EX-99.6 7 tm2127221d1_ex99-6.htm EXHIBIT 99.6

 

Exhibit 99.6

 

 

CONDENSED INTERIM FINANCIAL STATEMENTS

 

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2021 AND 2020

 

(Unaudited - Expressed in Canadian Dollars)

 

 

 

 

New Found Gold Corp.

Condensed Interim Statements of Financial Position

(Unaudited - Expressed in Canadian Dollars)

 

 

       June 30,   December 31, 
       2021   2020 
   Note   $   $ 
ASSETS               
Current assets               
Cash        30,735,284    47,731,125 
Investments, at fair value   5    57,388,926    21,089,997 
Amounts receivable        2,837    2,837 
Prepaid expenses and deposits   6    1,746,855    1,258,203 
Sales taxes recoverable        1,746,694    1,024,369 
Rights-of-use assets        55,767    54,034 
Financing costs        192,838    - 
Total current assets        91,869,201    71,160,565 
Non-current assets               
Exploration and evaluation assets   3    985,305    999,234 
Property and equipment   4    2,288,734    1,377,129 
Total non-current assets        3,274,039    2,376,363 
                
Total Assets        95,143,240    73,536,928 
LIABILITIES               
Current liabilities               
Accounts payable and accrued liabilities   9    2,764,361    396,451 
Flow-through share premium   7    579,034    185,431 
Lease liabilities        57,638    53,201 
Total current liabilities        3,401,033    635,083 
EQUITY               
Share capital   8    101,878,614    87,668,764 
Reserves   8    30,491,614    24,208,662 
Deficit        (40,628,021)   (38,975,581)
Total equity        91,742,207    72,901,845 
                
Total Equity and Liabilities        95,143,240    73,536,928 
NATURE OF OPERATIONS (Note 1)               
COMMITMENTS (Note 13)               
SUBSEQUENT EVENTS (Note 16)               

 

These financial statements are authorized for issue by the Board of Directors on August 27, 2021. They are signed on the Company’s behalf by:

 

“Collin Kettell” , Director  
“Douglas Hurst” , Director  

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

- 1 - 

 

 

New Found Gold Corp.

Condensed Interim Statements of (Loss) Income and Comprehensive (Loss) Income

(Unaudited - Expressed in Canadian Dollars)

 

 

       Three months ended June 30,   Six months ended June 30, 
       2021   2020   2021   2020 
   Note   $   $   $   $ 
Expenses                         
Corporate development and investor relations        351,209    155,435    624,885    155,435 
Depreciation        125,284    4,794    220,126    6,980 
Exploration and evaluation expenditures   3,9    11,261,823    582,722    18,257,533    1,310,712 
Office and sundry        52,543    24,298    94,535    45,093 
Professional fees   9    169,493    102,941    481,574    280,636 
Salaries and consulting   9    761,118    327,750    1,262,439    768,132 
Share-based compensation   9    6,939,341    3,032,801    6,939,341    3,032,801 
Transfer agent and regulatory fees        62,699    49,739    102,405    55,239 
Travel        38,107    31,794    38,107    61,039 
Loss from operating activities        (19,761,617)   (4,312,274)   (28,020,945)   (5,716,067)
Settlement of flow-through share premium   7    1,392,296    101,117    1,577,727    101,117 
Foreign exchange loss        (2,715)   (2,893)   (2,067)   (2,021)
Impairment of exploration and evaluation assets   3    (28,604)   -    (28,604)   - 
Interest expense        (1,436)   -    (2,876)   - 
Interest income        22,518    2,485    61,935    2,485 
Net realized gains (losses) on disposal of investments   5    (12,116)   -    192,114    - 
Net change in unrealized gains on investments   5    22,130,578    14,898,946    24,570,276    9,695,405 
(Loss) income and comprehensive (loss) income for the period        3,738,904    10,687,381    (1,652,440)   4,080,919 
(Loss) earnings per share – basic ($)        0.02    0.11    (0.01)   0.05 
(Loss) earnings per share – diluted ($)        0.02    0.09    (0.01)   0.04 
Weighted average number of shares outstanding                         
Basic   10    152,036,031    97,481,889    150,540,230    90,306,501 
Diluted   10    162,650,447    122,529,753    150,540,230    115,354,365 

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

- 2 - 

 

 

New Found Gold Corp. 

Condensed Interim Statements of Cash Flows

(Unaudited - Expressed in Canadian Dollars)

 

 

   Six months ended June 30, 
   2021   2020 
   $   $ 
Cash flows from operating activities          
(Loss) income for the period   (1,652,440)   4,080,919 
Adjustments for:          
Depreciation   220,126    6,980 
Impairment of exploration and evaluation assets   28,604    - 
Interest expense   2,876    - 
Settlement of flow-through share premium   (1,577,727)   (101,117)
Share-based compensation   6,939,341    3,032,801 
Net realized (gains) on disposal of investments   (192,114)   - 
Net change in unrealized (gains) on investments   (24,570,276)   (9,695,405)
   (20,801,610)   (2,675,822)
Change in non-cash working capital items:          
Decrease in amounts receivable   -    43,248 
(Increase) in prepaid expenses and deposits   (488,652)   (426,632)
(Increase) decrease in sales taxes recoverable   (722,325)   96,454 
Increase in accounts payable and accrued liabilities   2,367,910    110,211 
(Increase) in other   -    (317,654)
Net cash used in operating activities   (19,644,677)   (3,170,195)
Cash flows from investing activities          
Purchase of exploration and evaluation assets   -    (100,000)
Expenditures on claims staking   (14,675)   (38,505)
Proceeds on disposal of investments   1,313,462    - 
Purchases of investments   (12,850,001)   - 
Purchases of property and equipment   (1,082,903)   (189,403)
Net cash used in investing activities   (12,634,117)   (327,908)
Cash flows from financing activities          
Issuance of common shares in private placements   14,999,250    7,118,196 
Share issue costs   (587,641)   (126,187)
Stock options exercised   610,388    904,500 
Warrants exercised   502,794    - 
Financing costs   (192,838)   - 
Lease payments   (46,124)   - 
Interest expense on lease liabilities   (2,876)   - 
Net cash generated from financing activities   15,282,953    7,896,509 
Net (decrease) increase in cash   (16,995,841)   4,398,406 
Cash at beginning of period   47,731,125    7,336,638 
Cash at end of period   30,735,284    11,735,044 

 

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 11)

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

- 3 - 

 

 

New Found Gold Corp.

