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Item 7. Management’s Discussion and Analysis

2021-08-31 compared with 2020-09-25 · 81 added, 76 removed, 71 unchanged (69% of the section changed)

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The Company was formed on September 1, 2010 as a Delaware corporation.

The Company is Houston-based company, whose primary business is to explore in the state of Alaska for gold ore and associated minerals.

In connection with the closing of the Transactions with Royal Gold in January 2015, the Company formed the Joint Venture Company and contributed to the Joint Venture Company the Peak Gold Joint Venture Property and other related assets.

At the Closing, the Company and Royal Gold, through their wholly-owned subsidiaries, entered into the Joint Venture Company LLC Agreement.

The Company engages in exploration for gold, silver, and copper ores in Alaska.

The Company's largest asset is a 30.0% membership interest in Peak Gold, LLC, which leases approximately 675,000 acres from the Tetlin Tribal Council and owns approximately 13,000 State of Alaska mining claims for exploration and development through its wholly-owned subsidiary, CORE Alaska, LLC.

The Company’s wholly-owned subsidiary, Contango MineralsAlaska, LLC, owns 100% interest in the mineral rights to approximately 200,000 acres of State of Alaska mining claims located north and northwest of the Manh Choh Joint Venture Property.

As of June 30, 2021 the Company had approximately $35.2 million in cash and is actively working to acquire additional properties in Alaska for exploration.

The acquisitions may include leases or similar rights from Alaska Native corporations or may include filing Federal or State of Alaska mining claims by staking claims for exploration.

Neither the Company nor the Joint Venture Company has commenced mining or producing commercially marketable minerals.

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The Company’s ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund future exploration and working capital requirements.

In the future, the Joint Venture Company may generate revenue from a combination of mineral sales and other payments resulting from any commercially recoverable minerals from the Peak Gold Joint Venture Property.

The Company does not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future.

If the Peak Gold Joint Venture Property fails to contain any proven reserves, the Company’s ability to generate future revenue, and the Company’s results of operations and financial position, would be materially adversely affected.

If the Manh Choh Joint Venture Property fails to contain any proven reserves, the Company’s ability to generate future revenue, and the Company’s results of operations and financial position, would be materially adversely affected.

Other potential sources of cash, or relief of demand for cash, include external debt, the sale of shares of the Company’s stock, joint ventures, or alternative methods such as mergers or sale of our assets.

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General and administrative expense for the fiscal year ended June 30, 2021 and 2020 were $10,362,281 and $5,594,995, respectively.

Current year general and administrative expenses primarily related to audit fees, management fees, legal fees, payroll, payroll taxes, and stock-based compensation expense.

We recognized $3,368,916 of stock-based compensation expense for the fiscal year ended June 30, 2020, related to restricted stock and options granted to our officers and directors in January 2020, November 2019, November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014 all pursuant to either the Amended Equity Plan or the 2010 Plan.We recognized $2,988,331 of stock-based compensation expense for the fiscal year ended June 30, 2019, related to restricted stock granted to our officers and directors in November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014 all pursuant to either the Amended Equity Plan or the 2010 Plan.

We incurred legal fees of $1.1 million and $391,000 for the fiscal year ended June 30, 2020 and 2019, respectively.

Legal expenses for the fiscal year ended June 30, 2020 were higher than previous years due to an increase in exploring strategic corporate options.

On November 20, 2019, the Company entered into an Amended and Restated Management Services Agreement (the “A&R MSA”), with JEX, which amends and restates the Management Services Agreement between the Company and JEX dated as of October 1, 2016.

We incurred $504,000 and $384,000 in management fees related to the Management Services Agreement and the A&R MSA in fiscal year 2020 and 2019, respectively.

Under the A&R MSA, JEX manages the general and administrative services of the Company and its interest in the Joint Venture Company, subject to the direction of the Board, including corporate finance, accounting, budget, SEC reporting, risk management, operations and stockholder relation functions of the Company.

No part of the fee is allocated for compensation of our Executive Chairman, Brad Juneau, who is compensated separately as determined by the independent Directors of the Company.

Current year general and administrative expense primarily relates to audit fees, legal fees, management fees, payroll, and stock-based compensation expense.

The current year increase is the result of non-recurring legal and transaction related fees associated with the CORE Transactions, 2020 Private Placement, the 2021 Private Placement, and other strategic corporate activities of approximately $3.2 million and payroll and benefit related fees of $1.2 million.

