Wrap Text
Financiall results - audited year end
Giyani Gold Corporation
(formerly 99 Capital Corporation)
(Incorporated and registered in Canada)
(Registration number BC-C0887454)
Share code on the TSXV: WDG
Share code on the JSE: GIY ISIN: CA37636L1076
(“Giyani Gold” or “the company” or “the group”)
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (EXPRESSED IN CANADIAN DOLLARS)
Notice To Reader
The Company has refiled its December 31, 2013 audited consolidated financial statements herewith, due to an
omission of a signature on the Independent Auditor's Report. Additionally, on the statement of loss and comprehesive
loss, the net loss line description has been changed from "Net loss for the year before income taxes" to "Net Loss".
There were no further changes made from the statements originally filed on April 1, 2014.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Giyani Gold Corporation were prepared by management, on
behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the consolidated
financial statements. Management acknowledges responsibility for the preparation and presentation of the annual
consolidated financial statements, including responsibility for significant accounting judgments and estimates and the
choice of accounting principles and methods that are appropriate to the Corporation’s circumstances. In the opinion of
management, the consolidated financial statements have been prepared within acceptable limits of materiality using
accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.
Management has established processes which are in place to provide them sufficient knowledge to support
management representations that they have exercised reasonable diligence that (i) the consolidated financial
statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or
that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the
date of and for the periods presented by the consolidated financial statements and (ii) the consolidated financial
statements fairly present in all material respects the financial condition, financial performance and cash flows of the
Corporation, as of the date of and for the periods presented by the consolidated financial statements.
The Board of Directors is responsible for reviewing and approving the consolidated financial statements together with
other financial information of the Corporation and for ensuring that management fulfills its financial reporting
responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit
Committee meets with management to review the financial reporting process and the consolidated financial
statements together with other financial information of the Corporation. The Audit Committee reports its findings to the
Board of Directors for its consideration in approving the consolidated financial statements together with other
financial information of the Corporation for issuance to the shareholders.
Management recognizes its responsibility for conducting the Corporation’s affairs in compliance with established
financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its
activities.
"Duane Parnham" "Ron Reed"
Chief Executive Officer Chief Financial Officer
March 31, 2014
Independent Auditor's Report
To the Shareholders of Giyani Gold Corporation
We have audited the accompanying consolidated financial statements of Giyani Gold Corporation and its
subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2013
and December 31, 2012 and the consolidated statements of loss and comprehensive loss, changes in
shareholders'equity and cash flows for the years then ended, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation ofthe consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Giyani Gold Corporation and its subsidiaries as at December 31, 2013 and December 31, 2ol2
and their financial performance and their cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Emphasis of matter
Without qualifying our opinion, we draw attention to note I in the consolidated financial statements,
which describes matters and conditions that indicate the existence of a material uncertainty that may cast
significant doubt about the corporation's ability to continue as a going concern.
(Signed) "Pricewaterhousecoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Giyani Gold Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
As at December 31, 2013 2012
ASSETS
Current
Cash and cash equivalents $ 1,429,699 $ 1,852,133
Term deposit (Note 4) 150,583 1,550,000
Restricted cash (Note 5) 100,000 200,000
Amounts receivable 110,911 75,499
Prepaids 190,244 31,473
1,981,437 3,709,105
Equipment (Note 6) 75,584 94,049
Mineral property acqusition costs (Note 8) 5,680,292 5,680,292
Exploration and evaluation assets (Note 8) 3,399,268 3,121,836
9,155,144 8,896,177
$ 11,136,581 $ 12,605,282
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 12) $ 667,209 $ 351,389
Flow-through share premium (Note 9) 127,000 -
Due to related parties (Note 12) 118,298 119,853
912,507 471,242
Deferred tax liability (Note 15) 146,198 -
1,058,705 471,242
EQUITY
Equity Attributable to Owners of the Parent:
Share capital (Note 9) 17,432,543 16,910,654
Contributed surplus 4,482,971 4,440,908
Warrants (Note 11) 4,054,637 4,372,660
Cumulative translation adjustment 56,894 -
Deficit (17,015,956) (13,577,134)
9,011,089 12,147,088
Non-controlling interest (Note 18) 1,066,787 (13,048)
10,077,876 12,134,040
$ 11,136,581 $ 12,605,282
Nature of Operations and Going Concern (Note 1)
Commitments (Note 16)
Subsequent Events (Note 20)
Approved on Behalf of the Board:
"Ed Guimaraes" "Scott Kelly"
Director Director
Giyani Gold Corporation
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(EXPRESSED IN CANADIAN DOLLARS)
For the Years Ended December 31, 2013 2012
EXPENSES
Corporate, general and administration $ 3,334,967 $ 2,882,445
Amortization 18,465 17,429
Share-based payments 77,738 1,722,119
Public company listing expense of subsidiary (Note 3) 645,361 -
Impairment of exploration and evaluation assets (Note 8) - 1,046,058
Net loss before interest and other items: 4,076,531 5,668,051
Foreign exchange loss 26,690 80,964
Interest and other income (114,193) (135,204)
Net loss for the year before income taxes $ 3,989,028 $ 5,613,811
Recovery of income taxes (34,104) -
NET LOSS FOR THE YEAR $ 3,954,924 $ 5,613,811
Other Comprehensive Income
Items that may be subsequently reclassified to profit and loss:
Currency translation adjustment, net of tax (56,894) -
TOTAL COMPREHENSIVE LOSS $ 3,898,030 $ 5,613,811
Attributable to:
Owners of the parent 3,664,702 5,532,763
Non-controlling interest 290,222 81,048
NET LOSS FOR THE YEAR $ 3,954,924 $ 5,613,811
Basic and diluted loss per share (Note 19) $ 0.07 $ 0.13
Weighted average number of shares outstanding - basic and diluted 54,698,992 43,122,512
Giyani Gold Corporation
CONSOLIDATED STATEMENTS OF CHANGES SHAREHOLDERS' EQUITY
(EXPRESSED IN CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS)
Cumulative
Share Contributed Non-Controlling Translation
Capital Surplus Warrants Interest Adjustment Deficit Total
Balance, December 31, 2011 $ 8,696,441 $ 2,407,704 $ 212,212 $ 48,000 $ - $ (8,044,371) $ 3,319,986
Shares issued on exercise of warrants 1,108,724 212,212 (212,212) - - - 1,108,724
Shares issed on exercise of options and
re-allocation of contributed surplus 105,350 - - - - - 105,350
Net private placements 8,190,299 - - - - - 8,190,299
Shares of subsidiary issued to
non-controlling interest - - - 20,000 - - 20,000
Flow-through share reversal - 98,873 - - - - 98,873
Issuance of warrants (4,372,660) - 4,372,660 - - - -
Stock-based payment expense - 1,722,119 - - - - 1,722,119
Shares issued on acquisition of Rock
Island Tranding 3,182,500 - - - - - 3,182,500
Comprehensive loss - - - (81,048) - (5,532,763) (5,613,811)
Balance, December 31, 2012 $16,910,654 $ 4,440,908 $ 4,372,660 $(13,048) $ - $(13,577,134) $12,134,040
Change in non-controlling interest
due to amalgamation and dilution impact - - - 1,370,057 - 225,880 1,595,937
Shares issued on exercise of warrants 249,214 - (118,526) - - - 130,688
Shares issued on exercise of options
and re-allocation of contributed surplus 73,175 (35,675) - - - - 37,500
Shares issued 199,500 - - - - - 199,500
Stock-based payment expense - 77,738 - - - - 77,738
Tax on expired warrants - - (199,497) - - - (199,497)
Net loss - - - (290,222) - (3,664,702) (3,954,924)
Currency translation adjustment - - - - 56,894 - 56,894
Balance, December 31, 2013 $17,432,543 $ 4,482,971 $ 4,054,637 $ 1,066,787 $ 56,894 $(17,015,956) $10,077,876
Giyani Gold Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN CANADIAN DOLLARS)
For the Years Ended December 31, 2013 2012
CASH (USED IN) PROVIDED BY:
OPERATING ACTIVITIES
Net loss for the year: $ (3,954,924) $ (5,613,811)
Amortization 18,465 17,429
Impairment of exploration and evaluation assets - 1,046,058
Share-based payments 77,738 1,722,119
Income tax recovery (34,104) -
(3,892,825) (2,828,205)
Net change in non-cash working capital:
Amounts receivable (19,311) 211,396
Subscription receivable - 49,750
Prepaids (158,771) 5,638
Accounts payable and accrued liabilities 23,084 35,325
Due to related parties (1,555) 28,474
Public company listing expense of subsidiary 645,361 -
(3,404,017) (2,497,622)
INVESTING ACTIVITIES
Cash acquired on reverse acquisition of subsidiary 263,282 -
Redemption (purchase) of term deposit 1,399,417 (1,475,000)
Restricted cash 100,000 (200,000)
Purchase of equipment - (46,970)
Acquisition of interests in subsidiaries - (2,497,792)
Exploration and evaluation asset expenditures (264,664) (2,909,013)
1,498,035 (7,128,775)
FINANCING ACTIVITIES
Proceeds from conversion of warrants and options 168,188 1,214,074
Proceeds from issuance of shares in subsidiary, net of costs 1,315,360 8,190,298
1,483,548 9,404,372
CHANGE IN CASH (422,434) (222,025)
CASH, BEGINNING OF YEAR 1,852,133 2,074,158
CASH, END OF YEAR $ 1,429,699 $ 1,852,133
Giyani Gold Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(EXPRESSED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS AND GOING CONCERN
Giyani Gold Corp. (the "Company" or "Giyani") is engaged in the acquisition, exploration, evaluation and
development of principally gold resource properties in South Africa and Canada. The Company’s primary focus
is the development of the Rock Island Gold Project and ongoing exploration for gold at its Northern Ontario
Project. The Company is incorporated and domiciled in Canada and its shares are publicly traded on the
Toronto Venture Stock Exchange. The registered address is Suite 403 - 277 Lakeshore Road East, Oakville,
Ontario, L6J 6J3.