Condensed Interim Statements of Changes in Equity

(Unaudited - Expressed in Canadian Dollars)

 

 

   Share capital  Reserves       
         Equity settled          
   Number  Amount  share-based
payments		  Warrants  Deficit  Total equity 
   of shares  $  $  $  $  $ 
Balance at December 31, 2019  78,924,249  10,735,862  2,415,009  2,252,458  (6,441,142) 8,962,187 
Shares issued in private placement  15,000,000  16,736,110  -  -  -  16,736,110 
Flow-through shares issued in private placements  4,860,982  7,118,196  -  -  -  7,118,196 
Share issue costs  -  (126,187) -  -  -  (126,187)
Agents’ warrants issued  -  (42,183) -  42,183  -  - 
Flow-through share premium  -  (1,957,619) -  -  -  (1,957,619)
Share-based compensation  -  -  3,032,801  -  -  3,032,801 
Stock options exercised  2,915,000  1,544,670  (640,170) -  -  904,500 
Total comprehensive income for the period  -  -  -  -  4,080,919  4,080,919 
Balance at June 30, 2020  101,700,231  34,008,849  4,807,640  2,294,641  (2,360,223) 38,750,907 
Shares issued in initial public offering  24,150,000  31,395,000  -  -  -  31,395,000 
Share issue costs  -  (2,906,419) -  -  -  (2,906,419)
Agents’ warrants issued  -  (771,769) -  771,769  -  - 
Share-based compensation  -  -  23,424,534  -  -  23,424,534 
Stock options exercised  6,280,000  10,659,961  (4,527,837) -  -  6,132,124 
Warrants exercised  16,554,292  15,283,142  -  (2,562,085) -  12,721,057 
Total comprehensive loss for the period  -  -  -  -  (36,615,358) (36,615,358)
Balance at December 31, 2020  148,684,523  87,668,764  23,704,337  504,325  (38,975,581) 72,901,845 
Flow-through shares issued in private placements  2,857,000  14,999,250  -  -  -  14,999,250 
Share issue costs  -  (587,641) -  -  -  (587,641)
Flow-through share premium  -  (1,971,330) -  -  -  (1,971,330)
Share-based compensation  -  -  6,939,341  -  -  6,939,341 
Stock options exercised  716,750  1,045,554  (435,166) -  -  610,388 
Warrants exercised  383,448  724,017  -  (221,223) -  502,794 
Total comprehensive loss for the period  -  -  -  -  (1,652,440) (1,652,440)
Balance at June 30, 2021  152,641,721  101,878,614  30,208,512  283,102  (40,628,021) 91,742,207 

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

- 4 - 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

1.NATURE OF OPERATIONS

 

New Found Gold Corp. (the “Company”) was incorporated on January 6, 2016, under the Business Corporations Act in the Province of Ontario. On June 23, 2020, the Company continued as a British Columbia corporation under the Business Corporations Act in the Province of British Columbia. The Company’s registered office is located at Suite 2600 – 595 Burrard Street, Vancouver, British Columbia V7X 1L3.

 

The Company is a mineral exploration company engaged in the acquisition, exploration and evaluation of resource properties with a focus on gold properties located in the Provinces of Newfoundland and Labrador and Ontario, Canada. The Company’s exploration and evaluation assets presently have no proven or probable reserves, and on the basis of information to date, it has not yet determined whether these properties contain economically recoverable resources. The recoverability of amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production.

 

On March 11, 2020, the World Health Organization declared the global outbreak of a novel coronavirus identified as “COVID-19” a global pandemic. In order to combat the spread of COVID-19, governments worldwide have enacted emergency measures including travel bans, legally enforced or self-imposed quarantine periods, social distancing and business and organization closures. These measures have caused material disruptions to businesses, governments and other organizations resulting in an economic slowdown and increased volatility in national and global equity and commodity markets. Central banks and governments, including Canadian federal and provincial governments, 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 any interventions. Significant economic and social impacts have limited the Company’s ability to continue its exploration and evaluation activities as intended. 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 operations in future periods.

 

These condensed interim financial statements were approved by the Board of Directors of the Company on August 27, 2021.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies applied in the preparation of these financial statements are set out below.

 

a) Statement of compliance

 

The Company’s condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as applicable to interim financial reports including International Accounting Standards 34 “Interim Financial Reporting”.

 

These condensed interim financial statements do not include all the information and note disclosures required by IFRS for annual financial statements and should be read in conjunction with the annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”) and included in Part I of the Handbook of the Chartered Professional Accountants of Canada and consistent with interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

 

The policies applied in these condensed interim financial statements are the same as those applied in the most recent annual financial statements and were consistently applied to all the periods presented.

 

- 5 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

  b) Basis of presentation

 

These condensed interim financial statements have been prepared on a historical cost basis except for financial instruments classified as subsequently measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

 

  c) Significant Accounting Estimates and Judgments

 

The preparation of these condensed interim financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates.

 

These condensed interim financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates may be pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Significant assumptions about the future and other sources of estimation uncertainty that management has made at year end that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to the following:

 

(i)Critical accounting estimates

 

Valuation of Options Granted and Warrants Issued

 

The fair value of common share purchase options granted and warrants issued is determined at the issue date using the Black-Scholes option pricing model. The Black-Scholes model involves six key inputs to determine the fair value of an option, which are: risk-free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense. These estimates impact the values of share-based compensation expense, share capital, and reserves.

