Exhibit 99.3
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2023 AND 2022
(Expressed in Canadian Dollars)
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
New Found Gold Corp.
Opinion on the Financial Statements
We have audited the accompanying statement of financial position of New Found Gold Corp. (the Company) as of December 31, 2023, the related statements of loss and comprehensive loss, cash flows and changes in equity for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and its financial performance and its cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2023.
Vancouver, Canada
March 21, 2024
-1-
![]() | Crowe MacKay LLP |
1100 – 1177 West Hastings Street | |
Vancouver, BC V6E 4T5 | |
Main +1 (604) 687-4511 | |
Fax +1 (604) 687-5805 | |
www.crowemackay.ca |
Report of Independent Registered (Withdrawal Pending) Public Accounting Firm
To the Shareholders and the Board of Directors of New Found Gold Corp.
Opinion on the Financial Statements
We have audited the accompanying statement of financial position of New Found Gold Corp. (“the Company”) as of December 31, 2022, the related statements of loss and comprehensive loss, changes in cash flows and equity for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Material Uncertainty Related to Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Without modifying our opinion, we draw attention to Note 1 in the financial statements which indicates that the Company has no current source of revenue, has incurred losses from inception and is dependent upon its ability to secure new sources of financing. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that casts significant doubt as to the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered (withdrawal pending) with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Crowe MacKay LLP
Chartered Professional Accountants
Vancouver, Canada
March 30, 2023
We had served as the Company’s auditor since 2020.
-2-
New Found Gold Corp.
Statements of Financial Position
(Expressed in Canadian Dollars)
|
| December 31, |
| December 31, | ||
2023 | 2022 | |||||
Note | $ | $ | ||||
ASSETS |
|
|
|
|
| |
Current assets |
|
|
|
|
| |
Cash |
|
|
| | ||
Investments |
| 5 |
| | ||
Prepaid expenses and deposits |
| 6 | |
| | |
Sales taxes recoverable |
|
| |
| | |
Interest receivable | 8 | | — | |||
Other assets | — | | ||||
Total current assets |
|
| |
| | |
Non-current assets |
|
|
|
| ||
Exploration and evaluation assets |
| 3 | |
| | |
Investment in Kirkland Lake Discoveries Corp. | 7 | | — | |||
Property and equipment |
| 4 | |
| | |
Secured notes | 8 | | — | |||
Right-of-use assets | | | ||||
Total non-current assets |
| |
| | ||
Total Assets |
|
| |
| | |
LIABILITIES |
|
|
|
|
| |
Current liabilities |
|
|
|
|
| |
Accounts payable and accrued liabilities |
| 10,12 | |
| | |
Flow-through share premium |
| 9 | |
| | |
Lease liabilities |
| |
| | ||
Total current liabilities |
|
| |
| | |
Lease liabilities |
| |
| | ||
Total non-current liabilities | | | ||||
Total liabilities | | | ||||
EQUITY |
|
|
|
| ||
Share capital |
| 11 | |
| | |
Reserves |
| 11 | |
| | |
Deficit |
|
| ( |
| ( | |
Total equity |
|
| |
| | |
Total Liabilities and Equity |
|
| |
| |
NATURE OF OPERATIONS AND GOING CONCERN (Note 1)
COMMITMENTS (Notes 3 and 9)
CONTINGENCY (Note 17)
SUBSEQUENT EVENTS (Note 20)
These financial statements are authorized for issue by the Board of Directors on March 21, 2024. They are signed on the Company’s behalf by:
“Collin Kettell” |
| , Director |
|
“Douglas Hurst” | , Director |
The accompanying notes are an integral part of these financial statements.
-3-
New Found Gold Corp.
Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars, except share amounts)
Year ended December 31, | ||||||
|
| 2023 |
| 2022 | ||
Note | $ | $ | ||||
Expenses |
|
|
|
|
| |
Corporate development and investor relations |
| 12 | |
| | |
Depreciation |
| 4 | |
| | |
Exploration and evaluation expenditures |
| 3,12 | |
| | |
Office and sundry |
|
| |
| | |
Professional fees |
| |
| | ||
Salaries and consulting |
| 12 | |
| | |
Share-based compensation |
| 12 | |
| | |
Transfer agent and regulatory fees |
|
| |
| | |
Travel |
|
| |
| | |
Loss from operating activities |
|
| ( |
| ( | |
Other income (expenses) | ||||||
Settlement of flow-through share premium |
| 9 | |
| | |
Foreign exchange gain (loss) |
|
| |
| ( | |
Gain on sale of exploration and evaluation assets |
| 3(ii) | |
| | |
Gain on lease derecognition | — | | ||||
Loss from equity investment | 7 | ( | — | |||
Impairment of equity investment | 7 | ( | — | |||
Loss on disposal of property and equipment | 4 | ( | — | |||
Part XII.6 tax | 9 | ( | — | |||
Revaluation of secured notes | 8 | | — | |||
Impairment of exploration and evaluation assets |
| 3 | ( |
| — | |
Interest expense |
| ( |
| ( | ||
Interest income |
| 8 | |
| | |
Realized losses on disposal of investments |
| 5 | — |
| ( | |
Unrealized losses on investments |
| 5 | ( |
| ( | |
Total | | ( | ||||
Loss and comprehensive loss for the year |
|
| ( |
| ( | |
Loss per share – basic and diluted ($) |
| 13 | ( |
| ( | |
Weighted average number of common shares outstanding – basic and diluted |
| 13 | |
| |
The accompanying notes are an integral part of these financial statements.
-4-
New Found Gold Corp.
Statements of Cash Flows
(Expressed in Canadian Dollars)
Year ended December 31, | ||||
| 2023 |
| 2022 | |
$ | $ | |||
Cash flows from operating activities |
|
|
| |
Loss for the year | ( |
| ( | |
Adjustments for: |
|
| ||
Depreciation | |
| | |
Gain on sale of exploration and evaluation assets | ( |
| ( | |
Gain on lease derecognition | — | ( | ||
Loss from equity investment | | — | ||
Impairment of equity investment | | — | ||
Loss on disposal of property and equipment | | — | ||
Impairment of exploration and evaluation assets | |
| — | |
Revaluation of secured notes | ( | — | ||
Foreign exchange loss on secured notes | | — | ||
Interest expense | |
| | |
Settlement of flow-through share premium | ( |
| ( | |
Share-based compensation | |
| | |
Realized losses on disposal of investments | — |
| | |
Unrealized losses on investments | |
| | |
( |
| ( | ||
Change in non-cash working capital items: |
|
| ||
(Increase) decrease in prepaid expenses and deposits | ( |
| | |
(Increase) decrease in other assets | ( | | ||
(Increase) in sales taxes recoverable | ( |
| ( | |
(Increase) in interest receivable | ( | — | ||
(Decrease) increase in accounts payable and accrued liabilities | ( |
| | |
Net cash used in operating activities | ( |
| ( | |
Cash flows used in investing activities |
|
|
| |
Expenditures on claims staking and mineral license renewals | ( |
| ( | |
Purchases of exploration and evaluation assets | ( | ( | ||
Transaction costs on sale of exploration and evaluation assets | ( | — | ||
Proceeds on sale of exploration and evaluation assets | — | | ||
Proceeds on disposal of investments | — |
| | |
Proceeds on disposal of property and equipment | | — | ||
Purchases of property and equipment | ( |
| ( | |
Purchase of secured notes | ( | — | ||
Purchase of investments | ( | — | ||
Net cash used in investing activities | ( |
| ( | |
Cash flows from financing activities |
|
| ||
Issuance of common shares in prospectus offering | |
| | |
Share issue costs | ( |
| ( | |
Stock options exercised | |
| | |
Warrants exercised | — |
| | |
Lease payments | ( |
| ( | |
Net cash generated from financing activities | |
| | |
Net decrease in cash | ( |
| ( | |
Cash at beginning of year | |
| | |
Cash at end of year | |
| |
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 14)
The accompanying notes are an integral part of these financial statements.