These consolidated financial statements have been prepared using International Financial Reporting Standards
(“IFRS”) applicable to a “going concern”, which assume that the Company will continue in operation for the
foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of
operations.
The Company reported a net loss of $3,954,924 for the year ended December 31, 2013 (2012 - $5,613,811)
and had an accumulated deficit of $17,015,956 at December 31, 2013 (December 31, 2012 - $13,577,134 ).
In addition to its working capital requirements, the Company must secure sufficient funding for existing
commitments and exploration costs.
These circumstances may cast significant doubt as to the ability of the Company to meet its obligations as they
come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going
concern.
Management plans to secure the necessary financing through a combination of the exercise of existing
warrants for the purchase of common shares, the issue of new equity instruments and the entering into joint
venture arrangements. Nevertheless, there is no assurance that these initiatives will be successful.
The recovery of amounts capitalized for exploration and evaluation assets at December 31, 2013 in the
statement of position is dependent upon the ability of the Company to arrange appropriate financing to
complete the development and continued exploration of the properties and upon future profitable production or
proceeds from their disposition.
These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the
reported expenses and balance sheet classifications that would be necessary should the going concern
assumption be inappropriate, and those adjustments could be material.
Statement of Compliance
These consolidated financial statements of the Company, including comparatives, have been prepared in
accordance with IFRS as issued by the International Accounting Standards Board.
These consolidated financial statements were authorized for issuance by the Board of Directors of the
Company on March 31, 2014.
Basis of Presentation
These consolidated financial statements have been prepared on a historical cost basis.
The consolidated financial statements are presented in Canadian Dollars, which is the Company’s functional
and presentation currency except where otherwise indicated.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company. All intercompany transactions, balances, income and expenses are eliminated on
consolidation. The consolidated financial statements include the accounts of the Company and the following
subsidiaries:
Company Place of Functional Method of
Entity Name Ownership Incorporation Currency Consolidation
Canoe Mining Ventures Corp. 57.4% Canada Canadian Dollar Consolidated
Alpha 111 Holdings Co. Ltd. 100.0% Barbados Canadian Dollar Consolidated
Beta 222 Holdings Co. Ltd. 100.0% Barbados Canadian Dollar Consolidated
Giyani Gold Holdings 333 (Pty) Ltd. 100.0% South Africa Canadian Dollar Consolidated
Giyani Gold South Africa (Pty) Ltd. 100.0% South Africa South African Rand Consolidated
Lexshell 831 Investments (Pty) Ltd. 100.0% South Africa South African Rand Consolidated
GGC South Africa Mining 111 (Pty) Ltd. 100.0% South Africa South African Rand Consolidated
Obliwize (Pty) Ltd. 100.0% South Africa South African Rand Consolidated
Obliweb (Pty) Ltd. 100.0% South Africa South African Rand Consolidated
Lexshell 837 Investments (Pty) Ltd. 64.0% South Africa South African Rand Consolidated
Rock Island Trading 17 (Pty) Ltd.1 28.8% South Africa South African Rand Our Share
1 28.8% represents Giyani's effective ownership in Rock Island Trading 17 (Pty) Ltd. is a joint operation. See
Note 7.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company include the following and have been applied consistently
to all periods presented.
Critical Accounting Estimates, Risks and Uncertainties
The Company performed an analysis of risk factors which, if any should realize, could materially and adversely
affect the results, financial position and/or market price of its securities.
The preparation of financial statements in conformity with IFRS requires Management to make estimates and
assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of expenses and other income for the
year. These estimates and assumptions were based on Management’s knowledge of the relevant facts and
awareness of circumstances, having regard to prior experience. Significant estimates and assumptions include
the following (excluding going concern which is disclosed in Note 1)
i) Recoverability of exploration and evaluation properties
Management considered the economics of the Projects, including the drill and geophysical results.
Consideration was also given to the risk factors mentioned below (and in Note 1) and their potential
impact on the economics of the Projects.
Critical Accounting Estimates Risks and Uncertainties (Continued)
ii) Other accounting estimates
Other estimates included the benefits of future income tax assets and whether or not to recognize the
resulting assets on the Statement of Financial Position, estimated useful lives of capital assets, and
determinations as to whether exploration costs are expensed or capitalized.
While Management believes that these estimates and assumptions are reasonable, actual results may
differ from the amounts included in the financial statements.
iii) Stock-Based Compensation
Management is required to make certain estimates when determining the fair value of stock options
awards, and the number of awards that are expected to vest. These estimates affect the amount
recognized as stock-based compensation in the statements of loss based on estimates of forfeiture and
expected lives of the underlying stock options.
Foreign Currency Translation
i) Functional and Presentation Currency
Items included in the consolidated financial statements of each of the Company’s entities are measured
using the currency of the primary economic environment in which the entity operates (“the functional
currency”). The functional currency of each entity is listed in Note 1. The consolidated financial
statements are presented in Canadian dollars which is the Company’s presentation currency.
ii) Transactions and Balances
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate in
effect at the balance sheet date. Non-monetary assets and liabilities, expenses and other income arising
from foreign currency transactions are translated at the exchange rate in effect at the date of the
transaction. Exchange gains or losses arising from the translation are included in the determination of
losses in the current year.
iii) Group Companies
The results and financial position of all entities in the Company that have a functional currency different
from the Company’s presentation currency are translated into the Company’s presentation currency as
follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;
- equity transactions are translated at the historical exchange rate;
- income and expenses for each income statement are translated at the exchange rate in effect on
date of the transaction (or at average exchange rates for the reporting period)
Deferred Acquisition Costs
Acquisition costs related to mineral property interests are deferred until such time as title to the claim is
obtained and the Company has the right to explore that mineral property. Once title is obtained, the Company
reclassifies deferred acquisition costs to acquisition costs within exploration and evaluation assets. If title to a
mineral property is not obtained, the deferred acquisition costs are written-off to the statement of loss during
the period when it is determined that title will not be obtained.
