Wrap Text
Condensed consolidated financial statements
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)
March 31, 2014
(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 and nine month periods ended March 31, 2014 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 18
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
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. Subsidiary in the DRC and Investment in Associate.................................................................... 10
4. Exploration and Evaluation Assets ........................................................................................ 11
5. Related Party Transactions ................................................................................................ 11
6. Share Capital ................................................................................................................. 12
7. Share-Based Payments ...................................................................................................... 13
8. Segmented Reporting ....................................................................................................... 14
9. Financial Risk Management Objectives and Policies .................................................................. 15
10. Commitments and Contingencies....................................................................................... 18
11. Subsequent Events ........................................................................................................ 18
Page 3 of 18
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian dollars) (unaudited)
Notes March 31, 2014 June 30, 2013
$ $
Assets
Current Assets
Cash 33 516 101 713
Due from related parties 5 - 921
Prepaid expenses and other assets 13 501 24 858
Total current Assets 47 017 127 492
Non-Current- Assets
Explortation abd evaluation 4 5 371 718 5 142 097
Total Non-current Assets 5 371 718 5 142 097
Liabilities andshareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 442 591 420 637
Income taxes payable 5 420 10 840
Due to related parties 5 29 897 125 982
Total Current liabilities 477 908 557 459
Non-Current Liabilities
Income taxes payable - 5 420
Total Liabilities 0 5 420
Shareholder's equity
share capital 6 117 012 188 116 601 688
contributed surplus 8 159 644 8 159 644
deficit -120 231 005 -120 054 622
Total shareholders' equity 4 940 827 4 706 710
Total liabilitied and shareholders' equity 5 418 735 5 264 169
Common shares
Authorised 6a Unlimited Unlimited
Issued and outstanding 61 844 492 58 734 643
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 4 of 18
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian dollars) (unaudited)
Three Three Nine Nine
months months months months
ended ended ended ended
March 31, March 31, March 31, March 31,
Notes 2014 2014 2014 2014
$ $ $ $
Expenses
Consulting and professional fees 23 784 10 591 35 842 71 337
General and administrative 51 544 52 742 138 726 136 024
Foreign exchange loss/(gain) -509 -494 1 815 4 776
Loss from operations -74 819 -62 839 -176 383 -212 137
Net loss and comprehensive loss for the period -74 819 -62 839 -176 383 -212 137
Basic and diluted loss per share 6c -0.12 -0.12 -0.29 -0.40
Adjustment for headline loss per share 6c - - - -
Headline loss per share 6c -0.12 -0.12 -0.29 -0.40
Weighted average number of common shares oustanding 61 844 492 52 734 643 61 242 952 52 734 643
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 5 of 18
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian dollars) (unaudited)
Number of Total
shares Contributed Shareholder's
Notes (Note 6) Amount Surplus Deficit equity
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 - - - -212 137 -212 137
Balance at March 31, 2013 52 734 643 116 339 566 8 159 644 -119 982 983 4 516 227
Net loss for the year - -71 639 -71 639
Share issuance (net of costs) 6 000 000 262 122 262 122
Balance at June 30, 2013 58 734 643 116 601 688 8 159 644 -120 054 622 4 706 710
Net loss for the period - - - -176 383 -176 383
Warrants exercised 3 109 849 410 500 - - 410 500
Balanced at March 31, 2014 61 844 492 117 012 188 8 159 644 -120 231 005 4 940 827
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 6 of 18
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Expressed in Canadian dollars) (unaudited)
Three Nine Nine
months months months
Three months ended ended ended
ended March March 31, March 31, March 31,
Notes 31, 2014 2014 2014 2014
$ $ $ $
Cash flows from operating activities
Net loss for the period -74 819 -62 839 -176 383 -212 137
Changes in non-cash working capital
- Prepaid expenses and other assets 25 463 -3 767 11 357 30 865
- Bank indebtedness - 26 017 - 26 017
- Accounts payable and accrued liabilities 34 978 38 736 21 954 -53 885
- Taxes payable - - -10 840 -16 452
Net cash flows used in operating activities -14 378 -1 853 -153 912 -225 592
Cash flows from investing activities
Expenditures on exploration and evaluation 4 -78 492 -85 724 -286 891 -314 444
Funds received from Rio Tinto - 38 234 57 270 208 859
Net cash provided by (used in) investing activities -78 492 -47 490 -229 621 -105 585
Cash flows from financing activities
Warrants exercised 6 - - 410 500 -
Due to related parties 5 26 576 25 488 -95 164 -88 517
Net cash provided by (used in) financing activities 26 576 25 488 315 336 -88 517
Net (decrease) increase in cash during the period -66 294 -23 855 -68 197 -419 694
Cash, beginning of the period 99 810 44 816 101 713 440 655
Cash, end of the period 33 516 20 961 33 516 20 961
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 7 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(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 and nine months ended March 31, 2014
include the accounts of the Company and of its wholly-owned subsidiaries incorporated in the DRC, Delrand Resources Congo
SPRL.
