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DRN - Delrand Resources Limited - Interim Condensed Consolidated Financial
statements as at and for the three and nine month periods ended
September 30, 2011
DELRAND RESOURCES LIMITED
(formerly BRC DiamondCore Ltd.)
(Incorporated in Canada)
(Corporation number 627115-4)
Share code: DRN & ISIN Number: CA2472671072
("Delrand" or "the Company")
Interim Condensed Consolidated Financial Statements
As at and for the three and nine month periods ended
September 30, 2011
(Expressed in Canadian dollars)
(Unaudited)
NOTICE TO READER
These interim condensed consolidated financial statements of Delrand Resources
Limited (the "Company") as at and for the three and nine month periods ended
September 30, 2011 have been prepared by and are the responsibility of the
Company`s management. These interim condensed consolidated financial
statements have not been audited or reviewed by the Company`s auditors.
CONTENTS
Condensed Consolidated Statements of Financial Position......................4
Condensed Consolidated Statements of Comprehensive loss......................5
Condensed Consolidated Statements of Changes in Equity.......................6
Condensed Consolidated Statements of Cash Flows..............................7
1. Corporate Information....................................................10
2. Basis of Preparation.....................................................10
3. Summary of Significant Accounting Policies...............................11
4. Property, Plant and Equipment............................................26
5. Exploration and Evaluation Assets........................................28
6. Segmented Reporting......................................................29
7. Notes Payable............................................................29
8. Share Capital............................................................30
9. Share-Based Payments.....................................................31
10. Related Party Transactions..............................................35
11. Financial risk management objectives and policies.......................36
12. Supplemental cash flow information......................................41
13. Commitments and Contingencies...........................................41
14. First Time Adoption of International Financial Reporting Standards......42
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS - UNAUDITED)
September 30,
Notes 2011
$
Assets
Current Assets
Cash and cash equivalents 221,574
Prepaid expenses and other assets 34,333
Total Current Assets 255,907
Non-Current Assets
Property, plant and equipment 4 129
Exploration and evaluation 5 4,653,829
Total Non-Current Assets 4,653,958
Total Assets 4,909,865
Liabilities and Shareholders` Equity
Current Liabilities
Accounts payable and accrued liabilities 525,145
Notes payable 7 -
Taxes payable -
Due to related parties 94,994
Total Current Liabilities 620,139
Non-current
Future tax liability 15,789
Total Liabilities 635,928
Shareholders` Equity
Share capital 8 116,283,812
Contributed surplus 7,812,242
Deficit (119,822,117)
Total Shareholders` Equity 4,273,937
Total Liabilities and Shareholders` Equity 4,909,865
Common shares
Authorized Unlimited
Issued and outstanding 49,704,341
December 31, January 1,
2010 2010
$ $
Assets
Current Assets
Cash and cash equivalents 126,931 664,495
Prepaid expenses and other assets 21,713 163,175
Total Current Assets 148,644 827,670
Non-Current Assets
Property, plant and equipment 4,100 141,794
Exploration and evaluation 5,074,302 5,826,083
Total Non-Current Assets 5,078,402 5,967,877
Total Assets 5,227,046 6,795,547
Liabilities and Shareholders` Equity
Current Liabilities
Accounts payable and accrued liabilities 834,176 1,027,172
Notes payable 400,493 377,884
Taxes payable 6,127 -
Due to related parties 106,029 -
Total Current Liabilities 1,346,825 1,405,056
Non-current
Future tax liability 15,789 57,030
Total Liabilities 1,362,614 1,462,086
Shareholders` Equity
Share capital 115,457,876 115,457,876
Contributed surplus 7,812,242 7,774,233
Deficit (119,405,686) (117,898,648)
Total Shareholders` Equity 3,864,432 5,333,461
Total Liabilities and Shareholders` Equity 5,227,046 6,795,547
Common shares
Authorized Unlimited Unlimited
Issued and outstanding 89,408,640 89,408,640
The accompanying notes are an integral part of these interim condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(EXPRESSED IN CANADIAN DOLLARS - UNAUDITED)
Notes
For the
three
month For the
period three month
ended period ended
September September
30, 2011 30, 2010
$ $
Expenses
Consulting and professional fees 31,467 191,361
General and administrative 48,223 67,762
Share-based payment expense 9 - -
Foreign exchange (gain) loss (10,478) 1,010
Loss from operations (69,212) (260,133)
Headline Loss (69,212) (260,133)
Loss for the period (69,212) (260,133)
Comprehensive loss for the period (69,212) (260,133)
Loss per share, basic and diluted (0.00) (0.00)
For the
nine month For the nine
period month period
ended ended
September September
30, 2011 30, 2010
$ $
Expenses
Consulting and professional fees 233,785 335,954
General and administrative 193,637 174,318
Share-based payment expense - 73,116
Foreign exchange (gain) loss (10,991) 3,370
Loss from operations (416,431) (586,758)
Headline Loss (416,431) (586,758)
Loss for the period (416,431) (586,758)
Comprehensive loss for the period (416,431) (586,758)
Loss per share, basic and diluted (0.01) (0.01)
The accompanying notes are an integral part of these interim condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(EXPRESSED IN CANADIAN DOLLARS - UNAUDITED)
Common shares
Number of
Notes shares Amount
$
Balance at January 1, 2010 89,408,640 115,457,876
Net loss for the period
Share based compensation 9
Balance at September 30, 2010 89,408,640 115,457,876
Net loss for the period
Share based compensation
Balance at December 31, 2010 89,408,640 115,457,876
Balance at January 1, 2011 89,408,640 115,457,876
Net loss for the period
Share based compensation 9
Share issue 10,000,000 825,936
Two to one share consolidation 8a (49,704,299)
Balance at September 30, 2011 * 49,704,341 116,283,812
Total
Contributed Shareholder`s
Surplus Deficit equity
$ $ $
Balance at January 1, 2010 7,774,233 (117,898,648) 5,333,461
Net loss for the period (586,758) (586,758)
Share based compensation 95,255 95,255
Balance at September 30, 2010 7,869,488 (118,485,406) 4,841,958
Net loss for the period (920,280) (920,280)
Share based compensation (57,246) (57,246)
Balance at December 31, 2010 7,812,242 (119,405,686) 3,864,432
Balance at January 1, 2011 7,812,242 (119,405,686) 3,864,432
Net loss for the period (416,431) (416,431)
Share based compensation
Share issue 825,936
Two to one share consolidation
Balance at September 30, 2011 7,812,242 (119,822,117) 4,273,937
* 2 to 1 consolidation of shares was implemented June 2011 after the share
issue
The accompanying notes are an integral part of these interim condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN CANADIAN DOLLARS - UNAUDITED)
Three
Three months months
ended ended
September September
Notes 30, 2011 30, 2010
$ $
Cash flows from operating activities
Net loss for the period (69,212) (260,133)
Adjustments to reconcile loss to net cash
used in operating activities
Share based payments 9 - -
Accrued interest in notes payable - -
Changes in non-cash working capital
Prepaid expenses and other current assets 77 (3,802)
Taxes payable - -
Accounts payable and accrued liabilities (69,501) 25,648
Net cash flows from operating activities (138,636) (238,287)
Cash flows from investing activities
Expenditures on exploration and evaluation (61,897) 225,425
Funds received from Rio Tinto 36,775 -
Net cash used in investing activities (25,122) 225,425
Cash flows from financing activities
Issue of shares - -
Repayment of notes payable 7 - -
Due to related parties 45,380 95,695
Net cash from financing activities 45,380 95,695
Net increase in cash during the period (118,378) 82,833
Cash and cash equivalents, beginning of
the period 339,952 7,197
Cash and cash equivalents, end of the period 221,574 90,030
Nine Nine
months months
ended ended
September September
30, 2011 30, 2011
$ $
Cash flows from operating activities
Net loss for the period (416,431) (586,758)
Adjustments to reconcile loss to net cash used in
operating activities
Share based payments - 73,116
Accrued interest in notes payable 8,000 -
Changes in non-cash working capital
Prepaid expenses and other current assets (12,620) 32,804
Taxes payable (6,127) -
Accounts payable and accrued liabilities (309,032) (120,425)
Net cash flows from operating activities (736,210) (601,263)
Cash flows from investing activities
Expenditures on exploration and evaluation 83,336 190,476
Funds received from Rio Tinto 341,109 -
Net cash used in investing activities 424,445 190,476
Cash flows from financing activities
Issue of shares 825,936 -
Repayment of notes payable (408,493) -
Due to related parties (11,035) (163,678)
Net cash from financing activities 406,408 (163,678)
Net increase in cash during the period 94,643 (574,465)
Cash and cash equivalents, beginning of the period 126,931 664,495
Cash and cash equivalents, end of the period 221,574 90,030
Supplemental cash flow information (Note 12)
The accompanying notes are an integral part of these interim condensed
consolidated financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at and for the three and nine months ended September 30, 2011
(Expressed in Canadian dollars - unaudited)
1. CORPORATE INFORMATION
The principal business of Delrand Resources Limited (the "Company") is the
acquisition and exploration of mineral properties in the Democratic Republic
of the Congo ("DRC"). In June 2011, the Company effected a change in the name
of the Company from BRC DiamondCore Ltd. to Delrand Resources Limited and a
consolidation of the outstanding common shares of the Company on a two to one
basis.
These interim condensed consolidated financial statements as at and for the
three and nine month periods ended September 30, 2011 include the accounts of
the Company and of its wholly-owned subsidiaries incorporated in the DRC, BRC
DiamondCore Congo SPRL, and in South Africa, BRC Diamond South Africa
(Proprietary) Limited.
