9.RIGHT-OF-USE ASSET AND LEASE LIABILITIES 

The Company currently leases office space, which are classified as operating leases, and leases remote camp accommodations which are classified as finance leases under ASC 842.

The components of operating lease expense, associated with the Company’s leasing of office space, consisted of amortization of the right-of-use asset of $90,990 and $37,925 during the years ended December 31, 2024 and 2023, respectively, and accretion of the lease liability of $15,156 and $11,972 for the years ended December 31, 2024 and 2023, respectively.

The weighted average remaining lease term in years was 1.42 and 2.42 as of December 31, 2024 and  2023, respectively. The weighted average discount rate as of December 31, 2024, and  2023, was 10.25%.

Amortization expense on operating leases is included as part of general and administrative expenses on the income statement. The total lease expense recognized on the income statement is the sum of the accretion of the lease liability and amortization expense. This total expense reflects the cost of using the leased asset over the lease term.

The following table reconciles the undiscounted future cash flows for the next five years and thereafter to the operating lease liabilities recorded within the consolidated balance sheet as of December 31, 2024:

The components of finance lease expense, associated with the Company’s leasing of remote accommodation camps, consisted of amortization of the right-of-use asset of $20,144 and $0 during the years ended December 31, 2024 and 2023, respectively, and accretion of the lease liability of $103,117 and $0 during the years ended December 31, 2024 and 2023, respectively.

The weighted average remaining lease term in years was 19 and 0 as of December 31, 2024 and December 31, 2023, respectively. The weighted average discount rate as of December 31, 2024 was 10.25%.

Amortization expense on financing leases is included as part of general and administrative expenses on the statement of operations. The total lease expense recognized on the statement of operations is the sum of the accretion of the lease liability and amortization expense. This total expense reflects the cost of using the leased asset over the lease term.

Included in the total finance lease expense for the year ended December 31, 2024, is approximately $110,000 in demobilization costs associated with the decommissioning and removal of the remote accommodation camps at the end of the lease term. These costs have been capitalized as part of the lease liability and right-of-use asset and are being recognized over the term of the lease.

The following table reconciles the undiscounted future cash flows for the next five years and thereafter to the financing lease liabilities recorded within the consolidated balance sheet as of December 31, 2024: