EX-99.1 2 ff_ex991.htm CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS ff_ex991
  Exhibit 99.1
 
 
 
 
 
First Mining Gold Corp.
 
Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2021 and 2020
(Expressed in thousands of Canadian dollars unless otherwise noted)
(Unaudited)
 
 
 
 
 
 
FIRST MINING GOLD CORP.
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(Expressed in thousands of Canadian dollars unless otherwise noted)
(Unaudited)
 
 
September 30,
2021
 
 
December 31,
2020
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Current
 
 
 
 
 
 
Cash and cash equivalents
 $30,348 
 $28,901 
Investments (Note 3)
  17,331 
  18,425 
Prepaid expenses, accounts and other receivables
  868 
  2,700 
Total current assets
  48,547 
  50,026 
 
    
    
Non-current
    
    
Mineral properties (Note 4)
  165,073 
  179,429 
Investment in Treasury Metals Inc. (Note 5)
  16,260 
  63,812 
Investment in PC Gold Inc. (Note 6)
  21,570 
  - 
Investment in Big Ridge Gold Corp. (Note 7)
  1,569 
  - 
Mineral property investments (Note 8)
  6,210 
  6,726 
Property and equipment
  850 
  570 
Other assets
  431 
  650 
Total non-current assets
  211,963 
  251,187 
TOTAL ASSETS
 $260,510 
 $301,213 
 
    
    
LIABILITIES
    
    
Current
    
    
Accounts payable and accrued liabilities
 $2,258 
 $2,013 
Current portion of lease liability
  123 
  112 
Provision for Pickle Crow reclamation funding (Note 4(b))
  710 
  - 
Current portion of environmental reclamation provision
  - 
  250 
Option – PC Gold (Note 4(b))
  4,347 
  4,410 
Obligation to distribute investments (Note 5(c))
  - 
  34,040 
Total current liabilities
  7,438 
  40,825 
 
    
    
Non-current
    
    
Lease liability
  348 
  442 
Environmental reclamation provision
  - 
  3,133 
Silver Stream derivative liability (Note 9)
  23,768 
  13,260 
Total non-current liabilities
  24,116 
  16,835 
TOTAL LIABILITIES
  31,554 
  57,660 
 
    
    
  SHAREHOLDERS’ EQUITY
    
    
Share capital (Note 10)
  318,434 
  317,167 
Warrant and share-based payment reserve (Note 10)
  46,681 
  44,648 
Accumulated other comprehensive gain (loss)
  (376)
  (1,392)
Accumulated deficit
  (135,783)
  (116,870)
Total shareholders’ equity
  228,956 
  243,553 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 $260,510 
 $301,213 
Subsequent Events (Note 15)
The consolidated financial statements were approved by the Board of Directors:
Signed: “Keith Neumeyer”, Director           
Signed: “Raymond Polman”, Director
 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
 
1
FIRST MINING GOLD CORP.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Expressed in thousands of Canadian dollars unless otherwise noted)
(Unaudited)
 
 
 Nine months ended September 30,
 
 
 
 2021
 
 
 2020
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
 
Net loss for the period
 $(31,867)
 $(33,345)
Adjustments for:
    
    
Gain on deconsolidation of subsidiary (Note 4)
  (9,280)
  - 
Impairment of non-current assets (Note 5(b))
  23,555 
  24,870 
Share-based payments (Note 10)
  1,585 
  777 
Depreciation
  238 
  233 
Fair value loss on Silver Stream derivative liability (Note 9)
  700 
  6,112 
Investments fair value loss (Note 3)
  4,672 
  426 
Other expenses
  42 
  - 
Accrued interest receivable
  (84)
  - 
Unrealized foreign exchange loss (gain)
  40 
  (606)
Deferred income tax recovery
  - 
  (1,539)
Finance cost
  38 
  62 
Equity and dilution loss on equity accounted investments
  5,675 
  (467)
Loss on disposal of subsidiaries
  - 
  303 
Operating cash flows before movements in working capital
  (4,686)
  (3,174)
Changes in non-cash working capital items:
    
    
Increase in accounts and other receivables
  (35)
  (71)
Increase in prepaid expenditures
  (31)
  (8)
Decrease in accounts payables and accrued liabilities
  (751)
  (244)
Total cash used in operating activities
  (5,503)
  (3,497)
Cash flows from investing activities
    
    
Mineral property expenditures (Note 4)
  (11,241)
  (9,474)
Investment in Treasury Metals Inc.
  - 
  (118)
Proceeds from sale of investments (Note 3)
  11,386 
  - 
Property and equipment purchases
  (425)
  (197)
Option payments and expenditures recovered (Note 4)
  1,968 
  148 
Total cash provided by (used in) investing activities
  1,688 
  (9,641)
Cash flows from financing activities
    
    
Net proceeds from bought deal financing
  - 
  26,647 
Net proceeds from private placements
  - 
  9,124 
Proceeds from Silver Stream (Note 9)
  4,757 
  3,263 
Proceeds from ATM program
  - 
  125 
Proceeds from exercise of warrants and stock options
  668 
  706 
Repayment of lease liability
  (83)
  (67)
Finance costs paid
  (37)
  (41)
Total cash provided by financing activities
  5,305 
  39,757 
Foreign exchange effect on cash
  (43)
  (44)
Change in cash and cash equivalents
  1,447 
  26,575 
Cash and cash equivalents, beginning
  28,901 
  5,902 
Cash and cash equivalents, ending
 $30,348 
 $32,477 
 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
 
2
FIRST MINING GOLD CORP.
INTERIM CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Expressed in thousands of Canadian dollars, except share and per share amounts)
(Unaudited)
 
 
Three months ended
September 30,
 
 
 Nine months ended
September 30,
 
 
 
2021
 
 
 2020
 
 
 2021
 
 
 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES (Note 11)
 
 
 
 
 
 
 
 
 
 
 
 
General and administration
 $1,195 
 $441 
 $3,820 
 $2,449 
Exploration and evaluation
  174 
  213 
  621 
  571 
Investor relations and marketing communications
  399 
  346 
  1,830 
  892 
Corporate development and due diligence
  100 
  59 
  347 
  285 
Impairment of non-current assets (Note 5)
  - 
  2,372 
  23,555 
  24,870 
Loss from operational activities
  (1,868)
  (3,431)
  (30,173)
  (29,067)
 
    
    
    
    
OTHER ITEMS
    
    
    
    
Gain on deconsolidation of subsidiary (Note 4(b))
  449 
  - 
  9,280 
  - 
Fair value gain (loss) on Silver Stream liability (Note 9)
  7,704 
  (6,112)
  (700)
  (6,112)
Investments fair value loss (Note 3)
  (4,039)
  (3,439)
  (4,672)
  (426)
Foreign exchange gain (loss)
  112 
  (64)
  (54)
  543 
Other expenses
  (15)
  (25)
  (68)
  (71)
Interest and other income
  61 
  31 
  195 
  85 
Loss on disposal of subsidiaries
  - 
  - 
  - 
  (303)
Gain (loss) before income taxes
 $2,404 
 $(13,040)
 $(26,192)
 $(35,351)
Deferred income tax recovery
  - 
  221 
  - 
  1,539 
Equity income (losses) and dilution impacts of equity accounted investments (Note 5,6 & 7)
  15 
  467 
  (5,675)
  467 
Net income (loss) for the period
 $2,419 
 $(12,352)
 $(31,867)
 $(33,345)
 
