silef_ex992
Exhibit
99.2
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
TABLE OF CONTENTS
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1.
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INTRODUCTION
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3
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2
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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5
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3
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second
QUARTER HIGHLIGHTS AND SIGNIFICANT EVENTS
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6
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4
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PROPERTY
SUMMARY
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7
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5
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SUMMARY
OF QUARTERLY RESULTS
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41
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6
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DISCUSSION
OF OPERATIONS
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42
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7
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PROPOSED
TRANSACTIONS
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44
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8
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LIQUIDITY
AND CAPITAL RESOURCES
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44
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9
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CONTINGENCIES
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47
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10
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RELATED
PARTY DISCLOSURES
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47
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11
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CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
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48
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12
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FINANCIAL
INSTRUMENTS AND RELATED RISKS
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51
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13
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RISKS
AND UNCERTAINTIES
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53
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14
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DISCLOSURE
CONTROLS AND PROCEDURES
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54
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15
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CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
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55
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16
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DISCLOSURE
OF OUTSTANDING SHARE DATA
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55
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17
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OFF-BALANCE
SHEET ARRANGEMENTS
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55
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SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
This
Management’s Discussion and Analysis (this
“MD&A”) of
Silver Elephant Mining Corp. (formerly
Prophecy Development Corp.) and its subsidiaries (the
“Company” or
“Silver
Elephant”) was prepared by management as at August 13,
2021 and was reviewed, approved, and authorized for issue by the
Company’s Audit Committee. The following discussion of
performance, financial condition and future prospects should be
read in conjunction with the condensed interim consolidated
financial statements of the Company and notes thereto for the six
months ended June 30, 2021, prepared in accordance with
International Financial Reporting Standards (“IFRS”) applicable to the
preparation of interim financial statements, including
International Accounting Standard (“IAS”) 34 Interim Financial
Reporting, as issued by the International Accounting Standards
Board. This MD&A should be read in conjunction with the audited
annual consolidated financial statements for the year ended
December 31, 2020, which were prepared in accordance with IFRS (the
“Annual
Financial Statements”), and the related annual
Management’s Discussion and Analysis (the “Annual MD&A”) dated March 12,
2021, as well as the Company's Annual Report on Form 20-F, dated
March 12, 2021 (the “2020 Annual Report”), all of which are
available under the Company’s SEDAR profile at
www.sedar.com.
The
information provided herein supplements but does not form part of
the financial statements. Financial
information is expressed in Canadian dollars, unless stated
otherwise. All references to "$" or "dollars" in this MD&A
refer to Canadian dollars. References to "US$" or "USD" in this
MD&A refer to United States dollars. Readers are cautioned that
this MD&A contains “forward-looking statements” and
that actual events may vary from management’s expectations.
Readers are encouraged to read the cautionary note contained herein
regarding such forward-looking statements. Information on risks
associated with investing in the Company’s securities, as
well as information about mineral resources under National
Instrument 43-101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”)
are contained in the 2020 Annual Report which is available
under the Company’s SEDAR profile at
www.sedar.com.
Description of Business
The
Company amalgamated under the laws of the Province of British
Columbia, Canada. The Company’s Common Shares (the
"Common Shares”, and
each, a “Common
Share”) are listed for trading on the Toronto Stock
Exchange (the “TSX”) under the symbol
“ELEF” and on the Frankfurt Stock Exchange under the
symbol “1P2N” and are quoted on the OTCQX under the
symbol “SILEF”.
Silver
Elephant Mining Corp. is a mineral exploration and development
stage company. The Company's principal projects are the Pulacayo
Paca silver-lead-zinc property located in the Potosí
Department, Antonnio Quijarro Province, Bolivia (the "Pulacayo Project") and the Gibellini
vanadium project, which is comprised of the Gibellini and Louie
Hill vanadium deposits and associated claims located in the State
of Nevada, USA (the "Gibellini
Project").
Pulacayo Project
The
Pulacayo Project comprises seven mining areas covering an area of
approximately 3,560 hectares of contiguous areas centered on the
historical Pulacayo mine and town site. The Pulacayo Project is
located 18 kilometers east of the town of Uyuni in the Department
of Potosí, in southwestern Bolivia. It is located 460
kilometers south-southeast of the national capital of La Paz and
150 kilometers southwest of the City of Potosí, which is the
administrative capital of the department. The Pulacayo Project is
fully permitted with secured social licenses for
mining.
The
Pulacayo Project mining rights are recognized by two legally
independent contractual arrangements, one covering all, except the
Apuradita deposit, from a mining production contract (the
"Pulacayo MPC") between the
Company and the Corporación Minera de Bolivia ("COMIBOL"), a Bolivian state mining
company, and the original holder of the rights, executed on October
3, 2019. The Pulacayo MPC grants the Company the 100% exclusive
right to develop and mine at the Pulacayo and Paca concessions for
up to 30 years against certain royalty payments. It is comparable
to a mining license in Canada or the United States. In connection
with the Apuradita deposit, its rights are covered by a second
contractual arrangement, with the Bolivian Jurisdictional Mining
Authority, acting for the Government of Bolivia, which is in
process of formalization, as a mean of recognition of the acquired
rights to what was originally the mining concession. Until such
time as the contract is formalized, all mining rights, as
recognized in the Bolivian Mining Law 535, can be exercised by the
holder of the ex-concession.
Gibellini Project
The
Company holds, as a claim holder or through leasehold assignments,
a 100% interest in the claims comprising the Gibellini Project,
which the Company aims to make the first operating primary vanadium
mine in North America. The Gibellini Project is situated on the
south east flank of the Fish Creek Range in the Fish Creek Mining
District, about 25 miles south of Eureka, Nevada.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The
Gibellini Project consists of a total of 601 unpatented lode mining
claims that includes: the Gibellini group of 40 claims, the VC
Exploration group of 105 claims, and the Company group of 456
claims, which includes 201 Bisoni claims. The Gibellini Project is
located in Eureka County, Nevada, as well as 22 of the Bisoni group
of claims, with the remaining 179 claims extending from the Eureka
country border southwest into Nye County, Nevada.
The
Company is working to bring the Gibellini Project into production
in order to address the supply-demand gap for vanadium projected to
2023. The projected demand is largely driven by higher rebar
standards imposed by the Chinese government which is intensified by
increasing demand for vanadium redox flow storage batteries. The
supply is restricted by China’s improved
environmental-standards on its vanadium mining and processing. The
supply-demand gap is expected to affect all uses of vanadium
including steel manufacture, high tech applications and large
capacity vanadium redox flow batteries.
The
Company's marketing efforts have mostly been in assessing the
reasons and sources of demand, but the Company has also conducted
concept-level negotiations for supplying vanadium from the
Gibellini Project to traders and battery manufacturers. As the
Gibellini Project develops and more reliable information concerning
timing, volume and quality become available, the Company is
expected to increase its marketing efforts. The Company will be
primarily competing with other mining projects that produce
zinc-silver concentrate, lead-silver concentrate, nickel
concentrate vanadium pentoxide and thermal coal.
Other Projects
The
Company also owns or holds 100% interests in each of the following
projects: (a) the Sunawayo silver-lead mining project in Bolivia
(the "Sunawayo Project"),
(b) the El Triunfo gold-silver-lead-zinc project in Bolivia, (c)
the Minago nickel project in Manitoba, Canada (the "Minago Project"), (d) the Titan
vanadium-titanium-iron project located in Ontario, Canada, (e) the
Ulaan Ovoo coal project located in Selenge Province, Mongolia, and
(f) the Chandgana Khavtgai and Tal coal projects, located in
Khentii Province, Mongolia (collectively, the "Projects").
At this
time, the Company does not consider any of the Projects to be
material to the Company for the purposes of
NI 43- 101.
General Corporate Information:
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At June
30, 2021, and August 13, 2021, the Company had: (i) 209,289,349 and
209,477,539 Common Shares issued and outstanding, respectively;
(ii) 9,527,500 stock options, each exercisable for the purchase of
one Common Share, outstanding; (iii) 17,159,177 and
16,970,987 Common Share
purchase warrants, each exercisable for the purchase of one Common
Share, outstanding, respectively.
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Transfer Agent and Registrar
Computershare
Investor Services Inc.
3rd Floor, 510 Burrard
Street,
Vancouver, BC,
Canada, V6C 3B9
Tel: +1
(604) 661-9400
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Investor and Contact Information
All
financial reports, news releases and corporate information can be
accessed by visiting the Company’s website at:
www.silverelef.com.
Investor
& Media requests and queries: Email:
ir@silverelef.com
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Head Office and Registered Office
Suite
1610 - 409 Granville Street,
Vancouver, BC,
Canada, V6C 1T2
Tel: +1
(604) 569-3661
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Directors and Officers
As at
the date of this MD&A, The Company’s directors and
officers were as follows:
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Directors
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Officers
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John
Lee (Chief Executive Officer and Executive Chairman)
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Ronald
Espell, Vice-President, Environment and Sustainability
Danniel
Oosterman, Vice-President, Exploration
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Greg
Hall
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Joaquin
Merino-Marquez, Vice-President, South American
Operations
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Masa
Igata
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Irina
Plavutska, Chief Financial Officer
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Marc
Leduc
David
H. Smith
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Audit Committee
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Corporate Governance and Compensation Committee
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Greg
Hall (Chair)
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Greg
Hall (Chair)
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Masa
Igata
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Masa
Igata
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Marc
Leduc
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Marc
Leduc
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SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Qualified Persons
Danniel
Oosterman, B.Sc.(Hons), P.Geo., is a “qualified person”
within the meaning of NI 43-101 (a "Qualified Person"). Mr. Oosterman serves
as the Company’s Vice-President, Exploration and Qualified
Person. He is not considered independent of the Company given the
large extent that his professional time is dedicated solely to the
Company. Mr. Oosterman has reviewed and approved the technical and
scientific disclosure regarding the mineral properties of the
Company contained in this MD&A.
2.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements contained in this MD&A constitute
"forward-looking statements" within the meaning of United States
securities laws and "forward-looking information" within the
meaning of Canadian securities laws and are intended to be covered
by the safe harbors provided by such regulations (such
forward-looking statements and forward-looking information are
collectively referred to herein as "forward-looking statements"). These
forward looking statements concerns matters anticipated
developments in the Company’s continuing and future
operations in the United States, Canada, Bolivia and Mongolia, and
the adequacy of the Company’s financial resources and
financial projections.
Forward-looking statements in this MD&A are frequently, but not
always, identified by words such as "expects", "anticipates",
"intends", "believes", "estimates", "potentially" or similar
expressions, or statements that events, conditions or results
"will", "may", "would", "could" or "should" occur or are "to be"
achieved, and statements related to matters which are not
historical facts. Information concerning management's expectations
regarding the Company's future growth, results of operations,
performance, business prospects and opportunities may also be
deemed to be forward-looking statements, as such information
constitutes predictions based on certain factors, estimates and
assumptions subject to significant business, economic, competitive
and other uncertainties and contingencies, and involve known and
unknown risks which may cause the actual results, performance, or
achievements to be different from future results, performance, or
achievements contained in the forward- looking statements. Such
forward-looking statements include but are not limited to
statements regarding the Company's planned and future exploration
and/or development of the Pulacayo Project, the Gibellini Project
and the Titan Project; permitting and feasibility of the Gibellini
Project; the volatility of the novel coronavirus ("COVID-19") outbreak as a global
pandemic; political instability and social unrest in Bolivia and
other jurisdictions where the Company operates; the Revised Pulacayo Technical Report
(as defined herein), including the anticipated filing thereof; the
Company's goals regarding exploration, and development of, and
production from its projects, and regarding raising capital and
conducting further exploration and developments of its properties;
the Company's future business plans; the Company's future financial
and operating performance; the future price of silver, lead, zinc,
vanadium and other metals; expectations regarding any environmental
issues that may affect planned or future exploration and
development programs and the potential impact of complying with
existing and proposed environmental laws and regulations; the
ability to obtain or maintain any required permits, licenses or
other necessary approvals for the exploration or development of the
Company's projects; government regulation of mineral exploration
and development operations in Bolivia and other relevant
jurisdictions; the Company's reliance on key management personnel,
advisors and consultants; the volatility of global financial
markets; the timing and amount of estimated future operating and
exploration expenditures; the costs and timing of the development
of new deposits; the continuation of the Company as a going
concern; the likelihood of securing project financing; the impacts
of changes in the legal and regulatory environment in which the
Company operates; the timing and possible outcome of any pending
litigation and regulatory matters; and other information concerning
possible or assumed future results of the Company's operations,
including: estimated future coal production at the Chandgana Tal,
Ulaan Ovoo and Khavtgai Uul coal properties, and other information
concerning possible or assumed future results of operations of the
Company. Refer to Section 4 – Property Summary.
Statements relating to mineral resources are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the mineral
resources described exist in the quantities predicted or estimated
and may be profitably produced in the future. Estimated values of
future net revenue do not represent fair market value. There is no
certainty that it will be commercially viable to produce any
portion of the mineral resources.
Forward-looking statements are not guarantees of future performance
and are based upon a number of estimates and assumptions of
management at the date the statements are made including, among
other things, the following: timely receipt of regulatory and
governmental approvals (including licenses and permits) for the
development, construction and production of the Company's
properties and projects; there being no significant disruptions
affecting operations, whether due to labour disruptions, COVID 19
or other causes; currency exchange rates being approximately
consistent with current levels; certain price assumptions for
silver, lead, zinc, vanadium and other metals; prices for and
availability of fuel and electricity; parts and equipment and other
key supplies remaining consistent with current levels and prices;
production forecasts meeting expectations; the accuracy of the
Company's current mineral resource estimates and of any
metallurgical testing completed to date; labour and materials costs
increasing on a basis consistent with the Company's current
expectations; any additional required financing being available on
reasonable terms; market developments and trends in global supply
and demand for silver, lead, zinc, nickel, vanadium and other
metals meeting expectations; favourable operating conditions;
political stability; access to necessary financing; stability of
labour markets and in market conditions in general; and estimates
of costs and expenditures to complete the Company's programs. The
Company has no assurance that any of these assumptions will prove
to be correct.
Many of these assumptions are inherently subject to significant
business, social, economic, political, regulatory, competitive and
other risks and uncertainties, contingencies, and other factors
that are not within the control of the Company and could thus cause
actual performance, achievements, actions, events, results or
conditions to be materially different from those projected in the
forward-looking statements. Furthermore, such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from those
reflected in the forward-looking statements, whether expressed or
implied. Such factors include, among others, the following: the
Company is an exploration stage company; the cost, timing and
amount of estimated future capital, operating exploration,
acquisition, development and reclamation activities; the volatility
of the market price of the Common Shares; judgment of management
when exercising discretion in the use of proceeds from offerings of
securities; sales of a significant number of Common Shares in the
public markets, or the perception of such sales, could depress the
market price of the Common Shares; potential dilution with the
issuance of additional Common Shares; none of the properties in
which the Company has a material interest have mineral reserves;
estimates of mineral resources are based on interpretation and
assumptions and are inherently imprecise; the Company has not
received any material revenue or net profit to date; exploration,
development and production risks; no history of profitable mineral
production; actual capital costs, operating costs, production and
economic returns may differ significantly from those the Company
has anticipated; foreign operations and political condition risks
and uncertainties; legal and political risk; amendments to local
laws; the ability to obtain, maintain or renew underlying licenses
and permits; title to mineral properties; environmental risks;
competitive conditions in the mineral exploration and mining
business; availability of adequate infrastructure; the ability of
the Company to retain its key management and employees and the
impact of shortages of skilled personnel and contractors; limits of
insurance coverage and uninsurable risk; reliance on third party
contractors; the availability of additional financing on reasonable
terms or at all; foreign exchange risk; impact of anti-corruption
legislation; recent global financial conditions; changes to the
Company's dividend policy; conflicts of interest; cyber security
risks; litigation and regulatory proceedings; the obligations which
the Company must satisfy in order to maintain its interests in its
properties; the influence of third-party stakeholders; the
Company's relationships with the communities in which it operates;
human error; the speculative nature of mineral exploration and
development in general, including the risk of diminishing
quantities or grades of mineralization; and other risks and the
factors discussed under the heading "Key Information - Risk
Factors" in the 2020 Annual Report and in analogous disclosure in
other disclosure documents of the Company
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The foregoing list is not exhaustive and additional factors may
affect any of the Company's forward looking statements. Although
the Company has attempted to identify important factors that could
cause actual performance, achievements, actions, events, results or
conditions to differ materially from those described in
forward-looking statements, there may be other factors that cause
performance, achievements, actions, events, results or conditions
to differ from those anticipated, estimated or
intended.
The forward-looking statements contained herein are made as of the
date of this MD&A and the Company disclaims any obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or results or otherwise,
except as required by applicable law. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. All
forward-looking statements attributable to the Company are
expressly qualified by these cautionary statements.
3.
SECOND QUARTER HIGHLIGHTS AND SIGNIFICANT
EVENTS
●
On May 4, 2021, the
Company announced drill assay results from the Sunawayo Project
from drill holes SWD011 to SWD014, which include a high-grade
intercept of 2.0 meters grading 645 g/t Ag, 5.12% Pb and 1.34% Zn,
0.19% Cu (813 g/t AgEq) within a broader intercept of 5.0 meters
grading 297 g/t Ag, 2.43% Pb, 0.78% Zn, 0.08% Cu (380 g/t
AgEq).
●
On May 6, 2021, the
Company announced indium and gallium assay results from drillholes
SWD001 to SWD010 at the Company’s Sunawayo Project featuring
SWD002 which intercepted 87 g/t indium,7 g/t gallium, and 48 g/t Ag
(252 g/t silver equivalent) over 9 meters within an interval of 31
meters grading 119 g/t silver equivalent.
●
On May 13, 2021,
the Company filed its final short form base shelf prospectus
allowing the Company to offer up to $75 million of Common Shares,
Warrants, Subscription Receipts and Debt Securities during a
25-month period that the shelf prospectus including any amendments
is effective. A copy of the final short form base shelf prospectus
can be found under the Company’s SEDAR profile at
www.sedar.com.
●
On May 17, 2021,
the Company announced that it had commissioned an independent
Mineral Resource Estimate in accordance with NI 43-101 for the
Minago Project.
●
On May 20, 2021,
the Company announced the identification of a large linear anomaly
measuring over 1,400 meters in length, up to 250 meters wide,
starting at a depth of approximately 250 meters from surface at its
Pulacayo silver project in Potosi department, Bolivia.
●
On May 21, 2021,
the Company announced that it has
suspended the Sunawayo property installment payments pending
verification of the status of Sunawayo title and environmental
permit (held by the Vendors) with authorities. The Company has
notified the Vendors of their breach of certain disclosure
representations in the Sales and Purchase Agreement executed with
certain Vendors dated August 25,2020 (“SPA”). To date, the Company has made one
payment totaling US$300,000 and has no further contractual
obligations unless it wishes to pursue the SPA further to acquire
Sunawayo.
●
On May 24, 2021, pursuant to the terms of the Company’s
Share-Based Compensation Plan, the Company granted in aggregate,
300,000 incentive stock options to certain consultants of the
Company. The options are exercisable at a price of $0.37 per Common
share for a term of five years expiring on May 24, 2026 and vest at
12.5% per quarter for the first two years following the date of
grant.
●
On
May 25, 2021, the Company announced advisory and management
appointments to the Company’s Minago Project
operation.
●
On May 31, 2021, the Company had commissioned a
Preliminary Economic Assessment (“PEA”) in accordance with NI 43-101 in respect
of its Gibellini Project. The PEA will be prepared in collaboration
between Wood PLC (‘Wood”) and Mine Technical Services
(“MTC”) as part of its proposed spinout
strategy.
●
On June 21, 2021,
the Company announced it had started a 2,000-meter drilling program
at Pulacayo Project. Based on the
favorable results of an ongoing 108-km-line Induced Polarization
(“IP”) geophysical survey, the Company has planned a
minimum of 10 drillholes to test a large linear anomaly measuring
1,400 meters in length, and up to 250 meters wide. The IP anomaly
has never been drilled and is situated parallel to the main 3 km
east-west trending Tajo vein system (TVS), which is just 300 meters
to the south. Initial drill targets included El Abra, Veta Quatro,
and Pacamayo—all of which exhibit high chargeability that
starts shallow and runs vertically to at least 600 meters (IP
detection limit) at depth.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The
goal is to expand Pulacayo’s silver resource base, which
currently stands at 106.7 million oz of indicated silver and 13.1
million oz of inferred silver according to an independent technical
report by Mercator Geological Partners, effective October 13, 2020,
and available on sedar.com. (Details provided in Company’s
news release dated October 13, 2020.)
●
On June 25, 2021, the Company announced
receipt of the TSX approval for its request to extend its Annual
General Meeting. The Company will hold its Annual General and
Special Meeting of Shareholders on September 10, 2021 at 9:30 a.m.
(EDT).
Subsequent to period end
●
On July 6, 2021, the Company announced results of
a new mineral resource estimate (“MRE”) for the Minago Project. The MRE
has an effective date of July 2, 2021, and includes a Measured and
Indicated mineral resource of 722 million lbs of contained nickel
and an Inferred mineral resource of 319 million lbs of contained
nickel. All resources occur within a mineral lease that is
surrounded by 94 mineral claims plus a second mineral lease held by
the Company, comprising a total area of 197 km2.
The MRE
was prepared by Mercator Geological Services Limited
(“Mercator”).
AGP Mining Consultants (“AGP”) provided pit optimization
and associated services. Stantec Ltd. (“Stantec”) provided site visit and
professional support on environmental permitting review. All three
firms are independent of Silver Elephant as defined under NI
43-101.
