OROCO RESOURCE CORP.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2023
(Expressed in Canadian Dollars)
Unaudited - prepared by management
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.
The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.
The accompanying condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.
OROCO RESOURCE CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars)
(Unaudited) As at
August 31, 2023 | May 31, 2023 | |||
ASSETS | ||||
Current | ||||
Cash | $ | 1,016,065 | $ | 1,456,085 |
Receivables | 72,744 | 60,330 | ||
Prepaid expenses and advances | 536,176 | 560,584 | ||
1,624,985 | 2,076,999 | |||
Receivables (Note 5) | 1,118,748 | 1,125,536 | ||
Marketable securities (Note 4) | 22,405 | 28,006 | ||
Exploration and evaluation assets (Note 6) | 74,501,909 | 73,057,531 | ||
Equipment (Note 7) | 3,659,712 | 3,768,714 | ||
$ | 80,927,759 | $ | 80,056,786 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current | ||||
Accounts payable and accrued liabilities (Notes 8 and 12) | $ | 2,726,278 | $ | 2,892,558 |
2,726,278 | 2,892,558 | |||
Deferred tax liability | 13,443 | 13,443 | ||
2,739,721 | 2,906,001 | |||
Shareholders' equity | ||||
Share capital (Note 10) | 93,197,564 | 91,447,564 | ||
Reserves (Note 10) | 15,360,581 | 15,304,582 | ||
Deficit | (33,035,417) | (32,375,066) | ||
Equity attributable to the Company's shareholders | 75,522,728 | 74,377,080 | ||
Non-controlling interest (Note 11) | 2,665,310 | 2,773,705 | ||
78,188,038 | 77,150,785 | |||
$ | 80,927,759 | $ | 80,056,786 | |
Nature of operations and going concern (Note 1) |
Contingency (Note 6(a))
Subsequent event (Note 16)
Approved on behalf of the Board: | |||
"Craig Dalziel" | "Bob Friesen" | ||
Craig Dalziel - Director | Bob Friesen - Director |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
OROCO RESOURCE CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars)
(Unaudited)
For the Three Months Ended August 31,
2023 | 2022 | |||
Expenses | ||||
Consulting fees | $ | 66,129 | $ | 56,415 |
Foreign currency loss (gain) | 139,088 | (14,479) | ||
Management and director fees (Note 12) | 172,300 | 167,575 | ||
Office and general | 152,011 | 143,334 | ||
Professional fees (Note 12) | 114,730 | 65,660 | ||
Share-based payment (Notes 10 and 12) | 61,600 | 1,399,518 | ||
Shareholder communications and investor relations | 34,279 | 53,023 | ||
Transfer agent and filing fees | 28,609 | 29,330 | ||
Travel | - | 21,329 | ||
Operating loss | (768,746) | (1,921,705) | ||
Unrealized gain on fair value of | ||||
derivative contract (Note 9) | - | 4,313 | ||
Royalty income (Note 5) | - | 285,279 | ||
- | 289,592 | |||
Loss for the period | (768,746) | (1,632,113) | ||
Unrealized loss on fair value of | ||||
marketable securities (Note 4) | (5,601) | (56,013) | ||
Loss and comprehensive loss for the period | $ | (774,347) | $ | (1,688,126) |
Loss and comprehensive loss attributable to: | ||||
Equity holders of the Company | $ | (665,952) | $ | (1,606,212) |
Non-controlling interest (Note 11) | (108,395) | (81,914) | ||
$ | (774,347) | $ | (1,688,126) | |
Basic and diluted loss per common share | $ | (0.00) | $ | (0.01) |
Weighted average number of common shares | ||||
outstanding - basic and diluted | 213,906,770 | 205,651,929 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
OROCO RESOURCE CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Expressed in Canadian Dollars)
(Unaudited)
Share Capital | Reserves | ||||||||
Other | Non- | ||||||||
