Company Quick10K Filing
Quick10K
Hunt Mining
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-05-14 Quarter: 2018-05-14
10-K 2018-04-16 Annual: 2018-04-16
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-07-31 Enter Agreement, M&A, Sale of Shares, Control, Officers, Exhibits
8-K 2018-05-30 Officers
MIST Milestone Pharmaceuticals 565
CORVF Corvus Gold 196
JUVF Juniata Valley Financial 115
SUME Summer Energy Holdings 63
SIAF Sino Agro Food 7
MYHI Mountain High Acquisitions 2
CSTU Colorstars Group 0
GTVI Joway Health Industries 0
ARS Aleris 0
CHNG Change Healthcare 0
HMX 2019-06-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings: There Are No Proceedings To Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None
Item 3. Default Upon Senior Securities: There Are No Defaults To Report.
Item 4. Mine Safety Disclosures: N/A
Item 5. Other Information: None
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Hunt Mining Earnings 2019-06-30

HMX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 hmx-10q-06302019.htm


a

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

Commission File Number: 333-182072
--------------------------

Patagonia Gold Corp.
(Exact name of Registrant as specified in its charter)

British Columbia, Canada
1041
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)

Av. Libertador 498 P. 26 C.A.B.A (+5411) 52786950
(Address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes      No

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
 
As of August 14, 2019, the registrant's outstanding common stock consisted of 63,588,798 shares.
 
 

 
 



 
Hunt Mining Corp.
Consolidated Interim financial statements

 
 
Six months ended June 30, 2019 and year ended December 31, 2018
Page
 
 
Consolidated Balance Sheets
3
 
 
Consolidated Statements of Operations and Comprehensive Income (Loss) 4
 
 
Consolidated Statement of Changes in Stockholders' Deficiency 5
 
 
Consolidated Statements of Cash Flows 6
   
 Notes to the Consolidated Interim financial statements   7 - 23
 
 
 
 
 
 
 
 
 
 
- 2 -


 
 
 
 
Hunt Mining Corp.
                 
 Expressed in U.S. Dollars
                 
                   
 Interim Consolidated Balance Sheets
                 
         
June 30,
   
December 31,
 
   
NOTE
   
2019
   
2018
 
 CURRENT ASSETS:
                 
 Cash
   
17
   
$
41,136
   
$
115,372
 
 Accounts receivable
   
12,17,20
     
1,421,858
     
1,474,303
 
 Prepaid expenses
           
7,924
     
57,672
 
 Inventory
   
7
     
642,389
     
913,915
 
 Total Current Assets
           
2,113,307
     
2,561,262
 
 NON-CURRENT ASSETS:
                       
 Mineral Properties
   
8
     
438,062
     
438,062
 
 Property, plant and equipment
   
10
     
4,077,525
     
4,585,520
 
 Performance bond
   
11,17
     
342,583
     
315,378
 
 Total Non-Current Assets:
           
4,858,170
     
5,338,960
 
 TOTAL ASSETS:
         
$
6,971,477
   
$
7,900,222
 
                         
 CURRENT LIABILITIES:
                       
 Accounts payable and accrued liabilities
   
13,16,17
   
$
8,412,003
   
$
6,328,861
 
 Bank indebtedness
   
21
     
400,000
     
330,000
 
 Interest payable
   
16,17
     
-
     
320,669
 
 Transaction taxes payable
   
17
     
-
     
129
 
 Loan payable and current portion of long-term debt
   
14,16,17
     
550,183
     
3,198,569
 
 Total Current Liabilities:
           
9,362,186
     
10,178,228
 
 NON-CURRENT LIABILITIES:
                       
 Long-term debt
   
14,16,17
     
3,310,123
     
1,253,017
 
 Asset retirement obligation
   
9
     
1,361,292
     
1,308,399
 
 Interest on debt
   
16,17
     
526,455
     
-
 
 Total Non-Current Liabilities:
           
5,197,870
     
2,561,416
 
 TOTAL LIABILITIES:
         
$
14,560,056
   
$
12,739,644
 
                         
 STOCKHOLDERS' DEFICIENCY:
                       
 Capital stock: Authorized- Unlimited No Par Value Issued and outstanding - 63,588,798 common shares (December 31, 2018 - 63,588,798 common shares)
   
15
   
$
24,695,186
   
$
24,695,186
 
 Additional paid in capital
           
9,696,520
     
9,696,520
 
 Deficit
           
(42,098,480
)
   
(39,557,836
)
 Accumulated other comprehensive income (loss)
           
118,195
     
326,708
 
 Total Stockholders' Deficiency:
           
(7,588,579
)
   
(4,839,422
)
 TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
         
$
6,971,477
   
$
7,900,222
 
                         
 Going Concern (Note 3)
                       
 Commitments and Provision (Note 19)
                       
 Subsequent Events (Note 22)
                       
                         
 Approved on behalf of the Board of Directors
                       
                         
 Signed CEO "Christopher van Tienhoven"
                       
                         
 Signed CFO "Cristian Lopez Saubidet"
                       
                         
The accompanying notes are an integral part of these interim consolidated financial statements.
         
 
 
 
 
- 3 -


 
 
 
Hunt Mining Corp.
                             
 Expressed in U.S. Dollars
                             
Interim Consolidated Statements of Operations and Comprehensive Loss
       
             
  
 
3 month period ended June 30,
   
6 month period ended June 30,
 
   
NOTE
   
2019
   
2018
   
2019
   
2018
 
 OPERATING EXPENSES:
                             
 Professional fees
   
16
     
340,644
     
214,171
     
466,385
     
336,264
 
 Directors fees
           
748
     
1,589
     
1,499
     
1,589
 
 Exploration expenses
           
-
     
111,997
     
-
     
260,947
 
 Travel expenses
           
13,702
     
72,043
     
66,938
     
117,510
 
 Administrative and office expenses
   
16
     
79,896
     
26,026
     
109,951
     
93,004
 
 Payroll expenses
   
16
     
79,163
     
93,978
     
148,641
     
201,876
 
 Interest expense
   
16
     
195,812
     
96,068
     
356,219
     
228,828
 
 Banking charges
           
17,577
     
22,364
     
29,397
     
41,983
 
 Depreciation
   
10
     
253,998
     
403,398
     
507,995
     
805,666
 
 Royalty expense
           
5,242
     
-
     
11,146
     
-
 
 Total operating expenses:
         
$
986,782
   
$
1,041,634
   
$
1,698,171
   
$
2,087,667
 
 OTHER INCOME/(EXPENSE):
                                       
 Silver and gold recovery (loss), net of expenses
   
20
     
(608,175
)
 
$
-
   
$
(490,116
)
 
$
202,614
 
 Interest income
           
4,618
     
3,197
     
9,611
     
7,538
 
 Transaction taxes
           
(3,952
)
   
(5,665
)
   
(6,802
)
   
(10,259
)
 Gain (loss) on foreign exchange
           
4,133
     
(161,586
)
   
(290,073
)
   
(143,619
)
 Accretion expense
   
9
     
(32,547
)
   
(18,659
)
   
(65,093
)
   
(37,318
)
 Total other income (expense):
         
$
(635,923
)
 
$
(182,713
)
 
$
(842,473
)
 
$
18,956
 
 NET LOSS FOR THE PERIOD
         
$
(1,622,705
)
 
$
(1,224,347
)
 
$
(2,540,644
)
 
$
(2,068,711
)
                                         
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
                                 
 Change in value of performance bond
   
11
     
14,600
     
(56,378
)
   
27,205
     
(91,425
)
 Foreign currency translation adjustment
           
(166,931
)
   
93,356
     
(235,718
)
   
193,182
 
 TOTAL NET LOSS AND COMPREHENSIVE
                                       
 LOSS FOR THE PERIOD:
         
$
(1,775,036
)
 
$
(1,187,369
)
 
$
(2,749,157
)
 
$
(1,966,954
)
                                         
Weighted average shares outstanding - basic and diluted
     
63,588,798
     
63,588,798
     
63,588,798
     
63,588,798
 
                                         
 NET LOSS PER SHARE - BASIC AND DILUTED:
         
$
(0.03
)
 
$
(0.02
)
 
$
(0.04
)
 
$
(0.03
)
                                         
The accompanying notes are an integral part of these consolidated financial statements.
         
 
 
 
- 4 -



 
 

 
Hunt Mining Corp.
                   
