UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Lion Copper and Gold Corp.
Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2024 and 2023
(Expressed in thousands of U.S. Dollars)
(Unaudited)
| Lion Copper and Gold Corp. Condensed Interim Consolidated Balance Sheets As at June 30, 2024, and December 31, 2023 (Unaudited - In thousands of U.S. Dollars) |
| Note | June 30, 2024 | December 31, 2023 |
|||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | $ | |||||
| Other receivables | |||||||
| Prepaid and deposit | |||||||
| Other receivables - Long term | |||||||
| Mineral properties | 4,12 | ||||||
| Reclamation bonds | |||||||
| Investment in associate | 5 | ||||||
| Right of use asset | |||||||
| Total assets | $ | $ | |||||
| LIABILITIES | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities | $ | $ | |||||
| Rio Tinto deposit | 4 | ||||||
| Derivative liabilities | 7 | ||||||
| Convertible debentures | 7,8,11 | ||||||
| Lease liabilities - current | |||||||
| Lease liabilities - long term | |||||||
| Total liabilities | |||||||
| Stockholders' equity | |||||||
| Share capital, |
9 | ||||||
| Additional paid-in capital | 10 | ||||||
| Deficit | ( |
) | ( |
) | |||
| Non-controlling interest | 6 | ||||||
| Total stockholders' equity | |||||||
| Total liabilities and stockholders' equity | $ | $ |
NATURE OF OPERATIONS AND GOING CONCERN (Note 1)
COMMITMENTS (Note 13)
CONTINGENCIES (Note 14)
SUBSEQUENT EVENTS (Note 16)
Approved on behalf of the Board of Directors on August 14, 2024:
| /s/ "Thomas Patton" | /s/ "Tony Alford" | ||
| Director | Director |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
| Lion Copper and Gold Corp. Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss) For the three and six months ended June 30, 2024, and 2023 (Unaudited - In thousands of U.S. Dollars, except for shares and per share amounts) |
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| Note | 2024 | 2023 | 2024 | 2023 | |||||||||
| Operating expenses | |||||||||||||
| Exploration expenditures | 4 | $ | $ | $ | |||||||||
| Rio Tinto Deposit | 4 | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| General office | |||||||||||||
| Interest | |||||||||||||
| Investor relations and corporate development | |||||||||||||
| Professional fees | |||||||||||||
| Salaries and benefits | 11 | ||||||||||||
| Share-based payments | 10,11 | ( |
) | ( |
) | ||||||||
| Transfer agent and regulatory | |||||||||||||
| Travel | |||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | |||||
| Non-operating Income/(expenses) | |||||||||||||
| Fair value (loss) gain on derivative liabilities | 7 | ( |
) | ||||||||||
| Foreign exchange gain | ( |
) | ( |
) | |||||||||
| Accretion expense | 8 | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Gain on transfer of shares | 5 | ||||||||||||
| Loss on revaluation of SAFE notes | ( |
) | |||||||||||
| Share of loss in associate | 5 | ( |
) | ( |
) | ( |
) | ||||||
| Interest and other income | |||||||||||||
| Impairment of mineral properties | 4 | ( |
) | ( |
) | ||||||||
| Loss on conversion | 8 | ( |
) | ||||||||||
| Loss on repayment of convertible debentures | 8 | ( |
) | ||||||||||
| Loss on extinguishment of convertible debentures | 8 | ( |
) | ||||||||||
| ( |
) | ( |
) | ( |
) | ||||||||
| Net (loss) income and comprehensive (loss) income for the period | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||
| Net (loss) income and comprehensive (loss) income attributed to: | |||||||||||||
| Stockholders of the Company | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||
| Non-controlling interest | 6 | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| (loss) Income per share, basic and diluted | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||
| Weighted average number of shares outstanding - basic | |||||||||||||
| Weighted average number of shares outstanding - diluted | |||||||||||||
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
| Lion Copper and Gold Corp. Condensed Interim Consolidated Statements of Changes in Equity For the six and three months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars, except for shares) |
| Notes | Common shares | Share capital | Additional paid-in capital |
Deficit | Non-controlling interest |
Total stockholders' equity |
|||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Share-based payments | 10 | - | - | ( |
) | - | - | ( |
) | ||||||||||
| Issuance of common shares of FCC | 6 | - | - | - | - | ||||||||||||||
| Net loss for the period | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Private placement | - | - | - | ||||||||||||||||
| Private placement - share issuance cost | - | ( |
) | - | - | - | ( |
) | |||||||||||
| Conversion of convertible debentures - original | 8 | - | - | - | |||||||||||||||
| Conversion of convertible debentures - induced | 8 | - | - | - | |||||||||||||||
| Exercise of options | 10 | ( |
) | - | - | ||||||||||||||
| Share-based payments | 10 | - | - | - | - | ||||||||||||||
| Issuance of common shares of FCC | 6 | - | - | - | - | ||||||||||||||
| Net loss for the period | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( |
) | $ | $ |
| Lion Copper and Gold Corp. Condensed Interim Consolidated Statements of Changes in Equity For the six and three months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars, except for shares) |
| Notes | Common shares | Share capital | Additional paid-in capital |
Deficit | Non-controlling interest |
Total stockholders' equity |
|||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Share-based payments | 10 | - | - | ( |
) | - | - | ( |
) | ||||||||||
| Issuance of common shares of FCC | 6 | - | - | - | - | - | - | ||||||||||||
| Net loss for the period | - | - | - | ( |
) | ||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( |
) | $ | $ | ||||||||||||
| Exercise of options | 10 | ( |
) | - | - | ||||||||||||||
| Issuance of common shares of FCC | 6 | - | - | - | - | ||||||||||||||
| Net loss for the period | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( |
) | $ | $ |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
| Lion Copper and Gold Corp. Condensed Interim Consolidated Statements of Cash Flow For the six months ended June 30, 2024, and 2023 (Unaudited - In thousands of U.S. Dollars) |
| For the six months ended June 30, | ||||||
| 2024 | 2023 | |||||
| Cash flows provided by operating activities | ||||||
| Loss for the period | $ | ( |
) | $ | ( |
) |
| Non-cash transactions: | ||||||
| Interest expense | ||||||
| Accretion expense | ||||||
| Fair value gain on derivative liabilities | ( |
) | ( |
) | ||
| Gain on transfer of investment shares | ( |
) | ||||
| Share of loss of investment in associate | ||||||
| Wages settled through transfer of investment shares | ||||||
| Share-based payments | ( |
) | ||||
| Loss on revaluation of SAFE notes | ||||||
| Impairment of mineral properties | ||||||
| Loss on conversion of convertible debentures | ||||||
| Loss on repayment of convertible debentures | ||||||
| Loss on extinguishment of convertible debentures | ||||||
| Amortization of ROU asset | ||||||
| Changes in operating assets and liabilities: | ||||||
| Other receivables | ( |
) | ||||
| Accounts payables and accrued liabilities | ||||||
| Prepaid and deposit | ( |
) | ( |
) | ||
| Rio Tinto deposit | ||||||
| Lease liability | ( |
) | ||||
| Net cash provided by operating activities | ||||||
| Cash flows used in investing activities | ||||||
| Capitalized expenditures on mineral properties | ( |
) | ( |
) | ||
| Reclamation bond | ||||||
| Net cash used in investing activities | ( |
) | ( |
) | ||
| Cash flows provided by financing activities | ||||||
| Proceeds from convertible debentures | ||||||
| Proceeds from FCC SAFE notes | ||||||
| Proceeds for issuance of common shares of FCC | ||||||
| FCC - Proceeds from private placement | ||||||
| Proceeds from private placement | ||||||
| Share issuance costs | ( |
) | ||||
| Repayment of convertible debentures | ( |
) | ||||
| Exercise of options | ||||||
| Net cash provided by financing activities | ||||||
| Increase in cash and cash equivalents | ||||||
| Cash and cash equivalents, beginning of period | ||||||
| Cash and cash equivalents, end of period | $ | $ | ||||
| Supplemental cash flow information | ||||||
| Shares issued for conversion of SAFE notes | ||||||
| Shares issued for convertible debentures |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
|
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
1. NATURE OF OPERATIONS AND GOING CONCERN
Lion Copper and Gold Corp. (together with its subsidiaries, "Lion CG" or the "Company") is a Canadian-based Company advancing its flagship copper assets at Yerington, Nevada through an option to earn-in agreement with Nuton LLC, a Rio Tinto venture. The Company is incorporated in British Columbia, Canada. Its registered and records offices are located at 1200 - 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8. On November 22, 2021, the Company changed its name from Quaterra Resources Inc. to Lion Copper and Gold Corp. The shares of the Company commenced trading under the new name at the open of trading on November 23, 2021. The Company's common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol "LEO" and trades on the OTCQB Market under the symbol "LCGMF".
The Company acquires its mineral properties through option or lease agreements and capitalizes all acquisition costs related to the properties. The underlying value of the amounts recorded as mineral properties does not reflect current or future values. The Company's continued existence depends on discovering economically recoverable mineral reserves and obtaining the necessary funding to complete the development of these properties.