The Company is a publicly traded company whose outstanding common shares are
listed for trading on the Toronto Stock Exchange and the JSE Limited in
Johannesburg, South Africa. The head office of the Company is located at 1
First Canadian Place, 100 King St. West, Suite 707O, Toronto, Ontario, M5X
1E3, Canada.
2. BASIS OF PREPARATION
These interim condensed consolidated financial statements are prepared on a
going concern basis, which assumes that the Company will continue in operation
for a reasonable period of time and will be able to realize its assets and
discharge its liabilities in the normal course of operations. The Company has
not generated revenues from operations. The Company incurred a net loss of
$69,212 and $416,431 during the respective three and nine months ended
September 30, 2011 and, as of that date, the Company`s deficit was
$119,822,117. These conditions along with other matters indicate the existence
of material uncertainties that may cast significant doubt about the Company`s
ability to continue as a going concern. As such, the Company`s ability to
continue as a going concern depends on its ability to successfully raise
additional financing for development of the mineral properties. Although the
Company has been successful in the past in obtaining financing and
subsequently raised financing, there is no assurance that it will be able to
obtain adequate financing in the future or that such financing will be
available on acceptable terms.
a) Statement of compliance
These interim condensed consolidated financial statements have been prepared
in accordance with International Accounting Standard ("IAS") 34 Interim
Financial Reporting using accounting policies consistent with International
Financial Reporting Standards ("IFRS") issued by the International Accounting
Standards Board ("IASB").
The Company`s annual consolidated financial statements previously were
prepared in accordance with Canadian generally accepted accounting principles
("GAAP"). Canadian GAAP differs from IFRS in some areas. In preparing the IFRS
statements, management amended certain accounting, valuation, and
consolidation methods previously applied under Canadian GAAP.
The Company`s date of transition was January 1, 2010 (the "transition date").
An explanation of how the transition of previously prepared financial
statements in accordance with Canadian GAAP to IFRS has affected the reported
financial position, financial performance and cash flows of the Company is
provided in Note 14. This note includes reconciliations of equity and
profit/loss for comparative periods and of equity at the date of transition
reported under Canadian GAAP to those reported for those periods and at the
date of transition under IFRS. The 2010 comparative figures have been restated
to reflect the adjustments, except as described in the accounting policies.
These interim condensed consolidated financial statements and comparative
figures presented are in accordance with IFRS and have not been audited.
The policies applied in these interim condensed consolidated financial
statements are presented in Note 3 and are based on IFRS expected to be
effective as of December 31, 2011. The date the Company`s Audit Committee
approved these financial statements was November 11, 2011.
b) Basis of measurement
These interim condensed consolidated financial statements have been prepared
under the historical cost convention, except for certain financials assets
which are presented at fair value, as explained in the accounting policies set
out in Note 3.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all
periods presented in these interim condensed consolidated financial statements
and in preparing the opening IFRS consolidated statements of financial
position at January 1, 2010 for the purposes of the transition to IFRS, unless
otherwise indicated. The exemptions taken in applying IFRS for the first time
are set out in Note 14. The accounting policies have been applied consistently
by all entities.
a) Basis of Consolidation
i. Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
This control is evidenced through owning more than 50% of the voting rights or
currently exercisable potential voting rights of a company`s share capital.
The financial statements of subsidiaries are included in the consolidated
financial statements of the Company from the date that control commences until
the date that control ceases. Consolidation accounting is applied for all of
the Company`s subsidiaries.
ii. Transactions eliminated on consolidation
Inter-company balances, transactions, and any unrealized income and expenses,
are eliminated in preparing the consolidated financial statements.
Unrealized losses are eliminated in the same way as unrealized gains, but only
to the extent that there is no evidence of impairment.
b) Use of Estimates and Judgments
The preparation of these interim condensed consolidated financial statements
in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
In preparing these interim condensed consolidated financial statements, the
significant judgments made by management applying the Company`s accounting
policies and the key sources of estimation uncertainty are expected to be the
same as those to be applied in the first annual IFRS financial statements.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Information about
critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the interim condensed
consolidated financial statements is included in the following notes:
i) Provisions and contingencies
The amount recognized as provision, including legal, contractual, constructive
and other exposures or obligations, is the best estimate of the consideration
required to settle the related liability, including any related interest
charges, taking into account the risks and uncertainties surrounding the
obligation. In addition, contingencies will only be resolved when one or more
future events occur or fail to occur. Therefore assessment of contingencies
inherently involves the exercise of significant judgment and estimates of the
outcome of future events. The Company assesses its liabilities and
contingencies based upon the best information available, relevant tax laws and
other appropriate requirements.
ii) Exploration and evaluation expenditure
The application of the Company`s accounting policy for exploration and
evaluation expenditure requires judgment in determining whether it is likely
that future economic benefits will flow to the Company, which may be based on
assumptions about future events or circumstances. Estimates and assumptions
made may change if new information becomes available. If, after the
expenditure is capitalized, information becomes available suggesting that the
recovery of the expenditure is unlikely, the amount capitalized is written off
in the statement of comprehensive loss during the period the new information
becomes available.
iii) Impairment
Assets, including property, plant and equipment and exploration and
evaluation, are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amounts exceed their recoverable
amounts. The assessment of the fair value often requires estimates and
assumptions such as discount rates, exchange rates, commodity prices,
rehabilitation and restoration costs, future capital requirements and future
operating performance. Changes in such estimates could impact recoverable
values of these assets. Estimates are reviewed regularly by management.
iv) Income taxes
The Company is subject to income taxes in various jurisdictions and subject to
various rates and rules of taxation. Significant judgment is required in
determining the provision for income taxes. There are many transactions and
calculations undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The Company recognizes liabilities
for anticipated tax audit issues based on the Company`s current understanding
of the tax law. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact the
current and deferred tax provisions in the period in which such determination
is made. In addition, the Company has recognized deferred tax assets relating
to tax losses carried forward to the extent there are sufficient taxable
income relating to the same taxation authority and the same subsidiary against
which the unused tax losses can be utilized. However, future realization of
the tax losses also depends on the ability of the entity to satisfy certain
tests at the time the losses are recouped, including current and future
economic conditions, production rates and production costs.
v) Share-based payment transactions
The Company measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payment transactions
requires determining the most appropriate valuation model, which is dependent
on the terms and conditions of the grant. This estimate also requires
determining the most appropriate inputs to the valuation model including the
expected life of the stock option, volatility and dividend yield and making
assumptions about them. The assumptions and models used for estimating fair
value for share-based payment transactions are disclosed in Note 9.
vi) Decommissioning and environmental provisions
The Company`s operations are subject to environmental regulations in the DRC.
Upon establishment of commercial viability of a site, the Company estimates
the cost to restore the site following the completion of commercial activities
and depletion of reserves. These future obligations are estimated by taking
into consideration closure plans, known environmental impacts, and internal
and external studies which estimate the activities and costs that will be
carried out to meet the decommissioning and environmental obligations. Amounts
recorded for decommissioning and environmental provisions are based on
estimates of decommissioning and environmental costs which may not be incurred
for several years or decades. The decommissioning and environmental cost
estimates could change due to amendments in laws and regulations in the DRC.
Additionally, actual estimated decommissioning and reclamation costs may
differ from those projected as a result of an increase over time of actual
remediation costs, a change in the timing for utilization of reserves and the
potential for increasingly stringent environmental regulatory requirements.
c) Foreign Currency Translation
Functional and presentation currency
These interim condensed consolidated financial statements are presented in
Canadian dollars ("$"), which is the Company`s functional and presentation
currency.
Foreign currency transactions
The functional currency for each of the Company`s subsidiaries is the currency
of the primary economic environment in which the entity operates. Transactions
entered into by the Company`s subsidiaries in a currency other than the
currency of the primary economic environment in which they operate (their
"functional currency") are recorded at the rates ruling when the transactions
occur except depreciation and amortization which are translated at the rates
of exchange applicable to the related assets, with any gains or losses
recognized in the consolidated statements of comprehensive loss.
Foreign currency monetary assets and liabilities are translated at current
rates of exchange with the resulting gain or losses recognized in the
consolidated statements of comprehensive loss. Exchange differences arising on
the retranslation of unsettled monetary assets and liabilities are recognized
immediately in profit or loss. Non-monetary assets and liabilities are
translated using the historical exchange rates. Non-monetary assets and
liabilities measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value is determined.
d) Cash
Cash and cash equivalents includes cash on hand, deposits held with financial
institutions and other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known
amounts.
e) Financial Assets
Financial assets are classified as either financial assets at fair value
through profit or loss ("FVTPL"), loans and receivables, held to maturity
investments ("HTM"), or available for sale financial assets ("AFS"), as
appropriate at initial recognition and, except in very limited circumstances,
the classification is not changed subsequent to initial recognition. The
classification is determined at initial recognition and depends on the nature
and purpose of the financial asset. A financial asset is derecognized when
contractual rights to the asset`s cash flows expire or if substantially all
the risks and rewards of the asset are transferred.
i. Financial assets at FVTPL
Financial assets are classified as FVTPL when the financial asset is held for
trading or it is designated upon initial recognition as at FVTPL. A financial
asset is classified as held for trading if (1) it has been acquired
principally for the purpose of selling or repurchasing in the near term; (2)
it is part of an identified portfolio of financial instruments that the
Company manages and has an actual pattern of short term profit taking; or (3)
it is a derivative that is not designated and effective as a hedging
instrument. Financial assets at FVTPL are carried in the consolidated
statement of financial position at fair value with changes in fair value
recognized in profit or loss. Transaction costs are expensed as incurred.
The Company has classified cash and cash equivalents as FVTPL.
ii. Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivable.
