EX-99.1 2 ex991.htm Q3 2019 FINANCIAL STATEMENTS

Exhibit 99.1

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Interim Financial Statements of

NEXGEN ENERGY LTD.

September 30, 2019 and 2018

 

 
 

 

 

NEXGEN ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian Dollars)

(Unaudited)

As at

   Note 

 

September 30,

2019

  December 31,
2018
ASSETS         
Current         
  Cash and cash equivalents       $72,112,073   $125,059,189 
  Amounts receivable        607,005    386,939 
  Prepaid expenses and other assets        745,744    266,353 
         73,464,822    125,712,481 
Non-current               
  Deposits        119,835    514,711 
  Exploration and evaluation assets   5    238,491,804    194,128,594 
  Equipment   8    8,172,455    6,511,779 
         246,784,094    201,155,084 
TOTAL ASSETS       $320,248,916   $326,867,565 
                
LIABILITIES               
Current               
  Accounts payable and accrued liabilities       $10,014,316   $5,966,921 
  Current portion of lease liabilities   4, 6    599,291    —   
  Flow-through share premium liability   7    35,667    550,392 
         10,649,274    6,517,313 
Non-current               
  Deferred income tax liability        875,224    199,366 
  Deferred lease inducement        —      33,412 
  Long-term lease liabilities   4, 6    2,204,494    —   
  Convertible debentures   9    118,315,673    138,190,884 
         121,395,391    138,423,662 
  TOTAL LIABILITIES        132,044,665    144,940,975 
                
EQUITY               
  Share capital   10    214,596,888    208,711,135 
  Reserves   10    49,163,068    41,629,049 
  Accumulated other comprehensive income (loss)        (716,204)   97,675 
  Accumulated deficit        (90,754,440)   (85,143,089)
         172,289,312    165,294,770 
  Non-controlling interests        15,914,939    16,631,820 
TOTAL EQUITY        188,204,251    181,926,590 
                
TOTAL LIABILITIES AND EQUITY       $320,248,916   $326,867,565 

 

Nature of operations (Note 2)

Commitments (Note 7)

 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on October 28, 2019

 

 2 

 

 

 

NEXGEN ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

(Unaudited)

 

 

     

For the three

months ended

 

For the nine

months ended

                
      Note    

September 30,

2019

    

September 30,

2018

    

September 30,

2019

    

September 30,

2018

 
                          
Salaries, benefits and directors’ fees   11   $1,173,072   $818,000   $3,189,124   $3,521,396 
Office and administrative        366,749    484,941    1,563,888    1,350,190 
Professional fees        906,954    621,896    2,702,830    1,559,548 
Travel        236,246    188,260    750,996    614,407 
Depreciation   8    596,321    266,500    1,783,978    890,069 
Share-based payments   10, 11    2,090,369    2,828,066    8,055,513    9,969,076 
Finance income        (406,817)   (615,995)   (1,524,324)   (1,825,666)
Rental Income        (7,576)   -     (22,729)   -  
Mark to market loss (gain) on convertible debentures   9    (6,950,474)   11,026,181    (20,689,090)   (9,677,302)
Interest expense   9    2,970,900    2,939,402    8,968,707    8,933,328 
Interest on lease liabilities   6    50,666    -     159,447    -  
Foreign exchange loss (gain)        (289,278)   1,055,215    1,254,893    (1,560,600)
Loss on disposal of equipment       -     -     -     6,065 

 

Loss from operations

       $737,132   $19,344,176   $6,193,233   $13,780,511 
 Deferred income tax expense (recovery)        71,718    (128,856)   161,133    (182,429)

 

Loss for the period

       $808,850   $19,215,320   $6,354,366   $13,598,082 
                          
Other Comprehensive Income                         
 Change in fair value of convertible debentures attributable to the change in credit risk   9    -     -     813,879    -    
Total comprehensive loss for the period       $808,850   $19,215,320   $7,168,245   $13,598,082 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

 3 

 

 

 

NEXGEN ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (continued)

(Expressed in Canadian Dollars)

(Unaudited)

 

     

For the three

months ended

 

For the nine

months ended

                
      Note    

September 30,

2019

    

September 30,

2018

    

September 30,

2019

    

September 30,

2018

 
Loss attributable to:                         
  Shareholders of NexGen Energy Ltd.       $519,754   $19,002,306   $5,597,198   $13,064,983 
  Non-controlling interests in IsoEnergy Ltd.        289,096    213,014    757,168    533,099 
Loss for the period       $808,850   $19,215,320   $6,354,366   $13,598,082 
                          

Total comprehensive loss attributable to:

 

                         
  Shareholders of NexGen Energy Ltd.       $519,754   $19,002,306   $6,411,077   $13,064,983 
  Non-controlling interests in IsoEnergy Ltd.        289,096    213,014    757,168    533,099 
Total comprehensive loss for the period       $808,850   $19,215,320   $7,168,245   $13,598,082 
                          

Loss per common share attributable to the Company’s common shareholders

                
        Basic Loss per common share   16   $0.00   $0.05   $0.02   $0.04 
        Diluted Loss per common share   16   $0.01   $0.05   $0.04   $0.04 

Weighted average number of common shares outstanding

      Basic 16 355,779,091 346,776,859 353,759,502 344,440,009
        Diluted 16 403,862,428 346,776,859 401,842,839 344,440,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 4 

 

 

 

 

NEXGEN ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Expressed in Canadian Dollars)

(Unaudited)

 

 

   Note  Number of Common Shares  Share Capital  Reserves  Accumulated Other Comprehensive income  Accumulated Deficit  Non-controlling Interests  Total
                         
Balance as at December 31, 2017        339,339,356   $196,311,184   $28,050,059   $—     $(88,038,390)  $12,017,852   $148,340,705 
Exercise of options   10    8,383,334    6,492,393    (2,541,059)   —      —      —      3,951,334 
Issue of shares on convertible                                        
debenture interest payment   10    745,378    2,154,142    —      —      —      —      2,154,142 
Share-based payments   10    —      —      12,350,574    —      —      —      12,350,574 
Issue of shares of subsidiary to                                        
non-controlling interests        —      —      —      —      (892,202)   3,182,501    2,290,299 
Loss for the period        —      —      —      —      (13,064,983)   (533,099)   (13,598,082)
Impact of adopting IFRS 9        —      —      —      (503,146)   503,146    —      —   
Balance as September 30, 2018        348,468,068   $204,957,719   $37,859,574   $(503,146)  $(101,492,429)  $14,667,254   $155,488,972 
                                         