These condensed interim consolidated financial statements are prepared on a going concern basis, which assumes that the Company will be able to meet its commitments, continue operations and realize its assets and discharge its liabilities in the normal course of business for at least twelve months from the date of approval of these condensed interim consolidated financial statements from the Board of Directors. The Company has incurred ongoing losses and expects to incur further losses in the advancement of its exploration activities. For the six months ended June 30, 2024, the Company incurred a net loss of $
The Company continues to incur losses, has limited financial resources, and has no current source of revenue or cash flow generated from operating activities. To address its financing requirements, the Company plans to seek financing through, but not limited to, debt financing, equity financing and strategic alliances. However, there is no assurance that such financing will be available. If adequate financing is not available or cannot be obtained on a timely basis, the Company may be required to delay, reduce the scope of or eliminate one or more of its exploration programs or relinquish some or all of its rights under the existing option and acquisition agreements. The above factors give rise to material uncertainties that cast substantial doubt on the Company's ability to continue as a going concern.
If the going concern assumptions were not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary to the carrying values of assets, liabilities, the reported expenses, and the consolidated balance sheet classifications used. Such adjustments could be material.
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
2. BASIS OF PRESENTATION
Statement of compliance
The condensed interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and are expressed in U.S. dollars. These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions were eliminated upon consolidation.
These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for the cash flow information.
The Company consolidates an entity when it has power over that entity, is exposed, or has rights, to variable returns from its involvement with that entity and can affect those returns through its control over that entity. All material intercompany transactions, balances and expenses are eliminated on consolidation.
The accompanying condensed interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023. The interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.
These condensed interim consolidated financial statements include the financial statements of Lion Copper and Gold Corp., and its subsidiaries:
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
2. BASIS OF PRESENTATION (continued)
Statement of compliance (continued)
| Percentage ownership | |||
| Subsidiaries | June 30, 2024 | December 31, 2023 | Country of incorporation |
|
Quaterra Alaska Inc. ("Quaterra Alaska") |
USA | ||
|
Singatse Peak Services, LLC ("SPS") |
USA | ||
|
Falcon Copper Corp ("FCC") (Formerly Blue Copper Resources Corp ("BCRC")) |
USA | ||
| Blue Copper LLC |
through FCC |
through FCC |
USA |
|
Blue Copper Royalties LLC ("BCR LLC") |
USA |
||
|
Falcon Services, LLC (FSL") |
through FCC |
through FCC |
USA |
On August 25, 2023, BCR LLC was incorporated and on September 6, 2023, FCC carried out a re-organization of its assets and capital structure through an assignment transaction with BCR LLC. The Company assessed the impact of the re-organization and concluded the Company still has control over BCR LLC. As such, the re-organization is a transaction between entities under common control and the assets transferred are accounted for at their carrying values.
On December 13, 2023, Falcon Services, LLC was incorporated with FCC being the sole shareholder.
For partially owned subsidiaries, the interest attributable to non-controlling stockholders is reflected in non-controlling interest. The Company has assessed control for any entity with less than 50% ownership and has concluded the Company has control (Note 6).
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with the accounting policies disclosed in Note 3 of the Company's audited consolidated financial statements for the year ended December 31, 2023.
In preparing these condensed interim consolidated financial statements, management has made judgements, estimates and assumptions that affect the applicability of the Company's accounting policies. In preparing these condensed interim consolidated financial statements, the significant estimates and critical judgments were the same as those applied to the audited consolidated financial statements as at and for the year ended December 31, 2023.
During the six months ended June 30, 2024, the Company's ownership in FCC dropped from
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES
Total mineral property acquisition costs are listed in the table below:
| Singatse Peak Services ("SPS") | Lion CG ("LCG") | Falcon Copper Corp (formerly Blue Copper Resources Corp) ("FCC") |
|||||||||||||||||||||||||
| (In thousands of U.S dollars) |
MacArthur | Yerington | Bear | Wassuk | Copper Canyon | Chaco Bear & Ashton |
Blue Copper | Muncy | Total | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance December 31, 2022 | |||||||||||||||||||||||||||
| Acquisition costs | |||||||||||||||||||||||||||
| Impairment | ( |
) | ( |
) | |||||||||||||||||||||||
| Paid by Rio Tinto | ( |
) | ( |
) | |||||||||||||||||||||||
| Total additions (disposals) for the year | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance December 31, 2023 | |||||||||||||||||||||||||||
| Acquisition costs | |||||||||||||||||||||||||||
| Paid by Rio Tinto | ( |
) | ( |
) | |||||||||||||||||||||||
| Total additions for the period | |||||||||||||||||||||||||||
| Balance June 30, 2024 | |||||||||||||||||||||||||||
The Company owns a
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
Total exploration expenditures recorded on the condensed interim consolidated statements of operations and comprehensive income (loss) are listed in the tables below:
Exploration expenditures incurred for the six months ended June 30, 2024
| Singatse Peak Services | Falcon Copper Corp | |||||||||||||||||||||||
| (In thousands of U.S. dollars) | MacArthur | Yerington | Bear | Blue Copper | Muncy | Pioneer | Recon | Total |
||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Property maintenance | ||||||||||||||||||||||||
| Assay & Labs | ||||||||||||||||||||||||
| Drilling | ||||||||||||||||||||||||
| Environmental | ||||||||||||||||||||||||
| Geological & mapping | ||||||||||||||||||||||||
| Geophysical surveys | ||||||||||||||||||||||||
| Technical study | ||||||||||||||||||||||||
| Field support | ||||||||||||||||||||||||
| Total expenses incurred | ||||||||||||||||||||||||
| Total Expenditures funded by Rio Tinto | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Total Expenditures funded by Lion CG | ||||||||||||||||||||||||
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
Exploration expenditures incurred for the six months ended June 30, 2023
| Singatse Peak Services | Lion CG | Falcon Copper Corp | ||||||||||||||||||||||||||||||||||
| (In thousands of U.S dollars) | MacArthur | Yerington | Bear | Wassuk | Prospects | Chaco Bear & Ashton |
Ground hog |
Blue Copper | Recon | Nevada |
Arizona | Total |
||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Property maintenance | ||||||||||||||||||||||||||||||||||||
| Assay & Labs | ||||||||||||||||||||||||||||||||||||
| Drilling | ||||||||||||||||||||||||||||||||||||
| Environmental | ||||||||||||||||||||||||||||||||||||
| Geological & mapping | ||||||||||||||||||||||||||||||||||||
| Geophysical surveys | ||||||||||||||||||||||||||||||||||||
| Technical study | ||||||||||||||||||||||||||||||||||||
| Field support | ||||||||||||||||||||||||||||||||||||
| Total expenses incurred | ||||||||||||||||||||||||||||||||||||
| Total Expenditures funded by Rio Tinto | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Total Expenditures funded by Lion CG | ||||||||||||||||||||||||||||||||||||
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
a) Option to Earn-in Agreement with Rio Tinto
On March 18, 2022, the Company entered into an Option to Earn-in Agreement with Rio Tinto America Inc. ( "Rio Tinto") to advance studies and exploration at Lion CG's copper assets in Mason Valley, Nevada (the "Rio Tinto Agreement"). Under the agreement, Rio Tinto has the exclusive option to earn a
In addition, Rio Tinto will evaluate the potential commercial deployment of its Nuton™ technologies at the site.
On April 27, 2022, the Company TSX Venture Exchange approved the Rio Tinto Agreement.
The status of the Rio Tinto Agreement is set out below.
Stage 1
Rio Tinto paid $
Stage 2
Within forty-five (45) days of the completion of Stage 1, Rio Tinto was to provide notice to Lion CG whether Rio Tinto elected to proceed with Stage 2 (notice was provided), upon which Rio Tinto was to pay up to $
On October 5, 2023, an amendment was signed for the modification of the Stage 2 Program of Work. The significant updates are related to the following:
- The term of Stage 2 of the Option Agreement has an end date of January 12, 2024. The Parties extend that end date by 8 months, to September 12, 2024 to continue study work, including testing and evaluation of the Nuton Technologies.
- Subject to internal approvals, Nuton LLC ("Nuton"), on behalf of Rio Tinto, will advance $
- Should the Parties agree that Stage 2c is necessary, the Parties will memorialize the scope of work in a letter agreement. Subject to internal approvals, Nuton will advance another $
- The Parties agree that Lion CG may allocate $
Stage 3 - Feasibility Study
Within sixty (60) days of the completion of Stage 2, Rio Tinto shall provide notice to Lion CG whether Rio Tinto will exercise its Option and fund a Feasibility Study based on the results of the Stage 1 and Stage 2 Programs of Work. Rio Tinto will fully-fund the Feasibility Study and ancillary work completed by Lion CG in amount, in aggregate of Stages 1 through 3, not to exceed $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
a) Option to Earn-in Agreement with Rio Tinto (continued)
On January 4, 2024, $
A continuity of the Company's Rio Tinto deposit is as follows:
| Balance December 31, 2022 | $ | ||
| Proceeds received | |||
| Funds applied to reclamation deposit | ( |
) | |
| Funds applied to capitalized acquisition costs (Note 4) | ( |
) | |
| Funds applied to exploration expenditures | ( |
) | |
| Funds applied to general operating expenditures | ( |
) | |
| Balance December 31, 2023 | $ | ||
| Proceeds received | |||
| Funds applied to prepaids | ( |
) | |
| Funds applied to capitalized acquisition costs (Note 4) | ( |
) | |
| Funds applied to exploration expenditures (Note 4) | ( |
) | |
| Funds applied to general operating expenditures | ( |
) | |
| Balance June 30, 2024 | $ |
b) MacArthur and Yerington Properties, Nevada
Located in the historic copper district of Yerington, Nevada, the Company's Yerington and MacArthur properties are
The MacArthur Project consists of 902 unpatented lode claims and 8 placer claims totaling approximately 18,800 acres on lands administered by the U.S. Department of Interior - Bureau of Land Management (BLM).
