EX-99.4 5 exhibit99-4.htm FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 2021 Exhibit 99.4
Exhibit 99.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

unaudited condensed consolidated interim financial statements

For the three months ended September 30, 2021 and 2020

(Expressed in US Dollars)

 

 

 

 

New Pacific Metals Corp.

Unaudited Condensed Consolidated Interim Statements of Financial Position

(Expressed in US dollars)

 

  Notes  September 30, 2021    June 30, 2021  
ASSETS        
Current Assets             
Cash     $42,943,029   $46,441,482 
Short-term investments 3    138,114    143,914 
Receivables      331,504    343,608 
Deposits and prepayments      409,290    523,141 
       43,821,937    47,452,145 
Non-current Assets             
Other tax receivable 4    2,528,887    2,216,392 
Equity investments 5    413,822    496,526 
Plant and equipment 7    1,238,632    1,118,639 
Mineral property interests 8    78,070,425    75,535,422 
TOTAL ASSETS     $126,073,703   $126,819,124 
              
              
LIABILITIES AND EQUITY             
Current Liabilities             
Accounts payable and accrued liabilities     $2,101,052   $1,044,189 
Due to a related party 9    64,094    50,378 
       2,165,146    1,094,567 
Total Liabilities      2,165,146    1,094,567 
              
Equity             
Share capital 10    150,975,562    149,629,543 
Share-based payment reserve      16,264,989    16,564,197 
Accumulated other comprehensive income      12,159,351    13,641,379 
Deficit      (55,485,199)   (54,106,972)
Total equity attributable to the equity holders of the Company      123,914,703    125,728,147 
              
Non-controlling interests 11    (6,146)   (3,590)
Total Equity      123,908,557    125,724,557 
              
TOTAL LIABILITIES AND EQUITY     $126,073,703   $126,819,124 

 

 

Approved on behalf of the Board:
 
 
(Signed) David Kong
Director
 
(Signed) Mark Cruise
Director

 

 

See accompanying notes to the unaudited condensed consolidated interim financial statements

 

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New Pacific Metals Corp.

Unaudited Condensed Consolidated Interim Statements of Loss

(Expressed in US dollars)

 

      Three Months Ended September 30, 
  Notes    2021      2020  
                  
Operating expense                 
Project evaluation and corporate development     $ (103,475)  $(134,682)
Depreciation       (11,961)   (10,592)
Filing and listing       (117,269)   (83,827)
Investor relations       (132,424)   (104,099)
Professional fees       (257,976)   (204,109)
Salaries and benefits       (442,448)   (379,053)
Office and administration       (289,351)   (211,390)
Share-based compensation  10(b)    (241,627)   (394,207)
        (1,596,531)   (1,521,959)
               
Other (expense) income              
(Loss) income from investments  6  $ (47,919)  $633,457 
Loss on disposal of plant and equipment  7    -    (1,861)
Foreign exchange gain (loss)       264,371    (241,519)
Other expense       -    (345)
        216,452    389,732 
               
Net loss     $ (1,380,079)  $(1,132,227)
               
Attributable to:              
Equity holders of the Company     $ (1,378,227)  $(1,130,247)
Non-controlling interests  11    (1,852)   (1,980)
Net loss     $ (1,380,079)  $(1,132,227)
               
Loss per share attributable to the equity holders of the Company Loss per share - basic and diluted     $ (0.01)  $(0.01)
Weighted average number of common shares - basic and diluted       154,707,947    152,447,612 

 

See accompanying notes to the unaudited condensed consolidated interim financial statements

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New Pacific Metals Corp.

Unaudited Condensed Consolidated Interim Statements of Comprehensive (Loss) Income

(Expressed in US dollars)

 

 

      Three Months Ended September 30,  
  Notes     2021     2020  
                 
Net loss                
Other comprehensive (loss) income, net of taxes:     $ (1,380,079 ) $ (1,132,227 )
Items that may subsequently be reclassified to net income or loss:                
Currency translation adjustment, net of tax of $nil       (1,482,732 )   1,468,084  
Other comprehensive (loss) income, net of taxes     $ (1,482,732 ) $ 1,468,084  
                 
Attributable to:                
Equity holders of the Company     $ (1,482,028 ) $ 1,448,809  
Non-controlling interests 11     (704 )   19,275  
Other comprehensive (loss) income, net of taxes     $ (1,482,732 ) $ 1,468,084  
Total comprehensive (loss) income, net of taxes     $ (2,862,811 ) $ 335,857  
                 
Attributable to:                
Equity holders of the Company     $ (2,860,255 ) $ 318,562  
Non-controlling interests       (2,556 )   17,295  
Total comprehensive (loss) income, net of taxes     $ (2,862,811 ) $ 335,857  

 

See accompanying notes to the unaudited condensed consolidated interim financial statements

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New Pacific Metals Corp.