                                         
                                         
Balance at December 31, 2018        351,237,062   $208,711,135   $41,629,049   $97,675   $(85,143,089)  $16,631,820   $181,926,590 
Exercise of options   10    3,533,333    3,865,623    (1,421,957)   —      —      —      2,443,666 
Exercise of warrants of subsidiary                                        
to non-controlling interests        —      —      —      —      (14,153)   40,287    26,134 
Issue of shares on convertible                                      —   
debenture interest payments   10    1,041,304    2,020,130    —      —      —      —      2,020,130 
Share-based payments   10    —      —      8,955,976    —      —      —      8,955,976 
Loss for the period        —      —           —      (5,597,198)   (757,168)   (6,354,366)
Other commprehensive income (loss)        —      —           (813,879)   —           (813,879)
Balance as at September 30, 2019        355,811,699   $214,596,888   $49,163,068   $(716,204)  $(90,754,440)  $15,914,939   $188,204,251 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

 5 

 

 

 

NEXGEN ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)
(Unaudited)
For the nine months ended
  

September 30,

2019

  September 30,
2018

 

Cash flows (used in) from operating activities

          
Loss for the period  $(6,354,366)  $(13,598,082)
Items not involving cash:          
Depreciation   1,783,978    890,069 
Share-based payments   8,055,513    9,969,076 
Amortization of deferred lease inducement   —      (30,072)
Unrealized foreign exchange loss (gain) on cash and cash equivalents   763,280    (1,464,412)
Deferred income tax expense (recovery)   161,133    (182,429)
Mark to market gain on convertible debentures   (20,689,090)   (9,677,302)
Interest expense   8,968,707    8,933,328 
Accretion expense   159,447    —   
Gain on disposal of equipment   —      6,065 
Changes in non-cash working capital items:          
Amounts receivable   31,471    48,493 
Prepaid expenses   (479,391)   (218,692)
Deposits   394,876    (61,784)
Accounts payable and accrued liabilities   (1,628,258)   (402,984)
    (8,832,700)   (5,788,726)
Cash flows (used in) investing activities          
Exploration and evaluation asset expenditures   (40,603,232)   (26,474,194)
Acquisition of equipment   (615,395)   (2,420,089)
    (41,218,627)   (28,894,283)
Cash flows (used in) from financing activities          
   Cash from exercise of options and warrants, net of share issuance costs   2,469,800    3,951,334 
   Payment of lease liabilities   (578,043)   —   
   Shares of subsidiary issued to non-controlling interests for cash, net of share issuance costs   —      924,500 
   Interest paid on convertible debentures   (4,024,266)   (3,888,004)
    (2,132,509)   987,830 

 

Change in cash and cash equivalents

   (52,183,836)   (33,695,179)
Cash and cash equivalents, beginning of period   125,059,189    164,943,850 
Effect of exchange rate fluctuations on cash held   (763,280)   1,464,412 
Cash and cash equivalents, end of period  $72,112,073   $132,713,083 
           

 

Cash and cash equivalents consist of:      
Cash  $72,112,073   $132,713,083 
Cash equivalents   —      —   
Cash and cash equivalents  $72,112,073   $132,713,083 

 

Supplemental disclosure with respect to cash flows (Note 15)

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

 6 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

 

1.       REPORTING ENTITY

 

NexGen Energy Ltd. (“NexGen” or the “Company”) is an exploration and development stage entity engaged in the acquisition, exploration and evaluation and development of uranium properties in Canada. The Company was incorporated pursuant to the provisions of the British Columbia Business Corporations Act on March 8, 2011. The Company’s registered records office is located on the 25th Floor, 700 West Georgia Street, Vancouver, B.C., V7Y 1B3.

 

On April 19, 2013, the Company (as it was then called, Clermont Capital Inc. (“Clermont”)) completed its qualifying transaction, which was effected pursuant to an amalgamation agreement dated December 31, 2012 (the “Amalgamation Agreement”) amongst Clermont, 0957633 B.C. Ltd., a wholly owned subsidiary of Clermont, and NexGen Energy Ltd. (“Old NexGen”). Pursuant to the Amalgamation Agreement, the shareholders of Old NexGen were issued one common share of Clermont (on a post-share consolidation basis) for everyone Old NexGen common share held immediately prior to the completion of the amalgamation. In connection with the Qualifying Transaction, Clermont also completed a consolidation of its common shares on a 2.35:1 basis and changed its name to “NexGen Energy Ltd.”. The Company’s acquisition of Old NexGen was accounted for as a reverse takeover.

 

The Company commenced trading on the TSX Venture Exchange (“TSX-V”) as a Tier 2 Issuer under the symbol “NXE” on April 23, 2013. On August 7, 2015, the Company became a Tier 1 Issuer. On July 15, 2016, NexGen graduated and commenced trading on the Toronto Stock Exchange (“TSX”) under its existing symbol. The Company’s common shares ceased trading on the OTCQX Best Market under the symbol “NXGEF” upon the commencement of trading on the NYSE American LLC (“NYSE American”) under the symbol “NXE” on May 17, 2017.

 

In February 2016, the Company incorporated four wholly owned subsidiaries: NXE Energy Royalty Ltd., NXE Energy SW1 Ltd., NXE Energy SW3 Ltd., and IsoEnergy Ltd. (collectively, the “Subsidiaries”). The Subsidiaries were incorporated to hold certain exploration assets of the Company. In the three months ended June 30, 2016, certain exploration and evaluation assets were transferred to each of IsoEnergy Ltd. (“IsoEnergy”), NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd. (Note 5). Subsequent to the transfer, IsoEnergy shares were issued to third parties pursuant to external financings and listed its common shares on the TSX-V, with NexGen retaining 53.30% of IsoEnergy’s outstanding common shares as at September 30, 2019 (December 31, 2018 - 53.35%).

 

2.NATURE OF OPERATIONS

 

As an exploration and development stage company, the Company does not have revenues and historically has recurring operating losses. As at September 30, 2019, the Company had an accumulated deficit of $90,754,440 and working capital of $62,815,548. The Company will be required to obtain additional funding in order to continue with the exploration and development of its mineral properties and to repay its convertible debentures (Note 9), if required.

