SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2019

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

NOTE 13 SHAREHOLDERS’ EQUITY

Equity Issuances

November 2019 Offering

On November 20, 2019 (the “November Offering”), the Company issued 37,750,000 Units at $1.325 per Unit, for net proceeds of $46.6 million (net of issuance costs of $3.5 million). Each Unit consisted of one share of common stock and one-half of one warrant. Each whole warrant is exercisable at any time for one share of common stock of the Company at a price of $1.7225, subject to customary adjustments, expiring five years from the date of issuance.  The warrants provide for cashless exercise under certain conditions. The warrants under the November Offering are listed for trading on an over the counter market.

The Company concluded that both common stock 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 $46.6 million, $37.3 million was allocated to common stock and $9.3 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 November Offering using the following assumptions:

	November 20, 2019
Risk-free interest rate		1.55	%
Dividend yield		0.00	%
Volatility factor of the expected market price of common stock		60	%
Weighted-average expected life		5 years
Weighted-average grant date fair value	$	0.52

All 21,706,250 warrants under the November Offering remain outstanding and unexercised as at December 31, 2019.

March 2019 Offering

On March 29, 2019, the Company issued 16,129,032 Units at $1.55 per Unit, for net proceeds of $22.9 million (net of issuance costs of $2.1 million).  These Units include 1,935,484 Subscription Receipt Units approved for issuance on May 23, 2019 issued to certain of its executive officers, directors, employees and consultants. Each Unit consisted of one share of common stock and one-half of one warrant. Each whole warrant is exercisable at any time for one share of common stock at a price of $2.00, subject to customary adjustments, expiring three years from the date of issuance. The warrants provide for cashless exercise under certain conditions. The warrants under the March Offering are not listed for trading.

The Company concluded that both common stock 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 March 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 under the March Offering remain outstanding and unexercised as at December 31, 2019.

Flow-Through Shares and Restricted Cash

On December 20, 2018, the Company issued 6,634,000 flow-through shares of common stock 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). On December 19, 2017, the Company issued 4,000,000 flow-through shares of common stock priced at $2.50 per share for total proceeds of $10.0 million (C$12.9 million). The purpose of both offerings was to fund exploration activities on the Company’s properties in the Timmins region of Canada. The total proceeds were allocated between the sale of tax benefits and the sale of common stock.

The Company was 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) and accordingly recorded the proceeds as restricted cash.  The Company spent the entire proceeds from the 2018 issuance and 2017 issuance as of December 31, 2019 and December 31, 2018, respectively.

Net proceeds from the 2018 issuance of $14.1 million were allocated as $11.1 million to common stock and $3.0 million to flow-through premium liability (2017 issuance - $9.4 million of net proceeds allocated as $7.8 million to common stock and $1.6 million to flow-through premium liability).  The proceeds from the 2018 and 2017 flow-through offerings have been spent by the end of 2019 and 2018, respectively.  The corresponding flow-through premium liabilities have been amortized and recorded in income and mining tax recovery on the Statement of Operations.

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 shares of common stock for proceeds of $1.9 million (year ended December 31, 2018 – the Company issued an aggregate of 514,897 shares of common stock for gross and net proceeds of approximately $0.9 million). The Company terminated the agreement on March 13, 2019.

Shares Issued for Acquisition of Mineral Property Interests

During the year ended December 31, 2019, the Company issued a total of 353,570 shares of common stock for the acquisition of mineral interests adjacent to Gold Bar (year ended December 31, 2018 - issued 178,321 shares of common stock in exchange for the acquisition of mineral property interests adjacent to the Black Fox Complex).

Issuances Related to 2017 Acquisitions

The Company issued 12,687,035 shares of common stock as part of the Lexam acquisition completed on April 26, 2017. See Note 22 Acquisitions.

September 2017 Offering

On September 22, 2017, the Company issued 20,700,000 shares of common stock and 10,350,000 warrants in a public offering for net proceeds of $43.2 million, after deducting issuance costs of $3.4 million. Each share of common stock sold entitled the holder to receive half a warrant, and each whole warrant entitled the holder to purchase one share of common stock at a price of $2.70.  All warrants expired unexercised on September 28, 2018.  