●
On
July 7, 2021, the Company announced an update regarding the updated
Environmental Act License for the Minago Project which is expected
to be issued by the end of 2021 and the Company’s initiatives
to minimize the carbon footprint of potential mining operations at
Minago.
●
On
July 19, 2021, the Company announced the appointment of Peter
Lightfoot as a Technical Advisor for the Minago
Project.
For
further information please view the Company’s 2021 news
releases available under the Company’s SEDAR profile at
www.sedar.com.
DEFINITIONS AND INTERPRETATIONS
This
MD&A contains a number of technical terms relating to
exploration and resource development that may be unfamiliar to a
general reader. The following definitions are provided for
reference and clarification, and reflect their common use and
understanding in the mining industry:
“deposit”
means a mineral deposit which is a mineralized mass that may be
economically valuable, but whose characteristics may require more
detailed information. Mineral resources are calculated from
geological data collected from deposits, however, deposits do not
necessarily reflect the presence of mineral resources.
“mineral
resource” means
a concentration or
occurrence of natural, solid, inorganic, or fossilized organic
material in or on the Earth’s crust in such form and quantity
and of such a grade or quality that it has reasonable prospects for
economic extraction. The location, quantity, grade, geological
characteristics, and continuity of a mineral resource are known,
estimated, or interpreted from specific geological evidence and
knowledge. Mineral resources are sub-divided, in order of
increasing geological confidence, into Inferred, Indicated,
and Measured categories.
Note that the confidence level in Inferred Mineral
Resources is insufficient to allow the application of
technical and economic parameters or to enable an evaluation of
economic viability worthy of public disclosure. Regardless of
category, a mineral resource is estimated through
application of the guidelines of the Canadian Institute of Mining,
Metallurgy and Petroleum Standards for Mineral Resources and
Reserves: Definitions and Guidelines, as amended in 2014. A
“historic” mineral resource estimate refers to a
mineral resource estimate of the quantity, grade, or metal or
mineral content of a deposit that the Company has not verified as
current, and which was prepared before the Company acquired or
entered into an agreement to acquire, an interest in the property
that contains the deposit.
“project”,
as used in the context of the Pulacayo Project, the
Gibellini Project, the
Triunfo Project, the Sunawayo Project and the Titan Project defined
in this MD&A, refers to a mineral project which, pursuant to NI
43-101, means any exploration, development or production activity,
including a royalty or similar interest in these activities with
respect to base metals, precious metals or industrial metals as it
applies to the Company.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
“property”
refers to land concessions for which the Company holds mineral
rights to conduct its activities.
“Qualified
Person” means,
pursuant to NI 43-101, an individual who is an engineer or
geoscientist with at least five years experience in mineral
exploration, mine development or operation, or mineral project
assessment. This individual is a member or licensee in good
standing of a professional association and has to have relevant
experience of the subject matter of the mineral project and the
technical report.
PULACAYO PROJECT, BOLIVIA
The
scientific and technical information in this section of this
MD&A that specifically relates to the current Pulacayo Project
mineral resource estimates for the Pulacayo and Paca deposits has
been extracted or summarized from the Pulacayo Technical Report.
Additional information presented below that pertains to the
Pulacayo Project but does not specifically appear in the Pulacayo
Technical Report has been provided by the Company. The Pulacayo
Technical Report is available under the Company’s SEDAR
profile at www.sedar.com.
The
Company filed an amended Pulacayo Technical Report on November 17,
2020. The Amended Pulacayo Technical Report was filed by the
Company with Canadian securities regulatory authorities in
connection with the filing of the final short form prospectus of
the Company in relation to the Offering.
The
Pulacayo Project consists of many licenses within which are located
the Pulacayo and Paca mineral deposits, several areas of potential
mineralization and historic tailings piles.
The
Pulacayo Project mining rights are recognized by two legally
independent contractual arrangements, one covering all, except the
Apuradita mining concession, from the Pulacayo MPC between the
Company and COMIBOL, a Bolivian state mining company, and the
original holder of the rights, executed on October 3, 2019. The
Pulacayo MPC grants the Company the 100% exclusive right to develop
and mine at the Pulacayo and Paca mineral deposits for up to 30
years against certain royalty payments. It is comparable to a
mining license in Canada or the United States. In connection with
the Apuradita mining concession, its rights are covered by a second
contractual arrangement, with the Bolivian Jurisdictional Mining
Authority, acting for the State, which is in process of
formalization, as a mean of recognition of the acquired rights to
what was originally the mining concession. Until such time as the
contract is formalized, all mining rights, as recognized in the
Bolivian Mining Law 535, can be exercised by the holder of the
ex-concession.
The
Pulacayo Project comprises seven mining concessions covering an
area of approximately 3,560 hectares of contiguous areas centered
on the historical Pulacayo mine and town site. The Pulacayo Project
is located 18 kilometers east of the town of Uyuni in the
Department of Potosí, in southwestern Bolivia. It is located
460 kilometers south-southeast of the national capital of La Paz
and 150 kilometers southwest of the City of Potosí, which is
the administrative capital of the department. The Pulacayo Project
is fully permitted with secured social licenses for
mining.
Mineral Resources and Reserves
The
Pulacayo Technical Report describes mineral resources estimated
following the guidelines of the Canadian Institute of Mining,
Metallurgy and Petroleum Standards for Mineral Resources and
Reserves: Definitions and Guidelines, as amended in 2014 (the
“CIM Standards, 2014”). Two mineral resource
estimates were disclosed according to the requirements of
NI 43-101 for the Pulacayo Project, one for the Pulacayo
deposit and one for the Paca deposit (the “Pulacayo MRE” and “Paca MRE”, respectively, and
collectively referred to herein as the “Mineral Resource Estimate”).
The
Mineral Resource Estimate has an effective date of October 13, 2020
and includes an indicated mineral resource of 106.7 million oz of
silver, 1,384.7 million pounds of zinc, and 693.9 million pounds of
lead, and an inferred mineral resource of 13.1 million oz of
silver, 122.8 million pounds of zinc and 61.9 million pounds of
lead. Apogee Mineral Bolivia S.A., the Company’s wholly owned
Bolivian subsidiary, has invested over US$30 million at the
Pulacayo Project since 2006.
The
Mineral Resource Estimate was prepared by Mercator under the
supervision of Matthew Harrington, P. Geo., who is an independent
Qualified Person as defined under NI 43-101. A contained metal
summary based on the Mineral Resource Estimate for the Pulacayo
Project is reported below:
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Pulacayo Project Mineral Resource Estimate Summary of Total
Contained Metal -
Effective October 13, 2020**
|
Zone
|
|
|
|
|
Pb
Mlbs
|
*AgEq
Moz
|
|
Open Pit Constrained
|
Indicated
|
47,380,000
|
101.0
|
1,365.0
|
687.5
|
202.0
|
|
|
4,165,000
|
8.0
|
80.3
|
53.5
|
14.3
|
-
|
|
Out-of-Pit
|
Indicated
|
660,000
|
5.7
|
19.6
|
6.4
|
6.5
|
|
|
900,000
|
5.2
|
42.4
|
8.3
|
7.4
|
-
|
|
Total:
|
Indicated
|
48,040,000
|
106.7
|
1,384.7
|
693.9
|
208.5
|
|
|
5,065,000
|
13.1
|
122.8
|
61.9
|
21.7
|
-
|
**Notes:
1.
The Mineral Resource Estimate was prepared in accordance with
NI 43-101, the CIM Definition Standards (2014) and CIM MRMR
Best Practice Guidelines (2019).
2.
*Ag Eq. = silver equivalent (recovered) = (Ag
g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy
oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy
oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)). Sulphide zone metal
recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were
used in the silver equivalent (recovered) equation and reflect
metallurgical testing results disclosed previously for the Pulacayo
deposit. A metal recovery of 80% Ag was used for oxide zone mineral
resources.
3.
Metal prices of US$17/oz Ag, US$0.95/lb Pb, and US$1.16 Zn apply. A
currency exchange rate of CDN$1.00 to US$0.75 applies.
4.
Pit-constrained mineral resources are defined for each deposit
within optimized pit shells with average pit slope angles of
45⁰. The Pulacayo MRE was optimized at a 12.3:1 strip ratio
and the Paca MRE was optimized with at a 4.3: strip
ratio.
5.
Base-case sulfide zone pit optimization parameters include: mining
at US$2.00 per tonne; combined processing and general and
administrative (“G&A”) at US$12.50 per tonne
processed; haulage at US$0.50 per tonne processed for the Pulacayo
deposit and US$2.00 per tonne processed for the Paca
deposit.
6.
Base-case oxide zone pit optimization parameters include: mining at
US$2.00 per tonne; combined processing and G&A at US$23.50 per
tonne processed; haulage at US$0.50 per tonne processed for the
Pulacayo deposit and US$2.00 per tonne processed for the Paca
deposit.
7.
Pit-constrained sulphide zone mineral resources are reported at a
cut-off grade of 30 g/t ag eq. within the optimized pit shells and
pit-constrained oxide zone mineral resources are reported at a
cut-off grade of 50 g/t Ag within the optimized pit shells. Cut-off
grades reflect total operating costs used in pit optimization and
are considered to define reasonable prospects for eventual economic
extraction by open pit mining methods.
8.
Out of pit mineral resources are external to the optimized pit
shells and are reported at a cut-off grade of 100 g/t Ag Eq. They
are considered to have reasonable prospects for eventual economic
extraction using conventional underground methods such as long hole
stoping based on a mining cost of $35 per tonne and processing and
G&A cost of $20 per tonne processed.
9.
“Total” mineral resources for the Pulacayo MRE is the
tonnage-weighted average summation of pit-constrained and
out-of-pit Pulacayo deposit mineral resources.
10.
“Total” mineral resources for the Mineral Resource
Estimate is the tonnage-weighted average summation of the total
Pulacayo MRE and Paca MRE.
11.
Mineral resources were estimated using ordinary Kriging methods
applied to 1 m downhole assay composites capped at 2,300 g/t Ag,
13% Pb and 15% Zn.
12.
Bulk density was interpolated using ordinary Kriging methods for
Pulacayo MRE. An average bulk density of 2.32 g/cm3 or 2.24 g/cm3
was applied to Paca MRE, based on grade domain solid
models.
13.
Mineral resources may be materially affected by environmental,
permitting, legal, title, taxation, sociopolitical, marketing, or
other relevant issues.
14.
Mineral resource tonnages have been rounded to the nearest 5,000;
totals may vary due to rounding.
The
Mineral Resource Estimate is based on estimates of pit-constrained
and out-of-pit mineral resources, details of which are presented in
the following two tables for the Pulacayo and Paca deposits,
respectively. The Pulacayo MRE incorporate 73,016 metres of diamond
drilling (244 surface and 42 underground drill holes). The Paca MRE
incorporates results of 104 diamond drill holes and 6 reverse
circulation drill holes totaling 19,916 meters completed between
2002 and 2020. Geovia Surpac ® Version 2020 was used to create
the Pulacayo Project block models, associated geological and grade
solids, and to interpolate silver-zinc-lead grade. Geovia Whittle
pit optimization software and the PseudoFlow algorithm were applied
for pit shell optimization purposes.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Pulacayo Deposit Combined Pit-Constrained and Out-of-Pit Mineral
Resource Estimate – Effective Date October 13,
2020**
|
Cut -off Grade
|
Zone
|
Category
|
|
|
|
|
|
|
|
|
|
|
50
Ag g/t
|
Oxide
In-Pit
|
Indicated
|
1,090,000
|
125
|
|
|
4.4
|
|
|
|
|
|
Inferred
|
25,000
|
60
|
|
|
0
|
|
|
|
|
|
30
*AgEq g/t
|
Sulfide
In-Pit
|
Indicated
|
24,600,000
|
76
|
1.63
|
0.7
|
60.1
|
884
|
379.6
|
123.4
|
156
|
|
Inferred
|
745,000
|
82
|
1.79
|
0.61
|
2
|
29.4
|
10
|
3.9
|
164
|
|
100
*AgEq g/t
|
Sulfide
Out-of-Pit
|
Indicated
|
660,000
|
268
|
1.35
|
0.44
|
5.7
|
19.6
|
6.4
|
6.5
|
307
|
|
Inferred
|
900,000
|
179
|
2.14
|
0.42
|
5.2
|
42.4
|
8.3
|
7.4
|
257
|
|
Total:
|
|
Indicated
|
26,350,000
|
|
|
|
70.2
|
904
|
386
|
133.4
|
|
|
Inferred
|
1,670,000
|
|
|
|
7.2
|
71.8
|
18.4
|
11.4
|
|
Paca Deposit Pit-Constrained Mineral Resource Estimate –
Effective Date October 13, 2020**
|
Cut -off Grade
|
Zone
|
Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
Ag g/t
|
Oxide
In-Pit
|
Indicated
|
1,095,000
|
185
|
|
|
6.5
|
|
|
|
|
|
|
Inferred
|
|
131
|
|
|
1.5
|
|
|
|
|
|
30
*AgEq g/t
|
Sulfide
In-Pit
|
Indicated
|
20,595,000
|
46
|
1.07
|
0.67
|
30.5
|
486
|
304.2
|
70.2
|
106
|
|
|
Inferred
|
3,050,000
|
46
|
0.76
|
0.65
|
4.5
|
51.1
|
43.7
|
9.2
|
94
|
|
Total:
|
|
Indicated
|
21,690,000
|
|
|
|
37
|
486
|
304.2
|
70.2
|
|
|
|
Inferred
|
3,395,000
|
|
|
|
6
|
51.1
|
43.7
|
9.2
|
|
**See detailed notes on the Mineral Resource Estimate parameters
under preceding Table titled “Pulacayo Project Mineral
Resource Estimate Summary of Total Contained Metal - Effective Date
October 13, 2020”.
Pulacayo Deposit Sensitivity Analysis from October 13th, 2020 Mineral
Resource Estimate
The
sensitivity analysis is shown in the following tables showing
various pit-constrained grade-tonnage scenarios for the Pulacayo
deposit based on a range of cut-off grades for the sulphide and
oxide zones.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Pulacayo Deposit Pit-Constrained Cut-Off Grade Sensitivity Report
for Oxide Zone
|
Cut -off Grade
|
Category
|
|
|
|
|
|
Zn Mlbs
|
|
|
|
30
Ag g/t
|
Indicated
|
1,760,000
|
92
|
|
|
5.2
|
|
|
|
|
|
Inferred
|
35,000
|
55
|
|
|
0.1
|
|
|
|
|
45
Ag g/t
|
Indicated
|
1,220,000
|
116
|
|
|
4.6
|
|
|
|
|
|
Inferred
|
30,000
|
58
|
|
|
0.1
|
|
|
|
|
90
Ag g/t
|
Indicated
|
615,000
|
171
|
|
|
3.4
|
|
|
|
|
|
Inferred
|
|
|
|
|
0
|
|
|
|
|
200
Ag g/t
|
Indicated
|
185,000
|
250
|
|
|
1.5
|
|
|
|
|
|
Inferred
|
|
|
|
|
0
|
|
|
|
Note: Cut-off grade for pit-constrained oxide mineral resources is
50 g/t Ag.
Pulacayo Deposit Pit-Constrained Cut-Off Grade Sensitivity Report
for Sulfide Zone
|
Cut -off Grade
|
Category
|
|
|
|
|
|
|
|
|
|
|
30 AgEq g/t
|
Indicated
|
24,600,000
|
76
|
1.63
|
0.7
|
60.1
|
884
|
379.6
|
123.4
|
156
|
|
|
Inferred
|
745,000
|
82
|
1.79
|
0.61
|
2
|
29.4
|
10
|
3.9
|
164
|
|
45
AgEq g/t
|
Indicated
|
23,715,000
|
78
|
1.67
|
0.72
|
59.5
|
873.1
|
376.4
|
122
|
160
|
|
|
Inferred
|
735,000
|
83
|
1.81
|
0.61
|
2
|
29.3
|
9.9
|
3.9
|
166
|
|
90
AgEq g/t
|
Indicated
|
13,700,000
|
121
|
2.17
|
0.99
|
53.3
|
655.4
|
299
|
100
|
227
|
|
|
Inferred
|
290,000
|
154
|
3.62
|
0.97
|
1.4
|
23.1
|
6.2
|
2.9
|
312
|
|
200
AgEq g/t
|
Indicated
|
5,385,000
|
249
|
2.75
|
1.54
|
43.1
|
326.5
|
182.8
|
66.3
|
383
|
|
|
Inferred
|
180,000
|
230
|
4.57
|
1.22
|
1.3
|
18.1
|
4.8
|
2.5
|
426
|
|
400
AgEq g/t
|
Indicated
|
1,860,000
|
387
|
3.62
|
2.25
|
23.1
|
148.4
|
92.3
|
33.8
|
565
|
|
|
Inferred
|
105,000
|
297
|
5.29
|
1.46
|
1
|
12.2
|
3.4
|
1.8
|
521
|
Note: Mineral resource estimate cut-off grade bolded.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The
following table shows sensitivity analysis for the Pulacayo deposit
for out-of-pit grade tonnage scenarios:
Pulacayo Deposit Out-of-Pit Cut-Off Grade Sensitivity Report for
Sulfide Zone
|
Cut -off Grade
|
Category
|
|
|
|
|
|
|
|
|
|
|
100 AgEq g/t
|
Indicated
|
660,000
|
268
|
1.35
|
0.44
|
5.7
|
19.6
|
6.4
|
6.5
|
307
|
|
|
Inferred
|
900,000
|
179
|
2.14
|
0.42
|
5.2
|
42.4
|
8.3
|
7.4
|
257
|
|
150
AgEq g/t
|
Indicated
|
530,000
|
321
|
1.3
|
0.49
|
5.5
|
15.2
|
5.7
|
6
|
354
|
|
|
Inferred
|
680,000
|
220
|
2.25
|
0.46
|
4.8
|
33.7
|
6.9
|
6.6
|
300
|
|
200
AgEq g/t
|
Indicated
|
435,000
|
359
|
1.41
|
0.53
|
5
|
13.5
|
5.1
|
5.5
|
394
|
|
|
Inferred
|
505,000
|
260
|
2.37
|
0.54
|
4.2
|
26.4
|
6
|
5.6
|
343
|
|
250
AgEq g/t
|
Indicated
|
350,000
|
397
|
1.53
|
0.59
|
4.5
|
11.8
|
4.6
|
4.9
|
435
|
|
|
Inferred
|
375,000
|
309
|
2.14
|
0.64
|
3.7
|
17.7
|
5.3
|
4.6
|
381
|
|
300
Ag Eq g/t
|
Indicated
|
290,000
|
429
|
1.63
|
0.64
|
4
|
10.4
|
4.1
|
4.4
|
468
|
|
|
Inferred
|
310,000
|
327
|
2.23
|
0.72
|
3.3
|
15.2
|
4.9
|
4
|
403
|
|
350
Ag Eq g/t
|
Indicated
|
230,000
|
462
|
1.74
|
0.7
|
3.4
|
8.8
|
3.5
|
3.7
|
504
|
|
|
Inferred
|
225,000
|
358
|
2.18
|
0.85
|
2.6
|
10.8
|
4.2
|
3.1
|
434
|
|
400
Ag Eq g/t
|
Indicated
|
180,000
|
490
|
1.93
|
0.74
|
2.8
|
7.7
|
2.9
|
3.1
|
538
|
|
|
Inferred
|
165,000
|
384
|
2.01
|
0.99
|
2
|
7.3
|
3.6
|
2.4
|
455
|
Note: Mineral resource estimate cut-off grade bolded.
Paca Deposit Sensitivity Analysis from October 13th, 2020
MRE
The
Paca deposit is located 7 kilometers north of the Pulacayo deposit.
Sensitivity analysis shown in the following two tables illustrates
various pit-constrained grade-tonnage scenarios at the Paca deposit
based on a range of cut-off grades.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Paca Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for
Oxide Zone
|
Cut -off Grade
|
Category
|
|
|
|
|
|
|
|
|
|
|
30
Ag g/t
|
Indicated
|
1,805,000
|
128
|
|
|
7.4
|
|
|
|
|
|
|
Inferred
|
500,000
|
102
|
|
|
1.6
|
|
|
|
|
|
45
Ag g/t
|
Indicated
|
1,225,000
|
170
|
|
|
6.7
|
|
|
|
|
|
|
Inferred
|
375,000
|
124
|
|
|
1.5
|
|
|
|
|
|
90
Ag g/t
|
Indicated
|
800,000
|
231
|
|
|
5.9
|
|
|
|
|
|
|
Inferred
|
235,000
|
159
|
|
|
1.2
|
|
|
|
|
|
200
Ag g/t
|
Indicated
|
420,000
|
311
|
|
|
4.2
|
|
|
|
|
|
|
Inferred
|
55,000
|
285
|
|
|
0.5
|
|
|
|
|
|
400
Ag g/t
|
Indicated
|
80,000
|
493
|
|
|
1.3
|
|
|
|
|
|
|
Inferred
|
5,000
|
459
|
|
|
0.1
|
|
|
|
|
Note: Cut-off grade for pit-constrained oxide mineral resources is
50 g/t Ag.