    
    
    
    
OTHER COMPREHENSIVE INCOME (LOSS)
    
    
    
    
Items that will not be reclassified to net income or (loss):
    
    
    
    
Investments fair value gain (loss)
  (1,263)
  1,648 
  1,533 
  1,721 
 
    
    
    
    
Mineral property investments fair value gain (loss) (Note 8)
  (73)
  423 
  (516)
  1,326 
 
    
    
    
    
Items that are or may be reclassified to net income or (loss):
    
    
    
    
Currency translation adjustment of foreign subsidiaries
  10 
  (10)
  (1)
  25 
Recycling of currency translation adjustment on disposal of foreign subsidiaries
  - 
  - 
  - 
  (630)
Other comprehensive income (loss)
  (1,326)
  2,061 
  1,016 
  2,442 
 
    
    
    
    
Net income (loss) and comprehensive income (loss)
for the period
 $1,093 
 $(10,291)
 $(30,851)
 $(30,903)
Income (loss) per share
    
    
    
    
Basic
 $0.00 
 $(0.02)
 $(0.05)
 $(0.05)
Diluted
 $0.00 
 $(0.02)
 $(0.05)
 $(0.05)
Weighted average number of shares outstanding
    
    
    
    
Basic
  699,523,115 
  656,270,866 
  698,177,258 
  632,847,071 
Diluted
  705,398,997 
  656,270,866 
  698,177,258 
  632,847,071 
 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
 
 
3
FIRST MINING GOLD CORP.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Expressed in thousands of Canadian dollars, except share and per share amounts)
(Unaudited)
 
 
Number of common
shares
 
 
Share capital
 
 
Warrant reserve
 
 
Share-based payment reserve
 
 
Accumulated other comprehensive income (loss)
 
 
Accumulated deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Balance as at December 31, 2019
  591,997,138 
 $282,666 
 $14,532 
 $18,798 
 $(3,649)
 $(50,015)
 $262,332 
  Proceeds from bought deal financing
  57,500,000 
  25,339 
  3,411 
  - 
  - 
  - 
  28,750 
  Bought deal financing share issuance cost
  - 
  (1,854)
  (249)
  - 
  - 
  - 
  (2,103)
  Proceeds from private placements
  40,198,095 
  8,160 
  1,122 
  - 
  - 
  - 
  9,282 
  Flow-through share premium liability
  - 
  (300)
  - 
  - 
  - 
  - 
  (300)
  Private placements share issuance cost
  - 
  (136)
  (22)
  - 
  - 
  - 
  (158)
  At-the-market distributions
  532,000 
  125 
  - 
  - 
  - 
  - 
  125 
  Exercise of options (Note 10(d))
  2,092,500 
  1,049 
  - 
  (428)
  - 
  - 
  621 
  Exercise of warrants (Note 10(c))
  247,500 
  98 
  (13)
  - 
  - 
  - 
  85 
  Shares issued for prior mineral property acquisition
  24,220 
  4 
  - 
  - 
  - 
  - 
  4 
  Warrants issued to First Majestic Silver Corp.
  - 
  - 
  6,278 
  - 
  - 
  - 
  6,278 
  Share-based payments
  - 
  - 
  - 
  1,165 
  - 
  - 
  1,165 
  Obligation to distribute investments
  - 
  - 
  - 
  - 
  - 
  (37,222)
  (37,222)
  Loss for the period
  - 
  - 
  - 
  - 
  - 
  (33,345)
  (33,345)
  Other comprehensive income
  - 
  - 
  - 
  - 
  2,442 
  - 
  2,442 
  Balance as at September 30, 2020
  692,591,453 
 $315,151 
 $25,059 
 $19,535 
 $(1,207)
 $(120,582)
 $237,956 
  Balance as at December 31, 2020
  697,216,453 
 $317,167 
 $25,056 
 $19,592 
 $(1,392)
 $(116,870)
 $243,553 
  Exercise of options (Note 10(d))
  2,287,500 
  841 
  - 
  (265)
  - 
  - 
  576 
  Exercise of warrants (Note 10(c))
  265,650 
  104 
  (12)
  - 
  - 
  - 
  92 
  Shares issued on acquisition of Birch-uchi mineral
  property tenure (Note 4)
  857,035 
  310 
  - 
  - 
  - 
  - 
  310 
  Cameron Gold exploration agreement
  25,000 
  12 
  9 
  - 
  - 
  - 
  21 
  Share reduction due to expiry
  (701,579)
  - 
  - 
  - 
  - 
  - 
  - 
  Share-based payments
  - 
  - 
  - 
  2,301 
  - 
  - 
  2,301 
  Obligation to distribute investments fair value adjustment
  - 
  - 
  - 
  - 
  - 
  12,954 
  12,954 
  Loss for the period
  - 
  - 
  - 
  - 
  - 
  (31,867)
  (31,867)
  Other comprehensive loss
  - 
  - 
  - 
  - 
  1,016 
  - 
  1,016 
  Balance as at September 30, 2021
  699,950,059 
 $318,434 
 $25,053 
 $21,628 
 $(376)
 $(135,783)
 $228,956 
 
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
 
 
4
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
1. NATURE OF OPERATIONS
 
First Mining Gold Corp. (the “Company” or “First Mining”) is a public company which is listed on the Toronto Stock Exchange (the “TSX”) under the symbol “FF”, on the OTCQX under the symbol “FFMGF”, and on the Frankfurt Stock Exchange under the symbol “FMG”. The Company’s head office and principal address is Suite 2070 – 1188 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4A2.
 
First Mining was incorporated on April 4, 2005. The Company changed its name to First Mining Gold Corp. in January 2018.
 
First Mining is a Canadian gold exploration and development company focused on the permitting and development of the Springpole Gold Project in northwestern Ontario and advancing work at its other gold projects in Canada. First Mining holds a significant equity investment in Treasury Metals Inc. (“Treasury Metals”) (TSX: TML) (Note 5) which is advancing the Goliath-Goldlund gold complex in Ontario towards a construction decision. First Mining’s portfolio of gold projects in eastern Canada also includes equity accounted investments in entities which own Pickle Crow (being advanced by Auteco Minerals Ltd. (“Auteco”) (ASX: AUT)), Hope Brook (being advanced with Big Ridge Gold Corp. (“Big Ridge”) (TSXV: BRAU), Cameron, Duparquet, Duquesne, and Pitt.
 
In March 2020, the World Health Organization declared a global pandemic related to COVID-19. As the Company does not have production activities, the ability to fund ongoing exploration is affected by the availability of financing. Due to market uncertainty arising from the impacts of COVID-19 the Company may be restricted in its ability to raise additional funding. To date the impact on the Company has been limited to a slowing of on site exploration activities during the 2020 and 2021 years. The impact of COVID-19 on the Company over time is not readily determinable; however, its effects may have a material impact on the Company’s financial position, results of operations and cash flows in future periods.
 
2. BASIS OF PRESENTATION
 
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). These condensed interim consolidated financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2020, as some disclosures from the annual consolidated financial statements have been condensed or omitted.
 
These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as fair value through profit and loss or fair value through other comprehensive income (loss), which are stated at their fair value. The condensed interim consolidated financial statements are presented in thousands of Canadian dollars, unless otherwise noted, and tabular amounts are expressed in thousands of Canadian dollars.
 
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries.
 
