GOLD MOUNTAIN MINING CORP. (Formerly Freeform Capital Partners Inc.)
Consolidated financial statements Years ended January 31, 2022 and 2021
(Expressed in Canadian dollars)
THE AUDITOR’S REPORT 2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 8
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS 9
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ten
CONSOLIDATED STATEMENTS OF CASH FLOWS 11
NOTE 1 – NATURE OF OPERATIONS 12
NOTE 2 – PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PRESENTATION 12
NOTE 3 – MANAGEMENT JUDGMENTS AND MAIN SOURCES OF UNCERTAINTY OF ESTIMATES 19
NOTE 4 – REVERSE TAKE 21
NOTE 5 – RECEIVABLES 22
NOTE 6 – PREPAID EXPENSES AND DEPOSITS 22
NOTE 7 – TANGIBLE ASSETS 23
NOTE 8 – RESTORATION DEPOSITS 25
NOTE 9 – ACCOUNTS PAYABLE AND CHARGES TO BE PROVIDED 26
NOTE 10 – SHORT-TERM LOANS 26
NOTE 11 – PROMISSORY NOTE 26
NOTE 12 – PREMIUM LIABILITIES RELATING TO ACCREDIBLE SHARES 27
NOTE 13 – PROVISION FOR RESTORATION 27
NOTE 14 – SHARE CAPITAL AND SHARE-BASED PAYMENTS 27
NOTE 15 – TRANSACTIONS WITH RELATED PARTIES 31
NOTE 16 – ADDITIONAL INFORMATION ON CASH FLOWS 33
NOTE 17 – CAPITAL MANAGEMENT 33
NOTE 18 – INCOME TAX 34
NOTE 19 – FINANCIAL INSTRUMENTS 35
NOTE 20 – COMMITMENTS 36
NOTE 21 – EVENTS AFTER THE REPORTING PERIOD 36
The independent auditor’s report
To the shareholders of Gold Mountain Mining Corp.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial condition of Gold Mountain Mining Corp. and its subsidiaries (together, the Company) as at January 31, 2022 and 2021, and its financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
What we audited
The Company’s consolidated financial statements include:
the consolidated statements of financial position as of January 31, 2022 and 2021; the consolidated statements of income and comprehensive income for the years then ended; the consolidated statements of changes in equity for the years then ended; the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under these standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements part of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with ethical requirements applicable to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Main audit points
Key audit matters are matters that, in our professional judgment, were most significant in our audit of the consolidated financial statements for the year ended January 31, 2022. These matters were
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addressed in our audit of the consolidated financial statements taken as a whole and in forming our opinion thereon, and we express no separate opinion on those matters.
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of Elk Gold property exploration and evaluation assets prior to reclassification to property, plant and equipment
Refer to Note 2 – Significant Accounting Policies and Basis of Presentation, Note 3 – Management Judgments and Key Estimation Uncertainties and Note 7 – Property, Plant and Equipment to the Consolidated Financial Statements.
Effective June 1, 2021, the Company began capitalizing all direct costs related to the development of the Elk Gold property, as management determined that the technical feasibility and commercial viability of the property had been established. Accordingly, the Company has reclassified the capitalized costs associated with the Elk Gold property from exploration and mining property appraisal to property, plant and equipment. Capitalized mining property costs will be carried at cost until the Elk Gold property is brought into commercial production, sold, abandoned or determined by management to be impaired. Costs related to development work are capitalized in property, plant and equipment as mining property. The net book value of exploration and evaluation assets related to the Elk Gold property at the time of reclassification was $12.3 million as of June 1, 2021.
Concurrent with the development decision, the Company performed an impairment test of the Elk Gold property which compared the carrying value to the recoverable amount. The recoverable value is the higher between the value in use and the fair value less the cost of disposal. Fair value less disposal costs was used to determine the recoverable amount of the Elk Gold property and was calculated using a discounted cash flow model based on the preliminary economic assessment prepared by management experts. Significant assumptions that impacted fair value included future gold prices, capital cost estimates, operating cost estimates, mineral resource estimates,
Our approach to dealing with the issue involved the following procedures, among others:
Tested how management determined the recoverable amount of the Elk Gold property as of June 1, 2021, which included the following:
Assessed the appropriateness of the method used by management in the discounted cash flow model.
Tested the underlying data used in the discounted cash flow model.
Assessed the reasonableness of future gold prices considering external market and industry data.
The work of management’s experts was utilized in performing procedures to assess the reasonableness of capital cost estimates, operating cost estimates and mineral resource estimates. As a basis for using this work, the competence, capability and objectivity of management’s experts were assessed, the work performed was understood, and the relevance of the work as evidence was assessed. The procedures performed also included an evaluation of the methods and assumptions used by the management’s experts, testing of the data used by the management’s experts and an evaluation of their conclusions.
Professionals with specialized skills and knowledge in the field of valuation assisted us in assessing the reasonableness of the discount rate
Key audit matter
How our audit addressed the key audit matter
used in the model.
and the discount rate. Based on the result of the impairment test, management concluded that there was no impairment.
We considered this to be a key audit matter due to (i) the large balance of property, plant and equipment related to the Elk Gold property and (ii) the significant audit effort and subjectivity in performing procedures to test significant assumptions used by management in determining recoverable amount, which involved significant judgment on the part of management. We were also assisted by professionals with specialized skills and knowledge in the field of evaluation.
The management is responsible for the other information. Other information includes the management report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of conclusion of assurance thereon.
As part of our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, to consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge acquired during the audit. audit, or otherwise appear to be materially inaccurate.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. 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 IFRS, and for such internal control as management deems 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 Company’s ability to continue as a going concern, disclosing going concern issues, if any, and using the accounting principle going concern, unless management intends to liquidate the Company or cease operations or has no realistic alternative to doing so.