Unaudited Condensed Consolidated Interim Statements of Cash Flows

(Expressed in US dollars)

 

      Three Months Ended September 30, 
   Notes   2021    2020 
              
Operating activities             
Net loss      $(1,380,079)  $(1,132,227)
Add (deduct) items not affecting cash:             
(Loss) income from investments  6   47,919    (633,457)
Depreciation      11,961    10,592 
Loss on disposal of plant and equipment  7   -    1,861 
Share-based compensation  10(b)   248,313    409,590 
Unrealized foreign exchange (gain) loss      (264,371)   241,519 
Changes in non-cash operating working capital  15   1,193,991    (732,679)
Dividends and interests received      27,837    66,058 
Net cash used in operating activities      (114,429)   (1,768,743)
              
Investing activities             
Mineral property interest             
Capital expenditures      (2,662,349)   (1,316,187)
Plant and equipment             
Additions      (165,604)   (13,859)
Proceeds on disposals      -    1,357 
Short-term investments             
Proceeds on disposals  3   -    6,005,555 
Changes in other tax receivable      (312,495)   (38,900)
Net cash (used in) provided by investing activities      (3,140,448)   4,637,966 
              
Financing activities             
Proceeds from issuance of common shares      705,660    214,127 
Net cash provided by financing activities      705,660    214,127 
Effect of exchange rate changes on cash      (949,236)   652,431 
              
(Decrease) increase in cash      (3,498,453)   3,735,781 
              
Cash, beginning of the period      46,441,482    29,824,146 
              
Cash, end of the period    $42,943,029   $33,559,927 
Supplementary cash flow information  15          

 

See accompanying notes to the unaudited condensed consolidated interim financial statements

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New Pacific Metals Corp.

Unaudited Condensed Consolidated Interim Statements of Change in Equity

(Expressed in US dollars)

 

      Share capital                       Total equity
attributable to the		              
  Notes   Number of
common
shares issued		     Amount     Share-based
payment
reserve		     Accumulated other
comprehensive
income		     Deficit     equity holders of
the Company		     Non-
Controlling
interests		     Total equity  
Balance, July 1 , 2020     152,298,778   $ 145,904,310   $ 16,813,907   $ 7,669,888   $ (40,633,984 ) $ 129,754,121   $ (41,370 ) $ 129,712,751  
Options exercised     313,266     325,011     (110,884 )   -     -     214,127     -     214,127  
Restricted share units vested     10,500     37,260     (37,260 )   -     -     -     -     -  
Share-based compensation     -     -     611,694     -     -     611,694     -     611,694  
Common shares issued to acquire mineral property                                                  
interest     291,000     350,479     (350,479 )   -     -     -     -     -  
Net loss     -     -     -     -     (1,130,247 )   (1,130,247 )   (1,980 )   (1,132,227 )
Currency translation adjustment     -     -     -     1,448,809     -     1,448,809     19,275     1,468,084  
Balance, September 30, 2020     152,913,544   $ 146,617,060   $ 16,926,978   $ 9,118,697   $ (41,764,231 ) $ 130,898,504   $ (24,075 ) $ 130,874,429  
Options exercised     1,083,669     1,298,210     (436,180 )   -     -     862,030     -     862,030  
Restricted share units vested     454,050     1,714,273     (1,714,273 )           -     -     -  
Share-based compensation     -     -     1,787,672     -     -     1,787,672     -     1,787,672  
Spin-out distribution     -     -     -     -     (6,906,548 )   (6,906,548 )   -     (6,906,548 )
Net loss     -     -     -     -     (5,436,193 )   (5,436,193 )   (5,954 )   (5,442,147 )
Currency translation adjustment     -     -     -     4,522,682     -     4,522,682     26,439     4,549,121  
Balance, June 30, 2021     154,451,263   $ 149,629,543   $ 16,564,197   $ 13,641,379   $ (54,106,972 ) $ 125,728,147   $ (3,590 ) $ 125,724,557  
Options exercised 10(b)   583,331     1,041,524     (335,864 )   -     -     705,660     -     705,660  
Restricted share units vested 10(b)   60,167     304,495     (304,495 )   -     -     -     -     -  
Share-based compensation 10(b)   -     -     341,151     -     -     341,151     -     341,151  
Net loss     -     -     -     -     (1,378,227 )   (1,378,227 )   (1,852 )   (1,380,079 )
Currency translation adjustment     -     -     -     (1,482,028 )   -     (1,482,028 )   (704 )   (1,482,732 )
Balance, September 30, 2021     155,094,761   $ 150,975,562   $ 16,264,989   $ 12,159,351   $ (55,485,199 ) $ 123,914,703   $ (6,146 ) $ 123,908,557  

