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GreenX Metals #GRX – Interim Financial Report for the Half-Year Ended 31 Dec 2023

Highlights:

·        In July 2023 GreenX entered into an Option Agreement with Greenfields Exploration Limited (Greenfields) to acquire up to 100% of the Eleonore North Gold Project (Eleonore North or ELN) in eastern Greenland.

o  2023 field work at Eleonore North was focused on determining the depth of an intrusion within the project area by deployment of an array of seismic nodes. The nodes have been retrieved with the recorded data now being processed by a geophysics specialist consulting firm.

o  During the period, GreenX visited the Geological Survey of Denmark and Greenland in Copenhagen and discussed general co-operation and data sharing in respect of the Eleonore North region. GreenX also met with specialised arctic logistics service providers having extensive experience in East Greenland.

o  Eleonore North has the potential to host a “reduced intrusion-related gold system” (RIRGS), analogous to large bulk-tonnage deposit types found in Canada.

·        In November 2022, the hearing for the claim against the Republic of Poland under both the Energy Charter Treaty and the Australia-Poland Bilateral Investment Treaty was concluded (Claim).

o  Combined arbitration hearing took place in front of the Tribunal in London under the UNCITRAL Arbitration Rules.

o  With completion of the hearing, the Tribunal will render an Award (decision) in due course.

o  Damages of up to £737 million (A$1.3 billion / PLN4.0 billion) have been claimed including the assessed value of GreenX’s lost profits and damages related to both the Jan Karski and Debiensko projects, and accrued interest related to any damages.

·        Cash balance as at 31 December 2023 was A$9.3 million.

Arctic Rift Copper Project

The Arctic Rift Copper Project (ARC) is an exploration joint venture between GreenX and Greenfields. ARC is targeting large scale copper in multiple settings across a 5,774 km² Special Exploration Licence in eastern North Greenland. The area has been historically underexplored yet is prospective for copper, forming part of the newly identified Kiffaanngissuseq metallogenic province.

The results of the work program announced last year have demonstrated the high-grade nature of the known copper sulphide mineralisation and wider copper mineralisation in fault hosted Black Earth zones and adjacent sandstone units. The exact position of a native copper fissure at the Neergaard Dal prospect was also identified.

The Company is in the process of analysing further remote-sensing options for ARC, which  would be used to supplement current understanding of the known copper sulphide mineralisation and refine plans for the next exploration program. 

Eleonore North Gold Project

In July 2023, GreenX entered into an Option Agreement (Agreement) with Greenfields to acquire up to 100% of Eleonore North in eastern Greenland.

Eleonore North has the potential to host a RIRGS, analogous to large bulk-tonnage deposit types found in Canada including Donlin Creek, Fort Knox and Dublin Gulch.

Gold indicators documented at the high-priority Noa Pluton prospect within Eleonore North include:

·      Geophysical “bullseye” anomaly 6 km wide co-incident with elevated gold mineralisation from historical geochemical sampling.

·      Anomalous gold mineralisation associated with quartz veining exposed at surface over a length of up to 15 km.

·      Historical sampling includes 4 m chip sample grading 1.93 g/t Au and 1.9% Sb (refer to Appendix 1 of the Company’s announcement on 10 July 2023).

Eleonore North has potential to host large scale, shallow, bulk tonnage gold deposits. Eleonore North remains underexplored, with the existence of a possible RIRGS being a relatively new geological interpretation based on the historical data. Initial field work consists of a seismic survey to determine the depth from surface to the Noa Pluton to aid in drill targeting.

Figure 2: Eleonore North licence area showing the 6km diameter geophysical anomaly co-incident with gold veining visible at surface over some 15km at the high priority Noa Pluton prospect

The Eleonore North license area contains other gold targets as well as copper, antimony and tungsten prospects. At Holmesø there is copper and antimony mineralisation outcropping at surface. Historical mapping and sampling in the 1970s at Holmesø show a prospective horizon between 15 m and 20 m thick, with per cent level grades for both metals.