The Company concluded that both common stock 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. Based on the relative fair values, the Company allocated $39.4 million to common shares and $3.8 million to warrants, net of issuance costs. The Company used the Black-Scholes pricing model to determine the fair value of warrants using the following assumptions:

Risk-free interest rate		1.56	%
Dividend yield		0.36	%
Volatility factor of the expected market price of common stock		71	%
Weighted-average expected life		53 weeks
Weighted-average grant date fair value	$	0.40

Stock Options

The Company’s Amended and Restated Equity Incentive Plan (“Plan”) allows for equity awards to be granted to employees, consultants, advisors, and directors. The Plan is administered by the Compensation Committee of the Board of Directors (“Committee”), which determines the terms pursuant to which any award is granted. The Committee may delegate to certain officers the authority to grant awards to certain employees (other than such officers), consultants and advisors.  The number of shares of common stock reserved for issuance thereunder is 17.5 million shares, including shares

issued under the Plan before it was amended, with no more than 1 million shares subject to grants of options to an individual in a calendar year. The Plan provides for the grant of incentive options under Section 422 of the Internal Revenue Code (the “Code”), which provide potential tax benefits to the recipients compared to non-qualified options. At December 31, 2019, 4,221,023 awards were authorized and available for issuance under the Plan (December 31, 2018 – 5,776,483 awards).

During the year ended December 31, 2019, 535,000 shares of common stock (December 31, 2018 – 171,000) were issued upon exercise of stock options under the Plan, at a weighted average exercise price of $1.02 (2018 – $1.02) per share for proceeds of $0.5 million (2018 – $0.2 million).

Shareholder Distributions

During the year ended December 31, 2019 the Company did not make any shareholder distributions.

During the year ended December 31, 2018, the Company paid two semi-annual distributions to shareholders totaling $0.01 (year ended December 31, 2017, distributions totaling $0.01) per share of common stock, for a total distribution of $3.4 million (December 31, 2017 – $3.1 million). These distributions were treated as dividends for tax purposes.  

Pursuant to the term loan facility dated August 10, 2018 (Note 11), 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 ($0.01 per share).

Stock-Based Compensation

The following table summarizes information about stock options outstanding under the Plan at December 31, 2019:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Life (Years)	Value
	(in thousands, except per share and year data)
Balance at December 31, 2016	4,720	$	2.41	3.4	$	4,388
Granted	338		2.99	—		—
Exercised	(94)		1.30	—		87
Forfeited	(37)		4.28	—		—
Expired	(21)		5.00	—		—
Balance at December 31, 2017	4,906	$	2.45	2.6	$	2,564
Granted	375		1.90	—		—
Exercised	(171)		1.02	—		195
Forfeited	(405)		3.99	—		—
Expired	(462)		2.27	—		—
Balance at December 31, 2018	4,243	$	2.33	2.0	$	1,475
Granted	3,050		1.73	—		—
Exercised	(535)		1.01	—		419
Forfeited	(700)		2.56	—		—
Expired	(789)		2.90	—		—
Balance at December 31, 2019	5,269	$	2.00	3.0	$	364
Exercisable at December 31, 2019	2,234	$	2.27	1.2	$	364

Stock options have been granted to key employees, directors and consultants under the Plan.  Options to purchase shares under the Plan were granted at or above market value of the common stock as of the date of the grant.  During the year ended December 31, 2019, the Company granted stock options to certain employees and directors for an aggregate of 3.1 million shares of common stock (2018 – 0.4 million, 2017 – 0.3 million) at a weighted average exercise price of $1.73 per share (2018 – $1.90, 2017 – $2.99). The options vest equally over a three-year period if the individuals remain affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of five years from the date of grant.

The fair value of the options granted under the Plan was estimated at the date of grant, using the Black-Scholes option-pricing model, with the following weighted-average assumptions:

		2019		2018		2017
Risk-free interest rate		1.45% to 1.87%		2.67% to 2.89%		1.46% to 1.60%
Dividend yield		0.00%		0.36% to 0.53%		0.31% to 0.36%
Volatility factor of the expected market price of common stock		58%		63% to 64%		72% to 74%
Weighted-average expected life of option		3.5 years		3.5 years		3.5 years
Weighted-average grant date fair value	$	1.73	$	1.90	$	2.99

During the year ended December 31, 2019, the Company recorded stock option expense of $0.7 million (2018 – $0.3 million, 2017 – $1.3 million) while the corresponding fair value of awards vesting in the period was $0.4 million (2018 – $0.7 million and 2017 – $1.3 million).  

At December 31, 2019, there was $1.0 million (2018 – $0.4 million, 2017 - $0.7 million) of unrecognized compensation expense related to 3.0 million (2018 – 0.7 million, 2017 – 1.5 million) unvested stock options outstanding.  This cost is expected to be recognized over a weighted-average period of approximately 1.5 years (2018 – 1.4 years, 2017 – 1.3 years).

The following table summarizes the status and activity of non-vested stock options for the year ended December 31, 2019, for the Company’s Plan and the replacement options from the acquisition of Lexam (Note 22):

		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
	(in thousands, except per share amounts)
Non-vested, beginning of year	691	$	1.28
Granted	3,050	$	0.58
Cancelled/Forfeited	(402)	$	0.74
Vested	(304)	$	1.44
Non-vested, end of year	3,035	$	0.64