Euromax Resources : Consolidated Financial Statements 2023

CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2023 and 2022

Expressed in Canadian dollars

Euromax Resources Ltd.
December 31, 2023 and 2022
Table of contents
Independent auditor's report to the shareholders of Euromax Resources Ltd	1-4
Consolidated statements of profit or loss and other comprehensive income or loss	5
Consolidated statements of financial position	6
Consolidated statements of changes in equity	7
Consolidated statements of cash flows	8
Notes to the consolidated financial statements	9-40

Independent Auditor's Report

Opinion

We have audited the consolidated financial statements of Euromax Resources Ltd and its subsidiaries ("the Group"), which comprise the consolidated statements of financial position as at December 31, 2023, and 2022, and the consolidated statements of profit or loss and other comprehensive income or loss, the consolidated statements of changes in equity and the consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023, and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Relating to Going Concern

We draw attention to Note 3(a) in the consolidated financial statements which indicates that the Group may need to raise additional funds from August 2024 either through equity (supported by existing shareholders or new shareholders) or by further debt which is not guaranteed. As stated in Note 3(a) these events or conditions, along with other matters as set forth in Note 3(a), indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

We have highlighted going concern to be a key audit matter having considered:

• the ability of the Group to raise additional funds from August 2024 when current levels of cash are forecast to run out; the uncertainty over the level of cash required to fund the ongoing legal case disclosed in Note 7 in the consolidated financial statements; and the funds required to ultimately construct and bring the Ilovica-Shtuka Project into commercial production;
• the potential advance payments repayable to Royal Gold Inc. which could be recalled by the lender and required to be repaid within 60 days; and
• the European Bank for Reconstruction and Development (EBRD) and CC Ilovitza (CCI) convertible loans which after being extended, mature on February 28, 2025.

We performed the following audit procedures in response to this key audit matter.

• We obtained management's cash flow forecast for the period to December 31, 2025, and through recalculation, we tested the integrity of the model.
• We validated the cash position after the closure of the private placement by agreeing it to bank statement.
• We challenged the key operating assumptions in the cash flow forecast based on 2023 and 2022 year to date actual results.
• We considered management's ability to raise additional funds from their shareholders before August 2024, when cash is forecast to run out. This included consideration of the Group's recent track record of raising funds through private placements, including during the year ended December 31, 2023.
• We reviewed the agreement allowing the Group to extend the maturity of its convertible loans to February 28, 2025, and made inquiries of the Management over whether a termination or repayment notice had been received from Royal Gold Inc.
• We reviewed the adequacy and completeness of disclosures in the consolidated financial statements in respect of going concern based on the managements going concern assessment.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Independent Auditor's Report

In addition to the matter described in the Material Uncertainty Relating to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our report.

Key audit matter

Carrying value of the mineral right interests

Refer to the accounting policy note 3(i), note 3(o)(iii), note 4(b)(i) and note 7.

The mineral right interests is the most significant asset on the consolidated statement of financial position and relates to the exploration license acquisition costs and subsequently capitalized exploration expenditure incurred on the Group's Project, Ilovica-Shtuka. As at 31 December 2023, the Group's capitalized mineral right interests amounted to CAD 38.1 million.

Under the requirements of the applicable accounting standards, there is an impairment trigger if the right to explore in the specific area has expired during the financial year or will expire in the near future and is not expected to be renewed.

The Group continues to face a legal matter in the Macedonian court for the merger of both Ilovica 6 and and Ilovica 11 licenses, which remains outstanding. While the Group holds legal title to the exploration permits, there still remains an uncertainty towards the outcome of the legal case regarding the merger of the licences.

The significant uncertainty over the future outcome of the legal case is an indicator for impairment of the carrying value of the mineral right interests.

We therefore considered the carrying value of the mineral right interests to be a key audit matter.