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 7070, 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 $176,383 during the nine months ended March 31, 2014 and, as of that date, the Company?s deficit was
$120,231,005. 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 and nine month periods ended March
31, 2014, 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.
c) Summary of significant accounting policies
These interim condensed consolidated financial statements have been prepared using the same accounting policies and
methods of computation as presented in Note 3 of the annual consolidated financial statements of the Company as at and
for the year ended June 30, 2013, except for those newly adopted accounting standards noted below.
The Company has applied the following new and revised IFRSs in these unaudited interim condensed consolidated
financial statements: IFRS 10 Consolidated financial statements (“IFRS 10”), IFRS 13 fair value measurements (“IFRS
Page 8 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
13”), IAS 1 Presentation of financial statements (“IAS 1”), IAS 27 Separate financial statements (“IAS 27”), and IAS 28
Investments in associates and joint ventures.
d) Use of estimates and judgments
The preparation of these interim condensed consolidated financial statements in conformity with IFRS as issued by the
IASB requires management to make judgments, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
e) Accounting Standards Issued But Not Yet Effective
The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective
and determined that the following may have an impact on the Company:
IFRS 9, Financial instruments (“IFRS 9”) intends to replace IAS 39 Financial Instruments: Recognition and Measurement in
its entirety with IFRS 9. IFRS 9 is intended to reduce the complexity for the classification and measurement of financial
instruments. The mandatory effective date was previously January 1, 2015 and has since been removed with the effective
date to be determined when the remaining phases of IFRS 9 are completed. Once it is complete, the Company will be
evaluating the impact the final standard is expected to have on its consolidated financial statements.
An amendment to IAS 32, Financial Instruments: presentation (“IAS 32”) was issued by the IASB in December 2011. The
amendment clarifies the meaning of „currently has a legally enforceable right to set-off?. The amendments to IAS 32 are
effective for annual periods beginning on or after January 1, 2014. The Company does not expect the standard to have a
material impact on its consolidated financial statements.
An amendment to IAS 36, Impairment of Assets (“IAS 36”) was issued by the IASB in May 2013. The amendment reduces the
circumstances in which the recoverable amount of assets or cash-generating units are required to be disclosed, clarifies
the disclosures required, and introduces an explicit requirement to disclose the discount rate used in determining
impairment. The amendments to IAS 36 are effective for annual periods beginning on or after January 1, 2014. The
Company does not expect the standard to have a material impact on its consolidated financial statements.
An amendment to IAS 39, Financial Instruments: recognition (“IAS 39”) was issued by the IASB in June 2013. The amendment
clarifies that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria
are met. A novation indicates an event where the original parties to a derivative agree that one or more clearing
counterparties replace their original counterparty to become the new counterparty to each of the parties. The amendments
to IAS 39 are effective for annual periods beginning on or after January 1, 2014. The Company does not expect the standard
to have a material impact on its consolidated financial statements.
In May 2013, IFRS Interpretation Committee (“IFRIC”) published IFRIC Interpretation 21, Levies (“IFRIC 21”), effective for
annual periods beginning on or after January 1, 2014. IFRIC 21 provides guidance on when to recognize a liability for a levy
imposed by a government. IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that
triggers the payment of the levy in accordance with the relevant legislation. The Company does not expect the standard
to have a material impact on its consolidated financial statements.
Page 9 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
3. SUBSIDIARY IN THE DRC AND INVESTMENT IN ASSOCIATE
The table below sets out certain information in respect of the Company?s DRC subsidiary:
Proportion of Ownership
Name of Subsidiary Place of Incorporation Principal Activity
Interest
Delrand Resources Congo SPRL Democratic Republic of the Congo 100% Mineral Exploration
The Company?s former investment in Rio Tinto Exploration DRC Oriental Limited (“DRC Orientale”), which met the definition
of an associate of the Company, is summarized as follows:
As at June
30, 2013
Portion of ownership interest 25.00%
Common shares held 250
Total investment 0
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. Under the Iron
Ore Agreement, which was in the form of a shareholders' agreement, the Company owned 25% and Rio Tinto Minerals owned
75% of the capital stock of DRC Orientale, which owned a DRC registered company called Rio Tinto Exploration RDC Orientale
SPRL. The Company?s investment in DRC Orientale was accounted for in the consolidated financial statements using the equity
method.
Rio Tinto subsequently withdrew from the iron ore project and, in connection with this withdrawal, Delrand surrendered all
of its shares in DRC Orientale. As part of the arrangements with respect to Rio Tinto's said withdrawal, Delrand has
maintained the iron ore rights in the exploration permits relating to the iron ore project.
Page 10 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
4. EXPLORATION AND EVALUATION ASSETS
The following table summarizes the Company?s tangible exploration and evaluation expenditures with respect to its
properties in the DRC:
Northern DRC
Notes Tshikapa Project Project Total
Cost
Balance as at June 30, 2012 3 085 581 2 077 887 5 163 468
- Additions 29 973 85 517 115 490
- Other adjustments - -139 080 -139 080
Balance as atr June 30, 2013 3 115 554 2 024 324 5 139 878
- Addiditons - 229 621 229 621
Balance as at March 31, 2014 3 115 554 2 253 945 5 369 499
There is $2,219 of intangible exploration and evaluation expenditures as at March 31, 2014 (June 30, 2013: $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 six exploration permits, covering an area of 1,043km², held through an option agreement with the
permit holder Acacia SPRL. Acacia SPRL has advised the Company of its wish to modify the option agreement. The
Tshikapa project also includes a seventh exploration permit held by the Company through its wholly-owned DRC
subsidiary and which covers an area of 212 km² to the west of the Tshikapa triangle.
b. Northern DRC Project
The Company's northern DRC diamond project is located in Orientale Province of the DRC and consists of 10 exploration
permits, two of which are held by the Company directly through its DRC subsidiary and the balance of which are held
through an option agreement with the holder of the permits. Rio Tinto Mining and Exploration Limited (“Rio Tinto”)
was party to this agreement but has advised the Company that it no longer wishes to continue with this diamond
project. Previously 22 exploration permits under option covered an area of 4,155 km² but based on ongoing
exploration, application has been made to reduce these permits to the current total of 8 permits covering an area of
557 km². The two additional exploration permits held by the Company?s DRC subsidiary cover an area of 188 km² (after
its obligatory 50% reduction) directly north of the optioned ground.
5. RELATED PARTY TRANSACTIONS
a) Key Management Remuneration
The Company?s related parties include key management. Key management includes executive directors and non-executive
directors. The remuneration of the key management of the Company as defined above, during the three and nine months
ended March 31, 2014 and three and nine months ended March 31, 2013 was as follows:
Page 11 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
Three months Three months Nine months
ended March 31, ended March 31, Nine months ended ended March
2014 2013 March 31, 2014 31, 2013
Salaries $ 43 724 $ 41 497 $ 154 283 $ 186 050
$ 43 724 $ 41 497 $ 154 283 $ 186 050
b) Other Related Parties
As at March 31, 2014, an amount of $25,000 (June 30, 2013 - $117,107) was owing to one director of the Company representing
consulting fees.