 Expressed in U.S. Dollars
                   
                     
Interim Consolidated Statement of Changes in Stockholders' Deficiency
     
                     
         
Accumulated
         
         
Other
 
Additional
     
 
Capital
     
Comprehensive
 
Paid in
     
 
Stock
 
Deficit
 
Income (Loss)
 
Capital
 
Total
 
                     
 Balance -January 1, 2018
 
$
24,695,186
   
$
(35,993,656
)
 
$
57,289
   
$
9,696,520
   
$
(1,544,661
)
 Net Income
   
-
     
(2,068,711
)
   
-
     
-
     
(2,068,711
)
 Other comprehensive income
   
-
     
-
     
101,757
     
-
     
101,757
 
 Balance - June 30, 2018
 
$
24,695,186
   
$
(38,062,367
)
 
$
159,046
   
$
9,696,520
   
$
(3,511,615
)
                                         
 Balance - July 1, 2018
 
$
24,695,186
   
$
(38,062,367
)
 
$
159,046
   
$
9,696,520
   
$
(3,511,615
)
 Net Income (loss)
   
-
     
(1,495,469
)
   
-
     
-
     
(1,495,469
)
 Other comprehensive income
   
-
     
-
     
167,662
     
-
     
167,662
 
 Balance - December 31, 2018
 
$
24,695,186
   
$
(39,557,836
)
 
$
326,708
   
$
9,696,520
   
$
(4,839,422
)
                                         
 Balance - January 1, 2019
 
$
24,695,186
   
$
(39,557,836
)
 
$
326,708
   
$
9,696,520
   
$
(4,839,422
)
 Net Income (loss)
   
-
     
(2,540,644
)
   
-
     
-
     
(2,540,644
)
 Other comprehensive income
   
-
     
-
     
(208,513
)
   
-
     
(208,513
)
 Balance - June 30, 2019 (Note 22)
 
$
24,695,186
   
$
(42,098,480
)
 
$
118,195
   
$
9,696,520
   
$
(7,588,579
)
                                         
The accompanying notes are an integral part of these interim consolidated financial statements.
         
 
 
 
 
- 5 -


 
 
 
 
Hunt Mining Corp.
                 
 Expressed in U.S. Dollars
                 
                   
 Interim Consolidated Statements of Cash Flows
                 
   
6 month period ended June 30,
 
   
NOTE
   
2019
   
2018
 
                   
 CASH FLOWS FROM OPERATING ACTIVITIES:
                 
 Net Loss
       
$
(2,540,644
)
 
$
(2,068,711
)
 Items not affecting cash
                     
 Depreciation
   
10
     
507,995
     
805,666
 
 Loss on foreign exchange
           
(12,200
)
   
(4,200
)
 Accretion
   
9
     
65,093
     
37,318
 
 Net change in non-cash working capital items
                       
 Decrease in accounts receivable
           
52,445
     
1,065,334
 
 Decrease in prepaid expenses
           
49,495
     
9,717
 
 Decrease (increase) in inventory
           
271,526
     
(1,181,658
)
 Increase in accounts payable and accrued liabilities
           
2,289,119
     
189,408
 
 Increase in interest payable
           
205,786
     
49,570
 
 Decrease in transaction taxes payable
           
(129
)
   
(31,781
)
             
888,486
     
(1,129,337
)
 CASH FLOWS FROM INVESTING ACTIVITIES:
                       
 Purchases of property and equipment
   
10
     
-
     
(161,609
)
             
-
     
(161,609
)
 CASH FLOWS FROM FINANCING ACTIVITIES:
                       
 Change in bank line of credit (net)
   
21
     
70,000
     
49,999
 
 Proceeds from loans
   
14,16
     
600,000
     
2,345,000
 
 Repayment of loans
   
14,16
     
(1,085,560
)
   
(1,060,096
)
             
(415,560
)
   
1,334,903
 
                         
 NET INCREASE IN CASH:
           
472,926
     
43,957
 
                         
 EFFECT OF FOREIGN EXCHANGE ON CASH
           
(547,162
)
   
25,484
 
                         
 CASH, BEGINNING OF PERIOD:
           
115,372
     
78,145
 
                         
 CASH, END OF PERIOD:
         
$
41,136
   
$
147,586
 
                         
 Taxes paid
         
$
111,638
   
$
16,546
 
 Interest paid
         
$
21,301
   
$
-
 
                         
 SUPPLEMENTAL NON-CASH INFORMATION
                       
 Change in value of performance bond
         
$
27,205
   
$
(91,425
)
 PP&E included in AP
         
$
-
   
$
16,450
 
 Reclassification of loan payable to long-term debt
   
16,17
   
$
2,244,861
   
$
-
 
 Reclassification of current interest payable to long-term
   
16,17
   
$
526,455
   
$
-
 
                         
The accompanying notes are an integral part of these interim consolidated financial statements.
 
 
 
 
 
- 6 -



 
 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 


1.
Nature of Business

On July 22, 2019, Hunt Mining Corp. (the "Company", "Hunt", or "Hunt Mining"), reached agreement with Patagonia Gold PLC "(Patagonia)" on the terms of a recommended share for share exchange offer to be made by Hunt for all the issued shares of common stock of Patagonia in exchange for the common shares of Hunt Mining on the basis of 10.76 Hunt Shares for each Patagonia Share. Hunt would issue 254,355,192 Common Shares to the shareholders of Patagonia representing an ownership interest of approximately 80% in Hunt in exchange for all of the issued and outstanding shares of Patagonia. Subsequent to June 30, 2019 the operating name of Hunt Mining Corp. was changed to Patagonia Gold Corp.

Hunt Mining Corp. is a mineral exploration and processing company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties in Santa Cruz Province, Argentina.

Effective November 6, 2013, the Company relocated from the Province of Alberta to the Province of British Columbia. The Company's registered office is located at 25th Floor, 700 West Georgia Street, Vancouver, B.C. V7Y 1B3. The Company's head office is located at 23800 E Appleway Avenue, Liberty Lake, Washington, 99019 USA.

The consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:

 
Corporation
 
Incorporation
Percentage
ownership
Business Purpose
Cerro Cazador S.A. ("CCSA")
Argentina
100%
Holder of Assets and Exploration Company
Ganadera Patagonia(1)
Argentina
40%
Land Holding Company
1494716 Alberta Ltd.
Alberta
100%
Nominee Shareholder
Hunt Gold USA LLC
Washington, USA
100%
Management Company

(1) The Company has determined that the subsidiary is a variable interest entity because the Company is the primary beneficiary of the land the subsidiary holds, and therefore consolidates the subsidiary in its financial statements.

The Company's activities include the exploration and processing of minerals from properties in Argentina including the Mina Martha project (Note 8) and the La Josefina project on a metallurgical test basis. On the basis of information to date, the Company has not yet determined whether the Exploration properties contain economically recoverable ore reserves. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties. The Mina Martha project was purchased in the second quarter of 2016 and refurbishing activities began in late 2016. The Company finished all refurbishments to the Mina Martha project in the first quarter of 2017 and began selling concentrate in the second quarter of 2017. In 2018, the Company continued the sale of concentrate from Martha as well as began metallurgical tests on the La Josefina project. Concentrate produced as a byproduct of this testing began being sold in 2018.

Ongoing production and sales of gold and silver concentrate are being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations.  As a result, there is increased uncertainty and economic risks of failure associated with these production activities

Despite the sale of concentrate, all projects remain in the exploration stage because management has not established proven or probable ore reserves required to be classified in either the development or production stage. As such, the sales of concentrate are classified as silver and gold recovery, net of expenses in profit and loss.
 

 


 


 
 

 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
2.
Basis of presentation
 
These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("US GAAP").

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

The Company's presentation currency is the US Dollar.

The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Judgments made by management in the application of US GAAP that have a significant effect on the consolidated financial statements and estimates with significant risk of material adjustment in the current and following periods are discussed in Note 6.
 
3.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the six months ended June 30, 2019, the Company had net loss of $2,540,644. As at June 30, 2019, the Company had an accumulated deficit of $42,098,480 The Company intends to continue funding operations through operation of the Martha mine, La Josefina project, but also through a reverse acquisition with Patagonia Gold PLC (see subsequent events Note 22) This planned funding may be insufficient to fund capital expenditures, working capital and other cash requirements for the year ending June 30, 2019.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
4.
Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements are described below.

(a) Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value.

(b) Consolidation

The Company's consolidated financial statements consolidate the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on consolidation.
 

 


 



 

 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
    (c) Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the reporting date. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the transaction date. Revenues and expenses are translated at average exchange rates throughout the reporting period. Gains and losses on translation of foreign currencies are included in the consolidated statement of operations.

The Company's functional currency is the Canadian dollar. All of the Company's subsidiaries have a US dollar functional currency. Financial statements are translated to their US dollar equivalents using the current rate method. Under this method, the statements of operations and comprehensive loss and cash flows for each period have been translated using the average exchange rates prevailing during each period. All assets and liabilities have been translated using the exchange rate prevailing at the balance sheet date. Translation adjustments are recorded as income or losses in other comprehensive income or loss. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying consolidated statement of loss and comprehensive loss.

(d) Financial instruments

The Company measures the fair value of financial assets and liabilities based on US GAAP guidance, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions, which are accounted for at the transferor's carrying amount or exchange amount.
 
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
 
See Note 17 to the Consolidated Financial Statements for fair value disclosures.

(e) Cash and equivalents

Cash and equivalents include cash on hand, deposits held with banks and other liquid short-term investments with original maturities of three months or less. The Company has no cash equivalents for all periods presented.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.

Repairs and maintenance costs are charged to the consolidated statement of operations and comprehensive loss during the period in which they are incurred.

