Chatham provides Quarterly Update

CHATHAM ROCK PHOSPHATE LIMITED ("CRP") MANAGEMENT'S DISCUSSION & ANALYSIS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 (All amounts stated in Canadian dollars, unless otherwise indicated) Attention is called to a caution in respect of Forward-Looking Statements - included at page 25 CRP is Stock Exchange listed in Canada, New Zealand and Germany. As a result, Chatham is positioned on the world stage to more effectively raise funds from international investors. These funds are required to reapply for the Marine Consent required to give effect to our granted mining permit. Our overall objective is the mining of phosphate nodules on the Chatham Rise (offshore New Zealand). The TSX.V listing in Canada was achieved by means of a merger with dual listed Antipodes Gold Limited ("Antipodes Gold"), which, having sold its Coromandel based gold assets to Newmont New Zealand was a cashed-up shell. Antipodes Gold consolidated its shares 1 for 10 and then made a one Antipodes share for 65.59 Chatham shares offer. That process was complex, highly regulated and took over a year to complete. In parallel with that CRP undertook multiple investor roadshows in Europe and Canada and continued to steadily raise working capital from investors there, as well as in New Zealand and Asia. CRP has now raised more than $7.3 million since the Marine Consent was declined in February 2015. During this period, the market capitalisation has recovered from $2.4 million to over a peak of $10 million and is presently around $7.4 million on the TSX.V and $7 million on the NZX. The cornerstone investors are based in Singapore, Germany and Switzerland and together with the CRP management team hold, directly and indirectly, approximately 26% of the company. The rest of the shares are held by more than 3000 shareholders in nine countries. CRP is expecting to raise the funds required to complete the Marine Consent reapplication and to cover the costs of the Environmental Protection Authority hearing to be held in 2022. It is expected to take 15 months to complete the work required to submit the re-application with a proposed submission date in Q1, 2022. This would lead to an expected grant date of Q4, 2022 and eventual production in early 2025. Chatham has been largely unaffected by COVID-19 and lock down restrictions. Contents INTRODUCTION 3 CORPORATE HISTORY AND NATURE OF THE BUSINESS 3 BOARD OF DIRECTORS 5 CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS 5 Capital Transactions 5 Significant Events 5 CHATHAM ROCK PROJECT AND EXPLORATION 7 Summary of Quarterly Results 12 Significant Expenses of a Corporate Nature 12 Liquidity and Capital Resources 13 Related Party Transactions 13 SUBSEQUENT EVENTS 14 Use of Financial Instruments 14 Contractual Obligations and Commitments 14 Off-Balance Sheet Arrangements and Contingent Liabilities 14 Critical Accounting Policies and Estimates 14 Mineral Properties 15 OUTLOOK 15 RISKS, UNCERTAINTIES AND OTHER ISSUES 15 Risk Factors 15 SUPPLEMENTAL TO THE FINANCIAL STATEMENTS 24 Outstanding Share and Option Data 24 FORWARD-LOOKING STATEMENTS 25 INTRODUCTION This discussion and analysis of the operating results and financial condition of Chatham Rock Phosphate Limited ("Chatham Rock", or the "Company") for the nine months ended December 31, 2020, as prepared on March 1, 2021 should be read in conjunction with the unaudited consolidated financial statements and related notes for the same period and is intended to provide the reader with a review of the factors that affected the Company's performance during that year and the factors reasonably expected to impact future operations and results. The unaudited consolidated financial statements and related notes of Chatham Rock have been prepared in accordance with accounting principles that comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The financial statements and all amounts in this report are expressed in Canadian dollars, except where otherwise indicated. CORPORATE HISTORY AND NATURE OF THE BUSINESS Chatham Rock is incorporated under the Business Corporations Act (British Columbia) and listed on the Toronto Stock Exchange's Venture Exchange ("TSX-V"). The Company is also registered under the New Zealand Companies Act 1993 and listed on the New Zealand Stock Exchange ("NZX"). A name change from Antipodes Gold Limited to Chatham Rock, in February 2017, was undertaken at the same time as a reverse takeover arrangement for the Company to acquire its main subsidiary, Chatham Rock Phosphate (NZ) Limited ("Chatham (NZ)") (which was incorporated in New Zealand under the Companies Act 1993 on April 27, 2004). Chatham (NZ)'s registered office and principal place of business is located at Level 1, 93 The Terrace, Wellington 6011, New Zealand. Significant Intercorporate Relationships Chatham Rock Phosphate Limited (Chatham Rock) Incorporated under the Business Corporations Act (British Columbia) 100% Manmar Investments 106 (Proprietary) Limited Incorporated under the laws of Namibia Chatham Rock Phosphate (NZ) Limited Incorporated under the New Zealand Companies Act 1993 100% Pacific Rare Earths Limited Incorporated under the New Zealand Companies Act 1993 Chatham (NZ) is a junior mineral development company, focused on the development of a marine phosphorite deposit off the coast of New Zealand. It has not commenced mining operations or generated operating revenues to date. Chatham (NZ) holds a Mining Permit over an area off the coast of New Zealand with significant seabed deposits of rock phosphate, rare earths and other potentially valuable minerals. In 2007, Chatham (NZ) and an associate applied for a prospecting license over an area covering a portion of a phosphorite deposit on the Chatham Rise, being historically an intensively investigated area of the Chatham Rise for potentially economic concentrations of rock phosphate. In 2010, Chatham (NZ) (as to 90%) and its associate (as to 10%) were jointly granted a prospecting licence, pursuant to the Crown Minerals Act 1991 of New Zealand, covering 4,726 ?km?^2 of the Chatham Rise. Following the prospecting licence being granted, Chatham (NZ) carried out significant background work as part of the licence requirements to further characterize the phosphorite resource and assess the potential environmental impacts of a possible mining operation in a marine environment. Since acquiring the original prospecting licence in 2010, Chatham (NZ) has commissioned six cruises in two programs. The key objects of the cruises were to corroborate the previous work conducted on the Chatham Rise and to collect further geological, geotechnical, geophysical and environmental data. For phosphorite grade corroboration purposes, the M.V. Tranquil Image cruise collected 55 samples using a Van Veen grab. The R.V. Dorado Discovery conducted four cruises out to the project area and collected 181 box core and grab samples as well as environmental data. The data collected by Chatham (NZ) allowed better delineation of the deposit. The more recent work by Chatham (NZ) on investigating this resource confirmed the general tenor of the phosphorite grades and location of phosphorite in the area, advanced work aimed at investigating the feasibility of mining the resource, and has provided valuable information to assess the environmental effects of the proposed mining operations. In early 2011, Chatham (NZ) commissioned independent studies for the design of a system to recover phosphorite from the Chatham Rise seabed from three of the largest dredging companies in the world. Boskalis Offshore Subsea Contracting B.V ("Boskalis") was one of the participants and was selected by Chatham (NZ) as its preferred technical partner for the Chatham Rise Project. Chatham (NZ) divested some oil and gas related investments to its associate in exchange for it transferring its 10% interest in the prospecting license to Chatham (NZ), resulting in the project becoming wholly owned by Chatham (NZ). In September 2012, Chatham (NZ) applied for a Mining Permit in respect of a part of the area covered by the Continental Shelf Licence. As part of that application process and in anticipation of applying for the Marine Consent, Chatham (NZ) consulted with a range of stakeholders. This has included the local (Maori) Iwi, the Chatham Islands community, the Government, fishing groups and a range of environmental groups. The purpose of this consultation was to establish a relationship with these parties and to identify and resolve issues associated with the mining proposal. As a result, the Directors believe that the project is now well understood by a wide range of stakeholders and in turn Chatham (NZ) has a better understanding of the views and possible concerns of all parties whose interests are potentially affected by the project. The Mining Permit was granted on December 6, 2013. In May 2014, Chatham (NZ) submitted to the (New Zealand) Environmental Protection Authority ("EPA") a formal application for Marine Consents. The application was declined on February 11, 2015. Chatham (NZ) aims to pursue a re-submission of its Marine Consent application and has been raising equity capital in preparation for this task. BOARD OF DIRECTORS Chris Castle President and CEO (New Zealand based); Linda Sanders Non-executive Chairman (New Zealand based); Robert Goodden Independent non-executive director (England based); Jill Hatchwell Non-executive director (New Zealand based); and Ryan Wong Non-executive director (Malaysia based) CAPITAL TRANSACTIONS AND SIGNIFICANT EVENTS Capital Transactions Chatham (NZ) has continued to raise additional equity capital totalling $2.45m in the twenty four months to December 31, 2020. These funds are being applied to cover corporate overheads and to the preparatory work in reapplying for the marine consent for the Chatham Rise project. Avenir Makatea Acquisition On December 21, 2020 the Company announced that it had concluded negotiations to acquire French Polynesia-based Avenir Makatea Pty Limited. The merger was negotiated at arm's length. Avenir Makatea proposes, once fully permitted, to recover phosphate from the island of Makatea in French Polynesia, to enable the rehabilitation of previously mined parts of the island. The purchase price is CAD $1,455,000 and will be settled through an issue of shares. The acquisition is subject to certain conditions including TSX.V approval. When the transaction is completed the vendors of Avenir Makatea will hold approximately 28% of the enlarged capital of the Group. Significant Events Apart from progress in preparing for the marine consent reapplication, the Company completed its reverse takeover merger with Antipodes Gold Limited on 24 February 2017. This resulted in Chatham Rock gaining a listing on the Toronto Venture Exchange (TSX.V Code "NZP"). Chatham Rock is now also quoted on the Frankfurt Exchange. On September 5, 2018 Chatham Rock announced that it had recently formed a 100% owned subsidiary Pacific Rare Earths Limited. This company has been formed to project-manage a work programme aimed at quantifying the extent, value and recoverability of Rare Earths Elements (REE) and other potentially strategic or valuable minerals contained in the rock phosphate nodules on the Chatham Rise. In addition, the company will be investigating the existence and recovery potential of rare earths and other valuable minerals in seafloor muds on the Rise. Rare Earths in phosphate A recent study of marine phosphate nodules by the United States Geological Survey reveals that there are significant quantities of REE contained within the phosphate nodules on the Chatham Rise. Of the 17 recognised rare earths, 15 are present in Chatham Rise rock phosphate nodules, as well as varying concentrations of other valuable minerals including nickel, cobalt, chromium, vanadium, zirconium, fluorine and strontium. Collectively these minerals, if they can be efficiently extracted as by-products, represent not only an immensely strategic asset for New Zealand but could significantly improve the already attractive forecast project economics. The presence of these minerals within the phosphate rock is highly significant because the contained value may be released onshore (if extraction proves feasible and economically viable) without any change to the proposed mining system, and without any additional environmental impacts in the Project area. Rare Earths in seafloor muds Shareholders will recall that we established and announced some time ago that there were significant quantities of rare earths and other valuable minerals in the seafloor muds in our permit area. These include cerium, lanthanum, neodymium, praseodymium, yttrium, cobalt, rubidium, cesium, germanium, gallium, strontium, thallium and tungsten. The primary challenge associated with the production of rare earths from the muds is the extraction process, and the advancement of processing technology that will be required in order to demonstrate the feasible and economically viable separation of any of these minerals. In addition, recovery of rare earths from muds will involve the development of a new marine mining system, and therefore will be considered for development separately from the existing CRP rock phosphate nodules project. Further Independent Research The information CRP already holds about REEs and other valuable minerals in its permit areas was generated by independent organisations, with some of this work undertaken up to a decade ago. The current knowledge confirms that REEs occur over a wide area, and estimates of the average grades and therefore the size of the potential deposits have been made at a conceptual level. The current conceptual information, when assessed against current price data, confirms the significance of potential value. CRP has recently applied for NZ Government funding of a research project proposed to be undertaken by a New Zealand university.The objectives of this project are to further develop a better upstanding of the extraction and recovery potential of the minerals. CRP is excited to be engaging in the investigation of REE recovery, which is a strategic priority of the New Zealand Government in relation to the mineral sector, as stated by the Honourable Dr Megan Woods, Minister of Energy and Resources. The Chatham Rise rock phosphate and rare earths deposit has the potential to contribute to the understanding of REE potential in New Zealand, given that it is likely that there is more information already available about the REE minerals in the Chatham Rise deposit than any other rare earths deposit in New Zealand. CHATHAM ROCK PROJECT AND EXPLORATION CHATHAM RISE TECHNICAL REPORT The summary below concerning Chatham's Chatham Rise Phosphorite Project (the "Chatham Rise Project" or the "Project") is taken from the Chatham Rise Technical Report dated April 24, 2015 and prepared by Rene Sterk, MSc MAIG MAusIMM CP (Geo). For further detailed information concerning the Chatham Rise Project, the reader is directed to read the full Chatham Rise Technical Report. The Chatham Rise Technical Report has been compiled by RSC Consulting Ltd ("RSC") in