Exploration and Evaluation Assets
The Company capitalizes all costs related to investments in mineral property interests on a property-by-property
basis, once the right to explore a property has been obtained by the Company. Such costs include mineral
property acquisition costs and exploration and evaluation expenditures, net of any recoveries, and are
monitored for indications of impairment. Where there are indications of a potential impairment, an assessment
is performed for recoverability. Capitalized costs are charged to the statement of comprehensive loss to the
extent that they are not expected to be recovered.
Exploration and evaluation expenditures relate to the initial search for deposits with economic potential and to
detailed assessments of deposits or other projects that have been identified as having economic potential.
Once an economically viable reserve has been determined for an area and the decision to proceed with
development has been approved, exploration and evaluation assets attributable to that area are first tested for
impairment and then reclassified to construction in progress within property, plant and equipment.
Subsequent recovery of the resulting carrying value depends on successful development or sale of the
undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project are
written off.
Capital Stock
Proceeds from the exercise of stock options and warrants are recorded as capital stock in the amount for which
the option or warrant enabled the holder to purchase a share in the Company. Capital stock issued for non-
monetary consideration is valued at the closing market price at the date of issuance. The proceeds from the
issuance of units are allocated between common shares and common share purchase warrants based on the
residual value method. Under this method, the proceeds are allocated to capital stock based on the fair value of
the common share and any residual value remaining is allocated to common share purchase warrants.
Flow-through Common Shares
The Company finances a portion of its development and construction activities through financings in which
flow-through common shares are issued. These shares transfer the tax deductibility of qualifying expenditures
to investors. At the time of closing a financing involving flow-through shares, the Company allocates the gross
proceeds received ("flow-through commitment") as follows:
- Share capital – at fair market value, based on the share price at the date of grant;
- Warrant reserve – Warrants (if any) are measured, based on the valuation derived using the Black-Scholes
option-pricing model. A warrant reserve (if any) is recorded to the extent that the unit issue price is greater
than the fair market value of the share capital; and
- Flow-through share premium – Recorded as a liability and equal to the residual balance (if any).
At the end of each reporting period, the Company reviews its tax position and records an adjustment to its
deferred tax expense/liability accounts for taxable temporary differences, including those arising from the
transfer of tax benefits to investors through flow-through shares. The Company considers the tax benefits of
qualifying expenditures to have been effectively transferred if it has formally renounced those expenditures and
has incurred the expenditures at any time before the end of the reporting period.
Interest in Joint Arrangements
The Company conducts a portion of its business through a joint operation whereby the joint operation
participants are bound by contractual agreements establishing joint control. Joint control exists when
unanimous consent of the joint operation participants is required regarding strategic, financial and operating
policies of the joint operation. The Company has interests in a jointly controlled entity.
A jointly controlled entity is a corporation, partnership or other entity in which each joint arrangement participant
holds an interest. A jointly controlled entity controls the assets of the joint arrangement and incurs its own
liabilities and expenses. The Company has determined that its interest in the jointly controlled entity is a joint
operation and accounts for their share of assets and liabilities, their expenses and any share of expenses of
any future share of revenue of the joint operation. The Company’s share of results from joint operations has
been recognized in the Company’s consolidated financial statements from the date the Company obtained joint
control. Intercompany transactions between the Company and jointly controlled entities are eliminated to the
extent of the Company’s interest.
Share-based Payments
The Company grants share options to acquire common shares of the Company to directors, officers,
consultants and employees.
The fair value of the instruments granted is measured using a Black-Scholes model, taking into account the
terms and conditions upon which the instruments are granted. The fair value of the awards is adjusted by the
estimate of the number of awards that are expected to vest as a result of non-market conditions and is
expensed over the vesting period using the graded vesting method of amortization. At each balance sheet date,
the Company reviews its estimates of the number of options that are expected to vest based on the non-market
vesting conditions including the impact of the revision to original estimates, if any, with corresponding
adjustments to equity.
Equipment
Equipment is carried at cost, less accumulated amortization and accumulated impairment losses.
The cost of an item of equipment consists of the purchase price, any costs directly attributable to bringing the
asset to the location and condition necessary for its intended use and an initial estimate of the costs of
dismantling and removing the item and restoring the site on which it is located.
Equipment is depreciated using the following annual rates:
Computer equipment 33.3% declining balance
Furniture and fixtures 14.3% declining balance
Mining and exploration equipment 14.3% declining balance
Telecommunication and mobile equipment 20.0% declining balance
Impairment of Non-Current Assets
Non-current assets are evaluated at each reporting period by management for indicators that carrying value is
impaired and may not be recoverable. When indicators of impairment are present the recoverable amount of
an asset is evaluated at the level of a CGU, the smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from other assets or groups of assets, where the
recoverable amount of a CGU is the greater of the CGU’s fair value less costs to sell and its value in use. An
impairment loss is recognized in profit or loss to the extent the carrying amount exceeds the recoverable
amount.
In calculating recoverable amount, the Company uses discounted cash flow techniques to determine fair value
when it is not possible to determine fair value either by quotes from an active market or a binding sales
agreement.
The determination of discounted cash flows is dependent on a number of factors, including future metal prices,
the amount of reserves, the cost of bringing the project into production, production schedules, production costs,
sustaining capital expenditures, and site closure, restoration and environmental rehabilitation costs.
Additionally, the reviews take into account factors such as political, social and legal, and environmental
regulations. These factors may change due to changing economic conditions or the accuracy of certain
assumptions and, hence, affect the recoverable amount.
The Company uses its best efforts to fully understand all of the aforementioned to make an informed decision
based upon historical and current facts surrounding the projects. Discounted cash flow techniques often require
management to make estimates and assumptions concerning reserves and expected future production
revenues and expenses.
Reversal of Impairment
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized. An impairment loss with respect to goodwill is never
reversed.
Provision for Environmental Rehabilitation
The Company records a liability based on the best estimate of costs for site closure and reclamation activities
that the Company is legally or constructively required to remediate. The liability is recognized at the time
environmental disturbance occurs and the resulting costs are capitalized to the corresponding asset. The
provision for closure and reclamation liabilities is estimated using expected cash flows based on engineering
and environmental reports prepared by third-party industry specialists and discounted at a pre-tax rate specific
to the liability. The capitalized amount is depreciated on the same basis as the related asset. The liability is
adjusted for the accretion of the discounted obligation and any changes in the amount or timing of the
underlying future cash flows.
Significant judgments and estimates are involved in forming expectations of the amounts and timing of future
closure and reclamation cash flows. Additional disturbances and changes in closure and reclamation estimates
are accounted for as incurred with a change in the corresponding capitalized cost. Costs of rehabilitation
projects for which a provision has been recorded are recorded directly against the provision as incurred, most
of which are incurred at the end of the life of mine.
Income Taxes
Income tax expense consisting of current and deferred tax expense is recognized in the statement of loss and
comprehensive loss. Current tax expense is the expected tax payable on the taxable income for the year, using
tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards
to previous years. Deferred tax assets and liabilities and the related deferred income tax expense or recovery
are recognized for deferred tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected
to apply when the asset is realized or the liability settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that substantive enactment occurs.
The Company uses the balance sheet method of accounting for deferred taxes. A deferred tax asset is
recognized to the extent that it is probable that future taxable income will be available against which the asset
can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be
recovered, the deferred tax asset is reduced.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a net basis.
Loss Per Share
Basic loss per share is calculated using the weighted average number of common shares outstanding during
the period.
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar
instruments. Under this method the dilutive effect on earnings per share is calculated presuming the exercise of
outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be
used to repurchase common shares at the average market price during the period. However, the calculation of
diluted loss per share excludes the effects of various conversions and exercise of options and warrants that
would be anti-dilutive.
Shares held in escrow, other than where their release is subject to the passage of time, are not included in the
calculation of the weighted average number of common shares outstanding.
New Accounting Standards and Interpretations Adopted During the Year
(i) IFRS 10 – Consolidated financial statements (“IFRS 10”) was issued by the IASB in May 2011. IFRS 10
is a new standard which identifies the concept of control as the determining factor in assessing whether
an entity should be included in the financial statements of the parent company. Control is comprised of
three elements: power over an investee; exposure to variable returns from an investee; and the ability to
use power to affect the reporting entity’s returns. The Company adopted this pronouncement on January
1, 2013 with no impact on the Company’s consolidated financial statements.
