Exhibit 99.3
Consolidated Financial Statements
For the year ended
December 31, 2022
Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors of
enCore Energy Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of enCore Energy Corp. (the “Company”), as of December 31, 2022, December 31, 2021 and January 1, 2021, and the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, December 31, 2021 and January 1, 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Change in Presentation Currency
As discussed in Note 2 to the consolidated financial statements, during the year ended December 31, 2022, the Company retroactively changed its presentation currency from the Canadian Dollar to the United States Dollar.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2016.
/s/ DAVIDSON & COMPANY LLP
| Vancouver, Canada | Chartered Professional Accountants |
| April 28, 2023 |
F-1
| enCore Energy Corp. |
| Consolidated Statements of Financial Position |
| For the years ended December 31, 2022 and December 31, 2021 |
| Note | December 31, 2022 $ | December 31, 2021 $ (Note 21) | January 1, 2021 $ (Note 21) | |||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash | ||||||||||||||||
| Receivables and prepaid expenses | ||||||||||||||||
| Marketable securities - current | 6 | |||||||||||||||
| Deposit - uranium investment | 5 | |||||||||||||||
| Assets held for sale | 11 | |||||||||||||||
| Non-current assets | ||||||||||||||||
| Intangible assets | 7 | |||||||||||||||
| Property, plant, and equipment | 8 | |||||||||||||||
| Investment in associate | 4 | |||||||||||||||
| Investment in uranium | 5 | |||||||||||||||
| Marketable securities - non-current | 6 | |||||||||||||||
| Mineral properties | 11 | |||||||||||||||
| Reclamation deposits | 11 | |||||||||||||||
| Right-of-use asset | 9 | |||||||||||||||
| Deferred acquisition costs | 22(a) | |||||||||||||||
| Deferred financing costs | 22(b) | |||||||||||||||
| Restricted cash | 2,14,22(b) | |||||||||||||||
| Total assets | ||||||||||||||||
| Liabilities and shareholders’ equity | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
| Due to related parties | 15 | |||||||||||||||
| Note payable | 13 | |||||||||||||||
| Lease liability - current | 9 | |||||||||||||||
| Non-current liabilities | ||||||||||||||||
| Asset retirement obligations | 12 | |||||||||||||||
| Lease liability - non-current | 9 | |||||||||||||||
| Total liabilities | ||||||||||||||||
| Shareholders’ equity | ||||||||||||||||
| Share capital | 14 | |||||||||||||||
| Share subscriptions received | 14 | |||||||||||||||
| Contributed surplus | 14 | |||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||||
| Deficit | ( | ) | ( | ) | ( | ) | ||||||||||
| Total shareholders’ equity | ||||||||||||||||
| Total liabilities and shareholders’ equity | ||||||||||||||||
| Nature of operations and going concern | 1 | |||||||||||||||
| Change in presentation currency | 2 | |||||||||||||||
| Events after the reporting period | 22 | |||||||||||||||
Approved on behalf of the Board of Directors on April 26, 2023:
| “William M. Sheriff” | Director | “William B. Harris” | Director |
The accompanying notes are an integral part of these consolidated financial statements.
F-2
| enCore Energy Corp. |
| Consolidated Statements of Loss and Comprehensive Loss |
| As at December 31, 2022, December 31, 2021 and January 1, 2021 |
| December 31, | ||||||||||
| December 31, | 2021 | |||||||||
| 2022 | $ | |||||||||
| Note | $ | (Note 21) | ||||||||
| Expenses | ||||||||||
| Accretion | 9,12 | |||||||||
| Amortization and depreciation | 7,8,9 | |||||||||
| Community engagement | ||||||||||
| Consulting | ||||||||||
| General administrative costs | ||||||||||
| Impairment charges | 11 | |||||||||
| Interest expense | ||||||||||
| Office and administrative | 15 | |||||||||
| Professional fees | ||||||||||
| Project investigation | ||||||||||
| Promotion and shareholder communication | ||||||||||
| Reclamation costs | ||||||||||
| Travel | ||||||||||
| Transfer agent and filing fees | ||||||||||
| Staff costs | 15 | |||||||||
| Stock option expense | 14,15 | |||||||||
| Loss from operating expenses | ( | ) | ( | ) | ||||||
| Interest income | ||||||||||
| Loss on write-off of sales tax recoverable | ( | ) | - | |||||||
| Foreign exchange (loss) gain | ( | ) | ||||||||
| Gain (loss) on divestment of mineral properties | 11 | ( | ) | |||||||
| (Loss) gain on change in asset retirement obligation estimate | 12 | ( | ) | |||||||
| Gain on disposal of subsidiary | 11 | - | ||||||||
| Loss on contract termination | 13 | - | ( | ) | ||||||
| Unrealized gain on uranium investment | 5 | - | ||||||||
| Gain on sale of uranium investment | 5 | |||||||||
| Unrealized gain on marketable securities | 6 | - | ||||||||
| Loss on investment in associate | 4 | ( | ) | ( | ) | |||||
| Net loss for the year | ( | ) | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||
| Comprehensive loss for the year | ( | ) | ( | ) | ||||||
| Loss per share | ||||||||||
| Weighted average number of common shares outstanding | ||||||||||
| - basic # | ||||||||||
| - diluted # | ||||||||||
| ( | ) | ( | ) | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
| enCore Energy Corp. |
| Consolidated Statements of Cash Flows |
| For the years ended December 31, 2022 and December 31, 2021 |
| December 31, | |||||||||||
| December 31, | 2021 | ||||||||||
| 2022 | $ | ||||||||||
| Note | $ | (Note 21) | |||||||||
| Operating activities | |||||||||||
| Net loss for the year | ( | ) | ( | ) | |||||||
| Items not affecting cash: | |||||||||||
| Accretion | |||||||||||
| Amortization and depreciation | |||||||||||
| Impairment charges | - | ||||||||||
| Foreign exchange loss | |||||||||||
| Stock option expense | |||||||||||
| Interest income | ( | ) | ( | ) | |||||||
| Loss on write-off of sales tax recoverable | - | ||||||||||
| (Gain) loss on divestment of mineral properties | ( | ) | |||||||||
| (Gain) loss on divestment of subsidiary | ( | ) | - | ||||||||
| Loss (gain) on change in asset retirement obligation estimate | 12 | ( | ) | ||||||||
| Unrealized gain on uranium investment | - | ( | ) | ||||||||
| Gain on sale of uranium investment | ( | ) | ( | ) | |||||||
| Unrealized gain on marketable securities | ( | ) | - | ||||||||
| Loss on investment in associate | |||||||||||
| Changes in non-cash working capital items: | |||||||||||
| Receivables and prepaid expenses | ( | ) | ( | ) | |||||||
| Deposit - uranium investment | 5 | ( | ) | - | |||||||
| Restricted cash | ( | ) | - | ||||||||
| Accounts payable and accrued liabilities | ( | ) | |||||||||
| Due to related parties | |||||||||||
| ( | ) | ( | ) | ||||||||
| Investing activities | |||||||||||
| Acquisition of intangible assets | ( | ) | ( | ) | |||||||
| Acquisition of property, plant, and equipment | ( | ) | ( | ) | |||||||
| Mineral property expenditures | ( | ) | ( | ) | |||||||
| Proceeds from divestment of mineral properties | |||||||||||
| Cash acquired from Azarga asset acquisition | 10 | - | |||||||||
| Transaction costs on Azarga asset acquisition | 10 | - | ( | ) | |||||||
| Deferred acquisition costs | 22(a) | ( | ) | - | |||||||
| Interest income received | |||||||||||
| Investment in uranium | 5 | - | ( | ) | |||||||
| Proceeds received from sale of uranium investment | 5 | ||||||||||
| Settlement of asset retirement obligation | 12 | ( | ) | ( | ) | ||||||
| ( | ) | ( | ) | ||||||||
| Financing activities | |||||||||||
| Private placement proceeds | |||||||||||
| Share issue costs | ( | ) | ( | ) | |||||||
| Proceeds from exercise of warrants | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Share subscriptions received | - | ||||||||||
| Deferred financing costs | ( | ) | - | ||||||||
| Lease payments | 9 | ( | ) | ( | ) | ||||||
| Effect of foreign exchange on cash | ( | ) | ( | ) | |||||||
| Change in cash | ( | ) | |||||||||
| Cash, beginning of year | |||||||||||
| Cash, end of year | |||||||||||
Supplemental disclosure with respect to cash flows (Note 19)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
| enCore Energy Corp. |
| Consolidated Statements of Changes in Shareholder’s Equity |
| For the years ended December 31, 2022 and December 31, 2021 |
| Number
of shares # | Share
capital $ | Share
subscriptions received $ | Contributed
surplus $ | Accumulated other comprehensive income (loss) $ | Deficit $ | Total
shareholders’ equity $ | ||||||||||||||||||||||
| January 1, 2021 | ( | ) | ||||||||||||||||||||||||||
| Private placements | ||||||||||||||||||||||||||||
| Share issuance costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for exercise of warrants | ( | ) | ||||||||||||||||||||||||||