Paca Deposit Pit-Constrained Cut-Off Grade Sensitivity Report for
Sulfide Zone
|
Cut -off Grade
|
Category
|
|
|
|
|
|
|
|
|
|
|
30 AgEq g/t
|
Indicated
|
20,595,000
|
46
|
1.07
|
0.67
|
30.5
|
485.8
|
304.2
|
70.2
|
106
|
|
|
Inferred
|
3,050,000
|
46
|
0.76
|
0.65
|
4.5
|
51.1
|
43.7
|
9.2
|
94
|
|
45
AgEq g/t
|
Indicated
|
19,315,000
|
48
|
1.11
|
0.69
|
29.8
|
472.7
|
293.8
|
68.3
|
110
|
|
|
Inferred
|
2,650,000
|
51
|
0.81
|
0.7
|
4.4
|
47.3
|
40.9
|
8.7
|
102
|
|
90
AgEq g/t
|
Indicated
|
8,600,000
|
87
|
1.38
|
0.95
|
24.1
|
261.6
|
180.1
|
45.4
|
164
|
|
|
Inferred
|
950,000
|
114
|
0.94
|
0.95
|
3.5
|
19.7
|
19.9
|
5.2
|
171
|
|
200
AgEq g/t
|
Indicated
|
1,810,000
|
256
|
1.22
|
1.22
|
14.9
|
48.7
|
48.7
|
18.5
|
318
|
|
|
Inferred
|
190,000
|
338
|
0.61
|
0.98
|
2.1
|
2.6
|
4.1
|
2.2
|
360
|
|
400
AgEq g/t
|
Indicated
|
300,000
|
490
|
1.38
|
1.47
|
4.7
|
9.1
|
9.7
|
5.2
|
542
|
|
|
Inferred
|
50,000
|
545
|
0.39
|
0.82
|
0.9
|
0.4
|
0.9
|
0.9
|
530
|
Note: Mineral resource estimate cut-off grade bolded.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
2020
Reported
results in the following section do not define a mineral resource
and it is uncertain if further exploration will result in the
delineation of mineral resource. Drilling that began at the
Pulacayo deposit in December of 2019 was completed in February of
2020. The Company announced its first set of results on January 21,
2020, from borehole PUD 267 which intercepted 10 meters of
mineralization grading 147 g/t silver, 9.8% zinc, and 2.0% lead
(539 g/t AgEq) within 35.5-meter mineralization grading 230 g/t
AgEq starting 31.5 meters downhole.
On
March 6, 2020, the Company released additional results from 2,598
meters of drilling, which focused on the western portion of the
Pulacayo Project and on August 11, 2020, the Company announced
further diamond infill drilling results from the Pulacayo Project.
Complete results of all first phase 2020 drilling are tabulated
below:
|
Hole
ID
|
|
|
|
|
|
|
|
|
PUD267*
|
31.5
|
67
|
35.5
|
54.3
|
4.31
|
0.92
|
229.6
|
|
including…
|
117
|
123
|
6
|
47.8
|
1.11
|
0.25
|
89.7
|
|
PUD268
|
21
|
23
|
2
|
20
|
1.34
|
0.77
|
92.6
|
|
PUD274
|
75
|
77
|
2
|
93.5
|
|
0.42
|
98.8
|
|
PUD274
|
82
|
83
|
1
|
83
|
|
0.09
|
77.4
|
|
PUD283
|
248
|
350
|
102
|
145
|
2.56
|
1.05
|
255
|
|
including..
|
248
|
282
|
34
|
9
|
1.05
|
0.22
|
52
|
|
and…
|
282
|
297
|
15
|
35
|
2.99
|
0.4
|
148
|
|
and…
|
297
|
310
|
13
|
157
|
5.15
|
1.47
|
370
|
|
and…
|
310
|
317
|
7
|
225
|
3.74
|
1.15
|
371
|
|
and…
|
317
|
322
|
5
|
1565
|
3.85
|
8.25
|
1825
|
|
and…
|
322
|
329
|
7
|
134
|
1.73
|
1.18
|
222
|
|
and…
|
329
|
350
|
21
|
76
|
2.65
|
0.82
|
188
|
|
PUD284
|
30.5
|
204.2
|
173.7
|
15
|
0.67
|
0.28
|
46
|
|
including…
|
30.5
|
55
|
24.5
|
3
|
2.45
|
0.1
|
20
|
|
and…
|
55
|
65
|
10
|
113
|
2.11
|
1.93
|
243
|
|
and…
|
65
|
79
|
14
|
13
|
1.2
|
0.44
|
69
|
|
and…
|
79
|
101
|
22
|
4
|
0.36
|
0.11
|
20
|
|
and…
|
101
|
204.2
|
103.2
|
10
|
0.59
|
0.18
|
36
|
|
PUD284
|
206.3
|
273
|
66.7
|
112
|
1.94
|
0.46
|
182
|
|
Interval:
|
206.3
|
240
|
33.7
|
46
|
2.12
|
0.41
|
129
|
|
Interval:
|
240
|
256
|
16
|
79
|
2.7
|
0.72
|
189
|
|
Interval:
|
256
|
273
|
17
|
274
|
1.13
|
0.33
|
295
|
|
PUD284
|
282
|
318
|
36
|
26
|
1.01
|
0.34
|
70
|
|
including…
|
282
|
288
|
6
|
13
|
0.94
|
0.27
|
54
|
|
and…
|
288
|
300
|
12
|
60
|
1.48
|
0.61
|
127
|
|
and…
|
300
|
318
|
18
|
7
|
0.72
|
0.18
|
38
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Reported
widths are intercepted core lengths and not true widths, as
relationships with intercepted structures and contacts vary. Based
on core-angle measurements, true widths are estimated at
approximately 61% of reported core lengths. Silver equivalent is
calculated as follows: Ag Eq. (g/t) = Ag (g/t)*89.2% + (Pb%
*(US$0.94/ lb. Pb /14.583 Troy oz/lb./US$16.50 per Troy oz.
Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy
oz/lb./US$16.50 per Troy oz. Ag)*10,000*82.9). This calculation
incorporates metallurgical recoveries from test work completed for
Pulacayo in 2013 by Universidad Tecnica de Oruro (UTO), in Oruro
and La Paz, Bolivia as well as at Maelgwyn Mineral Services Africa
(MMSA) in Roodeporrt, South Africa.
The
Company adopts industry recognized best practices in its
implementation of QA/QC methods. A geochemical standard control
sample and one blank sample is inserted into the sample stream
every 20th sample. Duplicates are taken at every 40th sample.
Standards and duplicates including lab duplicates and standards and
are analyzed using Thompson-Howarth plots. Samples are shipped to
ALS Global Laboratories in Ururo, Bolivia for preparation, and then
shipped to ALS Global laboratories for analysis in Lima, Peru.
Samples were analyzed using intermediate level four acid digestion.
Silver overlimits are analyzed using fire assay with a gravimetric
finish. ALS Laboratories sample management system meets all
requirements of International Standards ISO/IEC 17025:2017 and ISO
9001:2015. All ALS geochemical hub laboratories are accredited to
ISO/IEC 17025:2017 for specific analytical procedures.
All
samples are taken from HQ-diameter core which split in half by a
diamond-blade masonry saw. One-half of the core is submitted for
laboratory analysis and the other half is preserved on the
Company’s secured core facility for reference. All core is
geotechnically analyzed, photographed and then logged by geologists
prior to sampling.
On
November 30, 2020, the Company announced that further to the news
release dated October 14, 2020, it has received the complete assay
results from the Company’s diamond drill program at the Paca
deposit. All 5 drill holes intersected mineralization, with the
results shown in the following table:
|
Hole ID
|
|
|
|
|
|
|
|
|
PND114
|
1.5
|
18.0
|
16.5
|
43
|
0.11
|
0.36
|
55
|
|
PND115
|
3.0
|
69.0
|
66.0
|
48
|
0.10
|
0.80
|
75
|
|
PND116
|
7.0
|
37.0
|
30.0
|
23
|
0.15
|
0.42
|
41
|
|
PND117
|
51.0
|
82.0
|
31.0
|
3
|
0.45
|
0.31
|
31
|
|
PND118
|
18.0
|
38.0
|
20.0
|
25
|
0.09
|
0.09
|
29
|
|
PND118
|
67.0
|
179.0
|
112.0
|
15
|
0.50
|
0.48
|
50
|
|
including…
|
133.0
|
143.0
|
10.0
|
61
|
0.65
|
0.37
|
93
|
(*) Silver equivalent (“AgEq”) calculation is based on
NI43-101 compliant 2020 resource report completed for the Paca
deposit by Mercator Geological Services (see Company’s press
release dated October 13th,
2020). Silver equivalent is calculated as follows: Ag Eq. = Silver
Equivalent (Recovered) = (Ag g/t*89.2%)+((Pb%*(US$0.95/lb.
Pb/14.583 Troy oz./lb./US$17 per Troy oz.
Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy oz./lb./US$17
per Troy oz. Ag)*(10,000*82.9%)) and assumed metallurgical
recoveries. Metal prices of US$17/oz Ag, US$0.95/lb Pb, and
US$1.16/lb Zn apply.
Reported widths are intercepted core lengths and not true widths,
as relationships with intercepted structures and contacts vary.
Based on core-angle measurements, true widths range from 77% to 86%
of the reported core length.
PND 114, 115, 118 drilled tested oblique structures parallel to the
main east-west trend and discovered new mineralized
zones.
PND 114 intersected 16.5 meters of mineralization grading 55g/t
silver equivalent that is to the north of the Paca north
zone.
PND 115 intercepted 66 meters of mineralization grading 75g/t
silver equivalent between Paca main zone and Paca north zone, which
are 250 meters apart.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
PND 118 was drilled at the eastern edge of the Paca main zone and
intersected 112 meters of mineralization grading 50 g/t silver
equivalent.
The Company is integrating the drill results to the recently
completed geomodelling. Commencement of next round of Paca drilling is
tentatively scheduled for the first half of
2021.
In March 2020 the Company further announced that it had commenced
district exploration program at its Pulacayo project. The Company
would be conducting geological mapping, with relevant sampling and
possible trenching on the property. Induced polarization geophysics
would also be conducted in tandem with the field program, with 106
line-kilometers of survey having been outlined.
In July 2020, the Company announced results of rock chip samples
taken from the San Leon underground tunnel. This geological
sampling and mapping program are part of an ongoing district
exploration program announced on March 9, 2020, at the
Company’s Pulacayo Silver Project in Bolivia. A total of 113
chip samples were collected at intervals of from 0.85 to 3.0 meters
to better characterize the geology and alteration of the San Leon
tunnel, which continues for 3km to the south of the mapping area,
passing through the Company’s existing NI43-101 Pulacayo
resource and connects to the town of Pulacayo. The tunnel also
extends to the north for 1 km where historically the Pulacayo
mine’s ore was carted for smelting during the 1800’s.
Sample results are tabulated below:
|
|
TYPE
|
|
|
|
|
|
|
Structure
|
|
|
|
3879
|
Chip
|
350
|
1.5
|
400
|
0.876
|
0.929
|
420
|
Breccia
|
20
|
80
|
|
3883
|
Chip
|
350
|
0.9
|
77
|
0.342
|
0.287
|
91
|
Fault
|
0
|
72
|
|
3881
|
Chip
|
7
|
1.8
|
25
|
0.137
|
0.127
|
32
|
Contact
|
345
|
78
|
|
3878
|
Chip
|
13
|
0.9
|
5
|
0.306
|
0.399
|
29
|
Veinlets
|
0
|
85
|
|
3882
|
Chip
|
338
|
1.8
|
17
|
0.18
|
0.074
|
24
|
Veinlets
|
350
|
65
|
|
3880
|
Chip
|
5
|
1.9
|
6
|
0.132
|
0.102
|
14
|
Veinlets
|
345
|
65
|
(*) Silver equivalent is calculated as follows: Ag Eq.(g/t) = Ag
(g/t)*89.2%+(Pb% *(US$0.94/ lb. Pb /14.583 Troy oz/lb./US$16.50 per
Troy oz. Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy
oz/lb./US$16.50 per Troy oz. Ag)*10,000*82.9). This calculation
incorporates metallurgical recoveries from test work completed for
the Pulacayo project in 2013.
Mapping identified a vein system trending in a roughly east-west
direction at the Pacamayo zone (“Veta Pacamayo”). The
vein system measures approximately 175 meters in width south to
north in the tunnel and is situated 1.3 kilometers north of the
Pulacayo resource and 5km south of Paca resource. Highlights of the
tunnel chip samples taken in Veta Pacamayo include 420g/t AgEq*
over 1.5 meters and 91g/t AgEq over 0.9 meters.
Geological mapping also identified a transition in the intensity of
alteration (argillic-style) along the San Leon tunnel. Highest
intensity alteration occurs in the Veta Pulacayo, and Veta Pacamayo
areas and coincides with the highest observed chip sample silver
values. Reported results do not define a mineral resource and it is
uncertain if further exploration will result in the delineation of
mineral resource.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
In September 2020 geological mapping was conducted in the Pero area
of the Pulacayo Project. Pero is located to the southeast of the
Tajo Vein system that hosts the Pulacayo deposit. Geological
mapping and surface sampling identified an area of silver bearing
surface mineralization of up to 200 g/t silver several hundreds of
meters south of the projected east-west Tajo Vein system trend,
suggesting that the Tajo Vein system was offset southward in this
portion of the system where strong alteration can be observed at
surface covering 250 meters by 100 meters wide. This reinterpreted
surface projection of the Tajo Vein system coincides with some
historic Spanish workings in that area of property that date back
to the 16th Century. Highlights of assay results from recent
surface samples at Pero are tabulated below:
|
|
|
|
|
|
|
|
|
1313
|
Chip
|
210
|
3
|
200
|
0.1
|
0.1
|
|
1314
|
Chip
|
195
|
1.2
|
200
|
0.1
|
0.01
|
|
1295
|
Chip
|
340
|
3
|
164
|
0.0164
|
0.0164
|
|
1297
|
Chip
|
320
|
1.4
|
132
|
0.0132
|
0.0132
|
|
1315
|
Chip
|
200
|
2.9
|
100
|
0.01
|
0.01
|
|
1301
|
Chip
|
240
|
4
|
72
|
0.0072
|
0.0072
|
|
1303
|
Chip
|
200
|
6.4
|
67
|
0.0067
|
0.0067
|
|
1323
|
Chip
|
20
|
4
|
50
|
0.005
|
0.005
|
|
1304
|
Chip
|
150
|
3.7
|
46
|
0.0046
|
0.0046
|
2021
On
January 12, 2021 the Company announced the completion of a 980m
drilling program testing the so-called Pero area located at the
southeastern area of the Pulacayo project. The program was designed
to follow-up on the 2020 sampling program in the area. Field work in 2020
identified potential structural remobilization in this area that
might explain the erratic nature of mineralization within the Tajo
Vein System as it occurs in this area of the property. A summary of
results from this drilling is tabulated below:
|
|
|
|
|
|
|
|
|
|
PUD285
|
30.6
|
44.6
|
14.0
|
43
|
0.19
|
0.02
|
46
|
|
PUD
285
|
143.0
|
191.0
|
48.0
|
10
|
0.11
|
0.17
|
23
|
|
PUD
286
|
99.0
|
124.0
|
25.0
|
18
|
0.33
|
0.09
|
32
|
|
PUD
286
|
148.0
|
152.0
|
4.0
|
393
|
3.79
|
0.88
|
518
|
|
PUD
286
|
174.0
|
183.0
|
9.0
|
20
|
0.13
|
0.05
|
25
|
|
PUD
287
|
56.0
|
78.0
|
22.0
|
43
|
0.23
|
0.02
|
48
|
|
PUD
287
|
127.0
|
139.0
|
12.0
|
15
|
0.01
|
0.01
|
15
|
*Ag Eq. = Silver Equivalent (Recovered) = (Ag
g/t*89.2%)+((Pb%*(US$0.95/lb. Pb/14.583 Troy oz./lb./US$17 per Troy
oz. Ag)*(10,000*91.9%))+((Zn%*(US$1.16/lb. Zn/14.583 Troy
oz./lb./US$17 per Troy oz. Ag)*(10,000*82.9%)). Sulphide zone metal
recoveries of 89.2% for Ag, 91.9% for Pb, and 82.9% for Zn were
used in the Silver Equivalent (Recovered) equation and reflect
metallurgical testing results disclosed previously for the Pulacayo
Deposit. Reported widths are intercepted core lengths and not true
widths, as relationships with intercepted structures and contacts
vary. Based on core-angle measurements, true widths range from 75%
to 85% of the reported core length.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
On June 21, 2021 the Company commenced a 2000m drilling program on
the project. Based on the favorable results of an ongoing
108-km-line Induced Polarization (“IP”) geophysical
survey, the Company testing a large linear anomaly measuring 1,400
meters in length, and up to 250 meters wide. The IP anomaly has
never been drilled and is situated parallel to the main 3 km
east-west trending Tajo vein system (TVS), which is just 300 meters
to the south. Initial drill targets included El Abra, Veta Quatro,
and Pacamayo—all of which exhibit high chargeability that
starts shallow and runs vertically to at least 600 meters (IP
detection limit) at depth. The program is ongoing as of
writing.
During
the six months ended June 30, 2021, the Company incurred total
costs of $1,291,398 (six month ended June 30, 2020 - $1,092,548)
for the Pulacayo Project including $1,055,286 (six months ended
June 30, 2020 - $939,675) for geological and engineering services,
$230,912 (six months ended June 30, 2020 - $152,873) for personnel,
legal, general and administrative expenses and $5,200 (six months
ended June 30, 2020 - $Nil) for fees and permits.
The
Company also reports that the national COVID-19 quarantine in
Bolivia was lifted in late-June of 2020. The Company has resumed
its work schedule and commenced an exploration program at the
Pulacayo Project consisting of geological mapping of the property.
Work will continue as planned; however, the Company will follow the
guidance of federal and local authorities in Bolivia with regards
to COVID-19.
2021 Outlook
The
Company’s 2021 Pulacayo objectives are:
●
Complete
district geological mapping over entire property;
●
Complete
induced polarization (geophysics) survey over the entire
property;
●
Evaluate
field data to generate drilling targets over property;
●
Commence
diamond drilling program testing priority targets on
property.
SUNAWAYO PROJECT, BOLIVIA
On
September 8, 2020, the Company announced that it had entered the
Sunawayo SPA, a binding sales and purchase agreement with the
Sunawayo Vendor to acquire the Sunawayo Project, a silver-lead
mining project located immediately adjacent to the Malku Khota
silver project in Bolivia.
The
Sunawayo Project is patented land which the Company has secured
rights to explore through the Sunawayo SPA, whereas Malku Khota is
unpatented land administered by COMIBOL. In January of 2020, the
Company applied for a mining production contract with COMIBOL that
would give it the rights to mine and explore Malku Khota. The
application was received by COMIBOL and is currently under review.
While the Company is engaging with COMIBOL to advance this process,
the Company has not been provided with any timelines for any
eventual approval. There are currently no existing resources or
reserves on the Sunawayo property, and it remains an exploration
stage project.
The
purchase agreement of the Sunawayo Project includes a fully
permitted 100 ton-per-day open-pit mining operation that produces
lead concentrate. The Sunawayo Project has a strike of 17
kilometers which covers 59.5 square kilometers of prospective area.
The Sunawayo Project has ready access to water and power and is
located 165 kilometers by road from Bolivia’s 5th largest
city, Oruro.
Subject
to the provisions of the Sunawayo SPA, the Sunawayo Vendor agreed
to transfer the mining rights of the Sunawayo Project to the
Company upon the Company paying it US$6,500,000. That payment
consists of US$300,000 that was paid to the Sunawayo Vendor upon
execution of the Sunawayo SPA with the remaining US$6,200,000 to be
paid in cash over a one-year period in twelve equal monthly
installments, starting March 1, 2021. The Company has suspended the
March 2021 installment and all proceeding installments while it
verifies that the vendor is in compliance of Bolivia’s
jurisdictional regulations.
The
Company commenced the maiden drilling program for the Sunawayo
project in January 2021. The first 2 drillhole results were
received in February 2021 and announced on February 24th, 2021. The
first drill hole intercepted 137 meters of mineralization grading
36 g/t silver, starting from 0 meters-depth. The second drill hole
intercepted 31 meters of mineralization grading 44 g/t silver,
0.39% lead, and 0.48% zinc from 1 meter-depth Drilling continued to
March 2021 with a total of 10 completed holes on the project.
SWD010 intercepted 3 meters of mineralization grading 421 g/t
silver, 0.92% lead, and 0.90% zinc (469 g/t AgEq) within 10 meters
grading 144 g/t silver, 0.43% lead, and 0.97% zinc (183 g/t AgEq).
SWD009 intercepted 2 meters of mineralization grading 50 g/t
silver, 0.40% lead, and 7.67% zinc (290 g/t AgEq). Notable
concentrations of Indium and Gallium were also reported in the same
drillholes on May 6th, 2021. While a
15-hole program was announced no further drilling was conducted as
due diligence requiring the pending verification of the status of
Sunawayo title and environmental permit by the vendor, as announced
on May 21, 2021.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
For
further information please view the Company’s news releases
available under the Company’s SEDAR profile at
www.sedar.com.
During
the six months ended June 30, 2021, the Company incurred total
exploration costs of $692,822 (six months ended June 30, 2020 -
$Nil) for the Sunawayo Project.
The
Company’s 2021 Sunawayo objectives are currently paused as it
verifies the vendor’s compliance status with Bolivia’s
regulatory requirements.
TRIUNFO PROJECT, BOLIVIA
On July
13, 2020, the Company executed the Triunfo Agreement with the Triunfo Vendor.
The Triunfo Agreement provides the Company with the Triunfo Rights
(consisting of the Exploration Right and the Purchase Right) with
respect to the Triunfo Project. The Purchase Right can be exercised
at any time after the Triunfo Vendor completes the required
Bolivian administrative procedures for the Triunfo Project
(expected to occur no later than March 2021) until July 13, 2025,
or such further period as the parties may agree. To secure the
Triunfo Rights, the Company paid the Triunfo Vendor US$100,000 upon
execution of the Triunfo Agreement. Until the Company exercises its
Purchase Right, beginning in 2021 the Company must pay the Triunfo
Vendor US$50,000 on June 15 of each year (2021 – paid) to
maintain the Triunfo Rights. The Company may elect to terminate the
Triunfo Agreement at any time. If the Company exercises the
Purchase Right, the Triunfo Vendor will maintain the Residual
Interest. Upon exercise of the Purchase Right, the Company may make
a lump sum payment to the Triunfo Vendor at any time to reduce some
or all of the Residual Interest as follows:
- the
Residual Interest may be extinguished for US$300,000;
- the
Residual Interest may be reduced to 4% for US$250,000;
- the
Residual Interest may be reduced to 3% for US$200,000;
- the
Residual Interest may be reduced to 2% for US$150,000;
or
- the
Residual Interest may be reduced to 1% for US$100,000.
