EX-99.1 2 ea020562301ex99-1_solaris.htm CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF SOLARIS RESOURCES INC. FOR THE THREE MONTHS ENDED MARCH 31, 2024

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

Solaris Resources Inc.

 

Condensed Consolidated Interim Financial Statements

 

For the three months ended March 31, 2024 and 2023

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Solaris Resources Inc.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited – In thousands of United States dollars)

 

 

   Note  March 31,
2024		   December 31,
2023		 
            
Assets           
Current assets           
Cash and cash equivalents     $28,773   $38,865 
Prepaids and other  3, 13   1,494    523 
       30,267    39,388 
              
Restricted cash  5   571    571 
Exploration and evaluation assets  4   19,929    19,929 
Property, plant and equipment      2,022    1,932 
              
Total assets     $52,789   $61,820 
              
Liabilities and Equity             
              
Current liabilities             
Accounts payable and accrued liabilities     $6,941   $5,274 
Lease liability      89    88 
       7,030    5,362 
Long-term liabilities             
Lease liability      44    3 
Reclamation provision  5   1,869    1,529 
Loans and borrowings  6   30,366    29,363 
Other long-term liability      123    137 
Total liabilities      39,432    36,394 
              
Shareholders’ equity             
Common shares  7   206,360    206,357 
Reserves  7   17,404    16,724 
Deficit      (218,297)   (205,566)
Equity attributable to shareholders of the Company      5,467    17,515 
Non-controlling interests      7,890    7,911 
Total shareholders’ equity      13,357    25,426 
              
Total liabilities and equity     $52,789   $61,820 
              
Nature of operations and going concern (Note 1)
Commitments (Notes 6(c), 8, 11(c), 13, 14) 		             

 

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

 

Page 1 of 14

 

 

Solaris Resources Inc.

Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, except share and per share amounts)

 

 

      For the three months ended
March 31,		 
   Note  2024   2023 
            
Exploration expenses  8  $10,193   $9,401 
General and administrative expenses  9   2,146    2,632 
Loss from operations      12,339    12,033 
              
Change in fair value of derivatives      –    105 
Finance cost      1,027    13 
Interest and other income      (614)   (173)
Net loss     $12,752   $11,978 
              
Other comprehensive income             
Items that may be reclassified to profit or loss:             
Foreign currency translation      147    (227)
Total comprehensive loss     $12,899   $11,751 
              
Net loss attributable to:             
Shareholders of the Company     $12,731   $11,959 
Non-controlling interest      21    19 
      $12,752   $11,978 
              
Total comprehensive loss attributable to:             
Shareholders of the Company     $12,878   $11,732 
Non-controlling interest      21    19 
      $12,899   $11,751 
              
Net loss per share attributable to shareholders of the Company             
Basic and diluted     $0.08   $0.10 
              
Weighted average number of shares outstanding             
Basic and diluted      150,813,530    124,027,698 

 

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

 

Page 2 of 14

 

 

Solaris Resources Inc.

Condensed Consolidated Interim Statements of Cash Flows

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars)

 

 

      For the three months ended
March 31,		 
   Note  2024   2023 
            
Cash provided by (used in):           
Operations           
Net loss for the period     $(12,752)  $(11,978)
Adjustments for:             
Change in fair value of derivatives      –    105 
Finance cost      1,027    13 
Finance income      (469)   (125)
Foreign exchange and other      (79)   (30)
Share-based compensation  7   829    1,540 
Amortization      235    221 
Reclamation provision      333    172 
Other      –    2 
Net changes in non-cash working capital items:             
Prepaids and other      (671)   (176)
Accounts payable and accrued liabilities      1,518    (1,150)
Reclamation provision settlement      (1)   (45)
Other long-term liability      (14)   11 
       (10,044)   (11,440)
              
Financing             
Share issue and finance costs paid      (5)   – 
Deferred share issue costs paid      (184)   – 
Proceeds from exercise of Equinox Warrants, warrants and stock options  7   2    20,803 
Payment of lease liability      (44)   (40)
Finance income received, net      458    121 
       227    20,884 
              
Investing             
Restricted cash contribution  5   –    (258)
Capital expenditures      (242)   (19)
       (242)   (277)
              
Effect of exchange rate changes on cash and cash equivalents      (33)   257 
Increase (decrease) in cash and cash equivalents      (10,092)   9,424 
Cash and cash equivalents, beginning of period      38,865    14,770 
              
Cash and cash equivalents, end of period     $28,773   $24,194 

 

Supplemental cash flow information (Note 15)

 

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

 

Page 3 of 14

 

 

Solaris Resources Inc.