comprehensive | Stock options and | controlling | |||||||
Number | Amount | income (loss) | warrants | Deficit | interest | Total | |||
$ | $ | $ | $ | $ | $ | ||||
May 31, 2022 | 204,916,539 | 85,250,305 | (255,251) | 12,840,116 | (27,652,771) | 3,315,983 | 73,498,382 | ||
Shares issued for warrant exercises | 977,594 | 422,693 | - | (4,363) | - | - | 418,330 | ||
Unrealized loss on fair value of | |||||||||
marketable securities | - | - | (56,013) | - | - | - | (56,013) | ||
Share-based payment | - | - | - | 1,399,518 | - | 1,399,518 | |||
Loss for the period | - | - | - | - | (1,550,199) | (81,914) | (1,632,113) | ||
August 31, 2022 | 205,894,133 | 85,672,998 | (311,264) | 14,235,271 | (29,202,970) | 3,234,069 | 73,628,104 | ||
May 31, 2023 | 213,438,543 | 91,447,564 | (395,283) | 15,699,865 | (32,375,066) | 2,773,705 | 77,150,785 | ||
Shares issued for cash | 2,692,308 | 1,750,000 | - | - | - | - | 1,750,000 | ||
Unrealized loss on fair value of | |||||||||
marketable securities | - | - | (5,601) | - | - | - | (5,601) | ||
Share-based payment | - | - | - | 61,600 | - | - | 61,600 | ||
Loss for the period | - | - | - | - | (660,351) | (108,395) | (768,746) | ||
August 31, 2023 | 216,130,851 | 93,197,564 | (400,884) | 15,761,465 | (33,035,417) | 2,665,310 | 78,188,038 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
OROCO RESOURCE CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars)
(Unaudited)
For the Three Months Ended August 31,
2023 | 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Loss for the period | $ | (768,746) | $ | (1,632,113) |
Adjusted for items not involving cash and restricted cash: | ||||
Depreciation | - | 100,282 | ||
Royalty income | - | (285,279) | ||
Foreign exchange | 6,788 | (32,905) | ||
Share-based payment | 61,600 | 1,399,518 | ||
Unrealized gain on fair value of derivative contract | - | (4,313) | ||
Changes in working capital items: | ||||
Receivables | (12,414) | (30,472) | ||
Prepaid expenses and advances | 24,408 | (48,699) | ||
Accounts payable and accrued liabilities | 150,429 | (243,890) | ||
Net cash and restricted cash used in operating activities | (537,935) | (777,871) | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Exploration and evaluation expenditures | (1,652,085) | (5,197,511) | ||
Equipment | - | (581,342) | ||
Net cash and restricted cash used in investing activities | (1,652,085) | (5,778,853) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Proceeds from private placement shares issued | 1,750,000 | - | ||
Proceeds from exercise of warrants | - | 418,330 | ||
Net cash and restricted cash provided by financing activities | 1,750,000 | 418,330 | ||
Change in cash | (440,020) | (6,138,394) | ||
Cash, beginning of period | 1,456,085 | 23,079,864 | ||
Cash, end of period | $ | 1,016,065 | $ | 16,941,470 |
Supplemental cash flow information (Note 13)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
OROCO RESOURCE CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars)
(Unaudited) August 31, 2023
1. NATURE OF OPERATIONS AND GOING CONCERN
Oroco Resource Corp. (the "Company") was incorporated on July 7, 2006 under the Business Corporations Act of British Columbia and is an exploration stage business engaged in the acquisition and exploration of mineral properties in Mexico. The Company is listed on the TSX Venture Exchange (the "TSX-V"). The Company's head office and principal address is located at #1201 - 1166 Alberni Street, Vancouver, British Columbia, Canada, V6E 3Z3.
These condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The continued operations of the Company and the recoverability of amounts shown for exploration and evaluation assets and related deferred exploration expenditures are dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of the mineral properties and upon future profitable production or proceeds from the disposition thereof. The Company has not yet determined whether its exploration and evaluation assets contain reserves that are economically recoverable. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. Although the Company has successfully raised funds in prior and current periods, management estimates it will require additional funds to operate for the upcoming 12 months. These factors indicate the existence of material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
There are many external factors that can adversely affect general workforces, economies and financial markets globally. Examples include, but are not limited to, the COVID-19 global pandemic and political conflict in other regions. It is not possible for the Company to predict the duration or magnitude of the adverse results of the Russian invasion of Ukraine and its effects on the Company's business or results of operations or its ability to raise funds.
2. BASIS OF PRESENTATION Statement of compliance
These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"s). They do not include all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements, and, therefore, should be read in conjunction with the Company's audited consolidated financial statements for the year ended May 31, 2023, prepared in accordance with IFRS as issued by the IASB.
These condensed interim consolidated financial statements were authorized by the Audit Committee and Board of Directors of the Company on October 30, 2023.
Basis of presentation
These condensed interim consolidated financial statements have been prepared on a historical cost basis, using the accrual basis of accounting, except for cash flow information and certain financial assets that are measured at fair value.
Functional and presentation currency
These condensed interim consolidated financial statements are presented in Canadian dollars, unless otherwise noted, which is the functional currency of the parent and of its subsidiaries.
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OROCO RESOURCE CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars)
(Unaudited) August 31, 2023
2. BASIS OF PRESENTATION (cont'd…)
Basis of consolidation
These condensed interim consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries are entities which the Company controls, either directly or indirectly, where control is defined as the power to govern an entity's financial and operating policies and generally accompanies a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. All inter- company transactions and balances have been eliminated upon consolidation. The Company's subsidiaries are as follows:
Country of | Percentage of | ||
Name of Subsidiary | Incorporation | Ownership | Principal Activity |
Minera Xochipala S.A. de C.V. ("MX") | Mexico | 100% | Exploration in Mexico |
Xochipala Gold S.A. de C.V. ("XG") | Mexico | 86% | Exploration in Mexico |
0973496 B.C. Ltd. | Canada | 100% | Holding company |
Altamura Copper Corp. ("Altamura") | Canada | 100% | Holding company |
Aureum Holding Corporation | Canada | 100% | Holding company |
The Company also holds: a majority interest in Aztec Copper Inc. ("Aztec"), an inactive subsidiary incorporated in the United States and its subsidiary, Prime Aztec Mexicana, S.A. de C.V. an inactive subsidiary incorporated in Mexico; and a 100% interest in Desarrollos Copper, S.A. de C.V. ("Desarrollos"), an inactive subsidiary incorporated in Mexico.
Significant estimates
The preparation of these condensed interim consolidated financial statements requires the Company to make estimates and assumptions concerning the future. The Company's management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and are, but are not limited to, the following:
Share-based payment - The fair value of stock options and compensatory warrants issued are subject to the limitation of the Black- Scholes option pricing model which incorporates market data and which involves uncertainty and subjectivity in estimates used by management in the assumptions. Changes in the input assumptions can materially affect the fair value estimate of stock options and compensatory warrants.
The carrying value and the recoverability of exploration and evaluation assets - Management has determined that exploration, evaluation and related costs incurred, which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including geologic and other technical information, history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, scoping and feasibility studies, accessible facilities and existing permits.
Rehabilitation provisions - The Company's potential for rehabilitation provisions includes estimates of future costs directly attributable to remediating the liability, inflation, movements in foreign exchange rates, and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting future cash outflows. Changes in the factors above can result in a change to the provision recognized by the Company. To the extent the carrying value of the related mining property is not increased above its recoverable amount, changes to reclamation and closure cost obligations are recorded with a corresponding change to the carrying amounts of related mining properties.