The
Triunfo Project area covers approximately 256 hectares located in
the La Paz Department, which is located about 75 kilometers to the
east of the city of La Paz, Bolivia. The Triunfo Project has access
to power and water and is accessible by road year-round. The
Triunfo Vendor maintains a positive relationship with the local
community. Exploration was conducted in 2005 through 2007 by
Solitario Resources, which made 3 drill holes, all of which
intercepted mineralization. Only 20% of the Triunfo Project was
explored by Solitario.
The
mineralization is characterized by pyrite, arsenopyrite, galena,
and sphalerite and carries gold, silver, and zinc and lead in
various proportions. Mineralization outcrops at the surface and
continues for at least 750 meters in three discrete blocks, known
as A, B, and C. The mineralized blocks have widths varying from 20
meters to 150 meters and are locally displaced for several meters
by north-east trending faults. In the past decade, some artisanal
mining has been developed where gold mineralization has been
identified. Those areas have been principally mined for
gold.
The
Triunfo Project contains polymetallic vein-style mineralization
hosted in metasediments of the Silurian and Devonian periods. The
metasediments were intruded by nearby plutonic batholiths which are
likely related to the mineralizing event. This style of
mineralization is well documented in Bolivia. Examples include
Cerro Rico and Porco, located in and around Potosi. Several dozen
chip samples were taken from the surface and tunnels at Triunfo in
late-May 2020. The sampling returned significant results from both
blocks.
The
following table shows the assay results, equal to and over 1.0 g/t
Au Equivalent which represent over 36% of the samples (37 /
103).
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
El Triunfo Chip Channel Results Returning 1g/t AuEq* or
greater
|
|
|
Type
|
|
|
|
|
|
|
|
|
46506
|
A
|
chip
channel
|
3.9
|
2
|
113
|
3.46
|
0.12
|
8
|
814
|
|
46505
|
A
|
chip
channel
|
2
|
4
|
29
|
1.34
|
0.06
|
8
|
806
|
|
46504
|
A
|
chip
channel
|
2.1
|
1
|
69
|
2.52
|
1.82
|
6
|
547
|
|
46503
|
A
|
chip
channel
|
2.2
|
1
|
64
|
1.93
|
0.13
|
5
|
465
|
|
46502
|
A
|
chip
channel
|
3.8
|
1
|
55
|
2.34
|
1.08
|
4
|
415
|
|
46501
|
A
|
chip
channel
|
2.3
|
0
|
75
|
2.61
|
1.29
|
4
|
406
|
|
46299
|
A
|
chip
channel
|
2.8
|
2
|
25
|
0
|
0.02
|
4
|
385
|
|
46298
|
A
|
chip
channel
|
2.3
|
1
|
35
|
1.42
|
1.76
|
4
|
366
|
|
46297
|
A
|
chip
channel
|
2
|
2
|
40
|
0
|
0.01
|
4
|
358
|
|
46296
|
A
|
chip
channel
|
2.4
|
1
|
96
|
0
|
0.01
|
3
|
304
|
|
46295
|
A
|
chip
channel
|
2.1
|
2
|
6
|
0
|
0
|
3
|
293
|
|
46294
|
A
|
chip
channel
|
3
|
0
|
46
|
2.88
|
0.14
|
3
|
289
|
|
46293
|
A
|
chip
channel
|
1.3
|
1
|
15
|
0.34
|
0.03
|
3
|
284
|
|
46292
|
A
|
chip
channel
|
2.6
|
1
|
75
|
0
|
0.04
|
3
|
270
|
|
46291
|
A
|
chip
channel
|
2
|
0
|
42
|
1.88
|
0.45
|
3
|
265
|
|
46290
|
A
|
chip
channel
|
2
|
0
|
47
|
1.76
|
0.1
|
3
|
251
|
|
46289
|
A
|
chip
channel
|
1
|
1
|
31
|
0.54
|
0.02
|
2
|
238
|
|
46288
|
A
|
chip
channel
|
1.7
|
0
|
20
|
0.53
|
2.23
|
2
|
218
|
|
46287
|
A
|
chip
channel
|
1
|
1
|
30
|
0.35
|
0.11
|
2
|
210
|
|
46286
|
A
|
chip
channel
|
3.4
|
1
|
14
|
0
|
0
|
2
|
209
|
|
46285
|
A
|
chip
channel
|
3
|
1
|
5
|
0
|
0
|
2
|
207
|
|
46284
|
A
|
chip
channel
|
2
|
0
|
25
|
1.02
|
0.37
|
2
|
206
|
|
46283
|
A
|
chip
channel
|
2.2
|
1
|
6
|
0
|
0
|
2
|
178
|
|
46282
|
A
|
chip
channel
|
1.3
|
1
|
2
|
0
|
0
|
2
|
175
|
|
46281
|
A
|
chip
channel
|
1.5
|
0
|
42
|
0
|
0.01
|
2
|
168
|
|
46279
|
A
|
chip
channel
|
2.4
|
1
|
14
|
0
|
0
|
2
|
164
|
|
46278
|
A
|
chip
channel
|
2
|
0
|
17
|
0.59
|
0.41
|
2
|
151
|
|
46277
|
A
|
chip
channel
|
2.1
|
1
|
26
|
0
|
0
|
2
|
149
|
|
46276
|
A
|
chip
channel
|
2
|
0
|
16
|
0.54
|
0.23
|
1
|
126
|
|
46275
|
A
|
chip
channel
|
2
|
0
|
6
|
0.25
|
0.23
|
1
|
126
|
|
46274
|
A
|
chip
channel
|
4
|
1
|
2
|
0
|
0
|
1
|
118
|
|
46273
|
A
|
chip
channel
|
2.3
|
1
|
4
|
0
|
0
|
1
|
114
|
|
46272
|
A
|
chip
channel
|
2.9
|
1
|
4
|
0
|
0.01
|
1
|
109
|
|
46271
|
A
|
chip
channel
|
2
|
0
|
11
|
0.3
|
0.36
|
1
|
102
|
|
46270
|
A
|
chip
channel
|
2.4
|
0
|
9
|
0.02
|
0.02
|
1
|
97
|
|
46269
|
A
|
chip
channel
|
2.5
|
0
|
23
|
0.25
|
0.46
|
1
|
95
|
(*)
Gold equivalent calculation uses a gold price of $1,795, a zinc
price of $0.93, a lead price of $0.80, and a silver price of $18.30
(all USD), and assumes a 100% metallurgical recovery. Gold
equivalent values can be calculated using the following formula:
AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x
0.3055). Silver equivalent calculation uses a silver price of
$25.00/oz, a zinc price of $1.10/lb., a lead price of $0.80/lb.
(all USD), and assumes a 100% metallurgical recovery. Silver
equivalent values can be calculated using the following formula:
AgEq = Ag g/t + (Zn % x 30.1644 ) + (Pb % x 21.9377).
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Denser
sets of veins and veinlets hosted by shales and quartzites appear
to correlate with higher grades. The strike lengths of these
mineralized trends have been recognized as continuing along several
hundreds of meters at surface.
On November 25, 2020, the Company announced that further to the
news release dated August 19, 2020, it has received the complete
assay results from the Company’s first diamond drill program
at its 100%-controlled El Triunfo Au-Ag-Zn-Pb project in
Bolivia.
Borehole TR007 intercepted 48.9 meters of mineralization grading
0.42 g/t gold, 35.5 g/t silver, 1.17% zinc, and 0.83% lead (1.45
g/t AuEq) within 98.9 meters of mineralization grading 1.04 g/t
AgEq starting 13.0 meters downhole.
Notable highlights include
|
Hole
ID
|
|
|
|
|
|
|
|
|
|
TR006
|
40.0
|
76.0
|
36.0
|
0.49
|
15.46
|
0.54
|
0.44
|
0.97
|
|
including…
|
58.0
|
72.0
|
14.0
|
0.48
|
20.23
|
0.76
|
0.66
|
1.16
|
|
TR007
|
13.0
|
111.9
|
98.9
|
0.37
|
22.71
|
0.74
|
0.58
|
1.04
|
|
including…
|
63.0
|
111.9
|
48.9
|
0.42
|
35.49
|
1.17
|
0.83
|
1.45
|
|
TR008
|
6.8
|
84.0
|
77.3
|
0.31
|
17.65
|
0.57
|
0.53
|
0.85
|
|
including…
|
45.0
|
51.4
|
6.4
|
1.60
|
56.49
|
1.66
|
0.94
|
3.05
|
(*) Gold equivalent calculation uses a gold price of $1,795, a zinc
price of $0.93, a lead price of $0.80, and a silver price of $18.30
(all USD) and assumes a 100% metallurgical recovery. Gold
equivalent values can be calculated using the following formula:
AuEq = Au g/t + (Ag g/t x 0.0102) + (Zn % x 0.3551) + (Pb % x
0.3055).
Mineralization is hosted in altered black shales exhibiting
hydrothermal sheeted quartz-carbonate vein sets that are
concentrated along the axes of regional anticlinal fold
structures.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Assay results are detailed in the table below:
|
Hole
ID
|
|
|
|
|
|
|
|
|
| From |
To |
Length (m)
|
Au
(g/t) |
Ag (g/t)
|
Zn %
|
Pb %
|
AuEq* (g/t)
|
|
TR004
|
|
15.0
|
1.0
|
0.24
|
|
0.21
|
0.65
|
0.70
|
|
|
18.0
|
1.0
|
0.74
|
|
0.03
|
0.04
|
0.78
|
|
7.0
|
74.0
|
3.0
|
1.11
|
|
0.00
|
0.00
|
1.16
|
|
TR005
|
61.0
|
62.0
|
1.0
|
0.59
|
8.00
|
0.00
|
0.01
|
0.67
|
|
122.0
|
124.0
|
2.0
|
0.50
|
2.29
|
0.01
|
0.02
|
0.53
|
|
TR006
|
5.0
|
6.0
|
1.0
|
0.73
|
3.19
|
0.10
|
0.13
|
0.84
|
|
20.0
|
21.0
|
1.0
|
0.15
|
11.10
|
0.35
|
0.29
|
0.48
|
|
40.0
|
76.0
|
36.0
|
0.49
|
15.46
|
0.54
|
0.44
|
0.97
|
|
including…
|
58.0
|
72.0
|
14.0
|
0.48
|
20.23
|
0.76
|
0.66
|
1.16
|
|
TR006
|
94.5
|
101.5
|
7.0
|
0.56
|
23.21
|
0.82
|
0.56
|
1.26
|
|
106.5
|
107.4
|
0.8
|
0.32
|
12.70
|
0.25
|
0.01
|
0.54
|
|
120.0
|
121.0
|
1.0
|
0.07
|
15.90
|
0.50
|
0.67
|
0.62
|
|
142.8
|
143.3
|
0.5
|
0.60
|
0.43
|
0.00
|
0.00
|
0.61
|
|
190.0
|
191.3
|
1.3
|
0.72
|
89.58
|
2.07
|
0.16
|
2.42
|
|
TR007
|
13.0
|
111.9
|
98.9
|
0.37
|
22.71
|
0.74
|
0.58
|
1.04
|
|
including…
|
63.0
|
111.9
|
48.9
|
0.42
|
35.49
|
1.17
|
0.83
|
1.45
|
|
TR007
|
118.5
|
119.5
|
1.0
|
0.03
|
4.55
|
0.17
|
0.53
|
0.30
|
|
121.5
|
122.5
|
1.0
|
0.30
|
3.69
|
0.07
|
0.46
|
0.50
|
|
125.5
|
126.3
|
0.8
|
0.56
|
3.18
|
0.09
|
0.03
|
0.63
|
|
179.0
|
181.0
|
2.0
|
1.05
|
1.38
|
0.01
|
0.01
|
1.07
|
|
185.6
|
186.2
|
0.6
|
0.44
|
5.69
|
0.02
|
0.01
|
0.51
|
|
196.0
|
197.0
|
1.0
|
0.74
|
1.46
|
0.00
|
0.00
|
0.76
|
|
TR008
|
6.8
|
84.0
|
77.3
|
0.31
|
17.65
|
0.57
|
0.53
|
0.85
|
|
including…
|
45.0
|
51.4
|
6.4
|
1.60
|
56.49
|
1.66
|
0.94
|
3.05
|
|
TR008
|
138.1
|
139.1
|
1.0
|
0.71
|
0.90
|
0.01
|
0.00
|
0.72
|
|
149.0
|
151.0
|
2.0
|
0.10
|
22.73
|
0.78
|
0.03
|
0.61
|
|
156.0
|
157.0
|
1.0
|
0.74
|
1.33
|
0.02
|
0.01
|
0.76
|
|
183.0
|
183.6
|
0.6
|
1.65
|
2.62
|
0.02
|
0.01
|
1.69
|
|
231.6
|
232.6
|
1.0
|
0.41
|
4.50
|
0.00
|
0.00
|
0.46
|
|
247.5
|
250.0
|
2.5
|
1.64
|
35.99
|
0.00
|
0.00
|
2.01
|
|
257.0
|
258.0
|
1.0
|
0.78
|
2.15
|
0.00
|
0.00
|
0.80
|
*See Notes on gold equivalent (AuEq) calculations and metals prices
above.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Reported widths in all tables are intercepted core lengths and not
true widths, as relationships with intercepted structures and
contacts vary. Based on core-angle measurements, true widths range
from 54% to 65% of reported core length. Reported results do
not define a mineral resource and it is uncertain if further
exploration will result in the delineation of mineral
resource.
As the next step, the Company will integrate those results with
planned district geological
mapping and geophysics such as induced polarization (IP).
Commencement of next round of El
Triunfo drilling is tentatively scheduled for second half of
2021.
During
the six months ended June 30, 2021, the Company incurred consulting
costs of $44,572 (six months ended June 30, 2020 - $Nil) for the
Triunfo Project.
The
Company’s 2021 Triunfo objectives are:
●
Conduct geological
and structural mapping over the property;
●
Complete induced
polarization (geophysics) survey over the property;
●
Generate drilling
targets from ground work; and
●
Test targets with
diamond drilling program.
GIBELLINI PROJECT, NEVADA, USA
The
Company holds, as a claim holder or through leasehold assignments,
a 100% interest in the claims comprising the Gibellini Project,
which the Company aims to make the first operating primary vanadium
mine in North America. The Gibellini Project is situated on the
south east flank of the Fish Creek Range in the Fish Creek Mining
District, about 25 miles south of Eureka, Nevada.
The
Gibellini Project consists of a total of 601 unpatented lode mining
claims that includes: the Gibellini group of 40 claims, the VC
Exploration group of 105 claims, and the Company group of 456
claims, which includes 201 Bisoni claims. The Gibellini Project is
located in Eureka County, Nevada, as well as 22 of the Bisoni group
of claims, with the remaining 179 claims extending from the Eureka
country border southwest into Nye County, Nevada.
The
Company is working to bring the Gibellini Project into production
in order to address the supply-demand gap for vanadium projected to
2023. The projected demand is largely driven by higher rebar
standards imposed by the Chinese government which is intensified by
increasing demand for vanadium redox flow storage batteries. The
supply is restricted by China’s improved
environmental-standards on its vanadium mining and processing. The
supply-demand gap is expected to affect all uses of vanadium
including steel manufacture, high tech applications and large
capacity vanadium redox flow batteries.
The
Gibellini Project is situated on the south east flank of the Fish
Creek Range in the Fish Creek Mining District, about 25 miles south
of Eureka, Nevada and is accessed by dirt road extending westward
from State Route 379.
The
Gibellini group of claims were acquired on June 22, 2017, through
leasehold assignments from the claimant and then-holder of the
Gibellini mineral claims (the “Gibellini Lessor”) and includes an
area of approximately 771 acres. Under the Gibellini mineral lease
agreement (the “Gibellini
MLA”), the Company leased this core group of claims,
which originally constituted the entire Gibellini Project, by,
among other things, agreeing to pay to the Gibellini Lessor annual
advance royalty payments. These payments are tied, based on an
agreed formula not to exceed US$120,000 per year, to the average
vanadium pentoxide price of the prior year (each an "Advance Royalty Payment"). Upon
commencement of production, the obligation to make Advance Royalty
Payments will cease and the Company will instead maintain its
acquisition through the lease of the Gibellini group of claims by
paying to the Gibellini Lessor, a 2.5% net smelter return royalty
(the “Gibellini
NSR Payments”) until a
total of US$3 million is paid. Thereafter, the Gibellini NSR will
be reduced to 2% over the remaining life of the mine ( referred to
thereafter, as “Production
Royalty Payments”). Upon commencement of production,
any Advance Royalty Payments that have been made will be deducted
as credits against the Gibellini NSR Payments or Production Royalty
Payments, as applicable. The lease is for a term of 10 years,
expiring on June 22, 2027, which can be extended for an additional
10 years, at the Company’s option.
On
April 19, 2018, the Gibellini MLA was amended to grant the Company
the option, at any time during the term of the Gibellini MLA, which
ends on June 22, 2027, to require the Gibellini Lessor to transfer
their title over all of the leased mining claims (excluding four
claims which will be retained by the Gibellini Lessor and which
contain minimal resource) to the Company in exchange for
USD1,000,000, which will be deemed an Advance Royalty
Payment.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The Company also entered into a lease agreement to acquire 10
unpatented lode claims totaling approximately 207 gross acres (the
“Former Louie Hill Claims”)
from their holders (the “Former Louie Hill Lessors”) on July 10,
2017 (the “Louie
Hill MLA”). The Former Louie Hill Claims
were located approximately 1600 feet south of the Gibellini
group of claims. The Former Louie Hill Claims were subsequently
abandoned by the Former Louie Hill Lessors, and on March 11 and 12,
2018, the Company staked the area within and under 17 new claims
totaling approximately 340 gross acres, which now collectively
comprise the expanded Louie Hill group of claims (the
“Current Louie Hill Claims”).
On
October 22, 2018, the Company entered into a royalty agreement (the
“Royalty
Agreement”) with the Former Louie Hill Lessors that
replaced, on substantially similar terms, the Louie Hill MLA. The
Royalty Agreement provides for payment by the Company to the Former
Louie Hill Lessors of both advance royalty payments and net smelter
return royalty payments. As with the Gibellini MLA, the advance
royalty payments are calculated based on an agreed formula relative
to the average vanadium pentoxide price for the prior year, for a
total amount not to exceed US$28,000 per year (the
“Louie Hill Advance Royalty Payments”). Upon commencement of
production, the obligation to make Louie Hill Advance Royalty
Payments will be replaced by a 2.5% net smelter return royalty (the
“Louie Hill NSR”) payable on vanadium
pentoxide produced from the area of the Former Louie Hill Claims
contained within the Current Louie Hill Claims.
The
Company may purchase three-fifths of the Louie Hill NSR at any time
for US$1 million, leaving the total Louie Hill NSR payable by the
Company at 1.0% for the remaining life of the mine. Any Louie Hill
Advance Royalty Payments that have been made at the time of the
commencement of production will be deducted as credits against
future payments under the Louie Hill NSR. The payments under the
Royalty Agreement will continue for an indefinite period and will
be payable as long as the Company, its subsidiaries, or any of
their permitted successors or assigns holds a valid and enforceable
mining concession over the area.
In December 2017, the Company expanded the land position at the
Gibellini Project, by staking a total of 198 new claims immediately
adjacent to the Gibellini claim group covering 4091 acres that are
sufficient to enable future vanadium mining, processing and
extraction.
On
February 15, 2018, the Company indirectly acquired
an additional 105 unpatented lode
mining claims located adjacent to its existing Gibellini
Project in Nevada,
USA through the indirect acquisition of VC Exploration (US) Inc, by
paying a total of $335,661 in cash and issuing the equivalent of
500,000 Common Share purchase warrants to
arm’s-length, private parties.
In September 2020, the Company acquired the Bisoni Project from
CellCube Energy Storage Systems Inc. (“Cellcube”). As consideration for the acquisition of
the Bisoni Project under the Bisoni Asset Purchase Agreement, the
Company issued 4 million Common Shares and paid $200,000
cash to Cellcube. Additionally, subject to TSX approval, if, on or
before December 31, 2023, the price of European vanadium pentoxide
on the Metal Bulletin (or an equivalent publication) exceeds US$12
a pound for 30 consecutive days, the Company will issue to Cellcube
additional Common Shares with a value of $500,000, calculated based
upon the 5-day volume weighted average price of the Common Shares
immediately following the satisfaction of the vanadium pentoxide
pricing condition.
The expanded Bisoni group of claims is located within the
same formation and lithologic units as the Gibellini group of
claims. The general geology in this area considered to be similar
to the Gibellini group of claims.
In August 2020 the Company expanded the land position at the
Gibellini Project, by staking a total 32 new claims adjacent to the
project.
On November 20, 2017, the Company filed an independent technical
report titled “Gibellini
Project Nevada, USA NI 43-101 Technical
Report” with an
effective date of November 10, 2017
(the ”2017
Gibellini Report”) prepared by
the Wood Group. The 2017 Gibellini Report was filed with
Canadian securities regulatory authorities and is available under
the Company’s SEDAR profile at www.sedar.com.
