Form 20-F STARCORE INTERNATIONAL For: Apr 30

July 29, 2021 5:35 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 20-F

[]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[ X ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2021

OR

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

OR

[   ]

SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _____________

For the transition period from ___________ to ____________

Commission file number 000-50922

STARCORE INTERNATIONAL MINES LTD.
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s name into English)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

Suite 750 – 580 Hornby Street, Box 113
Vancouver, British Columbia, Canada V6C 3B6
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of Class

Name of each exchange on which registered

Not Applicable

Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares Without Par Value
(Title of Class)

 


 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

49,646,851 common shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.[   ] YES   [X] NO

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.[   ] YES   [   ] NO

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[   ] YES   [] NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [   ]Accelerated filer [   ]Non-accelerated filer [X]

Indicate by check mark which financial statement item the registrant has elected to follow.
[   ] ITEM 17 [X] ITEM 18

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.[   ] YES   [X] NO

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).[   ] YES   [  X] NO

 

Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]

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TABLE OF CONTENTS

Page

 

CURRENCY AND MEASUREMENT1

RESOURCE CATEGORY (CLASSIFICATION) DEFINITIONS1

CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING MINERAL RESERVE AND RESOURCE ESTIMATES2

FOWARD-LOOKING STATEMENTS3

STATUS AS AN EMERGING GROWTH COMPANY4

PART I4

FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES4

Item 1

Identity of Directors, Senior Management and Advisers4

Item 2

Offer Statistics and Expected Timetable4

Item 3

Key Information5

 

A.

Selected Financial Data5

 

B.

Capitalization and Indebtedness6

 

C.

Reasons for the Offer and Use of Proceeds6

 

D.    Risk Factors

7

Item 4

Information on our Company16

 

A.

History and Development of our Company16

 

B.

Our Business Overview16

 

C.

Organizational Structure19

 

D.

Property, Plants and Equipment21

Item 5

Operating and Financial Review and Prospects33

 

A.

Operating Results33

 

B.

Liquidity and Capital Resources37

 

C.

Research and Development, Patents and Licenses, etc.39

 

D.

Trend Information39

 

E.

Off-Balance Sheet Arrangements39

 

F.

Tabular Disclosure of Contractual Obligations39

 

G.

Safe harbor.40

Item 6

Directors, Senior Management and Employees40

 

A.

Directors and Senior Management40

 

B.

Compensation42

 

C.

Board Practices45

 

D.

Employees47

 

E.

Share Ownership48

Item 7

Major Shareholders and Related Party Transactions49

 

A.

Major Shareholders49

 

B.

Related Party Transactions50

 

C.

Interests of experts and counsel50

Item 8

Financial Information50

 

A.

Consolidated Statements and Other Financial Information50

 

B.

Significant Changes51

Item 9

The Offer and Listing51

 

A.

Offer and Listing Details51

 

B.

Plan of Distribution51

 

C.

Markets51

 

D.

Selling shareholders51

 

E.

Dilution51

 


 

 

 

F.

Expenses of the issue51

Item 10

Additional Information51

 

A.

Share capital.51

 

B.

Memorandum and articles of association.52

 

C.

Material Contracts52

 

D.

Exchange Controls52

 

E.

Taxation52

 

F.

Dividends and Paying Agents59

 

G.

Statement by Experts59

 

H.

Documents on Display59

 

I.

Subsidiary Information59

Item 11

Quantitative and Qualitative Disclosures About Market Risk59

Item 12

Description of Securities Other than Equity Securities60

Item 13

Defaults, Dividend Arrearages and Delinquencies60

Item 14

Material Modifications to the rights of Security Holders and Use of Proceeds60

Item 15

Controls and Procedures60

Item 16

[RESERVED]60

 

A.

Audit Committee Financial Expert.60

 

B.

Code of Ethics60

 

C.

Principal Accountant Fees and Services61

 

D.

Exemptions from Listings Standards for Audit Committees61

 

E.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers61

 

F.

Change in Registrant's Certifying Accountant61

 

G.

Corporate Governance62

 

H.

Mine Safety Disclosure62

PART II……………………………………………………………………………………………………………….62

Item 17

Financial Statements62

Item 18

Financial Statements62

Item 19

Exhibits62

 

 

 

 

 

 

 

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CURRENCY AND MEASUREMENT

All currency amounts in this Annual Report are stated in Canadian Dollars unless otherwise indicated.

Approximate conversion of metric units into imperial equivalents is as follows:

 

Metric Units

Multiply by

Imperial Units

hectares

2.471

= acres

meters

3.281

= feet

kilometers

3281

= feet

kilometers

0.621

= miles

grams

0.032

= ounces (troy)

tonnes

1.102

= tons (short) (2,000 lbs)

grams/tonne

0.029

= ounces (troy)/ton

RESOURCE CATEGORY (CLASSIFICATION) DEFINITIONS

The discussion of mineral deposit classifications in this Annual Report adheres to the mineral resource and mineral reserve definitions and classification criteria developed by the Canadian Institute of Mining ("CIM") 2014.  Estimated mineral resources fall into two broad categories dependent on whether the economic viability of them has been established and these are namely "resources" (potential for economic viability) and "reserves" (viable economic production is feasible).  Resources are sub-divided into categories depending on the confidence level of the estimate based on level of detail of sampling and geological understanding of the deposit.  The categories, from lowest confidence to highest confidence, are inferred resource, indicated resource and measured resource.  Reserves are similarly sub-divided by order of confidence into probable (lowest) and proven (highest).  These classifications can be more particularly described as follows:

Mineral Resource

A concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction.  The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

Inferred Mineral Resource

That part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling.  Geological evidence is sufficient to imply but not verify geological and grade or quality continuity.  It has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve.  It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

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Indicated Mineral Resource

That part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors - including, but not limited to,  mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors (collectively, “Modifying Factors”) in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.  Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation.  It has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.

Measured Mineral Resource

That part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit.  Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation.  It has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource.  It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

Mineral Reserve

The economically mineable part of a Measured and/or Indicated Mineral Resource.  It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors, which are considerations used to convert Mineral Resources to Mineral Reserves and include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.  Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.  The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated.  It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.  The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.

Probable Mineral Reserve

The economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

Proven Mineral Reserve

The economically mineable part of a Measured Mineral Resource.  A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.

CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING MINERAL RESERVE AND RESOURCE ESTIMATES

The disclosure in this AIF, including the documents incorporated by reference herein, uses terms that comply with reporting standards in Canada in accordance with NI 43-101 and the 2014 CIM Standards. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all reserve and resource estimates contained in or incorporated by reference in this AIF have been prepared in accordance with NI 43-101 and the 2014 CIM Standards.

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The SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the U.S. Exchange Act, effective February 25, 2019 (the “SEC Modernization Rules”). The SEC Modernization Rules replace the historical property disclosure requirements for mining registrants that were included in SEC Industry Guide 7.

The SEC Modernization Rules include the adoption of definitions of terms, which are “substantially similar” to the corresponding terms under the 2014 CIM Standards that are presented above under “Resource and Reserve Categories (Classifications) Used in this AIF”.

We will not be required to provide disclosure on our mineral properties under the SEC Modernization Rules as we are presently a “foreign issuer” under the U.S. Exchange Act and entitled to file continuous disclosure reports with the SEC under the Multijurisdictional Disclosure System (“MJDS”) between Canada and the United States. Accordingly, we anticipate that we will be entitled to continue to provide disclosure on our mineral properties in accordance with NI 43- 101 disclosure standards and CIM Definition Standards. However, if we either cease to be a “foreign issuer” or cease to be able to or entitled to file reports under the MJDS, then we will be required to provide disclosure on our mineral properties under the SEC Modernization Rules.

Accordingly, United States investors are cautioned that the disclosure that we provide on our mineral properties in the AIF and under our continuous disclosure obligations under the U.S. Exchange Act may be different from the disclosure that we would otherwise be required to provide as a U.S. domestic issuer or a non-MJDS foreign issuer under the SEC Modernization Rules.

United States investors are cautioned that while the above terms under the SEC Modernization Rules are “substantially similar” to CIM Definitions, there are differences in the definitions under the SEC Modernization Rules and the CIM Definition Standards. Accordingly, there is no assurance any resources and reserves that we may report as “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” and “proven mineral reserves” and “probable mineral reserves” under NI 43-101 would be the same had we prepared these estimates under the standards adopted under the SEC Modernization Rules.

United States investors are also cautioned that while the SEC now recognizes “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”, investors should not assume that any part or all of the mineral deposits in these categories will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralization described by these terms has a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. Accordingly, investors are cautioned not to assume that any “measured mineral resources”, “indicated mineral resources”, or “inferred mineral resources” that we report in this AIF are or will be economically or legally mineable.

Further, “inferred resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist. In accordance with Canadian rules, estimates of “inferred mineral resources” cannot form the basis of feasibility or other economic studies, except in limited circumstances where permitted under NI 43-101.

For the above reasons, information contained in this AIF and the documents incorporated by reference herein containing descriptions of our mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

Forward-Looking Statements

Except for the statements of historical fact contained herein, some information presented in this Annual Report constitutes forward-looking statements. When used in this Annual Report, the words “estimate”, “project”,

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“believe”, “anticipate”, “intend”, “expect”, “predict”, “may”, “should”, the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, among others, lack of commercially exploitable mineral reserves, future prices of precious metals and minerals, as well as those factors discussed in the section entitled “Risk Factors” beginning on page 7, below.  Although our Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements.  The forward-looking statements in this Annual Report speak only as to the date hereof. Except as required by applicable law, including the securities laws of the United States, we do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

As used in this Annual Report, the terms “we”, “us” and “our” mean Starcore International Mines Ltd. and all of our wholly owned subsidiaries, unless otherwise indicated.

STATUS AS AN EMERGING GROWTH COMPANY

Our Company is an "emerging growth company" as defined in section 3(a) of the Exchange Act, and we will continue to qualify as an "emerging growth company" until the earliest to occur of: (a) the last day of the fiscal year during which our Company has total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every 5 years by the SEC) or more; (b) the last day of our Company's fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective Registration Statement under the Securities Act; (c) the date on which our Company has, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which our Company is deemed to be a "large accelerated filer", as defined in Exchange Act Rule 12b–2.  Therefore, we expect to continue to be an emerging growth company for the foreseeable future.

Generally, a company that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to companies that meet the definition of a “smaller reporting company” in Exchange Act Rule 12b-2, an auditor attestation report on management’s assessment of internal controls over financial reporting.  However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report in our annual reports filed under the Exchange Act, even if we do not qualify as a “smaller reporting company”.  In addition, auditors of an emerging growth company are exempt from the rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the registrant company (auditor discussion and analysis).  

As a reporting issuer under the securities legislation of the Canadian provinces of Ontario, British Columbia, and Alberta, we are required to comply with all new or revised accounting standards that apply to Canadian public companies. Pursuant to Section 107(b) of the Jumpstart Our Business Startups Act (commonly referred to as the “JOBS Act”), an emerging growth company may elect to utilize an extended transition period for complying with new or revised accounting standards for public companies until such standards apply to private companies. We have elected to utilize this extended transition period.  However, while we have elected to utilize this extended transition period, our audited consolidated financial statements as of April 30, 2018 reflect the adoption of all required accounting standards for Canadian public companies.

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PART I

Financial Information And Accounting Principles

The financial statements and summaries of financial information contained in this document are reported in Canadian dollars (“$”) unless otherwise stated.  All such financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”).

In May 2016, our Board of Directors resolved to change our financial year end from July 31 to April 30, with the result that our transition financial year ended on April 30, 2016 covered a period of nine months.  Our financial statements for the year ended April 30, 2021 have been reported on by Davidson & Company LLP, Chartered Professional Accountants, of 1200-609 Granville Street, P.O. Box 10372, Pacific Centre Vancouver, BC, Canada V7Y 1G6, a registered public accounting firm.     

Item 1

Identity of Directors, Senior Management and Advisers

Not Applicable for Annual Reports

Item 2

Offer Statistics and Expected Timetable

Not Applicable for Annual Reports

 

Item 3

Key Information

A.Selected Financial Data

The following tables summarize selected financial data for our Company for the year ended April 30, 2021 and the past four years before that.  As indicated elsewhere in this Annual Report, in May 2016, our Board of Directors resolved to change our financial year end from July 31 to April 30.  The information in the tables for the years ended April 30, 2021, April 30, 2020, April 30, 2019, April 30, 2018 and April 30, 2017 was extracted from the detailed audited financial statements and related notes included in this Annual Report and should be read in conjunction with those financial statements and the other information appearing under the heading “Item 5 – Operating and Financial Review and Prospects” beginning at page 35, below.  

Selected Financial Data
(Stated in thousands of Canadian Dollars)

IFRS as issued by the IASB

At

April 30,

2017

At

April 30,

2018

At

April 30,

2019

At

April 30,

2020

At

April 30,

2021

 

 

 

 

 

 

Total Revenues

27,228

27,807

32,795

24,820

26,799

Earnings from Mining Operations

826

(4,928)

36

1,984

6,402

Earnings for the Year

7,222

(12,000)

(11,804)

(3,629)

2,892

Basic and Diluted Earnings per Share

0.15

(0.24)

(0.24)

(0.07)

0.06

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IFRS as issued by the IASB

At

April 30,

2017

At

April 30,

2018

At

April 30,

2019

At

April 30,

2020

At

April 30,

2021

Total Assets

82,096

64,451

57,005

54,413

46,471

Total Liabilities

17,178

15,383

17,969

17,109

10,191

Net Assets

64,918

49,068

39,036

37,304

36,280

Share Capital

50,605

50,725

50,725

50,725

50,725

Common Stock

49,146,851

49,646,851

49,646,851

49,646,851

49,646,851

Cash Dividends per Common Share

NIL

NIL

NIL

NIL

NIL

 

Disclosure of Exchange Rate History

 

On July 23, 2021 the noon rate of exchange as set forth in the H.10 statistical release of the Federal Reserve Board, for the conversion of United States dollars into Canadian dollars was US$1.00 = $1.2580.

