Wrap Text
Interim Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2012
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 (UNAUDITED)
September 30, 2012
(Expressed in Canadian dollars)
NOTICE TO READER
These interim condensed consolidated financial statements of Delrand Resources Limited (the
“Company”) as at and for the three month period ended September 30, 2012 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.
Page 2 of 17
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2012
CONTENTS
Interim Condensed Consolidated Statements of Financial Position................................................................. 4
Interim Condensed Consolidated Statements of Comprehensive Loss................................................................. 5
Interim Condensed Consolidated Statements of Changes in Equity.................................................................. 6
Interim Condensed Consolidated Statements of Cash Flow.......................................................................... 7
1. Corporate Information and Continuation of the Business....................................................................... 8
2. Basis of Preparation ........................................................................................................ 8
3. Summary of Significant Accounting Policies .................................................................................. 8
4. Investment in Associate...................................................................................................... 9
5. Exploration and Evaluation Assets .......................................................................................... 10
6. Related Party Transactions.................................................................................................. 11
7. Share Capital .............................................................................................................. 12
8. Share-Based Payments ....................................................................................................... 12
9. Segmented Reporting ........................................................................................................ 14
10. Financial Risk Management Objectives and Policies ......................................................................... 14
11. Supplemental Cash Flow Information ........................................................................................ 17
12. Commitments and Contingencies ............................................................................................. 17
Page 3 of 17
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian dollars) (unaudited)
As at Notes September 30, 2012 June 30, 2012
$ $
Assets
Current Assets
Cash 97,837 440,655
Other receivables 5b 27,530 -
Prepaid expenses and other assets 27,122 54,472
Total Current Assets 152,489 495,127
Non-Current Assets
Exploration and evaluation 5 5,136,509 5,165,687
Total Non-Current Assets 5,136,509 5,165,687
Total Assets 5,288,998 5,660,814
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 522,908 645,575
Income taxes payable 5,420 16,496
Due to related parties 6 90,280 254,119
Total Current Liabilities
618,608 916,190
Non-current
Income taxes payable 16,260 16,260
Total Liabilities 634,867 932,450
Shareholders' Equity
Share capital 7 116,339,566 116,339,566
Contributed surplus 8,159,644 8,159,644
Deficit (119,845,080) (119,770,846)
Total Shareholders' Equity 4,654,130 4,728,364
Total Liabilities and Shareholders' Equity
5,288,998 5,660,814
Common shares
Authorized Unlimited Unlimited
Issued and outstanding 7a 52,734,643 52,734,643
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 4 of 17
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian dollars) (unaudited)
Notes Three months ended Three months ended
September 30, 2012 September 30, 2011
(Note 2a) (Note 2a)
$ $
Expenses
Consulting and professional fees 27,607 31,467
General and administrative 40,267 48,223
Foreign exchange loss (gain) 6,360 (10,478)
Loss from operations before other income and income taxes (74,234) (69,212)
Other income - -
Loss before income taxes (74,234) (69,212)
Income tax expense - -
Net loss and comprehensive loss for the period (74,234) (69,212)
Basic and diluted loss per share 7c (0.00) (0.00)
Adjustments for headline loss per share 7c - -
Headline loss per share 7c (0.00) (0.00)
Weighted average number of common shares outstanding 52,734,643 47,245,529
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 5 of 17
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian dollars) (unaudited)
Common shares
Contributed Total Shareholders'
Notes Number of shares Deficit
Amount Surplus equity
(Note 8)
Balance at January 1, 2011 44,704,320 115,457,876 7,815,398 (119,408,103) 3,865,171
Net loss for the year - - - (123,314) (123,314)
Share issuance (net of costs) 5,000,000 481,690 - - 481,690
Warrant issuance (net of costs) - - 344,246 - 344,246
Fractional shares due to consolidation 21 - - - -
Balance at December 31, 2011 49,704,341 115,939,566 8,159,644 (119,531,417) 4,567,793
Net loss for the period - - - (239,429) (239,429)
Warrant exercise 3,030,302 400,000 - - 400,000
Balance at June 30, 2012 52,734,643 116,339,566 8,159,644 (119,770,846) 4,728,364
Net loss for the period - - - (74,234) (74,234)
Balance at September 30, 2012 52,734,643 116,339,566 8,159,644 (119,845,080) 4,654,130
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 6 of 17
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Expressed in Canadian dollars) (unaudited)
Three months ended Three months ended
September 30, 2012 September 30, 2011
Notes (Note 2a) (Note 2a)
$ $
Cash flows from operating activities
Net loss for the period (74,234) (69,212)
Changes in non-cash working capital
Prepaid expenses and other assets 27,350 77
Other receivable (27,530) -
Taxes payable (11,076) -
Accounts payable and accrued liabilities (122,668) (69,501)
Net cash flows used in operating activities (208,158) (138,636)
Cash flows from investing activities
Expenditures on exploration and evaluation (152,381) (61,897)
Funds received from Rio Tinto 181,560 36,775
Net cash (used in) provided by investing activities 29,179 (25,122)
Cash flows from financing activities
Due to related parties (163,839) 45,380
Net cash provided by financing activities (163,839) 45,380
Net increase (decrease) in cash during the period (342,818) (118,378)
Cash, beginning of the period 440,655 339,952
Cash, end of the period 97,837 221,574
Supplemental cash flow information (Note 11)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 7 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
1. CORPORATE INFORMATION AND CONTINUATION OF THE BUSINESS
Corporate Information
The principal business of Delrand Resources Limited (“Delrand” or the “Company”) is the acquisition and exploration of
mineral properties in the Democratic Republic of the Congo (“the DRC”).