Condensed Consolidated Interim Statements of Changes in Equity

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, except number of shares)

 

 

      Share Capital   Reserves             
   Note  Number of
Shares		   Amount   Options,
RSUs
and
warrants		   Foreign
currency
translation		   Total   Deficit   Non-controlling
interest		   Total
equity		 
Balance, December 31, 2023      150,811,195   $206,357   $15,148   $1,576   $16,724   $(205,566)  $7,911   $25,426 
Share issue costs      –    (1)   –    –    –    –    –    (1)
Shares issued on exercise of stock options  7   4,166    4    (2)   –    (2)   –    –    2 
Share-based compensation  7   –    –    829    –    829    –    –    829 
Net loss and comprehensive loss      –    –    –    (147)   (147)   (12,731)   (21)   (12,899)
Balance, March 31, 2024      150,815,361    206,360    15,975    1,429    17,404    (218,297)   7,890    13,357 
                                            
Balance, December 31, 2022      122,660,841   $169,952   $13,880   $1,044   $14,924   $(164,558)  $7,912   $28,230 
Shares issued on exercise of stock options  7   336,500    249    (103)   –    (103)   –    –    146 
Shares issued on exercise of Solaris warrants and Equinox Warrants      23,524,333    24,250    (3,535)   –    (3,535)   –    –    20,715 
Share-based compensation  7   –    –    1,540    –    1,540    –    –    1,540 
Net loss and comprehensive loss      –    –    –    227    227    (11,959)   (19)   (11,751)
Balance, March 31, 2023      146,521,674   $194,451   $11,782   $1,271   $13,053    (176,517)  $7,893   $38,880 

 

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

 

Page 4 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

1.Nature of operations

 

Solaris Resources Inc. (the “Company” or “Solaris”) was incorporated under the Business Corporations Act of British Columbia on June 18, 2018 as a wholly owned subsidiary of Equinox Gold Corp. (“Equinox”). Equinox subsequently completed a spin-out of Solaris pursuant to a plan of arrangement (the “Arrangement”). Solaris’ common shares are listed on the Toronto Stock Exchange and trade under the symbol “SLS” as well as on the NYSE American LLC stock exchange under the symbol “SLSR”.

 

The Company is engaged in the acquisition, exploration and development of mineral property interests. The Company’s assets consist primarily of the Warintza property (“Warintza”) in Ecuador, the 60% owned La Verde property (“La Verde”) in Mexico and the Tamarugo property (“Tamarugo”) in Chile. The Company has not yet determined whether the properties contain mineral reserves where extraction is both technically feasible and commercially viable. The business of mining and exploration for minerals involves a high degree of risk and there can be no assurance that such activities will result in profitable mining operations.

 

These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due for the foreseeable future. The Company does not generate operating cash flow from a producing mine and has incurred operating losses to date. The Company has relied on cash received from share issuances and advances from the senior secured debt facility (the “Senior Loan”) to fund its business activities, including planned corporate expenditures, exploration expenses, as well as the development activities for the Warintza project. The Company’s ability to continue as a going concern is dependent upon the successful execution of its business plan, meeting certain Warintza project milestones, raising additional capital and/or evaluating strategic alternatives for its mineral property interests. The Company expects to continue to raise the necessary funds primarily through the issuance of common shares and/or advances from the Senior Loan (see below) in support of its business objectives. While the Company has been successful in securing financing to date, there can be no assurances that future equity financing, debt facilities or strategic alternatives will be available on acceptable terms to the Company or at all.