Payroll and benefit related fees increased because in December 2020, the Company added two new employees, and the Company’s executives that previously provided services to the Company via the Management Services Agreement with JEX, began receiving compensation and benefits directly from the Company, and the management fee under the Management Services Agreement with JEX was reduced.

The Company also paid its executives bonuses totaling $0.5 million in December 2020.

We recognized $3.9 million and $3.4 million of non-cash stock-based compensation expense for the fiscal years ended June 30, 2021 and 2020, respectively, related to restricted stock and options granted to our officers and directors in December 2020, January 2020, November 2019, November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014 all pursuant to either the Amended Equity Plan or the 2010 Plan.

Loss from Equity Investment in the Joint Venture Company .

The loss from the Company’s equity investment in the Joint Venture Company for the fiscal year ended June 30, 2021 and 2020 was $3,861,252 and $3,720,000, respectively.

Pursuant to the JV LLCA, the Company and Royal Gold are required to jointly fund the joint venture operations in proportion to their interests in the Joint Venture Company to avoid dilution.

The Company only records losses up to the point of its cumulative investment.

The Company invested $3,720,000 million in the Joint Venture Company during fiscal year 2020, and $4,140,000 during fiscal year 2019.

Pursuant to the terms of the A&R JV LLCA, the Company and KG Mining are required to jointly fund the joint venture operations in proportion to their membership interests in the Joint Venture Company to avoid dilution.

The Company invested $3,861,252 in the Joint Venture Company during the year ended June 30, 2021, and $3,720,000 during the year ended June 30, 2020.

The portion of the cumulative loss that exceeds the Company’s cumulative investment will be suspended and recognized against earnings, if any, from the Company’s investment in the Joint Venture Company in future periods.

The suspended losses for the period from inception to June 30, 2021 are $23.0 million.

Gain on Sale of a Portion of the Investment in the Joint Venture Company.

The Company recorded the $32.4 million cash proceeds and the 809,744 shares of Common Stock, received from the CORE Transactions, at fair value and recognized a gain on sale of $39.6 million.

The Company valued the Common Stock consideration from the CORE Transactions consistent with the accounting guidance for non-monetary exchanges.

The stock consideration was valued based on the implied fair value of the CORE Transactions in total less the cash proceeds.

The total value of the CORE Transactions was equated to the value of the Company's 30.0% ownership in the Joint Venture Company, post the 30.0% membership interest transferred to KG Mining.

As of the date of the CORE Transaction, the Company's investment in the Joint Venture Company had a zero balance, therefore the $39.6 million gain approximates the full fair value of the CORE JV Interest surrendered in the CORE Transactions.

Income Tax Benefit/(Expense).

The Company recognized an income tax expe nse of $1.3 million for the y ear ended June 30, 2021, compared to $0 for the year ended June 30, 2020.

The Company is forecasting book and taxable income for the year ended June 30, 2021, as a result of the income driven by the gain on the sale of the CORE JV Interest in connection with the Kinross Transactions in the first quarter of fiscal year 2021.

All subsequent quarters of fiscal year 2021 had a net loss.

The Company had a net loss in all quarters of fiscal year June 30, 2020.

Liquidity and Capital Resources

Prior to the Closing, the Company’s primary cash requirements were for exploration-related expenses.

Since the Closing, the Company’s primary cash requirements have been for general and administrative expenses.

Pursuant to the JV LLCA, the Company will require cash to fund the operations of the Joint Venture Company in proportion to its interest in the Joint Venture Company in order to prevent dilution of such interest.

The Company’s sources of cash have been from common stock offerings.

The Peak Gold Joint Venture Property is still in the initial stages of exploration, and the longer term liquidity of the Company will be impaired to the extent the Joint Venture Company’s exploration efforts are not successful in generating commercially viable mineral deposits on the Peak Gold Joint Venture Property.

As of June 30, 2020, the Company had approximately $3.0 million of cash, cash equivalents, and short-term investments.

Due to the effects of COVID-19 and for the safety of the Joint Venture Company's field personnel and the surrounding community, the Management Committee of the Joint Venture Company approved a $2.7 million budget for calendar year 2020 that would serve to care for and maintain the Peak Gold Joint Venture Property, and postpone new exploration until conditions permit.

The Company’s share of the budget is approximately $1.6 million, of which $1.0 million had been funded as of June 30, 2020.

Under this approved budget, the Company has sufficient liquidity to meet its working capital requirements for the next twelve months.