The functional currency of the Company and its Canadian subsidiaries is the Canadian dollar while the functional currency of the Company’s non-Canadian subsidiary is the US dollar.
 
These unaudited condensed interim consolidated financial statements were approved by the Board of Directors on November 9, 2021.
 
 
5
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
2. BASIS OF PRESENTATION (continued)
 
In preparing the Company’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2021, the Company used the same accounting policies, methods of computation and accounting policy judgments as in the annual consolidated financial statements for the year ended December 31, 2020. Additionally, the areas of estimation uncertainty remain unchanged from those disclosed in the annual consolidated financial statements. There are no IFRS or IFRS Interpretations Committee interpretations that are not yet effective that would be expected to have a material impact on the Company’s consolidated financial statements.
 
3. INVESTMENTS
 
The movements in investments during the nine months ended September 30, 2021 and the year ended December 31, 2020 are summarized as follows:
 
 
 
Marketable Securities (FVTPL)
 
 
Marketable Securities
(FVTOCI)
 
 
Warrants
(FVTPL)
 
 
Total
 Investments
 
Balance as at December 31, 2020
 $9,267 
 $3,386 
 $5,772 
 $18,425 
Additions
  13,691 
  216 
  - 
  13,907 
Disposals
  (9,043)
  (668)
  - 
  (9,711)
Gain recorded in other comprehensive loss
  - 
  1,531 
  - 
  1,531 
Loss recorded in net loss
  (1,049)
  - 
  (3,698)
  (4,747)
Reclassification to assets held for distribution
  - 
  - 
  (2,074)
  (2,074)
Balance as at September 30, 2021
 $12,866 
 $4,465 
 $- 
 $17,331 
 
 
 
Marketable Securities (FVTPL)
 
 
Marketable Securities
(FVTOCI)
 
 
Warrants
(FVTPL)
 
 
Total
 Investments
 
Balance as at December 31, 2019
 $- 
 $1,775 
 $- 
 $1,775 
Additions
  11,134 
  - 
  9,812 
  20,946 
Disposals
  (6,672)
  - 
  - 
  (6,672)
Gain recorded in other comprehensive loss
  - 
  1,611 
  - 
  1,611 
Gain (loss) recorded in net loss
  4,805 
  - 
  (4,040)
  765 
Balance as at December 31, 2020
 $9,267 
 $3,386 
 $5,772 
 $18,425 
 
The Company holds securities of publicly traded companies as strategic interests. The investments where the Company does not have significant influence are classified as marketable securities. The Auteco and First Majestic common shares are classified as FVTPL. Other marketable securities are designated as FVTOCI.
 
During the nine months ended September 30, 2021, the Company:
 
●
Received 287,300 common shares of First Majestic (initial recognition - $5,051,000, September 30, 2021 – $4,163,000) in connection with the Silver Purchase Agreement (defined in Note 9);
 
 
6
 
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)


3. INVESTMENTS (continued)
 
●
Received 100,000,000 common shares of Auteco (initial recognition - $8,640,000, September 30, 2021 – $8,704,000) in connection with the Auteco Earn-In Agreement (defined in Note 4(b));
●
Sold a total of 400,000 common shares of First Majestic for net proceeds of $9,022,000 which resulted in a $3,863,000 realized gain on sale based on the original cost at the time of receipt; and
●
Sold a total of 419,200 common shares of other marketable securities for net proceeds of $668,000 which resulted in a realized gain on sale of $385,000 based on the original cost at the time of receipt.
 
At June 30, 2021 the Treasury Metals Warrants (with a fair value of $2,074,000) were reclassified to Assets Held for Distribution following the June 30, 2021 shareholder vote approving the Treasury Metals Share and Warrant distribution which occurred on July 15, 2021.
 
4. MINERAL PROPERTIES
 
As at September 30, 2021 and December 31, 2020, the Company has capitalized the following acquisition, exploration, and evaluation costs on its mineral properties:
 
 
 
Springpole
 
 
Cameron
 
 
Duquesne/Pitt
 
 
Hope Brook
(Note 4(c))
 
 
Pickle Crow
(Note 4(d))
 
 
Goldlund
(Note 5)
 
 
Others (1)
 
 
Total
 
Balance December 31, 2020
 $87,907 
 $31,875 
 $7,229 
 $20,612 
 $24,986 
 $- 
 $6,820 
 $179,429 
Acquisition
 $1,342 
  21 
  - 
  - 
  - 
  - 
  791 
 $2,154 
Concessions, taxes and royalties
 $684 
  32 
  3 
  20 
  - 
  - 
  - 
 $739 
Salaries and share-based payments
 $2,263 
  136 
  4 
  44 
  22 
  - 
  75 
 $2,544 
Drilling, exploration, and technical consulting
 $2,894 
  56 
  4 
  16 
  3,251 
  - 
  230 
 $6,451 
Assaying, field supplies, and environmental
 $3,761 
  72 
  - 
  3 
  - 
  - 
  10 
 $3,846 
Travel and other expenditures
 $1,022 
  26 
  - 
  17 
  - 
  - 
  4 
 $1,069 
Total Expenditures
 $11,966 
 $343 
 $11 
 $100 
 $3,273 
 $- 
 $1,110 
 $16,803 
Disposal, impairment or reclassification
  - 
  - 
  - 
  (2,685)
  (28,259)
  - 
  (215)
  (31,159)
Balance September 30, 2021
 $99,873 
 $32,218 
 $7,240 
 $18,027 
 $- 
 $- 
 $7,715 
 $165,073 
 
 
7
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
4. MINERAL PROPERTIES (continued)
 
 
 
Springpole
 
 
Cameron
 
 
Duquesne/
Pitt
 
 
Hope Brook
 
 
Pickle Crow
 
 
Goldlund
 
 
Others (1)
 
 
Total
 
Balance December 31, 2019
 $76,775 
 $27,374 
 $7,217 
 $20,071 
 $19,263 
 $98,894 
 $3,221 
 $252,815 
Acquisition
 $-  
  4,219  
  -  
  - 
  - 
  - 
  - 
 $4,219 
Concessions, taxes and royalties
 $740 
  11 
  3 
  20 
  20 
  2 
  60 
 $856 
Salaries and share-based payments
 $1,300 
  145 
  1 
  148 
  71 
  430 
  7 
 $2,102 
Drilling, exploration, and technical consulting
 $4,828 
  52 
  8 
  140 
  4,409 
  796 
  37 
 $10,270 
Assaying, field supplies, and environmental
 $3,555 
  50 
  - 
  123 
  1,217 
  255 
  8 
 $5,208 
Travel and other expenditures
 $709 
  24 
  - 
  110 
  6 
  126 
  2 
 $977 
Total Expenditures
 $11,132 
 $4,501 
 $12 
 $541 
 $5,723 
 $1,609 
 $114 
 $23,632 
Disposal, impairment or reclassification
  - 
  - 
  - 
  - 
  - 
  (100,503)
  3,485 
  (97,018)
Balance December 31, 2020
 $87,907 
 $31,875 
 $7,229 
 $20,612 
 $24,986 
 $- 
 $6,820 
 $179,429 
 
(1)
Other mineral properties as at September 30, 2021 and December 31, 2020 include: the mining claims and concessions located in the Township of Duparquet, Quebéc, which are near the Company’s Duquesne gold project); six properties in Ontario’s Birch-uchi greenstone belt including three under option (see below); a 1.5% NSR Royalty under the terms of the Treasury Share Purchase Agreement (defined in Note 5), which was reclassified from “Goldlund” to “Others” during the year ended December 31, 2020; and, the Turquoise Canyon property in Nevada (under option to Momentum Minerals Ltd. which was acquired by IM Exploration Inc. on July 6, 2021).
 