On June
25, 2018, the Company filed a technical report titled
“Gibellini Project
Eureka County, Nevada, NI 43-101 Technical Report on
Preliminary Economic Assessment” prepared by Mr. Kirk Hanson,
P.E., Technical Director, Open Pit Mining; Mr. Edward J.C. Orbock
III, RM SME, Principal Geologist and US Manager of Consulting; Mr.
Edwin Peralta, P.E., Senior Mining Engineer; and Mr. Lynton
Gormely, P.Eng., Consultant Metallurgist of Wood Group (the
“2018 Gibellini
PEA”). The
2018 Gibellini PEA has an effective date of May 29, 2018 and
is available under the Company’s SEDAR profile at
www.sedar.com. Each of the authors of the 2018 Gibellini PEA are
"independent" Qualified Persons within the meaning of
NI 43-101.
The
Gibellini Project is situated entirely on public lands that are
administered by the BLM. No easements or rights of way are required
for access over public lands. Rights-of-way would need to be
acquired for future infrastructure requirements, such as pipelines
and powerlines.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Gibellini Deposit Mineral Resource Estimate and 2018 Gibellini
PEA
On June 25, 2018, the Company filed the 2018 Gibellini PEA, which
provides an updated mineral resource estimate for the Gibellini
Project.
The 2018 Gibellini PEA replaces the 2017 Gibellini Report. The 2018
Gibellini PEA is preliminary in nature and includes inferred
mineral resources that are too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is no certainty that the
2018 Gibellini PEA results will be realized. Mineral resources are
not mineral reserves and do not have demonstrated economic
viability.
The 2018 Gibellini PEA disclosed an estimated 7.94 million tons at
a weighted average grade of 0.314% vanadium pentoxide
(“V2O5”)
in the measured category and 15.02 million tons at a weighted
average grade of 0.271% V2O5 in
the Indicated category leading to a total combined measured and
indicated mineral resource of 22.95 million tons at a weighted
average grade of 0.286% V2O5.
Total contained metal content of the measured and indicated mineral
resources is 131.34 million pounds V2O5.
The inferred mineral resource estimate is 14.97 million tons at a
weighted average grade of 0.175% V2O5.
The total contained metal content of the inferred mineral resource
estimate is 52.30 million pounds V2O5.
The table below contains a summary of the Gibellini deposit mineral
resource estimate (the "Gibellini
Deposit Mineral Resource Estimate"), which is derived
from the 2018 Gibellini PEA:
Gibellini Deposit Mineral Resource Estimate***
|
Confidence
Category
|
Domain
|
Cut-offV2O5 (%)
|
Tons(Mt)
|
GradeV2O5
(%)
|
ContainedV2O5 (Mlb)
|
|
Measured
|
Oxide
|
0.101
|
3.96
|
0.251
|
19.87
|
|
Transition
|
0.086
|
3.98
|
0.377
|
29.98
|
|
Indicated
|
Oxide
|
0.101
|
7.83
|
0.222
|
34.76
|
|
Transition
|
0.086
|
7.19
|
0.325
|
46.73
|
|
Total Measured and Indicated
|
|
|
22.95
|
0.286
|
131.34
|
|
Inferred
|
Oxide
|
0.101
|
0.16
|
0.170
|
0.55
|
|
Transition
|
0.086
|
0.01
|
0.180
|
0.03
|
|
Reduced
|
0.116
|
14.80
|
0.175
|
51.72
|
|
Total Inferred
|
|
|
14.97
|
0.175
|
52.30
|
***Notes:
1.
The
Qualified Person for the Gibellini Deposit Mineral Resource
Estimate is Mr. E.J.C. Orbock III, RM SME, an employee of the
Wood Group of companies. The
Gibellini Deposit Mineral Resource Estimate has an effective date
of May 29, 2018.
2.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
3.
Mineral resources are reported at various cut-off grades for oxide,
transition, and reduced material.
4.
Mineral
resources are reported within a conceptual pit shell that uses the
following assumptions: mineral resource V2O5
price:
$14.64/lb.; mining cost: $2.21/ton mined; process cost: $13.62/ton;
G&A cost: $0.99/ton processed; metallurgical recovery
assumptions of 60% for oxide material, 70% for transition material
and 52% for reduced material; tonnage factors of 16.86 ft3/ton for
oxide material, 16.35 ft3/ton for transition material and 14.18
ft3/ton for reduced material; royalty: 2.5% net smelter return
(NSR); shipping and conversion costs: $0.37/lb. An overall 40º
pit slope angle assumption was used.
5.
Rounding as required by reporting guidelines may result in apparent
summation differences between tons, grade and contained metal
content. Tonnage and grade measurements are in US units. Grades are
reported in percentages.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Louie Hill Deposit
The Louie Hill deposit lies approximately 1,600 ft south of the
Gibellini deposit.
The 2018 Gibellini PEA provides an inferred mineral resource of
7.52 million tons at a weighted average grade of 0.276% vanadium
pentoxide (V2O5).
The oxidation domains were not modeled. The total contained metal
content of the estimate is 41.49 million pounds
V2O5.
The table below summarizes the Louie Hill deposit mineral resource
estimate (the "Louie
Hill Deposit Mineral Resource Estimate"):
Louie Hill Deposit Mineral Resource Estimate***
|
|
|
|
|
|
|
Inferred
|
0.101
|
7.52
|
0.276
|
41.49
|
***Notes:
1.
The Qualified Person for the Louie Hill Deposit Mineral Resource
Estimate is Mr. E.J.C. Orbock III, RM SME, an employee of the Wood
Group of companies . The Louie Hill Deposit Mineral Resource
Estimate has an effective date of May 29, 2018. The resource model
was prepared by Mr. Mark Hertel, RM SME.
2.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
3.
Oxidation state was not modeled.
4.
Mineral
resources are reported within a conceptual pit shell that uses the
following assumptions: mineral resource V2O5
price:
$14.64/lb; mining cost: $2.21/ton mined; process cost: $13.62/ton;
G&A cost: $0.99/ton processed; metallurgical recovery
assumptions of 60% for mineralized material; tonnage factors of
16.86 ft3/ton for mineralized material, royalty: 2.5% net smelter
return (NSR); shipping and conversion costs: $0.37/lb. For the
purposes of the Louie Hill Deposit Mineral Resource Estimate, an
overall 40º slope angle assumption was
used.
5.
Rounding as required by reporting guidelines may result in apparent
summation differences between tons, grade and contained metal
content. Tonnage and grade measurements are in US units. Grades are
reported in percentages.
A total of 280 drill holes (about 51,265 ft) have been completed on
the Gibellini Project since 1946, comprising 16 core holes (4,046
ft), 169 rotary drill holes (25,077 ft; note not all drill holes
have footages recorded) and 95 reverse circulation holes (22,142
ft).
The vanadium-hosted argillite unit ranges from 175 to over 300 ft
thick and overlies gray mudstone and black shales. The argillite
has been oxidized to various hues of yellow and orange to a depth
of 100 ft and is believed to have been part an overall homogenous
black shale unit. Alteration (oxidation) of the rocks is classified
as one of three oxide codes: oxidized, transitional, and
reduced.
No significant work has been conducted on the Gibellini Project
since 2015, with some minor prospecting completed in October of
2018. The Company has not completed trenching or drilling
activities since its acquisition of the Gibellini
Project.
The power supply for the Gibellini Project site is assumed to be at
24.9 kV and supplied from a planned substation to be located near
Fish Creek Ranch. This substation would tap and step-down the 69kV
supply carried by the line to the nearby Pan Mine to 24.9kV and
place it on a line to the Gibellini Project. Negotiations with the
power utility, Mt. Wheeler Power, will need to be undertaken to
secure any future power supply contract and transmission line to
the site.
In conformance with BLM permitting requirements and Secretarial
Order 3355, the Company submitted a package of enhanced baseline
reports (the "Enhanced Baseline
Reports") on March 22, 2019.
Following the BLM review of the baseline reports, the Company
submitted the Gibellini Mine Plan of Operations
(the “Gibellini MPO”) to the Battle Mountain District office of
the BLM and the Reclamation Permit application to the State of
Nevada Division of Environmental Protection Bureau of Mining
Regulation and Reclamation on June 28, 2019.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The Gibellini MPO includes over 1,100 pages of detailed development
plans for the Gibellini Project exploration activities, open pit
mining operations and processing facilities to extract and recover
vanadium from the Gibellini deposit with stated average mine
production during the seven-year mine life of 15.7 million tons of
ore material containing 120.5 million pounds of vanadium. The
primary facilities include the: pit, waste rock disposal facility,
mine office, auxiliary facilities such as water and power, crushing
facilities and stockpile, heap leach pad, process facility, water
ponds, borrow areas, and mine and access roads. The Company
currently has no timeline to production.
In addition, the Gibellini MPO includes the following management
plans and engineering studies:
1. quality
assurance plan;
2. storm
water management plan;
3. adaptive
waste rock management plan;
4. monitoring
plan;
5. noxious
weed management plan;
6. spill
contingency plan;
7. feasibility
study level pit slope design;
8. heap
leach and waste rock dump facility stability report;
9. closure
plan;
10. water
management plan;
11. interim
closure plan;
12. transportation
plan;
13. radiation
protection plan;
14. climate
data and surface water hydrology;
15. seismic
hazard analyses; and
16. engineering
design criteria.
In August 2018, NewFields completed the Gibellini heap leach pad
and waste dump designs as part of an overall basic engineering
design led by M3 Engineering and Technology Corp
On October 31, 2019, the water pollution control permit and air
permit applications were submitted to the Nevada Division of
Environmental Protection (“NDEP “) incorporating the
Newfields and M3 Engineering design packages. The draft air permit
was posted for public comment on July 13, 2020.
2018 Gibellini PEA
On May
29, 2018, the Company received results of the 2018 Gibellini PEA
for the Gibellini Project. The 2018 Gibellini PEA reported an
after-tax cumulative cash flow of $601.5 million, an internal rate
of return of 50.8%, a net present value of $338.3 million at a 7%
discount rate and a 1.72 years payback on investment from start-up
assuming an average vanadium pentoxide price of $12.73 per pound.
As of May 29, 2018, the price of vanadium pentoxide was $14.20 per
pound according to www.asianmetal.com. The 2018
Gibellini PEA was prepared by Amec Foster Wheeler E&C Services
Inc, part of the Wood Group, and is based on the NI 43-101
compliant resource calculations reported above.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Highlights of the 2018 Gibellini PEA (after tax)
|
Internal rate of
return
|
50.8%
|
|
Net present value
(“NPV”)
|
US$338.3 million at
7% discount rate
|
|
Payback
period
|
|
|
Average annual
production
|
|
|
Average
V2O5 selling
price
|
|
|
Operating cash
cost
|
|
|
All-in sustaining
costs*
|
|
|
Breakeven
price**
|
|
|
Initial capital
cost including 25% contingency
|
|
|
Average
grade
|
0.26% V2O5
|
|
Strip
ratio
|
0.17
waste to leach material
|
|
Mining operating
rate
|
3.4
million tons (leach material and waste) per year
|
| Average
V2O5 recovery
through Direct Heap Leaching |
62%
|
|
Life of
mine
|
|
*includes
selling costs, royalties, operating cash cost, reclamation,
exploration and sustaining capital costs.
**includes
selling costs, royalties, operating cash costs, taxes (local,
state, and federal), working capital, and sustaining and capital
costs.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The
2018 Gibellini PEA is preliminary in nature and includes inferred
mineral resources that are considered too speculative geologically
to have the economic considerations applied to them that would
enable them to be categorized as mineral reserves, and there is no
certainty that the 2018 Gibellini PEA will be realized. Mineral
resources are not mineral reserves and do not have demonstrated
economic viability.
Sensitivity Analysis
The
tables below show the sensitivity analysis to the vanadium
pentoxide price, grade, and to the 2018 Gibellini PEA capital cost
and operating costs. This sensitivity analysis indicates strong
project economics even in very challenging conditions, and that the
project is well positioned to benefit from the current rising
vanadium price environment. A 20% increase in the vanadium price
relative to the base case translates to a US$491.3 million
after-tax NPV at a 7% discount rate.
Sensitivity Analysis
|
|
|
|
|
|
|
30%
|
16.55
|
69%
|
568.0
|
996.0
|
|
20%
|
15.28
|
63%
|
491.3
|
864.4
|
|
10%
|
14.00
|
57%
|
415.2
|
733.2
|
|
|
12.73
|
51%
|
338.3
|
600.4
|
|
-10%
|
11.46
|
44%
|
261.0
|
467.2
|
|
-20%
|
10.18
|
36%
|
183.1
|
333.2
|
|
-30%
|
8.91
|
26%
|
103.9
|
196.9
|
|
|
|
|
|
|
|
30%
|
0.34%
|
68%
|
554.4
|
972.8
|
|
20%
|
0.31%
|
63%
|
482.4
|
849.0
|
|
10%
|
0.28%
|
57%
|
410.7
|
725.4
|
|
|
0.26%
|
51%
|
338.3
|
600.4
|
|
-10%
|
0.23%
|
44%
|
265.6
|
475.0
|
|
-20%
|
0.21%
|
37%
|
192.2
|
348.9
|
|
-30%
|
0.18%
|
28%
|
118.3
|
221.6
|
|
|
|
|
|
|
|
30%
|
151.8
|
40%
|
307.2
|
564.3
|
|
20%
|
140.1
|
43%
|
317.6
|
576.3
|
|
10%
|
128.4
|
47%
|
328.0
|
588.4
|
|
|
116.8
|
51%
|
338.3
|
600.4
|
|
-10%
|
105.1
|
55%
|
348.6
|
612.5
|
|
-20%
|
93.4
|
61%
|
358.9
|
624.6
|
|
-30%
|
81.7
|
67%
|
369.3
|
636.8
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
|
|
|
|
|
|
|
30%
|
6.20
|
45%
|
257.9
|
450.2
|
|
20%
|
5.72
|
47%
|
284.8
|
500.3
|
|
10%
|
5.25
|
49%
|
311.6
|
550.4
|
|
|
4.77
|
51%
|
338.3
|
600.4
|
|
-10%
|
4.29
|
53%
|
364.8
|
650.0
|
|
-20%
|
3.82
|
55%
|
390.7
|
698.4
|
|
-30%
|
3.34
|
56%
|
416.0
|
745.4
|
Mining & Processing
Mining
at the Gibellini and Louie Hill deposits is planned to be a
conventional open pit mine utilizing a truck and shovel fleet
comprised of 100-ton trucks and front-end loaders. Average mine
production during the 13.5 year mine life is 3.4 million tons of
leach material (3 million tons) and waste (0.4 million tonnes) per
year at a strip ratio of 0.17. Mining is to be completed either
in-house or through contract, with the Company’s mining staff
overseeing the contracted mining operation and performing the mine
engineering and survey work if contract mining is
selected.
|
|
|
|
|
|
Metal
containedV2O5 (Mlb)
|
|
|
YR 1
|
2,600
|
400
|
—
|
0.291
|
17.440
|
10.633
|
|
YR 2
|
2,400
|
600
|
—
|
0.278
|
16.690
|
10.480
|
|
YR 3
|
1,760
|
1,240
|
—
|
0.310
|
18.580
|
12.067
|
|
YR 4
|
650
|
2,350
|
—
|
0.372
|
22.320
|
15.217
|
|
YR 5
|
310
|
2,680
|
10
|
0.366
|
21.950
|
15.185
|
|
YR 6
|
2,240
|
750
|
10
|
0.315
|
18.920
|
11.928
|
|
YR 7
|
3,000
|
—
|
—
|
0.316
|
18.980
|
11.394
|
|
YR 8
|
1,910
|
700
|
380
|
0.189
|
11.310
|
7.085
|
|
YR 9
|
690
|
1,220
|
1,090
|
0.216
|
12.940
|
8.023
|
|
YR 10
|
110
|
370
|
2,520
|
0.208
|
12.480
|
6.898
|
|
YR 11
|
450
|
360
|
2,180
|
0.182
|
10.910
|
6.103
|
|
YR 12
|
50
|
140
|
2,820
|
0.166
|
9.980
|
5.349
|
|
YR 13
|
390
|
10
|
2,600
|
0.183
|
10.970
|
5.839
|
|
YR 14
|
1,710
|
—
|
—
|
0.195
|
6.670
|
4.096
|
|
Totals:
|
18,290
|
10,830
|
11,590
|
0.258
|
210.15
|
130.297
|
The
processing method envisioned for the Gibellini Project will be to
feed leach material from the mine via loader to a hopper that feeds
the crushing plant. The leach material will then be fed to an
agglomerator where sulfuric acid, flocculent and water will be
added to achieve adequate agglomeration. The agglomerated leach
material will be transported to a stacker on the leach pad, which
will stack the material to a height of 15 feet. Once the material
is stacked, solution will be added to the leach heap at a rate of
0.0025 gallons per minute per square foot. The solution will be
collected in a pond and this pregnant leach solution will be sent
to the process building for metal recovery where it will go through
solvent extraction and stripping processes to produce the vanadium
pentoxide and a secondary yellowcake uranium.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Vanadium Recoveries and Metallurgical Testing
Approximately
130.3 million pounds of V2O5 and 336,000
pounds of uranium is expected to be produced from the
Gibellini Project heap leaching operations at an average vanadium
recovery of 62% (oxide: 60%, transition: 70% and reduced: 52%). The
heap leaching is performed at ambient temperature and atmospheric
pressure without pre-roasting or other beneficiation process. The
pregnant leach solution is continuously collected with leach
material undergoing, on average, a 150-day heap-leaching cycle. The
table below summarizes the projected metallurgical recoveries used
in the 2018 Gibellini PEA for the three defined oxidation-type
domains.
|
Mill Feed
Material Type
|
|
|
Oxide
|
60%
|
|
Transition
|
70%
|
|
Reduced
|
52%
|
The
direct heap leach vanadium recovery estimates used in the 2018
Gibellini PEA were based on extensive metallurgical testing work
performed by SGS Lakefield Research Laboratories, Dawson Minerals
Laboratories, and McClelland Laboratories ("McClelland"). Samples were selected from
a range of depths within the deposit, representative of the various
types and styles of mineralization. Samples were obtained to ensure
that tests were performed on a sufficient sample mass. The end
results demonstrated low acid consumption (less than 100 lb acid
consumption per ton leached) and high recovery through direct
leaching.
Capital and Operating Costs
The
projected capital costs for the Gibellini Project over a
one-and-a-half-year construction period and mine life average
operating costs are summarized in the two tables below. The capital
cost includes 25% contingency or USD23.4 million.
Pre-Production Capital Cost
|
|
|
|
Open
Pit Mine
|
|
Open pit mine
development
|
1,412
|
|
Gibellini
incremental WRSF
|
212
|
|
Mobile
equipment
|
111
|
|
Infrastructure-On
Site
|
|
Site
prep
|
2,431
|
|
Roads
|
1,391
|
|
Water
supply
|
2,007
|
|
Sanitary
system
|
61
|
|
Electrical –
on site
|
2,052
|
|
Communications
|
165
|
|
Contact water
ponds
|
174
|
|
Non-process
facilities – buildings
|
7,583
|
|
Process
Facilities
|
|
Mill feed
handling
|
15,380
|
|
Heap leach
system
|
20,037
|
|
Process
plant
|
14,441
|
|
Off-Site
Infrastructure
|
|
Water
system
|
4,495
|
|
Electrical supply
system
|
3,227
|
|
First
fills
|
860
|
|
Subtotal Total Direct Cost
|
76,039
|
|
Construction
indirect costs
|
4,254
|
|
Sales tax /
OH&P
|
4,236
|
|
EPCM
|
8,879
|
|
Total
Before Contingency
|
93,409
|
|
Contingency
(25%)
|
23,352
|
|
Total
Project Cost
|
116,761
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Operating Costs
Total Cash
Operating Cost
|
|
US$ per lb of
V2O5
Produced
|
|
G&A
|
0.99
|
0.31
|
|
Mining
Cost
|
2.72
|
0.85
|
|
Total Processing
Cost
|
11.54
|
3.61
|
|
Total
|
15.26
|
4.77
|
The
cash operating costs in the first half of the project covering
years 1-7 is US$3.59 per lb of V2O5 produced and
for the years 8-14 is US$7.12 per lb of V2O5 produced,
resulting in the weighted average cash cost of US$4.77 per lb of
V2O5 produced.
The cash operating cost is lower in the first half of the project
due to processing higher grade material.
Big Sky Prospect (300m by 50m)
The Big
Sky prospect occurs 3.1 kilometers southwest of the Gibellini Hill
measured and indicated resource and 1.8 kilometers southwest of the
Louie Hill inferred resource. A total of 62 samples were taken, of
which 40% (n=25) returned
assays greater than Gibellini cut-off grade. Sixteen (16) samples
returned assays >0.200 V2O5. The distribution of samples occurs
along a 300-meter exposure of the Woodruff Formation. Assays
showing >0.200 V2O5 are shown in table below.
V2O5% grab sample assay results at Big Sky prospect for samples
with >0.200%
|
SAMPLE
ID
|
Prospect
|
V2O5
%
|
|
301910
|
Big
Sky
|
0.261
|
|
301913
|
Big
Sky
|
0.223
|
|
301915
|
Big
Sky
|
0.346
|
|
301916
|
Big
Sky
|
0.400
|
|
301918
|
Big
Sky
|
0.712
|
|
301920
|
Big
Sky
|
0.264
|
|
301926
|
Big
Sky
|
0.580
|
|
301927
|
Big
Sky
|
2.008
|
|
301928
|
Big
Sky
|
0.848
|
|
301944
|
Big
Sky
|
0.264
|
|
301946
|
Big
Sky
|
0.280
|
|
301947
|
Big
Sky
|
0.218
|
|
301950
|
Big
Sky
|
0.261
|
|
302050
|
Big
Sky
|
0.214
|
|
302054
|
Big
Sky
|
0.787
|
|
302055
|
Big
Sky
|
1.982
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Middle Earth Prospect (200m by 70m)
The
Middle Earth prospect occurs 1.7 kilometers southeast of the
Gibellini Hill deposit and 300 meters south of the Louie Hill
deposit. A total of 50 samples were collected of which 68%
(n=34) returned assays
>0.101% V2O5 or the Gibellini cut-off grade. Twenty-seven (27)
samples returned assays >0.200 V2O5. The samples are distributed
over 3 road cuts of exposed Woodruff Formation making up a 200
meter by 70-meter areal footprint. Assays showing >0.200 V2O5
are shown in the following table.