(ii) IFRS 11 – Joint arrangements (“IFRS 11”) was issued by the IASB in May 2011. IFRS 11 is a new
standard which focuses on classifying joint arrangements by their rights and obligations rather than their
legal form. Entities are classified into two groups: parties having rights to the assets and obligations for
the liabilities of an arrangement, and rights to the net assets of an arrangement. Entities in the former
case account for assets, liabilities, revenues and expenses in accordance with the arrangement,
whereas entities in the latter case account for the arrangement using the equity method. The Company
adopted this pronouncement on January 1, 2013 with no impact on the Company’s consolidated financial
statements.
(iii) IFRS 12 – Disclosure of interests in other entities (“IFRS 12”) was issued by the IASB in May 2011. IFRS
12 is a new standard which provides disclosure requirements for entities reporting interests in other
entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles. The
Company adopted this pronouncement on January 1, 2013 with no impact on the Company’s
consolidated financial statements.
(iv) IFRS 13 – Fair value measurement (“IFRS 13”) was issued by the IASB in May 2011. IFRS 13 is a new
standard which provides a precise definition of fair value and a single source of fair value measurement
considerations for use across IFRSs. The Company adopted this pronouncement on January 1, 2013
with no impact on the Company’s consolidated financial statements.
(v) In October 2011, the IASB issued IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine.
This interpretation requires the capitalization and depreciation of stripping costs in the production phase
if an entity can demonstrate that it is probable future economic benefits will be realized, the costs can be
reliably measured and the entity can identify the component of the ore body for which access has been
improved. The Company adopted this pronouncement on January 1, 2013 with no impact on the
Company’s consolidated financial statements.
Future Accounting Pronouncements
IFRS 9 – Financial instruments (“IFRS 9”) was updated by the IASB in November 2009 and will replace part of
IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 addresses the classification
and measurement of financial assets. The two measurement categories for financial assets include amortized
cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost
only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and
interest. Otherwise it is at fair value through profit or loss.
In May 2013, IASB issued IFRIC 21 levies which sets out the accounting for an obligation to pay a levy that is
not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy or when a
liability should be recognized. The Company is in the process of assessing the impact of this announcement.
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions
of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets
have expired or have been transferred and the Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged,
cancelled or expires.
At initial recognition, the Company classifies its financial instruments in the following categories:
i) Financial Assets and Liabilities at Fair Value Through Profit or Loss
A financial asset or liability is classified in this category if acquired principally for the purpose of selling or
repurchasing in the short term. Financial instruments in this category are recognized initially and
subsequently at fair value.
ii) Available-for-sale Investments
Non-derivatives that are either designated in this category or not classified in any other category.
Available-for-sale investments are initially recognized at fair value plus transaction costs and
subsequently carried at fair value with changes in fair value recognized in other comprehensive loss. The
Company classifies its short term investments as available-for-sale investments.
iii) Loans and Receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. The Company’s loans and receivables comprise trade receivables and cash and cash
equivalents, and are included in current assets due to their short term nature. Loans and receivables are
initially recognized at the amount expected to be received less, when material, a discount to reduce the
amount to fair value. Subsequently, loans and receivables are measured at amortized cost using the
effective interest rate method less a provision for impairment.
iv) Financial Liabilities at Amortized Cost
Trade payables and other payables are classified as financial liabilities at amortized cost. Trade payables
and other payables are initially recognized at the amount expected to be paid, less, when material, a
discount to reduce the amount to fair value. Subsequently trade payables, and other payables are
measured at amortized cost using the effective interest rate method.
At each reporting date, the Company assesses whether there is objective evidence that a financial asset
(other than a financial asset classified at fair value through profit or loss) is impaired. If such evidence
exists, the Company recognizes an impairment loss as follows:
Financial Assets Carried at Amortized Cost
The impairment loss is the difference between the carrying amount of the asset and the present value
of the estimated future cash flows, discounted using the instrument’s original effective interest rate.
Available-for-sale Financial Assets
The impairment loss is the difference between the acquisition cost of the asset and the fair value at
the measurement date, less any prior impairment losses previously recognized in the statement of
loss. Impairment charges are recognized through other comprehensive income unless the
impairment is deemed to be significant or prolonged, at which time it is recognized in the statement of
loss.
Impairment losses on financial assets carried at amortized cost and available-for-sale instruments are
reversed in subsequent periods if the amount of the loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized.
3. REVERSE TAKEOVER TRANSACTION
On December 5, 2013, the Company acquired 2299895 through an amalgamation. In accordance with the
terms of the Letter Agreement, the Company entered into the Amalgamation Agreement with 2299895 and
Giyani to carry out a Qualifying Transaction ("QT"). Pursuant to the terms of the Amalgamation Agreement, C
Level acquired all of the issued and outstanding shares of 2299895 and 2299895 amalgamated with a wholly-
owned subsidiary of C Level, Ontario AcquisitionCo, to create Canoe Mining Ventures Inc. The 12,852,515
issued and outstanding 2299895 shares of which Giyani owns 12,602,515, representing approximately 98.1%
of the issued and outstanding 2299895 shares were exchanged for 20,000,000 shares of the Company.
The 865,395 New 2299895 shares issued to subscribers pursuant to the 2299895 Private Placement were
exchanged for a total of 6,057,765 shares of the Company, on the basis of seven shares of the Company for
each New 2299895 share and seven warrants of the Company.
The QT constituted a reverse acquisition of the Company inasmuch as the former holders of 2299895 shares
(excluding the subscribers participating in the 2299895 Private Placement) owned approximately 59.5% of the
outstanding shares of the Company immediately after closing, including the conversion of the New 2299895
shares.
Prior to completion of the QT, C Level had 5,004,343 shares outstanding (including 3,250,000 C Level Seed
Shares subject to an escrow agreement), 483,392 C Level options exercisable at a price of $0.20 per C Level
Share, and 175,435 C Level Warrants exercisable at a price of $0.20 per C Level share. Upon completion of
the transaction, C Level owned approximately 14.9% of the Company.
The reverse takeover resulted in the issuance of common shares, broker warrants, and stock options to
holders of C Level equity investments with a total deemed value paid for C Level as agreed between C Level
and 2299895. The excess value of the consideration deemed paid of $645,361 over C Level net assets
deemed received has been reflected as a listing expense in the statement of loss and comprehensive loss as C
Level was a non-operating public company with nominal assets.
Shares Price Amount
Fair value of common shares deemed issued
to former C Level shareholders 5,004,343 $ 0.15 $ 750,651
Fair value of broker warrants deemed issued
to former C Level broker warrant holders 2,456
Fair value of stock options deemed issued
to former C Level stock option holders 42,539
Total fair value of consideration deemed paid 795,646
Less C Level net assets received (150,285)
Public company listing expense $ 645,361
Net Assets Received
Description Amount
Opening C Level share capital $ 520,451
Options and warrants previously issued 90,498
C Level deficit (460,664)
Deemed fair value of C Level $ 150,285
4. TERM DEPOSIT
The Company has a term deposit with a carrying value of $ 150,583 (2012 – $1,550,000). The term deposit is is
held in the form of an interesting bearing savings account at a Canadian Chartered bank, earning interest of
approximately 1.35% (2012 – 1.65%). The fair value of the term deposit approximates its carrying value due to
the short term to maturity.
5. RESTRICTED CASH
The Company has credit cards with a major financial institution with an aggregate credit limit of $100,000 (2012
-$200,000). The financial institution holds a $100,000 (2012 - $200,000) deposit as collateral on the credit
amount as long as the credit cards are active. The restricted cash amounts would change if there were any
changes to the credit limits on the cards.