The MacArthur Project is subject to a
The Yerington Mine Property covers approximately 11 square miles centered on the former Anaconda open pit copper mine. This includes 2,768 acres of fee simple parcels and patented mining claims as well as 208 unpatented lode and placer claims totaling approximately 4,300 acres on lands administered by the BLM. The Yerington Mine Property is subject to a
c) Bear Deposit, Nevada
The Bear deposit consists of approximately 2,300 acres of private land located to the northeast of the Yerington Mine Property, plus several hundred acres beneath the Yerington Mine property.
The Company has five option agreements, entered from March 2013 to May 2015, to acquire a
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
c) Bear Deposit, Nevada (continued)
Outstanding payments to keep the option agreements current are as follows, by year:
- $
- $
Outstanding consideration payments to purchase the property under the five option agreements are as follows:
- $
- $
- $
- Circle Bar N purchase option:
- On or before June 15, 2025: $
- June 16, 2025 - June 15, 2026: $
- June 16, 2026 - June 15, 2027: $
- June 16, 2027 - June 15, 2028: $
- June 16, 2028 - June 15, 2029: $
- On or before June 15, 2025: $
- $
d) Wassuk, Nevada
The Wassuk property consists of 310 unpatented lode claims totaling approximately 6,400 acres on lands administered by the BLM.
The property is subject to a
e) Copper Canyon, Nevada
On August 21, 2023, the Company entered into a Purchase and Sale Agreement with Convergent Mining, LLC, whereby the Company purchased the title to the Copper Canyon claims from Convergent Mining, LLC upon closing of agreement. As consideration, the Company paid $
f) Chaco Bear and Ashton Properties, British Columbia
On August 25, 2021, the Company entered into a non-binding letter of intent with Houston Minerals Ltd. setting forth the terms of an option whereby the Company may acquire a
On June 1, 2023, Lion CG and Houston terminated the option agreement surrounding the Chaco Bear and Ashton properties. As at June 30, 2024, and December 31, 2023, Lion CG impaired the full balance of property and recognized $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
4. MINERAL PROPERTIES (continued)
FALCON COPPER CORP.
g) Blue Copper Project, Montana
A Plan of Operations for exploration of the Blue Copper Project is currently under review for approval by the relevant agencies.
h) Cabin Property, Nevada
In 2023, FCC staked approximately 9,000 acres of federal mining claims in White Pine County, Nevada, the area of interest which is termed Cabin. The Cabin Property represents a potential major copper-moly porphyry discovery concealed beneath the Spring Valley pediment within a district-scale BLM land package, located immediately north of the Muncy Property.
i) Muncy Property, Nevada
On November 22, 2023, FCC entered into an Option to Joint Venture Agreement with Kennecott Exploration Company ("Kennecott"), a Rio Tinto subsidiary.
Pursuant to the agreement, Kennecott grants FCC the sole and exclusive right and option to acquire
- pay the payment commitment of $
- pay an additional payment commitment of $
- pay an additional payment commitment of $
- incur expenditures of $
- ensure that no less than
- ensure that no less than
If FCC decides to terminate the option at any time, they will grant Kennecott a
If Kennecott elects not to form a joint venture, Kennecott must transfer all their rights in the Muncy Property to the FCC. In return, FCC will grant the optionor a
A Plan of Operations for exploration of the Muncy Property is currently under review for approval by the relevant agencies.
(j) Pioneer, Arizona
In 2023, FCC staked an approximate 1,300 acre covered target area prospective for high grade primary or enriched porphyry copper mineralization located within Arizona’s prolific Copper Triangle and within 10 miles of the Resolution & Ray mines.
(k) Groundhog, Alaska
The Groundhog prospect lies on the Alaskan peninsula on state lands, within an established copper porphyry belt 200 miles southwest Anchorage.
l) Recon, Nevada, Arizona, and other prospects
During the six months ended June 30, 2024, FCC incurred $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
5. INVESTMENT IN ASSOCIATE
On April 5, 2022, the Company received
Summarized financial information of Falcon Butte and a reconciliation of the carrying amount of the investment in the condensed interim consolidated financial statements are set out below:
Summarized balance sheet:
| June 30, 2024 | December 31, 2023 | |||||
| Assets | ||||||
| Cash | $ | $ | ||||
| Receivables | ||||||
| Financial asset - Convertible loan receivable | ||||||
| Prepaids & deposits | ||||||
| Exploration and evaluation assets | ||||||
| Total Assets | $ | $ | ||||
| Liabilities | ||||||
| Accounts payable & accrued liabilities | $ | $ | ||||
| Freeport deposit | ||||||
| Derivative liabilities | ||||||
| Total Liabilities | $ | $ |
Summarized statement of loss
|
Six months ended June 30, 2024 |
Six months ended June 30, 2023 |
|||||
| Operating expenses | ||||||
| General and administrative expenses | $ | $ | ||||
| Total operating expenses | ||||||
| Fair value (gain) loss on derivative liability | ( |
) | ( |
) | ||
| Other income | ( |
) | ( |
) | ||
| Foreign exchange loss (gain) | ( |
) | ||||
| Net loss (income) | $ | $ |
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
5. INVESTMENT IN ASSOCIATE (continued)
A continuity of the Company's investment in associate is as follows:
| Balance December 31, 2022 | $ | ||
| Transfer of shares to the former CEO | ( |
) | |
| Company's share of net loss | ( |
) | |
| Balance December 31, 2023 | $ | ||
| Company's share of net loss | ( |
) | |
| Balance June 30, 2024 | $ |
6. NON-CONTROLLING INTEREST
On December 13, 2022, Quaterra Alaska assigned and transferred all right, title and interest in the Groundhog property, Butte Valley Royalty, 100% of the outstanding membership interest held in Blue Copper LLC, and the interest in the Nieves project to FCC.
As consideration, on the date of transfer of assets to FCC, Quaterra Alaska was issued
On March 2, 2023, FCC completed a financing of $
In addition, the private placement was considered a "triggering event" for Simple Agreements for Future Equity ("SAFE Notes"). FCC had previously raised $
On September 6, 2023, FCC carried out a re-organization of its assets and capital structure (the transaction described herein is referred to as the "Reorganization"). On August 25, 2023, a new entity, BCR LLC was organized in Wyoming. BCR LLC subsequently adopted an Operating Agreement that provided for issuance of LLC Interests to its Members in the same amounts as shares issued to Shareholders of FCC. On September 6, 2023, two of the mining assets, referred to as the Butte Valley Royalty and the Nieves Royalty, that had been held by FCC were assigned to BCR LLC in exchange for
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
6. NON-CONTROLLING INTEREST (continued)
On October 17, 2023, FCC issued
During the six months ended June 30, 2024, FCC completed the following private placements at $
- On February 5, 2024, FCC issued
- On February 27, 2024, FCC issued
- On March 29, 2024, FCC issued
- On May 15, 2024, FCC issued
- On May 17, 2024, FCC issued
At June 30, 2024, the Company held
At June 30, 2024, the Company held
The following table summarizes the balance recognized as NCI during the six months ended June 30, 2024, and year ended December 31, 2023:
| Balance December 31, 2022 | $ | ||
| Issuance of common shares for conversion of SAFE notes | |||
| Issuance of common shares equity financing | |||
| Issuance of common shares | |||
| Net loss and comprehensive loss attributable to NCI | ( |
) | |
| Balance December 31, 2023 | $ | ||
| Issuance of common shares | |||
| Net loss and comprehensive loss attributable to NCI | ( |
) | |
| Balance June 30, 2024 | $ |
7. DERIVATIVE LIABILITIES
Warrants & Conversion Feature Derivative Liability
During the period ended June 30, 2024, and year ended December 31, 2023, the Company issued certain share purchase warrants and issued convertible debt with a conversion feature that are both exercisable in a currency different from the Company's functional currency (Note 8). The warrants and the conversion feature were classified as derivative liabilities, carried at fair value and revalued at each reporting date.