 

 



 

 
 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 


Depreciation is calculated to amortize the cost of the property, plant and equipment over their estimated useful lives using the straight-line method. Plant, buildings, equipment and vehicles are stated at cost and depreciated straight line over an estimated useful life of three to eight years. Depreciation begins once the asset is in the state intended for use by management.

The Company allocates the amount initially recognized in respect of an item of property and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.

Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains or losses in the consolidated statement of operations and comprehensive loss.

(g) Mineral properties and exploration and evaluation expenditures

All exploration expenditures are expensed as incurred. Expenditures to acquire mineral rights, to develop new mines, to define further mineralization in mineral properties which are in the development or operating stage, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

Should a property be abandoned, its capitalized costs are charged to the consolidated statement of loss and comprehensive loss. The Company charges to the consolidated statement of loss and comprehensive loss the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

(h) Long-lived assets

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.

 (i) Asset retirement obligations

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal constructive obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset, which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).

(j) Income taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be recognized.
 
 
 


 
 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 


(k) Share-based compensation

The Company offers a share option plan for its directors, officers, employees and consultants. ASC 718 "Compensation – Stock Compensation" prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
 
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, "Equity Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

(l) Earnings (loss) per share

The calculation of earnings (loss) per share ("EPS") is based on the weighted average number of shares outstanding for each period. The basic EPS is calculated by dividing the earnings or loss attributable to the equity owners of the Company by the weighted average number of common shares outstanding during the period.

The computation of diluted EPS assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the earnings per share. The treasury stock method is used to determine the dilutive effect of the warrants and share options. When the Company reports a loss, the diluted net loss per common share is equal to the basic net loss per common share due to the anti-dilutive effect of the outstanding warrants and share options.

(m) Silver and gold recovery (loss), net of expenses

Recovery of concentrate and other income is recognized when title and the risks and rewards of ownership to deliver concentrate and commodities pass to the buyer and collection is reasonably assured. Sale of concentrate is classified as silver and gold recovery, net of expenses in profit and loss because the Company has not established proven or probable ore reserves and remains in the exploration stage as defined by Industry guide 7.

Not all overhead costs are applied against Silver and gold recovery. Since the Company has no reserves, the Company is treated as an exploration company and, as such, direct cost, portions of fixed costs and portions of variable costs are applied against Silver and gold recovery. Other administrative, office, professional fees, and travel are disclosed separately.

From time to time, some of the Company's sales of concentrate are made under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, sales are recorded at period end based on latest information about prices and quantities available to management for the expected date of final settlement. Under such arrangements, the Company's receivable changes as the underlying commodity market price varies, this component of the contract is an embedded derivative which is recognized at fair value with changes in fair value recognized in profit and loss and receivables. Subsequent variations in prices and metal quantities are recognized as they occur.
 

 
- 7 -


 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 


(n) Inventories

Mineral concentrate and mineralized material stockpiles are physically measured or estimated and valued at the lower of cost or net realizable value. Net realizable value is the estimated future sales price of the product the entity expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.

If the stockpile is not expected to be processed in 12 months after the reporting date, it is included in noncurrent assets and the net realizable value is calculated on a discounted cash flow basis.

Cost of silver concentrate and mineralized material stockpiles is determined by using the weighted average method and comprises direct costs and a portion of fixed and variable overhead costs incurred in converting materials into concentrate, based on the normal production capacity.

Materials and supplies are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.
 
5.
Recently Adopted Accounting Pronouncements

Leases
 
In February 2016, ASU No. 2016-02 was issued related to leases. The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018. The Company has evaluated all contracts which could be classified as leases under the new standards and determined that the impact as a result of adoption is $nil.
 
6.
Critical accounting judgments and estimates
(a) Significant judgments

Preparation of the consolidated financial statements requires management to make judgments in applying the Company's accounting policies. Judgments that have the most significant effect on the amounts recognized in these consolidated financial statements relate to functional currency; income taxes; provisions and reclamation and closure cost obligations. These judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Functional Currency

Management determines the functional currency for each entity. This requires that management assess the primary economic environment in which each of these entities operates. Management's determination of functional currencies affects how the Company translates foreign currency balances and transactions. Determination includes an assessment of various indicators. In determining the functional currency of the Company's operations in Canada (Canadian dollar) and Argentina (U.S. dollar), management considered the indicators of ASC 830.
 
 
 

- 8 -



 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 

 
Income Taxes and value-added taxes receivable

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain and subject to judgment. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company's current understanding of the tax law in the various jurisdictions in which it operates. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

The Company has receivables due from the Argentinean government for value-added taxes. Significant estimates and judgments are involved in the assessment of recoverability of these receivables. Changes in management's impairment assumptions may result in an additional impairment provision, or a reduction to any previously recorded impairment provision, with the impact recorded in profit and loss.

Provisions

Management makes judgments as to whether an obligation exists and whether an outflow of resources embodying economic benefits of a liability of uncertain timing or amount is probable, not probable or remote. Management considers all available information relevant to each specific matter.

Reclamation and closure costs obligations

The Argentine mining regulations require that mine property be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, and sealing portals at deep mines. The Company accrues for the cost of final mine closure reclamation over the estimated useful mining life of the property. At each period, the Company reviews the entire reclamation liability and makes necessary adjustments for revisions to cost estimates to reflect current experience.

The Company has adopted ASC 410, Asset Retirement and Environmental Obligations, which requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset.

Title to Mineral Property Interests

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

(b) Estimation uncertainty
The preparation of the consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also makes estimates and assumptions concerning the future. The determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience and current and expected economic conditions. Actual results could differ from those estimates.

The more significant areas requiring the use of management estimates and assumptions relate to title to mineral property interests; asset retirement obligations and inventories. These estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
 
 
 
- 9 -


 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 

 
The Company is also exposed to legal risk. The outcome of currently pending and future proceedings cannot be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not covered, either wholly or partly, under insurance policies and that could significantly influence the business and results of operations.

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Asset retirement obligation

Upon retirement of the Company's mineral properties, retirement costs will be incurred by the Company. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The liability, the related asset and the expense are affected by estimates with respect to the costs and timing of retiring the assets.

Inventories

Net realizable value tests are performed at each reporting date and represent the estimated future sales price of the product the Company expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.

Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained mineral ounces is based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile tonnages are verified by periodic surveys.

Silver and gold recovery (loss), net of expenses

From time to time, some of the Company's sales of concentrate are made under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, sales are recorded at period end based on latest information about prices and quantities available to management for the expected date of final settlement.

Change in estimates

During 2018, the Company conducted a review of its plant and buildings which resulted in changes in its expected use. It was determined that the renovation work performed in 2016 and 2017 on these assets was having greater success than originally anticipated in extending their useful life. Additionally, metallurgical studies performed throughout 2018 confirmed that the plant could be successfully used to process mineralized materials from other mineral properties of the Company. It is now expected that the useful life of these assets will be extended from an original estimate of 36 months in 2017 to 87 months from December 31, 2018.
 
7.
Inventory

   
June 30, 2019
   
December 31, 2018
 
             
Silver and gold concentrate
 
$
-
   
$
794,086
 
Material stockpiles
   
445,820
     
-
 
Materials and supplies
   
196,569
     
119,829
 
   
$
642,389
   
$
913,915
 

 

 
- 10 -


 
 

 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
8.
Mineral properties
(a) Acquisition of Mina Martha project

On May 6, 2016, the Company acquired the assets of the Mina Martha project from Coeur Mining Inc. ("Coeur"). The Mina Martha project consists of land, mineral rights, a mine camp, offices, a warehouse, maintenance shop, mining facilities including a flotation mill and a tailings retention facility.

 (b) Acquisition of La Josefina project
In March 2007, the Company acquired the exploration and development rights to the La Josefina project from Fomento Minero de Santa Cruz Sociedad del Estado ("Fomicruz").

In July 2007, the Company entered into an agreement (subsequently amended) with Fomicruz which provides that, in the event that a positive feasibility study is completed on the La Josefina property, a Joint Venture Corporation ("JV Corporation") would be formed by the Company and Fomicruz. The Company would own 81% of the joint venture company and Fomicruz would own the remaining 19%. Fomicruz has the option to earn up to a 49% participating interest in the JV Corporation by reimbursing the Company an equivalent amount, up to 49%, of the exploration investment made by the Company. The Company has the right to buy back any increase in Fomicruz's ownership interest in the JV Corporation at a purchase price of USD$200,000 per each percentage interest owned by Fomicruz down to its initial ownership interest of 19%; the Company can also purchase 10% of the Fomicruz's initial 19% JV Corporation ownership interest by negotiating a purchase price with Fomicruz. Under the agreement, the Company has until the end of 2019 to complete cumulative exploration expenditures of $18 million and determine if it will enter into production on the property. At December 31, 2018, the Company had incurred approximately $20 million and is in current discussions with Fomicruz to develop a plan for production.
As at June 30, 2019 this project has a carrying amount of $Nil (2018 - $Nil) on the consolidated balance sheet.

