COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 16 COMMITMENTS AND CONTINGENCIES

In addition to the commitments for payments on operating and finance leases and the repayment of long-term debt (Note 10), as at September 30, 2022, the Company has the following commitments and contingencies:

Reclamation Obligations

As part of its ongoing business and operations, the Company is required to provide surety bonding for its environmental reclamation obligations of $25.3 million in Nevada pertaining primarily to the Tonkin and the Gold Bar properties and $11.4 million (C$15.6 million) in Canada with respect to the Black Fox Complex. In addition, under Canadian regulations, the Company was required to deposit approximately $0.1 million with respect to its Lexam properties in Timmins, which is recorded as non-current restricted cash (Note 17).

Surety Bonds

As at September 30, 2022, the Company had a surety facility in place to cover all its bonding obligations, which include $25.3 million of bonding in Nevada and $11.4 million (C$15.6 million) of bonding in Canada. The terms of the facility carry an average annual financing fee of 2.3% and require a deposit of 10%. The surety bonds are available for draw-down by the beneficiary in the event the Company does not perform its reclamation obligations. If the specific reclamation requirements are met, the beneficiary of the surety bonds will release the instrument to the issuing entity. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, through existing or alternative means, as they arise. As at September 30, 2022, the Company recorded $3.8 million in restricted cash in non-current assets as a deposit against the surety facility.

Streaming Agreement

As part of the acquisition of the Black Fox Complex in 2017, the Company assumed a gold purchase agreement (streaming contract) related to production from certain land claims. The Company is obligated to sell 8% of gold production from the Black Fox mine and 6.3% from the adjoining Pike River property (Black Fox extension) to Sandstorm Gold Ltd. at the lesser of market price or $561 per ounce (with inflation adjustments of up to 2% per year) until 2090.

The Company records the revenue from these shipments based on the contract price at the time of delivery to the customer. During the three and nine months ended September 30, 2022, the Company recorded revenue of $0.4 million and $1.2  million, respectively (for the three and nine months ended September 30, 2021 – $0.3 million and $0.9 million, respectively) related to the gold stream sales.

Flow-through Eligible Expenses

On March 2, 2022, the Company completed a flow-through share issuance for gross proceeds of $15.1 million. The proceeds of this offering will be used for the continued development of the Company’s properties in the Timmins region of Canada. As at September 30, 2022, the Company has not started to incur the required CEE spend.

In January 2021, the Company closed a flow-through share issuance to fund the development at the Froome deposit. The Company incurred the full required spend of $12.7 million in CDE during 2021.

In 2020, the Company completed two flow-through share issuances. The total proceeds of $18.3 million have been used to incur qualifying CEE in the Timmins region of Ontario by December 31, 2022. As of September 30, 2022, the Company has incurred $18.9 million of the required CEE spend ($12.7 million as of December 2021) and expects to fulfill the remaining $1.3 million of CEE commitments by the end of 2023 (Note 12).

Prepayment Agreement

On July 27, 2022, the Company entered into a precious metals purchase agreement with Auramet International LLC (“Auramet”). Under this agreement, the Company may sell the gold on a Spot Basis, on a Forward Basis and on a Supplier Advance basis, i.e. the gold is priced and paid for while the gold is:

(i) at a mine for a maximum of 15 business days before shipment; or

(ii) in-transit to a refinery; or

(iii) while being refined at a refinery.

During the three and nine months ended September 30, 2022, the Company received the combined net proceeds of $20.5 million from the sales on a Supplier Advance Basis. The Company recorded revenue of $15.8 million related to the gold sales, with the remaining $4.7 million representing 2,860 ounces pledged but not yet delivered to Auramet, recorded as a contract liability on the Consolidated Balance Sheets.