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
7. DERIVATIVE LIABILITIES (continued)
A continuity schedule of the Company's derivative liabilities is as follows:
| Balance December 31, 2022 | |||
| Issuance of Warrants (Note 8) | |||
| Issuance of convertible debentures with conversion feature (Note 8) | |||
| Fair value change on derivative liabilities | ( |
) | |
| Balance December 31, 2023 | $ | ||
| Issuance of warrants for private placement (Note 10) | |||
| Issuance of warrants upon conversion of existing debentures (Note 8) | |||
| Issuance of contingent warrants upon conversion of existing debentures (Note 8) | |||
| Issuance of warrants and conversion feature for extinguishment of existing debentures (Note 8) | |||
| Modification of warrants upon restructuring of debentures (Note 8) | |||
| Modification of conversion feature upon restructuring of debentures (Note 8) | |||
| Fair value change on derivative liabilities | ( |
) | |
| Balance June 30, 2024 | $ |
8. CONVERTIBLE DEBENTURES
On June 17, 2022, the Company closed the first tranche of its non-brokered private placement of unsecured convertible debentures for gross proceeds of $
In conjunction with the first tranche of the convertible debt financing, the Company issued
The convertible debentures were determined to be a financial instrument comprising a host debt component, a conversion feature classified as a derivative liability, and freestanding warrants classified as a derivative liability. The warrants and conversion features were determined to be derivative liabilities because the exercise prices are denominated in both the functional currency of the Company and a foreign currency. Thus, the instrument fails to meet the criterion of an equity instrument that states that the instrument must be indexed to its own stock.
On initial recognition, the warrants and the conversion feature were fair valued, with the proceeds first allocated to the freestanding warrants, then the conversion feature. The residual proceeds are then allocated to the host debt component with an effective interest rate of
On July 8, 2022, the Company closed the second tranche of its non-brokered private placement of unsecured convertible debentures for gross proceeds of $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
8. CONVERTIBLE DEBENTURES (continued)
In conjunction with the second tranche of the convertible debt financing, the Company issued
The convertible debentures were determined to be a financial instrument comprising a host debt component, a conversion feature classified as a derivative liability, and freestanding warrants classified as a derivative liability. On initial recognition, the warrants and the conversion feature were fair valued, with the proceeds first allocated to the freestanding warrants, then the conversion feature. The residual proceeds are then allocated to the host debt component with an effective interest rate of
On March 2, 2023, the Company closed the third tranche of its non-brokered private placement of unsecured convertible debenture for gross proceeds of $
In conjunction with the third tranche of the convertible debt financing, the Company issued
The convertible debentures were determined to be a financial instrument comprising a host debt component, a conversion feature classified as a derivative liability, and freestanding warrants classified as a derivative liability. On initial recognition, the warrants and the conversion feature were fair valued, with the proceeds first allocated to the freestanding warrants, then the conversion feature. The residual proceeds are then allocated to the host debt component with an effective interest rate of
On February 16, 2024, the Company issued
Convertible Debt Restructuring
On February 16, 2024, the Company provided notice to existing holders of convertible debentures about a replacement offer with the following terms:
- The existing debentures will be replaced with new debentures. New debentures will have, a maturity date of
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
8. CONVERTIBLE DEBENTURES (continued)
- The existing debentures holders that elect not to participate in the replacement offer for New Debentures may instead convert the principal and interest of their existing debentures into units of the Company at $
- The existing debentures that do not elect for either of the above offers, will have their debentures repaid in cash.
On February 16, 2024, the Company issued new convertible debentures totaling $
Based on the terms of the New Debentures, the convertible debentures were determined to be a financial instrument comprising a host debt component, a conversion feature classified as a derivative liability, and freestanding warrants classified as a derivative liability. In this case, as the conversion option on the instrument is bifurcated both before and after the modification or exchange, the Company used the 10% cash flow test. As a result, the change in cash flows were considered not substantial for the convertible debentures issued on June 17, 2022, and July 8, 2022, and extinguishment accounting was not applied. A new effective interest rate was determined and there was no gain or loss recorded on the condensed interim consolidated statements of operations and comprehensive loss. However, the convertible debentures issued on March 2, 2023, surpassed the 10% cash flow test and as a result, the debentures were considered extinguished. A new effective interest was determined and there was a loss on extinguishment recorded on the condensed interim consolidated statements of operations and comprehensive loss.
Under ASC 815, for the convertible debentures that did not meet the 10% cash flow test, the amended conversion feature and the replacement warrants were valued using the Black Scholes model and the difference between the fair value of the original conversion feature and amended conversion feature were reflected on the condensed interim consolidated statements of operations and comprehensive loss as a gain/loss on the revaluation of the derivative liabilities. The fair value of the warrants associated with the prior debentures was recognized as a gain/loss and the fair value of the replacement warrants were deducted from the face value of the replacement debentures. For the convertible debentures that surpassed the 10% cash flow test, the fair value of the debentures at maturity were present valued using the new effective interest rate of
On March 8, 2024, the Company issued
Certain directors and individuals did not receive warrants with their convertible debenture settlement and will receive these warrants upon the Company's listing on the CSE ("Contingent Warrants"). The Company expects to list in the near future, therefore management concluded that the issuance of the 41,707,215 Contingent Warrants is probable. As such, the fair value of the warrants as at March 8, 2024, of $648 was recognized as a derivative liability at issuance (Note 14).
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
8. CONVERTIBLE DEBENTURES (continued)
Under ASC 815, the conversion of debt with a bifurcated conversion option should be accounted for under the debt extinguishment accounting model. Therefore, both the debt and the conversion option that is accounted for as a derivative was derecognized at their carrying amounts and the consideration transferred should be measured at its then-current fair value, with any difference recorded as a gain or loss on the extinguishment of the two separate liabilities. The existing debenture settlement resulting in a loss on conversion of $
Additionally, on March 8, 2024, the Company repaid convertible debentures of a total of $
The fair value of the warrants and conversion features were determined using the Black-Scholes Option Pricing Model using the assumptions set out as follows:
|
Initial recognition in 2023 |
Fair value at December 31, 2023 |
Initial recognition in 2024 |
Fair value at June 30, 2024 |
|
| Risk-free interest rate | ||||
| Expected volatility | ||||
| Dividend yield | ||||
| Expected life |
A continuity schedule of the Company's convertible debt is as follows:
| Balance as at December 31, 2022 | $ | ||
| Issued | |||
| Fair value of conversion feature | ( |
) | |
| Fair value of warrants | ( |
) | |
| Accretion | |||
| Interest | |||
| Balance as at December 31, 2023 | $ | ||
| Issued | |||
| Extinguished debt - fair value of conversion feature | ( |
) | |
| Extinguished debt - fair value of warrants | ( |
) | |
| Modified debt - fair value of warrants | ( |
) | |
| Accretion | |||
| Interest | |||
| Extinguished | ( |
) | |
| Converted | ( |
) | |
| Repayment | ( |
) | |
| Loss on repayment | |||
| Balance as at June 30, 2024 | $ |
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
9. SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares without par value.
Share transactions for the six months ended June 30, 2024
a) On February 16, 2024, the Company issued
b) On March 8, 2024, the Company issued
c) On March 8, 2024, the Company closed a private placement consisting of an aggregate of
d) In June 2024, the Company issued
Share transactions for the six months ended June 30, 2023
e) No share capital activity in the Company during the six months ended June 30, 2023.
10. ADDITIONAL PAID-IN CAPITAL
a) Stock options
The Company has a stock option plan under which the Company is authorized to grant stock options of up to
The continuity of the number of stock options issued and outstanding is as follows:
| As at June 30, 2024 | As at December 31, 2023 | |||||||||||
| Number of options | Weighted average exercise price (CAD) |
Number of options |
Weighted average exercise price (CAD) |
|||||||||
| Outstanding, beginning of period | ||||||||||||
| Granted | ||||||||||||
| Expired | ( |
) | ( |
) | ||||||||
| Cancelled | ( |
) | ( |
) | ||||||||
| Exercised | ( |
) | ( |
) | ||||||||
| Outstanding, end of period | ||||||||||||
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
10. ADDITIONAL PAID-IN CAPITAL (continued)
a) Stock options (continued)
As of June 30, 2024, and December 31, 2023, the number of stock options outstanding and exercisable were:
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||||
| August 8, 2024 | ||||||||||||
| June 20, 2025 | ||||||||||||
| August 18, 2025 | ||||||||||||
| June 18, 2026 | ||||||||||||
| September 17, 2026 | ||||||||||||
| October 21, 2026 | ||||||||||||
| May 25, 2027 | ||||||||||||
| March 2, 2028 | ||||||||||||
| July 21, 2028 | ||||||||||||
| March 1, 2029 | ||||||||||||
| Balance, June 30, 2024 |
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||||
| June 21, 2024 | ||||||||||||
| August 8, 2024 | ||||||||||||
| June 20, 2025 | ||||||||||||
| August 18, 2025 | ||||||||||||
| June 18, 2026 | ||||||||||||
| September 17, 2026 | ||||||||||||
| October 21, 2026 | ||||||||||||
| May 25, 2027 | ||||||||||||
| March 2, 2028 | ||||||||||||
| July 21, 2028 | ||||||||||||
| Outstanding, December 31, 2023 |
During the six months ended June 30, 2024, an amount of $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
10. ADDITIONAL PAID-IN CAPITAL (continued)
a) Stock options (continued)
|
Six months ended June 30, 2024 |
Six months ended June 30, 2023 |
|
| Risk-free interest rate | ||
| Expected life (years) | ||
| Annualized volatility | ||
| Forfeiture rate | ||
| Dividend yield |
b) Share purchase warrants
The continuity of the number of share purchase warrants outstanding as of June 30, 2024, and December 31, 2023, is as follows:
| June 30, 2024 | December 31, 2023 | |||||||||||
| Number of warrants |
Weighted average exercise price |
Number of warrants |
Weighted average exercise price |
|||||||||
| Outstanding, beginning of period | $ | $ | ||||||||||
| Issued | ||||||||||||
| Exercised | ||||||||||||
| Cancelled | ( |
) | ||||||||||
| Outstanding, end of period | $ | |||||||||||
The following table summarizes warrants outstanding as of June 30, 2024, and December 31, 2023:
| Expiry date | Currency | Exercise price | June 30, 2024 | December 31, 2023 |
||||||
| September 13, 2024 | USD | |||||||||
| September 27, 2024 | USD | |||||||||
| October 21, 2024 | USD | |||||||||
| February 17, 2024 | USD | |||||||||
| March 8, 2024 | USD | |||||||||
| November 2, 2024 | USD | |||||||||
| February 16, 2025 | USD | |||||||||
| March 8, 2029 | USD | |||||||||
| March 8, 2029 | USD | |||||||||
| Outstanding at the end of the period | ||||||||||
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
10. ADDITIONAL PAID-IN CAPITAL (continued)
c) Restricted share units
At the 2022 Annual General Meeting, the Company's stockholders approved issuance of common shares from treasury pursuant to the Company's Amended 2021 Restricted Share Unit Plan (the "RSU Plan") and reserved
There was no activity for Restricted share units ("RSU") during the six months ended June 30, 2024, and 2023.