The Company believes that if a larger budget beyond the current care and maintenance budget is undertaken by Joint Venture Company this calendar year and the Company funds its portion, or if we do not complete a strategic transaction, the Company will need to raise capital to fund future exploration.

If a larger budget is undertaken, and no additional financing is obtained, the Company can elect not to fund its portion of the approved budget, in which case the Company would maintain sufficient liquidity to meet its working capital requirements for the next twelve months.

The Company’s primary source of funding has been private offerings of its equity securities.

In September 2016, the Company distributed a Private Placement Memorandum to its warrant holders to give them the opportunity to exercise their warrants at a reduced exercise price and receive shares of common stock, par value $0.01 per share of the Company by paying the reduced exercise price in cash and surrendering the original warrants.

The offering applied to warrant holders with an exercise price of $10.00 per share originally issued in March 2013.

The offering gave the warrant holders the opportunity to exercise the warrants for $9.00 per share.

The offer expired on November 15, 2016.

In conjunction with the offering, a total of 587,500 warrants were exercised resulting in total cash to the Company of $5.3 million.

On October 13, 2017, the Company distributed a Private Placement Memorandum to its warrant holders to give them the opportunity to exercise their warrants at a reduced exercise price and receive shares of common stock, par value $0.01 per share of the Company by paying the reduced exercise price in cash and surrendering the original warrants.

The offering applied to warrant holders with an exercise price of $10.00 per share originally issued in March 2013.

The offering gave the warrant holders the opportunity to exercise the warrants for $9.50 per share.

The offer expired on November 10, 2017.

In conjunction with the offering a total of 124,999 warrants were exercised resulting in total cash to the Company of $1.2 million.

Proceeds from the exercise of the warrants have been used for working capital purposes and for funding future obligations to the Joint Venture Company.

On October 23, 2017, the Company completed the issuance and sale of an aggregate of 553,672 shares of common stock, par value $0.01 per share, of the Company at a purchase price of $19.00 per share of common stock, in a private placement to certain purchasers pursuant to a Stock Purchase Agreement dated as of October 23, 2017, by and among the Company and each purchaser named therein (the “Private Placement”).

Brad Juneau, who was serving as the Company’s President and Chief Executive Officer at the time of the offering, purchased 13,200 shares of common stock, at an aggregate purchase price of $250,800, in the Private Placement on the same terms and conditions as all other purchasers.

The Private Placement resulted in approximately $10.5 million of gross proceeds and approximately $10.0 million of net proceeds.

Prior to the formation of the Joint Venture Company, the Company’s primary cash requirements were for exploration-related expenses.

Since the formation of the Joint Venture Company, the Company’s primary cash requirements have been for general and administrative expenses and capital calls from the Joint Venture Company for the Manh Choh Property.

Prior to the Kinross Transactions, the Company’s sources of cash have been from Common Stock offerings.

In conjunction with the Kinross Transactions, the Company received $32.4 million and 809,744 shares of the Company’s Common Stock.

The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions and were subsequently canceled by the Company.

Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company of its proportionate share of certain silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that KG Mining will bear the entire impact of those royalty payments due from the Joint Venture Company.

As of June 30, 2021, the Company had approximately $35.2 million of cash.

On December 10, 2020, the Management Committee approved a total budget of $18.0 million for the calendar year 2021 to undertake in-fill drilling, engineering and environmental studies necessary to complete a feasibility-level study, additional exploration, community relations, and to prepare the project for formal permitting.

On June 22, 2021 the Management Committee voted to increase the exploration budget by $0.2 million for interpretation of archive drilling, adopting oriented core and geological consulting.

The Company’s proportionate share of the approved budget is approximately $5.5 million.

As of June 30, 2021, the Company has funded approximately $2.5 million to the Joint Venture Company during calendar year 2021.

In addition, the Company plans to fund an approximately $3.0 million exploration program to continue its exploration efforts on its earlier stage Eagle and Hona projects located immediately north of the Manh Choh project area, and to explore for additional resources on 100%-owned Triple Z prospect in late 2021, focused on the areas immediately adjacent to the known Joint Venture Company resources.

Due to cash received in the Kinross Transaction and the capital raise completed in September 2020, the Company believes that it has sufficient liquidity to meet its working capital requirements for the next twelve months.

The Company’s cash needs going forward will primarily relate to capital calls from the Joint Venture Company, exploration of the Contango Property, and general and administrative expenses of the Company.

