Quarterly Update

Operational Update

  • On July 28, 2020, the Company announced a private placement, subsequently increased on July 29, 2020, of common shares of the Company at a price (the “Offering Price”) of $0.67 per common share for gross proceeds of $19.7 million. Concurrently, the Company announced a public offering (the “Offering”) pursuant to which a syndicate of underwriters agreed to buy, on a bought deal basis, 15,000,000 common shares at the Offering Price for gross proceeds of approximately $10.0 million. The Company has also granted the underwriters an over-allotment option, exercisable at the Offering Price for a period of 30 days following the closing of the Offering, to purchase up to an additional 15% of the Offering to cover over-allotments, if any, and for market stabilization purposes. Should the over-allotment be filled, the Company expects to receive gross proceeds of $31.2 million, less estimated share issuance costs of $1.2 million, for net proceeds of $30.0 million.
  • The Company’s primary focus is the advancement of its wholly-owned Josemaría Project by completing a Feasibility Study during the second half of 2020. The Company has assembled an integrated engineering team led by Fluor Canada Ltd., who is responsible for overall project management, infrastructure and mineral process design and project cost estimation. Other consultants are also engaged to support the program with a focus on environment and permitting, social and community relations, mineral resource and reserve estimates, mine design and tailings and water management.
  • Work also continued on the Environmental and Social Impact Assessment (the “ESIA”) with Ausenco (Vector Argentina S.A.) based in Mendoza, Argentina, who is continuing to compile the baseline data and advance the ESIA in support of future project permitting. The Company anticipates filing the ESIA during Q1 2021.
  • To provide the material for feasibility-level metallurgical testwork and to increase confidence in the mineral reserve, particularly the portion scheduled for the first five years of production, the Company completed a comprehensive reserve definition drill program during 2019 and Q1 2020. Data from the drill program is being used to update the resource and reserve models and metallurgical information, which will form the basis for detailed mine planning as part of the Feasibility Study. Drilling to collect geotechnical data for the open-pit mine design and to determine site geotechnical conditions at planned locations for mine infrastructure, and to locate and characterize source locations for water to support the planned operation, has been completed and the results integrated into the feasibility-level designs.

OUTLOOK

The Company is targeting completion of the Feasibility Study on the Josemaría Project during the second half of 2020. Management also plans to continue environmental and social baseline studies that will provide information required to prepare an ESIA report in support of project permitting.

In light of the COVID-19 pandemic’s impact on global financial markets, the Company has conducted an extensive internal review of costs. As of the date of this MD&A, cost reduction measures implemented include the cessation of certain non-essential services including promotional activities and travel. The Company continues to evaluate its internal cost structure in order to preserve capital while delivering the Feasibility Study on the Josemaria Project.

QUARTERLY RESULTS

The Company’s net loss for the three and six months ended June 30, 2020 was $2.3 million and $25.3 million, respectively, compared to $8.1 million and $23.4 million, respectively, for the same periods in 2019. The decrease in the net loss for the three months ended June 30, 2020 is primarily related to the winding down of certain exploration activities as the Company progresses towards completing its Feasibility Study. Exploration expenditures for the three months ended June 30, 2020, all of which relate to the Josemaria Project, decreased to $4.4 million as compared to $7.0 million incurred in the prior period (including $6.1 million incurred on the Josemaria Project). The Company’s primary exploration expenditures during the three months ended June 30, 2020 consist of final costs related to the cessation of the field season and engineering and consultant costs related to the completion of the Feasibility Study.

Overall general and administrative (“G&A”) costs for the three months ended June 30, 2020 totaled $0.9 million compared to $1.1 million over the same period in 2019. Costs remain largely comparable period to period, but the 2020 period included decreases in professional fees, travel and promotional expenditures offset partially by an increase in share-based compensation. Share-based compensation is a non-cash charge reflecting the expense associated with the vesting of outstanding stock options during the period.

During the three months ended June 30, 2020, the Company recognized a net monetary loss of $0.2 million (2019 – gain of $0.1 million) in relation to the application of hyper-inflationary accounting for the Company’s Argentine subsidiary, which began July 1, 2018. In other comprehensive loss, the Company recognized a gain of $2,767 resulting from the impact of hyper-inflation which consists of adjustments recognized on the continuing inflation of opening non-monetary balances during the three months ended June 30, 2020 (2019 – gain of $1.7 million), and the ongoing translation of the Company’s Argentine subsidiary into the Canadian dollar presentation currency following July 1, 2018, as mentioned above. A detailed discussion regarding the application of hyper-inflationary accounting has been provided in the notes to the condensed interim consolidated financial statements.

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