V2O5% grab sample assay results at Middle Earth prospect for
samples with >0.200%
|
SAMPLE
ID
|
Prospect
|
V2O5
%
|
|
301951
|
Middle
Earth
|
0.350
|
|
301952
|
Middle
Earth
|
0.482
|
|
301968
|
Middle
Earth
|
0.628
|
|
301969
|
Middle
Earth
|
0.605
|
|
301970
|
Middle
Earth
|
0.634
|
|
301972
|
Middle
Earth
|
0.252
|
|
301973
|
Middle
Earth
|
0.687
|
|
301974
|
Middle
Earth
|
0.470
|
|
301975
|
Middle
Earth
|
0.612
|
|
301976
|
Middle
Earth
|
0.637
|
|
301978
|
Middle
Earth
|
0.559
|
|
301979
|
Middle
Earth
|
0.557
|
|
301980
|
Middle
Earth
|
0.259
|
|
301981
|
Middle
Earth
|
0.405
|
|
301983
|
Middle
Earth
|
0.255
|
|
301984
|
Middle
Earth
|
0.303
|
|
301985
|
Middle
Earth
|
0.434
|
|
301987
|
Middle
Earth
|
0.291
|
|
301988
|
Middle
Earth
|
1.294
|
|
301989
|
Middle
Earth
|
0.261
|
|
301991
|
Middle
Earth
|
0.314
|
|
301992
|
Middle
Earth
|
0.457
|
|
301993
|
Middle
Earth
|
0.380
|
|
301995
|
Middle
Earth
|
0.302
|
|
301998
|
Middle
Earth
|
0.539
|
|
301999
|
Middle
Earth
|
0.618
|
|
302000
|
Middle
Earth
|
0.532
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Northeast Trench Prospect (500m by 300m)
The
Northeast Trench prospect occurs 1.2 kilometers northeast of the
Gibellini Hill deposit and 2.5 kilometers northeast of the Louie
Hill deposit. A total of 43 samples were collected of which 37%
(n=16) returned assays
>0.101% V2O5 or the Gibellini cut-off grade. Three (3) samples
returned assays >0.200 V2O5. The samples are distributed through
road cuts (“trenches”) and dry gulches of exposed
Woodruff Formation making up a 500 meter by 350-meter areal
footprint. The exposure at the Northeast Trench is greatly obscured
by colluvium material however the extent where it is exposed might
indicate a large volume of Woodruff Formation yet to be explored.
Assays showing >0.200 V2O5 are shown in the following
table.
V2O5% grab sample assay results at Northeast Trench prospect for
samples with >0.200%
|
SAMPLE
ID
|
Prospect
|
V2O5
%
|
|
302004
|
NE
Trench
|
0.239
|
|
302005
|
NE
Trench
|
0.380
|
|
302016
|
NE
Trench
|
0.303
|
Water supply
On
August 20, 2018, the Company secured water supply for the
Gibellini Project construction and operation. The Company signed a
10-year agreement (the "Water
Supply Agreement") with the owner of a private ranch,
located approximately 14.5 kilometers from the Gibellini Project.
The Water Supply Agreement can be extended for any number of
additional 7-year terms, not to exceed (with the primary term) a
total of 99 years.
Under
the terms of the Water Supply Agreement, the lessor granted to the
Company the rights to 805 acre-feet (approximately 262.4 million
gallons) of water per year for the Gibellini Project, at a minimum
flow rate of 500 gallons per minute (“gpm”) from its year-round springs
surface water stream. The water flow rate was measured at the ranch
springs in 1965, in 1981, from December 2011 to September 2013, and
most recently, in 2017. The water flow rate ranges from 1,000 to
3,900 gpm with an average flow rate of 2,690 gpm, which exceeds the
project’s maximum water operational requirement of 420 gpm
based on the process engineering design prepared by Scotia
International of Nevada, Inc. as a part of engineering,
procurement, construction and management work done in
2014.license.
The
Gibellini Project completed water-related baseline studies
including the drilling of water-test wells, water source data
collection, characterization, flow rate testing and modeling. Due
to the fact that the Water Supply Agreement provides a source of
water from surface springs located on a private ranch and baseline
studies related to it have been completed, the Company expects to
significantly expedite the permitting process by eliminating the
need to appropriate water rights from the Nevada Division of Water
Resources.
Bisoni-McKay Claims and Historical Deposit
On
August 24, 2020 the Company announced it had commenced the
acquisition of the Bisoni-McKay Project from CellCube. This
transaction was successfully completed and announced on September
18, 2020. The Bisoni group of claims is host to a historic resource
known as the Bisoni-McKay deposit. The resource was calculated in
2016 by Edwin Ulmer and Edwin H. Bentzen III.
The
historic resource calculation adopted a 0.2% V2O5 cut-off grade and
utilized and inverse distance method with a search ellipsoid of 400
feet x 400 feet x 200 feet (x,y,z). A Qualified Person has not done
sufficient work to classify the historical estimate as current
mineral resources or mineral reserves. The Company is not treating
the historical estimate as current mineral resources or mineral
reserves. Full verification and validation of the project data by a
Qualified Person followed by Mineral Resource Estimate completed to
NI43-101 compliant standards will be required in order to upgrade
the historic estimate as current resources.
The
host rocks carrying vanadium mineralization at both the Gibellini
Project and Bisoni Project belong to the same Gibellini facies of
the Woodruff Shale Formation.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
There
exist several highly prospective exploration targets in between and
around the Gibellini and Bisoni McKay deposits (the two are 14
kilometers apart) along the northeast – southwest corridor
such as the Big Sky prospect, the Middle Earth prospect and the
North East prospect (from Gibellini Project) and BMK and BR zones
(from the Bisoni Project) all with outcropping surface vanadium
mineralization that could potentially ultimately lead to additional
vanadium mineral discoveries.
Offtake and Project Financing
The
Company has received unsolicited expressions of interest from
various potential investment sources and is currently engaged in
discussions with potential cornerstone investors, vanadium product
off-takers on potential equity, debt and prepaid off-take financing
possibilities. The Company expects to report material progress in
due course. Currently the Company has no timeline to production or
project financing.
Permitting
On October 31, 2019, the Company submitted permit
applications for the Water Pollution Control Permit and the Class
II Air Quality Permit. These Nevada state permits have been
developed to provide construction level engineering that supports
the mine plan previously submitted to the BLM in the Plan of
Operations. Comments received from the BLM were used as guidance in
the engineering design to ensure the State and Federal Permits are
aligned and reflect the most current guidance provided by both the
NDEP and BLM.
NDEP Water Pollution Control Permit
Mining
in Nevada is regulated under the authority of the Nevada Revised
Statutes (NRS) 445A.300-NRS 445A.730 and the Nevada Administrative
Code (NAC) 445A.350-NAC 445A.447. Water Pollution Control Permits
("WPCP") are issued to an
operator prior to the construction of any mining, milling, or other
beneficiation process activity. Facilities utilizing chemicals for
processing ores are required to meet a zero-discharge performance
standard such that waters of the State will not be
degraded.
The
engineering design for heap leaching, the processing facility, and
the mine design (M3 Engineering and Newfields Companies, LLC) was
integrated into to the site closure plan that was also submitted as
part of the WPCP application. This design will facilitate
concurrent closure of the heap as each heap cell is finished
leaching. This will allow the closure plan to be initiated during
operations. At the end of active mining, the site can be closed at
minimal technical risk. This reduces the closure duration and
liability and the commensurate reclamation bond.
Air Quality Class II Permit
The
Nevada Bureau of Air Pollution Control issues air quality operating
permits to stationary and temporary mobile sources that emit
regulated pollutants to ensure that these emissions do not harm
public health or cause significant deterioration in areas that
presently have clean air. This is achieved by stipulating specific
permit conditions designed to limit the amount of pollutants that
sources may emit into the air as a regular part of their business
processes.
Any
process/activity that is an emission source requires an air quality
permit. Nevada Revised Statute (NRS) 445B.155 defines an emission
source as “any property, real or personal, which directly
emits or may emit any air contaminant.”
The
Class II Permit for Gibellini is for facilities that emit less than
100 tons per year for any one regulated pollutant. Since the
vanadium processing will utilize a heap leach, the emissions will
be under the threshold for more complex air permits. The
engineering design incorporates stringent emission control
technology to minimize emissions. The modeled emissions from the
entire Gibellini Project are well below the National Ambient Air
Quality Standards (“NAAQS”).
The
Enhanced Baseline Reports (“EBR’s”) were extensively
used in the Project engineering design to ensure that potential
environmental impacts identified in the EBR’s would be
avoided or minimized by facility design. These engineering controls
help ensure that avoidance of potential environmental impacts is
“built into” the project from the start of the design
process. Doing so will allow environmental protection measures to
be taken to minimize the risk of impacts that cannot be completely
avoided in the design and ensure up-front project planning that is
sensitive to all environmental resources.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Integration with BLM 12-month 3355 Environmental Impact Statement
Process
The
Nevada state permit applications were brought forward in the
permitting process to identify any issues resulting from NDEP
review that could affect the project design in the plan of
operations early. By resolving the State permitting issues prior to
the start of the EIS, it will help ensure that the 12-month
schedule mandated by the BLM Secretarial Order 3355 (S.O. 3355) can
be met and interruptions to the schedule can be
avoided.
On July 14, 2020, the NOI to prepare the EIS was published in the
Federal Register. The NOI formally commences the 12-month timeline
to complete the National Environmental Policy Act review and EIS
preparation by the BLM. The NEPA process is designed to help public
officials complete permitting decisions that are protective of the
environment and includes a public engagement process.
A news release dated July 16, 2020 from the BLM Mount Lewis Office
stated the following: “If approved, this
project would provide hundreds of jobs and will contribute to the
nation’s domestic source of critical minerals,” said
Doug Furtado, Battle Mountain District Manager. “The
Gibellini mine would also be the first vanadium mine in the U.S.
and, in accordance with Secretarial Order 3355, we anticipate
having a record of decision in 12 months.
As there is currently no primary domestic production of vanadium,
the United States is dependent on foreign sources of vanadium; this
creates a strategic vulnerability for both the economy and military
to adverse government action or other events that can disrupt the
supply of this key mineral.”
The Company continues with its EPCM work and expects Phase 1 of the
EPCM, updating basic engineering design, to be completed by 2020;
Phase 2, equipment procurement and detailed engineering design, to
be completed in 2021; Phase 3, facilities construction, to start in
2022 and be completed in 2023 with the Gibellini Project wet
commissioning expected to be in 2023.
During
the six months ended June 30, 2021, the Company incurred total
costs of $1,373,213 (six months ended June 30, 2020 - $1,260,844)
for the Gibellini Project including of $799,963 (six months ended
June 30, 2020 - $488,392) for geological and engineering services,
$465,880 (six months ended June 30, 2020 - $704,706) for personnel,
legal, general and administrative expenses, and $107,370 (six
months ended June 30, 2020 - $67,746) for fees and
taxes.
2021 Outlook
The
Company intends to continue with the permitting process to obtain
necessary permits and authorizations prior to conducting
Project-related activities to ensure compliance with all applicable
regulatory requirements. The permits the Company expects to receive
are presented in the following table:
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Required Permits and Regulatory Authorizations for Gibellini
Project
|
Permits and
Authorizations
|
Regulatory
Agency
|
|
Plan of
Operations/Record of Decision
|
Bureau
of Land Management
|
|
Explosives
Permit
|
U.S.
Department of the Treasury, Bureau of Alcohol, Tobacco, and
Firearms
|
|
Surface
Disturbance Permit and Class II Air Quality Operating
Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Air Quality
|
|
Water
Pollution Control Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Mining Regulation and
Reclamation
|
|
Mining
Reclamation Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Mining Regulation and
Reclamation
|
|
Industrial
Artificial Pond Permit
|
Nevada
Department of Conservation and Natural Resources, Nevada Department
of Wildlife (NDOW)
|
|
Class
III Waiver Landfill Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Solid Waste
|
|
General
Discharge Permit (Stormwater)
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Water Pollution
Control
|
|
Hazardous
Materials Storage Permit
|
State
of Nevada, Fire Marshall Division
|
|
Hazardous
Waste Identification Number
|
United
States Environmental Protection Agency
|
|
Septic
Treatment Permit
Sewage
Disposal System Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Water Pollution
Control
|
|
Potable
Water System Permit
|
Nevada
Department of Conservation and Natural Resources, Division of
Environmental Protection, Bureau of Safe Drinking
Water
|
|
Radioactive
Materials License
|
Nevada
Department of Health and Human Services, Nevada State Health
Division, Radiological Health Section
|
|
Dam
Safety Permit
|
State
of Nevada Division of Water Resources
|
|
Local Permits
|
|
County
Road Use and Maintenance Permit/Agreement
|
Eureka
County Building Planning Department
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
In
addition to the ongoing permitting efforts, the Company announced
it has engaged Wood Plc to update the Preliminary Economic
Assessment in accordance with National Instrument 43-101 –
Standards of Disclosure for Mineral Projects (“NI
43-101”). The PEA will reflect updated costs and pricing for
the project.
Expected
costs associated with this process fall under General and
Administrative costs for the Company. The Company does not
anticipate that there will be any deficiencies or other factors
that will delay or prevent receipt of these permits.
The
Company’s 2021 Gibellini objectives are to:
●
explore off-take
options for vanadium products; and
●
complete the
permitting process and receive the Nevada permits described in the
table above.
MINAGO PROJECT, MANITOBA, CANADA
Silver Elephant Mining Corp. acquired Minago Nickel Project located
in Thompson nickel belt (“TNB”), Manitoba, Canada (the “Minago
Project”) in February 2021.
The Minago Project is located in the southern extent of
Manitoba’s TNB. Manitoba Provincial Highway 6 and a
high-voltage (230 kV) transmission line both transect the Minago
project area. Vale currently mines and produces nickel concentrates
in Thompson at the heart of the TNB, 270 km northeast of the Minago
project. Its nickel concentrates are shipped by rail to its Sudbury
smelter for processing to refined nickel.
The
2010 feasibility study completed on behalf of Victory Nickel Inc.
for the Minago Project is now historical in nature and no longer
applies. However, that study includes results of a metallurgical
test program that developed a sulphidic nickel head grade-recovery
curve for use in pit optimization and economic assessment of the
project. Flotation development tests and locked cycle tests (LCT)
were conducted on a master composite of open pit mineralization
samples having grades of 0.54% total Ni and 0.36% sulphidic Ni.
Results of this work indicated that a nickel concentrate containing
22.27% Ni and 10.43% MgO can be produced with an equivalent
sulphidic nickel recovery of 77.2% and a total nickel recovery of
52.3% (Feasibility Study, Minago Nickel Mine, dated March 4, 2010,
prepared by Wardrop Engineering Inc. for Victory Nickel Inc. and
filed on SEDAR by Victory Nickel Inc.). These historical
metallurgical results are relevant to ongoing evaluation of the
Minago Project, and the Company intends to thoroughly evaluate them
through a new metallurgical program that will support its plan to
move the Minago Project forward through feasibility assessment
leading to production.
On July 6, 2021, the Company announced results of a new mineral
resource estimate (“MRE”) for the Minago Project. The MRE
has an effective date of July 2, 2021 and includes a Measured and
Indicated mineral resource of 722 million lbs of contained nickel
and an Inferred mineral resource of 319 million lbs of contained
nickel. All resources occur within a mineral lease that is
surrounded by 94 mineral claims plus a second mineral lease held by
the Company, comprising a total area of 197 km2.
There are no known legal, political, environmental, or other risks
identified by the Company at the July 2, 2021 effective date that
would materially affect potential future development of the Minago
Project.
The MRE
was prepared by Mercator Geological Services Limited
(“Mercator”).
AGP Mining Consultants (“AGP”) provided pit optimization
and associated services. Stantec Ltd. (“Stantec”) provided site visit and
professional support on environmental permitting review. All three
firms are independent of Silver Elephant as defined under NI
43-101.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Table 1: Minago Project Mineral Resource Estimate – Effective
July 2, 2021
|
Type
|
Ni % Cut-off
|
Category
|
Rounded Tonnes
|
Ni %
|
Ni lbs (millions)
|
|
Open Pit
|
0.25
|
Measured
|
11,490,000
|
0.73
|
184.92
|
|
Indicated
|
12,450,000
|
0.69
|
189.39
|
|
Measured and Indicated
|
23,940,000
|
0.71
|
374.30
|
|
Inferred
|
2,070,000
|
0.57
|
26.01
|
|
Underground
|
0.5
|
Measured
|
610,000
|
0.81
|
10.89
|
|
Indicated
|
19,680,000
|
0.77
|
334.08
|
|
Measured and Indicated
|
20,290,000
|
0.77
|
344.97
|
|
Inferred
|
17,480,000
|
0.76
|
292.88
|
|
Combined
|
0.25/0.50
|
Measured
|
12,100,000
|
0.73
|
194.73
|
|
Indicated
|
32,130,000
|
0.74
|
524.17
|
|
Measured and Indicated
|
44,230,000
|
0.74
|
721.58
|
|
Inferred
|
19,550,000
|
0.74
|
318.94
|
See notes following Table 3
Table 2: Nose Zone Mineral Resource Estimate – Effective Date
July 2, 2021
|
Type
|
Ni % Cut-off
|
Category
|
Rounded Tonnes
|
Ni %
|
Ni lbs (millions)
|
|
Open Pit
|
0.25
|
Measured
|
11,490,000
|
0.73
|
184.92
|
|
Indicated
|
10,310,000
|
0.70
|
159.11
|
|
Measured and Indicated
|
21,800,000
|
0.72
|
344.02
|
|
Inferred
|
1,410,000
|
0.51
|
15.85
|
|
Underground
|
0.5
|
Measured
|
610,000
|
0.81
|
10.89
|
|
Indicated
|
13,870,000
|
0.80
|
244.62
|
|
Measured and Indicated
|
14,480,000
|
0.80
|
255.52
|
|
Inferred
|
10,610,000
|
0.80
|
187.13
|
|
Combined
|
0.25/0.50
|
Measured
|
12,100,000
|
0.73
|
194.73
|
|
Indicated
|
24,180,000
|
0.76
|
405.14
|
|
Measured and Indicated
|
36,280,000
|
0.75
|
599.88
|
|
Inferred
|
12,020,000
|
0.77
|
204.05
|
See notes following Table 3
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Table 3: North Limb Zone Mineral Resource Estimate –
Effective Date July 2, 2021
|
Type
|
Ni % Cut-off
|
Category
|
Rounded Tonnes
|
Ni %
|
Ni lbs (millions)
|
|
Open Pit
|
0.25
|
Measured
|
|
|
|
|
Indicated
|
2,140,000
|
0.65
|
30.67
|
|
Measured and Indicated
|
2,140,000
|
0.65
|
30.67
|
|
Inferred
|
660,000
|
0.70
|
10.19
|
|
Underground
|
0.5
|
Measured
|
|
|
|
|
Indicated
|
5,810,000
|
0.68
|
87.10
|
|
Measured and Indicated
|
5,810,000
|
0.68
|
87.10
|
|
Inferred
|
6,870,000
|
0.68
|
102.99
|
|
Combined
|
0.25/0.50
|
Measured
|
|
|
|
|
Indicated
|
7,950,000
|
0.67
|
117.43
|
|
Measured and Indicated
|
7,950,000
|
0.67
|
117.43
|
|
Inferred
|
7,530,000
|
0.68
|
112.89
|
Notes to accompany Tables 1, 2 and 3:
|
1. Mineral resources
were prepared in accordance with the CIM Definition Standards for
Mineral Resources and Mineral Reserves (MRMR) (2014) and CIM MRMR
Best Practice Guidelines (2019).
|
|
2. Open Pit mineral
resources are defined within an optimized pit shell with average
pit slope angles of 45⁰ and overall 13.3:1 strip ratio (waste
: mineralized material). The 13.3:1 strip ratio is comprised of
a 6.2:1 pre-strip component and a 7.1:1 deposit
component.
|
|
3. Pit optimization
parameters include: metal pricing at US$7.80/lb Ni, mining at
US$1.77/t, processing at US$7.62/t processed, G&A at US$3.33/t
processed, and an average sulphide Ni (NiS) recovery above the
cut-off grade of 78% (ranging from 40% to 90%), based on previous
metallurgical test programs. An average Ni recovery of 56% can be
calculated using the average NiS recovery and the average ratio of
NiS to Ni (72%) reported above the cut-off grade. Concentrate
by-product credits were applied at metal prices of US$3.25/lb (Cu),
US$2,000/oz Pd and US$ 1,000/oz Pt. A potential frac-sand
overburden unit was assigned a value of US $20/t, a recovery factor
of 68.8 %, mining cost of US $1.77/t, and processing cost of US
$6.55/t processed.
|
|
4. Open
Pit mineral resources are reported at a cut-off grade of 0.18 % NiS
within the optimized pit shell. The 0.18 % NiS cut-off grade
approximates a 0.25 % Ni grade when applying the average ratio of
total Ni to NiS for the mineral resource. The cut-off grade
reflects total operating costs used in pit optimization to define
reasonable prospects for eventual economic extraction by open pit
mining methods.
|
|
5. Underground
mineral resources are reported at a cut-off grade of 0.36 % NiS.