 

See accompanying notes to the unaudited condensed consolidated interim financial statements

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New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

 

1.      CORPORATE INFORMATION

 

New Pacific Metals Corp. along with its subsidiaries (collectively, the “Company” or “New Pacific”) is a Canadian mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company is in the stage of exploring and advancing the development of its mineral properties and has not yet determined if they contain economically recoverable Mineral Reserves. The underlying value and the recoverability of the amounts shown for mineral properties are entirely dependent upon the existence of recoverable Mineral Reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral properties, and future profitable production or proceeds from the disposition of the mineral property interests.

 

The Company is publicly listed on the Toronto Stock Exchange (“TSX”) under the symbol “NUAG” and on the NYSE American stock exchange (“NYSE-A”) under the symbol “NEWP”. The head office, registered address and records office of the Company are located at 1066 Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.

 

2.       SIGNIFICANT ACCOUNTING POLICIES

 

(a)     Statement of Compliance and Basis of Preparation

 

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2021. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies set out in Note 2 to the audited consolidated financial statements for the year ended June 30, 2021.

 

These unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.

 

The Company changed its presentation currency of the consolidated financial statements from Canadian dollar (“CAD”) to US dollar (“USD”) effective July 1, 2020. As a result, comparative figures for the three months ended September 30, 2020 have been restated in USD.

 

The unaudited condensed consolidated interim financial statements of the Company as at and for the three months ended September 30, 2021 was authorized for issue in accordance with a resolution of the Board of Directors (the “Board”) dated on November 10, 2021.

 

(b)     Basis of Consolidation

 

These consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.

 

Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary, and has the ability to use its power to affect its returns. For non-wholly-owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity

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New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

section of the consolidated statements of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.

Balances, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.

 

Details of the Company’s significant subsidiaries which are consolidated are as follows:

 

      Proportion of ownership interest held
Name of subsidiaries Principal activity Country of
incorporation		 September 30,
2021		 June 30,
2021		 Mineral
properties
New Pacific Offshore Inc. Holding company BVI (i) 100% 100%  
SKN Nickel & Platinum Ltd. Holding company BVI 100% 100%  
Glory Metals Investment Corp. Limited Holding company Hong Kong 100% 100%  
New Pacific Investment Corp. Limited Holding company Hong Kong 100% 100%  
New Pacific Andes Corp. Limited Holding company Hong Kong 100% 100%  
Fortress Mining Inc. Holding company BVI 100% 100%  
Minera Alcira S.A. Mining company Bolivia 100% 100% Silver Sand
NPM Minerales S.A. Mining company Bolivia 100% 100%  
Colquehuasi S.R.L. Mining company Bolivia 100% 100% Silverstrike
Granville S.R.L. Mining company Bolivia 100% 100% Carangas
Qinghai Found Mining Co., Ltd. Mining company China 82% 82% RZY
(i) British Virgin Islands (“BVI”)          

 

 

 

3.       SHORT-TERM INVESTMENTS

 

Short-term investments consist of the following:

 

  September 30, 2021   June 30, 2021 
Bonds $138,114  $143,914 

 

 

The Company acquired bonds issued by other companies from various industries through the open market. These bonds were held to receive coupon interest payments and to realize potential gains. The bonds may also be disposed on demand through the open market should the Company require funds for operational or investment needs. The Company accounts for the bonds at fair value at each reporting date.

 

The continuity of bonds is summarized as follow:

 

 

    Amount 
Balance, July 1, 2020  $462,829 
Loss on fair value change   (318,915)
Balance, June 30, 2021  $143,914 
Loss on fair value change   (5,800)
Balance, Sepetember 30, 2021  $138,114 

 

 

4.       OTHER TAX RECEIVABLE

 

Other tax receivable is comprised of value-added tax (“VAT”) imposed by the Bolivian government. The Company had VAT inputs through its exploration costs and general expenses incurred in Bolivia. These VAT inputs are deductible against potential future VAT outputs that will be generated through mining production sales.