As at March 31, 2014, an amount of $1,013 was owed to Banro Corporation (“Banro”) related to common expenses (June 30,
2013 - $921). Banro owns 17,716,994 common shares of the Company, representing a 28.65% interest in the Company.
During the three and nine months ended March 31, 2014, the Company incurred common expenses of $865 and $3,222
respectively (three and nine months ended March 31, 2013 - $603 and $3,982, respectively) in the DRC together with Loncor
Resources Inc. (“Loncor”), a corporation with common directors. As at March 31, 2014, an amount of $3,884 (June 30, 2013 -
$8,875) owing to Loncor was included in due to related parties in the consolidated statement of financial position.
March 31, 2014 June 30, 2013
$ $
Due from related parties - 921
Due to related party 29 897 125 982
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.
6. 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.
During the nine month period ended March 31, 2014, 3,109,849 warrants were exercised at a price of $0.132 per share.
This resulted in the issuance of 3,109,849 common shares of the Company and gross proceeds to the Company of $410,500.
2,109,849 of the shares were issued to a director of the Company.
As of March 31, 2014, the Company had 61,844,492 common shares issued and outstanding (June 30, 2013 – 58,734,643).
b) Share purchase warrants
As at March 31, 2014, the Company had outstanding warrants to purchase 5,000,000 (June 30, 2013: 11,969,698) common
shares of the Company. The 5,000,000 are exercisable at a price of $0.22 per share until May 2014.
Page 12 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
c) Loss per share
Loss per share was calculated on the basis of the weighted average number of common shares outstanding for three and
nine months ended March 31, 2014, amounting to 61,844,492 and 61,242,952 (three and nine months ended March 31,
2013: 52,734,643) common shares. Diluted loss per share was calculated using the treasury stock method. For the three
and nine months ended March 31, 2014, total stock options of nil (three and nine months ended March 31 2013: 675,000)
and warrants of 5,000,000 (March 31, 2013: 11,969,698) 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 Nine months ended Nine months ended
March 31, 2014 March 31, 2013 March 31, 2014 March 31, 2013
$ $ $ $
Loss for the period (74 819) (62 839) (176 383) (212 137)
- Adjustments for headline loss - - - -
Headline loss for the period (74 819) (62 839) (176 383) (212 137)
basic and diluted loss per share (0.00) (0.00) (0.00) (0.00)
Headline loss per share (0.00) (0.00) (0.00) (0.00)
7. SHARE-BASED PAYMENTS
In August 2011, the Company?s board of directors established a new stock option plan for the Company (the "New Plan").
In establishing the New Plan, the Board of Directors also provided that no additional stock options may be granted under
the Company?s other stock option plan (the "Old Plan") and terminated the Old Plan effective upon the exercise, expiry,
termination or cancellation of all of the currently outstanding stock options that were granted under the Old Plan.
Under the New Plan, non-transferable options to purchase common shares of the Company may be granted by the
Company?s Board of Directors to any director, officer, employee or consultant of the Company or any subsidiary of the
Company. The New Plan contains provisions providing that the term of an option may not be longer than ten years and
the exercise price of an option shall not be lower than the last closing price of the Company?s shares on the Toronto Stock
Exchange prior to the date the stock option is granted. Unless the Board of Directors makes a specific determination
otherwise, stock options granted under the New Plan and all rights to purchase Company shares pursuant thereto shall
expire and terminate immediately upon the optionee who holds such stock options ceasing to be at least one of a director,
officer or employee of or consultant to the Company or a subsidiary of the Company, as the case may be. Stock options
granted pursuant to the New Plan vest as follows: 75% of the stock options vest on the 12 month anniversary of their grant
date and the remaining 25% of such stock options vest on the 18 month anniversary of their grant date. The total number
of common shares of the Company issuable upon the exercise of all outstanding stock options granted under the New Plan
shall not at any time exceed 12% of the total number of outstanding common shares of the Company, from time to time.