Eleonore North provides GreenX with gold exposure in Greenland and complements GreenX’s existing exploration prospect in Greenland, the Arctic Rift Copper Project (ARC). There are significant synergies with regards to personnel, logistics and equipment in having multiple exploration projects in Greenland. Field works were conducted during the 2023 field season at Eleonore North, with data collected from the seismic survey presently being analysed to inform follow-on exploration program design. Results from the seismic analysis are expected in the coming months.

Greenland is a mining friendly jurisdiction with strong Government support for expanding its mining industry, simple laws and regulations, and a competitive fiscal regime.

The primary target in Eleonore North is the Noa Pluton, followed by the Holmesø prospect and its source intrusion.  The Noa Veins provide a near-term drill target, however, the Company’s 2023 field work was focussed on determining the depth of the causative intrusion with greater precision using a passive seismic survey. Once analysed, this information will assist with the magnetic interpretation, provide more certainty for a future exploration program, and help identify the size of the intrusion within the well-defined hornfels. 

Figure 3: Map showing prospects and geological features within the Eleonore North license areas

Dispute with the Polish Government

In November 2022, the Company reported the conclusion of the Claim against the Republic of Poland under both the Energy Charter Treaty (ECT) and the Australia-Poland Bilateral Investment Treaty (BIT) (together the Treaties). The hearing took place in London and lasted two weeks.

Following completion of the hearing, the Tribunal will render an Award (i.e., the legal term used for a ‘decision’ by the Tribunal) in due course with no specified date available for the Tribunal decision.

As previously advised, the arbitration and hearing proceedings in relation to the Claim are required to be kept confidential.

Details of the Claim

The Company’s Claim against the Republic of Poland is being prosecuted through an established and enforceable legal framework, with GreenX and Poland agreeing to apply the United Nations Commission on International Trade Law Rules (UNCITRAL) rules to the proceedings. The arbitration claims are being administered through the Permanent Court of Arbitration in the Hague.

The evidentiary hearing phase of the arbitration proceedings has now been completed in front of the Arbitral Tribunal. With completion of the hearing, the Arbitral Tribunal will render an Award in due course. There is no specified date for an Award to be rendered. The Company’s claims for damages against Poland are in the amount of up to £737 million (A$1.3 billion/PLN4.0 billion), which includes a revised assessment of the value of GreenX’s lost profits and damages related to both the Jan Karski and Debiensko projects, and accrued interest related to any damages. The Claim for damages has been assessed by independent external quantum experts appointed by GreenX specifically for the purposes of the Claim.

In February 2019, GreenX formally notified the Polish Government that there exists an investment dispute between GreenX and the Polish Government. GreenX’s notification called for prompt negotiations with the Government to amicably resolve the dispute and indicated GreenX’s right to submit the dispute to international arbitration in the event of the dispute not being resolved amicably.  

In July 2020, the Company announced it had executed a litigation funding agreement (LFA) for US$12.3 million with Litigation Capital Management (LCM). US$10.7 million of the facility has been drawn down to cover legal, tribunal and external expert costs as well as defined operating expenses associated with the Claim. The Company does not anticipate further material drawdowns in relation to the ongoing BIT and ECT Tribunal proceedings. The LFA is a limited recourse loan with LCM that is on a “no win – no fee” basis.

In September 2020, GreenX announced that it had formally commenced with the Claim by serving the Notices of Arbitration against the Republic of Poland. In June 2021, GreenX announced that it had formally lodged its Statement of Claim in the BIT arbitration, including the first assessed claim for compensation. The Company’s Statement of Reply, the last material filing to be made by the Company for the BIT arbitration proceedings, was submitted in July 2021. The Statement of Reply addresses various points raised by the Republic of Poland in its Statement of Defence. The Statement of Reply also contains a re-evaluation of the claim for damages based on responses to Poland’s Statement of Defence.

GreenX’s dispute alleges that the Republic of Poland has breached its obligations under the applicable Treaties through its actions to block the development of the Company’s Jan Karski and Debiensko projects in Poland which effectively deprived GreenX of the entire value of its investments in Poland.

CORPORATE

Share Placing

In July 2023, the Company successfully completed a placing of 5.2 million new ordinary shares at a price of A$0.80 (41 pence) per share to raise gross proceeds of approximately A$4.2 million (~£2.1 million) from new and existing investors.

The net proceeds from the placing will be used for exploration activities at the Company’s projects in Greenland and to ensure that GreenX retains its strong balance sheet position.

Financial Position

GreenX had cash of A$9.3 million as at 31 December 2023.

Results of Operations

The net loss of the Consolidated Entity for the half-year ended 31 December 2023 was $1,997,911 (31 December 2022: $1,432,272 ). Significant items contributing to the current half-year loss and the substantial differences from the previous half-year include to the following:

(i)         Arbitration related expenses of $594,802 (31 December 2022: $4,830,784) relating to the Claim against the Republic of Poland. This has been offset by the arbitration funding income of $404,858 (31 December 2022: $4,795,937);

(ii)        Exploration and evaluation expenses of $466,094 (31 December 2022: $298,378), which is attributable to the Group’s accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of rights to explore and up to the commencement of a bankable feasibility study for each separate area of interest;

(iii)       Business development expenses of $195,882 (31 December 2022: $132,578) which includes expenses relating to the Group’s review of new business and project opportunities plus also investor relations activities during the six months to 31 December 2023 including public relations, digital marketing, legal related expenses and business development consultant costs; and

(iv)       Revenue of $252,221 (31 December 2022: $161,385) consisting of interest income of $249,546 (31 December 2022: $27,901) and the receipt of $ 2,675 (31 December 2022: $133,484) of gas and property lease income derived at Debiensko.

Financial Position

At 31 December 2023, the Group had cash reserves of $9,318,320 (30 June 2023: $8,674,728) placing it in a good financial position to continue with exploration activities at in Greenland as well as pursuing business development activities.

At 31 December 2023, the Company had net assets of $17,745,904 (30 June 2023: $15,721,510) an increase of approximately 11% compared with 30 June 2023.  This is largely attributable to the increase in exploration and evaluation assets which amounts to A$8,984,599 (30 June 2023: $7,750,883).

Business Strategies and Prospects for Future Financial Years

GreenX’s strategy is to create long-term shareholder value through the discovery, exploration, development and acquisition of technically and economically viable mineral deposits. This also includes pursuing the Claim against the Republic of Poland through international arbitration in the short to medium term.

To date, the Group has not commenced production of any minerals, nor has it identified any Ore reserves in accordance with the JORC Code.  To achieve its objective, the Group currently has the following business strategies and prospects over the medium to long term:

·        Continue to enforce its rights through an established and enforceable legal framework in relation to international arbitration for the investment dispute between GreenX and the Polish Government that has arisen out of certain measures taken by Poland in breach of the Treaties;

·        Identify and assess other suitable business opportunities in the resources sector; and

·        Continue with current exploration activities in Greenland for minerals, including for copper and gold.

All of these activities are inherently risky and the Board is unable to provide certainty of the expected results of these activities, or that any or all of these likely activities will be achieved. Furthermore, GreenX will continue to take all necessary actions to preserve the Company’s rights and protect its investments in Poland, if and as required.  The material business risks faced by the Group that could have an effect on the Group’s future prospects, and how the Group manages these risks, include the following:

·        Litigation risk – All industries, including the mining industry, are subject to legal and arbitration claims. Specifically, and as noted above, the Company is continuing with its Claim against the Republic of Poland, and will strongly defend its position and will continue to take all relevant actions to pursue its legal rights in the Claim process. In November 2022, the hearing for the Claim was completed with the Tribunal to render an Award (i.e., a decision) in due course with no specified date available for the Tribunal decision. There is however no certainty that the Claim will be successful. If the Claim is unsuccessful, then this may have a material impact on the value of the Company’s securities.

·        Earn-in and joint venture contractual risk – The Company’s earn-in right to the ARC project is subject to the EIA with Greenfields as announced in October 2021. The Company’s ability to achieve its objectives is dependent on it and other parties complying with their obligations under the EIA. Any failure to comply with these obligations may result in the Company not obtaining its interests in ARC and being unable to achieve its commercial objectives, which may have a material adverse effect on the Company’s operations and the performance and value of the Shares. There is also the risk of disputes arising with the Company’s joint venture partner, Greenfields, the resolution of which could lead to delays in the Company’s proposed development activities or financial loss.