These interim condensed consolidated financial statements as at and for the three months ended September 30, 2012 include
the accounts of the Company and of its wholly-owned subsidiaries incorporated in the DRC, Delrand Resources 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 Street West, Suite 707O, Toronto, Ontario, M5X 1E3, Canada.
Continuation of the business
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 $74,234 during the three months ended September 30, 2012 and, as of that date, the Company’s deficit
was $119,845,080. 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.
2. BASIS OF PREPARATION
a) Statement of compliance
These interim condensed consolidated financial statements as at and for the three months ended September 30, 2012,
including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim
Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards
(“IFRS”) issued by the International Accounting Standards Board (“IASB”). Accordingly, certain information and footnote
disclosure normally included in the annual financial statements prepared in accordance with IFRS, have been omitted or
condensed.
b) Basis of measurement
These interim condensed consolidated financial statements have been prepared on a going concern basis, under the
historical cost convention, except for certain financial assets and liabilities which are presented at fair value.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim condensed consolidated financial statements have been prepared using the same accounting policies and
methods of computation as the consolidated financial statements of Delrand for the six month period ended June 30, 2012.
The disclosure contained in these interim condensed consolidated financial statements does not include all the requirements
in IAS 1 Presentation of Financial Statements (“IAS 1”). Accordingly, these interim condensed consolidated financial
statements should be read in conjunction with the Company’s consolidated financial statements for the six month period
ended June 30, 2012.
Page 8 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
The accounting policies set out below have been applied consistently to all periods presented in these interim condensed
consolidated financial statements.
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 interim condensed
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 wholly-owned subsidiaries.
ii. Associate
Where the Company has the power to significantly influence but not control the financial and operating policy
decisions of another entity, it is classified as an associate. Associates are initially recognized in the consolidated
statements of financial position at cost and adjusted thereafter for the post-acquisition changes in the Company’s
share of the net assets of the associate, under the equity method of accounting. The Company's share of post-
acquisition profits and losses is recognized in the consolidated statement of comprehensive loss, except that losses
in excess of the Company's investment in the associate are not recognized unless there is a legal or constructive
obligation to recognize such losses. If the associate subsequently reports profits, the Company’s share of profits is
recognized only after the Company’s share of the profits equals the share of losses not recognized.
Profits and losses arising on transactions between the Company and its associates are recognized only to the extent
of unrelated investor’s interests in the associate. The investor's share in the associate's profits and losses resulting
from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Company's share of the identifiable assets, liabilities
and contingent liabilities acquired is capitalized and included in the carrying amount of the Company’s investment in
an associate. Where there is objective evidence that the investment in an associate has been impaired, the carrying
amount of the investment is tested for impairment in the same way as other non-financial assets.
iii. Transactions eliminated on consolidation
Inter-company balances, transactions, and any unrealized income and expenses, are eliminated in preparing the
interim condensed consolidated financial statements.
Unrealized gains arising from transactions with associates are eliminated against the investment to the extent of the
Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only
to the extent that there is no evidence of impairment.
4. INVESTMENT IN ASSOCIATE
The Company’s investment in Rio Tinto Exploration DRC Oriental Limited (“Holdco”), which meets the definition of an
associate of the Company, is summarized as follows:
Page 9 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
September 30, June 30,
Holdco
2012 2012
Portion of ownership interest 25.00% 25.00%
Common shares held 250 250
Total investment $ - $ -
On January 26, 2010, the Company entered into an agreement (the “Iron Ore Agreement”) with Rio Tinto Minerals
Development Limited ("Rio Tinto Minerals") for the exploration for iron ore in areas within the Orientale Province of the DRC.