-5-
New Found Gold Corp.
Statements of Changes in Equity
(Expressed in Canadian Dollars)
Share capital | Reserves |
| ||||||||||
Equity settled | ||||||||||||
share-based |
| |||||||||||
Number | Amount | payments | Warrants | Deficit | Total equity | |||||||
| of shares |
| $ |
| $ |
| $ |
| $ |
| $ | |
Balance at December 31, 2021 |
| |
| | |
| |
| ( |
| | |
Issued pursuant to acquisition of exploration and evaluation assets | | | — | — | — | | ||||||
Issued in prospectus offering | | | — | — | — | | ||||||
Flow-through share premium |
| — | ( | — | — |
| — |
| ( | |||
Share issue costs | — | ( | — | — | — | ( | ||||||
Share-based compensation |
| — | — | | — |
| — |
| | |||
Stock options exercised |
| | | ( | — |
| — |
| | |||
Warrants exercised |
| | | — | ( |
| — |
| | |||
Total loss and comprehensive loss for the year |
| — | — | — | — |
| ( |
| ( | |||
Balance at December 31, 2022 |
| | | | |
| ( |
| | |||
Issued pursuant to acquisition of exploration and evaluation assets |
| | — | — |
| — |
| | ||||
Issued in prospectus offering | | | — | — | — | | ||||||
Flow-through share premium | — | ( | — | — | — | ( | ||||||
Share issue costs | — | ( | — | — | — | ( | ||||||
Share-based compensation |
| — | — | | — |
| — |
| | |||
Stock options exercised |
| | | ( | — |
| — |
| | |||
Total loss and comprehensive loss for the year |
| — | — | — | — |
| ( |
| ( | |||
Balance at December 31, 2023 |
| | | | |
| ( |
| |
The accompanying notes are an integral part of these financial statements.
-6-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
1. | NATURE OF OPERATIONS AND GOING CONCERN |
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 3500, The Stack, 1133 Melville Street, Vancouver, British Columbia V6E 4E5.
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 Newfoundland and Labrador, 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 or the Company’s ability to recover the value of exploration and evaluation assets through their sale, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production.
These financial statements have been prepared assuming the Company will continue on a going-concern basis and do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations. The ability of the Company to continue as a going concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. As at December 31, 2023, the Company had an accumulated deficit of $
Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. These items give rise to material uncertainties that cast significant doubt as to the Company’s ability to continue as a going concern.
These financial statements were approved by the Board of Directors of the Company on March 21, 2024.
-7-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION |
The principal accounting policies applied in the preparation of these financial statements are set out below.
a) | Statement of compliance |
The Company’s financial statements, including comparatives, have been prepared in accordance with and using accounting policies in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), effective for the Company’s reporting for the years ended December 31, 2023 and 2022.
b) | Basis of presentation |
These 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) | Exploration, evaluation and development expenditures |
Costs incurred before the Company has obtained the legal right to explore are expensed as incurred. Once the legal right to explore has been acquired, the Company capitalizes the costs of acquiring rights or licenses, including those purchased from other parties or staked directly by the Company, until such time as the lease expires, it is abandoned, sold or considered impaired in value. Indirect administrative costs and costs of surveying, exploratory drilling, sampling, materials, fuel, equipment rentals or payments to contractors are expensed as incurred. Once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable and economically recoverable reserves are developed, any direct exploration costs of the related property are capitalized as development costs.
Exploration and evaluation properties are not amortized during the exploration and evaluation stage.
The Company does not have revenue from mining operations. The Company recognizes gains or losses on the sale of exploration and evaluation assets in accordance with the terms of the purchase and sale agreements. Gains or losses are recognized when a mining option is executed and the cost is derecognized in accordance with the percentage interest sold.
At each reporting date the carrying amounts of the Company’s exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.
For the purposes of impairment testing, exploration and evaluation assets are allocated to cash generating units (“CGU”) to which the exploration activity relates. Each of the Company’s properties is considered to be a separate CGU. Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
-8-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
d) | Decommissioning liabilities |
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of exploration and evaluation assets and equipment when those obligations result from the acquisition, construction, development or normal operation of assets. The net present value of future reclamation costs is expensed as part of exploration and evaluation expenditures up until the point it is concluded that the technical feasibility and commercial viability of extracting a mineral resource from a particular project are demonstrable and economically recoverable reserves are developed, after which any such costs are capitalized as development costs with a corresponding increase in the reclamation provision in the period incurred.
Pre-tax discount rates that reflect the time value of money are used to calculate the net present value. The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to exploration and evaluation expenditures or exploration and evaluation assets and the reclamation provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period.
e) | Property, plant and equipment |
Property, plant and equipment is recorded at cost less accumulated depreciation calculated using the straight-line method over the estimated useful lives as follows:
Property and Buildings |
| |
Geological Equipment and Other Facilities | ||
Computer Equipment | ||
Office Furniture and Equipment | ||
Vehicles |
Depreciation of an asset begins once it is available for use.
Long-lived assets are comprised of property and equipment. At the end of each reporting period the carrying amounts of the Company’s long-lived assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use.
Fair value is determined as the amount that would be obtained by the sale of the asset in any arm’s length transaction between knowledgeable and willing parties. Fair value of mineral assets is generally determined as the present value of the estimated cash flows expected to arise from the continued use of the asset, including an expansion project. Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal.
Impairment is assessed at the CGU level, which is identified as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets.
Non-financial assets that have been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. When a reversal of a previous impairment is recorded, the reversal amount is adjusted for depreciation that would have been recorded had the impairment not taken place.