(c) Acquisition of La Valenciana project
On November 1, 2012, the Company entered into an agreement for the exploration of the La Valenciana project in Santa Cruz province, Argentina. The agreement is for a total of 7 years, expiring on October 31, 2019. The agreement requires the Company to spend $5,000,000 in exploration on the project over 7 years. If the Company elects to exercise its option to bring the La Valenciana project into production, it must grant Fomicruz a 9% ownership in a new JV Corporation to be created by the Company to manage the project and the Company will have a 91% ownership interest in the JV Corporation.

As at June 30, 2019 this project has a carrying amount of $Nil (2018 - $Nil) on the consolidated balance sheet.

(d) Reverse Acquisition of Patagonia Gold PLC (Note 22)
 

 
- 11 -


 
 
 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
9.
Asset retirement obligations
On May 6, 2016, the Company purchased the Mina Martha project (Note 8). The Company is legally required to perform reclamation on the site to restore it to its original condition at the end of its useful life. In accordance with FASB ASC 410-20, Asset Retirement Obligations, the Company recognized the fair value of that liability as an asset retirement obligation. The total amount of undiscounted cash flows required to settle the estimated obligation is $1,940,270 which has been discounted using a credit-adjusted rate of 10% (2018 – 10%) and an inflation rate of 2% (2018 – 2%).

The following table describes the changes to the Company's asset retirement obligation liability:

   
June 30,
   
December 31,
 
   
2019
   
2018
 
 Asset retirement obligation at beginning of year
 
$
1,308,399
   
$
773,436
 
 Additions
   
-
     
486,589
 
 Foreign exchange
   
(12,200
)
   
(25,996
)
 Accretion expense
   
65,093
     
74,370
 
 Asset retirement obligation at end of period
 
$
1,361,292
   
$
1,308,399
 
 
10.
Property, Plant and Equipment
   
Land
   
Plant
   
Buildings
   
Vehicles and Equipment
   
Total
 
 Cost
                             
 Balance at December 31, 2017
 
$
1,035,397
   
$
3,423,701
   
$
117,500
   
$
2,824,466
   
$
7,401,064
 
 Additions
   
-
     
486,589
     
-
     
13,559
     
500,148
 
 Balance at December 31, 2018
   
1,035,397
     
3,910,290
     
117,500
     
2,838,025
     
7,901,212
 
 Additions
   
-
     
-
     
-
     
-
     
-
 
 Balance at June 30, 2019
 
$
1,035,397
   
$
3,910,290
   
$
117,500
   
$
2,838,025
   
$
7,901,212
 
                                         
 Accumulated depreciation
                                       
 Balance at December 31, 2017
 
$
-
   
$
753,391
   
$
29,375
   
$
1,584,808
   
$
2,367,574
 
 Depreciation for the year
   
-
     
368,319
     
12,155
     
567,644
     
948,118
 
 Balance at December 31, 2018
   
-
     
1,121,710
     
41,530
     
2,152,452
     
3,315,692
 
 Depreciation for the year
   
-
     
217,717
     
6,078
     
284,200
     
507,995
 
 Balance at June 30, 2019
 
$
-
   
$
1,339,427
   
$
47,608
   
$
2,436,652
   
$
3,823,687
 
                                         
 Net book value
                                       
 At December 31, 2018
 
$
1,035,397
   
$
2,788,580
   
$
75,970
   
$
685,573
   
$
4,585,520
 
 At June 30, 2019
 
$
1,035,397
   
$
2,570,863
   
$
69,892
   
$
401,373
   
$
4,077,525
 
 
 
 
- 12 -


 

 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 

11.
Perfprmance bond
The performance bond, originally required to secure the Company's rights to explore the La Josefina property, is a step-up US dollar denominated 2.5% coupon bond, paying quarterly, issued by the Government of Argentina with a face value of $600,000 and a maturity date of 2035. The bond trades in the secondary market in Argentina. The bond was originally purchased for $247,487. As of the six months ended June 30, 2019, the value of the bond increased to $342,583 (December 31, 2018 - $315,378). The change in the face value of the performance bond of $27,205 for the six months ended June 30, 2019 (December 31, 2018- $119,261) is recorded as other comprehensive loss in the Company's consolidated statement of operations and comprehensive loss.

Since Cerro Cazador S.A. ("CCSA") fulfilled its exploration expenditure requirement mandated by the agreement with Fomento Minero de Santa Cruz Sociedad del Estado ("Fomicruz"), the performance bond was no longer required to secure the La Josefina project. Therefore, in September 2010 the Company used the bond to secure the La Valenciana project, an additional Fomicruz exploration project.

12.
Accounts Receivable
   
June 30,
   
December 31,
 
   
2019
   
2018
 
 Receivable from sale of concentrate
 
$
234,924
   
$
438,042
 
 Value added tax ("VAT") recoverable (Note 22)
   
1,126,033
     
986,014
 
 Other receivables
   
60,901
     
50,247
 
 Total accounts receivable
 
$
1,421,858
   
$
1,474,303
 
 
13.
Accounts payable
   
Note
   
June 30,
   
December 31,
 
         
2019
   
2018
 
 Accounts payables due to related parties
   
16
   
$
6,658,073
   
$
4,416,555
 
 Trade accounts payable and accrued liabilities
           
1,753,930
     
1,912,306
 
 Total accounts payable and accrued liabilities
         
$
8,412,003
   
$
6,328,861
 
 

 
- 13 -



 
 
Hunt Mining Corp.
Notes to the  Consolidated Interim financial statements
 

 
14.
Loan Payable and long-term debt
The Following is a summary of all loans.
   
June 30,
   
December 31,
 
   
2019
   
2018
 
Unsecured loan payable to related party at 8% interest per annum, due 2022 (Note 16)
 
$
1,615,445
   
$
1,615,445
 
                 
Unsecured loan payable to related party at 8% interest per annum, due 20211 (Note 16)
   
994,861
     
994,861
 
                 
Unsecured loan payable to related party at 7% interest per annum, due 20212 (Note 16)
   
1,250,000
     
1,250,000
 
                 
Loan payable
   
-
     
591,280
 
   
$
3,860,306
   
$
4,451,586
 
 Less current portion
   
(550,183
)
   
(3,198,569
)
 Long-term debt
 
$
3,310,123
   
$
1,253,017
 


Principal payments on long-term debt are due as follows.
     
 
Year ending December 31,
 
 2019
 
$
362,428
 
 2020
 
$
375,510
 
 2021
 
$
2,639,451
 
 2022
 
$
414,910
 
 2023
 
$
68,007
 

1)
During the six months ended June 30, 2019 the maturity of loan payable date was extended to January 1, 2021. The modification of the loan payable did not result in an extinguishment in accordance with ASC 470-50. During the six months ended June 30, 2019 the loan payable was re-classified as long-term debt. (Note 16)

2)
During the six months ended June 30, 2019 the maturity of loan payable date was extended to January 1, 2021. The modification of the loan payable did not result in an extinguishment in accordance with ASC 470-50. During the six months ended June 30, 2019 the loan payable was re-classified as long-term debt. (Note 16)

During the six months ended June 30, 2019 the due date for interest payable on long term debt date was extended to January 1, 2021 and has been reclassified as a non-current liability. (Note 16)
 

 
- 14 -


 

 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
15.
Capital Stock
Authorized:
Unlimited number of common shares without par value
Unlimited number of preferred shares without par value
Issued:
Common Shares
 
Six months ended
   
Year ended
 
   
June 30, 2019
   
December 31, 2018
 
   
Number
   
Amount
   
Number
   
Amount
 
 Balance, beginning of period
   
63,588,798
   
$
24,695,186
     
63,588,798
   
$
24,695,186
 
 Balance, end of period
   
63,588,798
   
$
24,695,186
     
63,588,798
   
$
24,695,186
 

Common share issuances:

No common shares were issued during the six months ended June 30, 2019 (December 31, 2018 – None). Subsequent to June 30, 2019 the Company issued 254,355,192 common shares to the shareholders of Patagonia Gold PLC as part of a reverse acquisition (Note 22).
Stock options
Under the Company's share option plan, and in accordance with TSX Venture Exchange requirements, the number of common shares reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 5 years and vest at the discretion of the Board of Directors. In connection with the foregoing, the number of common shares reserved for issuance to: (a) any individual director or officer will not exceed 5% of the issued and outstanding common shares; and (b) all consultants will not exceed 2% of the issued and outstanding common shares.
   
Range of Exercise prices (CAD)
   
Number outstanding
   
Weighted average life (years)
   
Weighted average exercise price (CAD)
   
Number exercisable on June 30, 2019
 
 Stock options
 
$
0.00
     
-
     
0.00
   
$
0.00
     
-
 

   
June 30, 2019
   
December 31, 2018
 
   
Number of options
   
Weighted Average Price (CAD)
   
Number of options
   
Weighted Average Price (CAD)
 
 Balance, beginning of period
   
4,160,000
   
$
0.21
     
4,380,000
   
$
0.21
 
 Expiration of stock options
   
(4,160,000
)
 
$
0.21
     
(220,000
)
 
$
0.23
 
 Balance, end of period
   
-
   
$
0.00
     
4,160,000
   
$
0.21
 

On May 29, 2019, all outstanding stock option holders consented to the cancellation of outstanding stock options. No options were granted during the six months ended June 30, 2019.
 
