on bond |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Interest accrual |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance, April 30, 2021 and April 30, 2022 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The Company’s financing costs for the year ended April 30, 2022, 2021, and 2020 as reported on its Consolidated Statement of Operations and Comprehensive Loss can be summarized as follows:
For the year ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Unwinding of discount on rehabilitation and closure accretion (note 12) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Discount unwinding on debt repaid (note 11) |
|
|
— |
|
|
|
|
|
|
|
|
|
Lease accretion Starcore (note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest on diesel equipment lease |
|
|
— |
|
|
|
— |
|
|
|
|
|
Interest expense on debt (note 11) |
|
|
— |
|
|
|
|
|
|
|
|
|
Bank fees |
|
|
|
|
|
|
|
|
|
|
— |
|
Interest revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
12. |
Rehabilitation and closure cost provision |
The Company’s asset retirement obligations consist of reclamation and closure costs for the mine. At April 30, 2022, the present value of obligations is estimated at $
Significant reclamation and closure activities include land rehabilitation, demolition of buildings and mine facilities, closing portals to underground mining areas and other costs.
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
||
Balance, beginning of year |
|
$ |
|
|
|
$ |
|
|
Accretion expense |
|
|
|
|
|
|
|
|
Increase in provision |
|
|
|
|
|
|
|
|
Foreign exchange fluctuation |
|
|
|
|
|
|
( |
) |
|
|
$ |
|
|
|
$ |
|
|
95
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
13. |
Share capital |
|
a) |
Common shares |
The Company is authorized to issue an unlimited number of common shares, issuable in series.
The holders of common shares are entitled to one vote per share at meetings of the Company and to receive dividends, which may be declared from time-to-time. All shares are ranked equally with regard to the Company’s residual assets. During the year ended April 30, 2022 and April 30, 2021, the Company did not issue any common shares.
|
b) |
Warrants |
A summary of the Company’s outstanding share purchase warrants at April 30, 2022 and April 30, 2021 and the changes during the period ended is presented below:
|
|
Number of warrants |
|
|
Weighted average exercise price |
|
||
Outstanding at April 30, 2020 and April 30, 2021 |
|
|
|
|
|
$ |
|
|
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2020 and April 30, 2021 |
|
|
— |
|
|
|
— |
|
During the year ending April 30, 2022,
|
c) |
Share-based payments |
The Company, in accordance with the policies of the Toronto Stock Exchange (“TSX”), was previously authorized to grant options to directors, officers, and employees to acquire up to
|
d) |
Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”) |
Effective August 1, 2016, The Board of Directors approved the adoption of a Restricted Share Unit and Deferred Share Unit Plan (the “RSU/DSU Plan”). Although the RSU/DSU Plan is share-based, all vested RSUs and DSUs will be settled in cash.
RSU
The RSU plan is for eligible members of the Board of Directors, eligible employees and eligible contractors. The RSUs vest over a period of
96
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
|
13. |
Share capital – (cont’d) |
|
d) |
Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”) – (cont’d) |
The Performance Conditions to be met are established by the Board at the time of grant of the RSU. RSUs that are permitted to be carried over to the succeeding years shall expire no later than the third calendar year after the year in which the RSUs have been granted and will be terminated to the extent the performance objectives or other vesting criteria have not been met. The RSU share plan transactions during the year were as follows:
|
|
Units |
|
|
Outstanding at April 30, 2020 |
|
|
|
|
Expired |
|
|
( |
) |
Exercised |
|
|
( |
) |
|
|
|
|
|
Outstanding at April 30, 2021 |
|
|
— |
|
Granted |
|
|
|
|
Outstanding at April 30, 2022 |
|
|
|
|
DSU
The Company introduced a DSU plan for eligible directors. The DSUs are paid in full in the form of a lump sum payment no later than December 31st of the calendar year immediately following the calendar year of termination of service. DSU Awards going forward will vest on each anniversary date of the grant over a period of
|
|
Units |
|
|
Outstanding at April 30, 2020 |
|
|
|
|
Exercised |
|
|
( |
) |
Outstanding at April 30, 2021 |
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2022 |
|
|
|
|
Based on the fair value at April 30, 2022 of $
During the year ended April 30, 2022, a total of $
97
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
14. |
Financial instruments |
All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Cash is carried at their fair value. There are no material differences between the carrying values and the fair values of any other financial assets or liabilities due to their short term nature. In the normal course of business, the Company’s assets, liabilities and future transactions are impacted by various market risks, including currency risks associated with inventory, revenues, cost of sales, capital expenditures, interest earned on cash and the interest rate risk associated with floating rate debt.
|
a) |
Currency risk |
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
A
|
b) |
Interest rate risk |
The Company’s cash earns interest at variable interest rates. While fluctuations in market rates do not have a material impact on the fair value of the Company’s cash flows, future cash flows may be affected by interest rate fluctuations. The Company is not significantly exposed to interest rate fluctuations and interest rate risk consists of two components:
|
(i) |
To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. |
|
(ii) |
To the extent that changes in prevailing market interest rates differ from the interest rates in the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk. |
|
c) |
Credit risk |
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s maximum exposure to credit risk is with respect to its cash and account receivable, the balance of which at A pril 30, 2022 is $
Cash of $
98
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
14. |
Financial instruments – (cont’d) |
|
d) |
Liquidity risk |
Liquidity risk arises from the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company accomplishes this by achieving profitable operations and maintaining sufficient cash reserves. As at April 30, 2022, the Company was holding cash of $
Obligations due within twelve months of April 30, |
|
2022 |
|
|
2022 |
|
|
2024 |
|
|
2025 and beyond |
|
||||
Trade and other payables |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Reclamation and closure obligations |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Leases Liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company’s trade and other payables are due in the short term. Long-term obligations include the Company’s reclamation and closure cost obligations, other long-term liabilities and deferred income taxes. Management believes that profits generated from the mine will be sufficient to meet its financial obligations.
|
e) |
Commodity risk |
Mineral prices and marketability fluctuate and any decline in mineral prices may have a negative effect on the Company. Mineral prices, particularly gold and silver prices, have fluctuated widely in recent years. The marketability and price of minerals which may be produced and sold by the Company will be affected by numerous factors beyond the control of the Company. These other factors include delivery uncertainties related to the proximity of its resources to processing facilities and extensive government regulations related to price, taxes, royalties, allowable production land tenure, the import and export of minerals and many other aspects of the mining business. Declines in mineral prices may have a negative effect on the Company. A
15. |
Commitments and related party transactions |
Except as disclosed elsewhere in these consolidated financial statements, the Company has the following commitments outstanding at April 30, 2022:
|
a) |
The Company has a land rental commitment with respect to the land at the mine site, for $ |
|
b) |
The Company has management contracts to officers and directors totaling $ |
For the year ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Management fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Legal fees - Professional Fees |
|
|
|
|
|
|
|
|
|
|
|
|
Directors fees - Salaries |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
99
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
15. |
Commitments and related party transactions – (cont’d) |
The Company also accrued $
16. |
Capital disclosures |
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company considers the items included in the consolidated statements of changes in equity as capital. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, sell assets to reduce debt or return capital to shareholders. The Company is not subject to externally imposed capital requirements and there were no changes to the capital management in the year ended April 30, 2022
17. |
Earnings per share |
The Company calculates the basic and diluted income per common share using the weighted average number of common shares outstanding during each period and the diluted income per share assumes that the outstanding vested stock options and share purchase warrants had been exercised at the beginning of the year. As at April 30, 2022 and 2020, all warrants outstanding were excluded in the dilutive weighted average shares outstanding as they were anti-dilutive. The denominator for the calculation of income per share, being the weighted average number of common shares, is calculated as follows:
For the years ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued common share, beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive warrants and options |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
100
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
18. |
Segmented information |
During the year ended April 30, 2022, the Company earned all of its revenues from one customer. As at April 30, 2022, the Company does not consider itself to be economically dependent on this customer as transactions with this party can be easily replaced by transactions with other parties on similar terms and conditions. The balance owing from this customer on April 30, 2022 was $
The Company operates in
April 30, 2022 |
|
Mexico |
|
|
Canada |
|
|
USA |
|
|
Total |
|
||||
Exploration & evaluation assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Right of use assets |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Mining interest, plant and equipment |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Deferred tax asset |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2021 |
|
Mexico |
|
|
Canada |
|
|
USA |
|
|
Total |
|
||||
Exploration & evaluation assets |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Right of use assets |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Mining interest, plant and equipment |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Reclamation bonds |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Deferred tax asset |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
19. |
Income taxes |
Current and deferred income tax expenses differ from the amount that would result from applying the Canadian statutory income tax rates to the Company’s earnings before income taxes. This difference is reconciled as follows:
For the year ended April 30, |
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Income (loss) before income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery) at statutory rate |
|
|
|
|
|
|
|
|
|
|
( |
) |
Difference from higher statutory tax rates on earnings of foreign subsidiaries |
|
|
|
|
|
|
( |
) |
|
|
|
|
Losses expired |
|
|
— |
|
|
|
( |
) |
|
|
|
|
Permanent Difference |
|
|
— |
|
|
|
— |
|
|
|
|
|
Effect of Mexican mining royalty tax (SMD) on deferred income tax liabilities |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Recognition of previously unrecognized non-capital loss carry forward and other deductible tax benefits |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Income tax (recovery) expense |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
101
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
19. |
Income taxes – (cont’d) |
The significant components of the Company’s deferred income tax assets and liabilities are as follows:
|
|
April 30, 2022 |
|
|
April 30, 2021 |
|
||
Deferred income tax assets (liabilities): |
|
|
|
|
|
|
|
|
Mining interest, plant and equipment |
|
$ |
( |
) |
|
$ |
( |
) |
Payments to defer |
|
|
( |
) |
|
|
( |
) |
Insurance |
|
|
( |
) |
|
|
( |
) |
Reclamation and closure costs provision |
|
|
|
|
|
|
|
|
Exploration assets |
|
|
( |
) |
|
|
|
|
Expenses reserve |
|
|
|
|
|
|
|
|
Pension-fund reserve |
|
|
|
|
|
|
|
|
Deferred mining tax |
|
|
( |
) |
|
|
( |
) |
Non-capital losses and other deductible tax benefits |
|
|
|
|
|
|
|
|
Plant and equipment |
|
|
|
|
|
|
|
|
Other |
|
|
( |
) |
|
|
( |
) |
Deferred income tax liabilities, net |
|
$ |
( |
) |
|
$ |
( |
) |
The Non-Capital losses are set to expire between 2026 and 2041 while the remaining loss carry forwards have no set expiry date. In accordance with Mexican tax law, Bernal is subject to income tax. Income tax is computed taking into consideration the taxable and deductible effects of inflation, such as depreciation calculated on restated asset values. Taxable income is increased or reduced by the effects of inflation on certain monetary assets and liabilities through an inflationary component.
Mexico Tax Reform
During December 2013, the 2014 Tax Reform (the “Tax Reform”) was published in Mexico’s official gazette with changes taking effect January 1, 2014. The Tax Reform included the implementation of a
Management is currently disputing the SMD, in a joint action lawsuit with other Mexican mining companies, with the applicable Mexican government authority. Management believes that the SMD is unconstitutional and should be overturned. In accordance with IFRS reporting standards, however, the estimated effect of the SMD has been accrued to the current and deferred income tax provisions as stated above. Should the Company be successful in overturning the SMD, in whole or in part, the accrued tax liabilities stated above will be reversed to recovery of income taxes in the applicable period.
102
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2022
20. |
Subsequent event |
Private Placement
Subsequent to April 30, 2022, the Company completed a non-brokered private placement for $
The Company paid $
103
Exhibit 1.4
Date and Time: November 17, 2020 04:00 PM Pacific Time
|
Mailing Address: |
|
Location: |
|
|
PO Box 9431 Stn Prov Govt Victoria BC V8W 9V3 |
|
2nd Floor - 940 Blanshard Street Victoria BC |
|
|
||||
|
www.corporateonline.gov.bc.ca |
|
1 877 526-1526 |
Notice of Change of Directors
FORM 10
BUSINESS CORPORATIONS ACT
Section 127
Incorporation Number: |
|
Name of Company: |
BC0218266 |
|
STARCORE INTERNATIONAL MINES LTD. |
Date of Change of Directors
November 17, 2020
Director(s) who have ceased to be Directors
Last Name, First Name, Middle Name: |
|
|
Kent, Cory H. |
|
|
Mailing Address: |
|
Delivery Address: |
1500 ROYAL CENTRE |
|
1500 ROYAL CENTR |
1055 WEST GEORGIA STREET |
|
1055 WEST GEORGIA STREET |
P.O. BOX 1117 VANCOUVER BC V6E 4N7 CANADA |
|
P.O. BOX 1117 VANCOUVER BC V6E 4N7 CANADA |
Last Name, First Name, Middle Name: |
|
|
SUMANIK, KEN |
|
|
Mailing Address: |
|
Delivery Address: |
6531 DAKOTA DR RICHMOND BC V7C4X5 |
|
6531 DAKOTA DR RICHMOND BC V7C4X5 |
Director(s) as at November 17, 2020
Last Name, First Name, Middle Name: |
|
|
Arca, Gary |
|
|
Mailing Address: |
|
Delivery Address: |
SUITE 750 |
|
SUITE 750 |
580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
|
580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
Last Name, First Name, Middle Name: |
|
|
EADIE, ROBERT |
|
|
Mailing Address: |
|
Delivery Address: |
SUITE 750 |
|
SUITE 750 |
580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
|
580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
Last Name, First Name, Middle Name: |
|
|
ESTRA, JORDAN |
|
|
Mailing Address: |
|
Delivery Address: |
5888 NORTH OCEAN BLVD OCEAN RIDGE FL 33435 UNITED STATES |
|
5888 NORTH OCEAN BLVD OCEAN RIDGE FL 33435 UNITED STATES |
Last Name, First Name, Middle Name: |
|
|
Garcia, Salvador |
|
|
Mailing Address: |
|
Delivery Address: |
SUITE 750, 580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
|
SUITE 750, 580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
Last Name, First Name, Middle Name: |
|
|
TANYA, LUTZKE |
|
|
Mailing Address: |
|
Delivery Address: |
SUITE 750, 580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
|
SUITE 750, 580 HORNBY STREET VANCOUVER BC V6C 3B6 CANADA |
Last Name, First Name, Middle Name: |
|
|
VILLASENOR, FEDERICO |
|
|
Mailing Address: |
|
Delivery Address: |
PANZACOLA 15 COYOACAN |
|
PANZACOLA 15 COYOACAN |
MEXICO, D.F. 04000 MEXICO |
|
MEXICO, D.F. 04000 MEXICO |
ARTICLES
OF
STARCORE INTERNATIONAL
MINES LTD.
Incorporation Number: BC0218266
(the “Company”)
INDEX
PARTARTICLESUBJECT |
|
|
|
|
|
1. |
INTERPRETATION |
|
|
|
|
|
1.1Definitions |
|
|
1.2Business Corporations Act and Interpretation Act Definitions Applicable |
|
|
|
|
2. |
SHARES AND SHARE CERTIFICATES |
|
|
||
|
2.1Authorized Share Structure |
|
|
2.2Form of Share Certificate |
|
|
2.3Shareholder Entitled to Certificate or Acknowledgment |
2 |
|
2.4Delivery by Mail |
2 |
|
2.5Replacement of Worn Out or Defaced Certificate or Acknowledgement |
2 |
|
2.6Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment |
2 |
|
2.7Splitting Share Certificates |
2 |
|
2.8Certificate Fee |
2 |
|
2.9Recognition of Trusts |
3 |
|
|
|
3. |
Issue of Shares |
3 |
|
|
|
|
3.1Directors Authorized |
3 |
|
3.2Commissions and Discounts |
3 |
|
3.3Brokerage |
3 |
|
3.4Conditions of Issue |
3 |
|
3.5Share Purchase Warrants and Rights |
3 |
|
|
|
4. |
Share Registers |
4 |
|
|
|
|
4.1Central Securities Register |
4 |
|
4.2Closing Register |
4 |
|
|
|
5. |
Share Transfers |
4 |
|
|
|
|
5.1Registering Transfers |
4 |
|
5.2Form of Instrument of Transfer |
4 |
|
5.3Transferor Remains Shareholder |
4 |
|
5.4Signing of Instrument of Transfer |
4 |
|
5.5Enquiry as to Title Not Required |
5 |
|
5.6Transfer Fee |
5 |
|
|
|
6. |
Transmission of Shares |
5 |
|
|
|
|
6.1Legal Personal Representative Recognized on Death |
5 |
|
6.2Rights of Legal Personal Representative |
5 |
|
|
|
7. |
Purchase of Shares |
5 |
|
|
|
|
7.1Company Authorized to Purchase Shares |
5 |
|
7.2Purchase When Insolvent |
5 |
|
7.3Sale and Voting of Purchased Shares |
6 |
|
|
|
ii
8. |
BORROWING POWERS |
6 |
|
|
|
|
8.1Company Authorized to Borrow |
6 |
|
|
|
9. |
ALTERATIONS |
6 |
|
|
|
|
9.1Alteration of Authorized Share Structure |
6 |
|
9.2Special Rights and Restrictions |
7 |
|
9.3Change of Name |
7 |
|
9.4Other Alterations |
7 |
|
|
|
10. |
Meetings of Shareholders |
7 |
|
|
|
|
10.1Annual General Meetings |
7 |
|
10.2Resolution Instead of Annual General Meeting |
7 |
|
10.3Calling of Meetings of Shareholders |
7 |
|
10.4Notice for Meetings of Shareholders |
8 |
|
10.5Record Date for Notice |
8 |
|
10.6Record Date for Voting |
8 |
|
10.7Failure to Give Notice and Waiver of Notice |
8 |
|
10.8Notice of Special Business at Meetings of Shareholders |
8 |
|
10.9Meetings by Telephone or other Electronic Means |
9 |
|
|
|
11. |
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS |
9 |
|
|
|
|
11.1Special Business |
9 |
|
11.2Special Majority |
10 |
|
11.3Quorum |
10 |
|
11.4One Shareholder May Constitute Quorum |
10 |
|
11.5Other Persons May Attend |
10 |
|
11.6Requirement of Quorum |
10 |
|
11.7Lack of Quorum |
10 |
|
11.8Lack of Quorum at Succeeding Meeting |
10 |
|
11.9Chair |
10 |
|
11.10Selection of Alternate Chair |
11 |
|
11.11Adjournments |
11 |
|
11.12Notice of Adjourned Meeting |
11 |
|
11.13Decisions by Show of Hands or Poll |
11 |
|
11.14Declaration of Result |
11 |
|
11.15Motion Need Not be Seconded |
11 |
|
11.16Casting Vote |
11 |
|
11.17Manner of Taking Poll |
12 |
|
11.18Demand for Poll on Adjournment |
12 |
|
11.19Chair Must Resolve Dispute |
12 |
|
11.20Casting of Votes |
12 |
|
11.21Demand for Poll |
12 |
|
11.22Demand for Poll Not to Prevent Continuance of Meeting |
12 |
|
11.23Retention of Ballots and Proxies |
12 |
|
|
|
12. |
Votes of Shareholders |
12 |
|
|
|
|
12.1Number of Votes by Shareholder or by Shares |
12 |
|
12.2Votes of Persons in Representative Capacity |
13 |
|
12.3Votes by Joint Holders |
13 |
|
12.4Legal Personal Representatives as Joint Shareholders |
13 |
|
12.5Representative of a Corporate Shareholder |
13 |
iii
|
12.6Proxy Provisions Do Not Apply to All Companies |
14 |
|
12.7Appointment of Proxy Holders |
14 |
|
12.8Alternate Proxy Holders |
14 |
|
12.9Proxy Holder Need Not Be Shareholder |
14 |
|
12.10Deposit of Proxy |
14 |
|
12.11Validity of Proxy Vote |
14 |
|
12.12Form of Proxy |
14 |
|
12.13Revocation of Proxy |
15 |
|
12.14Revocation of Proxy Must Be Signed |
15 |
|
12.15Production of Evidence of Authority to Vote |
15 |
|
|
|
13. |
Directors |
15 |
|
|
|
|
|
|
|
13.1First Directors; Number of Directors |
15 |
|
13.2Change in Number of Directors |
15 |
|
13.3Directors’ Acts Valid Despite Vacancy |
16 |
|
13.4Qualifications of Directors |
16 |
|
13.5Remuneration of Directors |
16 |
|
13.6Reimbursement of Expenses of Directors |
16 |
|
13.7Special Remuneration for Directors |
16 |
|
13.8Gratuity, Pension or Allowance on Retirement of Director |
16 |
|
|
|
14. |
Election and Removal of Directors |
16 |
|
|
|
|
14.1Election at Annual General Meeting |
16 |
|
14.2Consent to be a Director |
17 |
|
14.3Failure to Elect or Appoint Directors |
17 |
|
14.4Places of Retiring Directors Not Filled |
17 |
|
14.5Directors May Fill Casual Vacancies |
17 |
|
14.6Remaining Directors Power to Act |
17 |
|
14.7Shareholders May Fill Vacancies |
18 |
|
14.8Additional Directors |
18 |
|
14.9Ceasing to be a Director |
18 |
|
14.10Removal of Director by Shareholders |
18 |
|
14.11Removal of Director by Directors |
18 |
|
|
|
15. |
Alternate Directors |
19 |
|
|
|
|
15.1Appointment of Alternate Director |
19 |
|
15.2Notice of Meetings |
19 |
|
15.3Alternate for More Than One Director Attending Meetings |
19 |
|
15.4Consent Resolutions |
19 |
|
15.5Alternate Director an Agent |
19 |
|
15.6Revocation or Amendment of Appointment of Alternate Director |
19 |
|
15.7Ceasing to be an Alternate Director |
20 |
|
15.8Remuneration and Expenses of Alternate Director |
20 |
|
|
|
16. |
Powers and Duties of Directors |
20 |
|
|
|
|
16.1Powers of Management |
20 |
|
16.2Appointment of Attorney of Company |
20 |
|
|
|
17. |
Disclosure of Interest of Directors |
20 |
|
|
|
|
17.1Obligation to Account for Profits |
20 |
iv
|
17.2Restrictions on Voting by Reason of Interest |
21 |
|
17.3Interested Director Counted in Quorum |
21 |
|
17.4Disclosure of Conflict of Interest or Property |
21 |
|
17.5Director Holding Other Office in the Company |
21 |
|
17.6No Disqualification |
21 |
|
17.7Professional Services by Director or Officer |
21 |
|
17.8Director or Officer in Other Corporations |
21 |
|
|
|
18. |
Proceedings of Directors |
21 |
|
|
|
|
18.1Meetings of Directors |
21 |
|
18.2Voting at Meetings |
22 |
|
18.3Chair of Meetings |
22 |
|
18.4Meetings by Telephone or Other Communications Medium |
22 |
|
18.5Calling of Meetings |
22 |
|
18.6Notice of Meetings |
22 |
|
18.7When Notice Not Required |
22 |
|
18.8Meeting Valid Despite Failure to Give Notice |
23 |
|
18.9Waiver of Notice of Meetings |
23 |
|
18.10Quorum |
23 |
|
18.11Validity of Acts Where Appointment Defective |
23 |
|
18.12Consent Resolutions in Writing |
23 |
|
|
|
19. |
Executive and Other Committees |
23 |
|
|
|
|
19.1Appointment and Powers of Executive Committee |
23 |
|
19.2Appointment and Powers of Other Committees |
24 |
|
19.3Obligations of Committees |
24 |
|
19.4Powers of Board |
24 |
|
19.5Committee Meetings |
24 |
|
|
|
20. |
Officers |
25 |
|
|
|
|
20.1Directors May Appoint Officers |
25 |
|
20.2Functions, Duties and Powers of Officers |
25 |
|
20.3Qualifications |
25 |
|
20.4Remuneration and Terms of Appointment |
25 |
|
|
|
21. |
Indemnification |
25 |
|
|
|
|
21.1Definitions |
25 |
|
21.2Mandatory Indemnification of Directors and Former Directors |
25 |
|
21.3Indemnification of Other Persons |
26 |
|
21.4Non-Compliance with Business Corporations Act |
26 |
|
21.5Company May Purchase Insurance |
26 |
|
|
|
22. |
Dividends |
26 |
|
|
|
|
22.1Payment of Dividends Subject to Special Rights |
26 |
|
22.2Declaration of Dividends |
26 |
|
22.3No Notice Required |
26 |
|
22.4Record Date |
26 |
|
22.5Manner of Paying Dividend |
27 |
|
22.6Settlement of Difficulties |
27 |
|
22.7When Dividend Payable |
27 |
v
|
22.8Dividends to be Paid in Accordance with Number of Shares |
27 |
|
22.9Receipt by Joint Shareholders |
27 |
|
22.10Dividend Bears No Interest |
27 |
|
22.11Fractional Dividends |
27 |
|
22.12Payment of Dividends |
27 |
|
22.13Capitalization of Surplus |
28 |
|
|
|
23. |
Documents, Records and Reports |
28 |
|
|
|
|
23.1Recording of Financial Affairs |
28 |
|
23.2Inspection of Accounting Records |
28 |
|
|
|
24. |
Notices |
28 |
|
|
|
|
24.1Method of Giving Notice |
28 |
|
24.2Deemed Receipt of Mailing |
29 |
|
24.3Certificate of Sending |
29 |
|
24.4Notice to Joint Shareholders |
29 |
|
24.5Notice to Trustees |
29 |
|
|
|
25. |
SEAL |
29 |
|
|
|
|
25.1Who May Attest Seal |
29 |
|
25.2Sealing Copies |
29 |
|
25.3Mechanical Reproduction of Seal |
30 |
vi
ARTICLES
OF
STARCORE INTERNATIONAL MINES LTD.
