i-80 Gold (IAUX) - 2022 Q4 - Annual Report

Auditor's Reports This section presents the independent auditor's opinions on the company's consolidated financial statements for 2021 and 2022 Report of Independent Registered Public Accounting Firm (2022) The independent auditor, GRANT THORNTON LLP, issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2022, stating they are fairly presented in all material respects, conforming with International Financial Reporting Standards (IFRS), with no critical audit matters reported - The auditor, GRANT THORNTON LLP, provided an unqualified opinion, stating the 2022 financial statements are fairly presented in accordance with IFRS[2] - The audit was conducted under the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) [3][4] - No critical audit matters were identified during the audit for the year ended December 31, 2022[6] Independent Auditor's Report (2021) The independent auditor, GRANT THORNTON LLP, issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2021, stating they are fairly presented in accordance with IFRS, with three Key Audit Matters identified due to their significance and complexity - The auditor provided an unqualified opinion on the 2021 financial statements, confirming they are fairly presented in accordance with IFRS[9] - Key Audit Matters for 2021 included the asset exchange with Nevada Gold Mines LLC (NGM), a complex financing package, and the acquisition of Ruby Hill Mining Company LLC, significant due to their complexity, judgmental nature, and high estimation uncertainty[12][15][20] Consolidated Financial Statements This section presents the company's financial position, performance, cash flows, and equity changes for the years ended December 31, 2022, and 2021 Consolidated Statements of Financial Position As of December 31, 2022, total assets decreased slightly to $642.0 million from $656.3 million in 2021, primarily due to reduced cash, while total liabilities increased to $308.5 million from $249.4 million, leading to a decrease in total equity from $407.0 million to $333.4 million Consolidated Statements of Financial Position (in thousands of USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets | $77,309 | $121,496 | | Total non-current assets | $564,650 | $534,853 | | Total assets | $641,959 | $656,349 | | Total current liabilities | $85,649 | $29,919 | | Total non-current liabilities | $222,898 | $219,452 | | Total liabilities | $308,547 | $249,371 | | Total equity | $333,412 | $406,978 | | Total liabilities and equity | $641,959 | $656,349 | Consolidated Statements of Income / (Loss) and Comprehensive Income / (Loss) For the year ended December 31, 2022, the company reported a net loss of $79.2 million, a significant shift from a net income of $88.2 million in 2021, driven by higher expenses and a negative swing in other income, resulting in a basic loss per share of $0.33 Consolidated Income Statement Highlights (in thousands of USD) | | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Revenue | $36,958 | - | | Mine operating income | $3,569 | - | | Exploration, evaluation and pre-development | $38,809 | $10,477 | | General and administrative | $17,090 | $10,456 | | Other income / (expense) | ($11,683) | $126,942 | | Finance expense | ($20,488) | ($645) | | Income / (loss) for the year | ($79,197) | $88,223 | | Basic income / (loss) per share | ($0.33) | $0.60 | | Diluted income / (loss) per share | ($0.33) | $0.58 | Consolidated Statements of Cash Flows For the year ended December 31, 2022, cash used in operating activities increased to $45.8 million, while cash provided by financing activities was $61.4 million, resulting in a $39.2 million decrease in cash and cash equivalents, ending the year at $48.3 million Consolidated Cash Flow Summary (in thousands of USD) | | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Cash used in operating activities | ($45,842) | ($13,007) | | Cash used in investing activities | ($54,735) | ($137,586) | | Cash provided by financing activities | $61,427 | $222,895 | | Change in cash and cash equivalents | ($39,150) | $72,302 | | Cash and cash equivalents, beginning of year | $87,658 | $15,239 | | Cash and cash equivalents, end of year | $48,276 | $87,658 | Consolidated Statements of Changes in Equity Total equity decreased from $407.0 million at the end of 2021 to $333.4 million at the end of 2022, primarily driven by the net loss for the year, partially offset by equity increases from warrant and stock option exercises and share-based payments Consolidated Statement of Changes in Equity (in thousands of USD) | | Share capital | Reserves | Surplus / (deficit) | Total equity | | :--- | :--- | :--- | :--- | :--- | | Balance as at Dec 31, 2021 | $350,198 | $13,683 | $43,097 | $406,978 | | Exercise of warrants and stock options | $4,272 | ($573) | - | $3,699 | | Share-based payments | - | $1,932 | - | $1,932 | | Loss for the year | - | - | ($79,197) | ($79,197) | | Balance as at Dec 31, 2022 | $354,470 | $15,042 | ($36,100) | $333,412 | Notes to the Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, significant transactions, and financial instrument disclosures supporting the consolidated financial statements Note 1: Nature of Business i-80 Gold Corp. is a Nevada-focused gold and silver producer engaged in exploration, development, and production, detailing significant corporate activities in 2021 and 2022 including its formation, strategic acquisitions, an asset exchange, and a comprehensive financing package - i-80 Gold is a Nevada-focused gold and silver producer with principal assets including the Ruby Hill Mine, Lone Tree Mine, Granite Creek Project, and McCoy-Cove