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SHARE CAPITAL, WARRANTS AND OPTIONS

3 Months Ended

Mar. 31, 2024

SHARE CAPITAL, WARRANTS AND OPTIONS

SHARE CAPITAL, WARRANTS AND OPTIONS

11.

SHARE CAPITAL, WARRANTS AND OPTIONS

The authorized capital of the Company comprises an unlimited number of common shares without par value and 100,000,000 Series 1 convertible preferred shares without par value.

a)	Common Shares Issued and Outstanding

During the three months ended March 31, 2024, 126,259 common shares were issued for the net exercise of 278,100 options.

During the year ended December 31, 2023, the Company completed the following financing transactions:

On February 24, 2023, the Company issued 4,437,184 common shares at a price of $1.75 per share for gross proceeds of $7,765,072 upon the closing of a brokered private placement (the “Offering”). In connection with the Offering, the Company: (a) paid to the agents a cash commission of $473,383, equal to 6% of the gross proceeds (other than on certain president’s list purchasers on which a cash commission of 3% was paid); and (b) issued to the agents that number of non-transferable broker warrants of the Company (the “Broker Warrants”) as is equal to 6% of the number of common Shares sold under the Offering (other than on common shares issued to president’s list purchasers on which Broker Warrants equal to 3% were issued). Each Broker Warrant is exercisable to acquire one common share at an exercise price of $1.75 per common share until February 24, 2025. A total of 221,448 broker warrants were issued to the agents under the Private Placement. The fair value of the warrants was estimated at $167,939 using the Black-Scholes Option Pricing Model. Legal fees related to the Offering of $133,164 were also recorded as a share issuance cost.

On June 28, 2023, the Company issued 14,772,000 units at a price of $1.10 per unit to EdgePoint for aggregate gross proceeds of $16,249,200 upon the closing of the Financing Transactions. Each unit comprises one common share of PNRL and 22.5% of one whole common share purchase warrant (each a “Transferable Warrant” and together the “Transferable Warrants”). The total whole number of Transferable Warrants issuable in the Equity Financing is 3,324,000. Each Transferable Warrant may be exercised by the holder thereof to purchase one common share at an exercise price of $1.4375 per common share for a period of three years. The fair value of the Transferable Warrants was estimated at $1,898,349 using a proportionate allocation method based on the fair value of each

component (shares and warrants). The fair value of the warrants is calculated using the Black-Scholes Option Pricing Model while the fair value of the shares is determined by the stock price on the closing date of the Equity Financing times the total number of shares issued.

Fort Capital Partners acted as financial advisor to PNRL on the equity portion of the Financing Transactions and was paid cash fees of $812,460 by PNRL, equal to 5.0% of the gross proceeds of the equity portion of the Financing Transactions. Legal fees related to the Financing Transactions (Note 7) totaled $736,067, of which $240,596 was recorded as share issuance cost.

The fair value of the warrants in connection with the above two financing transactions were calculated using the following assumptions:


		February 24, 2023			June 28, 2023
Expected dividend yield			0	%		0	%
Expected forfeiture rate			0	%		0	%
Stock price		$	1.73		$	1.35
Expected share price volatility			77.52	%		92.06	%
Risk free interest rate			4.28	%		4.13	%
Expected life of warrant			2	years		3	years

The volatility was determined by calculating the historical volatility of stock prices of the Company over a period as the expected life of warrants using daily closing prices. The formula used to compute historical volatility is the standard deviation of the logarithmic returns.

On December 14, 2023, the company closed an equity and debt financing package of approximately $21.6 million, comprised of a broker private placement (the “Private Placement”) and amended Term Loan (Note 10). The Private Placement was completed in accordance with the terms of an agency agreement dated December 14, 2023 and entered into by the Company with Cormark Securities Inc. and BMO Capital Markets, as co-lead agents, and Canaccord Genuity Corp., Fort Capital Securities Ltd. and Paradigm Capital Inc. (collectively, the “Agents”). Under the offering of the Private Placement, the Company issued an aggregate of 13,133,367 common shares at a price of $1.20 per common share for aggregate gross proceeds of $15,760,040. In consideration for the services provided by the Agents under the offering, the Company paid to the Agents an aggregate cash commission of $796,983, representing 6% of the gross proceeds of the offering (other than in respect of subscribers included on a president’s list formed by the Company, for which a reduced commission of 3% of the gross proceeds was paid). In connection with the Private Placement, EdgePoint exercised its participation right in respect of the offering (the “Participation Right”) and subscribed for an aggregate 1,265,800 common shares. EdgePoint was granted the Participation Right pursuant to the terms of a subscription agreement between the Company and EdgePoint dated June 28, 2023.

b)	Warrants

The following summarizes common share purchase warrant activity for the three months ended March 31, 2024:


		March 31, 2024				December 31, 2023
				Weighted				Weighted
				Average				Average
		Number		Exercise Price		Number		Exercise Price
		Outstanding		($)		Outstanding		($)
Outstanding, beginning of the period		6,891,099		1.50		1,098,786		1.96
Issued		—		—		6,595,448		1.46
Exercised		—		—		(100,000)		1.75
Cancelled/expired		(350,000)		1.75		(703,135)		1.80
Outstanding, end of the period		6,541,099				6,891,099		1.50