1.1 |
Definitions |
In these Articles, unless the context otherwise requires:
(1) |
“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being; |
(2) |
“Business Corporations Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act; |
(3) |
“legal personal representative” means the personal or other legal representative of the shareholder; |
(4) |
“Notice of Articles” means the notice of articles for the Company contained in the Company’s transition application, as amended from time to time; |
(5) |
“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register; |
1.2 |
Business Corporations Act and Interpretation Act Definitions Applicable |
The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act (British Columbia), with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act (British Columbia) relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.
PART 2 - SHARES AND SHARE CERTIFICATES
2.1 |
Authorized Share Structure |
The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company as the same may be amended from time to time.
2.2 |
Form of Share Certificate |
Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.
2.3 |
Shareholder Entitled to Certificate, Acknowledgment or Written Consent |
Unless the shares of which the shareholder is the registered owner are uncertificated shares, Each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder’s name or (b) a non-transferable written acknowledgment of the shareholder’s right
to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate or one written acknowledgement and delivery of a share certificate or one written acknowledgment for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all. If a shareholder is the registered owner of uncertificated shares, the Company must send to a holder of an uncertificated share a written notice containing the information required by the Act within a reasonable time after the issue or transfer of such share.
Any share certificate or non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate, or written notice of the issue or transfer of an uncertificated share, may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate, acknowledgement or written notice is lost in the mail or stolen.
2.5 |
Replacement of Worn Out or Defaced Certificate or Acknowledgement |
If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:
(1) |
order the share certificate or acknowledgment, as the case may be, to be cancelled; and |
(2) |
issue a replacement share certificate or acknowledgment, as the case may be. |
2.6 |
Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment |
If a share certificate or a non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:
(1) |
proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and |
(2) |
any indemnity the directors consider adequate. |
2.7 |
Splitting Share Certificates |
If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.
2.8 |
Certificate Fee |
There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount determined by the directors, if any, which must not exceed the amount prescribed under the Business Corporations Act.Recognition of Trusts
2.9 |
Recognition of Trusts |
Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or
2
(except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.
PART 3 - Issue of Shares
3.1 |
Directors Authorized |
Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share, if any.
3.2 |
Commissions and Discounts |
The Company may at any time, pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.
3.3 |
Brokerage |
The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.
3.4 |
Conditions of Issue |
Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:
(1) |
consideration is provided to the Company for the issue of the share by one or more of the following: |
|
(a) |
past services performed for the Company; |
|
(b) |
property; or |
|
(c) |
money; and |
(2) |
the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1. |
Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.
PART 4 - Share Registers
4.1 |
Central Securities Register |
As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as
3
the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.
The Company must not at any time close its central securities register.
PART 5 - Share Transfers
5.1 |
Registering Transfers |
A transfer of a share of the Company must not be registered unless:
(1) |
a duly signed instrument of transfer in respect of the share has been received by the Company; |
(2) |
if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and |
(3) |
if a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company. |
5.2 |
Form of Instrument of Transfer |
The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be approved by the directors from time to time.
5.3 |
Transferor Remains Shareholder |
Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.
5.4 |
Signing of Instrument of Transfer |
If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer, or if the shares are uncertificated shares, then all of the shares registered in the name of the shareholder on the central securities register:
(1) |
in the name of the person named as transferee in that instrument of transfer; or |
(2) |
if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered. |
5.5 |
Enquiry as to Title Not Required |
Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate
4
owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.
5.6 |
Transfer Fee |
There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.
PART 6 - Transmission of Shares
6.1 |
Legal Personal Representative Recognized on Death |
In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.
6.2 |
Rights of Legal Personal Representative |
The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.
PART 7 - Purchase of Shares
7.1 |
Company Authorized to Purchase Shares |
Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.
7.2 |
Purchase When Insolvent |
The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:
(1) |
the Company is insolvent; or |
(2) |
making the payment or providing the consideration would render the Company insolvent. |
7.3 |
Sale and Voting of Purchased Shares |
If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:
(1) |
is not entitled to vote the share at a meeting of its shareholders; |
(2) |
must not pay a dividend in respect of the share; and |
PART 8 - BORROWING POWERS
8.1 |
Company Authorized to Borrow |
5
The Company, if authorized by the directors, may:
(1) |
borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate; |
(2) |
issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate; |
(3) |
guarantee the repayment of money by any other person or the performance of any obligation of any other person; and |
(4) |
mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company. |
9.1 |
Alteration of Authorized Share Structure |
Subject to Article 9.2, the Business Corporations Act, and any regulatory or stock exchange requirements applicable to the Company, the Company may by directors’ resolution:
(1) |
create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; |
(2) |
increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; |
(3) |
subdivide or consolidate all or any of its unissued, or fully paid issued, shares; |
(4) |
if the Company is authorized to issue shares of a class of shares with par value: |
|
(a) |
decrease the par value of those shares; or |
|
(b) |
if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; |
(5) |
change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value; |
(6) |
alter the identifying name of any of its shares; or |
(7) |
otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act. |
9.2 |
Special Rights and Restrictions |
Subject to the Business Corporations Act and any regulatory or stock exchange requirements applicable to the Company, the Company may by directors’ resolution:
(1) |
create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or |
(2) |
vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued. |
6
9.3 |
Change of Name |
The Company may by directors’ resolution authorize an alteration of its Notice of Articles in order to change its name subject to any other regulatory or stock exchange requirements applicable to the Company.
9.4 |
Other Alterations |
If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by directors’ resolution alter these Articles subject to any other regulatory or stock exchange requirements applicable to the Company.
PART 10 - Meetings of Shareholders
10.1 |
Annual General Meetings |
Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.
10.2 |
Resolution Instead of Annual General Meeting |
If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.
10.3 |
Calling of Meetings of Shareholders |
The directors may, whenever they think fit, call a meeting of shareholders.
10.4 |
Notice for Meetings of Shareholders |
The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:
(1) |
if and for so long as the Company is a public company, 21 days; |
(2) |
otherwise, 10 days. |
10.5 |
Record Date for Notice |
The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:
(1) |
if and for so long as the Company is a public company, 21 days; |
7
(2) |
otherwise, 10 days. |
If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.
10.6 |
Record Date for Voting |
The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.
10.7 |
Failure to Give Notice and Waiver of Notice |
The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.
10.8 |
Notice of Special Business at Meetings of Shareholders |
If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:
(1) |
state the general nature of the special business; and |
(2) |
if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders: |
|
(a) |
at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and |
|
(b) |
during statutory business hours on any one or more specified days before the day set for the holding of the meeting. |
A meeting of the Company’s shareholders may be held entirely or in part by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if approved by directors’ resolution prior to the meeting and subject to the Business Corporations Act. Any person participating in a meeting by such means is deemed to be present at the meeting.
PART 11 - PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
11.1 |
Special Business |
At a meeting of shareholders, the following business is special business:
(1) |
at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting; |
(2) |
at an annual general meeting, all business is special business except for the following: |
8
|
(a) |
business relating to the conduct of or voting at the meeting; |
|
(b) |
consideration of any financial statements of the Company presented to the meeting; |
|
(c) |
consideration of any reports of the directors or auditor; |
|
(d) |
the setting or changing of the number of directors; |
|
(e) |
the election or appointment of directors; |
|
(f) |
the appointment of an auditor; |
|
(g) |
the setting of the remuneration of an auditor; |
|
(h) |
business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; |
|
(i) |
any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders. |
11.2 |
Special Majority |
The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds (⅔) of the votes cast on the resolution.
11.3 |
Quorum |
Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is one person who is, or who represents by proxy, one or more shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting.
11.4 |
One Shareholder May Constitute Quorum |
If there is only one shareholder entitled to vote at a meeting of shareholders:
(1) |
the quorum is one person who is, or who represents by proxy, that shareholder; and |
(2) |
that shareholder, present in person or by proxy, may constitute the meeting. |
11.5 |
Other Persons May Attend |
The directors, the chief executive officer (if any), the president (if any), the chief financial officer (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.
11.6 |
Requirement of Quorum |
No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.
9
11.7 |
Lack of Quorum |
If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:
(1) |
in the case of a general meeting requisitioned by shareholders, the meeting is dissolved; and |
(2) |
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place. |
11.8 |
Lack of Quorum at Succeeding Meeting |
If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.
11.9 |
Chair |
The following individual is entitled to preside as chair at a meeting of shareholders:
(1) |
the chair of the board, if any; or |
(2) |
if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any. |
11.10 |
Selection of Alternate Chair |
If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number or the Company’s solicitor to be chair of the meeting failing which the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.
11.11 |
Adjournments |
The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
11.12 |
Notice of Adjourned Meeting |
It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.
11.13 |
Decisions by Show of Hands or Poll |
Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.
11.14 |
Declaration of Result |
The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is
10
defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.
11.15 |
Motion Need Not be Seconded |
No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.
11.16 |
Casting Vote |
In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.
11.17 |
Manner of Taking Poll |
Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:
(1) |
the poll must be taken: |
|
(a) |
at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and |
|
(b) |
in the manner, at the time and at the place that the chair of the meeting directs; |
(2) |
the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and |
(3) |
the demand for the poll may be withdrawn by the person who demanded it. |
11.18 |
Demand for Poll on Adjournment |
A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.
11.19 |
Chair Must Resolve Dispute |
In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.
11.20 |
Casting of Votes |
On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.
11.21 |
Demand for Poll |
No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.
11.22 |
Demand for Poll Not to Prevent Continuance of Meeting |
The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.
11.23 |
Retention of Ballots and Proxies |
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The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.
PART 12 - Votes of Shareholders
12.1 |
Number of Votes by Shareholder or by Shares |
Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:
(1) |
on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and |
(2) |
on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy. |
12.2 |
Votes of Persons in Representative Capacity |
A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.
12.3 |
Votes by Joint Holders |
If there are joint shareholders registered in respect of any share:
(1) |
any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or |
(2) |
if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted. |
12.4 |
Legal Personal Representatives as Joint Shareholders |
Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.
12.5 |
Representative of a Corporate Shareholder |
If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:
(1) |
for that purpose, the instrument appointing a representative must: |
|
(a) |
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or |
|
(b) |
be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting; |
12
(2) |
if a representative is appointed under this Article 12.5: |
|
(a) |
the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and |
|
(b) |
the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting. |
Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.
12.6 |
Proxy Provisions Do Not Apply to All Companies |
Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions (as defined in section 1(1) of the Business Corporations Act) as part of its Articles or to which the Statutory Reporting Company Provisions apply.
12.7 |
Appointment of Proxy Holders |
Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.
12.8 |
Alternate Proxy Holders |
A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.
12.9 |
Proxy Holder Need Not Be Shareholder |
A person appointed as a proxy holder need not be a shareholder.
12.10 |
Deposit of Proxy |
A proxy for a meeting of shareholders must:
(1) |
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or |
(2) |
unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting. |
A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.
12.11 |
Validity of Proxy Vote |
A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:
(1) |
at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or |
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(2) |
by the chair of the meeting, before the vote is taken. |
12.12 |
Form of Proxy |
A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:
[name of company]
(the “Company”)
The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.
Number of shares in respect of which this proxy is given (if no number is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): ______________
Signed [month, day, year] |
[Signature of shareholder] |
[Name of shareholder—printed] |
Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:
(1) |
received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or |
(2) |
provided, at the meeting, to the chair of the meeting. |
12.14 |
Revocation of Proxy Must Be Signed |
An instrument referred to in Article 12.13 must be signed as follows:
(1) |
if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy; or |
(2) |
if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5. |
12.15 |
Production of Evidence of Authority to Vote |
The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.
PART 13 - Directors
13.1 |
First Directors; Number of Directors |
The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. There is no requirement for the directors or shareholders to fix or set the number of directors from time to time. If the Company is a public
14
company, the Company shall have at least three directors. If the Company is not a public company, the Company shall have at least one director.
If the number of directors is at any time fixed or set hereunder:
(1) |
the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number; or |
(2) |
if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies. |
13.3 |
Directors’ Acts Valid Despite Vacancy |
An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.
13.4 |
Qualifications of Directors |
A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.
The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, their remuneration, if any, may be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.
13.6 |
Reimbursement of Expenses of Directors |
The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.
13.7 |
Special Remuneration for Directors |
If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.
13.8 |
Gratuity, Pension or Allowance on Retirement of Director |
Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.
PART 14 - Election and Removal of Directors
14.1 |
Election at Annual General Meeting |
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At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:
(1) |
the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and |
(2) |
all the directors cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment. |
14.2 |
Consent to be a Director |
No election, appointment or designation of an individual as a director is valid unless:
(1) |
that individual consents to be a director in the manner provided for in the Business Corporations Act; |
(2) |
that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or |
(3) |
with respect to first directors, the designation is otherwise valid under the Business Corporations Act. |
14.3 |
Failure to Elect or Appoint Directors |
If:
(1) |
the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or |
(2) |
the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors; |
then each director then in office continues to hold office until the earlier of:
(3) |
the date on which his or her successor is elected or appointed; and |
(4) |
the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles. |
14.4 |
Places of Retiring Directors Not Filled |
If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.
14.5 |
Directors May Fill Casual Vacancies |
Any casual vacancy occurring in the board of directors may be filled by the directors.
14.6 |
Remaining Directors Power to Act |
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The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.
14.7 |
Shareholders May Fill Vacancies |
If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.
14.8 |
Additional Directors |
Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:
(1) |
one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or |
(2) |
in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8. |
Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.
14.9 |
Ceasing to be a Director |
A director ceases to be a director when:
(1) |
the term of office of the director expires; |
(2) |
the director dies; |
(3) |
the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or |
(4) |
the director is removed from office pursuant to Articles 14.10 or 14.11. |
14.10 |
Removal of Director by Shareholders |
The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.
14.11 |
Removal of Director by Directors |
The directors may remove any director before the expiration of his or her term of office if:
(1) |
such director is convicted of an indictable offence; |
(2) |
such director ceases to be qualified to act as a director of a company and does not promptly resign; or |
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(3) |
if there are at least three directors on the board, then if all other directors pass a resolution to remove such director; and the remaining directors may in any such event appoint a director to fill the resulting vacancy. |
PART 15 - Alternate Directors
15.1 |
Appointment of Alternate Director |
Any director (an “appointor”) may by notice in writing received by the Company appoint any person (an “appointee”) who is qualified to act as a director to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors at which the appointor is not present unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.
15.2 |
Notice of Meetings |
Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.
15.3 |
Alternate for More Than One Director Attending Meetings |
A person may be appointed as an alternate director by more than one director, and an alternate director:
(1) |
will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity; |
(2) |
has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity; |
(3) |
will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity; and |
(4) |
has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity. |
15.4 |
Consent Resolutions |
Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.
15.5 |
Alternate Director an Agent |
Every alternate director is deemed to be the agent of his or her appointor.
15.6 |
Revocation or Amendment of Appointment of Alternate Director |
An appointor may at any time, by notice in writing received by the Company, revoke or amend the terms of the appointment of an alternate director appointed by him or her.
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15.7 |
Ceasing to be an Alternate Director |
The appointment of an alternate director ceases when:
(1) |
his or her appointor ceases to be a director and is not promptly re-elected or re-appointed; |
(2) |
the alternate director dies; |
(3) |
the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company; |
(4) |
the alternate director ceases to be qualified to act as a director; or |
(5) |
the term of his appointment expires, or his or her appointor revokes the appointment of the alternate director. |
15.8 |
Remuneration and Expenses of Alternate Director |
The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.
PART 16 - Powers and Duties of Directors
The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company. For clarity, notwithstanding the provisions of section 11.1(2), the directors may exercise any of those powers contemplated for shareholder approval, if permitted by the Business Corporations Act, including setting the remuneration of the Company’s auditors.
The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.
PART 17 - Disclosure of Interest of Directors
17.1 |
Obligation to Account for Profits |
A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.
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17.2 |
Restrictions on Voting by Reason of Interest |
A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.
17.3 |
Interested Director Counted in Quorum |
A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.
17.4 |
Disclosure of Conflict of Interest or Property |
A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.
17.5 |
Director Holding Other Office in the Company |
A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.
