COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 16 COMMITMENTS AND CONTINGENCIES

Reclamation obligations

As part of its ongoing business and operations, the Company is required to provide bonding for its environmental reclamation obligations. As at September 30, 2024, the Company had surety facilities in place to cover its bonding obligations, which include $32.3 million of bonding in Nevada and $7.4 million (C$10.0 million) of bonding in Canada.

The terms of the facilities carry an average annual financing fee of 2.3% and require a deposit of 6.1%. 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, 2024, the Company recorded $3.1 million in restricted cash in non-current assets as a deposit against the surety facility.

Streaming agreement

As part of the acquisition of the 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 (including the Froome deposit) 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. During nine months ended September 30, 2024, the realized gold price from the streaming agreement was $601 per ounce (nine months ended September 30, 2023 – $589 per ounce).

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, 2024, the Company recorded revenue of $0.4 million and $1.2 million, respectively (three and nine months ended September 30, 2023 –$0.5 million and $1.6 million, respectively) related to the gold stream sales.

Flow-through eligible expenses

On December 14, 2023, the Company completed a flow-through share issuance for gross proceeds of $16.1 million. The proceeds of this offering will be used for the continued exploration and development of the Company’s properties in the Timmins region of Canada. As at September 30, 2024, the Company has incurred $13.7 million in CEE and CDE and expects to fulfill its remaining obligations by the end of 2024.

On June 14, 2024, the Company completed a flow-through share issuance for gross proceeds of $21.9 million. The proceeds of this offering will be used for the continued exploration and development of the Company’s properties in the Timmins region of Canada. The Company expects to fulfill its CEE and CDE obligations from its most recent raise by the end of 2025.

Prepayment agreement

In May 2024, the Company extended the existing precious metals purchase agreement with Auramet International LLC (“Auramet”). Key terms of the agreement remained unchanged. 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, 2024, the Company received net proceeds of $nil and $4.8 million, respectively, from the sales on a Supplier Advance Basis (three and nine months ended September 30, 2023 –$41.2 million and $93.4 million, respectively). During the nine months ended September 30, 2024, the Company recorded revenue of $4.8 million related to gold sales (nine months ended September 30, 2023 – $83.2 million) with no amounts outstanding under this facility as at September 30, 2024.

Other potential contingencies

The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment, and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

The Company and its predecessors have transferred their interest in several mining properties to third parties throughout its history. The Company could remain potentially liable for environmental enforcement actions related to its prior ownership of such properties. However, the Company has no reasonable belief that any violation of relevant environmental laws or regulations has occurred regarding these transferred properties.