Loans and receivables are initially recognized at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are
subsequently carried at amortized cost less losses for impairment. The
impairment loss of receivables is based on a review of all outstanding amounts
at period end. Bad debts are written off during the period in which they are
identified. Amortized cost is calculated taking into account any discount or
premium on acquisition and includes fees that are an integral part of the
effective interest rate and transaction costs. Gains and losses are recognized
in the statements of comprehensive loss when the loans and receivables are
derecognized or impaired, as well as through the amortization process.
HTM investments
HTM financial instruments are initially measured at fair value. Subsequently,
HTM financial assets are measured at amortized cost using the effective
interest rate method, less any impairment losses. The Company did not classify
any assets as HTM.
iii. AFS financial assets
Non-derivative financial assets not included in the above categories are
classified as AFS financial assets. They are carried at fair value with
changes in fair value generally recognized in other comprehensive loss and
accumulated in the AFS reserve. Impairment losses are recognized in profit or
loss. Purchases and sales of AFS financial assets are recognized on settlement
date with any change in fair value between trade date and settlement date
being recognized in the AFS reserve. On sale, the cumulative gain or loss
recognized in other comprehensive loss is reclassified from the AFS reserve to
profit or loss. The Company has not designated any of its financial assets as
AFS.
iv. Impairment of financial assets
The Company assesses at each reporting date whether a financial asset or a
group of financial assets is impaired. A financial asset or group of financial
assets is deemed to be impaired, if, and only if, there is objective evidence
of impairment as a result of one or more events that has occurred after the
initial recognition of the asset and that event has an impact on the estimated
future cash flows of the financial asset or the group of financial assets that
can be reliably estimated.
For financial assets carried at amortized cost, the amount of the impairment
is the difference between the asset`s carrying amount and the present value of
estimated future cash flows, discounted at the asset`s original effective
rate.
The carrying amount of all financial assets, excluding advances receivables
and balances due from related parties, is directly reduced by the impairment
loss. The carrying amount of trade receivables is reduced through the use of
an allowance account. Associated allowances are written off when there is no
realistic prospect of future recovery and all collateral has been realized or
has been transferred to the Company. Subsequent recoveries of amounts
previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognized in profit or loss.
A provision for impairment is made in relation to advances receivable, and an
impairment loss is recognized in profit and loss when there is objective
evidence that the Company will not be able to collect all of the amounts due
under the original terms. The carrying amount of the receivable is reduced
through use of an allowance account. With the exception of AFS equity
instruments, if in a subsequent period the amount of impairment loss decreases
and the decrease relates to an event occurring after the impairment was
recognized, the previously recognized impairment loss is reversed through
profit or loss. On the date of impairment reversal, the carrying amount of the
financial asset cannot exceed its amortized cost had the impairment not been
recognized. Reversal for AFS equity instruments are not recognized in profit
or loss.
v. Effective interest method
The effective interest method calculates the amortized cost of a financial
instrument asset or liability and allocates interest income over the
corresponding period. The effective interest rate is the rate that discounts
estimated future cash receipts over the expected life of the financial asset
or liability, or where appropriate, a shorter period. Income is recognized on
an effective interest basis for debt instruments other than those financial
assets classified as FVTPL.
f) Financial Liabilities
Financial liabilities are classified as FVTPL, or other financial liabilities,
as appropriate upon initial recognition. A financial liability is derecognized
when the obligation under the liability is discharged, cancelled or expired.
i. Financial liabilities classified as other financial liabilities are
initially recognized at fair value less directly attributable transaction
costs. Subsequent to the initial recognition, other financial liabilities are
measured at amortized cost using the effective interest method.
The Company`s other financial liabilities include accounts payables and
accrued liabilities and notes payable.
ii. Financial liabilities classified as FVTPL include financial liabilities
held for trading and financial liabilities designated upon initial recognition
as FVTPL. Financial liabilities are classified as held-for-trading if they are
acquired for the purpose of selling in the near term. This category includes
derivative financial instruments (including separated embedded derivatives)
held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the
consolidated statement of comprehensive loss. The Company does not have any
financial liabilities classified as FVTPL.
g) Loss Per Share
Basic loss per share is computed by dividing the net loss applicable by the
weighted average number of common shares outstanding during the reporting
period. Diluted loss per share is computed by dividing the net loss by the sum
of the weighted average number of common shares issued and outstanding during
the reporting period and all additional common shares for the assumed exercise
of stock options and warrants outstanding for the reporting period, if
dilutive. The treasury method stock method is used for the assumed proceeds
upon the exercise of stock options and warrants that are used to purchase
common shares at the average market price during the reporting period. As the
Company is incurring losses, basic and diluted loss per share are the same
since including the exercise of outstanding stock options and share purchase
warrants in the diluted loss per share calculation would be anti- dilutive.
h) Property, Plant and Equipment ("PPE")
i. Recognition and measurement
Items of PPE are measured at cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition
of the asset. The cost of self-constructed assets includes the cost of
materials, directed labor and any other cost directly attributable to bring
the asset to the location and condition necessary to be capable of operating
in the manner intended by the Company. Assets in the course of construction
are capitalized in the capital construction in progress category and
transferred to the appropriate category of PPE upon completion. When
components of an asset have different useful lives, depreciation is calculated
on each separate component.
ii. Subsequent costs
The cost of replacing part of an item of PPE is recognized in the carrying
amount of the item if it is probable that the future economic benefits
embodied within the part will flow to the Company and its cost can be measured
reliably. The carrying amount of the replaced part is derecognized and
included in net loss. If the carrying amount of the replaced component is not
known, it is estimated based on the cost of the new component less estimated
depreciation. The costs of the day to day servicing of property, plant and
equipment are recognized in profit or loss as incurred.
iii. Depreciation
Depreciation is based on the cost of an asset less its residual value.
Significant components of individual assets are assessed to determine whether
a component has an estimated useful life that is different from that of the
remainder of that asset, in which case that component is depreciated
separately. Depreciation is recognized in profit or loss on a straight line
basis over the estimated useful lives of each item or component of an item of
PPE as follows:
- Furniture and office equipment two to seven years
- Vehicles four years
- Computer equipment three years
- Exploration and mining assets two to four years
Depreciation methods, useful lives and residual values are reviewed annually
and adjusted, if appropriate. Depreciation commences when an asset is
available for use. Changes in estimates are accounted for prospectively.
iv. Gains and losses
Gains and losses on disposal of an item of PPE are determined by comparing the
proceeds from disposal with the carrying amount of the PPE, and are recognized
net within other income/expenses in profit or loss.
v. Repairs and maintenance
Repairs and maintenance costs are charged to expense as incurred, except major
inspections or overhauls that are performed at regular intervals over the
useful life of an asset is capitalized as part of PPE.
vi. De-recognition
An item of PPE is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain
or loss arising on de-recognition of the assets (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is
included in net earnings (loss) in the period the item is derecognized.
i) Exploration and Evaluation Assets
All direct costs related to exploration and evaluation of mineral properties,
net of incidental revenues, are capitalized under exploration and evaluation
assets. Exploration and evaluation expenditures include such costs as
acquisition of rights to explore; sampling, trenching and surveying costs;
costs related to topography, geology, geochemistry and geophysical studies;
drilling costs and costs in relation to technical feasibility and commercial
viability of extracting a mineral resource.
A regular review of each property is undertaken to determine the
appropriateness of continuing to carry forward costs in relation to
exploration and evaluation of mineral properties. Should the carrying value of
the expenditure not yet amortized exceed its estimated recoverable amount in
any year, the excess is written off to the consolidated statements of
comprehensive loss.
j) Impairment of Non-financial Assets
The Company`s PPE is assessed for indication of impairment at each
consolidated statements of financial position date. Exploration and evaluation
assets are assessed for impairment when facts and circumstances suggest that
the carrying amount of an exploration and evaluation asset may exceed its
recoverable amount. Internal factors, such as budgets and forecasts, as well
as external factors, such as expected future prices, costs and other market
factors are also monitored to determine if indications of impairment exist. If
any indication of impairment exists, an estimate of the asset`s recoverable
amount is calculated. The recoverable amount is determined as the higher of
the fair value less costs to sell for the asset and the asset`s value in use.
This is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or the
Company`s assets. If this is the case, the individual assets are grouped
together into cash generating units ("CGU") for impairment purposes. Such CGUs
represent the lowest level for which there are separately identifiable cash
inflows that are largely independent of the cash flows from other assets.
If the carrying amount of the asset exceeds its recoverable amount, the asset
is impaired and an impairment loss is charged to the consolidated statements
of comprehensive loss so as to reduce the carrying amount to its recoverable
amount (i.e., the higher of fair value less cost to sell and value in use).
Fair value less cost to sell is the amount obtainable from the sale of an
asset or CGU in an arm`s length transaction between knowledgeable, willing
parties, less the costs of disposal. Value in use is determined as the present
value of the future cash flows expected to be derived from an asset or CGU.
Estimated future cash flows are calculated using estimated future prices,
mineral reserves and resources and operating and capital costs. All
assumptions used are those that an independent market participant would
consider appropriate. The estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which estimates of future cash flows have not been adjusted.
The Company has not recognized impairment of tangible assets during the three
and nine month periods ended September 30, 2011 and September 30, 2010 (year
ended December 31, 2010 - $740,975).
k) Income Taxes
Income tax expense consists of current and deferred tax expense. Income tax
expense is recognized in profit and loss, except to the extent that it relates
to items recognized in other comprehensive income or directly in equity. In
this case, the tax is also recognized in other comprehensive income or
directly in equity.
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute current
income tax assets and liabilities are measured at future anticipated tax
rates, which have been enacted or substantively enacted at the reporting date.
Current tax assets and current tax liabilities are only offset if a legally
enforceable right exists to set off the amounts, and the Company intends to
settle on a net basis, or to realize the asset and settle the liability
simultaneously.