-9-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
f) | Share-based payment transactions |
Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to equity settled share-based payments reserve.
Consideration received on the exercise of stock options is recorded as share capital and the related equity settled share-based payments reserve is transferred to share capital. Charges for options that are forfeited/cancelled before vesting are transferred from equity settled share-based payment reserve to deficit. Charges for options that are expired remain in equity settled share-based payment reserve.
Where the terms and conditions of options are modified before they vest, the changes in fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
g) | Valuation of equity units issued in private placements |
The Company follows the pro-rata allocation method with respect to the measurement of shares and warrants issued as private placement units. This values each component at fair value and allocates total proceeds received between shares and warrants based on the pro rata relative values of the components. The fair value of the common shares is based on the closing quoted bid price on the issue date and the fair value of the common share purchase warrants is determined at the issue date using the Black- Scholes pricing model. In the event of a modification in warrants issued as private placement units, no re-measurement adjustment is recognized within equity.
h) | Financial instruments |
Financial assets and liabilities are recognized when the entity becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows have expired or substantially all risks and rewards of ownership have been transferred. Gains and losses on derecognition are generally recognized in profit and loss. Financial liabilities are derecognized when the Company’s obligation has been discharged, cancelled or expired.
-10-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
h) | Financial instruments (continued) |
Financial assets are classified and measured either at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) based on the business model in which they are held and the characteristics of their contractual cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest are measured at amortized cost at the end of the subsequent accounting periods. All other financial assets including equity investments and secured notes are measured at their fair values at the end of subsequent accounting periods, with any change taken through profit or loss or other comprehensive income. Financial liabilities include accounts payable and lease liabilities, which are measured at amortized cost.
All financial instruments are initially recognized at fair value on the statement of financial position. Subsequent measurement of financial instruments is based on their classification. Financial assets and liabilities classified at FVTPL are measured at fair value with changes in those fair values recognized in profit or loss or other comprehensive income for the period. Financial assets and liabilities classified at amortized cost are measured at amortized cost using the effective interest method.
The following table sets out the classifications of the Company’s financial assets and liabilities:
Financial assets/liabilities |
| Classification under IFRS 9 |
Cash | Amortized cost | |
Investments | FVTPL | |
Deposits | Amortized cost | |
Secured notes | FVTPL | |
Accounts payables and accrued liabilities | Amortized cost | |
Lease liabilities | Amortized cost |
IFRS requires an expected credit loss model for calculating the impairment of financial assets.
The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in initial recognition. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods, if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods, if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
i) | Investments |
Purchases and sales of investments are recognized on the settlement date. Realized gains and losses on disposal of investments and unrealized gains and losses in the fair value of investments are reflected in the statement of loss and comprehensive loss. Upon disposal of an investment, previously recognized unrealized gains or losses are reversed so as to recognize the full realized gain or loss in the period of disposition. All transaction costs associated with the acquisition and disposition of investments are expensed to the statement of loss and comprehensive loss as incurred. Interest income and other income are recorded on an accrual basis.
-11-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
i) | Investments (continued) |
The fair value of investments is determined as follows:
(a) | Securities that are traded in an active market and for which no sales restrictions apply, are presented at fair value based on quoted closing trade prices at the date of statement of financial position. If there were no trades on the date of the statement of financial position, these securities are presented at the closing price on the last date the security traded. These investments are included in Level 1 of the fair value hierarchy. |
(b) | Securities that are traded in an active market, but which are escrowed or otherwise restricted as to their sale or transfer, are recorded at amounts discounted from market value to a maximum of |
(c) | Securities that are not traded in an active market or are valued based on unobservable market inputs are included in the Level 3 of the fair value hierarchy. |
See Note 5 for details of investments held by the Company as at December 31, 2023 and 2022.
j) | Investment in an associate |
An associate is an entity over which the investor has significant influence but not control and that is neither a subsidiary nor an interest in a joint venture. The Company’s share of the net assets and net earnings or loss is accounted for in the financial statements using the equity method of accounting.
Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company’s share of net earnings and losses of the associate, after any adjustments necessary to give effect to uniform accounting policies, any other movement in the associate’s reserves, and for impairment losses after the initial recognition date. The Company’s share of an associate’s losses that are in excess of its investment are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company’s share of earnings and losses of associates are recognized in net earnings/(loss) during the period. Dividends and repayment of capital received from an associate are accounted for as a reduction in the carrying amount of the Company’s investment. Unrealized gains and losses between the Company and its associates are recognized only to the extent of unrelated investors’ interests in the joint ventures and associates. Intercompany balances and interest expense and income arising on loans and borrowings between the Company and associates are not eliminated.
k) | Flow-through shares |
The Company will from time to time issue flow-through common shares to finance a significant portion of its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenditures being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as recovery of flow-through premium liability and the related deferred tax is recognized as a tax provision.
-12-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
k)Flow-through shares (continued)
The Company is subject to the flow-through share rules under the Income Tax Act of Canada. Proceeds received from the issuance of flow-through shares are required to be used only for Canadian resource property exploration expenditures within a specified time. The Company may also be subject to Part XII.6 tax on flow through proceeds renounced but not spent under the Look-Back Rules. When applicable, this tax is accrued as an expense.
l) | Income taxes |
Income tax on the profit or loss for the years presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at year end applicable to the period of expected realization or settlement.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
m) | Significant accounting estimates and judgments |
The preparation of these 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 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:
-13-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
m)Significant accounting estimates and judgments (continued)
(i) | Critical accounting estimates |
Valuation of Secured Notes
The fair value of secured notes at the issue date and the period end date is determined using the Hull-White model of interest rate uncertainty within a FINCAD Callable / Puttable Bond Model. The model involves various inputs to determine the fair value of the secured notes, including coupon rate, credit spread, mean reversion, rate volatility, riskless rates and redemption prices. 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. These estimates impact the value of the secured notes recognized in the statement of financial position and revaluation adjustments recognized in the statement of loss and comprehensive loss during the period.
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 stock-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.
The absence of the occurrence of any of these events, any significant change in trends in general market conditions, or any significant change in share performance of comparable publicly-traded companies indicates generally that the fair value of the investment has not materially changed.
-14-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
m) | 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 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.
Reclamation provision
The valuation of any reclamation provision is subject to significant judgement and estimates. Assumptions, based on the current economic environment, are made to estimate the future liability recognized in Note 10. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management and are based on current regulatory requirements. Significant changes in estimates of discount rate, contamination, restoration standards and techniques will result in changes to the provision from period to period. Actual reclamation and closure costs will ultimately depend on future market prices for the costs which will reflect the market condition at the time the expenditures are actually incurred. The final cost of the reclamation provision currently recognized may be higher or lower than currently provided for.