 

As at March 31, 2024, the Company had cash and cash equivalents of $28,773. In December 2023, the Company entered into definitive agreements to a financing package consisting of up to $80,000 in financing including a $60,000 Senior Loan of which $30,000 was received on closing and the remaining amount to be made available in two tranches based on achieving certain milestones. The Company also received in December 2023 $10,000 on issuance of common shares with an additional $10,000 of equity financing available if certain conditions are met. There are no guarantees that the Company will meet the conditions to receive the additional amounts under the financing package. In addition, the Senior Loan has a financial covenant which requires the Company to maintain an unrestricted cash balance of $5,000 in Canada. In January 2024, the Company entered into a subscription agreement for approximately C$130,000 of common shares. Closing of this transaction is subject to customary conditions precedent and applicable regulatory approvals including (i) receipt of the requisite approval of the TSX, (ii) receipt of regulatory approval under the Investment Canada Act, and (iii) receipt of regulatory approval from the relevant authorities in the People’s Republic of China. It is currently uncertain when the required approvals will be received or if the approvals will be received at all.

 

Based on its current forecasted expenditures, the Company requires the additional financing from the Senior Loan and the equity financings or additional new financing to fund ongoing operations for the next twelve months and to ensure it meets the covenant requirement under the Senior Loan. As a result, material uncertainty exists that may cast significant doubt about the Company’s ability to continue as a going concern. These condensed consolidated interim financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reported expenses and the condensed consolidated interim statement of financial position classifications that would be necessary if the going concern assumption was inappropriate. These adjustments could be material.

 

2.Basis of preparation

 

Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Accounting Standard 34 (“IAS 34”), Interim Financial Reporting, and do not include all of the information required for annual financial statements prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

Page 5 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performances since the last annual financial statements.

 

These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual audited financial statements for the year ended December 31, 2023. The accounting policies, significant judgments made by management in applying these policies and key sources of estimation uncertainty are the same as those applied in the Company’s annual audited consolidated financial statements for the year ended December 31, 2023.

 

These condensed consolidated interim financial statements were approved and authorized for issuance by the Board of Directors on May 9, 2024.

 

Amended IFRS standards effective January 1, 2024

 

In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1, Presentation of Financial Statements (“IAS 1”)), which amended IAS 1 to clarify the requirements for presenting liabilities in the statement of financial position. The amendments specify that the Company must have the right to defer settlement of a liability for at least 12 months after the reporting period for the liability to be classified as non-current.

 

In addition, the amendments clarify that: (a) the Company’s right to defer settlement must exist at the end of the reporting period; (b) classification is unaffected by management’s intentions or expectations about whether the Company will exercise its right to defer settlement; (c) if the Company’s right to defer settlement is subject to the Company complying with specified conditions, the right exists at the end of the reporting period only if the Company complies with those conditions at the end of the reporting period, even if the lender does not test compliance until a later date; and (d) the term settlement includes the transfer of the Company’s own equity instruments to the counterparty that results in the extinguishment of the liability, except when the settlement of the liability with the Company transferring its own equity instruments is at the option of the counterparty and such option has been classified as an equity instrument, separate from the host liability.

 

In October 2022, the IASB issued Non-current Liabilities with Covenants, which amended IAS 1 to clarify that if the Company’s right to defer settlement of a liability for at least 12 months is subject to the Company complying with covenants after the reporting period, those covenants would not affect whether the Company’s right to defer settlement exists at the end of the reporting period for the purposes of classifying a liability as current or non-current. The amendments also increased the disclosure requirement relating to such covenants to include: (i) the nature of the covenants and the date by which the Company must comply with the covenants; (ii) whether the Company would comply with the covenants based on its circumstances at the reporting date; and (iii) whether and how the Company expects to comply with the covenants by the date on which they are contractually required to be tested.

 

The Company adopted the Amendments to IAS 1 effective January 1, 2024 but did not result in a change in the presentation of the Company’s liabilities. The required disclosures, where applicable, have been included in Note 6.