Project[47] - The company was formed through a spin-out from Premier Gold Mines as part of Premier's acquisition by Equinox Gold, which closed on April 7, 2021[49][53] - In 2021, the company completed several major transactions: the acquisition of the Granite Creek Project, the acquisition of the Ruby Hill property, and an asset exchange with Nevada Gold Mines LLC (NGM) to acquire the Lone Tree and Buffalo Mountain properties[58][62][71] - The company secured a major financing package in late 2021 and funded in 2022, consisting of convertible loans from Orion and Sprott, and Gold Prepay and Silver Purchase agreements with Orion[86][87] Note 2: Significant Accounting Policies This note outlines the basis of preparation for the financial statements, which conform to IFRS, detailing key accounting policies and significant judgments applied to major transactions and the valuation of complex financial instruments - The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) on a historical cost basis[99][101] - The company's functional and presentation currency is the United States dollar (USD)[114] - Significant judgments were applied in accounting for major 2021 transactions, with the Osgood and NGM transactions treated as asset acquisitions, while the Ruby Hill acquisition was treated as a business combination[189][192][194] - Valuation of complex financial instruments, including convertible loans, warrants, and prepay/stream agreements, requires significant estimates and level 3 fair value inputs like credit spreads, volatility, and commodity price forecasts[199][200] Note 4: Disposal Group Classified as Held for Sale and Discontinued Operations This note details the accounting for the company's 40% interest in the South Arturo property, which was exchanged with NGM in October 2021, classified as a disposal group held for sale and reported as discontinued operations, generating $11.6 million in income for 2021 - The company's 40% interest in the South Arturo property was classified as a discontinued operation following the exchange agreement with NGM in October 2021[213] Income from Discontinued Operations (South Arturo) for Year Ended Dec 31, 2021 (in thousands of USD) | | Amount | | :--- | :--- | | Revenue | $31,991 | | Mine operating income | $13,093 | | Income from discontinued operations for the period | $11,603 | Note 5: Inventory As of December 31, 2022, total inventory was valued at $16.5 million, down from $26.0 million in 2021, with $28.9 million recognized as cost of sales and a $6.4 million write-down to net realizable value for heap leach ore Inventory Breakdown (in thousands of USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Ore in stockpiles and on leach pads | $12,492 | $22,477 | | Work-in-process | $3,059 | $3,523 | | Finished goods | $984 | — | | Total inventory | $16,535 | $26,000 | - In 2022, the company recognized a $6.4 million write-down of inventory to its net realizable value (NRV), which was included in cost of sales[217] Note 9: Property, Plant and Equipment The carrying amount of property, plant, and equipment (PP&E) increased to $529.3 million at the end of 2022 from $502.6 million in 2021, reflecting $56.1 million in additions, primarily at Granite Creek, partially offset by a $23.6 million adjustment in environmental rehabilitation provision, with no impairment losses recorded PP&E Carrying Amounts (in thousands of USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Mine properties | - | - | | Development properties | $108,712 | $76,385 | | Exploration, evaluation and pre-development properties | $208,035 | $223,220 | | Buildings, plant and equipment | $212,514 | $203,044 | | Total Carrying Amount | $529,261 | $502,649 | - Additions to PP&E in 2022 totaled $56.1 million, while changes in the environmental rehabilitation provision reduced the asset value by $23.6 million[224] - No impairment losses were recorded for the years ended December 31, 2022, and 2021[231] Note 10: Long-Term Debt Total long-term debt significantly increased to $115.9 million in 2022 from $41.4 million in 2021, primarily due to the funding of Gold Prepay and Silver Purchase Agreements with Orion, alongside existing convertible credit facilities from Orion and Sprott, which contain complex features measured at fair value Long-Term Debt Breakdown (in thousands of USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Orion convertible credit | $39,741 | $32,956 | | Sprott convertible credit | $8,903 | $7,685 | | Gold Prepay Agreement | $34,004 | - | | Silver Purchase Agreement | $32,447 | - | | Other | $781 | $795 | | Total Debt | $115,876 | $41,436 | | Less current portion | $21,288 | $58 | | Long-term portion | $94,588 | $41,378 | - In April 2022, the Gold Prepay and Silver Purchase Agreements were funded, adding a combined $71.6 million in debt before repayments[248][250] - The convertible loans with Orion and Sprott contain conversion and change of control features classified as derivative liabilities, which are remeasured at fair value through profit or loss (FVTPL)[239][241] Note 11: Provision for Environmental Rehabilitation The provision for environmental rehabilitation decreased to $71.6 million at the end of 2022 from $92.8 million in 2021, primarily due to a $24.8 million change in estimate capitalized to related assets, covering future closure and reclamation costs for properties like Lone Tree and Ruby Hill Reconciliation of Provision for Environmental Rehabilitation (in thousands of USD) | | Total | | :--- | :--- | | Balance as at January 1, 2022 | $92,849 | | Acquisitions | $1,247 | | Change in estimate capitalized | ($24,849) | | Accretion expense | $3,001 | | Reclamation