| Shares issued for exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Shares issued for Azarga asset acquisition (Note 10) | ||||||||||||||||||||||||||||
| Replacement options for Azarga asset acquisition (Note 10) | - | |||||||||||||||||||||||||||
| Replacement warrants for Azarga asset acquisition (Note 10) | - | |||||||||||||||||||||||||||
| Adjustment to investment in associate | - | |||||||||||||||||||||||||||
| Cumulative translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Loss for the year | - | ( | ) | ( | ) | |||||||||||||||||||||||
| December 31, 2021 | ( | ) | ||||||||||||||||||||||||||
| January 1, 2022 | ( | ) | ||||||||||||||||||||||||||
| Private placements | ||||||||||||||||||||||||||||
| Share issuance costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for exercise of warrants | ( | ) | ||||||||||||||||||||||||||
| Shares issued for exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||
| Share subscriptions received | - | |||||||||||||||||||||||||||
| Adjustment to investment in associate | - | |||||||||||||||||||||||||||
| Cumulative translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Loss for the year | - | ( | ) | ( | ) | |||||||||||||||||||||||
| December 31, 2022 | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 1. | Nature of operations and going concern |
enCore Energy Corp. was incorporated on October 30, 2009 under the Laws of British Columbia, Canada. enCore Energy Corp., together with its subsidiaries (collectively referred to as the “Company” or “enCore”), is principally engaged in the acquisition, exploration, and development of uranium resource properties in the United States. The Company’s common shares trade on the TSX Venture Exchange and the NYSE American Market under the symbol “EU”. The Company’s corporate headquarters is located at 101 N Shoreline, Suite 450, Corpus Christi, TX 78401.
On September 14, 2022, the Company consolidated its issued and outstanding shares on a ratio of three old common shares for every one new post-consolidated common share (the “Share Consolidation”). All current and comparative references to the number of common shares, weighted average number of common shares, loss per share, stock options and warrants have been restated to give effect to this Share Consolidation.
These
consolidated financial statements (the “financial statements”) have been prepared assuming the Company will continue on a
going-concern basis, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities and commitments in the normal course of operations. The Company has no source of
operating cash flow and operations to date have been funded primarily from the issue of share capital. For the year ended December 31,
2022, the Company reported a net loss of $
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic and the Company continues to evaluate the COVID-19 situation and monitor any impacts or any potential impacts to the business. enCore Energy Corp has implemented health and safety measures in accordance with the health officials and guidance from local government authorities. While the pandemic has had limited impact on the Company’s operations to date, future activities could be impacted as a result of the pandemic. As the COVID-19 health crisis continues, the Company will continue to rely on guidance and recommendations from local health authorities, Health Canada and the Centers for Disease Control and Prevention to update the Company’s policies.
Geopolitical uncertainty driven by the Russian invasion of Ukraine has led many governments and utility providers to re-examine supply chains and procurement strategies reliant on nuclear fuel supplies coming out of or through Russia. Sanctions, restrictions, and an inability to obtain insurance on cargo have contributed to transportation and other supply chain disruptions between producers and suppliers. As a result of this and coupled with multiple years of declining uranium production globally, uranium market fundamentals are shifting from an inventory driven market to one more driven by production.
Management estimates that it has adequate working capital to fund all of its planned activities for the next year. However, the Company’s long-term continued operations are dependent on its abilities to monetize assets or raise additional funding from loans or equity financings, or through other arrangements. There is no assurance that future financing activities will be successful.
F-6
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies |
Basis of presentation
These financial statements, including comparatives, have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
The policies applied in these financial statements are based on IFRS issued and effective as of December 31, 2022.
These financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value. All dollar amounts presented are in United States Dollars (“U.S. Dollars”) unless otherwise specified. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
These financial statements were approved for issuance by the audit committee of the Board of Directors on April 26, 2023.
Change in presentation currency
These financial statements are presented in U.S. Dollars, unless otherwise specified. The functional currency of enCore Energy Corp. is the Canadian Dollar. The functional currency of the Company’s subsidiaries is the U.S. Dollar. During the year ended December 31, 2022, the Company changed its presentation currency from Canadian Dollars to U.S. Dollars to better reflect the Company’s business activities. Accordingly, these financial statements are presented in U.S. Dollars. The change in presentation currency is to better reflect the Company’s business activities and to improve investors’ ability to compare the Company’s financial results with other publicly traded businesses in the exploration industry.
In making this change to the U.S. Dollar presentation currency, the Company followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates and has applied the change retrospectively as if the new presentation currency had always been the Company’s presentation currency. In accordance with IAS 21, the financial statements for all years presented have been translated to the new U.S. Dollar presentation currency. For 2021 and 2020 comparative balances, assets and liabilities have been translated into the U.S. Dollar presentation currency at the rate of exchange prevailing at the reporting date. The consolidated statements of loss and comprehensive loss were translated at the average exchange rates for the reporting period. Share capital and reserves were translated at the historical rates prevailing at the dates of the transactions. Exchange differences arising on translation were taken to the foreign currency translation reserve in shareholders’ equity.
The exchange rates used were as follows:
| U.S. Dollar/CDN Dollar exchange rate | December 31, 2022 | December 31, 2021 | ||||||
| Closing rate at the reporting date | ||||||||
| Average rate for the year | ||||||||
F-7
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Basis of consolidation
These
financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control is defined as the exposure,
or rights, to variable returns from involvement with an investee and the ability to affect those returns through power over the investee.
Power over an investee exists when an investor has existing rights that give it the ability to direct the activities that significantly
affect the investee’s returns. This control is generally evidenced through owning more than
These consolidated financial statements include the financial statements of the Company and its significant subsidiaries listed in the following table:
| Name of Subsidiary | Place of Incorporation | Ownership Interest | Principal Activity | Functional Currency | ||||||
| Tigris Uranium US Corp. | % | |||||||||
| Metamin Enterprises US Inc. | % | |||||||||
| URI, Inc. | % | |||||||||
| Neutron Energy, Inc. | % | |||||||||
| Uranco, Inc. | % | |||||||||
| Uranium Resources, Inc. | % | |||||||||
| HRI-Churchrock, Inc. | % | |||||||||
| Hydro Restoration Corp. | % | |||||||||
| Belt Line Resources, Inc. | % | |||||||||
| Cibola Resources, LLC (*) | % | |||||||||
| enCore Energy US Corp. | % | |||||||||
| Azarga Uranium Corp. | % | |||||||||
| Powertech (USA) Inc. | % | |||||||||
| URZ Energy Corp. | % | |||||||||
| Ucolo Exploration Corp. | % | |||||||||
| Azarga Resources Limited | % | |||||||||
| Azarga Resources (Hong Kong) Ltd. | % | |||||||||
| Azarga Resources USA Company | % | |||||||||
| Azarga Resources Canada Ltd. | % | |||||||||
*
Cash
Cash is comprised of cash held at banks and demand deposits.
