Artemis Gold : MD&A for December 31, 2024

Published: 2025-03-11 20:39:04 ET ARTG.V

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the year ended December 31, 2024

ARTEMIS GOLD INC.

Dated March 11, 2025

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

4. HIGHLIGHTS, KEY BUSINESS DEVELOPMENTS, AND DEVELOPMENT OF BLACKWATER

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

The stream percentage remains 50% of produced silver, until such time as 17.8 million ounces of silver have been delivered into the stream, at which point the stream percentage reduces to 33% of produced silver and the Silver Stream reverts to the original metallurgical protocols.

The Silver Stream Simplification allows the Company to prioritize gold production as the Company is no longer required to deliver a fixed recovery of silver to the stream company. The Silver Stream Simplification is also expected to significantly reduce the administrative burden and costs which would have been associated with applying the complex metallurgical protocols previously required by the streaming company.

The Silver Stream Simplification creates a theoretical timing difference which is estimated to deliver additional silver ounces equivalent to approximately 1% of silver reserves (approximately 600,000 ounces of silver) into the Silver Stream over the life of mine. In exchange, the streaming company provided the Company with an additional stream deposit of US$30 million (approximately $43 million).

5. DISCUSSION OF OPERATIONS AND SELECTED ANNUAL INFORMATION

During the years ended December 31, 2024 ("FY 2024"), December 31, 2023 ("FY 2023") and December 31, 2022 ("FY 2022"), the Company incurred a net loss of $31.4 million, of $11.4 million and of $21.6 million, respectively.

The following information has been derived from and should be read in conjunction with the Consolidated Financial Statements for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 ("Annual Financial Statements") which are available on www.sedarplus.ca.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

FY 2024

FY 2023

FY 2022

Operating expenses

681,450

Depreciation

679,377

412,254

Management fees and wages

5,589,522

5,033,033

5,049,645

Investor relations and corporate development

456,908

524,746

417,838

Office, insurance and general

1,640,233

2,080,825

1,420,683

Professional fees

965,371

1,199,266

736,601

Share‐based payments

7,998,029

4,467,272

5,078,570

Loss from operations

(17,331,513)

(13,984,519)

(13,115,591)

Other (expense) income

(67,672)

Interest expense on lease liability

(110,176)

(72,545)

Accretion expense on asset retirement obligation

(414,085)

(307,994)

(63,456)

Equity loss from investment in associate

(470,117)

(590,749)

(893,189)

Change in fair value of derivatives

(13,158,136)

Interest income

3,548,307

3,048,855

Fair value adjustment on warrants

(644,119)

Impairment loss on investment in associate

(9,889,867)

Net loss and comprehensive loss

(31,441,523)

(11,445,131)

(21,629,912)

Other comprehensive loss, net of tax

Items that will not be reclassified to net loss

Gains on marketable securities

262,316

Comprehensive loss

(31,441,523)

(11,445,131)

(21,367,596)

Net loss per common share

(0.15)

Basic and diluted

(0.06)

(0.13)

Weighted average number of common shares

outstanding

211,486,393

Basic and diluted

196,582,307

162,477,167

The following includes an analysis of significant factors that impacted period-to-period variations:

Share-based payments

Share based payments increased by $3.5 million when comparing FY 2024 to FY 2023. The increase is primarily due to the impact of additional stock options, restricted share units ("RSUs") and deferred share units ("DSUs") issued during Q1 2024, as well as the impact of an increase in the Company's share price on previously granted cash-settled RSUs and DSUs.

Change in fair value of derivatives

The change in fair value of derivatives is related to the Company's zero cost gold collars ("Gold Collars") entered into during Q4 2023. The expense of $13.2 million for FY 2024 was largely the result of an increase in forward price curves for gold denominated in Canadian dollars since the beginning of the year.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

Interest income

Interest income decreased by $3.5 million when comparing FY 2024 to FY 2023. The decrease was a result of the interest income associated with the proceeds received from the Project Loan Facility ("PLF") and Stand-by Facility being capitalized to mineral property following commencement of major works construction and utilization of the PLF.