The Company has various underlying agreements and commitments with respect to its mineral properties, which define annual or future payments in connection with royalty buy-backs or maintenance of property interests.
 
a)
Hope Brook Project
 
On June 8, 2021, the Company announced it had closed a definitive earn-in agreement with Big Ridge Gold Corp. “Big Ridge” (the “Big Ridge transaction”) whereby Big Ridge may earn up to an 80% interest in First Mining’s Hope Brook Gold Project located in Newfoundland, Canada. Pursuant to the definitive earn-in agreement, Big Ridge can earn an 80% interest in the Hope Brook Project through a two-stage earn-in over five years by incurring a total of $20,000,000 in qualifying expenditures, issuing up to 36.5 million shares of Big Ridge to First Mining and making a future cash payment to First Mining. Upon completion of the earning in, First Mining will retain a 20% interest in the Hope Brook Project and a 1.5% net smelter returns royalty on the Hope Brook Project, of which 0.5% can be bought back by Big Ridge for $2,000,000. In accordance with the agreement, First Mining nominated one member to the Board of Directors of Big Ridge upon closing and received $500,000 and 11,500,000 shares of Big Ridge which have been credited against the Hope Brook project mineral property balance. At the end of the reporting period, the Company assessed the Hope Brooke Project for impairment indicators, no impairment indicators were identified. See Note 7 below for further details of the equity accounted investment in Big Ridge.
 
 
8
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
4. MINERAL PROPERTIES (continued)
 
b)
Pickle Crow Project
 
On March 12, 2020, the Company and Auteco executed a definitive Earn-In Agreement (the “Auteco Earn-In Agreement”) whereby Auteco may earn up to an 80% interest in PC Gold, a then wholly-owned subsidiary of First Mining which owns the Pickle Crow Project. Pursuant to the Auteco Earn-In Agreement, the Earn-In is comprised of two stages:
 
●
Stage 1 Earn-In (51% earn-in) – Three year initial earn-in period to acquire a 51% equity interest in PC Gold by:
o
Spending $5,000,000 on exploration and environmental matters at the Pickle Crow Gold Project (or cash payments in lieu), of which $750,000 must be incurred within the first 12 months; and
o
Issuing 100 million shares of Auteco to First Mining.
 
●
Stage 2 Earn-In (additional 19% to earn-in to 70%) – Upon completion of the Stage 1 Earn-In, Auteco will have a two-year follow-on period to acquire an additional 19% equity interest in PC Gold by:
o
Spending a further $5,000,000 on exploration on the Pickle Crow Gold Project;
o
Making a $1,000,000 cash payment to First Mining within 90 days of completing the additional exploration spend; and
o
Issuing to First Mining a 2% NSR royalty on the Project (1% of which can be bought back for USD$2,500,000) (issued upon completion of the Stage 2 Earn-In).
 
Upon completion of the Stage 2 Earn-In, Auteco will have an option to acquire an additional 10% equity interest in PC Gold, exercisable any time following completion of the Stage 2 Earn-In, by paying First Mining $3,000,000 in cash, after which First Mining’s residual 20% interest in PC Gold is carried until a construction decision in relation to the Pickle Crow Project, which is to be made after a final feasibility study and following Auteco having arranged sufficient financing to achieve commercial production. If Auteco should fail to meet such requirements within the applicable time periods outlined above, the Auteco Earn-In Agreement will terminate and Auteco will be entitled to retain any interest it has earned prior to the date of termination. During the term of the Auteco Earn-In Agreement, Auteco will incur all program costs and manage Pickle Crow exploration activity.
 
On June 9, 2021, the Company announced completion of the Stage 1 earn-in and accordingly Auteco obtained a 51% ownership of the PC Gold legal entity. First Mining received the scheduled 100,000,000 Auteco shares and executed the joint venture shareholders agreement.
 
Following the completion of the Stage 1 earn-in by AuTeco, First Mining’s percentage ownership of its former subsidiary, PC Gold, was reduced from 100% to 49%, which led to a loss of control and the resulting deconsolidation of PC Gold Inc. from First Mining’s financial statements. The gain on deconsolidation was calculated as a result of derecognizing the net assets of PC Gold and recognizing the fair value of an equity accounted associate, PC Gold, along with the fair value of the Stage 2 and final earn-in option liabilities.
 
The following information summarizes the deconsolidation of PC Gold as at June 9, 2021:
 
 
9
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
4. MINERAL PROPERTIES (continued)
 
 
 
June 9, 2021
 
Fair Value of retained interest in PC Gold Inc.
 
 
 
112,146,017 shares at $0.32 per share (deemed FV based on underlying property interest)
 $36,000 
Provision for Pickle Crow reclamation funding
  (710)
 
    
Fair value of Auteco shares received as additional consideration (Note 3)
  8,640 
 
    
Option – PC Gold liability fair value of Stage 2 and final earn in options
  (17,306)
 
    
Net assets of PC Gold
    
Prepaids
  3 
Reclamation deposit
  120 
Mineral property, net
  20,358 
Environmental reclamation liability, net
  (3,137)
Net assets of subsidiary
  17,344 
 
    
Gain on loss of control of subsidiary, Net
 $9,280 
 
At the time of deconsolidation of PC Gold in Q2 2021, management estimated a fair value for the Stage 2 and final Auteco earn in options of $17,306,000 based on the portion of the fair value of the PC Gold investment that the Company would be required divest net of any future proceeds from Auteco. Following completion of the Stage 2 earn-in in Q3 2021 the Stage 2 option liability of $12,959,000 was settled and the Company delivered the additional 19% interest in PC Gold to Auteco from the Option – PC Gold balance which represented the fair value loss on the reduced 30% PC Gold ownership. A corresponding reduction in the equity accounted investment in PC Gold was also recorded as a result of this dilution. The $4,347,000 balance as at September 30, 2021 represents the additional net dilution which would result from Auteco completing its additional 10% equity interest. Following receipt of $3,000,000 under this option First Mining’s ownership would reduce to 20%.
 
The Company’s agreement with Auteco requires First Mining to contribute its pro-rata share of environmental reclamation funding, which was 30% as at September 30, 2021 following completion of the stage 2 earn-in. Accordingly, the company has recorded a provision of $710,000 as at September 30, 2021 (December 30, 2020 - $nil).
 
c)
Swain Post property option
 
On March 1, 2021, the Company entered into a three year option agreement with Exiro Minerals Corp. (“Exiro”) pursuant to which First Mining may earn a 100% interest in Exiro’s Swain Post property in northwestern Ontario through future cash and share payments of approximately $250,000 to Exiro during the term of the option, and by completing all assessment work requirements on the property during the three year option term.
 