 

Fair Value of Financial Derivatives

 

Investments in warrants that are not traded on a recognized securities exchange do not have a readily available market value. When there are sufficient and reliable market inputs, a Black-Scholes option pricing model is used. The Black-Scholes model involves six key inputs to determine the fair value of a warrant, which include: risk free interest rate, exercise price, market price at the grant date, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control.

 

- 6 - 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

2.SIGNIFICANT ACCOUNTING POLICIES (continued)

 

c)Significant Accounting Estimates and Judgments (continued)

 

(i)Critical accounting estimates (continued)

 

Computation of Income Taxes

 

The determination of tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and make estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings which affect the extent to which potential future tax benefits may be used.

 

The Company is subject to assessments by taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. We provide for such differences where known based on our best estimate of the probable outcome of these matters.

 

Shares Issued to Acquire Exploration and Evaluation Assets

 

From time to time, the Company issues common shares in the course of acquiring exploration and evaluation assets. When shares are issued without cash consideration, the transaction is recognized at the fair value of the assets received. In the event that the fair value of the assets cannot be reliably determined, the Company will recognize the transaction at the fair value of the shares issued. These estimates impact the value of share capital and exploration and evaluation assets.

 

Valuation of Flow-Through Premium

 

The determination of the valuation of flow-through premium and warrants in equity units is subject to significant judgment and estimates. The flow-through premium is valued as the estimated premium that investors pay for the flow-through feature, being the portion in excess of the market value of shares without the flow-through feature issued in concurrent private placement financing.

 

(ii)Critical accounting judgments

 

Impairment of Exploration and Evaluation Assets

 

Management is required to assess impairment in respect to the Company’s intangible mineral property interests. The triggering events are defined in IFRS 6. In making the assessment, management is required to make judgments on the status of each project and the future plans towards finding commercial reserves. The carrying value of each exploration and evaluation asset is reviewed regularly for conditions that may suggest impairment. This review requires significant judgment. Factors considered in the assessment of asset impairment include, but are not limited to, whether there has been a significant adverse change in the legal, regulatory, accessibility, title, environmental or political factors that could affect the property’s value; whether there has been an accumulation of costs significantly in excess of the amounts originally expected for the property’s acquisition, development or cost of holding; and whether exploration activities produced results that are not promising such that no more work is being planned in the foreseeable future. If impairment is determined to exist, a formal estimate of the recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. Management has determined that there were indicators of impairment as at June 30, 2021 and has impaired $28,604 (June 30, 2020 - $Nil) in exploration and evaluation assets. Refer to Note 3 for further information.

 

- 7 - 

 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

3.            EXPLORATION AND EVALUATION ASSETS

 

The schedules below summarize the carrying costs of acquisition costs and exploration expenditures incurred to date for each exploration and evaluation asset that the Company is continuing to explore as at June 30, 2021 and December 31, 2020:

 

    Newfoundland              
    Queensway(i)     Other     Ontario(ii)     Total  
Six months ended June 30, 2021     $        $       $       $  
Exploration and evaluation assets                                
Balance as at December 31, 2020     685,930       13,100       300,204       999,234  
Additions                                
Staking costs     14,675       -       -       14,675  
Impairment of exploration and evaluation assets     -       -       (28,604 )     (28,604 )
Balance at June 30, 2021     700,605       13,100       271,600       985,305  
Exploration and evaluation expenditures                                
Cumulative exploration expense - December 31, 2020     10,245,545       45,851       1,286,951       11,578,347  
Assays     2,777,282       -       6,796       2,784,078  
Drilling     7,880,535       -       -       7,880,535  
Environmental studies     158,684       -       -       158,684  
Geophysics     2,170,422       -       69,498       2,239,920  
Mapping & imaging     93,337       -       -       93,337  
Office & general     246,082       -       -       246,082  
Property taxes, mining leases and rent     30,452       -       132       30,584  
Reclamation     220,340       -       -       220,340  
Salaries & consulting     2,476,829       6,520       34,225       2,517,574  
Supplies & equipment     1,616,007       -       16,533       1,632,540  
Technical reports     278,350       -       22,479       300,829  
Travel & accommodations     221,812       -       678       222,490  
Trenching     200       -       6,840       7,040  
Exploration cost recovery     (76,500 )     -       -       (76,500 )
    18,093,832       6,520       157,181       18,257,533  
Cumulative exploration expense – June 30, 2021     28,339,377       52,371       1,444,132       29,835,880  

- 8 - 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

3. EXPLORATION AND EVALUATION ASSETS (continued)

 

   Newfoundland         
  Queensway(i)   Other   Ontario(ii)   Total  
Six months ended June 30, 2020   $    $    $    $ 
Exploration and evaluation assets                    
Balance as at December 31, 2019   658,700    16,500    425,516    1,100,716 
Additions                    
Acquisition costs   75,000    -    25,000    100,000 
Balance as at June 30, 2020   733,700    16,500    450,516    1,200,716 
Exploration and evaluation expenditures                    
Cumulative exploration expense - December 31, 2019   2,542,344    -    837,133    3,379,477 
Assays   104,487    414    211    105,112 
Geophysics   611,523    -    -    611,523 
Office   821    -    -    821 
Property taxes, mining leases and rent   26,020    -    400    26,420 
Salaries & consulting   297,543    8,300    36,613    342,456 
Supplies & equipment   164,539    -    18,631    183,170 
Travel & accommodations   26,439    -    76    26,515 
Trenching   13,510    -    31,865    45,375 
Exploration cost recovery   (30,680)   -    -    (30,680)
   1,214,202    8,714    87,796    1,310,712 
Cumulative exploration expense – June 30, 2020   3,756,546    8,714    924,929    4,690,189 