 
- 15 -



 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 


Warrants:
 
 Range of Exercise prices (CAD)
 Number outstanding
 Weighted average life (years)
 Weighted average exercise price (CAD)
 Warrants
$0.00
                -
0.00
$0.00

   
June 30, 2019
   
December 31, 2018
 
   
Number of warrants
   
Weighted Average Price (CAD)
   
Number of warrants
   
Weighted Average Price (CAD)
 
 Balance, beginning of period
   
47,500,000
   
$
0.06
     
48,862,500
   
$
0.07
 
 Warrants
   
(47,500,000
)
 
$
0.00
     
(1,362,500
)
 
$
0.40
 
 Balance, end of period
   
-
   
$
0.00
     
47,500,000
   
$
0.06
 

On May 29, 2019, all outstanding warrant holders consented to the cancellation of outstanding warrants. No warrants were granted during the six months ended June 30, 2019.
16.
Related Party Transactions
 
 
                                   
 Name and Principal Position
 
 
Remunera- tion, fees, or interest expense
   
Loans or Advances
   
Remunera- tion, fees, or interest payments
   
Loan payments
   
Included in Accounts Payable
   
Included in Loan Payable and Long-term debt
 
 
  
 
Period ended June 30,
   
As at June 30, 2019 and December 31, 2018
 
A company controlled by a director
2019
   
377,636
     
1,697,288
     
-
     
-
     
6,047,617
     
-
 
 - admin, office, and interest expenses
2018
   
217,185
     
-
     
-
     
-
     
3,972,693
     
-
 
 Key executive person
2019
   
67,500
     
-
     
67,500
     
-
     
-
     
-
 
 - salaries and wages
2018
   
62,500
     
-
     
31,250
     
-
     
-
     
-
 
 Key executive person
2019
   
67,500
     
-
     
67,500
     
-
     
-
     
-
 
 - salaries and wages
2018
   
62,500
     
-
     
31,250
     
-
     
-
     
-
 
 Director
2019
   
189,669
     
-
     
-
     
-
     
610,456
     
3,860,306
1 
  -loans
2018
   
104,678
     
300,000
     
56,745
     
120,716
     
443,862
     
3,860,306
 


 
 
1)
The Company has two unsecured loans to related party at 8% interest per annum, with one loan of $994,861 due 2021 and the other loan of $1,615,445 due 2022. The Company has another unsecured loan of $1,250,000 to a related party at 7% interest per annum due 2021 (Note 14).
 
 

 

- 16 -


 

 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 

 
17.
Financial Instruments
The Company's financial instruments consist of cash, accounts receivable, performance bond, accounts payable and accrued liabilities, transaction taxes payable, loan payable, interest payable, and long-term debt.

The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:
·
Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
·
Level 2: inputs, other than quoted prices, that are observable, either directly or indirectly. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the marketplace.
·
Level 3: inputs are less observable, unavoidable or where the observable data does not support the majority of the instruments' fair value.

Fair value
As at June 30, 2019, there were no changes in the levels in comparison to December 31, 2018. The fair values of financial instruments are summarized as follows:

   
June 30, 2019
   
June 30, 2018
 
   
Carrying amount
   
Fair value
   
Carrying amount
   
Fair value
 
   
$
     
$
     
$
     
$
   
 Financial Assets
                               
                                 
 FVTPL
                               
    Cash (Level 1)
   
41,136
     
41,136
     
147,586
     
147,586
 
                                 
 Available for sale
                               
    Performance bond (Level 1)
   
342,583
     
342,583
     
343,214
     
343,214
 
                                 
 Loans and receivables
                               
    Accounts receivable
   
1,421,858
     
1,421,858
     
1,079,496
     
1,079,496
 
                                 
 Financial Liabilities
                               
                                 
 Other financial liabilities
                               
    Bank indebtedness
   
400,000
     
400,000
     
49,999
     
49,999
 
    Accounts payable and accrued liabilities
   
8,412,003
     
8,412,003
     
6,492,406
     
6,492,406
 
    Transaction taxes payable
   
-
     
-
     
15,407
     
15,407
 
    Interest on debt
   
526,455
     
526,455
     
200,594
     
200,594
 
    Loan payable
   
550,183
     
550,183
     
2,650,664
     
2,650,664
 
    Long-term debt
   
3,310,123
     
3,310,123
     
1,615,445
     
1,615,445
 

Cash and performance bond are measured based on Level 1 inputs of the fair value hierarchy on a recurring basis.
 
 
- 17 -


 
 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 


The carrying value of accounts receivable, accounts payable and accrued liabilities, bank indebtedness, loan payable, interest payable, and long-term debt approximate their fair value because of the short-term nature of these instruments and because long-term debt approximates a market rate of interest. The Company assessed that there were no indicators of impairment for these financial instruments.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high quality financial institutions and limits the amount of credit exposure with any one institution. Accounts receivable consist of trade receivables and VAT recoverable and are not considered subject to significant risk, because the amounts are due from a government and a customer who is considered credit worthy.

The Company has concentrations of credit risk with respect to its trade receivables, the majority of which are concentrated geographically in Argentina amongst a small number of customers. As at June 30, 2019, the Company had one customer whose trade receivable of $234,924 (December 31, 2018 – $438,042) accounted for greater than 10% of the total trade receivables. The Company controls credit risk through monitoring procedures, and by performing credit evaluations of its customers, but generally does not require collateral to secure accounts receivable.

The Company has concentrations in the volume of sales it made to customers. For the 6 months ended June 30, 2019, the Company made sales of $1,070,679 to one customer which accounted for greater than 10% of the total silver and gold recovery, net of expenses (2018 - $913,454).

The Company currently maintains a substantial portion of its day-to-day operating cash balances at financial institutions. At June 30, 2019, the Company had total cash balances of $41,168 (December 31, 2018- $115,372) at financial institutions, where $Nil (December 31, 2018- $Nil) is in excess of federally insured limits.
 
18.
Segmented Information

All of the Company's operations are in the mineral properties exploration industry with its principal business activity in mineral exploration. The Company conducts its activities primarily in Argentina. All of the Company's long-lived assets are located in Argentina. All of the Company's silver and gold recovery arose from sales made in Argentina.
 
19.
Commitments and Provision
 
On October 31, 2011, the Company signed an agreement with the owners of the Piedra Labrada Ranch for the use and lease of facilities on the same premises as the Company's La Josefina facilities. The initial term was for three years beginning November 1, 2011 and ended on October 31, 2014, including annual commitments of $60,000. The Company extended this agreement on April 30, 2015 for three years with an option to renew for a second three-year term. This option to renew has not been signed as of June 30, 2019 and is currently being renegotiated. In the meantime, is on a month-to-month basis.
Subsequent to June 30th, 2019, the company entered into a reverse acquisition agreement with Patagonia Gold PLC. (Note 22)
 
20.
Silver and Gold Recovery (loss)
Silver and gold recovery (loss) include the sales from concentrate sold during the period ended June 30, 2019 from mining projects of $1,070,679 (2018 - $3,961,399) Silver and gold recovery revenues have been reported net of direct operating expenses for a loss of $(490,116) for the period ended June 30, 2019 (2018 – recovery of $710,840). Accounts receivable include $234,924 (December 31, 2018 -$438,042) for the sales of concentrate.
 
21.
Bank Indebtedness
The Company has a variable rate line of credit available for $400,000 with interest charged at the lender's Index Rate plus 1.0%, with a floor of 4.25%. As at June 30, 2019 the balance of bank indebtedness was $400,000 (December 31, 2018- $330,000).
 
 
 
 
- 18 -


 
 
 
 
Hunt Mining Corp.
Notes to the Consolidated Interim financial statements
 


22.  Subsequent Events
 
 
22.
Subsequent Events

a)
On May 31, 2019, the boards of directors of Hunt Mining Corp. ("Hunt") and Patagonia Gold, PLC ("Patagonia") announced that they had reached agreement on the terms of a recommended share for share exchange offer to be made by Hunt for all the issued shares of common stock of Patagonia in exchange for the common shares of Hunt on the basis of 10.76 Hunt Shares for each Patagonia Share. Hunt would issue 254,355,192 Common Shares to the shareholders of Patagonia representing an ownership interest of approximately 80% in Hunt in exchange for all of the issued and outstanding shares of Patagonia.

As a result of the Transactions, the former shareholders of Patagonia would acquire control of the Company. The transactions would be treated as a reverse merger that constitutes a business combination and accounted for using the acquisition method under ASC 805.

It was also announced that the offer would be implemented by way of a Court-sanctioned scheme of arrangement between Patagonia and its shareholders under Part 26 of the Companies Act of 2006.

On May 29, 2019 the holders of a majority of the outstanding Hunt shares approved the share exchange by written consent.

On July 22, 2019, the Court sanctioned the Scheme, a Court Order was delivered to the Registrar of Companies and the Scheme became effective. The latest date for the settlement and listing of the New Hunt Shares is August 6, 2019.

Additional information can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

b)
Subsequent to June 30, 2019, the company received payment of approximately $270,000 for the recovery value added tax.
 