 
10
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
4. MINERAL PROPERTIES (continued)
 
d)
Swain Lake property option
 
On April 29, 2021, the Company entered into an earn-in agreement with Whitefish Exploration Inc. (“Whitefish”), which gives First Mining the option to earn a 70% interest in Whitefish’s Swain Lake project in northwestern Ontario by making cash payments totaling $200,000 and share payments totaling $425,000, and by incurring at least $500,000 worth of expenditures on the Swain Lake Property during the first three years of the earn-in term. Upon completing the first stage of the earn-in, First Mining will hold a 70% interest in the Swain Lake Property and will have an additional period of two years within which to acquire the remaining 30% of the project by paying $1,000,000 to Whitefish and issuing $1,000,000 worth of First Mining shares.
 
e)
Vixen properties acquisition
 
On September 9, 2021, the Company entered into a three year option agreement with ALX Resources Corp. (“ALX”) pursuant to which First Mining may earn a 100% interest in ALX’s Vixen North, South and West properties (the “Vixen Properties”) in northwestern Ontario through future cash and share payments of approximately $1,450,000 to ALX during the term of the option, and by completing all assessment work requirements on the property during the three year option term.
 
First Mining will have the option to earn an initial 70% interest in the Vixen Properties by making cash payments totaling $550,000, and share payments totaling $400,000, to ALX, and by incurring at least $500,000 worth of expenditures on the Vixen Properties during the first three years of the earn-in term. Upon completing the first stage of the earn-in, First Mining will hold a 70% interest in the Vixen Properties, and will have an additional period of two years within which to acquire the remaining 30% of the Vixen Properties by paying $500,000 to ALX and issuing $500,000 worth of First Mining shares to ALX.  In the event the second stage of the earn-in is not completed, ALX and Gold Canyon will enter into a joint venture agreement with respect to the Vixen Properties
 
 5. INVESTMENT IN TREASURY METALS
 
a)
Treasury Share Purchase Agreement Overview
 
On August 7, 2020, First Mining completed a transaction with Treasury Metals under a share purchase agreement (the “Treasury Share Purchase Agreement”), pursuant to which Treasury Metals agreed to acquire all of the issued and outstanding shares of Tamaka Gold Corporation, a previously wholly-owned subsidiary of the Company, and 100% owner of the Goldlund Project. Under the terms of the Treasury Share Purchase Agreement, First Mining received total consideration of $91,521,000 which was comprised of (i) 43.33 million common shares (post-consolidation) of Treasury Metals (“Treasury Metals Shares”) with a fair value of $78,000,000; (ii) 11.67 million common share purchase warrants (post-consolidation) of Treasury Metals (“Treasury Metals Warrants”) with an exercise price of $1.50 for a three year term with a fair value of $9,812,000; (iii) a retained 1.5% Net Smelter Returns (“NSR”) royalty on Goldlund (0.5% of which can be bought back by Treasury Metals for $5 million in cash) with a fair value of $3,709,000; and (iv) the right to certain contingent milestone payments totaling $5 million, payable in cash on certain key advancements at Goldlund which have not been recorded as at September 30, 2021.
 
 
11
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
5. INVESTMENT IN TREASURY METALS (continued)
 
b)
Equity Accounting Method for Investment in Treasury Metals and Impairment
 
The Company has concluded it has significant influence over Treasury Metals. The Company is accounting for its investment using the equity method. As at September 30, 2021 the fair market value of the Company’s investment in common shares of Treasury Metals was $14,200,000, based on the Treasury Metals quoted market price. Due to the significant decline in fair value of the Treasury Metals Shares as at March 31, 2021, the Company recorded an impairment of the investment in Treasury Metals amounting to $23,555,000. This impairment was recorded within the impairment of non-current assets in the statement of net loss and comprehensive income (loss). In Q2 2021, the Company recorded dilution losses on the investment in Treasury Metals predominantly as a result of the exercise of special warrants by Treasury Metals investors (reducing the Company’s interest from 38.4% to 33.3%). As at June 30, 2021, the Company reclassified a portion of its investment to Assets held for distribution to reflect the portion of the equity accounted investment being distributed to shareholders (Note 5 (c)). As at September 30, 2021, the Company owns approximately 20.0 million Treasury Metals Shares.
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Balance, beginning of period
 $63,812 
 $- 
Acquisition – Initial Recognition on August 7, 2020
  - 
  78,000 
Equity (loss) income
  (56)
  1,446 
Dilution event in Q2, 2021
  (5,000)
  - 
Impairment of Investment in Treasury Metals Inc.
  (23,555)
  (15,634)
Reclassification to assets held for distribution
  (18,941)
  - 
Balance, end of period
 $16,260 
 $63,812 
 
The equity accounting for Treasury Metals is based on published results to June 30, 2021 and an estimate of results for the period of July 1, 2021 to September 30, 2021. The Company’s estimated equity share of Treasury’s net loss for the nine-month period ending September 30, 2021 was $56,000.
 
c)
Obligation to Distribute Investments
 
In accordance with the terms of a Shareholders Agreement signed in connection with the transaction, First Mining distributed approximately 23.3 million Treasury Metals Shares and all 11.6 million of the Treasury Metals Warrants to its shareholders (the “Distribution”) on July 15, 2021. Following the Distribution, First Mining retained approximately 20.0 million Treasury Metals Shares, leaving the Company with an approximate 15.4% interest in Treasury Metals. First Mining’s percentage ownership along with its Board representation of three Board seats continue to support the conclusions that it has significant influence.
 
As part of the distribution to its shareholders First Mining settled its obligation to distribute liability which had previously been recorded in the balance sheet. Investments fair value gain (loss) in the income statement included amounts related to the fair value changes of the Treasury Metals Shares and Warrants immediately prior to distribution on July 15, 2021.
 
 
12
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
6. INVESTMENT IN PC GOLD INC.
 
Following the completion of the Stage 1 earn-in by Auteco, First Mining determined that its then 49% investment in the common shares of PC Gold gave it significant influence over PC Gold, requiring PC Gold to be recorded in First Mining’s financial statements using the equity method of accounting as an investment in associate.
 
The initial recognition of the investment in associate was accounted for based on an estimated fair value using a market approach to value Pickle Crow’s inferred resources on a per unit of metal basis derived from comparable gold project transactions.
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Balance, beginning of period
 $- 
 $- 
Acquisition – Initial Recognition on June 9, 2021
  36,000 
  - 
Equity loss
  (2)
  - 
Dilution event in Q3, 2021-Stage 2 earn-in completion
  (14,428)
  - 
Balance, end of period
 $21,570 
 $- 
 
The subsequent equity accounting for PC Gold is based on results to March 31, 2021 and an estimate of results for the period of June 9, 2021 to September 30, 2021. The Company’s estimated equity share of PC Gold’s net loss for the interim period ending September 30, 2021 was $2,000.
 
Upon completion of Stage 2 on August 26, 2021, the Company recorded a $14,428,000 dilution event based upon the ownership interest reduction from 49% to 30%, which resulted in a $12,960,000 partial reversal of the PC Gold option liability and cash proceeds received from Auteco of (i) $1,000,000; (ii) $468,000 for unspent environmental reclamation work as part of the PC Gold Earn-in Agreement.
 
7. INVESTMENT IN BIG RIDGE GOLD CORP.
 
Following completion of the Big Ridge transaction on June 7, 2021, the Company’s common share ownership interest in Big Ridge was approximately 19.8% (Initial Recognition fair value - $2,185,000) and was 11.0% on September 30, 2021 following a dilution event whereby Big Ridge issued 23.4 million flow-through shares as part of a private placement. In addition to its share ownership interest, the Company considered various qualitative factors including representation rights on Big Ridge’s board of directors in arriving at the determination that significant influence exists, and therefore the Company will be required to apply the equity method of accounting.
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Balance, beginning of period
 $- 
 $- 
Acquisition – Initial Recognition on June 7, 2021
  2,185 
  - 
Equity loss
  (28)
  - 
Dilution event in Q2 2021
  (588)
  - 
Balance, end of period
 $1,569 
 $- 
 
The equity accounting for Big Ridge is based on results to June 30, 2021 and an estimate of results for the period of June 7, 2021 to September 30, 2021. The Company’s estimated equity share of Big Ridge’s net loss for the interim period ending September 30, 2021 was $20,000.
 