 

The business of exploring for minerals and development of projects involves a high degree of risk. NexGen is an exploration and development company and is subject to risks and challenges similar to companies in a comparable stage. These risks include, but are not limited to, the challenges of securing adequate capital; development and operational risks inherent in the mining industry; changes in government policies and regulations; the ability to obtain the necessary environmental permits or, alternatively NexGen's ability to dispose of its exploration and evaluation assets on an advantageous basis; as well as global economic and uranium price volatility; all of which are uncertain.

 

The underlying value of the exploration and evaluation assets is dependent upon the existence and economic recovery of mineral reserves and is subject to, but not limited to, the risks and challenges identified above. Changes in future conditions could require material write-downs of the carrying value of exploration and evaluation assets.

 

3.       BASIS OF PRESENTATION

 

Statement of Compliance

 

These condensed consolidated interim financial statements for the three and nine months ended September 30, 2019, including comparatives, have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. They do not include all of the information required by International Financial Reporting Standards (“IFRS”) for annual financial statements and should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2018. Accordingly, accounting policies applied other than as discussed in Note 4 are the same as those applied in the Company’s annual financial statements. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on October 28, 2019.

 

 7 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

3.       BASIS OF PRESENTATION (continued)

 

Basis of Presentation

 

These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value, including the convertible debentures issued by the Company (Note 9). In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information. All monetary references expressed in these notes are references to Canadian dollar amounts (“$”), except otherwise noted. These financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries.

 

Critical accounting judgments, estimates and assumptions

 

The preparation of the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Uncertainty about these judgments, estimates and assumptions could result in a material adjustment to the carrying amount of the asset or liability affected in future periods. Significant areas of estimation uncertainty are the same as those described in the Company’s 2018 annual financial statements, except for significant judgements and key sources of estimation uncertainty related to the application of IFRS 16, which are described in Note 4.

 

Where the fair value of financial assets and financial liabilities recorded in the financial statements cannot be derived from active markets, their fair value is determined using valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

 

4.       SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies followed by the Company are set out in Note 4 to the audited financial statements for the year ended December 31, 2018, and have been consistently followed in the preparation of these condensed consolidated interim financial statements except for the following change in accounting policy:

 

Change in accounting policy:

 

The Company has adopted all of the requirements of IFRS 16 Leases (“IFRS 16”), as of January 1, 2019, using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 Leases (“IAS 17”). IFRS 16 specifies how to recognize, measure, present and disclose leases. IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all major leases. The impact of the transition is shown in Note 4(e) below.

 

The following is the Company’s new accounting policy for leases under IFRS 16:

 

(a)Classification

 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contracts conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

 

•The contract involves the use of an identified asset - this may be specific explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

 

•The Company has the right to obtain substantially all of the economic benefit from use of the asset throughout the period of use; and

 

•The Company has the right to direct the use of the asset. The Company has this right when is has the decision-making rights that are most relevant to changing how and for what purpose the asset is used.

 

 8 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

4.       SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(b)Measurement

 

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of the right-of-use assets are determined on the same basis as those of the property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrow rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

(c)Remeasurement

 

The lease liability is measured at amortized costs using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss in the carrying amount of the right-of-use asset has been reduced to zero.

 

(d)Short-term leases and leases of low-value assets

 

The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases is recognized as an expense on a straight-line basis over the lease term.

 

(e)Impact of transition to IFRS 16

 

On initial application, the Company has elected to record right-of-use assets based on the corresponding lease liability. Right-of-use assets and lease obligations of $2,826,512 and $3,222,380, respectively, were recorded as of January 1, 2019, with no net impact on retained earnings. When measuring lease liabilities, the Company discounted lease payments using an incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 7.40%.

 

5.       EXPLORATION AND EVALUATION ASSETS

 

(a)   Rook I Property

 

The Rook I Project is located in Northern Saskatchewan, approximately 40 kilometres (km) east of the Saskatchewan - Alberta border, approximately 150 km north of the town of La Loche and 640 km northwest of the City of Saskatoon and consists of 32 contiguous mineral claims totalling 35,065 hectares.

The Rook I Project hosts the Arrow deposit discovered in February 2014, the Bow discovery in March 2015, the Harpoon discovery in August 2016 and the Arrow South discovery in July 2017. The Company released an updated mineral resource estimate and the results of a pre-feasibility study in November 2018, in each case, in respect of the Arrow deposit.

NexGen has a 100% interest in the claims subject only to: (i) a 2% net smelter return royalty (“NSR”); and (ii) a 10% production carried interest, in each case, only on claims S-113928 to S-113933 (the Arrow deposit is not located on any of these claims). The NSR may be reduced to 1% upon payment of $1 million. The 10% production carried interest provides for the owner to be carried to the date of commercial production.

 

 9 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

5.       EXPLORATION AND EVALUATION ASSETS (continued)

 

(b)Other Athabasca Basin Properties

 

The Other Athabasca Basin Properties are a portfolio of early stage mineral properties in the Athabasca Basin. The properties are grouped geographically as “SW1”, “SW2” and “SW3”. The SW2 properties are held directly by NexGen. The SW1 and SW3 properties are held by NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd., respectively, each a wholly owned subsidiary.

 

(c)IsoEnergy Properties

 

The IsoEnergy Properties consist of (i) a 100% interest in the Radio Project, Saskatchewan (subject to a 2% net smelter return royalty and 2% gross overriding royalty); (ii) a 100% interest in the Thorburn Lake Project, Saskatchewan  (subject to a 1% net smelter return royalty and a 10% carried interest which can be reduced to 1% at the holder’s option upon completion of a bankable feasibility study); (iii) a 100% interest, in each of the Madison, 2Z, Carlson Creek and North Thorburn properties, Saskatchewan; (iv) a 100% interest in the Mountain Lake property, Nunavut; (v) a 100% interest in the Geiger property, Saskatchewan; (vi) a 100% interest in the Laroque East property, Saskatchewan that consists of 6 mineral claims constituting 3,200 hectares; and (vi) a portfolio of newly staked claims in Saskatchewan, all of which are early stage exploration properties. 

 

The following is a summary of the capitalized costs on the projects described above.