 
 
 
 
- 19 -


 
 
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the operating results, corporate activities and financial condition of Hunt Mining Corp. (hereinafter referred to as "we", "us", "Hunt Mining", "HMX", or the "Company") and its subsidiaries provides an analysis of the operating and financial results between December 31, 2018 and June 30, 2019 and a comparison of the material changes in our results of operations and financial condition between the year ended December 31, 2018 and the six months ended June 30, 2019. This discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018.

This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the heading "Risk Factors and Uncertainties" in our Annual Report on Form 10-K for the period ended December 31, 2018, and elsewhere in this Quarterly Report on Form 10-Q.

The interim statements have been prepared in accordance with US Generally Accepted Accounting Principles ("US GAAP") as required under U.S. federal securities laws applicable to the Company, and as permitted under applicable Canadian securities laws. The Company is a reporting company under applicable securities laws in Canada and the United States. The reporting currency used in our financial statements is the United States Dollar.

The information contained within this report is current as of August 14, 2019 unless otherwise noted.

Additional information relevant to the Company's activities can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates

The Company uses Canadian Institute of Mining, Metallurgy and Petroleum definitions for the terms "proven reserves", "probable reserves", "measured resources", "indicated resources" and "inferred resources". U.S. investors are cautioned that while these terms are recognized and required by Canadian regulations, including National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), the U.S. Securities and Exchange Commission ("SEC") does not recognize them.

Canadian mining disclosure standards differ from the requirements of the SEC under SEC Industry Guide 7, and reserve and resource information referenced in this Form 10-Q may not be comparable to similar information disclosed by companies reporting under U.S. standards. In particular, and without limiting the generality of the foregoing, the term "resource" does not equate to the term "reserve". Under United States standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.

The SEC's disclosure standards normally do not permit the inclusion of information concerning "measured mineral resources" or "indicated mineral resources" or other descriptions of the amount of mineralization in mineral deposits that do not constitute "reserves" by U.S. standards in documents filed with the SEC. Disclosure of "contained ounces" in a resource estimate is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as tonnage and grade without reference to unit measures. The requirements of NI 43- 101 for identification of "reserves" are also not the same as those of the SEC, and reserves in compliance with NI 43-101 may not qualify as "reserves" under SEC standards.
 
 
 

- 20 -



 
 
 
Cautionary Note Regarding Forward-Looking Statements

Certain statements made in this Quarterly Report on Form 10-Q may constitute "forward-looking statements about the Company and its business. Forward looking statements are statements that are not historical facts and include, but are not limited to, reserve and resource estimates, estimated value of the project, projected investment returns, anticipated mining and processing methods for the project, the estimated economics of the project, anticipated Hunt Mining recoveries, production rates, grades, estimated capital costs, operating cash costs and total production costs, planned additional processing work and environmental permitting. The forward-looking statements in this report are subject to various risks, uncertainties and other factors that could cause the Company's actual results or achievements to differ materially from those expressed in or implied by forward looking statements.

These risks, uncertainties and other factors include, without limitation:
 
·
risks related to uncertainty of Hunt Mining property valuation assumptions;
·
uncertainties related to raising sufficient financing to fund the project in a timely manner and on acceptable terms;
·
changes in planned work resulting from logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties;
·
uncertainties involved in the estimation of Hunt Mining reserves and resources;
·
the possibility that required permits may not be obtained on a timely manner or at all;
·
the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic;
·
the possibility that the estimated recovery rates may not be achieved;
·
risk of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions;
·
the possibility of cost overruns or unanticipated expenses in the work program;
·
risks related to projected project economics, recovery rates, estimated NPV and anticipated IRR; and
·
other factors identified in the Company's SEC filings and its filings with Canadian securities regulatory authorities.

Forward-looking statements are based on the beliefs, opinions and expectations of the Company's management at the time they are made, and other than as required by applicable securities laws, the Company does not assume any obligation to update its forward-looking statements if those beliefs, opinions or expectations, or other circumstances, should change.

Hunt Mining Corporation Corporate Overview

Hunt Mining Corp. (the "Company" or "Hunt Mining"), is a mineral exploration and processing company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties in Santa Cruz Province, Argentina.

Effective November 6, 2013, the Company relocated from the Province of Alberta to the Province of British Columbia. The Company's registered office is located at 25th Floor, 700 West Georgia Street, Vancouver, B.C. V7Y 1B3. The Company's head office is located at 23800 E Appleway Avenue, Liberty Lake, Washington, 99019 USA.

The consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:

 
Corporation
 
Incorporation
Percentage
ownership
Business Purpose
Cerro Cazador S.A. ("CCSA")
Argentina
100%
Holder of Assets and Exploration Company
Ganadera Patagonia(1)
Argentina
40%
Land Holding Company
1494716 Alberta Ltd.
Alberta
100%
Nominee Shareholder
Hunt Gold USA LLC
Washington, USA
100%
Management Company
 
 
 
 
- 21 -


 
 

 
1)
The Company has determined that the subsidiary is a variable interest entity because the Company is the primary beneficiary of the land the subsidiary holds, and therefore consolidates the subsidiary in its financial statements.

The Company's activities include the exploration and processing of minerals from properties in Argentina including the Mina Martha project (Note 8) and the La Josefina project on a metallurgical test basis. On the basis of information to date, the Company has not yet determined whether the Exploration properties contain economically recoverable ore reserves. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties. The Mina Martha project was purchased in the second quarter of 2016 and refurbishing activities began in late 2016. The Company finished all refurbishments to the Mina Martha project in the first quarter of 2017 and began selling concentrate in the second quarter of 2017. In 2018, the Company continued the sale of concentrate from Martha as well as began metallurgical tests on the La Josefina project. Concentrate produced as a byproduct of this testing began being sold in 2018.

Ongoing production and sales of gold and silver concentrate are being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations.  As a result, there is increased uncertainty and economic risks of failure associated with these production activities

Despite the sale of concentrate, all projects remain in the exploration stage because management has not established proven or probable ore reserves required to be classified in either the development or production stage. As such, the sales of concentrate are classified as silver and gold recovery, net of expenses in profit and loss.

Principal Properties Review
Ongoing production at the Martha Project is being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations on the Martha Project. As a result, there is increased uncertainty and economic risk of failure associated with these production activities. A NI 43-101 compliant technical report from 2010 does exist for the La Josefina project with measured, indicated and inferred resources. The Ailin vein is part of this resource estimate.

Donald J. Birak, an independent consultant, is the qualified person under National Instrument 43-101 who has approved the technical and scientific aspects of this report.

La Josefina Property
The La Josefina Project is situated about 450 km northwest of the city of Rio Gallegos, in the Santa Cruz province of Argentina within a scarcely populated steppe-like region known as Patagonia. The La Josefina property occupies 52,800 hectares and makes up approximately 90% of all meters drilled by the Company.

The La Josefina Project consists of mineral rights composed by an area of 528 square kilometers established in 1994 as a Mineral Reserve held by Fomicruz, an oil and mining company owned by the Santa Cruz provincial government. The La Josefina Project comprises 16 Manifestations of Discovery totaling 52,767 hectares which are partially covered by 399 pertenencias.

Mina Martha Property

Martha is located in the province of Santa Cruz, Argentina, at 48o , 41', 33.94" south latitude and 69o , 42', 00.79" west longitude (degrees, minutes, seconds) at approximately 350 meters elevation. The closest community is the town of Gobernador Gregores, situated approximately 50 road kilometers (km) to the west-southwest of Martha.

The property was purchased in 2016 by Cerro Cazador SA (CCSA), an Argentine subsidiary of the Company, from an Argentine subsidiary of Coeur Mining Inc. (Coeur). The intent to purchase was announced February 10, 2016 and closed May 11, 2016 as disclosed by the Company on its website (www.huntmining.com). See note 8 of the 2017 financial statements for details on the purchase of the Mina Martha property. The processing plant at the Martha Project has an estimated useful life of 8 years as it is anticipated that this plant will be used to process mineral from the Martha and the La Josefina projects.
 
 
 
- 22 -


 
 

The Martha property consists of approximately 7,850 hectares of concessions, various buildings and facilities, surface and underground mining and support equipment, a 480 tonne per day (tpd - maximum) crushing, grinding and flotation plant, tailings facility, various stockpiles and waste dumps, employee living and cafeteria quarters, and miscellaneous physical materials. The Company restored and repaired the physical assets acquired in the purchase during the latter part of 2016 and the first quarter of 2017. The In addition, the Company has access to surface ranch ("estancia") lands surrounding the mine and mill site that are approximately 35,700 hectares in size.

Royal Gold Inc. holds a 2% Net Smelter Return (NSR) royalty on all production from the Martha property; the obligation for which transferred from Coeur to the Company (www.royalgold.com). In addition, the provincial government holds a 3% pit-head royalty from future production

La Valenciana Property

La Valenciana is located on the central-north area of the Santa Cruz Province, Argentina. The project encompasses an area of approximately 29,600 hectares and is contiguous to the Company's La Josefina property to the east. The La Valenciana project is comprised of 11 Manifestations of Discovery covering segments of Estancia Canodon Grande, Estancia Flecha Negra, Estancia Las Vallas, Estancia La Florentina, Estancia La Valenciana and Estancia La Modesta (inactive ranches).