How the scope of our audit addressed the key audit matter Due to the legal uncertainty and ambiguity as a result of the ongoing court case, we have undertaken the following procedures:

• We assessed the competency, independence and objectivity of the third-party legal advisor engaged by management to assist them with their legal proceedings;
• We obtained and reviewed a formal legal opinion from management's third-party legal advisor in Macedonia over whether the Group currently has the right to explore the Illovica 6 licence, and whether the Group has the right to merge both the Ilovica 6 and and Ilovica 11 licenses; and
• We have reviewed recent correspondence with the Macedonia Higher Administrative Court dated 24 November 2023 with respect to the Group's appeal.

Should the Group be successful in their legal case, we challenged management over other potential indictors of impairment under the relevant accounting standards.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion & Analyis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

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Independent Auditor's Report

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Management's Discussion & Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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Independent Auditor's Report

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Peter Acloque.

Signed BDO LLP

Chartered Professional Accountants

London, United Kingdom

3 May 2024

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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Euromax Resources Ltd.

Consolidated statements of profit or loss and other comprehensive income or loss

(Expressed in Canadian dollars)
		Years ended December 31,
	Note	2023	2022
		$000s	$000s
Operating expenses
Accounting, legal and professional		(951)	(886)
Depreciation	8	(45)	(45)
Office and general		(218)	(202)
Salaries, director and consultant fees		(905)	(931)
Share-based payments recovery/(expense)	10 (d)	1,247	(1,140)
Social responsibility and other project related costs		(549)	(92)
Gain/(Loss) on foreign exchange		988	(1,577)
Operating loss		(433)	(4,873)
Finance expense	6	(3,255)	(3,051)
Fair value gain on financial liabilities	11 (b)	8	-
Net finance loss		(3,247)	(3,051)
Other items
Other income		116	-
Loss before tax		(3,564)	(7,924)
Income tax expense	15 (a)	-	-
Loss for the year		(3,564)	(7,924)
Other comprehensive gain/(loss), net of tax:
Items that are or may be reclassified subsequently to profit or loss
Translation adjustment on foreign subsidiaries		217	(234)
Total other comprehensive gain/(loss), net of tax		217	(234)
Total comprehensive loss for the year		(3,347)	(8,158)
Loss per common share
Basic and diluted (in $)	5	(0.01)	(0.02)
Weighted average number of common shares outstanding
Basic and diluted	5	480,838,265	353,385,926

See accompanying notes to the consolidated financial statements.

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Euromax Resources Ltd.

Consolidated statements of financial position

(Expressed in Canadian dollars)

		As at
		December 31,	December 31,
	Note	2023	2022
		$000s	$000s
ASSETS
Current assets
Cash and cash equivalents		617	24
Other receivables		59	67
Other current assets		35	92
Total current assets		711	183
Non-current assets
Land and property, plant and equipment	8	203	198
Mineral right interests	7	38,102	37,483
Total assets		39,016	37,864
LIABILITIES
Current liabilities
Trade and other payables		272	860
Gold purchase advance payments	12	14,903	15,236
Share-based payment liabilities	10 (d)	1,290	2,749
Loans and borrowings	11	27,667	27,810
Lease liability		53	52
Total current liabilities		44,185	46,707
Non-current liabilities
Lease liability		90	89
Total liabilities		44,275	46,796
EQUITY
Share capital	9 (a)	82,119	78,899
Equity reserve		18,294	15,828
Convertible loan reserve	11 (b)	1,334	1,245
Currency translation reserve		3,385	3,168
Accumulated losses		(110,391)	(108,072)
Total deficit		(5,259)	(8,932)
Total liabilities and equity		39,016	37,864
Nature of operations	1
Subsequent events	18

Approved on behalf of the Board of Directors

Signed "Tim Morgan-Wynne"

Tim Morgan-Wynne, Director

See accompanying notes to the consolidated financial statements.

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Euromax Resources Ltd.

Consolidated statements of changes in equity

(Expressed in Canadian dollars)
For the years ended December 31, 2023 and 2022
						Currency
		Share capital		Equity	Convertible	translation	Accumulated	Total
	Note	Number of shares	Amount	reserve	loan reserve	reserve	losses	equity
			$000s	$000s	$000s	$000s	$000s	$000s
Balance on January 1, 2022		352,906,200	78,796	15,962	1,162	3,402	(101,365)	(2,043)
Total comprehensive loss for the year
Loss for the year			-	-	-	-	(7,924)	(7,924)
Other comprehensive loss for the year			-	-	-	(234)	-	(234)
Total comprehensive loss for the year			-	-	-	(234)	(7,924)	(8,158)
Transactions with owners of the Company
Exercised equity-settledshare-based payments	9 (a)	515,000	103	(103)	-	-	-	-
Equity-settledshare-based payments	10 (d)		-	24	-	-	-	24
Transfer of expired share options	9 (c)		-	(55)	-	-	55	-
Derecognition of the equity component of convertible loan	11 (b)		-	-	(1,162)	-	1,162	-
Equity component of convertible loan	11 (b)		-	-	1,245	-	-	1,245
Total transactions with owners of the Company		515,000	103	(134)	83	-	1,217	1,269
Balance on December 31, 2022		353,421,200	78,899	15,828	1,245	3,168	(108,072)	(8,932)
Balance on January 1, 2023		353,421,200	78,899	15,828	1,245	3,168	(108,072)	(8,932)
Total comprehensive loss for the year
Loss for the year			-	-	-	-	(3,564)	(3,564)
Other comprehensive gain for the year			-	-	-	217	-	217
Total comprehensive loss for the year			-	-	-	217	(3,564)	(3,347)
Transactions with owners of the Company
Common shares issued, net of issue costs	9	101,250,000	1,582	2,253	-	-	-	3,835
Conversion of the convertible notes	9 (a)	35,342,120	1,638	-	-	-	-	1,638
Equity-settledshare-based payments	10 (d)		-	213	-	-	-	213
Derecognition of the equity component of convertible loan	11 (b)		-	-	(1,245)	-	1,245	-
Equity component of convertible loan	11 (b)		-	-	1,334	-	-	1,334
Total transactions with owners of the Company		136,592,120	3,220	2,466	89	-	1,245	7,020
Balance on December 31, 2023		490,013,320	82,119	18,294	1,334	3,385	(110,391)	(5,259)

See accompanying notes to the consolidated financial statements.

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Euromax Resources Ltd.

Consolidated statements of cash flows

(Expressed in Canadian dollars)
		Years ended December 31,
	Note	2023	2022
		$000s	$000s
OPERATING ACTIVITIES
Loss before tax		(3,564)	(7,924)
Add back:
Depreciation	8	45	45
Finance expense	6	3,255	3,051
Other income - write off of trade payables		(116)	-
Share-based payments (recovery)/expenses	10 (d)	(1,247)	1,140
Unrealised foreign exchange (gain)/loss		(981)	1,579
Expensed transaction costs associated with convertible loans	11 (b)	76	77
Expensed transaction costs associated with convertible notes	11 (b)	-	81
Fair value gain on financial liabilities	11 (b)	(8)	-
Changes in working capital items:
Decrease/(Increase) in other receivables and prepayments and deposits		8	(27)
(Decrease)/Increase in trade and other payables		(425)	398
Cash used in operating activities		(2,957)	(1,580)
INVESTING ACTIVITIES
Expenditures on mineral right interests		(85)	(79)
Purchases of property, plant and equipment		(1)	-
Cash provided by investing activities		(86)	(79)
FINANCING ACTIVITIES
Proceeds from shares issued	9 (a)	4,015	-
Proceeds from convertible notes	11 (a)	-	1,627
Share issue costs	9 (a)	(143)	(7)
Transaction costs associated with convertible loans	11 (b)	(143)	(141)
Transaction costs associated with convertible notes	11 (b)	(19)	(62)
Payment of lease liabilities		(53)	(50)
Interest paid		(6)	(5)
Cash provided by financing activities		3,651	1,362
Effect of exchange rate changes on cash		(15)	(17)
Net change in cash and cash equivalents		608	(297)
Cash and cash equivalents, beginning of the year		24	338
Cash and cash equivalents, end of the year		617	24

See accompanying notes to the consolidated financial statements.

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