 

   Rook I  Other Athabasca Basin Properties  IsoEnergy Properties  Total
   $  $  $  $
Acquisition costs:                    
Balance, December 31, 2018   235,077    1,457,607    26,622,545    28,315,229 
Additions   —      —      13,477    13,477 
Balance, September 30, 2019   235,077    1,457,607    26,636,022    28,328,706 
                     
Deferred exploration costs:                    
Balance, December 31, 2018   148,658,925    6,530,533    10,623,907    165,813,365 
   Additions:                    
      Drilling   15,827,967    310,907    1,877,331    18,016,205 
      General exploration   4,357,561    —      662,068    5,019,629 
      Geological and geophysical   12,929,250    633,291    826,559    14,389,100 
      Labour and wages   4,703,032    78,110    465,337    5,246,479 
      Share-based payments (Note 10)   821,788    —      78,675    900,463 
      Travel   690,506    —      87,351    777,857 
    39,330,104    1,022,308    3,997,321    44,349,733 
Balance, September 30, 2019   187,989,029    7,552,841    14,621,228    210,163,098 
                     
Total costs, September 30, 2019   188,224,106    9,010,448    41,257,250    238,491,804 

 

 

 10 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

5.       EXPLORATION AND EVALUATION ASSETS (continued)

 

   Rook I  Other Athabasca Basin Properties  IsoEnergy Properties  Total
   $  $  $  $
Acquisition costs:                    
Balance, December 31, 2017   235,077    1,457,607    24,737,248    26,429,932 
Additions   —      —      1,885,297    1,885,297 
Balance, December 31, 2018   235,077    1,457,607    26,622,545    28,315,229 
                     
Deferred exploration costs:                    
Balance, December 31, 2017   112,937,959    4,942,297    8,102,367    125,982,623 
   Additions:   —      —             
      Drilling   16,761,145    —      1,103,960    17,865,105 
      General exploration   2,885,003    (23,200)   142,069    3,003,872 
      Geological and geophysical   7,650,358    1,611,436    256,224    9,518,018 
      Labour and wages   5,008,846    —      693,611    5,702,457 
      Share-based payments (Note 10)   2,883,711    —      235,852    3,119,563 
      Travel   531,903    —      89,824    621,727 
    35,720,966    1,588,236    2,521,540    39,830,742 
Balance, December 31, 2018   148,658,925    6,530,533    10,623,907    165,813,365 
                     
Total costs, December 31, 2018   148,894,002    7,988,140    37,246,452    194,128,594 

 

6.       LEASES

 

Right-of-use asset summary of adoption of IFRS 16 on January 1, 2019

 

          
  

Office Lease

Asset

  Vehicle Lease Assets  Total Right-of-use Assets
          
Right-of-use asset created on adoption of IFRS 16 on January 1, 2019  $2,472,349   $354,163   $2,826,512 
Depreciation of right-of-use asset   (364,200)   (92,645)   (456,845)
                
Right-of-use asset balance, September 30, 2019  $2,108,149   $261,518   $2,369,667 
                

 

Office and vehicle lease right-of-use assets are included in property and equipment in the office, furniture and leasehold improvements, and field equipment categories, respectively (Note 8).

 

 11 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

6.       LEASES (continued)

 

Lease obligation adoption summary of IFRS 16 on January 1, 2019

 

   Nine months ended
   September 30, 2019
    
Lease obligation created on adoption of IFRS 16 on January 1, 2019  $3,222,380 
Accretion expense   159,447 
Lease payments   (578,043)
      
Balance, end of the period  $2,803,785 
 Less Current portion   (599,291)
 Long-term lease liability  $2,204,494 

 

 

On January 1, 2019 the Company adopted IFRS 16 - Leases retrospectively with the cumulative effect on initially applying the standard recognized at the date of initial application (see Note 4).

 

The leases are for office space and vehicle leases that extend to 2025 and 2022, respectively. The discount rates applied to the leases for office spaces and vehicles are 7.50% and 6.74%, respectively. In addition to the lease payments the Company pays $422,185 annually related to operating costs and realty taxes of the leased office spaces. The amount is reassessed annually based on actual costs incurred.

 

In addition to the leased asset above the Company engages drilling companies to carry out its drilling programs on its exploration and evaluation properties. The drilling companies provide all required equipment for these drilling programs. These contracts are short-term in nature and the Company has elected not to apply the requirements of IFRS 16 to these payments. Payments to the drilling companies in the nine months ended September 30, 2019 were $14,250,274.

 

7.       COMMITMENTS

 

Flow-through expenditures:

 

IsoEnergy has raised funds through the issuance of flow-through shares. Based on Canadian tax law, IsoEnergy is required to spend this amount on eligible exploration expenditures by December 31 of the year after the year in which the shares were issued.

 

The premium paid for a flow-through share, which is the price paid for the share over the market price of the share, is recorded as a flow-through share premium liability. This liability is subsequently reduced when the required exploration expenditures are made, and accordingly, a recovery of flow-through premium is then recorded as a reduction in the deferred tax expense.

 

As of September 30, 2019, IsoEnergy must fulfill approximately $260,664 of the required eligible exploration expenditures before December 31, 2019. As the commitment is satisfied, the remaining balance of the flow-through premium liability will be recognized as income.

 

A continuity of the flow-through share premium liability is as follows:

 

       
   Nine months ended
September 30, 2019		  Year ended
December 31, 2018
       
Balance, beginning of the period  $550,392   $109,251 
Liability incurred on flow-through shares issued   —      784,892 
Settlement of flow-through share liability on expenditure made   (514,725)   (343,751)
           
Balance, end of the period  $35,667   $550,392 

 

 12 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

8.       EQUIPMENT

 

 

   Computing Equipment  Software  Field
Equipment		  Office, Furniture and Leasehold Improvements  Road  Total
                   
Cost                              
                               
Balance at December 31, 2017  $235,586   $378,733   $4,218,220   $215,172   $1,773,585   $6,821,296 
   Additions   69,863    371,281    2,333,896    16,685    305,810    3,097,535 
   Disposals   —      —      (54,075)   —      —      (54,075)
Balance at December 31, 2018   305,449    750,014    6,498,041    231,857    2,079,395    9,864,756 
   Assets recognized on adoption of                              
           IFRS 16 (Notes 4 and 6)   —      —      354,163    2,472,349    —      2,826,512 
   Additions   110,065    176,788    35,417    302,475    —      624,745 
Balance at September 30, 2019  $415,514   $926,802   $6,887,621   $3,006,681   $2,079,395   $13,316,013 
                               