 
13
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
8. MINERAL PROPERTY INVESTMENTS
 
The Company, through its subsidiary Clifton Star Resources Inc. (“Clifton”), has a 10% equity interest in the shares of Beattie Gold Mines Ltd., 2699681 Canada Ltd., and 2588111 Manitoba Ltd. which directly or indirectly own various mining concessions and surface rights, collectively known as the Duparquet gold project.
 
Mineral property investments (which comprise equity interests in the shares of three private companies) are designated as FVTOCI, with changes in fair value recorded in other comprehensive income (loss).
 
As at September 30, 2021, management determined, as a function of the falling gold price environment, that there was a decline in the fair value of mineral property investments and a fair value loss of $516,000 was recorded (nine months ended September 30, 2020 – fair value gain of $1,326,000) (Note 14). As at September 30, 2021, the fair value of the Company’s mineral property investments is $6,210,000 (December 31, 2020 - $6,726,000).
 
9. SILVER STREAM DERIVATIVE LIABILITY
 
a)
Silver Purchase Agreement Overview and Consideration Received
 
On June 10, 2020, the Company entered into a silver purchase agreement (the “Silver Purchase Agreement”) with First Majestic Silver Corp. (“First Majestic”), which closed on July 2, 2020. Under the terms of the Silver Purchase Agreement, First Majestic agreed to pay First Mining total consideration of US$22.5 million (approx. $30.6 million as at the closing date), in three tranches, for the right to purchase 50% of the payable silver produced from the Springpole Gold Project over the life of the project (the “Silver Stream”) and also received 30 million common share purchase warrants of First Mining. Each share purchase warrant entitles First Majestic to purchase one common share of First Mining at an exercise price of $0.40 for a period of five years. The fair value of the warrants issued of $6,278,000 was recorded in Equity (Warrant reserve) on the Company’s consolidated statements of financial position.
 
First Mining has the right to repurchase 50% of the Silver Stream for US$22.5 million (approx. $27.9 million as at September 30, 2021) at any time prior to the commencement of production at Springpole (the “Buy-Back Right”).
 
Per the Silver Purchase Agreement, First Majestic paid US$10 million ($13.7 million) to First Mining on the July 2, 2020 closing date, with US$2.5 million ($3.3 million) paid in cash and the remaining US$7.5 million ($10.4 million) paid in 805,698 common shares of First Majestic (“Tranche 1”). Upon announcement of the Pre-Feasibility Study (“PFS”) on March 4, 2021, First Mining received US$7.5 million ($9.8 million) from First Majestic, with US$3.75 million ($4.8 million) paid in cash and the remaining US$3.75 million ($5.0 million) paid in 287,300 common shares of First Majestic (“Tranche 2”).
 
Consideration payable for the Silver Stream includes one further tranche (split evenly between cash and First Majestic common shares) of US$5 million (approx. $6.4 million as at September 30, 2021) payable upon First Mining receiving approval of either a Federal or Provincial Environmental Assessment. (The three tranches of consideration totaling US$22.5 million ($23.5 million received for Tranche 1 and Tranche 2) constitute the “Advance Payment”). In the event of default, First Majestic may terminate the Silver Purchase Agreement and the Advance Payment received by First Mining at that time would become repayable. The Advance Payment amount is used to track the stream balance for commercial, but not accounting purposes. In the event the Company exercises the Buy-Back Right by paying US$22.5 million (approx. $28.7 million) to First Majestic, the Advance Payment amount shall be reduced to nil.
 
 
14
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
9. SILVER STREAM DERIVATIVE LIABILITY (continued)
 
b)
Silver Stream Derivative Liability Fair Value
 
The Company has concluded that the Silver Stream is a standalone derivative measured at FVTPL.
 
The estimated fair value of the Silver Stream derivative liability is determined using a discounted cash flow model which incorporates a Monte Carlo simulation. The fair value of the Silver Stream derivative liability is a Level 3 measurement.
 
The fair value of the Silver Stream derivative liability is calculated at each reporting date as the net of the future Advance Payment tranches receivable (an asset for the Company) and the Silver Stream obligation (a liability to the Company), with gains or losses recorded in the statement of net loss and comprehensive loss. The fair value of the Silver Stream derivative liability as at September 30, 2021 is US$18,654,000 ($23,768,000), which is comprised of the Silver Stream obligation fair value of US$21,721,000 ($27,676,000) less the Advance Payment receivable fair value of US$3,068,000 ($3,908,000). The fair value of the Silver Stream derivative liability as at December 31, 2020 was US$10,415,000 ($13,260,000), which is comprised of the Silver Stream obligation fair value of US$21,761,000 ($27,706,000) less the Advance Payment receivable fair value of US$11,346,000 ($14,446,000).
 
 
 
 
 
Silver Stream derivative liability
 
Balance, December 31, 2019
 $- 
Fair value of Silver Stream derivative liability - Initial Recognition on July 2, 2020
  (7,378)
Change in fair value during the period
  (5,882)
Balance, December 31, 2020
 $(13,260)
Advance payment received (Tranche 2) (US$7.5 million)
  (9,808)
Change in fair value during the period
  (700)
Balance, September 30, 2021
 $(23,768)
 
10. SHARE CAPITAL
 
a)
Authorized
 
Unlimited number of common shares with no par value.
Unlimited number of preferred shares with no par value.
 
b)
Issued and Fully Paid
 
Common shares: 699,950,059 (December 31, 2020 – 697,216,453).
Preferred shares: nil (December 31, 2020 – nil).
 
 
15
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
10. SHARE CAPITAL (continued)
 
c)
Warrants
 
The movements in warrants during the nine months ended September 30, 2021 and year ended December 31, 2020 are summarized as follows:
 
 
 
Number
 
 
Weighted average exercise price
 
Balance as at December 31, 2019
  15,872,998 
 $0.410 
Warrants issued
  77,460,159 
  0.494 
Warrants exercised
  (247,500)
  0.344 
Balance as at December 31, 2020
  93,085,657 
 $0.480 
Warrants issued
  2,100,228 
  0.375 
Warrants exercised
  (265,650)
  0.328 
Warrants expired
  (3,027,615)
  0.440 
Balance as at September 30, 2021
  91,892,620 
 $0.449 
 
The following table summarizes information about warrants outstanding as at September 30, 2021:
 
 
Exercise price
 
 
Number of warrants outstanding
 
 
Weighted average exercise price ($ per share)
 
 
Weighted average remaining life (years)
 
 $0.336 
  18,247,009 
 $0.336 
  1.08 
 $0.374 
  44,845,611 
  0.374 
  2.86 
 $0.421 
  50,000 
  0.421 
  1.83 
 $0.654 
  28,750,000 
  0.654 
  0.90 
    
  91,892,620 
 $0.449 
  1.46 
 
There were 50,000 warrants issued during the nine months ended September 30, 2021. As a result of the TML distribution an additional 2,050,228 warrants were issued to an individual warrant holder per the terms of the convertible security adjustment provision warrant indentures. In addition, following the distribution the exercise prices of all the outstanding warrants as at July 15, 2021 were reduced per the terms of the respective convertible security adjustment provisions warrant indentures. They are now shown to three decimal places.
 