expenditures | ($622) | | Balance as at December 31, 2022 | $71,626 | | Less current portion | $946 | | Long-term portion | $70,680 | Note 12: Other Liabilities Total other liabilities increased to $95.8 million in 2022 from $81.2 million in 2021, primarily composed of derivative liabilities and deferred consideration, including warrant liability, convertible loan conversion rights, and deferred consideration for the Ruby Hill acquisition, all measured at fair value Other Liabilities Breakdown (in thousands of USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Warrant liability | $15,945 | $15,465 | | Share-based payment liability | $983 | — | | Orion - Conversion and change of controls rights | $27,029 | $18,534 | | Sprott - Conversion and change of controls rights | $5,299 | $3,895 | | Deferred consideration | $45,805 | $42,543 | | Offtake liability | $730 | $730 | | Total other liabilities | $95,791 | $81,167 | - As of December 31, 2022, there were 17.6 million warrants outstanding, primarily related to the Osgood acquisition and the Orion financing package[262][264] - The deferred consideration relates to future milestone payments for the Ruby Hill acquisition, with $27.0 million paid subsequent to year-end to settle the first two milestone payments[266][268] Note 13: Share Capital This note details the company's equity structure, including authorized and issued share capital, and share-based compensation plans, highlighting significant share issuances in 2021 and the outstanding options and RSUs/DSUs at year-end 2022 - In 2021, the company undertook numerous share issuances, including 137.6 million shares to Premier for the spin-out, 30.9 million in a private placement, and shares for the acquisitions of Osgood, Christison, Ruby Hill, and the NGM asset exchange[271][272][273] Stock Option Continuity | | Options outstanding () | Weighted average price (C$) | | :--- | :--- | :--- | | Outstanding at Dec 31, 2021 | 6,689,000 | 2.21 | | Granted | 2,673,179 | 2.65 | | Exercised | (1,047,200) | 2.45 | | Expired / Forfeited | (436,233) | - | | Outstanding at Dec 31, 2022 | 7,878,746 | 2.30 | - The company granted 772,170 RSUs and 175,091 DSUs in 2022, with a liability of $1.0 million recorded as these are expected to be cash-settled[289] Note 20: Segmented Information The company reports its operations in three segments: Production, Development, and Corporate and other, with the Production segment generating all $37.0 million in revenue for 2022 but recording a pre-tax loss, and the majority of assets residing within the Production segment Segment Results for Year Ended Dec 31, 2022 (in thousands of USD) | | Production | Development | Corporate and other | Total | | :--- | :--- | :--- | :--- | :--- | | Revenue | $36,958 | — | — | $36,958 | | Income / (loss) before income taxes | ($29,702) | ($18,385) | ($42,943) | ($91,030) | | Total assets | $394,584 | $186,298 | $61,077 | $641,959 | - All of the company's revenue for 2022 was generated from two customers[305] Note 22: Related Party Transactions This note details transactions with related parties, including key management personnel compensation totaling $5.9 million in 2022, and significant 2021 transactions with former parent Premier and significant shareholder Equinox Gold that largely ceased after the spin-out Key Management Personnel Compensation (in thousands of USD) | | 2022 | 2021 | | :--- | :--- | :--- | | Compensation of executive leadership team | $5,182 | $2,795 | | Compensation of directors | $733 | $665 | | Total | $5,915 | $3,460 | - In 2021, prior to the spin-out, the company recognized $32.0 million in revenue from gold and silver sales to its former parent, Premier[316] Note 24: Financial Instruments This note outlines the company's management of financial risks, including negligible credit risk and liquidity risk managed through capital structure, and details fair value measurements, with many complex liabilities classified as Level 3 requiring significant unobservable inputs - The company manages financial risks including credit, liquidity, and market risk, with credit risk considered negligible[320][321] - Complex financial liabilities such as the warrant liability, deferred consideration, and derivatives embedded in convertible loans and prepay agreements are classified as Level 2 or Level 3 in the fair value hierarchy, requiring valuation models with significant unobservable inputs[331][332][333][334] Changes in Level 3 Financial Instruments (in thousands of USD) | | Balance at Dec 31, 2021 | Fair value adjustments in 2022 | Balance at Dec 31, 2022 | | :--- | :--- | :--- | :--- | | Deferred consideration | ($42,543) | ($3,262) | ($45,805) | | Orion - Conversion/control rights | ($18,534) | ($8,495) | ($27,029) | | Sprott - Conversion/control rights | ($3,895) | ($1,404) | ($5,299) | | Silver Purchase derivative | — | $1,898 | $1,898 | | Gold Prepay derivative | — | $2,916 | $2,916 | Note 26: Subsequent Events After the 2022 fiscal year, the company closed a $65 million private placement of secured convertible debentures, announced an agreement to acquire Paycore Minerals Inc., and made $27.0 million in milestone payments for the Ruby Hill acquisition - On February 22, 2023, the company closed a $65 million private placement of 8.00% secured convertible debentures due in 2027[345] - On February 27, 2023, the company entered into a definitive agreement to acquire all outstanding shares of Paycore Minerals Inc. in an all-stock transaction[349][350] - In January 2023, the company settled the first and second milestone payments for the Ruby Hill acquisition, paying $27.0 million in cash and shares to Waterton[351]