 

The following table sets forth the high and low rates of exchange for the Canadian dollar, expressed as Canadian dollars per U.S. dollar, for each month during the previous six months:

 

Month Ended

Exchange Rate U.S. Dollars into
Canadian Dollars

High

Low

June 30, 2021

1.2433

1.2356

May 31, 2021

1.2089

1.2059

April 30, 2021

1.2322

1.2266

March 31, 2021

1.2628

1.2540

February 28, 2021

1.2702

1.2587

January 31, 2021

1.2874

1.2740

The following table sets forth the average rates of exchange for the Canadian dollar, expressed as Canadian dollars per U.S. dollar, during the year ended April 30, 2021 and during each of the preceding four financial years ended April 30, calculated by using the average of the exchange rates on the last day of each month during the period:

 

Year Ended

Average Exchange Rate U.S. Dollars into Canadian Dollars

April 30, 2021

1.3088

April 30, 2020

1.3359

April 30, 2019

1.3179

April 30, 2018

1.2774

April 30, 2017

1.3179

B.      Capitalization and Indebtedness

Not Applicable for Annual Reports

 

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C.     Reasons for the Offer and Use of Proceeds

Not Applicable

 

D.    Risk Factors

An investment in our common stock involves a number of very significant risks.  You should carefully consider the following risks and uncertainties in addition to other information in this Annual Report in evaluating our Company and our business before purchasing shares of our Company’s common stock.  Our business, operating results and financial condition could be seriously harmed due to any of the following risks.  The risks described below are not the only ones facing our Company.  Additional risks not presently known to us may also impair our business operations.  You could lose all or part of your investment due to any of these risks.

 

Risks Associated with our Mining Operations

 

Our operations are subject to risk.   Our Company’s ability to generate sufficient cash flows to continue operations is dependent on many factors and cannot be assured.

 

During the year ended April 30, 2021, the cash flow generated from operating, investing and financing activities resulted in a net cash inflow of $2,651,000 (2020 - outflow of $988,000) bringing the Company’s cash balance to $4,392,000 (2020 - $2,105,000) with a working capital of $5,829,000 (2020 - $46,000) and an accumulated deficit of $26,610,000 (2020 - $29,502,000).  The ability of the Company to generate sufficient cash flows to continue operations is dependent upon many factors including, but not limited to, sufficient ore grade, ore production at the San Martin mine, control of mine production costs, administrative costs and tax costs and upon the market price of metals.  Cash flows may also be affected by the ability of the Company to reduce capital expenditures, including mine development.  

 

Exploration, development and mining involve a high degree of risk.

 

Our operations will be subject to all the hazards and risks normally encountered in the exploration, development and production of gold and other base or precious metals, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, pit-wall failures, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and legal liability. Milling operations are subject to various hazards, including, without limitation, equipment failure and failure of retaining dams around tailings disposal areas, which may result in environmental pollution and legal liability.

 

Mining risks.

 

The business of mining involves many risks and hazards, including environmental hazards, industrial accidents, labour force disruptions, the unavailability of materials and equipment, unusual or unexpected rock formations, pit slope failures, changes in the regulatory environment, weather conditions, cave-ins, rock bursts, water conditions and gold bullion losses. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. As a result, we may incur significant costs that could have a material adverse effect upon our financial performance, liquidity and results of operations.

 

Mine development is subject to a number of risks.

 

Our ability to sustain or increase our present levels of gold production is dependent upon the successful development of new producing mines and/or identification of additional reserves at existing mining operations. If we are unable to develop new ore bodies, we will not be able to sustain present production levels. Reduced

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production could have a material and adverse impact on future cash flows, results of operations and financial condition.  Many factors are involved in the determination of the economic viability of a deposit, including the achievement of satisfactory mineral reserve estimates, the level of estimated metallurgical recoveries, capital and operating cost estimates and the estimate of future gold prices. Capital and operating cost estimates are based upon many factors, including anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, ground and mining conditions, expected recovery rates of the gold from the ore, and anticipated environmental and regulatory compliance costs. Each of these factors involves uncertainties and as a result, we cannot give any assurance that our exploration and development activities will result in economically viable deposits. If a deposit is developed, actual operating results may differ from those anticipated.

We may be adversely affected by fluctuations in gold prices.

 

The value and price of our securities, our financial results, and our exploration, development and mining activities may be significantly adversely affected by declines in the price of gold and other precious metals. Gold prices fluctuate widely and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of gold producing countries throughout the world. The price for gold fluctuates in response to many factors beyond anyone’s ability to predict. The prices used in making the resource estimates are disclosed and differ from daily prices quoted in the news media. The percentage change in the price of a metal cannot be directly related to the estimated resource quantities, which are affected by a number of additional factors. For example, a 10 percent change in price may have little impact on the estimated resource quantities and affect only the resultant positive cash flow, or it may result in a significant change in the amount of resources. Because mining occurs over a number of years, it may be prudent to continue mining for some periods during which cash flows are temporarily negative for a variety of reasons including a belief that the low price is temporary and/or the greater expense incurred is in closing a property permanently.

 

Mineralized material calculations and life-of-mine plans using significantly lower gold and precious metal prices could result in material write-downs of our investments in mining properties and increased amortization, reclamation and closure charges.

 

In addition to adversely affecting our mineralized material estimates and our financial condition, declining metal prices can impact operations by requiring a reassessment of the commercial feasibility of a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays in development or may interrupt operations, if any, until the reassessment can be completed.

Further, if revenue from gold sales declines, we may experience liquidity difficulties. This may reduce our ability to invest in exploration and development and making necessary capital expenditures, which would materially and adversely affect future production, earnings and our financial position.

 

Our estimates of future production may not be achieved.

 

We prepare internal estimates of future gold production for our operations. We cannot give any assurance that we will achieve our production estimates. Our failure to achieve our production estimates could have a material and adverse effect on any or all of our future cash flows, results of operations and financial condition. These production estimates are dependent on, among other things, the accuracy of mineral reserve estimates, the accuracy of assumptions regarding ore grades and recovery rates, ground conditions and physical characteristics of ores, such as hardness and the presence or absence of particular metallurgical characteristics, and the accuracy of estimated rates and costs of mining and processing.  

 

Our actual production may vary from our estimates for a variety of reasons, including: actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors such as the need for sequential development of ore bodies and the processing of new or different ore

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grades from those planned; mine failures, slope failures or equipment failures; reduced metallurgical recovery rates, industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts, rock slides and earthquakes; encountering unusual or unexpected geological conditions; changes in power costs and potential power shortages; shortages of principal supplies needed for operation, including explosives, fuels, chemical reagents, water, equipment parts and lubricants; labour shortages or strikes; civil disobedience and protests; and restrictions or regulations imposed by government agencies or other changes in the regulatory environments. Such occurrences could result in damage to mineral properties, interruptions in production, injury or death to persons, damage to our property or others, monetary losses and legal liabilities. These factors may cause a mineral deposit that has been mined profitably in the past to become unprofitable, forcing us to cease production. Each of these factors also applies to our sites not yet in production and to operations that are to be expanded. In these cases, we do not have the benefit of actual experience in verifying its estimates, and there is a greater likelihood that actual production results will vary from the estimates.

 

Mineral reserves and resources estimates are subject to inherent uncertainty.

 

The figures presented for both mineral reserves and mineral resources herein are only estimates. The estimating of mineral reserves and mineral resources is a subjective process and the accuracy of reserve and resource estimates is a function of the quantity and quality of available data and the assumptions used and judgements made in interpreting engineering and geological information. There is significant uncertainty in any reserve or resource estimate, and the actual deposits encountered and the economic viability of mining a deposit may differ materially from our estimates. Estimated mineral reserves or mineral resources may have to be recalculated based on changes in gold prices, further exploration or development activity, actual production experience, other changes in the assumptions made in the estimation process, or changes in the estimation methodology. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence reserve or resource estimates. Market price fluctuations for gold, increased production costs or reduced recovery rates, or other factors may render our present proven and probable mineral reserves uneconomical or unprofitable to develop at a particular site or sites. A reduction in estimated reserves could require material write-downs in our investment in the affected mining properties and increased amortization, reclamation and closure charges.

 

We compete with other companies for mining claims and mining assets.

 

We compete with other mining companies and individuals for mining claims and leases on exploration properties and the acquisition of gold mining assets. Some of the companies with which we compete have significantly greater financial, management and technical resources than we do, and may use these resources to their advantage when competing with us for such opportunities. We cannot give any assurance that we will continue to be able to compete successfully with our competitors in acquiring attractive mineral properties and assets.

 

Our San Martin Mine is our primary source of operational cash flow.  Accordingly, our ability to continue our operations, and our financial position, will be materially and adversely affected if we are limited by insufficient quantities of mineral reserves and resources, which is dependent on the success of our continuing exploration efforts.

 

Specifically, continued operations at the Mine are dependent on our ability to discover new mineral resources and to convert them into reserves in sufficient quantities to replace current production.  However, mineral exploration is highly speculative in nature. Our exploration efforts involve many risks, and success in exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological expertise and availability of exploration capital.  We cannot give any assurance that our exploration efforts will result in the discovery of additional mineral resources and their conversion into reserves. We cannot give any assurance that our exploration programs will be able to extend the life of our San Martin Mine, or result in the discovery of new producing mines.

 

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We may have future capital requirements.

 

As of April 30, 2021, we had cash of approximately $4,392,000 (2020 - $2,105,000) and working capital of approximately $5,829,000 (2020 - $46,000). We intend to use our future cash flows to fund exploration and development work and for general corporate purposes. Capital expenditures and funds for exploration in financial year 2022 are expected to total approximately $200,000. The primary expenditures are planned to be mine development and equipment purchases and replacement which are anticipated to be funded out of the mine’s cash flow.   We may have further capital requirements to the extent we decide to develop other properties or to take advantage of opportunities for acquisitions, joint ventures or other business opportunities that may be presented to us. In addition, we may incur major unanticipated liabilities or expenses.  Failure to make required capital expenditures may impact our financial results.

 

We may be required to obtain additional financing in the future to fund future exploration and development activities or acquisitions of additional properties or other interests that may be appropriate to enhance our financial or operating interests. We have historically raised capital through equity financing and in the future we may raise capital through equity or additional debt financing, joint ventures, production sharing arrangements or other means. There can be no assurance that we will be able to obtain necessary financing in a timely manner or on acceptable terms, if at all.

 

We may require further loans in the future.

Although we repaid all outstanding debt in 2020 (US$1,000,000 due on April 25, 2020 and Cdn$3,000,000 due June 18, 2020 (see press release of June 10, 2020), we may need to arrange additional loans in the future which may require scheduled payments.  Our mining operations may not be able to generate sufficient cash to service such future indebtedness should we incur such debt, and we may be forced to take other actions to satisfy our obligations, which actions may not be successful.  

 

Our ability to meet the repayment obligations on future indebtedness depends on our financial condition and operating performance, which is subject to, among other factors, prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.  We may not be able to maintain a level of cash flow from our operating activities sufficient to permit us to pay the principal and the interest on our indebtedness.  

 

Government regulation may adversely affect our business and planned operations.

 

We believe we currently comply with existing environmental and mining laws and regulations and that our proposed exploration programs will also meet those standards.  Our mineral exploration and development activities, if any, are subject to various laws governing prospecting, mining, development, production, taxes, labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people and other matters.  We can provide no assurance that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail our exploration, production or development activities. Amendments to current laws and regulations governing operations and activities of exploration, development mining and milling or more stringent implementation thereof could have a material adverse impact on our business and financial condition and cause increases in operating and exploration expenses, capital expenditures or production costs or reduction in levels of production or require abandonment or delays in development of new mining properties.

 

Government approvals and permits are currently, and may in the future be, required in connection with our operations.  There can be no assurance that we will be able to obtain these permits in a timely manner.

 

Our Operations in Mexico are subject to Mexican Foreign Investment and Income Tax Laws

 

Under the Foreign Investment Law of Mexico, there is no limitation on foreign capital participation in mining operations; however, the applicable laws may change in a way which may adversely impact the Company and its ability to repatriate profits.  Under Mexican Income Tax Law, dividends are subject to a withholding tax.    

 

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The VAT (IVA) is an indirect tax levied on the value added to goods and services, and it is imposed on carry out activities within Mexican territory.  

 

During 2013, the Mexican Congress passed tax reform legislation, effective January 1, 2014.  The tax reform includes an increase in the corporate tax rate to 30% from 28%, the introduction of a special mining royalty of 7.5% on the profits derived from the sale of minerals, and, the introduction of an extraordinary mining royalty of 0.5% on the gross income derived from the sale of gold, silver and platinum.  These changes may have a material impact on the Company’s future earnings and cash flows, and possibly on future capital investment decisions.

 

Our operations are subject to environmental risks.

 

All phases of our operations, if any, will be subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.  We cannot be certain that future changes in environmental regulation, if any, will not adversely affect our operations, if any. Environmental hazards may exist on properties we hold that are unknown to us and that have been caused by previous or existing owners or operators of the properties.

 

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

 

We do not insure against all risks.

 

Our insurance will not cover all the potential risks associated with a mining company’s operations.  We may also be unable to maintain insurance to cover these risks at economically feasible premiums.  Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability.  Moreover, we expect that insurance against risks such as environmental pollution or other hazards as a result of exploration and production may be prohibitively expensive to obtain for a company of our size and financial means.  We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons.  Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial condition and results of operations.

 

Our directors and officers may have conflicts of interest.

 

Each of our directors and officers has served and continue to serve as officers and/or directors of other companies engaged in natural resource exploration and development and related industries.  Consequently, there is a possibility that our directors and/or officers may be in a position of conflict now or in the future.  For example, a conflict of interest might arise where one of our directors or officers becomes aware of a corporate opportunity that would be of interest not only to our Company, but also to another mining company of which he is also a director or officer; or it is foreseeable that our Company could become involved in a mineral property option or joint venture agreement in respect of a mineral exploration or mine development project in which such a company holds an interest.  For a description of the directorships and/or offices held by our directors and officers in other companies engaged in natural resource exploration and development and related industries, please see “Item 6 - Directors, Senior Management and Employees - A. Directors and Senior Management – Director Interlocks.”

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Title to our properties may be subject to challenge.

 

Acquisition of title to mineral properties in all jurisdictions is a very detailed and time-consuming process. We have acquired substantially all of our mineral properties through acquisitions. Although we have investigated title to all of our mineral properties, we cannot give any assurance that title to such properties will not be challenged or impugned. The properties may have been acquired in error from parties who did not possess transferable title, may be subject to prior unregistered agreements or transfers, and title may be affected by undetected defects or aboriginal, indigenous peoples or native land claims.

 

In Mexico, the site of the San Martin Mine, all mineral resources are owned by the state. Title to minerals can be held separately from title to the surface. Mining rights take precedence over surface rights. Rights to explore for and to extract minerals are granted by the state through issuance of mining concessions.