  

(i) Queensway Project – Gander, Newfoundland

 

As at June 30, 2021, the Company owns a 100% interest in 86 (December 31, 2020 – 86) mineral licenses including 6,041 (December 31, 2020 – 6,041) claims comprising 151,030 (December 31, 2020 – 151,030) hectares of land located in Gander, Newfoundland. The project rights were acquired by map staking mineral licenses and making staged payments in cash and common shares of the Company from 2016 through 2019 under nine separate, fully executed option agreements. The Queensway Project carries various net smelter return (“NSR”) royalties ranging from 0.6% to 2.5% which can be reduced to 0.5% to 1.6%, at the Company’s option, with payments ranging from $250,000 to $ 1,000,000 to the optionors. The total cost of the NSR’s that may be purchased at the Company’s discretion is $5,250,000.

 

(ii) Ontario Projects

 

As at June 30, 2021, the Company owns a 100% interest in the Lucky Strike project in Kirkland Lake, Ontario comprising 11,684 (December 31, 2020 – 11,684) hectares, as well as a portfolio of mining and royalty interests throughout northeastern Ontario. The project rights were acquired by map staking mineral licenses and making staged payments in cash and common shares of the Company from 2016 through 2019 under a fully executed option agreement. The optioned lands carry an NSR ranging from 1% to 2%.

 

During the six months ended June 30, 2021, the Company recorded an impairment of $28,604 (six months ended June 30, 2020 - $Nil) in acquisition costs related to Ontario projects no longer being explored.

 

- 9 - 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

4.            PROPERTY AND EQUIPMENT

 

   Property and   Computer   Geological         
   Buildings   Equipment   Equipment   Vehicles   Total 
   $   $   $   $   $ 
Cost                    
Balance at January 1, 2020   -    -    -    45,949    45,949 
Additions   836,009    15,860    336,020    258,551    1,446,440 
Balance at December 31, 2020   836,009    15,860    336,020    304,500    1,492,389 
Additions   449,247    13,429    451,067    169,160    1,082,903 
Balance at June 30, 2021   1,285,256    29,289    787,087    473,660    2,575,292 
Accumulated Depreciation                         
Balance at January 1, 2020   -    -    -    16,800    16,800 
Depreciation   6,998    4,090    45,474    41,898    98,460 
Balance at December 31, 2020   6,998    4,090    45,474    58,698    115,260 
Depreciation   20,684    5,006    89,310    56,298    171,298 
Balance at June 30, 2021   27,682    9,096    134,784    114,996    286,558 
Carrying Amount                         
At December 31, 2020   829,011    11,770    290,546    245,802    1,377,129 
At June 30, 2021   1,257,574    20,193    652,303    358,664    2,288,734 

 

5.INVESTMENTS

 

The Company classifies its investments at fair value through profit or loss. Realized gains and losses on disposal of investments and unrealized gains and losses in the fair value of investments are reflected in profit or loss in the period in which they occur.

 

Investments consists of the following as at June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
   $   $ 
Equities held (i)   46,676,739    21,089,997 
Warrants held (ii)   10,712,187    - 
Total Investments   57,388,926    21,089,997 

 

- 10 - 

 

 

New Found Gold Corp.

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020

 (Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

5.            INVESTMENTS (continued)

 

(i) Equities held

 

The Company held the following equities as at June 30, 2021 and December 31, 2020:

 

           Fair Value 
       Cost   June 30, 2021 
   Quantity   $   $ 
Exploits Discovery Corp.(1)  13,229,466   8,462,704   13,327,577 
Labrador Gold Corp.  12,555,556   8,850,000   19,461,112 
Novo Resources Corp.  6,645,000   16,014,450   13,888,050 
Total Equities      33,327,154   46,676,739 

 

(1) 6,562,799 shares of the Exploits Discovery Corp. investment is subject to certain resale restrictions expiring December 8, 2021 and was discounted in the amount of $695,657 at June 30, 2021.

 

           Fair Value 
           December 31, 
       Cost   2020 
   Quantity   $   $ 
Exploits Discovery Corp.(1)  6,562,799   4,462,703   3,957,368 
MetalsTech Limited  3,000,000   586,920   604,852 
Novo Resources Corp.  6,944,444   16,736,110   16,527,777 
Total Equities      21,785,733   21,089,997 

 

(1) 6,562,799 shares of the Exploits Discovery Corp. investment is subject to certain resale restrictions expiring December 8, 2021 and was discounted in the amount of $439,708 at December 31, 2020.

 

(ii) Warrants held

 

The Company held the following warrants as at June 30, 2021 and December 31, 2020:

 

           Fair Value 
       Cost   June 30, 2021 
   Quantity   $   $ 
Exploits Discovery Corp.  6,666,667    -    3,830,144 
Labrador Gold Corp.  6,277,778    -    6,882,043 
Total Warrants       -    10,712,187 

 

The Company did not hold any investments in warrants as at December 31, 2020.

 

Warrants held by the Company are classified at fair value through profit or loss, with any gains or losses arising on remeasurement recognized in profit or loss. Warrants that do not have a quoted market price are valued using a Black-Scholes option pricing model using assumptions including risk free interest rate, expected dividend yield, expected volatility, and expected remaining life of the warrant, which are supported by observable market conditions.