These areas are covered by exploration permits (the "Permits") which had been controlled by the Company. Under the Iron
Ore Agreement, which is in the form of a shareholders' agreement, the Company owns 25% and Rio Tinto Minerals owns 75% of
the capital stock of Holdco, which owns a DRC registered company called Rio Tinto Exploration RDC Orientale SPRL. The
registered company holds the Permits. The Company’s investment in Holdco is accounted for in the consolidated financial
statements using the equity method. Holdco is an inactive company which did not have any significant assets or liabilities and
had no significant balances in the statement of comprehensive income. As such, there has been no change in the value of the
investment since the date of acquisition.
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:
Tshikapa Northern DRC
Notes Total
Project Project
Cost
Balance as at December 31, 2011 $ 3,039,854 $ 2,079,413 $ 5,119,267
Additions 45,727 (1,526) 44,201
Balance as at June 30, 2012 3,085,581 2,077,887 5,163,468
Additions 9,243 (38,421) (29,178)
Balance as at September 30, 2012 3,094,824 2,039,466 5,134,290
There is $2,219 of intangible exploration and evaluation expenditures as at September 30, 2012 (June 30, 2012: $2,219).
There have not been any additions or disposals to intangible assets 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 km². 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. Six of the option agreement permits relate to Acacia SPRL, which has advised the Company
of its wish to modify the option agreement with the Company. The remaining two option agreement permits relate
to Caspian Oil & Gas.
Page 10 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
b. Northern DRC Project
The Company's northern DRC diamond project is located in Orientale Province of the DRC and consists of 24
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. The 22 exploration permits under
option cover an area of 4,155 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.
6. 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 months ended
September 30, 2012 and three months ended September 30, 2011 was as follows:
Three months ended
September 30, September 30,
2012 2011
Salaries $ 66,411 $ 65,930
$ 66,411 $ 65,930
b) Other Related Parties
As at September 30, 2012, an amount of $91,473 (June 30, 2012 - $242,793) was owed to two directors of the Company
representing consulting fees. During the three months ended September 30, 2012, consulting fees of $50,000 were incurred
to the two directors (three months ended September 30, 2011- $50,000 to the two directors).
As at September 30, 2012, an amount of $1,193 (June 30, 2012 - $11,326 owed to Banro) was owed from Banro Corporation
(“Banro”). Banro owns 17,716,994 common shares of the Company, representing a 33.6% interest in the Company
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.
Page 11 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
7. 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.
As of September 30, 2012, the Company had 52,734,643 common shares issued and outstanding (June 30, 2012 –
52,734,643) and no preference shares issued and outstanding.
b) Share purchase warrants
As at September 30, 2012, the Company had outstanding warrants to purchase 11,969,698 (June 30, 2012: 11,969,698)
common shares of the Company. Of the 11,969,698 warrants outstanding, 6,969,698 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 three
months ended September 30, 2012, amounting to 52,734,643 (three months year ended September 30, 2011: 47,245,529)
common shares. Diluted loss per share was calculated using the treasury stock method. For the three months ended
September 30, 2012, total stock options of 800,000 (three months ended September 30 2011: 1,040,000) and warrants of
11,969,698 (September 30, 2011: 15,000,000) were excluded from the calculation of diluted loss per share as their effect
would have been anti-dilutive. Items that are adjusted in the reconciliation between loss per share and headline loss per
share to arrive at the Company’s headline loss per share include impairment of property, plant, and equipment and
losses on disposal of assets, however they have no effect on the Company’s headline loss per share.
Three months ended Three months ended
September 30, 2012 September 30, 2011
Loss for the period (74,234) (69,212)
Adjustments for headline loss - -
Headline loss for the period (74,234) (69,212)
Basic and diluted loss per share (0.00) (0.00)
Headline loss per share (0.00) (0.00)
8. 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
Page 12 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
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.
As at September 30, 2012, the Company had outstanding under the Old Plan stock options to acquire 800,000 (June 30,
2012 – 890,000) common shares of the Company at a weighted-average exercise price of $2.10 (June 30, 2012 - $3.51)
per share. There are currently no stock options outstanding under the New Plan.
