AXM.V Q3 2018 Results (Financials + MD&A) Ending September 30th 2018
All information is available through Sedar. Numbers below are in US Dollars
*NOTE* - October 10th Cash & Share Deal Was Completed After Q3 Ended. Will be reflected in Q4 balance sheet
Tickers: AXM (CDN) & AXMIF (US)
Price: $0.26
Common Shares: 130,497,381 - Increased by 3.46 million after Q4 share deal
Options: 8,240,000
Insider/Institutional Holdings: 82,089,114
ASSETS
Cash: $2,250,907 - Cash will drop $1.2 million after Q4 deal
Receivables: $153,047
Prepaid Expenses: $2,105
Total Assets: $2,406,059
*NOTE - CAR property value has not yet been added to assets
LIABILITIES
Accounts Payable: $1,436,261 - Liabilities will drop $1.2 million after Q4 deal
Due To Related Parties: $192,572
Liabilities Of Discounted Operations: 0 - only liability removed in Q3
Total Liabilities: $1,628,833
Asset/Debt Ratio: 1.48:1 - first time since 2012 when a positive ratio
9 Month Earnings Summary
- Royalty Revenue: $1,214,682
- Total Expenses: $399,454
- Removal of $323,103 liability
- Total Comprehensive Income: $1,125,731
- USD Earnings Per Share: $0.008
*NOTE* - Terenga still owes Axmin around $1 million USD in royalty payments. This is paid as Gora ore is processed and sold
Management Discussion Highlights
Third Quarter 2018 Highlights
- During the three months ended September 30, 2018, the Company reported royalty income of $147,488 from Gora
Projects, compared with $273,516 for the same time period of 2017.
- The net income for the three months ended September 30, 2018 was $310,826 compared to $206,789 in the same period
of 2017.
Business and Summary of Activities
AXMIN is a publicly listed corporation with its shares trading on the TSX Venture Exchange (“TSXV”) under the symbol AXM. The
Company is an international mineral exploration and development company with a strong focus on the African continent. AXMIN,
through its wholly-owned subsidiaries, has exploration projects in the Central African Republic (“CAR”) and Senegal. The
Company’s primary asset is the Passendro gold project situated in the CAR. Due to escalating interreligious conflicts in the CAR, all
in-country operations other than administrative functions, carried out in the capital city of Bangui, have been suspended.
In June 2018, Axmin has received confirmation from Teranga that the Government of the Republic of Senegal has granted two new
exploration permits under the 2016 Senegalese Mining Code for Sounkounkou and Bransan, encompassing the 17 target areas that
the Company shares an interest in with Teranga.
The initial term of the exploration permits is for a period of 4 years with a requisite minimum expenditure commitment during this
initial period. Thereafter the exploration permits are renewable two times for consecutive periods not exceeding three years each
provided that Teranga has satisfied its work and expenditure commitments. The Bransan perimeter is 337.3km2
and Sounkounkou is 291.7km2, which together cover roughly 90% of the prior permit areas.
AXMIN holds a 1.5% NSR on 17 Royalty Target Areas (being Target Areas have been made Royalty Election on) in total and
maintains 20% interests of Remainder Areas within the above Senegal permits. Axmin’s royalty rights are intended to continue and
survive the Joint Venture Agreement and remain tied to the permits themselves, irrespective of title holder.
Since August 2015, Axmin Inc. started to generate the 1.5-per-cent net-smelter-return royalty’s income from the Gora deposit.
Royalty income in the amount of $4,033,360 has been recognized since Gora Deposit began production. The total royalty income
for the nine months ended September 30, 2018 was $1,214,682 (for the nine months ended September 30, 2017 - $970,855). The
royalty is applied to the production of gold from the Gora deposit, located in the Senegal Republic. The Gora deposit is operated by
Axmin's joint venture partner, Sabodala Mining Company SARL, a wholly owned subsidiary of Teranga Gold Corp.