When the Company earns in its interest in ARC, an incorporated joint venture will be established between the Company and Greenfields. The nature of the joint venture may change in future, including the ownership structure and voting rights in relation to ARC, which may have an effect on the ability of the Company to influence decisions on ARC.

With regards to the Option Agreement for ELN, it should be noted that the Option Agreement is subject to a number of conditions precedent including the payment of the option fee by the Company and there is a risk that the transaction may not complete and the Company will not acquire the ELN project.

·        Operations in overseas jurisdictions risk – ELN and ARC are located in Greenland, and as such, the operations of the Company will be exposed to related risks and uncertainties associated with the country, regional and local jurisdictions. Opposition to the projects, or changes in local community support for the projects, along with any changes in mining or investment policies or in political attitude in Greenland and, in particular to the mining, processing or use of copper, may adversely affect the operations, delay or impact the approval process or conditions imposed, increase exploration and development costs, or reduce profitability of the Company. Moreover, logistical difficulties may arise due to the assets being located overseas such as the incurring of additional costs with respect to overseeing and managing the projects, including expenses associated with taking advice in relation to the application of local laws as well as the cost of establishing a local presence in Greenland. Fluctuations in the currency of Greenland may also affect the dealings and operations of the Company.

Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights applications and tenure, could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests. Further, the outcomes in courts in Greenland may be less predictable than in Australia, which could affect the enforceability of contracts entered into by the Company.

The projects are remotely located in an area that has an arctic climate and that is categorised as an arctic desert, and as such, the operations of the Company will be exposed to related risks and uncertainties of arctic exploration, including adverse weather or ice conditions which may and has prevented access to the projects, which can impact exploration and field activities or generate unexpected costs. It is not possible for the Company to predict or protect the Company against all such risks.

The Company also had previous operations in Poland which may be subject to regulations concerning protection of the environment, including at the Debiensko and Kaczyce projects which have both been relinquished by the Company. As with all exploration projects and mining operations, activities will have an impact on the environment including the possible requirement to make good any disturbed or damaged land.

Existing and possible future environmental protection legislation, regulations and actions could cause additional expense, capital expenditures and restrictions, the extent of which cannot be predicted which could have a material adverse effect on the Company’s business, financial condition and results of operations.

·        The Group’s exploration and development activities will require further capital – The exploration and any development of the Company’s exploration properties will require substantial additional financing. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration and any development of the Company’s properties or even a loss of property interest. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company.

·        The Group’s exploration properties may never be brought into production – The exploration for, and development of, mineral deposits involves a high degree of risk. Few properties which are explored are ultimately developed into producing mines. To mitigate this risk, the Company will undertake systematic and staged exploration and testing programs on its mineral properties and, subject to the results of these exploration programs, the Company will then progressively undertake a number of technical and economic studies with respect to its projects prior to making a decision to mine. However, there can be no guarantee that the studies will confirm the technical and economic viability of the Company’s mineral properties or that the properties will be successfully brought into production.

·        The Group may be adversely affected by fluctuations in mineral prices – The price of gold and copper fluctuates widely and is affected by numerous factors beyond the control of the Group. Future production, if any, from the Group’s mineral properties will be dependent upon gold and copper prices being adequate to make these properties economic. The Group currently does not engage in any hedging or derivative transactions to manage commodity price risk. As the Group’s operations change, this policy will be reviewed periodically going forward.

·        The Group may be adversely affected by competition within the mineral industry – The Group competes with other domestic and international copper companies, some of whom have larger financial and operating resources. Increased competition could lead to higher supply or lower overall pricing. There can be no assurance that the Company will not be materially impacted by increased competition. In addition, the Group is continuing to secure additional surface and mineral rights, however there can be no guarantee that the Group will secure additional surface and mineral rights, which could impact on the results of the Group’s operations.

·        The Company may be adversely affected by fluctuations in foreign exchange – Current and planned activities are predominantly denominated in Sterling, Danish krone and/or Euros and the Company’s ability to fund these activates may be adversely affected if the Australian dollar continues to fall against these currencies. The Company currently does not engage in any hedging or derivative transactions to manage foreign exchange risk. As the Company’s operations change, this policy will be reviewed periodically going forward.

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