-15-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
m) | Significant accounting estimates and judgments (continued) |
(ii)Critical accounting judgments
Impairment of Exploration and Evaluation Assets
Management is required to assess impairment in respect to the Company’s 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, 2023 and has impaired $
Determination of whether the Company has significant influence over investees
Significant influence is presumed to exist where the Company has between 20% and 50% of the voting rights, but can also arise where the Company has less than 20%, if the Company has the power to participate in the financial and operating policy decisions affecting the entity. Determination of whether the Company has significant influence over investees requires an assessment of the activities of the investee that significantly affect the investee's returns, including strategic, operational and financing decision-making, appointment, remuneration and termination of the key management personnel and when decisions related to those activities can be influenced by the Company.
Based on assessments of the relevant facts and circumstances, primarily, the Company's ownership interests, board representation and ability to influence operating, strategic and financing decisions, the Company concluded that it has significant influence over Kirkland Lake Discoveries Corp. described in Note 7.
Impairment assessment for investment in associates
At each balance sheet date, management considers whether there is objective evidence of impairment in associates, including one or more loss events that would evidence a significant or prolonged decline in the fair value of the investment in associates below the carrying value. The net investment in an associate is impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment and that loss event or events have a negative impact on the estimated future cash flows from the net investment that can be reliably estimated. If there is such evidence, management determines the amount of impairment to record, if any, in relation to the associate.
The Company had significant influence over Kirkland Lake Discoveries Corp. during the period from May 25, 2023 to December 31, 2023 and as a result has accounted for it as an investment in an associate during this period. Management has determined that there were indicators of impairment as at December 31, 2023 and has impaired $
-16-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
2. | MATERIAL ACCOUNTING POLICY INFORMATION (continued) |
m) | Significant accounting estimates and Judgments (continued) |
(ii) | Critical accounting judgments (continued) |
Presentation of financial statements as a going concern
Presentation of the financial statements as a going concern which assumes that the Company will continue in operation for the foreseeable future, obtain additional financing as required, and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due involves significant judgment by management.
n) | Initial application of standards, interpretations and amendments to standards and interpretations in the reporting period |
The IASB issued certain new accounting standards or amendments that are mandatory for accounting periods on or after January 1, 2023. The effect of such new accounting standards or amendments did not have a material impact on the Company and therefore the Company did not record any adjustments to the financial statements.
As part of the new amendments, the Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) from January 1, 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the financial statements. The amendments require the disclosure of ‘material’, rather than ‘significant’, accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information that users need to understand other information in the financial statements. Management reviewed the accounting policies and made updates to the information disclosed in Note 2 Material accounting policies (2022: Significant accounting policies) in certain instances in line with the amendments.
o)New and amended IFRS standards not yet effective
Certain new accounting standards or interpretations have been published that are not mandatory for the current period and have not been early adopted. These standards and interpretations are not expected to have a material impact on the Company’s financial statements.
-17-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(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 December 31, 2023 and 2022:
Newfoundland | ||||||||
Queensway(i) | Other | Ontario(ii) | Total | |||||
Year ended December 31, 2023 |
| $ |
| $ |
| $ |
| $ |
Exploration and evaluation assets |
|
|
|
|
|
|
| |
Balance as at December 31, 2022 | |
| | |
| | ||
Additions |
|
| ||||||
Acquisition costs | |
| | — |
| | ||
Claim staking and license renewal costs | |
| — | — |
| | ||
Disposals | ||||||||
Disposal of exploration and evaluation assets | — |
| — | ( |
| ( | ||
Impairment of exploration and evaluation assets | — |
| — | ( |
| ( | ||
Balance as at December 31, 2023 | |
| | — |
| | ||
Exploration and evaluation expenditures |
|
| ||||||
Cumulative exploration expense – December 31, 2022 | |
| | |
| | ||
Assays | |
| | — |
| | ||
Drilling | |
| — | — |
| | ||
Environmental studies | | — | — | | ||||
Geochemistry | |
| — | — |
| | ||
Geophysics | |
| — | — |
| | ||
Imagery and mapping | | | — | | ||||
Metallurgy | | — | — | | ||||
Office and general | |
| — | |
| | ||
Other | | — | — | | ||||
Permitting | | — | — | | ||||
Property taxes, mining leases and rent | |
| — | |
| | ||
Reclamation | |
| — | — |
| | ||
Salaries and consulting | |
| | |
| | ||
Seismic survey | | — | — | | ||||
Supplies and equipment | |
| — | |
| | ||
Technical reports | | — | — | | ||||
Travel and accommodations | |
| | |
| | ||
Trenching | |
| — | — |
| | ||
Exploration cost recovery | ( | — | — | ( | ||||
|
| | |
| | |||
Cumulative exploration expense – December 31, 2023 | |
| | |
| |
-18-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
3. | EXPLORATION AND EVALUATION ASSETS (continued) |
| Newfoundland | |||||||
Queensway (i) | Other | Ontario(ii) | Total | |||||
Year ended December 31, 2022 |
| $ |
| $ |
| $ |
| $ |
Exploration and evaluation assets |
|
|
|
|
|
| ||
Balance as at December 31, 2021 | | |
| | | |||
Additions |
| |||||||
Acquisition costs | | |
| — | | |||
Claim staking and license renewal costs | | |
| | | |||
Balance as at December 31, 2022 | | |
| | | |||
Exploration and evaluation expenditures |
| |||||||
Cumulative exploration expense – December 31, 2021 | | |
| | | |||
Assays | | |
| | | |||
Drilling | | |
| | | |||
Environmental studies | | — | — | | ||||
Geochemistry | | — |
| — | | |||
Geophysics | | — |
| | | |||
Imagery and mapping | | — | — | | ||||
Metallurgy | | — | — | | ||||
Office and general | | |
| | | |||
Property taxes, mining leases and rent | | — |
| | | |||
Petrography | | — | — | | ||||
Reclamation | | — |
| — | | |||
Salaries and consulting | | |
| | | |||
Supplies and equipment | | |
| | | |||
Technical reports | | — | | | ||||
Travel and accommodations | | |
| | | |||
Exploration cost recovery | ( | — |
| — | ( | |||
| |
| | | ||||
Cumulative exploration expense – December 31, 2022 | | |
| | |
As at December 31, 2023, the Company owns a
-19-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
3. | EXPLORATION AND EVALUATION ASSETS (continued) |
(i)Queensway Project – Gander, Newfoundland (continued)
On November 2, 2022, the Company entered into a definitive property option agreement to acquire a
● | $ |
● | $ |
● | $ |
● | $ |
● | $ |
● | $ |
Disposal of Lucky Strike
During the year ended December 31, 2023, the Company recognized a gain on disposal of its Lucky Strike project in Kirkland Lake, Ontario of $
As at December 31, 2022, the Company owned a
Impairment of Ontario Properties
During the year ended December 31, 2023, the Company recorded an impairment of $
-20-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
4. | PROPERTY AND EQUIPMENT |
|
| Geological | Office | |||||||||
Property | Equipment | Furniture | ||||||||||
and | Computer | and Other | and | |||||||||
Buildings | Equipment | Facilities | Vehicles | Equipment | Total | |||||||
| $ |
| $ |
| $ |
| $ |
| $ |
| $ | |
Cost |
|
|
|
|
|
|
|
|
| |||
Balance at January 1, 2022 | |
| |
| |
| | — |
| | ||
Additions | |
| |
| |
| | |
| | ||
Balance at December 31, 2022 | |
| |
| |
| | |
| | ||
Additions | |
| |
| |
| | |
| | ||
Disposals | — | ( | — | ( | — | ( | ||||||
Balance at December 31, 2023 | |
| |
| |
| | |
| | ||
Accumulated Depreciation |
|
|
|
| ||||||||
Balance at January 1, 2022 | |
| |
| |
| | — |
| | ||
Depreciation | |
| |
| |
| | |
| | ||
Balance at December 31, 2022 | |
| |
| |
| | |
| | ||
Depreciation | |
| |
| |
| | |
| | ||
Disposals | — | ( | — | ( | — | ( | ||||||
Balance at December 31, 2023 | |
| |
| |
| | |
| | ||
Carrying Amount |
|
|
|
| ||||||||
At December 31, 2022 | |
| |
| |
| | |
| | ||
At December 31, 2023 | |
| |
| |
| | |
| |
5. | INVESTMENTS |
The Company classifies its investments at FVTPL. Realized gains and losses on disposal of investments and unrealized gains and losses in the fair value of investments are reflected in the statement of loss and comprehensive loss in the period in which they occur.