If a large budget is undertaken, and no additional financing is obtained, the Company can elect not to fund its portion of the approved budget, in which case the Company would maintain sufficient liquidity to meet its working capital requirements for the next twelve months.

The Company entered into Stock Purchase Agreements dated as of June 14, and June 17, 2021 (the “Purchase Agreements”) for the sale of an aggregate of 523,809 shares of Common Stock at a purchase price of $21.00 per share of Common Stock, in a private placement (the “2021 Private Placement”) to certain accredited investors.

The 2021 Private Placement closed on June 17 and 18, 2021.

The 2021 Private Placement resulted in approximately $11.0 million of gross proceeds and approximately $10.9 million of net proceeds to the Company.

The Company will use the net proceeds from the 2021 Private Placement to fund its exploration and development program and for general corporate purposes.

Petrie acted as sole placement agent in connection with the Private Placement and received a placement agent fee equal to 6.50%, which was reduced to 3.25% for existing stockholders and other purchasers referred by those existing stockholders, or a total of $0.5 million in placement agent fees.

On January 8, 2015, Royal Gold invested $5 million to fund exploration activity, and had the option to earn up to a 40% interest in the Joint Venture Company by investing up to $30 million (inclusive of the initial $5 million investment) prior to October 31, 2018.

As of June 30, 2020, Royal Gold had funded approximately $37.0 million (including the initial investment of $5 million) and earned a 40.0% interest in the Joint Venture Company.

The proceeds of Royal Gold’s investment were used for additional exploration of the Peak Gold Joint Venture Property.

For additional information regarding the Joint Venture Company’s capital budget and expenditures, see the “Gold Exploration” section above.

On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of the Company’s common stock, par value $0.01 per share, in a private placement (the “2020 Private Placement”) to certain purchasers who are accredited investors.

The shares sold in the 2021 Private Placement were issued in reliance on an exemption from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.

The bases for the availability of this exemption include the facts that the issuance was a private transaction which did not involve a public offering and the shares were offered and sold to a limited number of purchasers.

Rick Van Nieuwenhuyse, the Company’s President and Chief Executive Officer, purchased 47,619 shares of Common Stock, for a purchase price of approximately $1,000,000, in the 2021 Private Placement pursuant to a Purchase Agreement dated June 17, 2021, on the same terms and conditions as all other purchasers, except that Mr.

Nieuwenhuyse did not receive any of the rights under the Registration Rights Agreement.

The 2021 Private Placement to Mr.

Nieuwenhuyse closed on June 18, 2021.

The Audit Committee of the Company has reviewed and approved all agreements and arrangements relating to Mr.

Van Nieuwenhuyse’s participation in the 2021 Private Placement.

On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of the Company’s Common Stock in a private placement (the “2020 Private Placement”) to certain purchasers who are accredited investors.

The shares of the Common Stock were sold at a price of $13.25 per share, resulting in gross proceeds to the Company of approximately $3.3 million and net proceeds to the Company of approximately $3.2 million.

The Company will use the net proceeds from the 2020 Private Placement for working capital purposes and for funding future obligations to the Joint Venture Company.

Petrie Partners Securities, LLC (“Petrie”) acted as the sole placement agent in connection with the 2020 Private Placement and received a placement agent fee equal to 3.25% of the gross proceeds raised from the subscribers whom they solicited, or a total of approximately $0.05 million in placement agent fees.

The Company will use the net proceeds from the 2020 Private Placement for working capital purposes and for funding future obligations to the Joint Venture Company and Contango Minerals.

Petrie has provided to the Company in the past and may provide from time to time in the future certain securities offering, financial advisory, investment banking and other services for which it has received and may continue to receive customary fees and commissions.

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The Company’s President and Chief Executive Officer, Rick Van Nieuwenhuyse, purchased 75,472 of shares of Common Stock in the 2020 Private Placement, for total consideration of $1.0 million, on the same terms and conditions as all other Purchasers.

As a result of Mr.

Van Nieuwenhuyse’s purchase, as of September 23, 2020, his ownership interest in the Company is 2.2%.

The Audit Committee of the Company has reviewed and approved all agreements and arrangements relating to Mr.

Van Nieuwenhuyse’s participation in the 2020 Private Placement.

- Subsequent Events for information on the 2020 Private Placement.