Deferred Income Tax

As at December 31, 2024, the Company has unrecognized tax assets of $90.6 million (primarily related to non- capital losses and costs for BC Mineral tax). However, since the Company has not yet determined whether the deductible temporary differences are probable of being realized, no deferred tax asset was recognized.

6. SUMMARY OF QUARTERLY RESULTS

The following information is derived from the Company's Interim Financial Statements prepared in accordance with IFRS applicable to interim financial reporting including IAS 34 - Interim Financial Reporting. For quarterly periods other than those ended December 31, the information below should be read in conjunction with the Company's Interim Consolidated Financial Statements for each of the past quarters.

Q4 2024

Q3 2024

Q2 2024

Q1 2024

Revenue

Net loss

(8,769,816)

(10,298,634)

(5,726,685)

(6,646,388)

Basic and diluted net loss per share

(0.04)

(0.05)

(0.03)

Cash dividend declared per share

Q4 2023

Q3 2023

Q2 2023

Q1 2023

Revenue

Net loss

(3,901,301)

(2,579,098)

(3,151,645)

(1,813,087)

Basic and diluted net loss per share

(0.02)

(0.01)

(0.02)

(0.01)

Cash dividend declared per share

The Company was focused on the development of the Blackwater Mine during the periods reported in the table above, and as a result, did not generate any revenue. On January 29, 2025 the Company achieved its first pour of gold and silver doré at the Blackwater Mine, marking the transition from development to operations, and the commencement of revenue. It is the Company's policy to capitalize all mine development expenses incurred until commercial production is achieved, and as such the changes in net income from one period to another depend largely on corporate and administrative expenditure, share-based payments, and changes in fair value of derivatives associated with the Gold Collars.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

In addition to the foregoing, the predominant reason for fluctuations in net loss from one quarter to another were share-based payments associated with the incentive and retention of the management team towards the development and operation of the Blackwater Mine, and changes in the Company's share price impacting the value of RSUs and DSUs issued under the Share Unit Plan.

Q4 2024

Q3 2024

Q2 2024

Q1 2024

Share-based payments

(1,771,871)

(2,223,554)

(2,155,150)

(1,847,454)

Change in fair value of derivatives

(4,694,952)

(5,633,976)

(1,051,853)

(1,777,355)

Q4 2023

Q3 2023

Q2 2023

Q1 2023

Share-based payments

(1,609,470)

(897,827)

(1,214,990)

(744,985)

7. LIQUIDITY, CAPITAL RESOURCES, CASH FLOWS AND SELECTED ANNUAL INFORMATION Liquidity

As at December 31, 2024, Artemis Gold was a development stage company and did not have revenue and incurred operating losses as a result. On January 29, 2025 the Company achieved its first pour of gold and silver at the Blackwater Mine, marking the transition from development to operations, and the expectation of generating income from operations. The Company's net assets and working capital position were as follows:

As at

December 31, 2024

December 31, 2023

December 31, 2022

Assets

28,279,214

Cash and cash equivalents

156,590,674

194,089,372

Other current assets

24,546,500

10,234,647

2,968,341

Current assets

52,825,714

166,825,321

197,057,713

Restricted cash

15,126,227

4,734,100

Other non-current assets

1,653,581,936

938,822,800

454,959,611

TOTAL ASSETS

1,706,407,650

1,120,774,348

656,751,424

Liabilities

306,595,228

Other current liabilities

57,044,673

25,288,601

Current liabilities

306,595,228

57,044,673

25,288,601

Non-current liabilities

808,960,039

482,374,220

54,035,092

TOTAL LIABILITIES

1,115,555,267

539,418,893

79,323,693

NET ASSETS

590,852,383

581,355,455

577,427,731

WORKING CAPITAL(1)

(253,769,514)

109,780,648

171,769,112

(1) Working capital is defined as current assets less current liabilities.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

As of December 31, 2024, the Company had the following remaining undiscounted contractual commitments and obligations (which include future interest payments, as applicable):