Stock Options
 
The Company has adopted a stock option plan that allows for the granting of stock options to Directors, Officers, employees and certain consultants of the Company for up to 10% of the Company’s issued and outstanding common shares. Stock options granted under the plan may be subject to vesting provisions as determined by the Board of Directors.
 
The movements in stock options during the nine months ended September 30, 2021 and year ended December 31, 2020 are summarized as follows:
 
 
16
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
10. SHARE CAPITAL (continued)
 
 
 
Number
 
 
Weighted average exercise price
 
Balance as at December 31, 2019
  46,927,500 
 $0.57 
Options granted
  11,350,000 
  0.25 
Options exercised
  (3,717,500)
  0.33 
Options expired
  (2,790,000)
  0.40 
Options forfeited
  (5,950,000)
  0.52 
Balance as at December 31, 2020
  45,820,000 
 $0.53 
Options granted
  11,290,000 
  0.23 
Options exercised
  (2,287,500)
  0.25 
Options expired
  (8,020,000)
  0.73 
Options forfeited
  (2,037,500)
  0.38 
Balance as at September 30, 2021
  44,765,000 
 $0.44 
 
The weighted average closing share price at the date of exercise for the nine months ended September 30, 2021 was $0.45 (September 30, 2020 – $0.42). 2,287,500 stock options were exercised during the nine months ended September 30, 2021 (September 30, 2020 – 2,092,500).
 
The following table summarizes information about the stock options outstanding as at September 30, 2021:
 
 
  Options Outstanding               
        Options Exercisable          
 
Exercise price
 
 
Number of options
 
 
Weighted average exercise price ($ per share)
 
 
Weighted average remaining life (years)
 
 
Number of options
 
 
Weighted average exercise price ($ per share)
 
 
Weighted average remaining life (years)
 
 $0.25 – 0.50 
  32,450,000 
 $0.36 
  2.75 
  22,701,250 
 $0.36 
  4.11 
 $0.51 – 1.00 
  12,315,000 
  0.61 
  3.23 
  12,615,000 
  0.43 
  4.10 
    
  44,765,000 
 $0.44 
  2.88 
  35,316,250 
 $0.38 
  4.11 
 
During the nine months ended September 30, 2021, there were 11,290,000 (September 30, 2020 - 9,850,000) stock options granted with an aggregate fair value at the date of grant of $4,718,400 (September 30, 2020 - $1,170,000), or a weighted average fair value of $0.23 per option (September 30, 2020 – $0.12). As at September 30, 2021, 9,448,750 (September 30, 2020 – 6,062,500) stock options remain unvested with an aggregate grant date fair value of $3,948,000 (September 30, 2020 - $347,000).
 
Certain stock options granted were directly attributable to exploration and evaluation expenditures on mineral properties and were therefore capitalized to mineral properties. In addition, certain stock options were subject to vesting provisions. These two factors result in differences between the aggregate fair value of stock options granted and total share-based payments expensed during the periods. Total share-based payments expense during the three month and nine-month periods ended September 30, 2021 and September 30, 2020 was classified within the financial statements as follows:
 
 
17
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
10. SHARE CAPITAL (continued)
 
 
 
For the three months ended September 30,
 
 
For the nine months ended September 30,
 
Statements of Net Loss:
 
2021
 
 
2020
 
 
2021
 
 
2020
 
General and administration
 $229 
 $74 
 $1,026 
 $435 
Exploration and evaluation
  19 
  44 
  225 
  116 
Investor relations and marketing communications
  57 
  10 
  201 
  132 
Corporate development and due diligence
  34 
  - 
  133 
  94 
Subtotal
 $339 
 $128 
 $1,585 
 $777 
Statements of Financial Position:
    
    
    
    
Mineral Properties
  142 
  39 
  716 
  389 
Total
 $481 
 $167 
 $2,301 
 $1,166 
 
The grant date fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
 
 
 
Nine months ended
 
 
Year ended
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Risk-free interest rate
  0.44%
  1.72%
Share price at grant date (in dollars)
 $0.42 
 $0.25 
Exercise price (in dollars)
 $0.42 
 $0.27 
Expected life (years)
  5.00 years 
  4.96 years 
Expected volatility (1)
  68.32%
  69.10%
Forfeiture rate
  7.50%
  5.26%
Expected dividend yield
  Nil 
  Nil 
 
(1)
The computation of expected volatility was based on the Company’s historical price volatility, over a period which approximates the expected life of the option.
 
d)
Restricted Share Units
 
The Company granted Restricted Share Units ("RSUs") under its share-based compensation plan to the Company’s executive officers as part of the Company’s long-term incentive plan (“LTIP”). Unless otherwise stated, the awards typically have a graded vesting schedule over a three-year period and will be settled in equity upon vesting.
 
The associated compensation cost is recorded as share-based payments expense against share-based payment reserve.
 
The following table summarizes the changes in RSU's for the nine months ended September 30, 2021:
 
 
 
Number
 
 
Weighted average fair value
 
Balance as at December 31, 2020
  - 
 $- 
Granted – February 2, 2021
  1,550,000 
  0.40 
Balance as at September 30, 2021
  1,550,000 
 $0.40 
 
 
18
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
10. SHARE CAPITAL (continued)
 
e)
Deferred Share Units
 
The Company granted 303,000 Deferred Share Units ("DSUs") under its share-based compensation plan to a director as part of the Company’s LTIP. DSUs have a graded vesting schedule over an 18-month period and will be settled in equity upon vesting.
 
The associated compensation cost is recorded as share-based payments expense against share-based payment reserve. The grant date fair value of the DSUs recognized in the nine months ended September 30, 2021 is $0.36.
 
 
 
Number
 
 
Weighted average fair value
 
Balance as at December 31, 2020
  - 
 $- 
Granted – February 2, 2021
  40,000 
  0.40 
Granted – June 17, 2021
  263,000 
  0.35 
Balance as at September 30, 2021
  303,000 
 $0.36 
 
11. OPERATING EXPENSES
 
Operating expenditures by nature, which map to the Company’s functional operating expense categories presented in the consolidated statements of net loss and comprehensive loss, are as follows:
 
 
 
For the three months ended
September 30, 2021
 
 
For the three months ended
September 30, 2020
 
 
 
General and administration
 
 
Investor relations and marketing communications
 
 
General and administration
 
 
Investor relations and marketing communications
 
Administrative and office
 $86 
 $(1)
 $67 
 $9 
Consultants
  21 
  30 
  (45)
  - 
Depreciation
  43 
  - 
  40 
  - 
Directors fees
  160 
  - 
  58 
  - 
Investor relations and marketing communications
  - 
  252 
  - 
  241 
Professional fees
  198 
  - 
  47 
  - 
Salaries
  243 
  68 
  171 
  56 
Share-based payments (non-cash) (Note 10(d))
  229 
  40 
  74 
  10 
Transfer agent and filing fees
  210 
  3 
  25 
  25 
Travel and accommodation
  5 
  7 
  4 
  5 
Total
 $1,195 
 $399 
 $441 
 $346 
 