Investments consisted of the following as at December 31, 2023 and 2022:
| December 31, 2023 | December 31, 2022 | ||
| $ |
| $ | |
Equities held (i) | |
| | |
Warrants held (ii) | |
| | |
Total Investments | |
| |
-21-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
5. | INVESTMENTS (continued) |
(i) Equities held
The Company held the following equities as at December 31, 2023:
|
|
| Fair Value | |||
December 31, | ||||||
Cost | 2023 | |||||
| Quantity |
| $ |
| $ | |
Exploits Discovery Corp. |
| | |
| | |
Labrador Gold Corp. |
| | |
| | |
Long Range Exploration Corporation |
| | |
| — | |
Total Equities | |
| |
The Company held the following equities as at December 31, 2022:
|
|
| Fair Value | |||
December 31, | ||||||
Cost | 2022 | |||||
| Quantity |
| $ |
| $ | |
Exploits Discovery Corp. |
| | |
| | |
Labrador Gold Corp. | | | | |||
Long Range Exploration Corporation | | | — | |||
Total Equities |
| |
| |
Investments in Exploits Discovery Corp. and Labrador Gold Corp. represent investments in public companies that are quoted on an active exchange and are measured using the quoted market price of these companies.
Long Range Exploration Corporation is a private company without observable market prices for its common shares and is measured at its estimated fair value based on valuation techniques that use inputs derived by management and is considered Level 3 in the fair value hierarchy (Note 18).
(ii) Warrants held
The Company held the following warrants as at December 31, 2023:
|
|
| Fair Value | |||
December 31, | ||||||
Cost | 2023 | |||||
| Quantity |
| $ |
| $ | |
Maritime Resources Corp. (1) |
| | |
| | |
Total Warrants | |
| |
(1) | Each warrant is exercisable into one common share of Maritime Resources Corp. at a price of $ |
-22-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
5. | INVESTMENTS (continued) |
(ii) Warrants held (continued)
The Company held the following warrants as at December 31, 2022:
|
|
|
| Fair Value | ||
December 31, | ||||||
Cost | 2022 | |||||
| Quantity |
| $ |
| $ | |
Exploits Discovery Corp. | — | |||||
Labrador Gold Corp. | — | |||||
Total Warrants |
|
| — |
| |
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.
An analysis of investments including related gains and losses for the years ended December 31, 2023 and 2022 is as follows:
Year ended December 31, | ||||
| 2023 |
| 2022 | |
$ | $ | |||
Investments, beginning of year | | | ||
Purchases of investments | | — | ||
Proceeds on disposal of investments | — |
| ( | |
Realized losses on investments | — |
| ( | |
Unrealized losses on investments | ( |
| ( | |
Investments, end of year | |
| |
6. | PREPAID EXPENSES AND DEPOSITS |
| December 31, |
| December 31, | |
2023 | 2022 | |||
$ | $ | |||
Prepaid expenses |
| |
| |
Mineral license deposits |
| |
| |
Prepaid expenses and deposits, end of year |
| |
| |
-23-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
7. | INVESTMENT IN KIRKLAND LAKE DISCOVERIES CORP. |
On May 25, 2023, the Company disposed of its Lucky Strike project to Kirkland Lake Discoveries Corp. (TSXV: KLDC) for total non-cash consideration comprised of
Based on assessments of the relevant facts and circumstances, primarily, the Company's ownership interests, board representation and ability to influence operating, strategic and financing decisions, the Company concluded that it has significant influence over Kirkland Lake Discoveries Corp. for the period from May 25, 2023 to December 31, 2023 and has accounted for its investment in Kirkland Lake Discoveries Corp. as an investment in an associate.
The following table illustrates the summarised financial information of the Company’s investment in Kirkland Lake Discoveries Corp. as at December 31, 2023 on a
| December 31, 2023 |
| |
$ | |||
Summarised Statement of Financial Position |
|
| |
Current assets |
| | |
Non-current assets |
| | |
Current liabilities |
| ( | |
Non-current liabilities |
| — | |
Net Assets |
| | |
The Company’s ownership interest |
| | % |
Share of Kirkland Lake Discoveries Corp.’s net assets |
| | |
Summarised Statement of Loss and Comprehensive Loss |
|
| |
Net loss and comprehensive loss for the period |
| ( | |
Share of Kirkland Lake Discoveries Corp.’s loss for the period from May 25, 2023 to December 31, 2023 |
| ( |
The Company performs an impairment indicator assessment on its investment in Kirkland Lake Discoveries Corp. at each period end. The assessment is based on the review of recent share price history, industry statistics and assessment of the current market conditions. As at December 31, 2023, management has determined that there are indicators of impairment of the Company’s investment in Kirkland Lake Discoveries Corp. and has recognized an impairment of its equity investment of $
The following table illustrates the movement in investment in associate for the period from May 25, 2023 to December 31, 2023:
Net Carrying amount – May 25, 2023 |
| $ | |
Share of loss from operations of associate during the period |
| ( | |
Impairment of equity investment |
| ( | |
Net Carrying amount – December 31, 2023 | $ | |
The estimated fair value of the Company’s investment in Kirkland Lake Discoveries Corp.’s is $
-24-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
8. | SECURED NOTES |
On August 14, 2023, the Company participated in a brokered note offering completed by Maritime Resources Corp. (“Maritime”) consisting of the issuance of non‐convertible senior secured notes (the “Notes”) and common share purchase warrants. The Notes mature on August 14, 2025 (the “Initial Maturity Date”). The Company subscribed for
The Notes bear interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus
Pursuant to certain conditions set out in the Note indenture, including the approval of Noteholders holding at least
The indebtedness under the Notes may be redeemed in whole or in part at the option of Maritime for cash consideration equal to
The Notes are secured by a general security interest over Maritime and rank senior to all existing and future indebtedness of Maritime.