compliance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") and Form 43-101F1. The Report constitutes the supporting documentation for the estimate of a phosphorite resource for the Chatham Rise Project. This resource estimate has previously been the subject of a technical report compiled by RSC on behalf of Chatham (NZ) (RSC, 2014), which was prepared in compliance with the 2012 edition of the Joint Ore Reserves Committee (JORC). While the resource estimate disclosed in the present Report has not changed and has an effective date of March 3, 2014, this Report presents the estimate in compliance with NI 43-101, and also includes updated information on the Chatham Rise Project in light of environmental permitting developments that have taken place since the previous report (RSC, 2014) was published. The effective date of the Report is July 6, 2015. Property Description and Ownership The Project covers an area of seabed phosphorite nodules that is situated about 450 km offshore of the east coast of New Zealand at approximately 350 to 450 m water depth. Chatham holds Mining Permit Number 55549 which was granted to Chatham (NZ) in December 2013 ("Mining Permit"). The Mining Permit is not due to expire until 2033 and, subject to the granting of a Marine Consent from the Environmental Protection Authority ("EPA"), will allow Chatham (NZ) to conduct mining operations. Chatham previously held a Prospecting Licence (MPL 50270) which originally expired on February 25, 2014. An application for an extension of a term for a further four years was submitted to New Zealand Petroleum and Minerals ("NZPAM") in December 2013 and the licence was successfully renewed in August 2016, for a further 6 years from February 2014 to February 2020. At that time the licence area was reduced from 3,905 square kilometres to 2,876 square kilometres. On 29 August 2019 this prospecting permit was relinquished six months prior to the end of its term. This has no impact on the mining permit and the proposed mining programme. A summary of these licence holdings and applications in shown at the table below. Chatham Licence Holdings and Applications Asset Holder Interest (%) Status Licence Expiry Area (km2) MP 55549 Mining Permit Chatham (NZ) 100 Exploration Dec. 5, 2033 820 Geology and Mineralization The phosphorite deposit occurs as a thin surficial seafloor layer of phosphorite-bearing glauconitic sand with thicknesses typically ranging from 0 to 1 m, at depths of 350 to 450 m below sea level. The sand layer consists of mainly silt and sand-sized sediments, with phosphatised chalk nodules up to 15 cm in diameter. Exploration Phosphorite nodules were first discovered on the Chatham Rise in the 1950s by a New Zealand Government survey. During the 1960s to 1980s several private and government sponsored cruises explored the Chatham Rise and surrounding seafloor area. The most extensive surveys were conducted by an agreement between the New Zealand Department of Scientific and Industrial Research and the West German Government on cruises by the German research vessels R.V. Valdivia in 1978 and R.V. Sonne in 1981. The 1978 R.V. Valdivia cruise was the first intensive sampling and research campaign to be conducted over the Chatham Rise; a total of 655 samples from 689 attempts were collected over a 300 km2 area in the west of the Project area. The majority of the samples were collected using a large Van Veen-style grab of 0.12 m3 volume, weighing approximately 400 kg. The 1981 R.V. Sonne cruise was the most comprehensive exploration effort to assess the Chatham Rise phosphorite deposit. In addition to oceanographic, meteorological and geophysical data, the cruise collected 19 hours of video recordings of the sea floor as well as 519 sediment samples taken by a pneumatic grab-sampler. The seafloor sediment samples collected during this cruise are the most representative sample data collected on the Chatham Rise and are considered to be of a high enough quality to include in a resource estimation. Since acquiring the licence in 2010, Chatham (NZ) has conducted six cruises in two programs in the Project area. The key task of the cruises was to validate the previous work conducted on the Chatham Rise and collect further geological, geotechnical, geophysical and environmental data. For phosphorite grade estimation purposes the M.V. Tranquil Image cruise collected 55 samples using a Van Veen grab. The R.V. Dorado Discovery conducted four cruises to the Project area and collected 206 box core and grab samples. Sample quality and QA/QC measures varied considerably between the cruises and within each cruise. A critical part of the assessment of the data collected in the Project area was to determine what quality thresholds to use to allow or disallow data to enter into the estimation process. As part of the data verification process, the relative and absolute quality of the data was assessed in as much detail as practically possible. In general, the best samples were those that were collected using the pneumatic grab, sampled the full sand horizon, had a small survey error and had no other apparent data ambiguities. Samples collected from the R.V. Sonne are considered to represent the better quality samples collected in the licence area, followed by some of the R.V. Valdivia samples and then the box core samples from the Dorado Discovery. Samples not included in the resource estimate are samples that failed due to technical failure, samples collected but which have no data recorded, samples with no location coordinates, non-validated data and samples documented as washed or otherwise biased. Mineral Resources Definition of the domains used for modelling was based on seismic facies delineated during the R.V. Sonne cruise. A 2D block model was constructed based on 1 km by 1 km blocks that covers the main sampled area based on the average data spacing in the main sample areas. A maximum search radius of 3,000 m was used based on variogram modelling. Estimation was performed in each domain using ordinary kriging using the accumulation method on the parameters Ph kg/ m2 (phosphorite grade), Depth and Sample Quality Ranking ("SQR"). The grade (Ph kg/ m2) was then calculated by dividing Ph kg/ m2 by the estimated Depth for each block. A total of 80 million m2 at an average grade of 290 kg/ m2 is classified as a global Inferred Mineral Resource at a cut-off grade of 100 kg/ m2 (table below). There are no resources classified in indicated or measured categories. As the Chatham Rise phosphorite resource is classified entirely as an Inferred Mineral Resource it does not constitute a mineral reserve and so does not have demonstrated economic viability. The specification of the phosphorite (i.e. the phosphate content) has been studied by various operators including Chatham (NZ), and, even though a representative average grade cannot be determined for the Mineral Resource, the tenor of the specification (in the order of 18-19% P2O5 of screened material) is suitable to allow classification into the Inferred Mineral Resource category. The average thickness of the resource is 0.20 m. Statement of Mineral Resources (phosphorite) for Mining Permit 55549, Chatham Rise. Estimates are rounded to reflect the level of confidence in these resources at the present time. Classification Volume (m3) Thickness (cm) Ph kg/m3 Inferred Mineral Resource 80,000,000 20 290 Notes: The Mineral Resource is reported in accordance with CIM NI 43-101, 2011 edition The Mineral Resource is contained within MP 55549 All resources have been rounded to the nearest 0.1 million tonnes Ph kg/m3 is the weight of phosphorite per cubic metre Even though a representative average grade for the specification (phosphate grade) cannot be determined for the Mineral Resource, the tenor of the specification (in the order of 18-19% P2O5 of screened material) is suitable to allow classification into the Inferred Mineral Resource category The Mineral Resource is reported at 100 kg/m3 phosphorite cut-off grade The Mineral Resource is classified entirely as an Inferred Mineral Resource. It does not constitute a mineral reserve and so does not have demonstrated economic viability. RSC's analysis to date indicates that a potentially economically extractable Mineral Resource exists in the Project area. Several high-profile sampling cruises, most independent from each other, have all identified grades of economic interest within the same area. These cruises have been well documented and specific knowledge on sampling systems has been retained and included in this Report. Recommendations In addition to the Inferred Mineral Resource described above, in RSC's opinion, there is significant exploration potential to extend the Mineral Resource within the Mining Permit. Based on existing sampling data (that was not included in the resource because of lower density of sampling or lower SQR numbers), the exploration target would be in the order of 30,000,000 to 50,000,000 m3 at grades between 200 and 300 kg/m3 . The potential quantity and grade of this global exploration target is conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the target being delineated as a Mineral Resource. RSC recommends that further seafloor sampling is undertaken to both increase the confidence in the established Mineral Resource as well as to extend the boundaries of the resource, predominantly towards the west where currently low-quality Valdivia data indicate an exploration target of at least 5 Mt phosphorite. Increasing the confidence in the current Mineral Resource by additional sampling will give Chatham (NZ) the grade and geological confidence in the phosphorite deposit to allow them to further develop mining plans and economic studies. Outlook Chatham (NZ) continues to progress the Chatham Rise Project towards mining whilst also examining other high quality phosphate projects featuring strong grades, meaningful size, mining-friendly locales near significant markets. Chatham (NZ) remains confident that its phosphate deposit places it in a strong position globally to deliver an essential ingredient to the agriculture industry, where the demand for food remains a growth market in turbulent economic times. Despite challenging market conditions, Chatham (NZ) considers that the ongoing volatility in the major phosphate producing regions (Middle East and North Africa) supports its conviction in the importance of executing well-planned, efficient exploration and development program designed to advance this high-quality phosphate project; and to pursue other high -quality projects within our area of expertise. The Chatham Rise phosphate has valuable attributes: It is a reactive phosphate, of grades between 21-22% P205 that may be directly applied to existing pastures, without the necessity of beneficiation or upgrading. It is low in deleterious metals (cadmium), and has other significant environmental benefits over conventional imported phosphate products. It is a key ingredient of New Zealand's major agriculture industry. The project shows strong economic advantages over imported products where production and delivery to market costs of the Chatham Rise product are equivalent to transport costs to NZ of similar products. There is significant upside exploration potential, with grab tests of adjacent ground showing individual samples of economic grade, and much of the highly prospective Chatham Rise is untested. Chatham (NZ) is in the process of reapplying for a marine consent to mine phosphate nodules on the Chatham Rise seabed. Mitigation of the effects of mining on the corals by excluding known coral areas, adaptive management, articulation of the clear economic benefits, and a better understanding of modelling and risk management should ameliorate EPA concerns. Chatham (NZ) remains confident that marine resource consents will be granted. Current Work Program Working closely with the various government organizations, significant work is aimed at preparing re-application documents for the Marine Consent. Additional field trials are being scoped to establish the suitability of the Chatham phosphate for direct application in a range of New Zealand geographic agricultural conditions. Optimization of the current resources is being undertaken to establish better mine plans that amongst a range of outcomes addresses the exclusion of known coral thickets. FINANCIAL COMMENTARY The Company prepares and files its financial statements and related notes in accordance with accounting principles that comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Selected Annual Information Year ended March 31 2020 2019 2018 $000s except for per share Total revenue - - - Net profit/(loss) (640) (912) (1,228) Profit/(Loss) per share - basic and diluted (cents) (2.49) (4.55) (7.93) Total assets 4,586 5,079 4,840 Total long-term liabilities - - - Distribution or cash dividend declared per share - - - Summary of Quarterly Results Quarterly results for the past eight quarters ending December 31, 2020 are as follows: 2021 2020 2019 $000s Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Cash 49 78 289 12 94 70 277 244 Working capital 68 193 337 (137) 140 143 281 303 Total assets 5,099 4,905 5,079 4,541 4,600 4,483 4,865 5,079 Profit/(Loss) for period (104) (129) (117) (256) (128) (102) (154) (293) Profit/(Loss) per share (cents) (0.31) (0.39) (0.40) (.99) (0.50) (0.39) (0.61) (1.43) Mineral Project expenditures * (22) (18) (16) (21) (17) (23) (27) (28) Cash flow from financing (net) 94 32 555 - 98 - 223 427 Weighted average shares (millions) 33 33 29 26 26 25 25 21 *In recent years, mineral project expenditures have been focussed on the marine consent application and reapplication. The Company records losses each quarter/year arising from the expensing of its general and administration expenses. Periodic (at least annual) reviews of capitalized exploration expenditures are undertaken and write-offs and provisions are expensed to the Consolidated Statement of Comprehensive Income. Significant Expenses of a Corporate Nature For the nine months ended December 31, 2020 the Group recorded a net loss before income taxes of $104,000 (2019: net loss of $128,000). Significant expense categories (apart from accumulated exploration write-offs and provisions) for the period are discussed below: Expenditure 2020 Note 2019 General and administration 42 1 87 Legal fees 13 7 Consulting fees 7 25 Marketing 38 - Registry, Filing and Listing 5 5 Travel and accommodation - 5 Total 105 129 Note: General and Administration costs includes management fees $16,000 (2019: $30,000), accounting services $6,000 (2019: $3,000), insurance $5,000 (2019: $3,000) and New Zealand office costs $8,000 (2019: $6,000). Liquidity and Capital Resources The Company's cash position as at December 31, 2020 was $49,000. Trade and other payables total $133,000. The Company's existing share, option and warrant capital structure is set out at the end of this report under the heading of "Supplemental to the Financial Statements". Related Party Transactions Related party transactions are in the normal course of business and are measured at the exchange amount, which is the value as