17.6 |
No Disqualification |
No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.
17.7 |
Professional Services by Director or Officer |
Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.
17.8 |
Director or Officer in Other Corporations |
A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.
PART 18 - Proceedings of Directors
The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.
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18.2 |
Voting at Meetings |
Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does have a second or casting vote.
18.3 |
Chair of Meetings |
The following individual is entitled to preside as chair at a meeting of directors:
(1) |
the chair of the board, if any, or his or her alternate director; |
(2) |
in the absence of the chair of the board, the president, if any, if the president is a director (or his or her alternate); or |
(3) |
any other director chosen by the directors or, if the directors wish, the Company’s solicitor, if: |
|
(a) |
neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting; |
|
(b) |
neither the chair of the board nor the president, if a director, is willing to chair the meeting; or |
|
(c) |
the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting. |
18.4 |
Meetings by Telephone or Other Communications Medium |
A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.
18.5 |
Calling of Meetings |
A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.
18.6 |
Notice of Meetings |
Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors by any method set out in Article 24.1 or orally or by telephone.
18.7 |
When Notice Not Required |
It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:
(1) |
the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or |
(2) |
the director or alternate director, as the case may be, has waived notice of the meeting. |
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18.8 |
Meeting Valid Despite Failure to Give Notice |
The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.
18.9 |
Waiver of Notice of Meetings |
Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director.
18.10 |
Quorum |
The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at two directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.
18.11 |
Validity of Acts Where Appointment Defective |
Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.
18.12 |
Consent Resolutions in Writing |
A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.
PART 19 - Executive and Other Committees
19.1 |
Appointment and Powers of Executive Committee |
The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:
(1) |
the power to fill vacancies in the board of directors; |
(2) |
the power to remove a director; |
(3) |
the power to change the membership of, or fill vacancies in, any committee of the directors; and |
(4) |
such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution. |
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19.2 |
Appointment and Powers of Other Committees |
The directors may, by resolution:
(1) |
appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate; |
(2) |
delegate to a committee appointed under paragraph (1) any of the directors’ powers, except: |
|
(a) |
the power to fill vacancies in the board of directors; |
|
(b) |
the power to remove a director; |
|
(c) |
the power to change the membership of, or fill vacancies in, any committee of the directors; and |
|
(d) |
the power to appoint or remove officers appointed by the directors; and |
(3) |
make any delegation referred to in paragraph (2) subject to the conditions set out in the resolution or any subsequent directors’ resolution. |
19.3 |
Obligations of Committees |
Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must:
(1) |
conform to any rules that may from time to time be imposed on it by the directors; and |
(2) |
report every act or thing done in exercise of those powers at such times as the directors may require. |
19.4 |
Powers of Board |
The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:
(1) |
revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding; |
(2) |
terminate the appointment of, or change the membership of, the committee; and |
(3) |
fill vacancies in the committee. |
19.5 |
Committee Meetings |
Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:
(1) the committee may meet and adjourn as it thinks proper;
(2) the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;
(3) a majority of the members of the committee constitutes a quorum of the committee; and
(4) |
questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote. |
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PART 20 - Officers
The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.
20.2 |
Functions, Duties and Powers of Officers |
The directors may, for each officer:
(1) |
determine the functions and duties of the officer; |
(2) |
entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and |
(3) |
revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer. |
20.3 |
Qualifications |
No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.
20.4 |
Remuneration and Terms of Appointment |
All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.
In this Article 21:
(1) |
“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding; |
(2) |
“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director, former director or alternate director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company: |
|
(a) |
is or may be joined as a party; or |
|
(b) |
is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; |
(3) |
“expenses” has the meaning set out in the Business Corporations Act. |
21.2 |
Mandatory Indemnification of Directors and Former Directors |
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Subject to the Business Corporations Act, the Company must indemnify a director, former director or alternate director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director and alternate director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.
21.3 |
Indemnification of Other Persons |
Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.
The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Part.
21.5 |
Company May Purchase Insurance |
The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:
(1) |
is or was a director, alternate director, officer, employee or agent of the Company; |
(2) |
is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company; |
(3) |
at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity; |
(4) |
at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity, |
against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position.
PART 22 - Dividends
The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.
22.2 |
Declaration of Dividends |
Subject to the Business Corporations Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.
22.3 |
No Notice Required |
The directors need not give notice to any shareholder of any declaration under Article 22.2.
22.4 |
Record Date |
The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more
25
than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.
22.5 |
Manner of Paying Dividend |
A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of cash or of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.
22.6 |
Settlement of Difficulties |
If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:
(1) |
set the value for distribution of specific assets; |
(2) |
determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and |
(3) |
vest any such specific assets in trustees for the persons entitled to the dividend. |
22.7 |
When Dividend Payable |
Any dividend may be made payable on such date as is fixed by the directors.
22.8 |
Dividends to be Paid in Accordance with Number of Shares |
All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.
22.9 |
Receipt by Joint Shareholders |
If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.
22.10 |
Dividend Bears No Interest |
No dividend bears interest against the Company.
22.11 |
Fractional Dividends |
If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.
22.12 |
Payment of Dividends |
Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.
26
22.13 |
Capitalization of Surplus |
Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.
PART 23 - Documents, Records and Reports
The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.
23.2 |
Inspection of Accounting Records |
Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.
PART 24 - Notices
24.1 |
Method of Giving Notice |
Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:
(1) |
mail addressed to the person at the applicable address for that person as follows: |
|
(a) |
for a record mailed to a shareholder, the shareholder’s registered address; |
|
(b) |
for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class; |
|
(c) |
in any other case, the mailing address of the intended recipient; |
(2) |
delivery at the applicable address for that person as follows, addressed to the person: |
|
(a) |
for a record delivered to a shareholder, the shareholder’s registered address; |
|
(b) |
for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class; |
|
(c) |
in any other case, the delivery address of the intended recipient; |
(3) |
sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class; |
(4) |
sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class; or |
(5) |
physical delivery to the intended recipient. |
27
24.2 |
Deemed Receipt of Mailing |
A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.
24.3 |
Certificate of Sending |
A certificate or other document signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24.1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.
A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.
A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:
(1) |
mailing the record, addressed to them: |
|
(a) |
by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and |
|
(b) |
at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or |
(2) |
if an address referred to in paragraph (1)(b) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred. |
PART 25 - SEAL
25.1 |
Who May Attest Seal |
Except as provided in Articles 25.2 and 25.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:
(1) |
any two directors; |
(2) |
any officer, together with any director; |
(3) |
if the Company only has one director, that director; or |
(4) |
any one or more directors or officers or persons as may be determined by the directors. |
25.2 |
Sealing Copies |
For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer.
28
25.3 |
Mechanical Reproduction of Seal |
The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.
Robert Eadie |
Robert Eadie, Chairman & CEO |
November 17, 2020 |
Date of Amendment |
29
Exhibit 1.6
Date and Time: January 10, 2022 01:41 PM Pacific Time
Mailing Address: |
Location: |
|
PO Box 9431 Stn Prov Govt |
2nd Floor - 940 Blanshard Street |
|
Victoria BC V8W 9V3 |
Victoria BC |
|
www.corporateonline.gov.bc.ca |
1 877 526-1526 |
Notice of Change of Directors
FORM 10
BUSINESS CORPORATIONS ACT
Section 127
Incorporation Number: |
Name of Company: |
BC0218266 |
STARCORE INTERNATIONAL MINES LTD. |
|
Date of Change of Directors
January 1, 2022
|
New Director(s)
Last Name, First Name, Middle Name: |
|
Alarie, Pierre |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750, 580 HORNBY STREET |
SUITE 750, 580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
Director(s) as at January 1, 2022 |
|
|
|
Last Name, First Name, Middle Name: |
|
Alarie, Pierre |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750, 580 HORNBY STREET |
SUITE 750, 580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
BC0218266 page: 1 of 3
Last Name, First Name, Middle Name: |
|
Arca, Gary |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750 |
SUITE 750 |
580 HORNBY STREET |
580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
Last Name, First Name, Middle Name: |
|
EADIE, ROBERT |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750 |
SUITE 750 |
580 HORNBY STREET |
580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
Last Name, First Name, Middle Name: |
|
ESTRA, JORDAN |
|
|
|
Mailing Address: |
Delivery Address: |
5888 NORTH OCEAN BLVD |
5888 NORTH OCEAN BLVD |
OCEAN RIDGE FL 33435 |
OCEAN RIDGE FL 33435 |
UNITED STATES |
UNITED STATES |
Last Name, First Name, Middle Name: |
|
Garcia, Salvador |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750, 580 HORNBY STREET |
SUITE 750, 580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
Last Name, First Name, Middle Name: |
|
TANYA, LUTZKE |
|
|
|
Mailing Address: |
Delivery Address: |
SUITE 750, 580 HORNBY STREET |
SUITE 750, 580 HORNBY STREET |
VANCOUVER BC V6C 3B6 |
VANCOUVER BC V6C 3B6 |
CANADA |
CANADA |
BC0218266 page: 2 of 3
Last Name, First Name, Middle Name: |
|
VILLASENOR, FEDERICO |
|
|
|
Mailing Address: |
Delivery Address: |
PANZACOLA 15 COYOACAN |
PANZACOLA 15 COYOACAN |
MEXICO, D.F. 04000 |
MEXICO, D.F. 04000 |
MEXICO |
MEXICO |
BC0218266 page: 3 of 3
Exhibit 8.1
Exhibit 12.1
CERTIFICATIONS
I, Robert Eadie, certify that:
1. I have reviewed this annual report on Form 20-F of Starcore International Mines Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: July 29th, 2022
Signature: /s/ Robert Eadie
Title: Chief Executive Officer & President
Exhibit 12.2
CERTIFICATIONS
I, Gary Arca, certify that:
1. I have reviewed this annual report on Form 20-F of Starcore International Mines Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: July 29th, 2022
Signature: /s/ Gary Arca
Title: Chief Financial Officer
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Starcore International Mines Ltd. (the “Company”) on Form 20-F for the year ended April 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Eadie, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert Eadie
By: Robert Eadie
Chief Executive Officer
Dated: Jul 29, 2022
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Starcore International Mines Ltd. (the “Company”) on Form 20-F for the year ended April 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary Arca, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Gary Arca
By: Gary Arca
Chief Financial Officer
Dated: Jul 29, 2022
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 96.1
S-K 1300 Technical Report Summary San Martin Mine
Ezequiel Montes Municipality, Querétaro, México
UTM WGS 84, Zone 14 Q
Coordinates Centered at approximately:
(398,350 mE and 2,292,700 mN)
Prepared for:
Suite 750 - 580 Hornby Street Box 113 Vancouver, BC Canada, V6C 3B6 |
Prepared by:
Erme Enriquez C.P.G., BSc, MSc
Effective date: April 30, 2022
Report date: June 28, 2022
STARCORE International Mines Ltd.
San Martin Mine |
|
S-K 1300 Technical Report Summary |
Table of Contents
DATE AND SIGNATURE PAGE |
6 |
|
1.0 |
EXECUTIVE SUMMARY |
7 |
1.1 |
Property Description, Current Status, and Ownership |
7 |
1.2 Geology and Mineralization |
7 |
|
1.3 |
Mineral Resource Estimate |
8 |
1.4 |
Mineral Reserve Estimate |
10 |
1.5 |
Capital and Operating Cost Estimates |
11 |
1.6 |
Permitting Requirements |
12 |
1.7 |
Conclusions and Recommendations |
13 |
1.7.1 |
Geology and Resources |
13 |
1.8 |
Significant Risk Factors |
13 |
2.0 |
INTRODUCTION |
14 |
2.1 |
Details of Registrant |
14 |
2.2 |
Units of Measure |
14 |
2.3 |
Terms of Reference and Source of Information |
14 |
2.4 |
Qualified Person and Site Visits |
16 |
3.0 |
PROPERTY DESCRIPTION AND OWNERSHIP |
17 |
3.1 |
Property Location |
17 |
3.2 |
Ownership |
19 |
3.3 |
Mineral Titles, Claims Rights and Leases |
19 |
3.4 |
Comment on Factors and Risks Affecting Access, Title, and Ability to Perform Work |
21 |
4.0 |
ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, LOCAL RESOURCES, AND INFRASTRUCTURE |
21 |
4.1 |
Accessibility |
21 |
4.2 |
Climate |
22 |
4.3 |
Physiography |
22 |
4.5 |
Local Resources and Infrastructure |
24 |
5.0 |
HISTORY |
23 |
6.0 |
GEOLOGICAL SETTING, MINERALIZATION, AND DEPOSIT |
26 |
6.1 |
Regional -Geology |
27 |
6.2 |
Deposit Geology |
30 |
6.2.1 |
Las Trancas Formation |
30 |
6.2.2 |
El Doctor Formation |
30 |
6.2.3 |
Soyatal–Mezcala Formation |
30 |
6.2.4 |
Igneous Rocks |
30 |
6.2.5 |
Andesite/Dacite |
31 |
6.3 |
Structural Geology |
32 |
6.4 |
Mineralization |
32 |
7.0 |
EXPLORATION |
33 |
7.1 |
Channel Samples |
33 |
7.2 |
Drilling |
34 |
7.3 |
Collar and Downhole Surveys |
35 |
7.4 |
Drill Core Sampling |
35 |
Erme Enriquez |
June 28, 2022 |
2 |
STARCORE International Mines Ltd.
San Martin Mine |
|
S-K 1300 Technical Report Summary |
7.5 |
Core Logging |
36 |
7.6 |
Important Drilling Results |
36 |
7.7 |
Data Adequacy |
38 |
7.8 |
Comment of Exploration |
39 |
8.0 |
SAMPLE PREPARATION, ANALYSES, AND SECURITY |
39 |
8.1 |
Sample Preparation and Analysis |
40 |
8.1.1 |
Underground Channel Samples |
40 |
8.1.2 |
Diamond Drill Core Samples |
41 |
8.2 |
Security, Storage, and Transport |
41 |
8.3 |
Quality Control (QA/QC) |
41 |
8.3.1 |
Standards |
41 |
8.3.2 |
Blanks |
42 |
8.3.3 |
Duplicates |
42 |
8.4 |
Comment on Sample Preparation, Analyses and Security |
43 |
9.0 |
DATA VERIFICATION |
43 |
9.2 |
Comment on Data Verification |
44 |
10.0 |
MINERAL PROCESSING AND METALLURGICAL TESTING |
45 |
10.1 |
Metallurgical Testing and Recovery |
45 |
10.2 |
Data Adequacy |
45 |
11.0 |
MINERAL RESOURCE ESTIMATE |
46 |
11.1 |
Introduction and Qualified Person |
46 |
11.2 |
Density |
46 |
11.3 |
Methodology |
47 |
12.0 |
MINERAL RESERVE ESTIMATE |
48 |
12.1 |
Introduction |
48 |
12.2 |
Methodology |
50 |
12.3 |
Mineral Reserve Statement |
51 |
12.4 |
Comment on Mineral Reserve Estimate |
54 |
13.0 |
MINING METHODS |
54 |
13.1 |
Mining Operations |
54 |
13.2 |
Mining Method |
55 |
13.3 |
Mining Method Description |
56 |
13.4 |
Drilling |
56 |
13.5 |
Blasting |
57 |
13.6 |
Mucking |
57 |
13.7 |
Haulage of Ore |
57 |
13.8 |
Geotechnical Review |
58 |
13.9 |
Ventilation |
58 |
13.10 |
Dewatering |
58 |
13.11 |
Mining Equipment |
59 |
13.12 |
Comments on the Mine Operations |
61 |
14.0 |
PROCESSING AND RECOVERY METHODS |
61 |
14.1 |
Process of the Benefit Plant |
61 |
14.1.1 |
Crushing Area |
62 |
Erme Enriquez |
June 28, 2022 |
3 |
STARCORE International Mines Ltd.
San Martin Mine |
|
S-K 1300 Technical Report Summary |
14.1.2 |
Grinding Area |
63 |
14.1.3 |
Chemical Treatment Area |
63 |
14.1.4 |
Tailings Filtration Area |
63 |
14.1.5 |
Merrill-Cowe Area |
63 |
14.1.6 |
Smelting Area |
63 |
14.2 |
Comment on Mineral Processing and Metallurgical Testing and Recoveries |
64 |
14.3 |
Data Adequacy |
64 |
15.0 |
INFRASTRUCTURE |
67 |
15.1 |
Waste Rock |
67 |
15.2 |
Tailings |
67 |
15.3 |
Power and Electrical |
67 |
15.4 |
Water Usage |
67 |
15.5 |
Logistics, Supplies and Administration |
69 |
16.0 |
MARKET STUDIES |
69 |
16.1 |
Commodity Prices Forecast and Contracts |
69 |
17.0 |
ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL IMPACT |
70 |
17.1 |
General |
70 |
17.2 |
Permitting |
71 |
17.3 |
Permitting Requirements and Status |
72 |
17.4 |
Surface Water Management Plan |
73 |
17.5 |
Social Community Impact |
74 |
17.6 |
Comment on Environmental Compliance, Permitting, and Local Engagement |
75 |
18.0 |
CAPITAL AND OPERATING COSTS |
75 |
18.1 |
Capital Costs |
75 |
18.1 |
Operating Costs |
75 |
19.0 |
ECONOMIC ANALYSIS |
76 |
20.0 |
ADJACENT PROPERTIES |
78 |
21.0 |
OTHER RELEVANT DATA AND INFORMATION |
78 |
22.0 |
INTERPRETATION AND CONCLUSIONS |
78 |
22.1 |
Geology and Resources |
79 |
23.0 |
RECOMMENDATIONS |
79 |
24.0 |
REFERENCES |
80 |
25.0 |
RELIANCE ON INFORMATION PROVIDED BY THE REGISTRANT |
81 |
List of Tables
Table 1-1: |
Mineral Resources Inferred and Indicated, San Martín Mine |
10 |
Table 1-2: |
Proven and Probable Mineral Reserves, Effective Date April 30, 2022 |
11 |
Table 1-3 |
San Martin Capital Costs |
12 |
Table 1-4: |
Mine Operating Cost Summary |
13 |
Table 2-1: |
Identification of the issuer |
14 |
Table 2-2: |
Abbreviations and Terms of Reference |
14 |
Table 3-1: |
List of Mining Titles of the San Martin Mine |
19 |
Table 5-1: |
Summary of production for the San Martín Mine (from 1993 to April 30, 2022) |
26 |
Erme Enriquez |
June 28, 2022 |
4 |
STARCORE International Mines Ltd.
San Martin Mine |
|
S-K 1300 Technical Report Summary |
Table 7-1: |
Summary of drill hole programs performed by MICO and CMP |
34 |
Table 7-2 |
Drill Results of the San Martin Body Extension |
36 |
Table 7-3: |
Highlights of Drill Results at Area 28 Oreshoot |
38 |
Table 11-1: |
Inferred and Indicated Mineral Resources at the San Martín Mine |
48 |
Table 12-1: |
Proven and Probable Mineral Reserves, Effective Date April 30, 2022 |
51 |
Table 13-1: |
Table for choosing the mining method |
56 |
Table 13-2: |
List of Mining Equipment used at the San Martin Mine |
60 |
Table 17-1: |
San Martin Mine Recent Environmental Studies |
71 |
Table 17-2: |
List of the Status of Permits |
73 |
Table 18-1 |
San Martin Capital Costs |
75 |
Table 18-2: |
Mine Operating Cost Summary |
76 |
Table 19-1: |
Economic Model Input Parameters |
77 |
Table 19-2: |
LOM Plan Summary |
78 |
List of Figures
Figure 3-1: |
Location of the San Martin Mine |
18 |
Figure 3-2: |
San Martin Mine and Surrounding Area Property Map |
20 |
Figure 4-1: |
Physiographic map of Mexico showing the location of the San Martin Mine (After Raisz, 1964) |
23 |
Figure 6-1: |
Regional geological map of the surrounding San Martin Mine. Taken from Nuñez-Miranda, 2007 |
28 |
Figure 6-2 |
Generalized stratigraphic column of the San Martin Mine region |
29 |
Figure 6-3 |
Generalized regional geologic map of the San Martín Mine Project (After Labarthe, et. al, 2004) |
31 |
Figure 7-1: |
Map showing the swarm of drill holes done at the entire San Martin mine |
35 |
Figure 7-2: |
San Martin Orebody detected with Diamond Drill Holes |
37 |
Figure 7-3: |
Eastern extension of the 28 Orebody detected with diamond drilling |
38 |
Figure 8-1: |
Pulp Duplicate Gold Assay Result PENBER Lab |
42 |
Figure 8-2: |
Pulp Duplicate Silver Assay Result PENBER Lab |
43 |
Figure 12-1: |
Typical vertical longitudinal section (VLP) showing the blocks of proven and probable ore in the San José II orebody. |
52 |
Figure 12- 2: |
General vertical longitudinal section of the San Martin Mine showing the proven and probable reserve blocks. |
53 |
Figure 13-1: |
Schematic of the overhead cut-and-fill mining method |
55 |
Figure 13-2: |
Ventilation circuit, at the San Martin Mine, by using Robbins raises ventilation intake and for exhausting |
58 |
Figure 13-3: |
Pumping systems in the entire San Martin Mine. Water is sent to surface for usage in the plant process |
59 |
Figure 14-1: |
Plant flow chart |
61 |
Figure 14-2: |
Dried tailings being collected and hauled to the tailings dam |
64 |
Figure 14-3: |
Reforestation of the northern part of the tailings dam |
65 |
Figure 14-2: |
Flowsheet of the mill process at San Martin Mine |
66 |
Figure 15-1: |
San Martin Infrastructure Map |
68 |
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The effective date of the Mineral Resource estimate was April 30, 2022.