 

Mining operations are subject to reclamation costs, estimates of which may be uncertain.

 

In accordance with existing accounting standards, we have recognized a liability for future site closure and mine reclamation costs based on our estimate of the costs necessary to comply with existing reclamation standards. Site closure and mine reclamation costs for operating properties are reviewed annually. There can be no assurance that our reclamation and closure liabilities will be sufficient to cover all reclamation and closure costs. The costs of performing the decommissioning and reclamation must be funded by the Company’s operations.  These costs can be significant and are subject to change.  We cannot predict what level of decommissioning and reclamation may be required in the future by regulators.  If we are required to comply with significant additional regulations or if the actual cost of future decommissioning and reclamation is significantly higher than current estimates, this could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.

 

We have an obligation to reclaim our properties after the minerals have been mined from the site, and have estimated the costs necessary to comply with existing reclamation standards. Rehabilitation provisions have been created based on the Company’s internal estimates.  Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability.  These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management.  Estimates are reviewed annually and are based on current regulatory requirements.  Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period.  Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs, which will reflect the market condition at the time the rehabilitation costs are actually incurred.  The final cost of the currently recognized rehabilitation provision may be higher or lower than currently provided for.

 

The inflation rate applied to estimated future rehabilitation and closure costs is 3.0% and the discount rate currently applied in the calculation of the net present value of the provision is 8.0%.

 

We may be subject to unforeseen litigation.

 

All industries, including the mining industry, are subject to legal claims, with and without merit. Although we are not currently involved in any legal proceedings, and are not aware of any threatened or pending legal proceedings, there is no guarantee that we will not become subject to such proceedings in the future.  There can be no guarantee of the outcome of any such claim.  In addition, defense and settlement costs for any legal proceeding can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the resolution of any particular legal proceeding will not have a material effect on our financial position or results of operations.

 

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Estimates and assumptions employed in the preparation of financial statements.

 

The preparation of our Company’s consolidated financial statements requires us to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenues and expenses. Our accounting policies and our critical accounting estimates and judgements are described in notes 3 and 4 respectively in our April 30, 2021 audited annual financial statements.

 

Our accounting policies relating to mineral property and deferred exploration costs, asset retirement obligations, stock-based compensation and future amortization and depletion of mining interest, plant and equipment are critical accounting policies that are subject to estimates and assumptions.  If these estimates or assumptions prove to be inaccurate, we could be required to change the recorded value of our assets and liabilities, which may reduce our earnings and working capital.

 

We record mineral property acquisition costs and mine development costs at cost. In accordance with IFRS, we capitalize preproduction expenditures net of revenues received, until the commencement of commercial production. A significant portion of our mining interest, plant and equipment will be depreciated and amortized on a unit-of-production basis. Under the unit-of-production method, the calculation of depreciation, depletion and amortization of mining interest, plant and equipment is based on the amount of proven and probable reserves and a portion of resources expected to be converted to reserves. If these estimates of reserves prove to be inaccurate, or if we revise our mining plan for a location, due to reductions in the price of gold or otherwise, to reduce the amount of reserves expected to be recovered, we could be required to write-down the recorded value of our mining interest, plant and equipment, or to increase the amount of future depreciation, depletion and amortization expense, both of which would reduce our earnings and net assets.

 

In addition, IFRS requires us to consider at the end of each accounting period whether or not there has been an impairment of the capitalized mining interest, plant and equipment. For producing properties, this assessment is based on expected future cash flows to be generated from the location. For non-producing properties, this assessment is based on whether factors that may indicate the need for a write-down are present. If we determine there has been an impairment because our prior estimates of future cash flows have proven to be inaccurate, due to reductions in the price of gold, increases in the costs of production, reductions in the amount of reserves expected to be recovered or otherwise, or because we have determined that the deferred costs of non-producing properties may not be recovered based on current economics or permitting considerations, we would be required to write-down the recorded value of our mining interest, plant and equipment, which would reduce our earnings and net assets.

 

Our operations are subject to risks associated with currency fluctuations.

 

Currency fluctuations may affect the costs that we incur at our operations. Gold is sold throughout the world based principally on a U.S. dollar price, but the majority of our operating expenses are incurred in non-U.S. dollar currencies. The appreciation of non-U.S. dollar currencies in those countries where we have mining operations against the U.S. dollar would increase the costs of gold production at such mining operations which could materially and adversely affect our earnings and financial condition.

 

Our foreign investments and operations may be subject to political and other risks.

 

We conduct mining, development or exploration activities primarily in Mexico and exploration activities in the United States. Our foreign mining investments are subject to the risks normally associated with the conduct of business in foreign countries. The occurrence of one or more of these risks could have a material and adverse effect on our earnings or the viability of its affected foreign operations, which could have a material and adverse effect on our future cash flows, results of operations and financial condition.  

 

Such risks may include, among others, labour disputes, invalidation of governmental orders and permits, corruption, uncertain political and economic environments, war, civil disturbances and terrorist actions, criminal and gang related activity, illegal mining and protests, arbitrary changes in laws or policies of particular countries, foreign taxation, delays in obtaining or the inability to obtain necessary governmental permits,

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opposition to mining from environmental or other non-governmental organizations, limitations on foreign ownership, limitations on the repatriation of earnings, limitations on gold exports and increased financing costs. These risks may limit or disrupt our projects, restrict the movement of funds or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation.  

 

Certain of our projects are located in Mexico and are subject to country risks that may affect our ability to complete development work on or to operate our projects.

 

The Company’s primary mineral activities are conducted in Mexico and will be exposed to various levels of political, economic and other risks and uncertainties. These risks include but are not limited to, hostage taking, illegal mining, fluctuations in currency exchange rates, high rates of inflation, excessive import duties and taxes on the importation of equipment, expropriation and nationalization, possible future restrictions on foreign exchange and repatriation, changes in taxation, labour and mining regulations and policies, and changing political conditions, currency controls, and government regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ local citizens.

 

Changes, if any, in mining or investment policies, or shifts in political attitude in Mexico, may adversely affect the Company’s operations or profitability. Current activities and future operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety.

 

Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications, and tenure, could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

 

Mexico continues to undergo violent internal struggles between the government and organized crime with drug-cartel relations and other unlawful activities. The violence has increased since 2011 with the number of kidnappings throughout Mexico rising and continuing to be of particular concern.   Militarized crime has not diminished, with ongoing confrontations between Mexican security forces and drug cartels.  Shootouts, attacks and illegal roadblock may occur without warning.  The majority of crimes include homicides, kidnapping and extortion with the most dangerous regions centralized in specific regions of Mexico: Chihuahua, Colima, Coahuila, Durango, Guerrero, Guanajuato, Highway 45 between Leon and Irapuato, the area south of and including Highway 45D between Irapuato and Celaya,  Michoacán, Morelos - the Lagunas de Zempoala National Park, Nayarit - the area within 20 km of the border with Sinaloa and Durango, City of Tepic, Nuevo León, Sinaloa, Sonora and Tamaulipas. Travel advisories continue to prohibit intercity travel at night in numerous areas due to kidnappings, car jackings and highway robberies.   Queretaro for the most part remains largely unaffected and no travel advisory or restrictions are currently in effect.   However small incidents still occur and although the Company is vigilant in taking additional measures to increase security and protect both personnel and property, there is no absolute guarantee that such measures will provide an adequate level of protection for the Company.  The occurrence of these various factors and uncertainties cannot be accurately predicted, and could have an adverse effect on the Company’s operations or future profitability.

 

COVID-19 Uncertainties

 

The precise impacts of the global emergence of Coronavirus disease (COVID-19) on the Company are currently unknown.  The Company intends to conduct business as normal with modifications to personnel travel and work locations.  In Mexico, there is uncertainty as to the continuing designation of mining operations as an essential service.   The Company is also evaluating whether exploration work can continue at San Martin.  Rules in all jurisdictions are changing rapidly and the Company will need to evaluate and evolve with measures as they are announced.  Government restrictions on the movement of people and goods may cause operations, exploration work and analysis being done by the Company and its contractors to slow or cease temporarily or even permanently.  Ceasing operations will have disastrous effects in all Company sectors, and may cause the Company to enact force majeure under one or more of its agreements.  Such disruptions in work may cause severe negative impacts on the Company’s cash flow, on staffing and personnel, on actual or self-imposed

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deadlines and other adverse consequences and fiscal losses.  In addition, the outbreak of COVID-19 has caused considerable disruption to the world economy and financial markets which could have a materially adverse impact on the ability of the Company to raise additional funding in the future and could negatively impact, among other factors, the Company’s share price.

 

There are risks associated with our acquisition strategy.

 

As part of our business strategy, the Company has made acquisitions in the past.   The properties we acquired are primarily in the exploration stage.  There is no assurance that a commercially viable mineral deposit exists on any of our other exploration properties and further exploration is required before we can evaluate whether any exist and, if so, whether it would be economically and legally feasible to develop or exploit those resources.  Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute a reserve (a reserve is a commercially viable mineral deposit).  

 

On March 26, 2018, the Company announced that it was narrowing its focus to production oriented assets in Mexico and was seeking the sale or joint venture of its non-core assets, comprised primarily of our exploration properties.    

 

The Company cannot assure that it can complete any sale or joint venture that it pursues, or is pursuing, on favourable terms, or that any of these business arrangements will ultimately benefit the Company.  If not successful or if forced into “fire-sales” in disposing of its properties, these non-core assets acquired by the Company in prior years could have a material adverse effect on the Company’s results of operations and financial condition.  

 

We are reliant on our current management team.

 

The success of our operations and activities is dependent to a significant extent on the efforts and abilities of our management including Robert Eadie, Chief Executive Officer & President, Gary Arca, Chief Financial Officer and Salvador Garcia, Chief Operating Officer.    Investors must be willing to rely to a significant extent on management’s discretion and judgment. We do not have in place formal programs for succession of management and training of management. We do not maintain key employee insurance on any of our employees. The loss of one or more of these key employees, if not replaced, could adversely affect our operations.

 

We compete for access to qualified employees and contractors.

 

At April 30, 2021, we employed or contracted the services of approximately 244 persons (255 in 2020), including staff at the minesite.  We compete with other mining companies in connection with the recruitment and retention of qualified employees. At the present time, a sufficient supply of qualified workers is available for our operations. The continuation of such supply depends upon a number of factors, including, principally, the demand occasioned by other projects. There can be no assurance that we will continue to be able to retain or attract qualified employees. There is a risk that increased labour costs could have a material adverse effect on our operating costs.

 

Dilution of Shareholders’ Interests as a Result of Issuances of Additional Shares

 

Depending on the outcome of the Company’s exploration programs and mining operations, the Company may issue additional shares to finance additional programs and mining operations or to acquire additional properties.  In the event that the Company is required to issue additional shares or decides to enter into joint ventures with other parties in order to raise financing through the sale of equity securities, investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold.  

 

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Risks Related to Our Company

 

Our Articles of Incorporation indemnify our officers and directors against all costs, charges and expenses incurred by them.

 

Our Articles of Incorporation contain provisions limiting the liability of our officers and directors for their acts, receipts, negligence or defaults and for any other loss, damage or expense incurred by them which occurs during the execution of their duties as officers or directors of our Company, unless they failed to act honestly and in good faith with a view to the best interests of our Company.  Such limitations on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our shareholders from suing our officers and directors based upon breaches of their duties to our Company, though such an action, if successful, might otherwise have been of benefit to our Company and our shareholders.

 

Risks Relating to our Securities

 

The prior registration of our common stock under section 12(g) of the Securities Exchange Act of 1934 was revoked pursuant to section 12(j) of that Act due to our failure to comply with our reporting obligations. We have re-registered under the Act and our registration statement became effective on October 11, 2016.   If, in the future, we fail to comply with the reporting requirements of the Exchange Act, the SEC could initiate proceedings to once again revoke our registration, and broker-dealers in the United States would thereafter be unable to effect transactions in our Company’s common shares.

 

 

Trading in our common shares on the Toronto Stock Exchange and the OTCQB is limited and sporadic, making it difficult for our shareholders to sell their shares or liquidate their investments.

 

Our common shares are currently listed on the Toronto Stock Exchange under the symbol “SAM” and on the OTCQB under the symbol “SHVLF”.  The trading price of our common shares has been and may continue to be subject to wide fluctuations.  Trading prices of our common shares may fluctuate in response to a number of factors, many of which are beyond our control. In addition, the stock market in general, and the market for base metal companies has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies.  These broad market and industry factors may adversely affect the market price of our shares, regardless of our operating performance.  If you invest in our common shares, you could lose some or all of your investment.

 

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted.  Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

 

We do not expect to declare or pay any dividends in the immediate future.

 

Although we declared dividends in 2014, we do not anticipate paying any such dividends for the foreseeable future.

 

U.S. investors may not be able to enforce their civil liabilities against us or our directors, controlling persons and officers.

 

It may be difficult to bring and enforce suits against us.  Some of our directors and officers are residents of countries other than the United States.  Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of any court of the United States.

 

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Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations which may limit a stockholder’s ability to buy and sell our stock.

 

The U.S. Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) of less than US$5.00 per share or an exercise price of less than US$5.00 per share, subject to certain exceptions.  Although the company meets the net tangible asset exception to the definition of a penny stock, many brokers nonetheless maintain that any stock under $5.00 and not trading on a national securities exchange are still considered penny stocks.  Therefore, our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.”  The term “accredited investor” refers generally to institutions with assets in excess of US$5,000,000 or individuals with a net worth in excess of US$1,000,000 (exclusive of the value of a principal residence; and either individually or jointly with the individual’s spouse) or annual income exceeding US$200,000 in each of the two most recent years or US$300,000 jointly with their spouse for those years.  

 

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.  

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  

 

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.  Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.  We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

Item 4

Information on our Company

A.

History and Development of our Company

Our governing corporate legislation is the British Columbia Business Corporations Act (the “Act”).  We incorporated under the former Company Act (British Columbia) on October 17, 1980, under the name Omnibus Resources Inc.  On September 10, 1981, Omnibus Resources Inc. changed its name to Berle Oil Corporation.  On May 31, 1983 Berle Oil Corporation changed its name to Berle Resources Ltd.  On August 6, 1987 Berle Resources Ltd. changed its name to Eagle Pass Resources Ltd.  On September 17, 1992 Eagle Pass Resources Ltd. changed its name to Starcore Resources Ltd. On February 2, 2004 Starcore Resources Ltd. changed its name to Starcore International Ventures Ltd.  On February 1, 2008 Starcore International Ventures Ltd. changed its name to Starcore International Mines Ltd.