Accumulated Depreciation                              
                               
Balance at December 31, 2017  $127,923   $235,944   $1,121,800   $90,530   $262,025   $1,838,222 
   Depreciation   79,703    180,188    842,944    45,198    409,982    1,558,015 
   Disposals   —      —      (43,260)   —      —      (43,260)
Balance at December 31, 2018   207,626    416,132    1,921,484    135,728    672,007    3,352,977 
   Depreciation   63,053    173,815    781,323    430,767    341,623    1,790,581 
Balance at September 30, 2019  $270,679   $589,947   $2,702,807   $566,495   $1,013,630   $5,143,558 
                               
Net book value:                              
At December 31, 2018  $97,823   $333,882   $4,576,557   $96,129   $1,407,388   $6,511,779 
At September 30, 2019  $144,835   $336,855   $4,184,814   $2,440,186   $1,065,765   $8,172,455 

 

 

 

 13 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

9.       CONVERTIBLE DEBENTURES

 

   September 30, 2019  December 31, 2018
2016 Debentures (a)  $60,657,232   $72,481,375 
2017 Debentures (b)   57,658,441    65,709,509 
Convertible Debentures  $118,315,673   $138,190,884 

 

The fair value of the Debentures decreased from $138,190,884 on December 31, 2018 to $118,315,673 at September 30, 2019, resulting in a gain of $19,875,211 for the nine-month period ended September 30, 2019. This gain for the nine-month period ended September 30, 2019 was bifurcated with the amount of the change in fair value of the convertible debentures attributable to changes in the credit risk of the liability recognized in other comprehensive income (loss of $813,879) and the remaining amount recognized in loss for the period (gain of $20,689,090).

 

(a)2016 Debentures

 

On June 10, 2016, the Company issued US$60 million principal amount of convertible debentures (the “2016 Debentures”) which were determined to be a hybrid financial instrument comprised of the host debt contract and multiple embedded derivatives. The Company received gross proceeds of $76,416,000 (US$60 million) and net proceeds of $72,363,602 (US$56,852,383) after deducting $4,052,398 (US$3,147,617) in transaction costs from the issue of the 2016 Debentures. A 3% establishment fee of $2,292,480 (US$1.8 million) was also paid to the debenture holders through the issuance of 1,005,586 common shares. The fair value of the 2016 Debentures on issuance date was determined to be $74,123,520 (US$58.2 million).

 

Pursuant to an amended and restated trust indenture dated July 21, 2017, the maturity date of the 2016 Debentures was extended to July 22, 2022.

 

The fair value of the 2016 Debentures decreased from $72,481,375 (US$53,131,047) on December 31, 2018 to $60,657,232 (US$45,803,241) at September 30, 2019, resulting in a gain of $11,824,143 (US$7,327,806) for the nine-month period ended September 30, 2019. This gain, combined with the gain on the 2017 Debentures (see Note 9(b)) for the period ended September 30, 2019 was bifurcated with the amount of the change in fair value of the convertible debentures attributable to changes in the credit risk of the liability recognized in other comprehensive income and the remaining amount recognized in loss for the period.

       
   Nine months ended
September 30, 2019		  Year ended
December 31, 2018
Fair value of 2016 Debentures, beginning of period  $72,481,375   $90,742,373 
Fair value adjustment during the period   (11,824,143)   (18,260,998)
Interest payable   1,833,341    354,480 
2016 Debentures and interest payable  $62,490,573   $72,835,855 
Less: interest payable included in accounts payable & accrued liabilities   (1,833,341)   (354,480)
2016 Debentures, end of period  $60,657,232   $72,481,375 
           

The 2016 Debentures were valued using a convertible bond pricing model based on a system of two coupled Black-Scholes equations where the debt and equity components are separately valued based on different default risks and assumptions.

 

The inputs used in the 2016 Debentures pricing model as at September 30, 2019 and December 31, 2018 are as follows:

 

   September 30, 2019  December 31, 2018
Volatility   38.00%   38.00%
Expected life in years   2.81 years    3.56 years 
Risk free interest rate   1.56%   2.58%
Expected dividend yield   0%   0%
Credit spread   25.30%   25.79%
Underlying share price of the Company  $1.72   $2.41 
Conversion exercise price  US$2.3261   US$2.3261 
Exchange rate (C$:US$)  $0.7552   $0.7330 

 

 14 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

9.       CONVERTIBLE DEBENTURES (continued)

 

(b)2017 Debentures

 

On July 21, 2017, the Company issued US$60 million principal amount of convertible debentures (the “2017 Debentures”) which were also determined to be a hybrid financial instrument comprised of the host debt contract and multiple embedded derivatives. The Company received gross proceeds of $75,294,000 (US$60 million) and net proceeds of $72,482,854 (US$57,759,864) after deducting $2,811,146 (US$2,240,136) in transaction costs from the issue of the 2017 Debentures. A 3% establishment fee of $2,258,820 (US$1.8 million) was also paid to the debenture holders through the issuance of 869,271 common shares. The fair value of the 2017 Debentures on issuance date was determined to be $73,035,180 (US$58,200,000).

 

The fair value of the 2017 Debentures decreased from $65,709,509 (US$48,167,064) on December 31, 2018 to $57,658,441 (US$43,538,807) at September 30, 2019, resulting in a gain of $8,051,068 (US$4,628,257) for the nine-month period ended September 30, 2019. This gain, combined with the gain on the 2016 Debentures (see Note 9(a)) for the period ended September 30, 2019 was bifurcated with the amount of the change in fair value of the convertible debentures attributable to changes in the credit risk of the liability recognized in other comprehensive income and the remaining amount recognized in loss for the period.

 

       
   Nine months ended
September 30, 2019		  Year ended
December 31, 2018
Fair value of 2017 Debentures, beginning of period  $65,709,509   $80,627,593 
Fair value adjustment during the period   (8,051,068)   (14,918,084)
Interest payable   1,833,341    354,480 
2017 Debentures and interest payable  $59,491,782   $66,063,989 
Less: interest payable included in accounts payable & accrued liabilities   (1,833,341)   (354,480)
2017 Debentures, end of period  $57,658,441   $65,709,509 

 

The 2017 Debentures were valued using a convertible bond pricing model based on a system of two coupled Black-Scholes equations where the debt and equity components are separately valued based on different default risks and assumptions.