Based on the business model in which the secured notes are held and the characteristics of their contractual cash flows, the secured notes are classified as a financial instrument at fair value through profit and loss ("FVTPL") in accordance with IFRS 9 “Financial Instruments”.
The issuance of the Notes included a
The Company has allocated the gross investment of US$
-25-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
8. | SECURED NOTES (continued) |
The following table illustrates the movement in the Company’s secured notes for the period from August 14, 2023 to December 31, 2023:
| Period ended | |
December 31, 2023 | ||
$ | ||
Secured notes, beginning of year |
| — |
Purchase of secured notes |
| |
Revaluation of secured notes |
| |
Foreign exchange loss |
| ( |
Secured notes, end of year |
| |
During the period ended December 31, 2023, the Company recognized $
9. | FLOW-THROUGH SHARE PREMIUM |
| Issued |
| Issued | Issued |
| Issued |
| |||
August 24, | November 25, |
| December 14, | November 6, | ||||||
2021 | 2021 | 2022 | 2023 | Total | ||||||
$ | $ | $ | $ | $ | ||||||
Balance at December 31, 2021 |
| |
| |
| — |
| — |
| |
Liability incurred on flow-through shares issued |
| — |
| — |
| |
| — |
| |
Settlement of flow-through share premium on expenditures incurred |
| ( |
| ( |
| — |
| — |
| ( |
Balance at December 31, 2022 |
| — |
| |
| |
| — |
| |
Liability incurred on flow-through shares issued |
| — |
| — |
| — |
| |
| |
Settlement of flow-through share premium on expenditures incurred |
| — |
| ( |
| ( |
| ( |
| ( |
Balance at December 31, 2023 | — |
| — |
| — |
| |
| |
Flow-through share arrangements entitle the holder of the flow-through share to a
During the year ended December 31, 2023, the Company incurred $
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.
During the year ended December 31, 2023, the Company incurred $
-26-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
10. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
| December 31, 2023 |
| December 31, 2022 | |
$ | $ | |||
Accounts payable and accrued liabilities | | |||
Reclamation provision(1) |
| |
| |
Accounts payable and accrued liabilities, end of year |
| |
| |
(1) | Provincial laws and regulations concerning environmental protection affect the Company’s exploration and operations. Under current regulations, the Company is required to meet performance standards to minimize the environmental impact from its activities and to perform site restoration and other reclamation activities. The Company’s reclamation provision is based on known requirements. |
The breakdown of the Company’s reclamation provision is as follows:
| December 31, 2023 |
| December 31, 2022 | |
$ | $ | |||
Balance, beginning of year | | — | ||
Additions to reclamation provision |
| |
| |
Change in estimate | | — | ||
Reclamation costs incurred | ( | — | ||
Balance, end of year |
| |
| |
The Company has estimated that the reclamation obligations are current costs and as such considers the present value of the provision at December 31, 2023 to be equal to the total future undiscounted cash flows to settle the provision for reclamation, being $
-27-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
11. | SHARE CAPITAL AND RESERVES |
Authorized Share Capital
At December 31, 2023, 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 2023
| Year ended |
| Year ended | |||||||
December 31, 2023 | December 31, 2022 | |||||||||
| Gross |
|
| Gross | ||||||
Number of shares | proceeds | Number of shares | proceeds | |||||||
ATM program | $ | | $ | |||||||
Total | $ | | $ |
In August 2022, the Company filed a prospectus supplement to its short form base shelf prospectus, pursuant to which the Company may, at its discretion and from time-to-time, sell common shares of the Company for aggregate gross proceeds of up to US$
On November 6, 2023, the Company completed a bought-deal prospectus offering of
On November 2, 2023, the Company issued
During the year ended December 31, 2023,
On December 14, 2022, the Company completed a bought-deal prospectus offering of
On November 16, 2022, the Company issued
During the year ended December 31, 2022,
During the year ended December 31, 2022,
-28-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
11. | SHARE CAPITAL AND RESERVES (continued) |
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
The continuity of share purchase options for the year ended December 31, 2023 is as follows:
|
| Outstanding |
|
|
| Cancelled/ |
| Outstanding |
| Exercisable | |||||
Exercise | December | Forfeited/ | December | December | |||||||||||
Expiry date | Price | 31, 2022 | Granted | Exercised | Expired | 31, 2023 | 31, 2023 | ||||||||
September 30, 2023 | $ | | | — | ( | — | — | — | |||||||
December 17, 2024 | $ | | | — | — | — | | | |||||||
April 18, 2025 | $ | | | — | — | — | | | |||||||
May 23, 2025 | $ | |
| |
| — |
| — |
| — |
| |
| | |
August 11, 2025 | $ | |
| |
| — |
| — |
| — |
| |
| | |
September 3, 2025 | $ | |
| |
| — |
| ( |
| — |
| |
| | |
October 1, 2025 | $ | |
| |
| — |
| — |
| — |
| |
| | |
December 31, 2025 | $ | |
| |
| — |
| — |
| — |
| |
| | |
April 29, 2026 | $ | |
| |
| — |
| — |
| ( |
| |
| | |
May 17, 2026 | $ | |
| |
| — |
| — |
| — |
| |
| | |
September 27, 2026 | $ | |
| |
| — |
| — |
| — |
| |
| | |
November 26, 2026 | $ | |
| |
| — |
| — |
| ( |
| |
| | |
January 4, 2027 | $ | | | — | — | ( | | | |||||||
August 19, 2027 | $ | | | — | — | — | | | |||||||
September 8, 2027 | $ | | | — | — | — | | | |||||||
December 27, 2027 | $ | | | — | ( | ( | | | |||||||
|
| |
| — |
| ( |
| ( |
| | | ||||
Weighted average exercise price $ |
| |
| — |
| |
| |
| |
| | |||
Weighted average contractual remaining life (years) |
|
|
| — |
| — |
| — |
|
|
-29-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
11. | SHARE CAPITAL AND RESERVES (continued) |
The continuity of share purchase options for the year ended December 31, 2022 is as follows:
|
| Outstanding |
|
|
| Cancelled/ |
| Outstanding |
| Exercisable | |||||
December | Forfeited/ | December | December | ||||||||||||