The 0.36 % NiS cut-off grade approximates a 0.50 % Ni grade when
applying the average ratio of total Ni to NiS for the mineral
resource. The cut-off grade reflects total operating costs of
US$41.72/t processed to define reasonable prospects for eventual
economic extraction by underground mining methods.
|
|
6. Ni
% deposit grade was estimated using Ordinary Kriging methods
applied to 2 m downhole assay composites. No grade capping was
applied. NiS % block values were calculated from Ni % block values
using a regression curve based on Ni and NiS drilling database
assay values. Model block size is 6 m (x) by 6 m (y) by 6 m
(z).
|
|
7. Bulk
density was applied on a lithological model basis and reflects
averaging of bulk density determinations for each
lithology.
|
|
8. Mineral
resources may be materially affected by environmental, permitting,
legal, title, taxation, sociopolitical, marketing, or other
relevant issues.
|
|
9. Mineral
resources are not mineral reserves and do not have demonstrated
economic viability.
|
|
10. Mineral
resource tonnages are rounded to the nearest 10,000.
|
During
the six months ended June 30, 2021, the Company incurred total
costs of $49,558 (six months ended June 30, 2020 - $Nil) for the
Minago Project including of $36,799 (six months ended June 30, 2020
- $Nil) for geological and engineering services, $8,172 (six months
ended June 30, 2020 - $Nil) for personnel, legal, general and
administrative expenses, and $4,587 (six months ended June 30, 2020
- $Nil) for fees and taxes.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Environment Act License
In August 2011, the Minago Project achieved a major milestone when
the Environment Act License (“EAL”) was issued by the
province of Manitoba. The prior operator of the project
subsequently filed a Notice of Alteration (NOA) to the EAL, in
December 2013, related to relocation of the tailings management
area to address First Nation concerns. The NOA process was not
completed by the prior operator and remains outstanding. Since
acquiring the project in February 2021, Silver Elephant has
re-engaged the Manitoba Government regarding the NOA status for the
10,000 tonne-per-day open-pit mining operation at Minago. The ARDD
has confirmed that the NOA can still be completed and the Company
is currently working with ARDD to finalize the NOA approval,
leading to issuance of an updated Environment Act License, which is
tentatively expected by the end of 2021.
A
socioeconomic assessment was conducted, and the prior operator
signed a Memorandum of Understanding (MOU) with each of the
Pimichikamak Cree Nation (Cross lake), Mosakahiken First Nation
(Moose Lake), and Misipawistik Cree Nation (Grand Rapids). The
Company is re-engaging the First Nations with traditional
territories that include the project site, including the Norway
House Cree Nation, to work toward inclusion and renewal of the MOUs
in 2021.
The Agriculture and Resource Development Department
(“ARDD”) has expressed support for the Minago Project,
which would supply much needed Class 1 high-purity nickel to make
nickel-lithium batteries used in electric vehicles.
Low Carbon Operation
Several
initiatives are being considered or taken to minimize the carbon
footprint of potential future mining operation at Minago. For
mining, the Company will examine the use of a fully electric mine
fleet and review the use of waste material to expose the serpentine
component to air to absorb carbon dioxide through carbonation. For
ore and waste processing, the crushing, milling and flotation
processes would be powered by renewable hydroelectricity, which
accounts for 97% of all electricity generation in
Manitoba.
5.
SUMMARY OF QUARTERLY
RESULTS
To
date, COVID-19 has not significantly impacted the Company’s
operations. Silver Elephant has
implemented extensive preventative measures across its offices and
operations in order to safeguard the health of its employees, while
continuing to operate safely and responsibly maintain employment
and economic activity.
The
following table summarizes selected consolidated financial
information prepared in accordance with IFRS for the eight most
recently completed quarters:
|
|
|
|
|
|
|
|
Q2
|
Q1
|
Q4
|
Q3
|
|
|
|
|
|
|
|
Operating
expense
|
$(1,095,037)
|
$(736,241)
|
$(809,912)
|
$(853,332)
|
|
Net
gain/(loss)
|
(1,686,135)
|
1,012,508
|
(2,259,661)
|
(1,037,332)
|
|
Net
gain/(loss) per share, basic and diluted
|
$(0.01)
|
$0.01
|
$(0.01)
|
$(0.01)
|
|
Comprehensive
gain/(loss )
|
(1,686,135)
|
1,012,508
|
(2,259,661)
|
(1,037,332)
|
|
Comprehensive
gain/(loss) per common share
|
$(0.01)
|
$0.01
|
$(0.01)
|
$(0.01)
|
|
|
|
|
|
|
|
|
2020
|
2020
|
2019
|
2019
|
|
|
Q2
|
Q1
|
Q4
|
Q3
|
|
|
|
|
|
|
|
Operating
expense
|
$(592,874)
|
$(1,137,998)
|
$(1,175,096)
|
$(715,475)
|
|
Net
gain/(loss)
|
(389,770)
|
(940,124)
|
12,475,952
|
(1,019,268)
|
|
Net
gain/(loss) per common share
|
$(0.01)
|
$(0.01)
|
$0.11
|
$(0.01)
|
|
Comprehensive
gain/(loss )
|
(389,770)
|
(940,124)
|
12,475,952
|
(1,019,268)
|
|
Comprehensive
gain/(loss)per common share
|
$(0.01)
|
$(0.01)
|
$0.11
|
$(0.01)
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
The
fluctuation on quarterly net gain/(loss) was primarily due to a
valuation of marketable securities, common Share-based compensation
expenses recognized as stock options granted to directors and
officers, advertising and promotion expenses, impairment losses
recognized on resource properties and debt
settlements.
Although
we have adjusted some of our operating procedures, to date our
operations have not been significantly impacted by
Covid-19.
The
reader is encouraged to refer to Note 6 of the Company’s
Annual Financial Statements for the year ended December 31, 2020
for the Company’s IFRS accounting policies. For discussion on
each project, the reader is encouraged to refer to the
“Property Summary” section of this
MD&A.
Results of operations for the six months ended June 30, 2021 and
2020
|
Operating Expenses
|
Three Months Ended June 30,
|
|
|
|
|
|
Advertising
and promotion
|
$121,667
|
$32,253
|
|
Consulting
and management fees
|
436,196
|
52,500
|
|
General
and administrative expenses
|
310,267
|
268,543
|
|
Professional
fees
|
72,633
|
152,752
|
|
Share-based
payments
|
152,971
|
139,834
|
|
Travel
and accommodation
|
1,303
|
21,992
|
|
|
$1,095,037
|
$667,874
|
The
Company had an operating loss of $1,831,278 for the six months
ended June 30, 2021, compared to an operating loss of $1,805,872
for the six months ended June 30, 2020.
Of note
are the following items:
●
advertising and
promotion expenses increased by $247,724 from $82,878 in the six
months ended June 30, 2020, to $330,602 in the six months ended
June 30, 2021 due to promotional services incurred to raise
awareness in the market for financing opportunities during the
current period;
●
consulting and
management fees increased by $48,696 from $440,000 in the six
months ended June 30, 2020 to $488,696 in the six months ended June
30, 2021, due to new company consultants were hired for the Minago
Project;
●
general and
administrative fees consisted of general office expenses and
administrative services related to maintaining the Company’s
exchange listings and complying with securities regulations,
insurance, and salaries and directors’ fees. General and
administrative expenses in the six months ended June 30, 2021
decreased by $39,876 from $619,459 in the six months ended June 30,
2020 to $579,583 in the six months ended June 30, 2021. The
decrease is a result of cost cutting initiatives across the
Company;
●
professional fees
decreased by $60,744, from $242,997 in the six months ended June
30, 2020, to $182,253 in the six months ended June 30, 2021 due to
a decrease in legal fees related to the equity financing in the
current period;
●
share-based
payments decreased in the six months ended June 30, 2021, by
$98,684 compared to the six months ended June 30, 2020. The
decrease was related to the decrease in the number of options
earned during the six months ended June 30, 2021, compared to the
six months ended June 30, 2020; and
●
travel and
accommodation expenses decreased by $71,710 from $77,513 in the six
months ended June 30, 2020, to $8,803 in the six months ended June
30, 2021, due to decreased site visits and restricted travels
during the COVID-19 pandemic.
For the
six months ended June 30, 2021, the Company’s “Other
Items” amounted to a gain of $1,157,651 compared to a gain of
$400,894 in the six months ended June 30, 2020.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
|
Other Items
|
Three Months Ended June 30,
|
|
|
|
|
|
Costs
in excess of recovered coal
|
$14,404
|
$16,602
|
|
Foreign
exchange gain
|
(23,306)
|
(219,706)
|
|
Fair
value loss on marketable securities
|
600,000
|
-
|
|
|
$591,098
|
$(203,104)
|
Results of operations for the three months ended June 30, 2021 and
2020
|
Operating Expenses
|
Six Months Ended June 30,
|
|
|
|
|
|
Advertising
and promotion
|
$330,602
|
$82,878
|
|
Consulting
and management fees
|
488,696
|
440,000
|
|
General
and administrative expenses
|
579,583
|
619,459
|
|
Professional
fees
|
182,253
|
242,997
|
|
Share-based
payments
|
244,341
|
343,025
|
|
Travel
and accommodation
|
5,803
|
77,513
|
|
|
$1,831,278
|
$1,805,872
|
The
Company had an operating loss of $1,095,037 for the three months
ended June 30, 2021, compared to an operating loss of $667,874 for
the three months ended June 30, 2020.
Of note
are the following items:
●
advertising and
promotion expenses increased by $89,414 from $32,253 in the three
months ended June 30, 2020, to $121,667 in the three months ended
June 30, 2021 due to promotional services incurred to raise
awareness in the market for financing opportunities during the
current period;
●
consulting and
management fees increased by $383,696 from $52,500 in the three
months ended June 30, 2020 to $436,196 in the three months ended
June 30, 2021, mainly due to a bonus payment to the management in
the current period;
●
general and
administrative fees consisted of general office expenses and
administrative services related to maintaining the Company’s
exchange listings and complying with securities regulations,
insurance, and salaries and directors’ fees. General and
administrative expenses in the three months ended June 30, 2021
increased by $41,724 from $268,543 in the three months ended June
30, 2020 to $310,267 in the three months ended June 30, 2021. The
increase was mainly due to accrued bonuses to the employees and
directors in the current period;
●
professional fees
decreased by $80,119, from $152,752 in the three months ended June
30, 2020, to $72,633 in the three months ended June 30, 2021 due to
decreased legal fees related to the equity financing in the current
period;
●
share-based
payments increased in the three months ended June 30, 2021, by
$13,137 compared to the three months ended June 30, 2020. The
increase was related to an increase in the number of options earned
during the three months ended June 30, 2021, compared to the three
months ended June 30, 2020; and
●
travel and
accommodation expenses decreased by $20,689 from $21,992 in the
three months ended June 30, 2020, to $1,303 in the three months
ended June 30, 2021, due to decreased site visits and restricted
travels during the COVID-19 pandemic.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
For the
three months ended June 30, 2021, the Company’s “Other
Items” amounted to a loss of $591,098 compared to a gain of
$203,104 in the three months ended June 30, 2020. A decrease in
loss was mainly due to the fair value loss on marketable securities
of $600,000 in the current period.
|
Other Items
|
Six Months Ended June 30,
|
|
|
|
|
|
Costs
in excess of recovered coal
|
$106,947
|
$135,405
|
|
Foreign
exchange gain
|
(264,598)
|
(536,383)
|
|
Fair
value gain on marketable securities
|
(1,000,000)
|
-
|
|
|
$(1,157,651)
|
$(400,978)
|
As at
the date of this MD&A, there are no proposed transactions where
the Board or senior management believes that confirmation of the
decision by the Board is probable or with which the Board and
senior management have decided to proceed.
8.
LIQUIDITY AND CAPITAL
RESOURCES
Working Capital
The
Company utilizes existing cash received from prior issuances of
equity instruments to provide liquidity to the Company and finance
exploration projects.
At June
30, 2021, the Company had a cash flow of $176,022, representing a
decrease of $7,432,127 from $7,608,149 as at December 31, 2020. The
Company’s working capital at June 30, 2021, was $490,406
compared to working capital of $6,018,935 at December 31,
2020.
On
November 24, 2020, the Company closed its bought deal short form
prospectus offering pursuant to which the Company had issued
23,000,000 Common Shares at a price of $0.40 per Common Share for
aggregate gross proceeds of $9,200,000. Pursuant to the terms and conditions of the
Underwriting Agreement, the Company paid a cash commission to the
Underwriters of $534,000, additional fees of $391,545 and issued
1,335,000 Share purchase warrants as a finder’s fee in
relation with the Offering. The net proceeds from
the Offering were be used for the exploration, development and/or
improvement of the Company’s mineral properties and for
working capital purposes.
The
following table compares the estimated use of net proceeds from the
November 2020 Offering and the actual use of proceeds as of June
30, 2021.
|
|
|
|
|
Description of expenditure
|
|
|
|
Net
proceeds from the Offering
|
$8,348,000
|
$8,318,727
|
|
Exploration
– Phase 1 of Pulacayo Project
|
$3,240,000
|
$1,271,881
|
|
Exploration
– Triunfo Project
|
$980,000
|
$52,546
|
|
Exploration
– Sunawayo Project
|
$1,700,000
|
$525,182
|
|
Working
capital and general corporate purposes including Minago Project
acquisition
|
$1,300,000
|
$6,469,118
|
|
Total
|
$7,220,000
|
$8,318,727
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
As of
June 30, 2021, the net proceeds from the November 2020 Offering
were fully applied.
During
the six months ended June 30, 2021, the Company closed the February
2021 Placement through the issuance of 10,000,001 Common Shares at
a price of $0.375 per Common Share. The February 2021 Placement
raised gross cash proceeds of $3,750,000. The Company paid $73,875
in cash as finder’s fees. Proceeds of the February 2021
Placement were used for exploration, working capital and general
corporate purposes which may include project evaluations and
acquisitions.
The
following table compares the estimated use of net proceeds from the
February 2021 Placement and the actual use of proceeds as of June
30, 2021.
|
|
|
|
|
Description of expenditure
|
|
|
|
Net
proceeds from the February 2021 Placement
|
$3,676,125
|
$3,651,836
|
|
Mineral
property exploration
|
$367,613
|
$367,613
|
|
Working
capital and general corporate purposes
|
|
|
|
including
Minago Project acquisition
|
$3,308,513
|
$3,284,224
|
|
Total
|
$3,676,125
|
$3,651,836
|
As of
June 30, 2021, the net proceeds from the February 2021 Placement
were fully applied.
During the six months ended June 30, 2021, 12,411,890 Common Share purchase warrants and
995,000 stock options were exercised for aggregate proceeds of
$3,587,508. $590,000 of the proceeds was for prepaid
consulting fees and accrued bonus for the Company’s CEO and
$592,000 was included in accounts receivable as at June 30, 2021
due to adverse impact of COVID-19 on banking services. Subsequent
to the period end, the Company has received $592,000.
Subsequent to the period end, and as at the date of this MD&A,
188,190 Common Share purchase warrants were exercised for aggregate
proceeds of $48,929. Also, Company disposed of 40 million common
shares of Victory Nickel Inc. through the facilities of the
Canadian Securities Exchange for total proceeds of $779,179. As at
the date of this MD&A, the Company holds Nil common shares of
Victory Nickel Inc.
As at
the date of this MD&A, the Company’s cash flow is $0.4
million and the Company’s working capital deficit is $0.7
million.
The
Company’s cash flow highlights for the six months ended June
30, 2021, are presented in the table below.
Cash Flow Highlights
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Cash
Used in Operating Activities
|
$(198,176)
|
$(504,410)
|
|
Cash
Used in Investing Activities
|
(13,067,794)
|
(3,127,949)
|
|
Cash
Provided by Financing Activities
|
5,833,843
|
1,957,325
|
|
Net
Decrease in Cash
|
(7,432,127)
|
(1,675,034)
|
|
Cash
- beginning of period
|
7,608,149
|
3,017,704
|
|
Cash
- end of period
|
$176,022
|
$1,342,670
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Operating activities: During the six months ended June 30,
2021, cash used in
operating activities was $198,176 compared to $504,410 during the
six months ended June 30, 2020.
Investing activities:
During the six months ended June 30, 2021, the Company used
$13,067,794 for investing activities (six months ended June 30,
2020 - $3,127,949). During the six months ended June 30, 2021, the
Company spent $8,892,969 (six months ended June 30, 2020 - $Nil) on
the Minago Project acquisition, $3,174,825 for mineral property
exploration activities (six months ended June 30, 2020 -
$3,087,273), and $1,000,000 for the purchase of the Victory Nickel
Inc. shares (six months ended June 30, 2020 - $Nil), and $Nil (six
months ended June 30, 2020 - $40,676) on the purchase of
equipment.
Financing activities:
During the six months ended June 30, 2021, a total of $5,833,843
was generated by financing activities (six months ended June 30,
2020 used in $1,957,325) including net proceeds from the February
2021 Placement of $3,635,275 (six months ended June 30, 2020 -
$1,972,749), $206,825 from the exercise of stock options (six
months ended June 30, 2020 - $3,000), and $2,009,401 from the
exercise of warrants (six months ended June 30, 2020 - $Nil). The
Company spent $17,658 (six months ended June 30, 2020 - $18,424)
for corporate office lease payments.
Capital Resources
As an
exploration company, the Company has no regular cash in-flow from
operations, and the level of operations is principally a function
of availability of capital resources. The Company’s capital
resources are largely determined by the strength of the junior
resource markets and by the status of the Company’s projects
in relation to these markets, and its ability to compete for
investor support of its projects. See the disclosure under the
heading “Key
Information - Risk
Factors” in the 2020 Annual Report. To date, the
principal sources of funding have been equity and debt financing.
Many factors influence the Company’s ability to raise funds,
and there is no assurance that the Company will be successful in
obtaining adequate financing with favourable terms, or at all, for
these or other purposes including general working capital
purposes.
For the
foreseeable future, as existing properties are explored, evaluated
and developed, the Company will continue to seek capital through
the issuance of equity, strategic alliances or joint ventures, and
debt, of which the Company currently has none.
The
Company expects to continue requiring cash for operations and
exploration and evaluation activities as expenditures are incurred
while no revenues are generated. Therefore, its continuance as a
going concern is dependent upon its ability to obtain adequate
financing to fund future operations based on annual budgets
approved by the Company's board of directors, consistent with
established internal control guidelines, and programs recommended
in the Pulacayo Technical Report. The Company has managed its
working capital by controlling its spending on its properties and
operations. Due to the ongoing planned advancement of Pulacayo
Project milestones, the Company will continue to incur costs
associated with exploration, evaluation and development activities,
while no revenues are being generated. In response to the COVID-19
pandemic, exploration in Bolivia may be impacted by government
restrictions on the Company’s operations. Potential stoppages
on exploration activities could result in additional costs, project
delays, cost overruns, and operational restart costs. The total
amount of funds that the Company needs to carry out its proposed
operations may increase from these and other consequences of the
COVID-19 pandemic. The actual amount that the Company spends in
connection with each of the intended uses of proceeds may vary
significantly from the amounts specified above and will depend on a
number of factors, including those referred to under "Risk Factors".
The
condensed interim consolidated financial statements for the six
months ended June 30, 2021, have been prepared under the assumption
that the Company is a going concern, which contemplates the
realization of assets and the payment of liabilities in the
ordinary course of business.
Contractual Commitments
The
Company’s commitments related to mineral properties are
disclosed in Note 14 to the Annual Financial Statements and Note 8
to the condensed interim consolidated financial statements for the
six months ended June 30, 2021. The Company has no commitments for
capital expenditures.
Capital Risk Management
The
Company considers its capital structure to consist of Common
Shares, stock options and Common Share purchase warrants. The
Company manages its capital structure and makes adjustments to it,
based on the funds available to the Company, in order to support
the exploration and development of its projects and to pursue and
support growth opportunities. The Board does not establish
quantitative returns on capital criteria for management. The
Company is not subject to externally imposed capital requirements.
There has been no change in the Company’s approach to capital
management during the six months ended June 30, 2021.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Management
is aware that market conditions, driven primarily by vanadium,
silver, other metal and coal prices, may limit the Company’s
ability to raise additional funds. These factors, and others, are
considered when shaping the Company’s capital management
strategy.
The
Company’s business could be adversely impacted by the effects
of the COVID-19 coronavirus. The extent to which COVID-19 may
impact the Company’s business, including its operations and
the market for its securities, will depend on future developments
which cannot be predicted, and include the duration, severity and
scope of the outbreak and the actions taken to contain or treat the
outbreak.
9.
COMMITMENTS AND
CONTINGENCIES
Except
as disclosed elsewhere in this MD&A, the Company has no
financial obligations in the ordinary course of business. As at
June 30, 2021, the Company does not have any contingent
liabilities.
10.
RELATED
PARTY DISCLOSURES
The
Company had related party transactions with the following
companies, related by way of directors and key management
personnel:
●
Linx Partners Ltd.,
a private company controlled by John Lee, Director, Chief Executive
Officer and Executive Chairman of the Company, provides management
and consulting services to the Company.
●
MaKevCo Consulting
Inc., a private company 50% owned by Greg Hall, a director of the
Company, provides consulting services to the Company.
●
Sophir Asia Ltd., a
private company controlled by Masa Igata, a director of the
Company, provides consulting services to the Company.