Restricted cash
As
of December 31, 2022, the Company deposited $
As
of December 31, 2022, the Company held in escrow CAD $
F-8
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Asset retirement obligations
Various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality for its ISR projects to the pre-existing or background average quality after the completion of mining. Asset retirement obligations, consisting primarily of estimated restoration and reclamation costs at the Company’s ISR projects, are recognized in the period incurred and recorded as liabilities at fair value. Such obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to accretion expense. In addition, the asset retirement cost is capitalized as part of the asset’s carrying value and amortized over the life of the related asset. Asset retirement obligations are periodically adjusted to reflect changes in the estimated present value resulting from revisions to the estimated timing or amount of restoration and reclamation costs. As the Company completes its restoration and reclamation work at its properties, the liability is reduced by the carrying value of the related asset retirement liability which is based upon the percentage of completion of each restoration and reclamation activity. Any gain or loss upon settlement is charged to income or expense for the period. The Company reviews and evaluates its asset retirement obligations annually or more frequently at interim periods if deemed necessary.
Assets held for sale
The Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: management commits to a plan to sell the asset or disposal group; the asset or disposal group is available for immediate sale; an active program to locate a buyer is initiated; the sale of the asset or disposal group is highly probable, within 12 months.
Mineral properties
The Company is in the exploration stage, and records exploration and evaluation assets, which consists of the costs of acquiring licenses for the right to explore and costs associated with exploration and evaluation activity, at cost. All direct and indirect costs related to the acquisition, exploration and development of exploration and evaluation assets are capitalized by property.
The exploration and evaluation assets are capitalized until the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable. Exploration and evaluation assets are then assessed for impairment and reclassified to mining property and development assets within property and equipment. If an exploration and evaluation property interest is abandoned, both the acquisition costs and the exploration and evaluation cost will be written off to net income or loss in the period of abandonment.
On an ongoing basis, exploration and evaluation assets are reviewed on a property-by-property basis to consider if there are any indicators of impairment, including the following:
| (i) | Whether the period during which the Company has the right to explore in the specific area has expired during the year or will expire in the near future; |
| (ii) | Whether substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; |
| (iii) | Whether the Company has decided to discontinue activities in an area as the exploration and evaluation activities in the area have not led to the discovery of commercially viable quantities of mineral resources; and |
| (iv) | Whether sufficient data exists to indicate that the carrying amount exceeds the recoverable amount. |
F-9
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Mineral properties (continued)
If any indication of impairment exists, an estimate of the exploration and evaluation asset’s recoverable amount is calculated. The recoverable amount is determined as the higher of the fair value less costs of disposal for the exploration and evaluation property interest and its value in use. The fair value less costs of disposal and the value in use is determined for an individual exploration and evaluation property interest, unless the exploration and evaluation property interest does not generate cash inflows that are largely independent of other exploration and evaluation property interests. If this is the case, the exploration and evaluation property interests are grouped together into cash generating units (“CGUs”) for impairment purposes. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in net income or loss for the period. Where an impairment subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior periods. A reversal of an impairment loss is recognized in the period in which that determination was made in net income or loss.
Investments
Investments in uranium
Investments in uranium are initially recorded at cost, on the date that control of the uranium passes to the Company. Cost is calculated as the purchase price and any directly attributable expenditure. Subsequent to initial recognition, investments in uranium are measured at fair value at each reporting period end. Fair value is determined based on the most recent month-end spot prices for uranium published by UxC LLC (“UxC”). Related fair value gains and losses subsequent to initial recognition are recorded in the consolidated statement of loss and comprehensive loss as a component of “Other Income (Expense)” in the period in which they arise.
Due to the lack of specific IFRS guidance on accounting for investments in uranium, the Company considered IAS 1 Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to develop and apply an accounting policy that would result in information that is most relevant to the economic decision-making needs of users within the overall IFRS accounting framework. Consequently, the uranium investments are presented at fair value based on the application of IAS 40, Investment Property, which allows the use of a fair value model for assets held for long-term capital appreciation.
In 2022, the Company entered into fixed price agreements for future purchases of uranium. These agreements required the company to make a deposit at the time of contract execution toward its future purchase. These deposits are recorded on the Company’s statement of financial position in accordance with IFRS 9.
Investments in associates
Investments in associates are accounted for using the equity method. The equity method involves the recording of the initial investment at cost and the subsequent adjusting of the carrying value of the investment for the Company’s proportionate share of the earnings or loss. The cost of the investment includes transaction costs.
Adjustments are made to align the accounting policies of the associate with those of the Company before applying the equity method. When the Company’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.
F-10
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Property, plant and equipment
Useful lives are based on the Company’s estimate at the date of acquisition and are as follows for each class of assets:
Category | Range | |
| Uranium Plants | Straight-line over | |
| Other Property Plant and Equipment | Straight-line over | |
| Software | Straight-line over | |
| Furniture | Straight-line over | |
| Buildings | Straight-line over |
Uranium plants
Uranium plant expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and recorded at cost. Depreciation on other property is computed based upon the estimated useful lives of the assets. Repair and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed.
Other property, plant and equipment
Other property, plant and equipment consists of office equipment, furniture and fixtures and transportation equipment. Depreciation on other property is computed based upon the estimated useful lives of the assets. Repairs and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed.
Buildings
Depreciation on buildings is computed based upon the estimated useful lives of the asset. Repairs and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed.
Software
Software acquired in the normal course of business through a perpetual license is capitalized and depreciated over the estimated useful life of the asset. Support and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed
Intangible assets
Intangible assets are recognized and measured at cost. Intangible assets with indefinite useful lives are assessed for impairment annually and whenever there is an indication that the intangible asset may be impaired. Intangible assets that have finite useful lives are amortized over their estimated remaining useful lives. Amortization methods and useful lives are reviewed at each reporting period and are adjusted if appropriate.
Useful lives are based on the Company’s estimate at the date of acquisition and are as follows for each class of assets:
| Category | Range | |
| Data Access Agreement | ||
| Data Purchases |
F-11
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Impairment of non-financial assets
At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs of disposal and the value in use. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects a current market assessment of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Leases
In accordance with IFRS 16, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.
Income Tax
Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity. Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is recorded using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Temporary differences are not provided for the initial recognition of assets or liabilities that do not affect either accounting or taxable loss or those differences relating to investments in subsidiaries to the extent that they are not probable to reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the date of the statement of financial position.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it is not recorded.
F-12
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Foreign currency translation
The financial statements for the Company and each of its subsidiaries are prepared using their functional currencies. Functional currency is the currency of the primary economic environment in which an entity operates.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income (loss) in the consolidated statement of loss and comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income (loss). Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.
On consolidation, the parent Company’s financial statements are translated into the presentation currency, being the U.S. Dollar. Assets and liabilities are translated at the period-end exchange rate. Income and expenses are translated at the average exchange rate for the period in which they arise. Exchange differences are recognized in other comprehensive income (loss) as a separate component of equity.
Earnings (loss) per share
The Company presents basic and diluted earnings (loss) per share (“EPS”) data for its common shares. Basic EPS is calculated by dividing the profit or loss of the Company by the weighted average number of common shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by dividing the profit or loss attributable to common shareholders by the weighted average number of common shares outstanding, adjusted for own shares held and for the effects of all potential dilutive common shares related to outstanding stock options and warrants issued by the Company for the years presented, except if their inclusion proves to be anti-dilutive.
Share-based payments
The fair value of all stock options granted to directors, officers, and employees is recorded as a charge to operations and a credit to contributed surplus. The fair value of these stock options is measured at the grant date using the Black-Scholes option pricing model. The fair value of stock options which vest immediately is recorded at the grant date. For stock options which vest in the future, the fair value of stock options, as adjusted for the expected level of vesting of the stock options and the number of stock options which ultimately vest, is recognized over the vesting period. Stock options granted to non-employees are measured at the fair value of goods or services rendered or at the fair value of the instruments issued if it is determined that the fair value of the goods or services received cannot be reliably measured. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
Warrants issued to brokers are measured at their fair value on the vesting date and are recognized as a deduction from equity and credited to contributed surplus. The fair value of stock options and warrants issued to brokers are estimated using the Black-Scholes option pricing model. Any consideration received on the exercise of stock options and/or warrants, together with the related portion of contributed surplus, is credited to share capital.
F-13
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
Warrants issued in equity financing transactions
The Company engages in equity financing transactions to obtain the funds necessary to continue operations and explore its exploration and evaluation assets. These equity financing transactions may involve the issuance of common shares or units. Each unit comprises a certain number of common shares and a certain number of share purchase warrants.