As at March 31, 2014, the Company had outstanding under the Old Plan stock options to acquire nil (June 30, 2013 –
675,000) common shares of the Company at a weighted-average exercise price of nil (June 30, 2013 - $2.10) per share.
There are currently no stock options outstanding under the New Plan.
Page 13 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
The following tables summarize information regarding outstanding stock options:
For nine months ended March 31, 2014:
During the Year
Weighted
average
Exercise remaining
Price contractual
Range Opening Closing life Vested &
($) Balance granted Exercised Expired Forfeited Balance (years) Exercisable Unvested
2.
10 - 7.51 675,000 - - (675,000) - - - - -
675,000 - - (675,000) - - - - -
Weighted
Average
Exercise
Price $2.10 - - - - - - - -
For nine months ended March 31, 2013:
During the Year
Weighted
average
Exercise remaining
Price contractual
Range Opening Closing life Vested &
($) Balance granted Exercised Expired Forfeited Balance (years) Exercisable Unvested
2.
10 - 7.51 800 000 - - -1 250 000 675 000 0.66 675 000 -
7.
52 -
16.00 90 000 -90 000
890 000 0 0 -90 000 -1 250 000 675 000 675 000 0
Weighted
Average
Exercise $3.51 - - - - $2.10 - - -
Price
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.
8. 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:
Page 14 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
As at March 31, 2014
Exploration and
evaluations Total Assets
DRC $5 371 718 $5 418 735
Canada - -
$5 371 718 $5 418 735
As at June 30, 2013
Exploration and
evaluations Total Assets
DRC $5 142 097 $5 269 589
Canada - -
$5 142 097 $5 269 589
9. 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.
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
Page 15 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
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 and South African Rand. 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 March 31, 2014.
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 March 31, 2014.
U.S. Dollar South African Rand
$ ZAR
Cash 26 377 7 695
Prepaids and other assets - 79 823
Accounts payable and accrued liabilities -109 500 -197 480
Total foreign currency financial assets and liabilities -83 123 -109 961
Foreign exchange rate at March 31, 2014 1.1055 0.1050
Total foreign currency financial assets and liabilities
in CDN $ -91 892 -11 546
Impact of a 10% strengthening or weakening of the
CDN $ on net loss -9 189 -1 155
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, credit facilities and equity capital markets. In light of market
conditions, the Company initiated a series of measures to bring its spending in line with the projected cash flows from its
operations and available project specific facilities in order to preserve its financial position and maintain its liquidity
position. Accounts payable and accrued liabilities of $442,591 and amounts due to related parties of $29,897 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.
Page 16 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
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 any stock options as capital. The Company?s main objectives
when managing its capital are:
? to maintain a flexible capital structure which optimizes the cost of capital at acceptable risk while providing an
appropriate return to its shareholders;
? to maintain a sufficient capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business;
Page 17 of 18
Delrand Resources Limited
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 2014
(Expressed in Canadian dollars) (unaudited)
? to safeguard the Company?s ability to obtain financing; and
? to maintain financial flexibility in order to have access to capital in the event of future acquisitions.
The Company manages its capital structure and makes adjustments to it in accordance with the objectives stated above,
as well as responds to changes in economic conditions and the risk characteristics of the underlying assets.
There were no significant changes to the Company?s approach to capital management during the nine month period ended
March 31, 2014.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
As at March 31, 2014 As at June 30, 2013
Cash $33 516 $101 713
Share capital $117 012 188 $116 601 688
Deficit -$120 231 005 -$120 054 622
Contributed surplus $8 159 644 $8 159 644
10. 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.
11. SUBSEQUENT EVENTS
In April 2014, the Company closed a non-brokered private placement of 2,000,000 common shares of the Company at a price
of $0.075 per share for proceeds to the Company of $150,000. The Company intends to use the proceeds from this financing
for general corporate purposes. Arnold T. Kondrat, a director of the Company, was the purchaser of all of the said shares and
now holds 14,359,700 (or 22.49%) of the outstanding common shares of the Company. Mr. Kondrat was appointed Chief
Executive Officer of the Company in May 2014.
Page 18 of 18
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