Deferred taxation is provided on all qualifying temporary differences at the
reporting date between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred tax assets are only recognized to the extent that it is probable that
the deductible temporary differences will reverse in the foreseeable future
and future taxable profit will be available against which the temporary
difference can be utilized.
Deferred tax liabilities and assets are not recognized for temporary
differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of
the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future. Deferred tax assets
and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate
to the same taxation authority.
l) Share-Based Payments
Equity-settled share-based payments for directors, officers and employees are
measured at fair value at the date of grant and recorded as compensation
expense in the financial statements. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period based on the Company`s estimate of shares that
will eventually vest.
The number of forfeitures likely to occur is estimated on grant date. Any
consideration paid by the optionee on exercise of equity-settled share-based
payments is credited to share capital. Shares are issued from treasury upon
the exercise of equity-settled share-based instruments.
Compensation expense on stock options granted to non-employees is measured at
the earlier of the completion of performance and the date the options are
vested using the fair value method and is recorded as an expense in the same
period as if the Company had paid cash for the goods or services received.
When the value of goods or services received in exchange for the share-based
payment cannot be reliably estimated, the fair value is measured by use of a
Black-Scholes valuation model. The expected life used in the model is
adjusted, based on management`s best estimate, for the effects of non-
transferability, exercise restrictions, and behavioural considerations.
m) Provisions and Contingencies
Provisions are recognized when a legal or constructive obligation exists, as a
result of past events, and it is probable that an outflow of resources that
can be reliably estimated will be required to settle the obligation. Where the
effect is material, the provision is discounted using an appropriate current
market-based pre-tax discount rate. The increase in the provision due to
passage of time is recognized as interest expense.
When a contingency substantiated by confirming events, can be reliably
measured and is likely to result in an economic outflow, a liability is
recognized as the best estimate required to settle the obligation. A
contingent liability is disclosed where the existence of an obligation will
only be confirmed by future events, or where the amount of a present
obligation cannot be measured reliably or will likely not result in an
economic outflow. Contingent assets are only disclosed when the inflow of
economic benefits is probable. When the economic benefit becomes virtually
certain, the asset is no longer contingent and is recognized in the
consolidated financial statements.
n) Related Party Transactions
Parties are considered to be related if one party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common
significant influence, related parties may be individuals or corporate
entities. A transaction is considered to be a related party transaction when
there is a transfer of resources or obligations between related parties.
Related party transactions that are in the normal course of business and have
commercial substance are measured at the exchange amount.
o) New Pronouncements Adopted
March 31, 2011 was the Company`s first reporting period under IFRS. Accounting
standards effective for periods beginning on January 1, 2011 have been adopted
as part of the transition to IFRS.
p) Recent Pronouncements Issued
The Company has reviewed new and revised accounting pronouncements that have
been issued but are not yet effective and determined that the following may
have an impact on the Company:
IFRS 9 Financial instruments ("IFRS 9") was issued by the IASB on November 12,
2009 and will replace IAS 39 Financial Instruments: Recognition and
Measurement ("IAS 39"). IFRS 9 replaces the multiple rules in IAS 39 with a
single approach to determine whether a financial asset is measured at
amortized cost or fair value and a new mixed measurement model for debt
instruments having only two categories: amortized cost and fair value. The
approach in IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow
characteristics of the financial assets. The new standard also requires a
single impairment method to be used, replacing the multiple impairment methods
in IAS 39. IFRS 9 is effective for annual periods beginning on or after
January 1, 2013. The Company is currently evaluating the impact of IFRS 9 on
its consolidated financial statements.
A revised version of IAS 24 Related party disclosures ("IAS 24") was issued by
the IASB on November 4, 2009. IAS 24 requires entities to disclose in their
consolidated financial statements information about transactions with related
parties. Generally, two parties are related to each other if one party
controls, or significantly influences, the other party. IAS 24 has simplified
the definition of a related party and removed certain of the disclosures
required by the predecessor standard. The revised standard is effective for
annual periods beginning on or after January 1, 2011. The adoption of this
issuance did not have a significant impact on the Company`s consolidated
financial statements.
IFRS 10 Consolidated Financial Statements ("IFRS 10") establishes principles
for the presentation and preparation of consolidated financial statements when
an entity controls one or more other entities. IFRS 10 supersedes IAS 27
"Consolidated and Separate Financial Statements" and SIC-12 "Consolidated -
Special Purpose Entities" and is effective for annual periods beginning on or
after January 1, 2013. Earlier application is permitted. The Company is
currently evaluating the impact of this standard on its consolidated financial
statements.
IFRS 11 Joint Arrangements ("IFRS 11") establishes principles for financial
reporting by parties to a joint arrangement. IFRS 11 supersedes the current
IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities -
Non-Monetary Contributions by Venturers" and is effective for annual periods
beginning on or after January 1, 2013. Earlier application is permitted. The
Company is currently evaluating the impact of this standard on its
consolidated financial statements.
IFRS 12 Disclosure of Interests in Other Entities ("IFRS 12") applies to
entities that have an interest in a subsidiary, a joint arrangement, an
associate or an unconsolidated structured entity. IFRS 12 is effective for
annual periods beginning on or after January 1, 2013. Earlier application is
permitted. The Company is currently evaluating the impact of this standard on
its consolidated financial statements.
IFRS 13 Fair Value Measurements ("IFRS 13") defines fair value, sets out in a
single IFRS framework for measuring fair value and requires disclosures about
fair value measurements. IFRS 13 applies to IFRSs that require or permit fair
value measurements or disclosures about fair value measurements (and
measurements, such as fair value less costs to sell, based on fair value or
disclosures about those measurements), except in specified circumstances. IFRS
13 is to be applied for annual periods beginning on or after January 1, 2013.
Earlier application is permitted. The Company is currently evaluating the
impact of this standard on its consolidated financial statements.
IFRS 7 Financial instruments: disclosures ("IFRS 7") The Accounting Standards
Board ("AcSB") approved the incorporation of the IASB`s amendments to IFRS 7
Financial Instruments: Disclosures and the related amendment to IFRS 1 First-
time Adoption of International Financial Reporting Standards into Part I of
the Handbook. These amendments were made to Part I in January 2011 and are
effective for annual periods beginning on or after July 1, 2011. Earlier
application is permitted. The amendments relate to required disclosures for
transfers of financial assets to help users of the financial statements
evaluate the risk exposures relating to such transfers and the effect of those
risks on an entity`s financial position. The Company is currently evaluating
the impact of IFRS 7 on its consolidated financial statements.
An amendment to IAS 1, Presentation of financial statements was issued by the
IASB in June 2011. The amendment requires separate presentation for items of
other comprehensive income that would be reclassified to profit or loss in the
future, such as foreign currency differences on disposal of a foreign
operation, if certain conditions are met from those that would never be
reclassified to profit or loss. The effective date is July 1, 2012 and earlier
adoption is permitted. The Company is currently evaluating the impact of this
amendment on its consolidated financial statements.
IAS 27, Separate financial statements ("IAS 27") was re-issued by the IASB in
May 2011 to only prescribe the accounting and disclosure requirements for
investments in subsidiaries, joint ventures and associates when an entity
prepares separate financial statements. The consolidation guidance will now be
included in IFRS 10. The amendments to IAS 27 are effective for annual periods
beginning on or after January 1, 2013. The Company is currently evaluating the
impact of the amendments on its consolidated financial statements.
IAS 28, Investments in associates and joint ventures ("IAS 28") was re-issued
by the IASB in May 2011.
IAS 28 continues to prescribe the accounting for investments in associates,
but is now the only source of guidance describing the application of the
equity method. The amended IAS 28 will be applied by all entities that have an
ownership interest with joint control of, or significant influence over, an
investee. The amendments to IAS 28 are effective for annual periods beginning
on or after January 1, 2013. The Company is currently evaluating the impact of
the amendments on its consolidated financial statements.
4. PROPERTY, PLANT AND EQUIPMENT
The Company`s property, plant and equipment are summarized as follows:
Notes
Exploration Computer
assets equipment
$ $
Cost
Balance at January 1, 2010 316,476 28,659
Additions - -
Disposals (207,371) -
Balance at December 31, 2010 109,105 28,659
Additions - -
Disposals - -
Balance at September 30, 2011 109,105 28,659
Accumulated Depreciation
Balance at January 1, 2010 216,384 19,478
Depreciation for the year 34,398 6,985
Disposals (142,578) -
Balance at December 31, 2010 108,204 26,463
Depreciation for the period 901 2,067
Disposals - -
Balance at September 30, 2011 109,105 28,530
Carrying amounts
Balance at January 1, 2010 100,092 9,181
Balance at December 31, 2010 901 2,196
Balance at September 30, 2011 - 129
Furniture
and
office
Vehicles equipment Total
$ $ $
Cost
Balance at January 1, 2010 254,436 18,106 617,677
Additions - - -
Disposals (94,323) (1,255) (302,949)
Balance at December 31, 2010 160,113 16,851 314,728
Additions - - -
Disposals - - -
Balance at September 30, 2011 160,113 16,851 314,728
Accumulated Depreciation
Balance at January 1, 2010 225,820 14,200 475,882
Depreciation for the year 28,616 2,686 72,685
Disposals (94,323) (1,040) (237,941)
Balance at December 31, 2010 160,113 15,846 310,626
Depreciation for the period - 1,005 3,973
Disposals - - -
Balance at September 30, 2011 160,113 16,851 314,599
Carrying amounts
Balance at January 1, 2010 28,616 3,906 141,794
Balance at December 31, 2010 - 1,005 4,100
Balance at September 30, 2011 - - 129
5. EXPLORATION AND EVALUATION ASSETS
The following table summarizes the Company`s tangible exploration and
evaluation expenditures with respect to its properties in the DRC:
Notes Tshikapa
Project Lubao
Cost
Balance per IFRS as at January 1, 2010 $ 2,901,003 $ 325,416
Additions 120,938 -
Impairment - (325,416)
Balance as at December 31, 2010 3,021,941 -
Additions 124,586 -
Balance as at September 30, 2011 3,146,527 -
Tshikapa Northern DRC
(Candore) Project Total
Cost
Balance per IFRS as at
January 1, 2010 $ 415,559 $ 2,184,105 $ 5,826,083
Additions - (131,744) (10,806)
Impairment (415,559) - (740,975)
Balance as at December 31, 2010 - 2,052,361 5,074,302
Additions - (545,059) (420,473)
Balance as at September 30, 2011 - 1,507,302 4,653,829
There are $2,219 of intangible exploration and evaluation expenditures
as at January 1, 2010 (December 31, 2010: $2,219).