Bajo Pobre Property

The Bajo Pobre property covers 3,190 hectares and is mainly on the Estancia Bajo Pobre. The property is located 90 kilometers south of the town of Las Heras. No exploration activity has taken place on the Bajo Pobre Property and no exploration activity is planned for the immediate future.

El Gateado Property

In March 2006, CCSA acquired the right to conduct exploration on the El Gateado property through a claim staking process for a period of at least 1,000 days, commencing after the Government issues a formal claim notice, and retain 100% ownership of any mineral deposit found within. El Gateado is a 10,000-hectare exploration concession filed with the Santa Cruz Provincial mining authority. The El Gateado property is located in the north-central part of Santa Cruz province, contiguous to La Josefina on the east

The Company has not yet received a formal claim notice pertaining to the El Gateado property. Should a mineral deposit be discovered, CCSA has the exclusive option to file for mining rights on the property. The surface rights of the El Gateado claim are held by the following Ranches, Estancia Los Ventisqueros, Estancia La Primavera, Estancia La Virginia and Estancia Piedra Labrada. The El Gateado claims are filed with the government under file #406.776/DPS/06.

The El Gateado project is without known reserves as defined by SEC industry Guide No. 7. No exploration activity has taken place on El Gateado Property and no exploration activity is planned for the immediate future.

Operating results Revenues and Expenses

The Company's results fluctuate from period to period due to the nature of it being an exploration company that also sells concentrate generated as a result of exploration activities. Silver and gold recovery (loss), net of expenses is attributed to the sale of gold and silver. During the six months ended June 30, 2019 the Company sold 343 ounces of gold at an average price of $1,617 and 42,127 ounces of silver at an average price of $16.32 for net proceeds of $1,070,679 (2018 – 79 ounces at an average price of $1,324 and 56,553 ounces of silver at an average price of $16.58). 69 tonnes of gold/silver concentrate were shipped during the six months ended June 30, 2019 with average grades of Au 154.53 g/mt and Ag 18,989.88 g/mt. (2018 – 33 tonnes of gold/silver concentrate at grades of 74.01 g/mt Au and 52,835 g/mt Ag)
 
 
 

- 23 -



 
 
 
Quarterly Results Summary

Company's quarterly results are shown below in the table below:

Hunt Mining - Financial Performance
   
2018
     
2017
 
 
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Net Income (Loss)
 (917,939)
   (361,590)
 (1,133,879)
 (1,224,347)
    (844,364)
 1,213,124
  (168,266)
Basic Net Income (Loss) per share 
      (0.02)
        (0.06)
         (0.05)
         (0.03)
         (0.02)
          0.03
        (0.01)
Results of Operations for the three months ended June 30, 2019

 
June 30,
December 31,
Change
 
2019
2018
Favorable (Unfavorable)
Net loss for the year
       (2,540,644)
       (3,564,180)
                       1,023,536
Net income (loss) per share – basic and diluted:
               (0.03)
               (0.06)
                               0.03
Working capital
       (7,248,879)
       (7,616,966)
                          368,087
Total assets
        6,971,477
        7,900,222
                        (928,745)
Total non-current liabilities
        5,197,870
        2,561,416
                     (2,636,454)
Total shareholders' equity
       (7,588,579)
       (4,839,422)
                     (2,749,157)
The working capital change reflects that the Company repaid some current loans while also reclassifying a significant amount remaining to long-term debt while at the same time increasing its accounts payable owing to related parties. Net losses for the period were larger than those of the comparative 6 months from 2018. Unfavorable changes were primarily due to increased increases in payables to fund activities as first and second quarter sales were slower than anticipated.

The unfavorable change in equity was due to the overall increase in liabilities as explained above in working capital. More funds were required to keep the company operational while sales continued to be below projected levels.

Total assets change was due to normal fluctuations in operations, reduction in inventory levels and depreciation of property, plant and equipment.

Non-current liabilities increased as a result of reclassification of current debt to long-term.
 
 
 
 
- 24 -


 
 
 
 

 
Variance Analysis for Net Income

The significant variances in net income came as a result of the company incurring costs related to the due diligence and professional fee work related to the reverse acquisition disclosed in Note 22 of the financial statements. These additional professional fees combined with a reduction in silver and gold recoveries of approximately were the major contributing factors of the increase in Net Loss of approximately $471,000 over the same period in 2018.

Cash flow discussion for the six-month period ended June 30, 2019 compared to June 30, 2018

The cash inflow from operating activities for the six months ended June 30, 2019, was $888,486, an increase of $2,017,823 compared with outflows of $1,129,337 for the same period in 2018. Net losses for the six months ended June 30, 2019 were approximately $500,000 greater than they were for the six months ended June 30, 2018. Cash from operations increased mostly due to the company having increases in payables of approximately $2,289,000 in 2019 to fund activities, while in the same quarter of 2018, it had only an increase of $189,000. The company had cash inflows from collections of accounts receivable of $52,000 where in 2018, this same period had inflows of $1,065,000. Further to this, the six months ended June 30, 2018 had cash outflows for inventory increases of $1,181,000 while the current year's six months ended June 30, 2019 had cash inflows from the sale of inventory of $271,000.

There were no investing activities in 2019.

Cash outflows from financing activities was a due to increasing the line of credit by $70,000 to $400,000, the principal repayments on loans of $1,085,560 and the acquisition of new debt of $600,000

Within the cash flow changes, there is a significant component to the above discussions that is reflected in the effect of foreign exchange. As significant AP balances and long-term debts are in Canada, the foreign exchange effect on translation to USD resulted in a negative cash effect of $547,162 (2018- positive effect of 25,484).
 
 
 
 
- 25 -



 
 
Financial Position
Cash

The Company's cash position at June 30, 2019 within normal operational levels from December 31, 2018. The details of changes in cash are outlined above.

Accounts receivables

The accounts receivable total balance remained relatively consistent from December 31, 2018, however, receivables from the sale of concentrate reduced by approximately $200,000 while value added tax recoverable increased by approximately $140,000.

Inventory

Silver and gold concentrate inventory of $794,086 from December 31, 2018 was sold during the six months ended June 30, 2019 and stockpiles of unprocessed minerals increased from nothing at December 31, 2018 to $445,820 at June 30, 2019. Materials and supplies inventory increased from $119,829 at December 31, 2018 to $196,569 at June 30, 2019 as part of normal operational fluctuations.

Property Plant and equipment

Property and equipment only changed from prior period by depreciation expense in 2019.

Mineral interests

Mineral interests remained the same.

Accounts payable, accrued liabilities, bank indebtedness and accounts payable with related parties

Bank indebtedness balance at December 31, 2018 was $330,000 but during the first six months of 2019, the Company increased this balance owing to $400,000.

Accounts payable, accrued liabilities, and transaction taxes payable increased by approximately $2.3M over the balances at December 31, 2018. As total current and long-term loans were only reduced by approximately $600,000 in 2019, interest on loans continued to grow. Trade payables rose substantially from the need to fund operations due to not achieving budgeted sales

The company reclassified much of its current loan payable and interest payable to long-term debt as new repayment terms were negotiated with lenders.

Capital Stock

There were no changes to capital stock.

Liquidity and Capital Resources

At June 30, 2019, the Company had a negative working capital of $7,248,879 as compared to a negative working capital of $7,616,966 at December 31, 2018. The favorable change in working capital was primarily due to reclassification of approximately $2.2M of current debt to long-term. This was offset by advances from related parties and increases in trade payables as the Company had experienced delays to ship concentrate produced from metallurgical testing on the La Josefina project in the first quarter of 2019.
 
 
 

- 26 -



 
 
 
Subsequent to June 30, 2019, the Company completed a reverse acquisition with Patagonia Gold PLC and believes this acquisition will provide sufficient cash flow to cover operating costs, repay loans in full and cover current liabilities. The Company has not determined any resources or reserves for Mina Martha, La Josefina or La Valenciana as defined in the SEC Industry Guide 7.

Off-balance sheet arrangements

At June 30, 2019, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to the Company.

Transactions with related parties

Details of transactions with related parties are disclosed in Note 16 of these consolidated interim financial statements.

Recently issued Accounting Pronouncements
Details of recently issued accounting pronouncements are disclosed in Note 5 of these consolidated interim financial statements.

Critical Accounting Estimates

Details of critical accounting estimates are disclosed in Note 6 of these consolidate interim financial statements.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 4.     CONTROLS AND PROCEDURES

Disclosure controls and procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2019.

Our management, with the participation of our president (our principal executive officer, principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer, principal accounting officer and principal financial officer) has concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our president (our principal executive officer and our principal accounting officer and principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.
 
 
 
- 27 -



 
 
Evaluation of Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of our president (our principal executive officer and our principal accounting officer and principal financial officer), an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2019 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of June 30, 2019, our company's internal control over financial reporting was effective based on present Company activity

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above during the quarter ended June 30, 2019 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.
 