6. EQUIPMENT
Furniture Mining and Computer Phone
and Fixtures Exploration Equipment Equipment Total
Cost
Balance, December 31, 2011 $ 22,922 $ 11,062 $ 12,852 $ 24,712 $ 71,548
Additions 8,264 10,662 10,513 17,531 46,970
Balance, December 31, 2012 $ 31,186 $ 21,724 $ 23,365 $ 42,243 $ 118,518
Additions - - - - -
Balance, December 31, 2013 $ 31,186 $ 21,724 $ 23,365 $ 42,243 $ 118,518
Accumulated Amortization
Balance, December 31, 2011 $ 1,637 $ 790 $ 2,142 $ 2,471 $ 7,040
Additions 3,631 6,210 5,322 2,266 17,429
Balance, December 31, 2012 $ 5,268 $ 7,000 $ 7,464 $ 4,737 $ 24,469
Additions 3,703 5,896 5,300 3,566 18,465
Balance, December 31, 2013 $ 8,971 $ 12,896 $ 12,764 $ 8,303 $ 42,934
Carrying Value
Balance, December 31, 2012 $ 25,918 $ 14,724 $ 15,901 $ 37,506 $ 94,049
Balance, December 31, 2013 22,215 8,828 10,601 33,940 75,584
7. REHABILITATION DEPOSIT
The Department of Mineral Resources (“DMR”) in South Africa requires a deposit or bank guarantee as
security for the duty to rehabilitate any mineral property. The funds will be refunded once the rehabilitation has
been completed to the satisfaction of DMR. As at December 31, 2013 Giyani has recorded a deposit of
$15,018 (2012- $15,786) included in exploration and evaluation assets.
8. EXPLORATION AND EVALUATION ASSETS
Mineral Property Acquisition Costs
Balance, January 1, 2012 $ -
Acquisition of Rock Island 5,680,292
Balance, December 31, 2012 and 2013 $ 5,680,292
On October 26, 2012, the Company completed the execution of a revised binding agreement (the “Revised Agreement”) with Kytanite Development
Corp. ("Kytanite") pursuant to which the Company has confirmed its entitlement to acquire Kytanite's interest in the Rock Island gold properties. The
Company acquired 100% of Lexshell 831 (Pty) Ltd (“Lexshell 831”), a Company duly incorporated and registered in the Republic of South Africa.
Lexshell 831 was the legal and beneficial owner of 80% of the issued and outstanding shares of Lexshell 837 (Pty) Ltd (Lexshell 837), a Company
incorporated and registered in the Republic of South Africa. Lexshell 837 owns 45% of the shares of Rock Island Trading (Pty) Ltd.
Total consideration paid was U$2,500,000 (CAN $2,497,792) and 2,500,000 common shares valued at $3,182,500 of the Company.
On October 26, 2012, Lexshell 831 sold a further 16% of the Common Shares in Lexshell 837 to Malungani Resources (Pty) Ltd., a company
representing the Community Trust for Rock Island. Total consideration is Rand 3,600,000. No receivable has been set up for this amount, as it will
be paid with proceeds proceeds from the property.
After sale of the shares Lexshell 831 is the legal and beneficial owner of 64% of the issued and outstanding shares of Lexshell 837.
Abbie South
Killins Emerald Lake Keating Thibodeau Africa Total
Balance, December 31, 2011 $ - $ - $ 368,112 $ 177,150 $ 336,872 $ - $ 882,134
Current expenditures 267,200 354,523 195,035 121,797 709,186 1,638,020 3,285,761
Asset impairment - - - - (1,046,058) - (1,046,058)
Balance, December 31, 2012 $ 267,200 $ 354,523 $ 563,147 $ 298,947 $ - $ 1,638,020 $ 3,121,837
Current expenditures - 112,495 54,133 - - 110,803 277,431
Balance, December 31, 2013 $ 267,200 $ 467,018 $ 617,280 $ 298,947 $ - $ 1,748,823 $ 3,399,268
In October 2012, the Company made the decision not to renew its option agreement on the Thibodeau lands. The Company has recognized impairment on
the entire book value of the asset ($1,046,058).
Pursuant to the joint operation agreement relating to the assets of Rock Island, the Company funds the joint
operation with Corridor Mining Resources (“CMR”) on a 50:50 basis, whereby both parties are to share the
costs evenly on an ongoing basis. Exploration costs are recorded in a loan account where interest is accrued at
an agreed upon rate. This loan will be repaid out of proceeds from the sale of the Rock Island asset. The loan
is unsecured, with no fixed repayment terms and bears interest at South African prime +1%. As at December
31, 2013 the Company had advanced $1,748,823 to Rock Island for exploration work.
Abbie Lake Property, Ontario
The Company's 57.4% owned subsidiary, Canoe Mining Ventures Corp. (formerly C-Level III Inc.) executed an
option agreement on September 19, 2011 (the “UCEL Agreement”) with Upper Canada Explorations Limited
(the “Optionor”), an arm’s length party, to earn a 100% interest in certain surface and mineral rights (the “Abbie
Lake Property”) near Sault. Ste. Marie, Ontario, Canada. The Company paid the Optionor $50,000 upon receipt
of the approval of the UCEL Agreement by the Toronto Venture Exchange (the “Approval Date”) and issued
200,000 common shares valued at $20,000.
In November 2012, the Company paid $50,000 and issued 150,000 common shares valued at $15,000
pursuant to the agreement. The UCEL Agreement also specifies payments to the Optionor in the amount of
$50,000 and 150,000 common shares within 24 months of the Approval Date. Pursuant to an amending
agreement dated October 28, 2013, the Company renegotiated the final share payment to be 75,000 shares to
be due on or before April 30, 2014. The 75,000 shares were issued on December 17, 2013 and ascribed a fair
value of $12,000.
Pursuant to an amending agreement dated January 23, 2013, the Company renegotiated the Initial Work
Program to be $600,000 prior to December 31, 2013 and a total of $1,000,000 by December 31, 2014.
Pursuant to an amending agreement dated October 28, 2013, the Company renegotiated the Initial Work
Program to be $600,000 prior to June 30, 2014 and a total of $1,000,000 by June 30, 2015. As at December
31, 2013 $434,546 has been incurred relating to the Initial Work Program (excluding acquisition costs) on the
property.
Keating Property, Ontario
The Company executed a licensing agreement on November 1, 2011 (the “Michipicoten Agreement”) with
3011650 Nova Scotia Limited, trading as Michipicoten Forest Resources (the “Licensor”), an arm’s length party,
to acquire the license for an exploration area within the District of Algoma, Ontario, Canada. The term of the
lease is 5 years and contains the option to extend the agreement for an additional 5 years.
The Company is required to pay $8,040 for the first year of the agreement and $500 multiplied by the number
of grid claims that constitute the licensed area for the remaining four years of the agreement. For the renewal
term, the Company is required to pay $600 multiplied by the number of grid claims that constitute the licensed
area for the additional 5 years of the agreement. The Company is responsible for all taxes related to the
licensed area during the term of the Michipicoten Agreement. The current land package for the exploration area
held by the Company is 70.02 grid claims.
The Company is required to incur minimum exploration expenditures during each license year. During each
license year of the original term, an annual amount of $2,500 multiplied by the number of grid claims that
constitute the licensed area must be incurred. During each license year of the renewal term, an annual amount
of $3,000 multiplied by the number of grid claims that constitute the licensed area must be incurred.
The Company shall pay Michipicoten for each mine commencing commercial production, the conditional option
of reducing the royalty retained by and payable to the lessor therein to a maximum of two (2%) percent for all
minerals except for diamonds, gems and other precious or semi-precious stones which will remain at five (5%)
percent. The purchase price for the first one (1.0) percent of the royalty shall be $1,000,000 and for every one -
half (0.5%) percent increment of royalty there-after shall be $1,000,000.
Keating East
On March 21, 2012, the Company executed an agreement (the “Keating East Agreement”) with 2099840
Ontario Inc trading as Emerald Geological Services (“Emerald”), an arm’s length party, to have Emerald
release additional 985 Ha of claims (the “Lands”) in the form of certain surface and mineral rights situated in
Keating Township, Ontario, contiguous to Giyani Gold's Abbie Lake-Keating Property and then to have these
Lands included in the licensing agreement with Michipicoten.
