SHAREHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2019

SHAREHOLDERS' EQUITY

NOTE 12 SHAREHOLDERS’ EQUITY

Equity Issuances

Registered Direct Offering (the “Offering”)

On March 29, 2019, the Company issued 14,193,548 Units under the Offering at $1.55 per Unit, for net proceeds of $20.3 million (net of issuance costs of $1.7 million).  Each Unit consisted of one common share and one-half of one warrant to purchase one common share at a price of $2.00, expiring three years from the date of issuance.  Warrants are exercisable at any time prior to March 29, 2022.

Under the same Offering, the Company issued 1,935,484 Subscription Receipts at $1.55 per Unit to certain of its executive officers, directors, employees and consultants; each Subscription Receipt entitled the holder to receive one Unit upon necessary shareholder and NYSE approvals.  Upon approval on May 23, 2019, the Company issued 1,935,484 Units for net proceeds of $2.6 million (net of issuance costs of $0.3 million). All Units issued under the Offering have consistent terms.

The Company concluded that both common shares and warrants are equity-linked financial instruments and should be accounted for permanently in the shareholders’ equity section in the Consolidated Balance Sheets, with no requirement to subsequently revalue any of the instruments. Of the net proceeds of $22.9 million, $20.3 million was allocated to common stock and $2.6 million was allocated to warrants based on their relative fair value at issuance.

The Company used the Black-Scholes pricing model to determine the fair value of warrants issued in connection with the Offering using the following assumptions:

Issued on:	March 29, 2019			May 23, 2019
Risk-free interest rate		2.30	%		2.14	%
Dividend yield		0.00	%		0.00	%
Volatility factor of the expected market price of common stock		50	%		45	%
Weighted-average expected life		3 years			3 years
Weighted-average grant date fair value	$	0.43		$	0.22

All 8,064,516 warrants issued remain outstanding and unexercised as at June 30, 2019.

Shares issued for acquisition of mineral property interest

On June 11, 2018, the Company issued 178,321 shares of common stock in exchange for the acquisition of mineral interests adjacent to the Black Fox Complex.

Flow-through shares

On December 20, 2018, the Company issued 6,634,000 flow-through common shares (within the meaning of subsection 66(15) of the Income Tax Act (Canada)) priced at $2.24 per share for total proceeds of $14.9 million (C$20.0 million – or the “2018 issuance”). On December 19, 2017, the Company issued 4,000,000 flow-through common shares priced at $2.50 per share for total proceeds of $10.0 million (C$12.9 million – or the “2017 issuance”). The Company is required to spend flow-through share proceeds on flow-through eligible Canadian exploration expenditures (“CEE”) as defined by subsection 66(15) of the Income Tax Act (Canada).  The proceeds from the 2018 issuance are required to be spent in 2019. The proceeds from the 2017 issuance were spent in 2018.

Proceeds from the flow through issuance are allocated between the sale of tax benefits as flow-through premium liability and common shares (respectively $3.0 million and $11.9 million for the 2018 issuance). The flow through premium liability is amortized as the Company incurs CEE and is recorded as income tax recovery on the Consolidated Statement of Operations. During the six months ended June 30, 2019, the Company incurred $3.5 million (C$4.6 million) in CEE and recognized a flow-through premium recovery of $0.6 million and reduced the corresponding liability by the same amount. During the six months ended June 30, 2018, the Company incurred $8.1 million (C$10.5 million) in CEE and recognized a flow-through premium recovery of $1.3 million.

Flow through share proceeds are shown as restricted cash in the Consolidated Balance Sheet, with the balance reduced as the Company incurs flow through eligible CEE. The remaining balance of $13.1 million (C$17.1 million) of restricted cash as at June 30, 2019 is required to be spent to December 31, 2019.

At-the-market (“ATM”) offering

Pursuant to an equity distribution agreement dated November 8, 2018, the Company was permitted to offer and sell from time to time shares of its common stock having an aggregate offering price of up to $90.0 million, with the net proceeds to fund working capital and general corporate purposes. During the three months ended March 31, 2019, the Company issued an aggregate of 1,010,545 common shares for gross and net proceeds of $1.9 million. The Company terminated the agreement on March 13, 2019.

Stock options

During the six months ended June 30, 2019, the Company issued 257,500 common shares for proceeds of $0.3 million upon the exercise of same number of stock options at a weighted average exercise price of $1.01 per share. During the same period in 2018, the Company issued 39,199 commons shares for proceeds of less than $0.1 million upon the exercise of same number of stock options at a weighted average exercise price of $1.14 per share.

Stock based compensation

During the three and six months ended June 30, 2019, the Company recorded stock option expense of $0.1 million and $0.2 million, respectively (June 30, 2018 – $0.2 million and $0.4 million, respectively).

During the six months ended June 30, 2019, 2.6 million stock options were granted to officers, directors and certain employees at a weighted average exercise price of $1.67 per share.

Shareholders’ distributions

During the six months ended June 30, 2018, the Company paid a shareholders’ distribution of $0.005 per share of common stock, for a total of $1.7 million.

Pursuant to the term loan facility dated August 10, 2018 (note 10), the Company is limited on the distributions it is authorized to declare and pay. The Company may declare and pay distributions in any fiscal year that do not exceed the amount of dividends per share made in the fiscal year ended December 31, 2017.