Author |
Signature |
|
|
Erme Enriquez |
The qualifications and relevant experience of QP are shown below:
|
• |
Erme Enriquez |
Education:
Is graduate of University of Sonora, Mexico, with a bachelor’s in Geological Sciences in 1983 and a graduate of Colorado School of Mines, with a master’s degree in Geology in 1996
Years of Experience:
Has over 39 years of experience in the mining industry with 15 years in development and mining, 10 years in geological and mineral resource and reserves reporting, and 14 years in exploration of base and precious metals.
Relevant Experience:
He has been a geologist and geology superintendent at the Tayoltita deposit and underground mine. He has been an exploration manager in the San Dimas district, in charge of reviewing reserves and resources as well as district exploration programs. He was an exploration manager for Wheaton River-Goldcorp overseeing operating mines and project explorations.
He was exploration manager for Capstone Gold, in charge of generating projects in Mexico and leading the exploration and deep discovery of the Cozamin deposit.
He is Director of Exploration for Canasil Resources and has acted as a consultant on various mineral deposits.
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Professional Registration:
Professional Geologist (CPG) with the American Institute of Professional Geologists(Membership Number 11214)
1.1Property Description, Current Status, and Ownership
Erme Enriquez (QP) was retained by Starcore International Mines LTD (SIM) to prepare a Technical Report Summary (TRS) on the San Martin Mine (SM), located near the City of Querétaro, Queretaro, Mexico. The purpose of this Technical Report Summary is to support the disclosure of mineral reserve and mineral resources on the Mine as of April 30, 2022, in the proposed registration statement on Form S-1 and periodic filings with the United States Securities and Exchange Commission (SEC). This Technical Report Summary (TRS) conforms to SEC’s Modernized Property Disclosure Requirements for Mining Registrants as described in Subpart 229.1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (S-K 1300) and Item 601(b)(96) Technical Report Summary.
The San Martin (SM) mine is an underground gold and silver complex that has been in operation since 1993. It produces gold and silver doré bars with 99.6% purity. The mine is situated approximately 47 kilometers northeast of the city of Queretaro, capital of the Queretaro State, on the eastern edge of the Colon municipality.
The mine operates 365 days per year on a 24 hour per day schedule. Mining and ore processing operations are currently in production and the mine is considered a production stage property. The San Martin mine encompasses the San Jose, San Martin (SR), and Cuerpos 28 to 32 orebodies.
The San Martin mine is operated by Compania Minera Bernal, SA de CV (CMPB) a wholly owned subsidiary of SIM.
The San Martín gold-silver district hosts classic, medium-grade gold-silver, epithermal vein deposits characterized by low sulphidation mineralization and adularia-sericite alteration. The San Martin veins are typical of most other epithermal silver-gold vein deposits in Mexico in that they are primarily hosted in the Upper Cretaceous black limestone and calcareous shales of the Soyatal-Mezcala Formation. Tertiary Lower Volcanic series of rhyolite flows, pyroclastics and epiclastics, overlain the sediments.
Mineralization at San Martín occurs in association with an epithermal low sulphidation, quartz-carbonate, fracture-filling vein hosted by a structure trending approximately N40°-60°E, dipping to the 50° to 90° to the southeast.
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The San Martin structure has been known in different stages of exploration and has adopted several names, San José, San José II, San Martín, Cuerpo 28, Cuerpo 29, Cuerpo 30, Cuerpo 31, Cuerpo 32 and Cuerpo 33. The structure itself is offset by a series of faults of northeast trending that divides the oreshoots. The structure behaves vertical at the San José and San Martin areas (Tronco) and becomes flatter from Cuerpo 28 to 31 (Mantos), and mineralization follows the planes of the folded rocks.
The San Martin vein itself has been known to be underground and traced for 2 km along trend, with widths between 1.5 to 10 metres and averages approximately 4.0 m. A secondary mineralized vein is located, both in the footwall and hangingwall, of the San Martin vein, on the western limb of the local fold that contains the mineralization. This structure is the Santa Elena and represents a good target for exploration to the NE and SE of San Martin.
The mineral resource estimation for the San Martin Mine was completed following the requirements of Subpart 1300 of Regulation S-K (“Subpart 1300”) and align with Canada’s National Instrument 43-101 (“NI 43-101”) for which original estimates were prepared. The modeling and estimation of the mineral resources were completed on June 10, 2022, under the supervision of Erme Enriquez, qualified person with respect to mineral resource estimations under S-K 1300. The effective date of the resource estimate is April 30, 2022.
The San Martin resources are classified in order of increasing geological and quantitative confidence in Proven and Probable, Inferred and Indicated categories in accordance with the “CIM Definition Standards for Mineral Resources and Mineral Reserves” (2014) and therefore NI 43-101, as is the Inferred Resources category.
In the years prior to mining by CMPB reserve resource estimates were based on the assumptions and subject to rules defined by Luismin many years ago. In recent years, with the involvement of various professionals, it was recognized that mining methodology was changing due to factors such as:
|
• |
A greater percentage of production coming from narrow to wide steeply dipping vein structures. |
|
• |
Sub-horizontal Mantos mineralized structures that were somewhat narrower than historical Mantos. |
|
• |
Reopening and scavenging of the footwall mineralization in old stopes, where lower grade mineralization was not mined during times of lower gold prices. |
Based on the above mining changes and incorporating mining experience over the last 8 years some of the original Luismin assumptions have been modified to improve tonnage and grade estimation for reserves. The assumptions used in this estimate are:
|
• |
A gold price of $1750 per ounce. |
|
• |
A silver price of $22.00 per ounce. |
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First quarters of 2022 operating costs of US$69.30 per metric dry tonne. |
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• |
Average metallurgical recoveries of 86% for gold and 55% for silver. |
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• |
Using the above price and cost assumptions the resultant calculated cutoff grade is approximately 1.41 g/t Au equivalent. |
|
• |
Specific gravity of 2.6 g/cm3 has been applied to all calculated mineralized volumes. |
|
• |
Mining dilution is applied to in situ mineralized zones, and recovery factors are applied to these diluted blocks using the following factors: |
|
• |
Mining dilution of 20% of zero grade in horizontal mineralized zones (Mantos) mined by room and pillar. |
|
• |
Mining dilution of 20% of zero grade in steeply dipping mineralized zones mined by cut and fill. This dilution factor is modified by first applying a minimum 2-meter mining width to narrow zones. |
|
• |
Remnant pillars left in room and pillar stopes are typically 20% of the total tonnage, i.e., 80% extraction. This recovery factor has been applied to sub horizontal mineralized zones. |
In addition to these factors reserve grades are lowered to reflect mined grades in ore blocks that have sufficient historical production to establish that mined grades are similar than estimated from exploration data. The reserves and resources estimated in this report are based on data available up until April 30, 2022.
The mineral resources reported here are classified as Measured, Indicated and Inferred according to CIM Definition Standards.
Total Indicated and Inferred Mineral Resources at the San Martin mine, estimated by SIM, are about 1,481,770 tonnes at a grade of 1.78 g Au/t and 14 g Ag/t. Inferred and Indicated Mineral Resources are not known to the same degree of certainty as Mineral Reserves and do not have demonstrated economic viability. A summary of resources is in Table 1-1.
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Table 1-1:Mineral Resources Inferred and Indicated, San Martín Mine
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• |
Mineral resources have been classified into inferred and indicated in accordance with §229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K). |
|
• |
Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
|
• |
Reserve and resource cut-off grades are based on a 1.41 g/t gold equivalent. |
|
• |
Metallurgical Recoveries were 86% gold and 55% silver. |
|
• |
Mining Recoveries of 90% were applied. |
|
• |
Minimum mining widths were 2.0 meters. |
|
• |
Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
|
• |
Gold equivalents are based on a 1:79.5 gold:silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
|
• |
Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
|
• |
Mineral resources are estimated exclusive of and in addition to mineral reserves. |
|
• |
Resources were estimated by SIM and reviewed by Erme Enriquez CPG. |
Mineral reserve estimates in this Report are reported following the requirements of Subpart 1300. Accordingly mineral resources in the Measured and Indicated categories have been converted to Proven and Probable mineral reserves respectively, by applying applicable modifying factors and are planned to be mined out under the LOM plan within the period of our existing rights to mine, or within the time of assured renewal periods of rights to mine.
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Total Proven and Probable Mineral Reserves at the San Martin mine as of April 30, 2022, estimated by Geology staff and reviewed by QP, are 1,348,433 tonnes at a grade of 1.74 g Au/t and 13 g Ag/t (Table 1-2). This total includes Proven reserves of 144,331 tonnes grading 1.79 g/t Au and 14 g/t Ag along with Probable reserves of 1,204,102 tonnes grading 1.73 g/t Au and 13 g/t Ag.
Table 1-2:Proven and Probable Mineral Reserves, Effective Date April 30, 2022
|
• |
Mineral Reserves estimates have been classified in accordance with probable and proven mineral reserves in accordance with § 229.1302(e)(2) (Item 1302(e)(2) of Regulation S-K. |
|
• |
Reserve cut-off grades are based on a 1.41 g/t gold equivalent. |
|
• |
Metallurgical Recoveries were 88% gold and 55% silver. |
|
• |
Mining Recoveries of 90% were applied. |
|
• |
Minimum mining widths were 2.0 meters. |
|
• |
Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
|
• |
Gold equivalents are based on a 1:79.5 gold - silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
|
• |
Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
|
• |
Mineral resources are estimated exclusive of and in addition to mineral reserves. |
|
• |
Resources were estimated by SIM staff and reviewed by Erme Enriquez C.P.G. |
|
• |
Reserves are exclusive of the indicated and measured resources. |
|
• |
Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
1.5Capital and Operating Cost Estimates
The capital and operating costs are estimated by the property’s operations, engineering, management, and accounting personnel in consultation with SIM corporate staff, as appropriate. The cost estimates apply to the planned production, mine schedule, and equipment requirements for the LOM plan.
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Capital costs are based on CMPB internal forecasts and costs, which QP has reviewed and found to be consistent with a mine of this size. Capital costs are summarized in Table 1-3.
Table 1-3San Martin Capital Costs
The components of the operating cost are based on the annual mine schedule, equipment sizing and productivity, labor estimates, and unit costs for supply items. Inputs to the operating cost are based on vendor quotes, private and commercially available cost models, and actual and factored unit costs of the mine. Operating costs are summarized in Table 1-4.
Table 1-4:Mine Operating Cost Summary
In the QP opinion, the San Martin mine has adequate plans and programs in place, is in good standing with Mexican Environmental regulatory authorities, and no current conditions represent a material risk to continued operations. The SM mine staff have an elevated level of understanding of the requirements of environmental compliance, permitting, and local stakeholders to facilitate the development of the mineral reserve and mineral resource estimates. The periodic inspections by
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governmental agencies, SIM corporate staff, third-party reviews, and regular reporting confirm this understanding.
Based on the LOM plan, additional permits will be necessary in the future for continued operation of the SM mine, including a modification of the Environmental Impact Studies (MIA) and obtaining approval for increased tailings storage capacity and corresponding water supply.
1.7Conclusions and Recommendations
SIM and the QP believe that the geologic interpretation and modeling of exploration data, economic analysis, mine design and sequencing, process scheduling, and operating and capital cost estimation have been developed using accepted industry practices and that the stated mineral reserves and mineral resources comply with SEC regulations. Periodic reviews by third-party consultants confirm these conclusions.
Channel samples and drill holes have been collected and analyzed using industry standard methods and practices and are sufficient to support the characterization of grade and thickness and further support the estimation of Measured, Indicated, Inferred Resources and Proven and Probable Reserves.
Recommendations for further work:
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• |
Continue to collect specific gravity measurements and refine current estimation of specific gravity to have a more reliable measure. |
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• |
Implement procedure of duplicate channel samples in stopes and drifts, to ensure the grade and thickness and to serve as duplicates of channel samples. |
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• |
Implement procedure for standard and duplicate samples, in channel samples and drill core as well. The certified standards will give greater certainty to the QA/QC procedure for the evaluation and greater reliability in reserves and resources. |
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Perform detailed model reconciliation on stopes. A strict control in rebates will help to have a reliable number at the end of the year. |
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Continue the advance of the underground exploration at Body 28 East and Body 32 to the north-northwest. |
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• |
Complete a geochemical and structural model for future work to support the estimation domains. The QP notes that there is a large amount of multi-element data that could support a geochemical model to better understand the impact of elements such as antimony, arsenic, mercury, etc., on the gold distribution and recoveries. |
Estimation of resource and reserves could be affected by changes in metal prices, the distribution of mineralization within the structure or ore body and continuity of grades in oreshoots. Successful implementation of the mine plans is subject to the successful of conversion of Inferred Resources to
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Indicated Resources as well as conversion of Measured and Indicated Mineral Resources to Mineral Reserves, and the ability of mining operations to control waste dilution.
Starcore International Mining Ltd is the owner of the San Martin Mine, located in the state of Queretaro, Mexico.
SIM is registered in British Columbia, Canada, and listed in the TSX, FK and OTCQB under the symbols SAM, V4JA and SHVLF respectively. Additional information of the company is shown in Table 2-1:
Table 2-1:Identification of the issuer
DATA |
DESCRIPTION |
Company Name |
Starcore International Mines Ltd |
Financial Address |
Suite 750 - 580 Hornby Street Box 113 Vancouver, BC Canada, V6C 3B6 |
Telephone |
+1 604-602-4935 |
Web Site |
https://starcore.com |
Representative |
Robert Eadie |
This report provides updated mineral resource and mineral reserve estimates and classification of resources and reserves prepared in accordance with regulation S-K 229-1304 of the United States Securities Exchange Commission (SEC) and the Canadian Institute of Mining Metallurgy and Petroleum (CIM) Standards of Mineral Resources: Definitions and Guidelines.
At the time of this report the mine has been in continuous operation approximately 29 years.
The Metric System for weights and units has been used throughout this report. Tons are reported in metric tons (1,000 kilograms). AII currency is in U.S. dollars (US$) unless otherwise stated.
2.3Terms of Reference and Source of Information
The abbreviations and terms of reference used in this Technical Report are as shown in Table 2-2.
Table 2-2:Abbreviations and Terms of Reference
Abbreviation |
Term |
Au |
Gold |
AuEq |
Gold equivalent |
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Ag |
Silver |
CIM |
Canadian Institute of Mining |
cm |
Centimeter |
CMPB |
Compañía Minera Peña de Bernal |
CPG |
Certified Professional Geologist |
CRF |
Cemented Rock Fill |
E |
East |
ep |
Epidote |
Fe |
Iron |
FA |
Fire Assay |
FA-AAS |
Fire assay-Atomic Absorption Spectometry |
g |
Gram |
G&A |
General and Administrative (costs) |
g/t |
Grams per tonne |
Ha |
Hectare |
HQ |
Drill core size (63.5 mm) |
ICP |
Inductevely Coupled Plasma |
INEGI |
Instituto Nacional de Estadística y Geografía |
IP |
Induced Polarization |
K-spar |
Potassium feldspar |
kg |
Kilogram |
km |
Kilometre |
l |
Litre |
LOM |
Life of Mine |
m |
Metre |
m.a.s.l. |
Metres above sea level |
mm |
Millimiter |
m2 |
Square metre |
m3 |
Cubic metre |
Ma |
Million years |
MICO |
Minas Coremin, SA de CV |
N |
North |
NE |
Northeast |
NI 43-101 |
National Instrument 43-101 Standards of Disclosure for Mineral Projects |
NQ |
Drill core size (47.6 mm) |
NSR |
Net Smelter Return |
NW |
Northwest |
Ox |
Oxide |
oz |
Troy ounce |
oz/t |
Ounce per tonne |
PENBER Lab |
Peña de Bernal Lab |
P.Eng |
Professional Engineer |
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P.Geo |
Professional Geologist |
ppb |
Parts per billion |
ppm |
Parts per million |
QA/QC |
Quality Assurance/Quality Control |
Qtz |
Quartz |
QP |
Qualified Person |
S.A. de C.V. |
Sociedad Anónima de Capital Variable |
SE |
Southeast |
SEMARTNAT |
Secretaria del Medio Ambiente y Recursos Naturales |
Ser |
Sericite |
SG |
Specific gravity |
S-K 1300 |
Subpart 1300 of Regulation S- K of the US Securities and Exchange Commission |
SM |
San Martin Mine |
SRM |
Standard reference material |
SIM |
Starcore International Mines LTD |
SW |
Southwest |
TPD |
Tonnes Per Day |
Technical Report |
San Martin Mine Form S-K 1300 Technical Report |
TRS |
Technical Report Summary |
UTM |
Universal Transverse Mercator |
W |
West |
WGM |
Watts, Griffis & McQuat, Ltd |
WGS |
World Geodetic System |
yd |
Yard |
yr |
Year |
The information, opinions, conclusions, and estimates presented in this report are based on the following:
|
• |
Information and technical data provided by SIM |
|
• |
Review and assessment of previous investigations |
|
• |
Assumptions, conditions, and qualifications as set forth in the report |
|
• |
Review and assessment of data, reports, and conclusions from other consulting organizations and previous reports. |
These sources of information are presented throughout this report and in the References section. The qualified persons are unaware of any material technical data other than that presented by SIM.
2.4Qualified Person and Site Visits
Mr. Enriquez, E., CPG, has over 30 years of professional experience as geologist, both as an employee and a consulting geologist and has contributed to numerous mineral resource projects, including
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silver, gold, and polymetallic resources throughout Mexico for the past fifteen years. Mr. Enriquez is responsible for the full content of this report.
Mr. Enriquez has a good knowledge of the mine from its beginning in 1993 to date. He has overseen supervising the mine for Luismin-Goldcorp from 1997 to 2003, when he was Manager of Exploration in mines for that company. He has visited the mine in 2018 and 2019 for the preparation of Technical Reports NI-43-101. He has not visited the mine in 2020 due to the COVID-19 pandemic and due to the greeting restrictions imposed at the mine. As a Qualified Person Mr. Enriquez conducted an on-site inspection of the San Martín property during June 07 to 10, 2022. While on site, Mr. Enriquez reviewed SIM’s current operating procedures and associated drilling, logging, sampling, quality assurance and quality control (QA/QC), grade control, and mine planning (short, medium, and long term) procedures, he also inspected the laboratories at the San Martín facilities as well as the underground operations and plant.
Mr. Enriquez met with the general mine manager and all personnel of the geology department to review the geologic understanding, sampling methods and types, modeling (resources, reserves, and grade control), prior to inspecting the procedures in the mine and office for collecting and handling the data. Once the geology department processes were reviewed, Mr. Enriquez discussed with the mine planning and survey department the process for short, medium, and long-term mine planning. Reconciliation was discussed with both departments and the plant supervisors. The assay laboratory was toured, and the procedures were reviewed with the laboratory superintendent.
3.0PROPERTY DESCRIPTION AND OWNERSHIP
The San Martin mine is an underground gold-silver mining complex that has been in operation since 1993. It produces gold-silver by using the Merrill–Crowe Process technique for removing gold from the solution obtained by the cyanide leaching of gold and silver ores. The mine operates 365 days per year on a 24 hour per day schedule. Mining and ore processing operations are currently in production and the mine is considered a production stage property.
The San Martin mine is located 47 kilometres, in a straight line, northeast of the Queretaro City, Queretaro State, on local road No.100 and about 250 kilometres NW of Mexico City, near the towns of Tequisquiapan and Ezequiel Montes (Figure 3-1).
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The San Martin Mine is operated by Compañía Minera Peña de Bernal, S. A. de C. V. (CMPB), a direct, wholly owned subsidiary of SIM. A 3.0% net smelter returns a royalty (“NSR”) and is payable to Servicio Geológico Mexicano (“SGM”- Mexican Geological Survey) on the claims San Martin Fracc. A, Title 215262, San Martin Fracc. B, Title 215263 and San Martin Fracc. C, Title 215264.