During the six months ended June 30, 2024, an amount of $
The continuity of the number of RSUs issued and outstanding as of June 30, 2024, and December 31, 2023, is as follows:
|
Number of RSUs |
|||
| Outstanding at December 31, 2022 | |||
| Cancelled | ( |
) | |
| Outstanding at June 30, 2024, and December 31, 2023 |
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
11. RELATED PARTY TRANSACTIONS
The Company's related parties include its directors and officers whose remuneration was as follows, subject to change of control provisions for officers:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||
| Salaries | $ | $ | $ | $ | ||||||||
| Directors' fees | ||||||||||||
| Share-based payments | ( |
) | ( |
) | ||||||||
| Interest on convertible debenture | ||||||||||||
| $ | $ | ( |
) | $ | $ | |||||||
Other transactions for the six months ended June 30, 2024
a) On February 16, 2024, former CEO, former CFO and directors of the Company restructured $
b) On March 8, 2024, the former CFO and directors converted $
c) On March 8, 2024, the Company recognized
d) On March 8, 2024, former CFO and directors subscribed for
e) As at June 30, 2024, the Company had $
f) As at June 30, 2024, there was $
g) As at June 30, 2024, there was $
Other transactions for the six months ended June 30, 2023
h) During the six months ended June 30, 2023, certain directors of the Company subscribed for $
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
12. SEGMENTED INFORMATION
The Company operates in one reportable operating segment, being mineral exploration. Geographic segment information relating to the Company's mineral properties as at June 30, 2024, and December 31, 2023, is as follows:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||
| Canada | USA | Total | Canada | USA | Total | |||||||||||||||||
| Mineral properties | $ | $ | $ | $ | $ | $ | ||||||||||||||||
13. COMMITMENTS
To acquire certain mineral property interests as per Note 4, the Company must make optional acquisition expenditures to satisfy the terms of existing option agreements, failing which the rights to such mineral properties will revert to the property vendors.
14. CONTINGENCIES
Water Rights
On July 23, 2021, the Company received a notice from the State of Nevada that three water rights permits had been forfeited. Further, the application for an extension of time to prevent forfeiture of a fourth certificate was denied. On August 20, 2021, the Company filed a Petition for Judicial Review of the Forfeiture Notice and has retained legal counsel to undertake the appeal process. SPS subsequently filed and was granted a Stay of the Forfeiture Notice on September 15, 2021. SPS filed its Opening Brief on March 28, 2022. The State Engineer filed its Answering Brief on July 8, 2022. SPS filed its Reply Brief on August 25, 2022. A hearing regarding the status of the forfeiture appeal was held in the Third Judicial Court District in Lyon County on November 4, 2022. On December 6, 2022, the Judge remanded the case back to the State for further written findings based on issues raised at the hearing.
On August 30, 2023, SPS received written notice from the Nevada State Engineer in response to the Remand Order that the three water rights applications for Extensions of Time were denied and declared forfeited. The fourth certificate was not forfeited although the Extension of Time has not yet been approved.
On September 28, 2023 SPS simultaneously timely filed an Amended Petition for Review and a Complaint for Equitable Relief with the Third Judicial District Court in Lyon County, Nevada seeking judicial relief from the August 30 Forfeiture Notice. On October 10, 2023, the Judge signed an order granting a Stipulated Stay of the August 30,
2023 Forfeiture Notice while the appeal process is ongoing. A hearing regarding both legal paths described above is tentatively scheduled for January 2025.
The US firms representing SPS completed the briefing on the Amended Petition for Judicial Review and filed the opening brief on the Complaint for Equitable Relief. The hearing on both matters will occur in early January 2025. The firms interviewed the likely witnesses in the matters and developed the Declarations in Support of the Equitable Relief briefing. The firms await the response brief from the State of Nevada which is due on or before September 6, 2024. Thereafter the firms will determine whether expert or other witness testimony is necessary to the pursuit of the matters.
Just as SPS did with the initial forfeiture decision that was remanded by the Court, SPS continues to diligently defend against the wrongful forfeiture of its water rights with clear evidence of the need for those water rights in mine remediation, production and reclamation
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
14. CONTINGENCIES (continued)
Contingency Warrants
On March 8, 2024, the Company settled a portion of its Existing Debentures with the issuance of units (Note 8). Certain directors and individuals did not receive warrants with their convertible debenture settlement and will receive these warrants upon the Company's listing on the CSE ("Contingent Warrants"). The Company expects to list in the near future, therefore management concluded that the issuance of the
15. FINANCIAL INSTRUMENT RISKS
The board of directors has overall responsibility for establishing and oversight of the Company's risk management framework. The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. Financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, lease liabilities, Rio Tinto deposit, SAFE notes, convertible debentures, derivative liabilities.
Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The three levels of the fair value hierarchy are:
- Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
- Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
- Level 3 - Inputs that are not based on observable market data.
The Company's activities expose it to financial risks of varying degrees of significance, which could affect its ability to achieve its strategic objectives for growth and stockholder returns. The principal financial risks to which the Company is exposed are, liquidity risk, currency risk, interest rate risk, credit risk and commodity price risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.
The carrying values of cash, accounts payable, accrued liabilities and Rio Tinto deposit approximate their fair values because of their immediate or short term to maturity and the Company's convertible debentures and lease liabilities are recorded at amortized cost.
The Company's derivative liabilities is measured at its fair value at the end of each reporting period and is categorized as Level 2 in the fair value hierarchy.
a) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure. To mitigate this risk, the Company has a planning and budgeting process in place to determine the funds required to support its ongoing operations and capital expenditures. The Company ensures that sufficient funds are raised from equity offerings or debt financings to meet its operating requirements, after considering existing cash and expected exercise of stock options and share purchase warrants. See Note 1 for further discussion.
Lion Copper and Gold Corp. For the three and six months ended June 30, 2024 and 2023 (Unaudited - In thousands of U.S. Dollars except for shares and per share amounts) |
15. FINANCIAL INSTRUMENT RISKS (continued)
b) Currency risk
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates in the United States and Canada; therefore, it is exposed to currency risk from transactions denominated in CAD. Currently, the Company does not have any foreign exchange hedge programs and manages its operational CAD requirements through spot purchases in the foreign exchange markets. Based on CAD financial assets and liabilities' magnitude, the Company does not have material sensitivity to CAD to USD exchange rates.
c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company is exposed to the interest rate risk on its liabilities through its outstanding borrowings and the interest earned on cash balances. The Company monitors its exposure to interest rates and maintains an investment policy that focuses primarily on the preservation of capital and liquidity.
d) Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk through its cash and cash equivalents. Cash and cash equivalents are held in large Canadian and US financial institutions that have high credit ratings assigned by international credit rating agencies.
16. SUBSEQUENT EVENTS
In July 2024, the Company granted a total of
In July 2024,
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of applicable United States and Canadian securities legislations ("Forward-Looking Statements"). Forward-Looking Statements reflect the expectations of management and consist of statements that are not only historical fact but also relate to predictions, expectations, belief, plans, projections, objectives, assumptions, future events, or future performance. Forward-Looking Statements may be identified by such terms as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", "plan" or similar words. Although the Company believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct. The Company cautions investors that any Forward-Looking Statements provided by the Company is not a guarantee of future results or performance, and that actual results may differ materially from those in Forward-Looking Statements as a result of various estimates, risks, and uncertainties. Readers should not place undue reliance on Forward-Looking Statements. Forward-Looking Statements in this annual report and in documents incorporated by reference herein include, but are not limited to, statements with regard to:
• planned exploration activity including both expected drilling and geological and geophysical related activities;
• future foreign exchange rates;
• future sources of liquidity, cash flows and their uses;
• realization of anticipated benefits of acquisitions and dispositions;
• expected levels of operating costs, general and administrative costs, costs of services and others; and
• treatment under government regulation and taxation regimes.