A
summary of amounts paid or accrued to related parties is as
follows:
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Related parties
|
|
|
|
|
|
Directors
and officers
|
$273,198
|
$340,922
|
$509,771
|
$981,957
|
|
Linx
Partners Ltd.
|
485,000
|
105,000
|
590,000
|
530,000
|
|
MaKevCo
Consulting Inc.
|
12,800
|
5,500
|
19,900
|
17,000
|
|
Sophir
Asia Ltd.
|
12,200
|
4,900
|
18,100
|
15,800
|
|
|
$783,198
|
$456,322
|
$1,137,771
|
$1,544,757
|
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
A
summary of the transactions by nature among the related parties is
as follows:
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Related parties
|
|
|
|
|
|
|
Consulting
and management fees
|
$
|
$242,500
|
52,500
|
$295,000
|
$265,000
|
|
Directors'
fees
|
|
46,900
|
20,200
|
71,200
|
63,400
|
|
Mineral
properties
|
|
397,048
|
286,871
|
578,071
|
940,457
|
|
Salaries
|
|
96,750
|
96,751
|
193,500
|
275,900
|
|
|
|
$783,198
|
456,322
|
$1,137,771
|
$1,544,757
|
As at
June 30, 2021, amounts due to related parties were $168,500
(December 31, 2020 - $1,800), amounts receivable from a related
party were $592,000 (December 31, 2020 - $Nil), amounts of prepaid
consulting fees were $210,000 (December 31, 2020 -
$Nil).
Key
management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Company, including directors of the Company. The
amounts due to related parties is summarized below:
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Key Management Personnel
|
|
|
|
|
|
Salaries
and short term benefits
|
$110,485
|
$104,365
|
$220,969
|
$310,678
|
|
Directors'
fees
|
46,900
|
20,200
|
71,200
|
63,400
|
|
Share-based
payments
|
60,493
|
171,712
|
198,884
|
310,122
|
|
|
$217,878
|
$296,277
|
$491,053
|
$684,200
|
11.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
The Company’s consolidated financial statements are prepared
in accordance with IFRS as issued by the International Accounting
Standards Board. The Company followed the same accounting policies
and methods of computation as it used in the Annual Financial
Statements for the six months ended June 30, 2021. The significant accounting policies
applied, and recent accounting pronouncements are described in
Notes 4 and 6 to the Annual Financial
Statements.
In preparing the condensed consolidated interim financial
statements in accordance with IFRS, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Areas requiring the use of estimates include the rates of
amortization for property and equipment, the useful life and
recoverability of long-lived assets, the recoverability of accounts
receivable, determination of environmental obligation provision for
closure and reclamation, accounts payable and accrued liabilities,
the assumptions used in the determination of the fair value of
financial instruments and share-based payments, and the
determination of the recoverability of deferred income tax assets
bases its estimates and assumptions on current and various other
factors that it believes to be reasonable under the circumstances.
Management believes the estimates are reasonable; however, actual
results could differ from those estimates and could impact future
results of operations and cash flows.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Significant Accounting Judgments and Estimates
The
Company bases its estimates and assumptions on current and various
other factors that it believes to be reasonable under the
circumstances. Management believes the estimates are reasonable;
however, actual results could differ from those estimates and could
impact future results of operations and cash flows. The areas which
require management to make significant judgements, estimates and
assumptions in determining carrying values include, but are not
limited to:
The
significant judgments that the Company’s management has made
in the process of applying the Company’s accounting policies,
apart from those involving estimation uncertainties (Note 5 to the
Annual Financial Statements ), that have the most significant
effect on the amounts recognized in the Annual Financial Statements
include, but are not limited to:
(a)
Functional currency
determination
The
functional currency for each of the Company’s subsidiaries is
the currency of the primary economic environment and the Company
reconsiders the functional currency of its entities if there is a
change in events and conditions which determined the primary
economic environment. Management has determined the functional
currency of all entities to be the Canadian dollar.
(b)
Economic
recoverability and probability of future economic benefits of
exploration, evaluation and development costs
Management
has determined that exploratory drilling, evaluation, development
and related costs incurred which have been capitalized are
economically recoverable. Management uses several criteria in its
assessments of economic recoverability and probability of future
economic benefit including geologic and metallurgic information,
history of conversion of mineral deposits to proven and probable
reserves, scoping, prefeasibility and feasibility studies,
assessable facilities, existing permits and life of mine
plans.
Management
has determined that during the six months ended June 30, 2021, none
of the Company’s silver and vanadium projects have reached
technical feasibility and commercial viability and therefore remain
within Mineral Properties on the Statement of Financial
Position.
(c)
Impairment
(recovery) assessment of deferred exploration
interests
The
Company considers both external and internal sources of information
in assessing whether there are any indications that mineral
property interests are impaired. External sources of information
the Company considers include changes in the market, economic and
legal environment in which the Company operates that are not within
its control and affect the recoverable amount of mineral property
interest. Internal sources of information the Company considers
include the manner in which mineral properties and plant and
equipment are being used or are expected to be used and indications
of economic performance of the assets.
(d)
Deferred tax
liability
Judgement
is required to determine which types of arrangements are considered
to be a tax on income in contrast to an operating cost. Judgement
is also required in determining whether deferred tax liabilities
are recognised in the statement of financial position. Deferred tax
liabilities, including those arising from un-utilised tax gains,
require management to assess the likelihood that the Company will
generate sufficient taxable losses in future periods, in order to
offset recognised deferred tax liabilities. Assumptions about the
generation of future taxable losses depend on management’s
estimates of future cash flows. These estimates of future taxable
losses are based on forecast cash flows from operations (which are
impacted by production and sales volumes, commodity prices,
reserves, operating costs, closure and rehabilitation costs,
capital expenditure, and other capital management transactions) and
judgement about the application of existing tax laws in each
jurisdiction. To the extent that future cash flows and taxable
losses differ significantly from estimates, the ability of the
Company to offset the net deferred tax liabilities recorded at the
reporting date could be impacted.
The recoverability of the carrying value of the mineral properties
is dependent on successful development and commercial exploitation,
or alternatively, sale of the respective areas of
interest.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Significant
judgment is involved in the determination of useful life and
residual values for the computation of depreciation, depletion and
amortization and no assurance can be given that actual useful lives
and residual values will not differ significantly from current
assumptions.
The
carrying value of long-lived assets are reviewed each reporting
period to determine whether there is any indication of impairment.
If the carrying amount of an asset exceeds its recoverable amount,
the asset is impaired, and an impairment loss is recognized in the
consolidated statement of operations. The assessment of fair
values, including those of the cash generating units (the smallest
identifiable group of assets that generates cash inflows that are
largely independent of the cash inflow from other assets or groups
of assets) (“CGUs”) for purposes of testing
goodwill, require the use of estimates and assumptions for
recoverable production, long-term commodity prices, discount rates,
foreign exchange rates, future capital requirements and operating
performance. Changes in any of the assumptions or estimates used in
determining the fair value of goodwill or other assets could impact
the impairment analysis.
(h)
Allowance for
doubtful accounts, and the recoverability of receivables and
prepaid expense amounts
Significant
estimates are involved in the determination of recoverability of
receivables and no assurance can be given that actual proceeds will
not differ significantly from current estimations. Similarly,
significant estimates are involved in the determination of the
recoverability of services and/or goods related to the prepaid
expense amounts, and actual results could differ significantly from
current estimations.
(i)
Provision for
closure and reclamation
The
Company assesses its mineral properties’ rehabilitation
provision at each reporting date or when new material information
becomes available. Exploration, development and mining activities
are subject to various laws and regulations governing the
protection of the environment. In general, these laws and
regulations are continually changing, and the Company has made, and
intends to make in the future, expenditures to comply with such
laws and regulations. Accounting for reclamation obligations
requires management to make estimates of the future costs that the
Company will incur to complete the reclamation work required to
comply with existing laws and regulations at each location. Actual
costs incurred may differ from those amounts
estimated.
Also,
future changes to environmental laws and regulations could increase
the extent of reclamation and remediation work required to be
performed by the Company. Increases in future costs could
materially impact the amounts charged to operations for reclamation
and remediation. The provision represents management’s best
estimate of the present value of the future reclamation and
remediation obligation. The actual future expenditures may differ
from the amounts currently provided.
Management
uses valuation techniques in measuring the fair value of share
purchase options granted. The fair value is determined using the
Black Scholes option pricing model which requires management to
make certain estimates, judgement, and assumptions in relation to
the expected life of the share purchase options and Common Share
purchase warrants, expected volatility, expected risk-free rate,
and expected forfeiture rate. Changes to these assumptions could
have a material impact on the Annual Financial
Statements.
The
assessment of contingencies involves the exercise of significant
judgment and estimates of the outcome of future events. In
assessing loss contingencies related to legal proceedings that are
pending against the Company and that may result in regulatory or
government actions that may negatively impact the Company’s
business or operations, the Company and its legal counsel evaluate
the perceived merits of the legal proceeding or unasserted claim or
action as well as the perceived merits of the nature and amount of
relief sought or expected to be sought, when determining the
amount, if any, to recognize as a contingent liability or when
assessing the impact on the carrying value of the Company’s
assets. Contingent assets are not recognized in the Annual
Financial Statements.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
(l)
Fair value
measurement
The
Company measures financial instruments at fair value at each
reporting date. The fair values of financial instruments measured
at amortized cost are disclosed in Note 21 to the Annual Financial
Statements. Also, from time
to time, the fair values of non-financial assets and liabilities
are required to be determined, for example when the entity acquires
a business, completes an asset acquisition or where an entity
measures the recoverable amount of an asset or cash-generating unit
at fair value less costs of disposal. 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.
The
fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest. A fair value measurement of a non-financial
asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would
use the asset in its highest and best use. The Company uses
valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the
use of unobservable inputs. Changes in estimates and assumptions
about these inputs could affect the reported fair
value.
COVID-19
An
emerging risk is a risk not well understood at the current time and
for which the impacts on strategy and financial results are
difficult to assess or are in the process of being assessed. Since
December 31, 2019, the outbreak of COVID-19 has resulted in
governments worldwide enacting emergency measures to combat the
spread of the virus. These measures, which include the
implementation of travel bans, self-imposed quarantine periods and
social distancing, have caused material disruption to businesses
globally, resulting in an economic slowdown. Global equity markets
have experienced significant volatility and weakness. Governments
and central banks have reacted with significant monetary and fiscal
interventions designed to stabilize economic conditions. The
duration and impact of the COVID-19 outbreak is unknown at this
time, as is the efficacy of the government and central bank
interventions. It is not possible to reliably estimate the length
and severity of these developments and the impact on the financial
results and condition of the Company and its operating subsidiaries
in future periods.
COVID-19
may impact Company operations, and consequently, the nature and
amounts and disclosures in the financial statements. Some of the
specific areas impacted by COVID-19 include, but are not limited
to:
●
Going concern
assessments;
●
Evaluation of
subsequent events;
●
Impairment and
recovery of mineral assets;
●
Fair value
measurements;
●
Employee
termination benefits; and
●
Financial statement
and Management Discussion & Analysis disclosures.
As at
the date of this MD&A the COVID-19 pandemic has not affected
the Company’s critical accounting policies.
12.
FINANCIAL INSTRUMENTS AND
RELATED RISKS
The
Board, through its Audit Committee, is responsible for identifying
the principal risks of the Company and ensuring that risk
management systems are implemented. The Company manages its
exposure to financial risks, including liquidity risk, foreign
exchange rate risk, interest rate risk, and credit risk in
accordance with its risk management framework. The Company’s
board of directors’ reviews the Company’s policies on
an annual basis or when deemed to be reviewed.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
Financial
Instruments
A
description of financial instruments is included in Note 22 to the
Annual Financial Statements and Note 13 to the Company’s
unaudited condensed interim consolidated financial statements for
the six months ended June 30, 2021.
Related
Risks
Liquidity
risk is the risk that an entity will be unable to meet its
financial obligations as they fall due. The Company manages
liquidity risk by preparing cash flow forecasts of upcoming cash
requirements. As at June 30, 2021, the Company had a cash balance
of $176,022 (December 31, 2020 – $7,608,149). As at June
30, 2021, the Company had accounts payable and accrued liabilities
of $2,712,570 (December 31, 2020 - $1,759,163), which have
contractual maturities of 90 days or less.
Credit
risk is the risk that one party to a financial instrument will fail
to discharge an obligation and cause the other party to incur a
financial loss. The Company is exposed to credit risk primarily
associated to cash and restricted cash equivalents and receivables,
net of allowances. Management believes that the credit risk
concentration with respect to these financial instruments is remote
as the balances primarily consist of amounts on deposit with a
major financial institution and amounts receivable from the
Government of Canada. The carrying amount of assets included on the
statements of financial position represents the maximum credit
exposure.
The
significant market risks to which the Company is exposed are
interest rate risk, foreign currency risk, and commodity and equity
price risk. The objective of market risk management is to manage
and control market risk exposures within acceptable limits, while
maximizing returns.
Interest
rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate due to changes in market
interest rates. The Company’s cash and restricted cash
equivalents primarily include highly liquid investments that earn
interest at market rates that are fixed to maturity. Due to
the short‐
term nature of these financial instruments, fluctuations in market
rates do not have significant impact on the fair values of the
financial instruments as of June 30, 2021.
(e)
Foreign currency
risk
The
Company has exploration and development projects in the United
States, Mongolia and Bolivia and undertakes transactions in various
foreign currencies. The Company is therefore exposed to foreign
currency risk arising from transactions denominated in a foreign
currency and the translation of financial instruments denominated
in United States dollars, Mongolian tugrik, and Bolivian boliviano
into its functional and reporting currency, the Canadian
dollar.
Based
on the above, net exposures as at June 30, 2021, with other
variables unchanged, a 10% (December 31, 2020 – 10%)
strengthening (weakening) of the Canadian dollar against the
Mongolian tugrik would impact net loss with other variables
unchanged by $93,000. A 10% strengthening (weakening) of the
Canadian dollar against the Bolivian boliviano would impact net
loss with other variables unchanged by $54,000. A 10% strengthening
(weakening) of the US dollar against the Canadian dollar would
impact net loss with other variables unchanged by $48,000. The
Company currently does not use any foreign exchange contracts to
hedge this currency risk.
SILVER ELEPHANT MINING CORP.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
For the six months ended June 30, 2021
(Expressed
in Canadian dollars, except where indicated)
(f)
Commodity and
equity price risk
Commodity
price risk is defined as the potential adverse impact on earnings
and economic value due to commodity price movements and
volatilities. Commodity prices fluctuate on a daily basis and are
affected by numerous factors beyond the Company’s control.
The supply and demand for these commodities, the level of interest
rates, the rate of inflation, investment decisions by large holders
of commodities including governmental reserves and stability of
exchange rates can all cause significant fluctuations in prices.
Such external economic factors are in turn influenced by changes in
international investment patterns and monetary systems and
political developments.
The
Company is also exposed to price risk with regards to equity
prices. Equity price risk is defined as the potential adverse
impact on the Company’s earning due to movements in
individual equity prices or general movements in the level of the
stock market.
The
Company closely monitors commodity prices, individual equity
movements and the stock market to determine the appropriate course
of action to be taken by the Company. Fluctuations in value may be
significant.
The
Company’s business is the exploration, evaluation and
development of mining properties. Thus, the Company’s
operations are speculative due to the high-risk nature of its
business. The following list details existing and future material
risks to the Company. The risks listed below are not arranged in
any particular order and are not exhaustive. Additional risks and
uncertainties not currently known to the Company, or those that it
currently deems to be immaterial, may become material and adversely
affect the Company. The realization of any of these risks may
materially and adversely impact the Company’s business,
financial condition or results of operations and/or the market
price of the Company’s securities. Each of these risk factors
is discussed in more detail under the heading “Key Information - Risk Factors”
in the 2020 Annual Report, which is available under the
Company’s SEDAR profile at www.sedar.com.
●
The COVID-19 global
pandemic and the risk of other similar outbreaks and
pandemics;
●
The Company's
history of net losses;
●
Capital costs,
operating costs, production, and economic returns;
●
Exploration and
development risks;
●
The Company has no
history of profitable mineral production;
●
The risks inherent
to the estimation of mineral reserves and mineral
resources;
●
Foreign operations
risks;
●
The reform of the
mining laws, including the General Mining Act of 1872 in the
U.S;
●
Government
approvals and permits;
●
Risks associated
with the Company's property and mining interests;
●
Risks associated
with the Company's mineral claims, mining leases, licenses and
permits;
●
Risks associated
with claims from First Nations and other Aboriginal or community
groups;
●
Risks associated
with competition;
●
The Company's
reliance on key personnel;
●
The volatility of
mineral prices,
SILVER
ELEPHANT MINING CORP.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
For
the six months ended June 30, 2021
(Expressed in
Canadian dollars, except where indicated)
●
Global, national
and local financial conditions;
●
Risks associated
with third-party contractors;
●
Anti-bribery
legislation;
●
The Company has no
history of making dividend payments;
●
Related party
transactions;
●
Litigation and
regulatory proceedings;
●
Risks associated
with being a foreign private issuer;
●
Risks associated
with non-Canadian investors;
●
Risks associated
with the Company's operations in emerging markets; and
●
Emerging risks, as
described below.
An
emerging risk is a risk not well understood at the current time and
for which the impacts on strategy and financial results are
difficult to assess or are in the process of being assessed. Since
December 31, 2019, the COVID-19 global pandemic, has resulted in
governments worldwide enacting emergency measures to combat the
spread of the virus. These measures, which include the
implementation of travel bans, self-imposed quarantine periods and
social distancing, have caused material disruption to businesses
globally, resulting in an economic slowdown. Global equity markets
have experienced significant volatility and weakness. Governments
and central banks have reacted with significant monetary and fiscal
interventions designed to stabilize economic conditions. The
duration and impact of the COVID-19 outbreak is unknown at this
time, as is the efficacy of the government and central bank
interventions. It is not possible to reliably estimate the length
and severity of these developments and the impact on the financial
results and condition of the Company and its operating subsidiaries
in future periods.
14.
DISCLOSURE CONTROLS AND
PROCEDURES
Design of Internal Controls over Financial Reporting
Disclosure
controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by the Company
in its annual filings, interim filings or other reports filed or
submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods
specified in the securities legislation and include controls and
procedures designed to ensure that information required to be
disclosed by the Company in its annual filings, interim filings or
other reports filed or submitted under securities legislation is
accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure.
The
Company’s disclosure committee is comprised of the Chief
Executive Officer and senior members of management. The disclosure
committee’s responsibilities include determining whether
information is material and ensuring the timely disclosure of
material information in accordance with securities laws. The board
of directors is responsible for reviewing the Company’s
disclosure policy, procedures and controls to ensure that it
addresses the Company’s principal business risks, and changes
in operations or structure, and facilitates compliance with
applicable legislative and regulatory reporting
requirements.
The Company’s Chief Executive Officer and Chief Financial
Officer, after participating with the Company’s management in
evaluating the effectiveness of the Company’s disclosure
controls and procedures, have concluded that the Company’s
disclosure controls and procedures were effective during the six
months ended June 30,
2021.
SILVER
ELEPHANT MINING CORP.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
For
the six months ended June 30, 2021
(Expressed in
Canadian dollars, except where indicated)
Design of Internal Controls over Financial Reporting
The
Company’s management, with the participation of the Chief
Executive Officer and Chief Financial Officer, is responsible for
establishing and maintaining adequate internal control over
financial reporting. The Company’s internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with IFRS. The Company’s internal control over
financial reporting includes those policies and procedures
that:
●
pertain to the
maintenance of records that, in reasonable detail accurately and
fairly reflect the transactions, acquisition and disposition of
assets and liabilities;
●
provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of the financial statements in accordance with IFRS and
that receipts and expenditures are being made only in accordance
with the authorization of management and directors of the Company;
and
●
provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets, and incurrence of
liabilities, that could have a material effect on the financial
statements.
The Company’s management, with the participation of the Chief
Executive Officer and Executive Chairman and the Chief Financial
Officer, assessed the effectiveness of the Company’s internal
control over financial reporting using the criteria set forth in
the Internal Control –
Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management concluded that the
Company’s internal control over financial reporting was
effective during the six months ended June 30, 2021.
15.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the six months ended June 30, 2021, the Company’s employees began
working remotely due to the COVID-19 pandemic. This has required
certain processes and controls that were previously done or
documented manually to be completed and retained in electronic
form. Despite this, there were no changes to the Company’s
internal control over financial reporting during the six months
ended June 30, 2021, that have
materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial
reporting.
Limitations of controls and procedures
The
Company’s management, including the Chief Executive Officer
and the Chief Financial Officer, believe that any disclosure
controls and procedures or internal controls over financial
reporting, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, they
cannot provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been prevented
or detected. These inherent limitations include the realities that
judgements in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by unauthorized
override of the control. The design of any systems of controls also
is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Accordingly, because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud
may occur and not be detected.
16.
DISCLOSURE OF OUTSTANDING SHARE
DATA
As at
the date of this MD&A, the Company had a total of:
●
209,477,539 Common Shares outstanding with
recorded value of $210,964,570;
●
9.527.500 stock options outstanding with a
weighted average exercise price of $0.31. Each option is
exercisable to purchase one Common Share at prices ranging from
$0.20 to $0.50 per Common Share and expire between January 2022 and
May 2026; and
●
16,970,987 Common Share purchase warrants
outstanding with a weighted average exercise price of $0.25. Each
Common Share purchase warrant is exercisable to purchase one Common
Share at prices ranging from $0.16 to $0.48 and expire between
August 2021 and May 2023.
17.
OFF-BALANCE SHEET ARRANGEMENTS
During
the six months ended June 30, 2021, the Company was not a party to
any off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future effect on the results of
operations, financial condition, revenues or expenses, liquidity,
capital expenditures or capital resources of the
Company.