agreed between management and the related parties. Related party consultancy and management fees totalled $16,000 for the period (2019: $48,000) and are set out in detail in the financial statements at Note 15. Depending on the nature of the services and costs, certain amounts have been capitalised to intangible assets as they are directly attributable to the Chatham Rise Project. SUBSEQUENT EVENTS On January 18, 2021 the Company closed a non-brokered private placement of 10,000,000 common shares at a price of CAD$0.06 per share for gross proceeds of CAD$600,000. Finders fees in the amount of CAD$3,360 were paid in connection with the private placement. All securities issued pursuant to the private placement are subject to a hold period and may not be traded until May 16, 2021. The current outbreak of COVID-19 and the subsequent quarantine measures imposed by the New Zealand government as well as the travel restrictions imposed by New Zealand and other countries in early 2020 have caused disruption to businesses and economic activity. The Group considers this to be a non-adjusting post balance sheet event. The Group is committed to supporting government and community efforts to limit the spread of the virus, and supporting business continuity with regard to its employees and contractors. There were no other material subsequent events up to the date of this report. Use of Financial Instruments For the period ended December 31, 2020 Chatham did not enter into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk. The principal financial instruments affecting the Company's financial condition and results of operations are currently its cash, amounts receivable and prepayments, and accounts payable and accrued liabilities. Contractual Obligations and Commitments At December 31, 2020 the Group had no capital commitments (December 31, 2019: Nil). The Company has no commitments under the terms of non-cancellable operating leases (December 31, 2019: Nil). The Company has future multi-year work program obligations in order to maintain tenure of its mineral permits. These obligations include: - permit rentals, mapping, sampling, data compilation and modelling. These are set out in detail in the financial statements at Note 17. Off-Balance Sheet Arrangements and Contingent Liabilities The Company has no off-balance sheet arrangements. Critical Accounting Policies and Estimates Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as at the date of the financial statements, as well as the reported amounts of revenues earned and expenses incurred during the period. These estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. The Company's significant accounting policies are those that affect its financial statements, and are summarized in Note 3 of the audited financial statements for the year ended March 31, 2020. Critical accounting policies and estimates in the year included capitalization of the costs relating to the acquisition, exploration and development of non-producing resource properties and the recognition of impairment of those assets, the allocation of proceeds on the purchase or sale of assets, the valuation of stock based compensation and tax accounts, and contingent liabilities. Actual results could differ from these estimates. Mineral Properties The decision to capitalize exploration expenditures, and the timing of the recognition that capitalized exploration is unlikely to have future economic benefits, can materially affect the reported earnings of the Company. In line with accepted industry practice for exploration companies, the Company has adopted the policy of deferring property specific acquisition, exploration and development costs. Deferred costs relating to properties that are relinquished, or where continued exploration is deemed inappropriate, are written off in the year such assessment is made. If the Company adopted a policy of expensing all exploration costs, the Company's asset base, shareholders' equity, and loss from operations would be materially different. These deferred costs will be amortized on the unit-of-production basis over the estimated useful lives of the properties following the commencement of production. The cost of mineral properties includes any cash consideration paid, and the fair market value of shares issued on the acquisition of property interests, if any. The recorded amounts represent actual expenditures incurred and are not intended to reflect present or future values. The Company reviews capitalized costs on its property interests on a periodic, or at least annual, basis and will recognize an impairment in value based upon current exploration results and upon management's assessment of the future probability of profitable revenues from the property or from the sale of the property. Management's assessment of the property's estimated current fair market value may also be based upon a review of other property transactions that have occurred in the same geographic area as that of the property under review. OUTLOOK During 2020 the Company proposes to raise sufficient equity finance to commence the re-application process for the Marine Consent. It is expected to take 15 months to complete the work required to submit the re-application with a likely submission date in 2022. This would lead to an expected grant date in 2023 and eventual production in 2025. For additional information, please refer to the Company's website at www.rockphosphate.co.nz and for regulatory filings, including news releases, please refer to www.SEDAR.com. RISKS, UNCERTAINTIES AND OTHER ISSUES Risk Factors Chatham (NZ)'s business of exploring and developing for mineral resources involves a variety of operational, financial and regulatory risks that are typical in the natural resource industry. Chatham (NZ) attempts to mitigate these risks and minimize their effect on its financial performance, but there is no guarantee that Chatham (NZ) will be profitable in the future. The Company's common shares should be considered speculative. Investors should carefully consider the following risk factors: Marine Consent Chatham (NZ) cannot commence mining operations without the Marine Consent. Chatham (NZ) filed for the Marine Consent on May 14, 2014 but was declined on February 11, 2015. While Chatham (NZ) considers that it has a good case to receive the Marine Consent on re- application, there is no guarantee that the Marine Consent will be granted. If Marine Consent is not granted or is granted subject to economically unfeasible conditions, Chatham (NZ) will not be able to proceed with mining operations in respect of the Mining Permit, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Recent revisions to the Exclusive Economic Zone ("EEZ") ACT mean that the Marine Consent decision-making process will typically be completed within a nine-month period, however, there is provision for timeframes to be extended in certain circumstances. Any delay in the Marine Consent decision-making process could delay the entering into of a mining contract and the commencement of mining operations and production, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Uncertainty Relating to Mineral Resources Resource estimates are a product of the skill, experience and judgements of the person carrying out the resource estimation and no assurances can be given that the estimated grade and tonnes will be realized or that Chatham (NZ) will receive the prices assumed in determining its resources. Valid estimates made at a given time may significantly change when new information becomes available. While Chatham (NZ) believes that the resource estimates included in this Document are reasonable, resource estimates by their nature are imprecise and depend on the quality of the sampling data and to a certain extent, upon statistical inferences that may ultimately prove unreliable. All of Chatham (NZ)'s resources are reported as Inferred Mineral Resources. Inferred Mineral Resources have a great deal of uncertainty associated with them as to their existence (both quantity and ultimately recovered grade). Generally, Inferred Mineral Resources cannot form the basis of a feasibility study or bankable feasibility study. Owing to the nature of Chatham (NZ)'s phosphate deposit, and its accessibility, it is not guaranteed that the deposit will ever be converted to the measured and indicated resource categories. As such, there can be no assurance that third parties will find Chatham (NZ)'s resource categorization acceptable for future funding purposes or capital investment decisions, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Mining Contract and Mining Process Risk The technical ability of Chatham (NZ) to extract phosphorite from the seabed is unproven and will require the development of a novel mining technique in order to accommodate the depth of the sea in the Chatham Rise area. Therefore, there are no assurances that the proposed mining method will perform at the necessary water depths as intended or at all. Requirement for Future Funding Chatham (NZ) is likely to require access to further funding in the future and prior to commencement of production for a variety of reasons, including working capital, expansion of the business, new developments relating to existing operations or new acquisitions. General market conditions, volatile phosphorite markets, the lack of any necessary permit or contract to mine, a claim against Chatham (NZ) or other factors may make it difficult to secure funding. There is no assurance that Chatham (NZ) will be successful in obtaining required funding as and when needed on commercially acceptable terms. Work Program Commitments The Mining Permit issued by the New Zealand Petroleum and Minerals ("NZPAM") department, originally required that mining operations commence on or before December 6, 2017 at a mining rate of not less than 800,000 tonnes of phosphorite per annum. Chatham (NZ) has sought and already been granted changes to the terms of the Mining Permit to reflect that mining operations cannot commence before 2020. Further changes to the conditions of the mining permit have subsequently been applied for to reflect ongoing delays in the environmental permitting process that Chatham (NZ) must undertake. Chatham (NZ) believes that the specified mining rate can be achieved with the currently contemplated mining processes, but many of the steps needed to reach commencement of mining are beyond the control of Chatham (NZ) and as such there can be no guarantee that Chatham (NZ) will be able to meet this target production within the required deadline or at all. There can be no guarantee that Chatham (NZ) will receive Marine Consent and such other permits as may be required for mining operations, nor that it will enter into a mining contract should Marine Consent be granted or that a suitable mining vessel will be available in the timescale required to allow Chatham (NZ) to satisfy the Mining Permit requirements. The failure of Chatham (NZ) to commence mining at a rate of not less than 800,000 tonnes of phosphorite per annum could result in a breach of the Mining Permit and give rise to the power of the appropriate Minister, as defined in the Crown Minerals Act 1991 of New Zealand, to revoke the Mining Permit. Whilst Chatham (NZ) believes that the appropriate Minister would likely amend the terms of the Mining Permit in such circumstances, provided he or she was satisfied that Chatham (NZ) was making good progress to commence mining operations as soon as practicable, there can be no assurance that such discretion would be exercised and any such failing could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). The Mining Permit imposed other conditions upon Chatham (NZ) as well, including the requirement to complete a study within 24 months of the permit being granted (i.e. by 6 December 2017) in support of a final investment decision. This deadline has been altered and is expected to be extended again. However, no assurance can be given that NZPAM will accept Chatham (NZ)'s revised timing in satisfaction of this condition, when completed and presented. Any such failing could result in the termination or modification of the Mining Permit, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Chatham (NZ) was also expected to complete appropriate sampling, geophysical and geotechnical surveys required to define mining blocks within 48 months of the permit being granted (i.e. by 6 December 2017) and spend a minimum of NZD2 million per annum (C$1.9m) in carrying out its activities. This deadline has also been altered twice and is expected to be altered again. However, failure to comply with this condition could result in the termination or modification of the Mining Permit, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Market Risk Whilst Chatham (NZ) has engaged in market research and identified a number of potential buyers and markets in relation to the product to be mined from Chatham Rise, Chatham (NZ) has not yet entered into any marketing, sales or offtake agreements that are in markets considered material to Chatham (NZ). In addition, Chatham (NZ) cannot be assured of the quality of product that it intends to produce given the nature of Chatham (NZ)'s resource, which could affect anticipated demand. Further, the market may develop and change prior to the commencement of mining operations and impact negatively on anticipated demand, whether as a result in a change in technology, a new source of phosphate production or otherwise. There can be no assurance, therefore, that Chatham (NZ) will be in a position to sell all of its mining output, if any, at profitable prices, nor at all. Mining Contract and Mining Process Risk The technical ability of Chatham (NZ) to extract phosphorite from the seabed is unproven and will require the development of a novel mining technique in order to accommodate the depth of the sea in the Chatham Rise area. Chatham (NZ) intends to use a vessel that is specially modified and equipped with a trailing suction unit. Whilst this solution relies on existing, proven technology, the compilation of those techniques is novel and the use of the process in its proposed form and at the depths of the Chatham Rise area is untried and may require further work. Therefore, there are no assurances that the proposed mining method will perform at the necessary water depths as intended or at all. Modification of a vessel for such purpose will only take place if Chatham (NZ) is granted the Marine Consent and enters into a mining contract. There can be no assurance that Chatham (NZ) will be able to enter into such a contract on acceptable terms, nor at all, and the failure to do so could delay the development of Chatham (NZ)'s project, alter Chatham (NZ)'s mining cost assumptions and impair the ability of Chatham (NZ) to carry out future fund raises. Whilst the Directors believe that there is competition for the award of the mining contract on competitive terms, there is no certainty that any alternative contractors to Boskalis would be able to use the design work completed by Boskalis, nor that any alternative contractor would be able