 

Certain other new standards, interpretations, and amendments to existing standards have been issued by the IASB or the International Financial Reporting Interpretations Committee. However, these updates either are not applicable to the Company or are not material to the condensed consolidated interim financial statements.

 

3.Prepaids and other

 

   Note  March 31,
2024		   December 31,
2023		 
Prepaid expenses and deposits     $765   $230 
Deferred share issue costs      297    28 
Supplies inventory      160    95 
Taxes recoverable      158    118 
Amounts receivable and other      21    27 
Due from a related party  13   93    25 
      $1,494   $523 

 

Page 6 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

4.Exploration and evaluation assets

 

   Note  March 31,
2024		   December 31, 2023 
La Verde (Mexico)  a)  $19,741   $19,741 
Warintza (Ecuador)  b)   188    188 
      $19,929   $19,929 

 

a)La Verde

 

La Verde is situated in the Sierra Madre del Sur west of Mexico City in Michoacán State, Mexico and consists of the Unificación Santa Maria claim. The project is held 60% by the Company and 40% by a subsidiary of Teck Resources Ltd. The joint venture agreement governing the operation and funding of La Verde was formalized effective February 28, 2015 (the “Agreement”). The Agreement provides that Solaris is the operator of the project. The Agreement further provides for dilution of either party’s ownership should funding not be provided in accordance with their respective participating interests. La Verde is subject to a 0.5% net smelter royalty held by Minera CIMA, S.A. de C.V.

 

b)Warintza

 

The Company owns a 100% interest in Warintza. Warintza is located in southeastern Ecuador in the province of Morona Santiago, Canton Limon Indanza. It consists of nine mining concessions (the “Concessions”) covering a total of 26,774 hectares. The Concessions have a term of 25 years and can be renewed for additional periods of 25 years. South32 Royalty Investments Pty Ltd holds a 2% net smelter royalty on the original four concessions covering a total of 10,000 hectares.

 

c)Tamarugo

 

Tamarugo is a grass-roots copper porphyry target strategically located in northern Chile approximately 85 kilometres northeast of Copiapo and approximately 65 kilometres southwest of Codelco’s El Salvador Copper Mine. The Company owns a 100% interest in Tamarugo, which consists of claim blocks covering a total of approximately 7,600 hectares.

 

d)Other projects

 

Solaris has earn-in agreements on certain other projects including the Capricho and Paco Orco projects in Peru. The Capricho project is a 4,200-hectare copper-molybdenum-gold property. The Paco Orco project is a 4,400-hectare lead, zinc and silver property.

 

5.Reclamation provision

 

   March 31,
2024		   December 31,
2023		 
Balance, start of period  $1,529   $1,271 
Additions   369    291 
Accretion   8    23 
Settlement   (1)   (69)
Change in estimate   (36)   13 
Balance, end of period  $1,869   $1,529 

 

The reclamation provision represents the estimated costs for restoration and rehabilitation for environmental disturbances at Warintza, estimated to be incurred in the year 2027. The total undiscounted estimated cash flows required to settle these obligations as at March 31, 2024 are $2,213 (December 31, 2023 – $1,786), which have been inflated at an average rate of 2.10% per annum (December 31, 2023 – 2.10%) and discounted at an average rate of 4.31% (December, 31, 2023 – 3.93%).

 

Restricted cash of $571 (December 31, 2023 – $571) represents funds being used to collateralize guarantees issued to support environmental bonding requirements with respect to the environmental disturbances at Warintza.

 

Page 7 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

6.WARINTZA PROJECT FINANCING

 

On December 11, 2023, the Company entered into a financing package with OMF Fund IV SPV D LLC and OMF Fund IV SPV E LLC (collectively “OMF”), entities managed by Orion Mine Finance Management LP, to provide up to approximately $80,000 in aggregate funding for the advancement of the Warintza project in Ecuador. The financing package is comprised of a $60,000 Senior Loan, a subscription for $10,000 in common shares with a commitment for $10,000 in additional equity financing and a copper offtake agreement to purchase concentrate produced by the Warintza project. On December 19, 2023, the Company also signed a molybdenum offtake agreement with OMF.