There have not been any additions or disposals since January 1, 2010.
a. Tshikapa Project
The Tshikapa project is located in the south-western part of the Kasai
Occidental province of the DRC near the town of Tshikapa. The Tshikapa project
is located within the so-called Tshikapa triangle, bordering the Kasai River
in the east, the Loange River in the west and the Angolan border in the south.
The properties also lie within the broader kimberlite emplacement corridor
which extends from known kimberlite pipes located in Angola. The Tshikapa
diamond field has been extensively mined by alluvial diamond companies and
small-scale miners, and it is estimated that it has produced over 100 million
carats of diamonds since 1912. The Company has focused its attention on the
Tshikapa triangle through nine exploration permits covering an area of 1,429
kmSquared. One of these permits is held by the Company`s wholly-owned DRC
subsidiary and the other eight permits are controlled through option
agreements with the permit holders.
b. Northern DRC Project
The Company`s northern DRC diamond project is located in Orientale Province of
the DRC and consists of 46 exploration permits, two of which are held by the
Company directly through its DRC subsidiary and the balance of which are held
through an option agreement with the holder of the permits. Rio Tinto Mining
and Exploration Limited ("Rio Tinto") is also party to this agreement. Under
this agreement, funding for the exploration of the areas covered by the
permits is provided by Rio Tinto. Funds received from Rio Tinto under this
agreement are deducted from exploration and evaluation expenditures in the
Company`s statement of financial position. Assuming ongoing satisfactory
exploration results, the Company will acquire a 30% interest in the said
permits subject to certain conditions. The 44 exploration permits under option
cover an area of 7,313 km2.
The two additional exploration permits held by the Company`s DRC subsidiary
cover an area of 749 km2 directly north of the optioned ground.
During the year ended December 31, 2010, the Company decided to discontinue
its Lubao and Candore projects which resulted in an impairment loss of
$740,975.
c. In April 2011, the Company sold the containerized bulk sampling plant that
had been constructed for the alluvial deposits on the Kwango River in southern
DRC. The Kwango project had previously been abandoned by the Company and the
related licences relinquished when it was concluded that the project would not
be economically viable. The gross proceeds from the sale of the plant were
US$575,000.
6. SEGMENTED REPORTING
The Company has one operating segment: the acquisition, exploration and
development of mineral properties located in the DRC. The operations of the
Company are located in two geographic locations, Canada and the DRC. All of
the items of property, plant and equipment and exploration and evaluation
assets in the Company`s statements of financial position as at September 30,
2011, December 31, 2010 and January 1, 2010 are located in the DRC.
7. NOTES PAYABLE
In December 2010, the Company entered into two promissory notes payable (the
"Notes") in amounts of $100,000 and $300,000. The Notes bore simple interest
at a rate of 5% per annum and were unsecured and due on demand. The fair value
approximated the carrying value as at December 31, 2010. The notes were repaid
in May 2011 including accrued interest of $8,493.
8. SHARE CAPITAL
a) Authorized
The Company`s authorized share capital consists of an unlimited number of
common shares with no par value.
The holders of the common shares are entitled to receive notice of and to
attend all meetings of the shareholders of the Company and shall have one vote
for each common share held at all meetings of the shareholders of the Company.
The holders of the common shares are entitled to (a) receive any dividends as
and when declared by the board of directors, out of the assets of the Company
properly applicable to the payment of dividends, in such amount and in such
form as the board of directors may from time to time determine, and (b)
receive the remaining property of the Company in the event of any liquidation,
dissolution or winding-up of the Company.
On May 11, 2011 the Company closed a non-brokered private placement of
7,500,000 units of the Company at a price of $0.08 per unit for proceeds of
$600,000, and on May 27, 2011 the Company closed a non- brokered private
placement of 2,500,000 units of the Company at a price of $0.10 per unit for
proceeds of $250,000. Each of the said units was comprised of one common share
of the Company and one warrant of the Company entitling the holder to purchase
one common share of the Company at a price of $0.11 for a period of three
years from the date of issuance of the warrant. The purchasers of the units
under the May 27, 2011 private placement were directors and officers of the
Company.
In June 2011 the Company consolidated its outstanding common shares on a two
to one basis. Immediately prior to the consolidation, the Company had
99,408,640 common shares outstanding (December 31, 2010: 89,408,640, January
1, 2010: 89,408,640). Upon effecting the consolidation, and as of September
30, 2011, the Company had 49,704,341 common shares outstanding.
b) Share purchase warrants
The Company`s outstanding warrants have been adjusted to reflect the two to
one share consolidation that occurred in June 2011 (see Note 8a). As at
September 30, 2011, the Company had outstanding warrants to purchase
15,000,000 (December 31, 2010: 20,000,000) common shares of the Company. Of
the 15,000,000 warrants outstanding, 10,000,000 are exercisable at a price of
$0.132 per share until November 2013 and the remaining 5,000,000 are
exercisable at a price of $0.22 per share until May 2014.
c) Loss per share
Loss per share was calculated on the basis of the weighted average number of
common shares outstanding for the three and nine month periods ended September
30, 2011, amounting to 47,245,529 (three and nine months ended September 30,
2010: 89,408,640) common shares. Diluted loss per share was calculated using
the treasury stock method. Total stock options for the three and nine months
ended September 30, 2011 of 1,040,000 (three and nine months ended September
3, 2010: 2,280,000) and warrants of 15,000,000 (three and nine months ended
September 30, 2010: 20,000,000) were excluded from the calculation of diluted
loss per share as their effect would have been anti-dilutive.
9. SHARE-BASED PAYMENTS
In August 2011, the Company`s board of directors established a new stock
option plan for the Company (the "New Plan"). In establishing the New Plan,
the Board of Directors also provided that no additional stock options may be
granted under the Company`s other stock option plan (the "Old Plan") and
terminated the Old Plan effective upon the exercise, expiry, termination or
cancellation of all of the currently outstanding stock options that were
granted under the Old Plan.
Under the New Plan, non-transferable options to purchase common shares of the
Company may be granted by the Company`s Board of Directors to any director,
officer, employee or consultant of the Company or any subsidiary of the
Company. The New Plan contains provisions providing that the term of an option
may not be longer than ten years and the exercise price of an option shall not
be lower than the last closing price of the Company`s shares on the Toronto
Stock Exchange prior to the date the stock option is granted. Unless the Board
of Directors makes a specific determination otherwise, stock options granted
under the New Plan and all rights to purchase Company shares pursuant thereto
shall expire and terminate immediately upon the optionee who holds such stock
options ceasing to be at least one of a director, officer or employee of or
consultant to the Company or a subsidiary of the Company, as the case may be.
Stock options granted pursuant to the New Plan vest as follows: 75% of the
stock options vest on the 12 month anniversary of their grant date and the
remaining 25% of such stock options vest on the 18 month anniversary of their
grant date. The total number of common shares of the Company issuable upon the
exercise of all outstanding stock options granted under the New Plan shall not
at any time exceed 12% of the total number of outstanding common shares of the
Company, from time to time.
The Company`s outstanding stock options have been adjusted to reflect the two
to one share consolidation that was implemented by the Company in June 2011.
As at September 30, 2011, the Company had outstanding under the Old Plan stock
options to acquire 1,040,000 (December 31, 2010 - 2,280,000) common shares of
the Company at a weighted-average exercise price of $4.59 (December 31, 2010 -
$2.42) per share. There are currently no stock options outstanding under the
New Plan.
The following tables summarize information about stock options:
For the nine months ended September 30, 2011:
During the Period
Opening
Balance Granted Exercised Expired Forfeited
Exercise Price
Range (Cdn$)
2.10 - 5.00 800,000 - - - -
5.20 - 7.50 100,000 - - (100,000) -
7.52 - 16.00 240,000 - - - -
1,140,000 - - (100,000) -
Weighted Average
Exercise Price (Cdn$)** $ 2.42 $ - $ - $ 7.50 $ -
Weighted
average
remaining
Closing contractual
Balance life Vested &
(years) Exercisable Unvested
2.10 - 5.00 800,000 1.91 800,000 -
5.20 - 7.50 - - - -
7.52 - 16.00 240,000 0.64 240,000 -
1,040,000 1,040,000 -
Weighted Average
Exercise Price (Cdn$)** $ 4.59 $ 4.59 $ -
For the year ended December 31, 2010:
During the Period
Opening
Balance Granted Exercised Expired Forfeited
Exercise Price
Range (Cdn$)
1.05 -2.50 2,261,400 - - 466,400 195,000
2.60 - 3.75 200,000 - - - -
3.76 - 8.00 480,000 - - - -
2,941,400 - - 466,400 195,000
Weighted Average
Exercise Price
(Cdn$) $ 2.34 - - $ 1.76 $ 1.05
Weighted
average
Closing remaining Vested &
Balance contractual Exercisable Unvested
life
(years)
Exercise Price Range
(Cdn$)
1.05 -2.50 1,600,000 2.66 1,600,000 -
2.60 - 3.75 200,000 0.49 200,000 -
3.76 - 8.00 480,000 1.39 480,000 -
2,280,000 2,280,000 -
Weighted Average
Exercise Price (Cdn$) $ 2.42 - $ 2.42 -
For the nine months ended September 30, 2010:
During the Period
Opening
Balance Granted Exercised Expired
Exercise Price Range (Cdn$)
1.05 - 2.50 2,261,400 - - 466,400
2.60 - 3.75 200,000 - - -
3.76 - 8.00 480,000 - - -
2,941,400 - - 466,400
Weighted Average Exercise Price
(Cdn$) $ 2.34 - - $ 2.47
Weighted
average
Closing remaining Vested &
Balance contractual Exercisable Unvested
life
(years)
Exercise Price Range
(Cdn$)
1.05 - 2.50 1,795,000 2.11 1,795,000 -
2.60 - 3.75 200,000 0.75 200,000 -
3.76 - 8.00 480,000 0.40 480,000 -
2,475,000 3.25 2,475,000 -
Weighted Average
Exercise Price
(Cdn$) $ 2.31 $ 2.31 -
The fair value at grant date is determined using a Black-Scholes option
pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the
risk free interest rate for the term of the option.