Depending on the terms and conditions of each equity financing agreement, the Warrants are exercisable into additional common shares at a price prior to expiry as stipulated by the agreement. Warrants that are part of units are valued based on the residual value method. Warrants that are issued as payment for agency fees or other transactions costs are accounted for as share-based payments.
Financial instruments
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss and comprehensive loss in the period in which they arise.
Impairment of financial assets at amortized cost
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.
In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
The Company’s mineral property interest impairment policy is more specifically discussed above.
Derecognition of financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in profit or loss
F-14
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 2. | Significant accounting policies (continued) |
New standards and interpretations not yet adopted
The following new standards, amendments to standards and interpretations have been issued but are not effective during the year ended December 31, 2022:
The following amendments will be in effect for annual reporting periods beginning on or after January 1, 2023:
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) – the amendments require that an entity discloses its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy.
Definition of Accounting Estimates (Amendments to IAS 8) – the amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments clarify that a change in accounting estimate that results from new information or new developments is not the correction of an error.
The Company does not anticipate that these amendments will have a material impact on the results of operations and financial position of the Company.
| 3. | Critical accounting estimates and judgements |
The preparation of financial statements in conformity with IFRS requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. Although management uses historical experience and its best knowledge of the expected amounts, events or actions to form the basis for estimates, actual results may differ from these estimates.
Critical accounting estimates:
The assessment of the recoverable amount of mineral properties as a result of impairment indicators - When indicators of impairment are identified, recoverable amount calculations are based either on discounted estimated future cash flows or on comparable recent transactions. The assumptions used are based on management’s best estimates of what an independent market participant would consider appropriate. Changes in these assumptions may alter the results of impairment testing, the amount of the impairment charges recorded in the statement of loss and comprehensive loss and the resulting carrying values of assets.
Share-based payments - The fair value of stock options issued is subject to the limitation of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the fair value estimate.
Asset retirement obligations - Significant estimates were utilized in determining future costs to complete groundwater restoration, plugging and abandonment of wellfields and surface reclamation at the Company’s uranium in-situ recovery (ISR) sites. Estimating future costs can be difficult and unpredictable as they are based principally on current legal and regulatory requirements and ISR site closure plans that may change materially. The laws and regulations governing ISR site closure and remediation in a particular jurisdiction are subject to review at any time and may be amended to impose additional requirements and conditions which may cause our provisions for environmental liabilities to be underestimated and could materially affect our financial position or results of operations. Estimates of future asset retirement obligation costs are also subject to operational risks such as acceptability of treatment techniques or other operational changes.
F-15
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 3. | Critical accounting estimates and judgements (Continued) |
Recovery of deferred tax assets - Judgment is required in determining whether deferred tax assets are recognized in the statement of financial position. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the date of the statement of financial position could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Company operates could limit the ability of the Company to obtain tax deductions in future periods. The Company has not recorded any deferred tax assets.
Amortization and impairment of intangible assets - Amortization of intangible assets is dependent upon the estimated useful lives, which are determined through the exercise of judgement. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.
Critical accounting judgments:
The assessment of indicators of impairment for mineral properties - The Company follows the guidance of IFRS 6 to determine when a mineral property asset is impaired. This determination requires significant judgment. In making this judgment, the Company evaluates, among other factors, the results of exploration and evaluation activities to date and the Company’s future plans to explore and evaluate a mineral property.
Valuation of acquired mineral properties – The valuation of mineral properties acquired by the Company requires significant judgement. Acquired mineral properties are valued at their fair market value which can require significant estimates in future cash flows, production, and timing.
Business combinations - The determination of whether a set of assets acquired and liabilities assumed constitute a business may require the Company to make certain judgments, taking into account all facts and circumstances. A business is presumed to be an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or economic benefits. The acquisition of Azarga Uranium Corporation and its subsidiary entities on December 31, 2021 (Note 10) was determined to constitute an acquisition of assets.
Determination of functional currency - In accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates, management determined that the functional currency of the Company is the Canadian dollar and the functional currency of its subsidiaries is the U.S. Dollar.
F-16
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 4. | Investment in associate |
During
the year ended December 31, 2020, the Company acquired
As of December 31, 2022, Group 11 has severely constrained its activities as financing is unavailable in its market. The Company, determined its investment to be unrecoverable and wrote off the balance of its investment.
The Company’s proportional share in the associate at the last available date, June 30th, 2022, is as follows:
| Assets | Liabilities | Revenues | Expenses | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Year ended December 31, 2021 | ||||||||||||||||
| Current | ||||||||||||||||
| Non-current | ||||||||||||||||
| Loss from operating expenses | ( | ) | ||||||||||||||
| ( | ) | |||||||||||||||
| Year ended December 31, 2022 | ||||||||||||||||
| Current | ||||||||||||||||
| Non-current | ||||||||||||||||
| Loss from operating expenses | ( | ) | ||||||||||||||
| ( | ) | |||||||||||||||
| The Company’s percentage ownership | % | |||||||||||||||
The investment in associate continuity summary is as follows:
| Investment in associate | ||||
| $ | ||||
| Balance, December 31, 2020 | ||||
| Adjustments to carrying value: | ||||
| Proportionate share of net loss | ( | ) | ||
| Adjustment to investment in Group 11 | ||||
| Dilution loss | ( | ) | ||
| Currency translation adjustment | ( | ) | ||
| Balance, December 31, 2021 | ||||
| Adjustments to carrying value: | ||||
| Proportionate share of net loss through June 30 | ( | ) | ||
| Adjustment to investment in Group 11 through June 30 | ||||
| Write-off of investment | ( | ) | ||
| Currency translation adjustment | ||||
| Balance, December 31, 2022 | - | |||
F-17
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 5. | Investment in uranium |
During
the year ended December 31, 2021, the Company entered into purchase agreements to acquire a total of
During
the year ended December 31, 2021, the Company sold
During
the year ended December 31, 2022, the Company sold
Investments in uranium are categorized in Level 2 of the fair value hierarchy (Note 17).
The following table summarizes the fair value of the physical uranium investment:
| Investment in uranium | ||||
| $ | ||||
| Balance, December 31, 2020 | ||||
| Physical uranium | ||||
| Fair value adjustment | ||||
| Gain on sale of uranium | ||||
| Sale of uranium investment | ( | ) | ||
| Currency translation adjustment | ||||
| Balance, December 31, 2021 | ||||
| Sale of uranium investment | ( | ) | ||
| Gain on sale of uranium | ||||
| Currency translation adjustment | ||||
| Balance, December 31, 2022 | ||||
Deposits on uranium investment:
On
February 15, 2022, the Company entered into a Uranium Concentrates purchase Agreement with an arm’s length party whereby the Company
will purchase
On
August 4, 2022, the Company entered into a Uranium Concentrates purchase Agreement with an arm’s length party whereby the Company
will purchase
On
December 15, 2022, the Company entered into a Uranium concentrates purchase agreement with an arm’s length party whereby the Company
will purchase
| Purchase Commitments in Pounds | Total Purchase Price | |||||||
| Fiscal 2023 | $ | |||||||
| Fiscal 2024 | ||||||||
| Fiscal 2025 | ||||||||
| Fiscal 2026 | ||||||||
| Fiscal 2027 | ||||||||
F-18
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 6. | Marketable securities |
In
May 2022, the Company divested of Cibola Resources, LLC to Elephant Capital (“Elephant”) pursuant to a Share Purchase Agreement
whereby the Company received consideration in the form of
The
cost base of the Company’s shareholdings is
As
of December 31, 2022,
The
Final
In
October 2022, the Company received
The following table summarizes the fair value of the Company’s marketable securities at December 31, 2022:
| Marketable securities (current) | Marketable securities (non-current) | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Balance, December 31, 2020, and 2021 | ||||||||||||
| Additions | ||||||||||||
| Fair value adjustments | ||||||||||||
| Currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Balance, December 31, 2022 | ||||||||||||
F-19
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 7. | Intangible assets |
In
2018, the Company acquired access to certain uranium exploration data from VANE Minerals (US) LLC (“VANE”). In exchange the
Company issued
In
2020, for $
In 2020, the Company permanently acquired the Grants Mineral Belt database through its asset acquisition with Westwater Resources, Inc. The intangible asset was determined to have an indefinite life and therefore is not being amortized but reviewed for impairment annually and more frequently if required.