The agreement entitles Emerald to release completely its interest in Lands from the Licensor and to have the
Company acquire a 100% interest in the Lands in exchange for a combination of consideration comprised of:
$126,600 in cash payable over three years; $100,000 in exploration expenditures and other work programs,
and up to 200,000 shares in 2299895 over a period of three years, which shares are exchangeable into shares
of Giyani Gold, subject to satisfaction of certain conditions. 50,000 common shares were issued on September
23, 2012 valued at $5,000. The total current value of the maximum cash consideration payable if all conditions
are satisfied is $226,600. Under the terms of the agreement, Emerald has agreed to relinquish its license and
rights in the Lands and to allow 2299895 to acquire its interest and rights in the Lands under license from a
private arms-length corporate entity to 2299895 and the owner of the Lands, in exchange for an annual fee
payable to that party and an annual work program.
Pursuant to an amendment agreement, dated February 13, 2013, between 2299895 and Emerald, Emerald has
agreed that all future obligations pursuant to the Keating East Agreement shall be jointly those of 2299895 and
the Company and has agreed to exchange the 50,000 2299895 Shares it currently holds for 125,000 shares of
the Company. In addition, pursuant to an amendment agreement, dated January 23, 2013, Emerald has
agreed to extend the date for payment of the consideration payable upon the first anniversary of Completion of
the Proposed QT to July 1, 2013 and has agreed that the Company will be responsible for the payment of
$25,000 and the issuance of 125,000 shares of the Company. Pursuant to an amending agreement dated
August 12, 2013, 2299895 and Emerald have agreed to issue the 125,000 shares of the Company (issued on
December 17, 2013 and ascribed a fair value of $20,000) and to pay Emerald $25,000 on or before December
31, 2013 (paid, as stipulated). In addition, emerald acknowledges that the shares to be issued on the second
and third anniversary will be 125,000 shares of Canoe Mining Ventures Corp.
Thibodeau Property, Ontario
In October 2012, the Company chose not to renew the underlying option agreement, resulting in a $1,046,058
write-down recorded as at December 31, 2012.
South Africa
On November 17, 2011 the Company entered into a binding agreement to acquire prospecting rights from
Sephaku Gold Exploration (Proprietary) Limited ("SGE"), the holder of the rights, which are located in the
Giyani Greenstone Belt ("GGB"), South Africa. The transaction will be structured as an outright purchase of the
prospecting rights from SGE, which owns the rights for the Khavagari and Siyandani gold projects. Upon the
execution of a definitive sale agreement and closing of the transaction, the Company will have 100% interest in
these projects.
As consideration for the interest in the Khavagari and Siyandani gold projects, the Company will provide the
vendor a nominal cash payment of approximately Rand 1,000,000.
This transaction has not closed.
9. SHARE CAPITAL
(a) AUTHORIZED
Unlimited number of common shares without par value
(b) ISSUED
Shares Amount
Balance, December 31, 2011 37,208,181 $ 8,696,441
Shares issued on exercise of warrants 2,323,987 1,108,724
Shares issued on exercise of options 390,500 105,350
Shares issued on property purchase 2,500,000 3,182,500
Private placements 11,802,160 8,190,299
Less value ascribed to warrants - (4,372,660)
Balance, December 31, 2012 54,224,828 16,910,654
Shares issued on exercise of warrants 153,750 249,214
Shares issued on exercise of options 250,000 73,175
Shares issued 350,000 199,500
Balance - December 31, 2013 54,978,578 $ 17,432,543
On January 16, 2012, the Company completed a non-brokered private placement (the "Unit Private
Placement") of units (the "Units") for aggregate gross proceeds of $2,473,550. Each of the 2,150,910 Units
issued was issued at a price of $1.15. Each Unit consisting of one Common Share and one-half of one
common share purchase warrant, with each whole warrant exercisable by the holder thereof at a price of $1.40
per Common Share for a period of 18 months from the date of issuance (July 16, 2013). The transaction costs
on the private placement were $69,158.
On October 26, 2012 9,651,250 shares being held in escrow, subject to the closing of the Rock Island
Transaction were released from escrow. The shares held in escrow as part of an October 26, 2010 financing
were held in escrow subject to the closing of the Rock Island transaction. Each Unit consisting of one Common
Share and one-half of one common share purchase warrant, with each whole warrant exercisable by the holder
thereof at a price of $0.85 per Common Share for a period of 24 months from the date of issuance (October
26, 2014). There were no closing costs associated with this private placement.
A liability of $127,000 relating to tax benefits associated with the Canoe's issuance of 2,540,000 flow through
shares has been recorded in connection with the premium on share issuance.
In April 2013, the Company issued 350,000 common shares valued at $199,500 to an existing shareholder of
2299895, in return for 350,000 shares of 2299895.
10. STOCK OPTIONS
The Company has adopted an incentive stock option plan in accordance with the policies of the TSX Venture
Exchange ("TSXV"), under which the Board of Directors of the Company may grant to directors, officers,
employees and consultants of the Company, non-transferable options to purchase common shares provided
the number of shares reserved for issuance under the stock option plan shall not exceed 10% of the issued
and outstanding common shares, exercisable for a period of up to five years from the date of grant. The Board
of Directors determines the price per common share and the number of common shares, which may be allotted
to directors, officers, employees and consultants, and all other terms and conditions of the option, subject to
the rules of the Exchange.
On July 11, 2012, a total of 1,575,000 stock options with an exercise price of $1.30 per common share were
granted consultants of the Company. The options are exercisable up to July 11, 2017. The options are fully
vested on the date they are granted in accordance with the Company’s stock option plan.
On October 18, 2012, a total of 100,000 stock options with an exercise price of $1.30 per common share were
granted to a consultant of the Company. The options are exercisable up to October 18, 2017. The options are
fully vested on the date they are granted in accordance with the Company’s stock option plan.
Share option activities for the years ended December 31, 2013 and 2012 are as follows:
Number of
Stock Options Weighted Average
Outstanding Exercise Price
Balance - December 31, 2011 2,525,000 $ 1.34
Granted 1,675,000 1.30
Exercised (390,500) 0.27
Forfeited (459,500) 1.47
Balance - December 31, 2012 3,350,000 $ 1.43
Exercised (250,000) 0.15
Forfeited (400,000) 1.30
Balance, December 31, 2013 2,700,000 $ 1.53
10. STOCK OPTIONS (Continued)
The following table reflects the stock options outstanding as at December 31, 2013 and 2012:
Weighted
Average
Exercise Contractual Life
Expiry Date Price Remaining 2013 2012
July 15, 2015 $ 0.15 - - 250,000
November 3, 2015 $ 1.30 1.84 years 500,000 575,000
June 24, 2016 $ 2.00 2.48 years 450,000 450,000
July 25, 2016 $ 2.31 2.57 years 250,000 325,000
August 30, 2016 $ 2.35 2.67 years 75,000 75,000
July 11, 2017 $ 1.30 3.53 years 1,325,000 1,575,000
October 18, 2017 $ 1.30 3.80 years 100,000 100,000
2,700,000 3,350,000
The Company uses the Black-Scholes option pricing model to determine the fair value of options granted with
the undernoted weighted average assumptions for 2012. There were no stock options granted during 2013.
2012
Risk-free interest rate 1.17%
Expected life 5 years
Annualized volatility 158.2%
Dividend rate 0.00%
Forfeiture rate 5.00%
Weighted average fair value $1.14
Weighted average exercise price $1.30
11. WARRANTS
The following table reflects the continuity of warrants for the years ended December 31, 2013 and 2012:
Number of
Warrants Weighted Average
Outstanding Exercise Price
Balance - December 31, 2011 2,363,358 $ 0.48
Granted 5,901,082 0.95
Exercised (2,323,987) 0.48
Expired (39,371) 0.85
Balance - December 31, 2012 5,901,082 $ 0.95
Exercised (153,750) 0.85
Expired (1,075,456) 1.40
Balance - December 31, 2013 4,671,876 $ 0.85
Weighted
Average
Exercise Contractual Life
Expiry Date Price Remaining 2013 2012
October 26, 2014 $ 1.88 0.88 years 4,671,876 4,825,626
The Company uses the Black-Scholes option pricing model to determine the fair value of warrants granted with
the undernoted weighted average assumptions for 2012. There were no warrants granted during 2013.
