1 . NATURE OF OPERATIONS AND GOING CONCERN
Antioquia Gold Inc. (“Antioquia” or the “Company”) was formed by way of amalgamation on April 25, 1997 and continued under the laws of British Columbia on March 24, 2016. The registered address of Antioquia is 2800 Park Place, 666 Burrard St., Vancouver, BC, V6C 2Z7. The Company is listed on the TSX Venture Exchange (“TSX-V”) under the symbol “AGD”. The Company trades on the OTCQX pink sheets, under the symbol “AGDXF”.
The Company owns 100% of Antioquia Gold Ltd., a Barbados company, which in turn has a branch, AGD Colombia, registered to conduct business in Colombia, South America. All mineral exploration and evaluation activities of the Company are carried out in Colombia. The Company owns 100% of Ingenieria Y Gestion Del Territorio S.A. (“IGTER”), a management company incorporated under the laws of Colombia.
The Company’s primary focus is the operation of its Cisneros underground gold mine located outside Medellin Colombia. Commercial production was declared at the Cisneros mine on March 1, 2019. The decision to proceed with construction and mining of the Cisneros Project, was made on the basis of a Preliminary Economic Assessment (“PEA”), as compared to a pre-feasibility or a feasibility study. As a result, there is increased uncertainty and higher risk of economic and technical failure associated with the Company’s decision. Production and economic variables may vary considerably, due to the absence of a pre-feasibility or a feasibility study prepared in accordance with National Instrument 43-101 (“NI 43-101”) standards. In particular, there is additional risk that mineral volumes and grades will be lower than management expected and the risk that construction or ongoing mining operations will be more difficult or more expensive than management expected. Project failure may materially adversely impact the Company’s future profitability, its ability to repay existing loans, and its overall ability to continue as a going concern.
These interim unaudited condensed consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”) applicable to a going concern, which assumes continuity of operations and realization of assets and settlement of liabilities in the normal course of business for the foreseeable future, which
is at least, but not limited to, one year from September 30, 2019. At September 30, 2019, the Company had a cumulative deficit of $52,219,243 (December 31, 2018 – 39,047,575), and a working capital deficit of $108,860,495 (December 31, 2018 – working capital deficit of $89,911,748). The Company’s ability to continue as a going concern is dependent upon its ability to achieve profitable operations, generate sufficient funds and/or continue to obtain sufficient capital from investors to meet its current and future obligations. The recoverability of amounts shown for property and equipment is dependent on future profitable operations or proceeds from disposition of mineral interests. As a result of these risks, there is material uncertainty which raises significant doubt as to the appropriateness of the going concern assumption. There is no assurance that the Company’s initiatives will continue to be successful. These interim unaudited condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and consolidated statements of financial position classifications that would be necessary if the going concern assumption was inappropriate. These adjustments could be material.
These interim unaudited condensed consolidated financial statements were authorized for issue by the board of directors on November 25, 2019.
2 . BASIS OF PRESENTATION
Basis of presentation
These interim unaudited condensed consolidated financial statements of the Company and its subsidiaries are presented in accordance with IFRS and in particular in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Therefore, these interim unaudited condensed consolidated financial statements do not include all the information and note disclosures required by IFRS for annual financial statements and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2018, which have been prepared in accordance with IFRS.
Basis of measurement
These interim unaudited condensed consolidated financial statements have been prepared on the historical cost basis, except for financial instruments designated at fair value through profit and loss, which are stated at their fair value.
Basis of consolidation
These interim unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries; Antioquia Gold Ltd., a Barbados company (“AGD Barbados”) and Ingenieria Y Gestion Del Territorio S.A. (“IGTER”). AGD Barbados has a branch operation in Colombia (“AGD Colombia”). Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are de-consolidated from the date control ceases. Intercompany transactions and balances are eliminated on consolidation.
Presentation and functional currency
The Company’s presentation and functional currencies are the Canadian dollar. The functional currency of AGD Barbados is the United States dollar, and the functional currency of IGTER is the Colombian peso.
For the comparative period in 2018 the functional currency of AGD Colombia was the Colombian peso. During the nine months ended September 30, 2019 the Company went into production and at that time started generating revenue in United States dollars. With this change in circumstances the Company changed AGD Colombia’s functional currency from the Colombian peso to the United States dollar.
Foreign currency translation
The functional currency accounts are translated into the presentation currency by translating assets and liabilities into Canadian dollars at exchange rates in effect at the consolidated statement of financial position date. Equity accounts are translated at historical exchange rates. Revenues and expenses are translated at the average
exchange rate for the period. Any resulting gain or loss is recorded as a component of other comprehensive loss.
3 . CHANGES IN ACCOUNTING POLICIES
These interim unaudited condensed consolidated financial statements have been prepared using accounting policies consistent with those used in the Company’s annual consolidated financial statements as at and for the year ended December 31, 2018 and those new standards adopted in the period, described below.
During the period, the Company adopted the following significant accounting policies:
The determination of when a mine is in the condition necessary for it to be capable of operating in the manner intended by management (referred to as “commercial production”) is a matter of significant judgement which impacts when the Company recognizes revenue, operating costs and depreciation and depletion. In making this determination, management considers specific facts and circumstances. These factors include, but are not limited to, whether the major capital expenditures to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management have been completed, completion of a reasonable period of commissioning and consistent operating results being achieved at pre-determined levels of design capacity for a reasonable period of time. The Company determined commercial production was achieved for the Cisneros Mine on March 1, 2019.