In
2021, the Company permanently acquired additional borehole logs for the Grants Mineral Belt property for $
In
2022, the Company acquired access to the Getty Minerals Database from Platoro West Incorporated for $
| VANE Agreement $ | Getty Database $ | Signal Equities Database $ | Grants Mineral Belt Database $ | Total $ | ||||||||||||||||
| Balance, December 31, 2020 | - | |||||||||||||||||||
| Additions | - | - | - | |||||||||||||||||
| Amortization | ( | ) | - | - | - | ( | ) | |||||||||||||
| Currency Translation Adjustment | - | - | ||||||||||||||||||
| Balance, December 31, 2021 | - | |||||||||||||||||||
| Additions | - | - | - | |||||||||||||||||
| Amortization | ( | ) | - | - | - | ( | ) | |||||||||||||
| Currency Translation Adjustment | ( | ) | - | - | ||||||||||||||||
| Balance, December 31, 2022 | ||||||||||||||||||||
F-20
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 8. | Property, plant, and equipment |
| Uranium plants $ | Other property, plant, and equipment $ | Furniture $ | Buildings $ | Software $ | Total $ | |||||||||||||||||||
| Balance, December 31, 2020 | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Disposals | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Impairment | ||||||||||||||||||||||||
| Currency translation adjustment | ||||||||||||||||||||||||
| Balance, December 31, 2021 | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Disposals | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Impairment | ||||||||||||||||||||||||
| Currency translation adjustment | ||||||||||||||||||||||||
| Balance, December 31, 2022 | ||||||||||||||||||||||||
| 9. | Right-of-use assets |
The Company had a contractual arrangement to lease a copier through August 8, 2022.
In
2021, the Company entered a contractual agreement to lease office space in Corpus Christi, Texas through June 30, 2025. The terms of
the lease call for a monthly lease payment of $
In
2021, the Company acquired a contractual agreement to lease additional office space in Vancouver, B.C. through July 10, 2023. The terms
of the lease call for a monthly payment of $
In
2022, the Company entered a contractual agreement to lease office space in Corpus Christi, Texas through August 31, 2024. The terms of
the lease call for a monthly lease payment of $
The change in the ROU assets during the years ended December 31, 2021 and December 31, 2022 was as follows:
| Leased copier $ | Leased offices $ | Total $ | ||||||||||
| Balance, December 31, 2020 | ||||||||||||
| Additions | ||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Currency translation adjustment | ||||||||||||
| Balance, December 31, 2021 | ||||||||||||
| Additions | ||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Currency translation adjustment | ( | ) | ( | ) | ||||||||
| Balance, December 31, 2022 | ||||||||||||
F-21
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 9. | Right-of-use assets (Continued) |
The change in the Long-Term lease liability during the years ended December 31, 2021 and December 31, 2022 was as follows:
| Leased copier $ | Leased offices $ | Total $ | ||||||||||
| Balance, December 31, 2020 | ||||||||||||
| Additions | ||||||||||||
| Accretion | ||||||||||||
| Lease payments made | ( | ) | ( | ) | ( | ) | ||||||
| Currency translation adjustment | ( | ) | ( | ) | ||||||||
| Balance, December 31, 2021 | ||||||||||||
| Additions | ||||||||||||
| Accretion | ||||||||||||
| Lease payments made | ( | ) | ( | ) | ( | ) | ||||||
| Currency translation adjustment | ( | ) | ( | ) | ||||||||
| Balance, December 31, 2022 | ||||||||||||
| Less: current lease liability | ( | ) | ( | ) | ||||||||
| Balance (Long Term), December 31, 2022 | ||||||||||||
As of December 31, 2022, the undiscounted future lease payments are as follows:
| Year | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total |
| 10. | Asset acquisition |
During
the year ended December 31, 2021, the Company, and Azarga Uranium Corporation (“Azarga”) entered into an Arrangement Agreement
pursuant to which the Company acquired all of the issued and outstanding common shares of Azarga by way of a statutory Plan of Arrangement
under the Canada Business Corporations Act (the “Arrangement”). Pursuant to the terms of the Arrangement, securityholders
of Azarga received
In connection with the Arrangement, all outstanding vested and unvested stock options and share purchase warrants of Azarga were exchanged for replacement options and warrants of enCore, adjusted for the Exchange Ratio.
The
aggregate amount of the total consideration was $
F-22
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 10. | Asset acquisition (continued) |
As Azarga did not qualify as a business according to the definition in IFRS 3 Business Combinations, the Arrangement had been accounted for as an asset acquisition with the purchase price being allocated based on the estimated fair value of Azarga’s assets and liabilities summarized as follows:
| Consideration | ||||
| Fair value of share consideration | ||||
| Fair value of replacement options | ||||
| Fair value of replacement warrants | ||||
| Transaction costs | ||||
| Total consideration value |
| Net assets acquired | $ | |||
| Cash | ||||
| Restricted cash | ||||
| Prepaids | ||||
| Property, plant, and equipment | ||||
| Right-of-use asset | ||||
| Mineral properties | ||||
| Asset retirement obligations | ( | ) | ||
| Lease liability | ( | ) | ||
| Loan receivable (1) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||
| Total net assets acquired |
(1)
-
The
value of the Consideration Shares was calculated based on the issuance of
The value of the Replacement Options was derived using the Black-Scholes option pricing model. The weighted average assumptions used in the Black-Scholes option pricing model were as follows:
| Weighted average | ||||
| Exercise price | $ | |||
| Share price | $ | |||
| Discount rate | % | |||
| Expected life (years) | ||||
| Volatility | % | |||
| Fair value of replacement options (per option): | $ | |||
The
fair value of the Replacement Options is based on the outstanding
The value of the Replacement Warrants was derived using the Black-Scholes option pricing model. The weighted average assumptions used in the Black-Scholes option pricing model were as follows:
| Weighted average | ||||
| Exercise price | $ | |||
| Share price | $ | |||
| Discount rate | % | |||
| Expected life (years) | ||||
| Volatility | % | |||
| Fair value of replacement warrants (per warrant): | $ | |||
The
fair value of the Replacement Warrants is based on the outstanding
F-23
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 11. | Mineral properties |
| Arizona $ | Colorado $ | New Mexico $ | South Dakota $ | Texas $ | Utah $ | Wyoming $ | Canada $ | Total $ | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | ||||||||||||||||||||||||||||||||||||
| Acquisition costs: | ||||||||||||||||||||||||||||||||||||
| Asset acquisition (Note 10) | ||||||||||||||||||||||||||||||||||||
| Exploration costs: | ||||||||||||||||||||||||||||||||||||
| Maintenance and lease fees | ||||||||||||||||||||||||||||||||||||
| Resource review | ||||||||||||||||||||||||||||||||||||
| Impairment charged | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Divestment: | ||||||||||||||||||||||||||||||||||||
| Divest - Mineral interest | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Assets held for sale | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | ||||||||||||||||||||||||||||||||||||
| Exploration costs: | ||||||||||||||||||||||||||||||||||||
| Drilling | ||||||||||||||||||||||||||||||||||||
| Maintenance and lease fees | ||||||||||||||||||||||||||||||||||||
| Permitting & Licensing | ( | ) | ||||||||||||||||||||||||||||||||||
| Personnel | ||||||||||||||||||||||||||||||||||||
| Recoveries | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resource review | ||||||||||||||||||||||||||||||||||||
| Divestment: | ||||||||||||||||||||||||||||||||||||
| Divestment of Mineral Interest | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Assets held for sale | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Project Development costs: | ||||||||||||||||||||||||||||||||||||
| Construction of wellfields | ||||||||||||||||||||||||||||||||||||
| Drilling | ||||||||||||||||||||||||||||||||||||
| Personnel | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | ||||||||||||||||||||||||||||||||||||
Assets Held for Sale
Pursuant to an agreement dated August 27, 2021, the Company completed the sale of its subsidiary, Cibola Resources, LLC (Note 2), including its holding of the Cebolletta project to an arm’s length private company.