< 1 year

2 - 3 years

4 - 5 years

> 5 years

Total

Accounts payable, accrued liabilities and provisions

120,834,551

Lease liabilities

20,528,033

68,679,685

67,571,750

15,826,641

172,606,109

Construction commitments

1,349,136

Master lease agreement and other capital commitments

24,562,990

5,282,662

29,845,652

Variable consideration payable

28,000,000

56,000,000

84,000,000

Long-term debt

183,478,481

242,733,638

98,619,881

69,848,761

594,680,761

Asset retirement obligation

1,256,572

57,016,161

58,272,733

Total

352,009,763

344,695,985

222,191,631

142,691,563

1,061,588,942

As at December 31, 2024, the Company had a working capital deficit of $253.8 million. In January 2025, the Company agreed to a $40 million increase in its Stand-by Facility. In March 2025, the Company agreed to the Silver Stream Simplification pursuant to which the streaming company provided an additional stream deposit of US$30 million (approximately $43 million).

The Company poured its first gold and silver from its Blackwater Mine in January 2025 and is continuing its ramp-up of the mine, in anticipation of achieving commercial production in Q2 2025. It is conventional for a Company to reach a lower level of liquidity during this stage of development as it transitions into operations.

Following achievement of commercial production, the Company plans to refinance the PLF and Stand-by Facility which currently represents $151.6 million of the working capital deficit. The refinancing, subject to reaching mutually-agreeable terms, is planned to take the form of a corporate revolver which is expected to be more appropriate to the Company's (then planned) stage of development, more capital cost competitive and less restrictive. In addition, as the Company turns its attention to the possible acceleration of its Phase 2 expansion, a corporate revolver is expected to provide greater flexibility as it relates to the inevitable timing differences between the timing of cash flow generation and the potential Phase 2 expansion capital expenditures.

The working capital deficit also includes $24 million in current liabilities (representing derivative hedging contracts and expected deliveries into the Company's Silver Stream) that are expected to be settled by physical delivery of future production.

The Company expects that its available liquidity as at December 31, 2024, along with the increase in the Standby Facility, the proceeds from the Silver Stream Simplification and future cash flows associated with mining operations will provide sufficient resources to meet its contractual obligations for at least the following 12 months. This determination is based on management's short-term cash flow forecast, which relies on significant judgment and assumptions, including the estimated timing and volume of near-term production, short-term gold prices, and the estimated operating costs.

However, if certain conditions do not materialize in the manner or timing intended by the Company, it may need to fund such planned expenditures from additional equity financing or other capital sources. Management is confident financing will be available at terms agreeable to the Company, however, there can be no assurance that the Company will secure the funding required to fund the impact of unintended or unknown events.

The Company has not paid any dividends, and management does not expect that this will change in the near future.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

Contingencies

The Company may become subject to legal proceedings, claims, regulatory investigations and other proceedings in the ordinary course of its business, including the action(s) described below.

On November 20, 2024, Sedgman Canada Ltd. ("Sedgman") filed a claim of lien pursuant to the Builders Lien Act (British Columbia) alleging unpaid amounts due from BW Gold Ltd. ("BWG"), a subsidiary of Artemis Gold, in the amount of $88,967,137 (the "Lien") and on December 19, 2024, filed a Notice of Civil Claim in the Supreme Court of British Columbia ("Sedgman Claim") against BWG and Artemis Gold as guarantor, alleging, amongst other claims, breaches of the Engineering, Procurement and Construction Contract. On February 13, 2025, BWG and Artemis Gold filed a Response to Civil Claim and a Counterclaim, opposing all of the claims and allegations made within the Sedgman Claim and Lien, and seeking recovery of losses and damages (the "Counterclaim"), which is based on costs incurred by the Company in excess of $150 million. The losses and damages noted in the Counterclaim were incurred by BWG as a result of Sedgman's breach of Contract, negligence, and intentional and willful misconduct.