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New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

5.       EQUITY INVESTMENTS

 

Equity investments represent equity interests of other publicly traded or privately-held companies that the Company has acquired on the open market or through private placements. These equity interests consist of common shares and warrants. Equity investments are classified as fair value through profit or loss (“FVTPL”) and are measured at fair value on initial recognition and subsequent measurement. The fair value of warrants was determined using the Black-Scholes pricing model as at the acquisition date as well as at each period end.

 

The equity investments are summarized as follows:

     September 30, 2021   June 30, 2021
Common shares              
  Public companies    $413,822   $ 461,635
Warrants              
Public companies     -     34,891
      $413,822   $ $496,526

 

 

The fair value of the warrants was estimated using the Black Scholes options pricing model with the following assumptions:

 

    September 30, 2021    June 30, 2021 
Risk free interest rate   -    0.97%
Expected volatility   -    114%
Expected life of warrants in years   -    0.19 

 

The continuity of equity investments is summarized as follows:

 

    Fair value   Accumulated mark-to-
market gain included
in net income		 
Balance, July 1, 2020  $4,111,822   $3,515,548 
Proceeds on disposal   (4,345,636)   - 
Change in fair value   455,597    455,597 
Foreign exchange impact   274,743    - 
Balance, June 30, 2021  $496,526   $3,971,145 
Change in fair value   (69,956)   (69,956)
Foreign exchange impact   (12,748)   - 
Balance, September 30, 2021  $413,822   $3,901,189 

 

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New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

 

6.       (LOSS) INCOME FROM INVESTMENTS

 

(Loss) income from investments consist of:

 

 Three Months Ended September 30, 
    2021    2020 
Fair value change on equity investments  $(69,956)  $571,644 
Fair value change on bonds   (5,800)   (26,844)
Dividend income   -    53,312 
Interest income   27,837    35,345 
(Loss) income from investments  $(47,919)   $633,457 

 

 

7.       PLANT AND EQUIPMENT

 

Cost  Land and
building		   Machinery   Motor vehicles   Office
equipment and furniture		   Computer
software		   Total 
Balance, July 1, 2020  $1,283,620   $1,059,037   $295,565   $228,374   $183,500   $3,050,096 
Additions   -    2,232    -    110,935    -    113,167 
Disposals   (653,620)   (859,519)   (54,146)   (37,327)   (31)   (1,604,643)
Foreign currency translation impact   -    497    1,163    13,259    18,266    33,185 
Balance, June 30, 2021  $630,000   $202,247   $242,582   $315,241   $201,735   $1,591,805 
Additions   -    162,617    -    2,987    -    165,604 
Reclassifed among asset groups   -    13,998    62,428    (76,426)   -    - 
Foreign currency translation impact   -    -    -    (3,089)   (5,487)   (8,576)
Balance, September 30, 2021  $630,000   $378,862   $305,01 0   $238,71 3   $196,248   $1,748,833 
                               
Accumulated depreciation and amortization                              
Balance, July 1, 2020  $(653,620)  $(867,007)  $(145,814)  $(162,617)  $(94,004)  $(1,923,062)
Depreciation and amortization   -    (24,538)   (45,820)   (38,080)   (23,769)   (132,207)
Disposals   653,620    819,698    54,556    73,376    31    1,601,281 
Foreign currency translation impact   -    (224)   (506)   (8,270)   (10,178)   (19,178)
Balance, June 30, 2021  $-   $(72,071)  $(137,584)  $(135,591)  $(127,920)  $(473,166)
Depreciation and amortization   -    (10,945)   (14,457)   (11,132)   (6,048)   (42,581)
Foreign currency translation impact        4    8    2,016    3,519    5,546 
Balance, September 30, 2021  $-    $(83,012)  $(152,033)  $(144,707)  $(130,449)   $(510,201)
                               
Carrying amount                              
Balance, June 30, 2021  $630,000   $130,176   $104,998   $179,650   $73,815   $1,118,639 
Balance, September 30, 2021  $630,000   $295,850   $152,977   $94,006   $65,799   $1,238,632 

 

During the three months ended September 30, 2021, certain plant and equipment were disposed for proceeds of $nil (three months ended September 30, 2020 - $1,357) and loss of $nil (three months ended September 30, 2020 - $1,861).

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New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

8.       MINERAL PROPERTY INTERESTS

 

(a)Silver Sand Project

 

On July 20, 2017, the Company acquired the Silver Sand Project. The Project is located in the Colavi District of the Potosí Department, in Southwestern Bolivia, 35 kilometres (“km”) northeast of Potosí City, the department capital. The Project covers an area of approximately 5.42 km2 at an elevation of 4,072 metres (“m”) above sea level.

 

For the three months ended September 30, 2021, total expenditures of $2,205,533 (three months ended September 30, 2020 - $682,695) were capitalized under the project.

 

(b)Carangas Project

 

In April 2021, the Company signed an agreement with a private Bolivian company to acquire a 98% interest in the Carangas silver project.

 

The Carangas Project is located approximately 180 km southwest of the city of Oruro and within 50 km from Bolivia’s border with Chile. The Bolivian partner is owned 100% by Bolivian nationals and holds title to the two exploration licenses (covering an area of 6.25 km2) that comprise the Carangas Project. Under the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development, and production activities for the project. The agreement has a term of 30 years and is renewable for an additional 15 years.

 

For the three months ended September 30, 2021, total expenditures of $545,942 (three months ended September 30, 2020 - $nil) were capitalized under the project.

 

(c)Silverstrike Project

 

In December 2019, the Company acquired a 98% interest in the Silverstrike Project from a private Bolivian corporation by making a one-time cash payment of $1,350,000.

 

The Silverstrike Project covers an area of approximately 13 km2 and is located approximately 140 km southwest of the city of La Paz, Bolivia. The project shares many similarities with the Silver Sand Project pre-discovery drilling, namely: sandstone hosted structurally controlled silver-polymetallic mineralization centered on a historic mining district – the Berenguela District, presence of felsic Tertiary intrusive rocks with corresponding multiple silver rich occurrences associated with sercitic alteration. The area is largely underexplored with limited modern exploration applied.

 

For the three months ended September 30, 2021, total expenditures of $1,748 (three months ended September 30, 2020 - $413,254) were capitalized under the project.

 

(d)RZY Project

 

The RZY Project, located in Qinghai, China is an early stage silver-lead-zinc exploration project. The RZY Project is located approximately 237 km from the city of Yushu Tibetan Autonomous Prefecture. In 2016, the Qinghai Government issued a moratorium which suspended exploration for 26 mining projects in the region, including the RZY Project, and classified the region as a National Nature Reserve Area.

Page | 10

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

During Fiscal 2020, the Company’s subsidiary, Qinghai Found Mining Co., Ltd. (“Qinghai Found”), reached a compensation agreement with the Qinghai Government for the RZY Project. Pursuant to the agreement, Qinghai Found will surrender its title to the RZY Project to the Qinghai Government after completing certain reclamation works for one-time cash compensation of $2.7 million (RMB ¥20 million). As of September 30, 2021, the process was under review and subject to approval by the Qinghai Government.

 

The continuity schedule of mineral property acquisition costs and deferred exploration and development costs are summarized as follows:

 

Cost  Silver Sand  Silverstrike  Carangas  RZY Project  Total
Balance, July 1, 2020  $65,300,994   $1,821,190   $-   $2,623,616   $69,745,800 
Capitalized exploration expenditures                         
Reporting and assessment   482,355    4,119    -    -    486,474 
Drilling and assaying   78,201    169,102    21,952    -    269,255 
Project management and support   2,505,338    996,005    178,753    -    3,680,096 
Camp service   225,016    113,666    49,569    -    388,251 
Camp construction   53,199    -    -    -    53,199 
Permitting   12,995    11,015    153    -    24,163 
Foreign currency impact   587,402    48,207    4,823    247,752    888,184 
Balance, June 30, 2021  $69,245,500   $3,163,304   $255,250   $2,871,368   $75,535,422 
Capitalized exploration expenditures                         
Reporting and assessment   125,820    -    -    -    125,820 
Drilling and assaying   1,374,412    -    296,528    -    1,670,940 
Project management and support   589,612    868    191,828    -    782,308 
Camp service   103,584    880    57,586    -    162,050 
Permitting   12,105    -    -    -    12,105 
Foreign currency impact   (201,404)   (7,413)   (5,434)   (3,969)   (218,220)
Balance, September 30, 2021  $71 ,249,629   $3,1 57,639   $795,758   $2,867,399   $78,070,425 

 

9.       RELATED PARTY TRANSACTIONS

 

Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the condensed consolidated interim financial statements are as follows:

 

Due to a related party  September 30, 2021  June 30, 2021
Silvercorp Metals Inc.  $64,094   $50,378 

 

 

(a)       Silvercorp Metals Inc. (“Silvercorp”) has two directors and one officer in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Expenses in general and administrative services rendered and incurred by Silvercorp on behalf of the Company for the three months ended September 30, 2021 were $176,076 (three months ended September 30, 2020 - $165,575).