3.3Mineral Titles, Claims Rights and Leases
Compañía Minera Peña de Bernal S.A. de C.V., a wholly owned SIM subsidiary, holds eight mining concessions covering 12,991.7805 hectares at the San Martin Mine in the State of Querétaro (Figure 3-2). Claims are indicated by its Title number. Right payments are done twice a year, every semester. The San Martin Mine presently consists of two underground mines, San José and San Martin. The San Martin mine is approximately 800 m NNE of the San José mine. Minas Luismin, SA de CV commenced mining late in 1993 on the San José deposit with an open pit operation that was later abandoned and mining continued with underground methods over the San José and the San Martin oreshoots.
Mining regulations in Mexico provides that all concessions are to be valid for a period of 50 years. Taxes are based on the surface area of each concession and the time of expedition of the title and are due in January and June of each year. All tax payments have been paid by SIM to date. Currently, annual claim-maintenance fees are the only federal payments related to mining claims, and these fees have been paid in full to January 31, 2022. The current annual holding costs for the San Martin mining claims are estimated at US$234,000 Dollars (Table 3-1).
Table 3-1:List of Mining Titles of the San Martin Mine
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SIM acquired the San Martin Mine ("San Martin") from Goldcorp Inc. ("Goldcorp") in February 2007. Goldcorp is a Canadian mining company listed on both Canadian and United States Stock Exchanges. Goldcorp got the San Martin Project in February 2005 with the take-over of Wheaton River Minerals Ltd., who had acquired San Martin in the take-over in 2002 of the Mexican mining company Minas Luismin S.A. de C.V. ("Luismin"). SIM paid US$24 million in cash and issued 4,729,000 common shares to Luismin at a deemed value of CDN$0.50 per share in consideration for the shares of Bernal.
San Martin is owned and operated by Compañia Minera Peña de Bernal, S.A. de C.V., a wholly owned subsidiary ofSIM.
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3.4Comment on Factors and Risks Affecting Access, Title, and Ability to Perform Work
QP and the San Martin Mine staff believe that all major permits and approvals are in place to support operations at the San Martin mine. Based on the LOM plan, additional permits will become necessary in the future for increased capacities to tailing dam stockpiles and TSFs as discussed in Section 17. Such processes to obtain these permits and the associated timelines are understood and similar permits have been granted in the past. The San Martin mine have environmental, land, water, and permitting departments that monitor and review all aspects of property ownership and permit requirements so that they are maintained in good standing and any issues are addressed in a timely manner.
The mine has a unionized workforce and only safety, tailing dams and food service are contractors. There has not had been work stoppages over the operating history of the mine. As of December 31, 2021, QP and the San Martin mine believe the mine’s access, payments for titles and rights to the mineral claims, and ability to perform work on the property are all in good standing. Further, to the extent known to the QP, there are no significant encumbrances, factors, or risks that may affect the ability to perform work in support of the estimates of mineral reserves and mineral resources.
4.0ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, LOCAL RESOURCES, AND INFRASTRUCTURE
The roads through which the San Martín mine is accessed are paved and they are in good condition all year long. It can be reached by highway No. 57 between the cities of Querétaro and San Luis Potosí. Access to the San Martin mine can be conducted also from Mexico City through highway 57D, for 160 kilometers, until reaching the City of San Juan del Río, Queretaro. From here, take the HW 120, for 19 km until Tequisquiapan, and continue for 16 km more until Ezequiel Montes. From here take the road to the junction with the # 100 highway, take this to the NE and 1.5 km more to enter the mine facilities.
From the City of Querétaro take Highway 45D for approximately 22 km to the SE and then take Highway No. 100 to the NW for 36 kilometers until reaching the junction with the entrance to the mine in the town of San Martin. This same road leads to the magical town of Peña de Bernal, which is the company's employee camp.
There are constant flights from the City of Querétaro to several destinations in the United States, particularly Chicago, Atlanta, Dallas, Houston and Detroit and other domestic destinations: although these change from season to season.
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The climate in the San Martin mine area is semi-dry, described by generally low rates of precipitation. During the year, the temperature generally varies from 5 ° C to 30 ° C and rarely drops below 2 °C or rises above 33 °C.
The warm season lasts for two to three months, from April to June, and the average daily maximum temperature is over 28 °C. The hottest month is May. The cool season lasts around three months, from December to February, and the average daily maximum temperature is less than 24 °C. The coldest days of the year are January, with an average minimum temperature of 5 °C and an average maximum of 23 °C. The normal yearly temperature is 19°C.
The rainy season lasts six months, from June to November, with an average total accumulation of 509 millimeters. The dry season lasts from December to May.
Mining operations are all year-round with no interruptions due to weather. San Martin is located within a seismically stable area with small and imperceptible earthquakes that do not endanger the daily operations of the mine and plant.
The relief and landforms of Mexico have been greatly influenced by the interaction of tectonic plates. The resulting relief patterns are so complex that it is often claimed that early explorers, when asked to describe what the new-found lands were like, simply crumpled up a piece of parchment by way of response.
Figure (4-1) shows Mexico’s main physiographic regions. The core of Mexico (both centrally located, and where most of the population lives) is the Volcanic Axis (Region 10 on the map), a high plateau rimmed by mountain ranges to the west, south and east. Coastal plains lie between the mountains and the sea. The long Baja California Peninsula parallels the west coast. The low Isthmus of Tehuantepec separates the Chiapas Highlands and the low Yucatán Peninsula from the rest of Mexico.
The San Martin Mine falls in the convergence of the Central Plateau, Sierra Madre Oriental and Volcanic Axis or Trans-Mexican Volcanic Belt.
4.5Local Resources and Infrastructure
The City of Querétaro is the closest major population center to the San Martín Mine Project, with a population of approximately 802,000 inhabitants. Querétaro is an agricultural, commercial, tourist and mining center with all the associated municipal amenities, including an international airport with numerous regional flights to other major Mexican cities and the United States.
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At each of the mine sites, the water required is supplied from the dewatering of the mines. Industrial water for the cyanide plant is recycled, and additional water (60,000 m3/y of fresh water) is obtained from nearby wells.
The plant is a 627 tpd facility capable of treating sulfides containing Au-Ag ores using a Merrill-Crowe processing circuit to produce doré bars.
Electrical power from the Federal Electricity Commission (34 kV) supplies both the plant and mine, and satisfies power demand, which averages about 1.1 megawatts. Two emergency generators, one of 500 kW and other of 200 kW, provide power to the mill in case or outages.
An upgrade to the tailings dam was completed in 2010, when dry stacking of the tailings began, and current capacity is sufficient for many years of production.
Apart from offices, dining room, warehouses, shop, and other facilities, CMPB also provides dormitories and limited housing facilities for employees working on a rotational schedule at the townships of Ezequiel Montes and Bernal. Much of the labor work force lives in the San Martin town and nearby communities. The area has a rich tradition of mining and there is an ample supply of skilled personnel sufficient to man both the underground mining operations and the surface facilities.
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CMPB has negotiated access and the right to use surface lands sufficient for many years of operation. Sufficient area exists at the property for all needed surface infrastructure related to the LOM plan, including processing, maintenance, fuel storage, explosives storage and administrative offices. There exists enough capacity in existing tailing impoundments for tailings disposal.
Figure 4-1:
Physiographic map of Mexico showing the location of the San Martin Mine (After Raisz, 1964)
5.0 HISTORY
Mining in the San Martín district extends back to at least 1770 when the mines were first worked by the Spanish, particularly by Don Pedro Romero de Terreros, Count of Regla. Spaniards worked in the district for 40 years, however, there is no production records available for that time. During those days, silver and gold production accounted for 80% of all exports from Nueva España (New Spain), although, by the late-eighteenth century silver production collapsed when mercury, necessary to the refining process, was diverted to the silver mines of Potosí in present day Bolivia.
Most of the production came prior to the 1910 Mexican Revolution with San Martin district being an important producer. The first records show the Ajuchitlán Mining and Milling Company produced an estimated 250,000 tonnes at a grade of 15 g Au/t and 100 g Ag/t during 1900 to 1924.
The first modern stake was in 1982, when the Mexican government declared a 6,300 ha National Reserve over the area surrounding the Peña de Bernal. Luismin entered into an agreement to explore in the claims of CRM in 1986 for a payment of US $ 250,000 dollars and a royalty of 5%, which later was reduced to 3% in 1996. In1988 geological reconnaissance and exploration program initiated. Geological works concluded in 1992 and by the end of 1993 the decision was made to start the open-pit mining in the San José area, at a rate of 300 tpd.
The operation of the San José pit only lasted a couple of years, when it was discovered that the deposit was not a "Carlin type", as had been thought, but that it was a tabular structure in form of a vein that continued to deepen and run laterally along its strike. Then it was decided to start the underground mining, on the same San Jose structure and on the oreshoot of San Martin, which ultimately turned out to be the one with the largest number of reserve and resources.
In the year 2000, the exploitation begins in the San Martín body, called "Tronco" due to its verticality. In 2001, at the same time, the exploration of high-grade gold bodies called "Mantos" began. The first of these oreshoots was the Body 28.
The mine is currently mined 627 tpd and the capacity of the mill is 1100 tpd. The mining method is cut and filled with dry backfill. The exploitation in the Body 28 is currently room and pillars filled with a mixture of backfill and 5% cement.
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San Martin has produced over 7.3 million tonnes with average grades of 2.78 g/t Au and 41 g/t Ag, for a total of 688,081 oz of gold equivalent.
Historical production at the San Martín Mine for the years 1993 to April 30, 2022, is roughly estimated in Table 5-1.
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Table 5-1:Summary of production for the San Martín Mine (from 1993 to April 30, 2022)
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6.0 GEOLOGICAL SETTING, MINERALIZATION, AND DEPOSIT
The regional and local geology of the San Martín Mine Project is described in detail in several existing internal and previously published technical reports and other internal reports for SIM. The following descriptions of geology and mineralization are excerpted and/or modified from Labarthe, et. al (2006) and Rankin (2008). Mr. Enriquez has reviewed the available geologic data and information, and finds the information presented here is reasonably accurate and suitable for use in this report.
The San Martin area forms Mesozoic shallow-basin sediments (shales and limestones) unconformably overlain by Tertiary volcanics/epiclastic and volcaniclastic sediments. Localized subvolcanic micro-granodiorite also occurs (Figure 6-1)
The primary formations are (from oldest to youngest): Jurassic: Las Trancas Formation(Jtr). This includes massive well bedded and laminar limestones. Very thin (<10cm) shale intercalations occasionally occur. A dark carbonaceous limestone is known form the deeper SE sections of the San Martin mine.
Cretaceous: El Doctor and Soyatal-Mezcala Formations. These make up a lower pale buff to orange lithic shale, overlain by intercalated shale and limestone. Note that there may be some local problems in discrimination between the Cretaceous and Jurassic limestones in some outcrops and drill core; a zone of shallow-dipping limestones in the mine infrastructure area are shown in the geology map as Cretaceous Soyatal-Mezcala Formation.
Tertiary: Continental sediments, overlain by bimodal epiclastic, rhyolitic ignimbrite & andesite with a distribution around the mine site. The andesite has been dated at ~30 Ma. The volcanic breccias, lahar, epiclastic, ignimbrite and andesite are younger and have been dated at ~10–11Ma. The most conspicuous feature is the Peña de Bernal intrusive, which is a micro-granodiorite of an age of 35 Ma. See also Figure 6-2.
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Figure 6-1: |
Regional geological map of the surrounding San Martin Mine. Taken from Nuñez-Miranda, 2007 |
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The local geology is represented by the Las Trancas Fm, Doctor Fm, Soyatal-Mezcala Fm, map presented in Figure 6-2. The map shows trace of the mineralized structure projected on the surface, to visualize the direction of the structure, even if there are only small outcrops at the pit of the San José I and II bodies, and part of San Martín (Figure 6-3)
Burk (1993) describes this formation in the Arroyo Nacional, located in the area known such as Chicarroma, distant 3 km to the NE of the central part of the San Martín mine. The package consists of well-foliated slates, red to gray-brown shales, interbedded with strata of a few centimeters of calcareous siltstones, fine-grained sandstones and, to a lesser extent, proportion, conglomerates.
This formation does not outcrop on the surface of the San Martín mine, and neither is it present in underground works as encasing rock. However, 3 kms to the northeast has been mapped by the geologists of the mining unit, in the areas known as Chicarroma and Capulín, located in the vicinity of the intrusive that makes up La Peña de Bernal.
6.2.3Soyatal–Mezcala Formation
In the underground mine workings of the San Martín mine, this formation is the main host rock throughout the entire mineralized structure. Regarding its behavior on surface, it is seen in the San José I and II and part of San Martín structure, Rock consists of micritic and calcarenite limestones thinly bedded, interbedded clayey with some chert lenses and horizons thin shale and marl, with strata between 10 to 20 centimeters of argillaceous limestone and calcareous shale. The upper part of the strata consists in thinner layers between 5 to 10 cm. Thickness of this Formation is around 150 meters.
Locally in the mine area two types of igneous rocks are recognized, clearly differentiated and after the Soyatal-Mezcala Formation:
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1) |
A unit of volcanic rocks of andesite/dacite composition that overlies unconformably to the Cretaceous sedimentary rock units and which makes up the entire stratovolcano called Cerro San Martín. The geologists of the San Martín mine have subdivided this unit into the Andesitic/dacitic Breccia (Tdbx) and Andesite/dacite (Ta/d). |
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An intrusive known as a rhyolitic dike that fits between sedimentary rock units, the volcanic dacite-andesitic and the mineralized structure and that has only been observed in underground works. |
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Overlying the Soyatal-Mezcala Formation in erosional unconformity, they appear throughout the region and in the surroundings of the mine a set of volcanic rocks, of andesitic composition, which are part of the stratovolcano that constitutes the San Martín hill. The structure at the base is brecciated with fragments from 10 to 30 centimeters in diameter. The dike outcrops underground between the andesite/dacite and limestone of the Soyatal-Mezcala Formation (Figure 10). In the underground works of the mine, the intrusive body it is deeply silicified, megascopically it is milky white yellowish and with a general brecciated texture, that is, massive-brecciated quartz clasts and cemented by another stage of quartz that cements the entire rock.
Figure 6-3 |
Generalized regional geologic map of the San Martín Mine Project (After Labarthe, et. al, 2004) |
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The structure is extremely important in this deposit since mineralization is controlled by the brecciated structure. The San Martin deposit is located in the core of a strongly folded west northwest striking basement-cored anticline or southwest-tilted structural block. The strong folded Soyatal-Mezcala Formation and younger rocks have been affected by a series of faults NE-SW, regional of regional influence. The influence of this structural zone is reflected in the gold grade distribution at depth within the main breccia structure.
Mineralization occurs in Upper Cretaceous black limestone and calcareous shales of the Soyatal-Mezcala Formation as electrum, and silver selenide minerals principally associated with quartz and to a lesser degree with calcite. The deposit is an epithermal, low sulphidation precious metal (Au-Ag) type (metal ratio Ag:Au at 10:1).
Mineralization is generally made up of breccia that commonly is concordant with a limestone/shale contact (in the San Martin and San José areas) which forms the relatively steeply dipping “Tronco” and “Mantos” oreshoots, these breccia-veins contact the younger volcanic flows (dacite and ignimbrite) where they have formed the more horizontal portions of the deposit. The mineralized economic breccia grades from 30 g Ag/t to 250 g Ag/t.
Exploration has been concentrated along the NE trending breccia zone however evidence of a northerly trend in area 30 and 31 leads to suspect possible other structures together with 2.0 g Au/t to 30 g Au/t over widths that vary from 1.5 to 17.0 m but averaging 4.0 m.
The mineralized oreshoots show several stages of brecciation and cementation, with four major stages of hydrothermal breccias and supergene alteration that filled fractures and late cavities. The metallic mineralization is mainly formed by electrum, naumannite, tetrahedrite, pyrite and chalcopyrite as hypogene minerals, and free gold, partzite, chlorargyrite, malachite, hematite, goethite-limonite as supergene minerals. Gangue minerals are mainly quartz, chalcedony, and calcite, with minor amounts of adularia. Quartz and calcite occur in all the four stages cementing the breccia fragments of rock and older vein. Chalcedony, quartz, and calcite associated with the economic mineralization usually show saccharoidal, crustiform, colloform, cockade and comb textures. Stage one is totally barren of silver and gold. The main Ag-Au mineralization occurred in the second stage of brecciation, associated to colloform and chalcedony quartz. Stage three is carrying low grade and is abundant. The late stage of mineralization is characterized by native gold content, chlorargyrite and abundant partzite, because of the supergene alteration. Mineralization occurs as native gold, electrum, naumannite (AgSe) and argentojarosite (AgFe3(SO4)2(OH)6) associated principally with quartz and lesser calcite. The silver contained in argentojarosite is not recoverable with cyanidation.
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San Martin is a mature mining district with a long history of exploration. The data, methods, and historical activities presented in this section document actions that led to the first and continued development of the mine but are not intended to convey any discussion or disclosure of a new, material exploration target as defined by S-K1300. Exploration outside of the current operation is conducted by geologists of the mining unit and incorporated into the geologic model that is still under construction. New drilling was included in the update of the geological resource model to support the mineral reserves and mineral resources. Drilling results added for the model update provide local refinement of the geologic interpretations and grade estimates, but do not materially alter these interpretations and estimates on a district-wide scale.
The mine has been extensively explored from surface using geologic mapping, vein mapping and vein sampling. Underground exploration consisted of diamond drilling, geologic level mapping, vein level mapping, vein sampling and drift and stope development. Historical underground development includes 69,102 meters of drift and raise, and 82,664 meters of preparation and accessing ramps. Channel samples are collected from drifts and stopes to conduct the exploration with drifting and grade control in stopes.
Channel samples are collected using the following guidelines:
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During level mapping, geologists paint sample locations on the back or development face to guide samplers. |
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Samples are collected by chiseling out the painted area, ideally cutting 10 cm wide sample. |
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The sample widths range from 0.2 m to 1.5 meters as maximum. |
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The sample’s weight is usually between 1.0 and 2.5 kg. The sample is broken into small pieces of around ¼ inch to 1.0 inch as maximum. |
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Sampling is carried out as perpendicular to the vein strike as possible and the true width is measured by sighting the vein dip and tilting the measuring tape accordingly. |
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Stope and face samples are collected at 2 m intervals across strike. Wall rock and vein material are sampled separately. When dictated by geological features, samples are taken at closer intervals |
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Sampling along cross cuts is conducted continuously. |
Sampling is subject to numerous sources of error, particularly to the differential hardness of material being sampled, and the tendency to include disproportionate volume of softer rock. Diligent of systematic collection of channel samples generates a large data set which in most cases is statistically representative, but never completely free of errors or potential bias. The collection of channel samples has been observed underground it was noted that the procedure follows accepted engineering practices for channel sampling established by the geology department. The author concludes channel samples procedures used in the mine result in samples which are reasonably
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representative of the mineralization and meet industry best practices guidelines for this type of sampling. The resulting data is sufficient to support the estimation of reserve and resources.
Historic exploration drilling statistics for the period of 1988-2022 are summarized in Table 7-1. These results were proportionated by CMPB and summarized here, however; the data has not been independently verified by the author.
The drill hole database for the SM contains 1989 drill holes completed between 1988 and April 2022, representing 233,944 meters of drilling. This includes condemnation, district exploration, geotechnical. Minas Coremin, SA de CV (MICO), a subsidiary of Luismin-Wheaton River drilled the property since 1988 to 2007. SIM acquired the mine in February 2008 and since then the performance of drilling has improved significantly.
These low-grade to barren holes are not in the immediate mining areas and are not used for resource estimation. Some of the drill holes used for geologic modeling are summarized in Table 7-1.
The goals of drilling by MICO, for the period of 1988-2007, was to trace the breccia structure from the San José open pit to the north-northwest, resulting in the discovery of the San Martin orebody and the San José II structure. The misconception of the type of deposit resulted in starting the exploitation of the San Martin with an open pit. The idea, at that time, was to mine out 180,000 tonnes of ore and shut down the mine at the third year. The San Martin giant breccia was discovered with the pit and then the concept of exploration was reviewed by Luismin.
Most of the drilling was done from underground. The author has no information about the holes done from surface but represent less than 2% of the total. Figure 7-1 shows the swarm of historical holes that have been performed in the entire mine.
Table 7-1:Summary of drill hole programs performed by MICO and CMP
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7.3Collar and Downhole Surveys
Upon completion of a drill hole, collar locations are surveyed using the surveyors for underground and Global Positioning System (GPS) units for surface holes . All coordinates are based on UTM mine grid system. Historically, downhole surveys were not systematically performed. For historical holes lacking surveys, the collar azimuth and dip are used for the entire length of the hole. Survey data are part of the district-wide database and are used in the modeling process to locate drill hole intercepts. Final reports for collar and downhole surveys are included in the drill hole log files. Original survey records are stored in a secure facility. Spatial locations of the drill holes are visually confirmed in the resource modeling software.