 

The inputs used in the 2017 Debentures pricing model as at September 30, 2019 and December 31, 2018 are as follows:

 

   September 30, 2019  December 31, 2018
Volatility   38.00%   38.00%
Expected life in years   2.81 years    3.56 years 
Risk free interest rate   1.56%   2.58%
Expected dividend yield   0%   0%
Credit spread   25.30%   25.79%
Underlying share price of the Company  $1.72   $2.41 
Conversion exercise price  US$2.6919   US$2.6919 
Exchange rate (C$:US$)  $0.7552   $0.7330 

 

General Terms

 

At inception, for each of the 2016 Debentures and 2017 Debentures (collectively, the “Convertible Debentures”), the Company made an irrevocable election under IAS 39 to designate the Convertible Debentures as a financial liability at fair value through profit or loss. At their respective initial recognition date, the entire convertible instrument was measured at fair value with associated transaction costs expensed as incurred. Subsequent to initial recognition, the convertible financial instrument is marked to market at each financial reporting date and any change in fair value is recognized in profit or loss with the exception that the change in fair value that is attributable to change in credit risk is presented in other comprehensive income.

 

The Convertible Debentures bear interest at a rate of 7.5% per annum, payable semi-annually in US dollars on June 10 and December 10 in each year, with the first interest payment on the 2017 Debentures due on December 10, 2017. Two thirds of the interest (equal to 5% per annum) is payable in cash and one third of the interest (equal to 2.5% per annum) is payable, subject to any required regulatory approval, in common shares of the Company, using the volume-weighted average trading price (“VWAP”) of the common shares on the exchange or market that has the greatest trading volume in the Company’s common shares for the 20 consecutive trading days ending three trading days preceding the date on which such interest payment is due. For this purpose, the VWAP shall be converted into US dollars on each of the 20 days in the period, using the indicative rate of exchange for such currency as reported by the Bank of Canada.

 

 15 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

9.       CONVERTIBLE DEBENTURES (continued)

 

The 2016 Debentures and 2017 Debentures are convertible, from time to time, into common shares of the Company at the option of the debenture holders at any time prior to maturity at a price per common share of US$2.3261 and US$2.6919, respectively (the “Conversion Price”).

 

The 2016 Debentures and 2017 Debentures are not redeemable by the Company prior to June 10, 2019 and July 21, 2020, respectively. On or after June 10, 2019 and July 21, 2020 and prior to July 22, 2022, the 2016 Debentures and 2017 Debentures, respectively, may be redeemed by the Company, in whole or in part, at any time that the 20-day VWAP of the common shares exceeds 130% of the Conversion Price, on not less than 30 days’ prior notice to the debenture holders. For this purpose, the VWAP shall be converted into US dollars on each of the 20 days in the period, using the indicative rate of exchange for such currency as reported by the Bank of Canada.

 

Upon completion of a change of control (which includes in the case of the holders’ right to redeem the Convertible Debentures, a change in the Chief Executive Officer of the Company), the holders of the Convertible Debentures or the Company may require the Company to purchase or the holders to redeem, as the case may be, any outstanding Convertible Debentures in cash at: (i) on or prior to June 10, 2019 and July 21, 2020 for the 2016 Debentures and 2017 Debentures, respectively, 130% of the principal amount; and (ii) at any time thereafter, 115% of the principal amount, in each case plus accrued but unpaid interest, if any. In addition, upon the public announcement of a change of control that is supported by the Board, the Company may require the holders of the Convertible Debentures to convert the Convertible Debentures into common shares at the Conversion Price provided the consideration payable upon the change of control exceeds the Conversion Price and is payable in cash.

 

A “change of control” of the Company is defined as consisting of: (a) the acquisition by a person or group of persons acting jointly or in concert of voting control or direction over 50% or more of the Company’s outstanding common shares; (b) the amalgamation, consolidation or merger of the Company with or into another entity as a result of which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the entity carrying on the business of the Company following such transaction; (c) the sale, assignment, transfer or other disposition of all or substantially all of the property or assets of the Company to another entity in which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the other entity following such transaction; or (d) the removal by resolution of the shareholders of the Company, of more than 51% of the then incumbent directors of the Company which removal has not been recommended in the Company’s management information circular, or the failure to elect to the Company’s board of directors a majority of the directors proposed for election by management in the Company’s management information circular.

 

10.       SHARE CAPITAL AND RESERVES

 

Authorized Capital - Unlimited number of common shares with no par value and unlimited number of preferred shares.

 

Issued

 

For the nine months ended September 30, 2018:

 

(a)During the nine months ended September 30, 2018, the Company issued a total of 8,383,334 common shares on the exercise of 333,334 options at a price of $1.51, 150,000 options at a price of $0.64, 5,800,000 options at a price of $0.40, 1,050,000 options at a price of $0.46, 850,000 options at a price of $0.50 and 200,000 options at a price of $0.62 for total proceeds of $3,951,334. As a result of the exercises, $2,541,059 was reclassified from reserves to share capital.

 

(b)On June 11, 2018, the Company issued 745,378 common shares at the then fair value of $2,154,142 to the convertible debenture holders for the share portion of the debenture interest payment.

 

For the nine months ended September 30, 2019:

 

(a)During the nine months ended September 30, 2019, the Company issued a total of 3,533,333 common shares on the exercise of 2,450,000 options at a price of $0.40, 200,000 options at a price of $0.46, 50,000 options at a price of $0.50, 325,000 options at a price of $0.64 and 508,333 options at a price of $ 2.24 for total proceeds of $2,443,666. As a result of the exercises, $1,421,957 was reclassified from reserves to share capital.

 

(b)On June 7, 2019, the Company issued 1,041,304 common shares at the then fair value of $2,020,130 to the convertible debenture holders for the share portion of the debenture interest payment.

 

 16 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

10.       SHARE CAPITAL AND RESERVES (continued)

 

Stock Options

 

Pursuant to the Company’s stock option plan, directors may, from time to time, authorize the issuance of options to directors, officers, employees and consultants of the Company, enabling them to acquire up to 20% of the issued and outstanding common shares of the Company.

 

The options can be granted for a maximum term of 10 years and are subject to vesting provisions as determined by the Board of Directors of the Company.