Pursuant to the terms of the JV LLCA, the Company and Royal Gold are required to jointly fund the joint venture operations in proportion to their interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget or contributes less than its proportionate interest, its percentage interest will be reduced.

The capital costs of developing a large gold mining facility could exceed $1 billion.

KG Mining became the Manager of the Joint Venture Company in conjunction with the Kinross Transactions and the signing of the A&R JV LLCA.

Pursuant to the terms of the A&R JV LLCA, the Company and KG Mining are required to jointly fund the joint venture operations in proportion to their membership interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget or contributes less than its proportionate membership interest, its percentage membership interest will be reduced.

The Company’s ability to contribute funds sufficient to retain its membership interests in the Joint Venture Company may be limited.

To date, neither the Company nor the Joint Venture Company has generated any revenue from mineral sales or operations.

The Company does not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future.

Further, neither the Company nor the Joint Venture Company has any recurring source of revenue other than the Company and Royal Gold’s contributions to the Joint Venture Company.

As a result, the Company’s ability to contribute funds to the Joint Venture Company and retain its interest will depend on its ability to raise capital.

The Company has limited financial resources and the ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the exploration results achieved at the Peak Gold Joint Venture Property, as well as the market price of metals.

The Company currently does not have any recurring source of revenue.

The Joint Venture Company currently does not have any recurring source of revenue, and its only source of cash inflows are contributions received from KG Mining and the Company.

As a result, the Company’s ability to contribute funds to the Joint Venture Company and retain its membership interest will depend on its ability to raise capital.

The Company has limited financial resources and the ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the exploration results achieved at the Manh Choh Joint Venture Property, as well as the market price of metals.

The Company cannot be certain that financing will be available to the Company on acceptable terms, if at all.

If the Company were unable to fund its contributions to the approved programs and budgets for the Joint Venture Company, its interest in the Joint Venture Company would be diluted.

Now that Royal Gold has earned a 40% interest in the Joint Venture Company, it has the additional right to require the Company to sell up to 20% of the interest in the Joint Venture Company in a sale of Royal Gold’s entire 40% interest in the Joint Venture Company.

If Royal Gold exercises this right, the Company will be obligated to sell 20% of the membership interest to a bona fide third-party purchaser on the same terms and conditions as the interest being sold by Royal Gold.

If the Company were unable to fund its contributions to the approved programs and budgets for the Joint Venture Company, its membership interest in the Joint Venture Company would be diluted.

Further financing by the Company may include issuances of equity, instruments convertible into equity (such as warrants) or various forms of debt.

The Company believes that it is likely that it will raise capital through the issuance of additional equity securities in the next six months for purposes of funding its proportionate share of future Joint Venture Company exploration and for the Company’s operating costs.

The Company has issued Common Stock and other instruments convertible into equity in the past and cannot predict the size or price of any future issuances of Common Stock or other instruments convertible into equity, and the effect, if any, that such future issuances and sales will have on the market price of the Company’s securities.

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Contractual Obligations

The Tetlin Lease had an initial ten year term beginning in July 2008 which was extended for an additional ten years to July 15, 2028, or so long as the Joint Venture Company initiates and continues to conduct mining operations on the Tetlin Lease.

The Joint Venture Company is required to spend $350,000 annually until July 15, 2018 in exploration costs pursuant to the Tetlin Lease.

However, exploration expenditures to date under the lease have already satisfied this work commitment requirement for the full lease term, through 2028, because exploration funds spent in any year in excess of $350,000 are credited toward future years’ exploration cost requirements.

The Tetlin Lease had an initial ten year term beginning July 2008 which was extended for an additional ten years to July 15, 2028, or so long as the Joint Venture Company initiates and continues to conduct mining operations on the Tetlin Lease.

The Joint Venture Company was required to spend $350,000 per year annually until July 15, 2018 in exploration costs pursuant to the Tetlin Lease.

Exploration expenditures to date under the Tetlin Lease have satisfied this work commitment requirement for the full lease term, through 2028, because exploration funds spent in any year in excess of $350,000 are credited toward future years’ exploration cost requirements.

The Tetlin Lease also provides that the Joint Venture Company will pay the Tetlin Tribal Council a production royalty ranging from 3.0% to 5.0% should the Joint Venture Company deliver to a purchaser on a commercial basis precious or non-precious metals derived from the properties under the Tetlin Lease.

As of June 30, 2019, the Company had paid the Tetlin Tribal Council $225,000 in exchange for reducing the production royalty payable to them by 0.75%.