Operations
Central African Republic – Passendro Gold Project
The Company’s primary asset is the Passendro gold project, which is situated in the centre of a 25-year Mining License (355 sq km)
that was awarded to AXMIN in August 2010. At the same time, the Company was also awarded two, three-year renewable
Exploration Licenses, Bambari 1 and 2 (1,240 sq km), which ring fence the Mining License and cover a 90 km strike along the highly
prospective Bambari greenstone belt.
On December 24, 2012, the Company officially notified the CAR Minister of Mines and Defence of the existence of a state of Force
Majeure due to the escalating rebel activity in the country and the necessity to withdraw its field operations. Since that time, AXMIN
has not had access to its Passendro project. The Mining Convention of 2006 and the addendum thereto concluded in August 2010
provide the Company with full protection under the circumstances and, in the event that there is a change of Government in the
CAR, the existence of Force Majeure stays work related obligations. It is these circumstances that have caused the Company to
suspend all Passendro based operations as well as negotiations with prospective lenders.
Prior to the Force Majeure, the Company was working towards securing financing to develop the Passendro gold project into CAR’s
first modern gold mine. The following is a brief summary of the status at Passendro gold project as at December 2012. A full
description of the Passendro gold project can be found in the Company’s audited financial statements for 2014 and 2013, its June
2012 Annual Information Form, the 2011 Bankable Feasibility Study Optimization & Update and its 2009 Mineral Resource Estimate
prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). All reports
can be accessed under the Company’s profile on the SEDAR website at www.sedar.com.
On October 15, 2013, the Government of the CAR signed the Decree No. 13.412, stating that the duration of the validity of the
Bambari 1 and 2 Exploration Licences held by Aurafrique SARL, a wholly owned CAR registered subsidiary of the Company, were
extended for a period of one year from August 7, 2013 to August 6, 2014.
On October 15, 2013, the Government of the CAR granted SOMIO Toungou SA, a wholly-owned subsidiary of the Company, a oneyear
extension of the exemption from starting the development and pre-production work at the Passendro Gold Project. The period
of the extension of the exemption is valid from January 11, 2014 to January 10, 2015.
On October 15, 2013, the Government of the CAR (“Government”) officially acknowledged the considerable monetary losses the
Company sustained, which was estimated to be approximately US$38 million, at its operations in the capital city of Bangui and at its
Ndassima camp located 60 km north of the town of Bambari. In response to those losses, the Government has consented to a
compensation of 50 percent of all taxes, rights and taxations, but did not specify the applicable time period. Given the uncertainty of
the Government compensation, the Company has not accrued any compensation
On October 18, 2013, the Government of the CAR certified that the License of Exploitation (the “Mining License”) held by SOMIO
Toungou SA, which was originally granted to the Company on August 5, 2010 and recorded under the Chronological Code
PE001/10 (Registration number 002 of August 5, 2010) by the Department of Mines, remains valid for a period of twenty-five years
from the date of the grant.
As announced on November 15, 2013, the Company entered into an agreement to secure its ownership of the licenses in the CAR.
Under this agreement the consultant was entitled to remuneration upon the successful completion of its services. The total
outstanding payments due under this agreement amount to US$2,000,000. Axmin’s management are actively pursuing negotiations
to resolve this account payable on substantially better economic terms for the Company. A further announcement will be made
when appropriate.
On November 28, 2016, the Minister of Mines, Energy and Hydraulics of the CAR issued Ministerial Order No
245/16/MMEH/DIRCAB/DGMD, giving an Exemption Certificate of one (1) year to start the development and pre-production work at
the Passendro Gold Project to SOMIO Toungou SA, a wholly-owned subsidiary of the Company. The period of the Exemption is
valid within duration of one (1) year starting from November 28, 2016 to November 27, 2017.
Also on November 28, 2016, the Minister of Mines, Energy and Hydraulics of the CAR issued the Ministerial Order No
246/16/MMEH/DIRCAB/DGMD, giving an Exemption Certificate of one (1) year for exploration and research of the primary layer of
gold and others related to substances of Licenses of BAMBARI 1 and 2 to Aurafrique SARL, a wholly-owned subsidiary of the
Company. The period of the Exemption is valid within duration of one year from November 28, 2016 to November 27, 2017.
