CANDELARIA MINING CORP. Year Ended - April 30, 2022
Management's Discussion and Analysis
For the year ended April 30, 2022
(Expressed in Canadian dollars, unless otherwise noted)
August 29, 2022
The following management's discussion and analysis ("MD&A") was prepared as of August 29, 2022 and is management's assessment of the operating results and financial condition of Candelaria Mining Corp. ("Candelaria" or the "Company") together with its subsidiaries. For further information on the Company, reference should be made to its public filings on SEDAR at www.sedar.com. Information is also available on the Company's website at www.candelariamining.com. This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the audited consolidated financial statements for the year ended April 30, 2022, and related notes thereto which have been prepared in accordance with International Financial Reporting Standards. The MD&A contains certain forward-looking statements, please review the disclaimers that are provided on the last page of the report.
OVERVIEW
Candelaria Mining Corp. (the "Company"), is a British Columbia registered public company listed on the TSX Venture Exchange ("TSXV") under the trading symbol "CAND" and the OTC Best Market ("OTCQX") under the trading symbol "CDELF". The Company was incorporated under the Business Corporations Act of British Columbia on January 23, 2012. The Company's registered and records office is located at Suite 1200, 750 West Pender Street, Vancouver, BC, Canada, V6C 2T8. The address of the Company's head office is 1201
- 1166 Alberni Street, Vancouver, BC V6E 3Z3.
Candelaria Mining is a Canadian-based gold exploration company with a portfolio of highly prospective projects in Mexico, one of the world's best mining jurisdictions. Candelaria currently own 100% of the Caballo Blanco and the Pinos Gold Projects.
HIGHLIGHTS - YEAR ENDED APRIL 30, 2022
Corporate Transactions
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On September 22, 2021, the Company closed the first tranche of a non-brokered private placement of 17,622,494 units at a price of $0.45 per unit for gross proceeds of $7.9 million. Each unit consisted of one common share of the Company and one-half of a common share purchase warrant, with each full warrant entitling the holder thereof to acquire one common share of the Company at a price $0.65 for a period of 36 months following the closing of the offering.
The first tranche included the subscription of 13,333,333 Units by Agnico Eagle Mines Limited
("Agnico Eagle") for gross proceeds of $6.0 million. This increased Agnico Eagle's holding to approximately 19.41% of the basic shares outstanding, on a partially diluted basis. Prior to the
Offering Agnico Eagle held 10,120,000 (7.9%) of the Company's common shares.
All securities issued in connection with the Offering were subject to a hold period of four months plus a day from the date of issuance and the resale rules of applicable securities legislation.
Year ended - April 30, 2022 | Page 1 |
Year Ended - April 30, 2022
Ramon Perez and Neil O'Brien, each a director of the Company, subscribed for 888,888 Units ($400,000) and 50,000 Units ($22,500), respectively, under the first tranche of the offering. The insider subscriptions constitute "related party transactions" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security holders in Special Transactions ("MI 61-101"). The Company has relied on the exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in Sections 5.5(a) and 5.7(1)(a), respectively, of MI 61-101 in respect of the Insider Subscriptions.
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On October 29, 2021, the Company closed the second and final tranche of a non-brokered private placement with the issuance of 1,136,997 units at a price of $0.45 per unit for gross proceeds of $511,648. Each unit consisted of one common share of the Company and one-half of a common share purchase warrant, with each full warrant entitling the holder thereof to acquire one common share of the Company at a price $0.65 for a period of 36 months following the closing of the offering.
Armando Alexandri (COO) and Mike Struthers (CEO), subscribed for 622,222 Units ($280,000) and 91,111 Units ($41,000), respectively, in the final tranche.
Gross proceeds raised from the final offering will be used for general corporate purposes. Combining with the first tranche, which closed on September 22, 2021, the total proceeds raised was $8.4 million, with a total issuance of 18,759,491 Units. - On November 5, 2021, the Company commenced trading on the OTCQX under the symbol "CDELF". The listing on the OTCQX helps to provide our U.S. investors with increased liquidity and trading access.
CABALLO BLANCO DISTRICT, STATE OF VERACRUZ, MEXICO
Ownership: 100% Candelaria Mining Corp.
Background:
The Caballo Blanco licence area is located on the eastern coast of Mexico in the state of Veracruz, 65 kilometers northwest of the city of Veracruz. The most advanced project in the licence area, La Paila, was subject to a PEA in 2012 (refer NI43-101 Technical Report, May 2012, Goldgroup Mining Inc.) which envisaged a low CAPEX, conventional open pit / heap leach mining operation targeting approximately 100,000 ounces of gold production annually. Further geological and exploration works by the Company since acquiring Caballo Blanco have included an updated pit-constrained resource estimate for La Paila (refer Candelaria Mining Corp. NI43-101 Technical Report, April 2017), and additional exploration activities in the wider licence area, including at the seven additional high-priority targets in the Northern and Highway Zones.