The expected price volatility is based on the historic volatility (based on
the remaining life of the options), adjusted for any expected changes to
future volatility due to publicly available information. During the three and
nine month periods ended September 30, 2011, the Company recognized in the
statement of comprehensive loss as an expense $nil (three and nine months
ended September 30, 2010 $nil and $132,000 respectively) representing the fair
value at the date of grant of stock options previously granted to employees,
directors and officers under the Company`s Stock Option Plan. The weighted
average fair value of stock options issued was estimated at $1.87 per share
option at the grant date using the Black-Scholes option-pricing model. In
addition, an amount of $nil for the nine month period ended September 30, 2011
(year ended December 31, 2010: $8,893) related to stock options issued to
employees of the Company`s subsidiary in the DRC was capitalized to
exploration and evaluation assets.
These amounts were credited accordingly to contributed surplus in the
consolidated statements of financial position.
Replacement options
In connection with the acquisition by the Company of all of the outstanding
shares of Diamond Core Resources Limited ("Diamond Core") on February 11,
2008, 617,710 (the "Replacement Options") stock options were issued by the
Company to employees of Diamond Core to substitute for their stock options in
Diamond Core. Diamond Core was subsequently disposed of by the Company. As at
September 30, 2011, there were 70,752 Replacement Options outstanding
(December 31, 2010: 141,503).
10. RELATED PARTY TRANSACTIONS
a) Key Management Remuneration
The Company`s related parties include key management. Key management includes
executive directors and non-executive directors. The remuneration of the key
management of the Company as defined above, during the three and nine months
ended September 30, 2011 and 2010 was as follows:
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2011 2010 2011 2010
Salaries $ 153,675 $ 114,240 $ 200,305 $ 205,933
$ 153,675 $ 114,240 $ 200,305 $ 205,933
b) Other Related Parties
During the three and nine month periods ended September 30, 2011, legal
expenses of $8,610 and $29,739 (three and nine month periods ended September
30, 2010: $14,808 and $95,176), incurred in connection with general corporate
matters, were paid to a law firm of which a director and officer of the
Company was a partner until February 2011. As at September 30, 2011, $54,380
(December 31, 2010 - $90,778) owing to this legal firm was included in
accounts payable.
As at September 30, 2011, an amount of $83,334 was owed to two directors of
the Company representing consulting fees (December 31, 2010: $102,311). During
the three and nine month periods ended September 30, 2011, consulting fees of
$50,000 and $150,000, respectively were incurred to the two directors (three
and nine month periods ended September 30, 2010: $50,000 and $150,000
respectively to the two directors).
As at September 30, 2011, an amount of $11,660 (December 31, 2010: $3,719) was
owed to Banro Corporation ("Banro"). During the three and nine months ended
September 30, 2011, common expenses in the Congo were incurred in the amounts
of $nil and $7,941. Banro owns 17,716,994 common shares of the Company,
representing a 35.65% interest in the Company. During the year ended December
31, 2010, a drill rig was sold to Banro by the Company for gross proceeds of
$154,964.
On May 27, 2011 the Company closed a non-brokered private placement of
2,500,000 units of the Company at a price of $0.10 per unit for proceeds of
$250,000. The purchasers of the units under this private placement were
directors and officers of the Company (see Note 8a).
All amounts due to related parties are unsecured, non-interest bearing and due
on demand. All transactions are in the normal course of operations and are
measured at the exchange value.
11. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
a) Fair value of financial assets and liabilities
The consolidated statements of financial position carrying amounts for cash
and cash equivalents, prepaid expenses and other assets, accounts payable and
accrued liabilities and notes payable approximate fair value due to their
short-term nature. Due to the use of subjective judgments and uncertainties in
the determination of fair values these values should not be interpreted as
being realizable in an immediate settlement of the financial instruments.
The following presents the fair value and carrying value of the Company`s
financial instruments:
Classification Measurement 30-Sep-11
Financial assets
Cash and cash equivalents Held-for-
Trading Fair value $221,574
Loans and Amortized
Prepaid expenses and other receivables cost
assets 34,334
Financial liabilities
Accounts payable and accrued Amortized
liabilities Other liabilities cost $525,145
Notes payable Other liabilities Amortized
cost -
Amortized
Taxes payable Other liabilities cost -
Due to related parties Amortized
Other liabilities cost 94,994
Classification Measurement 31-Dec-10
Financial assets
Cash and cash equivalents Held-for-
Trading Fair value $126,931
Loans and Amortized
Prepaid expenses and other receivables cost
assets 21,713
Financial liabilities
Accounts payable and accrued Amortized
liabilities Other liabilities cost $834,176
Notes payable Other liabilities Amortized
cost 400,493
Amortized
Taxes payable Other liabilities cost 6,127
Due to related parties Amortized
Other liabilities cost 106,029
Fair value hierarchy
The following provides a description of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
- Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
- Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
- Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
There were no transfers between Level 1 and 2 during the reporting period. The
fair values of financial assets and liabilities carried at amortized cost are
approximated by their carrying values.
Cash is ranked Level 1 as the market value is readily observable. The carrying
value of cash approximates fair value as maturities are less than three
months. Notes payable is ranked level 2 as it is based on similar loans in the
market.
Risk Management Policies
The Company is sensitive to changes in commodity prices and foreign-exchange.
The Company`s Board of Directors has overall responsibility for the
establishment and oversight of the Company`s risk management framework.
Although the Company has the ability to address its price-related exposures
through the use of options, futures and forward contacts, it does not
generally enter into such arrangements.
b) Foreign Currency Risk
Foreign currency risk is the risk that a variation in exchange rates between
the Canadian dollar and United States dollar or other foreign currencies will
affect the Company`s operations and financial results. A portion of the
Company`s transactions are denominated in United States dollars, Congolese
francs and South African rand. The Company is also exposed to the impact of
currency fluctuations on its monetary assets and liabilities. The Company`s
functional currency is the Canadian dollar. The majority of major expenditures
are transacted in US dollars. The Company maintains the majority of its cash
in Canadian dollars but it does hold balances in US dollars. Significant
foreign exchange gains or losses are reflected as a separate component of the
consolidated statement of comprehensive loss. The Company does not use
derivative instruments to reduce its exposure to foreign currency risk.
c) Credit Risk
Financial instruments which are potentially subject to credit risk for the
Company consist primarily of cash. Cash is maintained with several financial
institutions of reputable credit in Canada, the DRC and South Africa and may
be redeemed upon demand. It is therefore the Company`s opinion that such
credit risk is subject to normal industry risks and is considered minimal.
d) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they become due. The Company attempts to ensure that
there is sufficient cash to meet its liabilities when they are due and manages
this risk by regularly evaluating its liquid financial resources to fund
current and long-term obligations and to meet its capital commitments in a
cost-effective manner. The key to success in managing liquidity is the degree
of certainty in the cash flow projections. If future cash flows are fairly
uncertain, the liquidity risk increases. The Company`s liquidity requirements
are met through a variety of sources, including cash, existing credit
facilities and equity capital markets. In light of market conditions, the
Company initiated a series of measures to bring its spending in line with the
projected cash flows from its operations and available project specific
facilities in order to preserve its financial position and maintain its
liquidity position.
e) Mineral Property Risk
The Company`s operations in the DRC are exposed to various levels of political
risk and uncertainties, including political and economic instability,
government regulations relating to exploration and mining, military repression
and civil disorder, all or any of which may have a material adverse impact on
the Company`s activities or may result in impairment in or loss of part or all
of the Company`s assets.
f) Market Risk
Market risk is the potential for financial loss from adverse changes in
underlying market factors, including foreign-exchange rates, commodity prices,
interest rates and stock based compensation costs.