 

Stock option transactions and the number of stock options are summarized as follows:

  

 

Number of Stock Options

 

 

Weighted Average Exercise Price

Outstanding at December 31, 2017   37,858,334   $1.42 
Granted   9,045,482    2.64 
Exercised   (10,458,334)   0.49 
Forfeited   (208,334)   3.23 
Outstanding at December 31, 2018   36,237,148   $1.98 
Granted   5,138,679    1.96 
Exercised   (3,533,333)   0.69 
Expired/Forfeited   (1,741,667)   2.91 
Outstanding at September 30, 2019   36,100,827   $2.06 
Number of options exercisable   27,256,489   $1.93 
           

 

As at September 30, 2019, the Company has stock options outstanding and exercisable as follows:

 

 

 

Number of

Options

 

 

 

Number Exercisable

 

 

 

Exercise

Price

 

 

Remaining

Contractual

Life (Years)

 

 

 

 

Expiry Date

             
 233,333    233,333   $2.930    0.01   October 5, 2019
 33,333    33,333   $3.390    0.09   November 1, 2019
 50,000    50,000   $1.920    0.20   December 12, 2019
 50,000    50,000   $2.410    0.20   December 12, 2019
 3,250,000    3,250,000   $0.460    0.23   December 24, 2019
 2,850,000    2,850,000   $0.500    0.66   May 27, 2020
 3,250,000    3,250,000   $0.640    1.21   December 16, 2020
 250,000    250,000   $2.690    1.69   June 8, 2021
 4,425,000    4,425,000   $2.650    1.73   June 23, 2021
 2,750,000    2,750,000   $2.240    2.21   December 15, 2021
 250,000    250,000   $3.110    2.56   April 22, 2022
 1,125,000    750,000   $2.930    3.12   November 13, 2022
 3,725,000    2,483,334   $3.390    3.21   December 14, 2022
 475,000    316,666   $2.390    3.54   April 13, 2023
 4,525,000    3,016,666   $2.850    3.69   June 8, 2023
 100,000    66,667   $2.660    3.72   June 20, 2023
 720,482    520,482   $2.490    3.89   August 21, 2023
 3,050,000    1,016,667   $2.410    4.25   December 31, 2023
 500,000    166,667   $2.270    4.48   March 21, 2024
 250,000    83,334   $2.220    4.49   March 27, 2024
 4,050,000    1,350,000   $1.920    4.70   June 12, 2024
 188,679    94,340   $1.590    4.88   August 16, 2024
 36,100,827    27,256,489              

 

 17 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

10.       SHARE CAPITAL AND RESERVES (continued)

 

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options granted. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. The following weighted average assumptions were used to estimate the weighted average grant date fair values for the nine-month periods ended September 30, 2019 and September 30, 2018:

 

 

  

September 30, 2019

 

September 30, 2018

Expected stock price volatility   63.64%   84.32%
Expected life of options   5.00 years    5.00 years 
Risk free interest rate   1.52%   2.18%
Expected forfeitures   0%   0%
Expected dividend yield   0%   0%
Weighted average fair value per option granted in period  $1.09   $1.86 

 

Share-based payments for options vested for the nine months ended September 30, 2019 amounted to $8,955,976 (2018 - $12,350,574) of which $8,055,513 (2018 - $9,969,076) was expensed to the statement of loss and comprehensive loss and $900,463 (2018 - $3,119,563) was capitalized to exploration and evaluation assets (Note 5).

 

11.       RELATED PARTY TRANSACTIONS

 

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of executive and non-executive members of the Company’s Board of Directors, corporate officers and related companies.

 

Remuneration attributed to key management personnel can be summarized as follows:

 

   For the nine months ended
   September 30, 2019  September 30, 2018
Short-term compensation(1)  $2,370,835   $2,056,649 
Share-based payments (stock options)(2)   6,807,788    9,148,119 
Consulting fees(3)   45,499    -  
   $9,224,122   $11,204,768 

 

(1) Short-term compensation to key management personnel for the nine months ended September 30, 2019 amounted to $2,370,835 (2018 - $2,056,649) of which $1,762,350 (2018 - $1,557,606) was expensed and included in salaries, benefits and directors’ fees on the statement of loss and comprehensive loss. The remaining $608,485 (2018 - $499,043) was capitalized to exploration and evaluation assets.

(2) Share-based payments to key management personnel for the nine months ended September 30, 2019 amounted to $6,807,788 (2018 - $9,148,119) of which $6,657,605 (2018 - $8,459,681) was expensed and $150,183 (2018 - $688,438) was capitalized to exploration and evaluation assets.

(3) The Company used consulting services from a company associated with one of its directors in relation to advice on corporate matters for the nine months ended September 30, 2019 amounting to $45,499 (2018 - $nil).

 

As at September 30, 2019, there was $47,500 (December 31, 2018 - $1,415,900) included in accounts payable and accrued liabilities owing to its directors and officers for compensation.

 

12.      CAPITAL MANAGEMENT

 

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and evaluation of assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business.

 

In the management of capital, the Company considers all components of equity and debt and is dependent on third party financing, whether through debt, equity, or other means. Although the Company has been successful in raising funds to date, there is no assurance that the Company will be successful in obtaining required financing in the future or that such financing will be available on terms acceptable to the Company.

 

The properties in which the Company currently has an interest are in the exploration and development stage. As such the Company has historically relied on the equity markets and convertible debt to fund its activities. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it determines that there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

 

 18 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

12.      CAPITAL MANAGEMENT

 

Management reviews its capital management approach on an on-going basis and believes that this approach, given the relative

size of the Company, is reasonable.

 

The Company is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the period.

 

13.FINANCIAL INSTRUMENTS

 

The Company’s financial instruments consist of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and the Convertible Debentures.

 

The fair values of the Company’s cash and cash equivalents, amounts receivable and accounts payable and accrued liabilities approximate their carrying value, due to their short-term maturities or liquidity.

 

Fair Value Measurement

 

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument:

 

•Level 1 - quoted prices in active markets for identical assets or liabilities.
•Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•Level 3 - inputs for the asset or liability that are not based on observable market data.

 

The Convertible Debentures are re-measured at fair value at each reporting date with any change in fair value recognized in profit or loss with the exception that under IFRS 9, the change in fair value that is attributable to change in credit risk is presented in other comprehensive income (Note 9). The Convertible Debentures are classified as Level 2.

 

As at September 30, 2019, the Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

 

(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. Financial instruments potentially subject to credit risk are cash and cash equivalents and amounts receivable. The Company holds cash and cash equivalents with large Canadian and Australian banks. Credit risk is concentrated as a large portion of the Company’s cash and cash equivalents is held at one financial institution. Management believes the risk of loss to be remote. The Company’s amounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash equivalents. Accordingly, the Company does not believe it is subject to significant credit risk.

