Skeena(SKE) - 2023 Q3 - Quarterly Report

Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Financial Position As of September 30, 2023, Skeena Resources Limited reported an increase in total assets and shareholders' equity compared to December 31, 2022, primarily driven by growth in exploration and evaluation interests and capital stock. Current liabilities also saw a significant increase | Metric | September 30, 2023 (CAD thousands) | December 31, 2022 (CAD thousands) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | ASSETS | | | | Cash and cash equivalents | 38,004 | 40,602 | | Total Current Assets | 47,531 | 50,124 | | Exploration and evaluation interests | 107,849 | 95,438 | | Capital assets | 25,517 | 20,236 | | Total assets | 184,647 | 167,980 | | LIABILITIES | | | | Accounts payable and accrued liabilities | 31,403 | 13,977 | | Total Current Liabilities | 35,236 | 20,885 | | Total liabilities | 44,244 | 30,753 | | SHAREHOLDERS' EQUITY | | | | Capital stock | 539,496 | 464,029 | | Deficit | (443,955) | (367,931) | | Total shareholders' equity | 140,403 | 137,227 | - Total assets increased by CAD 16,667 thousand (9.9%) from December 31, 2022, to September 30, 2023, primarily due to higher exploration and evaluation interests and capital assets[2] - Total liabilities increased by CAD 13,491 thousand (43.9%) over the nine-month period, largely driven by an increase in accounts payable and accrued liabilities[2] Condensed Interim Consolidated Statements of Loss and Comprehensive Loss Skeena Resources Limited reported an increased loss for both the three and nine months ended September 30, 2023, compared to the same periods in 2022, primarily due to higher exploration and evaluation expenses and administrative compensation | Metric | Three months ended Sep 30, 2023 (CAD thousands) | Three months ended Sep 30, 2022 (CAD thousands) | Nine months ended Sep 30, 2023 (CAD thousands) | Nine months ended Sep 30, 2022 (CAD thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Administrative compensation | 1,498 | 1,682 | 4,309 | 3,454 | | Exploration and evaluation | 38,170 | 28,985 | 63,899 | 71,944 | | Share-based payments | 2,042 | 1,965 | 6,554 | 5,037 | | Loss and comprehensive loss for the period | (39,795) | (28,778) | (76,024) | (72,481) | | Loss per share – basic and diluted | (0.45) | (0.41) | (0.92) | (1.06) | | Weighted average number of common shares outstanding | 88,203,855 | 70,227,095 | 82,794,872 | 68,384,529 | - Loss for the three months ended September 30, 2023, increased to CAD 39,795 thousand from CAD 28,778 thousand in the prior year, primarily due to a significant increase in exploration and evaluation expenses[4] - Loss per share for the nine months ended September 30, 2023, improved to CAD (0.92) from CAD (1.06) in the prior year, despite a higher total loss, due to an increase in the weighted average number of common shares outstanding[4] Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from CAD 137,227 thousand at December 31, 2022, to CAD 140,403 thousand at September 30, 2023. This increase was primarily driven by a significant bought deal offering, partially offset by the loss for the period and share issue costs | Metric | Balance Dec 31, 2022 (CAD thousands) | Bought deal offering (CAD thousands) | Loss for the period (CAD thousands) | Balance Sep 30, 2023 (CAD thousands) | | :----------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :----------------------------------- | | Capital Stock | 464,029 | 73,537 | — | 539,496 | | Reserves | 39,879 | — | — | 43,862 | | Deficit | (367,931) | — | (76,024) | (443,955) | | Total Shareholders' Equity | 137,227 | 73,537 | (76,024) | 140,403 | - A bought deal offering on May 24, 2023, raised gross proceeds of CAD 73,537 thousand through the issuance of 10,005,000 common shares[54] - Share issue costs of CAD 4,076 thousand were incurred in connection with the May 2023 bought deal offering[54] Condensed Interim Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, Skeena Resources Limited significantly reduced cash used in operating activities and saw a substantial increase in cash provided by financing activities, primarily from a bought deal offering. Cash used in investing activities increased due to higher exploration and evaluation asset expenditures | Activity | Nine months ended Sep 30, 2023 (CAD thousands) | Nine months ended Sep 30, 2022 (CAD thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | (53,404) | (65,364) | | Net cash used in investing activities | (19,143) | (12,702) | | Net cash provided by financing activities | 69,949 | 64,942 | | Change in cash and cash equivalents | (2,598) | (13,124) | | Cash and cash equivalents, end of period | 38,004 | 27,189 | - Net cash used in operating activities decreased by CAD 11,960 thousand for the nine months ended September 30, 2023, compared to the same period in 2022[8] - Net cash provided by financing activities increased by CAD 5,007 thousand for the nine months ended September 30, 2023, primarily due to proceeds from a bought deal financing of CAD 73,537 thousand[8] Notes to the Condensed