to provide an independently engineered processing solution on a timely basis and at a similar anticipated cost. Work on funding strategies for vessel modification or charter is currently being considered by Chatham (NZ). The present idea (in conjunction with project leader Boskalis) is to establish a special purpose vehicle to own the vessel and to fund the modifications by way of a combination of debt and equity. A consortium of investors would be sought by Boskalis to contribute equity. There is a risk that the required funding may not be secured at all or on terms unfavourable to Chatham (NZ), the special purpose vehicle, or the mining operator. Subject to finalization of the financing strategy, Chatham Rock may need to contribute equity into the special purpose vehicle which may require that Chatham Rock secures further funds. It is not Chatham Rock's intention to make a significant equity contribution. It is also possible, however, that the vessel could be owned by a third party marine investor and chartered. Intellectual Property Risk In addition to the above, while the proposed mining system comprises a compilation of existing technology, freedom-to-operate searches have not been undertaken. There is a remote possibility that some intellectual property rights associated with the mining system design could be proprietary to other parties. This could require licensing arrangements to be negotiated with such parties or alternative designs to be developed (where any such proprietary rights exist). There can be no assurance that such licensing arrangements will be negotiated on terms favourable or acceptable to Chatham (NZ) or at all. Production Risks The future development of any mineral deposit involves significant risks that even a combination of careful evaluation, experience and knowledge may not eliminate. This is particularly the case in an offshore deposit such as that at Chatham Rise, which is subject to additional risks related to its marine location. For example, production will be affected by weather patterns and sustained periods of bad weather could adversely impact mining activity and reduce tonnages of the rock phosphate mined. No assurance can be given that Chatham (NZ) will meet its annual target production rates of 1.5Mt per annum once production starts. In recent years, a New Zealand company called Rocket Lab has commenced launching satellites from the Mahia Peninsula, about 500 km west of the project area. There is a risk that jettisoned rocket components could damage the dredging vessel and/or impede the phosphate recovery operations. Chatham (NZ) has no operating history upon which to base estimates of future cash flow. Chatham (NZ)'s estimates of resources and cash operating costs are, to a large extent, based upon geological, engineering and market analyses. Estimates of capital and operating costs are necessarily preliminary at this stage of Chatham (NZ)'s development. It is possible that actual costs and economic returns may differ materially from Chatham (NZ)'s best estimates. It is not unusual in the mining industry for new mining operations to experience unexpected problems during the pre-production phase, take much longer than originally anticipated to bring into a producing phase, and to require more capital than anticipated. Changes in Law and Policy The laws, regulations, and authorities governing Chatham (NZ) and its operations may change, and may result in additional material expenditures or time delays. Exploration and mining permits may be susceptible to revision or cancellation by new laws or changes in direction by the government of the day. In addition, the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 has in recent years been subject to varying and conflicting interpretation by the Courts which is expected to be resolved by a recent application by another marine mining project. Until then there will continue to be uncertainty as to its interpretation or application. Whilst the Directors believe that the Government and population of New Zealand generally support the development of natural resources in the manner contemplated by Chatham (NZ), there is no assurance that future political and economic conditions will not result in the adoption of different policies or attitudes affecting ownership of assets, land tenure and mineral concessions, taxation, royalties, environmental protection, labour relations and return of capital. This may affect Chatham (NZ)'s ability to undertake exploration, development and mining activities on its projects. Regulatory Compliance Risks Chatham (NZ)'s future expected mining operations and exploration activities, as well as the transportation and handling of any products mined, are or will be subject to extensive regulations and laws. Such regulations relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, decommissioning and reclamation, toxic substances, transportation safety and emergency response, and other matters. Compliance with such regulations and laws increases the costs of Chatham (NZ)'s operations. It is possible that, in the future, the costs, delays and other effects associated with such laws and regulations may impact Chatham (NZ)'s decision as to whether to operate existing projects, or, with respect to exploration and development properties, whether to proceed with exploration or development, or that such laws and regulations may result in Chatham (NZ) incurring significant costs to remediate or decommission properties that do not comply with applicable environmental standards at such time. Chatham (NZ) expends significant financial and managerial resources to comply with such laws and regulations and anticipates the need for even greater resources if production is commenced. Because legal requirements are subject to change and to interpretation, Chatham (NZ) is unable to predict the ultimate cost of compliance with these requirements or their effect on operations. Furthermore, future changes in governments, regulations and policies, such as those affecting Chatham (NZ)'s mining operations and phosphorite transport, could materially and adversely affect Chatham (NZ)'s results of operations and financial condition in a particular period or its long term business prospects. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions. These actions may result in orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Chatham (NZ) may be required to compensate others who suffer loss or damage by reason of its activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Reliance on Key Equipment The ability of Chatham (NZ) to extract the phosphorite from the seabed will be dependent on unique mining equipment, including a specialized vessel and trailing suction unit. Should this unique equipment become unavailable once commissioned, Chatham (NZ) will likely have no alternative access to its Mineral Resource. The equipment may become temporarily or permanently unavailable to Chatham (NZ) due to factors beyond Chatham (NZ)'s control, including adverse weather conditions, labour stoppages, rocket strike, technical failures, government regulations, failure to secure any necessary intellectual property licenses or decisions of the equipment operator. The unavailability of such equipment could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Phosphate Demand and Pricing The profitability of Chatham Rock's group operations, and its ordinary Share price, will be highly dependent upon the market price of phosphate rock. Chatham (NZ)'s net earnings and operating cash flow will be closely related and sensitive to fluctuations in the long and short term market price of phosphorite. Commodity prices fluctuate widely and are affected by numerous factors beyond the control of Chatham (NZ). The world supply of and demand for fertilizers and the stability of exchange rates can all cause significant fluctuations in prices. These factors cannot be accurately predicted. The price of fertilizers has fluctuated widely in recent years and future price declines could cause commercial production to be impracticable, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Reliance on Key Personnel Chatham (NZ)'s success will largely depend on the efforts and abilities of certain senior officers and key personnel. Chatham (NZ) is committed to providing attractive working conditions to assist in retaining its key senior management personnel. However, there can be no assurance Chatham (NZ) will be able to retain these key personnel. Furthermore, the number of individuals with relevant mining and operational experience in this industry is small. The loss of key personnel or the inability to recruit and retain high-calibre staff could have a material adverse effect on Chatham (NZ). The addition of new personnel or employees and the departure of existing contractors, particularly in key positions, can be disruptive and may have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Personnel requirements of Chatham (NZ) will also change. At present, Chatham (NZ) has a particular need for scientific and communications expertise as it pursues the Marine Consent. If granted, those needs will reduce and there will be increased need for engineering and sales and marketing capabilities. There can be no assurance that additional personnel with such capabilities, fit for Chatham (NZ)'s purpose, will be secured. Property Title Risk The Mining Permit covers an offshore area in the EEZ of New Zealand. The Mining Permit and Marine Consent (if issued) can be considered utilization rights to that offshore area. These rights may be subject to defects or challenges. If such defects or challenges cover a material portion of Chatham (NZ)'s offshore area, they could materially and adversely affect Chatham (NZ)'s reported Mineral Resources or its long term business prospects. As well, any prolonged challenge to Chatham (NZ)'s rights could result in substantial delays in its development timetable, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Ambiguity can arise in the interpretation of mining legislation regulations, permits and policy, including whether or not conditions have or have not been satisfied (either at the time of satisfaction or subsequent thereto). For example, the precise form of study that is required to be delivered in support of a decision to mine and in satisfaction of Mining Permit is not subject to any further detailed guidance or definition. Interpretations, whether at the relevant time or subsequent thereto, could result in claims or losses that have a material adverse impact on the business, operations, assets or prospects of Chatham (NZ). Maori customary rights, as well as requirements to consult with Maori under applicable New Zealand law, are relevant to Chatham (NZ)'s rights. Managing relations with local Maori communities is a matter of paramount importance to Chatham (NZ). Notwithstanding that Maori interests do not carry with them a form of "veto" or similar right in relation to the Mining Permit or the potential grant of the Marine Consent, there can be no assurance that customary rights claims, as well as related consultation issues, will not arise on or with respect to Chatham (NZ)'s rights and impact on Chatham (NZ)'s exploration, development and mining activities, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Environmental Risk Chatham (NZ)'s New Zealand projects are subject to New Zealand environmental laws. These laws include laws generally applying to the protection of the environment, as well as specific regulation relating to areas in which Chatham operates. Exploration and mining projects can cause a variety of environmental impacts and Chatham (NZ) is conscious of a number of potential impacts in respect of its proposed mining operations, including: impact on fish stocks on the Chatham Rise; pollution risks from the vessel (e.g. oil spills); impact on benthic communities; and effects of plume (where silt and seabed materials are separated from the rock phosphate and returned to the ocean floor, but do not settle on the seabed immediately and then go into the lower levels of the water column). Chatham (NZ) has collected and analyzed extensive data on these potential effects to develop and mitigation strategies, as well as contracted scientific organizations in New Zealand and The Netherlands (including NIWA and Deltares) to assess the environmental impacts of its operations. This information comprises a significant part of the Marine Consent application. Chatham (NZ) intends to carry out its operations in compliance with all applicable environmental laws and in compliance with any conditions imposed upon it, as well as in a responsible manner. In the event that Chatham (NZ) does not operate in compliance with all applicable laws and conditions there is a risk that the Mining Permit and/or Marine Consent, if granted, could be forfeited or other adverse consequences could arise. NGO Risk Mining companies are often the target of actions by non-governmental organizations and environmental groups in the countries in which they operate. Such organizations and groups may take actions that are illegal, unauthorized or dangerous, without the support of government, to disrupt commercial operations. There can be no guarantee that any future action will not be taken by any non-governmental organization or environmental group to disrupt Chatham (NZ)'s mining operations. They may also apply pressure to local, regional and national government officials, or local iwi groups, to take actions that are adverse to Chatham (NZ)'s operations. Such actions could have an adverse effect on Chatham (NZ)'s ability to produce and sell its products, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Profitability and Operating History Chatham (NZ) has no history or earning revenue or profits and no assurance can be given by Chatham (NZ) that it will have future revenues or profits, since these are dependent on the future development and success of any mining operation. Chatham (NZ) has no history of mining operations and is in a pre-revenue stage of development. As such, Chatham (NZ) is subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and the lack of revenue. There is no assurance that Chatham (NZ) will be successful in achieving a return on Shareholders' investment. Competition and Customer Strength The fertilizer and mining industries are intensely competitive in all phases of exploration, development and production. Competition in the mining industry is primarily for properties that can be developed and produced economically; technical and commercial expertise; and capital. Many competitors not only explore for and mine phosphate rock, but conduct beneficiation and marketing operations on a global basis. Such competition may result in embedded relationships with customers that make it difficult for Chatham (NZ) to negotiate offtake or other supply arrangements. As well, many potential phosphate customers are better capitalized than Chatham (NZ) and may engage in tactical order delays and other behaviour that could cause Chatham (NZ) to suffer cash flow difficulties and induce it to execute