 

- 11 - 

 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

5.INVESTMENTS (continued)

 

An analysis of investments including related gains and losses for the six months ended June 30, 2021 and 2020 is as follows:

 

   Six months ended June 30, 
   2021   2020 
   $   $ 
Investments, beginning of period   21,089,997    114,937 
Investments received in private placement   -    16,736,110 
Purchase of investments   12,850,001    - 
Disposition of investments   (1,313,462)   - 
Realized gain on investments   192,114    - 
Unrealized gain (loss) on investments   24,570,276    9,695,405 
Investments, end of period   57,388,926    26,546,452 

 

6. PREPAID EXPENSES AND DEPOSITS

 

   June 30,   December 31, 
   2021   2020 
   $   $ 
Prepaid expenses   1,258,242    761,595 
Mineral license deposits   488,613    496,608 
Prepaid expenses and deposits, end of period   1,746,855    1,258,203 

 

7. FLOW-THROUGH SHARE PREMIUM

 

   Issued   Issued   Issued     
   June 4, 2020   June 10, 2020   April 8, 2021   Total 
   $   $   $   $ 
Balance at December 31, 2019   -    -    -    - 
Liability incurred on flow-through shares issued   1,697,704    259,915    -    1,957,619 
Settlement of flow-through share premium on expenditures incurred   (1,536,893)   (235,295)   -    (1,772,188)
Balance at December 31, 2020   160,811    24,620    -    185,431 
Liability incurred on flow-through shares issued   -    -    1,971,330    1,971,330 
Settlement of flow-through share premium on expenditures incurred   (160,811)   (24,620)   (1,392,296)   (1,577,727)
Balance at June 30, 2021   -    -    579,034    579,034 

 

Flow-through share arrangements entitle the holder of the flow-through share to a 100% tax deduction in respect of qualifying Canadian exploration expenses as defined in the Income Tax Act, Canada (“Qualifying CEE”). As at June 30, 2021, the Company incurred $11,267,811 in Qualifying CEE and amortized a total of $1,577,727 of its flow-through liabilities.

 

- 12 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

7.FLOW-THROUGH SHARE PREMIUM (continued)

 

The flow-through premium liability does not represent a cash liability to the Company and is to be fully amortized to the statement of loss and comprehensive loss pro-rata with the amount of qualifying expenditures that will be incurred.

 

As at June 30, 2021, the Company must spend another $4,405,694 of Qualifying CEE within one year to satisfy the remaining flow-through obligations.

 

8.SHARE CAPITAL AND RESERVES

 

Authorized Share Capital

 

At June 30, 2021, the authorized share capital comprised an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

 

Details of Common Shares Issued in 2021

 

During the six months ended June 30, 2021, 716,750 stock options were exercised at a weighted average exercise price of $0.85 per share for gross proceeds of $610,388.

 

During the six months ended June 30, 2021, 383,448 warrants were exercised at a weighted average exercise price of $1.31 per share for gross proceeds of $502,794.

 

On April 8, 2021, the Company completed a non-brokered private placement financing of 2,857,000 flow-through common shares at a price of $5.25 per common share for gross proceeds of $14,999,250. The Company paid share issuance costs of $587,641 in cash of which $524,974 were finder’s fees. The premium received on the flow-through shares issued was determined to be $1,971,330.

 

Details of Common Shares Issued in 2020

 

During fiscal 2020, 9,195,000 stock options were exercised at a weighted average exercise price of $0.77 per share for gross proceeds of $7,036,624.

 

During fiscal 2020, 16,554,292 warrants were exercised at a weighted average exercise price of $0.77 per share for gross proceeds of $12,721,057.

 

On March 6, 2020, the Company completed a private placement financing consisting of 15,000,000 common shares in exchange for non-cash consideration of 6,944,444 common shares of Novo Resources Corp. (TSXV: NVO) at a price of $2.41 per share for gross proceeds of $16,736,110.

 

On June 4, 2020, the Company completed a non-brokered private placement financing of 3,994,597 flow-through common shares at a price of $1.50 per common share for gross proceeds of $5,991,896. Finders’ fees paid were $69,394 in cash and the issuance of 64,282 warrants exercisable into common shares of the Company at $1.50 per share for two years from the date of issue with a fair value of $25,912. The premium received on the flow-through shares issued was determined to be $1,697,704.

 

On June 10, 2020, the Company completed a non-brokered private placement financing of 866,385 flow-through common shares at a price of $1.30 per common share for gross proceeds of $1,126,300. Finders’ fees paid were $56,793 in cash and the issuance of 43,582 warrants exercisable into common shares of the Company at $1.30 per share for two years from the date of issue with a fair value of $16,271. The premium received on the flow-through shares issued was determined to be $259,915.

  

- 13 - 

 

  

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

8.SHARE CAPITAL AND RESERVES (continued)

 

On August 11, 2020, the Company completed an initial public offering of 21,000,000 common shares at a price of $1.30 per share for gross proceeds of $27,300,000 and on August 13, 2020, its agents exercised their overallotment option in full to offer and sell an additional 3,150,000 common shares for gross proceeds of $4,095,000. The Company paid share issuance costs of $2,906,419 in cash and issued 1,379,768 agents’ warrants with a fair value of $771,769. The agents’ warrants are exercisable into common shares of the Company at $1.30 per share for 12 months from the date of issue in connection with the initial public offering.

 

Share Purchase Option Compensation Plan

 

The Company has a share purchase option plan (the “Plan”) approved by the Company’s shareholders that allows it to grant share purchase options, subject to regulatory terms and approval, to its officers, directors, employees and service providers. The Plan is based on the maximum number of eligible shares not exceeding 10% in the aggregate and 5% with respect to any one optionee of the Company’s outstanding common shares at the time of grant. If outstanding share purchase options are exercised or expire, and/or the number of issued and outstanding common shares of the Company increases, then the share purchase options available to grant under the Plan increase proportionately. The exercise price and vesting terms of each share purchase option is set by the Board of Directors at the time of grant. Share purchase options granted are subject to a four-month hold period and exercisable for a period determined by the Board of Directors which cannot exceed five years.