Diamond drill core samples are taken according to the following criteria:
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Drill core is split using a core saw |
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Samples are taken from the core sections with visible structure (breccia) or mineralization, and 1.5 meters of the surrounding wall rock |
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Will rock within the breccia structure is sampled independently |
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Information is recorded in the drill logs for each sample includes depth, width, core angle and ore/rock type |
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Core logging procedures used at the San Martin mine were developed under the ownership of MICO and recently by CMPB. Historical logging was done on paper and includes information regarding rock types, structure, mineralization, and alteration.
Currently, geological logging is done on laptop computers. Since 2008, all information is entered into a drill hole database. Information collected includes rock type, alteration type and intensity, mineralization, core recovery and rock quality designation (RQD). No high-resolution photographs are taken for each or set of boxes. Completed logs are validated, approved, and then printed out and stored on-site for each drill hole.
A total of 7,360.50 meters were drilled in 2021 until the end of April 2022 which focused on two areas of the mine: the first focusing on the CENTRAL (San Martin Body and 28 Body) part of the operating mine, and the second searching for the extension of the orebodies of high-grade discovered during the 30 years of the mine’s life. The San Martin structure was cut after the normal fault that displaces the right-lateral breccia structure(Figure 7-2). Highlights of the best results are in Table 7-2.
Table 7-2Drill Results of the San Martin Body Extension
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Other results that have proved the continuation of the orebody in Area 28 are outlined in Table 7-3. The mining work is aimed at assessing these resources for this current year. This new structure was discovered in 2021 with four diamond drill holes and the underground works have started to intercept this extension. This new vein is related to a vein discovered more than 15 years ago through a hole located 500 meters far away from the structure. Exploration continues with the development of drilling stations along the projection vein. Figure 7-3 shows the continuity of the orebody towards the eastern.
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Table 7-3:Highlights of Drill Results at Area 28 Oreshoot
The drill core sampling and the channel sampling of stopes and drifts are consistent with the commonly practiced procedures used throughout the mineral industry. Along with in-house blanks, standards, and duplicates included in the sample batches, some check assays are conducted on the samples by a certified, independent laboratory as well. Most double check analyses are conducted by the PENBER Lab.
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Drill core sampling practices are consistent with the industry standards, adequate for use in preparing a mineral resource estimate.
In the opinion of the QP:
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The exploration programs completed at San Martin (drilling, sampling, logging and drifting) are appropriate for geologic resource modeling. |
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The data spacing and distribution is sufficient to establish a degree of geological and grade continuity appropriate for mineral reserve and resource estimation. |
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The engineering programs and the geotechnical data are proper to support the design of the underground mine workings, according to the established design and criteria for the mine plans. |
8.0SAMPLE PREPARATION, ANALYSES, AND SECURITY
Sample preparation, analyses, and security followed by CMPB meet industry common practice standards and are adequate to support the estimation of Reserve and Resources. The quality control (QC) sampling results throughout the campaigns and laboratories are typical of an operation given the amount of throughput and data handling.
Core assays are complete by PENBER Lab, and some checks are sent to ALS Chemex in Vancouver, Canada, and the channel and mill samples are tested also in the PENBER Lab facility.
No modifications have been done in the last years. The samples received in the laboratory are dried before entering the preparation process. A primary size reduction is made up to 1/8 inch. The sample is divided into smaller portions using a Jones crusher until a sample of 150 g is obtained, which is considered representative of the initial sample volume.
The sample is reduced in size in a ring sprayer to a size smaller than 150 meshes, then is homogenized, and placed in an envelope previously labeled with the folio number tagged by the Department of Geology, including the date.
From the sample in the envelope, 20 g are taken and homogenized with the mixture of fluxes to be cast and obtain the lead button that has captured the gold and silver values. This button with values is placed in a cup to remove the lead and obtain a gold and silver button at the end of the process.
The button of gold is weighed, and a chemical attack is made to dissolve the silver, the residue is pure gold that is weighed and, in this way, obtain the gold and silver grades present in the mineral sample. This analysis of gold and silver in mineral samples has a detection limit of 0.1 g/t Au and 3.0 g/t Ag.
CMPB’s internal QAQC includes adding one duplicate, one reference and one blank to every 20 samples. A sample of sterile (white) material is crushed before starting the size reduction process.
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The degree of reduction is verified by passing the total of the sample through the # 6 mesh; 80% of the sample must pass, otherwise the breaker opening is adjusted. This process is done in the first sample and then every 20 samples. Similarly, every 20 samples in the crusher will pass a sample of sterile material, in addition to cleaning the equipment with compressed air, including the Jones quartz that is used to divide the sample into small portions.
Continuing with the reduction process, after passing the sample through the ring sprayer, it passes through the 150 mesh, through which 80% of the total weight must pass. To avoid contamination, compressed air is used to clean the equipment and every 20 samples a sterile material is sprayed.
The pulverized sample is taken to furnace in batches of 42 samples each. At the beginning of each batch a blank is placed, in the position number 21 a standard of known value is placed and in the position number 42 a duplicate of the sample corresponding to the position number 22 is placed.
The Assay Standard CDN-ME-1304 certified standard is from the CDN Resource Laboratories LTD laboratory, with a grade of 1.80 g/t Au and 34.0 g/t Ag. In the same way, an in-home made and validated standard is used on site, with a grade of 1.93 g/t Au and 40.5 g/t Ag.
When performing the gold and silver test and the relationship between these two elements is less than 4, it is considered to repeat the assay of the sample by adding silver nitrate (inaccurate) to increase the ratio and prevent the encapsulation of the silver.
The third-party laboratory that has been used is ALS Chemex, with the prep lab located in Guadalajara, Jalisco, of ALS Global.
In the past, personnel of Inspectorate laboratories in Vancouver have inspected the mine lab facilities and has provided procedures, flux recipes and feedback on all laboratory equipment. The mine has been awarded the Mexican Quality Award which is like International Standards ISO 9001 for quality control in the overall mining operations and with the award Certificate of Clean Industry by SEMARNAT.
8.1Sample Preparation and Analysis
8.1.1Underground Channel Samples
Stope and development channel samples are collected by sampling support staff, controlled by the Geology Department, who are instructed to take the sample in the transect lines marked with red paint by the geologist. Sampling is regularly supervised by the geologist or the leader of the sampling crew that also belong to the geologic staff. Samples are broken in various size pieces (approx. ¼ inch to 1.0 inch), is mixed, and bagged in plastic bags. The sample is transported to the on-site laboratory for preparation and analysis. Channel samples are prepared and then analyzed by the PENBER Lab for Au and Ag. Gravimetric fire assay is used to determine Au and Ag grade. The results are reported in a clear mode and sent by email to all departments involved in the process (Geology, Mine, Mill and Planning).
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8.1.2Diamond Drill Core Samples
Drill core samples are taken at regular intervals, according to the physical aspect of the core. This includes all types and stages of breccia and host rock, occasionally. The sample is prepared by splitting the core with a diamond saw. The process is supervised by the geological staff to ensure the integrity of the core splitting and sampling. Half of the core is used for the sample, with its identifying ticket, and the other half remains in the core box with its identifying ticket. The sample is crushed to ½ inch and bagged and tagged with the same ticket as the piece remaining in the core box. The samples are transported to the PEBER facilities for preparation and analysis. Au and Ag are analyzed by fire assay and gravimetric finish.
8.2Security, Storage, and Transport
The channel sampling pulps and rejects are obtained from the assay laboratory and are stored in a secured area at the complex of the San Martin mine, in a closed and locked building.
The core is stored at the San Martin mine complex, in a closed building. Core is stacked in plastic boxes which are resistant to humidity and dust. The pulps and rejects are stored in closed areas and are individually packed in plastic bags to avoid contamination. The mine facility is guarded by security personnel 24/7.
Quality assurance (QA) consists of evidence to prove that the assay data has precision and accuracy within generally accepted limits for the sampling and analytical method(s) used to have confidence in the resource estimation. Quality control (QC) consists of procedures used to ensure that an adequate level of quality is maintained in the process of sampling, preparing, and assaying the drill core samples. In general, QA/QC programs are designed to prevent or detect contamination and allow analytical precision and accuracy to be quantified. In addition, a QA/QC program can disclose the overall sampling – assaying variability of the sampling method itself.
A blank and standard is inserted every 20 samples, for channel samples and drill samples too.
CMPB’s uses internal QA/QC that includes adding one duplicate, one reference and one blank to every 20 samples. A sample of sterile (white) material is crushed before starting the size reduction process.
In-house standards, by PENBER Lab, are used to keep track of production grades and the mill. The standards are low for medium grade gold and silver. Each standard is used both for channel samples from the mine, as well as core samples from blastholes and samples from mill heads and tails.
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Sampling and QA/QC protocols have been updated in 2008, using blank material and standards to better reflect the vein grades and the deposit type. The analysis and verification for blank and standard material is conducted on a routine basis to ensure the results are as expected.
Blanks are used and inserted on a 1 in 20 basis to confirm that there is no contamination between samples due to the sample preparation errors at the laboratory. Blanks are not certified and were prepared by PENBER Lab, as an internal way to check the operation of the lab. The blanks were prepared at the San Martine mine using unmineralized quartz or rock material. The blanks are blind to the laboratory.
Duplicates of pulps are analyzed within the channel and drill core stream in the PENBER Lab. Review of the duplicates show good reproducibility (Figures 8-1 and 8-2). No significant errors have been noticed in Standards and duplicates, and do not suggest the invalidation of the results from the PENBER Lab. Almost 30 years of continuous operation of the San Martin mine and mill, have passed without having a problem that is attributable to the testing laboratory and the methods that have been used for its performance. However, the author has recommended using certified standards and an external laboratory for duplicates, as this will give the mining operation at San Martin even
greater certainty.
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8.4Comment on Sample Preparation, Analyses and Security
In the QP’s opinion, sample preparation, analytical methods, security protocols, and QA/QC performance are adequate and supports the use of these analytical data for mineral reserve and resource estimation at the San Martin mine.
The mineral resource estimate presented in report Section 11 is based on the following information provided to Mr. Enriquez by SIM with an effective date of April 30, 2022:
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Discussions with SIM personnel. |
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Personal investigation of the San Martin Mine office. |
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An underground database received as .xls files. |
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Production channel sample database revised on June 10, 2022. |
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Modeling blocks for veins San José, San José II, San Martin, Cuerpo 28, Cuerpo 29, Cuerpo 30 and Cuerpo 31, 4-700. |
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Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2014 and authored by Gunning, D. R. and Campbell. |
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Polygonal 2-dimensional long sections for veins San José, San Martin, Cuerpo 28, and Cuerpo 29 with resource and reserve calculations. |
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Reserves and Resources in the San Martin Mine, Queretaro State, Mexico, as of April 30, 2018 and authored by Erme Enriquez. |
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Reserves and Resources in the San Martin Mine, Queretaro State, Mexico, as of September 30, 2019, and authored by Erme Enriquez. |
The on-site laboratory (PENBER Lab) has undergone numerous improvements since SIM took over management of the operation in February 2008. Comparison of the on-site laboratory to commercial laboratories is conducted on an ongoing basis. The results of this analysis are presented in the July 1, 2009, NI43-101 report and for both gold and silver the variability of results were acceptable for a producing mine, thus supporting confidence in the results of the on-site lab. No other verification has been done since then.
Historically (since 1993 to 2003), the San Martin mine has been using a specific gravity of 2.7 to convert volume in cubic metres to metric tons (the tonnage factor). Under suggestion of Mr. Gunning and M. Whiting, the geological staff started to implement, a specific gravity testing procedure on diamond drill core and mine material.
Following an examination of drill core and wall rock conditions in stopes, the “Method of Archimedes” (dry mass in grams divided by water displacement in milliliters method) was chosen as a reasonable and time effective procedure. There is not a significant amount of void space, so the costlier and time-consuming methods of pre-coating drill core are not recommended.
A selection of drill core from the San Martin and Guadalupe veins was tested and a new specific gravity was recommended. The new SG is 2.55 g/cm3 was used prior to the 2014 Resource and Reserves. Subsequent testing more recently has shown values between 2.6 and 2.8. These new data have resulted in the use of 2.6 g/cm3 for estimates in 2014 and later
9.2Comment on Data Verification
As a confirmation of the mineral reserve and resource process, third party consultants have been hired to perform verification studies. The San Martin mine was last reviewed in September 2019. The study included database checks and concluded that the data base supporting the geological information of the San Martin deposit reserves and resource estimate is complete and follows mining industry standards.
The QP has been involved in two of the recent audits of the San Martin mine, including reviews of stope, drifts, and drill hole data. The data has been verified and no limitations have been identified.
In summary, data verification for the San Martin mine has been performed by mine site staff and external consultants contracted by SIM. Based on reviews of this work, it is the QP’s opinion the San Martin mine, stope, drifts and drill hole database and other supporting geologic data, align with the accepted industry practices and are adequate for the use in this level of study.
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10.0MINERAL PROCESSING AND METALLURGICAL TESTING
Mineral reserves and mineral resources are evaluated to be processed using cyanidation process by dynamic leaching. The process consisted essentially of leaching in a cyanide solution followed by solid-liquid separation, with the solid residues being washed as efficiently as possible, and the leach liquor being treated by zinc cementation to recover the precious metals. While this process is generally extremely efficient and fairly cheap; it does have limitations in the treatment of low-grade ores and certain complex ore types. For example, ores with a high content of clay or carbon, are usually difficult to filter, and losses of soluble gold or silver in the residues can be unacceptably high.
Because of the historical production for Plant, the liberation characteristics of the material and subsequent response to cynidation are within typical design criteria and known by the operations personnel. There are no geological, lithological, or mineralogical changes in the process plant feed anticipated for the envisaged future production as compared to previous operations. Historical operational results support the existing process flowsheet with some adjustments such as adding oxygen gas from the beginning of the process, this has increased the recovery of precious metals by up to 2%.
10.1Metallurgical Testing and Recovery
Metallurgical research is aimed at improving the recovery of gold and silver, reducing process time and reducing costs. In the San Martin ore, a reduction in the process time has been obtained without undermining the metallurgical recovery, currently working with a treatment time of 35 hours, which has helped reduce cyanide consumption, reducing costs.
To achieve this process time, the addition of oxygen in gaseous form was implemented in the grinding area. Currently, a mixture of reagents that increase the recovery of gold and silver values is being investigated, the objective is to reach 93% gold extraction. In the tests conducted, this result has been reached, so the process of validation and repeatability of results will begin with an external laboratory before carrying out tests directly at the Processing Plant. The smelter area is part of the process, which is why an investigation was started to reduce the impurities in the doré bars. The tests carried out have led us to produce bars with a purity of 99.3% industrially so far this year in 2022 and consequently the consumption of fluxes and crucibles was reduced, which led the pant to lower the smelter costs. The San Martin ore, in some of its areas, has a characteristic of refractoriness caused by the presence of carbonaceous material. Tests have been conducted with different processes and reagents, achieving gold extractions of 82%. Research continues to search for alternatives that can improve these results at a low cost.
The data provided by SIM conforms to the industry standards and is within the accuracy of this study and verified for use in this study. Historic production from multiple oreshoots at the San Martin mine demonstrates the capacity of the plant to process the mineralized material. As a result, the
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processing and associated recovery factors are considered appropriate to support mineral reserve and mineral resource estimation and mine planning.
11.1Introduction and Qualified Person
This Report provides a mineral resource estimate and a classification of resources reported in accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves. Accordingly, the Mineral Resources have been classified as lndicated Mineral Resources or lnferred Mineral Resources. The Mineral Resource estimate for the mine is reported here in accordance with the SEC S-K 1300 regulations. For estimating the Mineral Resources of the San Martin Mine, the following definition as set forth in the S-K 1300 Definition Standards adopted December 26, 2018, was applied.
The Mineral Resource estimate and related geologic modeling were reviewed and approved by Erme Enriquez, C.P.G. Mr. Enriquez is a Qualified Person, independent of SIM for the purposes of this study.
Mr. Enriquez worked for Luismin (former owner of San Martin) for 21 years and visited the San Martin Mine regularly every other month from 1996 to 2002 and is familiarized with the deposit. Mr. Enriquez has visited the San Martin Mine from June 07 to 10, 2012. Mr. Enriquez is an independent Qualified Person as defined by National Instrument 43-101. This Mineral Resource/Reserve estimate is effective as of April 30, 2022, and follows the previous independent Resource/reserve estimate performed as of September 30, 2019, by Erme Enriquez, as of April 30, 2018, by Erme Enriquez, as of July 31, 2013 and 2014 by David R. Gunning, P. Eng. and Joseph W. Campbell, P. Geo. Previous audits of Luismin's operations as of December 31, 2001; December 31, 2002; and, August 31, 2004, were performed by Watts Griffis McOuat. Prior to 2001, Pincock, Allen & Holt had conducted independent audits in the years 1998, 1999 and 2000.
Total Estimated Inferred and Indicated Resources at the San Martín Mine are 1,481,770 tonnes at a grade of 1.78 g Au/t and 14 g Ag/t. The calculation of resources had been updated, when only the inferred resources were reported and not the indicated resources, measured resources have not been included due to the lack of enough drilling to support this category. In this Report, the inferred and indicated resources have been included, so the calculation, compared to the year 2019, with a little decrease.
The San Martin staff apply a factor of 2.6 tonnes/m3 to convert volume to tonnage. This is considered reasonable for the type of deposit and is based on long production experience and historic measurements.
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The Inferred and Indicated Mineral Resources are estimated by projecting typical structural geometry within the confines of the various geological structures into untested areas. The thickness of the structure and the gold and silver grades assigned to these resources was previously based on the average of past production stopes within similar structures within each mine area.
In 2010 a change was made to reflect grades from stopes that are proximal to the Inferred blocks. This resulted in a significant decrease in the grade of metals for the Inferred ore at that time but better reflects the reality of the structures. In some cases, when there are various blocks below or above the block of the projected Inferred Mineral Resources, the average of their grade and thickness is used in the estimate. However, in other cases, statistics for gold and silver that have been produced through diamond drillholes and through development are applied. Blocks for Inferred Resources are colored blue.
Indicated Mineral Reserves are defined primarily by diamond drilling. In these cases, a square is drawn on the vertical longitudinal section with the drillhole centered on the square. The shape and size of the block depends upon the geological interpretation with the maximum size of the block based on the thickness of the vein as follows:
All blocks for this category are colored green. Inferred and Indicated Mineral Resources are shown in Table 11-1
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Table 11-1:Inferred and Indicated Mineral Resources at the San Martín Mine
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Mineral resources have been classified into inferred and indicated in accordance with § 229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K). |
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Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
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Reserve and resource cut-off grades are based on a 1.41 g/t gold equivalent. |
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Metallurgical Recoveries were 86% gold and 55% silver. |
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Mining Recoveries of 90% were applied. |
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Minimum mining widths were 2.0 meters. |
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Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
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Gold equivalents are based on a 1:79.5 gold:silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
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Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
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Mineral resources are estimated exclusive of and in addition to mineral reserves. |
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Resources were estimated by SIM and reviewed by Erme Enriquez CPG. |
Mineral reserve estimates in this Report are reported following the requirements of Subpart 1300. Accordingly mineral resources in the measured and indicated categories have been converted to proven and probable mineral reserves respectively, by applying applicable modifying factors and are
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planned to be mined out under the LOM plan within the period of our existing rights to mine, or within the time of assured renewal periods of rights to mine.
Total Proven and Probable Mineral Reserves at the San Martin mine as of April 30, 2022, estimated by Geology staff and reviewed by QP, are 1,348,433 tonnes at a grade of 1.74 g Au/t and 13 g Ag/t (Table 12-1). This total includes Proven reserves of 144,331 tonnes grading 1.79 g/t Au and 14 g/t Ag along with Probable reserves of 1,204,102 tonnes grading 1.73 g/t Au and 13 g/t Ag. The Carbonaceous material has not been included in the Reserves and that is why P&P reserves have decreased. The carbonaceous reserves have been always present in the deposit and have been mined and sent to the plant using normal treatment, but those always caused a problem with the recovery of gold. The reserves represent only 5.5% of total reserves and can be left for better times when the right process is found for treatment. There exists sufficient non- carbonaceous ore to operate for two full years, which should be enough for feeding the plant for several years.
The estimation methods used by Luismin/Goldcorp have been retained to some degree, but there have been substantial changes to determination criteria for Proven and Probable reserves, and changes to dilution rates to account for the mining of Tronco ore zones and remnant ore (both hanging wall and strike and dip extensions) versus the dominance of Manto ore mined in the past.
Relative to the Manto ore the Tronco ore is thinner and stepper dipping which has resulted in higher dilution during mining due to most of the ore being mined by cut and fill methods versus the room and pillar method in the thicker flat lying Mantos. For remnant ore there is a greater dilution associated with minimal widths for mechanical equipment, which at times exceeds the remnant ore widths. There is also additional dilution associated with breaking and mucking ore next to unconsolidated fill from past mining. Cutting of some high-grade samples has been implemented to try to better predict mined grades. As well grades were lowered in some ore blocks with sufficient production history to establish the lower grades.