 
19
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
11. OPERATING EXPENSES (continued)
 
 
 
For the nine months ended
September 30, 2021
 
 
For the nine months ended
September 30, 2020
 
 
 
General and administration
 
 
Investor relations and marketing communications
 
 
General and administration
 
 
Investor relations and marketing communications
 
Administrative and office
 $270 
 $59 
 $172 
 $25 
Consultants
  110 
  75 
  97 
  10 
Depreciation
  128 
  - 
  104 
  - 
Directors fees
  239 
  - 
  201 
  - 
Investor relations and marketing communications
  - 
  1,168 
  3 
  509 
Professional fees
  982 
  - 
  714 
  - 
Salaries
  712 
  283 
  556 
  159 
Share-based payments (non-cash) (Note 10(d))
  1,026 
  201 
  435 
  132 
Transfer agent and filing fees
  346 
  37 
  147 
  41 
Travel and accommodation
  7 
  7 
  20 
  16 
Total
 $3,820 
 $1,830 
 $2,449 
 $892 
 
12. SEGMENT INFORMATION
 
The Company operates in a single reportable operating segment, being the acquisition, exploration, development and strategic disposition of its North American mineral properties. Geographic information about the Company’s non-current assets, excluding financial instruments, as at September 30, 2021 and December 31, 2020 is as follows: Canada - $205,529,000 (December 31, 2020 - $244,018,000) and USA - $227,000 (December 31, 2020 - $444,000).
 
13. RELATED PARTY TRANSACTIONS
 
The Company’s related parties consist of the Company’s Directors and Officers, and any companies associated with them.
 
Key management includes the Directors, Officers and Vice Presidents of the Company. The compensation paid or payable to key management for services during the three months and nine months ended September 30, 2021 and 2020 is as follows:
 
Service or Item
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2021
 
 
2020
 
 
2021
 
 
2020
 
Directors’ fees
 $80 
 $58 
 $239 
 $201 
Salaries and consultants’ fees
  398 
  283 
  1,329 
  839 
Share-based payments (non-cash)
  171 
  137 
  974 
  778 
Total
 $649 
 $478 
 $2,542 
 $1,818 
 
 
20
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
14. FAIR VALUE
 
Fair values have been determined for measurement and/or disclosure requirements based on the methods below.
 
The Company characterizes fair value measurements using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The three levels of the fair value hierarchy are as follows:
 
●
Level 1 fair value measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities;
●
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
●
Level 3 fair value measurements are those derived from valuation techniques that include significant inputs for the asset or liability that are not based on observable market data (unobservable inputs).
 
The carrying values of cash and cash equivalents, current accounts receivables, and accounts payable and accrued liabilities approximated their fair values because of the short-term nature of these financial instruments. These financial instruments are financial assets and liabilities at amortized cost.
 
The carrying value of investments was based on the quoted market prices of the shares as at September 30, 2021 and was therefore considered to be Level 1.
 
The mineral property investments (First Mining’s 10% equity interest in three privately held companies that own the Duparquet Gold Project) are classified as financial assets at FVTOCI. The fair value of the mineral property investments was not based on observable market data and was therefore considered to be Level 3. The initial fair value of the mineral property investments was determined based on attributable pro-rata gold ounces for the Company’s 10% indirect interest in the Duparquet project, which formed part of the identifiable assets from the acquisition of Clifton. Subsequently, the fair value has been reassessed at each period end. Scenarios which may result in a significant change in fair value include, among others, a change in the performance of the investee, a change in the performance of comparable entities, a change in gold price, a change in the economic environment, or evidence from external transactions in the investee’s equity. During the nine months ended September 30, 2021, management concluded that there was a decrease in the fair value of the mineral property investments, and a fair value loss of $516,000 (September 30, 2020 – fair value gain of $1,326,000) was recorded (Note 4).
 
As the Earn‐In Agreement provides Auteco the right to earn an interest in PC Gold, rather than a direct interest in the Pickle Crow project, Auteco’s option to acquire PC Gold shares is a financial liability of First Mining. As a derivative, the Pickle Crow project option liability is classified as financial liability at FVTPL. The carrying value of the Option - Pickle Crow Gold Project is not based on observable market data and therefore is considered to be Level 3. The fair value of the Option – Pickle Crow Gold Project as at September 30, 2021 was determined by reference to the portion of the estimated fair value of PC Gold to be given up by the Company with the option for Auteco to earn an additional 10%, net of $3,000,000 proceeds to be received on exercise.
 
The Silver Stream was determined to be a derivative liability, which is classified as a financial liability at FVTPL. The carrying value of the derivative liability was not based on observable market data and involved complex valuation methods and was therefore considered to be Level 3.
 
The following table presents the Company’s fair value hierarchy for financial assets and liabilities that are measured at fair value:
 
 
21
FIRST MINING GOLD CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian dollars unless otherwise noted, tabular amounts are expressed in thousands of Canadian dollars)
(Unaudited)
 
 
14. FAIR VALUE (continued)
 
 
 
September 30, 2021
 
 
December 31, 2020
 
 
 
 
 
 
Fair value measurement
 
 
 
 
 
Fair value measurement
 
 
 
Carrying value
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Carrying value
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Financial assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments (Notes 3, 5)
 $17,331 
 $17,331 
 $- 
 $- 
 $18,425 
 $12,653 
 $5,772 
 $- 
Mineral property investments (Note 8)
  6,210 
  - 
  - 
  6,210 
  6,726 
  - 
  - 
  6,726 
Financial liabilities:
    
    
    
    
    
    
    
    
Silver Stream derivative liability
(Note 9)
  23,768 
  - 
  - 
  23,768 
  13,260 
  - 
  - 
  13,260 
Option – PC Gold (Note 4(b))
 $4,347 
 $- 
 $- 
 $4,347 
 $4,410 
 $- 
 $- 
 $4,410 
 
During the nine months ended September 30, 2021 there have been no transfers of amounts between levels in the fair value hierarchy.
 
15. Subsequent Events
 
Subsequent to the end of the quarter, on October 4, 2021, the Company announced it had entered into an earn-in agreement with Pelangio Exploration Inc. (“Pelangio”) which gives First Mining the right to earn, through Gold Canyon, up to an 80% interest in Pelangio’s Birch Lake and Birch Lake West properties (collectively, the “Birch Lake Properties”) over the course of two stages and a period of six years. Initially, First Mining (through Gold Canyon), may earn a 51% interest in the Birch Lake Properties by making cash payments totaling $350,000 and share payments totaling 1,300,000 and by incurring at least $1,750,000 worth of expenditures on the Birch Lake Properties during the first 4 years of the earn-in term. Upon completing the first stage of the earn-in, First Mining will have an additional period of 2 years within which to acquire a further 29% interest in the Birch Lake Properties by paying $400,000 to Pelangio in cash or First Mining Shares (at First Mining’s sole discretion) and by incurring an additional $1,750,000 worth of expenditures on the Birch Lake Properties. Upon completing the second earn-in stage, First Mining will hold a 80% interest in the Birch Lake Properties, and Gold Canyon and Pelangio will enter into a joint venture agreement with respect to the properties (if First Mining notifies Pelangio at any time after exercising the first earn-in that it will not complete the second earn-in stage, the joint venture will be formed as of the date of such notice, and First Mining will hold, through Gold Canyon, a 51% interest in the Birch Lake Properties).
 
 
22