transactions that do not reflect market conditions, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Conflicts of Interest Certain of Chatham (NZ)'s directors, officers and significant shareholders are or may become shareholders, directors and/or officers of other natural resource companies, and, to the extent that such other companies may participate in ventures with Chatham (NZ), these individuals may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or of its terms. In appropriate cases Chatham (NZ) will establish a special committee of independent directors to review a matter in which one or more directors or officers may have a conflict. From time to time, Chatham (NZ), together with other companies, may be involved in a joint venture opportunity where several companies participate in the acquisition, exploration and development of natural resource properties, thereby permitting Chatham (NZ) to be involved in a greater number of larger projects with an associated reduction of financial exposure in any given project. Chatham (NZ) may also assign all or a portion of its interest in a particular project to any of these companies due to the financial position of the other Company or companies. In accordance with the laws of the province of British Columbia, the directors are required to act honestly and in good faith with a view to furthering the best interest of Chatham (NZ). In determining whether or not Chatham (NZ) will participate in a particular program or transaction and the terms of such participation, the directors will primarily consider the potential benefits to Chatham (NZ), the degree of risk to which Chatham (NZ) may be exposed and its financial position at that time. Other than as indicated, Chatham (NZ) has no procedures or mechanisms to deal with conflicts of interest. Dependence on General Economic Conditions The operating and financial performance of Chatham (NZ) is influenced by a variety of general economic and business conditions, including levels of consumer spending, inflation, interest rates and exchange rates, access to debt and capital markets, and government fiscal, monetary and regulatory policies. Prolonged deterioration in general economic conditions, including an increase in interest rates or a decrease in consumer and business demand, could have a material adverse effect on Chatham (NZ)'s business and financial condition. Exchange Rates Chatham (NZ) is exposed to movements in exchange rates. Chatham (NZ)'s historical (New Zealand) financial statements are expressed and maintained in New Zealand dollars. Exchange rate movements between New Zealand and other countries may impact the profit and loss account or assets and liabilities of Chatham (NZ), to the extent the foreign exchange rate risk is not hedged or not appropriately hedged. Insurance Risk Although Chatham (NZ) may obtain insurance to cover some of these risks and hazards in amounts it believes to be reasonable, such insurance may not provide adequate coverage in the event of certain circumstances. No assurance can be given that such insurance will continue to be available or that it will be available at economically feasible premiums or that it will provide sufficient coverage for losses related to these or other risks and hazards. Furthermore, there are risks that Chatham (NZ) cannot insure against, or may elect not to insure against, any such risks and hazards and Chatham (NZ) may be subject to liability or sustain loss in such circumstances, which could have a material adverse effect on the financial condition, operations, and prospects of Chatham (NZ). Dividends There can be no assurance as to the level of future dividends. The declaration, payment and amount of any future dividends of Chatham (NZ) are subject to the discretion of the Shareholders or, in the case of interim dividends to the discretion of the directors, and will depend upon, amongst other things, Chatham (NZ)'s earnings, financial position, cash requirements, availability of profits, as well as provisions for relevant laws or generally accepted accounting principles from time to time. Under New Zealand law the board of directors may declare dividends from time to time from distributable profits provided that the board of directors first resolves and certifies that following the dividend being paid, Chatham (NZ) will satisfy the solvency test under the Companies Act 1993. This solvency test requires that the board of directors believes on reasonable grounds that Chatham (NZ) will be able to meet its debts as they fall due and that its assets exceed liabilities, including contingent liabilities. Taxation The tax rules, including stamp duty provisions and their interpretation, relating to an investment in Chatham (NZ) may change during the life of Chatham Rise project. The levels of, and reliefs from, taxation may also change and vary in respect of a given investor's circumstances. Dual Regulation Chatham Rock's New Zealand subsidiary, Chatham Rock Phosphate (NZ) Limited is primarily regulated by the Companies Act 1993. As a company listed on the NZX, Chatham Rock has the Toronto Venture Exchange as its home exchange, with a copy of each document filed in Canada, to also be filed with the NZX. SUPPLEMENTAL TO THE FINANCIAL STATEMENTS Outstanding Share and Option Data Chatham Rock's shares trade on the TSX Venture Exchange (ticker code NZP), the New Zealand Exchange (ticker code CRP) and the Frankfurt Stock Exchange (ticker code 3GRE). The Company is authorized to issue an unlimited number of common shares without par value. As at December 31, 2020, 33,699,154 common shares were issued and outstanding. No shares are subject to TSX Venture escrow provisions. On May 5, 2020 the Company closed a non-brokered private placement of 5,029,820 units at a price of CAD$0.08 per Unit for gross proceeds of CAD$402,386. Each unit consists of one common share and one transferable share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to the date that is five years from the date of issuance. In the event that the common shares of the Company trade on the TSX Venture Exchange at a closing price of greater than CAD$0.60 per common share for a period of 20 consecutive trading days at any time after four months and one day after the closing date of the private placement, the Company may accelerate the expiry date of the Warrants by giving notice to the holders thereof by way of a news release and in such case the Warrants will expire on the 30th day after the date of dissemination of the news release. On June 23, 2020 the Company closed a non-brokered private placement of 2,365,894 units at a price of CAD$0.08 per Unit for gross proceeds of CAD$189,272. Each unit consists of one common share and one transferable share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to the date that is five years from the date of issuance. In the event that the common shares of the Company trade on the TSX Venture Exchange at a closing price of greater than CAD$0.60 per common share for a period of 20 consecutive trading days at any time after four months and one day after the closing date of the private placement, the Company may accelerate the expiry date of the Warrants by giving notice to the holders thereof by way of a news release and in such case the Warrants will expire on the 30th day after the date of dissemination of the news release. FORWARD-LOOKING STATEMENTS These audited consolidated financial statements and this Management's Discussion and Analysis, contains certain "Forward-Looking Statements" that are prospective and reflect management's expectations regarding Chatham Rock Phosphate Limited's ("Chatham Rock" or "Company") future growth, results of operations, performance and business prospects and opportunities. Forward-looking information can often be identified by forward-looking words such as "anticipate", "believe", "expect", "goal", "plan", "intend", "estimate", "may" and "will" or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential mineralization and reserves, estimates of future production, unit costs, costs of capital projects and timing of commencement of operations, exploration results and future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Company's expectations are disclosed in its documents filed from time to time with the TSX Venture Exchange and other regulatory authorities and include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of ore to be mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failure to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors. Shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Chatham Rock undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law. Consolidated Financial Statements (Expressed in Canadian dollars) CHATHAM ROCK PHOSPHATE LIMITED For the nine months ended December 31, 2020 and 2019 CONTENTS Consolidated Statement of Financial Position 2 Consolidated Statement of Operations and Comprehensive (Loss)/Income 3 Consolidated Statement of Changes in Equity 4 Consolidated Statement of Cash Flows 5 Notes to the Consolidated Financial Statements 6-32 CHATHAM ROCK PHOSPHATE LIMITED Consolidated Statement of Financial Position (Expressed in Canadian dollars) December 31, March 31, Notes 2020 2020 Assets Current assets: Cash and cash equivalents $ 49,001 $ 12,352 Accounts receivable and other receivables 6,982 8,218 Current tax assets - - Other current assets 5 144,834 50,754 200,817 71,324 Non-current assets: Property, plant and equipment - - NZX Bond 13,818 12,762 Mineral property interest 6 4,883,959 4,456,736 4,897,777 4,469,498 Total assets $ 5,098,594 $ 4,540,822 Liabilities and Shareholders' Equity Current liabilities: Trade and other payables 7 $ 132,908 $ 208,222 132,908 208,222 Total liabilities 132,908 208,222 Shareholders' equity: Share capital 8 35,695,190 35,108,126 Warrants reserve 230,186 230,186 Foreign currency translation reserve 40,849 (355,961) Employee share option reserve 214,381 214,381 Accumulated deficit (31,214,920) (30,864,132) Total shareholders' equity 4,965,686 4,332,600 Total liabilities and shareholders' equity $ 5,098,594 $ 4,540,822 Going concern (note 1) Commitments and contingencies (note 17) The accompanying notes form an integral part of these consolidated financial statements. CHATHAM ROCK PHOSPHATE LIMITED Consolidated Statements of Operations and Comprehensive (Loss)/ Income (Expressed in Canadian dollars) For the three and nine months ended December 31, 2020 and 2019 Notes Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Revenue $ 1,340 $ 1,254 $ 3,840 $ 3,825 Finance income - (17) - 2,353 Finance expense (378) - (3,410) - Net finance income/(expense) 11 (378) (17) (3,410) 2,353 Expenses General and administrative expenses 12 (105,366) (128,887) (351,218) (389,341) Expenses (105,366) (128,887) (351,218) (389,341) Loss before income tax (continuing operations) (104,404) (127,650) (350,788) (383,163) Income tax expense - - - - Net loss for the period from continuing operations (104,404) (127,650) (350,788) (383,163) Other Comprehensive Income Foreign currency translation** 198,630 258,863 396,810 (182,448) Total comprehensive (loss)/profit for the period $ 94,226 $ 131,213 $46,022 $(565,611) Basic shareholders' loss per share (Canadian cents) $ (0.31) $ (0.50) $ (1.09) $ (1.50) Diluted shareholders' loss per share (Canadian cents) $ (0.31) $ (0.50) $ (1.09) $ (1.50) Weighted average number of common shares outstanding 33,699,154 25,712,744 32,299,742 25,561,568 **Items which can subsequently be reclassified to profit or loss The accompanying notes form an integral part of these consolidated financial statements. CHATHAM ROCK PHOSPHATE LIMITED Consolidated Statement of Changes in Equity (Expressed in Canadian dollars, except number of common shares) For the nine months ended December 31, 2020 and 2019 Number of common shares Number of warrants Share capital Warrants reserve Foreign currency translation Employee share option reserve Accumulated deficit Shareholders' equity Balance, April 1, 2019 24,303,754 4,243,402 35,068,781 - - 230,787 (30,302,781) 4,996,787 Issue of shares, net of costs, and discretionary warrants 1,999,686 1,323,657 246,722 22,809 - - - 269,531 Transfer of cost of warrants - - (207,377) 207,377 - - - - Expiry of discretionary warrants - (3,413) - - - - - - Cancellation of options - - - - - (55,506) 55,506 - Share-based payments - - - - - 39,100 - 39,100 Transactions with owners 39,345 230,186 - (16,406) 55,506 308,631 Transfer - - - - (23,439) - 23,439 - Loss for the period - - - - - - (383,163) (383,163) Currency Translation Loss - - - - (182,448) - - (182,448) Total comprehensive income for the period - - (205,887) - (359,724) (565,611) Balance, December 31, 2019 26,303,440 5,563,646 35,108,126 230,186 (205,887) 214,381 (30,606,999) 4,739,807 Loss for the period - - - - - - (257,133) (257,133) Currency Translation Loss - - - - (150,074) - - (150,074) Total comprehensive income for the period - - (150,074) - (257,133) (407,207) Balance, March 31, 2020 26,303,440 5,563,646 35,108,126 230,186 (355,961) 214,381 (30,864,132) 4,332,600 Issue of shares, net of costs, and discretionary warrants 7,395,714 7,395,714 587,064 - - - - 587,064 Transactions with owners 587,064 - - - - 587,064 Loss for the period - - - - - - (350,788) (350,788) Currency Translation Loss - - - - 396,810 - - 396,810 Total comprehensive income for the period - - 396,810 - (350,788) 46,022 Balance, December 31, 2020 33,699,154 12,959,360 35,695,190 230,186 40,849 214,381 (31,214,920) 4,965,686 The accompanying notes form an integral part of these consolidated financial statements. CHATHAM ROCK PHOSPHATE LIMITED Consolidated Statements of Cash flows (Expressed in Canadian dollars) For the three and nine months ended December 31, 2020 and 2019 Notes Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Cash flows from operating activities: Net interest received $ - $ (40) $ - $ 1,945 Cash received from suppliers 1,340 1,254 3,840 3,825 Cash paid to suppliers (117,855) - (597,682) - Interest paid (378) (91,907) (1,687) (468,897) Tax refund received - - - 2,055 Net cash (used in) operating activities 16 (116,893) (90,693) (595,529) (461,072) Cash flows from investing activities: Payments in respect of exploration and evaluation (6,357) - (72,492) - Net cash (used in) investing activities (6,357) - (72,492) - Cash flows from financing activities: Proceeds received in advance of private placement (January 2021) 93,699 - 93,699 - Proceeds from issue of share capital, net of issue costs - 97,144 587,064 320,532 Net cash from financing activities 93,699 97,144 680,763 320,532 Net increase/(decrease) in cash and cash equivalents (29,551) 6,451 12,742 (140,540) Cash and cash equivalents, beginning of period 78,166 69,834 12,352 243,615 Effect of foreign exchange rate fluctuations on cash held 386 17,230 23,907 (9,560) Cash and cash equivalents, end of period $ 49,001 $ 93,515 $ 49,001 $ 93,515 The accompanying notes form an integral part of these consolidated financial statements. 