Modifications have also been made to the determination of Probable and Proven ore. Most notably Proven ore is only calculated for blocks above mine development, whereas in the past Proven ore was also extended below workings.
The author believes that the Mineral Reserve and Mineral Resource estimates fairly represent the Mineral Reserve/Mineral Resource potential of the property.
The previous NI43-101 compliant estimation as of July 31, 2014, prepared by David R. Gunning, P. Eng., and Joseph W. Campbell, P.Geo, reported a total proven and probable reserves of 486,586 tonnes at a grade of 2.31 g Au/t and 18.5 g Ag/t. This total included Proven reserves of 179,589 tonnes grading 2.33 g/t Au and 17 g/t Ag along with Probable reserves of 306,997 tonnes grading 2.30 g/t Au and 19 g/t Ag. In addition to this reserve is 181,546 tonnes at a grade of 2.98 g/t Au and 32 g/t Ag which is hosted in carbonaceous limestone, of which 88,000 tonnes of this material have been mined in the last five years.
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The 2D polygonal method uses a fixed distance of Vertical Longitudinal Projection (VLP) from sample points. The VLP’s are created by projecting the mine workings of a vein onto a vertical 2D long section. Figure 15-1 displays the VLP for the San José II vein. Reserve blocks are constructed on the VLP based on the sample locations in the plane of the projection. SIM geologists review the data for sample trends and delineate areas with similar characteristics along the sample lines. The areas are then grouped based on mining requirements. The average grades and thicknesses of the samples are then tabulated for each block.
Reserve volumes are calculated from the delineated area and the horizontal thickness of the vein, as recorded in the sample database. The volume and density are used to determine the overall resource tonnage for each area, and the grades are reported as a length weighted average of the samples inside each resource block. No special software is used for the drawing of mineral blocks on the vertical section for each of the veins. Recently Leapfrog is being used for the estimation of reserve and resources, but still inadequate to the type and style of mineralization on this deposit.
The method of calculating proven and probable reserves is the product of many years of production in the mines operated by Luismin and SIM. This calculation system is still valid because it has worked in San Martin for the last 30 years. The calculation method of San Martín is in accordance with the parameters established by CIM.
The following criteria are used by SIM geologists to classify Proven and Probable Mineral Reserves. The distance for vertical projections for Proven Mineral Reserves and Probable Mineral Reserves is a function of the length of the block, defined as follows:
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Mineral reserves are derived from Inferred resources after applying the economic parameters as stated previously and utilizing the VLP to generate stope designs for the reserve LOM plan. The stope designs are then used to mine on levels along with the required development for the final mine plans. The San Martín Mine mineral reserves have been derived and classified according to the following criteria:
Figures 12-1 and 12-2 shows reserve blocks depicted on a portion of a typical longitudinal section. Proven reserve blocks are shown in red, Probable reserve blocks are shown in yellow. The mine planners have determined that extraction of the blocks is feasible given grade, tonnes, costs, and access requirement.
The San Martín Mine Project mineral reserves have been derived and classified according to the following criteria:
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Proven mineral reserves are the economically mineable part of the Measured resource for which mining, and processing/metallurgy information and other relevant factors demonstrate that economic extraction is feasible. |
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Probable mineral reserves are those Measured or Indicated mineral resource blocks which are considered economic and for which SIM has a mine plan in place. |
The Proven and Probable mineral reserves for the San Martin mine as of April 30, 2022, are summarized in Table 12-1. The mineral reserves are exclusive of the mineral resources reported in Section 11 of this report.
Table 12-1:Proven and Probable Mineral Reserves, Effective Date April 30, 2022
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Mineral Reserves estimates have been classified in accordance with probable and proven mineral reserves in accordance with § 229.1302(e)(2) (Item 1302(e)(2) of Regulation S-K. |
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Reserve cut-off grades are based on a 1.41 g/t gold equivalent. |
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Metallurgical Recoveries were 88% gold and 55% silver. |
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Mining Recoveries of 90% were applied. |
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Minimum mining widths were 2.0 meters. |
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Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations. |
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Gold equivalents are based on a 1:79.5 gold - silver ratio. Au Eq= gAu/t + (gAg/t ÷ 79.5) |
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Price assumptions are $1750 per ounce for gold and $22 per ounce for silver. |
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Mineral resources are estimated exclusive of and in addition to mineral reserves. |
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Resources were estimated by SIM staff and reviewed by Erme Enriquez C.P.G. |
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Reserves are exclusive of the indicated and measured resources. |
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Tonnage is expressed in tonnes; metal content is expressed in ounces. Totals may not add up due to rounding. |
Figure 12-1: Typical vertical longitudinal section (VLP) showing the blocks of proven and probable ore in the San José II orebody.
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Figure 12- 2: General vertical longitudinal section of the San Martin Mine showing the proven and probable reserve blocks.
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12.4Comment on Mineral Reserve Estimate
The mineral reserve estimate has been prepared using industry accepted practice and conforms to the disclosure requirements of S-K1300. Mineral reserve and mineral resource estimates are evaluated annually, providing the opportunity to reassess the assumed conditions. All the technical and economic issues likely to influence the prospect of economic extraction are expected to be resolved under the stated assumed conditions.
Mineral reserve estimates consider technical, economic, environmental, and regulatory parameters containing inherent risks. Changes in grade and/or metal recovery estimation, realized metal prices, and operating and capital costs have a direct relationship to the cash flow and profitability of the mine. Other aspects such as changes to environmental or regulatory requirements could alter or restrict the operating performance of the mine. Significant differences from the parameters used in this TRS would justify a re-evaluation of the reported mineral reserve and mineral resource estimates in the future.
The San Martin mine has a long operational history and mining conditions are well understood by the site and SIM corporate staff. The mining method is a conventional underground cut and fill.
Since 2008, SIM has been in control of the day-to-day mining operations at the San Martin Mine. SIM assumed control of the mining operations from a local mining contractor in order to allow for more flexibility in operations and to continue optimizing the costs.
The San Martin Mine project has a roster of 50 employees, 153 unionized workers and an additional 94 contractors. The San Jose mine operates on two 10-hour shifts (contractors) 20 by 8. The San Martin works 3 shifts 8 hours each, six days a week. The supervisors are in shifts of 20 by 8 for body 28 and 33 and 10 by 4 for San Martin. The mill operates on a 20/8 schedule.
The CMPB miners are skilled and experienced in vein mining and are currently unionized. In the production / development function, the Company’s agreement with the contractor is based on a set price There is an incentive system in place rewarding personnel for good attendance, safety and production. Technical services and overall supervision are provided by SIM staff. The mine employs geology, planning and surveying personnel and has detailed production plans and schedules. All mining activities are being conducted under the direct supervision and guidance of the mine manager.
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Given the conditions of the San Martín Unit deposit, the conventional cut-and-fill mining method is mainly used (Figure 13-1)
It is known that the exploitation of mineral deposits by underground methods is more complex than those of the surface, for this reason it is necessary to pay special attention to each of the existing methods, for a correct planning of the exploitation of an ore body. The selection of the mining method that is intended to be used in a deposit or a mineralized body must be studied carefully, taking into consideration that it is the method that must be adapted to the deposit and not in a counted way, the present work shows in detail the cut and fill mining method, the advantages, and disadvantages of its use, to give a broader view of the method. We can ensure the effectiveness of this method of exploitation since many mines currently use it, it is important to mention that the method offers powerful advantages, over the rest of the exploitation methods, however, its application is not always possible. Currently, with the arrival of mechanization in the mining sector, the method has developed variants that allow it to maximize its potential.
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In underground exploitation, mining is carried out from the top to the bottom of the different horizons or ore floor. It consists of breaking the ore. After a cut or floor has been completely extracted, it is filled before starting the new cut, this fill is what will help support the roof of the new cut that opens, the mining of the ore continues floor by floor until the end of the block.
Various factors were taken into account to choose the appropriate mining method: the size and morphology of the ore body, the thickness and type of the surface scarp, the location, direction and dip of the deposit, the physical characteristics and resistance of the mineral, the presence or absence of groundwater and its hydraulic conditions related to the drainage of the works, economic factors involved with the operation, including the grade and type of ore, comparative mining costs and desired production rates.
A methodology was developed based on the variables mentioned to evaluate which is the most appropriate exploitation method, generating a value for the fulfillment of a factor or variable and thus generating a more effective choice.
Table 13-1:Table for choosing the mining method
The objective of drilling is to establish a methodology that allows us to generate a cavity in the rock mass, with a diameter and a length determined in one linear meter. Consequently, it brings us an advance in either development or production, generating a tomb in ore. or waste or for drilling in a systematic anchoring support.
It is worth mentioning that before the drilling activity, the responsible personnel must verify the work area, correctly apply the work procedure and the work instructions, which tell us that we must check that our area is completely ventilated, free of particles from the blasting. Above, perfectly irrigate the load in a position from the outside to the inside, check simultaneously the tables of the undercut and ceiling, if any open rock, take the solidifying bar and lay it down immediately, that way we already have a safe undercut, and we can carry out drilling activity
Drilling is defined as the action of drilling wells or holes to recover our drilled material. The tools used for drilling are known as, which are formed by a proper mechanism to produce the effects of percussion or rotation, and which are normally provided with an attack bit.
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The objective of blasting is to establish the methodology to provoke the fragmentation of the rock in a linear meter or a ton of ore or waste with the help of charging explosives under pressure with compressed air in the hole cavity.
It is worth mentioning that before starting the blasting activity, we must blow the holes well by injecting compressed air into them, leaving them free of any obstacle that prevents entry, we proceed with the priming of the explosive, which is to make a hole in the tovex charge and introduce the primer. , which we proceed to put it to the bottom of the hole and when the explosive charge has been introduced into the hole, we proceed to load the column of the hole by injecting mexamón dust under pressure with a special charger, before starting a blast and to take into account the already established recommendations such as the firing schedule and taking care of the entrance accesses to said area where the blasting is going to be carried out.
The blasting is achieved thanks to the excellent work of the driller and assistant, either using a leg or jumbo machine. For the efficient drilling of a face, the equipment must be in good condition, there must be services such as sufficient air if a leg machine is used, the electrical current necessary to be able to operate the jumbo and water for both cases. The pressure necessary for a leg machine to be efficient requires an air pressure of between 80 and 90 psi and a water pressure of .5 bar, and it also needs a certain amount of oil for lubrication.
The leftover is the movement with heavy machinery of ore or waste leftovers, product of the detonation of blasting of production or development holes and unloading in cargo stock or accumulator, to transfer hoppers or directly to haul trucks generating a linear advance or production of economic or non-economic tonnage. The straggler is especially important because if the front in action is not prepared, it is not possible to continue drilling and therefore there is no progress. In addition to that if there is an excess of material in accumulators there is no option where to accommodate so much material.
The haulage establishes the methodology to generate movement on heavy machinery (low-profile truck, dump truck, etc.) or even with scoops of ore tailings or waste, product of the detonation of blasting of production or development holes and unloading in inside mine stock, transfer hoppers, or its destination to treatment plants or backyard dumps.
It is of the utmost importance to be able to effectively identify the loads so that the ore reaches the benefit plant and thus ensure the planned contents.
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A geotechnical analysis for the Project has not been conducted or reviewed by the author. The mine has historically operated without significant underground support on the shotcreting areas with significant falling rocks. The rock is most competent and self-supporting. No areas of concern were noted.
The San Martin mine is naturally ventilated. The access declines are used as an intake airway and the old mineworkings at San Martin and Bodies 28 and 33 use raises and drifts connected to Robbins raises for exhausting air (Figure 13-2). Booster fans are used in new drifts or areas away from the ventilation raises.
No further evaluation on the ventilation has been done since the mine operates at a temperature good enough for working comfortably.
Figure 13-2: |
Ventilation circuit, at the San Martin Mine, by using Robbins raises ventilation intake and for exhausting |
Dewatering at the San Martin mine is relatively simple. With several pumping stations, towards the surface, from the deepest part of the San Martin Mine and from the area of Bodies 28 to 32. The water is brought to the surface, and this is used for the processing of the ore in the plant. and for regular use and irrigation in gardens and on paths to avoid raising dust. The drain circuits are shown in the Figure 13-3.
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Figure 13-3: |
Pumping systems in the entire San Martin Mine. Water is sent to surface for usage in the plant process |
Ore and waste transportation is by scooptram and truck haulage. Ore and waste haulage is performed using 14-tonne underground trucks. Single boom jumbo drills and jacklegs are used for development headings and conventional cut and fill stope drilling is by jackleg. A total of 45 jackleg drills are available in inventory.
A list of the major underground equipment on-hand at San Martin is listed in Table 13-2. According toSIM’s personnel, all that equipment is in good, well-maintained condition and is operating on very smooth clean roads.
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Table 13-2:List of Mining Equipment used at the San Martin Mine
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13.12Comments on the Mine Operations
The site is in operation with experienced management and sufficient personnel. The mine works 365 days per year on a 24 hour per day schedule. Operational, technical, and administrative staff are on-site to support the operation. As of April 30, 2022, mine operations have 254 employees with additional contractors available as needed.
14.0PROCESSING AND RECOVERY METHODS
Mineral reserves and mineral resources are evaluated to be processed using cyanidation process by dynamic leaching. The mill is currently operating at 627 tons per day, it presents a series circuit that includes Crushing, Grinding, Leaching, a System of Countercurrent Washing by Decantation, Filtration, Tailings Deposit and Merril Crowe for the recovery of silver and gold values, in addition to the smelter area. The plant flowchart is illustrated in Figure 14-1.
14.1Process of the Benefit Plant
The Process plant is an agitated cyanide leach plant that produces Au-Ag doré by using Merryll-Crowe circuit. The facilities of the plant are designed to process gold and silver ore at a rate of 627 tpd, with the capacity of 1,100 tpd, in a series circuit that includes crushing, milling, leaching, a system of countercurrent washing by decantation and Merrill Crowe for the recovery of the silver and gold values.
The flow diagram of the plant consists of the following processes:
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Crushing and transport |
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Storage and claim |
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Primary and secondary milling |
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Dynamic leaching with gaseous oxygen injection |
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Counter-current washing circuit by decanting |
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Precipitation of values (Merrill Crowe) |
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Precipitate drying |
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Refinery |
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Filtering of tailings |
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Storage of dry tailings |
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Reagent preparation systems and their distribution |
In the crushing area, the ore is reduced to ¼ in., to be fed to the primary ball mills and later to the secondary vertical mill to obtain a 70% product at 74 microns. This is fed to the dynamic leaching circuit where oxygen is injected. The dissolved values are recovered by precipitating them with zinc powder in the Merrill Crowe process and melting to obtain doré bars with a purity of 99.3%.
The tailings are filtered before being deposited in the dam (Figure 14-2). The recovered solution is returned to the process.
The filtered tailings are transported to the deposit to be stored, a tailing banding system is used to be compacted and wind erosion is minimized. Later, when one side of the slope is formed, reforestation with flora of the region is conducted to avoid rain erosion (Figure 14-3).
In mid-2012, a decrease in mill recoveries was detected. The problem was that carbonaceous mineral was being fed in high quantities and the recovery of gold fell to 75.2% and 60.5% in June and July respectively. The metallurgical investigations showed that the ore could be recovered with the following treatment:
a)A low temperature roast of the carbonaceous ore
b)A conversion to Carbon in Leach processing
The organic matter in the carbonaceous mineral affects the leaching process, however, this type of mineral has always existed in the San Martin body and in the body Cuerpo 29 and its exploitation never caused problems in the chemical treatment in the past. This mineral was fed to the mill between 10% and 15% of the total daily processed mineral, between the years 1998 and 2003.
A processing flow sheet dated April 2022 is presented in Figure 14-4.
The first part of the beneficiation process consists of a reduction in the size of the ore coming from the mine. A hopper with a capacity of 80 tons is installed and a closed circuit of breakers that allows the reduction up to 1/4 ". The first reduction, which is from 12" to 4" is made by a jaw crusher, the second reduction, at 1/4" is done in a cone crusher, then all the ore is screened and sent to the pile stock of the grinding area.
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In this section there is a primary grinding conducted by a ball mill with dimensions of 9'x9', which aims to reduce the ore allowing the release of gold and silver particles, here begins the dissolution of values by adding sodium cyanide and lime to maintain the basic pH. Following this stage there is a secondary grinding carried out by a Vertimill VTM-200 mill which reduces the ore to a size of 74 microns.
Here is carried out, as a first step, a solid-liquid separation to recover the solution rich in gold and silver values. The leaching of the values that are still present in the solids is conducted in the leaching tanks obtaining recoveries of 88% for gold and 54% for silver. It is worth mentioning that this area has had significant changes reducing residence times. This has been achieved by the development of metallurgical tests carried out in the SM complex. The process is based on the addition of gaseous oxygen to the process, allowing a temporary oxidation of the metals of value which leads to a rapid formation of the complex of gold-silver-cyanide.
14.1.4Tailings Filtration Area
After the gold and silver values have been leached, the solids are sent to the tailings filtration area, where solution is recovered and sent back to the process and the solids are discharged with a humidity of 20% to be deposited in the tailings dam.
The value-rich solution from the chemical treatment area is clarified by a filtration system, the solids present are kept in the filter medium producing a clean solution. Subsequently, the oxygen present in the solution is removed by means of a vacuum column. Once you have an oxygen-free solution and a minimum of solids, zinc powder is added to it, generating an oxide-reduction reaction called cementation of gold and silver. This metallic sludge is retained in filter presses from which they are recovered to be dried and sent to the smelter.
The process of obtaining doré bars is conducted in electric induction furnaces using a graphite smelting pot, to obtain gold and silver bars with a purity of 99.3%. What was achieved by changing the conventional refining method that consisted of oxidation by decomposition of sodium nitrate, which had a drawback, such an aggressive oxidation that damaged the smelting pot, making it impossible to reach purities above 98%. Now, in the San Martin unit, doré is refined by creating an atmosphere rich in oxygen gas, which causes the elimination of impurities to be more selective, reducing damage to the smelting pot by 80%.
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14.2Comment on Mineral Processing and Metallurgical Testing and Recoveries
In the opinion of the QP, the metallurgical process is proper to establish reasonable processing methods for the different mineralization styles encountered in the deposit. Geometallurgical samples are carefully selected to represent future ores and recovery factors have been confirmed from production data collected from ore processed in underground.
The data provided by SIM conforms to the industry standards and is within the accuracy of this study and verified for use in this study. Historic production from multiple oreshoots at the San Martin mine proves the capacity of the plant to process the mineralized material. As a result, the processing and associated recovery factors are considered appropriate to support mineral reserve and mineral resource estimation and mine planning.
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The site infrastructure at the San Martin mine has been established over the history of the project and supports the current operations. The current major mine infrastructure includes waste rock storage, tailings dam, temporary stockpiles, power and electrical systems, water usage systems, various on-site warehouses and maintenance shops including small-scale mine truck shops, and offices required for administration, engineering, maintenance, and other related mine and processing operations. The communication system at site includes internet and telephone access connected by hard-wire, and mobile networks. Access to the property is discussed further in Section 4 of this TRS. The site infrastructure is shown in Figure 15.1.
The mining method used for mining is cut and fill. Waste rock from development is used to fill open stopes. No waste rock is hauled out to surface.
Tailings are dried and deposited in the southern edge of the tailing dam. Trucks are filled by using a paver, then hauled to be deposited in the tailings dam. Tailings are spread by using a backhoe and then a road compactor is used to compact the material evenly.
The San Martin mine’s electrical power is sourced under long-term contracts with, Comision Federal de Electricidad (CFE), a government enterprise. The mine and mill are connected to the electric grid. Electrical power is supplied by the CFE is in a power line of 34.5 kVa. A secondary electricity generating system with about 500kW capacity to supply power to the mill during a power failure and during the peak supply times when prices are higher, is available.
The water for industrial use is taken from the underground mine, this is used in the chemical treatment in the plant and for irrigation of the roads to avoid dust and other contaminants. There is also a water well that is for domestic use in the offices and kitchen of the complex and the showers of the workers. Additionally, in the rainy season, the water is stored in a dam with sufficient capacity for several months of operation. All water is used responsibly and there is no waste of the vital liquid.
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15.5Logistics, Supplies and Administration
The operation has common management and services, as well as a logistics network that
includes warehouses, vehicles, and personnel required to distribute and store supplies used by the operation and its workforce. Vehicle service is provided to the mine and workplaces. Warehouses are maintained at various locations throughout the site.
Supporting infrastructure in San Martin has been built, improved, and expanded over the life of the project including administration offices, training, recreational, and first aid service facilities. All workers are enrolled in Social Security (IMSS), to receive medical services for any illness, which is paid by the company. Employees have insurance for major medical expenses that allows them to select doctors and hospitals to treat any health condition.
The processing of gold and silver ores in the San Martin mines is using cyanidation with the Merrill-Crowe process to obtain doré bars 99.3% purity. No other by product is obtained.