2012
Risk-free interest rate 1.05%
Expected life 1.75 years
Annualized volatility 119.4%
Dividend rate 0.00%
12. RELATED PARTY TRANSACTIONS
Management and consulting fees of $649,089 (2012 - $751,539) were paid to officers and directors or to
companies controlled by officers or directors. In addition stock based payments awarded to officers and
directors of the Company of $nil (2012 - $1,151,813) were expensed.
The Company paid $196,182 in 2013 (2012 - $110,220) to McCarthy Tétrault LLP, a law firm where one of the
Company’s Directors is a Partner.
During the year ended December 31, 2012, the Company issued funds to 2299895 of $2,252,515, by means of
an unsecured loan, with no due date, bearing no interest. During the year ended December 31, 2013, the loan
was settled through the issuance of 2,252,515 common shares of 2299895, ascribed a fair value of
$2,252,515. These shares were exchanged for 3,505,174 of the Company on the closing of the QT.
During the year the Company reversed an intercompany loan payable from Canoe for $56,905.
The Company currently owns 57.4% of Canoe.
Management and key personnel compensation is as follows:
Years Ended December 31, 2013 2012
Cash compensation $ 649,089 $ 751,539
Stock-based compensation - 1,151,813
$ 649,089 $ 1,903,352
The Company is effectively a 28.8% shareholder in Rock Island trading (Pty) Ltd located in South Africa.
13. CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and sustain future development of the business. The capital of the Company consists of equity.
The Company manages its capital structure and makes adjustments in light of the changes in its economic
environment and the risk characteristics of the Company’s assets. To effectively manage the Company’s
capital requirements, the Company has in place planning, budgeting and forecasting process to help determine
the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth
objectives. With the exception of commitments detailed in note 16, there were no externally imposed capital
requirements to which the Company is subject as at December 31, 2013.
14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company provides information about its financial instruments measured at fair value at one of three levels
according to the relative reliability of the inputs used to estimate the fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The three levels of the fair value hierarchy are as follows:
- Level 1 quoted prices (unadjusted) in active markets for identical assets and liabilities
- Level 2 inputs other than quoted prices included in 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 inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
Cash and term deposits are classified as Level 2. There were no transfers between level 1, 2 and 3 during
2013. The Company's cash is comprised primarily of current deposits held with Canadian and South African
chartered banks and term deposits consist of Canadian guaranteed investment certificates. The fair values of
cash and term deposits approximate their carrying values due to their short-term nature.
The Company's risk exposure and the impact on the Company's financial instruments are summarized below:
Credit Risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its
contractual obligations. The Company's exposure to credit risk includes cash, term deposits, and cash
equivalents.
The Company reduces its risk by maintaining its bank accounts at large Canadian, Barbados, and South
African financial institutions.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The
Company's approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient
funds to meet its liabilities when they come due. The Company manages its liquidity risk by forecasting cash
flows required by operations to and anticipated investing and financing activities. The Company's financial
obligations currently consist of accounts payable and accrued liabilities, and amounts due to related parties.
The carrying value of the accounts payable, accrued liabilities and due to related parties approximates fair
value as they are short term in nature.
The Company had cash at December 31, 2013 of $1,429,699 (2012 - $1,852,133). At December 31, 2013, the
Company had accounts payable and accrued liabilities and due to related parties of $785,507 (2012 -
$471,242).
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and
other price risk.
a) Interest Rate Risk
The Company's cash and cash equivalents consist of cash and term deposits held in bank accounts
that earn interest at variable interest rates. Future cash flows from interest income on cash will be
affected by interest rate fluctuations. Due to the short-term nature of these financial instruments
fluctuations in market rates do not have a significant impact on estimated fair values. The Company
manages interest rate risk by maintaining an investment policy that focuses primarily on preservation
of capital and liquidity. The interest income earned on cash is minimal; therefore, the Company is not
subject to material interest rate risk.
b) Foreign Currency Risk
The Company is exposed to foreign currency risk of the South African rand. This risk is limited as
contracts and loan agreements are denominated in Canadian dollars where possible.
South African Rand
Cash 180,065
Accounts receivable 53,651
Accounts payable and accrued liabilities 3,849,320
Based on the net exposure at December 31, 2013, a 10% depreciation or appreciation of the South
African rand against the Canadian dollar would result in approximately a $37,000 increase or
decrease in the Company’s after-tax loss.
c) Other Price Risk
Other price risk is the risk that the fair or future cash flows of a financial instrument will fluctuate
because of changes in market prices, other than those arising from interest rate risk or foreign
currency risk. The Company is not exposed to any other price risk.
15. INCOME TAXES
The reconciliation of the income tax expense and the product of accounting profit multiplied by the Company's
domestic tax rate is provided below:
2013 2012
Loss before income taxes $ (3,989,028) $ (5,613,811)
Income tax expense at a statutory rate of 26.50% $ (1,057,092) $ (1,487,660)
Permanent differences 258,397 456,362
Tax rate differential and other 38,572 23,185
Change in tax benefits not recognized 648,029 1,008,113
Reversal of tax benefits not recognized 146,198 -
Income tax recovery $ 34,104 $ -
Deferred Income Taxes
The significant components of the Company's deferred income taxes as at December 31, 2013 and 2012 were
as follows:
a) Unrecognized deductible temporary differences
Deferred tax assets are recognized for the carry-forward or unused tax losses and unused tax credits to
the extent that it is probable that taxable profits will be available against which the unused tax
losses/credits can be utilized. The following represents the deductible temporary differences which have
not been recognized in the financial statements.
2013 2012
Property and equipment $ 42,934 $ 24,469
Loss carry-forward 7,980,109 5,172,381
Capital loss carry forward 578,544 778,041
Non refundable mining ITC 50,381 118,540
Share issuance costs 334,966 77,305
deferred mining expenditures 2,202,553 2,543,872
$11,189,487 $ 8,714,608
b) Non-capital losses
the following table summarizes the Company's non-capital losses that can be applied against future
taxable profit:
Country Expiry Date Amount
Canada 2026 to 2033 $ 6,587,614
Barbados 2022 71,170
South Africa Indefinite 1,321,325
$ 7,980,109
The capital losses carried forward can be carried forward indefinitely
16. COMMITMENTS
The Company has committed to approximately $1,085,120 over the next five years for obligations under
operating leases, rent, exploration, and option payments.
2014 2015 2016 2017 2018
Exploration commitments $ 165,454 $ 407,500 $ 7,500 $ - $ -
Licenses and taxes 63,000 63,000 - - -
Option payments 35,000 50,000 - - -
Rent (Oakville office) 95,243 95,243 95,243 7,937 -
$ 358,697 $ 615,743 $ 102,743 $ 7,937 $ -
The rent payments are for the head office space located in Oakville, Ontario. This lease expires on January 31,
2017. There are no restrictions imposed on the Company with this lease.
Commitments of Canoe, amounting to $791,454 included in the above are as follows:
2014 2015 2016 2017 2018
Exploration commitments $ 165,454 $ 407,500 $ 7,500 $ - $ -
Licenses and taxes 63,000 63,000 - - -
Option payments 35,000 50,000 - - -
$ 263,454 $ 520,500 $ 7,500 $ - $ -
17. SEGMENTED INFORMATION
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing
performance of the operating segments and has been identified as the Company’s Chief Executive Officer.
The Company has two operating segments: the exploration, evaluation and development of precious metal
mining projects located in Ontario (“Canoe”) and located in South Africa (“South Africa Mining”). The rest of the
entities within the Company are grouped into a secondary segment (“Corporate”).