Activities during the reporting period have included continued exploration activities in and around the priority targets within the licence area (refer below), the completion of a stakeholder mapping exercise, and ongoing engagement with local community groups. The Company has also built a strong local team for the project, led by a very competent Exploration Manager.
Caballo Blanco is subjected to two separate underlying royalty commitments as defined below:
- Almaden Minerals Limited retains a 1.5% NSR
- An (arm's length) 3rd party retains an NSR as follows:
- 1.25% NSR up to 1,000 tonnes per day
- 1.00% NSR from 1,001 to 1,500 tonnes per day
- 0.75% NSR from 1,501 to 10,000 tonnes per day
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Year Ended - April 30, 2022
- 0.5% NSR from 10,001 or more tonnes per day
Outlook:
The Company has expanded the initial (Phase 1) planned 9-month exploration program by incorporating additional drill platforms which will aim to test new porphyry-stylecopper-gold targets, in addition to the existing epithermal gold targets. A total of eight high-priority drill targets will be tested in this extraordinarily prospective mineral district.
As well as further developing any discoveries from Phase 1, the Phase 2 program will also include an expansion of the existing La Paila resource to the north-east and south of the pit footprint. The Phase 1 program comprises approximately 15,000m and 9 months duration, for a cost of $4.4 million. This will include drill testing of all of the Northern Zone priority targets (La Cruz; Bandera Norte; Bandera Sur; Las Cuevas); target definition and testing at the large epithermal anomaly at Highway North; drill-testing of porphyry-style targets in and around the Northern Zone, including at the porphyry occurrence at Red Valley; and ongoing surface exploration reconnaissance.
The first phase of this program is fully funded.
The plan for Phase 2 will depend on discoveries made during Phase 1, but will include resource expansion drilling of La Paila to the north-east and south.
This field work is expected to commence in early Q4 2022.
PINOS GOLD PROJECT, STATE OF ZACATECAS, MEXICO
Ownership: 100%
Background:
The Pinos property and historical mining district is located in the municipality of Pinos, Zacatecas state in north-central Mexico near the town of Pinos, Zacatecas. The property lies 405 air-kilometres northwest of Mexico City and is 67 km west-northwest of the city of San Luis Potosí, 113 km east-southeast of the city of Zacatecas, and 85 km northeast of the city of Aguascalientes. The project is located in one of the most prolific gold-silver mining trends of Mexico, the Zacatecas Trend, containing the current major mines of Minera Frisco, Fresnillo and Pan American Silver.
The Pinos Gold Project contains a compliant resource (NI43-101 Technical Report, September 2018) with significant expansion potential.
Royalties:
On November 25, 2020, the Company sold a 0.5% net smelter return ("NSR") royalty on production from the Pinos Project to Empress Royalty Corp. ("Empress") for US$750,000. Empress also purchased an additional 0.5% NSR royalty from a previous royalty holder on the Pinos Project, for a total of a 1.0% NSR royalty. The Company can buyback 0.25% from Empress for US$937,500.
The Pinos Project is subject to total NSR royalties of 2.0% including the two NSR royalties held by Empress.
Project Progress:
Exploration work on Pinos Property is being conducted by Candelaria Mining Corp personnel. During the reporting period the Company has continued to advance the Pinos project through the following activities:
1. Further detailed structural interpretations of controls on high-grade zones in the Peñitas and
Year ended - April 30, 2022 | Page 3 |
Year Ended - April 30, 2022
Natividad / San Francisco areas from drillholes and mapping. The association of high grades and low angle thrust faults was confirmed.
- Analysis of historical records and geological data to define drill targets for extended veins in the wider historical district, with a focus on high-grade veins adjacent to and below old workings. A large volume of potential mineralisation was defined, in a number of different veins. This will now form the basis for a drill program to test these potentials and then prioritise potential resource expansions. Note that the majority of historical mining ceased at the water table, and were focused at the time on very high grade ores.
- Extensive additional surface field reconnaissance was also completed on the stockwork mineralisation at San Matias, in the north-east of the licence area. This confirmed the presence of epithermal alteration zones and stockwork mineralisation over a wide area. The main characteristics are mineralised narrow veins, veinlets, stockworks and breccias of quartz and chalcedony, hosted in rhyolites and rhyolitic porphyries.