Page | 11

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

(b)       Compensation of key management personnel

 

The remuneration of directors and other members of key management personnel for the three months ended September 30, 2021 and 2020 are as follows:

 

 

   Three months ended September 30, 
   2021   2020 
Director’s cash compensation  $25,794   $24,398 
Key management’s cash compensation   234,327    225,085 
   $260,121   $249,483 

 

Other than as disclosed above, the Company does not have any ongoing contractual or other commitments resulting from transactions with related parties.

 

10.      SHARE CAPITAL

 

(a) Share Capital - authorized share capital

 

The Company’s authorized share capital consists of an unlimited number of common shares without par value.

 

(b) Share-based compensation

 

The Company has a share-based compensation plan (the “Plan”) under which the Company may issue stock options and restricted share units (“RSUs”). The maximum number of common shares to be reserved for issuance on any share-based compensation under the Plan is a rolling 10% of the issued and outstanding common shares from time to time.

 

For the three months ended September 30, 2021, a total of $241,627 (three months ended September 30, 2020 - $409,590) was recorded as share-based compensation expense.

 

For the three months ended September 30, 2021, a total of $6,686 (three months ended September 30, 2020 - $nil) was included in the project evaluation and corporate development expense.

 

For the three months ended September 30, 2021, a total of $92,838 (three months ended September 30, 2020 - $202,103) was capitalized under mineral property interests.

Page | 12

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

(i)Stock Options

 

The continuity schedule of stock options, as at September 30, 2021, is as follows:

 

   Number of options  Weighted average
exercise price (CAD$)
Balance, July 1, 2020   4,662,767    1.36 
Options exercised   (1,396,935)   0.98 
Options cancelled   (150,000)   0.82 
Balance, June 30, 2021   3,115,832    1.56 
Options exercised   (583,331)   1.53 
Options cancelled   (41,667)   2.15 
Balance, September 30, 2021   2,490,834    1 .56 

 

 

Option pricing model requires the input of subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate and therefore, the existing models do not necessarily provide a reliable estimate of the fair value of the Company’s stock options. The Company’s expected volatility is based on the historical volatility of the Company’s share price on the TSX.

 

The following table summarizes information about stock options outstanding as at September 30, 2021:

 

Exercise
prices (CAD$)		  Number of options
outstanding as at
2021-09-30		  Weighted
average remaining
contractual life (years)		  Number of options
exercisable as at
2021-09-30		  Weighted
average
exercise price (CAD$)
$0.55    465,000    0.08    465,000   $0.55 
 1.15    615,000    0.83    615,000   $1.15 
 1.57    200,000    1.19    200,000   $1.57 
 2.15    1,210,834    2.40    951,664   $2.15 
 0.55 - 2.15    2,490,834    1.48    2,231,664   $1.49 

 

Subsequent to September 30, 2021, a total of 465,000 stock options with an exercise price of CAD$0.55 were exercised for proceeds of $206,394.

 

(ii)RSUs

 

The continuity schedule of RSUs, as at September 30, 2021, is as follows:

 

   Number of shares  Weighted average
grant date closing
price per share (CAD$)
Balance, July 1, 2020   925,200   $4.70 
Granted   360,500    6.46 
Cancelled   (26,250)   4.80 
Distributed   (464,550)   4.72 
Balance, June 30, 2021   794,900   $5.48 
Cancelled   (60,167)   6.36 
Distributed   (25,000)   4.70 
Balance, September 30, 2021   709,733   $5.44 

 

Page | 13

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

11.       NON-CONTROLLING INTEREST

 

   Qinghai Found
Balance, July 1, 2020  $(41,370)
Share of net loss   (7,934)
Share of other comprehensive income   45,714 
Balance, June 30, 2021  $(3,590)
Share of net loss   (1,852)
Share of other comprehensive loss   (704)
Balance, September 30, 2021  $(6,146)

 

As at September 30, 2021 and June 30, 2021, the non-controlling interest in the Company’s subsidiary Qinghai Found was 18%.

 

12.     FINANCIAL INSTRUMENTS

 

The Company manages its exposure to financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with its risk management framework. 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.

 

(a)Fair Value

 

The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as defined in IFRS 13 – Fair Value Measurement (“IFRS 13”).

 

Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

 

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Unobservable inputs which are supported by little or no market activity.

Page | 14

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

The following table sets forth the Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at September 30, 2021 and June 30, 2021 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

   Fair value as at September  30, 2021
Recurring measurements  Level 1  Level 2  Level 3  Total
Financial Assets                    
Cash  $42,943,029   $-   $-   $42,943,029 
Short-term investments - bonds   138,114    -    -    138,114 
Common shares   413,822    -    -    413,822 

 

   Fair value as at June  30, 2021
Recurring measurements  Level 1  Level 2  Level 3  Total
Financial Assets                    
Cash  $46,441,482   $-   $-   $46,441,482
Short-term investments - bonds   143,914    -    -    143,914 
Common or preferred shares   461,635    -    -    461,635 
Warrants   -    34,891    -    34,891 

 

Fair value of other financial instruments excluded from the table above approximates their carrying amount as of September 30, 2021 and June 30, 2021, respectively.

 

There were no transfers into or out of Level 3 during the three months ended September 30, 2021.

 

(b)Liquidity Risk

 

The Company has a history of losses and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements. As at September 30, 2021, the Company had a working capital position of $41,656,791 and sufficient cash resources to meet the Company’s short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the next 12 months.

 

In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company’s financial liabilities:

 

 September 30, 2021  June 30, 2021
   Due within a year  Total  Total
Accounts payable and accrued liabilities   $2,101,052   $2,101,052   $1,044,189 
Due to a related party   64,094    64,094    50,378 
    $2,165,146   $2,165,146   $1,094,567 

 

(c) Foreign Exchange Risk

 

The Company is exposed to foreign exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional

Page | 15

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is RMB. The Company currently does not engage in foreign exchange currency hedging. The Company’s exposure to foreign exchange risk that could affect net income is summarized as follows:

 

 

Financial assets denominated in foreign currencies other than relevant functional currency  September 30, 2021  June 30, 2021
United States dollars  $8,491,486   $11,079,194 
Bolivianos   579,587    285,267 
Total  $9,071,073   $11,364,461 
           
Financial liabilities denominated in foreign currencies other than relevant functional currency          
Bolivianos   1,104,858    333,405 
Total  $1,104,858   $333,405 

 

 

As at September 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $85,000.

 

As at September 30, 2021, with other variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately $5,000.

 

(d) 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 holds a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have significant impact on the fair values of the financial instruments as of September 30, 2021. The Company, from time to time, also owns guaranteed investment certificates (“GICs”) and bonds that earn interest payments at fixed rates to maturity. Fluctuation in market interest rates usually will have an impact on bond’s fair value. An increase in market interest rates will generally reduce bond’s fair value while a decrease in market interest rates will generally increase it. The Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.

 

(e) Credit Risk

 

Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure to credit risk is primarily associated with cash, bonds, and receivables. The carrying amount of financial assets included on the statement of financial position represents the maximum credit exposure.

 

The Company has deposits of cash that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote, as the majority of its cash are held with major financial institutions. Bonds by nature are exposed to more credit risk than cash. The Company manages its risk associated with bonds by only investing in large globally recognized corporations from diversified industries. As at September 30, 2021, the Company had a receivables balance of $331,504 (June 30, 2021 - $343,608). There were no material amounts in receivables which were past due on September 30, 2021 (June 30, 2021 - $nil).

Page | 16

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

(f) Equity Price Risk

 

The Company holds certain marketable securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company’s portfolio at September 30, 2021, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted in an increase (decrease) to net income of approximately $40,000.

 

13.     CAPITAL MANAGEMENT

 

The objectives of the capital management policy are to safeguard the Company’s ability to support exploration and operating requirements on an ongoing basis, continue the investment in high quality assets along with safeguarding the value of its mineral properties, and support any expansionary plans.

 

The capital of the Company consists of the items included in equity less cash and bonds. Risk and capital management are primarily the responsibility of the Company’s corporate finance function and is monitored by the Board. The Company manages the capital structure and makes adjustments depending on economic conditions. Significant risks are monitored and actions are taken, when necessary, according to the Company’s approved policies.

 

In addition, the current COVID-19 pandemic has caused significant disruption to global economic conditions which may adversely impact the Company’s results.