Forward-Looking Statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the Forward-Looking Statements, including, without limitation:
• risks related to exploration and development of natural resource properties;
• the uncertain nature of estimating mineral resources and mineral reserves;
• uncertainty in the Company's ability to obtain funding;
• copper price fluctuations;
• recent market events and conditions;
• risks related to governmental regulations;
• risks related to the Company's business being subject to environmental laws and regulations;
• risks related to the Company's inability to meet its financial obligations under agreements to which it is a party; and
• risks related to the Company's ability to recruit and retain qualified personnel.
These Forward-Looking Statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us at the time such statements were made. We undertake no obligation to update forward-looking statements should circumstances or estimates or opinions change.
Lion Copper and Gold Corp.
Management's Discussion and Analysis
For the three and six months ended June 30, 2024
Dated: August 14, 2024
(In U.S. dollars)
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This Management's Discussion and Analysis ("MD&A") of Lion Copper and Gold Corp. and its wholly owned subsidiaries (collectively, "Lion CG" or the "Company"), dated August 14, 2024, should be read in conjunction with the condensed interim consolidated financial statements for the three and six months ended June 30, 2024 and audited consolidated financial statements for the year ended December 31, 2023, and related notes thereto which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). All dollar amounts in this MD&A are United States dollars unless otherwise noted.
Additional information about Lion CG, including the Company's press releases, quarterly and annual reports is available through the Company's filings with the securities regulatory authorities in Canada at www.sedarplus.com or the United States Securities Exchange Commission ("SEC") at www.sec.gov/edgar. Information about mineral resources, as well as risks associated with investing in the Company's securities is contained in the Company's most recently filed 10-K.
Steve Dischler, CEO of the Company, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"), and has approved the scientific and technical information in this MD&A.
ABOUT LION CG
Lion Copper and Gold Corp., formerly Quaterra Resources Inc., is a Canadian-based Company advancing its 100% owned flagship copper projects at Yerington, Nevada through an option to earn-in agreement with Nuton LLC, a Rio Tinto Venture. The Company also looks for opportunities to acquire projects on reasonable terms that have the potential to host large mineral deposits attractive to major mining companies.
The Company is incorporated in British Columbia, Canada. Its registered and records offices are located at 1200 - 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
On November 22, 2021, the Company changed its name and began trading on the TSX Venture Exchange ("TSXV") under the symbol "LEO" and on the OTCQB Market under the symbol "LCGMF".
During the year ended December 31, 2022, the Company transitioned into the SEC reporting system because more than 50% of its outstanding voting common shares are held directly or indirectly by residents of the United States, and the majority of its directors are U.S. citizens. Consequently, the Company must adhere to the SEC's reporting and disclosure requirements, enhance financial and corporate governance and ensure greater transparency.
Effective April 27, 2022, the Company entered an option to earn-in agreement (the "Rio Agreement") with Rio Tinto America Inc. ("Rio Tinto"), to advance studies and exploration at the Company's copper projects in Mason Valley, Nevada. Under the Rio Agreement, Rio Tinto has the exclusive option to earn a 65% interest in the projects comprising Yerington, MacArthur, Wassuk, Bear and associated water rights (the "Mining Assets") for $50 million over three stages.
In addition, Rio Tinto evaluates the potential commercial deployment of its Nuton™ technologies at the site. Nuton™ offers copper heap leaching technologies developed by Rio Tinto to deliver greater copper recovery from mined ore and access new sources of copper, such as low-grade sulfide resources and reprocessing of stockpiles and mineralized waste. These technologies have the potential to deliver leading environmental performance through more efficient water usage, lower carbon emission, and the ability to reclaim mine sites by reprocessing waste.
The Rio Agreement was amended in October 2023 with Stage 2 being modified to Stage 2a and Stage 2b. The Company completed Stage 1 on December 22, 2022, Stage 2a on January 12, 2024, and is currently progressing in State 2b.
As of June 30, 2024, the Company has received $23 million accumulative funding from Rio Tinto, incurred $16.742 million expenditures, including $12.755 million in exploration, $3.318 million in general operating and $0.669 million in capital items under the Rio Agreement.
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SELECTED FINANCIAL INFORMATION
| (in thousands) | June 30, 2024 | December 31, 2023 | ||||
| Financial Position: | ||||||
| Cash and cash equivalents | $ | 8,318 | $ | 2,310 | ||
| Working capital deficit | $ | (589 | ) | $ | (2,854 | ) |
| Investments | $ | 894 | $ | 1,206 | ||
| Mineral properties | $ | 7,802 | $ | 7,647 | ||
| Total assets | $ | 17,261 | $ | 11,258 | ||
| Total long-term liabilities | $ | 19 | $ | - | ||
SUMMARY OF QUARTERLY RESULTS
| (In thousands except for per share amount) | Q2'24 | Q1'24 | Q4'23 | Q3'23 | Q2'23 | Q1'23 | Q4'22 | Q3'22 | ||||||||||||||||
| General administration | (1,358 | ) | (1,821 | ) | (1,161 | ) | (2,148 | ) | (723 | ) | (877 | ) | (515 | ) | (795 | ) | ||||||||
| Fair value (loss) gain on derivative liabilities | (427 | ) | 680 | (131 | ) | 6 | 1,421 | (940 | ) | 377 | 17 | |||||||||||||
| Foreign exchange gain (loss) | (7 | ) | (1 | ) | (2 | ) | - | - | - | (11 | ) | 12 | ||||||||||||
| Other Income | 152 | 86 | 16 | 32 | 51 | 12 | - | - | ||||||||||||||||
| Loss on settlement of convertible notes | - | (1,695 | ) | - | - | - | - | - | - | |||||||||||||||
| Gain on transfer of shares | - | - | - | - | - | 22 | 19 | - | ||||||||||||||||
| Gain on settlement of debt | - | - | - | - | - | - | - | 14 | ||||||||||||||||
| Accretion | (29 | ) | (111 | ) | (136 | ) | (129 | ) | (121 | ) | (74 | ) | (57 | ) | (47 | ) | ||||||||
| Loss on revaluation of SAFE notes | - | - | - | - | - | (305 | ) | (364 | ) | - | ||||||||||||||
| NSR buy-down | - | - | - | - | - | - | - | 250 | ||||||||||||||||
| Share of loss of investment in associate | (218 | ) | (94 | ) | (287 | ) | 3 | 22 | (26 | ) | (316 | ) | (42 | ) | ||||||||||
| Exploration Expenditures | (2,389 | ) | (2,660 | ) | (1,597 | ) | (1,344 | ) | (2,159 | ) | (1,250 | ) | (1,370 | ) | (1,020 | ) | ||||||||
| Rio Tinto Deposit | 3,102 | 3,218 | 1,682 | 1,262 | 2,250 | 1,322 | 1,104 | 464 | ||||||||||||||||
| Impairment of mineral properties | - | - | - | - | (602 | ) | - | - | - | |||||||||||||||
| Loss on Extinguishment | - | (55 | ) | - | - | - | - | - | - | |||||||||||||||
| Net income (loss) | (1,174 | ) | (2,453 | ) | (1,616 | ) | (2,318 | ) | 139 | (2,116 | ) | (1,133 | ) | (1,147 | ) | |||||||||
| Basic income (loss) per share | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | 0.00 | (0.01 | ) | (0.00 | ) | (0.00 | ) |
The Company's results have been driven by its general corporate and exploration activities. Other income and expenses fluctuate due to changes in the fair value of the Company's convertible notes and investment in associate.
The Company's results are also impacted, from time to time, by other non-recurring events arising from its ongoing activities, as discussed below, where applicable
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RESULTS OF OPERATIONS
Preliminary Economic Assessment ("PEA")
On January 30, 2024, the Company announced the results of a PEA on its Yerington Copper Project. The PEA envisions an open pit mining strategy followed by a heap leach operation, enhanced by the application of Rio Tinto's Nuton technologies to process primary sulfide copper materials. Highlights of the PEA results include:
- Post-tax NPV7% of $356 million and IRR of 17.4%, calculated at a copper price of $3.85/lb.
- 12-year open pit mine life encompassing operations at Yerington and MacArthur, with projected lifetime copper (Cu) production of 1.4 billion pounds, averaging 117 million pounds per year
- Initial capital expenditure of $413 million including all mine pre-production costs, with sustaining capital of $653 million
- Post-tax payback period of 5.0 years
- Average cash operating costs of $2.20/lb. copper payable
- Cumulative cashflow of $1.00 billion post-tax and $1.24 billion pre-tax on base case assumptions
Rio Agreement
On March 12, 2024, the Company announced the commencement of the Stage 2b and Stage 3 Programs of Work to advance the flagship Yerington Copper Project through completion of a Pre-Feasibility Study ("PFS") and progress permitting and exploration initiatives on the Bear Deposit.
