Annual report pursuant to Section 13 and 15(d)

Financial Risk Management

v3.20.2
Financial Risk Management
12 Months Ended
Jun. 30, 2020
Risks And Uncertainties [Abstract]  
Financial Risk Management

10

Financial risk management

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or valuation of its financial instruments.

The Company is exposed to financial risk related to fluctuation of foreign exchange rates. Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the United Sates dollar, primarily general and administrative expenses incurred in Canadian dollars. The Company believes that the results of operations, financial position and cash flows would be affected by a sudden change in foreign exchange rates but would not impair or enhance its ability to pay its Canadian dollar accounts payable. The Company manages foreign exchange risk by converting its US$ to CA$ as needed. The Company maintains the majority of its cash in US$. As at June 30, 2020, Canadian dollar denominated accounts payable and accrued liabilities exposure in US$ totaled $152,347.

a)

Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. If foreign exchange rates were to fluctuate within +/-10% of the closing rate at year-end, the maximum exposure is $17,853.

Balances in foreign currencies at June 30, 2020 and 2019 are as follows:

 

 

 

June 30,

2020

balances

CA$

 

 

June 30,

2019

balances

CA$

 

Trade payables

 

 

167,499

 

 

 

201,279

 

Cash

 

 

20,981

 

 

 

24,248

 

Interest, taxes, and other receivables

 

 

12,808

 

 

 

26,099

 

 

b)

Interest rate risk

The Company is subject to interest rate risk on its cash and cash equivalents and believes that the results of operations, financial position and cash flows would not be significantly affected by a sudden change in market interest rates relative to the investment interest rates due to the short-term nature of the investments. As at June 30, 2020, cash and cash equivalents held by the Company were $2,392,402. The Company’s cash balance currently earns interest at standard bank rates. If interest rates were to fluctuate within +/-10% of the closing rate at year end the impact of the Company’s interest-bearing accounts will be not be significant due to the current low market interest rates.

The only financial instruments that expose the Company to interest rate risk are its cash and cash equivalents.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company continues to manage its liquidity risk based on the outflows experienced for the period ended June 30, 2020 and is undertaking efforts to conserve cash resources wherever possible. The maximum exposure of the Company’s liquidity risk is $2,674,923 as at June 30, 2020.

Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks, financial institutions, and contractors as well as outstanding receivables. The Company limits its exposure to credit risk, with respect to cash and cash equivalents, by placing them with high quality credit financial institutions. The Company’s cash equivalents consist primarily of operating funds with commercial banks. Of the amounts with financial institutions on deposit, the following table summarizes the amounts at risk should the financial institutions with which the deposits are held cease trading:

The maximum exposure of the Company’s credit risk is $9,401 at June 30, 2020 relating to interest, taxes, and other receivables. The credit risk related to uninsured cash and cash equivalents balances is $2,232,270 at June 30, 2020.

 

 

 

Cash and

cash

equivalents

$

 

 

Insured

amount

$

 

 

Non-

insured

amount

$

 

 

 

 

2,392,402

 

 

 

160,132

 

 

 

2,232,270

 

 

Concentration of credit risk

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents.

The Company places its cash and cash equivalents in accredited financial institutions and therefore the Company’s management believes these funds are subject to minimal credit risk. The Company has no significant off-balance sheet concentrations of credit risk such as foreign currency exchange contracts, option contracts or other hedging arrangements.