The following tables summarize information regarding outstanding stock options:
For three months ended September 30, 2012:
During the Period Weighted average
remaining
Exercise Price Range Opening Balance Closing Balance Vested & Exercisable Unvested
Granted Exercised Expired Forfeited contractual life
(years)
2.10 - 7.51 800,000 - - - - 800,000 0.91 800,000 -
7.52 - 16.00 90,000 - - (90,000) - - - 0 -
890,000 - - (90,000) - 800,000 - 800,000 -
Weighted Average
Exercise Price $ 3.51 $ - $ - $ - $ - $ 2.10 0.91 $ 2.10 $ -
For the three months ended September 30, 2011:
Exercise Price Range During the Period Weighted average
Opening Balance Closing Balance Vested & Exercisable Unvested
(Cdn$) Granted Exercised Expired Forfeited remaining
2.10 - 5.00 800,000 - - - - 800,000 1.91 800,000 -
7.52 - 16.00 240,000 - - - - 240,000 0.64 240,000 -
1,040,000 - - - - 1,040,000 1,040,000 -
Weighted Average
Exercise Price (Cdn$) $ 2.10 $ - $ - $ 7.50 $ - $ 4.59 $ 4.59 $ -
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 contractual life
of all options on the date of grant is 5 years.
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.
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
Page 13 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
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, 2012, there were no replacement options outstanding (June 30, 2012: 21,771).
9. 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. Geographic segmentation
of non-current assets is as follows:
As at Sept. 30, 2012
Property, plant Exploration and
and equipment evaluation Total Assets
DRC - $5,136,509 $5,136,509
Canada - - -
- $5,136,509 $5,136,509
As at June 30, 2012
Property, plant Exploration and
and equipment evaluation Total Assets
DRC - $5,165,687 $5,165,687
Canada - - -
- $5,165,687 $5,165,687
10. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
a) Fair value of financial assets and liabilities
The consolidated statements of financial position carrying amounts for cash, prepaid expenses and other assets and
accounts payable and accrued liabilities 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.
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).
The fair values of financial assets and liabilities carried at amortized cost are approximated by their carrying values.
Cash is ranked level 2 as it is based on similar loans in the market.
Page 14 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
b) 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.
c) 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.
The following table indicates the impact of foreign currency exchange risk on net working capital as at September 30,
2012. The table below also provides a sensitivity analysis of a 10 percent strengthening of the Canadian dollar against
foreign currencies as identified which would have increased (decreased) the Company’s net loss by the amounts shown in
the table below. A 10 percent weakening of the Canadian dollar against the same foreign currencies would have had the
equal but opposite effect as at September 30, 2012.
South
U.S dollar African
rand
$ ZAR
Cash 80,381 -
Prepaids and other assets 79,823
Accounts payable (7,500) (36,831)
Total foreign currency
financial assets and liabilities 72,881 42,992
Foreign exchange rate at
September 30, 2012 0.9832 0.1186
Total foreign currency
financial assets and liabilities
in CDN $ 71,657 5,099
Impact of a 10% strengthening
or weakening of the CDN $ on
net loss 7,166 510
d) 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.
e) 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.
Page 15 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
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. Accounts payable and accrued liabilities of $522,908 and amounts due to related parties
of $90,280 are due within one year and represent all significant contractual commitments, obligations, and interest and
principal repayments on financial liabilities. Please refer to Note 1, Continuation of the Business.
f) 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.
g) 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.
h) 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.
i) 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.
j) 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.
k) 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;
Page 16 of 17
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2012
(Expressed in Canadian dollars) (unaudited)
• to maintain a sufficient 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 three month period
ended September 30, 2012.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
As at September 30, 2012 As at June 30, 2012
Cash $ 97,837 $ 440,655
Share capital $ 116,339,566 $ 116,339,566
Deficit $ (119,845,080) $ (119,770,846)
Contributed surplus $ 8,159,644 $ 8,159,644
11. SUPPLEMENTAL CASH FLOW INFORMATION
During the three month periods ended September 30, 2012 and September 30, 2011, the Company undertook the following
significant non-cash transactions:
September September 30,
Note
30, 2012 2011
Depreciation included in exploration and
5
evaluation assets $ - $ 511
12. COMMITMENTS AND CONTINGENCIES
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 believes it can reach an agreement that is satisfactory for both
parties.
The Company and its subsidiaries are 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 involved in litigation with a former director and officer of the Company relating to a settlement agreement
pertaining to his departure. The former director and officer is claiming that he is owed payment of 1.2 million South African
rand plus interest, and the Company has instituted counterclaims against him. A trial date for this litigation, which is before
the South Gauteng High Court in South Africa, has been set for May 20, 2013.
Page 17 of 17
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