PART II – OTHER INFORMATION
Item 1. Legal Proceedings: There are no proceedings to report.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None
 
Item 3. Default Upon Senior Securities: There are no defaults to report.
 
Item 4. Mine Safety Disclosures: N/A
 
Item 5. Other Information: None
 
 
 
 
 

- 28 -


 
 
ITEM 6. EXHIBITS
 

 
 
Incorporated by reference
 
Exhibit
Number
Document Description
Form
Date
Number
Filed
herewith
3.1
Articles of Incorporation – British Columbia
F-1/A-4
06/30/14
3.4
 
 
 
 
 
 
 
10.1
Exploration and Option Agreement between Cerro Cazador S.A. and FK Minera S.A. dated March 28, 2007
F-1/A-2
12/20/12
10.1
 
 
 
 
 
 
 
10.2
Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary, Cerro Cazador, S.A., with respect to the La Josefina property, dated July 24, 2007
F-1/A-2
12/20/12
10.2
 
 
 
 
 
 
 
10.3
Share Purchase Agreement among Sinomar Capital Corp., Cerro Cazador S.A., HuntMountain Resources Ltd. and HuntMountain Investments, LLC, dated October 13, 2009
F-1/A-3
03/28/14
10.3
 
 
 
 
 
 
 
10.4
Executive Employment Agreement with Matthew J. Hughes dated January 1, 2012
F-1/A-3
03/28/14
10.4
 
 
 
 
 
 
 
10.5
Executive Employment Agreement with Timothy R. Hunt dated January 1, 2012
F-1/A-3
03/28/14
10.5
 
 
 
 
 
 
 
10.6
Executive Employment Agreement with Danilo P. Silva dated January 1, 2012
F-1/A-3
03/28/14
10.6
 
 
 
 
 
 
 
10.7
Executive Employment Agreement with Matthew A. Fowler dated January 1, 2012
F-1/A-3
03/28/14
10.7
 
 
 
 
 
 
 
10.8
Exploration Agreement Among Eldorado Gold Corporation, Hunt Mining Corp. and Cerro Cazador, S.A. dated May 3, 2012
F-1/A-3
03/28/14
10.8
 
 
 

- 29 -


 
 
 
 
 
 
 
 
 
 
10.9
Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary Cerro Cazador, S.A. with respect to the La Josefina property, dated November 15, 2012
F-1/A-4
06/30/14
10.9
 
 
 
 
 
 
 
10.10
Amended Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary, Cerro Cazador, S.A., with respect to the La Valenciana property, dated November 15, 2012
F-1/A-3
03/28/14
10.10
 
 
 
 
 
 
 
10.11
Buyer's Contract with Ocean Partners USA, Inc., Hunt Mining Corp and Huntwood Industries, Inc. dated September 28, 2016
10-K
05/22/17
10.11
 
 
 
 
 
 
 
10.12
Advance Payment Facility Agreement with Ocean Partners USA, Inc., Hunt Mining Corp and Huntwood Industries, Inc. dated October 28, 2016
10-K
05/22/17
10.12
 
 
 
 
 
 
 
14.1
Code of Ethics
10-K
05/19/17
14.1
 
 
 
 
 
 
 
21.1
List of Subsidiaries
10-K
05/22/17
21.1
 
 
 
 
 
 
 
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
 
 
 
 
 
 
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
 
 
 
 
 
 
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
 
 
 
X
 
 
 
 
 
 
32.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer
 
 
 
X
 
 
 
 
 
 
99.2
2011 Stock Option Plan of Hunt Mining Corp.
F-1/A-2
12/20/12
99.1
 
 
 
 
 
 
 
99.2
Audit Committee Charter
F-1
06/12/12
99.1
 
 
 
 
 
 
 
101.INS
XBRL Instance Document
 
 
 
 
 
 
 
 
 
 
101.SCH
XBRL Taxonomy Extension – Schema
 
 
 
 
 
 
 
 
 
 
101.CAL
XBRL Taxonomy Extension – Calculations
 
 
 
 
 
 
 
 
 
 
101.DEF
XBRL Taxonomy Extension – Definitions
 
 
 
 
 
 
 
 
 
 
101.LAB
XBRL Taxonomy Extension – Labels
 
 
 
 
 
 
 
 
 
 
101.PRE
XBRL Taxonomy Extension – Presentation
 
 
 
 
 
 
 
 

- 30 -


 
 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on this 14th day of August 2019.
 

 
Patagonia Gold Corp.
 
(the "Registrant")
     
 
BY:
TIMOTHY HUNT
   
Timothy Hunt
   
Former Principal Executive Officer and President
     
 
BY:
KEN ATWOOD
   
Ken Atwood
   
Former Principal Financial Officer and Principal Accounting Officer
     
   BY: CHRISTOPHER VAN TIENHOVEN
    Christopher van Tienhoven
    Principal Executive Officer
     
  BY:  CRISTIAN LOPEZ SAUBIDET
  Cristian Lopez Saubidet
    Principal Financial Officer and Principal Accounting Officer

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- 31 -


 
 
 
EXHIBIT INDEX
 

 
 
Incorporated by reference
 
Exhibit
Number
Document Description
Form
Date
Number
Filed
herewith
3.1
Articles of Incorporation – British Columbia
F-1/A-4
06/30/14
3.4
 
 
 
 
 
 
 
10.1
Exploration and Option Agreement between Cerro Cazador S.A. and FK Minera S.A. dated March 28, 2007
F-1/A-2
12/20/12
10.1
 
 
 
 
 
 
 
10.2
Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary, Cerro Cazador, S.A., with respect to the La Josefina property, dated July 24, 2007
F-1/A-2
12/20/12
10.2
 
 
 
 
 
 
 
10.3
Share Purchase Agreement among Sinomar Capital Corp., Cerro Cazador S.A., HuntMountain Resources Ltd. and HuntMountain Investments, LLC, dated October 13, 2009
F-1/A-3
03/28/14
10.3
 
 
 
 
 
 
 
10.4
Executive Employment Agreement with Matthew J. Hughes dated January 1, 2012
F-1/A-3
03/28/14
10.4
 
 
 
 
 
 
 
10.5
Executive Employment Agreement with Timothy R. Hunt dated January 1, 2012
F-1/A-3
03/28/14
10.5
 
 
 
 
 
 
 
10.6
Executive Employment Agreement with Danilo P. Silva dated January 1, 2012
F-1/A-3
03/28/14
10.6
 
 
 
 
 
 
 
10.7
Executive Employment Agreement with Matthew A. Fowler dated January 1, 2012
F-1/A-3
03/28/14
10.7
 
 
 
 
 
 
 
10.8
Exploration Agreement Among Eldorado Gold Corporation, Hunt Mining Corp. and Cerro Cazador, S.A. dated May 3, 2012
F-1/A-3
03/28/14
10.8
 
 
 

- 32 -


 
 
 
 
 
 
 
 
 
 
10.9
Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary Cerro Cazador, S.A. with respect to the La Josefina property, dated November 15, 2012
F-1/A-4
06/30/14
10.9
 
 
 
 
 
 
 
10.10
Amended Agreement between Fomento Minero de Santa Cruz Sociedad del Estado and Hunt Mining Corp.'s subsidiary, Cerro Cazador, S.A., with respect to the La Valenciana property, dated November 15, 2012
F-1/A-3
03/28/14
10.10
 
 
 
 
 
 
 
10.11
Buyer's Contract with Ocean Partners USA, Inc., Hunt Mining Corp and Huntwood Industries, Inc. dated September 28, 2016
10-K
05/22/17
10.11
 
 
 
 
 
 
 
10.12
Advance Payment Facility Agreement with Ocean Partners USA, Inc., Hunt Mining Corp and Huntwood Industries, Inc. dated October 28, 2016
10-K
05/22/17
10.12
 
 
 
 
 
 
 
14.1
Code of Ethics
10-K
05/19/17
14.1
 
 
 
 
 
 
 
21.1
List of Subsidiaries
10-K
05/22/17
21.1
 
 
 
 
 
 
 
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
 
 
 
 
 
 
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
 
 
 
 
 
 
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
 
 
 
X
 
 
 
 
 
 
32.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer
 
 
 
X
 
 
 
 
 
 
99.2
2011 Stock Option Plan of Hunt Mining Corp.
F-1/A-2
12/20/12
99.1
 
 
 
 
 
 
 
99.2
Audit Committee Charter
F-1
06/12/12
99.1
 
 
 
 
 
 
 
101.INS
XBRL Instance Document
 
 
 
 
 
 
 
 
 
 
101.SCH
XBRL Taxonomy Extension – Schema
 
 
 
 
 
 
 
 
 
 
101.CAL
XBRL Taxonomy Extension – Calculations
 
 
 
 
 
 
 
 
 
 
101.DEF
XBRL Taxonomy Extension – Definitions
 
 
 
 
 
 
 
 
 
 
101.LAB
XBRL Taxonomy Extension – Labels
 
 
 
 
 
 
 
 
 
 
101.PRE
XBRL Taxonomy Extension – Presentation
 
 
 
 
 
 

 
- 33 -