The Company believes the allegations made in the Sedgman Claim are without merit, and that the value of the Company's Counterclaim will exceed the alleged Sedgman Claim and Lien. Although no assurance can be given with respect to the ultimate outcome of proceedings, the Company does not currently expect that the matter will result in a material net liability and has not raised any provisions in relation thereto. The Company will continually monitor and re-assess the likelihood and magnitude of any net liability associated with such proceedings.

Cash Flows

Q4 2024

Q4 2023

FY 2024

FY 2023

Net cash used in operating activities

(1,418,579)

(1,683,554)

(8,811,364)

(8,519,913)

Net cash used in investing activities

(79,473,702)

(129,321,372)

(453,087,616)

(418,374,336)

Net cash provided by financing activities

98,451,015

214,775,551

333,587,520

389,395,551

Change in cash and cash equivalents

17,558,734

83,770,625

(128,311,460)

(37,498,698)

Cash and cash equivalents, beginning

10,720,480

72,820,049

156,590,674

194,089,372

Cash and cash equivalents, ending

28,279,214

156,590,674

28,279,214

156,590,674

Restricted cash, ending

20,751,443

15,126,227

20,751,443

15,126,227

Total cash and cash equivalents and

restricted cash, ending

49,030,657

171,716,901

49,030,657

171,716,901

Operating activities

Net cash used in operating activities decreased by $0.3 million and increased by $0.3 million when comparing Q4 2024 to Q4 2023 and FY 2024 to FY 2023, respectively. The changes were primarily due to changes in working capital.

ARTEMIS GOLD INC.

Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2024

Investing activities

Net cash used in investing activities decreased by $49.8 million when comparing Q4 2024 to Q4 2023 due to changes in working capital during the two periods. Net cash used in investing activities increased by $34.7 million when comparing FY 2024 to FY 2023 due to the timing of the commencement of Major Works activities in 2023.

Financing activities

Cash provided by financing activities decreased by $116.3 million when comparing Q4 2024 to Q4 2023, primarily due to the receipt of $150 million and $62.4 million received under the PLF and streaming arrangements, respectively, in Q4 2023, while $105 million was received under the COF and Stand-by Facility in Q4 2024. This was partially offset by $5.0 million of interest payments under the PLF and COF during Q4 2024, as the amount of capitalized interest available under the PLF had been fully utilized.

Cash provided by financing activities decreased by $55.8 million when comparing FY 2024 to FY 2023, primarily due to $150 million and $243.5 million received under the PLF and streaming arrangements, respectively, in FY 2023, while $315 million was received under the PLF, COF and Stand-by Facility and $28.3 million was received from the exercise of share purchase warrants in FY 2024, which was partially offset by $5.0 million of interest payments under the PLF and COF during Q4 2024, as the $25 million of capitalized interest available under the PLF had been fully utilized.

Use of Proceeds

The following table includes a comparison of actual use of proceeds, for the most recently completed financial year, to previous disclosures made by the Company:

Intended use of

Actual use of

proceeds

Proceeds from first draw-down on the PLF

150,000,000

Proceeds from second draw-down on the PLF

130,000,000

Proceeds from final draw-down on the PLF

80,000,000

Proceeds from draw-down on the COF

40,000,000

Proceeds from draw-downs on the Stand-by Facility

65,000,000

Total net proceeds

465,000,000

Advancing development of Blackwater and general working

465,000,000

436,720,786

capital

Remaining in treasury

28,279,214

Total net proceeds

465,000,000

The balance of the proceeds remaining in treasury is intended to be applied towards (i) final development, commissioning, and initial working capital requirements for the Blackwater Mine, (ii) ongoing compliance costs, and (iii) general corporate purposes.

8. TRANSACTIONS BETWEEN RELATED PARTIES

The Company transacts with key management personnel, who have authority and responsibility to plan, direct and control the activities of the Company and receive compensation for services rendered in that capacity. Salaries, benefits, consulting fees and director's fees are recorded on a cost basis while share-based

Disclaimer

Artemis Gold Inc. published this content on March 12, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 12, 2025 at 00:38:07.250.