For purposes of this study, it is assumed that San Martin is successful in securing buyers for doré bars. The metal prices used for this study are the average of the long-term consensus pricing forecast from different global banks. The prices used are US$1750/troy ounce Au and US$22.00/troy ounce Ag.
16.1Commodity Prices Forecast and Contracts
The price of base and precious metals is quoted based on the main international markets. Among them the most important are the metal markets of London, New York, Tokyo and Hong Kong, among others. They fluctuate depending on the supply and demand for them on an almost continuous basis. The historical prices of gold and silver for the last few years are as follows:
Long term for reserve estimation prices for reserve estimations are:
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US$1750 per ounce of gold |
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US$22.00 per ounce of silver |
The contract for the marketing of the product is ITALPREZIOSI, in Arezzo, Italy. Italpreziosi is one of the main operators in the production, refining and trading of precious metals, and the production and trading of investment gold. A contract has been signed since June 2013 and in force to date. Doré bars are paid at the gold and silver price established by London Fix at the time of the transaction.
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All part of the logistics for the delivery of the product is contracted with the company IBI International Logistics Inc.
All contracts currently necessary for supplies and services to maintain the San Martin mine’s facilities and production are in place and are renewed or replaced within timeframes and conditions of common industry practices.
SIM and the QP believe that the marketing and metal price assumptions for metal products are suitable to support the financial analysis of the mineral reserve evaluation. Further information regarding the sale and marketing of the mine’s metal products are discussed in SIM’s Annual Report on Form 10-K for the year ended April 30, 2022.
17.0ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL IMPACT
The San Martin mine operates under the policy of zero industrial discharges into the environment. Surface water in the tailings disposal facilities are practically zero due to the tailings being filtered before sending to the dam.
Running water in the intermittent streams within the property is tested for mineral elements and contaminants. Some water pumped from the underground workings is discharged in the water storage reservoir at the surface and used later for mineral processing. The following aspects are treated with special care by the company as they represent potential risks to the operation. To reduce the possibility of an incident regarding any of these issues, San Martin has established strict procedures of operation and monitoring in accordance with accepted standards.
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The tailing dams require strict environmental and operation control because the proximity to the San Martín community represents a risk. |
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Testing for water pollutants into creeks near the tailings dam. |
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Testing of discharge sewage pollutants. |
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Testing of the combustion gases from the laboratory's chimneys and foundry, and lead exposure for lab workers. |
The vegetation in the vicinity of the mine is diverse and abundant but has deteriorated in areas with abundant traffic. The arid ecosystem provides for predominantly shrub vegetation cover which contributes to soil stability. An indication of the stability maintained in this environment is the abundance of cacti species. Of the 37 species of flora recorded for the mine area, not one has been reported within a risk category.
Mammal species identified in the mine area include coyote (Canis latran), bush mouse (Peromiyscus boylii), skunk (Spilogale putarius); and one species considered endangered, armadillo (Dasypodiae). Of bird species identified in the mine area, three are under special protection (red-tailed hawk, peregrine falcon, Tousend’s solitaire). Falcon mexicanus is considered endangered.
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The reptile fauna is formed by rock rattlesnake, lizard (Psammodro hispanicus), black racer and coral snake (Lampropeltris Triangulum)
A variety of studies have been completed to characterize the natural environment of the SM area. The most recent Environmental Impact Statements are listed in Table 17-1.
Table 17-1:San Martin Mine Recent Environmental Studies
Currently, SIM has maintained all the necessary permits for exploration and exploitation at the San Martín mine site (Table 20-1). A Manifestacion de Impacto Ambiental (MIA) was submitted to Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT) in April 2004. The license covers all related to the underground expansion of the mine. In March 2011 approval of a MIA by SEMARNAT allowed an expansion for tailings facilities that were not previously required. An amendment for stabilization and expansion was approved by SEMARNAT in early August 2016. Tailings have been tested periodically; last test was on June 14, 2018. The results were presented by Intertek+ABC Analytic, finding all within normal parameters.
A mining concession in Mexico does not confer any ownership of surface rights. However, use of surface rights for exploration and production can be obtained under the terms of various acts and regulations if the concession is on government land. The San Martin concessions are located on Ejido (community or co-op) and private property land, and all the agreements with the surface owners have been signed which allows SIM access and authorization to complete exploration and mine operations activities.
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17.3Permitting Requirements and Status
QP and the San Martin mine staff believe that all major permits and approvals are in place to support operations at the SM, however additional permits or renewals will likely be necessary in the future. Where permits have specific terms, renewal applications are made to the relevant regulatory authority as required, prior to the end of the permit term.
Any major mining project in Mexico requires preparation of a Manifestation of Environmental Impact Study (MIA for its acronym in Spanish), including the construction, operation, and closure stages, completed by a third-party consultant, which is submitted to the regulatory agency.
After the MIA is approved, a comprehensive closure plan including closure cost estimates and financial guarantee schedule is submitted for approval to meet the applicable Mexican laws and regulations. The status of permits is listed in Table 17-2.
Based on the LOM plan, additional permits will be necessary in the future for continued operation of the San Martin mine, including a modification of the MIA and obtaining approval for modified leach pad configurations, increased tailings storage capacity and corresponding water supply. The Cerro Verde mine will need to submit the Second Modification of the MIA prior to reaching current tailings storage capacity, which is sufficient until 2027 at planned rates in the LOM plan. Closure strategies will be developed for these proposed facilities as part of the permitting process.
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Table 17-2:List of the Status of Permits
17.4Surface Water Management Plan
Most of the water comes from underground and is used for the preparation of the cyanide solution in the benefit process and for the different mining activities such as drilling, irrigation of roads to avoid raising dust and washing of works to maintain them. Pollution free; and from a deep well whose flows are deposited in tank No. 4 of industrial water with a capacity of 600 m3.
The working water is conducted through pipes and pumps that are inside the mine to a surface pool where it is stored and later sent by gravity to the process tank; while the water extracted from the supply well is poured directly into said tank.
Apart from the sedimentation process that occurs naturally, due to the residence time of the working water in the pumping station and in the industrial water tank, the water does not undergo any treatment to condition it for the process.
In smaller amounts, it is used in toilets, showers and irrigation of green areas.
Three more tanks receive the water with cyanide solution that is recovered from the Processing Plant and the tailings tank, which is recirculated to the process.
There are two septic tanks to which there is no authorized discharge since it is not discharged to any National good, it is only conducted to recover it and send it as mentioned above, all the water is recirculated to the ore benefit process.
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Payment of water rights is made quarterly with the well registration of title No. 09QRO106111/26IMDL18 for industrial use with meter No. 14040219 brand Azteca and for use of Services with Meter No. 16040040 brand Azteca. In rainy seasons, water is collected to be used in the process and thus use less water from tillage.
SIM considers nearby communities as important stakeholders and, as such, the company pays special attention to their problems and requests for support. A good neighbor and open-door policy characterize the relations with the communities inside and around the area of operations. A company representative interacts with the local authorities frequently.
According to the population and housing census of 2010, the inhabitants in the surrounding communities include 52,401 people living in the 5 locations. Women are 51.3% of the population. Table 20-2 presents population by gender in the communities, and shows the relationship of San Martín with them, whether directly or indirectly.
The relationship with a community is indirect whenever it has a direct relationship with another mining company. Regardless of the indirect relationship with these communities, San Martín considers that it has a shared commitment with them.
San Martín has a policy of social responsibility based on community development. The tactic used to achieve this strategic principle is focused on:
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Education and Employability: Promoting learning opportunities ranging from basic education to technical skills and supporting the creation and development of small business that provide an economic alternative to mining related jobs. |
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Infrastructure: Supporting construction, improvement, or rehabilitation of community facilities, such as the Church, the playgrounds, or the roads. |
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Health: In partnership with government institutions, SIM promote several health campaigns in the communities such as dental, vaccines, nutrition, pet control, and others. |
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Sports: Also, in partnership with government institutions and NGOs, SIM supports summer camps for children and in the last two years has sponsored one of the main races that happen in Guanajuato. |
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Environment: SIM runs different environmental campaigns in the communities, such as the recycling of electronics, the reuse of tires to rehabilitate recreational sites, reforestation initiatives, cleaning up campaigns, and others. |
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Traditions and Culture: SIM supports throughout the year the different celebrations that happen in the community, such as the day of the miner, mother´s day, day of the death, children´s day, Christmas celebrations, and others. SIM responds to ongoing requests from the community. |
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To fulfill social responsibility actions, San Martín has an internal procedure intended to channel the demands of the local communities, to assess their needs, to prioritize them, and to evaluate donations to be made to improve quality of life.
17.6Comment on Environmental Compliance, Permitting, and Local Engagement
In the QP’s opinion, the San Martin mine has adequate plans and programs in place, is in good standing with Mexican environmental regulatory authorities, and no current conditions represent a material risk to continued operations. The SM mine staff have a high level of understanding of the requirements of environmental compliance, permitting, and local stakeholders to facilitate the development of the mineral reserve and mineral resource estimates. The periodic inspections by governmental agencies, SIM staff, third-party reviews, and regular reporting and studies confirm this understanding.
18.0CAPITAL AND OPERATING COSTS
The capital and operating costs are estimated by the property’s operations, engineering, management, and accounting personnel in consultation with SIM corporate staff, as appropriate. The cost estimates apply to the planned production, mine schedule, and equipment requirements for the LOM plan.
Capital costs are based on CMPB internal forecasts and costs, which QP has reviewed and found to be consistent with a mine of this size. Capital costs are summarized in Table 18-1.
Table 18-1San Martin Capital Costs
The components of the operating cost are based on the annual mine schedule, equipment sizing and productivity, labor estimates, and unit costs for supply items. Inputs to the operating cost are based
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on vendor quotes, private and commercially available cost models, and actual and factored unit costs of the mine. Operating costs are summarized in Table 18-2.
Table 18-2:Mine Operating Cost Summary
The LOM plan includes comprehensive operational drivers (mine and corresponding processing plans, metal production schedules and corresponding equipment plans) and financial estimates (revenues, capital costs, operating costs, downstream processing, freight, taxes and royalties, etc.) to produce the reserves over the life of the property. The LOM plan is an operational and financial model that also forecasts annual cash flows of the production schedule of the reserves for the life of the property under the assumed pricing and cost assumptions. The LOM plan is used for economic analyses, sensitivity testing, and mine development evaluations.
The financial forecast incorporates revenues and operating costs for all produced metals, processing streams, and overall site management for the life of the property. The economic analysis summary in Table 19-1 includes the material drivers of the economic value for the property and includes the net present value (NPV) of the unleveraged after- tax free cash flows as the key metric for the economic value of the property’s reserve plan under these pricing and cost assumptions. This analysis does not include economic measures such as internal rate of return or payback period for capital since these measures are not applicable (and are not calculable) for an on-going operation that does not have a significant upfront capital investment to be recovered.
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Table 19-1:Economic Model Input Parameters
The key drivers of the economic value of the property include the gold and silver market price, gold and silver grades and recoveries, and costs. Depending on the changes in these key drivers, SIM can adjust operating plans (in the near-term as well as the mid-term, as appropriate) to minimize negative impacts to the overall economic value of the property.
Table 19.2 summarizes the LOM plan including the annual metal production volumes, mine plan schedule, capital and operating cost estimates, unit net cash costs, and unleveraged after-tax free cash flows over the life of the property. Free cash flow is the operating cash flow less the capital costs and is a key metric to demonstrate the cash that the property is projected to generate from its operations after capital investments for the reserve production plan at assumed pricing and cost assumptions. The property’s ability to create value from the reserves is determined by its ability to generate positive free cash flow. The summary proves the favorable free cash flow generated from the property’s LOM plan under the assumptions. This economic analysis supports the economic viability of the mineral reserves statement.
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20.0ADJACENT PROPERTIES
Exploraciones Mineras La Parreña, S.A. de C.V. (Peñoles) has a claim of 822 hectares, located on the Central-West part of the SIM’s concessions. This claim has been cancelled but hasn’t been released by the Mexican Mining Bureau. The name of the claim is Colón and is registered with the Title No. 237380 and the status of this claim is cancelled. Peñoles also holds The Palmita claim, Title 237379, with an area of 99.97 hectares.
Another property is the San Judas Tadeo claim, Title No. 220535, covering 700 hectares. This property is private and has three owners, the main owner is Ciro Feregrino. This property is located to the northeast of the SIM’s claims.
21.0OTHER RELEVANT DATA AND INFORMATION
This report summarizes all data and information material to the San Martín Mine Project as of April 30, 2022. QP knows of no other relevant technical or other data or information that might materially impact the interpretations and conclusions presented herein, nor of any additional information necessary to make the report more understandable or not misleading.
22.0INTERPRETATION AND CONCLUSIONS
Estimates of mineral reserves and mineral resources are prepared by and are the responsibility of SIM employees. All relevant geologic, engineering, economic, metallurgical, and other data is prepared according to SIM developed procedures and guidelines based on accepted industry practices. SIM maintains a process of verifying and documenting the mineral reserve and mineral
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resource estimates, information for which are located at the mine site and SIM corporate offices. SIM conducts ongoing studies of its ore bodies to optimize economic value and to manage risk.
SIM and the QP believe that the geologic interpretation and modeling of exploration data, economic analysis, mine design and sequencing, process scheduling, and operating and capital cost estimation have been developed using accepted industry practices and that the stated mineral reserves and mineral resources comply with SEC regulations. Periodic reviews by third-party consultants confirm these conclusions.
The SM mine is a mid-scale producing mining property that has been operated by SIM and its predecessors for many years. Mineral reserve and mineral resource estimates consider technical, economic, environmental, and regulatory parameters containing inherent risks. Changes in grade and/or metal recovery estimation, realized metal prices, and operating and capital costs have a direct relationship to the cash flow and profitability of the mine. Other aspects such as changes to environmental or regulatory requirements could alter or restrict the operating performance of the mine. Significant differences from the parameters used in this TRS would justify a re-evaluation of the reported mineral reserve and mineral resource estimates. Mine site administration and
SIM dedicate significant resources to managing these risks.
Channel samples and drill holes have been collected and analyzed using industry standard methods and practices and are sufficient to support the characterization of grade and thickness and further support the estimation of Measured, Indicated, Inferred Resources and Proven and Probable Reserves.
Recommendations for further work:
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Continue to collect specific gravity measurements and refine current estimation of specific gravity to have a more reliable measure. |
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Implement procedure of duplicate channel samples in stopes and drifts, to ensure the grade and thickness and to serve as duplicates of channel samples. |
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Implement procedure for standard and duplicate samples, in channel samples and drill core as well. The certified standards will give greater certainty to the QA/QC procedure for the evaluation and greater reliability in reserves and resources. |
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Perform detailed model reconciliation on stopes. A strict control in rebates will help to have a reliable number at the end of the year. |
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Continue the advance of the underground exploration at Body 28 East and Body 32 to the north-northwest. |
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Complete a geochemical and structural model for future work to support the estimation domains. The QP notes that there is a large amount of multi-element data that could support |
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STARCORE International Mines Ltd.
San Martin Mine |
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S-K 1300 Technical Report Summary |
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a geochemical model to better understand the impact of elements such as antimony, arsenic, mercury, etc., on the gold distribution and recoveries. |
Although ongoing initiatives in productivity and recovery improvements are underway, the mineral reserves and mineral resources are based on the stated long-term metal prices and corresponding technical and economic performance data.
No other recommendations for additional work are identified for the reported mineral reserves and mineral resources as of April 30, 2022.
Buchanan, L. J., 1981, Precious metal deposits associated with volcanic environments in the southwest, in Dickinson, W.R., and Payne, W.D., eds., Relations of Tectonics to Ore Deposits: Arizona Geological Society Digest, v. 14, p. 237-262.
Burk, R., 1993, Regional Geology of San Martin Property and Its Relationship to Precious Metal Mineralization, Central Queretaro State, Mexico. Priv. Rep. for Teck Cominco. MEXICO.
Campbell, J., 2012, Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2012. For Starcore International Mines LTD.
Enriquez, E., 1995, Trace element zonation and temperature controls of the Tayoltita Ag-Au fossil hydrothermal system, San Dimas district, Durango, Mexico: Unpublished M. Sc. Thesis, Colorado School of Mines, 195 p.
Enriquez, E, 2003, Transformation of Resources into Reserves in Mining Operations of Luismin. An Update. Priv. Internal Report for Luismin. 30 p.
Enriquez, E, 2018, Reserves and Resources in the San Martin Mine, Queretaro State, Mexico, as of April 30, 2018. For Starcore International Mines LTD.
Enriquez, E, 2019, Reserves and Resources in the San Martin Mine, Queretaro State, Mexico, as of September 30, 2019. For Starcore International Mines LTD.
Gunning, D. R. and Whiting, B., 2009, Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2009. For Starcore International Mines LTD.
Gunning, D. R. and Campbell, J., 2011, Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2011. For Starcore International Mines LTD.
Gunning, D. R., 2013, Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2013. For Starcore International Mines LTD.
Erme Enriquez |
June 28, 2022 |
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STARCORE International Mines Ltd.
San Martin Mine |
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S-K 1300 Technical Report Summary |
Gunning, D. R. and Campbell, J., 2014, Reserves and Resources in the San Martín Mine, Mexico, as of July 31, 2014. For Starcore International Mines LTD.
Labarthe-Hernández, G. y Tristán-González, M., 2006, Geología del distrito minero de San Martin. Instituto de Geología de La UNAM. Rep. Priv. Compañía Minera Peña de Bernal, SA de CV., 44 p.
Muñoz-Cabral, F., 1993, Modelo genético de los depósitos de oro proyecto San Martín, Qro., Asociación de Ingenieros de Minas, Metalurgistas y Geólogos de México, A.C., XX convención AIMMGM, octubre 27-30, 1993, Acapulco, Gro. México, p. 246-260
Nuñez-Miranda, A., 2007, Inclusiones Fluidas y Metalogénia del Depósito Epitermal Ag-Au del Distrito de San Martín, Mpio. Colón, Qro. MSc Thesis, 166p.
Ortiz, H.L.E., Solís P.G.N., Mérida, C.A. 1989, Geología y metalogénesis del yacimiento auroargentífero-brechoide epitermal (tipo carlin) de San Martín, Querétaro. XVIII Convención
Nacional de la A.I.M.M.G.M., A.C., p. 42-62.
Pérez-Nicolás, L. M., and -Nicolás y Fernández-Nava, R, 2007, PLANTAS DEL ESTADO DE QUERÉTARO, MÉXICO CON POTENCIAL PARA USO ORNAMENTAL, Escuela Nacional de Ciencias Biológicas, Instituto Politécnico Nacional- POLIBOTÁNICA, Núm. 24, pp. 83-115, ISSN 1405-2768; México.
Raisz, E. 1964. Landforms of Mexico (chart). Geography Branch of the Naval Research. 2º ed. Cambridge, Mass. USA.
Rankin, L. R., 2008, Structural Controls on the Carbonate Breccia Hosted Au-Ag Mineralisation, San Martín Deposit, Central Mexico. Private internal report for Starcore International Mines LTD, 55 p.
SGM Servicio Geolólogico Mexicano www.sgm.gob.mx
Spring, V. and McFarlane, G.R., 2002, A Technical Review of the Tayoltita, Santa Rita, San Antonio, La Guitarra and San Martin Operating Silver and Gold Mines in Mexico. Watts, Griffis and McOuat NI 43-101 report prepared for Wheaton River Minerals Ltd.
25.0RELIANCE ON INFORMATION PROVIDED BY THE REGISTRANT
QP is relying on documents and statements provided by SIM personnel regarding:
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Historical data, primarily earlier Technical Reports |
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• |
Resource block model estimation |
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Mine and plant production data |
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Status of mineral concessions |
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• |
Status and timelines of permits, contracts, and agreements needed for operation |
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• |
Capital and operating cost estimates |
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Legal matters outside of QP expertise. |
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Mine and plant closure plans and associated costs |
Erme Enriquez |
June 28, 2022 |
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Exhibit 96.2
CONSENT OF EXPERT
ERME ENRIQUEZ
I, Erme Enriquez, in connection with the filing of Starcore International Mines Ltd.’s Annual Report on Form 20-F for the year ended April 30, 2022, consent to:
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the filing and use of the technical report summary titled “S-K 1300 Technical Report Summary San Martin Mine” (the “Technical Report Summary”), dated June 28, 2022 and with effective date April 30, 2022, as an exhibit to and referenced in the Form 20-F or any amendment or supplement thereto; |
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• |
the use of and references to our name in connection with the Form 20-F or any amendment or supplement thereto and any such Technical Report Summary; |
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the information derived, summarized, quoted or referenced from the Technical Report Summary, or portions thereof, that was prepared by me, that I supervised the preparation of and/or that was reviewed and approved by me, that is included or incorporated by reference in the Form 20-F or any amendment or supplement thereto. |
Date: July 29, 2022
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/s/ “Erme Enriquez” |
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Erme Enriquez C.P.G., BSc, MSc |
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