The Company manages the market risk associated with commodity prices by
establishing and monitoring parameters that limit the types and degree of
market risk that may be undertaken.
g) Interest rate risk
Interest rate risk is the potential impact on any Company earnings due to
changes in bank lending rates and short term deposit rates. The Company is not
exposed to significant interest rate risk other than cash flow interest rate
risk on its cash. The Company does not use derivative instruments to reduce
its exposure to interest rate risk. A fluctuation of interest rates of 1%
would not affect significantly the fair value of cash.
h) Title risk
Title to mineral properties involves certain inherent risks due to the
difficulties of determining the validity of certain claims as well as the
potential for problems arising from the frequently ambiguous conveyancing
history characteristic of many mining properties. Although the Company has
investigated title to all of its mineral properties for which it holds
concessions or other mineral licenses, the Company cannot give any assurance
that title to such properties will not be challenged or impugned and cannot be
certain that it will have valid title to its mineral properties. The Company
relies on title opinions by legal counsel who base such opinions on the laws
of countries in which the Company operates.
i) Country risk
The DRC is a developing country and as such, the Company`s exploration
projects in the DRC could be adversely affected by uncertain political or
economic environments, war, civil or other disturbances, and a changing fiscal
regime and by DRC`s underdeveloped industrial and economic infrastructure. The
Company`s operations in the DRC may be effected by economic pressures on the
DRC. Any changes to regulations or shifts in political attitudes are beyond
the control of the Company and may adversely affect its business. Operations
may be affected in varying degrees by factors such as DRC government
regulations with respect to foreign currency conversion, production, price
controls, export controls, income taxes or reinvestment credits, expropriation
of property, environmental legislation, land use, water use and mine safety.
There can be no assurance that policies towards foreign investment and profit
repatriation will continue or that a change in economic conditions will not
result in a change in the policies of the DRC government or the imposition of
more stringent foreign investment restrictions. Such changes cannot be
accurately predicted.
j) Capital Management
The Company manages its cash, common shares, warrants and stock options as
capital. The Company`s main objectives when managing its capital are:
- to maintain a flexible capital structure which optimizes the cost of capital
at acceptable risk while providing an appropriate return to its shareholders;
- to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development of the business;
- to safeguard the Company`s ability to obtain financing; and
- to maintain financial flexibility in order to have access to capital in the
event of future acquisitions.
The Company manages its capital structure and makes adjustments to it in
accordance with the objectives stated above, as well as responds to changes in
economic conditions and the risk characteristics of the underlying assets.
There were no significant changes to the Company`s approach to capital
management during the nine month period ended September 30, 2011.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
September 30, 2011 December 31, 2010
Cash and cash equivalents $ 221,574 $ 126,931
Share capital $ 116,283,812 $ 115,457,876
Deficit $ (119,822,117) $ (119,405,686)
12. SUPPLEMENTAL CASH FLOW INFORMATION
During the periods indicated the Company undertook the following significant
non-cash transactions:
Three months ended
Note September 30, September 30,
2011 2010
Depreciation included in
exploration and evaluation assets 5 $ 511 $ 11,115
Stock-based compensation
included in exploration and
evaluation assets 9 $ - $ 40,126
Interest paid $ - $ -
Taxes paid $ - $ 6,459
Nine months ended
September 30, September 30,
2011 2010
Depreciation included in
exploration and evaluation assets $ 3,973 $ 66,562
Stock-based compensation included in
exploration and evaluation assets $ - $ 40,126
Interest paid $ - $ -
Taxes paid $ 6,127 $ 6,459
13. COMMITMENTS AND CONTINGENCIES
The Company is committed to the payment of surface fees and taxes. For the
year ended December 31, 2011, these fees and taxes are estimated to be
$127,981 (US$ 132,000) compared to $109,409 (US$ 110,000) incurred in the year
ended December 31, 2010. The surface fees and taxes are required to be paid
annually under the DRC Mining Code in order to keep exploration permits in
good standing.
Six of the exploration permits comprising part of the Company`s Tshikapa
project in the DRC are held through an option agreement with Acacia SPRL.
Acacia SPRL has advised the Company of its wish to modify the option
agreement. The Company continues its discussions with Acacia SPRL and is
optimistic of reaching an agreement that is satisfactory for both parties.
In addition to the above matters, the Company and its subsidiaries are also
subject to routine legal proceedings and tax audits. The Company does not
believe that the outcome of any of these matters, individually or in
aggregate, would have a material adverse effect on its consolidated losses,
cash flow or financial position.
Labour disputes
The Company is in dispute with two of its previous directors and officers. One
of the individuals had applied in 2008 for a summary judgment against the
Company in the Witwatersrand Local Division of the High Court of South Africa
in respect of a dispute relating to a settlement agreement pertaining to his
departure. The application for summary judgment was dismissed and the Company
was granted leave to defend the claim. This individual has not taken further
steps to progress that matter. However, in October 2010, almost two years
after the original claim, the same former director and officer instituted
fresh proceedings against the Company. He has repeated the claim made
previously, but this time in a summons lodged before the North Gauteng High
Court in South Africa. This former director and officer is claiming he is owed
payment of 1.2 million South African rand plus interest. The other individual
has referred two disputes to the Commission for Conciliation Mediation and
Arbitration in Johannesburg, South Africa and an action to the High Court in
that same jurisdiction. He elected to withdraw an application for summary
judgment. The Company is defending all these actions.
14. FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
IFRS 1, First Time Adoption of International Financial Reporting Standards,
requires that comparative financial information be provided. As a result, the
first date at which the Company has applied IFRS was January 1, 2010. IFRS 1
requires first-time adopters to retrospectively apply all effective IFRS
standards as of the reporting date, which for the Company will be December 31,
2011. However, it also provides for certain optional exemptions and certain
mandatory exceptions for first-time IFRS adoption. Prior to transition to
IFRS, the Company prepared its financial statement in accordance with Canadian
GAAP.
In preparing the Company`s opening IFRS consolidated statements of financial
position, the Company has adjusted amounts reported previously in the
financial statements prepared in accordance with previous Canadian GAAP. The
IFRS 1 applicable exemptions and exceptions applied in the conversion from
Canadian GAAP to IFRS are as follows:
a) Share-based payment transactions
The Company has elected not to retrospectively apply IFRS 2 to equity
instruments that were granted and that vest before the transition date. As a
result of applying this exemption, the Company has applied the provision of
IFRS 2 to all outstanding equity instruments that were unvested prior to the
date of transition to IFRS.
b) Deemed Cost of Exploration and Evaluation Assets
The Company has elected not to retrospectively apply IFRS 36 to the previous
impairments that have been recorded by the Company. Per IFRS 1, the Company
has taken an election to deem all exploration and evaluation assets at cost.
c) Estimates
The estimates previously made by the Company under Canadian GAAP were not
revised for the application of IFRS except where necessary to reflect any
difference in accounting policy or where there was objective evidence that
those estimates were in error. As a result, the Company has not used hindsight
to create or revise estimates.
IFRS employs a conceptual framework that is similar to Canadian GAAP. However
significant differences exist in certain matters of recognition, measurement
and disclosure. While the adoption has not changed the Company`s actual cash
flows, it has resulted in changes to the Company`s consolidated statement of
financial position and statement comprehensive loss. The statements of
comprehensive loss have been changed to comply with IAS 1 Presentation of
Financial Statements. The Canadian GAAP consolidated balance sheets as at
January 1, 2010 and December 31, 2010, the consolidated statements of
operations and other comprehensive loss for the three and nine month periods
ended September 30, 2010 as well as the consolidated statement of cash flows
for the three and nine month periods September 30, 2010 have been reconciled
to IFRS, with a summary of the most significant changes in share-based
payments as follows:
a) Share Based Payments
Under IFRS 2 Share Based Payments, each tranche of an award with different
graded vesting is accounted for as a separate award and the resulting fair
value is amortized over the vesting period of the respective tranches. Under
Canadian GAAP, the Company was accounting for these as a single award. In
addition, under IFRS 2, the Company is required to estimate the number of
forfeitures likely to occur on grant date and reflect this in the share-based
payment expense revising for actual experiences in subsequent periods. Under
Canadian GAAP, forfeitures were recognized as they occurred.