Our principal place of business is located at Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6.  Our telephone number at this address is: (604) 602-4935.

Our common shares are listed on the Toronto Stock Exchange under the symbol “SAM”, on the OTCQB under the symbol “SHVLF” and on the Frankfurt Stock Exchange under the symbol “V4JA”.

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B.

Our Business Overview

We are in the mineral resource business.  The mineral resource business generally consists of three stages: exploration, development and production.  We are a mineral resource company with projects in various stages. Mineral resource companies that are engaged in the extraction of a known mineral resource are in the production stage.  We fall in this category with our principal property, the San Martin Mine in Queretaro, Mexico, where we are engaged in extracting and processing gold and silver.  The San Martin Mine is our primary source of operating cash flows.  

In prior years, we were also engaged in acquiring exploration assets in North America directly and through corporate acquisitions. Some of our projects are in the exploration stage because our exploration activities on the project lands have not yet identified mineral resources in commercially exploitable quantities.  

Acquisition of Creston Moly

 

On February 19, 2015, Starcore completed the acquisition of all of the shares of Creston from Deloitte Restructuring Inc., in its capacity as trustee in bankruptcy of Mercator Minerals Ltd., at a purchase price of CDN$2 million.  Creston was formerly a wholly-owned subsidiary of Mercator Minerals Ltd., who acquired Creston in June 2011 in a cash-and-shares deal valuing Creston at approximately CDN$194 million.  Creston is a British Columbia company that owns, through its subsidiaries, a 100% interest in the following three molybdenum-copper mineral projects: (i) the El Creston Project located in Sonora, Mexico; (ii) the Ajax Project located in British Columbia, Canada; and (iii) the Moly Brook Project located in Newfoundland, Canada.  See Mineral Properties”.

Sierra Rosario: Sinaloa.

Located within the historically productive Sierra Madre Occident geological province in the northern Mexican state of Sinaloa, the Sierra Rosario property consists of two large mineral exploration concessions totaling 978.57 hectares.  In February 2018, the Company sold this property for US$100,000 and an additional 1% NSR.

Private Placement

On June 18, 2018, the Company announced that it had completed a private placement of secured bonds in the aggregate principal amount of CDN$3 million (the “Bonds”).  The Bonds bore interest at 8% per annum, payable on maturity, and matured on June 18, 2020.  The Bonds were secured by a charge over all of the Company’s and its subsidiaries’ assets.  

Following conditional acceptance from the Toronto Stock Exchange, the Company issued 3,000,000 warrants to the bond holders, each warrant entitling the bond holders to acquire one share of Starcore at a price of $0.20, expiring on June 18, 2021.

The Bonds were sold pursuant to exemptions from the prospectus requirement of Canadian securities legislation and were subject to a statutory four month hold period which expired on October 19, 2018.  The Bonds were not and will not be listed on any market or exchange.  The Bonds have not been registered under the U.S. Securities Act of 1933, as amended, and were not offered or sold in the United States.

The proceeds from the sale of the Bonds were added to general working capital.  

On June 10, 2020 the Company paid out the Bonds in the principal amount of Cdn$3 million, plus accrued interest of CAD$235,410, ahead of the Bonds’ June 18 , 2020, maturity date.

 

 

18

 


 

 

Salary Reductions

On May 16, 2019, the Company reported that Starcore management had agreed to take a 25% reduction in salary effective May 1, 2019.  The agreement to reduce the current contracts with Robert Eadie, CEO, Gary Arca, CFO and Salvador Garcia, COO has been amended to provide for the 25% reduction and to increase the term to April 30, 2022 from July 31, 2020.  The reductions to the CEO, CFO and COO will result in annual savings to the Company of approximately $250,000.

43-101 Filing

On December 2, 2019, the Company filed a technical report authored by Erme Enriquez, C.P.G., B.Sc., M.Sc. entitled “Reserves and Resources in the San Martin Mine, Queretaro State, Mexico as of September 30, 2019” dated October 30, 2019 (the “Technical Report”).

Revenues:  See Item 5(A) “Operating Results”

Principal Market

 

Gold and silver doré in the form of bullion that is produced from our San Martin Mine is shipped primarily to a refinery in Europe. We also have a contract and the ability to ship to a refinery in the United States of America to mitigate the potential impact of unrelated problems that could arise using a lone refinery such as strikes or other issues. The terms of the refinery contracts provide for payment of 99.25% to 99.9% of the gold and 99.25% to 99.5% of the silver content with treatment charges of $0.30 to $0.75/troy oz of doré and refining charges of US$1.00/troy oz of gold. Payment is due 5 – 20 business days following receipt of the bullion at the refinery and based on the spot price when settled.

 

The San Martin doré is a clean product with few impurities. There are numerous refineries around the world available to refine the doré.

We have not yet identified any commercially viable mineral deposit on any of our exploration properties, and metal prices are currently not economically attractive for one of our projects nearing the development stage. We expect that the principal markets for any of these other properties - should they be successful and be put into production - would consist of metals refineries and base metal traders and dealers.

Seasonality of our Business

 

The San Martin Mine operates year-round.  In general, the mine does not operate on Sundays although at times overtime is required in the mine to meet production targets.  The mine operates with 3 shifts, 8 hours each, six days a week. Administration personnel at the mine work Monday to Friday.

 

Exploration activities at all of our properties can be conducted year-round.

Patents and Licenses; Industrial, Commercial and Financial Contracts; and New Manufacturing Processes

We are not dependent on any patented or licensed processes or technology, or on any industrial, commercial or financial contract, or on any new manufacturing processes.

Competitive Conditions

We compete with other mining companies for the acquisition of mineral interests and for the recruitment and retention of qualified employees.  Some of our competitors have greater financial resources and technical facilities than our Company.  While we compete with these other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to

19

 


 

make production economically feasible.  Readily available markets exist worldwide for the sale of mineral products.  Therefore, we will likely be able to sell any mineral products that we identify and produce.

Governmental Regulations

Various levels of governmental controls and regulations address, among other things, the environmental impact of mineral exploration and mineral processing operations, and establish requirements for decommissioning of mineral exploration properties after operations have ceased.  With respect to the regulation of mineral exploration and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards, and other design or operational requirements for various aspects of the operations, including health and safety standards.  Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mineral exploration properties following the cessation of operations and may require that some former mineral properties be managed for long periods of time.

In North America, our production, processing and exploration activities are subject to various levels of federal and state laws and regulations in the countries where we have a presence.  These laws and regulations relate to protection of the environment, including requirements for closure and reclamation of mineral exploration properties.  In North America, these laws and regulations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act, the Federal Land Policy and Management Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act and the equivalents of these federal laws that have been adopted by the state of Nevada.

In addition, we are subject to Mexican mining laws and their laws protecting ecological balance and the environment.

C. Organizational Structure

The following table sets forth all of our material subsidiaries, their jurisdictions of incorporation and the percentage of voting securities beneficially owned or controlled by the Company.  

 

Name of Subsidiary

Jurisdiction of Incorporation

Percentage Ownership

Compañia Minera Peña de Bernal, S.A. de C.V.1

Mexico

100%2

Creston Moly Corp.

British Columbia

100%

American Consolidated Minerals Corp.

British Columbia

100%

Cortez Gold Corp.

British Columbia

100%

0993684 BC Ltd.

British Columbia

100%

Golden Oasis Exploration(3)

Nevada

100%

Tenajon Resources Corp.

British Columbia

100%4

Creston Mining Corporation

Ontario

100%4

Exploraciones Global S.A. de C.V.

Mexico

100%5

Arco Exploraciones S.A. de C.V.

Mexico

100%6

 

 

1.

Bernal, a wholly-owned subsidiary of Starcore, holds the title to the San Martin Mine in Queretaro, Mexico.

20

 


 

 

2.

To comply with Mexican corporate legislation, one share of Bernal is held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore.  All economic benefits of this share ownership accrue to Starcore.

 

3.  

Subsequent to the year end, in consideration of US$100,000, IM Exploration Inc. acquired Golden Oasis Exploration. See Item 4 - Information on our Company – D. Property, Plants and Equipment – Other Properties - Toiyabe Property, Nevada, USA

 

4.

Tenajon Resources Corp. and Creston Mining Corporation are wholly-owned by Creston Moly Corp., which is a wholly-owned subsidiary of Starcore.

 

5.

Exploraciones Global S.A. de C.V. is a wholly-owned subsidiary of Creston Mining Corp. (Ontario).  It holds the 100% interest in the El Creston molybdenum property located in the State of Sonora, Mexico. To comply with Mexican corporate legislation, four shares of Exploraciones are held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore.  All economic benefits of this share ownership accrue to Starcore.

 

6.

Arco Exploraciones S.A. de C.V. is a wholly owned subsidiary of 0993684 BC Ltd. and is our leasing and projects company in Mexico.  To comply with Mexican corporate legislation, one share of Arco is held of record by Mr. Robert Eadie, the CEO of Starcore, for the benefit of Starcore.  All economic benefits of this share ownership accrue to Starcore.

 

 

21

 


22

 

 

22

 


 

 

 

D.

Property, Plant and Equipment

 

a.

San Martin Mine, Queretaro, Mexico: Compañia Minera Peña de Bernal, S.A. de C.V., a wholly owned Starcore subsidiary, holds the mining concessions covering 12,991.78 ha (2021) - 5,588.5782 ha (2020) at the San Martin Project in the State of Querétaro.      The mining concessions include seven underground mining units and four units under exploration.  Luismin (now “Goldcorp Mexico”) operated the mine from 1993 to January, 2007 when it was purchased by our Company.  We have been mining at San Martin at a rate of approximately 300,000 tonnes per year.  We expect to continue to operate the mine as we convert resources to reserves.  Historically, the mine has typically maintained at least two years of reserves for operations.  

 

b.

Our executive office is located at Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6. We lease a 2,264 square foot office, with total rent and common costs for this space being $107,724.84 per year from May 2020 to April 2022, increasing to $110,102.04 per year from May 2022 to April 2024, and $112,429.24 for the year May 2024 to April 2025.  The lease expires on April 30, 2025.  This office space accommodates all of our executive and administrative personnel and we believe that it is adequate for our current needs.  Should we require additional space, we believe that such space can be secured on commercially reasonable terms. See Item 5(F) for office lease obligations.  

Mineral Properties

San Martin Mine, Queretaro, Mexico

Except as indicated below, the following description of the San Martin Mine has been extracted from the technical report entitled “Reserves and Resources in the San Martin Mine, Queretaro State, Mexico as of September 30, 2019” issued on October 30, 2019, (the “Technical Report”).  The Technical Report was prepared for Starcore in accordance with National Instrument 43-101 (“NI 43-101”) by Erme Enriquez C.P.G., B.Sc, M.Sc., who is independent.  The Technical Report is effective as at September 30, 2019.


 


24

 

 

The following table is a summary of mine production statistics for the San Martin mine for the years ended April 30, 2021 and 2020.  Although the mine reduced operations to 620 tons per day, the continued strength of the US dollar has resulted in profitable operational results even with the recently declining mill head grade.  Production for the year ended April 30, 2021 was 225,461 tonnes at an average head grade of 1.63 g/t gold and 24.7 g/t silver.  

 

 

Unit of measure

Actual results for period ended April 30, 2021

Actual results for period ended April 30, 2020

Mine production of gold in Doré

 

ounces

10,475

11,752

 

Mine production of silver in Doré

 

ounces

103,424

121,825

Total mine production – equivalent ounces

ounces

11,797

13,112

Silver to gold equivalency ratio

 

78.28

89.6

Mine gold grade

grams/tonne

1.63

1.82

Mine silver grade

grams/tonne

24.7

30.5

Mine gold recovery

percent

88

88

Mine silver recovery

percent

57

54

Milled

tonnes

225,504

229,830

Mine development, preparation and exploration

Meters

7,426

6,096

Mine operating cash cost per tonne milled

US dollars/tonne

55

65

Mine operating cash cost per equivalent ounce

US dollars/ounces

1,056

1,149

Number of employees and contractors at minesite

 

244

251

24

 


25

 

 

 

Location

The San Martin mine is located 47 kilometres, in a straight line, northeast of Queretaro City, Queretaro State, on local road No.100 and about 250 kilometres NW of Mexico City, near the towns of Tequisquiapan and Ezequiel Montes.  The San Martin underground mine has been in operation since 1993.

The San Martin Mine complex consists of 8 mining claims that cover 12,991.7805 hectares (2021) (reported as 5,588.5782 hectares in 2020 due to an application to reduce the surface area, application has since been withdrawn.

.

 

The following table summarizes the mining concessions comprising the San Martin Mine property.  

 

No.

on Map

Concession

Name

Exp.

Title

Term of Concession

 

Hectares

2020 Annual Taxes (Pesos)

From

To

1st Sem

2nd Sem

1

San Martin 2

321.1/6-72

191134

29/04/1991

28/04/2041

190.7972

$32,480

$32,480

2

San Martin

321.1/6-71

191423

19/12/1991

18/12/2041

132.0818

$22,485

$22,485

3

La Trinidad

6/1.3/276

204824

13/05/1997

13/05/2047

2,610.7224

$444,424

$444,424

4

San Martin Fracc. A.

6/1.3/00409

215262

14/02/2002

13/02/2052

37.1099

$6,318

$6,318

5

San Martin Fracc. B.

6/1.3/00411

215263

14/02/2002

13/02/2052

22.8901

$3,897

$3,897

6

San Martin Fracc. C.(1)

6/1.3/00412

215264

14/02/2002

13/02/2052

1,185.8658 (2)

$201,870

$201,870

25

 


26

 

7

San Martin 3

6/1.3/00410

215301

14/02/2002

13/02/2052

60.0000

$10,214

$10,214

8

San Martín Cuatro.(1)

065/15357

221844

02/04/2004

01/04/2054

1,349.1110(3)

$229,660

$229,660

 

 

 

 

 

 

 

 

 

TOTAL

5,588.5782

$951,348.00

$951,348.00

 

 

(1)

Claims San Martin Fracc. C, Title 215264 and San Martin Cuatro, Title 221844 are reverting to their original surface areas.  The application for reduction for each of the claims, which was filed with the Mexican Mining Bureau (Dirección General de Minas) in 2020, has been withdrawn.

 

(2)

San Martin Fracc. C’s surface will revert to its original surface area of 3,182.5644 has. instead of 1,185.8558 has., and 2021 payments will be made based on the original surface area.

 

(3)

San Martin Cuatro’s surface will revert to its original surface of 6,755.6145 has. instead of 1,349.1140 has., and 2021 payments will be made based on the original surface area.

 

Compañía Minera Peña de Bernal, SA de CV San Martin Mine Project

Historical Production 1993-April 30, 2021

 

Year

Tonnes

Grade

Production

Au (g/t)

Ag (g/t)

Oz Au

Oz Ag

Oz Au Eq.

1993

28,267

2.53

60

1,387

24,463

1,707

1994

134,118

3.19

35

13,179

81,605

14,298

1995

146,774

3.40

38

16,172

180,459

17,068

1996

187,691

3.40

44

19,553

155,160

21,620

1997

219,827

3.27

43

22,016

174,013

24,570

1998

224,279

3.45

50

23,680

210,680

27,539

1999

242,295

3.46

46

25,852

194,110

29,624

2000

284,490

3.61

54

31,209

245,310

35,571

2001

287,520

3.76

65

32,773

330,217

38,068

2002

268,451

4.26

71

35,634

370,406

41,124

2003

276,481

4.29

82

36,438

464,947

42,692

2004

272,734

4.47

83

36,935

458,681

44,377

2005

282,392

3.92

65

32,814

349,071

38,543

2006

278,914

2.82

52

22,004

235,806

26,529

2007

252,400

3.34

49

25,232

224,714

29,606

2008

266,600

2.50

33

18,733

159,877

21,367

2009

272,856

2.43

33

19,171

167,827

21,696

2010

275,290

2.03

30

15,492

163,489

18,156

2011

296,845

2.14

39

17,694

267,237

23,736

2012

309,796

2.09

25

16,197

160,678

19,213

2013

306,941

2.66

24

22,247

129,861

24,425

2014

311,210

2.35

22

20,062

112,010

21,755

2015

309,565

2.09

20

17,903

104,767

19,319

2016

286,278

1.94

16

14,606

68,463

15,547

2017

259,709

1.69

13

11,563

54,287

12,246

April 30 2018

99,067

1.59

36

4,410.96

64,459.38

5,218.98

April 30, 2019

314,347 314,347

1.62

39

  13,651

224,544

16,393

April 30, 2020

229,830

1.85

30

11,752

121,825

13,112

April 30, 2021

225,504

1.63

24.7

 

10,475

103,424

11,797

TOTALS

6,836,124

2.82

42

588,835

5,602,390

676,917

26

 


27

 

 

 

 

 

 

 

 

 

 

Resources are valid as of April 30, 2021 as defined by end of month April 2021 topography.

 

Measured, Indicated and Inferred resource cut-off grades were 1.66 g/t gold equivalent at San Martín.

 

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources estimated will be converted into mineral reserves.

 

Metallurgical recoveries were 88% gold and 55% silver.

 

Gold equivalents are based on a 1:75.00 gold: silver ratio. Au Eq= gAu/t + (gAg/t ÷ 75.00)

 

Price assumptions are $1800 per ounce for gold and $24.00 per ounce for silver for resource cutoff calculations.

 

Mineral resources are estimated exclusive of and in addition to mineral reserves.

 

Resources are constrained by a conceptual underground mining using parameters summarized in section.

 

Resources were estimated by Starcore and reviewed by Erme Enriquez CPG.

 

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Total Proven and Probable Mineral Reserves at the San Martin mine as of April 30, 2021 estimated by Starcore and reviewed by Erme Enriquez are 1,224,030 tonnes at a grade of 1.99 g Au/t and 19 g Ag/t.

 

 

 

Reserve cut-off grades are based on a 1.66 g/t gold equivalent.

 

Metallurgical Recoveries were 88% gold and 55% silver.

 

Mining Recoveries of 90% were applied.

 

Minimum mining widths were 1.5 meters.

 

Dilution factors is 20%. Dilution factors are calculated based on internal stope dilution calculations.

 

Gold equivalents are based on a 1:75.00 gold - silver ratio. Au Eq= gAu/t + (gAg/t ÷ 75.00)

 

Price assumptions are $1800 per ounce for gold and $24 per ounce for silver.

 

Mineral resources are estimated exclusive of and in addition to mineral reserves.

 

Resources were estimated by Starcore and reviewed by Erme Enriquez C.P.G.

 

Dilution factor is 20%. Dilution factors are calculated based on historical internal stope dilution calculations.

 

Reserves are exclusive of the indicated and measured resources.

27

 


28

 

 

 

 

Technical Report - see attached Exhibit 15.1

 

Cautionary Note to Investors Concerning Estimates of Mineral Resources

The Technical Report and related sections use the terms “proven mineral reserve” and “probable mineral reserve”, as permitted under Canadian reporting standards. For United States reporting purposes, SEC Industry Guide 7 applies different standards in order to classify mineralization as a reserve. As a result, the definitions of proven and probable reserves applicable under Canadian reporting standards differ from the definitions in the SEC Industry Guide 7.  Accordingly, mineral reserve estimates calculated in accordance with Canadian standards may not qualify as “reserves” under SEC standards.

In addition, the Technical Report and related sections also use the term "inferred mineral resources".  While this term is recognized and required by Canadian regulations, the SEC does not recognize it.  "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility.  It cannot be assumed that all or any part of a mineral resource will ever be upgraded to a higher category.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of economic studies, except in rare cases.  Investors are cautioned not to assume that all or any part of an inferred resource exists, or is economically or legally mineable.

 

Exploration Update

This section has been prepared by Salvador Garcia, P. Eng., COO of the Company, and a qualified person for the purposes of NI 43-101.

For the year ended April 30, 2021, the San Martin plant achieved 88 % recovery of gold and 57 % of silver from the 225,504 tonnes milled during the fiscal year. Head grades averaged 1.63 g/t gold and 24.7 g/t silver resulting in 11,797 equivalent gold ounces of production during the fiscal year.  Equivalent gold ounce calculation is based on the actual daily average gold: silver ratio of 1 to 89.6 during the fiscal year.

For the period ended April 30, 2020, surface and underground exploration programs were conducted using both company and contractor drill rigs. Between May 1, 2020 until April 30, 2021, a total of 7,680 exploration meters were drilled using the company’s drill rigs.

The exploration highlights during the year at the San Martin mine include three positive drill holes in section 28 of the mine. The potential to find additional mineralization exists to the east, where it is open for 700 meters.

 

SAN MARTIN DRILL HOLE HIGHLIGHTS

HOLE ID

WIDTH TRUE (M)

ASSAYS

Au g/t

Ag g/t

DC2820-214

1.92

2.1

57

DC2820-215

2.47

2.4

21

DC2820-217

1.32

4.7

14

28

 


29

 

 

In the San Jose II mine near to surface, a new body was intercepted on the hanging wall of San Jose vein, where we have drilled 14 positive holes.  The vertical potential is open to the east, where it will be the next target for the incoming months.

 

SAN JOSE II DRILL HOLE HIGHLIGHTS

HOLE ID

WIDTH TRUE (M)

ASSAYS

Au g/t

Ag g/t

DCSJ21-70

0.77

1.6

26

DCSJ21-71

0.83

1.8

45

DCSJ21-72

5.35

1.9

51

DCSJ21-73

5.63

1.0

23

DCSJ21-74

1.68

0.9

7

DCSJ21-75

6.85

1.5

41

DCSJ21-76

4.57

1.5

18

DCSJ21-77

4.76

0.6

15

DCSJ21-81

7.42

1.5

21

DCSJ21-83

2.14

3.5

43

DCSJ21-84

0.89

1.2

6

DCSJ21-91

2.70

1.2

48

DCSJ21-92

0.70

0.7

10

DCSJ21-94

1.11

1.2

27

 

In the northwest part of the San Martin mine, at an elevation of 1970 meters, a manto of breccia was intercepted, resulting in seven positive drill holes. The diamond drill hole exploration is continuing northwest of current operations where potential to find addition mineralization is open for more than 700 meters.

 

SAN MARTIN NORTHWEST

DRILL HOLE HIGHLIGHTS

HOLE ID

WIDTH TRUE (M)

ASSAYS

Au g/t

Ag g/t

29

 


30

 

SAN MARTIN NORTHWEST

DRILL HOLE HIGHLIGHTS

HOLE ID

WIDTH TRUE (M)

ASSAYS

DC3120-162

2.98

4.4

30

DC3120-163

0.92

1.8

19

DC3120-165

1.60

8.3

94

DC3121-166

7.25

1.7

24

DC3121-167

2.05

2.1

25

DC3121-168

0.46

1.0

51

DC3121-169

0.88

2.1

24

The Company continues to explore through the development of drifts to convert resources into reserves.  

Other Mineral Properties  

In addition to our principal property, the San Martin Mine, we have several other mineral interests in exploration properties, as summarized below, which we do not consider to be material to our operations at this time or have been sold or discontinued.  These include three molybdenum-copper exploration projects that we acquired through our acquisition of Creston Moly Corp. (“Creston Moly”) from Deloitte Restructuring Inc., in its capacity as trustee in bankruptcy of Mercator Minerals Ltd., in February 2015 for a purchase price of Cdn$2 million – namely, the El Creston Project in Mexico, the Ajax Project in British Columbia and the Moly Brook Project in Newfoundland (abandoned in 2019).  

Creston Moly, a British Columbia company, was formerly a wholly-owned subsidiary of Mercator Minerals, who acquired Creston Moly in 2011 in a cash-and-shares deal valuing Creston Moly at approximately Cdn$194 million.

 

 

o

El Creston Project, Sonora, Mexico

The El Creston molybdenum property is located in the State of Sonora, Mexico, 175 kilometres south of the US Border and 145 kilometers northeast of the city of Hermosillo.  Creston Moly’s indirect wholly-owned subsidiary, Exploraciones Global S.A. de C.V. (“Exploraciones Global”), is the registered holder of the El Creston property.  Exploraciones Global purchased the claims comprising the El Creston property from the previous owners.  The property is known to host several zones of porphyry-style molybdenum copper mineralization.

El Creston Project, Sonora, Mexico

Tenure Number

 

Claim Name

Owner/
Interest

Underlying Royalty

Tenure Type/
Tenure Sub Type

Area (ha)

Issue Date/
Present Expiry Date

Required Holding Expenses

Property Surface Rights

Ownership

219813

Meztli

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

89

16/04/2003
15/04//2053

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

4,529 hectares 100% Owned acquired through purchase from local landowners and Ejido.  573 hectares leased for 30 years with exclusive option to purchase

Ejido and local landowners

220332

Meztli 1

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

8

16/07/2003
15/07/2053

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

222321

Lorenia

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

138

25/06/2004
24/06/2054

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

222700

Alma

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

359

13/08/2004
12/08/2054

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

223111

Letty

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

391.5093

15/10/2004
14/10/2054

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

225638

Meztli 2

Exploraciones Global/
100%

3% NSR

Concession/
Mining Exploration

1455.9816

30/09/2005
29/09/2055

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

229984

Meztli 6

Exploraciones Global/
100%

3% NSR

Concession/
Mining

0.0032

04/07/2007
03/07/2057

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

243807

Meztli 4 Reduc-cion

Exploraciones Global/
100%

3% NSR

Concession/
Mining

8465.044

05/12/2014
09/07/2057

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

30

 


31

 

El Creston Project, Sonora, Mexico

Tenure Number

 

Claim Name

Owner/
Interest

Underlying Royalty

Tenure Type/
Tenure Sub Type

Area (ha)

Issue Date/
Present Expiry Date

Required Holding Expenses

Property Surface Rights

Ownership

231151

Meztli 3

Exploraciones Global/
100%

3% NSR

Concession/
Mining

457.0564

18/01/2008
17/01/2058

Taxes to be paid semi-annually.   Notice of Work form filed by May 30th

Part of above

As above

 

 

o

Sierra Rosario: Sinaloa.

Located within the historically productive Sierra Madre Occident geological province in the northern Mexican state of Sinaloa, the Sierra Rosario property consists of two large mineral exploration concessions totalling 978.57 hectares.  On February 2018, the Company sold this property for US$100,000 and an additional 1% NSR.

 

 

o

Ajax Project, British Columbia.

The Ajax molybdenum property is comprised of 1,718 hectares and is located 13 km north of Alice Arm, British Columbia.   The Ajax property, one of North America's largest undeveloped molybdenum deposits occupying a surface area of approximately 600 by 650 metres, is in the advanced stage of exploration.  

Creston Moly’s wholly-owned subsidiary, Tenajon Resources Corp. (“Tenajon Resources”), is the registered holder of the Ajax property.  Tenajon Resources acquired all but one of the claims comprising the Ajax property through on line staking; the final claim, identified by tenure number 511540, was acquired by way of a claim conversion (that is, a procedure for converting manually-staked claims to computerized-staked claims).

 

Ajax Molybdenum Property, British Columbia, Canada

Tenure Number

Claim Name

Owner/
Interest

Underlying Royalty

Tenure Type/
Tenure Sub Type

Area (ha)

Issue Date/
Present Expiry Date

Required Holding Expenses

Property Surface Rights

Ownership

501393

mq2

Tenajon Resources Corp./
100%

NONE

Claim/
Mineral Exploration

402.28

12/01/2005
14/07/2021

No work required until 2021.  No gov't fees

None

Govern-ment

504775

mq3

Tenajon Resources Corp/
100%

NONE

Claim/
Mineral Exploration

255.99

25/01/2005
27/07/2021

No work required until 2021.  No gov't fees

None

Govern-ment

504776

mq3

Tenajon Resources Corp/
100%

NONE

Claim/
Mineral Exploration

292.7

25/01/2005
27/07/2021

No work required until 2021.  No gov't fees

None

Govern-ment

31

 


32

 

Ajax Molybdenum Property, British Columbia, Canada

Tenure Number

Claim Name

Owner/
Interest

Underlying Royalty

Tenure Type/
Tenure Sub Type

Area (ha)

Issue Date/
Present Expiry Date

Required Holding Expenses

Property Surface Rights

Ownership

504782

mq-5

Tenajon Resources Corp/
100%

NONE

Claim/
Mineral Exploration

146.22

25/01/2005
27/07/2021

No work required until 2021.  No gov't fees

None

Govern-ment

505618

mq5

Tenajon Resources Corp/
100%

NONE

Claim/
Mineral Exploration

256.00

02/02/2005
04/07/2021

No work required until 2021.  No gov't fees

None

Govern-ment

511540

 

Tenajon Resources Corp/
100%

NONE

Claim/
Mineral Exploration

365.67

22/04/2005
09/06/2021

No work required until 2021.  No gov't fees

None

Govern-ment

 

 

 

 

 Total

1,718.86

 

 

 

 

 

 

o

Moly Brook Project, Newfoundland.  

 

Creston’s Moly Brook molybdenum property located on the south coast of Newfoundland is centered 2.5 km from the outport of Grey River less than 4 kilometres from a deep water, ice free navigable fjord.  During the year ended April 30, 2019, the Company decided to abandon the property and all costs associated with this property have been written off in the Consolidated Statements of Operations and Comprehensive Income.

 

 

o

American Consolidated Minerals Corp.

On November 20, 2014, the Company announced the approval of the proposed acquisition of American Consolidated Minerals Corp (“AJC”) pursuant to a plan of arrangement (the “Transaction”) by the AJC shareholders. The Transaction was completed on December 1, 2014 upon the satisfaction of all of the conditions set out in the arrangement agreement entered into by AJC and the Company on October 1, 2014, including approval by the Supreme Court of British Columbia.

32

 


33

 

 

o

Toiyabe Property, Nevada, USA

Pursuant to the acquisition of AJC, the Company acquired the right to a 100% undivided interest, subject to a 3% NSR, in 165 mining claims located in Lander County, Nevada, United States of America (“Toiyabe”) from MinQuest Inc. (“Minquest”)

Consideration to be paid for the interest is USD$900,000 (payable over 5 years commencing October 19, 2018) and the Company must incur total exploration expenditures of USD$1,025,000 on the property (which expenses have been incurred) as agreed by MinQuest. Annual payments commencing October 19, 2018 are $60,000 (paid), $80,000 (paid), $100,000 (deferred to May 31, 2021, (See below) by amending the agreement with Minquest), $120,000, $140,000 and $400,000.

In summary, to complete the acquisition of a 100% interest in Toiyabe (subject to a 3% royalty), there are remaining property payments to be made of US$760,000 over a period of 3 years to October 2023. (See news release dated July 7, 2020)

The optionor has also granted the Company the right to purchase up to one-half of the NSR (or 1.5%) on the basis of US$2 million per each 1% of the royalty.

On May 18, 2018 Starcore filed an updated National Instrument (“NI 43-101”)Technical Report for the Toiyabe Gold Project in Lander County, Nevada”, prepared by Paul D. Noland CPG dated May 11, 2018.

 

Highlights from the Technical Report include:

 

-

Summary results from three drilling programs completed since the last report (2009, 2010, 2016)

 

-

In all three drilling campaigns since the 2009 report and resource estimate, the near-surface ‘Courtney’ resource was expanded and enhanced.

 

-

Drilling since the previous report has focused largely on structurally controlled, deeper and higher-grade mineralization not included in the 2009 resource estimate.

 

-

Wider spread drilling, outside known resource areas has allowed a better understanding of the structural setting of the project.

On March 2021, the Company and IM Exploration Inc. (“IM”) announced that that they had entered into a binding agreement (the “Term Sheet”), which set forth the terms for the assignment of Starcore’s option to acquire a 100% interest (the “Transaction”) in the Toiyabe Gold Project in Lander County, Nevada (the “Project”) from Minquest Ltd. (“Minquest” or the “Optionor”).  On April 22, 2021, Starcore announced it had formalized the Transaction, through an assignment and assumption agreement with IM.

Transaction Details

As consideration for the assignment of Starcore’s right to acquire a 100% interest in the Project, IM has issued Starcore 4,100,000 common shares in the capital of IM (the “Consideration Shares”) at a fair value at date of issuance price of $0.19 per Consideration Shares. The Consideration Shares will be subject to a contractual escrow period of twelve (12) months following the date of issuance, with 25% being released every three (3) months, with the first release occurring no later than 3 months after the closing of the Transaction and a cash payment paid to Starcore in the amount of US$150,000.

Subsequent to the closing of the Transaction, in consideration of US$100,000, IM also acquired Golden Oasis Exploration, the Company’s wholly-owned subsidiary in Nevada, which held the bond lodged with the Bureau of Land Management in respect of the Toiyabe property.

 

 

o

Lone Ranch: Washington State, USA

The Company acquired the right to a 100% undivided interest, subject to a 3% net smelter royalty (“NSR”), in 73 mining claims located in Ferry County, Washington State, United States of America (“Lone Ranch”)

33

 


34

 

from MinQuest Inc. (“MinQuest”).  During the period ending October 31, 2018, the Company decided to abandon the property and all costs associated with this property have been written off in the Consolidated Statements of Operations and Comprehensive Income.

There is no assurance that a commercially viable mineral deposit exists on any of our exploration properties, or that we will be able to identify any mineral resource on any of these properties that can be developed profitably.  Even if we do discover commercially exploitable levels of mineral resources on any of our properties, which is unlikely, there can be no assurance that we will be able to enter into commercial production of our mineral properties.

Sale of Altiplano Plant, Matehuala, Mexico

The Altiplano plant was the principal asset of Cortez Gold Corp., a wholly-owned Starcore subsidiary that held title to the land, equipment and permits for the operation of a processing plant situated on 20 hectares of land in Matehuala, Mexico.  The land and the plant and equipment were owned by Altiplano Goldsilver, S.A. de C.V., a wholly-owned subsidiary of Cortez Gold.  The facility is located within a historic mining district, in an area that is home to numerous medium-sized mining operations.  The Altiplano Plant was designed to employ the dissolution treatment production process to recover precious metals from flotation concentrates. When compared to the alternative pyrometallurgical foundries, it is a cleaner process and more economical, enabling the facility to offer lower processing rates than those currently available to concentrate producers in the area.  Commencement of commercial production began on November 1, 2016.  

In November 2018, management announced that the capital requirements of the Altiplano facility for inventory and operations, despite improving cash flow to a small profit in the prior quarter, did not justify the continuation of these operations. The operations were placed on a maintenance status in the quarter and remaining inventories were processed and sold accordingly. After assessing the best use of the assets of Altiplano, management deemed the sale of the facility to be the best course of action for the Company.

The Company accepted an offer on July 5, 2019, to purchase 100% of the shares of Altiplano for US$1.6 million. Terms of the transaction were filed on July 31, 2019. The stock purchase agreement requires the payment of the US$1.6 million in instalments as to US$0.5 million on closing (received), US$0.5 million on August 31, 2019 (received), and US$0.2 million each 3 months from November 30, 2019 to May 31, 2020. (All payments received.)  The sale of Altiplano is now complete.

 

Item 5

Operating and Financial Review and Prospects

The following discussion and analysis of our financial condition and results of operations for the fiscal period ended April 30, 2021 should be read in conjunction with our financial statements and related notes included in this Annual Report.  Our financial statements included in this Annual Report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.  

A.

Operating Results

Our results of operations have been, and may continue to be, affected by many factors of a global nature, including economic and market conditions, the availability of capital, the level and volatility of prices and interest rates, currency values, commodities prices and other market indices, technological changes, the availability of credit, inflation and legislative and regulatory developments.  Factors of a local nature, including political, social, financial and economic stability, the availability of capital, technology, workers, engineers and management, geology and weather conditions, may also affect our results of operations.  As a result of the economic and competitive factors discussed above, our results of operations may vary significantly from period to period.  Except where otherwise noted, financial results are rounded to the nearest $1,000 and are expressed in Canadian currency.

34

 


35

 

Year Ended April 30, 2021, April 30, 2020 and April 30, 2019 (in thousands of audited)

 

 

Twelve-Month Year Ended
April 30, 2021

 

Twelve-Month Year Ended
April 30, 2020

 

Twelve-Month Year Ended
April 30, 2019

Revenues

 

 

 

Mined ore

26,799

24,820

27,053

Purchased concentrate

-

-

5,742

 

 

 

 

Total revenue

26,799

24,820

32,795

Cost of sales

 

 

 

Mined ore

(16,038)

(19,150)

(22,975)

Purchased concentrate

-

-

(5,891)

Depreciation and depletion

(4,359)

(3,686)

(3,893)

 

 

 

 

Total cost of sales

(20,397)

(22,836)

(32,759)

Earnings from mining operations

6,402

1,984

36

Financing income(costs)

(148)

(554)

(311)

Foreign exchange gain (loss)

(697)

(369)

(125)

Professional and consulting fees

(738)

(1,000)

(781)

Management fees and salaries

(1,283)

(1,151)

(1,405)

Office and administration

(598)

(942)

(1,250)

Property investigation costs

(47)

-

(54)

Shareholder relations

(220)

(297)

(246)

Regulatory and transfer agent fees

(112)

(83)

(112)

Loss before taxes

2,559

(2,412)

(4,248)

Sale of Altiplano

-

(39)

-

Allowance for receivables

-

-

(441)

Other Income: Sale of San Pedrito

-

-

-

Other Loss: Impairment of Mining Interest

-

-

(4,804)

Other Loss: Loss on disposal of E&E Asset

-

-

(82)

Other Loss: Loss on sale of Toiyabe

(1,116)

 

 

35

 


36

 

Income tax recovery (provision)

1,449

(1,178)

(2,229)

Earnings for the year

2,892

(3,629)

(11,804)

 

Comparison April 30, 2021 to April 30, 2020

Overall, revenue from mining operations increased by $1,979 for the year ended April 30, 2021 compared to the comparative year ended April 30, 2020, due mainly to higher gold and silver prices, partially offset by lower metal production and ore grade processed in the current year compared to the prior comparable year.

Sales of metals for mining operations for the year ended April 30, 2021 approximated 10,161 ounces of gold and 94,218 ounces of silver sold at average prices in the year of US$1,825 and US$25.38 per ounce, respectively. This is a decrease in sale of gold and silver ounces when compared to the prior comparable year ended April 30, 2020 where sales of metal approximated 11,357 ounces of gold and 117,148 ounces of silver, however, sold at much lower average prices of US$1,491 per ounce for gold and US$16.61 per ounce for silver.

The total cost of sales above includes non-cash expenses for depreciation and depletion of $4,359 compared to $3,686 in the prior comparable year ending April 30, 2020, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management. The increase is largely due to an increase in amortization of the leases on mobile equipment in accordance with the change to IFRS 16, offset partially by the reduction of production tonnage calculated over the total resource.

For the year ending April 30, 2021, the Company had gross profit of $6,402 from mine and concentrate operations compared to gross profit of $1,984 for the year ended April 30, 2020. The higher gross profit was due mainly to the cost savings measure taken in the first two quarters of the prior year, as discussed previously, whereby the Company reduced its staff by 32% at the San Martin Mine incurring severance costs of approximately US$600,000 related to the staff reduction. The lower tonnes processed, the higher recovery for gold, the higher overall metal prices during this period combined with the planned lower overall mine processing costs resulted in much higher gross profit from mined ore.

Other Items

Changes in other items for the year ended April 30, 2021, resulted in the following significant changes from the year ended April 30, 2020:

 

 

Financing costs during the year decreased by $406 primarily due to repayment of the US$1,000 loan in the prior year fourth quarter and the repayment of the $3,000 principal of Bonds outstanding in June of this year;

 

Office and administration decreased by $344 due to lower corporate costs relating to general regulatory administration in the current year and due to the sale of Altiplano;

 

Management fees and salaries increased by $132 mainly due to the increase in RSU/ DSU liability accrued based on the increased price of the Company’s shares on the TSX;

 

Foreign exchange loss increased by $328 for the year ended April 30, 2021. The increase relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations, and may be realized or unrealized at the period end;

 

Professional and consulting fees decreased by $262 to $738 for the year ended April 30, 2021. Professional fees relate primarily to charges in relations to legal, tax and audit fees and decreased mainly due to costs related to the sale of Altiplano in the prior year;

 

Deferred Income Tax (“DIT”) decreased by $2,627 due mainly to the difference in asset base of the underlying amounts that determine the temporary differences from year to year.

 

36

 


37

 

 

 

Comparison April 30, 2020 to April 30, 2019

Overall, revenue from mining operations decreased by $7,975 for the year ended April 30, 2020 compared to the comparative year ended April 30, 2019, due mainly to lower metal production from lower tonnage processed in the current year compared to the prior comparable year, partially offset by higher gold and silver prices accounting for a total of $2,233 of the decrease. The remaining difference is due to the loss of purchased concentrate revenue, from the amount of $5,742 in the prior year, due to the suspension and subsequent sale of the Altiplano concentrate processing plant as well as decreased carbon concentrate processed at the San Martin mine (see section 4.2 - Sale of Altiplano Processing Plant, Matehuala, Mexico).

Sales of metals for mining operations for the year ended April 30, 2020 approximated 11,357 ounces of gold and 117,148 ounces of silver sold at average prices in the year of US$1,491 and US$16.61 per ounce, respectively. This is a decrease in sale of gold ounces and in silver ounces when compared to the prior comparable year ended April 30, 2019 where sales of metal approximated 13,852 ounces of gold and 229,982 ounces of silver, sold at lower average prices of US$1,280 per ounce for gold and US$14.89 per ounce for silver.

The total cost of sales above includes non-cash expenses for depreciation and depletion of $3,686 compared to $3,893 in the prior comparable year, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management. The decrease is largely due to the reduction of production tonnage calculated over the total resource, offset partially by an increase in amortization of the leases on mobile equipment in accordance with the change to IFRS 16.

For the year ending April 30, 2020, the Company had gross profit of $1,984 in from mine and concentrate operations compared to gross profit of $36 for the year ended April 30, 2019. The higher gross profit was due to the cost savings measure taken in the first two quarters as discussed previously. The combination of lower tonnes processed and higher recovery for gold during this year resulted in relatively better metal production and, therefore, gross profit from mined ore as compared to the prior comparable year despite lower gross revenues.

Costs per ounce for the year ended April 30, 2020 was US$1,149/EqOz, which is slightly higher than the average operating cash cost of US$1,061/EqOz. during the comparable year ended April 30, 2019.

Other Items

Changes in other items for the year ended April 30, 2020, resulted in the following significant changes from the year ended April 30, 2019:

 

 

Financing costs during the year increased by $243 primarily due to amortization of the warrants and San Pedrito interest income received in the previous comparable year;

 

Office and administration decreased by $308 due to lower corporate costs relating to general regulatory administration in the current year and due to the sale of Altiplano;

 

Management fees and salaries decreased by $254 due to reduction in salaries of executive officers (see section 4.2 – cost reduction incentives at the mine);

 

Foreign exchange loss increased by $244 for the year ended 30 April, 2020. The increase relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations;

 

Professional and consulting fees increased by $219 to $1,000 for the year ended April 30, 2020. Professional fees relate primarily to charges in relations to legal, tax and audit fees and increased mainly due to costs related to the sale of Altiplano;

37

 


38

 

 

Property investigation costs of $54 were incurred during the prior year to perform the necessary due diligence on new projects;

 

Deferred Income Tax (“DIT”) decreased by $1,051 due mainly to a recovery of special mining tax and to the difference in asset base of the underlying amounts that determine the temporary differences from year to year.

 

Comparison April 30, 2019 to April 30, 2018

Overall, total revenue from mining operations milled ore increased by $4,988 for the year ended April 30, 2019. Mined ore increased by $6,048 when compared to the comparative year ended April 30, 2018, due mainly to higher metal production from higher ore grades and higher tonnage processed in the current year. Purchased concentrate revenue however decreased $1,060 due to the decreased operations experienced at the Altiplano concentrate processing plant as well as decreased carbon concentrate processed at the San Martin mine.

Sales of metals for mining operations for the twelve months ended April 30, 2019 approximated 13,852 ounces of gold and 229,982 ounces of silver sold at average prices in the period of US$1,280 and US$14.89 per ounce, respectively.  This is an increase in sale ounces from the comparative period ended April 30, 2018 where sales of metal approximated 11,782 ounces of gold and 101,377.90 ounces of silver, sold at higher average prices of US$1,293 and US$16.76 per ounce, respectively.

The total cost of sales above includes non-cash expenses for depreciation and depletion of $3,893 compared to $4,913 in the comparable year, which is calculated based on the units of production from the mine over the expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management.

For the year ending April 30, 2019, the Company produced a profit of $36 from mine operations compared to  a loss of $4,928 for the year ended April 30, 2018. The profit resulted from an increase in the sale of metal ounces when compared to the prior year.

Costs per ounce for the year ended April 30, 2019 was US$1,061/EqOz, which is lower than the average operating cash cost of US$1,237/EqOz. during the comparable year ended April 30, 2018. Reported mined ore costs were at $22,975 compared to $20,672 in the previous year ended April 30, 2018 due to higher tonnes processed in the current year. Mined ore costs also increased in the current year due mainly to much higher development costs incurred to increase future ore reserves, coupled with increased input costs such as fuel, electricity, chemicals and labour.

The Company also processed purchased concentrate at the Altiplano plant in the twelve months ended April 30, 2019 for revenue of $5,742 and cost of purchasing concentrate of $5,891, for a net loss of $149. The net loss is due mainly to the fixed cost of the facility in light of the facility not achieving a break-even level of production from purchase and processing of concentrates and other materials. During the year ended April 30, 2019, management determined that the capital requirements of the Altiplano facility for inventory and operations, despite improving cash flow, did not justify the continuation of these operations until the Company had sufficient excess working capital to support the operations of Altiplano. The Plant suspended operations in the second quarter of the 2019 fiscal year.

Other Items

Changes in other items for the year ended April 30, 2019 from the year ended April 30, 2018 are as follows:

 

Financing costs during the year increased by $250 due to the Company incurring interest on debt of $325. These costs were offset by interest income earned from the sale of  the San Pedrito property in the current year;

38

 


39

 

 

Office and administration decreased by $658 due to lower corporate costs relating to general regulatory administration in the current year.

 

Management fees and salaries decreased by $109 primarily due to a decrease in directors and management fees;

 

Foreign exchange loss increased by $318 for the year ended April 30, 2019. The increase in the loss relates primarily to the fluctuations of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the mining operations;

 

Professional and consulting fees decreased by $423 to $781 primarily due to additional costs relating to the San Pedrito sale in the prior year. Professional fees relate primarily to charges in relations to legal, tax and audit fees;

 

Property investigation costs of $54 were incurred during the year compared to $433 in the prior year, to perform the necessary due diligence on new projects;

 

Loss on disposal of Exploration and Evaluation Asset of $82 due to the disposition of Lone Ranch in AJC. In the previous year $1,013 resulted directly due to the sale of the Sierra Rosario asset to a third party.

 

Deferred Income Tax (“DIT”) expense increased by $8,174 due to the Company previously recognizing non-capital loss carry forwards in future periods which were adjusted lower in the current year.

 

Impairment of Mining Interest, Plant and equipment $4,804 was incurred in the current year on the Altiplano facility which operations were suspended, as discussed above. In the prior year impairment on CIL Plant led to an adjustment of $1,713 after management determined that the plant is no longer useful in the operations. An additional $5,000 impairment was recorded on the San Martin mine after management determined that future cash flow projects were negatively impacted due to changes in variables such as the amount of recoverable reserves, resources, and exploration potential, production cost estimates, discount rates and exchange rates.

 

B.

Liquidity and Capital Resources

Liquidity risk arises from the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company accomplishes this by achieving profitable operations and maintaining sufficient cash reserves.  As at April 30, 2021, the Company was holding cash of 4,392,000 (2020 - $2,105,000).


39

 


40

 

 

 

Obligations due within twelve months of the year ended,

 

 

 

2021

 

 

2022

2023 and beyond

Trade and other payables

 

 

$2,213

 

$-

$-

Lease liability

 

 

418

 

286

137

Reclamation and closure obligations

 

 

$-

 

$-

$2,545

The Company’s trade and other payables are due in the short term.  Long-term obligations include the Company’s reclamation and closure cost obligations, other long-term liabilities and deferred income taxes. Management believes that profits generated from the mine will be sufficient to meet its financial obligations and therefore has sufficient working capital.

The Company has several sources of cash flow which includes raising cash through debt, issuance of shares and from operating a profitable mine.

 

1.

On June 18, 2018, the Company completed a private placement of secured bonds in the aggregate principal amount of $3,000 (the “Bonds”) less structuring and finder’s fees of $60 cash and $171 attributed to finders warrants, totaling $231 (the “Discount”). The Bonds bore interest at 8% per annum, payable on maturity on June 18, 2020. The Bonds were secured by a charge over the Company’s and its subsidiaries assets. On June 10, 2020, the Company paid out the Bonds plus accrued interest of Cdn$235,410 ahead of the maturity date.  The payments were made from the Company’s cash flow generated from mine operations and prior asset sales.

 

2.

During the year ended April 30, 2018 the Company secured an additional $1,283 (USD1,000) loan with a lender.  The loan was secured against certain assets of the Company and bore interest at 8% per annum.  The full principal plus accrued interest on the loan was to be repaid to the lender on October 25, 2019.  The Company paid the interest on the loan on October 25, 2019 and the lender agreed to extend the loan for an additional 6 months to April 25, 2020.   The loan was repaid in full on the due date.  

 

As at June 10, 2020, the Company is debt free.

 

3.

The Company has no contractual commitments for capital expenditures and has disclosed all material commitments under Section F (“Tabular disclosure of contractual obligations”).  The Company does have budgeted capital expenditures to be incurred in the normal operation of the San Martin Mine and for exploration of properties, which are expected to approximate $2.0 million in fiscal 2021.

C.

Research and Development, Patents and Licenses, etc.

We do not currently, and did not previously, have research and development policies in place.  

D.

Trend Information

There have been no significant recent trends in production, sales and inventory, the state of the order book and costs and selling prices in our business since the end of the latest financial year, nor are there any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that

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41

 

is material to investors.  Although there are significant uncertainties in respect of market prices for minerals and, accordingly, the availability of equity financing for the purposes of mineral exploration and development, we do not believe that the fluctuations in market price are predictable.  The price of minerals has fluctuated widely in recent years and wide fluctuations are expected to continue.

E.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resource that is material to investors.  We have optioned its mineral properties from a private company controlled by an officer and director of our Company.

F.

Tabular Disclosure of Contractual Obligations

 

Obligations due within twelve months
of the year ended,

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

(in thousands of Canadian dollars)

Trade and other payables

2,213

2,213

-

-

-

Loan payable – current portion

-

-

-

-

-

Rehabilitation and closure cost provision

2,545

-

-

-

2,545

Executive employment agreement
obligation

686

450

-

-

-

Explorations and evaluation asset

1,000

200

600

200

-

Land lease obligation

132

132

-

-

-

Equipment lease obligation

574

359

215

-

-

Office lease obligation

274

66

208

-

-

G.

Safe harbor.

Statements in Item 5.E and Item 5.F of this Annual Report on Form 20-F that are not statements of historical fact, constitute “forward-looking statements.”  See “Forward-Looking Statements” on page 3 of this Annual Report.  Our Company is relying on the safe harbor provided in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in making such forward-looking statements.

Item 6

Directors, Senior Management and Employees

A.

Directors and Senior Management

The following table sets forth the names, age, business experience and functions and areas of experience in our Company of each of our directors and officers:

Name
Office Held
Age

Area of Experience and Functions in Our Company

Robert Eadie
Chief Executive Officer, President and Director
Age:  56

As our Chief Executive Officer, Mr. Eadie is responsible for strategic planning and operations, as well as managing our relations with our lawyers, regulatory authorities and investor community; as a director, Mr. Eadie participates in management oversight and helps to ensure compliance with our corporate governance policies and standards.  Mr. Eadie was one of the founders of our Company.

Gary Arca
Chief Financial Officer and Director
Age:  61

As Chief Financial Officer, Mr. Arca is responsible for the management and supervision of all the financial aspects of our business; as a director, Mr. Arca participates in management oversight.

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42

 

Name
Office Held
Age

Area of Experience and Functions in Our Company

Salvador Garcia
Chief Operations Officer and Director

Age: 65

As our Chief Operating Officer, Mr. Garcia is responsible for our exploration, development and mining operations and for management of our Mexican operations; as a director, Mr. Garcia participates in management oversight and helps to ensure compliance with our corporate governance policies and standards.  

Cory Kent
Corporate Secretary
Age:  52

As Corporate Secretary, Mr. Kent is responsible for ensuring that the board of directors has the proper advice and resources to fulfill their duties to shareholders.  Mr. Kent’s duties include compliance with statutory and regulatory requirements.  

Jordan Estra
Director
Age: 74

As an independent director, Mr. Estra provides oversight to management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards.  Mr. Estra is a member of the Audit Committee.

Federico Villaseñor
Director
Age: 70

As an independent director, Mr. Villaseñor provides oversight to management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards. Mr. Villaseñor is a member of the Audit Committee.

Tanya Lutzke
Director
Age: 52

As an independent director, Ms. Lutzke provides oversight for management to help ensure alignment with corporate strategies and compliance with our corporate governance policies and standards. Ms. Lutzke is a member of the Audit Committee. Her membership in the Board of Directors also confirms management’s compliance with gender diversity in its Board.

Robert Eadie – Chief Executive Officer, President and Director

Mr. Eadie has been our President & Chief Executive Officer, and a director of our Company since October 2003.  Mr. Eadie is a self-employed business owner and has many years of experience in working with and helping build start-up companies.  He began his career as a corporate investor and public relations consultant and went on to establish his own investor relations consulting business.  He has since become an executive, officer or director of a number of junior public companies, primarily in the natural resource sector.  In the past 20 years, Mr. Eadie has been actively involved in public resource companies raising over $100 million dollars for various exploration and development projects around the world.  

Gary Arca – Chief Financial Officer and Director

Mr. Arca has been our Chief Financial Officer and a director of our Company since January 2006.  Mr. Arca has over 37 years of financial management experience.  He is a Chartered  Professional Accountant (CPA) and has been a member of the Canadian Institute of Chartered Professional Accountants and British Columbia Institute of Chartered Professional Accountants since 1980.  He was a partner with public accounting firms, Amisano Hanson from 2002 to 2005 and Driver Anderson from 1996 to 2001.

Mr. Arca has provided auditing, consulting, taxation, accounting and litigation support services to various clients. Mr. Arca has extensive experience dealing with public companies and start-ups both from the perspective of management and as a consultant, and has served as a director of various publicly traded resource companies.

Mr. Arca is Chair of the Corporate Governance Committee.

Salvador Garcia – COO & Director

Mr. Garcia has been our Chief Operating Officer since August 2017 and a Director of the Company since October 2017. With over 39 years of progressive experience in the mining industry in Mexico. his extensive experience

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encompasses mine development and production including open pit and underground operations.  

Prior to Starcore, Mr. García was the Country Manager in Mexico for First Majestic Silver Corp, serving in that company since 2013. Previously, Mr. Garcia collaborated with Luismin (purchased by Goldcorp (TSX:G)(NYSE:GG) for a period of 25 years holding several positions from General Manager to Operations Director and later promoted to the senior management team of Goldcorp as Vice President for Mexico. During his tenure at Goldcorp, he was in charge of the operations at the Tayoltita and San Antonio mines and was involved in the development, construction and operation of the Los Filos, El Sauzal and Peñasquito mines.

Mr. García holds a BSc. degree in Mining Engineering from the Guanajuato University School of Mines in Mexico. In addition, Mr. García is the President of the Mining Cluster of Sonora State, member of the CAMIMEX (Mexican Mining Chamber) Advisor Board, Member of the Mining Cluster of Zacatecas State, Member of the Mining Advisor Board of San Luis Potosi State.

Cory Kent LLB – Corporate Secretary

Mr. Kent is a Partner at McMillan LLP and was the Executive of the Securities Law Section of the Canadian Bar Association from 2002 - 2004.  With a practice focused on corporate securities law and related technology, natural resources and commercial matters, Mr. Kent possesses a strong and varied legal background suited to the junior mining sector.

Mr. Jordan Estra – Director

Mr. Estra has been a director of our Company since March 2010.  He joined Boustead Securities, LLC, a full service investment banking firm headquartered in Irvine, California as Managing Director in 2019 and is the Head of the Mining & Metals Investment Banking Practice.  Mr. Estra is also currently President and Chief Executive Officer of Ophir Brasil Mineracao, Ltda., a privately owned gold mining company in Brazil, and President and Chief Executive Officer of Ophir Consulting Group, Inc., a privately owned mining consulting company. His background includes experience as a leading research analyst for a number of international investment banks.

Mr. Estra graduated with High Distinction from Babson College (International Economics) and with Honors from the Columbia University Graduate School of Business (Finance).  He served in the United States Army (Medical Corps) and has been a member of the American Institute of Mining, Metallurgical and Petroleum Engineers, the Foreign Policy Associate, the New York Society of Security Analysts and the Stock & Bond Club of South Florida.  He holds Series 6, 7, 24, 57 and 58 securities licenses.

