Financial risk factors

3 Months Ended

Nov. 30, 2021

Financial risk factors

12. Financial risk factors

12.	Financial risk factors
	The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

a)	Credit risk:
	Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash account. Cash accounts are held with major banks in Canada. The Company has deposited its cash with a bank from which management believes the risk of loss is low.

b)	Liquidity risk:
	Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet liabilities when due. Accounts payable are due within the current operating period. The Company has a working capital deficit and requires additional financing to meet its current obligations (see Note 1).
c)	Market risk:
	Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company is not exposed to market risk.
d)	Interest rate risk:
	Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk, from time to time, on its cash balances. Surplus cash, if any, is placed on call with financial institutions and management actively negotiates favorable market related interest rates.
e)	Foreign exchange risk:
	Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar. The Company has not entered into any foreign currency contracts to mitigate risk, but manages the risk my minimizing the value of financial instruments denominated in foreign currency. The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Canadian dollars:

	November 30, 2021
Balance in Canadian dollars:
Cash and cash equivalents	$	70,163
Accounts payable		(454,262	)
Net exposure
Balance in US dollars:	$	(384,099	)

A 10% change in the US dollar to the Canadian dollar exchange rate would impact the Company’s net loss by approximately $38,410 for the three months ended November 30, 2021 (November 30, 2020 – $35,296).

The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Colombian Pesos:

	November 30, 2021
Balance in Colombian Pesos dollars:
Cash and cash equivalents	$	281,751,039
Other receivables		83,072,204
Accounts payable		(3,170,820,800	)
Net exposure		(2,805,997,557	)
Balance in US dollars:	$	(702,870	)

A 10% change in the US dollar to the Colombian Peso exchange rate would impact the Company’s net loss by approximately $70,287 for the three months ended November 30, 2021 (November 30, 2020 - $74,408).