Pursuant to an agreement dated November 3, 2022 the Company completed the sale of its subsidiaries Beltline Resources, Inc and Hydro Restoration Corporation subsequent to the year ended December 31, 2022 (Note 22(k)).
F-24
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 11. | Mineral properties (continued) |
Arizona
Moonshine Springs
The Moonshine Springs project is located in Mohave County, Arizona.
On November 3, 2022, the Company entered into an agreement to sell the Moonshine Springs project to Nuclear Fuels, Inc, an arm’s length private company (Note 22(k)).
Other Arizona Properties
The
Company owns or controls three Arizona State mineral leases and 467 unpatented federal lode mining claims covering more than 10,000 acres
in the northern Arizona strip district. The Company holds cash bonds for $
Colorado
Centennial
The
Centennial Uranium Project is located in Colorado. In 2006, the Company entered into an option agreement to purchase uranium rights on
certain areas of the Centennial Project for consideration of $
New Mexico
Marquez, Nose Rock, & Treeline
The Marquez project is located in McKinley and Sandoval counties of New Mexico adjacent to the Company’s Juan Tafoya property.
The Nose Rock Project is located in McKinley County, New Mexico, on the northern edge of the Grants Uranium District.
The Treeline project is located west-northwest of Albuquerque, in McKinley and Cibola Counties, Grants Uranium District, New Mexico.
In
March 2021, the Company divested 2,240 acres of fee mineral interests to Tri State Generation and Transmission Association; $
In
May 2021, the Company divested one section of 640 acres of fee mineral interests to Wildcat Solar Power Plant, LLC; $
McKinley, Crownpoint and Hosta Butte
The
Company owns a
F-25
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 11. | Mineral properties (continued) |
Juan Tafoya
The Juan Tafoya property, located in Cibola County in west-central New Mexico near the Company’s Marquez project is leased from the Juan Tafoya Land Corporation (“JTLC”).
Cebolletta
The Cebolletta project is situated in the eastern portion of Cibola County, New Mexico. The lands that comprise the Cebolleta uranium project are owned in fee by La Merced del Pueblo de Cebolleta [the “Cebolleta Land Grant” (CLG)].
On
May 24, 2022, the Company divested of the Cebolletta mineral property via its sale of Cibola Resources, LLC to Elephant (Note 6) pursuant
to a Share Purchase Agreement dated August 27, 2021. Consideration received in the transaction included $
West Largo
The West Largo Project is near the north-central edge of the Grants Mineral Belt in McKinley County, New Mexico.
Other New Mexico Properties
The Company holds mineral properties in the “checkerboard” area located primarily in McKinley County in northwestern New Mexico.
In
January 2022, the Company divested approximately 808 acres of fee mineral interest to Ambrosia Solar, LLC. The assets, having no net
book value at the transaction date, resulted in a gain on disposal of the mineral interests of $
South Dakota
Dewey-Burdock
The Dewey-Burdock Project is an in-situ recovery uranium project located in the Edgemont uranium district in South Dakota.
Texas
Kingsville Dome
The Kingsville Dome project is located in Kleberg County, Texas on land owned by the Company. A Central Processing Plant at the site has been on standby since 2009.
Rosita
The Rosita Project is located in Duval County, Texas on land owned by the Company.
Upper Spring Creek
The Upper Spring Creek Project is located in Live Oak and Bee counties in Texas.
Butler Ranch
The Butler Ranch Exploration project is located in Karnes County, Texas.
F-26
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 11. | Mineral properties (continued) |
Utah
Ticaboo
The Company owns three portions of a claim block located in Shootaring Canyon, Utah. The Company has a federal Plan of Operation and State of Utah approval for processing of the assets.
Other Utah Properties
The Company owns various mining claims throughout Utah, as well as its Cedar Mountain project located northwest of the White Mesa Mill in Blanding County, Utah.
In
March 2021, the Geitus, Blue Jay and Marcy Look properties were transferred to Kimmerle Mining LLC. $Nil consideration was received in
the transaction and a loss on the disposal of these mineral rights was recorded on the Company’s consolidated statement of loss
and comprehensive loss as a component of “Other Income (Expense)” for the net book value of the assets at the transaction
date, $
In
June 2022, the Company divested of its mineral interests in the Lisbon Valley to Prime Fuels Corp (“PFC”). In consideration
of the transaction the Company was granted a
Also
in June 2022, the Company divested of a portion of its mineral interests, in the JB Claims, to PFC. As consideration for the transaction,
the Company was granted a
Wyoming
Gas Hills
The Gas Hills Project is located in the historic Gas Hills uranium district 45 miles east of Riverton, Wyoming.
Bootheel
The Bootheel uranium project is located in Albany County, Wyoming. On November 3, 2022, the Company entered into an agreement to sell the Bootheel Uranium project to Nuclear Fuels, Inc, an arm’s length private company (Note 22(k)).
Dewey Terrace
The Dewey Terrace Project is located in Weston and Niobrara Counties of Wyoming. The project is located immediately adjacent to the Company’s NRC licensed Dewey-Burdock Project along the Wyoming-South Dakota state line.
Juniper Ridge
The Juniper Ridge Project is located in the southwest portion of Wyoming, approximately 10 miles west of the town of Baggs.
F-27
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 11. | Mineral properties (continued) |
Utah (continued)
Kaycee
The Kaycee uranium project is located in Johnson County, Wyoming. On November 3, 2022, the Company entered into an agreement to sell the Kaycee Uranium project to Nuclear Fuels, Inc, a private arm’s length company (Note 22(k)).
| 12. | Asset retirement obligations |
The Company is obligated by various federal and state mining laws and regulations which require the Company to reclaim surface areas and restore underground water quality for certain assets in Texas, Wyoming, Utah and Colorado. These projects must be returned to the pre-existing or background average quality after completion of mining.
Annually,
the Company updates these reclamation provisions based on cash flow estimates, and changes in regulatory requirements and settlements.
This review may result in an adjustment to the asset retirement obligations in addition to the outstanding liability balance. The Company
used an inflation factor of
The asset retirement obligations balance consists of:
| December 31, 2022 $ | December 31, 2021 $ | |||||||
| Kingsville | ||||||||
| Rosita | ||||||||
| Vasquez | ||||||||
| Centennial | ||||||||
| Gas Hills | ||||||||
| Ticaboo | ||||||||
| Asset retirement obligations | ||||||||
The asset retirement obligations continuity summary is as follows:
| Asset retirement obligation | $ | |||
| Balance, December 31, 2020 | ||||
| Accretion | ||||
| Adjustments | ( | ) | ||
| Settlement | ( | ) | ||
| Additions from Azarga asset acquisition (Note 10) | ||||
| Balance, December 31, 2021 | ||||
| Accretion | ||||
| Settlement | ( | ) | ||
| Adjustments | ||||
| Balance, December 31, 2022 |
F-28
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 13. | Sales contracts |
On
December 31, 2020, through an asset acquisition from Westwater Resources, Inc. the Company acquired an agreement with UG USA, Inc.
(“UG”). The contract provided for delivery of one-half of the Company’s actual production, for a total of
In
July 2021, the Company entered into a new uranium supply contract with UG. Pursuant to the agreement, UG will purchase U3O8
from the Company for up to
In
December 2021, the Company entered into a new uranium supply contract. Pursuant to the agreement, a large utility will purchase U3O8
from the Company for up to
In
June 2022, the Company entered into a new uranium supply contract. Pursuant to the agreement, a domestic utility will purchase U3O8
from the Company for up to
In
December 2022, the Company was awarded a contract to sell
As
of December 31, 2022, uranium sales contracts over the next
| Sales Commitments in Pounds | ||||
| Fiscal 2023 | ||||
| Fiscal 2024 | ||||
| Fiscal 2025 | ||||
| Fiscal 2026 | ||||
| Fiscal 2027 | ||||
| 14. | Share capital |
The authorized share capital of the Company consists of an unlimited number of common and preferred shares without par value.