 

a)Senior Loan – OMF Fund IV SPV D LLC

 

A first advance of $30,000 was received on December 21, 2023. Two subsequent advances of $15,000 each will be made available upon (a) the approval and adoption of a pre-feasibility study by the Company's Board of Directors; and (b) the submission of an environmental and social impact assessment approved by an independent environmental and social consultant to progress the Warintza project to the exploitation phase.

 

The following table sets out the details of the Company’s loans and borrowings.

 

   March 31,
2024		   December 31,
2023		 
Balance, start of period  $29,363   $– 
Advances   –    30,000 
Transaction costs   (4)   (727)
Accrued interest   986    87 
Amortization of transaction cost   21    3 
Balance, end of period  $30,366   $29,363 

 

Amounts drawn on the Senior Loan bears interest payable quarterly at the higher of (a) adjusted term secured overnight financing rate (“SOFR”) and (b) 2.00%, plus either 7.00% per annum in the case of interest paid in cash, or 7.50% in the case of interest that is accrued to the loan balance in accordance with the Senior Loan agreement. At March 31, 2024, the Senior Loan is measured at amortized cost using an effective interest rate of 13.74% (December 31, 2023 – 13.76%).

 

The Company has the option quarterly to elect to pay the interest in cash or accruing it to the principal amount of the Senior Loan and paying it upon maturity. The quarterly interest for the three months ended March 31, 2024 was accrued to the principal amount of the Senior Loan. The principal amount and all accrued and unpaid interest are due on its maturity date on December 11, 2027. The Company may prepay all or any part of the principal amount owing at any time without any premium or penalty.

 

Any net proceeds received by the Company from the sale of particular assets, the issuance of securities, or compensation for liquidated damages must be allocated toward repaying a portion or all of the Senior Loan, along with accrued interest. However, this repayment requirement does not apply to net proceeds raised from the issuance of securities, provided such net proceeds are: (i) used in connection with the Warintza project; or (ii) used for general corporate and administrative expenses unrelated to the Warintza project in an amount up to $2,500 annually.

 

The Senior Loan is secured by a first-priority security ranking over the Warintza property and all the presently held and acquired undertakings, property, and assets including the equity interests in Lowell Mineral Exploration Ecuador S.A. and Lowell Copper Holdings Inc. but excluding subsidiaries and assets that are not related to the Warintza project. The Company must comply with certain covenants including maintaining a minimum unrestricted balance of $5,000 in cash in Canada. As at March 31, 2024, the Company was in compliance with all covenants.

 

b)Equity subscription agreement – OMF Fund IV SPV E LLC (the “Investor”)

 

Under the terms of the subscription agreement, OMF has committed to provide and the Company may elect to proceed with an additional $10,000 in equity financing when either (a) the Company publishes a pre-feasibility study; or (b) a separate third-party equity financing takes place in an amount of at least $10,000. The Company’s right to proceed with the second tranche expires ten business days after either of these conditions have been met but, in any event, no later than December 11, 2026. The Company may waive its right to elect to proceed with the second tranche.

 

Page 8 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

c)Offtake agreements

 

Under the terms of the offtake agreements, OMF will purchase the greater of (i) 20% of the copper and molybdenum concentrates produced from the Warintza project in each contract year, and (ii) the percentage of production of concentrates required to deliver a minimum 30,000 tonnes of copper and 1,500 tonnes of molybdenum in each contract year as well as the corresponding amount of gold and silver contained in the copper concentrate.

 

The offtake agreements will expire 20 years after the achievement of commercial production as defined in the agreements. If commercial production has not been achieved by December 31, 2027, then the term will extend by one year for each calendar year that commercial production has not been achieved, and if commercial production has not been achieved by December 31, 2032, then the term is extended for the duration of the mine life as defined in the offtake agreements.

