Skeena(SKE) - 2024 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements This report presents Skeena Resources Limited's unaudited condensed interim consolidated financial statements and accompanying notes for the three months ended March 31, 2024 Financial Statements This section presents the unaudited condensed interim consolidated financial statements for Skeena Resources Limited, covering the statements of financial position, loss and comprehensive loss, changes in shareholders' equity, and cash flows for the three months ended March 31, 2024, and 2023 Condensed Interim Consolidated Statements of Financial Position This statement details the Company's assets, liabilities, and shareholders' equity, showing a decrease in total assets and equity as of March 31, 2024 Condensed Interim Consolidated Statements of Financial Position | Metric | March 31, 2024 (CAD '000) | December 31, 2023 (CAD '000) | Change (CAD '000) | % Change | | :----------------------------- | :-------------------------- | :--------------------------- | :---------------- | :------- | | Total Assets | 167,582 | 194,987 | (27,405) | -14.05% | | Total Liabilities | 66,090 | 70,452 | (4,362) | -6.19% | | Total Shareholders' Equity | 101,492 | 124,535 | (23,043) | -18.50% | | Cash and cash equivalents | 59,056 | 91,135 | (32,079) | -35.20% | Condensed Interim Consolidated Statements of Loss and Comprehensive Loss This statement outlines the Company's financial performance, reporting an increased loss and comprehensive loss for the three months ended March 31, 2024 Condensed Interim Consolidated Statements of Loss and Comprehensive Loss | Metric | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | Change (CAD '000) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------- | :------- | | Loss and comprehensive loss | (27,418) | (16,743) | (10,675) | 63.76% | | Loss per share – basic and diluted | (0.30) | (0.22) | (0.08) | 36.36% | | Exploration and evaluation | 20,047 | 11,052 | 8,995 | 81.39% | | Share-based payments | 3,001 | 2,160 | 841 | 38.94% | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity This statement tracks changes in the Company's capital stock, reserves, and accumulated deficit, reflecting a decrease in total shareholders' equity Condensed Interim Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance Dec 31, 2023 (CAD '000) | Balance Mar 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------- | :----------------------------- | :----------------------------- | :---------------- | | Capital Stock | 552,397 | 552,881 | 484 | | Reserves | 48,299 | 52,190 | 3,891 | | Deficit | (476,911) | (504,329) | (27,418) | | Total Shareholders' Equity | 124,535 | 101,492 | (23,043) | - The deficit increased by $27,418,000 CAD during the three months ended March 31, 2024, primarily due to the loss for the period[6] Condensed Interim Consolidated Statements of Cash Flows This statement summarizes the Company's cash inflows and outflows from operating, investing, and financing activities, indicating significant cash usage Condensed Interim Consolidated Statements of Cash Flows | Activity | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | Change (CAD '000) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------- | | Net cash used in operating activities | (23,217) | (17,809) | (5,408) | | Net cash used in investing activities | (8,398) | (1,973) | (6,425) | | Net cash (used in) provided by financing activities | (464) | 882 | (1,346) | | Change in cash and cash equivalents | (32,079) | (18,900) | (13,179) | | Cash and cash equivalents, end of period | 59,056 | 21,702 | 37,354 | Notes to the Condensed Interim Consolidated Financial Statements This section provides detailed notes to the condensed interim consolidated financial statements, offering insights into the Company's operations, accounting policies, financial instruments, exploration activities, capital structure, related party transactions, and contingencies 1. Nature of Operations This note describes the Company's primary business of mineral exploration and evaluation, highlighting its current funding status and going concern considerations - Skeena Resources Limited's principal business activity is the exploration and evaluation of mineral properties in British Columbia, Canada, currently in the exploration stage[11] - As of March 31, 2024, the Company had $59,056,000 CAD in cash and cash equivalents, sufficient to fund committed exploration and general administrative costs for at least twelve months, though current cash balances are not sufficient for planned exploration and evaluation activities beyond 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 This note clarifies the accounting standards used for the interim financial statements and their consistency with prior annual reports - The unaudited condensed interim consolidated financial statements are prepared in accordance with International Accounting Standard 34 (IAS 34) and should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023[13] - Accounting policies applied are consistent with those in the 2023 annual consolidated financial statements, except as disclosed in Note 3[14] 3. New Standards, Amendments and Interpretations This note details the adoption of new accounting standards and the evaluation of future standards, including IFRS 18 - The Company adopted amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements effective January 1, 2024, with no material impact on the financial statements[17] - IFRS 18, which replaces IAS 1 and introduces significant changes to the statement of income (loss) structure, is applicable for annual reporting periods beginning on or after January 1, 2027, and the Company is currently evaluating its impact[18][19] 4. Financial Instruments and Risk Management This note provides an overview of the Company's financial instruments, their carrying values, fair value hierarchy, and associated credit, market, and liquidity risks Financial Instrument Carrying Values This section presents the carrying values of various financial instruments, categorized by their measurement basis, as of March 31, 2024, and December 31, 2023 | Financial Instrument | Category | March 31, 2024 (CAD '000) | December 31, 2023 (CAD '000) | | :------------------- | :------- | :------------------------ | :--------------------------- | | Cash and cash equivalents | Amortized cost | 59,056 | 91,135 | | Marketable securities | Fair value through profit or loss | 1,369 | 1,554 | | Receivables | Amortized cost | 954 | 957 | | Deposits | Amortized cost | 8,078 | 2,102 | | Accounts payable | Amortized cost | 5,719 | 16,074 | | Convertible debenture | Fair value through profit or loss | 23,955 | 22,775 | | Other liabilities | Amortized cost | 732 | 691 | Fair Value Hierarchy This section classifies financial instruments based on the inputs used in their fair value measurement, particularly noting the Level 3 classification of the convertible debenture - Marketable securities are classified as Level 1, based on quoted market prices[22] - The fair value of the convertible debenture is classified as Level 3, subject to significant estimates related to project financing and change of control probabilities, and its fair value increased by $1,180,000 CAD during the three months ended March 31, 2024[23] Credit Risk This section discusses the Company's exposure to credit risk and its approach to measuring expected credit losses in accordance with IFRS 9 - The Company measures credit losses using a present value and probability-weighted model in accordance with IFRS 9, with no material expected credit losses for financial instruments held at amortized cost[24][25] Market Risk This section details the Company's exposure to market risk, specifically on marketable securities, and the potential impact of share price fluctuations - As of March 31, 2024, the Company is exposed to market risk on its marketable securities, where a 10% decrease in their share price would result in a $137,000 CAD decrease in carrying value and an equivalent increase in unrealized loss[26] Liquidity Risk This section outlines the Company's strategy for managing liquidity risk, including cash flow forecasting and a schedule of undiscounted financial liabilities - The Company manages liquidity risk by forecasting cash flows and actively reviewing significant expenditures and commitments[27][28] Undiscounted Financial Liabilities by Maturity Period | Maturity Period | Undiscounted Financial Liabilities (CAD '000) | | :---------------- | :-------------------------------------------- | | Less than 1 year | 26,910 | | 1-5 years | 43,989 | | Greater than 5 years | 39,289 | | Total | 110,188 | - Management expects the convertible debenture, maturing in December 2028, to be repaid during 2024 upon completion of project financing for the Eskay Creek project[29] 5. Deposits This note details significant deposits made by the Company, specifically those related to infrastructure at the Eskay Creek project - During the three months ended March 31, 2024, the Company paid $5,693,000 CAD in deposits related to certain infrastructure at Eskay Creek[30] 6. Exploration and Evaluation Interests This note provides details on the Company's mineral properties, including capitalized assets, royalty agreements, and exploration expenditures Exploration and Evaluation Assets This section presents the carrying values of the Company's exploration and evaluation assets by property, including additions related to the Eskay Creek project Exploration and Evaluation Assets by Property | Property | Balance Dec 31, 2023 (CAD '000) | Additions (CAD '000) | Balance Mar 31, 2024 (CAD '000) | | :--------- | :------------------------------ | :------------------- | :------------------------------ | | Eskay | 44,822 | 1,581 | 45,927 | | Snip | 1,469 | — | 1,250 | | Other | 16,123 | — | 16,123 | | Total | 62,414 | 1,581 | 63,300 | - On December 18, 2023, the Company sold a 1% net smelter return royalty on Eskay to Franco-Nevada Corporation for $56,000,000 CAD cash and contingent cash consideration of $3,000,000 CAD to $4,500,000 CAD upon milestone completion[32] - During the three months ended March 31, 2024, the Company capitalized $1,581,000 CAD related to engineering and fabrication of mill equipment for Eskay Creek[33] Exploration and Evaluation Expenses This section details the breakdown of exploration and evaluation expenses, highlighting significant increases in environmental and geological costs Exploration and Evaluation Expenses by Category | Expense Category | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | | :----------------- | :------------------------------------------ | :------------------------------------------ | | Environmental studies | 7,241 | 3,329 | | Geology, geophysics, and geochemical | 8,251 | 3,735 | | Share-based payments | 1,078 | 278 | | Total | 20,047 | 11,052 | - Total exploration and evaluation expenses increased by 81.39% from $11,052,000 CAD in Q1 2023 to $20,047,000 CAD in Q1 2024, driven primarily by higher environmental studies and geology/geophysics costs at Eskay[35][37] 7. Capital Stock and Reserves This note provides information on the Company's capital structure, including Tahltan Investment Rights and various share-based payment instruments Tahltan Investment Rights This section describes the issuance of common shares related to the final milestone payment for Tahltan Investment Rights - In April 2024, the Company issued the final share payment related to Milestone 4 of the Tahltan Investment Rights, converting 79,858 Rights into common shares[39] Share-based Payments This section details the activity and expenses related to the Company's Restricted Share Units, Performance Share Units, Deferred Share Units, and Stock Options Share-based Payment Instrument Activity | Instrument | Outstanding Dec 31, 2023 | Granted Q1 2024 | Exercised Q1 2024 | Cancelled Q1 2024 | Outstanding Mar 31, 2024 | | :--------- | :----------------------- | :-------------- | :---------------- | :---------------- | :----------------------- | | RSUs | 1,845,339 | 323,940 | (48,334) | (23,659) | 2,097,286 | | PSUs | 770,000 | — | — | — | 770,000 | | DSUs | 86,257 | 142,158 | — | — | 228,415 | | Stock Options | 4,899,918 | 1,022,093 | (20,834) | (38,732) | 5,862,445 | - On January 28, 2024, the Company granted 822,093 stock options, 323,940 RSUs, and 105,080 DSUs to various personnel, with stock options and RSUs granted to senior management subject to a vesting condition of the Company raising at least $65,000,000 CAD[44] Share-based Payment Expenses | Expense Type | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | | :----------- | :------------------------------------------ | :------------------------------------------ | | Stock options | 773 | 741 | | RSUs | 2,022 | 1,697 | | PSUs | 684 | — | | DSUs | 600 | — | | Total | 4,079 | 2,438 | Key Inputs for Share-based Payment Valuation | Input | 2024 | 2023 | | :-------------------- | :--- | :--- | | Expected life (years) | 3.5 | — | | Annualized volatility | 54.21% | —% | | Dividend rate | —% | —% | | Risk-free interest rate | 3.79% | —% | 8. Supplemental Disclosure with Respect to Cash Flows This note provides additional information on non-cash transactions that affect the Company's financial position but are not reflected in the cash flow statement Non-Cash Transactions Affecting Cash Flows | Non-Cash Transaction | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | | :------------------- | :------------------------------------------ | :------------------------------------------ | | Capital asset additions in accounts payable and accrued liabilities | 167 | 142 | | Leasehold improvement allowance in receivables | 905 | — | | Exploration and evaluation expenditures in accounts payable and accrued liabilities | 1,906 | — | | Settlement of accrued directors fees through issuance of DSUs | 205 | — | 9. Related Party Transactions This note outlines transactions and balances with related parties, including remuneration for directors, officers, and key management personnel Related Party Remuneration | Remuneration Type | Three months ended March 31, 2024 (CAD '000) | Three months ended March 31, 2023 (CAD '000) | | :---------------- | :------------------------------------------ | :------------------------------------------ | | Director remuneration | 96 | 81 | | Officer & key management remuneration | 876 | 854 | | Termination benefits | — | 675 | | Share-based payments | 2,802 | 1,630 | - Share-based payment expenses to related parties recorded in general and administrative expense increased from $1,504,000 CAD in Q1 2023 to $2,543,000 CAD in Q1 2024[52] - Included in accounts payable and accrued liabilities at March 31, 2024, is $424,000 CAD due to key management personnel, a decrease from $1,004,000 CAD at December 31, 2023[54] 10. Contingencies This note discloses potential future obligations or assets arising from past events, specifically an appeal hearing regarding mineral rights - The Company has an appeal hearing on May 15, 2024, regarding the ownership of mineral rights to materials in the Albino Lake Storage Facility, with the outcome not expected to affect the carrying value of Eskay as these materials were not included in previous studies[56] 11. Other Subsequent Event This note reports significant events occurring after the reporting period, such as the issuance of common shares upon RSU vesting - In April 2024, the Company issued 302,357 common shares upon the vesting of Restricted Share Units (RSUs) granted on April 21, 2022[57]