During the year ended December 31, 2022 the Company issued:
| i) |
| ii) |
| iii) |
| iv) |
F-29
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 14. | Share capital (continued) |
During the year ended December 31, 2021, the Company issued:
| i) |
| ii) |
| iii) |
| iv) |
Stock options
The
Company has adopted a Stock Option Plan (the “Plan”) under which it is authorized to grant options to Officers, Directors,
employees and consultants enabling them to acquire common shares of the Company. The number of shares reserved for issuance under the
Plan cannot exceed
The Company’s stock options outstanding at December 31, 2022 and December 31, 2021, and the changes for the years then ended, are as follows:
| Year
ended December 31, 2022 | Year
ended December 31, 2021 | |||||||||||||||
| Weighted average | Weighted average | |||||||||||||||
| Options | exercise price | Options | exercise price | |||||||||||||
| # | CAD $ | # | CAD $ | |||||||||||||
| Options outstanding, beginning of year | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Forfeited/expired | ( | ) | ( | ) | ||||||||||||
| Options outstanding, end of year | ||||||||||||||||
| Options exercisable, end of year | ||||||||||||||||
As of December 31, 2022, stock options outstanding were as follows:
| Options
Outstanding December 31, 2022 | Options
Exercisable December 31, 2022 | |||||||||||||||||||||
| Weighted average | Weighted average | Weighted average | ||||||||||||||||||||
| Option price | Options | Remaining | exercise price | Options | exercise price | |||||||||||||||||
| per share | # | Life | CAD $ | # | CAD $ | |||||||||||||||||
| $ | 0.18 - 1.92 | $ | $ | |||||||||||||||||||
| $ | 2.40 - 3.78 | $ | $ | |||||||||||||||||||
| $ | 4.20 - 5.76 | $ | $ | |||||||||||||||||||
| $ | $ | |||||||||||||||||||||
F-30
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 14. | Share capital (continued) |
Stock options (continued)
During
the year ended December 31, 2022, the Company granted an aggregate of
During
the year ended December 31, 2021, the Company granted an aggregate of
Further,
pursuant to the Company’s acquisition of Azarga during the year ended December 31, 2021 (Note 10), the Company issued replacement
stock options at the acquisition date vested immediately and retained their original expiration date, except for terminated Directors,
Officers, employees, and consultants. For these terminated positions, the stock options had a revised term that was
The
Company’s standard stock option vesting schedule calls for
During
the year ended December 31, 2022, the Company recognized stock option expense of $
The fair value of all compensatory options granted is estimated on the grant date using the Black-Scholes option pricing model. The weighted average assumptions used in calculating the fair values are as follows:
| December
31, 2022 | December
31, 2021 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life of option | ||||||||
| Expected dividend yield | % | % | ||||||
| Expected stock price volatility | % | % | ||||||
| Fair value per option | CAD $3.21 | CAD $1.10 | ||||||
Share purchase warrants
A summary of the status of the Company’s warrants as of December 31, 2022, and December 31, 2021, and changes during the years then ended is as follows:
| Year
ended December 31, 2022 | Year
ended December 31, 2021 | |||||||||||||||
| Warrants | Weighted average exercise price | Warrants | Weighted average exercise price | |||||||||||||
| # | CAD $ | # | CAD $ | |||||||||||||
| Warrants outstanding, beginning of year | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Warrants outstanding, end of year | ||||||||||||||||
F-31
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 14. | Share capital (continued) |
Share purchase warrants (continued)
As of December 31, 2022, share purchase warrants outstanding were as follows:
| Warrants Outstanding December 31, 2022 | ||||||||||||
| Weighted average | Weighted average | |||||||||||
| Warrant price | Warrants | Remaining | exercise price | |||||||||
| per share | # | Life | CAD $ | |||||||||
| $1.59 - 1.80 | $ | |||||||||||
| $2.22 - 3.90 1 | $ | |||||||||||
| $4.59 - 6.00 | $ | |||||||||||
| $ | ||||||||||||
| 1 |
Share subscriptions received
As
of December 31, 2022, the Company has received CAD $
| 15. | Related party transactions and balances |
Related parties include key management of the Company and any entities controlled by these individuals as well as other entities providing key management services to the Company. Key management personnel consist of Directors and senior management including the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Administrative Officer.
The amounts paid to key management or entities providing similar services are as follows:
| December
31, 2022 $ | December
31, 2021 $ | |||||||||||
| Consulting | (1) | |||||||||||
| Data acquisition | (2) | |||||||||||
| Directors’ fees | (3) | |||||||||||
| Office and administration | ||||||||||||
| Staff costs | ||||||||||||
| Stock option expense | ||||||||||||
| Total key management compensation | ||||||||||||
| (1) |
| (2) |
| (3) |
During
the year ended December 31, 2022, the Company granted
F-32
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 15. | Related party transactions and balances (continued) |
As of December 31, 2022 and December 31, 2021, the following amounts were owing to related parties:
| December
31, 2022 $ | December
31, 2021 $ | January
1, 2021 $ | ||||||||||||
| Tintina Holdings, Ltd | Consulting services | |||||||||||||
| Officers and Board members | Accrued compensation | |||||||||||||
| 16. | Management of capital |
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to support the exploration, evaluation, and development of its mineral properties and to maintain a flexible capital structure that optimizes the cost of capital within a framework of acceptable risk. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue debt, and acquire or dispose of assets.
The Company is dependent on the capital markets as its primary source of operating capital and the Company’s capital resources are largely determined by the strength of the junior resource markets, the status of the Company’s projects in relation to these markets, and its ability to compete for investor support of its projects.
The Company considers the components of shareholders’ equity as capital.
There were no changes in the Company’s approach to capital management during the year ended December 31, 2022, and the Company is not subject to any externally imposed capital requirements.
| 17. | Financial instruments |
Financial instruments include cash, receivables and marketable securities and any contract that gives rise to a financial asset to one party and a financial liability or equity instrument to another party. Financial assets and liabilities measured at fair value are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement requires judgement and may affect placement within the fair value hierarchy levels. The hierarchy is as follows:
| ● | Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly. |
| ● | Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data. |
Cash, restricted cash, and marketable securities are measured at Level 1 of the fair value hierarchy. The Company classifies its receivables as financial assets measured at amortized cost. Accounts payable and accrued liabilities, lease liability and due to related parties and notes payable are classified as financial liabilities measured at amortized cost. The carrying amounts of receivables, accounts payable and accrued liabilities, and amounts due to related parties approximate their fair values due to the short-term nature of the financial instruments.
Investments in uranium are measured at Level 2 of the fair value hierarchy. The Company classifies these investments as financial assets measured at fair value as determined based on the most recent month-end spot prices for uranium published by UxC and converted to Canadian dollars at the date of the consolidated statement of financial position.
Marketable securities are measured at Level 1 of the fair value hierarchy. The Company classifies these investments as financial assets whose value is derived from quoted prices in active markets and carries them at FVTPL.
F-33
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 17. | Financial instruments (continued) |
Discussions of risks associated with financial assets and liabilities are detailed below:
Currency risk
Foreign currency exchange risk is the risk that future cash flows, net income and comprehensive income will fluctuate as a result of changes in foreign exchange rates. As the Company’s operations are conducted internationally, operations and capital activity may be transacted in currencies other than the functional currency of the entity party to the transaction.
The Company’s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by obtaining most of its estimated annual U.S. cash requirements and holding the remaining currency in Canadian dollars. The Company monitors and forecasts the values of net foreign currency cash flow and consolidated statement of financial position exposures and from time to time could authorize the use of derivative financial instruments such as forward foreign exchange contracts to economically hedge a portion of foreign currency fluctuations.
The following table provides an indication of the Company’s foreign currency exposures during the years ended December 31, 2022 and 2021:
| December
31, 2022 CAD $ | December
31, 2021 CAD $ | |||||||
| Cash | ||||||||
| Marketable Securities - Current | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
A
The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Credit risk
Credit risk arises from cash held with banks and financial institutions and receivables. The maximum exposure to credit risk is equal to the carrying value of these financial assets. The Company’s cash is primarily held with a major Canadian bank.
Market risk
The
Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities (Note 6). The Company
has no control over these fluctuations and does not hedge its investments. Based on the December 31, 2022 value of marketable securities
every
Further, the Company is in the exploration stage and commodity prices are not reflected in operating financial results. However, fluctuations in commodity prices may influence financial markets and may indirectly affect the Company’s ability to raise capital to fund exploration.