Page | 17

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

14.     SEGMENTED INFORMATION

 

As at and for the three ended September 30, 2021, the Company operates in three (as at and for the year ended June 30, 2021 – three) reportable operating segments, one being the corporate segment; the other two being the exploration and development segments focused on safeguarding the value of its mineral properties in Bolivia and China. These reporting segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer, the chief operating decision maker (“CODM”).

 

(a)Segment information for assets and liabilities are as follows:

 

      September 30, 2021   
   Corporate  Exploration and Development   
   Canada and BVI  Bolivia  China  Total
Cash  $42,403,035   $443,451   $96,543   $42,943,029 
Short-term investments   138,114    -    -    138,114 
Equity investments   413,822    -    -    413,822 
Plant and equipment   100,492    1,123,364    14,776    1,238,632 
Mineral property interests   -    75,203,026    2,867,399    78,070,425 
Other assets   319,742    2,732,585    217,354    3,269,681 
Total Assets  $43,375,205   $79,502,426   $3,196,072   $126,073,703 
                     
Total Liabilities  $(765,708)  $(1,104,858)  $(294,580)  $(2,165,146)

 

   June 30, 2021
    Corporate   Exploration and Development      
    Canada and BVI    Bolivia    China    Total 
Cash  $46,259,720   $158,539   $23,223   $46,441,482 
Short-term investments   143,914    -    -    143,914 
Equity investments   496,526    -    -    496,526 
Plant and equipment   115,340    988,503    14,796    1,118,639 
Mineral property interests   -    72,664,054    2,871,368    75,535,422 
Other assets   461,135    2,427,576    194,430    3,083,141 
Total Assets  $47,476,635   $76,238,672   $3,103,817   $126,819,124 
                     
Total Liabilities  $(573,163)  $(333,405)  $(187,999)  $(1,094,567)

Page | 18

 

New Pacific Metals Corp.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

for the three months ended September 30, 2021 and 2020

(Expressed in US dollars)

(b)Segment information for operating results are as follows:

 

   Three months ended September 30, 2021
   Corporate  Exploration and Development   
   Canada and BVI  Bolivia  China  Total
Project evaluation and corporate development  $(45,773)  $(57,702)  $-   $(103,475)
Salaries and benefits   (377,203)   (61,083)   (4,162)   (442,448)
Share-based compensation   (241,627)   -    -    (241,627)
Other operating expenses   (734,071)   (68,718)   (6,192)   (808,981)
Total operating expense   (1,398,674)   (187,503)   (10,354)   (1,596,531)
                     
(Loss) income from investments   (47,983)   -    64    (47,919)
Foreign exchange gain   264,371    -    -    264,371 
Net loss  $(1,182,286)  $(187,503)  $(10,290)  $(1,380,079)
                     
                     
Attributed to:                    
Equity holders of the Company  $(1,182,286)  $(187,503)  $(8,438)  $(1,378,227)
Non-controlling interests   -    -    (1,852)   (1 ,852)
Net loss  $(1,182,286)  $(187,503)  $(10,290)  $(1,380,079)

 

   Three months ended September 30, 2020
   Corporate  Exploration and Development   
   Canada and BVI  Bolivia  China  Total
Project evaluation and corporate development  $(21,337)  $(113,345)  $-   $(134,682)
Salaries and benefits   (371,036)   -    (8,017)   (379,053)
Share-based compensation   (394,207)   -    -    (394,207)
Other operating expenses   (613,230)   -    (345)   (613,575)
Total operating expense   (1,399,810)   (113,345)   (8,362)   (1,521,517)
                     
                     
Income from investments   633,443    -    14    633,457 
Loss on disposal of plant and equipment   -    -    (1,861)   (1,861)
Foreign exchange loss   (241,519)   -    -    (241,519)
Other expense   -    -    (787)   (787)
Net loss  $(1,007,886)  $(113,345)  $(10,996)  $(1,132,227)
                     
                     
Attributed to:                    
Equity holders of the Company  $(1,007,886)  $(113,345)  $(9,016)  $(1,130,247)
Non-controlling interests   -    -    (1,980)  $(1,980)
Net loss  $(1,007,886)  $(113,345)  $(10,996)  $(1,132,227)

 

15.      SUPPLEMENTARY CASH FLOW INFORMATION

 

Changes in non-cash operating working capital:

 

 

   Three Months Ended September 30
   2021  2020
Receivables  $1,978   $9,284 
Deposits and prepayments   103,298    (491,484)
Accounts payable and accrued liabilities   1,073,459    (241,426)
Due to a related party   15,256    (9,053)
   $1,193,991   $(732,679)

Page | 19