 

If prior to the 18-month anniversary of the Senior Loan closing date a change of control transaction (as defined in the offtake agreements) is approved by the Company’s board and announced, either party may terminate the offtake agreements prior to the end of the term which will require the Company to then pay $27,000 to OMF to terminate the copper offtake agreement and $3,000 to terminate the molybdenum offtake agreement.

 

7.Share capital

 

a)Common shares

 

Authorized: Unlimited common shares, with no par value

 

Issued and fully paid: 150,815,361 (December 31, 2023 – 150,811,195)

 

b)Share purchase options

 

For the three months ended March 31, 2024, the Company recognized a share-based compensation expense included in general and administrative expenditures of $829 (three months ended March 31, 2023 – $1,540). The following table shows the change in the shares issuable for Arrangement options and Solaris options during the three months ended March 31, 2024 and 2023:

 

For the three months ended March 31,  2024   2023 
Balance, start of period   10,556,688    8,131,226 
Granted   900,000    2,950,000 
Exercised   (4,166)   (336,500)
Forfeited   (285,000)   (43,122)
Balance, end of period   11,167,522    10,701,604 

 

The weighted average exercise price per share issuable of options granted, exercised and forfeited during the three months ended March 31, 2024 was C$3.79, C$0.80 and C$5.03, respectively. The weighted average exercise price per share issuable of options granted, exercised and forfeited during the three months ended March 31, 2023 was C$5.94, C$0.59 and C$1.20, respectively.

 

The assumptions used in the Black-Scholes option pricing model for the options granted in the three months ended March 31, 2024 and 2023 were as follows.

 

Weighted average  2024   2023 
Exercise price per share issuable  C$3.79 

 

 C$5.94 
Expected term (years)   5    5 
Volatility1   59%   61%
Expected dividend yield   –    – 
Risk-free interest rate   3.55%   3.59%
Weighted average fair value per share   2.06    3.06 

 

1The expected volatility of Solaris is based on the historical volatility of the shares of a comparative peer group of companies.

 

Page 9 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

Arrangement options

 

Pursuant to the Arrangement under which Equinox distributed the shares of the Company to its shareholders, option holders of Equinox received options of Solaris which were proportionate to, and reflective of the terms of, their existing options of Equinox (“Arrangement options”). As at March 31, 2024, a total of 325,194 (December 31, 2023 – 325,194) Arrangement options are outstanding with each option entitling the holder to one-tenth of a Solaris share. As at March 31, 2024, a total of 32,522 shares (December 31, 2023 – 32,522) are issuable by Solaris upon exercise of the Arrangement options.

 

Exercise price per
Arrangement option

(C$)2

   Number of Arrangement
options outstanding		   Number of shares
issuable		   Remaining contractual
life (years)		 
$0.12    325,194    32,522    0.21 

 

2Exercise price per Arrangement option for 1/10th of a Solaris share.

 

The exercise price of the Arrangement options exercisable at March 31, 2024, attributable to the issuance of a whole Solaris share was C$1.20 (December 31, 2023 – C$1.20).

 

Solaris options

 

The following is a summary of the Company’s outstanding and exercisable options as at March 31, 2024:

 

Outstanding  Exercisable 
Grant date  Exercise price
(C$)		   Number of options   Weighted average remaining contractual life (years)   Number of options   Weighted average remaining contractual life (years) 
August 9, 2019  $0.50    400,000    0.36    400,000    0.36 
November 18, 2019   0.80    700,000    0.64    700,000    0.64 
November 21, 2019   0.80    200,000    0.64    200,000    0.64 
January 2, 2020   0.80    350,000    0.76    350,000    0.76 
March 20, 2020   0.80    100,000    0.97    100,000    0.97 
May 27, 2020   0.80    2,510,000    1.16    2,510,000    1.16 
November 2, 2020   4.90    2,050,000    1.59    2,050,000    1.59 
March 16, 2021   7.24    300,000    1.96    300,000    1.96 
September 15, 2021   13.11    400,000    2.46    200,000    2.46 
November 10, 2021   12.45    150,000    2.61    75,000    2.61 
August 9, 2022   7.36    300,000    3.36    75,000    3.36 
February 24, 2023   5.94    2,775,000    3.90    1,143,750    3.90 
February 23, 2024   3.79    900,000    4.90    –    – 
    4.02    11,135,000    2.29    8,103,750    1.63 