The impact of adjustments relates to share based payments on the Company`s
consolidated statement of financial position is as follows:
December 31, 2010 September 30, 2010 January 1, 2010
$ $ $
Exploration and evaluation (739) (739) 17,248
(739) (739) 17,248
Contributed surplus (3,156) (3,156) 73,715
Deficit 2,417 2,417 (56,467)
(739) (739) 17,248
The Canadian GAAP consolidated balance sheet as at January 1, 2010 has been
reconciled to IFRS as follows:
January 1, 2010
Effect of
Notes Canadian GAAP Transition IFRS
to IFRS
Assets
Current Assets
Cash and cash equivalents $ 664,495 $- $ 664,495
Prepaid expenses and
other assets 163,175 - 163,175
Total Current Assets 827,670 - 827,670
Non-Current Assets
Capital assets 141,794 - 141,794
Mineral properties and
deferred exploration
expenditures 5,808,835 17,248 5,826,083
Total Non-Current
Assets 5,950,629 17,248 5,967,877
Total Assets 6,778,299 17,248 6,795,547
Liabilities and
Shareholders` Equity
Current Liabilities
Accounts payable and
accrued liabilities 1,027,172 - 1,027,172
Accrued liabilities 377,884 - 377,884
Total Current
Liabilities 1,405,056 - 1,405,056
Non-current
Future tax liability 57,030 - 57,030
Shareholders` Equity
Share capital 115,457,876 - 115,457,876
Contributed surplus 7,700,518 73,715 7,774,233
Deficit (117,842,181) (56,467) (117,898,648)
Total Shareholders`
Equity 5,316,213 17,248 5,333,461
Total Liabilities and
Shareholders` Equity 6,778,299 17,248 6,795,547
The Canadian GAAP consolidated balance sheet as at September 30, 2010 has been
reconciled to IFRS as follows:
September 30, 2010
Notes Effect of
Transition to
Canadian GAAP IFRS IFRS
Assets
Current Assets
Cash $ 90,030 $ - $ 90,030
Prepaid expenses
and other assets 130,371 - 130,371
Total Current
Assets 220,401 - 220,401
Non-Current Assets
Property, plant and equipment 10,438 - 10,438
Mineral properties and deferred
exploration expenditures 5,789,841 (739) 5,789,102
Total Non-Current
Assets 5,800,279 (739) 5,799,540
Total Assets 6,020,680 (739) 6,019,941
Liabilities and
Shareholders` Equity
Current Liabilities
Bank indebtedness - - -
Accounts payable and accrued
liabilities 906,747 - 906,747
Due to related parties 214,206 - 214,206
Total Current
Liabilities 1,120,953 - 1,120,953
Non-current
Future tax liability 57,030 - 57,030
Total Liabilities 1,177,983 - 1,177,983
Shareholders` Equity
Capital stock 115,457,876 - 115,457,876
Contributed surplus 7,872,644 (3,156) 7,869,488
Deficit (118,487,823) 2,417 (118,485,406)
Total Shareholders` Equity 4,842,697 (739) 4,841,958
Total Liabilities and
Shareholders` Equity 6,020,680 (739) 6,019,941
The Canadian GAAP consolidated balance sheet as at December 31, 2010 has been
reconciled to IFRS as follows:
December 31, 2010
Effect of
Notes Canadian GAAP Transition to IFRS
IFRS
Assets
Current Assets
Cash $ 126,931 $ - $ 126,931
Prepaid expenses
and other current assets 21,713 - 21,713
Total Current
Assets 148,644 - 148,644
Non-Current Assets
Capital assets 4,100 - 4,100
Mineral properties and
deferred exploration
expenditures 5,075,041 (739) 5,074,302
Total Non-Current
Assets 5,079,141 (739) 5,078,402
Total Assets 5,227,785 (739) 5,227,046
Liabilities and
Shareholders` Equity
Current Liabilities
Accounts payable and
accrued liabilities 834,176 - 834,176
Note payable 400,493 - 400,493
Taxes payable 6,127 - 6,127
Due to related parties 106,029 - 106,029
Total Current
Liabilities 1,346,825 - 1,346,825
Non-current
Future income tax liabilities 15,789 - 15,789
Shareholders` Equity
Capital stock 115,457,876 - 115,457,876
Contributed surplus 7,815,398 (3,156) 7,812,242
Deficit (119,408,103) 2,417 (119,405,686)
Total Shareholders` Equity 3,865,171 (739) 3,864,432
Total Liabilities and
Shareholders` Equity 5,227,785 (739) 5,227,046
The Canadian GAAP consolidated statements of operations and other
comprehensive loss for the three and nine month periods ended September 30,
2010 have been reconciled to IFRS as follows:
Three Months Ended September 30, 2010
Notes
Effect of
Transition
Canadian GAAP to IFRS IFRS
Expenses
Professional fees and
consulting fees $ 191,361 $ - $ 191,361
General and administrative 67,762 - 67,762
Share based payments - - -
Foreign exchange (gain) loss 1,010 - 1,010
Loss from operations (260,133) - (260,133)
Loss for the period (260,133) - (260,133)
Comprehensive loss for the period $ (260,133) $ - $ (260,133)
Loss per share, basic and diluted 0.00 - 0.00
Nine Months Ended September 30, 2010
Notes
Effect of
Transition
Canadian GAAP to IFRS IFRS
Expenses
Professional fees and
consulting fees $ 335,954 $ - $ 335,954
General and administrative 174,318 - 174,318
Share based payments 132,000 (58,884) 73,116
Foreign exchange (gain) loss 3,370 - 3,370
Loss from operations (645,642) (58,884) (586,758)
Loss for the period (645,642) - (586,758)
Comprehensive loss for the period $ (645,642) $ - $ (586,758)
Loss per share, basic and diluted - 0.01 - - 0.01
The Canadian GAAP consolidated statements of operations and other
comprehensive loss for the year ended December 31, 2010 have been reconciled
to IFRS as follows:
Year Ended December 31, 2010
Notes
Effect of Transition
Canadian GAAP to IFRS IFRS
Expenses
Consulting, management
and professional fees $ 447,319 $- $ 447,319
General and
administrative 209,778 - 209,778
Share based payments 88,000 (58,884) 29,116
Foreign exchange (loss)
gain unrealized 3,356 - 3,356
Impairment of mineral
properties and deferred
exploration expenditures 740,975 - 740,975
Bad debt expense 105,009 - 105,009
Loss from operations (1,594,437) (58,884) (1,535,553)
Income tax recovery 28,515 - 28,515
Loss for the period (1,565,922) - (1,507,038)
Comprehensive loss for
the period $ (1,565,922) $- $ (1,507,038)
Loss per share, basic
and diluted (0.02) - (0.02)
The Canadian GAAP reconciliation to IFRS of the consolidated statements of
cash flows for the three and nine month periods September 30, 2010 is as
follows:
Three months ended September 30, 2010
Effect of
Transition to
Notes Canadian GAAP IFRS IFRS
Cash flows from
operating activities
Net loss for the period $ (260,133) $
(260,133)
Adjustments to reconcile
loss to net cash used in
operating activities
Share based payments - -
Changes in non-cash working capital
Prepaid expenses and other assets (3,802) - (3,802)
Accounts payable and
accrued liabilities 25,648 - 25,648
Net cash flows from
operating activities (238,287) - (238,287)
Cash flows from
investing activities
Deferred Exploration expenditures 225,425 - 225,425
Net cash used in investing
activities 225,425 - 225,425
Cash flows from financing
activities
Due to related parties 95,695 - 95,695
Net cash (used in) /
from financing activities 95,695 - 95,695
Net increase (decrease) in cash
during the period 82,833 - 82,833
Cash, beginning of the period 7,197 - 7,197
Cash, end of the period $ 90,030 $ - $ 90,030
Nine months ended September 30, 2010
Effect of
Transition to
Notes Canadian GAAP IFRS IFRS
Cash flows from
operating activities
Net loss for the period $ (645,642) $ 58,884 $ (586,758)
Adjustments to reconcile
loss to net cash used in
operating activities
Share based payments 132,000 (58,884) 73,116
(513,642) - (513,642)
Changes in non-cash
working capital -
Prepaid expenses and
other assets 32,804 - 32,804
Accounts payable and
accrued liabilities (120,425) - (120,425)
Net cash flows from
operating activities (601,263) - (601,263)
Cash flows from investing
activities
Deferred Exploration expenditures 190,476 - 190,476
Net cash used in
investing activities 190,476 - 190,476
Cash flows from financing
activities
Due to related parties (163,678) - (163,678)
Net cash (used in) /
from financing activities (163,678) - (163,678)
Net increase (decrease) in cash
during the period (574,465) - (574,465)
Cash, beginning of the period 664,495 - 664,495
Cash, end of the period $ 90,030 $ - $ 90,030
The Canadian GAAP reconciliation to IFRS of the consolidated statement of cash
flows for the year ended December 31, 2010 is as follows:
Year ended December 31, 2010
Effect of
Transition to
Notes Canadian GAAP IFRS IFRS
Cash flows from
operating activities
Net loss for the period $ (1,565,922) $ 58,884 $ (1,507,038)
Adjustments to reconcile
loss to net cash used
in operating activities
Impairment of properties 740,975 - 740,975
Share based payments 88,000 (58,884) 29,116
Accrued interest expense 493 - 493
Bad debt expense 105,009 - 105,009
Provision for taxes (28,515) - (28,515)
Changes in non-cash
working capital-
Prepaid expenses
and other current assets 36,453 - 36,453
Accounts payables and
accrued liabilities (192,996) - (192,996)
Taxes payable (6,598) - (6,598)
Net cash flows from
operating activities (823,101) - (823,101)
Cash flows from
investing activities
Proceeds from disposal
of capital asset 64,794 - 64,794
Expenditures on exploration
and evaluation (338,757) - (338,757)
Funds received from Rio Tinto 431,355 - 431,355
Net cash used in investing
activities 157,392 - 157,392
Cash flows from financing
activities
Due to related parties (271,855) - (271,855)
Notes payable 400,000 - 400,000
Net cash (used in)
/ from financing activities 128,145 - 128,145
Effect of foreign exchange
on cash held in foreign currency - -
Net increase (decrease) in cash
during the period (537,564) - (537,564)
Cash, beginning of the period 664,495 - 664,495
Cash, end of the period $ 126,931 $ - $ 126,931
The Canadian GAAP reconciliation to IFRS of the consolidated statement of
changes in equity as at January 1, 2010 is as follows:
January 1, 2010
Notes Effect of
Transition to
Canadian GAAP IFRS IFRS
Common Shares
Amount $ 115,457,876 $ - $ 115,457,876
Contributed Surplus 7,700,518 73,715 7,774,233
Deficit (117,842,181) (56,467) (117,898,648)
Total Shareholder`s Equity $ 5,316,213 $ 17,248 $ 5,333,461
The Canadian GAAP reconciliation to IFRS of the consolidated statement of
changes in equity for the nine months ended September 30, 2010 is as follows:
Nine months ended September 30, 2010
Notes Effect of
Transition to
Canadian GAAP IFRS IFRS
Common Shares
Amount $ 115,457,876.00 $ - $115,457,876
Contributed Surplus 7,872,644 (3,156) 7,869,488
Deficit (118,487,823) 2,417 (118,485,406)
Total Shareholder`s Equity $ 4,842,697 $ (739) $ 4,841,958
The Canadian GAAP reconciliation to IFRS of the consolidated statement of
changes in equity for the year ended December 31, 2010 is as follows:
December 31, 2010
Notes Effect of
Transition
Canadian GAAP to IFRS IFRS
Common Shares
Amount $ 115,457,876.00 $ $ 115,457,876
Contributed Surplus 7,815,398 (3,156) 7,812,242
Deficit (119,408,103) 2,417 (119,405,686)
Total
Shareholder`s Equity $ 3,865,171 $ (739) $ 3,864,432
Date: 18/11/2011 10:37:01 Supplied by www.sharenet.co.za
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