 

(b)   Liquidity Risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company attempts to manage liquidity risk by maintaining sufficient cash and cash equivalent balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2019, NexGen had cash and cash equivalents of $72,112,073 to settle accounts payable and accrued liabilities of $10,014,316.

(c)   Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates and commodity and equity prices.

 

 19 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

13.FINANCIAL INSTRUMENTS (continued)

(i)       Interest Rate Risk

 

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds its cash and cash equivalents in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on the estimated fair value of the Company’s cash and cash equivalent balances as of September 30, 2019. The Company manages interest rate risk by maintaining an investment policy for short-term investments. This policy focuses primarily on preservation of capital and liquidity. The Company monitors the investments it makes and is satisfied with the credit rating of its banks. The Convertible Debentures, in an aggregate principal amount of US$120 million, carry a fixed interest rate of 7.5% and hence, are not subject to interest rate fluctuations.

(ii)       Foreign Currency Risk

 

The functional currency of the Company and its subsidiaries is the Canadian dollar. The Company is affected by currency transaction risk and currency translation risk. Consequently, fluctuations of the Canadian dollar in relation to other currencies impact the fair value of financial assets, liabilities and operating results. Financial assets and liabilities subject to currency translation risk primarily include US dollar denominated cash and US dollar accounts payable and accrued liabilities. The Company maintains Canadian and US dollar bank accounts in Canada.

 

The Company is exposed to foreign exchange risk on its US dollar denominated Convertible Debentures. At maturity the US$120 million principal amount of the Convertible Debentures is due in full, and prior to then at a premium upon the occurrence of certain events, including a change of control. The Company holds sufficient US dollars to make all cash interest payments due under the Convertible Debentures until maturity but not to pay the principal amount. Accordingly, the Company is subject to risks associated with fluctuations in the Canadian/US dollar exchange rate that may make the Convertible Debentures more costly to repay.

(iii)       Price risk

 

The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Accordingly, significant movements in the Company’s share price may affect the valuation of the Convertible Debentures which may adversely impact its earnings.

 

Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatility. Future declines in commodity prices may impact the valuation of long-lived assets. The Company closely monitors commodity prices of uranium, individual equity movements, and the stock market to determine the appropriate course of action, if any, to be taken by the Company.

 

Sensitivity Analysis

 

As at September 30, 2019, the Company’s US dollar net financial liabilities were US$70,206,541. Thus a 10% change in the Canadian dollar versus the US dollar exchange rates would give rise to a $9,299,482 change in loss and comprehensive loss.

 

The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.

 

14.SEGMENT INFORMATION

 

The Company operates in one reportable segment, being the acquisition, exploration and development of uranium properties. All of the Company’s non-current assets are located in Canada.

 

 20 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

15.SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

 

The significant non-cash transactions during the nine-month period ended September 30, 2019 included:

 

a)At September 30, 2019, $5,623,228 of exploration and evaluation asset expenditures and $2,747 of equipment expenditures were included in accounts payable and accrued liabilities.

 

b)At September 30, 2019, $3,666,682 of interest expense related to the convertible debentures was included in the accounts payable and accrued liabilities. On June 7, 2019 the Company issued 1,041,304 shares valued at $2,020,130 for the non-cash portion of the convertible debenture interest payment.

 

c)The right-of-use lease asset of $2,826,512 and related lease liability of $3,222,380 recorded in the nine months ended September 30, 2019 were non-cash (see Note 4 & 6).

 

d)Share-based payments of $900,463 was included in exploration and evaluation assets (Note 5).

 

e)The re-allocation upon exercise of stock options from reserves to share capital of $1,421,957.

 

The significant non-cash transactions during the nine-month period ended September 30, 2018 included:

 

a)At September 30, 2018, $3,732,632 of exploration and evaluation asset expenditures and $199,774 of equipment expenditures were included in accounts payable and accrued liabilities.

 

b)At September 30, 2018, $3,603,946 of interest expense related to the convertible debentures was included in the accounts payable and accrued liabilities. On June 10, 2018, the Company issued 745,378 shares valued at $2,154,142 for the non-cash portion of the convertible debenture interest payment.

 

c)Share-based payments of $2,381,498 was included in exploration and evaluation assets (Note 5).

 

d)The re-allocation upon exercise of stock options from reserves to share capital of $2,541,059.

 

e)In the nine months ended September 30, 2018 IsoEnergy issued 3,330,000 shares valued at $1,282,050 and a cash payment of $200,000 to expand its interest in the Geiger property (see Note 5(c)).

 

f)In the nine months ended September 30, 2018 IsoEnergy issued 1,000,000 shares valued at $350,000 and a cash payment of $20,000 to acquire Laroque East uranium exploration property (see Note 5(c)).

 

 21 

 

 

NEXGEN ENERGY LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

(Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 & 2018

 

 

16.       LOSS PER SHARE

 

Basic net income per share provides a measure of the interests of each ordinary common share in the Company’s performance over the year. Diluted net income per share adjusts basic net income per share for the effect of all dilutive potential common shares.

 

 

   Three months ended  Nine months ended
             
    

September 30,

2019

    

September 30,

2018

    

September 30,

2019

    

September 30,

2018

 

 

Basic loss per share

                    
Loss attributable to common shareholders  $519,754   $19,002,306   $5,597,198   $13,064,983 
Weighted average number of common shares   355,779,091    346,776,859    353,759,502    344,440,009 
Basic loss per share  $0.00   $0.05   $0.02   $0.04 
                     
Diluted loss per share                    
Loss available to common shareholders  $519,754   $19,002,306   $5,597,198   $13,064,983 
Interest expense on convertible debentures   (2,970,900)   —      (8,968,707)   —   
Mark to market gain on convertible debentures   6,950,474    —      20,689,090    —   
Diluted Loss available to common shareholders  $4,499,328   $19,002,306   $17,317,581   $13,064,983 
                     
Weighted average number of common shares   355,779,091    346,776,859    353,759,502    344,440,009 
Effect on conversion of convertible debentures   48,083,337    —      48,083,337    —   
Weighted average number of common shares (diluted) at September 30   403,862,428    346,776,859    401,842,839    344,440,009 
Diluted loss per common share  $0.01   $0.05   $0.04   $0.04 
                     

 

 

17. COMPARATIVE FIGURES

 

Certain amounts have been reclassified to conform with current period presentation.

 

 

 

 22