Interest rate risk
Interest rate risk mainly arises from the Company’s cash, which receives interest based on market interest rates. Fluctuations in interest cash flows due to changes in market interest rates are not significant.
F-34
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 17. | Financial instruments (continued) |
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its current obligations as they become due. The majority of the Company’s accounts payable and accrued liabilities are payable in less than 90 days. The Company prepares annual exploration and administrative budgets and monitors expenditures to manage short-term liquidity. Due to the nature of the Company’s activities, funding for long-term liquidity needs is dependent on the Company’s ability to obtain additional financing through various means, including equity financing.
| 18. | Segmented information |
The Company operates in a single segment: the acquisition, exploration, and development of mineral properties in the United States.
The table below provides a breakdown of the Company’s long-term assets by geographic segment:
| Balance Sheet Items | South
Dakota $ | Texas $ | New
Mexico $ | Wyoming $ | Other
States $ | Canada $ | Total $ | |||||||||||||||||||||
| Intangible assets | ||||||||||||||||||||||||||||
| Property, plant and equipment | ||||||||||||||||||||||||||||
| Mineral properties | ||||||||||||||||||||||||||||
| Right-of-use assets | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | ||||||||||||||||||||||||||||
| Intangible assets | ||||||||||||||||||||||||||||
| Property, plant and equipment | ||||||||||||||||||||||||||||
| Mineral properties | ||||||||||||||||||||||||||||
| Right-of-use assets | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | ||||||||||||||||||||||||||||
| 19. | Supplemental disclosure with respect to cash flows |
The Company incurred non-cash financing and investing activities during the years ended December 31, 2022, and December 31, 2021 as follows:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Non-cash financing activities: | ||||||||
| Deferred financing costs remaining in accounts payable and accrued liabilities | ||||||||
| Non-cash investing activities: | ||||||||
| Marketable securities received on disposition of mineral properties | ||||||||
| Mineral property costs included in accounts payable and accrued liabilities | ||||||||
| Property, plant, and equipment additions included in accounts payable and accrued liabilities | ||||||||
| Fair value of common shares issued for Azarga asset acquisition | ||||||||
| Fair value of replacement options issued for Azarga asset acquisition | ||||||||
| Fair value of replacement warrants issued for Azarga asset acquisition | ||||||||
There were no amounts paid for income taxes or interest during the years ended December 31, 2022, and December 31, 2021.
F-35
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 20. | Income taxes |
The actual income tax provision differs from the expected amount calculated by applying the Canadian combined federal and provincial corporate tax rates to income before tax. These differences result from the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Loss before income tax | ( | ) | ( | ) | ||||
| Statutory income tax rate | % | % | ||||||
| Expected income tax expense (recovery) | ( | ) | ( | ) | ||||
| Increase (decrease) resulting from: | ||||||||
| Change in unrecognized temporary differences | ||||||||
| Permanent differences | ||||||||
| Effect of tax rates in foreign jurisdictions | ||||||||
| Share issue costs | ||||||||
| Prior period adjustments | ||||||||
| Income tax expense (recovery) | ||||||||
Recognized deferred tax assets and liabilities
Deferred tax assets are attributable to the following:
Income tax expense (recovery)
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Deferred tax expense (recovery) | ||||||||
| Organization and reversal of temporary differences | ( | ) | ( | ) | ||||
| Change in unrecognized temporary differences | ||||||||
| Income tax expense (recovery) | ||||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Loss carryforwards | ||||||||
| Deferred tax assets | ||||||||
| Set-off of tax | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
Deferred tax liabilities are attributable to the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Intangible assets | ( | ) | ||||||
| Right-of-use assets | ( | ) | ( | ) | ||||
| Fixed assets | ( | ) | ||||||
| Right-of-use assets | ( | ) | ||||||
| Marketable securities | ( | ) | ( | ) | ||||
| Set-off of tax | ||||||||
| Net deferred tax liability | ||||||||
F-36
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 20. | Income taxes (continued) |
Unrecognized deferred tax assets
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| $ | $ | |||||||
| Deductible temporary differences | ||||||||
| Tax losses | ||||||||
Deferred tax assets have not been recognized in respect of the above items, because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom.
The Company has Canadian non-capital
loss carryforwards of $
| 21. | Change in presentation currency |
For comparative purposes, the consolidated statements of financial position as of December 31, 2021 and January 1, 2021 includes adjustments to reflect the change in accounting policy resulting from the change in presentation currency to the U.S. Dollar. The amounts previously reported in Canadian Dollars as shown below have been translated into U.S. Dollars at the December 31, 2021 and January 1, 2021 exchange rates (Note 2). The effect of the translation is as follows:
| As at January 1, 2021 | ||||||||
| Previously reported (CAD$) | Translated (USD$) | |||||||
| Current assets | ||||||||
| Non-current assets | ||||||||
| Total assets | ||||||||
| Current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Total liabilities | ||||||||
| As at December 31, 2021 | ||||||||
| Previously reported (CAD$) | Translated (USD$) | |||||||
| Current assets | ||||||||
| Non-current assets | ||||||||
| Total assets | ||||||||
| Current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Total liabilities | ||||||||
F-37
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 21. | Change in presentation currency (continued) |
For comparative purposes, the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021 includes adjustments to reflect the change in accounting policy resulting from the change in presentation currency to the U.S. Dollar. The amounts previously reported in Canadian Dollars as shown below have been translated into U.S. Dollars at the average 2021 exchange rate (Note 2). The effect of the translation is as follows:
| Previously reported (CAD$) | Translated (USD$) | |||||||
| Expenses | ||||||||
| Accretion | ||||||||
| Amortization and depreciation | ||||||||
| Consulting | ||||||||
| General administrative costs | ||||||||
| Impairment charges | ||||||||
| Interest expense | ||||||||
| Office and administrative | ||||||||
| Professional fees | ||||||||
| Promotion and shareholder communication | ||||||||
| Reclamation costs | ||||||||
| Travel | ||||||||
| Transfer agent and filing fees | ||||||||
| Staff costs | ||||||||
| Stock option expense | ||||||||
| Loss from operating expenses | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Foreign exchange gain | ||||||||
| Loss on divestment of mineral properties | ( | ) | ( | ) | ||||
| Gain on change in asset retirement obligation estimate | ||||||||
| Loss on contract termination | ( | ) | ( | ) | ||||
| Unrealized gain on uranium investment | ||||||||
| Gain on sale of uranium investment | ||||||||
| Loss on investment in associate | ( | ) | ( | ) | ||||
| Net loss for the year | ( | ) | ( | ) | ||||
| Exchange differences on translation foreign operations | ( | ) | ||||||
| Other comprehensive loss for the year | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
F-38
| enCore Energy Corp. |
| Notes to the Consolidated Financial Statements |
| For the years ended December 31, 2022 and December 31, 2021 |
| 22. | Events after the reporting period |
Subsequent to December 31, 2022, the following reportable events were completed:
| (a) | On February 14th, the Company completed its acquisition of the Alta Mesa project, a fully-licensed and constructed ISR processing facility, from Energy Fuels, Inc. Consideration paid to Energy Fuels, Inc in the transaction consisted of $ |
| (b) | In connection with the closing of the Alta Mesa Acquisition, |
On
February 8, 2023, the Company issued
| (c) | Subsequent to the year ended December 31, 2022 the Company issued |
Subsequent
to the year ended December 31, 2022
| (d) | Subsequent to the year ended December 31, 2022 the Company issued |
| (e) | Subsequent to year ended December 31, 2022 the Company granted |
| (f) | On January 13th, 2023, the Company purchased |
| (g) | On January 16th, 2023, the Company completed the sale of |
| (h) | In February of 2023, the Company secured an additional sales contract with a Fortune 500 listed United States Utility. The agreement commences in 2027 and covers firm deliveries of |
| (i) | In March of 2023, the Company completed its purchase of |
| (j) | In April of 2023, the Company completed the sale of |
| (k) | In March of 2023, the Company completed its divestment of Belt Line Resources, Inc and Hydro Restoration Corporation, which held the Company’s Moonshine, Bootheel, and Kaycee projects (Note 11). In return for these assets the Company received |
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