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OROCO RESOURCE CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars)
(Unaudited) August 31, 2023
2. BASIS OF PRESENTATION (cont'd…)
Significant estimates (cont'd…)
Equipment - The carrying amounts of equipment are depreciated to their estimated residual value over the estimated economic life of the specific assets to which they relate, using the deprecations methods and rates as indicated below. Estimates of residual values and useful lives are reassessed annually and any change in estimate is taken into account in the determination of the remaining deprecation rate. Depreciation commences on the date the asset is available for its use as intended by management.
Significant judgments
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these condensed interim consolidated financial statements are, but are not limited to, the following:
Determination of functional currency - The functional currency of the Company and its subsidiaries is the currency of the primary economic environment in which each entity operates. The Company has determined the functional currency of each entity to be the Canadian dollar. Determination of the functional currency may involve certain judgments to determine the primary economic environment. The functional currency may change if there is a change in events and conditions which determines the primary economic environment.
3. SIGNIFICANT ACCOUNTING POLICIES
These condensed interim consolidated financial statements were prepared using the same accounting policies and methods of computation as in the Company's consolidated financial statements for the year ended May 31, 2023.
New standards, interpretations and amendments to existing standards not yet effective
A number of new standards and amendments to standards and interpretations have been issued by the IASB and are effective for annual periods beginning on or after June 1, 2023 which have not been applied in preparing these condensed interim consolidated financial statements as they are not yet effective. The standards and amendments to standards that would be applicable to the consolidated financial statements of the Company are the following:
IAS 1, Presentation of Financial Statements
The amendments clarify the requirements for classifying liabilities as current or non-current. The amendments provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. This amendment is effective for financial statements beginning on or after January 1, 2024, with early adoption permitted.
The Company is assessing the potential impact of the application of this standard.
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OROCO RESOURCE CORP.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars)
(Unaudited) August 31, 2023
4. MARKETABLE SECURITIES
As at August 31, 2023, the Company owned 560,125 (May 31, 2023 - 560,125) Goldgroup Mining Inc. ("Goldgroup") shares with a fair value of $22,405 (May 31, 2023 - $28,006). The change in market value of the shares resulted in the recording of other comprehensive loss of $5,601 for the three months ended August 31, 2023 (August 31, 2022 - $56,013).
As at August 31, 2023, the Company owned 375,000 (May 31, 2023 - 375,000) common shares in a private British Columbia company ("BC Co.") with a fair value of $nil (May 31, 2023 - $nil). BC Co. is related by virtue of a common director.
Goldgroup | BC Co. | Total | ||||||
Number | Amount | Number | Amount | Amount | ||||
May 31, 2022 | 560,125 | $ | 168,038 | 375,000 | $ | - | $ | 168,038 |
Fair value adjustment | - | (140,032) | - | - | (140,032) | |||
May 31, 2023 | 560,125 | 28,006 | 375,000 | - | 28,006 | |||
Fair value adjustment | - | (5,601) | - | - | (5,601) | |||
August 31, 2023 | 560,125 | $ | 22,405 | 375,000 | $ | - | $ | 22,405 |
5. CERRO PRIETO ROYALTY
Pursuant to the sale of the Company's interest in the Cerro Prieto Property to Goldgroup in fiscal 2013, Goldgroup agreed to pay to the Company a production royalty (the "Production Royalty"). The Production Royalty, payable for each month in which the monthly average of the daily PM London gold fix is in excess of US$1,250 per ounce, is calculated at the rate of 20% of the dollar value of that excess for each ounce of gold produced from the property during that month, to a maximum royalty of US$90 per ounce. The Production Royalty was payable for each ounce of the first 90,000 ounces of gold produced from the Property, which was achieved in August 2022.
During the three months ended August 31, 2023, the Company recorded $nil (August 31, 2022 - $285,279) in royalty income. As at August 31, 2023, the Company is owed $1,118,748 (May 31, 2023 - $1,125,536) by Goldgroup in connection with the Production Royalty.
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Oroco Resource Corp. published this content on 31 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2023 11:43:08 UTC.