On March 26, 2018, the Minister of Mining and Geology issued an executive order No 031/18/MMG/DIRCAB/DGM to grant SOMIO
Toungou an extension period of exemption from the development work and productions of the Passendro gold mine for one (1)
year, running from March 22, 2018 to March 21, 2019.
On March 26, 2018, the Minister of Mining and Geology issued an executive order No 032/18/MMG/DIRCAB/DGM to grant
Aurafrique SARL an extension period of exemption from exploration and research for one (1) year, running from March 22, 2018 to
March 21, 2019.
As of the date of this report, operations at Passendro remain suspended and although the Company continues to maintain a
presence in the CAR (through its administrative office and permanently stationed employees in Bangui) and relationship with the
State in the CAR, the Company is unable to predict when it will be able to resume its operations at Passendro for the foreseeable
future, if at all. As a result, impairment in the amount of $37,346,576 was recognized at December 31, 2013 on exploration and
evaluation (“E&E”) assets for the Bambari properties to reflect the decrease in their recoverable value as of result of the current
unstable situation in CAR. As at September 30, 2018, given that impairment was recognized and the unstable condition remains the
same, the residual value of E&E assets for the Passendro gold project was written down to $nil in 2016.
This impairment recognized in the financial statements does not in any way mean that the Company is relinquishing its rights to the
assets and it reflects the utmost conservative view by management on the objective circumstances and will be reviewed annually
and subject to recovery when certain conditions are met pursuant to the accounting standards the Company has adopted.
The Company through its in-country staff have maintained close communications with senior ministers and officials in Bangui and
also in Bambari which is the closest city to the Company’s asset near Ndassima. AXMIN’s country representative Mr. Boubacar
Sidbe recently meet with the Vice Mayor of Bambari and Sub-prefect to discuss the situation on the ground and express the
Company’s desire to get back on site. Meetings have also been held with the Mining Minister and Chief of the Office of the Head of
State. AXMIN remains confident that stability will eventually return to the country and that the Company will be well positioned and
ready to work with the elected government of the CAR to develop a pragmatic mining plan focusing on the extremely high-grade
deposits that will be safe for our employees and contractors, have limited capital expenditure and hopefully achieve very profitable
returns in a very timely fashion for shareholders.
The Company notes as reported in the world press that the Central African Armed Forces (FACA) have recently been deployed in
the city of Bambari and the vicinity. AXMIN regrets the violence that has taken place during this time, and believes that the
combination of the FACA and MINUSCA forces on joint patrols should hopefully bring stability to the region enabling the Company
to become operational again at Ndassima near Bambari.
Senegal Joint Venture
On February 28, 2012, AXMIN and its joint venture partner and manager, Sabodala Mining Company SARL (“SMC”), a whollyowned
subsidiary of Teranga Gold Corporation (“Teranga”) amended its 2008 joint venture agreement. At the time, Teranga had
earned an 80% interest in the Sounkounkou, Heremokono and Sabodala NW explorations licenses (the “Project”) located in the
Birimian belt of eastern Senegal, by spending US$6 million on exploration. AXMIN has retained a 20% interest in the Project. The
amended joint venture and royalty agreement (the “Agreement”) supersedes and replaces the original joint venture agreement.
The 2012 Agreement with SMC includes, among other things, the following terms: (a) both parties agree that their respective
interests (Teranga–80% and AXMIN–20%) in the Project are divided into Target Areas (being areas subject to exploration) and
Remainder Areas (areas not yet subject to exploration); and (b) that both parties will retain all respective interests in all of these
areas, until an election is made by AXMIN to convert its 20% interest in a Target Area into a 1.5% NSR or Royalty Interest (“Royalty
Election”). After AXMIN has made a Royalty Election with respect to the Target Area, SMC will solely fund all finance work costs for
each of the Royalty Interests.
As of February 28, 2012, AXMIN elected to take a 1.5% NSR Royalty Interest in the Gora Deposit, located on the Sounkounkou
permit. In July 2012, the Republic of Senegal declined the application submitted by SMC, the manager, for the extension for the
Sabodala NW license, which has now expired and is believed to have been granted by the Senegal Government to a third party.