The Company had previously paid the Tetlin Tribal Council $225,000 in exchange for reducing the production royalty payable to them by 0.75%.

These payments lowered the production royalty to a range of 2.25% to 4.25%.

On or before July 15, 2020, the Tetlin Tribal Council had the option to increase its production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, (ii) 0.50% by payment to the Joint Venture Company of $300,000, or (iii) 0.75% by payment to the Joint Venture Company of $450,000.

The Management Committee of the Joint Venture Company extended the Tetlin Tribal Council’s option until November 15, 2020.

On January 8, 2015, the Company assigned the Tetlin Lease to the Joint Venture Company in connection with the Transactions.

The Tetlin Tribal Council had the option to increase its production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, (ii) 0.50% by payment to the Joint Venture Company of $300,000, or (iii) 0.75% by payment to the Joint Venture Company of $450,000.

The Tetlin Tribal Council exercised the option to increase its production royalty by 0.75% by payment to the Joint Venture Company of $450,000 on December 30, 2020.

In lieu of a cash payment, the $450,000 will be credited against future production royalty and advance minimum royalty payments due by the Joint Venture Company to the Tetlin Tribal Council under the lease once production begins.

On January 8, 2015, the Company assigned the Tetlin Lease to the Joint Venture Company in connection with the formation of the Joint Venture Company.

Until such time as production royalties begin, the Joint Venture Company will pay the Tetlin Tribal Council an advance minimum royalty of approximately $75,000 per year, plus an inflation adjustment.

Additionally, the Joint Venture Company will pay Royal Gold an overriding royalty of 3.0% should it deliver to a purchaser on a commercial basis gold or associated minerals derived from the Tetlin Lease and certain other properties, and an overriding royalty of 2.0% should it deliver to a purchaser on a commercial basis precious metals, non-precious metals or hydrocarbons derived from additional properties.

The Joint Venture Company pays claim rentals on state of Alaska mining claims which vary based on the ages of the claims.

Additionally, the Joint Venture Company will pay Royal Gold an overriding royalty of 3.0% should it deliver to a purchaser on a commercial basis gold or associated minerals derived from the Tetlin Lease, and a 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease.

The Company will pay Royal Gold an overriding royalty of 3.0% on certain State of Alaska mining claims should it deliver to a purchaser on a commercial basis precious metals, non-precious metals or hydrocarbons.

The Company pays claim rentals on State of Alaska mining claims which vary based on the ages of the claims.

For the 2020–2021 assessment year, claims rentals totaled $349,955.

In addition, if the minimum work requirement is not performed on the property, additional minimum labor payments are due on certain state of Alaska acreage.

Also, if the minimum work requirement is not performed on the property, additional minimum labor payments are due on certain state of Alaska acreage.

In February 2019, the Company entered into Retention Agreements with its then-Chief Executive Officer, Brad Juneau, its Chief Financial Officer, Leah Gaines, and one other employee providing for payments in an aggregate amount of $1,500,000 upon the occurrence of certain conditions.

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Van Nieuwenhuyse is employed by the Company when the change of control occurs.

The Company received $32.4 million in cash consideration in conjunction with the Kinross Transactions.

Of the $32.4 million, $1.2 million constituted a reimbursement prepayment to the Company relating to its proportionate share of certain silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that KG Mining will bear the entire economic impact of those royalty payments due from the Joint Venture Company.

Pursuant to Article IV of the A&R JV LLCA, if the Joint Venture Company is dissolved, or the Company’s membership interest in the Joint Venture Company falls below 5% prior to when the prepaid royalty is paid out, the $1.2 million (less any portion already paid out) is refundable to KG Mining.

Application of Critical Accounting Policies and Management ’s Estimates

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The portion of the cumulative loss that exceeds the Company’s investment will be suspended and recognized against earnings, if any, from the investment in the Joint Venture Company in future periods.

The audited financial statements of the Joint Venture Company as of the year ended June 30, 2020 are filed as an exhibit to this Form 10-K.

The audited financial statements of the Joint Venture Company as of and for the six months ended December 31, 2020 are filed as an exhibit to this Form 10-K.

Recently Issued Accounting Pronouncements.

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplemental information required to be filed under Item 8 of Form 10-K are presented on pages 40 through 58 of this Form 10-K.

The consolidated financial statements and supplemental information required to be filed under Item 8 of Form 10-K are presented on pages 40 through 58 o f this Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis