NOTE

15:

INCOME TAXES

July 31, 2020,

we had U.S. and Canadian net operating loss carry-forwards of approximately

$167.3

million and

$5.1

million in Canadian dollars, respectively, that

may

be available to reduce future years' taxable income. These carry-forwards will begin to expire, if

not

utilized, commencing in

2023.

In addition, at

July 31, 2020,

we had U.S. net operating loss totalling

$37.3

million and interest expenses of

$3.4

million subject to IRC section

163

(j) limitation, which will be carried forward indefinitely as a result of the

Tax Cut and Job

Act

enacted on

December 22, 2017.

Future tax benefits which

may

arise as a result of these losses have

not

been recognized in these consolidated financial statements, as their realization has been determined

not

likely to occur and, accordingly, we have recorded a full valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

We review the valuation allowance requirements on an annual basis based on projected future operations. When circumstances change resulting in a change in management's judgement about the recoverability of deferred tax assets, the impact of the change on the valuation allowance will generally be reflected in current income.

A reconciliation of income tax computed at the federal and state statutory tax rates including the Company's effective tax rate is as follows:

	Year Ended July 31,
	2020		2019		2018
Federal income tax provision rate	21.00	%	21.00	%	26.87	%
State income tax provision rate, net of federal income tax effect	0.72	%	0.52	%	0.59	%
Total income tax provision rate	21.72	%	21.52	%	27.46	%

The actual income tax provisions differ from the expected amounts calculated by applying the combined federal and state corporate income tax rates to our loss before income taxes. The components of these differences are as follows:

	Year Ended July 31,
	2020			2019			2018
Loss before income taxes	$	(14,616,067	)	$	(17,167,161	)	$	(18,534,145	)
Corporate tax rate		21.72	%		21.52	%		27.46	%
Expected tax recovery		(3,174,610	)		(3,694,373	)		(5,089,476	)
Increase (decrease) resulting from
Foreign tax rate differences		85,796			90,391			167,162
Permanent differences		170,023			2,427,665			434,863
Prior year true-up		(435,565	)		(160,019	)		(141,814	)
Foreign exchange rate differences		17,456			39,667			(41,014	)
Other		71,805			(94,291	)		35,706
Recognition of deferred tax assets		-			-			430,121
Change in valuation allowance		3,233,427			1,373,462			4,156,768
Tax adjustment from operations		(31,668	)		(17,498	)		(47,684	)

Re-measurement of deferred tax liability at 21%		-			-			(232,843	)
Recognition of deferred tax assets to offset deferred tax liability		-			-			(430,121	)
Unrealized loss, other comprehensive loss		26,117			3,126			3,137
Deferred tax benefits	$	(5,551	)	$	(14,372	)	$	(707,511	)

We have incurred taxable losses for all years since inception and, accordingly,

provision for current income tax has been recorded for the current or any prior fiscal years. During Fiscal

2020

and Fiscal

2019,

we recorded a deferred tax benefit of

$5,551

and

$14,372,

respectively. During Fiscal

2018,

we recognized a deferred tax benefit of

$707,511,

of which

$232,843

resulted from the re-measurement of deferred tax liabilities to the enacted tax rate of

21%

December 22, 2017,

and

$430,121

resulted from the recognition of deferred tax assets relating to the taxable losses incurred in Fiscal

2018

to offset the remaining deferred tax liabilities relating to the acquisition of the Reno Creek Project.

July 31, 2020,

we re-evaluated the realizability of our tax loss carry-forwards and our conclusion that the realization of these tax loss carry-forwards is

not

likely to occur remains unchanged. As a result, we will continue to record a full valuation allowance for the deferred tax assets relating to the remaining tax loss carry-forwards.

The components of income (loss) from operations before income taxes, by tax jurisdiction, are as follows:

	Year Ended July 31,
	2020			2019			2018
United States	$	(13,962,287	)	$	(16,560,132	)	$	(17,709,866	)
Canada		53,960			120,362			145,267
Paraguay		(707,740	)		(727,391	)		(969,546	)
	$	(14,616,067	)	$	(17,167,161	)	$	(18,534,145	)

The Company's deferred tax assets (liabilities) are as follows:

	July 31, 2020			July 31, 2019
Deferred tax assets (liabilities)
Mineral properties	$	1,270,292		$	1,256,327
Exploration costs		6,384,265			6,551,403
Stock option expense		4,594,159			4,570,905
Depreciable property		(1,157,934	)		(937,614	)
Inventories		(3,550,814	)		(3,343,361	)
Asset retirement obligations		62,626			20,561
Other		58,559			35,983
Section 163(j) interest expense carry forwards		733,343			384,109
Loss carry forwards		46,552,687			43,198,434
		54,947,183			51,736,747
Valuation allowance		(54,973,300	)		(51,739,873	)
Deferred tax assets		(26,117	)		(3,126	)
Deferred tax assets, other comprehensive loss		26,117			3,126

Deferred tax liabilities
Mineral properties		(545,000	)		(550,551	)
Net deferred tax liabilities	$	(545,000	)	$	(550,551	)

As the criteria for recognizing deferred income tax assets have

not

been met due to the uncertainty of realization, a valuation allowance of

100%

has been recorded for the current and prior years.

The Company's U.S. net operating loss carry-forwards expire as follows:

July 31, 2023	$	180,892
July 31, 2024		228,757
July 31, 2025		507,833
July 31, 2026		5,895,221
July 31, 2027		3,892,722
Remaining balance		156,594,095
	$	167,299,520

For U.S. federal income tax purposes, a change in ownership under IRC Section

382

has occurred as a result of the acquisition of the Reno Creek Project during Fiscal

2018

and also in prior years. When an ownership change has occurred, the utilization of these losses against future income would be subject to an annual limitation, which would be equal to the value of the acquired company immediately prior to the change in ownership multiplied by the IRC Section

382

rate in effect during the month of the change.

The Company's Canadian net operating loss carry-forwards in Canadian dollars expire as follows:

July 31, 2027	$	183,105
July 31, 2028		629,788
July 31, 2029		769,072
July 31, 2030		764,230
July 31, 2031		1,747,548
Remaining balance		958,124
	$	5,051,867