Expiry date | Exercise Price | 31, 2021 | Granted | Exercised | Expired | 31, 2022 | 31, 2022 | ||||||||
September 30, 2023 | $ | | | — | — | — | | | |||||||
December 17, 2024 | $ | | | — | ( | — | | | |||||||
April 18, 2025 | $ | | | — | ( | — | | | |||||||
May 23, 2025 | $ | | |
| — |
| ( |
| — |
| |
| | ||
August 11, 2025 | $ | | |
| — |
| ( |
| — |
| |
| | ||
September 3, 2025 | $ | | |
| — |
| ( |
| — |
| |
| | ||
October 1, 2025 | $ | | |
| — |
| — |
| — |
| |
| | ||
December 31, 2025 | $ | | |
| — |
| ( |
| — |
| |
| | ||
April 29, 2026 | $ | | |
| — |
| ( |
| ( |
| |
| | ||
May 17, 2026 | $ | | |
| — |
| — |
| — |
| | | |||
September 27, 2026 | $ | | |
| — |
| — |
| — |
| |
| | ||
November 26, 2026 | $ | | | — | — | ( | | | |||||||
January 4, 2027 | $ | | — | | — | ( | | | |||||||
August 19, 2027 | $ | | — | | — | — | | | |||||||
September 8, 2027 | $ | | — |
| |
| — |
| — |
| |
| | ||
December 27, 2027 | $ | | — | | — | — | | | |||||||
| | ( | ( | | | ||||||||||
Weighted average exercise price $ | | | | | | | |||||||||
Weighted average contractual remaining life (years) | — | — |
The table below summarizes the weighted average fair value of share purchase options granted and exercised:
| Year ended December 31, | |||||
| 2023 |
| 2022 | |||
Weighted average: | ||||||
Fair value of share purchase options granted | — | $ | | |||
Fair value of share purchase options exercised | $ | | $ | | ||
Closing share price at the date of exercise | $ | | $ | |
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:
| Year ended December 31, |
| |||||
| 2023 |
| 2022 |
| |||
Risk-free interest rate |
| — | | % | |||
Expected option life in years |
| — |
| | |||
Expected share price volatility(i) |
| — | | % | |||
Grant date share price | — | $ | | ||||
Expected forfeiture rate |
| — |
| — | |||
Expected dividend yield |
| — |
|
(i) | The expected share price volatility is based on the average historical share price of comparable companies over the life of the option. |
-30-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
11. | SHARE CAPITAL AND RESERVES (continued) |
Warrants
The Company did not have any warrants outstanding as at December 31, 2023 and 2022.
The continuity of warrants for the year ended December 31, 2022 is as follows:
|
| Outstanding |
|
|
|
| Outstanding | ||||||
Exercise | December | Cancelled/ | December 31, | ||||||||||
Expiry Date | Price | 31, 2021 | Issued | Exercised | Expired | 2022 | |||||||
May 12, 2022 | $ | |
| |
| — |
| ( |
| ( |
| — | |
May 13, 2022 | $ | |
| |
| — |
| — |
| ( |
| — | |
June 4, 2022 | $ | |
| |
| — |
| ( |
| — |
| — | |
|
| |
| — |
| ( |
| ( | — | ||||
Weighted average exercise price $ |
| |
| — |
| |
| |
| — | |||
Weighted average contractual remaining life (years) |
|
| — |
| — |
| — |
| — |
The table below summarizes the weighted average fair value of warrants exercised:
Year ended December 31, | |||||
| 2023 |
| 2022 | ||
Weighted average: | |||||
Fair value of warrants exercised |
| — | $ | | |
Closing share price at the date of exercise |
| — | $ | |
-31-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
12. | 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 is as follows:
| Year ended December 31, | |||
| 2023 |
| 2022 | |
$ | $ | |||
Amounts paid to EarthLabs Inc. (i) for exploration and evaluation |
| |
| |
Amounts paid to DigiGeoData Inc. (i) for corporate development and investor relations |
| — |
| |
Amounts paid to Notz Capital Corp. (ii) for corporate development and investor relations | | — |
(i) | EarthLabs Inc. is a related entity having the following common director and officer to the Company: Denis Laviolette, Director and President. DigiGeoData Inc. is a subsidiary of EarthLabs Inc. |
(ii) | Notz Capital Corp. is a related entity of the Executive Chairman and Chief Executive Officer. |
There are
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.
|
|
|
| Year ended | ||||
Salaries and | Share-based | December 31, | ||||||
Consulting | compensation | Bonus | 2023 | |||||
$ | $ | $ | $ | |||||
Executive Chairman and Chief Executive Officer |
| |
| — |
| |
| |
President |
| |
| — |
| |
| |
Chief Financial Officer |
| |
| — |
| |
| |
Chief Operating Officer |
| |
| — |
| |
| |
Chief Development Officer | | | | | ||||
Non-executive directors |
| |
| — |
| — |
| |
Total |
| |
| |
| |
| |
| Year ended | |||||||
Salaries and | Share-based | December 31, | ||||||
Consulting | compensation | Bonus | 2022 | |||||
| $ |
| $ |
| $ |
| $ | |
Executive Chairman and Chief Executive Officer |
| |
| |
| |
| |
Former Chief Executive Officer | |
| — |
| — |
| | |
President |
| |
| |
| |
| |
Chief Financial Officer |
| |
| |
| |
| |
Chief Operating Officer |
| |
| |
| |
| |
Chief Development Officer |
| | | | | |||
Non-executive directors |
| |
| |
| — |
| |
Total |
| |
| |
| |
| |
-32-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
12. | RELATED PARTY BALANCES AND TRANSACTIONS (continued) |
As at December 31, 2023, there was $
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.
13. | BASIC AND DILUTED LOSS PER COMMON SHARE |
| Year ended December 31, | |||||
| 2023 |
| 2022 | |||
Loss attributable to common shareholders ($) |
| |
| | ||
Weighted average number of common shares outstanding |
| |
| | ||
Loss per share attributed to common shareholders | | |
Diluted loss per share did not include the effect of
14. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS |
Year ended December 31, | ||||||
2023 | 2022 | |||||
| $ |
| $ | |||
Non-cash investing and financing activities: |
|
|
|
| ||
Consideration received for disposal of Lucky Strike project (Note 3(ii)) | | — | ||||
Shares issued pursuant to acquisition of exploration and evaluation assets |
| |
| | ||
Right-of-use assets and liabilities |
| |
| | ||
Property and equipment included in accounts payable and accrued liabilities | — | | ||||
Share issuance costs included in accounts payable and accrued liabilities | | | ||||
Cash paid for income taxes |
| — |
| — | ||
Cash paid for interest | — | — | ||||
Cash received for interest |
| |
| |
15. | 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.