 

The continuity of share purchase options for the six months ended June 30, 2021 is as follows:

 

       Outstanding               Outstanding   Exercisable 
   Exercise   December           Cancelled/   June   June 
Expiry date  Price   31, 2020   Granted   Exercised   Expired   30, 2021   30, 2021 
February 20, 2022  $0.15    75,000    -    (75,000)   -    -    - 
September 30, 2023  $0.40    250,000    -    (100,000)   -    150,000    150,000 
December 17, 2024  $0.50    2,685,000    -    (410,000)   -    2,275,000    2,275,000 
April 18, 2025  $1.00    1,500,000    -    -    -    1,500,000    1,500,000 
May 23, 2025  $1.075    225,000    -    -    -    225,000    225,000 
August 11, 2025  $1.40    2,965,000    -    (15,000)   -    2,950,000    2,950,000 
September 3, 2025  $2.07    215,000    -    (76,000)   -    139,000    139,000 
October 1, 2025  $2.15    25,000    -    -    -    25,000    25,000 
December 31, 2025  $4.10    6,242,500    -    (37,500)   -    6,205,000    6,205,000 
April 29, 2026  $6.79    -    1,369,000    (3,250)   -    1,365,750    1,122,750 
May 17, 2026(i)  $8.62    -    200,000    -    -    200,000    - 
         14,182,500    1,569,000    (716,750)          -    15,034,750    14,591,750 
Weighted average exercise price $    2.36    -    0.61    -    2.92    2.77 
Weighted average contractual remaining life (years)    4.58    -    -    -    4.20    4.18 

 

(i)       Subject to shareholder approval.

 

- 14 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

8.SHARE CAPITAL AND RESERVES (continued)

 

The continuity of share purchase options for the six months ended June 30, 2020 is as follows:

 

       Outstanding               Outstanding   Exercisable 
   Exercise   December           Cancelled/   June   June 
Expiry date  Price   31, 2019   Granted   Exercised   Expired   30, 2020   30, 2020 
February 20, 2022  $0.15    1,930,000    -    (1,580,000)   -    350,000    350,000 
September 30, 2023  $0.40    350,000    -    -    -    350,000    350,000 
December 17, 2024  $0.50    5,605,000    -    (1,335,000)   -    4,270,000    4,270,000 
April 18, 2025  $1.00    -    2,300,000    -    -    2,300,000    2,300,000 
May 23, 2025  $1.075    -    1,670,000    -    -    1,670,000    1,670,000 
         7,885,000    3,970,000    (2,915,000)   -    8,940,000    8,940,000 
Weighted average exercise price $    0.41    1.03    0.31    -    0.72    0.72 
Weighted average contractual remaining life (years)    4.22    4.84    -            -    4.48    4.48 

 

The weighted average fair value of share purchase options exercised during the six months ended June 30, 2021 is $0.61 (six months ended June 30, 2020 – $0.31).

 

The weighted average fair value of share purchase options granted during the six months ended June 30, 2021 is $6.01 (six months ended June 30, 2020 – $0.76).

 

The weighted average share price of share purchase options exercised at the date of exercise during the six months ended June 30, 2021 is $8.21 (six months ended June 30, 2020 – $1.30).

 

Options were priced based on the Black- Scholes option pricing model using the following weighted average assumptions to estimate the fair value of options granted:

 

   Six months ended June 30, 
   2021   2020 
Risk-free interest rate   0.95%   0.42%
Expected option life in years   5.0    5.0 
Expected share price volatility(i)   91.1%   100%
Grant date share price  $7.066   $1.0375 
Expected forfeiture rate   -    - 
Expected dividend yield   Nil    Nil 

 

(i)The expected share price volatility is based on the average historical share price of comparable companies over the life of the option.

 

 

- 15 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

8.SHARE CAPITAL AND RESERVES (continued)

 

Warrants

 

The continuity of warrants for the six months ended June 30, 2021 is as follows:

 

       Outstanding               Outstanding 
   Exercise   December           Cancelled/   June 
Expiry date  Price   31, 2020   Issued   Exercised   Expired   30, 2021 
August 11, 2021  $1.30    714,462    -    (238,155)   -    476,307 
August 13, 2021  $1.30    113,399    -    (113,399)   -    - 
May 12, 2022  $1.30    39,475    -    (6,230)   -    33,245 
May 13, 2022  $1.50    36,052    -    (11,672)   -    24,380 
June 4, 2022  $1.50    25,845    -    (9,885)   -    15,960 
June 10, 2022  $1.30    4,107    -    (4,107)   -    - 
         933,340        -    (383,448)               -    549,892 
Weighted average exercise price $    1.31    -    1.31    -    1.31 
Weighted average contractual remaining life (years)    0.70    -    -    -    0.22 

 

The continuity of warrants for the six months ended June 30, 2020 is as follows:

 

       Outstanding               Outstanding 
   Exercise   December          Cancelled/   June 
Expiry date  Price   31, 2019   Issued   Exercised   Expired   30, 2020 
May 12, 2022  $1.30    -    39,475    -    -    39,475 
May 13, 2022  $1.50    -    36,052    -    -    36,052 
June 4, 2022  $1.50    -    28,230    -    -    28,230 
June 10, 2022  $1.30    -    4,107    -    -    4,107 
November 29, 2022  $0.75    16,000,000    -    -    -    16,000,000 
         16,000,000    107,864              -           -    16,107,864 
Weighted average exercise price $     0.75    1.42    -    -    0.75 
Weighted average contractual remaining life (years)    2.92    1.89    -    -    2.41 

 

The weighted average fair value of warrants exercised during the six months ended June 30, 2021 is $0.58 (six months ended June 30, 2020 - $Nil).

 

The weighted average fair value of warrants issued during the six months ended June 30, 2021 is $Nil (six months ended June 30, 2020 - $0.38).

 

The weighted average share price of warrants exercised at the date of exercise during the six months ended June 30, 2021 is $6.11 (six months ended June 30, 2020 – $Nil). 