- Completed geological mapping of the El Africano zone, and defined drill targets.
- Continued the maintenance of protected species at the Pinos nursery as required by Mexican environmental authorities and the CITES Convention.
Outlook:
Following the failure of the Accendo Bank in Mexico, in September 2021, with which the Company had a US$9.0 million debt facility, the Company has been negotiating alternative financing to construct the Pinos project. However, in parallel it is planned to execute a drill program which will test for mineralisation within the multiple vein systems elsewhere on the property, outside of the footprint of the Preliminary Economic Assessment ("PEA") report (NI43-101 Technical Report, September 2018). If successful this provides the potential, with further drilling, to expand the resources and ultimately provide additional production flexibility with multiple production sources.
The drill program will be executed in H2 2022. It will test mineralisation targets adjacent to old workings in the following veins: Natividad, San Francisco, San Miguel, San Manuel, San Ramon, Azul, and others.
In parallel with the drilling, the Company will continue to resolve alternative funding options to enable the board to make a decision on construction at Pinos.
LIQUIDITY AND CAPITAL RESOURCES
A summary of the Company's cash position and changes in cash and cash equivalents for:
Year ended April 30 | |||||||||
(tabled amounts are expressed in | 2022 | 2021 | 2020 | ||||||
thousands of Canadian dollars) | |||||||||
Cash used in operating activities | $ (5,021) | $ (1,781) | $ (1,039) | ||||||
Cash flow from investing activities | (209) | 688 | - | ||||||
Cash flow from financing activities | 8,308 | 1,870 | 794 | ||||||
Increase (decrease) in cash | 3,078 | 777 | (245) | ||||||
Cash and cash equivalents, end of year | $ 3,804 | $ 756 | $ 35 | ||||||
Year ended - April 30, 2022 | Page 4 |
Year Ended - April 30, 2022
As at April 30, 2022, the Company's net working capital was $2.3 million compared to net working capital deficit of $1.9 million as at April 30, 2021 and net working capital deficit of $2.2 million as at April 30, 2020. The improvement in net working capital in the current year is primarily due to the $8.4 million equity private placement in October 2021 that did not occur in the previous years.
Cash outflow from operating activities for the current year ended April 30, 2022 was higher than 2021 and 2020 as the Company increased its corporate activities with the proceeds received from the private placement.
Cashflow from investing activities in the current year ended April 30, 2022 was solely $209,000 in capital expenditures related to the Pinos project. In 2021, cashflow from investing activities was primarily related to US$750,000 proceeds from sale of royalty of the Pinos Project. There were no investing activities in the comparative period in 2020.
Cash inflow from financing activities was higher in the current year ended April 30, 2022 due to the $8.4 million private placement. In 2021, there was no private placements but the Company drew US$1.5 million ($2.0 million) of the Accendo debenture. There was no debenture and only a small private placement in the comparative period in 2020.
The Company's ability to continue as a going concern is dependent on the Company's ability to raise funds.
ANNUAL FINANCIAL INFORMATION
In thousands '000 | Year ended April 30 |
2022 | 2021 | 2020 | ||||
General and administration expenses | ||||||
Amortization | $ | - | $ | - | $ | (7) |
Exploration expense | (1,585) | (1,401) | (313) | |||
Consulting and professional fees | (1,107) | (646) | (616) | |||
General and administration (1) | (1,712) | (1,156) | (647) | |||
Stock-based compensation | (735) | (1,794) | - | |||
(5,139) | (4,997) | (1,583) | ||||
Other (expenses) income, net | ||||||
Foreign exchange gain (loss) | (176) | 171 | (150) | |||
Finance cost | (5,782) | (463) | - | |||
Other income | 422 | 90 | 256 | |||
Net loss | (10,675) | (5,199) | (1,477) | |||
Cash | $ | 3,804 | $ | 756 | $ | 35 |
Total assets | 16,789 | 18,282 | 12,077 | |||
Cash dividends declared | $ | 0.00 | $ | 0.00 | $ | 0.00 |
- General and administration includes all administration expense including salary and wages, investor relations and development, regulatory and filing fees, and travel, etc.
Net loss for the year ended April 30, 2022 was $10.7 million, compared with $5.2 million in the comparative period in 2021, and $1.5 million in 2020. The net loss was higher than 2021 mainly due to a one-time write- off of $5.3 million in deferred charges related to the Accendo debenture. The net loss in 2021 was higher than 2020 primarily due to increased exploration activity and $1.8 million in stock-based compensation.
Year ended - April 30, 2022 | Page 5 |
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Candelaria Mining Corp. published this content on 30 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 August 2022 21:09:04 UTC.