The segmental report is as follows
South Africa
2013 Canoe Mining Corporate Total
Property and equipment $ - $ - $ 75,584 $ 75,584
Exploration and evaluation $ 1,650,445 $ 1,748,823 $ - $ 3,399,268
Total Assets $ 3,035,877 $ 7,452,790 $ 647,914 $11,136,581
Total Liabilities $ 531,683 $ 389,936 $ 137,086 $ 1,058,705
Total Loss $ 703,004 $ 1,135,491 $ 2,116,429 $ 3,954,924
Net Additions to Exploration and
Evaluation Assets $ 166,629 $ 110,803 $ - $ 277,432
Impairment to Exploration and
Evaluation Assets $ - $ - $ - $ -
South Africa
2012 Canoe Mining Corporate Total
Property and equipment $ - $ - $ 94,048 $ 94,048
Exploration and evaluation $ 1,483,817 $ 1,638,019 $ - $ 3,121,836
Total Assets $ 1,510,499 $ 7,330,036 $ 3,764,747 $12,605,282
Total Liabilities $ 28,903 $ 193,276 $ 249,063 $ 471,242
Total Loss $ 1,350,783 $ 404,033 $ 3,858,995 $ 5,613,811
Net Additions to Exploration and
Evaluation Assets $ 1,647,740 $ 1,638,020 $ - $ 3,285,760
Impairment to Exploration and
Evaluation Assets $ 1,046,058 $ - $ - $ 1,046,058
18. NON-CONTROLLING INTEREST
On December 5, 2013, the Canoe Mining Ventures Corp. ("Canoe") (formerly C-Level III Inc, a capital pool
corporation under the policies of the TSX Venture Exchange) acquired 2299895 Ontario Inc. ("2299895"), a
subsidiary of Giyani, through amalgamation. In accordance with the terms of the Letter Agreement, the
Company entered into the Amalgamation Agreement with 2299895 and Giyani to carry out a Qualifying
Transaction. Pursuant to the terms of the Amalgamation Agreement, Canoe acquired all of the issued and
outstanding shares of 2299895 and 2299895 amalgamated with a wholly-owned subsidiary of Canoe, Ontario
AcquisitionCo, to create Canoe Mining Ventures Inc.. The 12,852,515 issued and outstanding 2299895 Shares
of which Giyani Gold owned 12,602,515, representing approximately 98.1% of the issued and outstanding
2299895 Shares were exchanged for 20,000,000 shares of Canoe. As a result of the transaction, Giyani's
interest in Canoe declined from 98.1% to 57.4%.
Since these transactions did not result in a loss of control by Giyani, they have been recorded as a transfer of
equity to non-controlling interest holders. The major transactions not resulting in a loss of control and the
resulting impact are summarized and described as follows:
2013 2012
Balance, January 1, 2013 $ (13,048) $ 48,000
Change in non controlling interest 1,370,057 20,000
Share of loss attributable to non-controlling interests (290,222) (81,048)
Balance, December 31, 2013 $ 1,066,787 $ (13,048)
Set out below is summary financial information for Canoe, in which the Company holds a 57.4% interest (2012
- 98.1%). The amounts disclosed are based on those included in the consolidated financial statements, before
intercompany eliminations.
Summarized Consolidated Statement of Financial Position
2013 2012
Non-Controlling Interest Percentage 42.6% 5.4%
Current assets $ 1,385,432 $ 26,682
Current liabilities 424,111 424,111
$ 961,321 $ (397,429)
Non-current assets $ 1,650,445 $ 2,301,418
Non-current liabilities 146,198 145,391
$ 1,504,247 $ 2,156,027
Net assets $ 2,465,568 $ 1,758,598
Accumulated non-controlling interest $ 1,050,332 $ 94,964
Summarized Consolidated Statement of Loss and Comprehensive Loss
Non-Controlling Interest Percentage 42.6% 5.4%
Expenses $ 702,198 $ 1,451,841
Net loss and comprehensive loss 703,004 1,433,484
Loss allocated to non-controlling interest $ 299,480 $ 77,408
Summarized Consolidated Statement of Cash Flows
Non-Controlling Interest Percentage 42.6% 5.4%
Cash flows from operating activities $ (163,320) $ (348,499)
Cash flows from financing activities $ 1,353,986 $ 1,962,138
Cash flows from investing activities $ 128,654 $ (1,613,535)
Of total cash and cash equivalents as of December 31, 2013, $18,240 (2012: $3,472) was held in subsidiaries
which have regulatory regulations, contractual restrictions or operate in countries where exchange controls
and other legal restrictions apply and are therefore not available for general use by the Company.
19. BASIC AND DILUTED LOSS PER SHARE
Basic loss per share is computed using the weighted average number of common shares outstanding during
the period. Diluted loss per share, which reflects the maximum possible dilution from the potential exercise of
warrants and stock options, is the same as basic loss per share for the year ended. The effect of potential
issuances of shares under options and warrants would be anti-dillutive in the years ended December 31, 2013
and 2012 as they would decrease the loss per share, consequently the weighted average number of shares
outstanding for basic and dilluted are the same.
20. SUBSEQUENT EVENTS
i) On March 26, 2014, the Canoe announced it had signed a definitive amalgamation agreement (the
"Amalgamation Agreement") pursuant to which Canoe will acquire all the issued and outstanding shares
of Birch Hill (the "Birch Hill Shares"). The Amalgamation Agreement replaces and supersedes the
agreement dated and announced on March 4, 2014.
The transaction will be carried out by way of a three-cornered amalgamation (the "Amalgamation")
pursuant to which Birch Hill will amalgamate with 0996623 B.C. Ltd., a wholly owned subsidiary of
Canoe, and the shareholders of Birch Hill will receive one common share of Canoe (a "Canoe Share") in
exchange for every 2.5 Birch Hill Shares. Other securityholders of Birch Hill will receive equivalent
securities of Canoe based on the same exchange ratio.
The Amalgamation must be approved by a special majority (66%) of the votes cast at the Birch Hill
shareholders meeting to be held on May 15, 2014 to consider the Amalgamation.
The currently issued and outstanding capital of Birch Hill consists of 9,671,385 Birch Hill Shares and
2,019,275 common share purchase warrants. In connection with Birch Hill's previously announced
private placement (see Birch Hill News Release, dated March 12, 2014), it is expected that an additional
3,750,000 Birch Hill Shares and 1,875,000 Birch Hill common share purchase warrants will be issued in
advance of the completion of the Amalgamation for aggregate gross proceeds of $300,000 (the
"Offering").
Assuming full subscription of the Offering, upon completion of the Amalgamation it is anticipated that the
issued and outstanding capital of Canoe will consist of 39,196,262 Canoe Shares, 2,199,399 stock
options, and 8,448,308 common share purchase warrants. Former shareholders of Birch Hill will hold
approximately 13.7% of the outstanding Canoe Shares.
The Amalgamation is not a "Non-Arm's Length Transaction" within the meaning of the term under the
policies of the TSX Venture Exchange (the "TSXV").
Completion of the Amalgamation remains subject to a number of conditions, including but not limited to,
approval by special resolution of the shareholders of Birch Hill, satisfaction of standard closing conditions
for transactions of this nature, and the acceptance of the TSXV. There can be no assurance the
Amalgamation will be completed as proposed or at all.
ii) On February 27, 2014 Canoe granted 2,000,000 stock options to purchase common shares in the capital
of Canoe with an exercise price of $0.25 per common share, which reflects a 12% increase over the
closing price of Canoe's common shares on the date of issuance, to various directors, officers, and
consultants in accordance with Canoe's stock option plan. 1,900,000 options will vest immediately and
the 100,000 options granted will vest over a twelve month period with 25,000 options vesting every three
months. All 2,000,000 options will expire on February 27, 2019.
iii) On March 5, 2013, the Company announced that 2,000,000 stock options had been granted to various
directors, officers, and consultants in accordance with its stock ption plan. 1,900,000 options will be
convertible to common shares at $0.25 per share and vested immediately and 100,000 options at the
same price will vest ver a twelve month period with 25,000 options vesting every three months. All
options will expire on March 04, 2019.
3 April 2014
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 03/04/2014 02:44:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