 

- 16 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

8.SHARE CAPITAL AND RESERVES (continued)

 

Warrants were priced based on the Black-Scholes option pricing model using the following weighted average assumptions to estimate the fair value of warrants issued:

 

   Six months ended June 30, 
   2021   2020 
Risk-free interest rate   -    0.29%
Expected option life in years   -    2.0 
Expected share price volatility(i)   -    84%
Grant date share price   -    1.0375 
Expected forfeiture rate   -    - 
Expected dividend yield   Nil    Nil 

 

(i)The expected share price volatility is based on the average historical share price of comparable companies over the life of the option.

 

9.RELATED PARTY BALANCES AND TRANSACTIONS

 

All transactions with related parties have occurred in the normal course of operations and on terms and conditions that are similar to those of transactions with unrelated parties and are measured at the amount of consideration paid or received. A summary of the Company’s related party transactions with corporations having similar directors and officers, being Goldspot Discoveries Inc. and Mexican Gold Mining Corp., is as follows:

 

   Six months ended June 31, 
   2021   2020 
   $   $ 
Amounts paid to Goldspot Discoveries Inc. (i) for administration, exploration and evaluation   (578,749)   (69,511)
Amounts paid to Mexican Gold Mining Corp. (ii) for legal fees   -    (127,234)
Options exercised by members of key management   90,000    500,000 

 

(i)Goldspot Discoveries Inc. is a related entity having the following common director and officer to the Company: Denis Laviolette, Director and President.

 

(ii)Mexican Gold Mining Corp. is a related entity having the following common director and officer to the Company: John Anderson, Director, Michael Kanevsky, Chief Financial Officer. On January 26, 2020 the Company entered into a binding letter agreement with Mexican Gold Mining Corp. (“MGMC”) to have all of the issued and outstanding shares of the Company acquired by MGMC. On February 19, 2020, the Company announced that the binding letter agreement was mutually terminated.

 

As at June 30, 2021, $541,732 is included in accounts payable and accrued liabilities for amounts owed to GoldSpot Discoveries Inc. (December 31, 2020 - $Nil owed to related corporations).

 

There are no ongoing contractual commitments resulting from these transactions with related parties.

 

Key management personnel compensation

 

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers.

  

- 17 - 

 

  

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

9.RELATED PARTY BALANCES AND TRANSACTIONS (continued)

 

   Salaries and   Share-based       Six months
ended		 
   Consulting   compensation   Bonus   June 30, 2021 
   $   $   $   $ 
Executive Chairman   150,000    1,291,220    100,000    1,541,220 
Chief Executive Officer   150,000    1,291,220    100,000    1,541,220 
President   105,000    1,291,220    70,000    1,466,220 
Chief Financial Officer   27,000    -    -    27,000 
Chief Operating Officer   97,500    544,192    65,000    706,692 
Non-executive directors   32,129    1,546,426    -    1,578,555 
Total   561,629    5,964,278    335,000    6,860,907 

 

   Salaries and   Share-based       Six months
ended		 
   Consulting   compensation   Bonus   June 30, 2020 
   $   $   $   $ 
Executive Chairman   119,069    1,183,282    -    1,302,351 
Chief Executive Officer   100,000    1,434,601    250,000    1,784,601 
President   90,000    113,932    -    203,932 
Chief Financial Officer   23,400    -    -    23,400 
Chief Operating Officer   65,000    -    -    65,000 
Non-executive directors   -    56,966    -    56,966 
Total   397,469    2,788,781    250,000    3,436,250 

 

As at June 30, 2021, $16,250 is included in accounts payable and accrued liabilities for amounts owed to the Chief Operating Officer (December 31, 2020 - $Nil owed to key management personnel).

 

Under the terms of their management agreements, certain officers of the Company are entitled to 18 months of base pay in the event of their agreements being terminated without cause.

 

10.BASIC AND DILUTED EARNINGS PER COMMON SHARE

 

Diluted earnings per common share is calculated based on the following weighted average number of common shares outstanding:

 

   Three months ended June 30,   Six months ended June 30, 
   2021   2020   2021   2020 
Basic weighted average number of common shares outstanding   152,036,031    97,481,889    150,540,230    90,306,501 
Effect of dilutive securities:                    
Share purchase options   10,143,967    8,940,000    -    8,940,000 
Share purchase warrants   470,449    16,107,864    -    16,107,864 
Diluted weighted average number of common shares outstanding   162,650,447    122,529,753    150,540,230    115,354,365 

   

The following table lists the number of share purchase options and warrants excluded from the computation of diluted earnings per share because the exercise prices exceeded the average market value of the Company’s common share or are anti-dilutive during the respective periods as follows:

 

- 18 - 

 

 

New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

10. BASIC AND DILUTED EARNINGS PER COMMON SHARE (continued)  

 

    Three months ended June 30,   Six months ended June 30 
    2021   2020   2021   2020 
Share purchase options    443,000    -    14,791,750    - 
Share purchase warrants    -    -    549,892    - 
Total    443,000    -    15,341,642    - 

 

11. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS  

 

   Six months ended June 30,  
   2021   2020  
   $   $  
Non-cash investing and financing activities:           
Agents warrants issued in private placements   -   42,183  
Investments received for private placement   -   16,736,110  
Right-of-use assets   55,767   -  
Cash paid for income taxes   -   -  
Cash paid for interest   -   -  

 

12.SEGMENTED INFORMATION

 

The Company’s operations are limited to a single reportable segment, being mineral exploration and evaluation. All of the Company’s evaluation and exploration assets are located in Canada.

 

13.COMMITMENTS

 

The following table summarizes the Company’s long-term commitments as at June 30, 2021:

 

               4-5   More than 
   1 Year   2 Years   3 Years   Years   5 Years 
   $   $   $   $   $ 
Lease obligations   57,638    -    -    -    - 

 

The Company is required to spend approximately $1,443,589 over the next 12 months to keep all claims owned in good standing.