-33-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
16. | INCOME TAXES |
The recovery of income taxes shown in the statements of loss and comprehensive loss differs from the amounts obtained by applying statutory rates to the loss before provision for income taxes due to the following:
2023 | 2022 | ||||
| $ |
| $ | ||
(Loss) before income taxes | ( |
| ( | ||
Statutory tax rate | | % | | % | |
Income tax (recovery) at statutory rate | ( |
| ( | ||
Flow-through shares and other non-deductible differences | |
| | ||
Change in unrecognized deductible temporary differences | |
| | ||
Income tax expense (recovery) | |
| |
The significant components of the Company’s deductible temporary differences, unused tax credits and unused tax losses that have not been included on the statement of financial position are as follows:
2023 | 2022 | |||
| $ |
| $ | |
Investments | |
| | |
Exploration and evaluation assets | |
| | |
Non-capital tax losses carryforward | |
| | |
Net capital losses carryforward | |
| | |
Capital assets | | | ||
Reclamation provision | | | ||
Other | |
| | |
Total | | |
As at December 31, 2023, the Company has Canadian non-capital loss carry forwards of approximately $
Expiry Date |
| $ |
2040 |
| |
2041 |
| |
2042 |
| |
2043 | | |
| |
As at December 31, 2023, the Company also has capital loss carry forwards of approximately $
-34-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
17. | CONTINGENCY |
Claims and Legal Proceedings
On November 15, 2019, ThreeD Capital Inc. (“ThreeD”) and 1313366 Ontario Inc. (“131” and together with ThreeD, the “Plaintiffs”) each entered into share purchase agreements (the “Share Purchase Agreements”) with Palisades Goldcorp Ltd. (“Palisades”) under which Palisades agreed to purchase the
On March 10, 2020, ThreeD Capital Inc. and 131 filed a statement of claim in the Ontario Superior Court of Justice against Collin Kettell, Palisades and the Company (the “ThreeD Claim”). Pursuant to the ThreeD Claim, the Plaintiffs are challenging the validity of the sale of
The Company filed a statement of defence in response to the ThreeD Claim on June 12, 2020, pursuant to which, among other things, the Company denies that it is a proper party to the ThreeD Claim and the allegations against it therein, including because no relief is claimed against the Company in paragraph 1 of the ThreeD Claim. The action has now progressed through the production of documents and oral examinations for discovery stages.
In early 2022, the Plaintiffs formally amended their statement of claim to increase the amount claimed to $
The outcome of this claim cannot be determined at this time and therefore
-35-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
18. | 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, warrants and Notes 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 and Notes are classified within level 2 of the fair value hierarchy. Warrants 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. The Notes are not traded on an active exchange and are valued using the Hull-White valuation model using assumptions including coupon rate, credit spread, mean reversion, rate volatility, riskless rate curve and redemption prices.
The carrying values of other financial instruments, including cash, deposits, interest receivable, accounts payable and accrued liabilities, and lease liabilities approximate their fair values due to the short-term maturity of these financial instruments.
The Company’s financial instruments according to the fair value hierarchy are as follows as at December 31, 2023:
Level 1 | Level 2 | Level 3 | Total | |||||||
$ |
| $ |
| $ |
| $ | ||||
Recurring measurements |
| Carrying amount |
| Fair value | ||||||
Investments |
| | |
| |
| — |
| | |
Secured notes | | — | | — | |
The Company’s financial instruments according to the fair value hierarchy are as follows as at December 31, 2022:
Level 1 | Level 2 | Level 3 | Total | |||||||
$ |
| $ |
| $ |
| $ | ||||
Recurring measurements | Carrying amount | Fair value | ||||||||
Investments |
|
| | | — | |
There was no movement between levels during the year ended December 31, 2023.
-36-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
18. | FINANCIAL INSTRUMENTS (continued) |
(a) | Fair Values (continued) |
The following table represents the changes in fair value measurements of financial instruments classified as Level 3. Within Level 3, the Company includes private company investments which are not quoted on an active exchange. These financial instruments are measured at fair value utilizing non-observable market inputs.
Balance at | Net Unrealized | Balance at | ||||||
January 1 | Additions | Gains/(Losses) | December 31 | |||||
| $ |
| $ |
| $ |
| $ | |
2023 | — | — | — | — | ||||
2022 | | — | ( | — |
The balance at December 31, 2023 and 2022 relates to the investment in shares of Long Range Exploration Corporation (Note 5(i)). Long Range Exploration Corporation is a private company without observable market prices for its common shares and is measured at its estimated fair value based on valuation techniques that use inputs derived by management. The key assumptions used in the valuation of this investment include, but are not limited to, the value at which a recent financing was completed by the investee, company-specific information, review of adjusted net book values, liquidation analysis, trends in general market conditions, share performance of comparable publicly-traded companies and a strategic review. The fair value of this investment has been estimated to be
as at December 31, 2023 and 2022.(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 is subject to the credit through its investment in Maritime secured notes, in which case the maximum exposure to the credit risk is the full value of the secured notes of $
There have been no changes in management’s methods for managing credit risk during the years ended December 31, 2023 and 2022.
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 December 31, 2023, the Company has total liabilities of $
There have been no changes in management’s methods for managing credit risk during the years ended December 31, 2023 and 2022.
-37-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
18. | FINANCIAL INSTRUMENTS (continued) |
(b) | Financial Instrument Risk Exposure (continued) |
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange rates will affect the Company’s net earnings or the value of financial instruments. The objective of the Company is to manage and mitigate market risk exposures within acceptable limits, while maximizing returns.
(i) | Currency risk |
Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuation include cash accounts, secured notes, interest receivable, investments and accounts payable and accrued liabilities denominated in US dollars. The sensitivity of the Company’s net loss to changes in the exchange rate between the US dollar and the Canadian dollar at December 31, 2023 would change the Company’s net loss by $334,274 as a result of a 10% change in the exchange rate.
(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 cash into demand accounts with minimal interest rates, the interest rate risk is not significant. Interest receivable on secured notes is determined based on a floating interest rate and therefore subject to interest rate fluctuations, the interest rate risk is not material.
(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 loss to changes in market prices at December 31, 2023 would change the Company’s net
There have been no changes in management’s methods for managing market risks during the years ended December 31, 2023 and 2022.
-38-
New Found Gold Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian Dollars Unless Otherwise Noted)
19. | 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 December 31, 2023 totalled $
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 years ended December 31, 2023 and 2022.
20. | SUBSEQUENT EVENTS |
ATM Sales
Subsequent to December 31, 2023, the Company sold
Stock Options Expired
Subsequent to December 31, 2023,
-39-