 

c)Restricted share units

 

Pursuant to the Arrangement, holders of Equinox restricted share units (“RSUs”) or RSUs with non-market-based performance vesting conditions (“pRSUs”) received RSUs or pRSUs of Solaris (“Arrangement RSUs”), which were proportionate to, and reflective of the terms of, their existing RSUs or pRSUs of Equinox. The holder of the Arrangement RSUs acquires one-tenth of a Solaris share upon vesting. During the three months ended March 31, 2024 and 2023, there were no RSUs redeemed under the provision of the Company’s RSU plan and as of March 31, 2024, 260,836 RSUs and pRSUs are outstanding with 26,085 of Solaris shares issuable.

 

Page 10 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

8.Exploration expenditures

 

The Company’s exploration expenditures by activity are as follows:

 

For the three months ended March 31,  2024   2023 
Salaries, geological consultants and support, and travel  $2,928   $2,332 
Site preparation, supplies, field and general   2,288    2,078 
Drilling and drilling related costs   1,501    1,233 
Assay and analysis   144    175 
Community relations, environmental and permitting   1,934    2,677 
Concession fees   452    472 
Studies   378    41 
Reclamation provision   333    172 
Amortization   235    221 
   $10,193   $9,401 

 

Pursuant to agreements with local communities, the Company is required to make certain monthly community support payments.

 

The Company’s exploration expenditures by jurisdiction are as follows:

 

For the three months ended March 31,  2024   2023 
Ecuador  $9,872   $8,956 
Chile   2    196 
Mexico   52    47 
Peru and other   267    202 
   $10,193   $9,401 

 

9.General and administrative expenditures

 

For the three months ended March 31,  2024   2023 
Share-based compensation  $829   $1,540 
Salaries and benefits   462    407 
Office and other   242    188 
Filing and regulatory fees   75    77 
Professional fees   357    318 
Marketing and travel   181    102 
   $2,146   $2,632 

 

10.Segmented information

 

The Company has determined that it has one operating segment, being the exploration of mineral properties.

 

Information about the Company’s non-current assets by jurisdiction is detailed below:

 

   March 31,
2024		   December 31,
2023		 
Mexico  $19,753   $19,755 
Ecuador   2,636    2,627 
Chile   10    12 
Peru   117    32 
Canada   6    6 
   $22,522   $22,432 

 

Information about the Company’s exploration expenditures by jurisdiction is detailed in Note 8.

 

Page 11 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

11.Financial instrument risk exposure and risk management

 

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management process.

 

a)Credit risk

 

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s financial assets.

 

The Company is primarily exposed to credit risk on its cash and cash equivalents and amounts receivable. Credit risk exposure is limited through maintaining its cash with high-credit quality financial institutions. The carrying value of these financial assets of $29,616 represents the maximum exposure to credit risk.

 

b)Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Senior Loan which has a floating interest rate.

 

With all other variables held constant, a 1% change in SOFR would have changed net loss by approximately $75 for the three months ended March 31, 2024 (three months ended March 31, 2023 – nil).

 

c)Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company ensures that there is sufficient capital in order to meet short term business requirements after taking into account the Company’s holdings of cash.

 

At March 31, 2024, the Company had contractual cash flow commitments as follows:

 

   < 1 Year   1-3 Years   4-5 Years   > 5 Years   Total 
Accounts payable and accrued liabilities  $6,941   $–   $–   $–   $6,941 
Lease liabilities   89    44    –    –    133 
Senior loan principal and interest1   –    –    50,633    –    50,633 
Other long-term liability   –    –    –    123    123 
Office rent obligations   285    275    –    –    560 
Exploration expenses and other   842    1,796    –    –    2,638 
   $8,157   $2,115   $50,633   $123   $61,028 

 

1The interest is calculated using the interest rate in effect at March 31, 2024.