 

The following table summarizes the Company’s long-term commitments as at December 31, 2020:

 

               4-5   More than 
   1 Year   2 Years   3 Years   Years   5 Years 
   $   $   $   $   $ 
Lease obligations   53,201    -    -    -    - 

  

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New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

14.FINANCIAL INSTRUMENTS

 

The Company thoroughly examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, and interest rate risk. Where material, these risks are reviewed and monitored by the Board of Directors.

 

(a) Fair Values

 

Financial assets and liabilities measured at fair value are recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:

 

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The Company’s financial instruments measured at fair value are its investments, which include equities and warrants held. The fair value of equities held is determined using closing prices at the statement of financial position date with any unrealized gain or loss recognized in profit or loss. The Company’s warrants held are not traded on an active exchange and are valued using the Black-Scholes option pricing model using assumptions including risk free interest rate, expected dividend yield, expected volatility and expected remaining life of the warrant which are supported by observable market conditions and as such are classified within level 2 of the fair value hierarchy.

 

The carrying values of other financial instruments, including cash, deposits and amounts receivable, and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments.

 

       Level 1   Level 2   Level 3   Total 
       $   $   $   $ 
                     
Recurring measurements  Carrying
amount		   Fair value 
Investments, at fair value                         
June 30, 2021   57,388,926    40,415,829    16,973,097    -    57,388,926 
December 31, 2020   21,089,997    17,132,629    3,957,368    -    21,089,997 

 

There was no movement between levels during the six months ended June 30, 2021.

 

(b) Financial Instrument Risk Exposure

 

Credit risk

 

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 does not have financial instruments that potentially subject the Company to credit risk. Overall, the Company’s credit risk has not changed significantly from the prior year. Sales taxes recoverable are due from the Canada Revenue Agency and the Company places its cash with financial institutions with high credit ratings, therefore in management’s judgment, credit risk is low.

 

There have been no changes in management’s methods for managing credit risk during the six months ended June 30, 2021 and 2020.

 

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New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

14.FINANCIAL INSTRUMENTS (continued)

 

(b) Financial Instrument Risk Exposure (continued)

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company has historically relied on issuance of shares to fund exploration programs and may require doing so again in the future. As at June 30, 2021, the Company has total liabilities of $3,401,033 and cash of $30,735,284 which is available to discharge these liabilities (December 31, 2020 – total liabilities of $635,083 and cash of $47,731,125). Accordingly, in management’s judgment, liquidity risk is low.

 

There have been no changes in management’s methods for managing liquidity risk since December 31, 2020.

 

Market risk

 

(i) Currency risk

 

Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuation include cash accounts denominated in US dollars. Fluctuations in the exchange rate between the US dollar and the Canadian dollar at June 30, 2021 would not have a material impact on the Company’s net earnings and other comprehensive income.

 

(ii) Interest rate risk

 

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. As the Company deposits its short-term investments into fixed rate guaranteed investment certificates with one-year maturities or less, the Company is not exposed to interest rate risk.

 

(iii) Commodity price risk

 

Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company’s property has exposure to predominantly gold. Commodity prices, especially gold, greatly affect the value of the Company and the potential value of its property and investments.

 

(iv) Equity price risk

 

Equity price risk is the risk that the fair value of or future cash flows from the Company’s financial instruments will significantly fluctuate because of changes in market prices. The Company is exposed to market risk in trading its investments in unfavorable market conditions which could result in dispositions of investments at less than favorable prices. Additionally, the Company adjusts its investments to fair value at the end of each reporting period. This process could result in write-downs of the Company’s investments over one or more reporting periods, particularly during periods of overall market instability. The sensitivity of the Company’s net income (loss) to changes in market prices at June 30, 2021 would change the Company’s net income (loss) by $5,738,893 as a result of a 10% change in the market price of its investments.

 

There have been no changes in management’s methods for managing market risks since December 31, 2020.

  

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New Found Gold Corp. 

Notes to the Condensed Interim Financial Statements

For the three and six months ended June 30, 2021 and 2020 

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

 

15.CAPITAL MANAGEMENT

 

The Company’s objectives when managing capital are:

 

·To safeguard our ability to continue as a going concern in order to develop and operate our current projects;

 

·Pursue strategic growth initiatives; and

 

·To maintain a flexible capital structure which lowers the cost of capital.

 

In assessing our capital structure, we include in our assessment the components of equity consisting of common shares, stock options and warrants, and deficit that as at June 30, 2021 totalled $91,742,207 (December 31, 2020 - $72,901,845). In order to facilitate the management of capital requirements, the Company prepares annual expenditure budgets and continuously monitors and reviews actual and forecasted cash flows. The annual and updated budgets are monitored and approved by the Board of Directors. To maintain or adjust the capital structure, the Company may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. The Company’s current capital resources are sufficient to carry out our exploration plans and support operations through the current operating period.

 

The Company is not subject to any capital requirements imposed by a regulator.

 

There were no changes in the Company’s approach to capital management during the six months ended June 30, 2021.

 

16.SUBSEQUENT EVENTS

 

Prospectus Offering

 

Subsequent to June 30, 2021, the Company completed a bought deal financing of 5,048,500 flow-through common shares at a price of $11.39 per flow-through share for gross proceeds of $57,502,415 which includes the full exercise of the Underwriters' over-allotment option. The Company paid the Underwriters a cash fee of $2,734,547 in connection with the financing.

 

Stock Options Exercised

 

Subsequent to June 30, 2021, 534,500 stock options were exercised at a weighted average exercise price of $1.04 for gross proceeds of $553,620.

 

Stock Options Expired

 

Subsequent to June 30, 2021, 35,000 stock options with an exercise price of $6.79 expired.

 

Warrants Exercised

 

Subsequent to June 30, 2021, 476,307 warrants were exercised at an exercise price of $1.30 for gross proceeds of $619,199.

  

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