PFS Work Programs
During the quarter ending June 30, 2024, PFS progressive work included exploration drilling, environmental and geotechnical studies, metallurgical testing and engineering.
Work to upgrade the mineral resource within the MacArthur mineral resource domain as represented in the PEA included contractor engagement to author the necessary sections of the PFS report as it refers to the MacArthur resource. The information from drilling, that includes 6,165 feet of drilling in 18 drill holes, was added to the MacArthur datasets and preparation for the resource model estimation was completed.
Two additional core drill holes were completed in the Yerington resource with a combined drill footage of 1,270 feet. One core hole reached 562 feet by March 31 and an additional 708 feet was drilled in April. A second core hole was completed to 634 feet and has been converted into a water level measuring station. The purpose of additional core drilling is to increase and upgrade the mineral resource along the margin of and beneath the Yerington pit. The mineral resource estimation will include adding recent drilling and newly discovered historical Anaconda drilling to the model, and by varying search distances to determine the influence on assigned mineral resource classes. The updated resource will be included in the PFS.
Yerington core drilling provided material for geomechanical testing, oriented core measurement and geotechnical logging to assess stability of pit slope design. A pit slope stability evaluation, including geotechnical pit bench mapping was initiated during Q2. Additional drill core samples were selected and delivered for metallurgical column leach test work and hydrodynamic leach characterization of Yerington sulfide material. Drill core samples were submitted for laboratory tests to characterize the geochemistry of planned mined materials.
Additional geotechnical and exploration drilling on the Yerington Site to support the PFS are in the planning stages. The timing and scope of additional drilling is dependent on receipt of permits from NDEP, as discussed in the next section.
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Permitting and Environmental
During the quarter ending June 30, 2024, the following material permit related activities occurred:
- On May 21, 2024, SPS submitted to Nevada Division of Environmental Protection (NDEP) a revised application for a major modification to the Yerington Mine Exploration Reclamation Permit #0321. As of June 30, 2024, the revised permit had not been received by SPS.
- On May 31, 2024, SPS submitted to NDEP an application for a Temporary Discharge Permit to allow exploration drilling into the bottom of the Yerington Pit Lake from a barge platform that would be constructed and floated on the surface of the pit lake. As of June 30, 2024, the permit had not been received by SPS.
- On June 18, 2024, SPS received a Surface Air Disturbance Permit for the MacArthur Mine Exploration Project from NDEP.
- On June 18, 2024, SPS received a Surface Air Disturbance Permit for the Yerington Mine Exploration Project from NDEP.
- On June 21, 2024, SPS received a decision notice from the Bureau of Land Management (BLM) authorizing exploration drilling on public lands administered by the BLM at the Yerington Mine Project.
- On June 27, 2024, SPS received a Stormwater Construction General permit for the Yerington Mine Exploration Project from NDEP.
- On June 27, 2024, SPS received a Stormwater Construction General permit for the MacArthur Mine Exploration Project from NDEP.
All permits either applied for or received during the period are aligned to the Stage 2B and 3 work plan requirements. For those permits that SPS has applied for but not yet received, the Company continues to work cooperatively and proactively with NDEP to facilitate permit issuance in a timely manner.
Water Rights
On July 23, 2021, the Company received notice from the State of Nevada that three water rights permits had been forfeited. Further, the application for an extension of time to prevent forfeiture of a fourth certificate was denied. On August 20, 2021, the Company filed a Petition for Judicial Review of the Forfeiture Notice and has retained legal counsel to undertake the appeal process. SPS subsequently filed and was granted a Stay of the Forfeiture Notice on September 15, 2021. SPS filed its Opening Brief on March 28, 2022. The State Engineer filed its Answering Brief on July 8, 2022. SPS filed its Reply Brief on August 25, 2022. A hearing regarding the status of the forfeiture appeal was held in the Third Judicial Court District in Lyon County on November 4, 2022. On December 6, 2022, the Judge remanded the case back to the State for further written findings based on issues raised at the hearing.
On August 30, 2023, SPS received written notice from the Nevada State Engineer in response to the Remand Order that the three water rights applications for Extensions of Time were denied and declared forfeited. The fourth certificate was not forfeited although the Extension of Time has not yet been approved.
The US firms representing SPS completed the briefing on the Amended Petition for Judicial Review and filed the opening brief on the Complaint for Equitable Relief. The hearing on both matters will occur in early January 2025. The firms interviewed the likely witnesses in the matter and developed the Declarations in Support of the Equitable Relief briefing. The firms await the response brief from the State of Nevada which is due on or before September 6, 2024. Thereafter the firms will determine whether expert or other witness testimony is necessary to the pursuit of the matters.
On September 28, 2023, SPS simultaneously timely filed an Amended Petition for Review and a Complaint for Equitable Relief with the Third Judicial District Court in Lyon County, Nevada seeking judicial relief from the August 30 Forfeiture Notice. On October 10, 2023, the Judge signed an order granting a Stipulated Stay of the August 30, 2023, Forfeiture Notice while the appeal process is ongoing. A hearing regarding both legal paths described above is tentatively scheduled for January 2025.
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The US firms representing SPS completed the briefing on the Amended Petition for Judicial Review and filed the opening brief on the Complaint for Equitable Relief. The hearing on both matters will occur in early January 2025. The firms interviewed the likely witnesses in the matter and developed the Declarations in Support of the Equitable Relief briefing. The firms await the response brief from the State of Nevada which is due on or before September 6, 2024. Thereafter the firms will determine whether expert or other witness testimony is necessary to the pursuit of the matters.
Just as SPS did with the initial forfeiture decision that was remanded by the Court, SPS continues to diligently defend against the wrongful forfeiture of its water rights with clear evidence of the need for those water rights in mine remediation, production and reclamation.
FALCON COPPER CORP.
Blue Copper Project, Montana
The Blue Copper project is a Butte-style copper-gold system in Powell County and Lewis & Clark County in Montana, located 45 miles north of the world famous Butte, Montana copper mines. District-scale land consolidation almost completely encompasses a prolific placer gold system with extensive copper showings.
Schell Creek Project, Nevada
The Schell Creek Project is composed of the Cabin and Muncy Properties in White Pine County, Nevada, which represent two immediately adjacent copper targets composed of approximately 15,000 acres of mineral claims.
The Cabin Property represents a potential major copper-moly porphyry discovery concealed beneath the Spring Valley pediment within a district-scale BLM land package, located immediately north of the Muncy Property.
Muncy Option to Joint Venture Agreement
On November 22, 2023, Falcon Copper Corp. entered into an Option to Joint Venture Agreement with Kennecott Exploration Company (“Kennecott”), a Rio Tinto subsidiary.
Pursuant to the Agreement, Kennecott grants FCC the sole and exclusive right and option to acquire 100% interest in the Muncy Property. To exercise this option, FCC must satisfy the following:
- pay the Payment Commitment of $95,059 to Kennecott on or before the Effective Date of November 22, 2023 (Paid);
- pay an additional payment commitment of $5,000 by February 18, 2024 (Paid);
- pay an additional payment commitment of $51,000 by July 1, 2024 (Paid as a subsequent event);
- incur exploration expenditures of $1,500,000 with respect to the Muncy Property and $1,000,000 with respect to the Cabin Property on or before November 22, 2025.
Upon FCC satisfying the exploration expenditures, Kennecott has the option to opt in for 40% of an asset-level joint venture for the Schell Creek Project; if Kennecott chooses to not opt in, FCC takes 100% ownership of the Muncy Property, along with the Cabin Property, with a Muncy Property royalty granted to Rio Tinto.
If FCC decides to terminate the option at any time, they will grant Kennecott a 2.0% net smelter royalty in the Cabin Property. After this is done, the agreement, except for specified sections, will terminate
If Kennecott elects not to form a joint venture, Kennecott must transfer all their rights in the Muncy Property to the FCC. In return, FCC will grant the optionor a 2.0% net smelter royalty (NSR) in the Properties. Before FCC decides to develop a commercial mining operation on any portion of the Properties, FCC has the right to reduce the net smelter royalty (NSR) from 2.0% to 1.0% by paying the optionor $10,000,000 in cash
Pioneer, Arizona
Pioneer is an approximate 1,300 acre covered target area prospective for high grade primary or enriched porphyry copper mineralization located within Arizona’s prolific Copper Triangle - within 10 miles of the Resolution & Ray mines.
Groundhog, Alaska
The Groundhog prospect lies on the Alaskan peninsula on state lands, within an established copper porphyry belt 200 miles southwest Anchorage.
Reconnaissance
FCC incurred reconnaissance evaluation expenditures on targets in Nevada, Arizona and Montana in order to determine whether they warranted further pursuit.
BLUE COPPER ROYALTIES, LLC
Blue Copper Royalties, LLC holds the Butte Valley Royalty and the Nieves interest.
The Butte Valley Royalty is represented by a 1.0% NSR, subject to a buy-down to a 0.5% NSR in exchange for an aggregate payment of $15,000,000.
The Nieves Interest is represented by a 5% net profits interest associated with the Nieves Silver property in Mexico.