1. Nature of business and going concern Chatham Rock Phosphate Limited (the "Group" or "CRP") is a development-stage Group incorporated under the Business Corporations Act (British Columbia) and listed on the Toronto Stock Exchange's Venture Exchange ("TSX-V"). The Group is also registered on the overseas company register under the New Zealand Companies Act 1993 and listed on the New Zealand Stock Exchange ("NZX"). The Group is an FMC reporting entity under part 7 of the Financial Markets Conduct Act 2013 (New Zealand). The Group comprises the parent Group and its wholly owned subsidiaries. The financial statements are presented for the consolidated group. Chatham Rock Phosphate Limited's focus is the development and exploitation of the Chatham Rise rock phosphate deposit offshore New Zealand and potential overseas phosphate projects. The Group's registered offices are: o 3200 - 650 West Georgia Street, Vancouver, B.C., Canada V6B 4P7 o Level 1, 93 The Terrace, Wellington 6011, New Zealand Accordingly, the Group has reporting obligations in both the Canadian and New Zealand jurisdictions. 2. Basis of preparation (a) Statement of compliance: These consolidated financial statements have been prepared in accordance with the principles of the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). (b) Approval of the financial statements: The consolidated financial statements for the period ended December 31, 2020 were reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on March 01, 2021. (c) Basis of measurement: These consolidated financial statements have been prepared on the historical cost basis, utilising the accrual method of accounting unless otherwise described in the following notes. 2. Basis of preparation (continued) (d) Going concern: These consolidated financial statements have been prepared on a going concern basis, which assumes that the Group has the ability and intention to continue operations for a period of at least 12 months from the date of the financial statements. The following conditions indicate the existence of a material uncertainty that may cast significant doubt on the validity of this assumption. Marine consent re-application The Group requires a marine consent in order to undertake its proposed operations. On February 11, 2015, the Group was refused Marine Consent by an Independent Decision Making Committee (DMC) convened by the Environmental Protection Authority (EPA), New Zealand's environmental regulator on grounds which the Group disputes. The Directors plan is to re-submit its Marine Consent application with the EPA once additional funding (see below) has been secured. Management has conducted an independent review of the marine consent application and the EPA judgement and has identified the areas where their application was deficient. These deficiencies are to be addressed and communicated as part of the re-submission. The outcome of the re-submission is uncertain. Avenir Makatea Acquisition On December 21, 2020 the Company announced that it had concluded negotiations to acquire French Polynesia-based Avenir Makatea Pty Limited. The merger was negotiated at arm's length. Avenir Makatea proposes, once fully permitted, to recover phosphate from the island of Makatea in French Polynesia, which will also enable the rehabilitation of previously mined parts of the island. The purchase price is CAD $1,455,000 and will be settled through an issue of shares. The acquisition is subject to certain conditions including TSX.V approval. When the transaction is completed the vendors of Avenir Makatea will hold approximately 28% of the enlarged capital of the Group. Additional funding The Group incurred a net loss of $104,404 during the three months ended December 31, 2020 (2019: $127,650 net loss) and as of that date the Group's current assets exceed its current liabilities by $67,909 (March 31, 2020: current liabilities exceed current assets by $136,898). During the period the Group had operating cash outflows of $116,893 (2019: $90,693 operating cash outflows) and had a cash balance of $49,001 (March 31, 2020: $12,352). The Directors forecast they have sufficient cash to continue to fund operations for at least 12 months from the date the financial statements are signed. While management do not currently have committed funding to fund operations beyond this point, or to fully fund the marine consent re-application in its entirety, it has a history of raising additional funds and therefore expects to continue to meet its obligations for the foreseeable future, and to raise funding to complete the marine consent re-application. 2. Basis of preparation (continued) (d) Going concern (continued): Management's cash flow forecasts include the following assumptions: o The Group continues to manage its corporate costs appropriately within existing available funds. o The Directors will continue to raise further capital as required by one of a combination of the following: placement of shares; pro-rata issue to shareholders; and/or further issue of shares to the public. o Expenditure is scalable such that the Group can continue to operate depending on funding obtained. This includes continuing to operate for a period of 12 months from the date of the financial statements in the event to further funding is obtained during that period. o The Directors plan to evolve the company from a single project focus into a more diversified company, principally involving other phosphate assets. The Group has obligations under the Minimum Work Programme for its existing mining permit as disclosed in Note 19. The work programme commitments have been met to date. If sufficient funding is not received the Group has the ability to apply to defer and reduce planned expenditure, similar to what the Group has done in the past. In preparing these consolidated financial statements, the Directors have considered the above material uncertainties. They believe that the plans they have implemented to address the uncertainties are feasible. In reaching this assessment, the Directors have considered: o the independent review of its marine consent application including the identified areas of deficiency and its assessment of further study of how these deficiencies can be addressed; o the Group's past success in managing costs to meet available funding; and o the Group's previous ability to raise equity funding. On this basis, the Directors believe that the Group has the ability to generate sufficient funding to continue operations for at least the next 12 months from the date of authorising the financial statements. Hence, they consider the use of the going concern basis is appropriate. These financial statements do not include any adjustments that may be made to reflect that situation should the Group be unable to continue as a going concern, which means it may not be able to realise its assets or settle its liabilities in the normal course of business. Such adjustments may include realising assets at amounts other than those recorded in the financial statements, in particular the Mineral property interest of $4,883,959. In addition, the Group may have to: o provide for further liabilities that may arise; o reclassify certain non-current assets and liabilities as current. 2. Basis of preparation (continued) (e) Functional and presentation currency: These consolidated financial statements are presented in Canadian dollars ($) as the Group's primary listing is on the Toronto Stock Exchange's Venture Exchange. The functional currency of the parent company is Canadian Dollars and the functional currency of Chatham Rock Phosphate (NZ) Limited, the subsidiary company, is New Zealand dollars (NZD), the currency of the primary economic environment in which it operates. (f) Significant accounting judgements, estimates and assumptions: The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on amounts recognised in the consolidated financial statements: Share-based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The Company includes an estimate of forfeitures, share price volatility, expected life of awards, and risk-free interest rates in the calculation of the expense related to certain long-term employee incentive plans. These estimates are based on previous experience and may change throughout the life of an incentive plan. Such changes could impact the share-based payments reserve. Exploration and evaluation costs Significant judgement is required in determining whether it is likely that future economic benefits will be derived from the capitalised exploration and evaluation expenditure. In the judgement of the Directors, at March 31, 2020 exploration activities in each area of interest where amounts remain capitalised have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Active and significant operations in relation to each of those areas of interest are planned and nothing has come to the attention of the Directors to indicate future economic benefits will not be achieved. 2. Basis of preparation (continued) (f) Significant accounting judgements, estimates and assumptions (continued): The Group cannot commence mining operations without the Marine Consent. The Group filed for the Marine Consent on May 14, 2014 but was declined on February 11, 2015. While the Group considers that it has a good case to receive the Marine Consent on re- application, there is no guarantee that the Marine Consent will be granted. If the Marine Consent is not granted or is granted subject to economically unfeasible conditions, the Group will not be able to proceed with mining operations in respect of the Mining Permit, which could have a material adverse effect on the financial condition, operations, and prospects of the Group. In the event where ongoing committed activities cannot be funded by existing financial resources, the Group will either need to raise additional capital, or meet its obligations either by farm-out or partial sale of the Group's exploration interests, or subject to negotiation and approval, vary the minimum work requirements. The Directors are continually monitoring those areas of interest and are exploring alternatives for funding the development of those areas of interest when economically recoverable reserves are confirmed. If new information becomes available that suggests the recovery of expenditure is unlikely, the amounts capitalised will need to be reassessed at that time. COVID-19 The current outbreak of COVID-19 and the subsequent quarantine measures imposed by the New Zealand government as well as the travel restrictions imposed by New Zealand and other countries in early 2020 have caused disruption to businesses and economic activity. The Group has considered the nature of the event and concluded that the impact on the Group's current activities to be minimal. (g) New accounting standards: (i) New IFRS standards and interpretations adopted There are no other relevant standards and revisions to standards that have been published and are mandatory for the Company's accounting periods beginning on or after 1 April 2020. (ii) New IFRS standards and interpretations issued but not yet adopted The standards below have been issued but not early adopted by the Group. It is expected that these will be adopted from the first period beginning on or after the effective date of the pronouncement. 3. Significant accounting policies The accounting policies set out below have been applied consistently for all periods presented in these consolidated financial statements. (a) Basis of consolidation: Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. The Group recognises the fair value of all identifiable assets, liabilities and contingent liabilities of the acquired business. Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions eliminated on consolidation Intra-group balances are eliminated in preparing the consolidated financial statements. These consolidated financial statements include the accounts of the Group and its subsidiaries. All inter-Group transactions and balances are eliminated on consolidation. Significant subsidiaries of the Group are as follows: Country of Effective Name incorporation interest Chatham Rock Phosphate (NZ) Limited New Zealand 100 Manmar Investments One Hundred and Nine (Proprietary) Limited Namibia 100 Pacific Rare Earths Limited New Zealand 100 All of the subsidiaries have a March, 31 balance date. Manmar Investments One Hundred and Nine (Proprietary) Limited and Pacific Rare Earths Limited both did not have any transactions during the years ending March 31, 2020 and 2019. 3. Significant accounting policies (continued) (b) Currency translation: Transactions in currencies other than the functional currency are recorded at the rate of exchange prevailing on the date of the transaction. Monetary assets and liabilities are translated at the exchange rate in place on the reporting date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined. Foreign currency translation differences are recognised in profit or loss. For consolidation purposes, Chatham Rock Phosphate (NZ) Limited is translated into the Group's presentation currency of Canadian dollars. Assets and liabilities are translated using the exchange rate prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rate for the relevant period. Translation differences are recognised in other comprehensive income (loss) and are accumulated within equity in the currency translation reserve. (c) Share capital: Common shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity. (d) Share purchase warrants: The Group issues transferrable share purchase warrants as part of their common share capital offering. The warrants are classified as an equity instrument as it only allows the holder to purchase one common share at a fixed price and is a non-derivative contract. The consideration received on the sale of share and share purchase warrant is allocated using the residual method. The allocated amounts are presented respectively as share capital and warrants reserve account, within the Statement of Changes in equity. Any re-measurement adjustment, as a result of a subsequent modification of the terms of warrants, is not recognised within equity. (e) Share-based payments: The Company has a share option plan, under which the fair value of all share-based awards as estimated using the Black-Scholes Option Pricing Model at the grant date and amortized over the vesting periods. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset is credited to share-based payments reserve. 