Mr. Estra is a member of the Audit Committee and the Corporate Governance Committee.

Mr. Federico Villaseñor – Director

Mr. Villasenor has been a director of our Company since February, 2007.  He is currently a consultant to various mining companies.  From 2007 to 2014, he served as the Business Development Director for Goldcorp Mexico, a subsidiary of Goldcorp Inc., a leading global gold producer engaged in the acquisition, exploration, development and operation of gold properties in Canada, the United States and Latin America.  He obtained a BSc. in Mining Engineering from the University of Guanajuato in 1972, a Master of Science from Columbia University of New York City in 1976 and a Finance Degree from the Instituto Tecnológico Autónomo de México.in 1985.  Mr. Villaseñor has been a member of the Mexican Mining Chamber Board.  

Mr. Villaseñor is a member of the Audit Committee and the Compensation Committee.


Ms. Tanya Lutzke – Director

Ms. Lutzke has been a director of our Company since October, 2016 and has over 10 years’ experience in financial services, the banking industry and law enforcement.  A native of Vancouver, B.C., Ms. Lutzke attended the University of British Columbia and obtained her Financial Planning and Canadian Securities Institute designations.  

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Ms. Lutzke sits on the Audit Committee.

Director Interlocks

Each of our directors and officers has served and continue to serve as officers and/or directors of other companies engaged in natural resource exploration and development and related industries.

Messrs. Robert Eadie and Gary Arca (who are, respectively, the Chief Executive Officer and Chief Financial Officer of our Company), in addition to serving on our Board of Directors, are also executive officers and/or directors of iMining Blockchain and Cryptocurrency Inc., a junior company listed on the TSX Venture Exchange, and Hemp for Health Inc. and Bond Resources Inc. which are junior companies listed on the Canadian Securities Exchange.

Tanya Lutzke, a member of our Board of Directors, also serves as a director of iMining Blockchain and Cryptocurrency Inc.

Mr. Federico Villaseñor, a member of our Board of Directors, is also a director of Santacruz Silver Mining, Ltd., a company listed on the TSX Venture Exchange whose operations include the Rosario silver mine near the town of Charcas, in the state of San Luis Potosi, Mexico.  

Mr. Jordan Estra, a member of our Board of Directors, is also a director of Searchlight Minerals Corp., a junior mineral exploration company quoted on the OTCQB with a slag reprocessing project in Arizona.  

B.

Compensation

Executive Compensation

The following table contains information about the compensation paid for services in all capacities to us, including compensation paid to or earned by (a) our Chief Executive Officer (or an individual who acted in a similar capacity); (b) our Chief Financial Officer (or an individual who acted in a similar capacity); (c) each of the three most highly compensated executive officers, other than the Chief Executive Officer and Chief Financial Officer, who were serving as executive officers as at April 30, 2021 and whose total salary and bonus exceeds $150,000 during the period ended April 30, 2021; and (d) any additional individuals for whom disclosure would have been provided under (c) except that the individual was not serving as an officer of our Company as of April 30, 2021.

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45

 

Summary Compensation Table

The compensation paid to the Named Executive Officers during the Company’s most recently completed financial year ended April 30, 2021 is as set out below and expressed in Canadian dollars unless otherwise noted:  

 

Name and principal position

Year ended April 30, 2021

Salary(1)
($)

Share-based awards(4)
($)

Option-based awards

($)

Non-equity incentive plan compensation(2)
($)

Pension value
($)

All other compen-sation(3)
($)

Total compen-sation
($)

 

 

Annual incentive plans

Long-term
incentive plans

 

Robert Eadie
Executive Chairman, CEO & President

2021

 

270,000

3,800

-

-

-

-

12,000

285,800

Gary Arca
CFO

2021



144,000

2,375

-

-

-

-

12,000

158,375

Salvador Garcia
COO

2021



440,044

10,925

-

-

-

-

-

450,969

 

 

(1)

Includes the dollar value of cash and non-cash base salary earned during a financial year covered.  Pursuant to their executive employment agreements amended  August 2015 and subsequently amended effective May 1, 2019, Messrs. Eadie and Arca are entitled to be paid annual salaries of $270,000 and $180,000, respectively. Mr. Garcia is paid annual fees in the amount of US$236,250. For additional details please refer to the discussion below under the heading, “Directors, Senior Management and Employees – Board Practices – Executive Employment Agreements”.

(2)

These amounts include annual non-equity incentive plan compensation, such as bonuses and discretionary amounts for the year ended April 30, 2021.

(3)

All other compensation includes $12,000 paid to each of Mr. Eadie and Mr. Arca as directors’ fees for 2021.

(4)

Share based awards are based on RSU/DSU options vested which are calculated at the volume weighted average (“VWAP”) of the trading price per common share on the Toronto Stock Exchange (“TSX”) for the last ten (10) trading days ending on that date.

Long Term Incentive Plan (LTIP) Awards

We do not have any long term incentive plans except as disclosed above.

An LTIP is “any plan providing compensation intended to motivate performance over a period longer than one fiscal year but does not include option or stock appreciation rights plans or plans for compensation through shares or units that are subject to restrictions on resale”.

Option and Stock Appreciation Rights (SARs)  

 

The Company currently has no outstanding stock options.    The Company does not currently have an active plan as shareholders rejected the Company’s share option plan dated for reference January 17, 2011 (the “Plan”) at its annual general meeting which was held on January 28, 2014.  

Option/SAR Grants During the Most Recently Completed Financial Year

During the most recently completed financial year ended April 30, 2021 and subsequent thereto, no stock options were granted.  See “Options and Stock Appreciation Rights.”

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Aggregated Option/SAR Exercises During the Most Recently Completed Financial Year and Financial Year-End Option/SAR Values

There were no outstanding stock options as at April 30, 2021.  Any unexercised options expired on January 15, 2019 and no values can be attributed as there were no unexercised in the money options as at that date.  

 

Option and SAR Repricings

All unexercised options expired on January 15, 2019.

Defined Benefit or Actuarial Plan

We do not have a defined benefit or actuarial plan.

Compensation of Directors  

The compensation provided to the directors, excluding the three officers named in the foregoing, for the Company’s most recently completed financial year of April 30, 2021, is as follows:

 

Name(1)

 

Fees earned(1)
($)

Share-based
Awards(2)
($)

Option-based awards
($)

Non-equity incentive plan compensation
($)

Pension value
($)

All other compen-sation(3)
($)

Total
($)

Cory Kent(4)

6,600

32,550

-

-

-

-

39,150

Ken Sumanik(5)

7,100

32,550

-

-

-

-

39,650

Jordan Estra

-

-

-

-

-

-

-

Federico Villaseñor

10,477

-

-

-

-

-

10,477

Tanya Lutzke

13,500

-

-

-

-

-

13,500

(1)

Includes all fees awarded, earned, paid or payable in cash for services as a director, including annual retainer fees, committee, chair and meeting fees.

(2)

Includes share based awards granted during the year that vested during the year. Share based awards are based on RSU/DSU options vested and paid calculated at and the volume weighted average (“VWAP”) of the trading price per common share on the Toronto Stock Exchange (“TSX”) for the last ten (10) trading days ending on that date.

(3)

Includes all compensation paid, payable, awarded, granted, given or otherwise provided, directly or indirectly, wherein the director received compensation for services rendered.  The Company paid in legal fees to a law firm of which Cory Kent is a partner.

(4)

Mr. Kent did not stand for re-election as a director on November 17, 2020 but continues to serve as the Company’s Corporate Secretary.

(5)

Mr. Sumanik did not stand for re-election as a director on November 17, 2020.

 

 

 

 

 

 

 

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Outstanding Share-based Awards and Option-based Awards

The following table sets out all share-based awards and option-based awards outstanding as at April 30, 2021, for each director, excluding a director who is already set out in disclosure for a Named Executive Officer for the Company:

 

Option-based Awards

Share-based Awards

Name

Number of securities underlying unexercised options
(#)

Option exercise price

($)

Option expiration date

Value of unexercised in-the-money options(1)
($)

Number of shares or units of shares that have not vested
(#)

Market or payout value of share-based awards that have not vested
($)

Cory Kent(2)

Nil

n/a

n/a

Nil

Nil

Nil

Ken Sumanik(3)

Nil

n/a

n/a

Nil

Nil

Nil

Jordan Estra

Nil

n/a

n/a

Nil

Nil

Nil

Federico Villaseñor

Nil

n/a

n/a

n/a

Nil

Nil

Tanya Lutzke

Nil

n/a

n/a

n/a

Nil

Nil

 

(1)

The market price of the Company’s common shares as reported on the TSX on April 30, 2021 was $0.24 per share.

 

(2)

Mr. Kent did not stand for re-election as a director on November 17, 2020 but continues to serve as the Company’s Corporate Secretary.

 

(3)

Mr. Sumanik did not stand for re-election as a director on November 17, 2020.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets out all incentive plans (value vested or earned) during the year ended April 30, 2021, for each director who was not a Named Executive Officer

Name

 

Option-based awards – Value vested during the year
($)

Share-based awards – Value vested during the year
($)

Non-equity incentive plan compensation – Value earned during the year
($)

Cory Kent(1)

Nil

317

Nil

Ken Sumanik(2)

Nil

Nil

Nil

Jordan Estra

Nil

Nil

Nil

Federico Villaseñor

Nil

Nil

Nil

Tanya Lutzke

Nil

Nil

Nil

 

(1)

Mr. Kent did not stand for re-election as a director on November 17, 2020 but continues to serve as the Company’s Corporate Secretary.

 

(2)

Mr. Sumanik did not stand for re-election as a director on November 17, 2020.

C.

Board Practices

Each director of our Company is elected annually and holds office until the next annual general meeting of the shareholders unless that person ceases to be a director before then.  Our last annual general meeting of the shareholders was held on November 17, 2020.

 

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Name and Position with the Company

Director/Officer Since

Robert Eadie
Executive Chairman, Chief Executive Officer and Director

October 24, 2003

Salvador Garcia
Chief Operating Officer and Director

August 23, 2017(COO)

October 24, 2017 (Director)

Gary Arca
Chief Financial Officer and Director

January 25, 2006

Federico Villaseñor
Director

February 1, 2007

Jordan Estra
Director

March 26, 2010

Tanya Lutzke
Director

October 28, 2016

1.  Executive Employment Agreements

Pursuant to an executive employment agreement amended with effect as of August 1, 2015, and further amendment of May 1, 2019, Robert Eadie is paid a base salary of $270,000 per annum, for acting as Chief Executive Officer of the Company.  The agreement expires on April 30, 2022 and may be terminated upon notice in writing and payment of 24 months salary.  In addition, the agreement provides that, for a period of 30 days after a “change of control”, Mr. Eadie may, by notice in writing to the Company, deem the agreement to be terminated, in which case Mr. Eadie will receive a lump sum payment of $540,000. A change of control (a “Change of Control”) is deemed to occur when (i) there is a sale of all or substantially all of the assets of the Company, (ii) there is a merger of the Company whereby shareholders of the Company hold less than 50% of the shares in the surviving entity, (iii) there is a change in ownership of voting securities of the Company sufficient to permit any person to elect or appoint a majority of the Board of Directors, (iv) any person or persons acting jointly or in concert acquire greater than 50% of the outstanding voting securities of the Company, or (v) there is a change in the composition of the Board of Directors of the Company as a result of a proposal by a shareholder group not supported by management resulting in current members of the Board of Directors representing less than 51% of the members of the Board of Directors.  In addition to his base salary, Mr. Eadie received fees for his services as a director in the amount of $12,000 for the year ended April 30, 2021.

Pursuant to an executive employment agreement amended with effect as of August 1, 2015, and further amendment of May 1, 2019 Gary Arca is paid a base salary of $180,000 per annum, for acting as Chief Financial Officer of the Company.  The agreement expires on April 30, 2022 and may be terminated upon notice in writing and payment of 24 months salary.  In addition, the agreement provides that, for a period of 30 days after a Change of Control, Mr. Arca may, by notice in writing to the Company, deem the agreement to be terminated, in which case Mr. Arca will receive a lump sum payment of $360,000.  In addition to his base salary, Mr. Arca received fees for his services as a director in the amount of $12,000 for the year ended April 30, 2021.

Salvador Garcia is paid a base fee of US236,250 for acting as Chief Operating Officer of the Company.  Mr. Garcia received fees for his services as a director in the amount of $nil for the year ended April 30, 2021.

The voluntary reductions to the salaries made by the CEO, CFO and COO have resulted in annual savings to the Company of approximately $250,000.

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2.Committee

The members of our Company’s audit committee include Jordan Estra (Chairman), Tanya Lutzke and Federico Villaseñor.  The audit committee is directly responsible for overseeing the work of the external auditors in preparing or issuing the auditor’s report, including the resolution of disagreements between management and the external auditors regarding financial reporting and audit scope or procedures.  The audit committee also considers whether adequate controls are in place over annual and interim financial reporting as well as controls over assets, transactions and the creation of obligations, commitments and liabilities of our Company.  The audit committee also reviews the financial statements and financial information prior to its release to the public.

D.

Employees

 

The San Martin mine operates with a combination of contractors and employees. Most of the hourly workers are contracted through the union or syndicate.  The mine has a good relationship with the union and has seen significantly fewer labour issues than most other mines in Mexico.

 

As at April 30, 2021, we had the following employees and contractors:

Location

Full-Time Salaried

Hourly (Union)

Contractors


Total

 

 

 

 

 

San Martin Mine

58

132

54

244

Vancouver Office

6

1

1

8

Total

64

133

55

252

 

As at April 30, 2020, we had the following employees and contractors:

Location

Full-Time Salaried

Hourly (Union)

Contractors


Total

 

 

 

 

 

San Martin Mine

54

136

57

247

Vancouver Office

6

1

1

8

Total

60

137

58

255

As at April 30, 2019, we had the following employees and contractors:

Location

Full-Time Salaried

Hourly (Union)

Contractors


Total

 

 

 

 

 

Altiplano

-

-

-

-

San Martin Mine

74

170

95

339

Vancouver Office

6

-

3

9

Total

80

170

98

348

 

E.

Share Ownership

There were 49,646,851 common shares issued and outstanding as of April 30th, 2021.  Of the shares issued and outstanding, warrants held and stock options granted, our directors and officers owned the following common shares as of April 30, 2021:    

Name

Number of Common Shares
Beneficially Owned

Percentage

Robert Eadie

3,632,117