 

d)Foreign currency risk

 

The Company is exposed to currency risk on transactions and balances in currencies other than the functional currency. At March 31, 2024, the Company had not entered into any contracts to manage foreign exchange risk.

 

The functional currency of the Company is the Canadian dollar, therefore, the Company is exposed to currency risk from the assets and liabilities denominated in the US dollar. As at March 31, 2024, cash of $27,713 (December 31, 2023 – $37,245), loans and borrowings of $30,366 (December 31, 2023 – $29,363), and accounts payable and accrued liabilities of $619 (December 31, 2023 - $94) are denominated in the US dollar. For the three months ended March 31, 2024, if the US dollar to Canadian dollar currency exchange rate changes by 5% with all other variables held constant, the impact on the Company’s net loss is $164 (three months ended March 31, 2023 – $17).

 

The Company is also exposed to currency risk on financial assets and liabilities denominated in Peruvian soles, Chilean pesos, Mexican pesos and Guatemalan quetzals. However, the impact on such exposure is not currently material.

 

Page 12 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

12.Fair value measurements

 

The carrying values of cash and cash equivalents, amounts receivable, due from related parties, restricted cash and accounts payable and accrued liabilities approximate fair value due to their short terms to maturity. The fair value of loans and borrowings is $31,073. There were no transfers between fair value levels in the periods presented.

 

13.Related party transactions

 

Compensation of key management personnel

 

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company, and comprises the Company’s Executive Chairman, President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Senior Vice President Corporate Affairs and Corporate Secretary and Directors.

 

Key management compensation for the three months ended March 31, 2024 and 2023 is comprised of the following:

 

For the three months ended March 31,  2024   2023 
Share-based compensation  $655   $1,327 
Salaries and benefits   223    167 
Professional fees   41    93 
   $919   $1,587 

 

During 2021, the Company entered an agreement with Augusta Capital Corporation (“Augusta”) for consulting services. The owner of Augusta Capital Corporation is the Chairman and a major shareholder of the Company. Total amount charged by Augusta for the three months ended March 31, 2024 was $41 (three months ended March 31, 2023 – $93).

 

Related party transactions

 

On January 2, 2020, the Company entered into an arrangement to share office space, equipment, personnel, consultants and various administrative services with other companies related by virtue of certain directors and management in common. These services have been provided through a management company equally owned by each company party to the arrangement. Costs incurred by the management company are allocated and funded by the shareholders of the management company based on time incurred and use of services. All of the parties have jointly entered into a rental agreement for office space. If the Company’s participation in the arrangement is terminated, the Company will be obligated to pay its share of the rent payments for the remaining term of the office space rental agreement. The Company’s obligation for future rental payments if the Company’s participation in the arrangement was terminated on March 31, 2024 was approximately $558 (December 31, 2023 – $656), determined based on the Company’s average share of rent paid in the immediately preceding 12 months.

 

The Company was charged for the following with respect to these arrangements in the three months ended March 31, 2024 and 2023:

 

For the three months ended March 31,  2024   2023 
Salaries and benefits  $367   $413 
Office and other   116    104 
Filing and regulatory fees   –    9 
Marketing and travel   5    6 
   $488   $532 

 

At March 31, 2024, amounts in prepaids and other include $93 due from a related party (December 31, 2023 – $25) with respect to this arrangement.

 

Page 13 of 14

 

 

Solaris Resources Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024 and 2023

(Unaudited – In thousands of United States dollars, unless otherwise noted)

 

 

14.Commitments

 

The Company is committed to payments for office leases premises through 2026 in the total amount of approximately $560 based on the Company’s current share of rent paid. Payments by fiscal year are:

 

2024   244 
2025   165 
2026   151 

 

The Company is committed to payments related to exploration expenses and other of $553 in 2024, $796 in 2025, $721 in 2026 and $568 in 2027.

 

15.Supplemental cash flow information

 

For the three months ended March 31,  2024   2023 
Non-cash items:        
Accrued deferred share issue costs  $113   $– 
Capitalized interest expense  $986   $– 
Right of use asset acquired  $83   $– 

 

Page 14 of 14