At March 31, 2024, the Company had outstanding common share purchase warrants exercisable to acquire common shares of the Company as follows:


				Exercise Price		Weighted Average remaining
Warrants Outstanding		Expiry Date		($)		contractual life (years)
295,651		August 3, 2024		2.40		0.01
221,448		February 24, 2025		1.75		0.03
5,324,000		June 28, 2026		1.44		1.83
700,000		June 28, 2026		1.44		0.24
6,541,099						2.11

c)	Stock Options

The Company adopted a Stock Option Plan (the “Plan”) providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire up to 27,100,000 common shares of the Company. Under the Plan, the exercise price of each option typically equals the last closing price per share on the trading day immediately preceding the day on which the Company announces the grant of the option, less applicable discount, if any, permitted by the policies of the Exchange and approved by the Board. The options can be granted for a maximum term of ten years.

A summary of option activity under the Plan during the three months ended March 31, 2024 and the year ended December 31, 2023 is as follows:


		March 31, 2024				December 31, 2023
				Weighted				Weighted
				Average				Average
		Number		Exercise Price		Number		Exercise Price
		Outstanding		($)		Outstanding		($)
Outstanding, beginning of the period		13,487,921		1.39		10,407,044		1.10
Issued		—		—		3,833,277		1.75
Exercised		(278,100)		0.86		(488,900)		0.49
Cancelled		(150,000)		1.75		(263,500)		2.40
Outstanding, end of the period		13,059,821		1.39		13,487,921		1.39

During the year ended December 31, 2023, the Company granted an aggregate total of 3,833,277 stock options to employees, directors, officers and consultants with a term of five years. The options have an exercise price of $1.75 per share and vest annually in equal thirds beginning on the first anniversary of the date of grant. As at December 31, 2023, none of the options granted were vested. During the three months ended March 31, 2024, a total of $389,612 (Q1 2023 – Nil) was recorded as share-based payment expense and credit to reserves.

The fair value of stock options granted during the year ended December 31, 2023:


		December 31, 2023
Expected dividend yield		0	%
Expected forfeiture rate		0	%
Expected share price volatility		87.92	%
Risk free interest rate		4.28-4.68	%
Expected life of options		3-4	years

Details of options outstanding as at March 31, 2024 are as follows:


								Weighted average
Options		Options		Expiry		Exercise		remaining contractual life
Outstanding		Exercisable		Date		Price ($)		(years)
660,000		660,000		February 24, 2025		0.80		0.05
240,000		240,000		August 19, 2025		0.45		0.03
3,320,100		3,320,000		January 26, 2026		0.39		0.46
495,000		495,000		February 25, 2026		1.60		0.07
1,185,750		1,185,750		September 29, 2026		0.91		0.23
998,794		998,794		October 25, 2026		2.00		0.20
2,476,900		2,476,900		January 20, 2027		2.40		0.53
3,683,277		—		August 8, 2028		1.75		1.23
13,059,821		9,376,444						2.80

d)	DSU Plan

Effective December 2022, the Company approved a Deferred Share Unit Plan (“DSU Plan”) that enables the Company upon approval by the Directors to grant DSUs to eligible non-management directors. The DSUs credited to the account of a director may only be redeemed following the date upon which the holder ceases to be a director. Depending upon the country of residence of a director, the DSUs may be redeemed at any time prior to December 15 in the calendar year following the year in which the holder ceases to be a director and may be redeemed in as many as four installments. Upon redemption, the holder is entitled to a cash payment equal to the number of units redeemed multiplied by the five-day VWAP of the Company’s common shares on that date. The Company may elect, in its sole discretion, to settle the value of the DSUs redeemed in the Company’s common shares on a one-for-one basis, provided shareholder approval has been obtained on or prior to the relevant redemption date.

During the three months ended March 31, 2024, DSUs have been granted as follows:


		Number		Market Price ¹		Fair Value
		Outstanding		($)		($)
DSUs outstanding at December 31, 2023		730,975		1.21		884,481
DSUs granted during the period		312,499		0.90		281,249
Fair value adjustment		—				(226,602)
DSUs outstanding at March 31, 2024		1,043,474		0.90		939,128

^1.	According to the DSU plan, Market Price is the volume weighted average price on the TSXV for the last five trading days immediately preceding the grant date.

During the three months ended March 31, 2024, the DSU compensation totaled $281,249 and was recorded as share based compensation (Q1 2023 - $173,292).

The DSUs were classified as a derivative financial liability that should be measured at fair value, with changes in value recorded in profit or loss. The fair value of the DSUs was determined by the volume weighted average price on the TSXV for the last five trading days of each reporting period. As at March 31, 2024, the Company reassessed the fair value of the DSUs at $939,128 and recorded the amount as a DSUs liability (December 31, 2023 - $884,481).