Operating and Other Expenses
For the six months ended June 30, 2024, the Company incurred operating expenses of $1.908 million compared to $1.437 million in the prior period. The increase of $0.471 million is primarily due to professional fees in the current period related to convertible debenture and water rights dispute.
During the six months ended June 30, 2024, the Company recognized a $1.75 million loss on debenture conversion and repayment. The Company also recorded $0.66 million share-based payments expense versus a $0.136 million recovery in the same prior period resulting from the RSU cancellation.
LIQUIDITY AND CAPITAL RESOURCES
The Company is an exploration stage company that has not earned any production revenue. Its operations have been dependent mainly on the Rio-Tinto agreement and private placements in the last few years without diluting shareholders' value. The Company may have capital requirements in excess of its currently available resources and may be required to seek additional financing. There can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.
The following table summarizes the Company's cash flows for the six months ended June 30, 2024, and 2023:
| (In thousands) | 2024 | 2023 | ||||
| Cash provided by operating activities | $ | 4,490 | $ | 2,605 | ||
| Cash used in investing activities | (155 | ) | (259 | ) | ||
| Cash provided by financing activities | 1,673 | 3,406 | ||||
| Increase in cash and cash equivalents | 6,008 | 5,752 | ||||
| Cash and cash equivalents, beginning of period | 2,310 | 1,365 | ||||
| Cash and cash equivalents, end of period | $ | 8,318 | $ | 7,117 |
As of June 30, 2024, the Company had cash and cash equivalents of $8.318 million (December 31, 2023 - $ 2.31 million) and working capital deficit of $0.589 million (December 31, 2023 - $2.854 million). The decrease in the working capital deficit of $2.265 million is primarily due to the increase in cash and cash equivalents of $6.008 million which was offset by an increase in the Rio Tinto deposit of $4.901 million.
As of June 30, 2024, the Company had convertible debentures with a face value of $1.011 million and a carrying value of $0.932 million.
On February 16, 2024, the Company issued new convertible debentures totaling $0.941 million to replace the existing debentures. The new debentures will have, a maturity date of 12 months; bear interest at a rate of 20% per annum, non-compounding, and accrued interest or may be converted into common shares of the Company at a conversion price equal to $0.06 (C$0.08) per share, or at the holder's option into common shares the Company owns of Falcon Butte at $0.25 (C$0.32) per share; and one Warrant will be issued for every $0.06 of principal new debentures issued. New debentures holders also received 15,696,883 share purchase warrants, exercisable at $0.06 (C$0.08) per share which expire on February 16, 2025.
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On March 8, 2024, the Company issued 4,107,998 units and 41,707,215 common shares to settle $1.924 million of existing debenture debt. The existing debenture holders converted their principal and interest into units of the Company at $0.045 (C$0.06) per Unit. Each Unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one additional common share at a price of $0.06 (C$0.08) per share for a period of 5 years from the date of issuance.
Certain directors and individuals did not receive warrants with their convertible debenture settlement and will receive these warrants upon the Company's listing on the CSE ("Contingent Warrants"). The Company expects to list in the near future, therefore management concluded that the issuance of the 41,707,215 Contingent Warrants is probable. As such, the fair value of the warrants as of March 8, 2024, of $0.648 million was recognized as a derivative liability at issuance
Additionally, on March 8, 2024, the Company repaid convertible debentures of a total of $0.831 million in cash.
The Company has no operating revenues and therefore must utilize its cashflows from financing transactions to maintain its capacity to meet ongoing operating activities.
TRANSACTIONS WITH RELATED PARTIES
The Company's related parties include its directors and officers whose remuneration was as follows, subject to change of control provisions for officers:
| (In thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | ||||
| Salaries (1) | $ | 212 | $ | 230 | ||
| Director's fees (2) | - | 21 | ||||
| Share-based payments (3) | 281 | (162 | ) | |||
| Interest on convertible debenture (4) | 126 | 104 | ||||
| $ | 619 | $ | 193 |
(1) Charles Travis Naugle, Former CEO, Director - $104 (2023 - $125); Stephen Goodman, Former CFO, Director - $83 (2023 - $105); Steven Dischler, CEO - $17 (2023 - $-); Lei Wang, CFO $8 (2023 - $-).
(2) Thomas Pressello, Former Director - $Nil (2023 - $ 21).
(3) Charles Travis Naugle, Former CEO, Director - $Nil (2023 - ($81)); Stephen Goodman, Former CFO Director - $66 (2023 - ($81)); Tony Alford, Director - $215 (2023 - $Nil).
(4) Charles Travis Naugle, Former CEO, Director - $40 (2023 - $16); Tony Alford, Director - $79 (2023 - $84); Ekaterina Naugle, spouse of a director - $5 (2023 - $2); Stephen Goodman, Former CFO, Director $2 (2023 - $1); Thomas Pressello, Director - $Nil (2023 - $1)
These transactions have occurred in the normal course of the business and are measured at the equivalent amount of the services rendered.
Other transactions for the six months ended June 30, 2024
a) On February 16, 2024, the former CEO, former CFO and directors of the company restructured $407,000 of their existing convertible debentures into the New Debentures. The debentures bear interest at a rate of 20% per annum and mature on November 16, 2025, and are convertible into shares of the Company at $0.06 (C$0.08) per share. Additionally, certain directors converted $259 of their existing convertible into 3,500,000 common shares at a price of $0.074.
b) On March 8, 2024, the former CFO and directors converted $1,541,000 of their outstanding convertible debentures into 36,675,478 common shares at a price of US$0.042.
c) On March 8, 2024, the Company recognized 36,675,478 Contingent Warrants for former CEO, former CFO, directors, and other related parties who converted their existing debentures into units. The value of the contingent warrants upon recognition was $570,000. The related parties will receive these warrants upon the Company's listing on the CSE.
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d) On March 8, 2024, the former CFO and directors subscribed for 12,202,380 common shares for a total proceeds of $513,000 in relation of a private placement. Additionally, the directors received 12,202,380 warrants with a value of $177,000.
e) As at June 30, 2024, the Company had $30,000 (December 31, 2023 - $290,000) in interest accrued relating to outstanding convertible debentures with directors and officers of the Company.
f) As at June 30, 2024, there was $Nil (December 31, 2023 - $11,000) in prepaid expenses to the former CEO of the Company relating to wages paid during the year for services subsequent to period end.
g) As at June 30, 2024, there was $12,000 (December 31, 2023 - $Nil) in accounts payable for CEO, and CFO of the company relating to wages.
OUTSTANDING SHARE INFORMATION
As of August 14, 2024, the Company has:
- 385,855,710 common shares
- 58,021,020 stock options
- 130,970,408 warrants
OFF - BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
PROPOSED TRANSACTIONS
The Company has no proposed transactions other than as disclosed in this MD&A.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis contains "forward-looking information" and "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other applicable securities laws.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
The Forward-Looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the Forward-Looking Statements. Such factors include, but are not limited to, general business and economic uncertainties; exploration and resource extraction risks; uncertainties relating to surface rights; the actual results of current exploration activities; the outcome of negotiations; conclusions of economic evaluations and studies; future prices of natural resource based commodities; increased competition in the natural resource industry for properties, equipment and qualified personnel; risks associated with environmental compliance and permitting, including those created by changes in environmental legislation and regulation; the risk of arbitrary changes in law; title risks; and the risk of loss of key personnel.
The foregoing lists of factors and assumptions are not exhaustive. The reader should also consider carefully the matters discussed under the heading "Risks Factors and Uncertainties" elsewhere in this MD&A. Forward-Looking Statements contained herein are made as of the date hereof (or as of the date of a document incorporated herein by reference, as applicable). No obligation is undertaken to update publicly or otherwise revise any Forward-Looking Statements or the foregoing lists of factors and assumptions, whether as a result of new information, future events or results or otherwise, except as required by law. Because Forward-Looking Statements are inherently uncertain, readers should not place undue reliance on them. The Forward-Looking Statements contained herein are expressly qualified in their entirety by this cautionary statement.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure controls and procedures
The Company's management is responsible for establishing and maintaining adequate disclosure controls and procedures. The Company's management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on that evaluation, the principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, the Company has maintained effective disclosure controls and procedures in all material respects, including those necessary to ensure that information required to be disclosed in reports filed or submitted with the SEC (i) is recorded, processed, and reported within the time periods specified by the SEC, and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow for timely decision regarding required disclosure.
Changes in Internal Control
There have been no changes in internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any material current, pending, or threatened litigation with respect to the Company.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
The Company has no active mining operations or dormant mining assets currently and has no outstanding mine safety violations or other regulatory safety matters to report.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
| 101.INS | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
________________
(1) Previously filed as exhibit to the Form 10-K filed March 31, 2023 and incorporated herein by reference.
(2) Previously filed as exhibit to the Form 20-F filed April 28, 2020 and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 16, 2024
| LION COPPER AND GOLD CORP. | ||
| (Registrant) | ||
| By: | /s/ Steven Dischler | |
Steven Dischler | ||
Principal Executive Officer | ||
| By: | /s/ Lei Wang | |
Lei Wang | ||
| Principal Financial Officer | ||