3. Significant accounting policies (continued) (e) Share-based payments (continued): Upon exercise of the share purchase options, consideration paid together with the amount previously recognized in share-based payment reserve is recorded as an increase to share capital. Charges for share purchase options that are forfeited before vesting are reversed from the share-based payments reserves. For those share purchase options that expire or are forfeited after vesting, the amount previously recorded in share-based payments reserve is transferred to accumulated deficit. (f) Impairment: Non-financial assets other than indefinite life intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group conducts an annual internal review of asset values, which is used as a source of information to assess any indicators for impairment. If any impairment exists, an estimate of the asset's recoverable amount is calculated. Refer to factors considered in identifying whether the mineral asset may be impaired in Note (h). An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an assets fair value less costs of disposal and value in use. Non-financial assets that have suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. (g) Mineral property interest: Exploration and evaluation costs, including the costs of applying and acquiring licences, are capitalised as intangible assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the Statement of Comprehensive Income. Exploration and evaluation assets are classified as intangible assets and are measured at cost less any accumulated amortisation and impairment losses. Amortisation will commence once the Group has commenced mining operations and will be recognised on a unit of production basis. Exploration and evaluation assets are recognised and carried forward if the rights of the area of interest are current and either: (i) The expenditures are expected to be recouped through successful development and exploitation of the area of interest; or (ii) Activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or other wise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. 3. Significant accounting policies (continued) (g) Mineral property interest (continued): Ultimate recoupment of costs is dependent on successful development and commercial exploration or alternatively sale of respective areas. Costs are written off as soon as an area has been abandoned or considered to be non-commercial. Exploration and evaluation assets are assessed for impairment when facts of circumstances suggest that the carrying amount of the exploration and evaluation assets may exceed its recoverable amount. The below facts and circumstances indicate that an entity should test exploration and evaluation assets for impairment (the list is not exhaustive): (a) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed. (b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. (c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. (d) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment. (h) Finance income and expenses: Finance income comprises interest income on bank deposits and foreign currency gains that are recognised in the Statement of Comprehensive Income. Interest income is recognised as it accrues, using the effective interest method. Finance expenses comprise interest expense and foreign currency losses, are recognised in the Statement of Comprehensive Income. All borrowing costs are recognised in the Statement of Comprehensive Income using the effective interest method. (i) Income tax: Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. 3. Significant accounting policies (continued) (i) Income tax (continued) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (j) Financial assets: Financial asset are measured at: (I) Amortized cost; (ii) Fair Value in Other Comprehensive Income ("FVOCI") - debt investment; (iii) FVOCI - equity investment; and (iv) Fair Value Through Profit or Loss ("FVTPL"). The classification depends on the business model in which the financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of IFRS 9, Financial Instruments, are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification. The Group does not have any FVOCI instruments. A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. 3. Significant accounting policies (continued) (j) Financial assets (continued) The following accounting policies apply to the subsequent measurement of financial assets: Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. Impairment of financial assets Financial assets measured at amortized cost, contract assets, and debt investments in FVOCI, but not investments in equity instruments, are assessed for credit impairment under the expected credit loss ("ECL") model of impairment. This impairment model applies to lease receivables, loan commitments, and financial guarantee contracts; the Company has no such items. The financial assets at amortized cost consist of accounts receivables, cash and cash equivalents. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Presentation of impairment Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. Impairment losses related to accounts and other receivables are presented separately in the statement of profit or loss and OCI. Impairment losses on other financial assets are presented under 'finance costs', and not presented separately in the statement of profit or loss and OCI due to materiality considerations. 3. Significant accounting policies (continued) (k) Financial liabilities: Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities at amortized cost. Financial liabilities Financial liabilities at amortized cost are initially measured at fair value, net of transaction costs incurred and subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit or loss over the period to maturity using the effective interest method. Financial liabilities are classified as current or non-current based on their maturity dates. The Company has classified accounts payable and other liabilities as liabilities at amortized cost. De-recognition of financial liabilities The Company de-recognizes financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire. (l) Earnings per share: The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share warrants and options. 4. Segment reporting The Group conducts its business as a single reportable operating segment, being the development of a defined rock phosphate deposit. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the Board. The Board manages development activity through review and approval of contracts and other operational information. The Group operates in the minerals exploration industry within New Zealand and has commenced due diligence activities on phosphate assets overseas. However, as the overseas activities have not been significant to date, the Chief Operating Decision Maker, which is the CEO, does not analyze the overseas activities separately. The overseas license are subject to a moratorium therefore limiting the Group's activities. 5. Other current assets December 31, March 31, 2020 2020 Prepayments $ 144,834 $ 50,754 $ 144,834 $ 50,754 6. Mineral property interest Exploration and evaluation on Chatham Rise Project December 31, March 31, 2020 2020 Opening balance $ 4,456,736 $ 4,680,435 Exploration costs capitalised 55,681 87,574 Foreign exchange fluctuation 371,542 (311,273) Net book value $ 4,883,959 $ 4,456,736 Cost $ 22,143,712 $ 20,397,463 Impairment (17,259,753) (15,940,727) Net book value $ 4,883,959 $ 4,456,736 The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the Group gaining a Marine Consent for the project to be commercially successful. Commitments and tenure of the permit is included in Note 19. The Group was granted a Minerals Prospecting Licence ("MPL") 50270 under the Continental Shelf Act 1964 on February 25, 2010 for a period of four years. The licence was extended for a further nine years and due to expire on 24 February 2020. The Group relinquished the permit early on August 29, 2019. The licence covered 2887km2 of the Chatham Rise and was located approximately 450 kilometres east of Christchurch. The Group was granted a Minerals Mining Permit 55549 on December 6, 2013. The Minerals Mining Permit covers 820 sq km within the MPL 50270 area. The Mining Permit is for twenty years (expiry 2033) and subject to the granting of a Marine Consent from the Environmental Protection Authority ("EPA"), will allow the Group to conduct mining operations. The relinquishment of MPL 50270 has no impact on the mining permit and the proposed mining programme. On February 11, 2015, the Group was refused Marine Consent by an Independent Decision Making Committee (DMC) convened by the Environmental Protection Authority (EPA), New Zealand's environmental regulator on grounds which the Group disputes. Subsequently, the Directors impaired the carrying value of the capitalised costs to represent their best estimate of the recoverability as the Group reconsiders the re-submission of the Marine Consent with the EPA. On April 27, 2017 and December 8, 2017 the Group was granted a change of conditions in the permit to further defer the minimum work programme commitments. All work commitments have been met to date. 6. Mineral property interest (continued) The Group has considered whether there are any facts or circumstances that would indicate that the mineral property interest should be assessed for impairment and noted the following: o The Group's tenure to the mining permit over the area is current and is not to expire in the near future; o Substantive expenditure on further exploration for and evaluation of mineral resources is still planned; o Relevant studies suggest that the phosphate within the area remains commercially viable and once the exploration begins the carrying amount of the asset is likely to be recovered. The above factors are unchanged and it was concluded that no further impairment is required (March 31, 2020: no impairment). In December 2012, the Group applied for five prospecting licences offshore Namibia. The prospecting regime is currently subject to a moratorium. It remains the intention of the Directors to pursue these licences. 7. Trade other payables December 31, March 31, 2020 2020 Trade and other payables due to related parties $ 12,816 $ 11,837 Other trade payables 119,199 151,102 Accrued expenses 893 45,283 $ 132,908 $ 208,222 8. Share capital (a) Authorised: The Group's share capital consists of an unlimited number of common shares without par value. The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at meetings of the Group, to the extent to which they have been paid up. All shares rank equally with regard to the Group's residual assets. 8. Share capital (continued) (b) Issued and outstanding: Number of shares Amount Balance, April, 1, 2019 24,303,754 35,068,781 Transfers of share capital costs during the year - (207,377) Issued during the year: Shares issued net of costs 1,999,686 246,722 Balance, March 31, 2020 26,303,440 35,108,126 Issued during the year: Shares issued net of costs 7,395,714 587,064 Balance, December 31, 2020 33,699,154 $ 35,695,190 (c) On May 5, 2020 the Company closed a non-brokered private placement of 5,029,820 units at a price of CAD$0.08 per Unit for gross proceeds of CAD$402,386. Each unit consists of one common share and one transferable share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to the date that is five years from the date of issuance. On June 23, 2020 the Company closed a non-brokered private placement of 2,365,894 units at a price of CAD$0.08 per Unit for gross proceeds of CAD$189,272. Each unit consists of one common share and one transferable share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to the date that is five years from the date of issuance. (d) Warrants: Original Grant Date Modified Grant Date Original Expiry Date Modified Expiry Date December 27, 2017 February 18, 2019 December 27, 2019 December 27, 2022 January 24, 2018 February 18, 2019 January 24, 2020 January 24, 2023 December 13, 2018 February 18, 2019 December 13, 2020 December 13, 2023 August 25, 2018 February 18, 2019 August 25, 2020 August 25, 2023 March 26, 2019 - March 26, 2024 - April 23, 2019 - April 23, 2024 - December 23, 2019 - December 23, 2024 - May 5, 2020 - May 5, 2025 - June 23, 2020 - June 23, 2025 - 8. Share capital (continued) (e) Warrants (continued): Expiry Date Exercise prices Balance March 31, 2020 Issued Exercised Expired/ cancelled/ forfeited Balance December 31, 2020 December 27, 2022 $0.45 442,293 - - - 442,293 January 24, 2023 $0.45 486,368 - - - 486,368 December 13, 2023 $0.45 1,172,885 - - - 1,172,885 August 25, 2023 $0.45 381,780 - - - 381,780 March 26, 2024 $0.45 1,756,663 - - - 1,756,663 April 23, 2024 $0.45 676,026 - - - 676,026 Dec 23, 2024 $0.45 647,631 - - - 647,631 May 5, 2025 $0.45 - 5,029,820 - - 5,029,820 June 23, 2025 $0.45 - 2,365,894 - - 2,365,894 5,563,646 7,395,714 - - 12,959,360 Weighted average exercise price $0.45 $0.45 - - $0.45 Weighted average remaining life (years) 3.60 4.44 - - 3.76 On May 5, 2020 as part of a Share Purchase Plan the Company issued 5,029,820 non-transferable share purchase warrants. Each warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to May 5, 2025. On June 23, 2020 as part of a Share Purchase Plan the Company issued 2,365,894 non-transferable share purchase warrants. Each warrant entitles the holder to purchase one common share at a price of CAD$0.45 per share any time prior to June 23, 2025. Using the residual approach, the warrants issued in May and June 2020 were valued at $nil. These are deemed Level 2 fair values as it is in reference to the quoted price of the shares at issuance date. During the year ended March 31, 2020, the cost allocated to the share purchase warrants issued in prior years were transferred from Share capital to the Warrants reserve account. As this was merely a reclassification within equity accounts, this was not considered to materially impact the financial statements and therefore the reclassification was effected in the year ended March 31, 2020 and not treated as a prior year adjustment. 8. Share capital (continued) On February 18, 2019 the Company announced that all issued 2017 warrants would be reduced in price from CAD $1.00 per common share to CAD $0.45 per share and that it was going to extend the expiry date from two years to five years from the date of issuance. None of the 2017 warrants have to date been exercised. It was also announced that the December 2018 and August 2018 options would also be extended to five years from the date of issuance. None of the December 2018 or August 2018 warrants have to date been exercised. The warrant terms were changed in order to ensure that they can be exercised after the achievement of key future milestones including the grant of the environmental permit and the commencement of the dredging operations. 9. Share based payments (a) Recognised share-based payment expenses The purpose of the share-based payments is to reward key consultants and cornerstone investors in a manner that aligns remuneration with the creation of shareholder wealth. As the Company's activities have been predominantly developing an already defined mineral deposit, shareholder wealth is dependent, for the foreseeable future, on development success rather than an improvement in the Company's earnings. The Company grants share purchase options pursuant to the policies of the TSX-Venture Exchange with respect to eligible persons, exercise price, maximum term, vesting, maximum options per person and termination of eligible person status. These are treated as equity-settled share based payments. During the year ended March 31, 2019 the Company granted 1,690,000 share options under the share option plan of May 8, 2018. The options expire on May 8, 2023 and are exercisable at $0.29 per share. 