On September 5, 2014, an extraordinary extension of 24 months for the Heremokono exploration permit has been granted by the
Senegal authorities.
On June 18, 2015, in addition to its royalty interest of 1.5% NSR in the Gora Target Area, AXMIN has elected to convert its 20%
interests in another 15 Target Areas into a 1.5% NSR from each Target Area. On January 12, 2016, AXMIN elected to convert its 20%
interest in one new Target area into a 1.5% NSR. After this Royalty Election, AXMIN holds a 1.5% NSR on 17 Royalty Target Areas
(being Target Areas have been made Royalty Election on) in total and maintains 20% interests of Remainder Areas within the
Senegal permits. The free carried interest of US$2.5 million granted to AXMIN under the Agreement has been depleted on account
of its 20% Participation Interest in respect of all Participation Target Areas (being areas subject to exploration and both parties
remain their respective interests (Teranga – 80% and AXMIN – 20%)). No further participation contribution needs to be made by AXMIN beyond this $2.5 million free carried interest with respect to the Participation Target Areas where a Royalty Election has
been made.
Senegal JV – Gora Deposit (1.5% Royalty Interest)
In February 2012, AXMIN elected to hold a 1.5% NSR royalty interest in the Gora deposit. Since August 2015, Axmin Inc. started to
generate the 1.5-per-cent net-smelter-return royalty’s income from the Gora deposit.
On November 1, 2018, Teranga released its nine months ended September 30, 2018 Financial Statements and MD&A which
contain additional information including information on Gora’s reserve and resources as noted below:
Exploration and Evaluation Assets and Expenditures
AXMIN holds a 100% interest in the Bambari properties which consist of a 25-year Mining Licence (355 sq km), which was granted
in August 2010 and remains valid up to date, and two Exploration Licences, Bambari 1 and 2 (1,240 sq km), which were also
granted in August 2010 and remains valid up to date. The Bambari properties had been the subject of substantial exploration by
AXMIN since the discovery of the Passendro project. The Passendro project is situated in the centre of the Mining License which is
ring-fenced by the two Bambari Exploration Licenses.
Impairment in the amount of $37,346,576 was recognized as at December 31, 2013 on the Bambari properties to reflect the
decrease in their recoverable value as the result of the current political turmoil in CAR. The new government of the CAR might
adopt different policies respecting foreign development and ownership of mineral resources. Any such changes in policy may result
in changes in laws affecting mining policies, ownership of mineral assets and might extend to expropriation of mineral assets. The
recoverable amount of the Company’s Bambari properties is $nil based on management’s estimate of the asset’s fair value less
costs to sell (“FVLCD”).
As at September 30, 2018, there has been no significant change in the assumptions used to determine the FVLCD since the
impairment loss was recognized in 2013 but as stated above the Board may re-evaluate the FVLCD once the Company is back on
site and operational.
Subsequent Events
The Company settled an accounts payable of $2.0 million by making a payment of US$1.2 million and the issuance of 3.46 million
shares at a price of C$0.30 per share. A settlement agreement has been entered into (the "Settlement Agreement") and the
transaction relating to the Settlement Agreement has received final approval from the TSX Venture Exchange. Subsequent to the
period end, the US$1.2 million was paid and the 3.46 million shares were issued extinguishing this accounts payable in its totality.
The shares issued pursuant to the above-referenced Settlement Agreement are subject to transfer restrictions under a two (2) year
lock-up agreement, during which time the shares may not be sold. The transfer restrictions under the lock-up agreement will expire
two (2) years plus one day from the date of grant.
Subsequent to the period end, 280,000 stock options were exercised.
Concentration of Share Ownership
As at the date of this report, AOG Holdings BV holds approximately 12.38% of the issued and outstanding common shares of the
Company on a non-diluted basis, Shenglin Trading holds approximately 15.32% of the issued and outstanding common shares of
the Company on a non-diluted basis and Dickson holds approximately 34.48% of the issued and outstanding common shares of the
Company on a non-diluted basis.