Interim Consolidated Financial Statements The notes provide detailed explanations of the company's operations, accounting policies, financial instruments, exploration activities, capital assets, related party transactions, capital structure, and subsequent events, offering crucial context to the condensed interim consolidated financial statements 1. Nature of Operations Skeena Resources Limited is primarily engaged in mineral property exploration in British Columbia, Canada. The company relies on share issuances for funding and aims to bring its Eskay Creek project to profitable operation, with current cash sufficient for committed expenditures for at least the next twelve months - Skeena Resources Limited's principal business activity is the exploration of mineral properties, primarily in British Columbia[11] - As of September 30, 2023, the Company had cash and cash equivalents of CAD 38,004,000, which is expected to fund committed exploration and evaluation expenditures and general administrative costs for at least the next twelve months[12] - The Company's long-term ability to continue as a going concern depends on the successful execution of its business plan, including bringing the Eskay Creek project to profitable operation, raising additional capital, or evaluating strategic alternatives[12] 2. Basis of Presentation These unaudited condensed interim consolidated financial statements are prepared in accordance with IAS 34 and are consistent with the accounting policies applied in the Company's audited annual consolidated financial statements for the year ended December 31, 2022 - The financial statements are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34)[14] - Accounting policies are consistent with those applied in the Company's audited annual consolidated financial statements as at and for the year ended December 31, 2022[15] 3. New Standards, Amendments and Interpretations Adopted The Company adopted amendments to IAS 1 regarding disclosure of material accounting policies, with no material impact. Future amendments to IAS 1 (non-current liabilities with covenants) and IAS 7/IFRS 7 (supplier finance arrangements) are being assessed, with IAS 1 amendments expected to have no material impact - Amendments to IAS 1, 'Disclosure of Accounting Policies,' effective January 1, 2023, had no material impact on the Company's consolidated financial statements[19] - Amendments to IAS 1, 'Presentation of Financial Statements,' regarding non-current liabilities with covenants, effective January 1, 2024, are expected to have no material impact[21] - The Company is currently assessing the potential disclosure requirements of amendments to IAS 7 and IFRS 7 related to supplier finance arrangements, effective January 1, 2024[24] 4. Financial Instruments and Risk Management The Company's financial instruments include cash, marketable securities, receivables, deposits, and payables. Marketable securities are measured at fair value through profit or loss. The Company is exposed to market risk, particularly from marketable securities, and manages liquidity risk by forecasting cash flows and reviewing expenditures | Financial Instrument | Category | September 30, 2023 (CAD thousands) | December 31, 2022 (CAD thousands) | | :------------------- | :--------------- | :--------------------------------- | :--------------------------------- | | Cash and cash equivalents | Amortized cost | 38,004 | 40,602 | | Marketable securities | Fair value through profit or loss | 2,012 | 2,494 | | Accounts payable | Amortized cost | 20,991 | 10,209 | - Marketable securities are measured using Level 1 inputs (unadjusted quoted prices) for most, while warrants and contingent consideration receivable use Level 3 inputs (unobservable market data)[26] - A 10% decrease in the share price of marketable securities at September 30, 2023, would result in a CAD 201,000 decrease to their carrying value and an increase in unrealized loss[30] 5. Exploration and Evaluation Interests Exploration and evaluation assets increased to CAD 107,849 thousand at September 30, 2023, from CAD 95,438 thousand at December 31, 2022, primarily due to additions at the Eskay Creek Property. The Company incurred significant exploration and evaluation expenses, with Eskay Creek being the largest contributor | Property | Balance, Dec 31, 2022 (CAD thousands) | Additions (CAD thousands) | Balance, Sep 30, 2023 (CAD thousands) | | :--------- | :------------------------------------ | :------------------------ | :------------------------------------ | | Eskay | 78,488 | 12,626 | 91,667 | | KSP | 7,872 | — | 7,872 | | Kingpin | 3,936 | — | 3,936 | | Red Chris | 2,871 | — | 2,871 | | Snip | 959 | — | 191 | | Sofia | 1,312 | — | 1,312 | | Total | 95,438 | 12,626 | 107,849 | - During the nine months ended September 30, 2023, the Company incurred CAD 8,626 thousand relating to earthworks for mine-related infrastructures at Eskay Creek, which are capitalized to exploration and evaluation interests[38] | Expense Category | Nine months ended Sep 30, 2023 (CAD thousands) | Nine months ended Sep 30, 2022 (CAD thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | | Drilling | 11,964 | 11,841 | | Environmental studies | 13,200 | 5,125 | | Geology, geophysics, and geochemical | 15,091 | 15,353 | | Total for the period | 63,899 | 71,944 | 6. Capital Assets During the nine months ended September 30, 2023, the Company invested CAD 4,851 thousand in the construction of a modular analytical laboratory at Eskay Creek and CAD 1,554 thousand in leasehold improvements for a new office space - CAD 4,851 thousand was incurred for the construction of a modular analytical laboratory at Eskay Creek during the nine months ended September 30, 2023[46] - CAD 1,554 thousand was incurred for leasehold improvements towards a new office space during the nine months ended September 30, 2023[46] 7. Related Party Transactions Key management compensation, including director and officer remuneration and share-based payments, totaled CAD 8,867 thousand for the nine months ended September 30, 2023. The Company also had accounts payable of CAD 1,213 thousand due to key management personnel at September 30, 2023 | Compensation Type | Nine months ended Sep 30, 2023 (CAD thousands) | Nine months ended Sep 30, 2022 (CAD thousands) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Director remuneration | 258 | 744 | | Officer & key management remuneration | 2,541 | 2,728 | | Termination benefits | 675 | — | | Share-based payments | 6,033 | 4,920 | | Total Key Management Compensation | 8,867 | 8,392 | - Share-based payment expenses for key management personnel increased to CAD 6,033 thousand for the nine months ended September 30, 2023, from CAD 4,920 thousand in the prior year[47] - Included in accounts payable and accrued liabilities at September 30, 2023, is CAD 1,213 thousand due to key management personnel[52] 8. Capital Stock and Reserves The Company completed a bought deal public offering in May 2023, raising CAD 73,537 thousand. It also adopted the 2023 Omnibus Equity Incentive Plan and granted various share-based payments, including stock options, Restricted Share Units (RSUs), and Deferred Share Units (DSUs), with a total of 4,597,505 stock options and 1,934,502 RSUs outstanding at September 30, 2023 - On May 24, 2023, the Company closed a bought deal public offering, raising gross proceeds of CAD 73,537 thousand by issuing 10,005,000 common shares[54] - During the nine months ended September 30, 2023, Milestone 1 of the Tahltan Investment Rights was met, converting 119,785 Rights into common shares valued at CAD 1,500,000[56] | Instrument | Outstanding, Dec 31, 2022 (Units) | Granted (9M 2023) (Units) | Exercised (9M 2023) (Units) | Cancelled (9M 2023) (Units) | Outstanding, Sep 30, 2023 (Units) | | :----------- | :------------------------ | :------------------ | :------------------ | :------------------ | :------------------------ | | Warrants | 12,823 | — | (9,657) | (3,166) | — | | RSUs | 1,835,821 | 607,750 | (315,853) | (193,216) | 1,934,502 | | DSUs | — | 11,755 | — | — | 11,755 | | Stock Options | 5,033,425 | 155,151 | (267,524) | (323,547) | 4,597,505 | 9. Supplemental Disclosure with Respect to Cash Flows Non-cash transactions for the nine months ended September 30, 2023, included CAD 1,628 thousand in capital asset additions in accounts payable and accrued liabilities, and CAD 1,796 thousand in deposits reclassified to capital assets. No payments were made for interest or income taxes during these periods | Non-Cash Transaction | Nine months ended Sep 30, 2023 (CAD thousands) | Nine months ended Sep 30, 2022 (CAD thousands) | | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Capital asset additions in accounts payable and accrued liabilities | 1,628 | 298 | | Deposits reclassified to capital assets | 1,796 | — | | Share issue costs in accounts payable and accrued liabilities | — | 552 | - The Company did not make any payments towards interest or income taxes during the three and nine months ended September 30, 2023 and 2022[83] 10. Contingencies The Company accrues liabilities for legal and tax matters when the amount can be reasonably estimated, and settlement is probable to require an outflow of future economic benefits - The Company accrues legal and tax matters as liabilities when the amount can be reasonably estimated and settlement is probable to require an outflow of future economic benefits[85] 11. Other Subsequent Events Subsequent to September 30, 2023, the Company closed a non-brokered private placement offering, raising CAD 4,541 thousand, and conditionally granted performance-linked options and PSUs to officers, employees, and consultants, with a maximum of 330,000 options and 770,000 PSUs - On October 10, 2023, the Company closed a non-brokered private placement offering, raising gross proceeds of CAD 4,541 thousand through the issuance of flow-through shares[86] - On October 12, 2023, the Company conditionally granted performance-linked options (maximum 330,000) and PSUs (maximum 770,000) to officers, employees, and consultants, contingent on the Eskay Creek Definitive Feasibility Study results and ESG-linked criteria[87]