1,580,000 options fully vested on May 8, 2018 and 110,000 options will vest upon a performance hurdle being achieved. The performance hurdle is gaining the Marine Consent. Following the resignation of two directors, 380,000 options have been forfeited. During the year ended March 31, 2020 500,000 share options were granted under the share option plan of May 8, 2018. The options expire on October 8, 2029 are exercisable at $0.11 per share. 500,000 options fully vested on October 8, 2019. The share-based payment expense of $39,100 (2019: $231,787) was estimated using the Black-Scholes Option Pricing model assuming a risk free rate of 1% (2019: 2.16%), a volatility of 65%, an expected dividend rate of nil and an expected life of 10 years (2019: 5 years). The shares in the Company traded at CAD $0.11 (2019: CAD$0.27) on the grant date. 9. Share based payments (continued) The continuity of outstanding share based options for the three months ended December 31, 2020, is as follows: Expiry Date Exercise prices Balance March 31 2020 Issued Exercised Expired/ cancelled/ forfeited Balance December 31, 2020 May 8, 2023, $0.29 1,310,000 - - - 1,310,000 October 8, 2029 $0.11 500,000 - - - 500,000 1,810,000 - - - 1,810,000 Weighted average exercise price $0.24 - - - $0.24 Weighted average remaining life (years) 4.86 - - - 4.10 (b) Equity-settled transactions Share-based payments of C$nil (December, 31 2019: C$nil) were settled by the issue of nil (December, 31 2019: nil) ordinary shares in the Company. 10. Earnings per share The earnings and weighted average number of outstanding shares used in the calculation of basic and diluted earnings per share are as follows: Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Loss used in the calculation of basic EPS $ (104,404) $ (127,650) $ (350,788) $ (383,163) Weighted average number of outstanding shares for the purpose of basic EPS 33,699,154 25,712,744 32,299,742 25,561,568 Effect of dilution, weighted number of mandatory warrants - - - - Weighted average number of outstanding shares used in the calculation of diluted EPS 33,699,154 25,712,744 32,299,742 25,561,568 Basic loss per share (Canadian cents) (0.31) (0.50) (1.09) (1.50) Diluted loss per share (Canadian cents) (0.31) (0.50) (1.09) (1.50) No dilution effect on diluted EPS as the company was operating at a net loss for the period. 11. Finance income and expenses Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Interest income on bank deposits - (17) - 1,968 Net foreign exchange gains - - - 385 Finance income - (17) - 2,353 Interest expense (378) - (1,687) - Net foreign exchange losses - - (1,723) - Finance expense (378) - (3,410) - Net finance income and expenses (378) (17) (3,410) 2,353 12. General and administrative expenses The following items of expenditure are included in administrative expenses: Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Accountancy fees $ 5,754 $ 3,236 $ 10,970 $ 12,680 Consultancy fees 7,372 24,812 7,372 77,026 Directors fees - - - - Insurance 5,000 2,797 15,000 10,389 Legal fees 12,569 7,255 56,824 44,945 Management fees 16,092 30,085 47,390 91,789 Marketing 38,400 - 148,400 - Registry fees 2,727 2,239 12,101 8,414 Rent 4,913 4,596 14,078 14,023 Share-based payments - 39,100 - 39,100 Travel 239 5,262 2,701 31,980 The Board has agreed to forfeit directors fees for the year ended March 31, 2020 (beyond the amount charged). Some directors are remunerated for their services through consultancy fees. Refer to Note 15 for discussion on consultancy fees, which are charged by related parties. 13. Financial instruments Exposure to credit, market, foreign currency, equity prices and liquidity risks arise in the normal course of the Group's business. Financial instruments are comprised of accounts receivable and other receivables, cash and cash equivalents, other financial assets, trade creditors and other payables, and other financial liabilities. Recognition and de-recognition of financial assets and liabilities Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets and financial liabilities are recognised initially at fair value plus transaction costs Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or if the Group transfers the financial asset to another party without retaining control or substantial all risks and rewards of the asset. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Subsequent measurement of financial assets All financial assets held by the Group in the years reported have been designated into one classification, "loans and receivables", being non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. All financial assets are subject to review for impairment at least once each reporting date. Accounts receivable are reviewed for impairment when accounts are past due or when other objective evidence is received that a specific counterparty will default. Subsequent measurement of financial liabilities Trade payables and other borrowings are subsequently measured at amortised cost using the effective interest method. Sensitivity analysis In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group's earnings. Over the longer-term, however, permanent changes in foreign exchange will have an impact on profit. It is estimated that a general increase of one percentage point in the value of the New Zealand dollar against other foreign currencies would have decreased the Group's profit before income tax by an immaterial amount for the period ended December 31, 2020 (2019: an immaterial amount). As a purchaser of foreign currency, the Group's risk is that the NZD depreciates. 13. Financial instruments (continued) Credit risk: The Group incurs credit risk from financial instruments when a counter party fails to meet its contractual obligations. Credit risk arises on cash and other receivables. The Group does not have a significant concentration of credit risk with any single party. Market risk: Market risk is that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of it's holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Foreign currency risk: The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the Group's functional currency, New Zealand dollars (NZD). It is the Group's policy not to hedge foreign currency risks. At December 31, 2020, the Group is exposed to currency risk through the following assets and liabilities denominated in Canadian dollars: December 31, March 31, 2020 2020 Cash and cash equivalents 1,342 3,808 Other current assets - 816 Accounts payable (67,965) (111,949) (66,623) (107,325) Interest rate risk: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's cash and cash equivalents attract interest at floating rates and have maturities of 90 days or less. The interest is typical of New Zealand banking rates, which are at present historically low; however, the Group's conservative investment strategy mitigates the risk of deterioration to capital invested. A change of 100 basis points in the interest rate would not be material to the consolidated financial statements. 13. Financial instruments (continued) Liquidity risk: Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk framework for the management of the Group's short, medium and longer term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash balances through monitoring of future rolling cash flow forecasts of its operations and equity raising, which reflect management's expectations of the settlement of financial assets and liabilities. The only financial liabilities are trade and other payables. At December 31, 2020, the Group had $132,908 (March 31, 2020 $208,222) in trade and other payables including accrued liabilities. Trade payables are non-interest bearing and have a contractual maturity of less than 31 days. (a) Financial assets and liabilities: As at December 31, 2020, the carrying and fair values of our financial instruments by category are as follows: Amortised cost Fair value through profit and loss Total carrying amount Less than 1 year 1 to 3 years $ $ $ $ $ Financial assets Cash and cash equivalent 49,001 - 49,001 49,001 - Trade and other receivables - - - - - NZX Bond 13,818 - 13,818 13,818 - Total financial assets 62,819 - 62,819 62,819 - Financial liabilities Trade and other payables - 132,908 132,908 132,908 - Total financial liabilities - 132,908 132,908 132,908 - 13. Financial instruments (continued) (b) Fair value: All financial instruments measured at fair value are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities: o Level 1 - Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. o Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full contractual term of the asset or liability. o Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature of these instruments. The carrying value of the bank term loan approximates its fair value due to the existence of floating market-based interest rates. The Group has no financial assets or liabilities included in Level 1, 2 or 3 of the fair value hierarchy. 14. Capital management The Group defines the capital that it manages as its shareholder equity. The Group's objectives with respect to managing capital are to safeguard the Group's ability to continue as a going concern so that it can provide future returns to shareholders and benefits for other stakeholders. The Group's capital structure reflects a Group focused on mineral exploration and financing both internal and external growth opportunities. The exploration for and development of mineral deposits involves significant risk which even a combination of careful evaluation, experience and knowledge may not adequately mitigate. In order to maintain or adjust its capital structure, the Group may issue new shares or sell assets to fund ongoing operations. The Group manages its capital structure by performing the following: o Preparing budgets and cash-flow forecasts which are reviewed and approved by the Board of Directors; o Regular internal reporting and Board of Directors meetings to review actual versus budgeted spending and cash-flows; and o Detailed project analysis to assess and determine new funding requirements. There were no changes in the Group's approach to capital management during the period. The Group is not subject to externally imposed capital requirements. 15. Related party transactions (a) Balances receivable and payable: The amounts due to related parties and included in accounts payable, are non-interest bearing, unsecured and due on demand, and comprise the following: December 31, 2020 March 31, 2020 Due to directors $ 12,816 $ 11,837 Due to executive officers - - $ 12,816 $ 11,837 (b) Key management personnel: Key management personnel includes the consulting and management fees paid and/or accrued to the Group's senior officers and directors as follows: Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Consultancy fees $ - $ 18,329 $ - $ 24,242 Management fees 16,092 30,085 47,390 91,789 Share-based payments - - - - $ 16,092 $ 48,414 $ 47,390 $ 116,031 Depending on the nature of services and costs, certain amounts have been capitalized to intangible assets as they are directly attributable to the Chatham Rise project. 16. Reconciliation of the loss for the period with the net cash from operating activities Three months ended Dec 31, 2020 Three months ended Dec 31, 2019 Nine months ended Dec 31, 2020 Nine months ended Dec 31, 2019 Profit/(loss) for the period $(104,404) $ (127,650) $ (350,788) $ (383,163) Adjustments for: Depreciation - - - - Expenses (non-cash) - 39,100 - 34,635 Change in trade and other receivables (2,854) (3,670) 1,236 3,767 Change in other current assets (16,411) 20,501 (75,985) 20,810 Change in current tax assets - (58) - 2,055 Change in trade and other payables 6,776 10,642 (169,992) (61,641) Change in exploration expenditure - (29,558) - (77,535) Net cash from operating activities (116,893) $ (90,693) (595,529) $ (461,072) 17. Commitments and contingencies Licence work commitments The Group has the following indicative expenditure commitments at balance date (being minimum work requirements under its minerals mining permit and minerals prospecting licence). The Company is dependent on certain factors to be able to meet these minimum work requirements. They are set out in Note 2(d). 2020 2019 NZD NZD Within one year $ - $ - After one year but not more than five years $ 6,000,000 $ 6,000,000 $ 6,000,000 $ 6,000,000 17. Commitments and contingencies (continued) Minerals Mining Permit 55549 The Minerals Mining Permit was granted on December 6, 2013. On November 7, 2019 the Company was granted a change of conditions in the permit to defer the minimum work programme commitments. To date all minimum work commitments have been completed. The minimum work programme includes: Within 96 months of the commencement date of the permit, the permit holder shall: o Complete and submit a sufficiently detailed engineering study and feasibility study, which (without limitation) is at the level of detail to reach a decision-to-mine milestone; and o Submit a detailed timeline for the construction/refit of a selected vessel including (without limitation) the detail timing of the commissioning and mobilisation to the Chatham Rise; and o Complete and submit a marine operations risk review report that includes (without limitation) a HAZID Risk Assessment Matrix, risk review of on-board processing and risk review of planned and unplanned maintenance in various weather scenarios; and o Either commit by notice in writing to the Chief Executive to carry out the work programme obligations set out for the following 24 months and to commence production within 60 months of the commencement date of the permit or surrender the permit. Within 120 months of the commencement date of the permit, the permit holder must spend on average $2 million per annum completing appropriate sampling, geophysical and geotechnical surveys and data analysis (without limitation) in respect of the mining blocks identified for the first five years of production. For the remainder of the term the Company must spend $2 million per annum on carrying out further specified work programme commitments. 18. Subsequent events On January 18, 2021 the Company closed a non-brokered private placement of 10,000,000 common shares at a price of CAD$0.06 per share for gross proceeds of CAD$600,000. Finders fees in the amount of CAD$3,360 were paid in connection with the private placement. All securities issued pursuant to the private placement are subject to a hold period and may not be traded until May 16, 2021. The current outbreak of COVID-19 and the subsequent quarantine measures imposed by the New Zealand government as well as the travel restrictions imposed by New Zealand and other countries in early 2020 have caused disruption to businesses and economic activity. The Group considers this to be a non-adjusting post balance sheet event. The Group is committed to supporting government and community efforts to limit the spread of the virus, and supporting business continuity with regard to its employees and contractors. There were no other material subsequent events up to the date of the financial statements. End CA:00368487 For:CRP Type:GENERAL Time:2021-03-02 14:45:55